"The nation is now nursing a seriously skinned knee because of reckless housing and credit practices. But rather than force consumers, borrowers, and bankers to face the consequences of their own actions, Washington is functioning as a helicopter parent."

As brought to you by whom? I agree with most of Gross's analysis of the child like behavior of Wall Street, the financial insitutions, behavior of the multi-national companies, and the execs who participate. I would not align their actions with Attention Deficit Disorder as this does a disservice to those who are truly afflicted with ADD. I would call it personal greed and wanton disregard. Oh I forgot, and it is also an attempt to save those multi-million dollar bonuses.

Blaming a consumer for the results of a directed-lemming-like-migratio­n of consumers is silly. The charge off the cliffs and into the sea of debt accumulation was promulgated by the same people who are now attempting to save the economy through similar practices. Lower the Fed Rate and the inter-bank discount rates to lower costs and spur the economy. Except none of this is filtering down to the consumers, from the banks and financial institutions, to spur the economy upwards in the short term. The banks and financial institutions are taking short term gains by maintaining consumer rates and mortgage rates or in some cases increasing them termporaily. Greenspin used the same tactics of lowering rates in 2001 and held the rates low for several years afterwards, the length of time of which is not Keynsianism. Keeping the rates lowfor aperiod of years set off a credit influenced spending spree, dissolving equity; the likes of which has not been seen since The Depression. The Fed was created, with a national banking authority, to more or less control such activities amongst financial institutions and Wall Street after the depressions previous to 1913 resulted from poor bank practices. It was not meant to foster those practices.

So lets leave the consumers, the ones who will have the biggest impact on the economy, out of the reasons for the actions by the Fed in lowering both rates. So lets leave the consumers, the ones who will pay the price, out of reasons for the actions by the Fed also. This is market manipulation by multinational interests. On one hand, Bernanke can hold the rates in abeyance and let the country slide into a harsh recession during an election year in which case consumers will suffer or Bernanke can lower rates and spare consumers economic pain over the short term and let them get run over after the election in 2008. I suspect companies know which way the gov will go after the election. I think Bernanke made his decison.

As far as the future, look to higher energy costs which will drive commodity prices even higher creating an inflationary environment. If there is little or no growth over the next year, we will be entering into a period of stagflation. Interesting note was "Jubak's" comment on how Japan went through the same real estate bubble and sliding into a 10 year period of a no growth economy and equity. Maybe the future?

run,

I caught Jubak's opinion too. Your posting beat me to the punch.

Go back a hundred years. The nation is growing through a series of booms and busts in business and the nation's money is constantly manipulated by those giant Wall Street fronts for European central bankers who refuse to leave their investments to the new republic. The nation does not trust the NYC bankers and neither were they contacted openly by Senator Aldrich when he set about to recommend improvements to the nation's money as he was appointed to do by the urging of Teddy Roosevelt. Instead, of a Congressional panel, which was supposed to be doing the work, the Senator steals away with top Wall Street bankers and they secretly draw up plans for a central bank in America.

We had already killed two central banks in the beginning of the republic... this was financial treason. The same bankers who caused the money panics Teddy Roosevelt sought a solution for, were now taking over the Constitutional power of money creation. They disguised it as a government institution and it was rewritten by other Senators and voted upon in complete ignorance that Paul Warburg himself had drawn up the program. But it was still recognized and labelled "the biggest money trust ever formed" ... in the language of the day a "trust" was a monopoly; and monopolies are private sector. The new Law went through committee after committee for five years, there was too much opposition for passage until they snuck it through on Christmas break, behind the back of honest Congressmen.

The FED is a scam, it was a scam from day one, and it is totally illegal besides; it amends the first Article of the Constitution without being an amendment. Our republic was over thrown by a money coup d'etat. Every budget since 1914 is illegal, the form of government in practice is unConstitutional. And it is no small matter that they are changfing, nope it is the biggest matter in all government; they have usurped gold and silver coin and replaced it with private bank notes; they have indebted the entire nation to the Wall Street banks; the scam worked perfectly and today the conspirators of the scam own all America; lock, stock, and barrel. When I took my real estate course, the teacher pointed at the FED governor and said flatly, "this man is far and away the most powerful man in America, the US president is a joke, the FED has all the power."

Let's not forget who owns the FED. Lazarus Brothers, Lehman Brothers, Goldman Sachs, Citibank, Chase-Morgan, Kuhn-Loeb, Warburg, and about five others. None of the original owners have failed and no stock has ever changed hands. They control much more than industrial might, much more than gold and silver, they control the nation's money. More precisely, they destroyed the nation's money and took it over, now the nation runs on their money. They pay our mints a printing fee to print up their money; they write "United States of America" on the notes, but the very top tells you the true master... The Federal Reserve; a 100% stock owned corporation that is a conglomerate of Wall Street banks... the biggest money trust in the world.

Greenspan lowered the interest rate to 1% as a result of 911. Containing inflation would be the least of anyone's worry at that time.

The nature of capitalism economy is based on a scam to concentrate the wealth of the many into the hands of a few people. Those with money then use it to produce good and services. Along the way, the rich lost track of the scam and invented ways to skim off money without producing anything - they become corporate raiders, hedgefund managers and patent lawyers. The sub-prime crisis is merely a symptom of the scam being unraveled. The rich have to produce good and services, CDO and SIV are just pieces of worthless paper.

This is where the author is spot on. The rich have lost track of basic economic theories - printing money without producing more stuff doesn't work. The Fed is bailing them out in order for the scam to continue. There will be a need for some serious bloodletting if the current batch of rich spoiled brat refuse to go back to producing goods and services.

... right up until that becomes necessary, or the only option.

And the trouble with that is the level of misery necessary to push people to the barricades is unimaginable to most Americans.

The average American is being injured enough by the 'pirate economy' right now, to justify some kind of revolt.

The rich have lost track of basic economic theories

The rich have also lost track of what it is to be part of a society, and part of humanity. They hoard money like desert rulers hoard camels. The average Joe working man can bust his rear for 20 or 30 years, and his compensation is less than a single bonus paid to these selfish, soul-less scoundrels.

"The charge off the cliffs and into the sea of debt accumulation was promulgated by the same people who are now attempting to save the economy through similar practices. Lower the Fed Rate and the inter-bank discount rates to lower costs and spur the economy."

Only, this time, something has changed. In 2006 and 2007, 3 million households have experienced a foreclosure.

That is a huge black stain on credit records. The so-called ninja loan is now seen for the poison it always was. The pool of borrowers has been thinned, and so has the pool of exotic garbage loans. The loans of today will be made with underwriting discipline. Banks will say no when the risk is high.

The ramification is that the next crop of loans made will be given to consumers with the lowest risks. People coming with *verified* income more than 3x the monthly payment, AND a down payment. There will be no fast speculative run-up. It will be slow, and solidly supported by verified fundamentals.

Bone:

Did you mean this to Ronin?

Madai:

which resulted from the previous lax credit terms due to low interest. The issue is not the people, it is the mortgage brokers.

rev:

There is some truth to what jubak is saying. We are going down a similar path as what Japan did, except we are many times larger. It will remain to be seen whether we are sucked into the same vortex that they were.

days:

another interesting read as written by you. Hope all is well.

I'm good, thanx; driving a taxi has been good to me!

I was preaching money to one of my business passengers on the way to O'hare just a couple hours ago. I told her that ever since the bankers grabbed hold of our money and switched us over to their fiat paper, they have been using the interest cycle to fence their paper money. That works like this; every time we go through a recession (or worse) the worthless paper money is redeemed with real goods. First, the farm depression seized midwest farm lands, then the great depression seized corporations, and now it is houses. In time we will learn to call this present period the housing depression. It is the same old scam.

Mr. Peabody: Well Sherman . . . today we are goning vist a time when banks made mortgage loans to people and not everybody on the street in trench coats.

Sherman: Mr. Peabody, what is the difference? I thought all mortgage loans were made by banks.

Mr. Peabody: Oh no Sherman, in an effort to make loans easier to get; the government decided to lossen restrictions on Motgage Loans so anyone could make one, package them up, and sell them on Wall Street. Banks could now sell these on Wall Street as well as other peopl.

Sherman: Mr. Peabody, how do we know the mortgage is a good and safe loan????

Mr. Peabody: Well Sherman, we didn't know and still don't know. Many people who made mortgage loans to unsuspecting customers did not disclose all of the details of the loans and in fact covered up some of the details. Everyone expected the market to appreciate so they could escape these short term mortgages before rates went up. When the market depreciated instead, many people lost their homes.

to be continued . . ..

Days, there is nothing wrong with fiat money as long as everyone follows the rules. The rules worked for years. When they changed the rules, the Wall Street sharks came in for their piece of the meat. We lost the lessons of The Depression. What is hilarious is listening to some of Congress and some of Wall Street blaming the consumers for the bad mortgages. There was nothing wrong with a properly constructed ARM or Balloon Mortgage, I have had both and I also had a subprime mortgage. The dfference was, I also had a legit broker and bank.