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Originally Posted by dragonrider
I agree that the long-term situation is not ALL Bush's fault, but I do think he bears some significant responsibility.
I do not think much of it is Bush's fault at all. Maybe you can make the argument that the federal governments dramatic increase in size caused for a debasement of the currency, but Bush really just inherrited this mess. He inherrited Greenspan who lowered interest rates to their lowest level (Keynesian measure) in decades (50's).
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What I am faulting him for and also faulting McCain for is this idea that they both have been pushing that nothing is wrong. They both have been saying the economy is fundamentally strong! It is not!
It certainly does not help to have your chief economic advisor chiefly
responsible for the Gramm-Leach-Bliley Act. Of course, it should be noted that Clinton signed this into effect.
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Have Paulson and Bernanke been telling Bush that the economy is fundamentally strong and then in one week make a complete reversal and decide we need a trillion dollars in order to avoid a Depression? I don't think that is true. I think that Bush has known that we are in serious trouble for a long time and has not wanted to say or do anything about it.
Paulson is former chairman of Goldman Sachs. Does anyone find it hilarious that a former Investment Bank CEO is treasury secretary, and governmental actions were more so protective of "To big to fail banks" and little more than a rebate check for taxpayers?
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This is only my personal theory, but I think Bush was hoping we could push the collapse off a few more months and let the next guy clean it up. He wanted to go on saying everything was OK, and then if it all fell apart in January or sometime next year, maybe everyone would just blame the new President.
Just like it is greasy to blame Bush for the current situation, it would also be a fallacy to blame the next executive for actions beyond their control.
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There is just absolutely no way that these economic experts in the Treasury and the Federal Reserve were completely unaware of fundamental economic problems that were very serious dangers for our economy for some time and just figured it out last week. That is impossible. If it is true, then they are incompetent.
Exactly!~! Has the instance of such controlling and unconstitutional financial banking policies known as the FDIC been able to sure up the problem? Financial entities of large stature seem to be failing or nearly failing every week. Has the economy become too complex to be controlled by artificial interest rates? I believe so, and will use the Japanese as an example.
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Just as the boom builds outward from banks to the rest of the economy, with banks benefiting the most, the bust collapses inward to banks from the rest of the economy, with banks suffering the most. Now the balance sheets of fractional-reserve banks, swollen with loans and checkable deposits during the boom, suddenly collapse. Or rather, the value of their loans collapses initially, as the projects they lent to turn out to be unprofitable, leaving them with negative net worth and then upon bankruptcy, their checkable deposits are liquidated.
Bankruptcy is made much more likely by the policy of fractional reserves. The checkable-deposit liabilities built up during the boom no longer have assets of equal value balancing them out once the crisis hits. Customers who know this have a great incentive to demand redemption of their checking accounts in cash, an obligation which fractional-reserve banks cannot fulfill even when the value of their assets is intact let alone after their loans devalue.
Monetary deflation via bank failures is the other side of the coin of liquidation of bad loans. Liquidating the loans implies realizing the bankruptcy of the businesses that have taken out these loans. The monetary inflation and credit expansion of the boom are now reversed in the bust. The capital build-up of the boom must now be dismantled and factors reallocated into lines of activity made profitable by consumers.
It goes on to say:
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From 1985-1990, the largest six banks in Japan made $215 billion worth of real-estate loans. In the six major Japanese cities, commercial real-estate values have fallen 75% since the bubble burst in 1991. Risky Japanese loans were not confined to real estate. Recently, Moody's Investors Service Inc. downgraded Toyota Motor Corp. debt from triple-A to double-A-1, leaving only nine Japanese companies with the triple-A rating and five of these are being reviewed for downgrading. Mitsubishi Electric Corp., Hitachi Ltd., Nissan Motors Co., and Mitsubishi Motor Co. all recently had their debt downgraded. Moody's is even considering downgrading Japan's triple-A, sovereign-debt rating.
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