Current economic/market events - a view from the playing field

[Roxanne Appleby]

Is capitalism "moral?" Does the statement even have meaning? I'll leave that debate to others but will say this: Given the improvements in human well being that have arisen where capitalism is permitted to operate, and the misery that prevails where it is not, prohibiting capitalism is immoral.

"If we accept the evidence from survey responses that people become no happier as their incomes increase, then we have to conclude that they become no happier as fewer of their children die, as they live longer and healthier lives, as their environmental quality improves, as their educational opportunities expand, as their jobs become more interesting and less dangerous, and as their leisure time increases. Maybe they are not happier because they have adapted to what, upon reflection, anyone would recognize as a far better state of the world. Can anyone argue, however, that it makes sense to dismiss these improvements as of little importance? Does it make any more sense to impose high taxes on income or consumption to discourage the production of wealth that makes longer lives, better health, and a cleaner environment possible?

". . . The most valuable benefit we realize from others’ pursuit of money is the most difficult to appreciate and to connect with its cause: when people are busy making money, they are not busy doing other things. (H)istory is filled with examples of people who used their time in ways not nearly as conducive to others’ happiness as making money. . . . John Maynard Keynes also saw the advantages of making money, arguing that ‘dangerous human proclivities can be canalized into comparatively harmless activities by the existence of the opportunity for money-making and private wealth, which, if they cannot be satisfied in this way, may find their outlet in cruelty, the reckless pursuit of personal power and authority, and other forms of self-aggrandizement. It is better that a man should tyrannize over his bank balance than over his fellow citizens’ (1936, 374)."

From "Who Says Money Can’t Buy Happiness?" by Dwight R. Lee, The Independent Review, Winter 2006

 

[JAMESBJOHNSON]

ROXANNE

My paper (very liberal) has started calling America the UNITED SOCIALIST STATES OF AMERICA. I think theyre giddy from all theyre imagining.

ROXANNE

I've spent my life puzzling over what it is that makes people happy. I concluded that happiness results when youre presented with a challenge youre competent to master, and do master.

 

[Roxanne Appleby]

ROXANNE

My paper (very liberal) has started calling America the UNITED SOCIALIST STATES OF AMERICA. I think theyre giddy from all theyre imagining.

Yep. All the Depression talk - some of it fondly nostalgic (illustrating the profound historical igorance of most members of the fourth estate) - is part of an agenda to bring back New Deal-type big government interventionism in a big way. They're salivating over the possibility that this time the Supreme Court won't throw out the fascist National Industrial Recovery Act.

 

[JAMESBJOHNSON]

ROXANNE

I got news for you, those HAPPY DAYS ARE HERE AGAIN.

My fear is the bureaucrats will impose a command economy on us once the government buys up most of our industry and commerce. It'll be like Albania circa 1989. Some will ride in Mercedes, and most will ride on a mule-drawn trolley.

 

[Roxanne Appleby]

Mreh. I'm not wholly convinced. In cases in which more of the commodity can be created, I'll agree that the rising prices created by scarce supply do seem to stimulate more production - although it can still also price even a large new supply out of reach of people who need it, and as we've seen with the MBS meltdown, it also stimulates the supply of things that aren't actually the desired commodity, but are labelled as such. But when the supply is finite and can't be increased in any practical way, its chief efficiency seems to be in moving scarce commodities into the hands of the wealthiest people.

I'm not sure that that really counts as "efficient." It's orderly, in its way, and it does keep people in the lower socio-economic classes from frittering away a resource unless they absolutely need it. However, at least in the Western developed world, there doesn't seem to be a real shortage of people with enough money to blow very large quantities on their whims. In the old "What about people selling ice for $50 a bag post-hurricane?" example, the problem I see is that while there are poor people with serious health problems or other circumstances that make them really need the ice, there are ample rich people who typically blow $200 on a dinner out anyway to buy the ice up because they like cold beer.

Then capitalism to me doesn't seem to serve any moral purpose. I understand that the theory is that the outrageous prices will limit the use of the commodity to those who desperately need it, but in practice it seems to me more likely that it limits use of the commodity to people with cash to burn, whether they need it or not.

So, as Rob says, I guess it comes down to what you mean by "efficient." If you mean it works in a relatively orderly fashion, and that people with a lot of money can very often find what they need in the shops, then it's efficient. If you're thinking in moral terms, however, or if your definition of "efficient" includes some desire for resources to go to the areas of most critical need, then I don't see that it's ideal from a moral stance.

To the extent that there is a moral justification for free market capitalism it is this: in the long run, it efficiently allocates scarce resources.

The problem with both these posts is that they take the production of necessary and desireable material goods as a given. Shang is upset that, after many smart and energetic people have dilligently and often courageously applied 200 years worth of unprecedented knowledge accumulation and wealth creation to produce the inumerable goods available in the current era, the distibution of those goods in some cases falls short of his ideal. Trysail fails to convey here what he actually understands, that without the process referred to in the previous sentence those "scarce resources" would be nothing but unmined rocks and untilled dirt.

All these goods didn't just appear like manna from heaven - somebody had to make them. Some person had to accumulate capital (ie, the deferred consumption of himself and others), take big risks, and probably bust their butt for years.

Why would any person do that? Before pronouncing high-minded conclusions about what precise allocation of goods produced by some other person is "moral," one should give a whole lot of thought to that question - and to what the outcome would be under conditions where people wouldn't do that, or would do much less of it.

 

[BlackShanglan]

The problem with both these posts is that they take the production of necessary and desireable material goods as a given. Shang is upset that, after many smart and energetic people have dilligently and often courageously applied 200 years worth of unprecedented knowledge accumulation and wealth creation to produce the inumerable goods available in the current era, the distibution of those goods in some cases falls short of his ideal.

All these goods didn't just appear like manna from heaven - somebody had to make them. Some person had to accumulate capital (ie, the deferred consumption of himself and others), take big risks, and probably bust their butt for years.

Why would any person do that? Before pronouncing high-minded conclusions about what precise allocation of goods produced by some other person is "moral," one should give a whole lot of thought to that question - and to what the outcome would be under conditions where people wouldn't do that, or would do much less of it.

Thank you for an excellent example of what it means to engage in uncivil political discourse in precisely the objective and easily identified ways I mentioned in the thread concerned therewith: deliberately misrepresenting the opponent's ideas, throwing about emotionally loaded terms, and declining to deal with any of the substance of the opposing position. I had faith that you could easily identify such behavior, but am impressed that you did so this quickly.

That's not a debate. That's a silly brawl. I'll leave you to it.

 

[amicus]

I still maintain, ethusiastically, that the practice of free market economics, 'capitalism', is inherently a system of morals expressed by the free decisions of free men, to buy, sell, trade, barter or consume what they produce.

I know none of our resident socialists will ever proclaim the socialist economic principles as superior nor even attempt to defend the concept.

Instead, they revert to a 'Keynsian' amalgamation of part socialist, part free market, call it what you will, as a compromise between the efficacy of a free market and the 'fairness' of socialism, from each...to each.

Unfortunately, bureaucrats trying to manage portions of the free economy is somewhat like attempting to herd cats...it don't work very well.

And of course, the inherent fallacy of a command market, where government directs production and consumption, always results in an expanding government role and those self same, 'selfish individuals greed', that our socialist apologists identify as part and parcel of a free market, are set loose in a socialist system where success and efficiency are measured by political pull and not real time production.

So, among the three choices...and there are only three, free, slave or a mixture, why is it that so many here choose that mixture of slavery which eventually overwhelms the free?

?

Amicus...

 

[rgraham666]

You expected Roxanne to treat a Marxist such as yourself with respect?

 

[Roxanne Appleby]

Thank you for an excellent example of what it means to engage in uncivil political discourse in precisely the objective and easily identified ways I mentioned in the thread concerned therewith: deliberately misrepresenting the opponent's ideas, throwing about emotionally loaded terms, and declining to deal with any of the substance of the opposing position. I had faith that you could easily identify such behavior, but am impressed that you did so this quickly.

That's not a debate. That's a silly brawl. I'll leave you to it.

Not true. I cited an entirely legitimate shortcoming in the viewpoint you expressed and challenged you to consider it. What you call "deliberately misrepresenting" your ideas was a sincere effort to render in just a few words a fundamental reality that your opinions about distribution of goods failed to encompass - that production of goods is not a given.

I'll repeat my challenge: You refer to our old discussion of ice after a hurricane, and whether the poor person who needs some to preserve life saving medicine is well served by allowing the operation of Handrints' "freedom to price things" and allocate capital on the basis of that freedom. It is perfectly legitimate for me to suggest that in the absence of that freedom not only there not be any ice, there wouldn't be any lifesaving drugs, either.

You are perfectly free to explain that your pevious post was unclear, that you do appreciate these things, and to explain how you don't believe there are any contradictions between your focus on distribution with no apparent regard for where production comes from.

 

[BlackShanglan]

Not true. I cited an entirely legitimate shortcoming in the viewpoint you expressed and challenged you to consider it. What you call "deliberately misrepresenting" your ideas was a sincere effort to render in just a few words a fundamental reality that your text failed to encompass.

That comes from a horse, but not from this one. There's nothing honest about that statement, and I decline to believe that someone of your wit ever considered your post a reasonable representation of what I said.

I've had done with you. You're a playground bully who's decided to hide behind the word "debate" when in fact you simply enjoy being unpleasant, and you lack even the soupcon of courage it takes to acknowledge that while posting anonymously on the Internet. Troll who you like; I've done attempting to respect you in any way.

 

[Roxanne Appleby]

That comes from a horse, but not from this one. There's nothing honest about that statement, and I decline to believe that someone of your wit ever considered your post a reasonable representation of what I said.

I've had done with you. You're a playground bully who's decided to hide behind the word "debate" when in fact you simply enjoy being unpleasant, and you lack even the soupcon of courage it takes to acknowledge that while posting anonymously on the Internet. Troll who you like; I've done attempting to respect you in any way.

That is unfortunate and I regret it, but in this instance the mote is in your eye, not mine. It is a fact that your original post gave no consideration to the source of the goods whose distribution was its subject. Going into a huff when I point this out reflects badly on you, not me.

 

[BlackShanglan]

That is unfortunate and I regret it, but in this instance the mote is in your eye, not mine. It is a fact that your original post gave no consideration to the source of the goods whose distribution was its subject. Going into a huff when I point this out reflects badly on you, not me.

Your post was crammed with loaded language and deliberate misrepresentation of my position. I recognize that this is, in fact, your chief and most common strategy - to insult and misrepresent, then to argue that people are angry with you because they can't answer your logic. It's a lie, and it's a lie anyone sincerely interested in ideas would be ashamed of. It's also what I've come to expect from you, and thus lacks the sting of surprise.

 

[JAMESBJOHNSON]

Roxanne is Pollyanna but not evil, and I cant recall when she's been rude.

 

[Roxanne Appleby]

Your post was crammed with loaded language and deliberate misrepresentation of my position. I recognize that this is, in fact, your chief and most common strategy - to insult and misrepresent, then to argue that people are angry with you because they can't answer your logic. It's a lie, and it's a lie anyone sincerely interested in ideas would be ashamed of. It's also what I've come to expect from you, and thus lacks the sting of surprise.

Loaded language yes, but not deliberate misrepresentation of your position.

Let me be explicit. Trysail wrote that capitalism efficiently allocates scarce resources. You responded dismissively with "when the supply is finite . . . its chief efficiency seems to be in moving scarce commodities into the hands of the wealthiest people."

To your credit you also said, "the rising prices created by scarce supply do seem to stimulate more production." Based on that I accept blame for not granting a more generous interpretation to your post. (I was probably put off by its overall sneering tone.)

Referring to the ice-after-a-hurricane scenario you said that the freedom to set prices "seems to me more likely that it limits use of the commodity to people with cash to burn, whether they need it or not." This is a direct allusion to a debate you and I had several years ago in which the alternative buyer of ice was a poor person who needed it to keep their life saving medicine cold.

In that debate (and generally) I have said taking away the freedom to set prices makes it more likely that next time there won't be any ice for anyone.

To connect the dots, sneering at the freedom to set prices for goods infers a desire to take away or limit that freedom. This suggests a failure to understand or appreciate what is required to produce those goods in the first place. To be even more explicit, when you take away or limit the freedom to "price things and allocate capital towards them on the basis of your pricing beliefs" - Handprints' definition of capitalism - you also remove or limit the incentive for individuals to do the hard things necessary to produce the abundant goods whose availability too many people take for granted.

 

[BlackShanglan]

Let me be explicit.

Pray don't waste your efforts on my account. I care very little what people think of me, but I care very much what they make of debate and rational discourse. You do cheap and ugly things to it, and you use it in ways that are both dishonest and cowardly. To prolong any discussion with you is only to encourage you to degrade yourself and the art further.

 

[Roxanne Appleby]

Pray don't waste your efforts on my account. I care very little what people think of me, but I care very much what they make of debate and rational discourse. You do cheap and ugly things to it, and you use it in ways that are both dishonest and cowardly. To prolong any discussion with you is only to encourage you to degrade yourself and the art further.

That's really low and really unfair, Shang. It's downright cruel. At the very least it suggests that you are applying to me a monumental double standard. If your goal is to silence a vigorous advocate of a point of view you disagree with, congratulations: You may have just succeeded.

 

[xssve]

The applebot is accustomed to one sided discussion, to merely question her narrative is the very essence of socialism:

Shang is upset that, after many smart and energetic people have dilligently and often courageously applied 200 years worth of unprecedented knowledge accumulation and wealth creation to produce the inumerable goods available in the current era, the distibution of those goods in some cases falls short of his ideal.

Ingrate!

Trysail fails to convey here what he actually understands, that without the process referred to in the previous sentence those "scarce resources" would be nothing but unmined rocks and untilled dirt.

True, financial investment makes it possible for corporations such as Barrick Gold who have accumulated enough capital to buy off the local politicians, to bulldoze independent miners into their own stakes and use child and slave labor to extract the gold much faster, albeit at a much higher human and environmental cost - but hey, supply and demand, you know.

Bottom line here with all of the applebot posts is that capital is the only good, and to stand in the way of it's accelerated accumulation is the greatest evil - no other considerations are worth mentioning, and if people have to die for it, it's always for a good cause.

On the contrary applebot, no one disputes that there are those willing to take advantage of any situation , to try an prevent them from doing so is like trying to keep the cat out of the cream - one merely questions the ethical wisdom of rolling the red carpet out for them and strewing rose petals in their path, using our collective power to eradicate their enemies and keep them in the style to which they've become accustomed - I figure where there's a will there's a way, and as a person accustomed to keeping my consumption habits from reaching compulsive levels, from considering avarice itself a virtue, I have to ask what exactly you have done for me lately?

I don't need your baubles if they have blood all over them.

Meantime, I suspect enterprising individuals will continue to make progress, while corrupt pseudo-capitalists will continue to drain their blood and hire attack dogs like yourself to spin it - it is the way of the world, but I object to making it the sanctified standard.

Utilitarian ethics have been correlated with brain damage, just FYI - on the philosophical value scale they're right beside racism, eugenics and slavery.

 

[xssve]

I have but one question for you applebot: is the current situation diseconomic or is it not?

No need to cut and paste, it's a simple yes or no question.

 

[trysail]

Think about our cousins, the Chimps - they had it fucking made.

Eh? Say what? You mean the animals that practice cannibalism and infanticide? Or were you perhaps falling into the trap of idealizing the bonobo?


(Fair Use Excerpt)
By Michael Kahn
Mon Oct 13, 1:35 PM ET

LONDON (Reuters) - Despite their reputation as lovers not fighters of the primate world, bonobos actually hunt and eat other great apes, German researchers said Monday.

Their findings, the first direct evidence of hunting by the so-called "hippie" apes, show that such behavior is not linked to male dominance as females rule bonobo society and also go on hunts.

"We always have this view that hunting is a male business," said Gottfried Hohmann of the Max-Planck Institute for Evolutionary Anthropology in Leipzig, Germany. "What our study shows is this is not necessarily the case.

"This has implications for models on early humans that people have proposed how humans have evolved," said Hohmann, whose findings are published in Current Biology.

Bonobos, chimpanzees and orangutans, collectively known as the great apes, are the closest genetic relatives to humans and scientists study their behavior to learn more about our own evolution...

***​

...The apes are generally considered more peaceful than their close cousins, the chimps, and have a reputation for free-loving ways because sex plays a major role their society, being used for greetings, conflict resolution and reconciliation.

Scientists had thought bonobos, found in the lowland forest south of the river Congo, only ate small animals such as squirrels, forest antelopes and rodents they encountered.

But over five years of observing a group of bonobos the researchers recorded about 10 instances when a group of the apes set out on hunting trips in search of chimpanzees.

Each time the bonobos silently crept through the woods on the ground, trying to get underneath a group of chimps before clambering up a tree in a sudden attack, the researchers said.

The bonobo hunts were successful on fewer than half the excursions and in some cases shared the meat, evidence they were willing to share to encourage group hunting, Hohmann and colleagues said.

(Editing by Will Dunham and Opheera McDoom)

http://news.yahoo.com/s/nm/20081013/sc_nm/us_bonobos_hunting_2

 

[amicus]

Chuckles, you bad, bad person...thas hitting those old hippies where it hurts the most.

On a more serious note, would be interesting to hear your thoughts on crude oil selling at half what it was in the summer and any predictions....

Amicus....

 

[xssve]

Eh? Say what? You mean the animals that practice cannibalism and infanticide? Or were you perhaps falling into the trap of idealizing the bonobo?


(Fair Use Excerpt)
By Michael Kahn
Mon Oct 13, 1:35 PM ET

LONDON (Reuters) - Despite their reputation as lovers not fighters of the primate world, bonobos actually hunt and eat other great apes, German researchers said Monday.

Their findings, the first direct evidence of hunting by the so-called "hippie" apes, show that such behavior is not linked to male dominance as females rule bonobo society and also go on hunts.

"We always have this view that hunting is a male business," said Gottfried Hohmann of the Max-Planck Institute for Evolutionary Anthropology in Leipzig, Germany. "What our study shows is this is not necessarily the case.

"This has implications for models on early humans that people have proposed how humans have evolved," said Hohmann, whose findings are published in Current Biology.

Bonobos, chimpanzees and orangutans, collectively known as the great apes, are the closest genetic relatives to humans and scientists study their behavior to learn more about our own evolution...

***​

...The apes are generally considered more peaceful than their close cousins, the chimps, and have a reputation for free-loving ways because sex plays a major role their society, being used for greetings, conflict resolution and reconciliation.

Scientists had thought bonobos, found in the lowland forest south of the river Congo, only ate small animals such as squirrels, forest antelopes and rodents they encountered.

But over five years of observing a group of bonobos the researchers recorded about 10 instances when a group of the apes set out on hunting trips in search of chimpanzees.

Each time the bonobos silently crept through the woods on the ground, trying to get underneath a group of chimps before clambering up a tree in a sudden attack, the researchers said.

The bonobo hunts were successful on fewer than half the excursions and in some cases shared the meat, evidence they were willing to share to encourage group hunting, Hohmann and colleagues said.

(Editing by Will Dunham and Opheera McDoom)

http://news.yahoo.com/s/nm/20081013/sc_nm/us_bonobos_hunting_2

As I've noted before, species under stress tend to increase both violent and sexual behaviors, and by extension, sexually violent behaviors - sexual predators are often produced by early exposure to sexual and emotional violence.

This is probably an artifact of the reptilian brain: when an organism feels it's survival threatened, it will often drop the elaborate social behaviors that maintain social balance and adopt increasingly aggressive strategies to increase breeding potential by monopolizing territory, resources, sexual partners, etc.

i.e., the entire range of planetary ecosystems are under increasing stress, so any behavior being currently observed has to be intrepreted in this light, i.e., it may not be "normal" behavior, but the result of environmental stressors.

Like I said, the had it made, now they're just in the way of "progress" - that was my point - that you are idolizing capital and rapid development as the only definition of progress, and in purely statistical terms, that means you have to have a constantly growing population in order to increase demand, which means you have to deplete resources at faster rates, which causes commodification price pressures, which means markets have to grow even faster, while cutting costs even more, etc., etc.

There are logical limits to this, there have to be, that's all I'm saying, it's a philosophical question: is capital the only consideration here? Is it just going to be a race to the edge? Saturation, die off, and eventual (hopefully) recovery and repetition?

And don't give me any of that "Malthus is dead" crap, this is biology 101, all populations, all organisms follow this pattern - we happen to be the only one capable of constructing abstract models of cause and effect that allow us to make educated guesses about outcomes based on specific behavioral models.

Whether we use it or not, or are capable of using it on a mass cultural level is the real test of whether we make it as a species, or we go the way of the Bonobos, who will most likely be extinct by the end of the century.

 

[xssve]

Is capitalism "moral?" Does the statement even have meaning? I'll leave that debate to others but will say this: Given the improvements in human well being that have arisen where capitalism is permitted to operate, and the misery that prevails where it is not, prohibiting capitalism is immoral.

Oh fucking please, "prohibiting capitalism" - as if, what a bunch of fucking children.

 

[xssve]

The real question is, have we already "prohibited capitalism" by redefining it as "bailing banks and corporations out every ten years", and draining the capital reserves that might otherwise be used to form what is the backbone of capitalism, small businesses?

Seems to me that Keynsianism is more in keeping with the spirit of capitalism than what is rapidly developing - fuck, developed, into corporatist patronage.

Used to be, you actually had to do something, make something to call yourself a capitalist - nowadays you just push numbers around until your calculator busts circuit.

How much of the "capital" that has evaporated over the last two weeks represented actual goods and services?

Do financial services even count as production? Seems to me more of a shift towards that good old Bushco value subtracted economics.

 

[trysail]

(Fair Use Excerpt)
New York Times
http://www.nytimes.com/2008/10/31/b...r=1&oref=slogin&ref=business&pagewanted=print
October 31, 2008
Mortgage Plan May Irk Those It Doesn’t Help
By DAVID STREITFELD
As the Treasury Department prepares a $40 billion program to help delinquent homeowners avoid foreclosure, it confronts a difficult challenge: not making the plan too tempting to people like Todd Lawrence.

An airline pilot who lives outside Norwich, Conn., Mr. Lawrence has a traditional 30-year mortgage that he has no trouble paying every month. But, thanks to the plunging real estate market, he owes more on his house than it is worth, like millions of other people.

If the banks, which frequently lent irresponsibly, and many homeowners, who often borrowed irresponsibly, are getting government assistance, Mr. Lawrence says he believes sober souls like himself are also due a break.

“Why am I being punished for having bought a house I could afford?” he asked. “I am beginning to think I would have rocks in my head if I keep paying my mortgage.”

The plan, still under development by Treasury, is part of the economic rescue package passed by Congress earlier this month. It is aimed at aiding up to three million beleaguered homeowners by reducing their monthly payments.

Washington and Wall Street are frantically seeking to stabilize markets by curtailing the onslaught of foreclosures. There are now at least four major plans to aid homeowners. But experts say it is difficult to design these programs in ways that reduce the indebtedness of the distressed without giving everyone else a reason to mail the keys back to their lenders.

“If the lunch truly is free, the demand for free lunches will be large,” said Paul McCulley, a managing director with the investment firm Pimco.

More than 10 million homeowners are underwater like Mr. Lawrence, and their ranks are swelling. In theory, Mr. McCulley points out, underwater homeowners benefit when a neighbor is bailed out instead of surrendering his house to foreclosure. With a foreclosure, the owner becomes the bank, which will care for the house minimally. When the bank finally manages to unload the house months later, the fire-sale price will establish a new floor for the remaining neighbors.

But the benefits of a bailout for his neighbors seem ephemeral to the 45-year-old Mr. Lawrence, especially because he figures the cost of helping them will come, one way or another, out of his pocket as a taxpayer. “I’m basically financing my own financial destruction,” he said.

Government officials say that homeowner bailouts are not a gift. For one thing, they assert, most mortgages will simply be revamped so the monthly payments become affordable for the next few years. Reductions in loan balances, which are drawing the most attention, will generally be a last resort.

“This is not about trying to create fairness,” said Michael H. Krimminger, special adviser for policy at the Federal Deposit Insurance Corporation, which is working with Treasury on the latest plan. “The goal is to keep people in their houses.”

Still, he acknowledged, “a lot of people are angry because they feel some people are getting something they don’t deserve.”

Going into default, whether as a gambit to get a loan modification or to get rid of a burdensome house payment, carries risks. Under some conditions, lenders have the right to sue a borrower for assets beyond the house itself. Then there is the inevitable blot on the borrower’s credit record.

Other factors are intangible: Many owners like their houses and neighborhoods and do not want to leave them. And many people, even as their retirement funds vaporize, consider paying their debts a moral obligation.

Against those considerations must be measured the burden of paying a $500,000 mortgage on a property now worth $350,000.

“From a purely economic standpoint, there’s not a whole lot to be gained from staying,” said Rich Toscano, a San Diego financial adviser whose popular blog, Piggington.com, predicted the collapse.

Homeowners are not the only ones weighing their options. Real estate investors are also wondering if they will be left behind.

“We told our lenders that if you’re writing down 90 percent of your portfolio, we want to be in on it,” said Jason Luker, a principal at Cardinal Group Investments in San Diego. Cardinal owns homes that it rents out.

“If all of our neighbors are getting bailed out despite their own bad decisions, arrogance or ignorance, and we’re asked to keep playing by the rules for the sake of the greater good, I don’t want to participate,” Mr. Luker said.

Peter Schiff, the president of Euro Pacific Capital in Darien, Conn., who prophesied doom before it became fashionable, says he thinks just about everyone who is underwater and has few other assets should stop paying.

“If the government says, ‘Prove that you can’t afford your house and we’ll redo your mortgage,’ then people are going to try to qualify,” Mr. Schiff said.

In that situation, those who will benefit the most are the ones who, unlike Mr. Lawrence, spent far beyond their means — who refinanced their houses and used the cash to buy toys and lavish vacations, or sometimes just to pay the bills.

“You put something down, you have something to lose,” Mr. Schiff said. “You put nothing down, you’ve got nothing to lose.”

Though hard numbers are scarce, estimates are that foreclosures will surpass one million this year. Losses on home loans are piling up faster than banks can deal with them. First Federal Bank of California said this week that as of June 30 it owned 380 foreclosed houses. It managed to sell 329 of them during the third quarter but acquired another 450.

This sense of rapidly losing ground underlies the urgency behind the Treasury’s new plan, which is being developed even as various homeowner bailouts that were announced earlier are just getting under way.

A White House spokeswoman, Dana M. Perino, said on Thursday that the plan was not “imminent” and that several different proposals were being considered.

“If we find one that we think strikes the right notes and could meet all of those standards that we want to protect taxpayers, make sure that it’s also fair and that it would actually have an impact, then we would move forward and we would announce it,” Ms. Perino said.

The Federal Housing Administration began Hope for Homeowners on Oct. 1, aimed at making as many as 400,000 mortgages affordable. Under the program, lenders will refinance loans to 90 percent of a house’s current value, automatically giving the owner 10 percent equity.

The loans will be insured by the government, which will take a share of any gain when the house is sold. If a sale occurs in the first year, the government takes it all. The second year, it takes 90 percent; and so on down a sliding scale. After five years, it takes half the gain.

To guard against fraud, an F.H.A. spokesman said, borrowers will have to certify they did not “intentionally” default.

The Hope Now Alliance, an initiative by a range of lenders, trade groups and counseling agencies, says it has aided 2.3 million borrowers in the last year. Nearly half of Hope Now’s most recent workouts involved modifications of the original loan, including reducing the principal or the interest rate.

Countrywide Financial says it will help 400,000 of its customers through the Nationwide Homeownership Retention Program, slated to begin in December. Countrywide, an aggressive lender during the boom, is now a division of Bank of America.

The $8.4 billion program arose out of a legal settlement, but a Countrywide spokesman, Rick Simon, said the lender now realized that it was cheaper to keep owners in their homes than to let them go into foreclosure.

But not every owner. The program, aimed at those spending more than a third of their household income on a mortgage, property taxes and insurance, is limited to borrowers with subprime and pay-option adjustable-rate mortgages — the worst of the many exotic loan types that proliferated during the boom.

“Confusion or misrepresentation went into the marketing of these loans,” Mr. Simon said. By contrast, a buyer with a standard 30-year mortgage “probably understood the terms.”

Countrywide says it will write down pay-option mortgages to as low as 95 percent of the current value of the home. The borrowers must either be in default or “reasonably likely” to default.

“I guess they are forcing me to deliberately stop paying to look worse than I am,” said one borrower with a Countrywide pay-option loan. “Crazy, don’t you think?”

The borrower, who lives in suburban Los Angeles, took nearly $200,000 in cash out of his house and then paid less than the monthly interest due on his new loan.

He now owes about $350,000 on a house that is worth only $150,000. He asked not to be identified for fear he would not get a modification, which could reduce his mortgage to $142,500.

 

[Kev H]

“Why am I being punished for having bought a house I could afford?” he asked. “I am beginning to think I would have rocks in my head if I keep paying my mortgage.”

Most definitely a sickening mess. If we all begin thinking in terms of fairness (or getting our "pound of flesh" from those who helped put us in this drastic situation), we're truly fucked, as a society. It's a tempting rationalization, though; it feels good to be angry at those who were financially irresponsible, but I fear that's a slippery slope. There's no bottom in sight if the good guys, the financially responsible, begin to think their responsibility is only hurting them.

I don't see any solution that jives with everyone, but someone has to keep this section of our people focused on the long-term health of our society (and them, as a member of it). The irresponsible people, as a whole, will not learn their lesson--we need to get used to that idea. And, we cannot rewind the clock to wipe away the culture that allowed them to pretend they were affluent (moreso than they were). However, if we cannot correct that mistake without punishing the responsible people (the foundation of our property/ownership/tax dynamic), then I cannot see why our brand of capitalism isn't truly dead (i.e., unsalvagable).

Any thoughts on how we accomplish this? No one wants to be crapped upon by the instigators of this mess (or at least a large part of the problem: the enablers and the enabled), but using that as a feeling to justify further destabilization is like vandalizing your own neighborhood when you riot.