Originally Posted by Fish2006
Actually, these are not unreasonable arguments. It will actually take me a little time to think through them. The best way to win an argument with me is to give me facts and help me learn something :) - if that is your goal.
I think the leverage thing I wrote wasn't as nuanced as yours. I think most people understand that if you allow, say, an internal trading desk at Goldman, Bear, Lehman (!) to borrow money to buy CDOs at 1% down (i.e. 100x leverage), you are making certain assumptions about the risk of those CDOs. And you are right, it works both ways, as from what I understand, it was Goldman that actually popped the housing bubble by going hard short and super leveraged just as the housing was starting to crack - but I could be mistaken.
The real root of the problem, when I really think about it, was rating agencies (Moody's et. al.) slapping the AAA label on CDO debt fraudulently. In an environment where there is little *cough* reality around actual risk assessment, allowing super high leverage (i.e. 10x and higher) is really fucking dangerous. Until we get evidence that Moddys, Fitch, and others are actually paying attention to whats going on and not just lapdogging for investment banks whose securities they grade, I think leverage has to be limited.
I agree that leverage is just a tool - it is borrowing money. The real question is "for what". Leverage to buy a home or start a business where a.) the risks are at least reasonable understood and b.) there is at least some level of skin in the game that is meaningful == good. Leverage of 100x on securities that you can't even price (hence, what they used to call "mark to model"), let alone price on a RAROC basis (risk adjusted return on capital), well, thats bad.
Back to the administration, and by that I mean going all the way from Bush (where the buck stops, remember) - to the SEC and the chain of command in between - should have stopped this years ago. Limitations on capital ratios for leverage, not allowing high leverage on securities you can't even price efficiently - would have stopped this. It didn't, and as a result, we are all paying a tax, through a lower dollar, and worse, through a government bailout of the players involved - which in the end, is simply borrowing from our kids to pay for not allowing the free market to handle these entities that fucked everything up in the first place.
Ok, now for energy. I personally think government is the last entity that should refresh the grid. But I think some leadership to mandate a lot of things that would help, such as requiring states to allow for net metering (some do, some don't) - and promoting through tax incentives to energy companies reinvestment into the grid to make it possible - would achieve a number of positive things, namely:
a.) Making the grid more robust because power is generated in a distributed fashion
b.) Achieve the upgrades required that will allow us to leverage the wind corridor in the middle of the country
The problem is that, currently, a grid upgrade would essentially cannibalize the profits of Exelon and the other power companies. So it doesn't happen. IT isn't a conspiracy, it just is the fact that a company is not going to invest capital in projects that kill their profits. If I owned Exelon, I probably wouldn't either.
I am no expert, but it seems like splitting ownership of generation and transmission would do a lot of good here. When one shares interest in the other, we don't get a distributed grid. Government would have to enforce the splitting of ownership and making sure that those two conflicting interests don't collude. As we know, given how friendly BushCo is with energy, that nothing like that is going to happen soon.
As for higher taxes pushing up the dollar - hey, it is what they told me in macro econ class :). If you take money out with higher taxes, in theory, you are using it to pay down the debt (outbound to China). Now, thats a special problem, because China still pegs their currency to the dollar to some degree, so you might be robbing peter to pay paul.
No candidate is really talking about what would be really nice, which is to tax estates at like 100% of everything over a few million (no more paris hilton), eliminate corporate taxes (which is the most onerous middle class tax, since corporations are mostly just pass through vehicles for middle class wages), and raise taxes on 250k+, so we have a shot at paying off the debt. Reducing money taxed on the middle class, while adding strong incentives for the middle and lower (lets not forget lower - they usually get the shaft in this debate) savings would be a real powerful way to prop the dollar to a reasonable range. Maybe this isn't buying dollars back, but by moving the needle to more saving, less spending, some balance comes back.
I think the weak dollar policy of Bush has indeed helped keep us out of recession, but at a huge cost. Given that we entered the recession cycle early (hell, we just got out 4 years ago) - as a result of the housing crisis, we basically have two wrongs (housing crisis + weak dollar) trying to compensate for one another, and kinda doing so in some ways, but in the process, creating some really nasty longer term problems.
I want leadership for this country that is right more than its wrong. Obama has to speak to his base on taxes - thats a political reality. But he also, of all the politicians in this cycle, owes the least to anyone that I have seen get this far in a long time. It isn't nothing - every politician deals with lobbyists, just like you can't sail a vessel into the ocean and not pick up some barnicles. But his rapid rise actually helps.
For that matter, if Sarah Palin were at the top of the ticket, and did not have some views that, at least to be, are shockingly retrograde (i.e. teaching creationism in school) - I would get behind her.
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