Bush Calls for $140 Billion Economic Aid Package

[HuskyCaucasian]

Share your thoughts.

Below is a link to Bush's plan...

http://www.nytimes.com/2008/01/18/business...amp;oref=slogin

[HuskyCaucasian]

Ok, I understand the need to drive more money into the market, but it's not FIXING the problem. $800 or $1600 isnt going to pay mortgages that were doomed fromt he start. it wont pay thousands of dollars in medical bills. The underlying problems need to be fixed, just dont throw money at it and expect it to get fixed.

[southsider2k5]

This is all so mental it isn't even funny. We have been being talked into a recession for six months now, and this is their way of talking us out of it. That amount of money is so small, it wouldn't really have a noticable economic effect on a 6 TRILLION dollar economy. Besides by the time this actually hits the economy and flows through, odds are we would be coming out of the slump without this help anyway. It really is pointless.

[NorthSideSox72]

This is all so mental it isn't even funny. We have been being talked into a recession for six months now, and this is their way of talking us out of it. That amount of money is so small, it wouldn't really have a noticable economic effect on a 6 TRILLION dollar economy. Besides by the time this actually hits the economy and flows through, odds are we would be coming out of the slump without this help anyway. It really is pointless.

Funny thing too, what may bring us out of the recession was a major contributor to going into one - housing. There has not been a housing recession like this in a very long time, and maybe not one as severe ever. It runs against the grain. Opportunists are going to start buying up depressed property for future development. That gives desperate sellers cash, and encourages that future development. The only reason it hasn't started in earnest already is the parallel credit crisis - those developers won't get as leveraged as they did, and marginal ones won't be able to enter the market. But for the majority of them that are semi-well-funded, they will only be encouraged.

 

[HuskyCaucasian]

Funny thing too, what may bring us out of the recession was a major contributor to going into one - housing. There has not been a housing recession like this in a very long time, and maybe not one as severe ever. It runs against the grain. Opportunists are going to start buying up depressed property for future development. That gives desperate sellers cash, and encourages that future development. The only reason it hasn't started in earnest already is the parallel credit crisis - those developers won't get as leveraged as they did, and marginal ones won't be able to enter the market. But for the majority of them that are semi-well-funded, they will only be encouraged.

See, that is were i think the problem lies. It's the housing / credit market (they are tied together). That is why i dont htink Bush's plan works on any level. if nothing else, it gives it a very small temporary bump, but then it goes right back tot he same course. The underlining issues need to be address. The underlining problem is a really bad mortgage system. It's a combo of people who over extend themselves and lenders prey on those people and peopl ein worse off situations. If that isnt fixed int he next few months, this tax refund is pointless.

[Rex Kickass]

This is all so mental it isn't even funny. We have been being talked into a recession for six months now, and this is their way of talking us out of it. That amount of money is so small, it wouldn't really have a noticable economic effect on a 6 TRILLION dollar economy. Besides by the time this actually hits the economy and flows through, odds are we would be coming out of the slump without this help anyway. It really is pointless.

 

You don't think the housing bubble bursting coupled with a credit crunch finally reaching critical mass with Joe Consumer is more than a mental reason for recession?

[StrangeSox]

This is all so mental it isn't even funny. We have been being talked into a recession for six months now, and this is their way of talking us out of it. That amount of money is so small, it wouldn't really have a noticable economic effect on a 6 TRILLION dollar economy. Besides by the time this actually hits the economy and flows through, odds are we would be coming out of the slump without this help anyway. It really is pointless.

 

May 6, 1932

 

A very interesting book could be written on mass psychology and the effect thereof. That everyone is influenced more or less by the opinion of others is obvious. There was no reason for the unwarranted heights which the market reached in 1929 except universal over-optimism - there is, no excuse for the present market value of good bonds and stocks today except undue pessimism. In 1929 no pessimistic comment could survive. Today an expression of confidence in the future of the country is unpopular. Strangely, the peaks of 1929 and the low quotations of today are both due to the same cause, which is lack of intelligent and sound analysis. It is strange that such divergent conditions should come within such a short period and should be due to such identical factors.

 

We are no longer much interested in the fantastic heights of 1929 except that we marvel at our lack of sane judgment. We are keenly interested in the present, and until some time elapses and we can obtain a better perspective it is difficult to realize that present conditions and markets are just as abnormally low as 1929 conditions and markets were excessively high.

 

There are only two premises, which are tenable as to the future. Either we are going to have chaos or else recovery. The former theory is foolish. If chaos ensues nothing will maintain value, neither bonds nor stocks nor bank deposits nor gold will remain valuable. Real estate will be a worthless asset because titles will be insecure. No policy can be based upon this impossible contingency. Policy must therefore be predicated upon the theory of recovery. The present is not the first depression; it may be the worst, but just as surely as conditions have righted themselves in the past and have gradually been readjusted to normal so this will again occur. The only uncertainty is when it will occur.

 

Everyone now seems to be indulging in the futile desire to buy at the bottom, just as everyone sought the very top in 1929. Most conservative people thought that values were much too high in 1928. Their judgment has since been fully vindicated in spite of the fact that values went much higher in 1929. Someone once said that they had made their fortune because they had never tried to buy at the bottom or sell at the top. This only means that they had not striven for the impossible but had been satisfied to buy when values were in general low and had been satisfied to sell when values were in general high, and without regard to peaks, which no one can identify and which, except by accident, are impossible to attain.

 

I think everyone must know that values are now abnormally low. In a few years and with a better perspective they will realize that they were low in 1931. In other words, they were even then way below normal. People are deterred from buying good stocks and bonds now only because of an unwarranted terror. Almost everyone says that prices are going still lower. All sorts of bugaboos are paraded to destroy the last vestige of confidence. Stories of disaster, which are incredible and untrue, are told to foolish and credulous listeners, who appear willing to believe and worst.

 

I wish to say definitely that values were low in the latter half of 1931 and that they are now ridiculous. To prove this one has only to take an average period of 10 to 20 years of earnings, which should provide a proper normal, and compare present values with the value, which such normal earning power would adequately support. The stocks .of many good companies which are faced with no ascertainable financial hazard are selling at only 2 or 3 times 10 year earnings, and at from 5 to 50 of sound book value, disregarding such valuable intangibles as good will, going concern value and trained intelligent organizations which it has taken years and the expenditure of vast sums of money to develop. I wish to say emphatically that in a few years present prices will appear as ridiculously low as 1929 values already appear fantastically high.

 

In 1929 one could only profit by selling. Many of us are instinctively reluctant to sell. There was the problem of reinvestment - there were taxes to be paid on profits. Today the situation is reversed. The present offers a splendid opportunity to the buyer. Great fortunes will be made out of securities bought today. There is no tax on buying and there is no sentimental deterrent. Only unwarranted fear or a futile desire to buy at the very bottom deters people from investment now. Most people who are buying at all are buying Treasury Certificates or the highest grade of municipals. Some are even putting money in their safe deposit boxes. None of these things are cheap. By comparison they are most expensive.

 

The time to have bought Treasury Certificates and the highest grade of short-term obligations was in 1928 and 1929 when values were high and in order to preserve the dollar intact. The present is the time to use the dollar in the purchase of good securities, whether they be greatly depreciated bonds or excessively deflated common stocks. All of our customers who have money must some day put that money to work, and into some type of revenue producing investment. Why not invest it now when securities are cheap? Why leave it in cash or invest in Treasury Certificates, which are dear? Some people say that they wish to await a clearer view of the future. When the future is again clear the present bargains will no longer be available. Does anyone think that present prices will continue when confidence has been fully restored? Such bargains exist only because of terror and distress. When the future is assured the dollar will long since have ceased to have its present buying power. If one holds either cash or the very highest grade of short-term bonds as a temporary medium of investment he will find that he has only permitted great investment opportunities in tremendously under priced securities to escape him.

 

It requires courage to be optimistic as to the future of the country when nearly everyone is pessimistic. It is, however, cowardly to assume that the future of the country is in peril.

 

No successful policy can be established upon this unsound theory. It is easy to run with the crowd. The path of least resistance is to join in the wailings that are now so popular. The constructive policy, however, is to maintain your courage and your optimism, to have faith in the ultimate future of your country and to proclaim your faith and to recommend the purchase of good bonds and good stocks, which are inordinately depreciated. You will gain the respect of those people with whom you come in contact by such an attitude. If you can persuade them to evidence their confidence in the future of the country by the purchase of good securities now you will do them a great favor and they will be grateful to you later.

 

It is disconcerting to have recommended the purchase of securities in 1931 as they have gone much lower since. This shakes one’s confidence in his own judgment. You were just as right, however, in 1931 as you are now in recommending investment in securities, which were even then cheap. I can remember distinctly that I could find no justification for values, which existed in 1928 and in many cases recommended sale or advised against purchase. I was decidedly wrong, as prices went much higher in 1929. I was only wrong, however, in that I failed to pick the very top of the market. It is true that values in 1928 were already inordinately high as judged by normal and average yardsticks.

 

On April 18. 1929. I dictated a memorandum, which was published to the entire organization, copies of which are still available in the files. The subject matter of the memorandum was unpopular. It stated that people were buying stocks without regard to “value, earning power and dividends, present and prospective.” It stated that people were buying stocks not because they were worth the price at which they were selling, but because they hoped they would go higher and could be sold at a profit. The memorandum stated that the average speculator who bought stocks upon that theory in the long run lost money. It compared the psychology, which then existed (April, 1929) with the psychology of the Florida land boom. The commodity inflation of 1919 and other characteristic periods of inflation. It pointed out that one could not afford to buy stocks that earned less than 5 and paid less than 3 on market values then prevailing. It stated “perhaps we are going to have the greatest era of prosperity in our history.”---

 

“Maybe we have already had this era. Perhaps we have nothing but increasing earnings and increasing dividends ahead of us. I hope so. If we have. Present values are hardly justified; if we haven’t they wi11 decline. Many things can happen, most of them unforeseen - politics, wars, economic changes, European competition, money shortage, withdrawal of foreign balances, adverse foreign trade balances, sudden withdrawal of large sums of bootleg money in the call market. Federal Reserve restrictions, interference by Congress or by the Government. These things probably won’t happen but they might. If they don’t present levels may be all right - if they do, the last holder will suffer and not the next to the last, but we can’t all be next to the last.”

 

 

“The danger signals are waving - higher time money than we have ever known - more speculation than ever before - and tremendous brokers’ loans, though this may be a proper and normal increase in a very rapidly growing country. Not only are the rich and intelligent speculating but many have “their last dollar in the stock market on margin. $5,500,000,000 of record and a great deal more, unrecorded, is borrowed to carry stocks. People are paying 8 or 9°s for this money and generally getting 3 or 4. How long can this last? Can it last until the 3 or 4 catches up to the 8? Probably not.”

 

“I am not a stock market prognosticator nor an analyst. I do not pretend to be a Moody, a Babson, or a Brookmire. I have been rather pessimistic about stock market prices for two years. If I had been an unqualified optimist I could have made a great fortune. I am not a pessimist - I think this country will prosper beyond conception in the next 20 years. I don’t, however, believe in over-speculation. I don’t believe in 9 money for 3 stocks. The former may be temporary - the latter is more or less permanent unless price levels change. I have been taught that a good stock should earn 10, not 5. Probably I am old-fashioned. In any event, this is not the prevailing custom today. I believe that people should speak honestly and not too guardedly. I would not want our brokerage department to be the means or vehicle of severe loss to people. It is hard to be patient with 3 stocks carried on 9 money. Will they stay at a level, which produces a 3 return? John Moody and a great many other excellent authorities seem to think so. I don’t know but I would not gamble on it.”

 

Dean Witter

[YASNY]

I didn't take the time to read the entire commentary by Dean Witter, but usually the first paragraph or two cover the crux of the matter. But, wouldn't Dean Witter have a vested interest in persuading the average investor that stock market is not only healthy but undervalued?

[HuskyCaucasian]

But, wouldn't Dean Witter have a vested interest in persuading the average investor that stock market is not only healthy but undervalued?

I've never understood why our entire economy is based on speculative values of companies.

[HuskyCaucasian]

I SHOULD be a little fair here. A combination of this rebate with the freezing on foreclosures might be a kick in the seat. I dont like the foreclosures freezing solution, but it's temporary. Might just be enough.

[Texsox]

Would this be a good time for a Republican President to hand out gifts to the tax payers? When is the next election?

[YASNY]

Would this be a good time for a Republican President to hand out gifts to the tax payers? When is the next election?

 

Just remember that this will have to be approved by a Democratic congress.

[southsider2k5]

You don't think the housing bubble bursting coupled with a credit crunch finally reaching critical mass with Joe Consumer is more than a mental reason for recession?

 

Honest answer is yes, it is mental. I already showed people that the technical measure of GDP has one components making up for the losses in housing (exports). The way the US markets work is that we write debt off, and then go back to work. The reason the Japanese never recovered is because their culture does not allow the write down of debt. Also not getting mentioned is that the money for housing is going somewhere. All of these people who are getting foreclosed on, aren't becoming homeless (for the vast majority). They are moving somewhere else, and spending money on housing.

 

The irony of it all is that all this proves is that some people shouldn't own houses, no matter what the homeownership #s look like.

[YASNY]

I've never understood why our entire economy is based on speculative values of companies.

 

It's because the money men know and set the rules. The reason is always profits.

[NorthSideSox72]

I SHOULD be a little fair here. A combination of this rebate with the freezing on foreclosures might be a kick in the seat. I dont like the foreclosures freezing solution, but it's temporary. Might just be enough.

Freezing foreclosures is a horrible idea, in my view. I could understand freezing rate increases temporarily, or setting some other restrictions in there. But if you freeze foreclosures, you will only make the problem worse. For one thing, those mortgage companies that are already losing money and laying people off will suddenly be laying off even more people. And for another thing, you'll just end up with an even bigger pile of foreclosures later for it, which is even harder for the economy to stomach.

 

[kapkomet]

Honest answer is yes, it is mental. I already showed people that the technical measure of GDP has one components making up for the losses in housing (exports). The way the US markets work is that we write debt off, and then go back to work. The reason the Japanese never recovered is because their culture does not allow the write down of debt. Also not getting mentioned is that the money for housing is going somewhere. All of these people who are getting foreclosed on, aren't becoming homeless (for the vast majority). They are moving somewhere else, and spending money on housing.

 

The irony of it all is that all this proves is that some people shouldn't own houses, no matter what the homeownership #s look like.

DING!!! WINNAR!!!

 

Except illegal immigrants. They work their asses off and deserve a house and (dirty) money.

 

[HuskyCaucasian]

Freezing foreclosures is a horrible idea, in my view. I could understand freezing rate increases temporarily, or setting some other restrictions in there. But if you freeze foreclosures, you will only make the problem worse. For one thing, those mortgage companies that are already losing money and laying people off will suddenly be laying off even more people. And for another thing, you'll just end up with an even bigger pile of foreclosures later for it, which is even harder for the economy to stomach.

very good points. I was in favor of a 6 month freeze and in those 6 months work to revamp the system. I think the SYSTEM needs to be fixed.

[Texsox]

Just remember that this will have to be approved by a Democratic congress.

 

Beautiful isn't it? Even if it's a bad idea, how can the Dems say no? Santa is coming early this year

[southsider2k5]

I SHOULD be a little fair here. A combination of this rebate with the freezing on foreclosures might be a kick in the seat. I dont like the foreclosures freezing solution, but it's temporary. Might just be enough.

 

I'll say it again. Freezing foreclosures would be the worst possible thing you could do to our economy. Forcing companies to hold onto bad debt for extended amounts of time will have a huge detriment to the economy. It basically puts the multiplier on ice.

[NorthSideSox72]

DING!!! WINNAR!!!

I'm gonna make a slightly different point - that it exposes the nearly complete lack of education on finance that this country's kids get. For the leading economy of the capitalist world, we sure don't seem to value knowledge of finances in our schools. Its an afterthought if its there at all.

 

[Texsox]

DING!!! WINNAR!!!

 

Except illegal immigrants. They work their asses off and deserve a house and (dirty) money.

 

Intersting we do not require citizenship or even coming here to own real property in the US. Foreign companies and individuals invest in American property all the time. Or was this a slam against hard working people?

[HuskyCaucasian]

I'm gonna make a slightly different point - that it exposes the nearly complete lack of education on finance that this country's kids get. For the leading economy of the capitalist world, we sure don't seem to value knowledge of finances in our schools. Its an afterthought if its there at all.

I have to say, i wish every kid in America had my dad. He taught me so well. I know to save money. I know not to over extend. i know to budget and plan for the unexpected. I cant tell you how many times I have stood up to my wife (who LOVES to spend every dime she makes) and say "no, we need to save it. we dont need that". Then guess what... we needed the money for medical bills or car work or some unexpected reason. You can teach kids at school all you want, but the best education is at home.

[southsider2k5]

I've never understood why our entire economy is based on speculative values of companies.

 

First of all people want a clear and simple way of taking something incredibly complex, and boiling it down into a 2 second soundbyte. The closing Dow Jones Industrial Average is just that.

 

Second, the health of the countries largest companies, is an accurate measure of the economy as a whole. If those companies are employing people, things are good. If they aren't making money, they fire their works, and things aren't so good anymore.

[Texsox]

I'm gonna make a slightly different point - that it exposes the nearly complete lack of education on finance that this country's kids get. For the leading economy of the capitalist world, we sure don't seem to value knowledge of finances in our schools. Its an afterthought if its there at all.

 

I believe part of the issue is the age that the classes would happen. At 16 or 18 I don't believe the kids have enough "real world" experience and it does not "stick" for the 10 years or so until they are buying homes, etc. Think how hard we strain to remember some items we learned in High School.

[HuskyCaucasian]

I believe part of the issue is the age that the classes would happen. At 16 or 18 I don't believe the kids have enough "real world" experience and it does not "stick" for the 10 years or so until they are buying homes, etc. Think how hard we strain to remember some items we learned in High School.

I graduated HS in 2001 and I dont remember a damn thing I learned in ConsumerEd sophomore year. I learned it all at home and from experience.