Submit your own Neatorama post and vote for others' posts to earn NeatoPoints that you can redeem for T-shirts, hoodies and more over at the NeatoShop!

How Will the Economic Crisis Reshape America?

Richard Florida wrote an interesting editorial for The Atlantic about how the current economic crisis will shape the future for Americans:

The historian Scott Reynolds Nelson has noted that in some respects, today’s crisis most closely resembles the “Long Depression,” which stretched, by one definition, from 1873 to 1896. It began as a banking crisis brought on by insolvent mortgages and complex financial instruments, and quickly spread to the real economy, leading to mass unemployment that reached 25 percent in New York.

During that crisis, rising industries like railroads, petroleum, and steel were consolidated, old ones failed, and the way was paved for a period of remarkable innovation and industrial growth. In 1870, New England mill towns like Lowell, Lawrence, Manchester, and Springfield were among the country’s most productive industrial cities, and America’s population overwhelmingly lived in the countryside. By 1900, the economic geography had been transformed from a patchwork of farm plots and small mercantile towns to a landscape increasingly dominated by giant factory cities like Chicago, Cleveland, Pittsburgh, Detroit, and Buffalo.

How might various cities and regions fare as the crash of 2008 reverberates into 2009, 2010, and beyond? Which places will be spared the worst pain, and which left permanently scarred?

Will Detroit - currently the 11th largest city in the US - become a ghost town? Will homeownership continue its role as the keystone of the US economy? Read the rest here: Link - via 3 Quarks Daily (Illustration: Sean McCabe)

Detroit is already well on it's way to becoming a ghost town and it began well before the current crisis.
Abusive comment hidden. (Show it anyway.)
Perhaps the economy will prosper after the current downtown, except for the people who starve, die of exposure, or are murdered for camping out on pristine land that's owned by some wanna-be feudalist.
Abusive comment hidden. (Show it anyway.)
One aspect that is starting to rise in Washington state is the law of Adverse Possession. Property owners are losing some of their land due to squatters, who basically take possession of any land they hang out on, as long as it goes uncontested for 8-10 years. It's not feudalism, it's rage. Justifiable Rage.
Abusive comment hidden. (Show it anyway.)
Wanna-be feudalist?

If I have land, and I have a small family, (educated and responsible) do I owe it to poor people with large families to let them squat and take my land.

Do you want us to end up like lovely Mexico City?

It's sort of the same attitude one might have if hungry, and the only thing to eat was someone else's seeds. Eat their seeds, then just get enough strength from it to go and make another baby. The only thing to eat after that will be the responsible people themselves.

As far as Detroit. Some people there are buying up whole blocks. Some day there may be old fashioned truck farms right in the city. There is a good chance it will be a very cool place to live.
Abusive comment hidden. (Show it anyway.)
Sorry, that was a bit ambiguous. What I meant was:

"A lot depends on how you [the original possessor of the sees] got those seeds."

While you legitimately question the justice of a squatter being able to take your land, you open the door to question the justice of your owning land to begin with.
Abusive comment hidden. (Show it anyway.)
Well if we are going to start questioning that, then we would have to question all international borders too. We would have to question whether or not we have any individual rights.

I know a guy who is 26, and has 4 kids. The State pays all his bills. He told me that after his last child was born, (a son he was so proud of) his brother threw him a pack of condoms and said he should learn to use them. I said "there is an easy permanent way to take care of that too" because that's what I did after having my second child. He said "No, I would never do that, what if I broke up with my girlfriend and got another one. It wouldn't be fair to her if I couldn't give her a child". I said "Yes it would".

He told me his sister has 6 kids and takes care of them all by herself because their dad is in prison. I said "She pays all the bills?" No, she is on welfare; he just meant she took them to their doctor appointments and stuff like that.

Where is any society going to end up when people like this have "right" to live off of productive, responsible people?

If you have seeds that need to be planted for the future, only a fool would allow them to be eaten by anyone.
Abusive comment hidden. (Show it anyway.)
You need a license for a gun. You need a license to marry. You need a license to own a dog, heck you need a license to fish.

But having kids -- now that's open to everyone no matter their ability to cover the costs. At least when you own a gun, get a dog of go fishing you have to pay for it....
Abusive comment hidden. (Show it anyway.)
My fear is the coming class warfare of the true workers and business owners vs the government workers- who have unsustainable compensation and benefits, but their bosses are not spending thier own money- it has become an us vs them game and they dont care if we all lose
Abusive comment hidden. (Show it anyway.)
I live in Paulding County, Georgia. Every weekend we see that all of the restaurants and department stores are packed with big eaters and shoppers. It is a fact that the recession we are going through right now is now where as bad as recessions we faced in the 70's or 80's or even as bad as the Great Depression. The automakers have beens slowly going out of business for years. This recession is just now putting the final nail in the coffin. It is not secret that things have got to change. We have to stop lining the pockets of the rich. We have to pay attention to what pollution is doing to earth and try like Hell to reverse it. Most important of all, we have got to invest in education! A whole lot of us are undereducated, which only results in either trying to get by on minimum wage or just existing on what the government hands out. You are never too old to learn and you owe everything to your children to make sure they get a good education so they can have better than you had.
Abusive comment hidden. (Show it anyway.)
Why are government schools so bad? Because Democrats want obedient voters. With obedient voters, the issues no longer matter, but physical factors like, who you think looks better and is cooler. Obama owes a lot of his sucess to the stupidity of voters educated by uncaring over funded schools. Prvatization is the only way to make education work for the consumer.
Abusive comment hidden. (Show it anyway.)
We are in a period of transition right now, and while it's painful to go through, we always come out better for it at the other end. Mistakes have been made, ideas have to be reconsidered and there's got to be a new way of conducting business. It's happened before, it'll happen again and individuals need to change along with the times to become better educated and better trained for what's ahead. Those that don't adapt will be left behind, but we need to remember that we will always need a working class. You can design a product or a building but somebody has to build them and maintain and repair them and those individuals need to share in the American dream too.
Abusive comment hidden. (Show it anyway.)

- Solve the loan problem.
- Solve the derivative problem.
- Reassemble whole loan mortgages

The U.S. economy is shrinking fast, because businesses cannot get loans that they need to operate normally. Banks and lenders already own $ billions in bad loans, and they are afraid to make new loans. The government gave $ billions in bailout money for banks to start lending, but banks hoard the money to save themselves.

Our financial system became untrustworthy, because it mixed $ billions in bad loans in with the good loans. Now, banks do not trust any of the loans, and the entire credit market stopped working.

The U.S. economy will continue to shrink until we untangle the loans. Once the bad loans are isolated, they can be fixed one at a time. Then trust will be restored. Credit will flow, and the economy will grow.

So far, our government is spending $ trillions on bailouts and pork projects, out of ignorance and political ideology. The real solution is much less expensive than that.

The USA has fixed this problem before, and it is not hard to fix again. This is how:

A) Start with the Resolution Trust Corporation (RTC), which the federal government setup to solve a Savings and Loan problem in the 1980s.

B) RTC buys up securitized mortgages and derivatives to reassemble whole mortgage loans.
1. “Securitized mortgages” are home loans that have been bundled into large groups and sold to investors. A group of about 4,000 mortgages can be “securitized” and sold just like a stock or bond. Investors like to buy groups of mortgages because they receive all the monthly house payments.
2. Some groups of securitized mortgages were subdivided into smaller pieces, called “derivatives.” However, both of the fancy names refer to mortgage loans.
3. The problem is that many bad loans (with no payments) got mixed in with good loans. That turned the all the securitized mortgages into bad investments, which are ruining our banks. It is a huge problem, and the government has to fix it, before our economy will recover.
4. Total securitized mortgage and derivative market is estimated at $1.3 Trillion by a Professor of Economics at Ohio State University. (Also see the graph from Deutsche Bank at “The Death of Securitized Mortgages” )
5. Government should buy up securitized mortgages and derivatives at the lowest market price, which is set via a reverse auction. (Google on “reverse auction”.)
6. Squatters, who sit on their mortgage derivatives, in order to extort big $ from the rest of the system, can be forced to sell. (Law is analogous to eminent domain, or sales forced on cybersquatters that registered the domain names of well-established companies.)
7. Government pays mortgage derivative squatters at market price set by previous reverse auctions, perhaps with a penalty to the squatters.
8. Sellers give up all rights. No new law there.
9. Banks, investors, and insurers now have cash instead of questionable mortgage loans and derivatives. So, the banking system is healthy with cash to lend.
10. Credit will flow, and the economy will grow.

C) Government reassembles whole loans from securitized mortgage components and derivatives.

D) Government sorts the newly reassembled whole loans (mortgages) into groups according to risk/quality.
1. Government uses traditional mortgage experts and guidelines to sort the home loans into quality groups, for example, a high quality group would include homeowners with 20% (or more) equity in their house at today’s market price; and house payments that are 25% (or less) of homeowners monthly income.

E) Government (RTC) sells the reassembled whole loans to traditional mortgage banks.
1. This solves the problem of renegotiating home loans with homeowners. Read on.
2. Law must be changed so that reassembled whole loan mortgages cannot be securitized into derivatives, again.
3. An important purpose is to reconnect each homeowner with his lender, and vice versa.
4. It eliminates incentive for mortgage lenders to make predatory and junk loans. If the loan fails, the lender is stuck with a bad loan.
5. Government recovers much of the $1.3 Trillion purchase cost, because government auctions off the reassembled mortgages.
6. The lower quality, more risky mortgages would fetch a lower price at auction.
7. Mortgage companies, that buy the risky loans, will have more room to negotiate with the homeowners.
8. Some homeowner negotiations will not succeed. Those homeowners will move into affordable rentals. (The government does not owe everyone a free house.)
9. Other renters would like to buy those empty homes at reduced market prices.
10. If the government gets stuck with some homes, the government could profit by selling the homes when the housing market recovers.

F) Insurers like AIG may be reorganized through bankruptcy.
1. Securitized mortgage pools never made business sense, unless they were protected by various insurance schemes.
2. Those insurance schemes always were a scam.
3. Insurance only works when most of the insured assets are never hit with a disaster. That is why flood insurance does not work very well. A major flood ruins all the buildings in a large area, all at the same time. So, the insurance company goes broke, and people that bought the insurance are not protected. That is the problem with securitized mortgage insurance. In an economic downturn, the “disaster” hits all the houses at the same time. Securitized mortgage insurance was doomed to fail, and the insurance companies went broke in 2009.
4. Companies that ran the insurance scam may have to go through bankruptcy.
5. Never ending government bailouts for insurers like AIG are just throwing good money after bad. So, stop the bailouts.

This plan is inexpensive, tried and true. It leaves the banks healthy, with cash to lend. It restores trust in the credit markets, so loans will be made. It reassembles mortgage derivatives into whole loans, and restarts traditional mortgage lending. People can get loans to buy homes. Credit will flow, and the economy will grow.*


*The economy will grow if President Obama’s massive tax, borrow, and spending plans can be stopped, before he creates another Great Depression. Presidents Hoover and Roosevelt already tried to tax, borrow and spend their way out of a recession in the 1930s. Instead, they created the Great Depression, which lasted 12 years. Straight as he goes, President Obama is doing it, again. Nevertheless, cleaning up the securitized mortgage mess is a necessary first step.

If President Obama announced Steps 1 and 2, today, the stock market would go up within hours. Investors love a real business plan, instead of a political pork plan. Millions of people will be wealthier, feel wealthier, and have more money to spend. That will jump start the economic recovery within days.
Abusive comment hidden. (Show it anyway.)
Login to comment.
Click here to access all of this post's 16 comments

Email This Post to a Friend
"How Will the Economic Crisis Reshape America?"

Separate multiple emails with a comma. Limit 5.


Success! Your email has been sent!

close window

This website uses cookies.

This website uses cookies to improve user experience. By using this website you consent to all cookies in accordance with our Privacy Policy.

I agree
Learn More