Capitol Hill Blue Forums Political Issues Finance, the economy & Economics How will the financial crisis develop?

Just to clarify, are you saying that what ever the government does is inherently a distortion of the market and inevitably will result in negative consequences?

Unfortunately, the market is all too often a distortion of the market ---- particularly when it is a market of monopolies and vast conglomerates.

This is why I call our economic system the "Invisible Mind of the Marketplace," ---- as opposed to the "Invisible Hand of the Marketplace" of ancient fable.

Quite a few people here seem to whine about government dictatorship; very few seem to be bothered about economic dictatorship. To me, both are equally loathsome, and a cause for alarm. Indeed, economic interests are able to worm themselves into our lives even more dangerously than the government.
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Frankly, Numan, I fail to see the difference between the two

Me too.
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In case you all have not seen it, I highly reccomend a film called "Roll Over, George Orwell"

No, I meant exactly what I wrote, Ardy, and within the context of the subject california rick and I were discussing.:-)
Yours,
Issodhos

Do you mean, "Orwell Rolls in His Grave"?
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Let me be crystal clear about this....

I meant what you said
And?

I don't think you know how these "bond" programs work judging by your mis-informed post.

"Bonds" taken out by states are sold to investors and have a fixed rate priced by the market at the date of issuance. Investor's buy those "bonds" and they receive interest while they hold the bond and at the end of the term (usually 30 years) they receive back the investment. (That is a basic bond and there are others like 'zero cupon' bond that work a bit different).

Once the states auctions off the 'bond issue' then they allocate the money to whatever they want: there are bonds out there to build schools, prisons, maintain roads and some are out there to help first time homebuyers buy their homes. The people that use the state, county or city bond program do not get the money for free. They pay an interest rate which is higher than the 'bond issue' rate and thus the investors get paid plus the locality recoups the cost of the 'bond issue'. The benefit of using such programs is that you get a fixed rate and often you get down payment assistance to either pay for closing costs or to lower the loan amount. There are rules to obtaining such grants such 'recapture tax' which means that if you sell the home in the first 9 years than you have to pay back part of the grant (depending on when you sell the house or refinance and it can be up to the full amount of the grant) if you make a profit on the house. To qualify for these kind of programs there are income limits and they depend on the county you live in. In California, on average I believe the income limit for 1-2 people families is 88k per year and for 3 or more person families is around 100k. There are also house price limits thus you don't buy a mansion with these kind of programs but starter homes.

Programs like the one Rick mentioned, Nehemiah, is a program in which the seller provides the funds. NOT the state, not the lender, not the buyer, not a third party. Nobody is forcing the seller to put up the money. It is their choice.

Side note Rick - Nehemiah doesn't have an expiration period. Maybe your approval for the gift as it but you can re-apply. Nehemiah can also be used on conventional loan but only if you do a MyCommunity 97 Mortgage loan. The Max LTV is 97% but it doesn't have to be that high. Also there are certain requirements for that loan program and might include a home ownership course. The limit for Nehemiah is 6% of the sales price.

Also I kinda gathered that you live in San Francisco and there is a program in that area that also helps first time homebuyers. It is called Downpayment Assistance Loan Program and is offered by Mayor's Office of Housing of the city and County of San Francisco. They provide a 2nd lien that has 0% interest and can be up to 150k and is deferred for 40 years (if you keep that house that long).


BTW, there are programs like this one throught out the country.. you just have to know where to look... most lenders don't want to go into that kind of assistance since it greatly increases the paperwork

I have had so many thoughts on this thread that I haven't had the time to follow up with my own post.

Since it happens so rarely, I wanted particularly to point out where numan and I agree: The greater risk to economic stability and a "free market" is market dominance (monopoly, primarily) by global conglomerates rather than governments - although governmental market manipulation can also have destabilizing effects, they tend to be less long-term than market conglomerations.

Our overreliance on "stock prices" to determine the "health" of the economy has always troubled me, particularly as it is based upon a premise of constant expansion - anything less is considered "unhealthy." But the stock market is a pretty crude barometer of economic health, especially as it misses most of the most important aspects of what the average person considers important: e.g. cost of food and fuel, employment status, wage status, etc, and instead relies on "feelings" and "expectations" about the market rather than fundamentals underlying it. "Booms," "bubbles," and "busts" exaggerate the importance of the market to the overall health of the economy.

For most Americans, the economy has been ailing for over 30 years, as they have seen the cost of everything outstrip their income and more and more of the "expectations" of life - health care, insurance, education for children, adequate housing , an adequate retirement - slip further and further from their grasp. Middle Class 'On the edge' - CNN Money; American Middle Class Still Losing Ground - American Progress; The Heart of the Economic Mess - Rober Reich, 25 July 08. This has been masked, in large part, by the growth in the Dow Jones, NASDAQ, etc. - which means little to the average American wage earner, but, because of conditioning, they rely upon it to gauge how "the economy" is doing.

Long term, I think, the world economy has become less stable and more control has been concentrated in the "big pools of money." (Giant Pools of Money - This American Life). As these pools chase returns, they slosh around the markets and tend to destabilize whatever markets they touch, at the same time driving up prices for everything, without contributing anything to productive capacity. That, I think, is where the real economy is hurting most - we are losing productive capacity and relying more and more on "investments" to sustain "growth." This is a chimera. Some have described it as the problem with "fiat" money, and to that extent, I agree (although the reality is, in my opinion, that all monetary systems are fiat by definition). The end result, inevitably and inexorably, is that the world economy will collapse back in on itself as the gap between the production economy and the investment economy grows beyond even ephemeral support. The mass contraction will be devastating.