Keith Ellison’s Utopia
Posted by Moonage on 17 Jul 2008 | Tagged as: Fun with Numbers, Idiot of the day
Representative Keith Ellison submitted this letter to The Hill blogs:
We have to consider the 30 years of stagnant wages that your average Americans have had to face. That fact is that the reason we have people refinancing their homes, getting home equity loans, getting high rate interest credit cards and petty loans is because wages have been flat. We need to pursue a higher wage strategy. Humphrey-Hawkins required that the Fed not only try to maintain loan inflation, but also increase full employment. Full employment, with the increased productivity rates that we would experience, would have meant that people would have been making more money. If people would have been making more money, people would not be in the difficult, dire straits that they are in today. I think that we have to look beyond just the current crisis in to the larger framework.
What dimension does this guy live in? I’m not sure I’ve ever read a more completely clueless statement in my lifetime.
To wit. “Wages” can otherwise be called “Per Capita Income”. Now, those figures are very easily obtained. If Keith had looked, he would have seen this:
In other words, “wages” have grown 400% over 30 years. What is “stagnant” about that?
Then, we have to look at “full employment”:
We are closer to “full employment” than we were in 1976.
So, the actual evidence is more people are working and making more than they were 30 years ago. Completely contradicting Keith Ellison’s assertion. This guy couldn’t be more wrong if he tried. So, his solution that more people have jobs that pay more money is flawed as well.
So, what is the root of this mess? Paul Krugman I think did the absolutely best job illustrating it.
Paul Krugman illustrates where the problem is
The foreclosure rate for fixed rate loans has dropped substantially since 2000. The Primes have stayed pretty much level. The only area to increase, and to say the least, spike, is the Subprime Adjustable Rate. Now, what does Paul also point to that means something in this discussion?
Paul Krugman illustrates the average price of a house
Starting around 1998 or so, the average price of a house exploded, doubling in about five years. Problem is, there was nothing to support this. People were borrowing twice as much money to build the same house as they did in 1995. Wages were increasing, but not that fast. A lot of this “bubble” was financed, obviously, with risky loans. Now, those risky loans are biting the careless and greedy loaners that issued them. The additional effect is that those risky institutions making those loans also held a lot of traditional loans. As they got in trouble with the risky loans, it affected the more traditional loans. Additionally, since the average price of a house was twice as much, it required Fannie Mae and Freddie Mac to access more credit. Now, in addition to risky loans hammering the private sector, it is believed that some of those same institutions that were issuing those risky loans, like Indymac, were also sending Freddie Mac and Fannie Mae bogus loan applications that should never have been in the traditional mortgages in the first place, thereby increasing the exposure to risky loans for Freddie Mac and Fannie Mae.
So, what needs to be done? In my opinion, Freddie Mac and Fannie Mae need to re-examine their portfolio of mortgages received from Countrywide and Indymac. Possibly foreclosing on those that should never have been there in the first place. In the meantime, the feds need to make the traditional market more accessible to safer loans by raising the mortgage limits for applicants.
That’s really about it.
And you know what, that’s already being done.
In the meantime, the companies that ignored the rules will be absorbed in the market place. Countrywide’s already being absorbed, Indymac will be absorbed by someone else I imagine. So, rather than imposing his Utopian dream of a purely communist society, I think Keith Ellison just needs to stay out of issues he clearly is completely clueless about.
And quite frankly Minnesota, you guys have elected a blitehring idiot. Please, for the sake of the rest of the country, do the right thing.
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