[davelj]

[quote=sdduuuude]
The logical fact remains – when the government starts making decisions for people, it removes choices from every-day people, increasing their reliance on luck.

There’s no two ways about it from my perspective.
[/quote]

Your perspective is incomplete. When you take one person’s money – say, a wealthy person’s – and redistribute it to another person – say a poor person – you are removing the choice of what the the first person will do with that money, but… you are increasing the choices available to the person receiving that money. The wealthy person has already benefited from luck. All you’re doing is raising the odds that the poor person will benefit as well. Now, in reality, many poor folks will be HURT by receiving that money because it will set up a negative incentive (ouch!), but… in many other cases this redistributed “assistance” will help that disadvantaged person. The price of the former is one expense related to helping the latter. And, admittedly, I’m oversimplifying (just as you are).

[quote=sdduuuude]
And I’m quite certain that the government shouldn’t be in control of luck.
[/quote]

Spoken as someone who has benefited from luck and thus wants to simplify the debate into something that is silly on its face.

[quote=sdduuuude]
Somebody writes a book saying luck plays a part in people’s success and all of the sudden, we need the government to get involved to fix the whole problem.

True insanity.[/quote]

The problem is not “luck”, per se, and you know this. The problem is massive income (and thus influence) inequality of which one source is “random fortune” (or “luck”).

While I don’t advocate a Scandinavian-socialist model, it’s pretty clear to me (at least) that our system is rigged to perpetuate the ultra-wealthy and, as we saw during the financial crisis, to “protect” these folks from the actual downside risks associated with the risky assets from which much of this group’s wealth is derived (think of much of Big Finance). If these folks are going to have a permanent put related to their wealth – as it appears they do – I think they should pay for it in the form of redistribution that reduces the level of inequality that we see today.

I’m not saying this is a perfect model (far from it, in fact) – to be clear – I’m just saying the model we have now is completely screwed where the middle class is concerned vis-a-vis the 1%.

[davelj]

[quote=CA renter] Beautiful girls have a way of making perfectly intelligent men do painfully stupid things.[/quote]

Just ask Bobby Petrino… or the LONG list of others.

As Jim Rome says, “The unbeaten, untied, undisputed Heavyweight Champion of the World is… sex. Ultimately it takes down everyone it encounters in the ring.”

Now, by “takes down” he doesn’t mean “destroys” (although that happens a lot too), but he means that virtually everyone ultimately succombs (even clergy, apparently).

[davelj]

Your friend must do this transaction… in the interest of my personal entertainment. Please encourage him.

And if on the off chance that it turns out to be legit (hey, there’s always some miniscule chance, right?), then more power to the Foreclosure Virgin Power Couple.

[davelj]

[quote=pri_dk]Interesting approach.

Are you concerned about legal recourse if the policy chooses not to pay?

That’s a concern I have with American companies, but I would be more concerned with a policy in another country. Our medical system sucks, but our legal system can actually work for the “little guy” (not always, but it’s not impossible either…)

Say you actually needed to invoke the unlimited ceiling and the provider decided not to pay – do you think your chances of prevailing in court would be better/worse/the same in Mexico?[/quote]

I’m not overly concerned. I think you’d run into the same issues whether in the US or Mexico. I think it’s natural to believe that companies from one’s own country are more “honorable” – for lack of a better word – than those of other countries, and particularly developing countries (the “home country bias”). The evidence, however, doesn’t support it.

As an aside, my agent – referred to me by my doctor in TJ – has dual citizenship and owns a home on Coronado (where she has an office) as well as in TJ, where she spends most of her time. Most of her clients are wealthy Mexicans that live in both the US and Mexico. When we were discussing the two countries’ systems she said, “It wouldn’t occur to me or most of my clients to get healthcare in the US – we have the same quality at 1/3 the cost in Mexico.” My point is that I think false perceptions drive a lot issues within the health care debate.

[davelj]

[quote=pri_dk][quote=ocrenter]I do agree it is not the prototypical southern state. [/quote]

I agree Florida is culturally different than say Mississippi or Alabama – certainly more ethnically diverse.

But Florida was part of the Confederacy, which is the standard definition of the American “south.” And pre civil war it had an economy heavily dependent on slavery, which is the root of racial tension in America.[/quote]

That part of Florida that identifies culturally with the South is principally north of Gainesville and through the Panhandle. If you asked a sample of residents south of Gainesville whether they had more in common culturally with Georgia or California/North East… the majority would answer the latter. I don’t think there’s any more racial tension in Florida than there is in, say, California. The same cannot be said of much of the rest of the South.

[davelj]

[quote=ocrenter]It is the South.

This is expected.[/quote]

Just a point on what defines “the South” (being from the South myself).

Florida is IN the South – geographically – but it is not OF the South. Culturally, Florida is completely different from the aggregate of Louisiana, Alabama, Mississippi, Georgia, South Carolina, North Carolina, Virginia, West Virginia, Kentucky, Tennessee, and Arkansas, which are culturally somewhat similar (at least compared to Florida).

Culturally, Florida has more in common with California or New York than with Georgia, et al. Just clearing that point up.

[davelj]

[quote=CA renter]

Most of the growth in life expectancy over the past 50+ years came from lower infant/maternal mortality rates and lower death rates at younger ages (mostly due to antibiotics, vaccines, and fewer work accidents/more regulations). The net increase in life expectancy for those who reach 65 was about 2-3 years, IIRC.[/quote]

From a paper linked in another thread: “In 1935, 65-year-olds could expect to live 12 additional years on a gender-blended basis, while a 65-year-old in 2004 could expect an additional 19 years of life.”

So, the net increase in life expectancy since the beginning of Social Security for those who reach 65 is about 7 years (using 2004 data). So, about half of the overall increase in life expectancy over the last 75 years has been from lower infant mortality, and the other half from actual increases in longevity.

[davelj]

[quote=bearishgurl][quote=davelj]I’d guess $1850/month for the larger one, $1700/month for the smaller one. Might be able to get $50/month more for each. But that’s in the ballpark.[/quote]

Just saw this and I think your rent projections are a bit too high for these units, davelj. There is a lot of current vacancy down there and one can rent a 1500-1600 sf SFR in that area for about $1800-1900 mo.[/quote]

I’m not suggesting that Craigslist is the last word on rents, but if you go there you’ll see plenty of comps that support my rents. Also, I have a friend that owns a 1325 sqft condo in CV that’s inferior to both of those units (by a wide margin) that he rents out for $1450/month. I also follow the rents on three large complexes down near Tocayo, and 825 sqft 2/2 units are renting for $1250/month. But perhaps you know the various sub-markets better than I do – I only have a handful of datapoints; I’m no expert.

[davelj]

I’d guess $1850/month for the larger one, $1700/month for the smaller one. Might be able to get $50/month more for each. But that’s in the ballpark.

[davelj]

[quote=Allan from Fallbrook]Yeah, Krugman is “cool” because he can operate in an academic vacuum and never once have to truly deal with the real world and how things get built. Just wave a magic wand and we have… Infrastructure! Do a little research and fully understand the process before opining, because you clearly have no idea what you’re talking about.[/quote]

Which gets to the larger problem that… most academics and politicians have precious little real world experience in anything… and yet they influence hundreds of billions of dollars of “investment”. I don’t, however, know what the alternative is. But it would be nice if occasionally someone raised their hand and said, “I don’t understand any of this”. I ain’t gonna hold my breath…

[davelj]

[quote=pri_dk]

Of course this has been discussed here before many times, mostly with a tone of outrage.

As one of those “responsible” types who would not qualify for the free boost to my balance sheet, I really want to find a reason not to like this idea. But I’ll step back and try to be objective.
[/quote]

I wouldn’t qualify either. Frankly, I feel sorry for those that would. I mean, how financially challenged are these folks? Helping these folks – who are at least trying to be responsible – wouldn’t bother me too much at this point. I certainly wouldn’t want to trade places with them.

[quote=pri_dk]

I agree the idea has merits. Mainly, it eliminates the huge transaction costs of the slow but inevitable foreclosure process. Most of the underwater portion of mortgage debt will ultimately be written off balance sheets anyway, so why not just get it over with?[/quote]

Also, recall that a goodly portion of this money would effectively be going to Fannie/Freddie… which we as taxpayers already own! So, there’s a circular reference in this strategy as well.

[quote=pri_dk]

But what about government? What is the government really doing here? They are sending out checks, but only to forgive debt that is already lost. Is there a cost? Where does the money come from – can the government just “print” this money since it isn’t real anyway?[/quote]

Yes, the Federal Reserve can just print the money (in effect). This is one iteration of Bernanke’s “helicopter” strategy.

[quote=pri_dk]

And in what ways is this different from taking on (and monetizing) debt? [/quote]

None, in effect. This would be a “targeted monetization” of consumer debt as opposed to a “general monetization” of government debt, which is what the various QEs are.

[quote=pri_dk]
It could work, but it is definitely uncharted territory.[/quote]

Yup, the devil’s in the details… and we just don’t know.

[davelj]

[quote=pri_dk]

davelj made a reference up-thread to some studies that show that, in general, ROI on government spending in the past few decades has been negative. I’ve seen these studies referenced before, but never with enough details that I could really tell if the methodology was sound or the sources were unbiased.
[/quote]

Actually, that’s not what I said. All I said was that from an economy-wide standpoint – that is, inclusive of government, businesses and consumers – additional debt has been yielding incrementally less GDP for a few decades. I have no idea what the ROI on government spending is, specifically. But, on an economy-wide basis, if we’re defining R=GDP growth and I=incremental debt, then yes ROI, in aggregate, has been declining (although not negative, to be clear).

[davelj]

[quote=pri_dk][quote=davelj]I agree with this 100%. But… we are so far in the hole AT THIS POINT that I would argue that almost all INCREMENTAL debt is harmful – again, at this point.[/quote]

By ‘harmful,’ do you mean worse than the alternatives?

I think that’s the crux of it. It is very likely that we only have a few crappy alternatives, but which is the least crappy, and why?
[/quote]

A good question. I don’t have a good answer. But… when you’re in a hole the best interim step is to stop digging.

Rather than create more debt, and as objectionable as it may sound, I’d prefer going in the other direction and extinguishing debt via the Ben Bernanke Helicopter: Just send a “specific use” check to all of the underwater homeowners still current on their mortgage payments such that their LTV drops to 105%. The check would (obviously) vary in size by the amount needed to get the LTV down to 105%. (That’s about a $600 billion aggregate check, by the way.) The check could ONLY be used to reduce the mortgage – not for consumption. Theoretically, this would reduce debt and not lead to inflation, as you still couldn’t borrow against the house (it’s still underwater) and most of the lenders ultimately receiving the funds are in no mood to lend (expanding the money supply). I’m not saying this is a good solution, by the way. I’m just saying it, or something similar to it, might be a least bad one.

Now, here come the folks justifiably complaining about moral hazard and “but I was responsible and you’re rewarding stupidity”, etc etc etc… Let the admonishment rain!!

[davelj]

[quote=pri_dk]The idea that debt is always bad and that more debt is always worse is simply not true.[/quote]

I agree with this 100%. But… we are so far in the hole AT THIS POINT that I would argue that almost all INCREMENTAL debt is harmful – again, at this point.

We are the equivalent of a struggling levered firm “gambling for resurrection” (to use an old LBO term) at this point. The first step is to stop gambling.

(But, hey, at least we have a printing press. Of course, to some extent it’s that very printing press that’s gotten us into this mess. Oh, sweet paradox!)

[davelj]

[quote=briansd1][quote=davelj]
[quote=briansd1]
Krugman is right that government debt and spending is contributing a positive sum to GDP, right now. The government could contribute more if it weren’t for political obstruction.
[/quote]

The operative words being “right now”. That debt will have to be paid back one day, thus one day the servicing of that debt will be a drag on “future” GDP. File under: Kick The Can Down The Road, Additional Ways To.[/quote]

Yes, “one day the servicing of that debt will be a drag on “future” GDP” but the productive capability we are building today will continue to contribute in the future and will make paying down the debt easier.

There will be a drag on future economy growth, but that drag will be lower than the momentum we are creating today. That will thus result in a positive sum. That’s the magic of debt and capitalism. ;)[/quote]

Empirically incorrect. There was a period of time (several decades back) during which, arguably, debt was accretive to GDP – that is every $1 of incremental debt was creating more than $1 of incremental GDP. That relationship broke down… I believe back around 1980 (could’ve been the 1970s, I can’t recall exactly). Now we’re at the point where it takes several dollars of incremental debt to create one additional dollar of GDP (thank you Federal Government). That’s patently obvious in the debt-to-GDP charts that you see so often (even thought they’re typically wrong). We are well beyond the point where we can simply leverage our way out of the current mess – the math is not at all complicated.

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