Sunday, September 10, 2017
The Banksters Who Wrecked The Economy 10 Years Ago:
Dean Baker: Ten Years After Financial Crisis Our Elites Have Learned Nothing
"Last week, I heard BBC announce the 10th anniversary of the beginning of the financial crisis. This is dated to the decision by the French bank BNP Paribas to prohibit withdrawals from two hedge funds that were heavily invested in subprime mortgage backed securities. According to BBC, this was when lending began to freeze and house prices began to fall. The problem with BBC's story is that house prices had already been falling for more than a year. While the nationwide decline was still relatively modest, around 4 percent, the drop in many of the most active markets was more than 10 percent. This was the reason that the mortgage-backed securities in the Paribas hedge funds had plunged in value. When people bought homes with zero or near zero down, and the price dropped by 10 percent (and was falling rapidly), the mortgages suddenly did not look like very good investments. While some people may try to make good on a mortgage that exceeded the value of their home, many others would simply walk away. This was especially likely when the mortgage was an adjustable rate mortgage that was due to reset to a much higher interest rate in the next year or two. This timing matters because the financial crisis was first and foremost the story of the housing bubble. If mortgage debt had not been tied to an asset that was hugely over-valued, there would not have been a crisis shaking the financial system. This is true even if we recognize the corruption of the financial sector and the number of people who were dealing in complex financial instruments they did not understand. It is understandable that economists and economic reporters would like to turn attention away from the housing bubble since it was easy to see for anyone paying attention at the time. The country had an unprecedented nationwide run-up in house prices, as house sale prices rose far faster than the overall rate of inflation across most of the country. This was a break with the usual pattern where nationwide house prices just tracked inflation. This should have set off alarm bells, not only because the run-up was extraordinary, but because there was no remotely corresponding change in rents. The rental indexes barely outpaced the rate of inflation in these years. Also, even as house sale prices were going through the roof, the vacancy rate for housing was reaching record levels. The fact that houses were being purchased with dubious loans was also hardly a secret. It was common to refer to "NINJA" loans, which stood for "no income, no job and no assets." Banks were happy to make loans to anyone who would take them since they knew they could resell these loans almost immediately in the secondary market. A survey by the National Association of Realtors found that 43 percent of first-time buyers in 2005 had a down payment of zero or less on their mortgage. The "or less" refers to the fact that some homebuyers actually borrowed more than the sale price in order to get money to cover closing costs, renovations or moving expenses. The housing bubble was also the story of the Great Recession. The housing bubble was driving the economy in the years leading up to the crash. Soaring house prices lead to an unprecedented boom in construction, which peaked at just under 6.5 percent of GDP. This would be more than $1.2 trillion annually in today's economy. After the crash, the glut of housing led construction to fall to less than 2 percent of GDP. Anyone have a quick way to fill a demand gap of $800 billion a year? But it was actually worse than this. Soaring house prices led to an unprecedented consumption boom as people spent against the bubble generated equity in their homes. When prices came back down to Earth and the equity disappeared, people cut back their spending accordingly. We lost the equivalent of more than $500 billion in annual demand due to the fall in consumption in the wake of the crash..."
Dean Baker: Ten Years After Financial Crisis Our Elites Have Learned Nothing
"Last week, I heard BBC announce the 10th anniversary of the beginning of the financial crisis. This is dated to the decision by the French bank BNP Paribas to prohibit withdrawals from two hedge funds that were heavily invested in subprime mortgage backed securities. According to BBC, this was when lending began to freeze and house prices began to fall. The problem with BBC's story is that house prices had already been falling for more than a year. While the nationwide decline was still relatively modest, around 4 percent, the drop in many of the most active markets was more than 10 percent. This was the reason that the mortgage-backed securities in the Paribas hedge funds had plunged in value. When people bought homes with zero or near zero down, and the price dropped by 10 percent (and was falling rapidly), the mortgages suddenly did not look like very good investments. While some people may try to make good on a mortgage that exceeded the value of their home, many others would simply walk away. This was especially likely when the mortgage was an adjustable rate mortgage that was due to reset to a much higher interest rate in the next year or two. This timing matters because the financial crisis was first and foremost the story of the housing bubble. If mortgage debt had not been tied to an asset that was hugely over-valued, there would not have been a crisis shaking the financial system. This is true even if we recognize the corruption of the financial sector and the number of people who were dealing in complex financial instruments they did not understand. It is understandable that economists and economic reporters would like to turn attention away from the housing bubble since it was easy to see for anyone paying attention at the time. The country had an unprecedented nationwide run-up in house prices, as house sale prices rose far faster than the overall rate of inflation across most of the country. This was a break with the usual pattern where nationwide house prices just tracked inflation. This should have set off alarm bells, not only because the run-up was extraordinary, but because there was no remotely corresponding change in rents. The rental indexes barely outpaced the rate of inflation in these years. Also, even as house sale prices were going through the roof, the vacancy rate for housing was reaching record levels. The fact that houses were being purchased with dubious loans was also hardly a secret. It was common to refer to "NINJA" loans, which stood for "no income, no job and no assets." Banks were happy to make loans to anyone who would take them since they knew they could resell these loans almost immediately in the secondary market. A survey by the National Association of Realtors found that 43 percent of first-time buyers in 2005 had a down payment of zero or less on their mortgage. The "or less" refers to the fact that some homebuyers actually borrowed more than the sale price in order to get money to cover closing costs, renovations or moving expenses. The housing bubble was also the story of the Great Recession. The housing bubble was driving the economy in the years leading up to the crash. Soaring house prices lead to an unprecedented boom in construction, which peaked at just under 6.5 percent of GDP. This would be more than $1.2 trillion annually in today's economy. After the crash, the glut of housing led construction to fall to less than 2 percent of GDP. Anyone have a quick way to fill a demand gap of $800 billion a year? But it was actually worse than this. Soaring house prices led to an unprecedented consumption boom as people spent against the bubble generated equity in their homes. When prices came back down to Earth and the equity disappeared, people cut back their spending accordingly. We lost the equivalent of more than $500 billion in annual demand due to the fall in consumption in the wake of the crash..."
Wednesday, September 06, 2017
Sure, Let Plastic Go Into the Ocean, But You'll Eat It In Your Seafood
Matthew Savoca: The bad news is that fish are eating lots of plastic. Even worse, they may like it
"As you bite down into a delicious piece of fish, you probably don’t think about what the fish itself ate — but perhaps you should. More than 50 species of fish have been found to consume plastic trash at sea. This is bad news, not only for fish but potentially also for humans who rely on fish for sustenance. Fish don’t usually die as a direct result of feeding on the enormous quantities of plastic trash floating in the oceans. But that doesn’t mean it’s not harmful for them. Some negative effects that scientists have discovered when fish consume plastic include reduced activity rates and weakened schooling behavior, as well as compromised liver function. Most distressingly for people, toxic compounds that are associated with plastic transfer to and bioaccumulate in fish tissues. This is troubling because these substances could further bioaccumulate in people who consume fish that have eaten plastic. Numerous species sold for human consumption, including mackerel, striped bass and Pacific oysters, have been found with these toxic plastics in their stomachs. It is well known that plastic trash poses a serious threat to marine animals, but we are still trying to understand why animals eat it. Typically, research has concluded that marine animals visually mistake plastic for food. While this may be true, the full story is probably more complex. For example, colleagues at the University of California at Davis and I showed in a recent study that plastic debris may smell attractive to marine organisms. That study focused on seabirds, but now my co-authors and I have found that plastic trash has a similar effect on anchovies — a critical part of ocean food chains..."
Matthew Savoca: The bad news is that fish are eating lots of plastic. Even worse, they may like it
"As you bite down into a delicious piece of fish, you probably don’t think about what the fish itself ate — but perhaps you should. More than 50 species of fish have been found to consume plastic trash at sea. This is bad news, not only for fish but potentially also for humans who rely on fish for sustenance. Fish don’t usually die as a direct result of feeding on the enormous quantities of plastic trash floating in the oceans. But that doesn’t mean it’s not harmful for them. Some negative effects that scientists have discovered when fish consume plastic include reduced activity rates and weakened schooling behavior, as well as compromised liver function. Most distressingly for people, toxic compounds that are associated with plastic transfer to and bioaccumulate in fish tissues. This is troubling because these substances could further bioaccumulate in people who consume fish that have eaten plastic. Numerous species sold for human consumption, including mackerel, striped bass and Pacific oysters, have been found with these toxic plastics in their stomachs. It is well known that plastic trash poses a serious threat to marine animals, but we are still trying to understand why animals eat it. Typically, research has concluded that marine animals visually mistake plastic for food. While this may be true, the full story is probably more complex. For example, colleagues at the University of California at Davis and I showed in a recent study that plastic debris may smell attractive to marine organisms. That study focused on seabirds, but now my co-authors and I have found that plastic trash has a similar effect on anchovies — a critical part of ocean food chains..."
Tuesday, September 05, 2017
Cyberwar:
NY Times: Russian Election Hacking Efforts, Wider Than Previously Known, Draw Little Scrutiny
"...After a presidential campaign scarred by Russian meddling, local, state and federal agencies have conducted little of the type of digital forensic investigation required to assess the impact, if any, on voting in at least 21 states whose election systems were targeted by Russian hackers, according to interviews with nearly two dozen national security and state officials and election technology specialists. The assaults on the vast back-end election apparatus — voter-registration operations, state and local election databases, e-poll books and other equipment — have received far less attention than other aspects of the Russian interference, such as the hacking of Democratic emails and spreading of false or damaging information about Mrs. Clinton. Yet the hacking of electoral systems was more extensive than previously disclosed, The New York Times found. Beyond VR Systems, hackers breached at least two other providers of critical election services well ahead of the 2016 voting, said current and former intelligence officials, speaking on condition of anonymity because the information is classified. The officials would not disclose the names of the companies. Intelligence officials in January reassured Americans that there was no indication that Russian hackers had altered the vote count on Election Day, the bottom-line outcome. But the assurances stopped there. Government officials said that they intentionally did not address the security of the back-end election systems, whose disruption could prevent voters from even casting ballots. That’s partly because states control elections; they have fewer resources than the federal government but have long been loath to allow even cursory federal intrusions into the voting process. That, along with legal constraints on intelligence agencies’ involvement in domestic issues, has hobbled any broad examination of Russian efforts to compromise American election systems. Those attempts include combing through voter databases, scanning for vulnerabilities or seeking to alter data, which have been identified in multiple states. Current congressional inquiries and the special counsel’s Russia investigation have not focused on the matter. “We don’t know if any of the problems were an accident, or the random problems you get with computer systems, or whether it was a local hacker, or actual malfeasance by a sovereign nation-state,” said Michael Daniel, who served as the cybersecurity coordinator in the Obama White House. “If you really want to know what happened, you’d have to do a lot of forensics, a lot of research and investigation, and you may not find out even then.” In interviews, academic and private election security experts acknowledged the challenges of such diagnostics but argued that the effort is necessary. They warned about what could come, perhaps as soon as next year’s midterm elections, if the existing mix of outdated voting equipment, haphazard election-verification procedures and array of outside vendors is not improved to build an effective defense against Russian or other hackers..."
NY Times: Russian Election Hacking Efforts, Wider Than Previously Known, Draw Little Scrutiny
"...After a presidential campaign scarred by Russian meddling, local, state and federal agencies have conducted little of the type of digital forensic investigation required to assess the impact, if any, on voting in at least 21 states whose election systems were targeted by Russian hackers, according to interviews with nearly two dozen national security and state officials and election technology specialists. The assaults on the vast back-end election apparatus — voter-registration operations, state and local election databases, e-poll books and other equipment — have received far less attention than other aspects of the Russian interference, such as the hacking of Democratic emails and spreading of false or damaging information about Mrs. Clinton. Yet the hacking of electoral systems was more extensive than previously disclosed, The New York Times found. Beyond VR Systems, hackers breached at least two other providers of critical election services well ahead of the 2016 voting, said current and former intelligence officials, speaking on condition of anonymity because the information is classified. The officials would not disclose the names of the companies. Intelligence officials in January reassured Americans that there was no indication that Russian hackers had altered the vote count on Election Day, the bottom-line outcome. But the assurances stopped there. Government officials said that they intentionally did not address the security of the back-end election systems, whose disruption could prevent voters from even casting ballots. That’s partly because states control elections; they have fewer resources than the federal government but have long been loath to allow even cursory federal intrusions into the voting process. That, along with legal constraints on intelligence agencies’ involvement in domestic issues, has hobbled any broad examination of Russian efforts to compromise American election systems. Those attempts include combing through voter databases, scanning for vulnerabilities or seeking to alter data, which have been identified in multiple states. Current congressional inquiries and the special counsel’s Russia investigation have not focused on the matter. “We don’t know if any of the problems were an accident, or the random problems you get with computer systems, or whether it was a local hacker, or actual malfeasance by a sovereign nation-state,” said Michael Daniel, who served as the cybersecurity coordinator in the Obama White House. “If you really want to know what happened, you’d have to do a lot of forensics, a lot of research and investigation, and you may not find out even then.” In interviews, academic and private election security experts acknowledged the challenges of such diagnostics but argued that the effort is necessary. They warned about what could come, perhaps as soon as next year’s midterm elections, if the existing mix of outdated voting equipment, haphazard election-verification procedures and array of outside vendors is not improved to build an effective defense against Russian or other hackers..."
