Friday, October 07, 2011

Occupy Wall Street Ignorance

The Occupy Wall Street (OWS) movement has no goal and the protests are built on a foundation of ignorance. At the core, protesting Greed, is reasonable and I find nothing wrong with it

I am goal oriented and there is no goal to Occupy Wall Street. That bugs me. It tells me a lot about people though, OWS people are "aversion oriented" and move away from something rather than towards something.

With the current pro-Greed administration it is very doubtful that any actual change will occur. I believe people need to be specific in their goals and at the end I outline 5 goals I think we need to achieve.

Lets address some of the ignorance in the beliefs of the Occupy Wall Street movement. You can find them in the link below.

1: Bankers are responsible for the mortgage crash.

Ultimately management is always responsible for problems. What management in the case?

Here is how the mortgage crash occurred. In the late 90's a Republican congress and President Clinton deregulated mortgages so that more people could purchase homes.

As housing demand increased commission based real estate agents pushed housing prices up as far as they could go. Real Estate offices are typically small franchise businesses. Realtors typically make more money brokering a mortgage than they do selling a house. The higher the interest rate the more money the realtor made.

Mortgage brokers are also typically small businesses and the higher the interest rate the more money the mortgage broker made.

Here are two small businesses operating within the law and being as profitable as they could be.

The mortgage brokers sold the mortgages into pools which were offered as investments. Investment organizations such as those on wall street.

So who really screwed up? Appraisers. Why?

As realtors and mortgage brokers were looking to increase housing prices privately contracted appraisers were pressured to appraise homes at inflated values. Those appraisers who did not submit to the pressure were not contracted and went out of business.

Even local governments hated appraisers who submitted realistic appraisals because the real appraisal reduced the local tax base.

Appraisers either supplied the Greed demand or were out of work.

The small business process and failure to monitor real estate appraisals is what caused the crash.

Want to prevent another crash? Make all real estate appraisers employees of the federal government. No regulation on wall street can fix this problem.

This problem was caused by local Greed.

2: The Wall Street crash directly caused the gravest unemployment crisis since the Great Depression.

Not really, although it didn't help. The biggest problem is businesses exporting their manufacturing overseas. 70% of people in the United States do not have a bachelors degree. Most of them are employed in small businesses. The first employment crash occurred when the internet bubble burst. When the mortgage bubble burst construction declined. These both set off chain reactions. A similar thing happened in the 70's when the primary employment for the 70% of people without degrees was in manufacturing. Within about 5 years two economic bubbles burst in the United States creating huge employment issues.

We need balanced and diversified national employment which means government regulation. Sorry folks, this problem is also caused by local greed.

3: Wall Street profited from the bailouts and remains unaccountable:

Can't argue this one, it is absolutely true.

4: The super-rich are getting richer:

Can't argue this one, it is absolutely true.

5: The super-rich are paying lower and lower taxes:

Not from my research, but, I'd be willing to review the research others have done and there is no link or reference to that research. I have reviewed the tax code and the only real issue I see is that the capital gains is fixed at 15% no matter what the income is.

The Democrats in congress are pushing a "millionaire" tax increase, which is a laugh. Look up how many people make over 1 million a year. Most millionaires declare between 150K and 250K a year in income. A millionaire is someone with over one million dollars in assets, not an income of over one million dollars a year. The Senate Democrats are FOS.

Not buying this, but, willing to listen.

6: Financial elites pay lower taxes than their secretaries:

Wording is wrong, some people pay a lower tax rate than others. Correct the wording and I agree.

Capital gains interest rate should increase with income. Under 100K, 15% is fine. After that 100K the normal tax rate applies so about 35% of everything over the first 100K would work for me and the vast majority of retired people living on investments.

This reason has an incorrect basis. the 15% capital gains rate was originally for retirees. The "carried interest" should not be taxed at capital gains rate. That is just lame.

7: None of those who caused the crash have been prosecuted.

True, because it was a bunch of your next door neighbors doing their best to make a profit in their small businesses and none of them broke the law.

8: Wall Street is much too big and its salaries are much too high:

I do not believe "Wall Street" is too big. I'm not sure what "too high" means. For the most part I agree that the amount of money that can be made by Wall Street Brokers is obscene and I think that money needs to be taxed at 35% of everything over 100K up to 1 million. 50% of everything 1 million and above.

The more people make, the more they spend and the more they should be taxed. Period.

9: Wall Street still owns the regulators.

Can't argue this one, it is absolutely true. Wall Street owns Washington, especially the Senate Democrats.

10: Financial innovation is a joke.

Disagree, the mortgage de-regulation in the 90's increased the potential for home ownership. It should have been tempered by making all real estate appraisers Federal Government employees so they only had to answer to the government when they appraised real estate.

There have been many innovations in finance over the years. Back in the 20's mortgages were interest only and balloon payments were common which is why so many family farms were wiped out. Changing mortgages was a financial innovation.

I could write a long time about things like this, but, it would take multiple economic text books to explain t all. This statement is just ignorant.

There they are, 10 reasons to protest without any kind of goal, 3 reasons make sense, 1 could be reasonable. Maybe 40%, the rest is ignorance.

Does that mean people shouldn't protest? No. People should protest.

The Federal government is not going to establish any real estate appraisal regulation because they like the record increases and don't really care about the record crashes. Maybe 1% of people have researched the mortgage crash well enough to know that it was caused by appraisals at maximum possible value. Greed caused the mortgage bubble, greed in the heartland.

Microsoft caused the Internet bubble crash by making their software not work with other companies software. The world is naturally moving away from microshit and into Linux. Advertising driven business models have always succeeded. If Microsoft had played fair instead of being a greedy corporate monster the world would be better off now. Microsoft should be split up the way Ma Bell was.

We need Copyright reform, software should not be covered by copyright, it should be covered by patent law and all code should be open source. Open source and software patents will increase the pace of innovation creating jobs and increasing the national GDP.

The one thing that I agree with is that our financial problems have been caused by Greed and that Greed is bad.

The government should take some action, but, they won't because congress is owned by people with money who make the decisions.

I'd like to see five things accomplished by these protests.

1: Split up Microsoft.

2: All software should be open source and covered only by patents.

3: All Real estate appraisals should be done by employees of the Federal Government.

4: Tax all capital gains over 100K at 35% up to 1 million and then at 50%.

5: Impose a tariff on Chinese imports based on currency exchange rates.

I am really tired of people rejecting each other over ideas. Reject ideas. Do not reject people.

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