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Comment by mmphosis | Hacker News Reader

US Presidents during The "Upward" Ramps:

  John F. Kennedy - January 20, 1961 - November 22, 1963
  Lyndon Johnson - November 22, 1963 - January 20, 1969
  Jimmy Carter - January 20, 1977 - January 20, 1981
  Bill Clinton - January 20, 1993 - January 20, 2001

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As a non-American, I have no allegience to either party... but couldn't you be mixing up cause and effect here? Perhaps instead of one party creating the economic effects, perhaps that party is voted in when the country is doing economically well?

This is a theory I've often heard, and personally suspect to have a good deal of validity (although obviously it's an oversimplification). In good economic times, people don't mind the government spending a lot - after all, the economy is doing well, what can go wrong? In bad economic times, people think the government ought to be more stingy.

Of course, this is pretty much the opposite of what you really want. When the economy is doing well is the time to reel in spending and raise taxes. When the economy is doing badly is the time for stimulus spending and a larger deficit.

The mistake is associating one party or another with spending. While American conservatives speak of cutting spending rarely does this happen in practice. Think of the Iraq war under Bush, or my favorite, in 2003 Republicans extending Medicare's prescription drug coverage to essentially pander to elderly voters [1]. Not to mention most voters are poorly informed. Most elections are won by charismatic candidates and campaigns that can weave a coherent narrative rather than by the population's calculations on what spending policy is best for the country. I worked in politics for years, including for Obama for America in 2008 and wow undecided voters are scary. And those are the people who decide elections, people who are largely poorly informed & making gut decisions about who has the power to start wars for the next four years.

1. http://en.wikipedia.org/wiki/Medicare_Prescription_Drug,_Imp...

"As a non-American, I have no allegiance to either party." - this does not follow. Just because you are not the citizen of a country does not mean you do not have political biases that lead you to look on certain politicians/parties with favor.

Or did you mean - "I have no knowledge of US politics and have no opinion of these politicians"

I take "political bias" to mean "how will this affect me". Even someone with some understanding of US politics will typically not be able to immediately understand the worldwide implications of a certain leader over another. For example, take a platform of cutting taxes: How is that going to affect a random guy who lives in Australia?

I suppose some people can say "I'm a democrat and will always vote democrat", but don't I follow that kind of thinking. I think I've voted for almost every party in my country at one time or another, depending on who I feel is best suited for representation at that time.

I have knowledge, and opinions, but like I said: no allegiance. I feel partisanship is pointless, and because I have zero influence on US politics, I remain on the sidelines observing rather than leaning one way or another.

I'm not sure that means much. Sometimes the effects of previous policies are inherited. And more importantly, the president of the US, contrary to popular opinion, doesn't control everything in the universe.

There's a Mathematica worksheet which demonstrates that stock market returns (DJIA) are highly sensitive to start date / policy effect delay assumptions:

http://www.demonstrations.wolfram.com/StockMarketReturnsByPa...

It's not proof that you would observe a similar effect in this data, but it's enough for me to put no stock in any speculation of this sort that doesn't come with a sensitivity analysis :)

Bill Clinton rewrote the Community Reinvestment Act, which many believe played a central role in the housing bubble[1]. Political policies do not take effect over night - Often their effects take decades to surface.

1.http://content.time.com/time/specials/packages/article/0,288...

The meme of the CRA causing the housing bubble holds little water.

A simple example of why this idea has very little validity: the housing bubble was a global phenomenon.

As a second example: most of the questionable sub-prime lending during the housing bubble was done by private institutions not under the CRA regulation.

Some good reading on the subject: http://www.ritholtz.com/blog/2011/11/examining-the-big-lie-h...

Now if you want to talk about repealing Glass-Steagall or the lack of regulation of the derivatives market via the Commodity Futures Modernization Act (both mentioned in the article you link to), then I'm all ears.

While I don't believe the CRA was the root cause, I do believe it influenced the invention of MBS to relieve banks of the debt they deemed too risky for their own balance sheets

Based on what? Reference?

Hacker News continues to mystify me - getting knocked down for asking for a reference for a statement?

> the housing bubble was a global phenomenon

Is there a link that shows the foreclosure data in different countries?

I find it hard to take at face value as some large real estate markets (e.g. China) don't even have the same structure (mortgages, underwriters, loan originator, loan repackager) as US does.

Foreclosure data is different from housing prices - which can be seen here:

http://www.ritholtz.com/blog/wp-content/uploads/2011/11/Sept...

I agree with you about China - different structure - but this chart shows how the bubble spread throughout Europe.

I don't know about foreclosure data, but I also wouldn't look at just that, because regulations are different in other countries. I live in the Netherlands and a lot of people now (about 30%) have a mortgage that is worth more than the house. That is not a huge problem as long as they are able to pay the mortgage each month and do not have a pressing reason to move, do not get divorced, etc. but if they do need/want to move they end up with a debt for the difference of the value of the house and the mortgage (In this country, you cannot just walk away from your house and debt, you always remain responsible for the debt).

I think the fact that 30% of all houses here are "underwater" is a better sign of a housing bubble than the amount of foreclosures because at least where I live in many cases banks prefer not to foreclose but put the house on the regular market and hope to sell it for a reasonable prices.

It wasn't CRA that caused the housing bubble. It was cheap debt and public attitudes towards real estate investment.

JFK and LBJ both had tax cuts as major economic policy decisions, Jimmy Carter deregulated every industry he could get his hands on, and Bill Clinton created the largest and most important Free Trade agreement in our country's history. It is almost as if good economic policy requires a bit of ignorance about party lines.

Which LBJ tax cuts would those be?

JFK's supply side tax cuts are well known by Republican policy wonks, after all they were a concrete inspiration and justification for Reagan's.

Again, wonks know Jimmy Carter set trucking (and railroad???) and airline deregulation in motion (there's a cute picture of Teddy Kennedy in the background of the signing of one of those laws), but infamously didn't deregulate energy (initially, as I recall, part of Nixon's wage and price controls, but not ended like other sectors). It's one of the biggest things that wrecked his presidency.

http://en.m.wikipedia.org/wiki/Revenue_Act_of_1964

Don't forget Carter's deregulation of the brewing industry.

And for obvious reasons (if you read the link) JFK is given credit for that tax cut.

While I'm sure LJB's legendary ability to work the Congress played a part in it actually getting passed, this was clearly part of JFK's legacy, especially after his assassination three months earlier.

Adding brewing to the list of 2-3 transportation deregulations does not satisfy my interpretation of "every industry he could get his hands on". There's a reason Malcolm Wallop's 1976 advertisement of a cowboy strapping a port-a-potty to a donkey behind his horse resonated long after.

In retrospect it's possible Carter was a deregulator at net, certainly the regulatory things he's infamous for were, to my memory, inherited, but it would be a hard case to make. Remember the 95% complete Tellico dam and the snail darter? He also put an awful person in charge of the NHTSA, and I believe it was their insane air bag decisions that resulted in the deaths of hundreds or more short people and children.

The data shows this trend is not unique to the US. http://economics.mit.edu/files/5554 page 17.

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