[arin-ppml] Will the price per IP really be affected by thetransfer market introduced in 2009-1?

[Tom Vest]

On May 15, 2009, at 4:11 PM, Ted Mittelstaedt wrote:

> Gee Tom, it almost sounds like your saying that some players in the
> biz secretly precipitated the crash after concluding that would be the
> only way to stop the spiral.
>
> Ted

I'm not sure how one could interpret what I said in that way, for  
either industry.
Thanks to (1), foreign demand for $US securities, individual banks  
could truly say that they were satisfying a "real market demand" --  
i.e., that one way or another it would have been serviced by someone,  
so why not them? (aka the "it's just business" argument) Because of  
(2), they could credibly claim that they were fulfilling their  
essential function of "facilitating liquidity" -- never mind for the  
moment the reasons why the mechanism of credit creation (= somebody  
else's debt formation) was so much *more* necessary to sustain this  
function than it has ever been in the past.

The near universal embrace of self-destructive, can't-see-no-evil-no- 
more commercial practices are really the only truly (or most)  
undeniably damning factor. In an industry full of people who are/were  
fabulously compensated for their allegedly unique domain expertise and  
judgment, a collective failure as epic as this is actually more far- 
fetched that some conspiracy theories. Ultimately the causes doesn't  
matter however; the harm is done, and the industry must be recognized  
for what it is: unfit for continued self-governance.

In any case, if some players in the biz really had intentionally   
"precipitated a crash" as you suggest, then their timing sure sucked;  
a couple of $US trillions earlier, and it might have actually been  
constructive.

Chatting about the financial sector can be illuminating in its own  
right, but as others have rightly noted, whatever relevance it has for  
address policy has probably been fully plumbed at this point. I'll  
keep my own thoughts on the subject off PPML hereafter...

Cheers,

TV

>> -----Original Message-----
>> From: Tom Vest [mailto:tvest at pch.net]
>> Sent: Friday, May 15, 2009 1:08 PM
>> To: Ted Mittelstaedt
>> Cc: 'Stephen Sprunk'; 'ARIN PPML'
>> Subject: Re: [arin-ppml] Will the price per IP really be
>> affected by thetransfer market introduced in 2009-1?
>>
>> The real Real problem was the enthusiastic embrace by the
>> financial industry members of commercial practices that
>> allowed them to achieve their own objectives (e.g.,
>> satisfying ever-growing international demand for $US
>> denominated securities), and enabled them to help out with
>> other people's problems (e.g., clearing an ever-expanding
>> supply of stuff that the largely stagnant US wage base could
>> not by itself support), but in ways that absolutely destroyed
>> whatever level of visibility that each industry member had
>> into the others.
>> Progressively less external regulation over the last decade
>> or so, leading to ever-diminishing transparency for
>> non-insiders, finally capped by the knowing/willful
>> abandonment by the insiders themselves of any surviving,
>> effective mechanisms for "counter-party scrutiny"
>> that might have helped protect them (or the rest of us) from
>> each other in the past.
>>
>> Not really all that different from the story of how our last
>> bubble ended.
>>
>> Batter up...
>>
>> TV
>>
>> On May 15, 2009, at 3:37 PM, Ted Mittelstaedt wrote:
>>
>>>> -----Original Message-----
>>>> From: Stephen Sprunk [mailto:stephen at sprunk.org]
>>>> Sent: Friday, May 15, 2009 9:02 AM
>>>> To: Ted Mittelstaedt
>>>> Cc: 'Joe Maimon'; 'ARIN PPML'
>>>> Subject: Re: [arin-ppml] Will the price per IP really be
>> affected by
>>>> thetransfer market introduced in 2009-1?
>>>>
>>>> Ted Mittelstaedt wrote:
>>>>> I don't say though that I believe the idea that the more you
>>>>> interefere the worse the comeuppance is at correction
>> time.  The US
>>>>> financial sector is a prime example of an industry with
>> very little
>>>>> interference and terrible comeuppances at correction
>> time, just ask
>>>>> Benie Madoff
>>>>>
>>>>
>>>> The real estate market arguably has the most government
>> interference
>>>> of any market in the US, and that is the root cause of our current
>>>> financial problems.  The FHA, FNMA, FDMC, and VA were originally
>>>> chartered to "stabilize" the market, and they did an
>> excellent job at
>>>> that "interference"
>>>> with the market's previously wild swings.  However, in the
>> 90s, they
>>>> were rechartered to get _everyone_ a house, and banks were
>> forced by
>>>> law to give mortgages to people who couldn't afford them.
>>>
>>> I've heard that fairy tale before.  The problem is that people who
>>> have actually looked at this theory have disproven it by
>> comparing the
>>> foreclosure rates on CRA (Community Revitalization
>>> Act) loans against the standard loans, they are an order of
>> magnitude
>>> lower.  Plus the CRA (ie: "forced loan") stuff initally
>> sold for a lot
>>> less and resale under foreclosure is a lot quicker and much
>> less of a
>>> loss for the bank.  And this is as you would expect because poor
>>> people with bad credit who got an opportuity to get a loan
>> typically
>>> bought a much cheaper house.
>>>
>>> The real culprits were the army of home flippers out there who were
>>> (and are) typically mid to upper middle class people buying second
>>> homes for $300K and putting 100K into them and expecting to
>> get $600K
>>> a year later.  When the market tanked they all walked away
>> from their
>>> loans (or short-sold them) and the banks had to eat it,
>> initiating the
>>> subsequent bailout.
>>>
>>> This is why the current government programs to help out
>> foreclosures
>>> aren't working - because all of them prohibit assistance if the
>>> foreclosed property is a second home bought for
>> speculation, and it is
>>> precisely those homes that are driving the foreclosure rates.
>>>
>>> The home flippers were mostly using ARMS (why would you pay
>> principle
>>> on a home your expecting to sell in a year) and it is the
>> bundling of
>>> those ARMS and subsequent resale as unregulated securities
>> that caused
>>> a bubble in the stock and bond market, when that bubble burst the
>>> stock speculators paniced and shoved money into commodities
>>> speculation, which pushed gasoline to $4 a gallon last year,
>>> contracted consumer spending, and that contraction caused a
>> shortage
>>> of buyers for flip homes which triggered the collapse of
>> the housing
>>> prices.
>>>
>>>> The result was widespread marketing of ARMs and "subprime"
>> loans, and
>>>> that huge increase in artificial demand directly created the real
>>>> estate bubble.
>>>
>>> The artificial demand was from home-flippers buying more
>> properties to
>>> flip, and using ARMS to do it.
>>>
>>>> When all those ARMs reset at higher rates (due to the
>> bubble), we saw
>>>> record levels of foreclosures and prices dropped back
>> towards where
>>>> they would have been all along if it weren't for the government's
>>>> interference.
>>>>
>>>
>>> Most ARMS reset at the 3 year mark and the collapse was
>> underway long
>>> before.  Before the crash back in 2005/2006 it was very common for
>>> home flippers to complete a sale BEFORE their ARM reset.
>>>
>>> The resetting of the ARM rates was just a byproduct of the
>> crash, and
>>> it happened because nobody was buying for so long that the home
>>> flippers were sitting on property.  It was the trading of
>> unregulated
>>> securities that were FUNDING the arms that started it.
>>>
>>> Google up "Enron loophole" for a better understanding of
>> the problem.
>>> What your doing is simply repeating a line the US
>> Republican Party has
>>> dreamed up in their constant war against governmental regulation, a
>>> line that is absent many critical things.
>>>
>>>> The financial sector simply took advantage of the government's
>>>> interference,
>>>
>>> No, the financial sector in conjunction with the land
>> speculators took
>>> advantage of the UNREGULATED market.
>>>
>>> This is why last year the feds forced all of the trading houses to
>>> either collapse or recharter as banks - because that was
>> the quickest
>>> way to bring them under regulation.
>>>
>>> Ted
>>>
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>>
>