Q: why not, as econ. Hudson suggests, form U.S. bank, and thereby rid ourselves of all this interest owed private banks. We could loan $ directly to a productive economy, rather than for banksters to gamble with. Our bank branches could be in post offices as in Japan.

Submitted by sharon from Independence oregon

A: the simple answer is it involves abrogation of contracts, which is something Argentina and Greece have done and with great economic consequence.

Answered 01/03/12 18:49:10 by Kevin Hall and Tony Pugh

Q: I'm 75, living alone and only asset is 401k, approx. 100K, plus 1st time buyer VA mortagaged condo residence. (I had some stock and sold to put 5% down on $270 purchase). Current mortgage since July 2010 is at 5% and current balance is $241k. Seeking VA "Streamline-IRRRL" 30 year remortgage, current rates approx. 4% would reduce my $1600/mo PIT by approx. $200/mo.All sounded good to three different mortgage brokers, but (Although VA requires no new appraisal, lenders do). Came in at $225k, (16k underwater). I could pull that much out of 401K to reduce remortgage principal (no penalty), but feel very confident that the banks will find another excuse to protect current mortgagor's 5% package (BOA) and deny me again. Any suggestions?

Submitted by Bernard Couming from Stoughton, MA

A: That's way over my pay grade, sorry and sorry on the very delayed response....i would reach out to a HUD loan counselor they have been aggressive in outreach

Answered 01/03/12 18:48:12 by Kevin Hall and Tony Pugh

Q: This is not a homework question; hopefully not a loaded one: Since many of the "bailed-out" banks have used and are still using the robo-signing procedures to evict borrowers with subprime loads, and with some courts refusing to enforce the eviction (i.e., Cornelius J. Moriarty II in MA, etc) without producing the actual "note", is there an argument to be made that the borrower is the sole proprietor (without another payment needed to be made) of the house since he/she made utility payments and the "lender du jour" cannot produce the note in a given or reasonable amount of time, thereby making the lender not able to take hold of the property? The potential case(s) for fraud over the loan process and the latter robo-signing by the "bailed-out" banks and other institutions are another matter. Thank you for your time.

Submitted by Joey LeCompte from Wichita, KS

A: seems plausible, but for now many judges are siding with borrowers who ask for lender to produce the note, there are some exceptions, Florida being one of them.

Answered 01/03/12 18:47:02 by Kevin Hall and Tony Pugh

Q: I have been applying for trial modification since Feb this year. They took me out of the program. I filed for bankruptcy. I retried to apply for mod again and waited. I tried to apply to KYHC MRAP program also but got denied due to too high DTI. I finally got a trial mod plan to start in January 2011. I tried to contact KYHC again thinking now I can qualify. They told me that IF I RECEIVE ANY KYHC FUNDING AT TIME I AM ON TRIAL MOD, I WILL BE TAKEN OUT OF THE HAMP TRIAL MOD PROGRAM. IS THIS TRUE? I HAVE A BIG HEADACHE AND STRESSED OUT. I thought I would get help on my 4-6 months arrears? PLEASE answer me asap. I am afraid to do anything

Submitted by june from california

A: don't know, send me your email to khall@mcclatchydc.com and i will try to get you in touch with a contact who migth now. sorry on the late response

Answered 01/03/12 18:45:30 by Kevin Hall and Tony Pugh

Q: Can you please try to explain the differences and similarities between the interest rate in the bonds market and the interest rate set by the Federal Reserve? Are they somehow tied together?

Submitted by Anders Bjelland Buer from Trondheim Norway

A: sorry on a very delayed response, the Fed sets the federal funds rate, which is an overnight rate banks charge each other since they borrow from each other rather than keep vast amounts in vaults. this fed funds rate is a benchmark that influences the prime rate, which is what banks charge their best borrowers. the prime rate is generally 3 percentage points higher than the fed funds rate, which right now is in a range of 0 to 0.25 percent... so the prime rate is 3.25 percent.

Answered 01/03/12 18:44:37 by Kevin Hall and Tony Pugh

Q: High energy costs are killing us. Gas/Diesel/Ethanol wholesale are 5x more expensive than natural gas, which also pollutes much less. Ethanol has doubled feed prices, bankrupting 1000+ farms. Natural gas = energy independence, and an economic boom. Fracking? We've been fracking for 60 years- so how come the big fuss now? Harold Hamm, oil tycoon says natural gas royalties would pay off the national debt. What is Washington and Sacramento waiting for?

Submitted by Bill from Stockton,Ca

A: Sorry on the delayed response and I wrote an article in late December that deals with your concerns. my colleague Renee Schoof offered the counter viewpoint, here are links to both: http://www.mcclatchydc.com/2011/12/21/133787/does-shale-boom-mean-us-energy.html http://www.mcclatchydc.com/2011/12/21/133807/as-shale-fracking-booms-environmental.html

Answered 01/03/12 18:40:27 by Kevin Hall and Tony Pugh

Q: Howard Buffet once said the penalty for debasing the US Dollar was once a Death Penalty. The U.S. Dollar has been on life support provided by the IMF. IMF Special Drawing Rights have been overused in the past 2 years and a crash of the U.S. Dollar due to a Floating Interest rate is still anticipated. Private wars are lobbied and fought every whim to keep the Dollar in World Banks. Politicians in the past were fined and imprisoned for violating the Logan act yet , they're traveling out of the country to meet with Leaders, Financiers, and CEO's. Cartels were dismantled by the DOJ under a functioning Sherman Anti-Trust Act, yet obvious Monopolies in Banking, Tech, Sales, Media,Telecom,etc. are not only permeated but, are fully operational with use promoted by agencies globally. Q: Doesn't the Federal Reserve seem to function as a Hedge Fund; on a Macro picture, doesn't it seem like they will rid the Dollar for a currency backed by Bonds, Loans, Taxes and Socialized Real-estate. Won't they have to technically monetize Precious metals to back Bonds at the least? The IMF basket of currencies would be threatened, the Dollar is 44% of the Special Drawing Right. Wouldn't the IMF also have to scrap the SDR for a more stable outlook? (The Bancor perhaps)? Q: Do we live in an Oligopoly?

Submitted by M from New York

A: too many questions, loaded and otherwise, to respond in brief format. will publish it and leave to others if they care to answer. regards

Answered 01/03/12 18:38:37 by Kevin Hall and Tony Pugh

Q: When I read about the economy in newspapers and magazines, I am struck by how many economists and other gurus advocate more focus on growing the economy, not severe deficit reduction, in the near term. An article even chided Britain for continuing their failed policy with even more spending cuts. And the ratings agencies seem bent on extreme deficit reduction. Why is this?

Submitted by Kathleen Stokes from Downers Grove, IL

A: good question, sorry so late in response. i think the ratings agencies have viewed Europe differently than the US, in part because our problems are still a few years off and probably mostly because we remain the world's reserve currency and as such right now we are refinancing our long-term debt at rock bottom rates. there obviously needs to be a mix of both, you have to have enough growth to kick the virtuous cycle into high gear and right now we're still not out of the woods, that's why many economists argue against too steep a reduction too soon, if the private sector is impaired then government spending on the state, local and federal level become more important, and pulling back on them is tantamount to putting headwinds in front of the U.S. recovery

Answered 01/03/12 18:37:39 by Kevin Hall and Tony Pugh

Q: Why is there no talk of how much gold is left in Ft. Knox? It would seem that this would be an opportune time to cash some of it in and pay off some of the debt, or investing in infrastructure. Have they stolen it, possibly since there seems to be no accounting of it.

Submitted by Gary Straub from Columbia, MO

A: I don't know how much there actually is, but what's clear is their is gold hoarding going on around the world as governments and individuals seek to protect themselve against a potential collapse of the financial system. i personally dont see it coming, but obviously plenty of folks do.

Answered 01/03/12 18:34:40 by Kevin Hall and Tony Pugh

Q: What's crisis is in store next for American consumers? We have seen the mortgage meltdown. In your opinion are there any impending financial crises? Credit cards, Student Loans, other?

Submitted by Leigh from Los Angeles, CA

A: surprinsgly credit cards did okay because like mortgages they were bundled together into complex bonds, the income stream provided by credit card payments. These did better than mortgage bonds because banks had to eat their own cooking, that's to say the owned a portion of that debt. funny how they behave when it is their money at stake, none of this heads i win, tails you lose stuff. debt is being paid down, student loans remain problematic. the new Consumer Finance Protection Bureau will provide a cop on the beat to guard against unscrupulous lending. knock on wood.

Answered 01/03/12 18:33:38 by Kevin Hall and Tony Pugh

Q: I can't understand why some DC thinktank, or any of our elected leaders for that matter, can't call for the end of globalization as we know it. The Economic Policy Institute, in a myriad of detailed reports, lays the greatest portion of the blame for our ecomic problems onto Globalization; but even EPI dares not call for protectuve tariffs or revocation of NAFTA, the WTO, and all the "favored nation" trade agreements which have been passed over the past 20 years. What/Who are they all afraid of?

Submitted by Arthur G. Brina from Brooklyn, New York

A: I think they are afraid of what happened during the Great Depression, where countries turned inward, protected themselves from the outside world and saw their economies shrink even further. it is a tough question and even the strongest supporters of free trade now question whether China, so large and so undemocratic, breaks the model of free trade.

Answered 11/15/11 12:49:37 by Kevin Hall and Tony Pugh

Q: Is there a point at which so many dollars are tied up and held by only a few that the economy will collapse? What is that point? Where are we now? When will we reach it?

Submitted by Mike Gallagher from St Joseph, MI

A: I think you are asking is can wealth be so concentrated in the hands of a few that there won't be enough spending to support a wide range of businesses that depend on the middle class? if that's the question, then i'd say we're nowhere near that point but it seems logical to presume that people with stagnant wages can only increase their borrowing power through borrowing and debt, which is what we've had over the last 20 years and that helps explain the rut we are in now.

Answered 11/15/11 12:48:15 by Kevin Hall and Tony Pugh

Q: pardon my naivete, but i don't understand the following: where did governments had the money in the 50's to 80's to build so much housing for people, support unions and keep a welfare state? how come that capital doesn't exist anymore? so much out of britain has been built and arranged in those times that i don't understand how with our advances in these times we're so far behind what they have been able to do, and without having massive debts. And the case goes for loads of european contries...i don't know about the us... Please clear me out if u have some answers.

Submitted by jennifer from london / UK

A: It's not that complicated, the government has spent more than it takes in via taxes and fees. To bridge that gap, it has borrowed, through the issuance of bonds. there is no shortage of capital, corporations are sitting on mounds of money but are reluctant to spend because of weak demand amid a sluggish recovery and ongoing hurdles such as the housing crisis. these companies are also reluctant to invest given all the risks in financial markets, and with inflation barely above 1 percent, they aren't losing much ground parking their money for the moment. much of the housing boom here and abroad was fueled by creative financing mechanisms where Wall Street firms_NOT GOVERNMENT, DESPITE THE POLITICAL RHETORIC. these firms bought mortgages from non-bank lenders like Countrywide, who in turn depended on fly-by-night mortgage brokers. These bonds were pooled together in creative bonds and sold to investors, who were eventually soaked. everybody made a buck along the way, consumers got more house than their income would have allowed otherwise, and everyone was complicit, including government regulators who were asleep at the switch. but it was Wall Street that drove this, not government policies touting home ownership. Sure there was a push to expand home ownership and there was a bubble, but it was possible only because of the financial engineering pushed by Wall Street that proved to be folly.

Answered 11/15/11 12:46:19 by Kevin Hall and Tony Pugh

Q: I don't understand how all the countries in the world can have debt? Shouldn't it stand to reason that there should be some country(s) that are cash flush and debt free? Even China has a trillion dollar public debt. If the U.S. owes China a trillion, and China owes Europe a trillion and Europe owes the U.S. a trillion, does anyone owe anyone anything?

Submitted by Keith Svagr from Charlotte, NC

A: Europe owes China too, China exports much to the United States and Europe and it buys bonds from both in order to try to keep currency exchanges stable. There is an old joke about owe you $1000 shame on me, owe you $1 million, shame on you. You are correct to suggest that we are all connected at the hip and this is what leaders mean when they urge all major nations to "do their part." it translates into keep letting us borrow and spend more domestically to boost your economy and allow us to export to you

Answered 11/15/11 12:40:32 by Kevin Hall and Tony Pugh

Q: The government borrowed and spend 1.3 trillion in FY2011, but the GDP is up only ~.3 trillion. If we had zero growth the extra spending should have added 1.3 trillion to the GDP. Is our real GDP shrinking or am I missing something?

Submitted by Wilfred Olschewski from Palm Springs, 815.572.8685

A: part of the answer is a lot of our borrowing goes to pay off debt we owe, we are borrowing to pay interst on what we've borrowed and this grows by the year and could explode if investors sour on Treasury bonds and demand a higher return.

Answered 11/02/11 19:10:10 by Kevin Hall and Tony Pugh