Do you wish the bailout money had paid off the delinquent mo

[CCS]

I heard the delinquent mortages in the US total $270,000,000,000 dollars. Still a fraction of the size of the bailout money. Even some conservatives on 104.1 FM said it would be better to pay those off rather than give it to the banks. I was outraged. So the people who get loans they should not have been given, and then don't make payments, get to keep their house and have it paid off, while everyone else who is honest still makes payments? Not fair, and I'm sure many people would deliborately default on their houses then to get them paid off. Good thing this did not happen, but I'm getting really sick of hearing about the government giving money to everyone who says they need it. They give it to the people who blow their money on stuff, while people who are wise with their money have to pay for these other people in their taxes. I'd love to tell the IRS I'm not paying them taxes since I know it is just given to these people who live beyond their means. Of course they will say they are not living beyond their means, and that they are just living the lifestyle everyone is entitled to. Really. They don't even have to break into my apartment to steal anything from me. The feds just point a gun to my head and say, "pay up some taxes, so we can give it to those people over there."

Anyone else here ever have coworkers who spend their entire pay check on booze, then get word that you saved away $200 this month, or have more in savings, so they try to pressure you to buy them all rounds of drinks, or loan them money to pay their rent on time since they spent the money on booze? Well that is who the feds are giving money to now: every business that irresponsible and says it needs a bailout is getting one, and the rest of them have to pay the bill in taxes.

 

[The Gardener]

CCS, the delinquent mortgages weren't the problem, per se.

The problem is that the banking system loaned out TOO MUCH money. Not just to mortgages, but to ALL kinds of borrowers... commercial real estate, credit cards, business loans, financing of mergers and acquisitions, etc. The mortgages were just a portion of the overall problem, but, due to the change in property prices, they were the first type of loans to start going bad.

Banks are normally supposed to keep a "10 to 1" cash reserve on all of their lending, in other words, for every ten dollars they lend out, they were supposed to keep one dollar in cash on hand. Well, we are finding out now that the banks were actually keeping a "30 to 1" reserve ratio, and in some cases upwards to 50 to 1 with some banks! They were accomplishing this by using all sorts of off-balance sheet trickery. Remember the Enron fiasco? Well, our banking system was, in effect, doing the same exact thing... the US banking system.. actually the entire Western world's banking system is one big Enron.

Then, in addition to this, the banks started abusing the credit default swaps (CDS) market, which is the REAL culprit in terms of dollar risk. These CDS swaps were a market, just like a stock exchange, where financial companies could make bets on whether or not certain loans would go bad. This market started out as a way for the banks to hedge risk on loans they made, because they could issue a CDS swap and, in effect, sell some of the risk to a willing buyer. But, when the value of CDS swaps started exceeding the value of the actual underlying loans that were being hedged against by significant factors, the entire CDS market turned into a casino.

As a result, the top three banks (Citibank, BofA, and JPM) have outstanding liabilities that are TENS OF TRILLIONS larger than the reserve capital they have on hand. This article explains:
http://www.marketoracle.co.uk/Article8504.html

So, giving the banks 2 trillion in loan relief would be tantamount to pissing into a hurricane.

 

[blueshard]

I find economics to be difficult stuff to absorb, it is like philosophy or something!

Gardener I came across this quote somewhere which I thought great:

"We will never rise up as long as we are so well fed. THE REVOLUTION WILL NOT BE TELEVISED!"

 

[ali777]

I find economics to be difficult stuff to absorb, it is like philosophy or something!

Gardener I came across this quote somewhere which I thought great:

"We will never rise up as long as we are so well fed. THE REVOLUTION WILL NOT BE TELEVISED!"

I understand the mathematics of it, but I don't understand the games traders play.... Like Soros says, trading based on forecasting and predictions doesn't work, humans do not follow logical mathematical models. We act like a herd, and we do things we aren't supposed to do.

The problem arises from the financial organisations trading far too much money. The world is not about producing anymore, but about placing bets on certain events and making money in the market. We are in a situation where the economic output is based on trading money and not production. There are some crazy stats, like the global trade being 10 times more than the global economic output, or the options market being worth 40 times the US economy... Basically, everything we produce is traded 10 times a year, imagine all the commissions the brokers get in the process...

My leftist instincts occasionally come out and I wish all the markets were closely regulated to prevent such irresponsible gambling with out money... However, my money making side (not working very well at the moment) wants to compete and be successful, and such success doesn't come in restricted markets. The solution is to have a regulated market where the regulations are not too restrictive. I don't want some parasites or thieves to gamble away my pension plan, or my mortgage. However, I do understand that the pool of money in the pension plan needs to be invested, then the best path would be to invest it ethically and not gamble all of it on some made up financial product.

I'm not surprised we have a recession at the moment. Most of the money in the system was a result of trading with nothing to back it up, in a way the market is inflated. I'm actually more surprised with the predictions that we are going to deflate only 2% this year. In economic terms, growth of -2% is a disaster, but my mathematical brain is telling me I can survive with 98% of what I have. So, I don't see it as a disaster at all.... It might be the wake up call needed to clear the system of irresponsible gambling.

 

[Bryan]

Let's all give a big "THANK YOU!!" to all those right-wing reactionary politicians (cough::Ronald Reagan::cough) who convinced everybody that government isn't the ANSWER to our problems, government IS the problem, and that all we need to do is get out of the way of those wonderful, altruistic capitalists, who will let society just naturally reach the heights of wealth and prosperity that our mean ol' government was keeping it from reaching.

Pardon me, I have to go vomit.

 

[The Gardener]

That's pretty much right on the mark, Bryan. What we are seeing now is the unwinding of the debt bubble that began under Reagan... a president who I believe, in retrospect, will go down as one of the most overhyped ever. A man who has perenially gotten credit for ushering in some sort of "economic miracle" of prosperity, and now people are waking up to the fact that it was all a sham.. prosperity ushered in by charging up the national VISA card to the tune of trillions. One big bubble.

The S&L crisis should have been a warning.

The Long Term Capital Management crisis should have been a warning.

The 1990 currency crisis and Latin American defaults on loans extended by US banks should have been a warning.

The Tech Bubble should have been a warning.

The Real Estate Bubble should have been a warning.

Increasingly bigger and bigger bubbles, and in the aftermath of each one, bankruptcy averted by blowing a bigger bubble and kicking the can further down the road a few years.

 

[CCS]

The problem is with the watcher of the watchers. You let one person rule the economy, but what if that person or people get bribed and ruin it? Solution: have an even higher power above them, unless they steal money too.

It also goes back to state's rights vs federal power: in the event of slavery, we want the feds to over turn it. But what if the feds were forcing slavery? Then we would want the states to have individual rights. Who do we give power to to give the best chance of good government? I say we have states rights, but let the feds intrude on any states that violate the wishes of 2/3 of the states. If 2/3 of the states think something is totally unreasonable, the feds may then step in. The current constitution lets the feds have power in some areas and states in other areas, and you have to have a constitutional amending process by a group other than the legislatures to outlaw something like slavery. Pretty cumbersum.

So everyone wants to give the federal government the power to regulate economies. Well, if they do an honest job, and are intelligent, fine. But what if they are not one or both? Then you have the feds telling businesses how to run themselves. Could get expensive.

 

[monitoradiation]

Not to be a conspiracy theorist, but has anyone watched the Zeitgeist Addendum? I was watching it last Sept. or so right when the whole economy was going down the hole. They talked about ripping down the current money-based economy and replacing it with a resource-based economy.

I quite liked that documentary (with the exception of the pragmatic aspect), but Zeitgeist part 1 was so full of conspiracy theories that I'm not sure what false information I've been fed in Addendum.

Any thoughts?

 

[yvakin]

Not to be a conspiracy theorist, but has anyone watched the Zeitgeist Addendum?

Yaah, wanted to ask about it also. Watched that a couple of months ago.

 

[The Gardener]

I don't buy most of the conspiracy theories about this.

The only thesis that I DO buy is the one that implicates the Federal Reserve as being a parasitic tool of the banking cartel. The Fed is NOT a government-controlled entity, they are in fact a privately held corporation that MANAGES OUR CURRENCY. And, considering that the major shareholders of this privately held corporation are all publically traded banks, why would they not use the Fed to assist in harvesting profits?

This is done by gradual inflation of the currency, over a period of years. This, in effect, levies an "inflation tax" on all Americans who save money, this tax payable to those who hold treasury bonds. Who buys most of the outstanding US treasury bonds? Well, the central banks do, of course! YES US treasuries are typically low yield financial vehicles, but when you issue and own trillions of them, even a modest return makes you a guaranteed fortune. All of it done on relatively small margins, barely noticeable by most... but when you are, in effect, renting a currency to an entire massive economy such as the US, even the slightest of yields nets trillions of dollars in profit, over time.

Then, when a point of maximum inflation is reached, they suddenly deflate the currency which forces those who cannot afford to hold onto their assets to sell them, or foreclose upon them, at a MAJOR DISCOUNT, to... you guessed it... the banks. This brings a period of major buyouts of assets and weak companies, banking consolidation, and anything and everything that cash-strapped folks have available for sale (cities privatizing airports, privatizing toll roads, etc).

Once deflation reaches its depths and the discount yardsale of assets is over with, we re-enter another period of gradual inflation. It's what stock traders call a "pump and dump".

This "pump and dump" cycle has been repeated about three or four times on our currency value in the US since the inception of the Federal Reserve.

 

[monitoradiation]

Yeah, that was outlined in that film. I was actually really scared by it... I'm Canadian but this is obviously a larger, global issue considering the American economy's weight on the rest of us.

 

[The Gardener]

The Bank of Canada, the Canadian central bank, is controlled in the EXACT same fashion as the US Federal Reserve... and, in effect, controlled by the exact same people.

 

[CCS]

I say we go back to the gold standard.