the economy/discuss

[Dragon Forge Design]

Originally posted by Ebonbuddha
Looks like some of the states problems are taken care of.

Here.

Thats a pin prick on a \"Texas\" sized problem..

They have created a house of cards built on the banking system and its collapsing.

The 750 Billion they are trying to get today to bail out the Mortgage industry could end up being 60-75 Trillion dollars.. Yes I did say Trillion..

 

[paintingploddy]

Philosophically I\'m against the bail out. They took high risk investments to try for high profits. The risk has bit them. The difficulty as I see it is that the effect will cascade. The Great Depression started with a loan default. The ripple effect of this will start to take down companies that were more prudent and are not to blame. Cash will dry up in the community and the ripple will go beyond the markets to affect everyone. One way or the other we are going to pay for the greed. The question is which way will cost us less and what message do we give for the future. This will be the third bail out for a financial collapse since the Iron Curtain came down and each time the price tag goes up.

As part of any rescue I\'d like to see those reponsible working for a pittance for the remainder of their lives, preferably something physical and mind numbing.

 

[demonherald]

does anyone look at the world economy today particularly in the west and just think to themelves... 9/11 did it\'s job????

The amount of money used by the west fightig the war on terror makes the loan bail out seem like peanuts.. freedom comes at a cost they say and that cost seems to be a crumbling economy...I may be tlking shite as I really don\'t know enough about it all but it just seems that way to me.

regards th bail out.. I think it could be a good thing if it is handled properly.. otherwise all it is doing is robbing Peter to Pay Paul.. I think that there should be strict measures put in place to establish a level of means and what becomes necessity and what Luxury... help out those that really need it and don\'t bail out credit card millionaires who want holiday homes all over the place while travelling endlessly all on credit.

It pisses me off when the rich who are bad with their mney get bailed while the poor who just don\'t have the money get screwed.

It\'s like the Gas and electric prices here... keepgetting higher and higher.. ridiculously high .. average household is struggling to pay the bills while the fat cats that own and run things walk away with millions of pounds bonuses each year...

Privatisation fucked us. (I\'m not opinionated) Share holders being more important than the consumer and the rich got richer.

The digital age is also partly responsible where it is now so easy to have entire transactions and companies running on nothing more than essentially IOU\'s. There comes a time when all those IOU\'s are needed and poomph...where is it???? the physical money doesn\'t exst.

 

[generulpoleaxe]

Originally posted by demonherald
does anyone look at the world economy today particularly in the west and just think to themelves... 9/11 did it\'s job????

The amount of money used by the west fightig the war on terror makes the loan bail out seem like peanuts.. freedom comes at a cost they say and that cost seems to be a crumbling economy...I may be tlking shite as I really don\'t know enough about it all but it just seems that way to me.

regards th bail out.. I think it could be a good thing if it is handled properly.. otherwise all it is doing is robbing Peter to Pay Paul.. I think that there should be strict measures put in place to establish a level of means and what becomes necessity and what Luxury... help out those that really need it and don\'t bail out credit card millionaires who want holiday homes all over the place while travelling endlessly all on credit.

It pisses me off when the rich who are bad with their mney get bailed while the poor who just don\'t have the money get screwed.

It\'s like the Gas and electric prices here... keepgetting higher and higher.. ridiculously high .. average household is struggling to pay the bills while the fat cats that own and run things walk away with millions of pounds bonuses each year...

Privatisation fucked us. (I\'m not opinionated) Share holders being more important than the consumer and the rich got richer.

The digital age is also partly responsible where it is now so easy to have entire transactions and companies running on nothing more than essentially IOU\'s. There comes a time when all those IOU\'s are needed and poomph...where is it???? the physical money doesn\'t exst.

in a nutshell, your pretty damn close mate.
it\'s been going on since before 9/11, 9/11 and the ensuing war on the east/terror has just speeded things up through the prices of oil and gas being pushed up at a faster rate thatn what it was currently increasing at (even with china and india\'s develpment programs)

 

[james9487]

If I\'m not mistaken, just about all of this is ultimately the result of the Subprime Loan bubble. Summed up, mortgage companies were giving loans for houses to people that had bad, little, or no credit. These loans are very risky and are thus called \'sub-prime\' mortgages. Then what happened was the mortgage companies would bundle up all of these loans and sell the debt to all of these financial firms like Citi, Merryl Lynch, Bear Sterns, etc. The problem with that was the bundled debt (I believe at this point they were called bonds) was, somewhere along the process, mislabeled as light to moderate risk debt when in fact it was incredibly risky investments.

Then comes the housing bubble burst as housing prices fall as they do every decade or so and people started realizing they couldn\'t refinance they\'re homes, or sell them, and they realized they\'re houses were worth less than they owed the banks and many people started defaulting on payments. Also, ARM (adjustable rate mortgages) started jacking up they\'re rates and of course people dumped they\'re houses like the bad investment it was.

My point is that this isn\'t just some people at the top being stupid and getting away scott-free while the rest of us pay. There was greed all along from the top all the way down to the \'poor houseowner\'. Ultimately, people with NO means to afford a house wanted something they shouldn\'t be able to have. A little common sense and basic arithmetic should tell people living on a salary of 35k a year, with no savings, already overinflated spending habits, probably a hefty amount of credit card debt, etc, that they can\'t afford to up and buy a $200,000 house.

I just don\'t think this is all the master plan of a dozen soul-less CEOs sitting in a dim conference room saying to themselves, \"Yes, perfect...\". It\'s businessmen all along the way wanting profits they didn\'t earn, maybe a young aggressive mortgage salesman at a random Countrywide branch in california, focusing on his career more than the big picture, adding in a quick justification (for cognitive dissonance\'s sake) saying, \"they may not be able to afford it but I\'m giving them a chance to buy their own home!\". And finally it\'s people at the bottom saying, \"I know I can\'t afford to buy this house, but I deserve it!\"

On the flip side: the people at the bottom got they\'re punishment, they lost they\'re homes (although I think actually the homes still belonged to Merryl Lynch, Bear Stearns, etc.). \"With great power comes great responsibility\" and I am in support of much stricter punishment on those at the top.

 

[airhead]

James, dead on:

Funny how the Democrats have such short memories.

The New York Times

Fannie Mae Eases Credit to Aid Mortgage Credit

By STEVEN A. HOLMES
Published: September 30, 1999
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.


The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation\'s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.


\'\'Fannie Mae has expanded home ownership for millions of families in the 1990\'s by reducing down payment requirements,\'\' said Franklin D. Raines, Fannie Mae\'s chairman and chief executive officer (and current Obama advisor). \'\'Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.\'\'

Isn\'t interesting how the Democrats like Chris Dodd, Barney Frank, Nancy Pelosi and Harry Reid are blaming Bush and the Republicans for this financial disaster. And now the Foxes are in the Hen House trying to develop a plan to fix the problem and we should feel secure? And the Democratic Voters are drinking the Koolaid offered by their leaders.

 

[generulpoleaxe]

it\'s not just banks giving easy credit to people that can\'t afford it, it\'s then those banks (or the companies that the banks have then invested in) investing in the artificialy inflated housing market.

combine that with companies worldwide doing exactly the same as well as other dodgy stuff and you have what the world is seeing now.
world wide economic fuck up, and the politicians answer is to prop it all up with the peoples money.
thanks, can they call me in the morning this time when they screw me over, it\'s the least they could do!

people who watch their money and only take on debt (if any at all!) that they can manage are the real losers as they will have to bear the brunt of politicians stupidity, directors greed and people who can\'t look after their own debt responsibly.

yes i\'m having a crappy day.

 

[Dedwrekka]

Originally posted by generulpoleaxe
people who watch their money and only take on debt (if any at all!) that they can manage are the real losers as they will have to bear the brunt of politicians stupidity, directors greed and people who can\'t look after their own debt responsibly.

yes i\'m having a crappy day.

You know, I hear a lot of carp about \"people not being able to responsible handle debt\", but there are a number of people who simply have situations dumped in their lap that force them into recurring debt. I know it\'s easy to blame the ethereal concept of \"Those people\" but realize that \"those people\" have a side to the story all their own.



On another note, due to an utter fluke, I just found out 5min ago that as of yesterday my bank no longer exists, except as an asset of another bank.

 

[Ebonbuddha]

And this is why I like Ron Paul.

School is in suckers.

Private tutor.

 

[Infidel Castro]

I don\'t know if anyone has mentioned it, but the bailing out of the American financial institutions is only a stop-gap to prevent mass problems for the common folk (or so commentators think). It took a long time to get to the position where everything went tits up, therefore a bit of time will be taken before meting out the necessary beatings after the cock-ups. I think that\'s fair to an extent - revenge is a dish best served cold, etc...

 

[Dougs Workshop]

To the original question: No, I don\'t believe it\'s right that the government provide a bailout of the companies that got themselves into this situation. I\'d be much happier if these banks were allowed to buy insurance (as it is with FHA insured loans). That way, these sub-prime mortgages would be bought up rather quickly. The situation exists because no one wants to touch these things, and since these banks borrowed money based on the asset value, they\'re now in the hole big-time.

As to how it affect me, it really doesn\'t. My wife and I live in a modest house with a fixed rate mortgate (and making double payments at that). We live on half our income, which means that we don\'t fear one of us losing our jobs. And it\'s not like we can\'t find jobs making half what we were before. On top of this, we have an emergency fund in case something does happen.

As to my 401k, yes it\'s down. But even if the company that holds that account goes bankrupt, I still own the shares of mutual funds within the 401k. Since I\'m invested in a broad range of companies, I don\'t worry. If I invested in the stock of AIG or Lehman, yeah, I\'d be worried. But Coca Cola is doing okay. Microsoft is okay. the S&P 500 is okay. I\'m okay.

The lesson is that debt is bad. Bad for businesses, bad for individuals, bad for governements. That\'s why I don\'t have a credit card. No chance for me to go into debt.

-Doug

 

[paintingploddy]

Didn\'t AIG goes down because it did insure other institutions against loan default?

@Doug - The problem here in Australia is the same as the US (though not to the same degree). Our economy is built solely on consumption and debt. A lot of people are employed to build houses, and selling the stuff to outfit houses. If people stop building houses because interest rates go up or the banks tighten up lending there is less work for the tradies. They have less to spend which passes on to the retail and services sectors. They in turn shed jobs and the whole vicious cycle starts to turn over. We went through it in the 90s (the recession we had to have according to one prime minister) and it wasn\'t pleasant. Point is this has the potential to impact substantial numbers of people who have lived within their means and don\'t have large amounts of debt hanging over their heads.

 

[Dougs Workshop]

While I have no doubt that the situation could cause a recession, I do doubt that credit markets will \"freeze.\"

I\'ve been hearing for a while now that it is impossible (or will be impossilbe) to get a loan for a house. But that\'s simply not true. I still qualify for a traditional mortgage. Subprime mortgages will be gone. People who shouldn\'t get credit won\'t get credit. If someone has money, they will still lend it. Loans will be made, because there is a market for them.

Would a recession be bad? Sure. Would it be the end of the financial world? No. It will be the end of some very powerful peoples careers, which is why the bailout scheme is being pushed through and hyped as necessary.

 

[paintingploddy]

I too don\'t see this as the end of the world but there will be a lot f people hurt. I am against providing a safety net for greed, but at the same time there will be people hurt in this that are blameless (if anyone living in western society can be called blameless). If there is a way to minimise the hurt to the bystanders is it worthwhile to use it even though it saves those who don\'t deserve to be saved?

 

[Dougs Workshop]

Ploddy, the question you ask starts heading towards a political debate, so I won\'t answer directly.

I will say this: If you used a home equity line of credit, if you bought a home with an 80/20 mortgage, if you got a subprime mortgage, if you thought that interest-only deal was a good idea, you are at fault for the situation.

If, instead, you lived below your means, and eschewed credit, you will be fine. The simple fact that you had enough foresight to plan for the contingency of bad things happening means you have enough intelligence to weather whatever storm might come. Yes, that means if you lose your job, you\'re more likely to be okay if you lived without credit. I will likely lose my job in the next 6 months as the pharmaceutical industry is hurting right now. I\'m not worried.

 

[Wendy]

Originally posted by Ebonbuddha
And this is why I like Ron Paul.

Too bad more people don\'t listen to what he\'s saying rather than calling him names.

He gets it. He knows that we need to let things sort themselves out in the short term. By putting off the inevitable, it\'s making it much, much worse. Which is worse, a hard recession for a year or so or a decade long depression?

Sounds like they\'ve reached an agreement. We\'re going to be paying for this for a long time. If I read correctly, the 700 billion isn\'t just a one time deal. It\'s just 700 billion at a time. The Treasury Secretary has was too much authority now.

The whole problem was caused by printing too much money (liquidity) and extending way too much credit to anyone with a pulse. Their answer to the problem will be to print more money. It doesn\'t matter if the stock market reaches 100,000 if the dollar keeps declining in value. (Check out Zimbabwe - I believe they just cut three zeros off their currency.)

So bottom line, the people who were responsible and saved money are being penalized by the devaluation of the dollar.

Some tidbits

I would encourage everyone to read up on the Fed. (They\'ve got a pretty sweet deal going for a private bank interest. Well, sweet for them.)