The "Dutch Tulip Market Bubble" replayed by unscrupulous bastards in America's top Financial markets.

Talk about hating your own country, eh?
Let's watch if Obama will prosecute those scheming perpetrator bastards.

This financial mess will end when the fools lose all their money.

Almost everyone who plays in this game are fools.

And the government is intent on giving them more money to lose.

Stock up, hunker down. It's going to be a long one.

Derek

Obama won't touch them . . . . Wall street inoculated themselves by being $$BIG contributors to his fund raising machine.

They are inoculated, he is infected.

America will suffer the consequences.

"Your f**kin' blog destroyed my career"

-- Lorne Calvert

That was a very good read. I think I now have a much better understanding of how this all went down. Thanks for posting the link!

Derivatives: The egg that laid the goose.

A close family member is a bond fund manager with approximately 14 billion under management, his assessment is that this whole sub prime debacle is in essence nothing but a gigantic fraud. He feels that those responsible should be treated like any other fraud artist and prosecuted, from the investment banks to the rating agencies on down.

His biggest fear now is that government and over zealous regulators will now over compensate and make a bad situation worse as well as prolong the whole mess.

His other fear is that you can’t legislate trust, which is what they will probably try and do, that is something that is earned and it will be a long time coming before anything resembling diamond dealers trust is restored to the financial industry.

.

Gee, what a coincidence.

Over at primetimecrime.com there is a article on Zurich's secretive 'Canada Desk'.
Turns out that a senior UBS banker is being charged by US authorities for helping American citizens to evade paying taxes.

And apparently UBS also had a secret Canada Desk that helped rich Cdns do the same thing.
The legitmate UBS bank branch in Canada recorded only $2 bil plus in its work, whereas the secret UBS operation helped over $5 bil to leave Canada.

Unlike the US though, Canadian authorities have done nothing in the way of laying any charges so far. No of course not, we have to think of all the rich politicians and friends that would be involved in this operation.

It seems that what the world financial system really needs, and Wall Street in particular, is a good long enema.

good long enema.

"This town needs an enema!"

- Jack Nicholson, playing the Joker, in the first Batman, where Gotham City is a thinly veiled New York City, coincidental centre of the US Brokerage Industry.

I guess in Canada crooks go into politics instead of finance. Or maybe we haven't dug into the Big Five banks quite hard enough.

That was an amazingly informative story though, I have to say. Quite a while ago I asked if this mortgage crisis was going to be as big a deal as the $600 billion and 3000 dead from the WTC attack. Turns out, hell yes it was! I was completely and utterly wrong, and I must say I paid for it because the one or two stocks I still have are under water.

My mistake, and the mistake pretty much everybody in the whole world seems to have made, was in assuming these mega-bankers of Wall Street (and Bay Street!) were both honest and competent. Oopsie.

This is like finding out your doctor is generating business by hiring minions to dust shopping carts with flu germs. And then finding out this is legal.

Now, to bring in something from the outfield: who is the bogeyman of modern society? Who are the only people we are publicly allowed to hate in print, in movies, in songs?

Conservative Christians!!!

Yes friends, the entire MSM missed this story since pretty much -forever-, preferring to go on safari for racists, bigots, homophobes and Conservative gun owners. One might almost suspect it was deliberate, but for a single thing.

These people who authored our current crisis seem not to have been that competent. Not cynical masterminds then, but more like drunk teenagers with a stolen car, which has finally run out of gas.

Wasn't there some sort of mortgage insurance "house of cards" tied into this also to provide a figleaf for the clowns buying up these scams for their sucker investors? There is only one way this could have functioned - huge kickbacks.

...like drunk teenagers with a stolen car, which has finally run out of gas. Posted by: The Phantom at November 15, 2008 12:05 PM

More like - crashed into innocent hard working bystanders, who'll now be forced to pay for their injuries as well as the bling bling debt of the drunken teenagers and THEIR families.

What is truly astonishing is how the Treasury and the Fed have rushed in to rescue these unbelievably negligent financial institutions.

Restoring "confidence" to institutions that clearly deserve none will be a very, very expensive proposition for taxpayers. This bailout/rescue is a swindle of taxpayers on a scale we've probably never seen before, and it is to their eternal shame that this is happening under a Republican administration. They will wear this rescue for a long, long time.

Can anyone with a financial background explain why short selling is legal? If it were applied to houses instead of stocks, wouldn't it be like me selling your house for $300K (even though I don't own your house) and betting I could then get your house for $280K? It just seams backwards to me.

And bailing these companies and these people out of their self-made disaster was necessary to prevent a collapse of the American banking system? Why? So we get to pay for their ... no polite word in the English language exists to characterize their actions and the action and inaction of the supposed "regulatory authorities". Failure of the free market my hind leg; failure of state capitalism would be a more accurate capitalism. Each of the steps was made possible by the passage of amendments to prior laws or the passage of new laws enabling these people to destroy their own companies and endanger the entire financial system of the nation. Notice that most local banks which did not participate in the legalized fraud haven't any problems, apart from the general loss of consumer confidence. Hope that consumers, generally, will remember that and remember our fine federal government's reaction to this debacle was to "rescue" their buddies on Wall Street and those places. Well written article and well-done to link us to it. Thank you.

When you note that there were SIX times the amount of derivatives as the total world GDP in 2007, roughly $516 trillion, one begins to understand the looks of terror on politicians' faces.

kmn: they shorted on the bonds by cds's.

What that means is they found someone who for a fee would agree to pay the face value of the bond upon default. To receive the face value, they would have to hand over a bond.

So they bought this 'insurance' without owning any of the bonds they were insuring. When the bonds defaulted, they bought them at the very low price they were selling for, since they were worthless, and cashed them in for face value.

I suspect they did very well.

Derek

OK, now that we've established that the US taxpayer is going to get stuck for the bill, look at the voting record on the final bailout.

A majority of Democrats voted to stick the taxpayers with the bill.

A majority of Republicans voted against the $700 billion bailout.

Seems kinda curious, does it not, that Wall Street is getting the blame and the party that portrays itself as the guardian of the ordinary people against the Wall Street guys and their Republican friends ... votes FOR a bill that sticks the taxpayers?

Something in the narrative does not make sense.

I'd guess the question would be is why did so many Democrats vote to stick it to the ordinary taxpayer?

"...investment banks took huge piles of loans that in and of themselves might be rated BBB, threw them into a trust, carved the trust into tranches, and wound up with 60 percent of the new total being rated AAA."

Yup, sounds like believing in software simulations rather than common sense, experienced insight and actual reality to me. Now where have we heard about this phenomenon before? [cough]AGW[/cough]

I now work as an engineering computer/software support guy after almost 30 years in engineering (the money's good). There's no end of people I have to help that have no clue about what they're doing, how they can easily eff things up, don't/can't/won't understand the "meat" of what they're doing.

It's all "computer stuff" to them, and mastering Word or email to the extent that they can save and print a document is a huge achievement worthy of a big salary.

WTF? Many people are just middle-men ("middle-people"?), just passing along information, so it come as no surprise that this internet age has bred a generation of wannabees who are capable of Googling for the top result and parroting what is found there.

Mind you, I'm a Google fan, though. Look up 'piping design' and you'll see my site at the top of the list, been there for years without ever having to hype anything. Not a millionaire yet though, maybe next month.

kmn,

The idea behind short selling is that you borrow the shares from someone, and sell them. That person does reserve the right to recall the lent shares (forcing you to buy shares to cover), as well. What you describe is naked short selling, and it is illegal, but still fairly common.

Short selling would make a bit sense if you were required to pay rent on the borrowed shares... ;)

These people who authored our current crisis seem not to have been that competent. Not cynical masterminds then, but more like drunk teenagers with a stolen car, which has finally run out of gas.

No...they'd LIKE you to believe that they are screwups. That's the limited hangout that the prostrate media is offering up: "Oops! Guess we screwed up!"
Bullsh*t!
The truth is virtually all MBA types have sociopathic tendencies. Watch "The Smartest Guys in the Room". It has audio clips of Enron traders gloating over California wildfires and screwing little old ladies out of their savings. They should all meet their end sh*tting and twitching on the end of a rope in the public square.

Peter Schiff... Correct Before It Was Cool

http://www.lewrockwell.com/blog/lewrw/archives/023997.html

K Stricker: This isn't stocks or shares, which are regulated somewhat.

This is bonds. Credit Default Swaps are a way of hedging risk on a bond, where you pay a fee (by contract) to have someone else cover the losses if the bond defaults.

CDS vendors would sell a guarantee on a bond whether you owned it or not.

If you didn't, you would pay the fee. If it defaulted, you would buy a bond (cheap) and present it to be redeemed under your CDS contract. Pension fund investors who by law can't buy anything with low risk ratings liked CDS's because it hedged their risk.

The purchaser of the CDS who didn't own the bond would lose if the bond didn't default since they would have to pay the monthly fees for the duration of the contract. The fees would be high for a high risk bond.

This isn't the stock market. The stock market is tiny compared to the whole structure of leveraged debt in this market.

The problem with this mess is that the 'low risk' AAA bonds were buying a 3/4 million dollar house for a guy who had no income.

Now, for a not too hypothetical question, that goes to the question of when things will get better:

In what way is Wall Street different than the Vancouver Stock Exchange, or the Salt Lake City exchange, both known for shenanigans and thievery? I know, maybe some Wall Street trader can use death threats against the journalists that are wrecking their scam. It worked real well in Vancouver.

In other words, who in their right mind will entrust their money to Wall Street? They have burnt the only asset they had, which is trust.

Derek

Short selling tempers the system its intent and purpose is to create sellers where normally Longs wouldn't be exiting the market thereby mitigating volatility.

Subsequently short covering creates buying typically before sidelined money comes in to take long positions. Thereby slowing or even ending a securities decent before it gets way over extended.

If you have been watching the massive swings in the markets the last few weeks what that is is a few massively large players all using plays from the same play book. in essence dog piling into a market then dog piling out. Sometimes within hours

Believe it or not short selling adds liquidity and diversity to alleviate the kind of volatility we are seeing today by bringing a far more diversified group of players not all using the same play book.

Taylor Caldwell wrote of the determination of EVIL to undermine the decency and the Freedom of the American people. 'Economic Contol is the key to Communism' was the theme of most of the Late Taylor Caldwell's books. The stage was being set before WWI. Ronald Regan stopped the Bolsheviks for a time but he was followed by sleezy willy. George Bush was supposed to be a push over but he was not, America bought some more time...but this latest choice has all the earmarks of being on the wrong side of Freedom, IMO.

Without shorts, there is no way for the market to determine actual value.

Exactly Jeff and I also look at the shorts piling up as an indicator of problems, a canary.

Edward, I'm not making excuses for the moral underpinnings of these guys. I just don't think they could have managed this edifice of calamity in a planned, deliberate way. Nobody is that smart or that lucky.

Where my thoughts are is awe at the utter recklessness on display here. Yes, these guys all think they're the smartest guy in the room. Where the incompetence comes is their apparently universal assumption that nothing bad could happen.

They lack the insight to see the limits of their skill, and indeed to see the consequences of their actions. They think they can do these things, sink the whole fricking world economy with their tricks, and skate away laughing. That's incompetence. That's like the Himalayas of incompetence.

And yeah, we get stuck sweeping up behind them.

But then we are the ones who voted in the regulators who created the CDO loopholes, the 40-1 leverage, the sub prime loan market, aren't we? We cheered them on. The USA just elected ANOTHER ONE for crap sakes. These guys arranged all this behind our backs, and they're now bailing each other out behind our backs.

And we are letting them, because as a society we still think they know what they're doing.

I'd say the whole tulip craze just bumped up another level. I think the same mentality that ruined Lehman Brothers is hard at work trying to ruin the US government. And the governments of Britain and Europe. Maybe even ours, if we're not careful. Even a government doesn't have limitless power and limitless money.

That's not the work of eeeevile masterminds. Its the work of idiots. Fools with MBAs and law degrees.

dkite at November 15, 2008 12:50 PM
==============================
Wow, so you mean that people who trade imaginary value get off scot-free for losing other peoples' money while skimming millions of dollars for themselves?

Pardon me, but that sounds like a scam to me.

If enough people are convinced of:

"I owe the bank $100,00, it's my problem. If I owe the bank $100,000,000, it's their problem."

Of course in the latter case there are lawyers and extradition-free vacation homes involved.

Don't get me wrong, I'm not anti-capitalism and I reject higher taxes, but this sort of thing is just silly.

Resolution 203 just passed unanimously at the policy plenary!

Once again average Americans are going to be brought to their knees by things they can't (and 99% of people including the CEOs of these companies) understand. Hope the rest of the world enjoys the ride

Never been that good at reading or understanding financial or monetary events like this. But even an economic Moron like me can see this is gonna be a big long bust. Being an Albertan helps. Where used to the cycle.
As I read Drudge along with other papers than tabulated the rate of lost jobs, it looks like a breakdown. This whole scam will collapse & with it a lot of savings, banks. Than come the job losses with the ripple effect across the Nation. Seen this with the NEP. Obama will do little, since he's one of the enablers. Has been since the beginning. If handled right it could cleanse the market of the thieves ,hucksters with all the other riff raft. Instead they will try to save the sinking ships corporate welfare Captains, causing more social harm. They should be in jail
JMO

"That is how socialism works. Politicians, bankers, and big businessmen do an age-old dance in triple time. There is no trickle down economics in socialism. Almost all of the money stays at the top."
http://www.americanthinker.com/2008/11/waltzing_on_the_titanic_1.html

"this is one of the first cases to come out of the U.S. subprime mortgage crisis, the ultimate outcome will be of interest to accountants, lawyers and regulators alike.
New York Supreme Court Justice Charles Ramos barred a law suit in which the liquidators of the now-defunct Beacon Hill Master (BHM)- a hedge fund launched under Cayman Islands law-tried to sue BHM auditor Ernst & Young LLP in the U.S. and its Cayman Island affiliate in an effort to recover US$300 million the fund lost in late 2002." ""Justice Ramos applied well-established common law principles to hold that a company cannot sue its outside auditor for misconduct that its own management allegedly perpetrated,""
"On Oct. 17, 2002, Beacon Hill announced much larger investor losses, acknowledging that, as of Sept. 30, 2002, the net asset values of its hedge funds had declined 54 percent from previously-reported Aug. 31, 2002levels and, further, that it had mispriced securities in the fund prior to August."

THE BOTTOM LINE September 2008 paper.

Note this melt down should have been seen as far back as 2002. So what has changed? Could it be the Banks purchasing the best agricultural land in the world, in the Ukraine? Control the food supply, step 2.

Grain.org

Jema 54..
"The Captain and the Kings" comes to mind frequently, especially during this past election in the states. The Big O could not have won without all the manipulation.
Lot's of puppets on strings.

Best quote from the article:

"From that moment, though, the Wall Street firm became a black box. The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever more complex, their understanding diminished. The moment Salomon Brothers demonstrated the potential gains to be had by the investment bank as public corporation, the psychological foundations of Wall Street shifted from trust to blind faith.

No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.

No partnership, for that matter, would have hired me or anyone remotely like me. Was there ever any correlation between the ability to get in and out of Princeton and a talent for taking financial risk?

Now I asked Gutfreund about his biggest decision. “Yes,” he said. “They—the heads of the other Wall Street firms—all said what an awful thing it was to go public and how could you do such a thing. But when the temptation arose, they all gave in to it.” He agreed that the main effect of turning a partnership into a corporation was to transfer the financial risk to the shareholders. “When things go wrong, it’s their problem,” he said—and obviously not theirs alone. When a Wall Street investment bank screwed up badly enough, its risks became the problem of the U.S. government."

BEST SUBPRIME COMEDY ON YOUTUBE:

http://www.youtube.com/watch?v=UC31Oudc5Bg

Bird & Fortune's Hilarious Discussion

Cheers

Hans-Christian Georg Rupprecht, Commander in Chief

Frankenstein Battalion
2nd Squadron: Ulanen-(Lancers) Regiment Großherzog Friedrich von Baden(Rheinisches) Nr.7(Saarbrucken)
Knecht Rupprecht Division
Hans Corps
1st Saint Nicolaas Army
Army Group “True North”

Speaking of Shorts, I just keep on filling mine every day I see the market go down.

Back in the mid '90's, I was working in an underground mine as an equipment operator. One day they told me to use my locomotive to haul several loads of "stock analysts" back to the "face." These visitors were just checking to see if they should recommend our company to their investors/clients, I guess. These people seemed very young and wide-eyed and totally our of their element. I remember thinking how silly it was for such greenhorns to evaluate our operation. After reading this article, I see that my experience was not an anomaly. A pretty degree is worth more than a lifetime of hands-on experience in most industries these days. Heaven help us.

If there are two sides to every transactions, then where did the money that Wall Street lost go?

There had to be someone else on the other side of these deals.

Sellers of the homes, pre-bubble burst, short sellers of default credit swaps, and mortgage employees based on commission.

Stricker, Derek: when you short a bond or a stock, you are responsible for paying the interest or dividends due on that bond/stock until you "cover". So, there is a cost involved. In addition, you must post "margin" with your broker in the amount of (usually) 105% of the total value shorted. If the shorted item rises in price, you must post additional margin to get back onside, or your position will be covered regardless of your desires.

Now, I haven't worked on Bay Street for almost 20 years, so I don't know exactly what the mechanics are with derivatives like CDO/CDS's, but from what I've read, an investor who offers a CDS receives an annual payment in return for taking on the risk if the original borrower defaults. I would assume that someone shorting the CDS would also be responsible for making that annual payment, but I could be wrong.

As to Mike Lewis's excellent article: I have been vilified all over the blogosphere (and ignored in my letters to the editor of various papers) for suggesting that Moody's and S&P are complicit in the buildup of this bubble. But, as Eisman, Lewis, Grant, and others have pointed out, without the AAA ratings put on this excrement by the ratings agencies, no pension fund and no mutual fund (and most other investment vehicles) would have been allowed to purchase them. And, as most of this dreck offered yields of 5-10% when 10-yr Treasuries were offering less than 4%, there was no shortage of credulous buyers who substituted Moody/S&P's judgement for their own, and bought, bought, bought! (I was told years ago the two most important words in finance are "DUE DILIGENCE"; judge for yourself.)

Trying to wring a few extra points out of a $1 billion portfolio may not seem like a big deal, but each point represents $10 million a year. Most investment managers are measured against a benchmark index (like the S&P500, Scotia's bond indices, etc.), and if you present results that are 2% higher than Treasuries, and thus earned $20 million more for your portfolio, guess how big your bonus is going to be? Richard Russell of Dow Theory Letters fame wrote "More money has been lost chasing yield than anywhere else on Wall Street".

Finally, Karl Marx, who, like a stopped clock, was right twice a day, said "History repeats itself, first as tragedy, second as farce". If the Great Depression was the tragedy, what are we in today?

KevinB:

We are now in "My Big Fat Greek Tragedy"! :)

Keep laughing, it is the only thing that keeps you sane and on balance.

The eventual other side of the trade, is that with all the multi-billion dollar bailout packages, for Wall Street firms, AIG, Freddy Mac and Fanny Mae, the commodity stocks that actually have something in the ground do really still express "REAL VALUE" some at 2x to 3x earnings.

Canada still looks like a handsome place to invest, while the US goes through its 'financial stocks disemboweling' which for the most part appears to be gradually abating.

Moreover, Intel is finally doing something smart with their Core i7 cpus and using the Quickpath mircro-architecture. A structural change that qualitatively brings them up to step with AMD's cpu structure long since done on their Opteron cores with Hypertransport. When Intel adds ECC support they should really be humming along.
A die shrink or two and AMD will be able to ratchet up their clock speeds again.

http://en.wikipedia.org/wiki/Core_i7

Further, consumer stocks will still do ok as people will not suddenly stop eating, unless there is an outbreak of anorexia nervosa, which seems to have a relatively low probability for those not involved in the fashion runway industry.

Cheers

Hans-Christian Georg Rupprecht, Commander in Chief

Frankenstein Battalion
2nd Squadron: Ulanen-(Lancers) Regiment Großherzog Friedrich von Baden(Rheinisches) Nr.7(Saarbrucken)
Knecht Rupprecht Division
Hans Corps
1st Saint Nicolaas Army
Army Group “True North”

The auto industry seems to be top of mind for many, especially Ontario. The hacks in the media keep hounding the Harper Conservatives about whether they're going to bail them out.

All will be well as long GM et al can follow union dictum and pay for Viagra and other drugs for various and sundry "ailments" or natural occurrences to their workforce?

ward makes a very relevant point;

[If there are two sides to every transactions, then where did the money that Wall Street lost go?

There had to be someone else on the other side of these deals.]

It didn't just vanish into thin air - as much as the Ten O'clock news likes to insist, dramatize, fear monger.

We wondering where all the money will come from to drive the markets back up ? Dunno, but was it not all the short selling (for cash) that caused the bid-ask ratios to adjust the market down ? If that same (and same amount of) cash came back in the market, would the same bid-ask (in reverse) drive it back up ? To the previous level. All things being equal, of course.

Oh, and the Executives' bonus money would also be coming back into the market as the recovery takes place :)

Well as long as Bernanke has his printing presses running white hot cranking out new thousand dollar notes what is the problem people. I mean what's another 4 or 5 trillion in the big picture. The truth is that the current situation is looking more and more like the second coming of the Weimar republic. Now that is scary.

Posted by: ron in kelowna at November 15, 2008 8:20 PM>

Agreed! Good points.

I’ve never heard anyone say the stock market wasn’t risky? Neither is going to Vegas and trying your luck.

The only losers are those that sell at this point. Now is the time to buy. The same goes’ for property in the US “if you have the money”, use your head, and plot your plan.

As I’ve repeatedly stated in previous threads this is not the fault of the government or Wall Street alone. If you wish to live in a capitalist market society you need to be savvy to the pitfalls.

Obviously an extremely undereducated society with enormous third world entrenchment does not fit that bill. Hence the rise of the socialists new American dream of care givers and the nanny state.

Hans:

Right you are about consumer stocks - go to "Stockcharts.com", and plot Johnson & Johnson (JNJ) and Procter and Gamble (PG) vs. the Dow Jones Industrial Average. Plus they pay a dividend.

Time to stay hunkered down for a while, but keep the powder dry!

When Alan Greenspan pushed interest rates down to one percent to avoid a recession at the end of the tech boom, the evolution of this kind of ponzi scheme is the inevitable result.

No one should be surprised that when easy money turns the economy into a casino, people will behave like reckless gamblers.

No amount of "regulation" could possibly have prevented this, unless regulators are somehow blessed with a sense of clairvoyance that the rest of us don't have.

Dennis - absolutely correct.

Now is a very good time to buy Roger Lowenstein's When Genius Failed - The LTCM Debacle.

That was the most fascinating article I've read in some time. I was particularly gobsmacked by these two bits:

In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.

Eisman knew subprime lenders could be scumbags. What he underestimated was the total unabashed complicity of the upper class of American capitalism.

What worries me now though are the repeated calls for America (and the West generally) to turn its back on capitalism and change to a much more socialist society. That would be a tragic mistake.

What has gone off the rails is not Capitalism, but Capitalism WITHOUT ETHICS. The solution is not to move away from Capitalism altogether but simply to severely penalize those who choose to operate without ethics - including and perhaps especially the ratings agencies like Standard & Poor's and Moody's.

Many of us in the general public are shocked that anyone has been able to legally act so unethically in the first place but such is the case. Greed has corrupted a great many. Now it's time for them to pay the price ... that is if they haven't bought off too many of those who will be judging them. So I hold out little hope that the guilty will ever suffer anything more than a slap on the wrist.

amazing. creat paper, assign a value and call it an investment. fraud??????

No Robert, it's capitalism with personal consequences that has gone off the rails. Bailouts and buyouts are only exacerbating the problem. What we need to see is some jail time, and some people spending the next few years paying back what they owe - from the Mexican strawberry picker to the CEO.

Its a good thing that in a money supply driven financial crisis we don't have a Liberal demagogue with Totalitarian Guevarist admirers in the White House.

Or, as we say in the online donation business:

Hail to the Thief.

This financial crisis hilites the problem with a fiat currency.
With a fiat currency, ie the unlimited ability to print more and more dollars just gives the politicians and friends more reasons not to make hard choices or make good value judgements.

With a limited money supply, everyone is required to make the best use of the available dollars in their situation. And hard workers are rewarded with quality money that can buy goods.

A gold standard/fixed basis for currency forces people, and governments in particular, to make better decisions.

Anybody for smaller govt?
Vote for a gold standard money system, or some suitable substitute.
Ron Paul has it right.

Robert W said-

"What has gone off the rails is not Capitalism, but Capitalism WITHOUT ETHICS."

Not actually. What went off the rails was the Dems, (with help from the RINOs), skewed the market by forcing lenders to create continually more sub-prime loans, BY REGULATION! At the peak, Fannie and Freddie were REQUIRED to have 42% of loan volume to sub-prime lenders. To meet this sheer volume of funding, a $40,000 trailer just didn't cut it. Hence the $720,000 sized loans with vicious ARM's attached.

Given that REGULATION also required that these loans be sold off, (to generate the cashflow to be able to sell MORE sub-prime loans), regulators effectively FORCED banks and near banks to accept this doggy doo.

Just as you would do if forced to keep a couple of hundred pounds of doggie doo in your house, instead of putting it in the hottub so your neighbours could smell it, they put it in the freezer instead, and tried to sell it to someone else.

The market ALWAYS works, if left alone. The problem is, people that like big government don't like the workings, OR the results.

No Robert, it's capitalism with personal consequences that has gone off the rails.

That's exactly right Kate. However, we also need to address the "fatal conceit" of central banking as practiced by former wizard, now clown, Alan Greenspan, and explore some form of "free banking".
Central banks skew the incentive structure and cause malinvestments when interest rates are artifically low, as they were in 2003 when Greenspan pushed the Fed rate down to 1%, well below inflation.

This disaster has much to do with a politicized Fed fighting a recession "tooth and nail" for it's political masters. Sadly, the delayed but inevitale recession is much, much worse.

Once upon a time you dressed so fine
You threw the bums a dime in your prime, didn't you?
People'd call, say, "Beware doll, you're bound to fall"
You thought they were all kiddin' you
You used to laugh about
Everybody that was hangin' out
Now you don't talk so loud
Now you don't seem so proud
About having to be scrounging for your next meal.

Let's see if you can accept the truth. Who controls wallstreet? Jewish bankers? People control the stockmarket. Not anyone of you on this blog.

Granny! Take that money from your mattress an oblige Mr.Drysdale.

That's the best commentary yet on this entire fiasco. The real failure is the $700 billion bailout. I plan to send the article to my representatives. The horse has bolted the barn but it's not too late to break out the shotgun.

The gov't should gurantee all pensions. They guarantee their own. Do you think Harper will give up his cushy gov't pension? Not in this life. Niether will any MP or MLA. Their's are guranteed.

You fools on here still think a totally free market works? You guys are the worst need of a BJ than any white guys I know.