Timing is everything…
“Behind the Housing Crash – Confessions from an Insider”
Full of stories guaranteed to make your blood boil, bring shame to the banking industry, and packed full of charty-goodness (35 charts no less!) this has been the single largest project I’ve ever embarked on. I did my best to write a clear, concise, but above all, entertaining book that I hope achieves its aim of explaining what happened, how the housing crash came to be, and why your house is all of the sudden worth $150,000 less than what it used to be.
By our own Captain Capitalism! His goal is to outsell Nancy Pelosi – we have enough hourly readers to accomplish that!
You can check out more, including how to order at Amazon.
Looks like the chickens are all coming home at once, eh? First Bear Sterns, now Lehman, next AIG.
The thing that bothers me the most about this whole thing is the utter moral vacuum these people operate in. Its as if nothing matters, and money made or lost has no effect on the real world no matter how big the numbers get. That’s evil, and as we are seeing right now it is ultimately stupid. The pyramid scheme is coming down and bringing its architects with it. Money comes from people’s work, stealing it by fancy financial instruments is wrong.
I applaud the US government’s decision to let Lehman Brothers implode, even though its going to have some effects on my personal pocket book. That’s a moral stand as well as a political one. Maybe if these big wheels on Wall Street and Bay Street start having to pay the cost of their immorality, they will at least think about changing their behavior.
Here’s and IBD Editorial blaming the Clinton administration for the mess due to legislation which forced banks to lend money to people the did not qualify…
The Real Culprits In This Meltdown – Big Government: Barack Obama and Democrats blame the historic financial turmoil on the market. But if it’s dysfunctional, Democrats during the Clinton years are a prime reason for it.
http://ibdeditorial.com/IBDArticles.aspx?id=306370789279709
You mean the democrat mindset that everyone deserves to own a house can cause economic turmoil? Preposterous!
o O 0 Bubbles Bubbles o o O O 0 0
Tulip Bulbs, stocks, South Sea Bubble, dot com, biofuels, pet rocks, housing, … and oil(?). (Remember when oil was at $140 and CIBC said it was going to $200)
Human nature causes bubbles, not the item itself.
hype Hype HYPE
Remember The National’s feature story on Saskatoon house prices going through the roof ? Adding fuel to the fire ?
Investment Instruments. Derivatives, ect. Some of them remind me of a tactic used by auctioneers. In the box, put in something of value. Then, add some junk to bulk up the “package”.
Here’s a post by Ed Morrisey showing how Bush tried to put regulations in place to control the reckless lending practices and was stopped by the Dems.
http://hotair.com/archives/2008/09/16/whose-policies-led-to-the-credit-crisis/
The second biggest fear – being left behind by the rising bubble.
The biggest fear – being aboard the bubble when it is pricked !!
It is just amazing, and one more disastrous example, of the total dis function of those we elect and appoint to look after our, the public’s, interest.
The exact same thing happened in 1987 at the end of a heated real-estate market. While the public bailed out with billions the Savings and Loans Banks, nothing was changed to protect us from this happening again.
If you have some spare time, you can get an eye-opening education of why nothing was done to protect us, of if something was done, why it was not enforced by looking at the cozy relationship between Fannie May, Freddie Mac, and our ‘representatives’ in Congress. Donations, jobs for them when they leave, jobs for their family members while still serving us, the Fannie May Foundation set up to sent ‘grants’ to a Congressman’s favorite community/political projects, the buying of influence of Congressmen assigned to Banking Committees.
It is just a total unbelievable combination of self-interest, greed, and ‘legal’ corruption.
The main cause of today’s financial problems are Fanny, Freddie and bad legislation by the Clinton administration allowing low and no down payments. Yes everyone could get a home, but a hell of a lot of them couldn’t pay the mortgage. Add to that the whores of the investment world, Banks, bundling all the bad and high risk mortgages together with a few good ones and selling them to institutional investors as a quality investment and you have the current situation in a nutshell. One more whore you can add to the list is the media, causing panic and insecurity among investors of all stripes. As I said here months ago this was a media induced recession or whatever you want to call it and should have been contained to the mortgage industry alone.
I guess I have one point for all to ponder, two years ago legislation in the congress was taken over by the Dems, parallel that with when all the current problems started, I guess what goes around comes around, Democrat to Democrat.
From someone(not I) who is considering buying a house in the Napa Valley.
The house is $100k less than is was.
The price now ?(Mar 08) $500k.
What was it two years ago ? $400k.
What was it 5 years ago ? $280k
$280k @ a realistic 6% a year for five years = $374k
Buyer beware also applies to bankers.
I sometimes wonder if all this did not start 20 years ago when banks dropped savings account interest to virtually zero.
It forced the every day consumer into equities, housing, condos ect in order to make some kind of ROI.
Also, at that time, enter 401kays, pension funds, hedge funds, venture funds.
Unfunded pension funds tried to make up the short fall by playing the market.
It all sounds like Las Vegas – lots of players, no brains !!
The problem is that one cannot go on loaning a million dollars to the wino on the street, selling him the “American Dream” for no money down, interest payments only. It is precisely that: “An intoxicated American Dream.”
Even worse the banking industry in the US, made advertisements no too long ago promising to loan up to 130% of the value of your home, predicated on a 10% growth in the value of one’s home.
This is working out splendidly! /sarc
Gee real estate going down in value, who would have thought? Fortunately, the Canuckle-head banking system north of the 49th parallel didn’t buy too heavily into these “ADVANCED FINANCIAL INSTRUMENTS” known as “asset backed commercial paper (ABCP).
Danny Williams is yelling a new political slogan “Anything But Commercial Paper (ABCP)”.
He may however be “Hiberniating” as the BEARS gently fall asleep again as winter soon approaches.
Well financial discipline has now arrived in the US! After the last few gut wrenching financial vomit sessions the bowels of the financial system in the US will finally flush this collossal cess pool of stupidity.
One might describe this as the drunk who is staggering home after an ‘all nighter’ being blinded by the the sunshine of the rising sun, heading east on the Forty-second Street, Manhattanville and St. Nicholas Avenue Railway.
The bulls have expelled their BS, and will now be pawing the ground ready to chase bears back into their caves for winter.
GOOD MORNING AMERICA!!
And would you like a Starbucks coffee with that or perhaps some stronger stuff like Tim Hortons?
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 fact that Freddie Mac and Fannie Mae ceased to exist as
viable private companies shouldn’t surprise anyone. They were half-public and half-private. Of course the half public interference in the business drove it into wild excesses the same way wild excesses exist in all government enterprises (public health care comes to mind).
The fact that government fingerprints are all over these companies is why Frank Raines, the one-time president of Fannie Mae escaped into retirement with payments numbered in the multiple tens of millions of dollars and how he escaped indictment instead of being strung up for his malfescence the way a truly private CEO would (Enron anyone).
Make no mistake, Greenspan’s rule at the Fed laid the perfect framework for the housing boom. Just as he created the internet boom with gobs of cash to fight Y2K, he pushed mind-boggling amounts of money into the system and promoted the boom in housing to save the country’s economy from the mess in internet stocks. All this sitting upon his doctrine of companies being to big to fail. Everybody knew the mortgage lending was crazy, but Greenspan demonstrated that if you get into trouble the fed will bail you out.
I’ll bet Greenspan still doesn’t get that the risk free environment he created was his fault. He really is the only one who should be strung up. Candidly, if you are running a business and Government makes rules that allow you to lend drunkenly without risk, you might as well play by the rules as your competition surely is going to.
Quote of the day:
“Thanks goodness we bailed out Bear Stearns back in March if we hadn’t we might have lost Fannie Mae and Freddie Mac, Lehman Brothers, Merrill Lynch and who knows what else. Oh wait…”
RCGZ nailed it !!
aka, the moral hazard.
This is what happens when jobs go overseas
It may be worth $150 k. less than it used to be but in many places like Vancouver it’s still worth $500,000 plus more than it should be.
Houses are for living in – when people talk of a “housing industry”, you know something unpleasant is afoot.
RCGZ,
I’m not quite sure which side you’re supporting here…do you believe that the public should stay out of financial institutions and leave that to the private sector, or do you believe that we need regulation by people who won’t let rampant greed rule their decisions?
I remember being on here even a few months ago and hearing a chorus of people saying there was no crisis, that everything was fine, that the corruption and ridiculous economics being practiced down south were nothing to be worried about…blah blah blah. And yet here we are today.
“You mean the democrat mindset that everyone deserves to own a house can cause economic turmoil? Preposterous!”
Exactly, since we all know who’s been in power for the last 8 years to promote such an agenda…
http://online.wsj.com/article/SB122152311313139643.html?mod=googlenews_wsj
It seems like Obama and ACORN had something to do with this too. In order to force lenders to lend in certain neighborhoods, Democrats in congress enacted penalties if the lender did not. The only way to lend their was to lower credit standards. Then fannie mae was their accepting the risk on taxpayer’s behalf. Of course Wall Street sees privat profit and public risk and wants in. Fannie mae in the meantime was giving money to Obama’s ACORN, because, well, why not?
I just hope McCain can get this into a 30 second spot, somehow.
Obama is wide open on this one.
I only support the side of capitalism. Government’s attempts to remove risk from the equation always result in the opposite result they seek.
Small government, straightforward common sense rules, and an economy that breathes normally from growth to recession. Those that can’t compete die should die during recessions vs keeping the sick alive with taxpayer dollars (bombardier). Better to have new growth sprout up from the ashes of a hapless company.
As for greed, the greatest concentration of greed exist within the halls of government and it spreads from there. Are there greedy capitalists? Yes there are. Sadly, they are usually the best at extracting taxpayer cash.
The stock market will bottom shortly, but the recovery will be far less robust just because of the blatant interference of public authorities. Ergo the economy itself. If we are actually in a recession (the numbers don’t support it yet), what is sad is that the excesses won’t be wrung out as they should be as government fights tooth and nail to prevent the natural ebb and flow that should be allowed to take place.
As for more regulation, the morass of regulation we already have is a significant part of the problem. More? Anything but please.
bar_jebus, Democrats have been protecting and funding fannie mae for years, while Republicans, includeing McCain, have been attacking the whole scheme as a disaster waiting to happen. The Dems liked the Govt Private partnership (textbook fascism) while the Republicans rightly saw it as private profit, govt risk. The head of fannie mae appointed by Clinton was removed a couple of years ago partly for having paid himself 100 million dollars in bonuses.
“this is what happens when jobs go overseas” Aaron @12.25
You mean put up trade barriers so we can all enjoy a South American type of economy? You might want to travel a bit more there Aaron.
Tim,
I simply don’t understand how your statement can possibly be truth. If the Republicans really felt that way, why didn’t they shuttle Fannie and Freddie to private industry during their 8 years in power? The Dem’s had no control until a year ago when they took power, and even then Bush was still in power.
RCGZ,
I agree, sort of. I don’t think mortgage lenders should be owned by government institutions. I agree theres a crapload of regulation, but the problem in this case was that regulation was circumvented. People who shouldn’t have been able to obtain mortgages were given mortgages hand over fist. Now, whether that was due to incentives of government programs, I’m not sure, and if it was, then those laws/regulations need to be ended.
I sort of wonder whether a system of boom/bust in a flowing manner is even possible anymore. The last .com boom/bust awhile back and this current sharp downturn seem to be indicative of a trend that global economics is now in a shock and awe mode of extreme growth or extreme recession. Do you believe this is simply the result of economic policies that have been in vogue for the last decade?
Deregulation, generally attributed to Reagan was actually started by Carter (airlines, trucking, railroads, oil and interest rates)… though Reagan took it to the next level.
It was Bush senior (in this atmosphere) that allowed the Banking industry to write its own deregulation criteria and then signed off (as head of the finance committee, blindly stamped thereafter by congress) which resulted in the richest, those that benefited most by the banking collapse, to cash on by buying up National assets as fire sale prices.
But it took Bush jr. to deregulate Wall St and thereby set the stage for a 3 trillion dollar write-off, that which we have seen correction of 1 trillion to date…
Finally, an end to the Reagun-era trend toward degregulation, and thus, some stability we might count on for a bit, we’ll see ~regards
I think the turning point was actually in the early 80s , at that time the equity in US housing began to the value of the stock market. it was the first time other than in the 1930s that it had happened. I remember reading about it at the time , Im looking for sources right now. so basicly at the time it said people were more interested in their lifestyle than they were their basic making a living , The house exceeded the value of the barn, it was over invested in something that really wasnt returning any value. and ask folks now and their houses account for 90 % of their net worth, its unsustainable. this is the Bob Vila logic where everything is renovated for false value and live we live in a tulip bulb worldclass shacks. 40% of the downtown condos in Calgary sit empty as investments ( no renters , just false forward inflation hedges) looks like the next great tumble to me.
Everyone is missing the point here. It was caused by the creation of “Collaterized Debt Obligations” (CDOs). Originally created by the late Drexel Lambert, they were originally collections of so-called “junk” bonds. The theory was that most junk bonds actually do get re-paid, and that if you bundle together a lot of different bonds, one or two might default, but you’re going to get such higher yields from the rest, you still come out ahead of so-called “AAA” bonds or Treasuries. And the theory proved to be correct, until the 1990 recession, when Drexel went bankrupt during a run of confidence. Mike Milliken made an heroic effort to stave off the run, for which he was eventually indicted.
Skip forward a few years, and laxer federal regulation and lower interest rates re-ignited the CDO market. One of the key movers was Angelo Mozilo’s Countrywide mortgage firm. When a traditional bank gives you a mortgage, they do their due diligence – they find out how long you’ve been employed, how much money you make, how much you spend, and how much you can put down. Since it’s their money at stake, they take care to make sure they’ll get it back.
Not so at Countrywide. Their goal was to write as many mortgages as possible, and then sell the CDO’s to third parties. Bingo! It’s no longer their money at stake – it’s third parties who have no idea what homes are involved, or who is living in them. And, when Clinton authorized “No money down” mortgages, the flood gates really opened. Individual mortgage brokers got paid a commission on every mortgage they wrote, so their incentive was to approve everyone, and some people did. So-called “undocumented” mortgages is a polite way of saying no income check, no check on employment, and no money down. In some cases, people just paid interest only for the first five years. A lot of people gambled that they could move into a house, pay the interest (which was about equal to the rent on an apartment), and then sell the house after four or five years at a much higher price than they bought it, and pocket the difference. And that worked for them, too.
As they say on Bay Street, “trees don’t grow to the sky”. At some point last year, housing prices rose to the point where you couldn’t find buyers, as prospective buyers decided they couldn’t afford the mortgage. Meanwhile, those five year interest only mortgages reset, some times doubling or tripling the monthly payment. Adjustable rate mortgages also reset, at much higher prices.
So many people, looking at a house that was worth less than the outstanding mortgage, and payments that had gone up two or three times, started defaulting on their loans. Unlike Canada, many states in the US have “non-recourse” mortgages; in other words, if you turn the house back to the mortgager, you don’t owe anything else. (It’s not that way in Canada; the bank will sell your house for whatever it can get, and then come after you for the difference.) This resulted in many people just mailing the keys back to Countrywide, which Wall Street, with their typical black humour, referred to as “jingle mail”.
This led to the collapse of Countrywide, and some other mortgagers who also practiced in similar fashion. However, all those CDO’s had been sold to third parties, and were now virtually worthless.
Meanwhile, the Wall Street investment banks, ever inventive, created “credit default swaps”, where one party pays the other a fee, and the second party has to make good on the loan if the original lendee defaults. These were quite lucrative, and many of the banks, like Lehman, held both CDO’s and CDS’s in their own account. There are literally billions – some say trillions – of these swaps out there, and the banks are having to mark them down – Amex sold theirs at 22 cents on the dollar. This has resulted in an enormous loss of liquidity, and capital. Every day it seems, another bank comes out and announces multi-billion dollar write-downs. That’s why so many banks seem shaky, and some have disappeared. Interestingly, Goldman Sachs, which some say is the most detested firm on Wall Street, stayed away from much of this action, and actually announced a quarterly profit.
But the basic cause is simple – greed. The mortgage brokers, Mozilo, the investment bankers, their traders, and their senior execs were all getting huge bonuses. So they wanted to keep the party going as long as they can. It was inevitable it would fall apart; the only question was when.
I don’t really know how this thing came about.
I do know that Bush ditched Greenspan as fast as he could (Greenspan was a darling and it’s hard to ditch darlings) and brought in Bernanke. Bush thought Greenspan was a dumb stiff (and I’m sure that Greenspan thought Bush was a dumb stiff – but ultimately Bush is in charge and Greenspan got ditched).
The way that Bernanke and Paulson are handling things so far is very proactive – they understand that this impacts the US but also impacts the entire world. They have already put in measures to ensure that the sub-prime stuff cannot happen again. Taking over Fanny Mae, etc. was very positive. This idea brought about by Roosevelt in 1938 (and completely gov’t controlled and on gov’t books until 1968) to help people own their own homes (understand that no banks after the depression would lend money to people – without a gov’t guarantee) is way out of date. Now we are going to see a new mechanism invented to handle the present and future and I wouldn’t be surprised if it turns out to be a more Canadian type model.
“why didn’t they shuttle Fannie and Freddie to private industry during their 8 years in power?”
You really don’t understand the US govt. This is not Canada. It takes 60 votes in the senate to do anything controversial. Fannie mae has a lot of support in congress, especially among Democrats. It is a Democrat idea, private public partnership. If you point to some time when the R’s had 60 votes, then I will buy your argument, otherwise it is hopelessly naiive.
Certainly some regulation could have helped here, but what was really blowing up the bubble was the money in Fannie Mae to back the crap loans that the govt was forcing lenders to make. The rest is the inevitable result of perverse incentives. This is a Democrat scandal, as some Democrats noted, before they got their orders from the Obama campaign. Here is one article by a liberal Obama supporter in a San Fransisco Newspaper.
Congressional Democrats were and remain the leading defenders of Fannie Mae and Freddie Mac, promising to resist efforts to shrink the companies, now under government control, and sell off their assets. Democrats had plenty of help from Republicans, to be sure, but it was mainly conservatives who have been warning for more than a decade that their public risk/private profit model was a disaster waiting to happen.
If Obama were to use the financial crisis to rise again above partisan orthodoxy, he might shake people out of their party ruts that they are fast falling into.
http://www.sfgate.com/cgi-bin/blogs/sfgate/detail?blogid=14&entry_id=30261
I understand your point Tim, but Reagan/Bush had around 55 seats in the senate…but I do get your point.
My favourite saying regarding who government should bail out:
“Government is very bad at picking winners, but, losers are very good at picking government.”
“I sort of wonder whether a system of boom/bust in a flowing manner is even possible anymore.” posted by bar_jebus at 2:49 PM
Good observation. By preventing busts from occurring what happens is the energy builds up to the point that when it finally lets go you get a horrifying economic contraction. We may be there now, but I doubt it. This one will be put on the shelf like all the others by the exact behavior witnessed recently in complete takeover of Fannie/Freddie. In fact there may be enough interference to keep this wheel spinning for another 10-12 years. Make no mistake though, risks that this one will evolve into a huge collapse throughout every sector of the economy does indeed exist. The only safe bet is that we will have a humdinger at some point.
“Do you believe this is simply the result of economic policies that have been in vogue for the last decade?”
I believe this trend has been in place since FDR. We are now at the point where faith in government to solve problems is collapsing, and faith in private institutions is rising. Case in point would be the energy industry. The only reason the US imports oil from Dictatorships is because development of the US’s huge energy resources are not allowed. Green legislators against coal (US has the worlds largest reserves), Green legislators against Nuclear power, Green legislators against drilling offshore and in the ANWR. The brilliant Congressional brain trust (DEMS) prevented tapping the trillion barrel Bakken Oil Shale formation in North Dakota (Saudi has 260 BBls) for environmental reasons. Legislative geniuses blowing billions on Ethanol, which consumes more energy to produce a gallon than can be obtained by burning a gallon. Sure made farmers rich though, and taxpayers poor.
Bottom line, the US is more of a command economy right now than it ever has been. And there is not a single case of a command economy ever working.
From Instapundit
I would put together a commercial that said…
James A. Johnson – former Fannie Mae CEO and Obama Advisor
Just cost you billions in taxes
Franklin Raines – former Fannie Mae CEO and Obama Advisor
Just cost you billions in taxes
Barack Obama – If we can’t afford his advisors, how can we afford him?
http://www.pajamasmedia.com/instapundit/archives2/024435.php
Of course Obama is probably already saying they were “just some guys he saw around the neighborhood.”
not to complicated that. freddy and fanny are controlled by the government. the goverment told them that anyone should get a mortgage, especially minorities. this was passed through the financial sector with the fact that penalaties would be applied to those who did not toe the line. the then wothless paper was sold to financial institutions worldwide. what the hell do you think selling worthless paper is called. fraud is one word. the ramifications are horrendous.
for those who find this (and some of the posts explaining this)a little complex
you live a million dollar life style
on a hundred thousand dollar pay cheque
earned with thirty thousnad dollars worth of work
IT’S CALLED SOCIALISM
I just use the ol’ 1-click, being as I buy waaaay too many books from Amazon … and used book stores.
This has been a long way coming, and shouldn’t surprise anyone with half a brain.
The US economy – by economy I mean producing real things with real value – has peaked a long time ago, somewhere in the mid 1970s. Ever since it’s been run on less and less producing goods and more and more on gimmicks.
Call those gimmicks ‘knowledge economy’, ‘financial economy’, ‘dot.com’ or ‘housing boom’, they had one thing in common, that you can make money without earning it with actual work. And when the gimmicks were not enough to keep the party going, Americans – governments, corporations and individuals – took obscene amounts of debt. General Motors, once the flagship of corporate America, owes 300$ billion and is effectively bankrupt.
Let’s not forget the last remaining US gimmick, ‘health care’, which accounts to nearly 20% of their GNP. With this kind of spending you’d expect Americans to be by far the healthiest people on the planet. Oh, wait…
Now all those chicken are coming home to roost.
And yet the biggest problem has been the utter moral bankruptcy of those in power, be they in the public or private sectors.
There is still way to go before the bad debts get liquidated and the phony wealth evaporates. How this plays out is anybody’s guess (and will affect us in Canada big time). Whoever wins in November will have one heck of a ride.
ron in Kelona, I’d definately advise your friend to wait a bit.
In a bust, cash is king!
Fannie Mae, if I recall, was created in the New Deal era; it always was a government animal. It was partially privatised … when??? But it never had market and profit discipline. Anyone who invested in its “privatised” form was an idiot.
Fannie Mae, if I recall, was created in the New Deal era; it always was a government animal. It was partially privatised … when??? But it never had market and profit discipline. Anyone who invested in its “privatised” form was an idiot.
GreenNeck, but much of that loss of real, physical, productive power is due to increased government interference in the economy, I hazard to state.
I wonder if Obama is going to carry that telepromter with him everywhere he goes now. I can just see him meeting with Putin, reading from his teleprompter.
I’m going out on a limb here and assuming that since it’s about 21:00 here and this post was up since 07:38 this morning …. that Aaron has succeeded in outselling Nosy Pelosi already !
“In a bust, cash is king!” posted by RW @ 8:40pm
Of course you are correct. Which is why when people are jumping off of ledges those with cash are scooping severely discounted assets. It takes a long upward trend in pricing to attract the not so saavy folks back in, just in time to buy the assets back from the brave/bold cash rich who purchase in the depths of chaos.
I note that AIG has been bailed out by the US taxpayers a coupla’ days after the same said there would be no more bailouts. Obviously these problems will be fought tooth and nail by the same folks that brought you the crisis…..your friendly but caring government legislators like Clinton who signed the Glass Steagall act, his minions Robert Rubin and Jamie Gorelick and Obama’s advisor Jim Johnson who made tens of millions of dollars from Fannie Mae……. all fathers of the Fannie/Freddie implosion.
Bottom line, this is a better time to pick up quality stocks than when everybody wanted them at the top. With crisis comes opportunity, though only for those who can hold their positions with adequate cash and courage. Or take a loss when its evident they are wrong. This rally will give several days to gauge that.
I have no interest in stocks though I think we are either at the bottom here or close to it. The moves treasury/fed/congress/executive branch are dooming the dollar, which means the real move to make is to continue to accumulate hard assets, gold, silver, diamonds, oil, farmland…… some people think art. Unlisted recession proof business’s with strong balance sheets.
One thing is for sure, dow at 11,000 with a 79 cent dollar is the same as dow 22,000 with a 39.5 cent dollar. If deflation takes hold, then you sir will indeed be prescient. Careful though, you are taking on the printing presses and inflation will kill your cash. Recent government moves broadcast that deflation is the enemy they will fight. In short they will Inflate or die.
The story certainly has not played out, but there are huge risks both sides of the coin. If confidence in government has dropped too far, you will be right.
and those who are faint of heart will do well with cash. Trouble is, those that do not buy in crisis also buy when things are well along and don’t sell in euphoria. Nasdaq 2001 the most recent obvious example.
So the real question is, has faith in government declined to such a level that these bailouts will fail to restore confidence? We will see, but after two decades of disinflation from 1980-2002, and the reawakening of inflation on the heels of the internet bust…….. the trend is still long term towards the destruction of the US dollar. All paper currencies in fact.
This is what happens when jobs go overseas. Cash goes overseas. Country begins to starve on cash and government has to print more and more of it. When jobs stay in the country, cash stays in the country. Quite different than your ‘trade barriers’, eh?
You are closing your eyes monkey style: ain’t seeing anything, ain’t hearing anything, ain’t saying anything. The public corporations sell their stock in US or Canada and use the money to pay the workers in the 3d world. This drains our economy w/o generating taxes that the economy used to generate.
You can call me all the names you wont, I don’t give a damn. If calling a spade a spade makes me not conservative enough for your liking, so be it.
“In a bust, cash is king!”
Depends…on the scale of the bust and the quantity of the cash. Cash is merely a promise. Lose the trust, lose the promise. A crash is a loss of trust, justified or not.
Wealth is generated by meaningful effort to create someting useful that previously did not exist.
I leave it to the reader to define “effort”, “useful” and “exist”.
Aaron what is your idea for keeping corporations in the country?
Pass laws that says they can’t leave so that they will continue to “generate” taxes?
Nationalize them? Put up barriers so other countries cannot sell their products in our country?
Reduce corporate taxes to zero?
Help me out here, I want to “open” my eyes to your point of view.
From my viewpoint these kind of events are like winter. They kill all the bugs, varmints, & refreshes the land with nutrients for the coming spring from the corruption of the last crop. New leaves will appear, the old wither away.
We all know there is going to have to be an economic adjustment in the future. Prices & wages have to come down some how, we cannot keep inflation going forever.
This is a chill that will kill off the parasites for a while, than have bored into the system using money scams. This is the “Raid “ of the financial world.
This book sounds interesting.
“In a bust, cash is king!” posted by RW @ 8:40pm
Sorry but as JJ Cale puts it “Gold is the king” cash is just paper and ultimately worthless.
I have taken this from Jeff Randall in the UK daily Telegraph as I think it is well put…
Nobody said that capitalism was devised to provide soft landings for hopeless losers. Sending a message that all sinners will be saved only encourages reckless behaviour. Meddling politicians often find this impossible to accept. They would rather pay a stricken company’s ransom than face the wrath of voters whose interests are linked to a business about to go bust. Which explains Gordon Brown’s willingness to jet-hose a relative tiddler like Northern Rock with Treasury largesse, instead of allowing the bank to take its chances in administration. The Rock’s nationalisation was not about saving the banking system from oblivion. It was a cynical and unduly expensive exercise in electoral engineering failed to instill confidence in other UK mortgage lenders (shares in wobbly Halifax Bank of Scotland fell by more than 15 per cent yesterday). By contrast, in America, Fannie Mae and Freddie Mac were special cases. Not because they are inextricably linked to the US housing market – although that is true ($5.4 trillion of liabilities) – but because from the outset they were “government-sponsored” private companies. As quasi state bodies, their implicit guarantee was that Washington stood behind them. Had they gone under, it would have told the world that Uncle Sam was happy to renege on his promises. While unbothered by the wiping out of shareholders in Fannie and Freddie, the US Treasury was determined to preserve value for their bondholders. The reason was that these bonds are held in vast quantities by foreign governments, notably China’s, whose confidence Washington is desperate not to lose. With more than $1 trillion of foreign-exchange reserves, China is equally anxious that America’s economy, and with it the dollar, does not get flushed away.
http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=A1YourView&xml=/money/2008/09/16/ccjeff116.xml
RCGZ, you sound like an extremist. Economy cannot be fixed with extreme measures, because there is always a factor of ‘what people want’ and they usually don’t want to be pushed around with extreme measures. The solutions have to be soft and balance.
First of all, we must put an end to redistribution of wealth. It is killing our economies on the largest scale.
End the pension plans, where larger and larger portion of present price of goods pays for the pensions of greater and greater number of already retired workers – make them save for their own retirement, for God’s sake!
Abolish the unions, these parasites on the economy! Make unionization illegal.
Abolish UN and stop sending money to Africa. While the developed world sends money to the retarded tinpot dictatorships, competition of North America and 3d world is not balanced.
In short, f46k the commies!