Can someone PLEASE explain the source of the current economic mess

[WaTaGuMp]

I have proof that Wolrd of Warcraft is to blame for causing so many addicts to not work and thus lower the amount of cash being generated by income tax.

 

[WaTaGuMp]

On another sorta serious side note, wasnt it just about time for our economy to go to shit so it can rebound? Not the 1st time its happened ya know.

 

[miketheidiot]

Originally posted by: bamacre

Originally posted by: Vic
It was caused by a good old fashioned market bubble, which burst leading to a loss of market confidence, followed by a good old fashioned banking panic. No more no less.

Oh come on Vic, it isn't that simple. How do these bubbles come into existence in the first place?

free market economics.

 

[eleison]

Originally posted by: Sacrilege

Originally posted by: Muse
A big part of it has to be the rules that allow investment banks, hedge funds, whatever massive leverage. 30:1 leverage means that when the market tanks, the companies that use these instruments have to sell in order to meet their margin calls. That further depresses the markets and you have a vicious cycle.

The Ayn Rand-ers can cry and shout, the Republicans too (mouthpieces for their corporate sponsors), but serious regulation of the financial sector is what's going to come of all this and for the very indefinite future. This will transpire in the next few years. If you don't think the serious crippling of world economies isn't going to lead to big changes you're nuts.

I'm tired of corporate boot lickers blaming home buyers who couldn't pay mortgages for the financial crisis ("The Negroes caused it").

The tanking of subprime mortgage backed securities threatened our entire financial system only because banks massively leveraged the deals and sold huge quantities of credit swaps. It all comes down to greed; trying to make as much money as possible from a risky asset. And yet Republicans are so eager once again to blame naive, middle class and poor people. Especially racial minorities.

Image Link

In chicago, according to my friend, most of the foreclosures happened/are happening in the black neighborhoods. I wanted to see if I could get a steal in this "white neighborhood"... he said "no go"..


Oh, my friend is a real estate agent. He use to buy and sell homes.. now, because of the bad economy, he just helps people buy homes for a bargain, esp foreclosures..

 

[silverpig]

Originally posted by: Jhhnn
Atlas Shrugged, updated to cover the current situation-

http://mcsweeneys.net/2008/11/20tucker.html

And, in a more serious tone, a very long article with a great deal of insight-

http://www.portfolio.com/news-...om?tid=true&print=true

If it's too long or too deep to follow, then the reader isn't really interested in honest answers...

That second link was pretty good. Thanks for posting it.

 

[Mavtek3100]

http://www.lewrockwell.com/pod...recked_the_economy.mp3

I think this explains it pretty damn well. Peter explains why it happened, as he said it would last year, and explains how to properly fix it. Enjoy!

 

[dmcowen674]

Originally posted by: miketheidiot

Originally posted by: bamacre

Originally posted by: Vic
It was caused by a good old fashioned market bubble, which burst leading to a loss of market confidence, followed by a good old fashioned banking panic. No more no less.

Oh come on Vic, it isn't that simple. How do these bubbles come into existence in the first place?

free market economics.

Bahahahahahaa :laugh: :laugh: :laugh: Free Market Bahahahaa :laugh: :laugh: :laugh:

 

[Genx87]

Our economy is cyclical. Why do people act surprised when it goes into recession every few years?

This cycle will be rougher due to a banking crisis. But it would have happened either way.

 

[nergee]

Originally posted by: dmcowen674

Originally posted by: miketheidiot

Originally posted by: bamacre

Originally posted by: Vic
It was caused by a good old fashioned market bubble, which burst leading to a loss of market confidence, followed by a good old fashioned banking panic. No more no less.

Oh come on Vic, it isn't that simple. How do these bubbles come into existence in the first place?

free market economics.

Bahahahahahaa :laugh: :laugh: :laugh: Free Market Bahahahaa :laugh: :laugh: :laugh:

I had a good laugh also....

Root Cause Of This Financial Crisis:

The Fed
Fractional Reserve Lending
Government sponsorship of the rating agencies
Government sponsorship and promotion of housing via GSEs, tax breaks, etc.

There is not a free market failure in the group, nor will there ever be........

 

[PokerGuy]

Anyone who claims there is a single reason for the mess is delusional. It's a large number of factors coming together at just the wrong time.

Also, the argument that more regulation would have prevented it holds no water. Other countries (especially in western europe) that are regulated to the max have the same problems now. Conversely, the "regulation forced banks to make bad loans" argument is also weak, since those regulations that supposedly caused the banks to have to make risky loans have been in effect for a looooong time and the volume of those risky loans as part of those regulations is too small to be a major culprit.

Bottom line: stupid consumers borrowing too much, from stupid banks lending to people who couldn't pay back, selling securitized mortgages to stupid investment firms who stupidly leveraged themselves into precarious positions. Combine that with the economic slowdown, a rapid rise in energy and food costs, and a housing bubble that had been forming for a while popping, and you have the financial crisis.

 

[chess9]

Originally posted by: ZeGermans
Investment banks were allowed to do business with traditional banks. Traditional banks made terrible loans not because ACORN or jimmy carter or anyone forced them too, but because they could make one, then just sell it, make a tidy profit and wash their hands.

Investment banks dressed up the bad debt to make it look like a reputable investment by getting insurance on it that wasn't worth a damn. Then, well, everything went to hell.

Freddy Mac/Fannie Mae had little to do with this, they weren't even in the top 10 losers of subprime assets. Private companies like lehman/goldman/aig/etc bit the dust because deregulation let them take a big gamble and it failed pretty badly. Well except for the people who originally made the decisions to buy these loans as investments, they made millions. So who's at fault? Bill Clinton for signing the bill originally and Phil Gramm for authoring it.

Epic win.

-Robert

 

[chess9]

Originally posted by: Sacrilege

Originally posted by: Muse
A big part of it has to be the rules that allow investment banks, hedge funds, whatever massive leverage. 30:1 leverage means that when the market tanks, the companies that use these instruments have to sell in order to meet their margin calls. That further depresses the markets and you have a vicious cycle.

The Ayn Rand-ers can cry and shout, the Republicans too (mouthpieces for their corporate sponsors), but serious regulation of the financial sector is what's going to come of all this and for the very indefinite future. This will transpire in the next few years. If you don't think the serious crippling of world economies isn't going to lead to big changes you're nuts.

I'm tired of corporate boot lickers blaming home buyers who couldn't pay mortgages for the financial crisis ("The Negroes caused it").

The tanking of subprime mortgage backed securities threatened our entire financial system only because banks massively leveraged the deals and sold huge quantities of credit swaps. It all comes down to greed; trying to make as much money as possible from a risky asset. And yet Republicans are so eager once again to blame naive, middle class and poor people. Especially racial minorities.

Image Link

Dude, they tracked down a 'negro' family in Charleston, S.C. who caused the whole mess. Those investment bankers didn't have a thing to do with it. This is what black power is all about right?

I'm never amazed at the lengths to which the right wing will go to deflect criticism of it's methods and failures. The SEC, CFTC, Treasury, under Bush failed to regulate markets effectively and that is a large part of the cause (not all). This has been discussed here ad infinitum.

-Robert

 

[chess9]

Originally posted by: DomS
regulations forcing banks to lend in shit neighborhoods and ending the practice of redlining?

Yes, Federal Marshalls went into all the banks with guns drawn and made them lend money to Negroes. LOL!

-Robert

 

[chess9]

Originally posted by: Jhhnn

Originally posted by: miketheidiot

Originally posted by: DomS
regulations forcing banks to lend in shit neighborhoods and ending the practice of redlining?

CRA mortgages are not defaulting at a particularly high rate, in fact that i read they were performing at about prime. The suburbs and downtowns are where the bubble happened and are the areas being hit the hardest, not the slums.

Don't bother with the truth, mike. Righties have already formed opinions independent of such inconveniences.

They're not about to admit that keeping capitalism healthy isn't something it can do itself. It's like treating bipolar disorder- the first thing that the correct meds accomplish is that the manic highs disappear, after that, so do the dismal depressions. But just as manic depressives love those manic highs, so does capitalism love its own version.

Capitalism has been spitting out its meds for 30 years or so, shedding one sort of regulation after another until it worked itself up into one doozy of a manic state- depression being the inevitable product of that.

Of course, it doesn't help when those in charge of the meds give the patient crack cocaine instead, which is pretty much what the FRB did with cheap money and what the govt did with relaxed regulations, taxcuts, and deficit spending... not to mention allowing new markets and financial products to be developed w/o any sort of oversight at all.

LOL! Love the 'spitting out meds' line.

-Robert

 

[chess9]

Originally posted by: PokerGuy
Anyone who claims there is a single reason for the mess is delusional. It's a large number of factors coming together at just the wrong time.

Also, the argument that more regulation would have prevented it holds no water. Other countries (especially in western europe) that are regulated to the max have the same problems now. Conversely, the "regulation forced banks to make bad loans" argument is also weak, since those regulations that supposedly caused the banks to have to make risky loans have been in effect for a looooong time and the volume of those risky loans as part of those regulations is too small to be a major culprit.

Bottom line: stupid consumers borrowing too much, from stupid banks lending to people who couldn't pay back, selling securitized mortgages to stupid investment firms who stupidly leveraged themselves into precarious positions. Combine that with the economic slowdown, a rapid rise in energy and food costs, and a housing bubble that had been forming for a while popping, and you have the financial crisis.

The European Banks, the central banks, did not regulate most of the swaps, etc. So, they fell (or, are hurting badly), in large part, for the same reason our investment banks fell. You've made the argument for the main source of our problems, intending to exclude it. LOL.

-Robert

 

[Jhhnn]

Originally posted by: PokerGuy
Anyone who claims there is a single reason for the mess is delusional. It's a large number of factors coming together at just the wrong time.

Also, the argument that more regulation would have prevented it holds no water. Other countries (especially in western europe) that are regulated to the max have the same problems now. Conversely, the "regulation forced banks to make bad loans" argument is also weak, since those regulations that supposedly caused the banks to have to make risky loans have been in effect for a looooong time and the volume of those risky loans as part of those regulations is too small to be a major culprit.

Bottom line: stupid consumers borrowing too much, from stupid banks lending to people who couldn't pay back, selling securitized mortgages to stupid investment firms who stupidly leveraged themselves into precarious positions. Combine that with the economic slowdown, a rapid rise in energy and food costs, and a housing bubble that had been forming for a while popping, and you have the financial crisis.

"Regulated to the max" doesn't mean anything when the regulations miss the target, when governments fail to extend regulations to new markets and financial "products" as fast as shysters can invent and exploit such developments.

We could regulate the hell out of buggy whips- doesn't mean it would have any real effect on the economy... or we could regulate derivatives much the same way as the commodities market is regulated to have some real effect... we could also prevent the kind of business structures where conflicts of interest are the norm rather than the exception.