The ten month mortgage orgy

[HeXploiT]

Don Harrold comments on the ten month mortgage orgy.

Don Harrold really has a knack for communicating the market in laymens terms. Eyebrow raising stuff.
Not only do we get the privilege of supporting the largest banks in the world but we get to take the hit of trickle down inflation once that "new money" hits the streets.

 

[LegendKiller]

Originally posted by: Perry404
Don Harrold comments on the ten month mortgage orgy.

Don Harrold really has a knack for communicating the market in laymens terms. Eyebrow raising stuff.
Not only do we get the privilege of supporting the largest banks in the world but we get to take the hit of trickle down inflation once that "new money" hits the streets.

How was it "new money". Money for investment just doesn't appear out of thin air. People who *HAVE* money by *MAKING* money *INVEST* money in mortgage backed securities. If creation of wealth is inflation and should be countered, then we'd forever be in a deflationary spiral.

I'll comment on the rest later.

 

[HeXploiT]

Originally posted by: LegendKiller

Originally posted by: Perry404
Don Harrold comments on the ten month mortgage orgy.

Don Harrold really has a knack for communicating the market in laymens terms. Eyebrow raising stuff.
Not only do we get the privilege of supporting the largest banks in the world but we get to take the hit of trickle down inflation once that "new money" hits the streets.

How was it "new money". Money for investment just doesn't appear out of thin air. People who *HAVE* money by *MAKING* money *INVEST* money in mortgage backed securities. If creation of wealth is inflation and should be countered, then we'd forever be in a deflationary spiral.

I'll comment on the rest later.

The new money I'm speaking of is the money the fed prints to "loan" to the banks.
I assure you these hundreds of billions of dollars aren't coming from taxes.

 

[LegendKiller]

Originally posted by: Perry404

Originally posted by: LegendKiller

Originally posted by: Perry404
Don Harrold comments on the ten month mortgage orgy.

Don Harrold really has a knack for communicating the market in laymens terms. Eyebrow raising stuff.
Not only do we get the privilege of supporting the largest banks in the world but we get to take the hit of trickle down inflation once that "new money" hits the streets.

How was it "new money". Money for investment just doesn't appear out of thin air. People who *HAVE* money by *MAKING* money *INVEST* money in mortgage backed securities. If creation of wealth is inflation and should be countered, then we'd forever be in a deflationary spiral.

I'll comment on the rest later.

The new money I'm speaking of is the money the fed prints to "loan" to the banks.
I assure you these hundreds of billions of dollars aren't coming from taxes.

What money are you referring to?

How do you know it's not from reserves already in place?

 

[Slew Foot]

I dont know who Don Harrold is, but between all his videos he does make some good points.

 

[HeXploiT]

Originally posted by: LegendKiller

Originally posted by: Perry404

Originally posted by: LegendKiller

Originally posted by: Perry404
Don Harrold comments on the ten month mortgage orgy.

Don Harrold really has a knack for communicating the market in laymens terms. Eyebrow raising stuff.
Not only do we get the privilege of supporting the largest banks in the world but we get to take the hit of trickle down inflation once that "new money" hits the streets.

How was it "new money". Money for investment just doesn't appear out of thin air. People who *HAVE* money by *MAKING* money *INVEST* money in mortgage backed securities. If creation of wealth is inflation and should be countered, then we'd forever be in a deflationary spiral.

I'll comment on the rest later.

The new money I'm speaking of is the money the fed prints to "loan" to the banks.
I assure you these hundreds of billions of dollars aren't coming from taxes.

What money are you referring to?

How do you know it's not from reserves already in place?

I think it's generally accepted what's going on. The point of the video is not where the money is coming from but whether the banks need that money and deserve that money. Imo it is perfectly acceptable to allow banks to fail in a free market economy. Of course it's debatable whether they would. Obviously many of the smaller banks will.

 

[blackangst1]

wow

 

[LegendKiller]

Originally posted by: Perry404
I think it's generally accepted what's going on. The point of the video is not where the money is coming from but whether the banks need that money and deserve that money. Imo it is perfectly acceptable to allow banks to fail in a free market economy. Of course it's debatable whether they would. Obviously many of the smaller banks will.

BSC did fail and the turmoil it caused was large. It's an interesting problem the Fed was in. You could let banks fail, but then what? Borrowing costs would skyrocket, the capital markets would shut down, the worldwide economy would be seized up.

So, you weigh the societal costs of that, versus the societal costs of them not failing. After that analysis, you make a decision.

What would you do? Knowing that because of your decision, everybody from the smallest personal business with an SBA loan, to the largest corporation which depends on revolving funding to cover seasonal cashflows, would suddenly be shit out of luck.

The asset backed market, which finances fleet leases, corporate leases, consumer and commercial loans, student loans, vehicle loans, mortgages, would all shut down and/or skyrocket in price.

The corporate loan market, which companies depend on for bonds, would be shut down.

People would run to the banks to take out deposits, as they wouldn't know which ones were going to fail.


yes, what a great alternative.

 

[HeXploiT]

Originally posted by: LegendKiller

Originally posted by: Perry404
I think it's generally accepted what's going on. The point of the video is not where the money is coming from but whether the banks need that money and deserve that money. Imo it is perfectly acceptable to allow banks to fail in a free market economy. Of course it's debatable whether they would. Obviously many of the smaller banks will.

BSC did fail and the turmoil it caused was large. It's an interesting problem the Fed was in. You could let banks fail, but then what? Borrowing costs would skyrocket, the capital markets would shut down, the worldwide economy would be seized up.

So, you weigh the societal costs of that, versus the societal costs of them not failing. After that analysis, you make a decision.

What would you do? Knowing that because of your decision, everybody from the smallest personal business with an SBA loan, to the largest corporation which depends on revolving funding to cover seasonal cashflows, would suddenly be shit out of luck.

The asset backed market, which finances fleet leases, corporate leases, consumer and commercial loans, student loans, vehicle loans, mortgages, would all shut down and/or skyrocket in price.

The corporate loan market, which companies depend on for bonds, would be shut down.

People would run to the banks to take out deposits, as they wouldn't know which ones were going to fail.


yes, what a great alternative.

let's say everything you have presented is entirely plausible.
That's still only one scenario(albeit extreme). The other more dangerous scenario is what in now occurring and what is about to occur only with what is happening now the banks lose little while a nations currency is severely depreciated to compete with the peso and the little man takes the brunt of the hit and at the same time loses the one thing of value he has in his home and is then turned a slave. Imho we're all about to find out this other side of the coin. We the people have already lost trillions of our wealth and taken the brunt of the pain and it's going to get much worse before it gets better.

The lack of the ability to borrow will not kill an economy yet will encourage people to work harder to acquire more rather than borrowing and spending money they don't have. That's how this mess began. Time to be responsible.

 

[LegendKiller]

Originally posted by: Perry404
let's say everything you have presented is entirely plausible.
That's still only one scenario(albeit extreme). The other more dangerous scenario is what in now occurring and what is about to occur only with what is happening now the banks lose little while a nations currency is severely depreciated to compete with the peso and the little man takes the brunt of the hit and at the same time loses the one thing of value he has in his home and is then turned a slave. Imho we're all about to find out this other side of the coin. We the people have already lost trillions of our wealth and taken the brunt of the pain and it's going to get much worse before it gets better.

The lack of the ability to borrow will not kill an economy yet will encourage people to work harder to acquire more rather than borrowing and spending money they don't have. That's how this mess began. Time to be responsible.

Ummm...the dollar's depreciation has only been about 35%, of which more than 2/3 occurred *BEFORE* the banks got help from the Fed.

The lack of ability to borrow won't kill an economy? are you fucking serious? Did you ever hear of 1929?

Leverage isn't inherently evil and is actually very good, if used appropriately. Simply dismissing it because it doesn't fit inside your rubric of a proper economy is stupid.

 

[HeXploiT]

Originally posted by: LegendKiller

Originally posted by: Perry404
let's say everything you have presented is entirely plausible.
That's still only one scenario(albeit extreme). The other more dangerous scenario is what in now occurring and what is about to occur only with what is happening now the banks lose little while a nations currency is severely depreciated to compete with the peso and the little man takes the brunt of the hit and at the same time loses the one thing of value he has in his home and is then turned a slave. Imho we're all about to find out this other side of the coin. We the people have already lost trillions of our wealth and taken the brunt of the pain and it's going to get much worse before it gets better.

The lack of the ability to borrow will not kill an economy yet will encourage people to work harder to acquire more rather than borrowing and spending money they don't have. That's how this mess began. Time to be responsible.

Ummm...the dollar's depreciation has only been about 35%, of which more than 2/3 occurred *BEFORE* the banks got help from the Fed.

The lack of ability to borrow won't kill an economy? are you fucking serious? Did you ever hear of 1929?

Leverage isn't inherently evil and is actually very good, if used appropriately. Simply dismissing it because it doesn't fit inside your rubric of a proper economy is stupid.

You're going to blame the great depression on the lack of borrowing power? I'm not even going to go their so if anyone else wants to argue the point that's fine.:laugh:
It's the "free" money that destroys a currency not the money that one doesn't have.

 

[Billb2]

The worldwide capitalization of the derivatives market is currently about equal to the total, combined GDP of all the nations on the planet. The "bet" isn't on whether humankind will continue to prosper, but on whether some particular investment will fare better than others.

You have to believe (unless history is not a lesson) that some of those risks are too great.

The question is whether those taking the risk are acting "prudently". That's a very hard question to answer without knowing the future. What Bernake is asking for is the power (from the politicians) to control those risks, since obviously the risk takers are depending on
1.)They'll will have lived rich and prosperous lives, and be dead before they loose the bet.
2.) Some entity will bail them out if they loose ...for the good of society.

It's kind of like the Cubs game i went to. I bet on the Cubs. The guys behind me were betting on, after the third out, and the catcher threw the ball back onto the field, would it stop on the dirt around the mound, or on the grass. There is a great difference in the "psyche" of those bets. The Cubs could win or loose (the economy flourish or collapse), but they would either make or loose money irrespective of the win or loss.

 

[Jhhnn]

I dunno, LK- when you have to pull out the stops, send in the reserves, it's not a good sign, at all. And the fact that the Fed wants to "extend" their current lending program isn't a good sign, either.

It makes me wonder when the banks will once again be healthy enough to stand on their own, if ever...

The Fed's reserves weren't actively in circulation, but now they are... obviously, the longer that proves to be necessary, the more likely inflation will occur. There's definitely some lag in terms of cause and effect there, as well...

The current situation is seemingly quite contradictory in some respects. We're seeing a basic debt/deflation scenario in housing, with banks caught holding the bag, and a hugely inflationary situation wrt petroleum and other commodities... I really don't know what all that means, but one way to save the banks is thru rapid inflation, reducing the value of their losses, and it also tends to stimulate the economy when people rush to spend their money faster than its value falls away...

The problem with the Don Harrold video is that he doesn't account for fractional reserve lending, and the fact that there's been a lot of fudging the numbers in that regard. As a bank, if I have $100, I can lend $1000... If I figure out how to bend the rules, lend $2000, then I make a lot more money if it all works out... But I'll get the royal rectal shaft if they don't... While I can lend imaginary money, losses are, unfortunately for me, coming right out of my wallet... the money Harrold thinks is still in the system never actually existed in the first place...

If I go under, then a lot of legitimate going concerns who depend on me for operating capital will go under, too...

 

[LegendKiller]

Originally posted by: Jhhnn
I dunno, LK- when you have to pull out the stops, send in the reserves, it's not a good sign, at all. And the fact that the Fed wants to "extend" their current lending program isn't a good sign, either.

It makes me wonder when the banks will once again be healthy enough to stand on their own, if ever...

The Fed's reserves weren't actively in circulation, but now they are... obviously, the longer that proves to be necessary, the more likely inflation will occur. There's definitely some lag in terms of cause and effect there, as well...

The current situation is seemingly quite contradictory in some respects. We're seeing a basic debt/deflation scenario in housing, with banks caught holding the bag, and a hugely inflationary situation wrt petroleum and other commodities... I really don't know what all that means, but one way to save the banks is thru rapid inflation, reducing the value of their losses, and it also tends to stimulate the economy when people rush to spend their money faster than its value falls away...

The problem with the Don Harrold video is that he doesn't account for fractional reserve lending, and the fact that there's been a lot of fudging the numbers in that regard. As a bank, if I have $100, I can lend $1000... If I figure out how to bend the rules, lend $2000, then I make a lot more money if it all works out... But I'll get the royal rectal shaft if they don't... While I can lend imaginary money, losses are, unfortunately for me, coming right out of my wallet... the money Harrold thinks is still in the system never actually existed in the first place...

If I go under, then a lot of legitimate going concerns who depend on me for operating capital will go under, too...

They'll be healthy again, it won't take too long either. Remember, Citibank generated 20bn in profit *per year*. The worst loss has been 40bn.

LOL, I like the simplistic explanation of fractional lending, it shows you really don't know what you're talking about. You don't get to "bend the rules". I know, because I deal with this all of the time. You wouldn't believe how anal they are about capital treatment of different assets.

The problem wasn't lending imaginary money, it was playing it fast and loose as to what they were lending. The dollar amount was fine, but the way they valued them wasn't.

The money existed, it was lent by many parties, or was retained through earnings. Saying it "didn't exist" is ignoring a lot of stuff. It's the hyperbole I wouldn't expect from you, but I am sadly getting it,

 

[LegendKiller]

Originally posted by: Billb2
The worldwide capitalization of the derivatives market is currently about equal to the total, combined GDP of all the nations on the planet. The "bet" isn't on whether humankind will continue to prosper, but on whether some particular investment will fare better than others.

You have to believe (unless history is not a lesson) that some of those risks are too great.

The question is whether those taking the risk are acting "prudently". That's a very hard question to answer without knowing the future. What Bernake is asking for is the power (from the politicians) to control those risks, since obviously the risk takers are depending on
1.)They'll will have lived rich and prosperous lives, and be dead before they loose the bet.
2.) Some entity will bail them out if they loose ...for the good of society.

It's kind of like the Cubs game i went to. I bet on the Cubs. The guys behind me were betting on, after the third out, and the catcher threw the ball back onto the field, would it stop on the dirt around the mound, or on the grass. There is a great difference in the "psyche" of those bets. The Cubs could win or loose (the economy flourish or collapse), but they would either make or loose money irrespective of the win or loss.

I am putting together a total of 5 derivatives for a transaction I am working on. One to swap principal and interest from an 18-month 200MM euro bond which pays quarterly interest, to 1 month paying $200MM USD LIBOR. That requires 2 components for a total of $400MM in notional value. I am then swapping that amount to Canadian LIBOR (CDOR). That's another $200MM in notional, $600MM total.

Since I don't take positions directly in that type of swap, I am offsetting my risk to two different counterparties. That's another $400MM.

So, for a $200MM loan, I get $1BN in notional value.

Do you know how much money will ever change hands during this whole thing, even in the extreme case of EUR/USD or CAD/USD movements?

Probably less than $20MM. Wow!


People speaking of the "global derivatives" risk really need to educate themselves.

 

[Genx87]

Originally posted by: Perry404

Originally posted by: LegendKiller

Originally posted by: Perry404
let's say everything you have presented is entirely plausible.
That's still only one scenario(albeit extreme). The other more dangerous scenario is what in now occurring and what is about to occur only with what is happening now the banks lose little while a nations currency is severely depreciated to compete with the peso and the little man takes the brunt of the hit and at the same time loses the one thing of value he has in his home and is then turned a slave. Imho we're all about to find out this other side of the coin. We the people have already lost trillions of our wealth and taken the brunt of the pain and it's going to get much worse before it gets better.

The lack of the ability to borrow will not kill an economy yet will encourage people to work harder to acquire more rather than borrowing and spending money they don't have. That's how this mess began. Time to be responsible.

Ummm...the dollar's depreciation has only been about 35%, of which more than 2/3 occurred *BEFORE* the banks got help from the Fed.

The lack of ability to borrow won't kill an economy? are you fucking serious? Did you ever hear of 1929?

Leverage isn't inherently evil and is actually very good, if used appropriately. Simply dismissing it because it doesn't fit inside your rubric of a proper economy is stupid.

You're going to blame the great depression on the lack of borrowing power? I'm not even going to go their so if anyone else wants to argue the point that's fine.:laugh:
It's the "free" money that destroys a currency not the money that one doesn't have.

One of the recurring issues post crash was the lack of liquidity in the market. How does a company expand or pay its workforce if it runs straight out of cash during hard times? But it has assets and produces a product that generates revenue? Does it make sense for them to borrow to cover their short term losses or restructure and pay off over time? Or does it make more sense to let it fold shop and put those people out of business. Lets even say you suggest they sell assets. Who is going to buy them without the ability to borrow? Not many organizations or people have that kind of cash around to buy assets from companies.

 

[LegendKiller]

Originally posted by: Genx87

Originally posted by: Perry404

Originally posted by: LegendKiller

Originally posted by: Perry404
let's say everything you have presented is entirely plausible.
That's still only one scenario(albeit extreme). The other more dangerous scenario is what in now occurring and what is about to occur only with what is happening now the banks lose little while a nations currency is severely depreciated to compete with the peso and the little man takes the brunt of the hit and at the same time loses the one thing of value he has in his home and is then turned a slave. Imho we're all about to find out this other side of the coin. We the people have already lost trillions of our wealth and taken the brunt of the pain and it's going to get much worse before it gets better.

The lack of the ability to borrow will not kill an economy yet will encourage people to work harder to acquire more rather than borrowing and spending money they don't have. That's how this mess began. Time to be responsible.

Ummm...the dollar's depreciation has only been about 35%, of which more than 2/3 occurred *BEFORE* the banks got help from the Fed.

The lack of ability to borrow won't kill an economy? are you fucking serious? Did you ever hear of 1929?

Leverage isn't inherently evil and is actually very good, if used appropriately. Simply dismissing it because it doesn't fit inside your rubric of a proper economy is stupid.

You're going to blame the great depression on the lack of borrowing power? I'm not even going to go their so if anyone else wants to argue the point that's fine.:laugh:
It's the "free" money that destroys a currency not the money that one doesn't have.

One of the recurring issues post crash was the lack of liquidity in the market. How does a company expand or pay its workforce if it runs straight out of cash during hard times? But it has assets and produces a product that generates revenue? Does it make sense for them to borrow to cover their short term losses or restructure and pay off over time? Or does it make more sense to let it fold shop and put those people out of business. Lets even say you suggest they sell assets. Who is going to buy them without the ability to borrow? Not many organizations or people have that kind of cash around to buy assets from companies.

Agreed. Everybody knows the GD was caused by the lack of credit. Capital contraction is more deadly to an economy than moderate or even a little high inflation.

Yet another libertopian who can't see the forest from the trees. I've tried to educate them before Genx, good luck.

 

[HeXploiT]

Originally posted by: LegendKiller

Originally posted by: Genx87

Originally posted by: Perry404

Originally posted by: LegendKiller

Originally posted by: Perry404
let's say everything you have presented is entirely plausible.
That's still only one scenario(albeit extreme). The other more dangerous scenario is what in now occurring and what is about to occur only with what is happening now the banks lose little while a nations currency is severely depreciated to compete with the peso and the little man takes the brunt of the hit and at the same time loses the one thing of value he has in his home and is then turned a slave. Imho we're all about to find out this other side of the coin. We the people have already lost trillions of our wealth and taken the brunt of the pain and it's going to get much worse before it gets better.

The lack of the ability to borrow will not kill an economy yet will encourage people to work harder to acquire more rather than borrowing and spending money they don't have. That's how this mess began. Time to be responsible.

Ummm...the dollar's depreciation has only been about 35%, of which more than 2/3 occurred *BEFORE* the banks got help from the Fed.

The lack of ability to borrow won't kill an economy? are you fucking serious? Did you ever hear of 1929?

Leverage isn't inherently evil and is actually very good, if used appropriately. Simply dismissing it because it doesn't fit inside your rubric of a proper economy is stupid.

You're going to blame the great depression on the lack of borrowing power? I'm not even going to go their so if anyone else wants to argue the point that's fine.:laugh:
It's the "free" money that destroys a currency not the money that one doesn't have.

One of the recurring issues post crash was the lack of liquidity in the market. How does a company expand or pay its workforce if it runs straight out of cash during hard times? But it has assets and produces a product that generates revenue? Does it make sense for them to borrow to cover their short term losses or restructure and pay off over time? Or does it make more sense to let it fold shop and put those people out of business. Lets even say you suggest they sell assets. Who is going to buy them without the ability to borrow? Not many organizations or people have that kind of cash around to buy assets from companies.

Agreed. Everybody knows the GD was caused by the lack of credit. Capital contraction is more deadly to an economy than moderate or even a little high inflation.

Yet another libertopian who can't see the forest from the trees. I've tried to educate them before Genx, good luck.

Through the trees. Can't see the forest through the trees. :laugh:

 

[LegendKiller]

Originally posted by: Perry404

Originally posted by: LegendKiller

Originally posted by: Genx87

Originally posted by: Perry404

Originally posted by: LegendKiller

Originally posted by: Perry404
let's say everything you have presented is entirely plausible.
That's still only one scenario(albeit extreme). The other more dangerous scenario is what in now occurring and what is about to occur only with what is happening now the banks lose little while a nations currency is severely depreciated to compete with the peso and the little man takes the brunt of the hit and at the same time loses the one thing of value he has in his home and is then turned a slave. Imho we're all about to find out this other side of the coin. We the people have already lost trillions of our wealth and taken the brunt of the pain and it's going to get much worse before it gets better.

The lack of the ability to borrow will not kill an economy yet will encourage people to work harder to acquire more rather than borrowing and spending money they don't have. That's how this mess began. Time to be responsible.

Ummm...the dollar's depreciation has only been about 35%, of which more than 2/3 occurred *BEFORE* the banks got help from the Fed.

The lack of ability to borrow won't kill an economy? are you fucking serious? Did you ever hear of 1929?

Leverage isn't inherently evil and is actually very good, if used appropriately. Simply dismissing it because it doesn't fit inside your rubric of a proper economy is stupid.

You're going to blame the great depression on the lack of borrowing power? I'm not even going to go their so if anyone else wants to argue the point that's fine.:laugh:
It's the "free" money that destroys a currency not the money that one doesn't have.

One of the recurring issues post crash was the lack of liquidity in the market. How does a company expand or pay its workforce if it runs straight out of cash during hard times? But it has assets and produces a product that generates revenue? Does it make sense for them to borrow to cover their short term losses or restructure and pay off over time? Or does it make more sense to let it fold shop and put those people out of business. Lets even say you suggest they sell assets. Who is going to buy them without the ability to borrow? Not many organizations or people have that kind of cash around to buy assets from companies.

Agreed. Everybody knows the GD was caused by the lack of credit. Capital contraction is more deadly to an economy than moderate or even a little high inflation.

Yet another libertopian who can't see the forest from the trees. I've tried to educate them before Genx, good luck.

Through the trees. Can't see the forest through the trees. :laugh:

Whoops, that's what I get for not paying attention. Watching tv, playing a game, and posting.

Nice riposte to though. Way to attack the issues.

 

[HeXploiT]

Originally posted by: LegendKiller

Originally posted by: Perry404

Originally posted by: LegendKiller

Originally posted by: Genx87

Originally posted by: Perry404

Originally posted by: LegendKiller

Originally posted by: Perry404
let's say everything you have presented is entirely plausible.
That's still only one scenario(albeit extreme). The other more dangerous scenario is what in now occurring and what is about to occur only with what is happening now the banks lose little while a nations currency is severely depreciated to compete with the peso and the little man takes the brunt of the hit and at the same time loses the one thing of value he has in his home and is then turned a slave. Imho we're all about to find out this other side of the coin. We the people have already lost trillions of our wealth and taken the brunt of the pain and it's going to get much worse before it gets better.

The lack of the ability to borrow will not kill an economy yet will encourage people to work harder to acquire more rather than borrowing and spending money they don't have. That's how this mess began. Time to be responsible.

Ummm...the dollar's depreciation has only been about 35%, of which more than 2/3 occurred *BEFORE* the banks got help from the Fed.

The lack of ability to borrow won't kill an economy? are you fucking serious? Did you ever hear of 1929?

Leverage isn't inherently evil and is actually very good, if used appropriately. Simply dismissing it because it doesn't fit inside your rubric of a proper economy is stupid.

You're going to blame the great depression on the lack of borrowing power? I'm not even going to go their so if anyone else wants to argue the point that's fine.:laugh:
It's the "free" money that destroys a currency not the money that one doesn't have.

One of the recurring issues post crash was the lack of liquidity in the market. How does a company expand or pay its workforce if it runs straight out of cash during hard times? But it has assets and produces a product that generates revenue? Does it make sense for them to borrow to cover their short term losses or restructure and pay off over time? Or does it make more sense to let it fold shop and put those people out of business. Lets even say you suggest they sell assets. Who is going to buy them without the ability to borrow? Not many organizations or people have that kind of cash around to buy assets from companies.

Agreed. Everybody knows the GD was caused by the lack of credit. Capital contraction is more deadly to an economy than moderate or even a little high inflation.

Yet another libertopian who can't see the forest from the trees. I've tried to educate them before Genx, good luck.

Through the trees. Can't see the forest through the trees. :laugh:

Whoops, that's what I get for not paying attention. Watching tv, playing a game, and posting.

Nice riposte to though. Way to attack the issues.

I'll argue when there is something worth arguing. "Everybody knows" is hardly enough to convince the masses.

 

[Jhhnn]

LOL, I like the simplistic explanation of fractional lending, it shows you really don't know what you're talking about. You don't get to "bend the rules". I know, because I deal with this all of the time. You wouldn't believe how anal they are about capital treatment of different assets.

You do get to bend the rules, just not on the bank's books. You create a hedge fund or a private equity firm, lend it money, use it as a vehicle to bring others in on the deal. Leverage ratios of 30 or 40 to 1 have been quite common in such scenarios... reference LTCM and the 2 failed Bear Stearns funds...

Plausible deniability doesn't work the same way in banking as it does in politics...

 

[soccerballtux]

Originally posted by: LegendKiller

Originally posted by: Genx87

Originally posted by: Perry404

Originally posted by: LegendKiller

Originally posted by: Perry404
let's say everything you have presented is entirely plausible.
That's still only one scenario(albeit extreme). The other more dangerous scenario is what in now occurring and what is about to occur only with what is happening now the banks lose little while a nations currency is severely depreciated to compete with the peso and the little man takes the brunt of the hit and at the same time loses the one thing of value he has in his home and is then turned a slave. Imho we're all about to find out this other side of the coin. We the people have already lost trillions of our wealth and taken the brunt of the pain and it's going to get much worse before it gets better.

The lack of the ability to borrow will not kill an economy yet will encourage people to work harder to acquire more rather than borrowing and spending money they don't have. That's how this mess began. Time to be responsible.

Ummm...the dollar's depreciation has only been about 35%, of which more than 2/3 occurred *BEFORE* the banks got help from the Fed.

The lack of ability to borrow won't kill an economy? are you fucking serious? Did you ever hear of 1929?

Leverage isn't inherently evil and is actually very good, if used appropriately. Simply dismissing it because it doesn't fit inside your rubric of a proper economy is stupid.

You're going to blame the great depression on the lack of borrowing power? I'm not even going to go their so if anyone else wants to argue the point that's fine.:laugh:
It's the "free" money that destroys a currency not the money that one doesn't have.

One of the recurring issues post crash was the lack of liquidity in the market. How does a company expand or pay its workforce if it runs straight out of cash during hard times? But it has assets and produces a product that generates revenue? Does it make sense for them to borrow to cover their short term losses or restructure and pay off over time? Or does it make more sense to let it fold shop and put those people out of business. Lets even say you suggest they sell assets. Who is going to buy them without the ability to borrow? Not many organizations or people have that kind of cash around to buy assets from companies.

Agreed. Everybody knows the GD was caused by the lack of credit. Capital contraction is more deadly to an economy than moderate or even a little high inflation.

Yet another libertopian who can't see the forest from the trees. I've tried to educate them before Genx, good luck.

An alternative I've heard of is that BSC fails and gets vultured on the free market with someone with the capital to take the temporary writedowns. Then the vulture reaps huge profits down the road. Those of us paying attention, investing in the vulture that took up BSC, profit as well.

The alternative is you shield the investors that pressured BSC to push their leverage, from the market. Not that they haven't already been hurt, but if BSC were instead bought up at 25c/share, pretty much all the investors would have lost their money. Which they should, considering everybody saw this whole thing coming from a mile away, but everybody thought they could ride the bubble and get out before everybody else. Even if they didn't get out, why should they care? They knew the government would save them.

This notion that we need to protect the bankers in the way we're doing now has got to go. Let them walk away with 0.25% of the value they invested. They knew it was coming. Let them get burned. And nobody will ever do it again, because they'll know they can't get away with it. They were too busy making money hand over fist to care. Obviously, the potential consequence wasn't great enough to suppress their enthusiasm.

If you can provide an alternative force to keep them from making poor investment decisions, situations like this, where they knew it was coming, then we can talk about bailing them out. But as it stands they can't be allowed to run our economy into the ground like this. Leveraging too much, knowing they'll get away with it if it fails.

 

[LegendKiller]

Originally posted by: Perry404
I'll argue when there is something worth arguing. "Everybody knows" is hardly enough to convince the masses.

That's because the masses already know. You're behind the curve.

 

[LegendKiller]

Originally posted by: Jhhnn

LOL, I like the simplistic explanation of fractional lending, it shows you really don't know what you're talking about. You don't get to "bend the rules". I know, because I deal with this all of the time. You wouldn't believe how anal they are about capital treatment of different assets.

You do get to bend the rules, just not on the bank's books. You create a hedge fund or a private equity firm, lend it money, use it as a vehicle to bring others in on the deal. Leverage ratios of 30 or 40 to 1 have been quite common in such scenarios... reference LTCM and the 2 failed Bear Stearns funds...

Plausible deniability doesn't work the same way in banking as it does in politics...

But the investment in the hedge fund must be reported also. Provided the fund isn't a direct obligation of the bank, then the bank isn't on the hook for all of it. What they are on the hook for is covered under the capital ratios, provided they are modeled and accounted for correctly.

Using 3 failures as an example isn't even accounting for the successes. LTCM wasn't supported by the banks directly and failed for completely different reasons.

 

[LegendKiller]

Originally posted by: soccerballtux
An alternative I've heard of is that BSC fails and gets vultured on the free market with someone with the capital to take the temporary writedowns. Then the vulture reaps huge profits down the road. Those of us paying attention, investing in the vulture that took up BSC, profit as well.

The alternative is you shield the investors that pressured BSC to push their leverage, from the market. Not that they haven't already been hurt, but if BSC were instead bought up at 25c/share, pretty much all the investors would have lost their money. Which they should, considering everybody saw this whole thing coming from a mile away, but everybody thought they could ride the bubble and get out before everybody else. Even if they didn't get out, why should they care? They knew the government would save them.

This notion that we need to protect the bankers in the way we're doing now has got to go. Let them walk away with 0.25% of the value they invested. They knew it was coming. Let them get burned. And nobody will ever do it again, because they'll know they can't get away with it. They were too busy making money hand over fist to care. Obviously, the potential consequence wasn't great enough to suppress their enthusiasm.

If you can provide an alternative force to keep them from making poor investment decisions, situations like this, where they knew it was coming, then we can talk about bailing them out. But as it stands they can't be allowed to run our economy into the ground like this. Leveraging too much, knowing they'll get away with it if it fails.

Who is going to be able to take down over a all of BSC's assets? I'd love for you to show who has the scratch to do that, especially in an uncertain and downward trending market. Your viewpoint lacks the knowledge that *nobody* would take that. There were maybe 5 people who looked, two who could actually do it, and one who really wanted to.

BSC wasn't worth .25 per share. Isn't enough that most people lost 90% of their investment? If you had given them .25, then they'd have said "no" and fucked the market. You can't just *FORCE* them to take the money. Yet again, a very simplistic viewpoint on the market that has no grounding in reality.

Who knew it was coming? Certainly 99% of them didn't. If they did then there wouldn't have been many people putting in a hundred million bucks. It's stupid to say they knew it was coming.

I admit that you're creating a moral hazard when you bail out banks. However, that moral hazard can be countered through increased surveillence, proper regulatory oversight (which obviously failed here in many obvious ways), and quick movements to counter what appears to be problem areas.