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Current Financial Mess
22

Current Financial Mess

Current Financial Mess

(OP)
I thought that a group of Engineers would be the perfect audiance to ask the question......Is this financial crisis being talked about on TV for real?  What do you guys think?

A large part of me doesn't feel sorry for people who bit off more than they could chew with their mortgage.  I also don't feel sorry for the banks who wrote the bad mortgage.  I personally think we should let the banks fail, let the people lose their houses, and get back to the old times of actually sharing risk when lending/borrowing money, ie having 20% down to buy a home.

Kind of a side note, with everyone supposedly losing their homes and the banks not being able to liquedate them, where does the PMI insurance come into play?  I would assume these folks are paying PMI if they are "subprime" loan canidates.  Isn't PMI designed for situation such as this?

Just wondering your thoughts.   

RE: Current Financial Mess

3
The problem isn't just the poor idiots with houses they can't afford.  It has escalated to the point where the credit market is profoundly damaged and stalled.  The implications go far beyond homes lost.  With the credit market in its current state, it will not be possible for the economy to expand.

A bailout of some form is necessary.  The form of that bailout is the question.  It is possible to structure the financing of the bailout such that ultimately the U.S. taxpayers will get their money back.  The last thing we need to do is hand over a bag o'cash with no strings attached.

The current bailout plan simply puts the U.S. taxpayer on the hook for the worst of the liabilities.  Not good.  there are plenty of good loans in banks' portfolios to ensure that the bailout money is not lost, or even gets a return.

Part of the problem is equity trading gamesmanship.  Speculators have been trading debt in an underregulated credit-swap market.  Investors have been suckered into believing this debt was higher grade than it was.  Credit is not cash, and the end result is that the losses are mounting.

Must read:
http://www.2000wave.com Heavy but worthwhile reading.
John Mauldin and his buddies had this pegged a full year in advance.  I pulled my money from stocks before the crash.  My portfolio has actually been making money in the last few months.

batHonesty may be the best policy, but insanity is a better defense.bat
http://www.EsoxRepublic.com-SolidWorks API VB programming help

RE: Current Financial Mess

The overall problem, as it always is with high stakes economics, is greed.  Of course you may include stupidity and incompetence if you wish. I've seen this before, and, yes Mable, I've been bitten...hard.  I learned my lesson.
Last year with housing prices 'out the roof' in my area of Socal, I spread my accts to three financial institutions, Wachovia, WaMu and, B of A and sold ALL my stocks and put my money into mutual funds and CD's...Seems like I guessed correctly...at least this time. winky smile

Even the much publicized failure of WaMu Thursday, it was 'business as usual' yesterday.  Even a 'run' of $16B still left WaMu with $307B assets and $188B in deposits...Certainly a good buy for JP Morgan/Chase!

Rod

RE: Current Financial Mess

Actually many of these banks for political reasons were forced to lend to less than desirable candidates. They didn't want to and it wasn't necessarily predatory bank practices.

There was an act passed in 1995 that made matters far worse. If I remember then name I'll post it on here.

RE: Current Financial Mess

"Stated Income" loans were EVERYWHERE last year.  That's what broke the bank (literally), coupled with falling housing prices.  The majority of these people, both borrowers and lenders, were betting on the come, thinking they could ride the bubble upward and get out before they were caught holding the bag.  As usual too many people got on the bubble and it collapsed, as is ALWAYS the case.  It's just that the bubble got so large that a WaMu, with $310B in assets can't get a decent loan to save its life.

In some respects, the Fed is also complicit; by ramping down interest rates to try for a soft landing, it prolonged the borrowing bubble, allowing even more people to borrow indiscriminately.  Had the Fed been less aggressive in interest rate drops, credit would have been tighter earlier, thus keeping the likes of WaMu from digging the deeper hole that it found itself in last weekend.

Think about it.  There were, and still are, hundreds of homes in Yorba Linda, CA, alone, that are listed at well above $1M.  Someone without a house to sell would need $200K in down payment, and would have to pay about $5K a month on a fixed rate loan.  This would require about $15K a month in income to qualify.  So, the majority of these homes were purchased through trading up, but even still, they probably shot for the "most" house they could get away with, figuring that if they got into trouble, they could unload the house.  Everyone was in on it, even those that bought "cheaper" houses at $500K, trading up whatever they were living in, prior.  

People are basically greedy; it's human nature.  25 yrs ago, there are plenty of people caught in adjustable mortgages with balloon payments, and they bit the dust.  People have absurdly short memories when it comes to financial debacles.  A measley 3 generations after the Depression, almost no one has any savings to speak of.

Of course, many appear to have bought into the notion that they're screwed on SS anyway, so why not spend like there's no tomorrow?  Besides, they're also betting on the come, that Uncle Sam will always come to the rescue.

TTFN

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RE: Current Financial Mess

I once actually liked Yorba Linda.  I spent a lot of time at the shooting range...it's just 'Yuppieville' now.

Banks fail, even in good times they change hands.  WaMu is gone, officially.  It's now Chase and all the logos are to change within six months. No big deal, I suppose. I opened the acct. in the 80' when it was Household Savings Bank which was sold to Home Savings and then to Washington Mutual...Now it's JPMorgan-Chase. Now I need to look at Wachovia, which absorbed my Prudential accts a few years back. I've got a couple CD's with them, but they are FDIC and less than $100k so I suppose I'll be okay here, as well. We must be kinda careful with using the FDIC as our backup, they only have $40B in reserves and, should it have been required, WaMu would have eaten up $30B of it!

I know it's pretty bad and could potentially get much worse.  Just keep in mind that only 13 bank failures so far. The Enron/Worldcom/S&L deal caused over 700 failures, albeit no really big ones.

Rod

RE: Current Financial Mess

Are bank mgrs immune from prosecution? Haven't heard anything about identifying the culprits and bringing them to justice. The machinery of regulations and justice should put the fear of God into the hearts of bank mgrs and their staffs, who are playing hard and fast with other people's money.

I don't commit crime because of moral training and the fear of retribution on several levels. You get the feeling that bank people have an immoral bent and no fear of anything.

RE: Current Financial Mess

An interesting look on what some believe was the root cause of the United State's financial problems:
http://hotair.com/archives/2008/09/26/video-financial-crisis-in-10-minutes-or-less/
Personally, I am adamantly against bailing out any business by political means.  The problem was created by politicians that did not understand the full ramifications of what they were doing.  Their plan was for the crisis to develop on someone else's watch, mostly for our children to deal with while they raid the bank for personal gain.  Yes I mean the politician's personal gain; the foxes were in charge of the hen house, and they were selling out our future for votes to keep themselves in office.  The politicians were not the only ones to blame.  The American people who wanted goodies from the government, all for free, are also to blame.

Now the same folks that brought the United States this problem are the ones proposing a solution to the problem they made.  No doubt they will create a greater problem in the future by not allowing a correction now.  The only real long term solution is a correction in the housing-markets/financial-markets and to stop the deficit spending.  In the long run, people will not lose a place to live.  There are a 3 million people in the United States and around 160 million households.  If there is an adjustment to the markets, these numbers will not change.

If you are an American and want to leave something better for your children, let's take the financial hit now instead of making a bigger problem for our children.
 

RE: Current Financial Mess

One thing I'll say is we need to let the price of homes drop to market value.

Speaking as someone who is 29, and recently watched the last five years as housing has zoomed incredibly high, I believe that we need affordable homes in the United States. Just because I wasn't born 10 years earlier shouldn't mean that I can't own a home.

The overall appreciation of homes over the last five or ten years was unsustainable, because everyone's home can't rapidly increase in value beyond increasing incomes. At some point, the home become unaffordable to the general public and prices fall. No government bailout can change free market economics (supply and demand).

RE: Current Financial Mess

There's a few things you can't blame the current crisis on...

1) Greed.  Greed is the force that runs capitalism.  It's a mistake to assign any motivation other than greed to any corporation.  If such an alternate motive existed in a particular company, it's stockholders should sue.

2) Any particular person.  What happened was not predictable or else it wouldn't have happened.  Read up on the tulip bulb craze.  That's how bubbles work.  While I love the fact that the exec's are going to get pummeled in the bailout agreement, I recognize that it's a purely political bone thrown to us plebs.

I'm not sure the bailout is the best thing, as I think it's going to just prolong the pain rather than taking it as one hit.  It will only be a slower, softer ride to the bottom.  But that is speaking as one who's not counting on the equity in his home to keep himself solvent.

-b

RE: Current Financial Mess

My 2 cents....
I believe a lot of this started with the unions about 20 years ago. There were strong aerospace and mfg industries and the unions demanded more money. This was the start of mfg leaving California, trickling into other states. In time, outsourcing began, then house prices went up. Realstate boomed, then jobs were finally lost to more outsourcing. The US gave away technology and services to China and India, killing our economy. Schools were hit hard (which should be the last on the list to touch financially).
More jobs were lost, houses foreclosed, leading up to our current mess.
The Iraq "war" didn't help. Taking away US citizen's taxes and giving it away to other countries. Not not this is bad, but US citizens should come first.

Companies can not afford the rising costs of unions, going bankrupt or moving out of state or country.

My kids are honor students, but the way the world is going, I fear for their futures.

I have lost trust in our US gov't, and do not see anything getting better in the near future.

Chris
SolidWorks/PDMWorks 08 3.1
AutoCAD 08
ctopher's home (updated Aug 5, 2008)
ctopher's blog
SolidWorks Legion

RE: Current Financial Mess

The hotair.com partisan propaganda video oversimplifies and/or ignores key facts and does not go nearly deep enough.

This crisis could no have happned without banks' complicity.  A flood of subprime loans alone was not enough to blow this situation up to current levels.  Banks were aware of their own overleveraging and treated these bad loans as if they were AAA assets.

Besides, who owns the politicians?  Are they not all just flunkies on lobbyists' leashes?

RE: Current Financial Mess

Chris, it's interesting that you lay a lot of the blame on "unions".   Interesting in so far as the majority of outsourcing has been done by non union companies.

This current  'crisis'  should easily point out the probability that 'management' does not have our best interests at heart.  Is it just possible that the unionization of the labor market in this country is responsible, at least in part, to our overall prosperity?  How much money would the aforesaid management be willing to part with 'as wages' for us 'campasinos'?

Tick....Partisan propaganda? Ya think?

Rod

RE: Current Financial Mess

A lot of companies are outsourcing, union or not.

We are going to get hit more. The union is one strike at Boeing, hurting production. Russia and China are teaming up to start their own commercial aircraft line. With them and Airbus, they will kill Boeing.

Chris
SolidWorks/PDMWorks 08 3.1
AutoCAD 08
ctopher's home (updated Aug 5, 2008)
ctopher's blog
SolidWorks Legion

RE: Current Financial Mess

If the jobs are being outsourced, then those affected would be earning less, or leaving the state to go get the jobs elsewhere.  Both would lead to LOWER housing prices.  

China started their domestic aircraft business more than 20 yrs ago, with the help of McDonnell Douglas, which sold aircraft to China, with the stipulation that China be allowed to build parts of the aircraft in China.

There's a big difference between "self-interest" and "greed."  Capitalism runs on self-interest, coupled with the self-control needed to prevent complete crippling of the economy and to ensure long-term success.  Greed doesn't care about the consequences or the future.  

It's interesting that every time capitalism takes a dump there's a rush to blame unions, who are doing the precise same thing at the behest of their constituents.  And yet, when times are booming, it's because of capitalism, and not the unions.  

Is the CEO of Lehman really doing 1000 times the work of their lowest paid worker?  Given Lehman's track record, the CEO is making way more mistakes, and hurting the company way more than the mailroom guy.

TTFN

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RE: Current Financial Mess

Unions have little, if anything to do with the current housing/financial problems.  There are huge problems with government regulations involving union labor.  The biggest problem I know about is the "Davis-Bacon Act" which results in public projects costing more than they should.  The reason for the "Davis-Bacon Act" was to buy votes from unions.  Although I cannot site off hand government regulations that were developed to buy votes in other industries, I am certain they are there.  How many public school districts have non NEA work forces?  

The current problem is a society in America that is more concerned about what the government can give them in the near future without concern of the long term consequences.  Most people think that it is the other politicians that are the problems and that their elected representative is just looking out for their local interests.


PS  In my previous post I meant 300 million and not 3.  
 

RE: Current Financial Mess

The best bailout would be for the government to buy any load going into foreclosure at $0.25 to $0.50 on the dollar.  That would take the foreclosures out of the loop, and would establish a floor under the securitized mortgages that seem to be the major problem.  That price guarantees a loss for the lender, as should be for failure to ensure the borrow had means to repay.  That price then allows the government to rewrite that mortgage at $0.30-$0.60 on the dollar, to the advantage of both the taxpayers in general and the mortgage borrower.  Far better to keep people in homes and gently push down housing prices than to bailout Wall Street without doing anything to help the people being displaced by this mess.  The borrower would have to be living in the house to qualify.

RE: Current Financial Mess

davidbeach, Let me get this straight.  You want to exclude all homeowners and businesses that are in a strong financial position to competitively participate in purchasing foreclosed mortgages,  by allowing the existing defaulted home owner to have the right of first refusal at 30 to 60 percent of the balanced owed on the mortgage?  This would create a rush for people to become insolvent with their mortgages so they could change the terms of their debt to 30 to 60 percent of the mortgage.   

RE: Current Financial Mess

OK, sure anybody except financial institutions.  The whole bailout mess is totally misguided.  The financial institutions need to take their medicine and have a severe spanking at the same time; they're the ones that really should have known better.  Sure the people who took out mortgages that seemed too good to be true should also have known better but this whole mess would have been avoided if the financial institutions had been prudent, no matter how irresponsible the borrowers turned out to be.  In this case the financial institutions needed to be the "grownups" and show some restraint.

RE: Current Financial Mess

The idiotic US tax break for mortgage interest has at least something to do with this.  Why a nation wants to encourage people to go into hawk up to their eyeballs is beyond me.

Speculation is behind the rest.  And indeed, the results WERE predictable.  Buying on speculation with borrowed money was the underlying cause of the 1929 crash.  Every time, the greedy think the boom will last.  As in the case of every past boom, this one didn't last forever.  Those who bought on spec, or more properly those who loaned the money to those who bought on spec, were left holding the bag.  Of course those "on spec" loans were packaged and re-sold as "commercial paper", so the real crooks- the ones who gave the mortages in the first place- aren't necessarily the ones who are getting hurt this time around.

RE: Current Financial Mess

Moltenmetal:

Unless you're typing from your private island in the caribbean with private satalite internet then you didn't predict it either....

Hindsight is 20/20.  If bubbles were predictable, then they wouldn't exist.  Even if you think you're over the long term average you won't know if the market will correct or by how much.

-b

RE: Current Financial Mess

4
In the last few decades, the power of unions has decreased to only a small percentage of non-governmental workers; to blame them for the current fiscal problems is silly since they weren't much of a player in the financial decisions of Wall Street.  

In their heyday, unions provided a great buffer to the exploits of business, and with their higher wages, the members able to afford a good standard of living, and also provided purchasing power to the business' goods.  They were effectively a mass consumer of the goods that the businesses produced.  

By destroying unions since the 50's, businesses have had no political or economic opponent to their greed.  Wages stagnated or decreased for a vast majority of Americans over the decades.  Savings diminished and the use of credit increased.  By removing real monies from a large percentage of the population, businesses effectively cut the hands that feed them.  This has been analagous to a poker game where the winnings are concentrated in the hands of fewer and fewer players; the guys can only keep playing if they borrow.  This is fine until the credit dries up, at which point the game stops.

There will be political and social backlash against all the greed and excesses; whether it will result in renewed interest in union membership remains to be seen.

RE: Current Financial Mess

bvanhiel:  predicting THAT something will happen eventually is very different than predicting WHEN it will happen.  THAT the US housing market would implode was entirely predictable:  knowing precisely WHEN it would happen or what would be its trigger (ie. so that you could maximally profit from it) is impossible.

I'm typing from Canada- I don't need a trip to the Carribean, thanks.  Our banks didn't do the same idiotic mortage lending that many of yours did.  And our housing market saw a run-up nowhere nearly as steep as yours was, nor is the landing on the downside expected to be nearly as dramatic as yours continues to be.  Like banks worldwide, some Canadian banks bought the resulting commercial paper and got their knuckles rapped, but some others are now looking for bargains amongst the US banks.

RE: Current Financial Mess

One thing that saddens me is that the housing market is so depressed that I can not sell my current house to snap up one of the fine properties up for sale.

RE: Current Financial Mess

My house sits vacant 12 hours away because I had to find new work out of state.  At this rate it will never sell and it'll be years before I can save to purchase a new home.

James Spisich
Design Engineer, CSWP

RE: Current Financial Mess

Tick,
Same issue here. There is a house for sale across the street from for sale. the owner died and his two adult children don't want it.
It's much bigger than my house and selling approx 150k more than what my house current market.
But, I can't sell mine because houses here are not selling.
It is cheaper for me to add on or build up.

Chris
SolidWorks/PDMWorks 08 3.1
AutoCAD 08
ctopher's home (updated Aug 5, 2008)
ctopher's blog
SolidWorks Legion

RE: Current Financial Mess

SEC Chairman Chris Cox allowed naked short selling ever since he took up the position in 2005, as have all others before him despite the fact that naked shorting is illegal.

This was probably "necessary" to raise cash to offset the money drain in Iraq, which was also illegal.

But then the US has a long establidhed practice of appointing senior administrators based on favors owing such as Michael Brown at FEMA.

IN UK this practice was abolished in the 1832 Reform Act  

RE: Current Financial Mess

moltenmetal,

I don't agree.  If someone knew for sure that the housing/credit/financial market would crash, then there was lots of money to be made.  But nobody did, or at least not enough people who would put their money where their mouth is.

The crash might never have come.  It might have been a slow deflation.  It might have been that the market moved gently to a new equilibrium with easy credit.  You, and everyone else, were afraid to take that gamble.

RE: Current Financial Mess

bvanhiel,

Lots of people recognized that the housing market in the United States would crash, especially those areas with the fastest appreciation, warnings of Freddy and Fanny problems were numerous, California was ahead of the nation in artificial prices, etc.; however, no one rings a bell at the top or bottom of the market.  A willingness to bet on the market timing and having the capital available are the items needed to profit in the housing market regardless of whether it is climbing or dropping. There are a lot of folks that have sold near the top and are ready to throw cash into the market once they recolonize that the housing market has bottomed.

RE: Current Financial Mess

Zapster,

Not enough of them to move the market.

-b

RE: Current Financial Mess

Sometimes with age and experience comes wisdom.  I've lived in Socal for 42 years and have seen these housing bubbles several times and, finally, I figured out how to recognize one when it bonks me on the head.  Greed, the key, ya think?  Lots of buyers getting into ARM's to be able to buy $350k and $450k homes in my area...one in particular that had an "interest only" of $2100/mnth for three years.  Insane!
Needless to say, we all know where that went.  I bought my house for $82,500 and it's been as high as (free appraisal paid for by Century 21 in June, 2006) $660,000. Now that really is nuts. There is now way in hell this house is worth more than $350k at best.  No matter, I did not move here to make money...this is home and I'll probably die here, hopefully in at least another 20 years.
 
Rod

RE: Current Financial Mess

I echo the pro-union sentiments of other writers here. I don't buy into the arguments against Davis-Bacon. Although I believe that the argument that unions are responsible for the current problems is completely irrelevant,  I would join an engineering union to collectively bargain for wages and benefits if I could.

The citizens of the United States need to demand better from our government, businesses, media and ourselves.  If banding together in unions furthers that, then good.

RE: Current Financial Mess

Rod,
It is nuts!
I bought mine 9.5 years ago for 229k, was appraised 2 years ago at 640k.
Probably in the low 400's now.

Chris
SolidWorks/PDMWorks 08 3.1
AutoCAD 08
ctopher's home (updated Aug 5, 2008)
ctopher's blog
SolidWorks Legion

RE: Current Financial Mess

I don't like to beat the union drum in these forums, even though I exist, at least partially, on a union pension.
However, I will bore you with yet another anecdote...
In October of 1961, just married one month, I went to work at the Helium plant in Liberal, Kansas for MW Kellogg, for union wages. (short version, I only stayed six weeks) Just a few yeas ago, before his death, my brother in law worked for KBR (Kellogg now being a part of the non union conglomerate) for wages, adjusted for inflation, he made roughly only two thirds what my 61 wage was.  He worked for KBR for YEARS!

Rod

RE: Current Financial Mess

2
Zapster got it right.  

Quote:

the foxes were in charge of the hen house

Question is, who gave the foxes the keys to the chicken house ... and will we do it again?

If you were plowing a field, which would you rather use? Two strong oxen or 1024 chickens?" - Seymour Cray (1925-1996), father of supercomputing
***************
http://virtualpipeline.spaces.live.com/

RE: Current Financial Mess

Quote:

......Is this financial crisis being talked about on TV for real?  What do you guys think?

I believe the markets are reacting to emotion and no, I don't necessarily believe this is for real. As was said on more than one occasion, "this too shall pass". I believe we need to wait it out and let the weak banks fail and allow others to rise up to the occasion. This will settle out over time with no government intervention.
 

RE: Current Financial Mess

2
The housing market is encouraged to expand because it employs large numbers of people. The downside apart from the current difficulties is that every house built in USA or Australia etc becomes filled with imported products, particularly electrical goods. Anything that is manufactured is imported.  The result:- votes for the politicians and a trade deficit in the trillions of dollars.

If you run your house based upon the USA financial principals you  will soon end up in the poor house. You cannot spend what you dont have the ability to repay. If you buy from overseas it is paying someone else's wages and their taxes go to their government not yours. Also the unemployed take a share of your taxes to live.

When people realise that happiness is based on what you do not need rather than the material goods you have to have the economy will return to some stability.

RE: Current Financial Mess

Of course, it's unreal.  Buying $310B in assets for a piddly $2B is, by definition, unreal.

But go ask those let go from Lehman Brothers if it's unreal, and you'll get a radically different answer.
 

TTFN

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RE: Current Financial Mess

How not to build an economy... On credit.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************
http://virtualpipeline.spaces.live.com/

RE: Current Financial Mess

Perhaps my view is too simplistic...You just cannot spend your way out of debt.  Any correction is going to hurt.  If not all of us, certainly most of us. Either through loss of income, higher taxes, greater inflation or, increased energy cost.  No simple solution, at least not one that fits the current financial problems.

Rod

RE: Current Financial Mess

Maybe my views are because im young, but here's my two cents.

I don't think we are going to see the financial system crash everyone keeps talking about.  Lets take the most stabile and required industry in the nation, power.  Power is needed for everything and will always be in demand thanks to cities, drinking water demands, hospitals/military/government, and the rich needing to waste money amongst just a few.  More personal uses are lighting, computers, to sewage/water treatment plants, factories, offices, etc.  We live in the digital age.    

In order to generate power, we need fuel, which must be gathered, processed, and transported.  Fuel is useless without the generation equipment, so factories, workers, and more transportation are required for production.  Not to mention, someone needs to build the transportation and service it as well.  Support and repair personal will be a required for this equipment on the suppliers end.  On the actual generation end, people will be required to maintain, watch, supervise, protect, and engineer new systems.  The power has to be transmitted and blah blah... I'm sure you get the picture by now, but it's a never ending web of interconnection and dependence.

In 1929, the power grid barely existed.  Most people lived where they worked, and even more people bought goods locally as mass transportation didn't exist for food or goods or services.

In today's world, no one can produce the goods to do even simple things.  There is no town blacksmith or trade routes to even make hammers, much less provide enough food and water for our population.  (yes the world can support us, but it would take a gradual change to ween off of tap water simply because so many people live far away from clean water.  If we lost the ability to tap wells and treat water, we would end up in civil war over the scare resources).  People live so far away, that anyone with even a 30 minute commute by car would not be able to go to work .  The great depression could happen in 1929, and people could survive because they didn't live the styles we live today.

I think in today's highly dependant and interconnected world, if one system came to a complete stop, we aren't talking a great depression like scenario, we are talking apocalypse.   That is exactly why the financial system will keep chugging along.  I named one industry (albeit an important one) but this exercise could be done for several other vital industries.  Times will get tight as the market adjusts itself, but I really do not believe the market will come down around us if the bailout doesn't happen.  

Sorry for the longer post, my lunch break got boring and had to rattle out these thoughts because everyone in the office is pretending their 401Ks arent being demolished.   

RE: Current Financial Mess

MasterMaxter,

Let me paraphrase what you wrote.  

In 1929 a catastrophic failure of the financial system was merely inconvenient.  Today the results of such a failure would be apocalyptic, with no one able to work or buy necessities and we'd all be living in a Mad Max dystopia.  Therefore it can't happen today.

While I agree that I think this current mess can sort itself out without too much interference, your logic leaves a bit to be desired.

-b

RE: Current Financial Mess

That's not at all what Im saying.

Im not an economy expert, but the market is not going to stall, simply because there are too many forces which make it impossible.

My point being, in 1929, we didn't need china to make our hammers for us.  In fact they were probably produced "locally".  That's not the case today, and the world market will be forced to keep moving because people need the essentials and they aren't available locally, thus requiring the market.  As I said, perhaps I am young and naive, but I don't think a market stall is possible with how the world operates today.

RE: Current Financial Mess

MasterMaxter

The transport system in the US was well developed by the time of the Great Depression.

The Emphasis was on rail roads not roads but none the less, the priniciple of mass production in one (or few) location(s) then distribution from there was well established.

This was part of the Industrial Revolution which as I recall had happened before 1929.

No China didn't make the Hammers, but they were quite likely made in a big dirty factory in a different states, not by your local blacksmith.

KENAT,

Have you reminded yourself of FAQ731-376: Eng-Tips.com Forum Policies recently?

RE: Current Financial Mess

Before there was "money" people traded in product and services to get the basic necessities of life.

Now we still operate under that principle, but "money" is the middle man means to the end.  So as long as people have some "money" that is backed by product or services, supply and demand will keep the market afloat.  Since we're constantly trading, buying, selling, the likelyhood that "money" will fail to the point where that trading stops is unlikely.  People will always need those goods/services, and sometimes the only place to get them is another country, etc.

I don't feel bad for the financial industry, it should go down.  Someone will fill the gap in it's place.  Maybe they'll learn a lesson from it in the process.

James Spisich
Design Engineer, CSWP

RE: Current Financial Mess

Bah, the more I read, the more confused I am. I've read a bunch of articles, most have been against the bail-out, and still doesn't make sense to me.
I guess that's why I love engineering. If it ain't working, beat it until it does or breaks and the you replace it.

<<A good friend will bail you out of jail, but a true friend
will be sitting beside you saying " Damn that was fun!" - Unknown>>

RE: Current Financial Mess

Actually I just managed to discuss the entire issue with the accountant in the company, and again, found that my in-expierance was showing.  

Ah, the joy of being young and stupid (and wrong).  

 

RE: Current Financial Mess

I'm not saying that I am an expert, but, over the last few months I've averaged well two hours per week (sometimes much more) studying (not just perusing) the situation.  Self-interest, trying to keep my money safe, maybe even profit.

That is what it takes to really understand what is happening.  It's not going to reveal itself in soundbites.  I doubt that the majority of our congressman truly understand.

Money makes the world go 'round.  Right now, the money isn't even going 'round.  Left unmitigated, it will be a problem for all.

Word of the day:: "Credit Default Swap"
If you don't know what one is, then you are far from seeing.

RE: Current Financial Mess

MasterMaxter,

You did link to one important industry, and there are many that will keep going off of that and other key industries and thier related support.

But here is the key:  The current economy doesn't runn on a few key industries, it runs off of capitalism.  Sure, the power is generated, and gives those workers funds to live off of, but they do not go out and blow it on junk made in China, get a new car, buy a new house, etc.

That is where this crunch will eventually lead, is the other consumer driven industries.  There are a lot of people that make thier living off of them, that are likely to loosejobs, afford less, etc.

The idustry on the forefront of this issue, is also an example of a key industry that has had a slow down - the housing industry.  Sure, it plugs along, and is still here, but there are a lot of people out of work, from the laborers building the homes to the engineers that design them.  In my mind these people have lost the capitalistic "consumer " status.

No, the world will not end without a bailout.

Some bailout info for perspective:
The U.S. Federal Government collected $2,568 billion in fiscal year 2007, while spending $2,730 billion, generating a total deficit of $162 billion. This proposal asks for more than 25 percent of last year's collections. This is more than the government spent on defense ($549 billion), Social Security ($581 billion), or Medicare and Medicaid ($561 billion) last year.

The latest U.S. Census information indicates there are 116 million households in the U.S. – given that information, the cost per household for this proposal equals approximately $6,000.

The legislation will increase the national debt to $11.3 trillion.

Personally, I like the fact that it was asked for to be used without oversight. :rolls eyes:  How stupid do they think we are?
 

RE: Current Financial Mess

There is no crisis, there is only hype and stupidity among the media.  The lack of easy credit is a LIE.  I can borrow with no notice on my credit cards and the commercial paper market is churning with transactions.  Capital can be raised by stock offerings or bond sales as opposed to bank loans.  The "Marked to market" rule says bonds that do not trade or can not trade are valued at zero.  This is fiction and even defaulted bonds have value, (less than 100% or par, but still value).  Right now I am buying CMO's and CDO's at bargain prices in the speculation that 90% of the morgages are not in default and the ones in default still have brick/mortar and land as backing.

RE: Current Financial Mess

If the US pulled out of Iraq they could fund the debt with the savings.

RE: Current Financial Mess

stanier, although if done too quickly the likely increased unrest may have some unpleasent side effects.

KENAT,

Have you reminded yourself of FAQ731-376: Eng-Tips.com Forum Policies recently?

RE: Current Financial Mess

stanier, a bit naive.

The army/navy/air force still costs unless inactive personnel are fired.  The fact that they are firing live rounds overseas rather than blowing up bits of the US desert doesn't change the price.

Firing inactive personnel would have quite an effect on the economy.

- Steve

RE: Current Financial Mess

Selling stock to raise capital works fine when your stock prices are not in the gutter.  Most bank stocks have fallen below a point where it is not practical.  Besides, no one is buying.

RE: Current Financial Mess

4
Hopefully all of you who are Americans have written to your Representative and Senators and asked them to support/reject the bill (depending on your viewpoint).  Don't just waste time posting here, waste it by writing to the folks actually voting!

Patricia Lougheed

Please see FAQ731-376: Eng-Tips.com Forum Policies: Eng-Tips.com Forum Policies for tips on how to make the best use of the Eng-Tips Forums.

RE: Current Financial Mess

Star for you, vpl...



If you "heard" it on the internet, it's guilty until proven innocent. - DCS

RE: Current Financial Mess

bvanhiel you are wrong.  Here is why:

1. People are greedy
2. People have a collective short term memory loss
3. People collectively suffer from the "We're different" fallacy.


Human history is chock full of market boom/bubble/bust stories.  Try doing an internet search on "Dutch tulip craze" for example.  In my relatively short adult life I have lived through two such events: the dot-com craze and the current real estate mess and it is the same story every single time.  True, no one can predict when the bust will come or how bad it will be, but rest assured every bubble will eventually burst despite the snake oil salesmen touting "This time it's different."  Well, no it's not!   I remember during the dot-com boom when stock of startup companies were trading at insane P/E ratios.  Young MBA talking heads were on TV and in print touting that "This is a NEW economy, things are DIFFERENT now in the age of the internet."  Well history has proven them wrong yet again.   

If you are looking for signs of when a market is about to go bust, here it is:  By the time Joe Sixpack realizes that he "needs" to be in the market because it will make him rich, it's already too late.  
 

RE: Current Financial Mess

The crisis hit home today.  Plant manager announced we are losing orders due to customers' inability to secure financing.  These are good customers who never had trouble in the past.  It is a growth industry (long term healthcare products).

How far down is your 401K?  Among my friends and acquaintances, it seems to be 20-30%.  In a stagnant economy, don't expect a rebound to happen at the same speed.

RE: Current Financial Mess

Yeah...20% is about right.  I'm dollar-cost averaging and diversified in my holdings, so all I can really do is just hold on for the ride.  Not like I'm planning to retire for 20-30 years anyway...

RE: Current Financial Mess

spongebob007,

1. Yup.
2. Maybe so.
3. Sometimes things really are different.

Steel, the assembly line, electricity, trains, computers, the internet...  all of those bandwagons were for real, but some of them were overvalued and got pummeled.

-b

RE: Current Financial Mess

As painful as it might be in the short term, I say no bailouts, let the guilty suffer and the market will eventually correct itself.  I feel absolutely zero sympathy for the fools who bought more house than they could afford and are now potentially facing being homeless.  They don't deserve those homes, they couldn't afford them in the first place.  I also think those in the industry who made irresponsible loans and those that then packaged them up as investment vehicles should also hang along side those who treated their primary residences as their own personal ATM machine.   

We didn't get into this mess overnight, and we CAN NOT get out of this overnight.  What we are seeing today is the result of an economy that has been propped up with funny money for far too long.   It may not be of Great Depression proportion, but I predict things are going to get much, much worse, and it could be more than a decade before it gets better again.   

The roots of today's problems go back to the 1970's.   This is when big banking got into bed with big government.   Prior to this time lenders were bound by usury laws that were on the books in most states.  These laws placed a limit on how much interest could be charged on a loan.   Ever wonder why Citibank is located in South Dakota?   The answer is simple.  South Dakota had no usury laws.   Citibank lawyers greased the political wheels in order to facilitate their move to SD and get Federal law rewritten so that they could skirt the usury laws of other states where they did business.   Thus began banking deregulation.   The fire is now burning out of control.  If consumer greed is the gasoline, banking deregulation surely is the match that set things ablaze.

The bailout is a terrible idea because it is government meddling that played a big hand in the financial crisis we are in right now.   When the dot-com boom went bust, the FED should have let the guilty parties hang in the wind.   Instead, they attempted to soften the landing by lowering interest rates.  Working in the manufacturing seector, we as engineers have seen our greedy corporate overlords ship more and more of our jobs overseas while at the same time holding back our pay raises and bonuses.   There has been absolutely zero real wage growth for the average American worker for nearly a decade.   But yet the economy grew.   The U.S. economy has NOT grown however.  The economy has been propped up by funny money since 2001.   The problem with funny money goes back to ECON 101.  The intersection of the supply and demand curve is the price point.   Increase demand and prices increase.   This is what happened in the housing market and to some extent the U.S. economy overall.   But only so much price increase can be sustained before something goes horribly wrong, and that horrible thing was $4/gallon gas.  Then the house of cards started tumbling and it's a downward spiral.
 

RE: Current Financial Mess

The rot set in in the UK when building societies became banks.

- Steve

RE: Current Financial Mess

The best synopsis I have seen to date.  Got it this morning from Stratfor.com.

Quote (Stratfor):

As interest rates declined in recent years, investors — particularly conservative ones — sought to increase their return without giving up safety and liquidity. They wanted something for nothing, and the market obliged. They were given instruments ultimately based on mortgages on private homes. They therefore had a very real asset base — a house — and therefore had collateral. The value of homes historically had risen, and therefore the value of the assets appeared secured. Financial instruments of increasing complexity eventually were devised, which were bought by conservative investors. In due course, these instruments were bought by less conservative investors, who used them as collateral for borrowing money. They used this money to buy other instruments in a pyramiding scheme that rested on one premise: the existence of houses whose value remained stable or grew.

Unfortunately, housing prices declined. A period of uncertainty about the value of the paper based on home mortgages followed. People claimed to be confused as to what the real value of the paper was. In fact, they were not so much confused as deceptive. They didn't want to reveal that the value of the paper had declined dramatically. At a certain point, the facts could no longer be hidden, and vast amounts of value evaporated — taking with them not only the vast pyramids of those who first created the instruments and then borrowed heavily against them, but also the more conservative investors trying to put their money in a secure space while squeezing out a few extra points of interest. The decline in housing prices triggered massive losses of money in the financial markets, as well as reluctance to lend based on uncertainty of values. The result was a liquidity crisis, which simply meant that a lot of people had gone broke and that those who still had money weren't lending it — certainly not to financial institutions.

RE: Current Financial Mess

Sompting, true.  But to a 16 or so year old as I was then the 500+ pounds looked real good.

Thanks Tick, nice summary.

KENAT,

Have you reminded yourself of FAQ731-376: Eng-Tips.com Forum Policies recently?

RE: Current Financial Mess

KENAT: What's up, no £ on your keyboard?  I used to really hate that when I was over there.

- Steve

RE: Current Financial Mess

Another quote from the same Stratfor report (bold emphasis mine).  Seems it's a matter of how bad we want it to get before it gets better.

Quote (Stratfor):

Societies have two sorts of financial crises. The first sort is so large it overwhelms a society's ability to overcome it, and the society sinks deeper into dysfunction and poverty. In the second sort, the society has the resources to manage the situation — albeit at a collective price. Societies that can manage the crisis have two broad strategies. The first strategy is to allow the market to solve the problem over time. The second strategy is to have the state organize the resources of society to speed up the resolution. The market solution is more efficient over time, producing better outcomes and disciplining financial decision-making in the long run. But the market solution can create massive collateral damage, such as high unemployment, on the way to the superior resolution. The state-organized resolution creates inequities by not sufficiently punishing poor economic decisions, and creates long-term inefficiencies that are costly. But it has the virtue of being quicker and mitigating collateral damage.

Like most, I have no sympathy for homeowners in over their heads.  Problem is that it's gotten way bigger than that.

RE: Current Financial Mess

No, the £ is lacking.

I haven't got a house yet, waiting for the market to get to a realistic level, houses that 6 or so years ago were less than $100,000 are still advertised at more than twice that round our way and the prices are still dropping.

So for me house prices dropping is good.  However, to buy that home I'll need a job, which with the current state of things may be a risky assumption.  Also I'll need a mortgage and though we've cut back and are trying to save it's not going as well as I'd hoped so we may struggle with a large deposit too, though we have a plan...

I'm generally againste the bail out in principle, but I'll admit I don't want that principle to cost me my job.

KENAT,

Have you reminded yourself of FAQ731-376: Eng-Tips.com Forum Policies recently?

RE: Current Financial Mess

Quote (KENAT):

I'm generally againste the bail out in principle, but I'll admit I don't want that principle to cost me my job.

Another great synopsis!

RE: Current Financial Mess

Lots of hype about there being no crisis.  The reality speaks otherwise.  

There were a grand total of 5 IPOs in the entire last quarter, contrasted with 37 IPOs for the same quarter last year.  That's an 86% drop, which means the VCs are unable to recoup their investments.  Even the quarter ending in June was sluggish, with only 13 IPOs.

TTFN

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RE: Current Financial Mess

£ = <alt> + 0163
remember that the numbers need to be typed on the number pad

RE: Current Financial Mess

The financial mess is alos a produce of the media.  They hype it up and make people panic.  That in turn cause more panic and a downward spiral insues.

The bailout (no refered to as a rescue package) is flawed.  If the gov't buys all these bad debts, then the taxpayer is saddled with all these homes/properties that are in states of disrepair.  The gov't would need to spend $$$ fixing and maintaining these assets until they could sell them, otherwise they will eventually become worthless and the taxpayer will pay the piper.

The cause of the problem is the decrease in housing values.  The gov't needs to freeze all arm adjustment until something better can be resolved.  This would stop the hemoraging of the housing market, dramatically slowing the increase in forclosures and thus helping financial institutions.  The gov't should then allow all homeowners to refinance their homes at the current market rate, and reimburse banks for the difference on their books.  In exchange for the reimbursement, the gov't gets stock in the bank.  Homeowners who refinance at the lower home value would be taxed over X years until the difference was made up.  Something like this seems more equitable as it is addressing the main issue, and not giving the money away to wallstreet.

As someone who bough a house near the high, I have to live with the fact that my house is worth less than what was paid.  However, I was responsible and made sure that I could afford the payments.  I see no reason to help out the greedy, stupid, or ignorant, without helping those who were responsible also.

jetmaker

RE: Current Financial Mess

The issue isn't necessarily with the loans that have already defaulted.  The issue is with the loans that they don't have any idea whether they will default or not.  Those are also part of the "toxic" assets.  Because you don't know the quality of the assets, you have to bump up the loss reserves.  In many cases, 90+% of the assets have no problems what

Freezing ARM rates isn't going to help either, since many people were simply marginal at the original ARM rates; any job changes or financial emergencies tank the borrowers' reserves, causing them to default, or, they get transferred, and can't unload their house because they're negative and have no money to make up the difference.  Our neighbors are in the middle of a divorce and got foreclosed because they max'd out their equity at the peak of the market, but afterwards, they were negative on the loan, and couldn't make the short sale work either.   

TTFN

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RE: Current Financial Mess

I have heard no mention of going after those that made money out the whole scam? What about the big bonuses paid to execs in the financial market/ Why are not these people in Alcatraz? They make Al Capone look like a modern Robin Hood.

It is  a bit like governments crying over the increase in the medical budget. Do they go after the grossly over paid doctors?

Whilst we are on it, the lawyers who drew up the financial instruments that have fallen apart should be hunted down and stripped of all their assets. They were knowledgable in what they were doing.

A few lynch mobs would not go astray for the midery imparted on the populous. Dont you guys get angry in the US?

RE: Current Financial Mess

Stanier, yeah people get angry in the US.  

However, they also have the right to bear arms.

How angry do you really want them to get?

KENAT,

Have you reminded yourself of FAQ731-376: Eng-Tips.com Forum Policies recently?

RE: Current Financial Mess

For years the engineers of the world have had to bear the responsibility of development in real terms. But who gets the rewards? Lawyers and financiers in their plush offices. Most engineering offices are tawdry places with poor furnishings, aircon that doesnt work etc etc.

Salaries are not comparable between these professions and engineers.

The guy who invented the wheel never earnt a buck . The lawyer charged him for the patent, the insurance salesman took him for a policy, the advertising guru insisted he had a campaign, the doctor charged an arm and leg to heal the wounds he sysustained in making the thing...

Time to redress the balance and chuck the lawyers and financiers out of their comfortable dwellings and take away their fat fees.

How many designers earn more than the company lawyer or accountant?

Angry, I am damn angry. Spent my life building up a nestegg to retire on for these fools to squander it. What a mug believing that they had something special in the investment world. They are just punters at the track with our money.

So why are not the authorities tracking them down and putting them in jail? Surely we dont believe we need them to straighten out the financial system they stuffed up in the first place?

Where are the financial regulators that supposed to stop the greed of the banks? perhaps they dont want them in jail or the great unwashed will begin to look at them too.

RE: Current Financial Mess

Track them down for what, exactly?  The guys at the top are all teflon-coated.  They might even have the plausible, or real, deniability, since the heavy-lifting for creating the bad loans were all done at your friendly, local loan broker's office.  By the time someone at Lehman Brothers even saw a mortgage, it had already passed hands a few times.

You can't realistically jail or punish them for simply betting on the come.  That would probably put have of the defense industry in jail, as well.  After all, most contract cost overruns are bets on the come.

TTFN

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RE: Current Financial Mess

Howt about the due diligence necessary in running a business? Have not the shareholders interests been compromised by the ineptitude of those who didnt check out the fundamentals? Isnt there a duty of care on the part of the teflons?

You generally know a contract is going to overrun a long time before it does. The project manager then reports a forecast overrun to the Board of Directors. provisions are then made in the revenue account for the loss. The tools used in the construction industry are a lot less sophisticated than those used in the finance industry.

By their silence the corporate teflons are culpable. They conspired with the market to hide this mess, even from themselves, for so long. Alarm bells were ringing 18 months ago but they kept trading and all the punters got was the the three wise monkeys. Hear no evil, see no evil and speak of no evil. The teflons even advised local councils in Australia to take up these financial commodities. Before they can sue them they have gone bust. Where is the money?

For a start how about a class action against the local brokers who lent money to people who he/she knew couldnt pay it back? Take their houses from them. Perhaps they will spill the beans on the teflons and what they did know.

RE: Current Financial Mess

stanier,

The problem with punishing the guilty, especially the lawyers, is that the lawmaking bodies are dominated by lawyers.  So to make a start, we need to vote out all the lawyers.

RE: Current Financial Mess

Amen to that, I've said before there should be a quota for how many politicians are ex lawyers, no idea how you'd do it though.

KENAT,

Have you reminded yourself of FAQ731-376: Eng-Tips.com Forum Policies recently?

RE: Current Financial Mess

I grew up in North London where the Kray twins held sway. Take a couple of hundred grand from those guys and you would find your head nailed to the floor of the Blind Beggar's public bar.

I dont think the teflons are out of the woods yet. There will be some angry hoods out there who have trying to launder money into legit businesses. They are going to be very angry they have been robbed.

If I were a lawyer or financier involved in these scams I would be changing names and location pretty quickly. Teflon isnt much protection.

RE: Current Financial Mess

So, in short, the cause of all this was the rapid increase and later VERY rapid decrease in home prices.  Coupled with covering up the rapid decrease by those selling the "paper".  ...and bad lending practices.  Correct?

Did the supply go up or the demand go down to cause the rapid decrease?  Or both?

I think everyone knows that one area hit the hardest by the increase/decrease of housing was California.  My area, WV, seems to be affected very little.  What are some of the other hard hit areas?

RE: Current Financial Mess

"The first thing we do, let's kill all the lawyers"

--The Bard

RE: Current Financial Mess

Don't forget to add local, county and state governments to the list of guilty parties.  All of the above were very anxious for property values to increase because the property taxes rose accordingly. So much of the rise in real estate values was "blessed" by governments from top to bottom.  

Although only a fraction of the total number of homes were sold or re-financed, they were all re-assessed.  The only question posed by government was how to spend the money.  Now, will tax assessments fall quickly, or will we learn that our property tax levies will need to increase to support government at the level they choose.   

RE: Current Financial Mess

It would appear greed and avarice still remain some of the most potent deadly sins. The Confessional will have to be fitted with a revolving door to handlethe increase in traffic.

What is most gauling is that loose laws & greed in the USA cost the rest of the world.

Sooner the oil & gold standard moves to Euros or Yuan the better. The Arabs and Chinese must be rueing the day they invested in the USA.

RE: Current Financial Mess

Abraham Lincoln's frightening premonition:

"I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country... corporations have been enthroned, and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country than ever before, even in the midst of war."


 – Abraham Lincoln (1809-1865) letter to Colonel William F. Elkins, 21 Nov 1864.

Chris
SolidWorks/PDMWorks 08 3.1
AutoCAD 08
ctopher's home (updated Aug 5, 2008)
ctopher's blog
SolidWorks Legion

RE: Current Financial Mess

Nice quote Ctopher, goes to show many of the fundamental issues behind the current crisis have always been around, or at least for a long time.

At the end of the day it comes back to the golden rule - he who has the gold makes the rules.  

Stanier, why would the Chinese be regretting it?  They're making bank, the Arabs aren't doing badly either.  At this rate the "land of the free & home of the brave" will be all but owned by a communist dictatorship and several absolute, or near absolute, moarchies.

As for putting all the blame on the US greed, I don't recall 'the city' being much different in the UK and seem to remember Australia may have had it's own issues.

KENAT,

Have you reminded yourself of FAQ731-376: Eng-Tips.com Forum Policies recently, or taken a look at http://eng-tips.com/market.cfm?

RE: Current Financial Mess

Even though they have $519B worth of US Treasuries, the Chinese economy is highly dependent upon exports to the US and Europe.  Many of us are just worried about paying the mortgage, not spending on more stuff we don't really need.  The domestic Chinese economy won't be able to pick up the slack in demand.  Chinese stocks are likely to fall even further than this years 58% plung, upsetting their new economy.

RE: Current Financial Mess

Excellent discussion here - many interesting points.  I'm curious though - being a Canadian Engineer; what do other Canadians (or those who know of the Canadian economy) think the impact will be on Canada, given our strengths in the 'not-likely-to-fizzle' oil/gas/energy sectors?

My personal opinion is that the Canadian economy will likely follow the US economy, but not to the same extent.  Our banking system is far more stable (more legislative control), and we are not facing the sub-prime mortgage fiasco.  I think that the bailout will improve the Canadian economy as much as it will the US (or perhaps even more), as the more stable energy sector will draw additional investments from those feeling uncomfortable with on-goings south of the border.

RE: Current Financial Mess

Not all Canadian exports are oil and gas.  Your trading partner statistics will suggest that there are many industries contributing to the Canadian trade balance that will also stand to suffer significantly with reduced trade to the US.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************
http://virtualpipeline.spaces.live.com/

RE: Current Financial Mess

The recession of the early 90s was engineered to take down the Japanese juggernaut.  If you may recall from that time, much gallows humor was invested in the notion of having to learn Japanese to survive.  The US semiconductor industry was getting clobbered by the likes of Hitachi, Toshiba, etc.  They bought up billions in US real estate.  Fujitsu, whose corporate logo mimicked the corporate logo of Fairchild Semiconductor, was a hairs breadth away from purchasing one of the two founders of the US semiconductor industry before the Reagan administration nixed the deal.

Yet, a mere 5 yrs later, the company that roared in to purchase the Century City headquarters of Northrop Grumman for $200M went belly up, and it took nearly 10 years for Japan to regain its industrial preeminence.

China has gotten quite financially powerful; there's no doubt that "those" in charge are looking for a way to manipulate the US economy into tanking the Chinese economy.  It's not clear that they'll be successful this time around, since the Chinese should have learned lessons from the Japanese.  Should be interesting to see what happens...

TTFN

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RE: Current Financial Mess

IRStuff, Which side are you referring to when you say, those in control"?  How do you know that its not been the Chinese at the wheel?  Is it not possible that Chinese control over the value of the Yuan at excessively low rates and their placement of 1/2 trillion dollars + at very low US Treasury interest rates to finance the resulting feeding frenzy level US appitite for Chinese products wasn't actually part of an economic warefare plan to take down the US economy?  Hey, the same concept used to work very effectively to take out independent gas stations competing with the major dealers in the 60's.  Why else did China, a communist model, implemented on a scale so large and more perfect than Carl Marx ever imagined, suddenly and radically change philosophy to accept a limited capitalistic model?  Was it because of Tiniman Square, or just because all-of-a-sudden they realized the value of money?  Is such a thing at least minimally possible?

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************
http://virtualpipeline.spaces.live.com/

RE: Current Financial Mess

BTW DirtGuy,  I think the oil industry is anything but stable at this point.  On one hand they face a great potential shortage of supply (even an OPEC flood and glut of oil), in the face of ever increasing costs to the majors companies for finding, producing and moving it to markets.  On the other hand they also face either a significant potential drop in demand and revenue going into a possible worldwide recession with probable still increasing exploration costs.  To compound matters, a rapid increase in demand with exploration budgets that would undoubtedly have been reduced during recession and resulted in little addition to new reserves might be probable, if the economy happens to find its way out to the other side of the chasm in a relatively short time.  That scenario might produce price increases which would be so fast and severe that oil might not be afforadable to anybody.  Care to chose a long-term strategy from those alternatives?  I'll bet it involves reducing present costs as much as possible.  

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************
http://virtualpipeline.spaces.live.com/

RE: Current Financial Mess

Of course, given the financial situation, OPEX, and even Capital investment costs are under large scrutiny, as much in the oil industry as all others.  Many people, however, are suggesting that the pending recession (notwithstanding the US Bailout) could be as bad or worse than the Great Depression.  My suggestion is that the energy sector may in fact become a more stable 'lifeline' for economic disaster, as certainly the western world has such a great dependency on oil (certainly far moreso than in the 1930's).  We all drive more, heat our houses using natural resources, rely heavily on international and intercontinent transport of goods etc.  So despite the decrease in demand on the manufacturing industry (people won't be buying as much), my feeling is that the energy sector may be our saving this time around.

I recognize that Canada's exports are more than just oil and bitumen, however, our oil reserves (esp. in the oilsands) exceed most others on the planet (even in Saudi), and certainly, they are a more stable form of reserves (based on political situation).  Thus, doesn't this make Canada a candidate for fairing well through this economic downturn?

RE: Current Financial Mess

I would predict, with the occurance of any reduction of demand, that the expensive oilsand to the north will be the first oil to feel any production cutbacks.  The Saudi's can still get it out of the ground for appx $15/BBL or less.  The cheapest sources are ALWAYS preferred.  In the mid 80's Texas had hundreds of producing gas and oil wells shut in when the oil world market price went to $10/BBL and the Saudis were selling still cheaper FOB for $4.  We were selling gas at $1.18/MMCF even though it cost us more to produce it, just so we could make payroll until pink slips could be handed out.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
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RE: Current Financial Mess

And oil isn't always a victim of politics.  During the coldest parts of the cold war, the one thing that kept flowing was oil.  As long as the supply stays above the demand, politics hasn't entered into the flowrate equation, the price equation yes, ... well except for the OPEC embargo of the 70's... and when the US decides they don't need oil from Libiya, Iraq or Iran, but that's more of a "reverse political" driver.  Even still, the black market takes over in those cases.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
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RE: Current Financial Mess

Interesting change in how this thread evolved.... housing prices.... crooked lawyers / bankers..chinese / canadian perspectives.

As a Canadian working in the mining industry, I developed the opinion back in April that the Chinese phenomenon was unsustainable ,probably post olympics , and that recent sky high metal prices would correct, since china seems to be the main demand centre recently.  Minor  concerns in the USA at the time suggested that if the US consumer did slow down his spending, this would result in less Chinese goods finding their way to Walmart which would contribute to an overall Chinese slow down which would  exacerbate the drop in metal prices which would then cause the Canadian $$ to suffer.  I liquidated a lot of my stock market nvestments,  bought Pounds and Euros.

Turns out I was right but for all the wrong reasons... I never considered housing at all... and some of the bonds I bought might be at risk.  AIG ring a bell??  And the Pound has not been a sterling choice either.

Have some knowledge of the Alberta Oil sand business amd cant see that slowing down dramatically if oil is $65+.  Some slow down would be welcome anyway to control construction costs and social problems in Fort Mac.

Anyone care to comment further.  If I end up being proven correct, what happens when China collapses,  metal prices drop to say 50% of present levels... probabably taking oil with them.    

RE: Current Financial Mess

U.S. politics does not fully explain the banking crises in Great Britain and France.

RE: Current Financial Mess

Well Tick, it kinda does, since the banks going bust in the EU have been primairly those that were buying up the packaged BS that NYNY was unloading on them.  "Buyer beware" is no excuse for not taking the blame though and they deserve much fault of their own for buying those packages without kicking the tires first as NYNY does for packaging them up.  Unfortunately the US financial industry is turning out to be about as conscientious as the Chinese milk manufacturers.  

Miningman,
I think a good part of the recent FX declines are from US and Russian companies/govs pulling foreign currency reserves and cash assets back to CYA as much as possible in the home countries and the Soverign funds in the mideast increasing their own market liquidities.  Just a guess as I've no inside tracks in that business.  As a mining man, I'm surprized you didn't buy gold, although that has suffered some recently as well, it might be the best bet in the long run, if you get my drift.  I'm about ready to try some of that.  Any ideas there?

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
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RE: Current Financial Mess

Yes, either directly as in the case of UBS losses(if not mistaken), or indirectly by the resulting credit squeeze in the above case.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
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RE: Current Financial Mess

Hey, the Chinese milk manufacturers are blameless.  Cows just aren't that crafty.  As always, blame the middlemen.

RE: Current Financial Mess

-John Paul Getty: "If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem."

-Einstein dies and goes to heaven only to be informed that his room is not yet ready. "I hope you will not mind waiting in a dormitory. We are very sorry, but it's the best we can do and you will have to share the room with others" he is told by the doorman.
Einstein says that this is no problem at all and that there is no need to make such a great fuss. So the doorman leads him to the dorm. They enter and Albert is introduced to all of the present inhabitants. "See, Here is your first room mate. He has an IQ of 180!"
"Why that's wonderful!" Says Albert. "We can discuss mathematics!"
"And here is your second room mate. His IQ is 150!"
"Why that's wonderful!" Says Albert. "We can discuss physics!"
"And here is your third room mate. His IQ is 100!"
"That Wonderful! We can discuss the latest plays at the theater!"
Just then another man moves out to capture Albert's hand and shake it. "I'm your last room mate and I'm sorry, but my IQ is only 80."
Albert smiles back at him and says, "So, where do you think interest rates are headed?"

-If you want a guarantee, buy a toaster.
Clint Eastwood

-Yesterday is not ours to recover, but tomorrow is ours to win or lose.
Lyndon B. Johnson

-Economists have forecasted 9 out of the last 5 recessions

-An economist is someone who gets rich explaining others why they are poor.

Chris
SolidWorks/PDMWorks 08 3.1
AutoCAD 08
ctopher's home (updated Aug 5, 2008)
ctopher's blog
SolidWorks Legion

RE: Current Financial Mess

The Chinese have ALWAYS understood the value of money.  There's a Chinese saying that they taught the *** everything the *** know about money.  

Nonetheless, the perfectness and egality of Chinese communism is a myth.  The poorest city dweller was often substantially better off than the farmers, even though there was much lip-service given to the notion that the farmers were the backbone of the country.  The typical city dweller today makes easily 10 times more than the farmer.  

The Chinese nouveau riche drive BMWs, MBs, etc., and live the life of the decadent bourgeoisie, while the farmers literally slave for dollars a day, hardly the Marxian communist utopia.  Not only that, there are now Chinese working for Western companies stationed in China, making American salaries, and are able to buy mansions, filled with servants, etc.; great stuff for class conflicts, isn't it?  Google China was offering a certain person I know $100K+ plus car/driver for a position in Beijing.

TTFN

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RE: Current Financial Mess

I didn't mean to imply Chinese communism was perfect, only that it was implemented as completely as it was practical to do so.

Value of money.  Exactly what I mean.  They have always known the value of money, hence that was not the reason they allowed capitalism to infiltrate the system.  If they always knew that, they would have rejected communism much earlier.  Allowing your example salaries to flourish under the new system and the potential class conflicts that could arise even makes it more dangerous for them to permit even small capitalistic colonies to exist, which only increases my suspicions as to why they do allow its existance.

My question to you and/or other's still remains, do you think that there is a possibility that the Chinese deliberately changed their system to gear up to "wage economic warefare" on the west?  If not, what other reason do you think might have encouraged them to change their system in such a radical manner?  Especially given their apparent previous disregard for the actual conditions of their working class up to now.  Did all of a sudden, that become the impetus?  Possibly, but not likely ... IMO.





 

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
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RE: Current Financial Mess

  And the thread continues to evolve.  Biginch, yes I am a believer in gold and continue to hold positions in senior producers and mutual funds.  However bullion prices are most certainly not behaving as they should be  in these times of economic turmoil.  And I dont know why.  What I do know is that the cost of producing an ounce continues to skyrocket. If you think capex costs in the oilsands business are escalating, you aint seen anything untill you look at mining costs.  Operational costs are rising due to labour, fuel, transpotation, environmental  and regulatory costs and capex is escalating due to all the above plus cement, steel etc etc. Most people... and EPCM contractors / consultants continue to underbudget these costs... $500 million doesnt go very far these days and many of the resouces / reserves are optimistic.  Bankers have a right to feel nervous lending to the junior companies.

RE: Current Financial Mess

Quite the contrary.  I do believe your cost projections.

It seems nothing is behaving in the classical manner these days.  That's what has me really worried.  When things don't behave in the manner that they should, I have generally found they eventually tend to whip back in the right direction, then even overshoot the mark they should have been heading towards originally.  And that's with physics Mother Nature at the helm.  With the lemmings in charge, this overshoot could merit a lunar landing, or a hole in the dirt deeper than either of us has ever seen.

Optimistic?  I suppose then you must be talking to the same geologists as I.  They used to predict 60 MMSCFD and we would get 10 MM/D for 1 month, then 30,000 SCFD thereafter.  Of course that company was in bankruptcy for close to 15 years (a record I believe) before they were finally forced to close.  They were the undoing of the Bank of Illinois and had Vatican lawyers that were actually certified in reviving the dead.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
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RE: Current Financial Mess

... gold being lower than expected would indicate that liquidity is being valued even greater than gold ... for the presnt.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
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RE: Current Financial Mess

Perhaps the Chinese have realised that now everyone has 1, 2 or 3 each of $10 steaming irons, $20 microwave ovens and other cheap items. So demand will slow. Even if the quality isnt top notch these products do last. I have every power tool there is and they cost 10% or less of a real one. I am not a tradesman so they do a job without blowing up. If they do I can buy another for a few bucks.

All those resources have been converted into household goods and find there way to our scrap heaps.

Technology is losing the race. There is not longer the churn for new products except for mobile phones and plasma TVs. Cars, kitchen electrical goods and tools are built to higher standards and are lasting longer. No need to replace.

Chinese, Indian, Russian and Brazilian tiger economies will suffer. Tighter econominc outlook in the USA will drive down demand as people can accept what they have rather than wanting more and more ematerial possessions.

The saving grace will be population increase, immigration and the desire for a higher standard of living in the countries that manufacture these goods. The challenge is that the USA doesnt have a command at the table of the local economies of the manufacturers that are near to developing there own markets. Being less than democratic these countries can elect to keep the USA out.

Yes I believe there is a conspiracy or two. But which one do you gamble on winning? Hold on to your tiger.

The countries are also too big to go to war with as they have huge populations.

RE: Current Financial Mess

Quote:

Being less than democratic these countries can elect to keep the USA out

They could, but they don't.  Oddly, the modern Chinese think that Buicks are great cars...

TTFN

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RE: Current Financial Mess

IRstuff,

They do now when they are riding the crest of a wave. But my point is in the future, when the foreign currency dries up, government introduce tariffs and begins to look inwardly. Gas guzzling Buicks will be cheaper than a chook raffle ticket in the public bar.

One thing happens when you have been around for a few decades is that you realise it is true that "everything changes but everything remains the same". We have seen recessions , 19% mortgage interest rates, large oligarchies changing tack in foreign and economic policy, stockmarket corrections/collapses, wars etc etc before.

I liken the current market carryings on to an unstable control loop. The primary element step change is outside the control algorithm designer's parameters. The system is out of control and the controller does not know where it is going to end up. We have reset windup.

RE: Current Financial Mess

Fire Bush today.  Move the election up to next week and the inauguration to the following week.  Don't let the guy screw up anything else!

RE: Current Financial Mess

Any enlightment on how to read the odds on that page BigInch?  Looks like gibberish to me.

David

RE: Current Financial Mess

Current Odd posting at time of this response reads,

Bookie         A      B         C       D       E
Dem Victory   1/6     1/5      1/5      3/14   2/9
Rep Victory   7/2     3        29/9     4     39/10

Bookie A pays $1 for every $6 you bet on a Democratic victory and/or will pay $7 for every $2 bet on a Rep victory.  Bookie A hence would require you to risk a $6000 bet, if you want to try to win $1000 on a Dem victory. In which case he'd pay you back your original 6000 + another 1000, but would keep all your $6000 bet, if you got it wrong and the Republicans won.

Click on the "1/6" under BET365, a new page opens.  Enter your bet and see your potential winnings, if the democrats win.  Enter $ 1000 for a bet and see your potential winnings are $ 166.67 so total payback would be $1166.67, a $ 166.67 net.

So the money is saying the Republicans are pretty much wasting your time at this point.  Before Palin and the Crisis reared their heads, the Democratic odds were only running around 5 to 4.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
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http://virtualpipeline.spaces.live.com/

RE: Current Financial Mess

The OP asked about PMI.  Well, many of the loans were "piggyback" loans such as 80/20, etc... Which means you have a 80% loan and a 20% loan.  That bypasses PMI, since neither loan is for over 80%, but the financing is 100% of the purchase.

RE: Current Financial Mess

Hah...

The banks would be happy if they made 80/20 loans.  Read that some were making 105% loans on expensive homes to cover closing costs.  There were some smart people that played the game the same as the banks were... they got 105% loans on million dollar homes and then did not make a single payment.  3-6 months rent free, and then they stripped the homes and walked away, pocketing a bunch of money.

Love it.

RE: Current Financial Mess

Here's an interesting albeit paranoid (a higher state of awareness?) take on the situation:  http://www.naturalnews.com/024427.html

When the people fear their government, there is tyranny; when the government fears the people, there is liberty. - Thomas Jefferson
 

RE: Current Financial Mess

Actually, not totally true.  They might have well been only 80/20 loans last year, but they're now 130% or worse.  A local house was listed at $2.75M last year, and is listed today at $1.2M.  This is after foreclosure by the bank, since the owner was not only upside down, but might have actually been turn a full 360º into Riemann space, from whence there is no return.   

TTFN

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RE: Current Financial Mess

ewh:

Quote (Hanlon):

Never ascribe to malice that which can be adequately explained by stupidity.

RE: Current Financial Mess

Japanese banking crisis

Bad news from Asia this afternoon as Japanese banks are the latest hit ...

Origami Bank has folded
Sumitomo Bank has gone belly-up
Karaoke bank goes for a song
Bonsai Bank cuts its branches
Shares in Kamikaze Bank suspended after they nosedive
Samurai Bank soldiers on following sharp cutbacks
Ninja Bank takes a hit, but remains in the black
Furthermore, 500 staff at Karate Bank get the chop
Analysts report there is something fishy going on at Sushi Bank where it's feared that staff may get a raw deal
 

RE: Current Financial Mess


Dear Bank Manager,

I am writing to thank you for bouncing the check with which I endeavoured to pay my plumber last month. By my calculations some three nanoseconds must have elapsed between his presenting the check, and the arrival in my account of the funds needed to honour it. I refer, of course, to the automatic monthly deposit of my entire salary, an arrangement which, I admit, has only been in
place for eight years.

You are to be commended for seizing that brief window of opportunity, and also for debiting my account with $50 by way of penalty for the inconvenience I caused to your bank. My thankfulness springs from the manner in which this incident has caused me to re-think my errant financial ways. You have set me on the path of fiscal righteousness.

No more will our relationship be blighted by these unpleasant incidents, for I am restructuring my affairs in 2008, taking as my model the procedures, attitudes and conduct of your very bank. I can think of no greater compliment, and I know you will be excited and proud to hear it.

To this end, please be advised about the following changes:

First, I have noticed that whereas I personally attend to your telephone calls and letters, when I try to contact you I am confronted by the impersonal, ever-changing, pre-recorded, faceless entity which your bank has become. From now on I, like you, choose only to deal with a flesh and blood person.

My mortgage and loan repayments will, therefore and hereafter, no longer be automatic, but will arrive at your bank, by cheque, addressed personally and confidentially to an employee of your branch, whom you must nominate. You will be aware that it is an offence under the Postal Act for any other person to open such
an envelope.

Please find attached an Application Contact Status which I require our chosen employee to complete. I am sorry it runs to eight pages, but in order that I know as much about him or her as your bank knows about me, there is no alternative. Please note that all copies of his or her medical history must be countersigned by a Justice of the Peace, and that the mandatory details of his/her financial situation (income, debts, assets and liabilities) must be accompanied by documented proof.

In due course I will issue your employee with a PIN number which he/she must quote in all dealings with me. I regret that it cannot be shorter than 28 digits but, again, I have modelled it on the number of button presses required to access my account balance on your phone bank service. As they say, imitation is the sincerest form of flattery.

Let me level the playing field even further by introducing you to my new telephone system, which you will notice, is very much like yours. My authorised contact at your bank, the only person with whom I will
have any dealings, may call me at any time and will be answered by an automated voice.

By pressing Buttons on the phone, he/she will be guided thorough an extensive set of menus:

1. To make an appointment to see me

2. To query a missing repayment

3. To make a general complaint or inquiry

4. To transfer the call to my living room in case I am there; Extension of living room to be communicated at the time the call is received.

5. To transfer the call to my bedroom in case I am still sleeping. Extension of bedroom to be communicated at the time the call is received.

6. To transfer the call to my toilet in case I am attending to nature. Extension of toilet to be communicated at the time the call is received.

7. To transfer the call to my mobile phone in case I am not at home.

8. To leave a message on my computer. To leave a message a password to access my computer is required. Password will be communicated at a later date to the contact.

9. To return to the main menu and listen carefully to options 1 through 8. The contact will then be put on hold, pending the attention of my automated answering
service. While this may on occasion involve a lengthy wait, uplifting music will play for the duration. This month I've chosen a refrain from The Best Of Woody Guthrie:

"Oh, the banks are made of marble With a guard at every door And the vaults are filled with silver That the miners sweated for"

After twenty minutes of that, our mutual contact will probably know it by heart. On a more serious note, we come to the matter of cost.

As your bank has often pointed out, the ongoing drive for greater efficiency comes at a cost. A cost which you have always been quick to pass on to me. Let me repay your kindness by passing some costs back.

First, there is the matter of advertising material you send me. This I will read for a fee of $20 per page. Inquiries from your nominated contact will be billed at $5 per minute of my time spent in response.

Any debits to my account, as, for example, in the matter of the penalty for the dishonoured cheque, will be passed back to you.

My new phone service runs at 75 cents a minute (even Woody Guthrie doesn't come for free), so you would be well advised to keep your inquiries brief and to the point.

Regrettably, but again following your example, I must also levy an establishment fee to cover the setting up of this new arrangement.

May I wish you a happy, if ever-so-slightly less prosperous, New Year.

Your humble client

--------------------------------------------------------

Bank Name

Mother decided that 10-year-old Cathy should get something 'practical' for her birthday.

"Suppose we open a savings account for you?" mother suggested. Cathy was delighted.

"It's your account, darling," mother said as they arrived at the bank, "so you fill out the application."

Cathy was doing fine until she came to the space for 'Name of your former bank.' After a slight hesitation, she put down 'Piggy.'

Chris
SolidWorks/PDMWorks 08 3.1
AutoCAD 08
ctopher's home (updated Aug 5, 2008)
ctopher's blog
SolidWorks Legion

RE: Current Financial Mess

I think we have seen a prime example of what happens when an economy moves away from wealth generation activities to "money making" activities.  Without true wealth to support it, collapse happens.

Regards,

RE: Current Financial Mess

When I bought my last house I put down a large deposit, paid through some firm of solicitors and moved in.  The next weekend was a bank (public) holiday.  My cashpoint (ATM) card was refused.  So I had to live on small change for a few days.  When I called the bank the following Tuesday, they told me my account had been frozen because of that big cheque, even thouogh I had loads still in there.

I told them that they'd ruined my bank holiday and would therefore need to pay for my time for that day so I could take it off later.  They agreed.  My HR manager backed-up my claim and I got a day's salary.

- Steve

RE: Current Financial Mess

Somtingguy,

I guess it was like all thieves. Once they are caught they say" fair cop guv" and give back the money they have stolen.
 

RE: Current Financial Mess

The Aussie Leader of the Opposition (Malcolm Turnbull) stated today that shareholders, particularly institutional investors such as fund managers, have been too complacent with regard to executive remuneration packages.

Mr Turnbull went on to say -
"(They) haven't stood up for the rights of shareholders in ensuring that executive salaries are properly correlated so that they coincide with the interests of those shareholders.''

The issue had been that finance sector executives, at all levels, had been rewarded for writing business, making sales and accumulating loans.

"They've been paid for that without account being taken of the consequences of those loans going bad in the future,''

It's ironic that he has mentioned institutional investors being complacent because their commissions are generally front-end loaded, so they have no real or vested interest in the performance of your funds.

While on fund managers - those guys seem to have come out unscathed even though they are paid and feted like pop stars or English footballers, shifting camp to the highest bidder.  I have just looked at a capital-protected investment that I have had for seven years with one of these "superstars" and have only been assured of a "locked in" return of only 22% (spread over 7 years) - and that included the boom years!  It would have been better as money in the bank.
 

RE: Current Financial Mess

The insurance companies underwriting the "credit swaps" treated the risk management like ordinary insurance.

However, when a policy holder's house burns down, it doesn't automatically start a stampede of burning houses, all across the country.

Another thing is the new trend of simply walking away from a mortgage, & not looking back. There was a time when this was unheard of. I have reached 60 years old, and have NEVER been acquainted with (more so, even heard about, in my little blue-collar world.) anyone who has done that. Like multiple bankruptcy, and unwed motherhood, defaulting on a mortgage is now "ok" somehow.

Mortgage brokers promise folks the world, these folks want to believe in the dream ( who doesn't?)Fill out the paperwork, lie about income, whatever it takes. When you have 30 or 40 'applicants', you shop this package around to mortgage lenders, take your commission (money off the table) and move on.

The "winner" of this mortgage package,(mortgage company) after hosing the applicants with thousands of dollars worth of fees, insurance, points, and other closing costs,( which are often rolled over into the mortgage, or paid for by a second mortgage!!) bundles these, along with others together and sells them to a larger Lending institute,at a discount. ( again taking money off the table, the fees, costs, & % discount ) The more mortgage paper you can move, the bigger your bonus!!

Then Fannie or Freddie takes them on, and buys "credit swaps" ( which is insurance by another name. If you call it insurance, you have to regulate it as such ) from say, AIG.

And now these bundles of "credit swaps" have taken on, at least in the financial world, intrinsic value. Like a bushel of corn, or a barrel of west texas sweet crude. So.....they can be traded on the futures market. You can buy call & put options on them. You do not have to prove liquidity of any sort, to play in this market.

And because of the so-called "value" of this paper, they are no longer considered debt, in some arcane bizzaro accounting world.

And all of it, these trillions of dollars, & the whole capitalist system rests on old upwardly mobile joe plumber, or joe machinst, or joe aircraft mechanic making that house note. Shucks, we were expecting to be out of that house before the interest rate went up...........

Someone mentioned the "tulip mania" of the 1600's?

You know how the dutch government cleaned up the mess? They simply cancelled all contracts dealing with tulip commerce. Across the board. Man what would our lawyers do with that one!?



 

RE: Current Financial Mess

Obama's on the way.

Paddypower bookies are paying all bets made on Obama today.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************
http://virtualpipeline.spaces.live.com/

RE: Current Financial Mess

They've been known to be terribly wrong on many occasions, however.

V

RE: Current Financial Mess

Thruthefence,

So dont the mortgage brokers who "lied about the income" go to jail? Isnt that fraud or deception? Why are their assets stripped and paid to the injured party?

Surely the lawyers would be salivating at the prospect of all these fees?

I have lost my faith in the USA being the legal capital of the world.

RE: Current Financial Mess

vc,

Don't you think if there was any chance at all that they might get it wrong, they would take that chance and simply wait until its over to settle up?

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************
http://virtualpipeline.spaces.live.com/

RE: Current Financial Mess

I guess not, as they've been wrong, and had to pay out to both parties.

V

RE: Current Financial Mess

Man I hope this garbage about the Irish bookmakers causes many complacent adults in the US who were not going to vote to change their minds and get out and vote.  To let shady bookies decide an election is just about as dumb as ... the electoral college.

David

RE: Current Financial Mess

ie mortgage brokers; there was a broadcast on NPR about mortgage brokers in Florida, one of the biggest problem areas, it told how some 10,000 or so "Licenced" brokers in that state were convicted felons. Apparently Florida had maybe 3 people assigned to certify & police that particular aspect of the mortgage industry. It also alluded to the fact that the "mortgage scam" was actually 'taught' by the con artists in prison as what to do once you're "outside".

here's a link:
http://www.npr.org/templates/story/story.php?storyId=92793930

and here:
http://floridaforeclosurefraud.com/2008/08/13/florida-broker-regulator-saxon-out-of-a-job-felons-still-brokering-loans/

when there is this much "easy money" out there, via "easy credit" the roaches come out from under the rocks.

RE: Current Financial Mess

zdas,  I disagree with your comment about the electorial college.  Don't be so hasety to condem the Constitution.  The EC is a form of a check and balance similar to why the House has its number of members based on population from each state and why the Senate has fixed equal number of members from each state.  In the Senate, each state is equally powerfull, but in the house the larger states effectively have more power.  The electorial college, based on population (House of Representatives) is a check against the immense imbalance of power that a state with low population has in relation to a state with high population in the Senate.  Obviously, it is grossly unfair, "population-wise" for Alaska to have as much power in the Senate as California, but was necessary for the states to agree to unify.  To counter that imbalance, the HR was created, based on population, and all the duties were split.  One of the duties is the election of the president by the electorial college, since based on population, is essentially a HR function.  The states with the largest populations were intended to have more influence over the election of the president.  The president is elected by the states according to their populations.  So, IMO, the EC is a perfect division between the power of the states and the power of the nation's people as a whole.  Essentially it tends to prevent a group of states with relatively low populations from having too much relative influence in the politics of the legislative branch of the federal government, just as they do not share equal powers with all the states in the House of Representatives.  It therefore prevents undue influence of a region of the United States over the will of the whole population as a nation.  But, likewise, it was never intended that the president was to be an officer elected solely by the nation's people, as is the common misconception, as doing so the people would then have too much influence over the will of the states.  The EC power split by state also tends to check the "American Idol" or "Messiah" or herd effect of an entire population, but ...not at times when great changes are needed.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************
http://virtualpipeline.spaces.live.com/

RE: Current Financial Mess

BigInch,
Do you really believe your post or are you just pulling my chain?  

The way I see it, each state gets membership in the Electoral College equal to the sum of their representatives and senators.

A state like Wyoming with around 1/2 million people has three votes so each person in the state gets 1/166,667 of a vote.  In California there are 36 million people and 53 representatives and 2 senators--1/645,000.  With the Electoral College someone in Wyoming has 4 times as valuable a vote as someone in California.

That just doesn't jibe with my understanding of the "one person one vote" concept.  The whole concept of "winning a state" and getting 50.00001% of the vote in a state and all the EC delegates also flies in the face of my idea of "democracy".

A bunch of states have decided on their own to divide their EC votes (which is not prohibited in the Constitution, a document that I revere) to approximately match the popular vote which seems to help, but it doesn't mitigate the problem of voters in small population states having a disproportionate voice.

Reading the Federalist Papers and the discussion seemed to be about getting a prompt vote count instead of equity.  I may just be reading too much into it.
David

RE: Current Financial Mess

Dave,

That's exactly the intent.  The idea is to prevent "tyranny of the majority" by ensuring the minority would have a disproportionately large vote, making it critical that a candidate pays at least lip service to those states, otherwise, one could simply spent one's time campaigning in the high population states and blow off all the other states.

TTFN

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RE: Current Financial Mess

Then it is a stupid intent.  There is no state that has an homogenous opinion on any subject past today's weather.  There are liberals, conservatives, and every other flavor of wacko in every state.  Why should the accumulation of environmental wacko's in Oregon cancel the votes of Conservatives in that state?

David

RE: Current Financial Mess

Whoever wins the popular vote should win the election, IMO.

V

RE: Current Financial Mess

It's "fair" because those are the terms the states agreed to when they joined the Union.  As an entity, the USA as a country is a collection of member states, not just a pile of people in one arbitrarily subdivided region.  It is the states that decide who the president is.  It's not a "national" election, it's a simultaneous election of electors in all 50 states.

Some states are divvying up electoral votes by percentage of popular vote.  That's up to each state to decide.  It's not up to the federales.

It's about States' rights.  In the Civil War, the South was in the right about everything but the slavery issue.

RE: Current Financial Mess

The more populist we get in our selection of presidents, the lower quality we will have.  It was only recently that politcal parties started selecting candidates almost entirely by votes in primaries.  Dumb idea.

Political parties are actually private entities, and should maintain stronger control over who they select.  Now the parties have virtually no control over the quality of their candidates.  That's how we got the likes of Clinton vs. Dull; W vs. Kerry and W vs. Gore.  Lose-lose elections 3 times in a row.

RE: Current Financial Mess

I know my vote doesn't count either way, and now at the point where I really don't care. Everyone that has ran for Pres, Senate, etc for the past couple decades I didn't care about and not much has got better since.
It's no different than going to a car lot and deciding which sales person I want to help me, but I don't have a choice!

my .02, sorry.

Chris
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RE: Current Financial Mess

Perhaps I did get the effect backwards, but my point still stands.  Its a states rights thing, its not at all about the popular vote or the absolute wishes of the nation's people.  

Yes, there is the "danger" in a democracy that the rule of averages takes precedence.  If it was about the rule of only the intelligent, or the dumb, only the landowners or the renters, only the rich or only the poor, or fill in your own pet attribute, then it just wouldn't be democracy now would it.

Votes never count.  They only confirm decisions already made by those involved in the process.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
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RE: Current Financial Mess

Tick, I had to star you for your point about popular votes being a relatively late introduction into the electorial process.  Its a very good point as its plainly evidence of the original intent having been diluted by the "popularity contest" aspects of the current situation and assures that only those who can afford the massive campaign expenses can ever hope to enter any campaign for any major office.  It virtually assures that only the rich can be viable candidates and that Joe the plumber, or you or myself can never aspire to hold any office above dog catcher.  The only hole in their methods was a possible opening for a massiah that can generate massive campaign donations.  The guys already in power knew damn well what they were doing when they changed it to a popularity contest.  They guaranteed that those in power pretty much would stay in power forever after... at least until they screwed up horribly.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
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RE: Current Financial Mess

The biggest advantage to the electoral college at this point is that we will never have the need for a national recount following a presidential election.  It might turn out to be very close overall but it won't be that close in most states.  Therefore, no matter how close the national results, only a limited number of states might need a recount.  On the other hand, if it were just the popular vote we wouldn't be in the mess we are now.

RE: Current Financial Mess

BigInch, TheTick, well done in explaining and defending the electoral college system.  It makes perfect sense to me, and I think it is brilliant, rather than "stupid".

Tick makes the best point of all about the proliferation of primaries.  Populism has taken over, and this makes 4 lose-lose elections in a row.

RE: Current Financial Mess

Yes hokie, as usual, there have been so very very few changes to the original system, as "envisioned by the founding fathers", that have proven themselves that hindsight would suggest that they should have required 7/8 agreement to effect ammendments.  I hesitate to suggest 7/8, simply because 3/4 is what the Constitution originally required and you know, that's probably the best number as well.  7/8 might have prevented the "Prohibition" debacle, but have denied the possibility of enacting the other ammendments which have proven themselves to be good changes.    

A also like davidbeach's comment noting the potential for recounts and other challeanges to the electorial process with a popular vote.  Can you imagine what this year would be like with the "current financial mess" (remember that?), if recounts prevented any president from taking office for 6 months or so?  The potential delay in seating a president caused by court cases seeking to address voting process errors, voter right issues, fraud, registration errors, lost ballots, counting errors, hanging chad (remember that?)etc. could be catastrophic in pressing times, the current mess perhaps being only a minor one of those.

  

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
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RE: Current Financial Mess

Just saw this quote,

"The best argument against democracy is a five-minute conversation with the average voter." Winston Churchill  

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
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RE: Current Financial Mess

BigInch,
So is watching reality / "talent" shows with viewer voting, or for that matter TV ratings in general.

RE: Current Financial Mess

... back to my thinking that voters should write down the name of their chosen candidate.

- Steve

RE: Current Financial Mess

As one might recall, there were no "environmental wackos" in 1789.  There were, however, a clear delineation between the wants ans desires of the rural/frontier states vs. the more populous states.  The electoral system was a concession to those states, to bring them on board the Constitution, by ensuring that those of the original 13 states would have some degree of veto power relative to the more urbanized and heavily populated coastal states.

While the original reasons are OBE, the rationale is still valid.  The Constitution is ALL about checks and balances.  

The "environmental  wackos" keep in check the "oil drilling Mafia."  I, for one, certainly don't want my coastline littered with oil derricks and polluted water from oil spills.  Particularly since the reserves in the US are pitiful compared to elsewhere.  Even if we could get ALL the oil in US out of the ground, it would amount to barely a few years or decades of consumption, at which time we would be bone dry and leverageless.   

TTFN

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RE: Current Financial Mess

IR I certainly agree with your comment about conservation of homeland oil.  As everybody knows by now, every drop of home oil that can be conserved for later use will help the ever worsening issue of supply security and interruption, if nothing else.  

A few decades of meeting less than one half of the almost always increasing national demand hasn't gotten anywhere in the past, so its proven that it isn't a reliable energy strategy for the future.  As we have already seen, it will result in very expensive oil .. at best. Everyone seems to think that drilling at home will make cheaper oil available to Americans, but they also fail to recognize that the domestically produced oil price went up in accordance with market conditions too.  That logic fails.

As far as offshore drilling is concerned, I grew up on the Gulf Coast and have done a lot of scuba diving off the rigs there.  While they may not be the prettiest things in the world, they are relatively clean these days and do attract much sea life.  I for one don't believe that they are the cause of very much oil pollution.  While there is some natural seepage of oil from Gulf of Mexico bottom, I believe that much of what is seen is the result of the shipping traffic and balasting operations, not necessarily related to the petroleum economy alone.

Personally I don't like wind turbines or vast solar fields located in highly traveled and visible scenic areas either, but they obviously have environmenal benifits over offshore drilling, coal mountain mining and coal, oil and NG burning power plants.  I also think its better to spend money on green power in any form than on an oil war in Iraq. (I say that, because even Allen Greenspan admitted it was common knowledge.)

While the present financial crisis is blamed on other things, I believe a good portion of the past USD devaluation and the forthcoming recession was caused by pumping 20-25 billion out every month for foreign oil.  In the last 30 years, I have noticed that whenever oil prices spike for a year, 2 years of recession or a near-recessive US economy is the result.  This time the effects of those two factors have to be multiplied together as well as to that of the war cost.  What I find really incredible is with all that, everyone still wants a tax cut.  Does everyone think those bills never need to be paid?  The only practical way to pay for it all that I can see is to allow massive inflation and pay them back in cheaper dollars.  That is also the fact that doesn't get mentioned when some say that "The taxpayer made money" the last time they did it with the mortgages in the 90's.  Sure the taxpayer made money, but only because the inflation rate made it possible to sell the properties off at a higher price. So what this new bill will do is put everything on ice, until the inflation rate heats up and brings the prices back to the level they were or higher.  Man.. you can do a lot of stuff with the books when you don't include the inflation that I think is sure to follow.  You think its been bad this last year?  Nothing to what's going to happen next year.  I hope I'm wrong, because inflation and recession isn't a very nice thing at all.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
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RE: Current Financial Mess

IRstuff; what "leverage" do we have now?  

RE: Current Financial Mess

There's just the threat of being able to dump oil onto the market to drive down prices, which is basically what we're allegedly doing.  

However, any concept of "independence" is purely illusory, since we have less than 2% of the world's reserves, yet we are cranking out 10% of the world's production.  Our current reserve life is 1/8th that of almost everyone else, so pretty soon, we are going to need to get on a different horse, regardless.

TTFN

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RE: Current Financial Mess

I can recall reading a book by Asimov on elections in the UK. In the futuristic society elections were so close that they decided that the bureaucracy would select the ultimate "swinging voter". Then they would ask him/her who won and it was all over red rover. The 50.00001% majority.

Sounds more efficient than the college electorate system, achieves roughly the same result, achieves the same voter interest ( who cares?), elects the same imbecile and costs a hell of a lot less. Also leaves the TV with boring shows/sport/evening presenters etc etc interrupted only by intelligent and amusing advertisements.

RE: Current Financial Mess

"Fannie Mae and Freddie Mac handing out home loans to people that couldn't afford them"

Not true.  Fannie Mae does not lend directly to consumers.  This is all at the feet of Wall Street and Bank Street.  They did this, knowing that that once the loans were signed off, there would be no way to know how bad the loan was, without going back and doing all the loan qualification work that they skipped.

This was compounded by buy credit default swaps (insurance), again, know full well that the most of the paper was bad.

Basically, a lot of people betting on the come, which didn't.

Nonetheless, if all the institutions involved were allowed to collapse, it would completely cripple the economy, since the bulk of regular commercial business is done through the same banks.  No car loans, no new refrigerators, etc.  Not only would the commercial sector be tanked, so would the consumer sector be tanked.  Think about all the credit transactions you do on your credit cards.  If every business suddenly reverted to cash and carry, most stores would instantly die, and lots of people would starve.

TTFN

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RE: Current Financial Mess

"The US is the Saudi Arabia of Negabarrels.
We can use less oil a lot faster than they can conveniently sell us."  Amory Lovins - http://www.oilendgame.com/  

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
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RE: Current Financial Mess

djlance, you are only half way right.  The U.S. and European banking systems could have readily weathered a spate of subprime defaults.

The problem has been compounded many times over by the underhanded trafficking in these loans.  The debt was treated as if it was as good as cash and traded at leverage levels several times higher than ever allowed in history.

RE: Current Financial Mess

I heard some sobering figures on just how deeply in debt the US currently is... When the country's public debt, the liabilities owed to federal employees and verterans for retirement benefits, Social Security and Medicare benefits are added together, it has reached somewhere between $49,000,000,000,000 and $53,000,000,000,000 (trillion) mark.  That adds up to over [i]$186,500.00 per person[/].
That makes the current bailouts seem like a drop in the ocean.

When the people fear their government, there is tyranny; when the government fears the people, there is liberty. - Thomas Jefferson
 

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