This is what happened!

 

I recently heard Peter Mansbridge (CBC tv evening news anchor) interviewing the dean of the Rotman school of business at the University of Toronto. This school is one of the most "respected" in the world.

 

Mansbridge asked him for a simple explanation of the Wall Street Scam and he said this; they came in, robbed the bank, and on the way out the bank manger stopped them and said "you can keep the money, just don't do this agian." Those crazy republicans egh?

 

The other day, George Bush said, "if I could just snap my fingers and 'make it right', I would."

Good news egh, everybody now, all together, one, two three, snap those fingers.

 

What a freak show egh? You and I "work" for our money and some people "rob banks", legally, with the approval and support of the US treasury. What a joke. What a nightmare.

 

It would be funny if the fucking end of life as we know it did not also hang in the balance here. We should have been planning for environmental issues 30 years ago. Instead, we are now about to come about full face into the day of our own making/reckoning and what common survival plan does world humanity have?

 

Compete with one another?

 

The sooner everything crashes the better. Only then will people start to value what is real and throw away all that is ruining this world.

 

Can you spare some credit buddy?

 

 

 

Rob in the Fog In Vancouver / taser capital of canada

It is truly sad to see people don't understand what is going on here. Half of you want to blame just the republicans. Truth is this was started by Democrats, and furthered by Republicans who took a bad idea from democrats and ran with it. The blame here lies with both sides because you can trace bad polices to both sides and corruption to BOTH sides.

 

Oh and BOTH SIDES are on this bail out that is very corrupt and will make it all worse. The answer by democrats and republicans to corruption and bad policies is more corruption and bad policies.

 

People simply don't get what is going on and I fear many will stay with their partisan politics.

 

This is our government as a whole being corrupt and stupid, both parties

 

Peter Mansbridge must not be too respected if he doesn't even grasp what is going on and what happened in the past to make this....sad fact is most don't. We'll make the same mistakes if we don't learn what/who caused this and how to fix it.

I have to agree again, Bush and Co are not guilty on this one. We all are. Wanting our I phones, city breaks, extended nights out, our city center flats, concerts etc...

Jay, thanks for the explanation! So then it does all boil down to the sub-prime loans being passed off as Grade-A stock? So, what was the reason that 60-minutes added the issue of the derivatives??

But the reasons for the defaults, I still think a lot of good people were hoodwinked. What I've seen suggests that many people fall into a spell when they're buying something, and plus they may have trusted the financial institution that had lured them in - I for one came close to taking out a loan without consistent employment - it would have been a mistake at the time, but the banks were perfectly willing to go ahead with it. Still, if it was because of allowing or insisting banks offer these loans by legislative effort, then the problem of marketing politicians and selling themselves is a serious issue. Ironically, reform of the candidate race process seems essential to stabilize the economy.

Still, the reference on 60-minutes, the quote I got from it related something else as the culprit - the same institutions (offering the sub-prime loans as Grade A stock) lobbied to prevent oversight of the markets - that's a direct suggestion that the corruption in American politics played a key role in the financial meltdown...

I can understand banning short selling in a severe panic - but the government did this during regular market conditions? Hmm..

I recall doing some calculations many years back, and figuring out current assets, increasing profits, and future earning for several companies & their stocks, and came to realize the value of the stock was still way over that figure. Or, at least it seemed so to me! It's all speculative, so I could have been off - but in a market that keeps rising and rising, just how much is real, and how much is fluff is the question I would be curious to see answered.

And what did we do before derivatives? Hmm.. There were some problems no doubt with not being able to spread risk..

Still seems wise to take the big money out of politics.

 

Please take a look at the bit on 60-minutes, and tell me what mistakes in reporting the story they made:

http://60minutes.yahoo.com/segment/197/credit_default_swaps

60 minutes is like fox news...more propaganda from the government.

 

The report has many flaws. The government encouraged massive amounts of debt, and spend not save. They also encouraged banks to give out these bad loans...either through threats of more regulation, or by "sweet talking" banks and getting in bed with them to give out these loans.

 

Of course government propaganda would never admit to this. That video is very wrong and some of the worst propaganda i've seen since the media before the Iraq war.

 

People don't fall for the propaganda 60 Minutes, Fox and CNN are putting out there. You might as well listen to Bush and Obama for your news, at least they're more interesting when they lie.

I'm no expert. But I studied in depth the Great Depression in my final year at school. So, if you look at the similarities between this situation and that one. Would I be right in saying that the way to attempt to solve the problem is to not sell everything. To keep confidence (in the share markets) and also to keep to buying things.

In saying that, I doubt it is that simple.

But I figure that if everyone tries to horde their money in fear or lack of confidence, companies will go out of business and jobs will be lost etc?

If there is one thing I learnt in History, it was that there is never 1 sole factor to blame on any situation. So you can't put all the blame on the government, or the banks, or the legislations etc.

 

It is a snowball effect of all these bad mistakes together.

I'm no expert. But I studied in depth the Great Depression in my final year at school. So, if you look at the similarities between this situation and that one. Would I be right in saying that the way to attempt to solve the problem is to not sell everything. To keep confidence (in the share markets) and also to keep to buying things.

In saying that, I doubt it is that simple.

But I figure that if everyone tries to horde their money in fear or lack of confidence, companies will go out of business and jobs will be lost etc?

 

Well our economy was more sound before the great depression then it is now. We had the gold standard then, a lot less debt if we had any at all. Now were facing massive inflation, the dollar will be worthless and foreign nations won't lend to us anymore.

 

And I fear after this sever global recession, most countries will move away from America and its economy and put a firewall to keep this from happening again. I see in the future a lot less investors in the market and in the dollar. I see the world moving on without us, which is understandable.

 

We need to save our money, not spend it and borrow more. "hording" our money is a good thing now because part of the problem is spending it and debt. The consumer and debt society has failed, and doing more of it will cause more problems.

 

Soon there will be very little money floating around in the US, because a lot of our consumer spending was funed directly or indirectly by debt and there were soon be not many places were people can get loans. When massive inflation hit's and we run out of money to borrow, consumer spending will come crashing down anyways.

 

Better to get it over with now, fix the system and come back stronger and wiser then try to kickstart a dead horse and make the problem bigger and last longer.

 

Government made the great depression worse, like the government now is making the problem worse with horrible policies.

Well, I did watch the Libertarian viewpoint tonight on Link TV, and it is compelling. Although, perhaps a gold standard isn't the answer, because as the economy expands, and population grows, the gold is a very limited resource to tie things to, and obtaining it is making a mess of much of the land surface, creating some of the largest environmental messes in the world.

But, it would be good to tie the paper money to something tangible - we could use an aluminum standard perhaps, or an energy standard. Somewhere we still have an old silver certificate or two, and I liked that - the idea that the paper was in lieu of solid something!

I do think it's better to not go through another depression - those were horribly desperate times, and while citizens felt closer to one-another, those were pretty sad, stressful, and tenuous times - soup lines, picking coal along the rail-road tracks for fuel, lots of despair.

When there's the means of production, and a work-force to do it, why let things slide into chaos? I think we can move ahead to a brighter future, but one thing that is essential is cleaning up politics! From Nixon to Bush, the path to success too often corrupts otherwise honorable men and women, and that process is where the best checks and balances must be applied. Noam is right - the business party runs it all, and while business is important, it should not preferentially trump the citizens' right to one man, one woman, one vote. Getting the influence out, and getting rid of those negative ads - to get the candidates to run based on ideas, platforms, teamwork, true leadership (by example), and honesty , means taking away the underhanded tools that currently dominate our political landscape.

I don't think its good to go through another depression rather, whatever is going to happen will eventually happen no matter what we do, depression or long hard recession. I'm just saying economically the sooner we get what naturally is going to happen out of the way, the better off we'll be. The rest of our economy is close to collapse because what our economy is based upon is credit and debt and were seeing a collapse of that. So bad times are coming, I'm just saying let them come while were healthy enough to deal with them, and not later when were too weak to.

 

Chaos or something close to that is coming, I'm saying let what is going to happen no matter what, happen sooner then later., I'm not advocating for something worse then what is going to happen.

 

From Nixon to Bush,

 

I do hope you include the democrats in office between them...otherwise change will never occur if we don't hold everyone accountable. When we get this horrible one side view as we have today;"democrats are to blame" or "republicans are to blame" we only ignore half the problem and it will happen again.

 

Washington has an infection, we must clear out the infection on both sides, or it will come back stronger then ever, immune to drugs.

The problem with the derivatives, the mortgage backed securities, etc... all goes back to the mortgage origination business (Fannie Mae and Freddie Mac).

 

We can complain that Wall Street was overpaid and they didn't recognize the risk. But keep in mind the reason for this was because they weren't used to the idea of mortgages being risky to begin with! And by their very nature they shouldn't be risky; your mortgage is the first thing you pay off every month.

 

Wall Street has always used leverage. It has always used derivatives and insurance. These are actually good for allocating capital quickly and spreading risk more evenly. So we shouldn't over-regulate these instruments because of a single bad experience.

 

First we should get rid of the Fed. Let interest rates float and the market determine it. De-regulate the mortgage industry. The solutions to this are so SIMPLE and yet we complicate it with a witch hunt: Republicans, Democrats, Wall Street, etc.

The Real Problem - See the Men behind the Curtain!

 

Jay, I have to say I think we need regulation of the markets to prevent excessive risky behavior, to prevent crashes and panics. Derivatives may be fine, but there is a need for oversight lest some of the riskiest and most unscrupulous behaviors lead to further bubbles and deceptions in the markets. Here's a quote from Common Cause - and I think it has a great deal of salience:

"Wall Street routinely doles out large campaign contributions to members of Congress. In the current election cycle, the financial services sector (which includes insurance and real estate sectors) contributed more money to candidates for Congress, the Presidency, and political parties than did any other sector, totaling $339.6 million from 2007 through today. Both chambers' banking committees also benefitted handsomely. According to the Center for Responsive Politics, PAC's and employees of the securities and investment industry are the second largest source of cash for members of the Senate Banking Committee. During the 2008 election cycle, these contributors raised $11.7 million for the 21 members of that Committee. Banking Committee Chairman Senator Christopher Dodd (D-Conn.) received about 4.3 million since 2003, or half of all contributions to his campaign coffers.

On the Broader Question: Does campaign cash influence legislation and regulation? When Congress last debated regulation (or rather, de-regulation) of the financial industry in 1999, a study by the Center for Responsive Politics showed that members of Congress who supported the Graham-Leech-Bliley Act received twice as much money from commercial banks, investment banks, and insurance companies as those who opposed the measure. The Gramm-Leech-Bliley Act was the product of many years of lobbying by the financial industry and allowed for the loosening of bank regulations that had been in place since the Great Depression.

 

For further edification, see: http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act

Chuck,

 

It strikes me as irrational that Wall Street should donate money to political candidates in an effort to deregulate, when (as you suggest) deregulation is the cause of massive losses on Wall Street.

 

My point is that the risk of losses is enough. Regulation is unnecessary. The risk of losses is diminished when the Fed keeps interest rates ridiculously low for extended periods of time - after all, borrowing money is easy! Why not take your chances in the stock market or flipping houses?

Peter Schiff: Just Stop Paying Your Mortgage!

 

http://www.signonsandiego.com/uniontrib/20081010/news_lz1e10schiff.html

Thanks for letting me know about Schiff. Since you mentioned him I've seen him on Glenn Beck and I just ordered his book. I also signed up for his mailing list on his website and was surprised when I got a phone call today from someone working at europ-pacific capital.

Chuck,

 

It strikes me as irrational that Wall Street should donate money to political candidates in an effort to deregulate, when (as you suggest) deregulation is the cause of massive losses on Wall Street.

Jay, that is true - it is irrational. But history is replete with individuals making irrational decisions. Consider the ENRON executives - they pretended to be conservative, careful, sound businessmen. That's how they sold themselves to the investors. & They were anything but. These guys were going out on their week-ends and riding motor-cycles off of cliffs, and then opening parachutes last-minute. The had even worse behavior with investments and corporate structure - they ran a house of cards, and kept piling on more, hoping the pyramid scheme could go on forever. When it all came down, the top executives committed harry-carry. So Wall Street firms in a like manner are very tempted when gambling and racket fever sweeps through town, and they all want in on the game - and if it had been done on a smaller scale in the past, then they just keep trying to push further to de-regulate, not truly considering the consequences down the line to themselves. Blind ambition. It's what happens when the lust and adrenalin overtakes better judgment.

 

My point is that the risk of losses is enough. Regulation is unnecessary. The risk of losses is diminished when the Fed keeps interest rates ridiculously low for extended periods of time - after all, borrowing money is easy! Why not take your chances in the stock market or flipping houses?

The risk of loss would make those of us who are careful and not prone to the unnatural highs of extreme risk-taking make careful decisions. But I think there is a certain thrill in making/taking huge gambles, especially if everyone else is doing it, and maybe the interest rate wouldn't have even mattered much either way.. So, then the markets would correct - but after first a huge fall, and then an irrational panic. It's hard to un-do a train wreck. I'm squarely with Daffy Duck on this one - "Now look mister - Is this any way to run a railroad?!":P

 

Well, maybe higher interests rates would have made it less tempting to try.. but then again, those same firms perhaps wanted the low interest rates for the very reason of trying to take bigger gambles?

Without all this free credit and such, we wouldn't have had such a nice decade before hand. Now in the tradition of those things we couldn't really afford we'll just have to pay later.

 

 

The governments of the world have money to spend if the banks go under, and the less banks there are the more the remaining ones will stablise.

 

If anything emerges from this expect a more streamlined more catious set of banks to emerge on top.

 

So far it appears only the big banks that played around with silly schemes are suffering.

 

 

 

Everyone knows how to solve a depression by now its happened so many times in capitalist history, get the contruction industry pumping again. Make sure people still have income so nobody stops spending (welfare states! the key lesson learned after the WSC and one all countries have benifited from since) Make sure people can't just withdraw all their money from a bank in one go (annoying as that can be sometimes like when I wanted a Nintendo DS and had to go to my bank over 2 days :( )

 

Theres a reason nobody is really panicing right now, its not that big a deal. The experts are predicting around a half year slump. And during that time loads of people can get themselves on the housing ladder which in itself helps the economy.

 

Great thing about economics, is that quite like the WWW. for example. If one area fails, theres always another area to pump money into the system. And for every negative thing that happens to the economy it opens up new opportunities for profit.

The experts you are listening to are government propagandist. The problems we are facing will be here for years to come. It'll take half a year to a whole year before we hit the bottom.

 

"If one area fails, theres always another area to pump money into the system"

 

That is simply not true, most area's do not have the money anymore. Plus the government has to print new money or borrow money for these bailouts.

 

I don't think people understand what is really going on. Plus how government caused the great depression and made it worse and is doing the same thing over again. Our government took a bad recession and turned it into the great depression.

The idea that the government can create jobs is just as pervasive (and creepy) as the idea that government can create money.

 

"Don't have a job? Oh, no problem, I'll print money and make you WORK for it!"

 

It's literally slavery.

The experts you are listening to are government propagandist. The problems we are facing will be here for years to come. It'll take half a year to a whole year before we hit the bottom.

 

See I dunno if I agree here, in the Uk the media are really pitching the doom angle, theres loads of fear and uncertainty on the news not really reflected in the population, I don't think their sugar coating (but i don't know, just like I don't know if your a trustable authority on this)

 

"If one area fails, theres always another area to pump money into the system"

 

That is simply not true, most area's do not have the money anymore. Plus the government has to print new money or borrow money for these bailouts.

 

No you misunderstand what I said. Lets say the housing market falls on its arse and people can't sell their homes to make the money to move into new ones, then the people trying to get on the property ladder (first time buyers) have an opportunity. They pump money into the system.

 

On a larger scale, such as in the WSC when America went into a big depression the world followed, but as the world recovered areas of relative poverty recovered faster, such as SAmerica who made money supplying to America at more competitive prices, pumping monitary value back into the global economy. In short as long as a basic level of capitalism exists (the entity of an economy on a global level) every negative can lead to a positive.

 

 

I don't think people understand what is really going on. Plus how government caused the great depression and made it worse and is doing the same thing over again. Our government took a bad recession and turned it into the great depression.

 

Do explain... I thought it was (and im pretty sure the great depression was due to people losing faith in the economy) , the debate of how Hoover delt with the great depression is still a major issue of debate, so what your saying here is your opinion yes, but not neccasarily what happened before or what will happen this time.

 

This happened in the 80's, its no big deal, these problems correct themselves. The key is not losing confidence in the economy and simply not spending because thats when things go completely pear shaped. If Christmas goes well, this could very well just go away faster.

Do explain... I thought it was (and im pretty sure the great depression was due to people losing faith in the economy) , the debate of how Hoover delt with the great depression is still a major issue of debate, so what your saying here is your opinion yes, but not neccasarily what happened before or what will happen this time.

 

This happened in the 80's, its no big deal, these problems correct themselves. The key is not losing confidence in the economy and simply not spending because thats when things go completely pear shaped. If Christmas goes well, this could very well just go away faster.

 

Hoover and FDR, raised taxes, spent more money, forced businesses to spend there saved money. They burned thousands of acres of crops to raise food prices and slaughtered millions of cattle and other animals to help raise prices, causing more problems. Hoover and FDR became anti business. Nothing FDR did helped, it took a world war to end the great depression, not FDR's and Hoovers failed policies.

 

The problems correct themselves unless the government messes thing up worse like in the great depression. The bad recession would have just been a bad recession but the government got too involved and created the great depression.

StephenG, nobody will fault you for believing the economy's health is the result of "animal spirits" (as was suggested by Keynes). But the truth is, the only time faith plays a role in aggregate is when investors are choosing where to put their money.

 

When a government interferes with capital markets (in our case by banning short selling, nationalizing banks, or changing the tax code every few years), it causes investors to see added risk. Investors avoid countries whose governments can't seem to keep their hands off the markets. Everything else about a market is somewhat predictable using mathematical calculations... but politicians' actions are fickle and impossible to predict. Hence the added risk premium.

 

What you call "faith" in the economy is really nothing more than investors (in aggregate) seeing less risk than there actually is. What causes this? The federal reserve keeping interest rates too low. Normally the rates are set by the market, but when they are forced too low by the government it causes people to borrow and invest money where they wouldn't otherwise have done it. Why risk your money on flipping expensive homes when you can get a higher guaranteed return by just leaving it in the bank? What I'm trying to say is "Animal spirits" is really nothing more than a risk calculation. The government drove the risk too low for too long. Now it's trying to guarantee bank loans - ZERO risk.

Did someone say Christmas? Ah yes, that great time of year when we purchase material goods as symbols of love because marketers tell us to. Hang on, don't we do that anyway? Everyday is Christmas Day!

As Bush would say "be a patriot, don't save, go into debt buying things that you don't need!"