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Gaze With Me Into The Credit Crystal Ball

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If the recession occurs it will be the most highly predicted and *hoped for* one ever in history :)

 

Florida is in recession as reported by the Tampa Tribune yesterday.

 

Nobody wants a recession, but when the financial fatcats have done unsustainable things, it's best that the boil gets lanced quickly and the financial trails are followed to recoup whatever can be recouped from the miscreants.

 

To do otherwise is to invite 20 years of economic paralysis that punishes those at the bottom with a stagnant economy and higher taxes while the fatcats at the top sweep each others' messes under the carpet, cook the books and perhaps ultimately either flee the country or go to their graves with impunity. Just like what happened in Japan.

 

The excesses of the Clinton administration (BK changes in '94 that took shareholders' interests out of the mix, or the changes that reduced accountability for board members and officers of corporations) hurt this country badly, and were finally rectified somewhat under George W. Bush. For instance Enron inflated into a bubble under Clinton, and got popped almost right away when Bush got into office. Now it's also important to realize that Enron brought tremendous efficiencies to energy markets that were instrumental in holding the prices down for most people (California notwithstanding--if you can't make enough energy to supply yourself, outsiders are going to scr*w you--a lesson the nation as a whole should take to heart). And the loss of Enron allowed those efficiencies to gradually slip away, which has contributed mightily to the current crisis. But of course Enron was corrupt. And its implosion has made investors chary of supporting any venture that would duplicate the good parts of what Enron did.

 

When markets are efficient, prices are predictable and everyone (from the explorer and driller to the owner of an office building that uses the energy) is able to plan appropriately. When the efficiencies vanish, the price swings arise to accompany the resulting confusion.

 

One thing that a recession does is force businesses to become more efficient or shut their doors. The surviving businesses typically achieve greater profit margins they are able to invest in further improving their operations. Thus recessions are not unalloyed negatives for an economy. They create the conditions for the next round of growth and innovation.

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Ahh, I see your real agenda now. Clinton bashing. Wake up and smell the coffee, he has not been President for 8 years.

Stop blaming him for stuff. Jeez.

 

 

If the recession occurs it will be the most highly predicted and *hoped for* one ever in history :D

 

Florida is in recession as reported by the Tampa Tribune yesterday.

 

Nobody wants a recession, but when the financial fatcats have done unsustainable things, it's best that the boil gets lanced quickly and the financial trails are followed to recoup whatever can be recouped from the miscreants.

 

To do otherwise is to invite 20 years of economic paralysis that punishes those at the bottom with a stagnant economy and higher taxes while the fatcats at the top sweep each others' messes under the carpet, cook the books and perhaps ultimately either flee the country or go to their graves with impunity. Just like what happened in Japan.

 

The excesses of the Clinton administration (BK changes in '94 that took shareholders' interests out of the mix, or the changes that reduced accountability for board members and officers of corporations) hurt this country badly, and were finally rectified somewhat under George W. Bush. For instance Enron inflated into a bubble under Clinton, and got popped almost right away when Bush got into office. Now it's also important to realize that Enron brought tremendous efficiencies to energy markets that were instrumental in holding the prices down for most people (California notwithstanding--if you can't make enough energy to supply yourself, outsiders are going to scr*w you--a lesson the nation as a whole should take to heart). And the loss of Enron allowed those efficiencies to gradually slip away, which has contributed mightily to the current crisis. But of course Enron was corrupt. And its implosion has made investors chary of supporting any venture that would duplicate the good parts of what Enron did.

 

When markets are efficient, prices are predictable and everyone (from the explorer and driller to the owner of an office building that uses the energy) is able to plan appropriately. When the efficiencies vanish, the price swings arise to accompany the resulting confusion.

 

One thing that a recession does is force businesses to become more efficient or shut their doors. The surviving businesses typically achieve greater profit margins they are able to invest in further improving their operations. Thus recessions are not unalloyed negatives for an economy. They create the conditions for the next round of growth and innovation.

 

 

 

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Clinton did a lot of good. You seldom felt anything wrenching happen under Clinton. His policy was to put off anything wrenching for another day. If you're a Keynsian you feel like that's exactly what was supposed to happen. But painful crises postponed are more likely made even more painful to your successors. What Bob Marley ignores on his toe winds up in his brain. Or for those who know not Marley, we have the guy from the Fram filter ads: "Pay me now ... or pay me later."

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Clinton did a lot of good. You seldom felt anything wrenching happen under Clinton. His policy was to put off anything wrenching for another day. If you're a Keynsian you feel like that's exactly what was supposed to happen. But painful crises postponed are more likely made even more painful to your successors. What Bob Marley ignores on his toe winds up in his brain. Or for those who know not Marley, we have the guy from the Fram filter ads: "Pay me now ... or pay me later."

 

Exactly. But every politician has been playing this same game for decades...Rep or Dem...it doesn't matter. It really started accelerating under Reagan, when the massive deficit spending picked up in earnest. Every Prez since then has participated....along with most all other governmental figures down to township levels. Borrow borrow borrow and don't worry about paying it back. Hold your breath and hope it doesn't implode on your watch, so you can blame someone else for it if/when it implodes on THEIR watch down the line.

 

Unfortunately (or fortunately!) we're hitting the proverbial wall on debt as individuals....and soon, most of government. It's a shame that it takes extremely painful lessons and suffering, to get any real change in monetary policy on an individual and national level. Hopefully, this will bear some worthwhile fruit when it's finally dealt with realistically instead of via "shell games/smoke and mirror" policies. Robbing Peter's grandchildren's future to pay for present-day Paul's beyond-his-means lifestyle is not exactly a good policy to continue.

 

Yes, I'm a cranky morning person! :lol:

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Did I really ready that this thread took a political twist? Come on guys, we need a political free zone :)

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Good thread up until it turned toward the direction of being locked :huh:

 

Head back toward credit and the economy and leave the politics out so the debate can go on :)

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Politics and economics are intrinsically intertwined. After all, the best predictor of a revolution is crop failure.

 

Capital will not remain where private property is not respected, and working people will not long tolerate oppression and deprivation. Ya gotta drive an anchoring stake between those two extremes and keep your country tethered there while it dodges the boulders that roll at it.

 

And if you can foster transparency and trust on either side, that would be the best thing.

 

Unfortunately, right now the financial institutions have been less than forthcoming about what they have in mind. We're left to dope it out for ourselves.

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Politics and economics are intrinsically intertwined. After all, the best predictor of a revolution is crop failure.

 

Capital will not remain where private property is not respected, and working people will not long tolerate oppression and deprivation. Ya gotta drive an anchoring stake between those two extremes and keep your country tethered there while it dodges the boulders that roll at it.

 

And if you can foster transparency and trust on either side, that would be the best thing.

 

Unfortunately, right now the financial institutions have been less than forthcoming about what they have in mind. We're left to dope it out for ourselves.

 

I agree with you 100% with what you said above and appreciate the debate within this thread!!! Thank you for starthing the thread flacorps...

 

Politics and economics are intrinsically intertwined.

 

Maybe, but not on this board :grin: For the record I agree with your statement about politics and economics, BUT I know the thread won't last if politics are brought up the way they were being brought up and I was just hoping everyone would tread lightly so we could all continue to enjoy the discussion being had...

 

Thanks again for the thread...

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Politics and economics are intrinsically intertwined. After all, the best predictor of a revolution is crop failure.

 

Capital will not remain where private property is not respected, and working people will not long tolerate oppression and deprivation. Ya gotta drive an anchoring stake between those two extremes and keep your country tethered there while it dodges the boulders that roll at it.

 

And if you can foster transparency and trust on either side, that would be the best thing.

 

Unfortunately, right now the financial institutions have been less than forthcoming about what they have in mind. We're left to dope it out for ourselves.

 

Basically, politics is BS and current economics is the reality and result of that BS. But that's all I'm going to say about that :grin:

 

I don't believe the financial institutions know enough to be forthcoming. They don't have anything in mind other than damage control and profits. They are riding the tide.

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I have to say, politics aside, that I agree with Trevor. I really don't think the banks really know how bad its going to get. IMO, they are hanging on for dear life, looking for anything to give them guidance on predicting future losses. All they can do is ride the wave and hope they come out the other side OK.

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Ahh, I see your real agenda now. Clinton bashing. Wake up and smell the coffee, he has not been President for 8 years.

Stop blaming him for stuff. Jeez.

 

The reality is that the effects of economic decisions made by a sitting President continue to ripple long after he has left office for good or ill.

 

Franklin Delano Roosevelt hasn't been President for over 60 years but would you argue that the Social Security Act he signed into law in 1935 has no effect on the economy today?

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i think this enconomic problem we have right now is VERY necessary. as a society we are far too dependant on credit cards and studies show that americans are saving less and less. that HAS to change. if you look at the financial habits of our grandparents and Generation Y, we are hugely different. Unfortunetally, Public schools do not teach much when it comes to financial education and credit. I think this virtual slap in the face will cause americans to change their spending habbits (along with the rise in gas and such). I just hope it doesn't go as far as to ruin our economy and we end up like mexico lol.

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i think this enconomic problem we have right now is VERY necessary. as a society we are far too dependant on credit cards and studies show that americans are saving less and less. that HAS to change. if you look at the financial habits of our grandparents and Generation Y, we are hugely different. Unfortunetally, Public schools do not teach much when it comes to financial education and credit. I think this virtual slap in the face will cause americans to change their spending habbits (along with the rise in gas and such). I just hope it doesn't go as far as to ruin our economy and we end up like mexico lol.

:):o:clapping::clapping::clapping:

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Social Security was a good idea during the depression - and was meant for a limited audience. During it's inception there were over 100 people paying into it for every recipient. It was also meant to be time bound and perpetual, like it turned out to be. Not doing anything about and expanding coverage is responsible for the current liquidity problems in Social Security - and responsibility for not doing anything about it must go to the last few Presidents. Blaming Clinton for today's economic crunch (and we are not even in a recession, mind you) was not just mean spirited, it was also misguided.

 

Ahh, I see your real agenda now. Clinton bashing. Wake up and smell the coffee, he has not been President for 8 years.

Stop blaming him for stuff. Jeez.

 

The reality is that the effects of economic decisions made by a sitting President continue to ripple long after he has left office for good or ill.

 

Franklin Delano Roosevelt hasn't been President for over 60 years but would you argue that the Social Security Act he signed into law in 1935 has no effect on the economy today?

 

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I came across the following quote today, and it is more succinct than anything I could tap out:

 

For one thing, roughly $400 billion in ARMs (adjustable rate mortgages) have or will reset between March and October of this year. Assuming 3 to 6 months for strapped debtors to actually hit the wall with their payments, a huge wave of defaults is about to strike, continuing through March 2009 – just in time for the next huge wave of resets, in option ARMs. Option ARMs are loans with the option to pay even less than just the interest on the loan monthly, increasing the loan balance until the loan reaches a certain amount (typically 110% to 125% of the original loan balance), when it resets. The $800 billion credit line recently opened to Fannie Mae and Freddie Mac may be not only tapped but tapped out, at taxpayer expense. The underlying problem is little discussed but impossible to repair – a one quadrillion dollar derivatives scheme that is now imploding. Banks everywhere are facing massive writeoffs, putting the whole banking system on the brink of collapse. Only public bailouts will save it, but they could bankrupt the nation.

 

http://www.webofdebt.com/articles/wag_the_dog.php

Edited by flacorps

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...

The underlying problem is little discussed but impossible to repair –

a one quadrillion dollar derivatives scheme that is now imploding.

A quadrillion $US is a thousand trillions. (That's roughly the GNP of 20

Earth-like planets.) I don't think anything in the world economy is that

large. Typo?

 

ER

Edited by EastRidge

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I thought the real number of one gazillion, not one quadrillion, LOL.

 

...

The underlying problem is little discussed but impossible to repair �"

a one quadrillion dollar derivatives scheme that is now imploding.

A quadrillion $US is a thousand trillions. (That's roughly the GNP of 20

Earth-like planets.) I don't think anything in the world economy is that

large. Typo?

 

ER

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i think this enconomic problem we have right now is VERY necessary. as a society we are far too dependant on credit cards and studies show that americans are saving less and less. that HAS to change. if you look at the financial habits of our grandparents and Generation Y, we are hugely different. Unfortunetally, Public schools do not teach much when it comes to financial education and credit. I think this virtual slap in the face will cause americans to change their spending habbits (along with the rise in gas and such). I just hope it doesn't go as far as to ruin our economy and we end up like mexico lol.

 

I completely agree, they are not teaching this in schools, and for a late 50's boomer, who' parents never had a credit card in their lives, I didn't have much of an education on this either;

 

How did the " greatest generation" all get by without a credit card, a credit report or the CRA's?

 

The banks just wanted a another way to make money off the middle class and the rich just wanted another investment vehicle.

 

Hence loan out money to folks who can barely afford it, let them have the taste of a good life, try to keep up with the Jones; lend them money and give them mortgages....

 

We all see how well that worked out for the middle class.............. forget about 'maxed out' we've been 'sucked dry'...

 

 

I'm used to be a democrat, sure ain't a republican, I'm about to turn socialist.

 

This system is screwed up; never deregulate financial markets or banks.... there was a good logical reason they were regulated in the first place.... and it has to do with bankers and laywers sharing the same bed.

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I thought the real number of one gazillion, not one quadrillion, LOL.

 

...

The underlying problem is little discussed but impossible to repair �"

a one quadrillion dollar derivatives scheme that is now imploding.

A quadrillion $US is a thousand trillions. (That's roughly the GNP of 20

Earth-like planets.) I don't think anything in the world economy is that

large. Typo?

 

ER

 

So what does that equal in terms of quatloos?

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...

The underlying problem is little discussed but impossible to repair –

a one quadrillion dollar derivatives scheme that is now imploding.

A quadrillion $US is a thousand trillions. (That's roughly the GNP of 20

Earth-like planets.) I don't think anything in the world economy is that

large. Typo?

 

ER

 

Are you saying that every year's GNP is entirely consumed? There are no cathedrals from 1300 AD, etc.?

 

In other words, it's possible there is 20 years of GDP of debt out there.

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The underlying problem is little discussed but impossible to repair –

a one quadrillion dollar derivatives scheme that is now imploding.

A quadrillion $US is a thousand trillions. (That's roughly the GNP of 20

Earth-like planets.) I don't think anything in the world economy is that

large. Typo?

 

ER

 

Are you saying that every year's GNP is entirely consumed? There are no cathedrals from 1300 AD, etc.?

 

In other words, it's possible there is 20 years of GDP of debt out there.

Um, I looked up the International Monetary Fund number. If I recall,

something like $54 trillion for the sum across ALL countries for 2007.

Usual problems with the statistics (not all in dollars, a lot of low-level

trade is not even tracked) but still "about right" ... even if you double

the number, still need ten years or so to count up to a quadrillion.

 

The implication: over a decade of worldwide production is pledged

against some huge pile of bad paper. Could be true, but sane traders

won't go there. No power on earth could collect it.

 

On the other hand, a $US trillion is quite believable. And still shocking

enough.

 

ER

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The implication: over a decade of worldwide production is pledged

against some huge pile of bad paper. Could be true, but sane traders

won't go there. No power on earth could collect it.

 

Think carefully about what you've said: "sane traders won't go there."

 

But what we've had are bond salesman making the rounds of pension funds and other entities, saying "this stuff is as good as gold ... safe as T-bills" or what have you, and the rubes in the sticks have been buying it. Because it was the highest return you could get. So while the stuff was still salable, it had a lot of value, which made the next batch of it out of the chute equally as valuable even though the quality was a little less. And so on, and so on.

 

Meanwhile, the monoline insurers upped their reserves a little as they made piles of money, but there was no way it could be enough, particularly in the face of systemic catastrophe.

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I came across the following quote today, and it is more succinct than anything I could tap out:

 

For one thing, roughly $400 billion in ARMs (adjustable rate mortgages) have or will reset between March and October of this year. Assuming 3 to 6 months for strapped debtors to actually hit the wall with their payments, a huge wave of defaults is about to strike, continuing through March 2009 �" just in time for the next huge wave of resets, in option ARMs. Option ARMs are loans with the option to pay even less than just the interest on the loan monthly, increasing the loan balance until the loan reaches a certain amount (typically 110% to 125% of the original loan balance), when it resets. The $800 billion credit line recently opened to Fannie Mae and Freddie Mac may be not only tapped but tapped out, at taxpayer expense. The underlying problem is little discussed but impossible to repair �" a one quadrillion dollar derivatives scheme that is now imploding. Banks everywhere are facing massive writeoffs, putting the whole banking system on the brink of collapse. Only public bailouts will save it, but they could bankrupt the nation.

 

http://www.webofdebt.com/articles/wag_the_dog.php

 

Another good read :clapping:

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Maybe someone can help me out here. When they say $400 bil in ARMs are about to reset, are they assuming EVERY one will default? Are there no debtors paying back ARMs? Are NONE of them refinancing to a low fixed rate? Personally, my lender has been trying to get me to re-fi like crazy, I'm already at 5.5% fixed so I don't care.

 

Do the houses have zero value? I understand that their worth was inflated in many parts of the country, but come on.

 

EVERY person that got an ARM is just going to walk away and be a renter for eternity?

 

If not all of them, how many? 20%? 50%?

 

The lender has gotten the downpayment, the intersest payments for the past few years and then they get the house. What's the problem?

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