The Financial Crisis Is Escalating Out of Control 60 comments
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The current financial crisis we are in is escalating out of control. I question whether the current administration has anyone who understands what is happening, why it is happening, and is operating without some vested interest; never mind whether they have the correct answers as to how to solve it. The creation of a new entity "The Public-Private Investment Corporation" to purchase toxic debt funded by some $1 Trillion of taxpayer money is going to buy up mortgages, car loans, credit cards loans and other toxic debt off balance sheets for banks and other lenders... If these assets are sold to large investor groups, hedge funds and other such entities at 5 cents on the dollar, then it is an open admission that the tax payer will never see any return on his investment and those in power will have scratched the backs of many who put us in this position in the first place. This is the definitive version of the AIG bonuses being paid and we will unwittingly agree to this, not that we have any say, because of the language and structures used to deceive us.
We are talking about a quarter of the total bail out funds which will never even be attempted to be recouped, it would be impossible for it ever to be returned and it will be a small component of the $10 Trillion of additional debt that will be created by the Obama plan. The question is will the repayment of this money be handled as cavalierly? At least in Europe the governments have taken shares and stakes in the banks they bailed out, so they will get share growth and dividends. The lack of commercialism and understanding in the US government is a strong indicator of how we got ourselves into this mess in the first place. If our representatives can sign the patriot act without reading it and give away our civil liberties, why would we expect them to have read how the money will be used and where it will come from.
We, the people, need a voice; we need to speak out and someone needs to derail the coming travesties and injustices that are about to occur.
The Institutions
The financial institutions essentially walk away scot free and start business anew with an unblemished and untarnished record as a result of the bailout. Now I wish I had been running an unethical business where short term bonuses were put ahead of the interests of the company and its shareholders. I could have leveraged up and paid off my leveraged loans with new loans from another institution without ever having developed an additional cent of cash flow. The price of the underlying asset having undergone a paper increase so someone could write the new loan, pocket the commission and sold it on to an unsuspecting third party who was blinded by the supposedly independent rating of the supposedly impartial credit rating agency who was charging $50,000-$5,000,000 for the pleasure. Let's be honest, this is in truth what has been happening for the last 10 years or so.
Government Regulation has missed the point entirely - why haven't they taken over the Rating Agencies
The government claims it will tighten regulations to ensure that such situations will never occur again but there are fundamental changes that need to occur for this to happen that will not happen without a broader scale collapse of the existing system and with the maintenance of status quo. The entire ratings system requires not just revamping and overhauling but a new and different uncorrupted system, "power corrupts and absolute power corrupts absolutely." With so much blame being directly attributable to the rating agencies who were evaluating investments and attaching to them double and triple A credit ratings. Kudos to their PR and PM firms who are keeping them out of the press and are enabling them to fly under the radar at a time when they should be chastised and probably shut down entirely.
Corporate Ownership/ Responsibility
Current executives are being paid enormous amounts and quite clearly do not have any great degree of competence, a few such as HSBC (HBC) and Porsche stand out. These executives are being paid in proportion with people who built and created businesses and who really created or earned their rewards, which often took a lifetime of effort and much financial hardship along the way. As a salaried employee you have minimized your risk and therefore should not be paid proportionately to someone who has ownership and therefore carries all the risk. If you are paid after all others and are paid out of profit and profit alone then fair enough. Obviously there will be some leeway to tax planning in this situation.
The corporation has to return to private ownership, or some semblance of this, when the Rockefellers, Carnegie, Gates and Buffett owned a business they pocketed the profits at the end of the year and they funded the losses, these were actual figures to them that affected how they were paid and how their managers were paid. In the modern world the accountability of ownership doesn't exist, everyone is milking the huge amorphous entities so big and diverse that no one really knows what is going on, they are managers taking the salaries and benefits of owners and that is very wrong. They have always had the security of a salary and never staked all or nothing on the success of the entity, with this reduction of risk should come the reduction of remuneration. With international taxation and offshore tax havens these entities are so complex that it takes a degree of genius to understand it. That kind of genius is found in someone who establishes and builds a company (Rockefellers, Carnegie, Gates and Buffett ) not in some employee who has risen through the ranks. If he had the capability to run the organization properly he would have done it himself.... look at the ultra successful hedge fund managers, the Bill Gates and Warren Buffetts, they are not out running someone else's company.
The Bankers and Banking Professionals
A whole generation of Bankers have grown up with what was always explained to me as the new model which made no mathematical or economic sense. Keeping said individuals in the job is a recipe for disaster as they cannot rectify the problem as they don't understand how the underlying system works, the principles it was established upon and they do not have ownership of the problem.
The toxic debt is not what people think it is, it is actually real assets owned by real people, it isn't some ethereal accounting principle.
What is the government going to do with the toxic debt it is buying from the banks that created the loans in the first place, it is being treated as some ethereal unsubstantiated piece of paper which is what got us into this problem in the first place. There is a loan behind each number, that loan is made by someone who has been financially imprudent or had the misfortune to be laid off in the economic downturn stemming from the world's rapid deleveraging. Will said Joe Bloggs be allowed to keep the property he purchased, many of the banks have ceased foreclosure activity, or will he be foreclosed upon and evicted. If he is allowed to keep his beautiful home that he couldn't afford then the average man on the street who wasn't imprudent is being financially punished for his caution and education. This would represent one of the greatest tragedies in capitalistic history. Thus impugned for intelligence what should you do, buy a house you cannot afford as everyone else is doing it and getting away with it? No one in their right mind will buy these except at such cut down rates - 5-15 cents on the dollar - that they are bargain enough to justify the handling and carrying costs of defaults. No one has the liquidity to do this without gearing up again which is how the whole problem occurred in the first place.
The Media
Many in the media are making statements that are reassuring and attempting to waylay a lot of the fears of the public and the investment community. These statements are false, unsubstantiated and in my opinion downright misleading and deception. There is no way we can turn any corner or see improvements in the economy this year or next. Much of the campaign rhetoric from the presidential campaigns is just downright impossible. The nationalization of the healthcare system is too expensive for us to pursue. Effective increases in the quality of schooling is manageable but not with the current crisis and no matter which way we look at it social security is running out of money and state pensions are going to be impossible to maintain without some delusionary system with ever escalating debt that is never intended to be repaid. The knock on effect of this is no one outside the US wants to buy treasuries and the value of the Dollar collapses, raising cost of living of all our China/ Asian products. Without immense increases in domestic production this will lead to Hyper inflation, which is something we should have had long ago except for Greenspan and Bernanke's artificially low rates which created this bubble.
Long Term Consequences
We live in a universe governed by cause and effect, the second that an imbalance is created in this system it moves to right itself. With artificial measures put in place to prevent this check and balance system from operating we are causing a far greater, wide reaching and longer lasting reverse. This could well, without being melodramatic, mark the implosion of US global dominance as the pendulum swings back to reestablish balance. We stand in a pivotal moment as a country and as an economy where arrogance and ignorance are all that are required to mark the end of a short but bright epoch of American dominance.
Remembering that it takes about 12-18 months to foreclose on a property, we haven't even seen the beginning of the impending crash, we are nowhere near a midpoint. The banks have held off on a lot of foreclosures and many people are only now and over the coming two years losing their jobs and income that will bring them to the edge of bankruptcy and force them to face impending foreclosure. This could be the largest class shift we witness in the last 1000 years as so many people who formerly owned their own homes are forced to rent and those who can afford to own rental properties grow their wealth dramatically (ending up with a European/ German/ French ownership structure).
Hedge Fund Managers - Not Villains, just making profit in a society where profit is placed above all else
Why are we berating hedge fund managers who made billions of dollars shorting the current crisis? I believe we should compliment their intelligence as they would have been vilified by investors had the market gone the other way. America was made great by saluting the greatness of those who succeed, jealous and creating laws to crush ingenuity are the antithesis of what made America great.
If the government was to decide to increase regulation on Hedge Funds we really would be in trouble as they wouldn't know what they were seeing, how to deal with it or what regulations to put in place. There isn't a single person that could figure it out, as if they could they would be running their own funds. They would be unable to understand or calculate the future impact of their legislation it would just be some knee jerk, popularist response as with almost everything the current administration has done.
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This article has 60 comments:
I would not impute all the pains of the econimy on the current administation. These have been built up over decades. and while I don't agree with all the proposed solutions, we owe the adminsitration the chance to try and they are tirelesly trying over the past couple of months. The administration will outgrow some of the naive approach they are planning... and will change in time as they mature... but they are under a lot of pressure timewise and from the hollering and ignorant attention grabbing media.
The decline in incomes, not only lost wages, but lost interest, dividends and debt collections is staggering and unfortunately forces people to try and find higher gains, which leads to more opportunities for scams and outright theft such as Geithner is now proposing to reward his Wall Street friends at tax payer expense.
Rewarding greed and incompetent entites with tax payer money also sends the wrong message to all businessed and stiflles individual optimism at every level making any recovery a very long term process.
Until this gov't realizes the folly of their present course and backs off daily interference in the economy that is mis-directed and realizes that more debt is not the answer the decine of our once great republic ican only acclerate.
From what I read on SA, some hedge funds are huge and are part of Da Boyz who are on the inside, moving markets for the real ruling class. So, any regulation in the deliberately opaque world of Wall St. besides being difficult, will deliberately fall short of effectiveness anyway.
Since trillions are being conjured up regularly, let's do what they say we can't: Hand money to real people to pay off their bills and debts. We're creating debt to pay debt anyway.
Maybe if you spent as much time putting your hopeless thoughts into words as thinking about the inherent human tragedy you seem to embrace by saying single human beings making billions of dollars in one year by betting against companies(no matter how noble or unnoble) you would have something worthwhile to say.
This endless villification of ALL poilitcians and ALL CEO's and ALL bankers is a waste of time. But thank god you are here to stroke hedge fund managers.
Money is a token of useful production. Financial engineers adjust that real money in their attempts to deal with credit and produce products that enable us to save or borrow, as we wish. As long as the engineered money is proportional to the whole, fine: but the past years have seen a disproportionate amount being constructed into houses of straw, arid landscapes and other items of apparent but worthless value. Now we are having to account for it, and until we do, we can expect more financial pain. Let's use this time to return to a system where real values matter, and in doing so make the politicians and financiers aware that we expect them to contribute real value too.
On Mar 27 01:31 PM CJJ wrote:
> Any article that ends with saying that we should applaud hedge fund
> managers that made billions of dollars last year is a waste of time.
>
>
> Maybe if you spent as much time putting your hopeless thoughts into
> words as thinking about the inherent human tragedy you seem to embrace
> by saying single human beings making billions of dollars in one year
> by betting against companies(no matter how noble or unnoble) you
> would have something worthwhile to say.
>
> This endless villification of ALL poilitcians and ALL CEO's and ALL
> bankers is a waste of time. But thank god you are here to stroke
> hedge fund managers.
>
>
>
Don't count on it. As home values plummet, so do rents, and more foreclosures on the part of landlords. Lot's of flippers and investors were buying all through 2008. They are in deep s#%t right now.
We need another 20% drop to be inline with inflation. In a depression the value of homes could fall 50% from where they are today. At least, that's what happened in the great depression.
It is very tempting to rush out and buy investment properties. But I can assure you, it's much too early for that:
www.newfinancialwisdom...
And if inflation kicks in and interest rates rise, that will put even more downward pressure on home prices. For many years to come prices will stay down. I'd say a decade at least.
In the eyes of the masses, the financial elites are little more than criminals in control of the politicians. The $trillions in bail-outs reveals that what we actually have in the USA is an Oligarchy: capitalism serves the Oligarchy and the masses of working/middle class, well, they just have to go along, b/c, they are perceived to have no choice in the matter...
By the way, I am neither Republican nor Democrat since both are, as the bail-outs show, right wings of the one party, the rich and politically connected, or Oligarchy.
"Banks Counted on Looting America’s Coffers"
tinyurl.com/bkezmt
"Fluke? Credit crisis was a heist"
tinyurl.com/cgugqm
"Following the A.I.G. Money"
tinyurl.com/d6xkbk
"Economic Fascism and the Bailout Economy"
mises.org/story/3333
"Behind the Financial Market Crisis?"
mises.org/story/3111
"In the modern world the accountability of ownership doesn't exist, everyone is milking the huge amorphous entities so big and diverse that no one really knows what is going on, they are managers taking the salaries and benefits of owners and that is very wrong. They have always had the security of a salary and never staked all or nothing on the success of the entity, with this reduction of risk should come the reduction of remuneration."
This country's CEO's act like, and are treated like, founders of great corporations, but they are only employees. This unwarranted respect and awe for CEO's is spreading to other institutions like charties, universitites, school districts, and other government entities. The result is a host of insitutions, both public and private, that are wasting a lot of money at the top of the organization on pay and perks for leaders who are not that special. This society no longer has enough money to simply throw it away on ridiculous pay and unnecessary perks for the leaders of businesses and government.
On Mar 27 11:15 PM MADE IN SOMALIA wrote:
> You call it crisis, this is only the beginning, I don't say about
> what the stocks will do in the future, I don't care, for me everyday
> is new future, the problem is with the people who will soon go to
> the streets because they lose job, house, family, life.
> There is nothing more dangerous, than a society, that used to borrow
> and spend and wakes up one day hungry and broke.
> Take all your money out of US banks, I don't say they will fall,
> I say Switzerland will not fall same as Germany, Austria, Luxembourg...
>
> Go offshore, live offshore.
Hmmmm, if we took 8 trillion and devided it by all those that paid their taxes for 2008 how much would it be per household?
The credit crisses would go away, lets bailout ourselves.
is that to many zeros?
8,000,000,000,000,000 /100 million tax payers? = 80,000. Wow I would start buying things again and pay taxes.
It becomes ethereal when one creates $30 to $40 out of a $1 asset. And now this mess is being attempted to be sorted out by making it more ethereal!! God Bless!!!
Every indicator from LIBOR to the yield curve to the massive refi wave to the holding up of the USD to the stabilization of treasury bill prices points to a financial system in rapid repair mode, and this fellow thinks this is all an indication that the situation is "escalating out of control"?
One thing I have noticed about every one of these bank bashers is their complete silence on the unprecedented mortgage fraud perpetrated by individuals and the the irresponsibility of individual speculators and home purchasers.
But his joker takes it a step further by applauding the hedge funds that are profiting from worsening the crisis!
8,000,000,000,000,000 /100 million tax payers? = 80,000. Wow I would start buying things again and pay taxes.
The real number is 8,000,000,000,000(defi... payers) = 80,000 in new taxes per person
and yes you had too may zeros.
perhaps a little free market blood letting would have been better after all. if we had a free market, i mean truly free, and govt, played its' proper role by keeping anti-trust, anti-cartel, anti monopoly regulations up and running we might be a little better off. it (govt.) is like a mutant spider-tick with webs entangling and hindering everything from business to healthcare to feed its' little mutant parasites (the welfare vote) while the symbiotic relationship between the corporate-fascist monster exchanges fluids with the spider tick. laws and regulations that hurt the small/medium but the oversized corporate business monsters love it because they can afford it or they can pay a few million in fines to ignore it while it simply sucks the life from small innovative competiton. the mutant and the monster continue to feed each other the middle class life juices and they continue to bloat and swell. the little parasites keep squealing for more table crumbs and vote accordingly.
the banks are guilty/ the borrowers are guilty, but i will bet the bulk of the bad debt is bad govt. loans.
john s. gordon
pointed out in an earlier aticle/post that bad govt. debts were at the root of the gd. also that undoing glass/steagol had much to do with the mutation of the banks this time around.
our constitution provides for safeguards against mega-banks (federal reserve) and the other problems in a free market. i believe restoration of the legal democratic-republic is better than the centralized state, corporate fascism, socialism, or whatever label you wish to put on our coming serfdom. it is worth the struggle. but it will not happen unless the u.s. citizens are willing to live up to their responsibilities and guard their freedoms. this means understanding our legal govt. and recognizing that it has been rendered unrecognizable.
in the beginning of a change, the patriot is a scarce man, brave, hated, and scorned. when his cause succeeds, however, the timid join him, for then it costs nothing to be a patriot.
mark twain
On Mar 27 11:15 AM John Thomas wrote:
> It's not a slam dunk. Now that traders are partying again on Wall
> Street, we have to ask, what will take the punch bowl away? The unemployment
> rate shooting over 10%, which could happen in April or May, would
> be my first pick. Losses on option ARM loans could accelerate, taking
> out a few dozen more regional banks, WAMU style. Another, until now
> apparently healthy corner of the financial market taking huge undisclosed
> positions in securities we’ve never heard of, could suddenly blow
> up. A giant hedge fund could close at any time, freezing existing
> investors in place, and dumping gigantic positions on the market.
> Defaults on some big, high profile commercial real estate projects
> could also pull the rug out from under the market. Given the magnitude
> of the move up over the past two weeks, we might even see a short
> seller bite the dust. And of course, if any of the administration’s
> $3 trillion in bailouts/ reliquifying/stimulus hit a wall that would
> trigger a sell signal. Party on ebullient traders, but do so close
> to the exit.
On Mar 28 09:56 AM bones33 wrote:
> The revolution is at hand.Arm yourselves.
some will pay off mortgages,
some will pay off credit card debt,
some will invest in the market,
some will buy CD's and Treasuries,
some will buy a new car,
some will buy a new house,
and some will go on crazy shopping sprees,
I couldnt agree with you more that this would stimulate the economy in a far fairer wayand have a better short term inpact and not damage the dollar so heavily.
On Mar 28 09:35 AM Paul in Texas wrote:
> Expat in China wrote:
>
> 8,000,000,000,000,000 /100 million tax payers? = 80,000. Wow I would
> start buying things again and pay taxes.
>
> The real number is 8,000,000,000,000(defi... payers) = 80,000 in
> new taxes per person
>
> and yes you had too may zeros.
There is no intrinsic value to paper money, and the world is awash in it. Our sawbuck is the firmest paper on the planet, despite our fiscal dalliances. The world needs a captain of capitalism and we are him, otherwise they'd mutiny and our dollars would be dispensed in rolls.
As ugly and untrustworthy as it may seem, this is a recovery. Capitalism HAS survived albeit in a slightly different form. There is nothing to replace it and the world so voted by buying up our Treasuries. Next they will buy up our equities while the academicians continue to expect anarchy.
The comments are all over the place partly as a result of the lack of focus on what you want to say.
Your readers can't pin it down.
After 40 years of college instruction, I know whereof I speak.
Seriously, take an English composition course at the nearest college.
Your contributions to this forum will be improved.
Certainty is an elusive God and life is full of surprises:
Epitaph found on a gravestone in Manchester:
Here lies Ann Mann;
She lived an old maid
But died an old Mann
You never know how things are going to turn out in the end.
Really? Credit default swaps are derivative bets on the direction of debt, not real assets; as we've all learned too painfully, they're not backed up with adequate cash reserves (never mind a claim on the underlying assets) in the event of default; and they're not owned by real people in any sense of either word.
This is very confusing to people, and doesn't contribute to a clear understanding of the problem. If you have a different theory about CDOs & CDSs, it would be helpful if you'd expand on your point, here.
Somehow we need to find away for power to stay in the people's hands POWER FOR THE PEOPLE, BUY THE PEOPLE!
everybody knows their name,no?
where is the justice? at side of power?
www.dailymail.co.uk/ne...
amazing, no?
Why?
Because we don't want to give up our TV's for every room in our house and our video games and our disability payments that we don't need or deserve (in too many cases).
We the people have sold out and we are willing to continue to sell out right up to the point where they start dragging us off to work camps when our debts becomes too great. Then we will ask for help and our neighbor will either already be at one of those camps or he will be too busy playing video games.
Think it can't happen? Think again. It has and it is.
> In Canada we have had 3 minority governments in a row. I love minority
> governments. The people's needs always get taken care of.Our government
> has'nt had the power to destroy our banks.
> Somehow we need to find away for power to stay in the people's hands
> POWER FOR THE PEOPLE, BUY THE PEOPLE!
Was that "BUY" meant to be there?
In America they have certainly bought the people. We are weak and stupid and until we wake up will will continue to get what we deserve: a TV in every room.
> Funny you should mention this, one of the first comments I wrote
> on the crisis when it initally broke was this. If you put real cash
> in the hands of each household;
>
> some will pay off mortgages,
> some will pay off credit card debt,
> some will invest in the market,
> some will buy CD's and Treasuries,
> some will buy a new car,
> some will buy a new house,
> and some will go on crazy shopping sprees,
>
> I couldnt agree with you more that this would stimulate the economy
> in a far fairer wayand have a better short term inpact and not damage
> the dollar so heavily.
And when we pay the bill we at least would be paying off a bill for things we got.
Right now we are bailing out the exact wrong people and we still must pay the bill.
> This is the most nonsensical article I have yet read.
>
> Every indicator from LIBOR to the yield curve to the massive refi
> wave to the holding up of the USD to the stabilization of treasury
> bill prices points to a financial system in rapid repair mode, and
> this fellow thinks this is all an indication that the situation is
> "escalating out of control"?
No. They are simply a bit better than they were when it looked like everything could come crashing down around us. Better people than you (and I) say that there is much more to come (I did not say "worse") and anyone looking at the DATA objectively also sees that. I do, and I have been right about all of this since 2007. Have you?
Libor is still looking very bad and LEI's are way down as is GDP and Asian exports are a SURE sign that we are not buying things (70% of GDP) as is the growing savings rate.
And then there is the ultimate Leading Economic Indicator: the stock market. It states clearly that things are worse than in 2008 and even after a 20% rally the market is BELOW the levels after the October crash.
October 2008 low (closing price): 8175
March 2009 high (closing price): 7924
It's funny how people see what they WISH to see in statistics. Well, it's funny to me because it provides me with opportunity. I will try to spend your money wisely, punditobserver.
Sorry I meant BY
He wasn't reimbursed, since travel was not a requirment, we simply live in the country and a drive to the city is requisite part of our (almost) daily regimine.
After working for about 1 week, he came to me sheepishly asking for an advance again his upcoming paycheck. I was happy to oblige, that wasn't the point, the point was the gas prices were striking my son (and myself) directly in the wallet.
Now while the gas prices are not necessarily the focus of this post, it was a rude awakening for my boy, he was well provided for (we are not wealthy, but we watch our pennies) and this was the first time he'd actually had to stare the economy dead in the face and realize it was a problem that affects all of us, to a greater or lesser degree.
I'm a big believer that we will (in fact are) recovering, whether or not it's too late for some, time will be the judge. As for my son, he's doing well and has now started to put something away for the coming summers of his life.
On Mar 27 11:06 PM EEB wrote:
> I would like to thank this author for writing the following:
>
> "In the modern world the accountability of ownership doesn't exist,
> everyone is milking the huge amorphous entities so big and diverse
> that no one really knows what is going on, they are managers taking
> the salaries and benefits of owners and that is very wrong. They
> have always had the security of a salary and never staked all or
> nothing on the success of the entity, with this reduction of risk
> should come the reduction of remuneration."
>
> This country's CEO's act like, and are treated like, founders of
> great corporations, but they are only employees. This unwarranted
> respect and awe for CEO's is spreading to other institutions like
> charties, universitites, school districts, and other government entities.
> The result is a host of insitutions, both public and private, that
> are wasting a lot of money at the top of the organization on pay
> and perks for leaders who are not that special. This society no
> longer has enough money to simply throw it away on ridiculous pay
> and unnecessary perks for the leaders of businesses and government.
On Mar 28 03:31 PM Jonathan Rose wrote:
> Thank you for your comments, I agree with you. In the old days we
> had successful business leaders etc turn to politics in later life
> to give back, much as someone like Michael Bloomberg has..... he
> is someone i would really like to see and trust in power handling
> the current crisis. When you have made money for yourself you appreciate
> its value. What is a professional politicians real skill? What have
> they achieved? Obviously some are legitimate but the career politician
> caused the downfall of Greek and Roman civilization, I hope we do
> something to avoid them doing the same to ours......
I exited the market early on in 06 and watched it go through a blow off top. In February 07 before the Bear Stearns funds imploded, I opened up enough FDIC insured accounts to distrubute funds out to insure each account was under max coverage limits.
I previously concluded in 05 that home prices were being unsustainably bid up by an influx of inexperienced and naive buyers, so I put off a home purchase - to this day I am still on the sidelines.
So I did see it coming fairly early on.
Now, your comments. I dont get your comment "Libor is still looking very bad" when the LIBOR rates that are most important are as low or lower than they have been since '03.
All asset markets move on stories that can best be phrased in simple single sentences:
"Oil Production will soon slow down and then run out" was the story that got people buying oil at $147 thinking it was going to $200.
"They arent making any new land and if you dont buy now you will be locked out of the housing market" was the story that got people paying double the sane price for real estate.
"The banks are insolvent", then after TARP, "The banks will be nationalized", then after the administration nixed that "The banks are stealing your money so you need to write your congressman to punish and disamantle them" is the set of stories that have people thinking they will soon be rich by shorting BAC at 2.53.
These stories run their course and many who buy the story early do very well. But in order for the early people and planners of these stories to REALLY DO WELL, they need to energize armies of foot soldiers who will buy oil at $147, or the DOW at 14k or houses at twice the price, or short positions in banks after TARP, TALF, and all the other programs the results of which will soon about to be evident as the credit markets recover.
Notice the author is responding to other comments but still has no answer as to why he is silent about the wave of mortgage fraud and personal irresponsibility that have so damaged the financial markets that even well run, conservative institutions that had no subprime operations are now perceived to be affected?
It is because he is the merchant of the "short the bad banks" story, and he is leading a lot of suckers into making bad trades and into writing stupid letters to congressmen who will pay the lip service while ignoring their ridiculous rants.
Other than shorts, the only other people I see here are the fringe "we are living in tyranny when a government takes steps to steer us out of economic ruin" crowd and the typical malcontents that revel when they think apocalypse is near so everyone will be as miserable as they are.
Sorry, I have to call it as I see it. Articles like these and the comment streams that follow the are mostly irrational, basically uninformed, and utterly irresponsible at their core.
I am learning from these articles, this one was very helpful. Some comments such as yours fall into the, "shutup and let your betters have their way" group. As a voter with responsibility to my kids I am beyond appalled at what is going on and I consider myself motivated and intelligent enough to have a valid opinion.
There are irrefutable facts: Wall St. has been rewarded, as has the whole leadership class in this country far beyond precedent and they led us into an unprecedented financial calamity. They want trillions more every few weeks since October. There is no clarity or consistency.
There have been escalating financial debacles since the 3rd world debt problem in the 80's, the thrift problem in the early 90's, LTCM then dotcom busts and now this. With each recovery more flawed on Main St. than the last. More debt.
When do we decide this has been the wrong way to go, these leaders are wrong, and we should follow the Constitution?
> Until this gov't realizes the folly of their present course and backs
> off daily interference in the economy that is mis-directed and realizes
You mean like how the government had backed off the last ten years???
On Mar 27 11:15 AM John Thomas wrote:
> It's not a slam dunk. Now that traders are partying again on Wall
> Street, we have to ask, what will take the punch bowl away? The unemployment
> rate shooting over 10%, which could happen in April or May, would
> be my first pick. Losses on option ARM loans could accelerate, taking
> out a few dozen more regional banks, WAMU style. Another, until now
> apparently healthy corner of the financial market taking huge undisclosed
> positions in securities we’ve never heard of, could suddenly blow
> up. A giant hedge fund could close at any time, freezing existing
> investors in place, and dumping gigantic positions on the market.
> Defaults on some big, high profile commercial real estate projects
> could also pull the rug out from under the market. Given the magnitude
> of the move up over the past two weeks, we might even see a short
> seller bite the dust. And of course, if any of the administration’s
> $3 trillion in bailouts/ reliquifying/stimulus hit a wall that would
> trigger a sell signal. Party on ebullient traders, but do so close
> to the exit.
On Mar 28 08:33 PM punditobserver wrote:
> Fred Voetsch, thanks for your reply regardless of our differences.
>
>
> I exited the market early on in 06 and watched it go through a blow
> off top. In February 07 before the Bear Stearns funds imploded, I
> opened up enough FDIC insured accounts to distrubute funds out to
> insure each account was under max coverage limits.
>
> I previously concluded in 05 that home prices were being unsustainably
> bid up by an influx of inexperienced and naive buyers, so I put off
> a home purchase - to this day I am still on the sidelines.
>
> So I did see it coming fairly early on.
>
> Now, your comments. I dont get your comment "Libor is still looking
> very bad" when the LIBOR rates that are most important are as low
> or lower than they have been since '03.
>
> All asset markets move on stories that can best be phrased in simple
> single sentences:
>
> "Oil Production will soon slow down and then run out" was the story
> that got people buying oil at $147 thinking it was going to $200.
>
>
> "They arent making any new land and if you dont buy now you will
> be locked out of the housing market" was the story that got people
> paying double the sane price for real estate.
>
> "The banks are insolvent", then after TARP, "The banks will be nationalized",
> then after the administration nixed that "The banks are stealing
> your money so you need to write your congressman to punish and disamantle
> them" is the set of stories that have people thinking they will soon
> be rich by shorting BAC at 2.53.
>
> These stories run their course and many who buy the story early do
> very well. But in order for the early people and planners of these
> stories to REALLY DO WELL, they need to energize armies of foot soldiers
> who will buy oil at $147, or the DOW at 14k or houses at twice the
> price, or short positions in banks after TARP, TALF, and all the
> other programs the results of which will soon about to be evident
> as the credit markets recover.
>
> Notice the author is responding to other comments but still has no
> answer as to why he is silent about the wave of mortgage fraud and
> personal irresponsibility that have so damaged the financial markets
> that even well run, conservative institutions that had no subprime
> operations are now perceived to be affected?
>
> It is because he is the merchant of the "short the bad banks" story,
> and he is leading a lot of suckers into making bad trades and into
> writing stupid letters to congressmen who will pay the lip service
> while ignoring their ridiculous rants.
>
> Other than shorts, the only other people I see here are the fringe
> "we are living in tyranny when a government takes steps to steer
> us out of economic ruin" crowd and the typical malcontents that revel
> when they think apocalypse is near so everyone will be as miserable
> as they are.
>
> Sorry, I have to call it as I see it. Articles like these and the
> comment streams that follow the are mostly irrational, basically
> uninformed, and utterly irresponsible at their core.
The concept of accountability and moral hazard has been officially eliminated. There was hope that Obama administration would take a tough stand, but they have folded, the lobbyists have won. If fat paychecks and bonuses cannot be reined in an environment of 10s of billions of losses and trillions in bailouts, then likely they never can. We will continue to have two classes -haves and have nots, unless there is total class warfare. That is the direction we are headed.
Market direction? Lot more losses and write downs to come – commercial property, bankruptcies, etc. How will the market react is the question. Currently the market is totally dominated by momentum traders – so just stay with the direction – you may make some money (may lose too). Right strategy is to totally stay out of this market – it can go either way significantly.
i saw this coming too. as one poster suggested, i was always close to the exit. just because i saw the corruption, thievery, almost constant assault on the constitution (for decade after decade) does not lessen the crimes. i am not wild about gold and silver but i recognize their strength and the weakness of fiat money.
i much prefer peaceful restoration of the democratic republic and the return of self-detrmination, however i will not settle for any less to appease the power hungry.
i have had a successful life enabling me to retire 15 yrs. early so i no longer am forced by the illegal irs and their marxist progressive income tax to contribute to the socialist destruction of my country. i have a beautiful woman by my side to enjoy our good fortune. neither of us is willing to sit idly by while our country and fellow citizens are raped by the power hungry. we know how to play the financial system and to funnel money from the crooks to us.
so label me a malcontent. i like the title. it was not a group of passive, politically correct, gutless, accept evil, weaklings that gave us this liberty as a prize to enjoy and protect.
maybe observe the pudits less and read our history and founding documents more.
Can you say "Moral Hazard" ? When the catholic church "took care" of its pedophiles, did you think the crisis was over? These crooks who call themselves investment firms and and banks who walk away from their malfeasant strategies leaving us to hold the "bag-of-shit"....and you think the crisis is OVER ??? Our government is complicit in this ripoff....and you think the crisis is OVER. What hole is your head stuck into?
re brass shell casings -
it was discovered during the vietnam war that the congs were salvaging our discards, packing them with explosives & using them to blow up our troops.
this led to the army's development of combustible case ammo. the early models used felted NC paper (not as strong); the later models use spiral wrap like your kitchen paper towel inner cardboard.
the advantage of brass is that it may tarnish over time but is still self-lubricating.
> jack
This is the fundamental moral hazards of our lender and borrower system: lender does not have to be responsible, while borrower carries all the responsiblities and burdens.
Bank laws and regulations allow the uncheck, and relentless, reckless lending. Borrower, does not have the wisdom to envision their responsiblities (basic concept of that writer of the Constitution had notice), which lead consumer to a debt level that can not be sustain.
The way to fixed this problem is to reverse bankruptcy law that was pass on April 15, 2005. This will shift the responsiblity of lending to the lender; bank should not be lending or extending credit to anyone that does not have the capability to repay new debt.
" ...almost constant assault on the constitution"
What assault are you referring to?
I need to get to the bottom of this insane talk about tyranny and supposed assaults on the constitution.
You know, the constitution does not prohibit implementing a plan of tax cuts, stimulus measures and important company supports in order to promote commerce and prosperity.
Some people think its is important that we as a nation and as an economy do so to keep an unprecedented wave of individual irresponsibility and mass individual fraud from causing a panic, ruin and prolonged depression.
Or are you going to say that the popular perception of Hoover not being proactive enough was actually the right thing to do?
Oh, no, I have just opened the floor to the "scholars" who are going to spread their own insane brand of disinformation about the great depression.
the anti trust, anti monopoly sections have been selectively disregarded.
the bill of rights, are each at different levels of degradation.
the 16th and 17th are not in keeping with the spirit and directions of the constitution, therefore their legality is questionable. it is debateable if the income tax was properly ratified. it appears not.
the labeling of u.s. citizens as terrorist suspects because of legitimate dissent.
warrentless searches.
warrentless wiretaps.
turning control of u.s. soldiers over to a foriegn govt. for use in police actions. (viet nam, korea, and numerous u.n. actions)
taking property (taxation) by threat of force from one group of citizens to give (stipend) to another group.
the federal reserve (a cartel of bankers) controling the issuance of money which is loaned to our govt with interest after it is purchased at cost of printing.
not insuring that certain member states provide state governments that are in compliance with constitutional guidelines. (illinois 2nd infringment is an easy example)
these examples are just a few off the top of my head.
please take notice of the installation of marx ten planks. govt schools, the abolition of private property (property taxes) please go down the list for yourself.
the 1968 gun registration laws, are almost verbatim to the nazi gun registration laws.
federal police force that is a standing army of secret police to harass the u.s. citizens for political and even personal reasons.
this is getting long. anyone else wish to add to these?
p.o.
thank you for a reasonable question. if you wish i can go on at a later time in a less haphazard manner. i believe you can easily search these problems out for yourself and probably find infractions i have missed.
the main confusion comes from allowing (lawyers) politicians to convince the public that the constitution is an evolving document and we, the common people need them to interpret what was written for us in the plain language of the day. the result is govt. by the lawyers of the lawyers, for the lawyers. if you doubt this try doing anything of importance without employing one. an innocent man should have been able to walk into a courtroom representing himself without fear for his property, liberty, or life. this is not reality. sadly the man who represents himself has a fool for a lawyer has come to be truth.
i apologize that my answer is unorganized. it has been a busy day and i am tired but a reasonable question deserves a quick response.