SGK

Why Interest Rates Will Go Up

I agree in principle with everything you said CFA, but I think you miss one crucial point. The underlying principle of a free-market economy is ‘survival of the fittest’ and therefore such an economy must inherently produce a stratified system of haves and have-nots, and everything in-between. And as most distributions in nature follow a bell curve, there will have to be a lot more have-nots than haves. Politicians will always exploit the voting power of these have-nots for either self-serving political gains or for misguided altruistic reasons, to bring us full-circle back to where we are now - a compromise system of free-markets and socialism with its bubbles and fluctuations.

As much as communism was unsustainable, so is pure, free-market capitalism - it just goes against (selfish) human nature. Prophets of the pure free-market system are as misguided as was Karl Marx I fear.

On May 25 10:08 AM Prudent Man CFA wrote:

> An excellent primer. It isn't so much that history repeats itself,
> it doesn't have to. It is that people, especially politicians and
> bureaucrats, don't learn anything from history. Evidently their egos
> are so big and brains so small that they think they can rescind reason.
>
>
> We are on the cusp of not only more bank failures but of several
> sovereign countries de facto failure. S & P's (we know how late
> they are on downgrading) negative warning on England's bond rating
> should be a wake up call. Except for political purposes, they do
> need their business, they would have downgraded them now instead
> of waiting for the inevitable. Italy, Spain and, definitely, Ireland
> are in terrible financial condition.
>
> The move up last week in U.S. Treasuries is an indication of things
> to come. Mr. Cooper's gave a good explanation of why Keynesian Economics
> creates inflation - politics. From Greenspan to Bernanke, no one
> wants to take away the punch bowl so market forces will do it for
> them, BHO, Pelosi, Barney Frank, Chris Dodd and Harry Reid (Is this
> the best we can do for political leadership then Congressional Term
> Limits please!) notwithstanding.
>
> This recession teaches us what recessions are supposed to teach us
> in a Free Market Economy: We have overcapacity and we must trim our
> sails as we are consuming more than we produce like a bunch of drug
> addicts and we will be forced to lower our standard living insofar
> as our wants are concerned. Unfortunately for politicians who prostitute
> themselves to the voters, their wasteful policies blow up in their
> faces, e.g., California and other states with irrational public polices
> to reward the unproductive and parasitic.
>
> This condition will remain until the country returns to the disciple
> of Free Enterprise which will require of major political shift. The
> realities is that the political elite will give us more of the poison
> that is killing us which will create Stagflation.
>
> Bernanke studied the Great Depression. Unfortunately for us he didn't
> learn anything and we once again have the "Forgotten Man", that person
> who pays the bills, fights the wars, is an entrepreneur and is productive,
> who must pay for it. Our government and its bureaucracy are staffed
> with students of Bernanke's irrational policy of all-knowing Central
> Government that will lead us our of this recession. Where are the
> facts to back this philosophy up? Certainly not The Great Depression
> or The Great Society and Vietnam or Jimmy Carter. Try the eighties!
> As I have lived during all of these times, all I can say is that
> "You had to be there!),

Moody's Dangerous Aggression

Fat, Dumb and Happy....and Criminal - that's what Moody's is. They were way behind the powercurve during the inflation of the bubble, even contributing to its grwoth; and they're incompetent actions now border on the criminal - somebody muzzle them, please...

Should Wall Street Have Saved Itself?

This bubble, as the one before it, are perfect examples of the herd mentality that defines Wall Street - "..if the guys next door are doing it and making a ton of money at it, we need to do it too...!" However, Main Street colluded to a large extent by demanding and accepting 120% LTV, Interest only, variable interest rate mortgages it never had a realistic chance of paying back and by overloading on revolving credit debt to the tune of $3,000,000,000,000 in the last 4 years. What's different about this bubble is that it was largely made possible by exotic, off-balance sheet financial vehicles and derivatives that were created by mathematicians and statisticians (yes, many of whom were PhDs) and were little understood; and the government (Congress, Fed, SEC) were instrumental and complicit in allowing this to happen. Now that the genie has vacated the bottle, we can't get him back in....

Merrill Lynch Can Kiss Another $3.1 Billion Goodbye

The way I see it, S&P and Moody's are criminally culpable in the subprime meltdown by virtue of rating these mortgage-backed securities as highly as they did. And if they are not criminally negligent, then they are chronically inept.