pacalis

Real Cause of This Financial Crisis? Global Hunger for Savings Instruments

I think this is a nice re-framing of the problem. A big question in all of this is why did people buy all this mortgage backed s$#t. If there was no demand, these mortgage products wouldn't have sold and banks would have been forced to hold the debt of the mortgages they made rather than skimming fees of the transactions. If the banks held the debt, like the did in Canada, you can be damned sure that (1) less mortgages would be given out, and (2) that the quality of the average mortgage would be much much higher.


On Oct 22 07:34 AM a fat panda wrote:

> Great. We have an article about how many how many explanations there
> are, and we get 3 more.
>
> Guys, It is consumer debt that caused the problems. Consumer debt
> enable people to pull demand forward creating the revenues that made
> the whole thing look reasonable. The low interest rates let people
> consume hamburgers today for 2 on Friday. Only it wasn't hamburgers.
> It was cars, and houses, and TVs.
>
> That is layer one. In the next layer, the TV manufacturers became
> 'rich' selling future demand today. The workers wanted more pay
> so we set pensions at 8.5% discount rates so that we wouldn't have
> to fund them. At one point, America had something like 9% of the
> population was millionaires, all selling tomorrows demand today.
>
>
> It wasn't just housing that had a bubble. American expectations
> were in the greatest bubble in history.