Howdy, Stranger!
It looks like you're new here. If you want to get involved, click one of these buttons!
Quick Links
The USA Will Enter a Depression ... Yes, the D Word.
declaredemer
Member Posts: 2,698
It is necessary for "illiquid" assets to become "liquid" when they are priced where they should be.
Right now, via YOUR generosity and per the U.S. Treasury and Federal Reserve (neither Federal nor a Gold reserve) the U.S. Congress purchased wortheless debt. A small percentage of which is "mortgages." Barney Franks, people who borrowed too much, are not to blame.
If the U.S. Congress is going to continue to be this generous with YOUR money (and future and kids' future, you might not care about YOUR kids, but I care about my country) we will enter a depression. If we devalue the dollar to buy "bad" debts/assets, our dollar and those debts, already wortheless, will both become wortheless and YOU will suffer.
It is necessary, now, for the U.S. Congress to allow bad debts to FAIL... to allow good debts to "modifty" through some forberance and modified rates (IF they can stay in the home) and allow the private sector to do this. Allow the private sector to buy "illiquid" assets when they are priced down.
- In a word, let the private sector buy "illiquid" assets when the market prices them down. The U.S. Congress was intimidated by Finance and Creditors and Bankers to buy "shit" aka "illiquid" debts to keep bad money afloat. Newly printed cash chasing bad assets will not save the economy.
Comments
There's too few digits to show the actual number now, lol.
So here's what I was thinking- what could I buy that would not lose it's value? And Im not talking like gold or produce futures- im talking like hard, non perishable goods?
What could I have that everyone would want? Maybe I should just buy a crap load of guns to use as currency. Cigarettes, booze and drugs would retain high value. What else? Help me out here.
Keep laughing.
It's crashing an economy near you!
I guess everything can change value, but on a long term perspective I guess real estate, land area, would allways have a good value. Especially in a world with growing population.
But it can be a bit expensive I guess...
Bibles and booze for the impending depression.
Land almost never looses its value. Especially with the real estate industry in such a bad state with banks owning all that housing and no-one buying if u v saved up some (alot) of money now would be the time to invest them.
5 yr old cigarettes and booze are worthless, the smokes become unsmokable and the booze goes stale unless it is of very high quality and ment to be kept in a bottle. Drugs on the other hand
How do you figure that one?
I know they aren't the only ones to blame, but how do you figure they are blameless?
And why do you think that honouring your nations debts will devalue the dollar?
The Dollar is a promissary note. A promise that is readily broken is no promise at all.
Failure to honour your debts devalues the Dollar. It makes it a higher risk currency.
The private sector does not want to buy bad debts yet. in fact it already owns quite a lot of them.
They are already "allowed" to buy bad debts. How will allowing them to do something they are already allowed to do and flagrently have no further intrest in doing, change anything?
And even if you forced them to buy bad debts, how could they? They don't have any money. The private sector is skint. The magic private sector money tree is out of season. The private sector is not a magic wand you can just keep waving everytime someone in your country need more money. That wand has been waved so many times in the last 20 years that it is all out of magic power. Broken.
The money your government is lending will be lent to your government by cash rich societies (and private individuals) like China and Japan in the form of government bonds. In the event that they are unable to repay this from the sale of the "bad debts" (back to the private sector later on when things have recovered), the tax payer will be guarenteeing the money.
Given that the ecnoomic crisis has now spread to China and Japan, the danger if Depression is much magnified. Quite simply the money that your government is proposing to use to bail out the banking system may not be available for them to borrow.
Buying bad debts is a simply a method by which you government is able to lend money to the banks. So that the banks are able to lend money to people and businesses again.
It's not a question of keeping bad debt afloat, it is a real and present need to keep good business afloat by offering them regular banking services in a time when many private sector banks are unable to provide that unassisted.
Land very frequently loses it's value. Property is a high risk investment. You are at the whimsy of intrest rates.
Planning permission that is not recieved negates value. A fall in housing prices reduces the value of development property. A crash in the housing market massively reduces the value of development land.
Agricultural land values fluctuate in accordance with the price of the crops they produce.
Land is a safe and worthwhile investment if you personally intend to live on it.
Nothing you can buy is risk free. Everything is able to lose it's value.
Fine art is a good one. Fine wine is another. Antiques.
In a recession. In a depression, the only commodity people don't have a lot of is cash.
Cash is king. Stashing it under your matress is the traditional method.
You can hedge your bets by keeping it in a variety of different banks and currencies around the world. Minimising your exposure to any single collapse.
Lets stave a depression. Permanent Central Government Spending Freeze.
I understand debt derivatives:
Step 1:
Make a loan.
Step 2:
Sell the loans to a buyer
Step 3:
Buyer Resell the loan to a new buyer.
Step 4:
The new buyer Re-resell the loan to another buyer.
Step 5:
And so on.
In a distributorship:
(1) Make a wideget; (2) sell widget to distributor; (3) distributor sells to retailer; and (4) retailer sells to end-user.
What is this important?
If the retailer cannot sell the widget, the government does not intervene and buy the widgets that the market does not want or considers "illiquid" (aka "wortheless").
Today, the U.S. Congress was pressured by insurance companies, bankers, and creditors to use YOUR money to save them, which did NOT save YOUR economy.
If the government keeps taking new money and buying illiquid "wortheless" debt to clear the balance sheets of bankers, it will lead to a depression because the money is not being invested in the US in the form of tax cuts to the economic engine (consumers) or in infrastructure to sustain the national economy, create jobs, and tax incomes.
We have a serious, and deep, crisis and it will only get worse if the US Treasury uses YOUR money to clear the balance sheets of even more banks.
Spam would be as nonperishable as you could get.
Oh SPAM™! Oh SPAM™! Gourmet delight!
My food by day, my dreams by night.
To carve, to slice, to dice you up -
pureed in a blender and sipped from a cup.
What shining deity from Olympus knelt
down to the earth and hog butt smelt?
Creating then man's eternal desire
for swine entrails congealed by fire.
On some corporate farm, a pig has died.
Eyes, tongue, and snout end up inside
that cube of SPAM™ hidden in the can
I now hold in my trembling hand.
That glistening pinkness beckons me
with gristle, fat, and BHT.
Oh SPAM™! Oh SPAM™! - the taste, the smell!
The sacred meat product, from Hormel
The other day I just sent my brother a list of index funds that he should consider buying, but a lot of people are staying-away from "equities." Equities are stocks because you buy an equity stake in the company, though you need to study Delaware Corporate law to understand what your rights as a shareholder are, which are pretty much none. Delaware is the state of incorporation for most public companies. People that invest in equities need to know not only the difference between difference classes of shares of stuck (Such as "common" or "preferred" and others) but how to value a company and a stock. If you are going to invest in a company for less than 20 years, forget it. It is why I impore, and I mean impore, working-class (mostly fixed-income earners and small business owners) to open a Roth IRA. It is the ONLY way for people to "make it" unless they get really lucky. A lot of people, for whatever reason, think "something" will happen such as winning the lottery. Shame.
You Said People are Staying-Away from Equities - Why?
What is a "crash"?
A crash is when the market loses over 20% of its value in one day or several days. For the past seven days, the market had what is called a "slow motion" crash: over a period of days the market lost over 20% of its value. Debt is being downgraded, the banking system is imploding, and people's confidence in financial markets and the political process is at an all-time low. I think the party is over.
Why do you think the "party is over"?
Government intervention, as many American citizens widely predicted, would not capitalize the banking system. A coordinated effort of the US Treasury + Banking + Federal Reserve (neither Federal nor a gold reserve) would not work. It really helped bankers pre-crash, and I suspect they knew what they were up to. Yes. I am implying a 1.4 trillion fraud: saving bear stearns, AIG, Fannie and Freddie pre-crash, and "saving" them helped precipitate the crash.
I believe the US Congress was under duress in passing the Bogus Banking Bail-Out, which has profoundly changed my think of where the center of authority is in this country. Where the locus of decision-making actually occurs.
Yes. It is a red-level take-over of Congress through threats saying, "bail-me-out or I will crash YOUR economy." The economy crashed anyway, and credit is still frozen.
If I were a Senator or member of Congress, I would have summoned the Sergeant-at-Arms and had these people escorted out of the building.
The Great Depression (1929 to 1942)
Today
Unless that widget is considered to be a critical widget to the economy.
In which case the government does intervene to buy those widgets.
Boeing for example. Wheat subsidies.
The government intervenes in many industries during times of crisis.
Steel, cars, the airline industry, agriculture and god knows what else. It uses trade tariffs and preferred orders to favour industries it deems critical to the good of the nation.
Why should banking be any different?
"Yes. It is a red-level take-over of Congress through threats saying, "bail-me-out or I will crash YOUR economy." The economy crashed anyway, and credit is still frozen."
Some one threatened to crash the economy? Conspiracy theory time. As far as I'm aware THE economy isn't YOUR economy, it is EVERYONES economy. Bankers and government employee's included.
Or, more critically, it is not owned by anyone at all. It is THE economy.
No one said the economy wouldn't crash if the government passed a new law or bailed out banks. They just said the crash wouldn't be anything like as bad as it will be if they don't.
There is no magic wand cure for your economy. You are overloaded with debt and you have to repay what you have spent. It isn't going to return to what it was two years ago in just one day or even one week. One new law passed in Congress won't fix it.
There is a very good chance it will never return to what you have been getting away with for the last two decades at all ever. Or at lest not until so far in the future that all the lessons you are relearning this year are well and truely forgotten about again.
If you are expecting magic wand miracles, they aren't coming. The government can't create them for you and neither can the private sector. This is your wake up call. All those people who kept telling you how fantastic your economy was last year, they were all wrong. It wasn't. It was shit. Now you know.
The credit is still frozen, the bailout has not happened yet. Only the law enabling them to have one has occoured so far. No money has been doled out. And no extra tax has been raised.
The government hasn't "used YOUR money". YOUR money is still in the exact same place it was last month, in YOUR pocket. I don't live in America, so feel free to correct me if you have just written an extra $15,000 check to the tax office I'm not aware of.
You should however expect tax rises in your future and you should think more than twice about electing anyone who is promising you tax cuts. Such a person would be part of the problem, not the cure.
What I think will happen is stagflation in the US, which means having loads of $ cash will get you pwnzored. OPEC is dicussing of cutting oil production -> prices go higher and this while the FED is making more money out of thin air (means that FED is LITERALLY stealing from everyone that owns $$$) = stagflation.
I would wait for maybe a week or two and then invest to stocks. Just look for companies that have good cash reserve and are cheap. There will be plenty of them all over in coming days.
The first time, since the Great Depression, the US government is going to buy ownership stakes in banks: news.yahoo.com/s/ap/20081011/ap_on_bi_ge/financial_meltdown;_ylt=Aro3XvVW6396rT2wa0iSiKqs0NUE
Utterly a horrible decision.
Most Americans, I have come to learn, have NO idea what is going on or how to even define a derivative or what the Federal Reserve is.
Simply put, the creditors said they would break the economy unless they got bailed-out. Now the banks are saying we will not give loans unless you back the loans.
When the banks and creditors make money, the profit is individualized. When they have illiquid (wortheless) debt, the public buys it.
I am not even laughing anymore. Smiling, amused, but the taxpayer is getting soaked!
There is one BIG difference between our situation now and that in 1929: the US Federal Government had little, if any, debt. That's right. None or almost none. Today, the national debt is over $10 trillion, and we're going to add to it while simultaneously US production (and the GDP that's associated with it) is going to decrease. This was not the case in 1929.
This is what you fail to understand. The banks are not saying they "will not". This is not a threat.
They are saying they "cannot". This is a statement of capability.
Finding scapegoats won't fix anything.
I'm afraid I have to agree with just about everything Baff has writen. (oh the shame
) EDIT except for his clear anti American tone and the fact he doesn't acknowledge that Briton shares almost the same spending / debt issues as the US and speaks as if the rest of the world is only the victim of the US system.
Before I went back to civil service with the military I worked for an insurance company for many years. One of the things we had to do was get a securities license and a few other things so we could plan estates for our clients.
We saw this coming in the mid 90's. I'm surprised it took as long as it did. Hope everyone enjoyed the party but now its time to pay the bill.
No one forced the American population to live way beyond their means and abandon financial common sense. Everyone wanted that new 3000 sq ft house and 2 new SUV's in the driveway.
The financial industry went berserk with lending and you all went for it. Now you all want to blame the Feds and expect them to clean up your mess and make it all better by Monday.
I know am in shallow waters when I make posts. I do it mostly for entertainment. I enjoy it.
Repeatedly, now, I have explained what caused the meltdown. I have linked this post, and I have copied and pasted it, repeatedly. The area where I think a lot of you younger people do not understand is that this not a consumer debt problem exclusively. You keep thinking it is because people lived above their means, and that is what is crashing the NYSE and NASDAQ, or you thinking something like that. Actually, I am not certain how you think, but I think I understand what you are saying:
You are saying I am wrong because I am blaming Central Banking; I am saying you wrong if you think this crisis is the result of consumer debt.
IT IS A FINANCIAL MARKET MELTDOWN & HOUSEHOLD PROBLEM
Households will always be in DEBT, no one is trying to rescue households. Households did not create this crisis exclusive of everything else. Do you know what a household is? When I say there are 21 million households, each with three of for people, what do I mean? What is a household? When I say one-fifth of those 21 million households earn incomes under 21,000.00, what do I mean? Do you have any idea what I am talking about?
As the post below, copied and pasted again shows, the factors that led to the meltdown.
Here is the link to the post I made #37 www.mmorpg.com/discussion2.cfm/post/2335690#2335690
The Federal Reserve
The origins of this crisis is known as "easy money." From 2003 to 2005, the Fed kept interest rates BELOW the level of expected inflation, which created an ENORMOUS subsidy for debt that BOTH (1) households and (2) financial markets exploited.
Fannie Mae and Freddie Mac
Both created by government, and able to borrow at rates LOWER than proviate corporations because of the "implied" backing from YOU (taxpayers). These firms bought questionable mortgages (Alt-A and subprime loans). [Brief aside: IF I can find the Memo I wrote, when I was an officer of a development company, warning what these loans would do to the real estate industry and how to guard against it.]
Mae and Mac have patrons in Washington who will simply bail them out and nothing more.
Credit-Rating
As a result of federal, and state, law a small number of credit rating agencies are allowed to assess risk for all debt securities in the market. Many of their assessments are wrong.
Moody's and S&P are the government chosen credit rating agencies, and at least Moody's is sending signals it will actually have no choice but to lower the Federal Government's perfect credit-rating.
Yes. It is THAT bad.
Banking Regulation
Simply put, bank regulation was not lacking during the Bush Administration... it did not exist. It is a government that hates regulators, people who ensure fairness, honesty, and accuracy to prevent these type of crises.
[Brief aside: wait until the least regulated firms, hedge funds and private-equity companies, start to implode as well.]
The Bear Stearns Bail-Out
This is where I admire Ron Paul. Yes. He knew, and this crisis has shown, that just bailing-out companies will delay a more serious crisis.
(1) bad debts, (2) bail-out, and (3) future crisis.
Taxpayer gets screwed in each stage.
Conclusion
The current crisis we are in has Republican prints ALL over it.
It is (1) banks + (2) big business + (3) non-regulation requiring the taxpayers to loose their assets, loose their homes, and then pay for the bail-out. God Bless America.
Whatever.
Maybe we should put you and baff in charge. Couldn't do any worse.
Whatever.
Maybe we should put you and baff in charge. Couldn't do any worse.
How do you know I am not already in charge?
Whatever.
Maybe we should put you and baff in charge. Couldn't do any worse.
How do you know I am not already in charge?
You are here posting
Britain shares almost the exact same debt issues as the U.S.
This isn't a result of critically flawed American Capitalism , it is a result of critically flawed Anglo Capitalism.
In these threads I tend to discuss the American debt issue, because that is what most people here are discussing. This is an American dominated board. The economic issues here in England are more or less the same. In fact, given that 40% of our GDP is derived from banking, it is recognisably worse.
The credit crunch in Britain began in the exact same place too, the U.S. Sub prime market. It is not just Americans who must repay their foreign debts, Britains must too. If you think your bailout in the U.S. is affecting the taxpayer, wait until you see ours.
If I was confronted with a thread load of British people complaining that some of their bailout money was going to be sent to foreign banks, I would be saying exactly the same thing to them as I am the people in this thread.
Americans have problems. They do things wrong too. Foreigners who talk about them do not hate you. I find the constant xenophobia very tiresome. Yes, I'm foreign. Get over it.
Torak,
I post here because I know no one cares what I write here and maybe 5% of the readers fully understand what it is I am writing about.
I have asked you this before, baff, and I will ask again:
What percentage of the 840 billion dollar bail-out had to do with sub prime mortgages?