Stan R wrote:
> kujebak contributed these words of wisdom on 11/04/08 07:33:
> >
> <...>
> >
> > The only two remarkable aspects of the current financial
> > crisis are its root cause,
>
> You mean government-inspired political correctness? Or the Fed-inspired
> credit bubble, caused by what can be termed a criminally loose monetary
> policy under the Chairman****p of Mr Irrational Exuberance?
Greenspan, and his monetary policy is what's responsible
for this country's current economic woes. He killed the eco-
nomic expansion (often credited to Clinton by left wing dema-
gogues) brought about by demilitarization of the U.S. econo-
my at end of the Cold War. For what he (Greenspan) did sub-
sequent to that, in order to save the economy from complete
collapse, he should be in jail today. Never mind his age.
Where is the indignation over the Federal Reserve's handling
of the economy in '99 - 2001? Why are we instead preoccupied
with scapegoats, like Bears and Stern and Exxon Mobil?
Because it's the election year. Economic misery always sells
at the polls.
>
> > and the way it's being ****trayed
> > in the media. It is quite astoni****ng to compare present
> > day perception of how capitalism is supposed to work to
> > the way Americans used to think 40 years ago.
>
> That does not apply just to America. All over the western world more and
> more people believe it is the government's job to look after them and to
> ensure they are happy and their needs are met. If they screw up, then
> why - it's the government's job to bail them out!
>
> Painlessly, of course.
>
> > To most
> > people today, when one makes a profit from an investment,
> > that's capitalism, but when one loses money in a risky,
> > or ill-conceived economic venture, that's not capitalism.
>
> The trouble is, George, that while you are correct in principle, a large
> part of the current problem has been caused also by financial gurus with
> black box modelling systems, who believed they were bullet proof and
> that that the concept of black swans was no more than an academic
> economists' fairy tale.
>
> The sheer complexity of many of the products that are now going bad,
> coupled with what can only be termed greed and short-termism (best seen
> in the amount of leverage some of these "experts" have been using), has
> made sure that even the wonder boys now don't know what the extent of
> their liabilities really is. Creative accounting can only help up to a
> point in such cases. Ultimately insolvency cannot be avoided.
>
> This is the main reason for the credit crunch - counterparty risk. This
> is also why the CDS implosion, coupled with bankruptcy of one or more
> major banks is rather likely.
I must disagree with you there, Stan. I don't think it was
what you say that *caused* the so-called credit crunch.
All of what you mention were merely byproducts of the un-
derlying financial disturbance in our economy - too much idle
cash, and ridiculously low interest rates for too long a period
of time, which drove the long term rates (and the cost of home
owner****p) to unprecedented lows. The fixed mortgage rates
bottomed out at well below 5% here on the West Coast. The
creative mortgage products (like negative amort. loans) that
eventually replaced conventional mortgages after initial re-
financing frenzy (I personally refied my own house three times
since the mid 90's) were merely a means to continue selling
overinflated real estate to people who couldn't afford it, and
shouldn't really have been in the market. Speculators, house
flippers, and those like the immature couple in the article.
>
> > That is some sort of foul play, and a reason for government
> > involvement (i.e. socialism). When people sign one of these
> > newfangled mortgage contracts knowing full well they could
> > not get into the housing market any other way,
>
> Many of them could, though. As I said in my reply to Karel, many of
> those now defaulting are in fact quite well off in income terms.
>
> But they just had to have the extra 3 bedrooms and 2 bathrooms, in the
> better suburb. They also had to have that pool and all new fittings and
> whitegoods.
>
> I am of course not excusing those people. To the contrary.
>
> > and that they
> > quite likely are not going to be able to make payments
> > two or three years down the road, they deserve what they
> > get, which is not necessarily and immediate foreclosure
> > followed by an eviction, as in the case of this young Stock-
> > ton couple, which decided to squat in their own home,
> > waiting for a government bailout:
> >
> > http://tinyurl.com/3vhw94
>
> <...>
>
> That is rather disgusting what these people are on about. And so brazen
> about it - they bought a house they knew they could barely afford; now
> life got too hard, so they stopped paying the loan - even though they
> still had the means to continue - and, oh, how wonderful; they now have
> spare cash to eat out and get a babysitter!
>
> They could not get away with this here in Australia. Their bank would
> evict them within weeks and if they could not pay the loan out or did
> not have insurance to cover the shortfall between the sale price and the
> loan balance, it would bankrupt them and take whatever else they had of
> any value.
>
> No wonder the concept of jingle mail is proving so popular even amongst
> those Americans who can very much afford to cover the mortgage payments.
> Why would you if you can live in the house for free, without any fear of
> repercussions?
>
> Sheer lunacy.
>
> S
The current federal legislative proposal to spend $20 billion
of taxpayers' money to bail out 2 million irresponsible home
owners is wrong. Why? Because it ushers a mentality of
of victimization, and entitlement into a segment of popula-
tion heretofore unaffected by this disease - the young, married
couples. Potential home owners. The next generation of up-
standing Americans. This is just as immoral as the business
schemes that prey on the financial deabeats:
http://tinyurl.com/6rv4k8
I am just sick of hearing it all. It's everywhere.
Do you have ad(vert)s like these in Australia?
http://www.nomoremortgage.com/
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