On Apr 13, 11:35 am, kujebak <kuje...@[EMAIL PROTECTED]
> wrote:
> On Apr 12, 4:44 pm, Karel Kriz <ka...@[EMAIL PROTECTED]
> wrote:
>
> > In article
> > <5b0b13fb-4967-4341-a405-e98876eff...@[EMAIL PROTECTED]
>,
>
> > kujebak <kuje...@[EMAIL PROTECTED]
> wrote:
> > > 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?
Having re-read the above, I've realised I'd meant for the above
sentence to continue: "...in lending practices?"
> > > >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.
To a major extent, certainly.
<...>
>
> > > > 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.
True; I have again quite clearly not put the sentence above together
very well. I meant to say that counterparty risk is the main reason
for the *current stage* of the credit crunch and why it is now likely
to get a lot worse still.
> > > 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.
I agree. In addition to similar factors, we have also had the
government hand out free cash to anyone who wanted to buy their first
home. So even those who could not get a deposit together could
suddenly do so.
> > > > > 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.
It comes from the same book of political populism that came up with
the great idea of giving many thousands of dollars to the victims of
New Orleans floods who had neglected to insure their homes.
Unsurprisingly, others, who *did* insure are now wondering why they'd
bothered and are less likely to do so in the future.
I mean, why would you if the government will bail you out?
> > > 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 same mechanism operates through most middle class welfare schemes.
The problem is, do you have any politicians in the States that would
admit this and behave accordingly? Because we certainly don't have
them here in Australia.
> > > 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
The fool and his money are soon parted. That is one universal truth.
> > > 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/-Hide
quoted text -
I haven't seen anything quite like that, but then I don't watch TV, so
can't say that we definitely don't. There's no shortage of schemes
aimed at the gullible though. Often it is quite amazing what sort of
people fall for them. If anything, they serve as a clear proof that
nominal IQ and/or formal education levels attained have nothing
whatsoever to do with common sense.
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