Site Presented By
Sunday, Nov 8, 2009
re: We have seen this coming.
Yes, Master Yoda, that is a fact. I thank you for the many articles to which you have pointed me and your own learned posts over the years that have given me even the modest understanding of the situation I now (think I) have.
We might also now conclude that, like virtually every other matter since Bush took (and I do mean "took") office, we have been systematically lied to about the economy. Think about it: This is the same bunch who sold us the snake oil of WMDs, who have been busted by government scientists for purposely skewing scientific data to conform to policy, etc. What makes anyone think they haven't done exactly the same thing with all the economic data put out by the government, upon which honest people rely for guidance?
As with the disaster in Iraq, these non-reality based goofballs think that they can just conjure up an alternate reality at will.
The problem is, objective reality always rears its ugly head.
The mortgage scam is only the tip of the iceberg. The same thing is going on with your credit card debt which is also packaged and resold to each other. With interest rate for sub-prime creditcard borrower exceeding 30% and equity refinancing shut off it's only a matter of time before it hits the fan. When that happen it won't be a pretty sight.
1. Interest rates have gone down, over the past month, over the past week. This does not square with the idea that money is scarce. Is the the central bank intervention effect? Maybe it is just too soon to measure? Does not make sense yet.
2. I learned a little economics when I had to go to summer school at the U. of Michigan in 1972. At that time, I learned, and I wondered why every American does not learn this stuff in junior high. Indeed, why not?
Americans would be richer and happier if they knew something about economics. Plus, they would have no excuse now.
This article was helpful. It seems to point to the same type of unpredictable tangle that we are seeing now in the real economy as capital seeks cheap labor and production facilities. Because none of that is transparent, unforseen dependencies arise, and when something breaks, things can unravel in spectacular ways.
Some things I don't quite understand, though. If a CDO is a seen as a package, how is it that people invest in different tranches? That is, if you can pick which tranche you buy, how is that any different from treating each tranche as an independent investment?
Or is the idea that, because the tranches are presented to the ratings companies as "a package" they only issue one rating for the whole, so an equal-weighted combination of AAA and CCC ends up looking like BBB (or something like that)?
I'm wondering what responsibility the ratings companies really bear? Did they somehow conceal the risk, or is this one of those wink-and-nod corporate things where they blindly accepted ("in good faith") absurd projections about default rates from whoever packaged the CDO?
Another thing I don't understand is all these billions of dollars that the (surprisingly panicky) central banks are said to be pouring into the world's economies. How do they do that? I mean... surely they're not just giving the money away. Either they're loaning cash to banks or... they're actually buying these junk loans so the banks can get them off their balance sheets while becoming flush with cash and able to... uh... make more loans (after the bonuses to management, of course). Is that it? Even if it works, the chickens must come home to roost at some point, right? Or is it just that they won't roost on the banks... it'll fall on us instead?
But I guess the really scary thing is that nobody knows who holds these increasingly risky assets or how much they may have leveraged them. The web of who-owns-what is too complicated and private, so we just won't know until more companies, perhaps even very large ones, start reporting unexpected losses. So what started out as a risk management exercise ends up creating a situation where risk is unknowable?
It is not only the CDO market but GMAC which was thought to be as good as gold is now a junk rated credit and the market capitalization of GMAC paper is pretty huge and then there is the CDS(credit default swaps) which I have not looked at lately but have to believe liquidity is not great there, I am sorry to be cynical but it has all been a deck of cards and the investment bankers only have there bonuses in mind every year and try to get as many securities to market as they possibly can why do you think they have made the exhorbitant bonuses that they have made. The whole focus of the markets has always been the next deal, the next pay check, at some point this was going to happen. The only question is how long and how bad. Do the bankers really care, of course they care, if the market is suddenly illiquid no deals no bonuses but they have plenty of moneyin the bank. If your net worth is $50 million, how much more money do you really need? Of course in their minds,more!!!!
The person this really hurts is the mom and pop investor as usual....... Personally, I hope there is a huge correction, this scam game has been going on for far too long!!!!!!!!!!!!!!!!!!!!!!!!!!!
The revisions to the Bankruptcy Laws in April 2005 that made it more difficult for individuals to declare bankruptcy certainly looked at the time like a storm on the horizon. Now the wind is picking up and it is starting to rain.
Most Americans are not savvy investors. We have knowledge of things like graphic design, small engine repair, niche marketing, teaching methods, asphalt engineering, dental reconstruction, vascular surgery, short order cooking and web site publishing.
We have put our financial faith in a couple of simple, time-tested ideas. One was that the value of your property will always increase. Another that, as the television commercials used to say "To get a good job, get a good education."
Now we find that our mortgages might ruin us financially, despite the fact that so many of us are working as hard and as much as possible.
Meanwhile, young people are leaving college with mortgage-sized debt that will likely take decades to repay. (And there are corollaries to that situation which we hardly even suspect yet, such as the sense that it makes no sense to amass debt for a career that will not return enough income to repay the huge debt. So we become a nation of "trained professionals", and the idea that college should deliver an education - not just training - seems somehow quaint.)
We see discussion here about "warning signs". Hell, the whole thing was planned. That's what the change to the bankruptcy law was about. In a world where natural resources are becoming scarce, one of the easiest things to do is to mine your assets, harvest your wealth.
Much of the initial coverage about Fort Hood turned out to be wrong. Is there anything wrong with that?
The accountability imposed by another country for the CIA's kidnapping and torture reveals much about our own.
Fox News' morning show plays to type, talking about whether Muslims in the Army should face "special debriefings"
219 Democrats and one Republican join in favor of the legislation, which passed by a narrow margin
The survivor and author is upset about comparisons some on the right are making to genocide
Salon headlines in your mailbox
