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Huge Bailout Proposal--$700 billion--Suck the bad debt out of the financial system

Discussion in 'Politics & Religion' started by earlpearl, Sep 20, 2008.

  1. bogart

    bogart Notable Member

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    #241
    We need to let the derivatives unwind. There is too much leverage. It's great on the way up. But it real bad on the way down.

    What hapeened to all the profits when real estate and the market were going up? Anybody going to give it back?
    SEMrush
     
    bogart, Oct 2, 2008 IP
    guerilla likes this.
    SEMrush
  2. earlpearl

    earlpearl Well-Known Member

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    #242
    Thanks Korr: I'm not a monetarist, but from my research MZM was established in 1991 and acknowledged as a better metric for evaluating supply of money versus economic conditions than M1, 2, or the now no longer tracked M3.

    Regardless, economists back tracked MZM. It appears that long term MZM growth has been about 8% for about 3 decades. Exactly the pattern you are showing for the 2000-2008 period.

    Why didn't any of these crises occur at this level in the past 30 years.

    I think there are dramatically different characteristics that have impacted the markets and caused this collapse. Also I think you are taking an enormous leap in logic jumping from MZM to commodities in general. There are lots of commodities. They are of all types from food supplies to minerals. Mineral commodity prices were decreasing in value for long long long periods while MZM was increasing at 8%/year. What has happened with food commodities? Is world wide production increasing or decreasing. Most commodities are tied to demand and supply that reflect either production or demand for food.

    A few commodities have a very different characteristic, such as gold or silver, used also as characteristics of wealth or holdings with their valuations being partially attributable to production demand and partially attributable to holding for wealth. They have different characteristics.

    The mortgage crisis has nothing to do with valuations against commodities. There was an explosion of piss poor mortgages, primarily of the variable rate subprime category. These are the underlying causes of this economic crisis. They turned bad, and then exposed all the other underlying increases in debt that has fueled the American economy.

    An interesting look at long term debt and where it comes from is supplied at . http://www.ft.com/cms/s/0/a09b317e-898d-11dd-8371-0000779fd18c.html?nclick_check=1
    . by Martin Wolf of the Financial Times. To quote from his discussion of debt...

    Take a look at the graphs supplied in the link and you'll see that the enormous surges in debt broken down by 4 categories; household, government, finance industry, and non finance industry; were primarily caused by huge increases in financial industry debt and household debt.


    I got this strong feeling.......take a look at the explosion of subprime mortgages that started taking off in the mid 1990's and then really really exploded in the first half of the 2000's and you have a vision of how household debt took off.

    That was crappy debt. No or little evaluations of credit worthiness, no or little money down, teaser rates on adjustable rate mortgages with subsequent big increases, loan totals presented on asset values rather than ability to pay the loan off. A recipe for disaster.

    Take a look at financial industry debt. Big big increases in debt levels. While the relative debt.

    I don't see the connection between a form of money growth that has shown consistent growth of 8% over decades against explosions of household and finance industry debt.

    Instead I see breakdowns in credit worthiness and wildly unrestrained financial industry explosions that coincided and imploded when a market bubble for housing prices stalled. All this happened in a relatively short period. Meanwhile long term growth in MZM has been relatively stabile at 8% for about 3 decades.

    I lived thru one of these financial crises before, as I've stated. I first hand saw examples of 2 institutions making a series of loans that made no sense. After looking at a bunch of them I opened my big mouth, and was eliminated from seeing these.

    That process was duplicated by in excess of 1,000 financial institutions doing the same stupid stuff over a bunch of years without any constraints.

    The financial industry explodes into excess every couple of years. Always has. Always will. It makes aggregate amts of loans that so exceed the supply of money that how can money supply have an impact. It simply goes on fire when there are easy ways to make fee money today.

    Put some restraints on them. Then see what happens.
     
    earlpearl, Oct 2, 2008 IP
  3. earlpearl

    earlpearl Well-Known Member

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    #243
    The point above is that debt has increased dramatically faster than the money supply. It has increased far more rapidly in the financial and consumer sectors than government or corporate (non-financial) sectors.

    In that regard it isn't tied to money growth but increases based on independant factors.

    Try these. 1. Consumers are taking on debt like it is going out of style. There are no constraints. Consumers turned to subprime mortgages which were crap. Ultimately this garbage got consolidated and sold world wide. Its not a strictly US monetary problem. 2. Financial institutions have similarly increased debt like it is going out of style. No constraints. The institutions which went down first had among other problems debt to equity ratios that approximated 30 to 1. Huge leverage. Risky leverage.
    Liquidity for debt is world wide and not restricted to the US. World wide liquidity is flowing everywhere.

    As much as the US may or may not be growing or constraining the money supply the availability of debt with loose terms, and world wide liquidity has fueled the growth of debt.

    I don't see it as a monetary problem. I see it as a easy debt problem. Tighten access to credit going forward and overstated debt doesn't explode again.



    Now it turned bad. Now we have to pay the piper.
     
    earlpearl, Oct 2, 2008 IP
  4. Firegirl

    Firegirl Peon

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    #244
    House has just passed the bill with a vote of 263 to 171 in favor.....

    Only time will tell....
     
    Firegirl, Oct 3, 2008 IP
    GRIM likes this.
  5. GRIM

    GRIM Prominent Member

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    #245
    Could the dems of been anymore partisan in their speech after the fact? I didn't watch it all, just bits and pieces, sure came off as it though. 'Frank this, and Obama that'
     
    GRIM, Oct 3, 2008 IP
  6. earlpearl

    earlpearl Well-Known Member

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    #246
    I'm glad they passed it. IMHO, throw all the theories, the politics out the door. We are in uncharted territory for the US, with a situation that could resemble the Great Depression. There aren't any decision makers, major economists, big or small business people around today who were making critical decisions then.

    Forget who it bails out or doesn't. Forget the problems with more debt. We are looking at meltdown with enormous loss of jobs without some massive efforts to fix it.

    I still go with an effort at buying the real estate debt at big big discounts with the only caveat being don't buy so low that it drives these banks that provide credit to the economy, out of business.

    My gut is at $0.25 on the stated dollar, but truthfully the market will determine these purchases.

    The whole thing will take some years to work through. The last time the US did something like this was on a relatively mini level with the Resolution Trust Company (RTC) buying up debt and commercial real estate and reselling it over years. By the end of the process, the Feds owned nothing. Everything it swallowed up it resold. It all wasn't pretty and all the transactions weren't winners. I read in one recent piece how Louisiana folks recalled that the Feds resold properties at too low a price, thereby elongating depressed real estate values in that market. (hmmm....maybe the area just had a sucky market).

    In the meantime I hope this generates some very quick confidence in the banking community allowing for some extensions of credit that are desperately needed right now.
     
    earlpearl, Oct 3, 2008 IP
  7. PioneerGold

    PioneerGold Well-Known Member

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    #247
    I can't freaking believe this BS passed!

    There goes a lot of respect I had for the United States government.

    They basically just stole money from every holder of Federal Reserve notes in the country.

    My anger is great at this moment.

    The US is now accelerating down the road toward destroying the middle class.
     
    PioneerGold, Oct 3, 2008 IP
  8. smatts9

    smatts9 Active Member

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    #248
    I'm hoping for big dubya to give us one final "F" you and veto this shit. I would laugh my ass off.

    I can dream can't I?
     
    smatts9, Oct 3, 2008 IP
  9. GRIM

    GRIM Prominent Member

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    #249
    He already signed it ;)
     
    GRIM, Oct 3, 2008 IP
  10. debunked

    debunked Prominent Member

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    #250
    He was the one who was pushing for it to begin with, why would he veto it? His fiscal policies are like a schizophrenic, cut taxes like a conservative and spend like a drunken liberal....
     
    debunked, Oct 3, 2008 IP
  11. PioneerGold

    PioneerGold Well-Known Member

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    #251
    For anyone who claims to support this, the next time I hear...

    trickle-down
    pull yourself up by your bootstraps
    self-reliance
    free market
    capitalism
    democracy
    personal responsibility
    land of opportunity
    beacon of hope

    to describe the United States, I know you have no credibility.
     
    PioneerGold, Oct 3, 2008 IP
  12. debunked

    debunked Prominent Member

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    #252
    The bailout is a form of trickle down according to the creators of it. Supposedly will save or add new jobs. Just have to wait and see now that it went through.
     
    debunked, Oct 3, 2008 IP
  13. thsadmin

    thsadmin Notable Member

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    #253
    I don't think they had a choice .... after the first knock back and the effect it had on the global market .... could we have gone through that again ? so in saying yes - it really was their only choice. Could this be Bush's last dumb stunt ?

    I say fuk the war in Iraq/Afghanistan and where ever else they are going to send troops and pull the troops out - save millions per day there already and then the returning soldiers have heavy pockets, they're young so buying and spending is what they will do .... the soldiers money would add a nice amount to the economy.

    Oh well the Aussie dollar continues to drop and I am paid in US dollars - just mens that I am being paid 20% more now .... was 97cents to the US$ and now it's under 78cents .... woot.
     
    thsadmin, Oct 3, 2008 IP
  14. wisdomtool

    wisdomtool Moderator Staff

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    #254
    Yeap, went to Yahoo Finance and first thing I saw was Dear Bush with his lovely pen on the Bill......

    The next thing I saw was news that the credit market was claiming the $700 billion bill really wasn't enough. IMHO nothing is enough for these greedy banks and finance companies. They destroyed themselves trying to outdo each other giving mortgages to dog kennels or invisible houses and they are now asking for money to help pay for such "houses".

    We are in uncharted territories which is very true but sometimes common sense can help a lot. Tighten the belts and work harder are better than borrowing more and more from the loan sharks. Let the banks runs begin, let the fittest survive and not those with the most political connections.

     
    wisdomtool, Oct 3, 2008 IP
  15. smatts9

    smatts9 Active Member

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    #255
    Wait for when Obama/McCain whip out their pens and sign a big 'ole $10 trillion bailout, you heard it hear first.
     
    smatts9, Oct 3, 2008 IP
  16. wisdomtool

    wisdomtool Moderator Staff

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    #256
    By then Zimbabwe may come in handy as a shining example of what to do during hyperinflation. Mugabe can act as a financial consultant and I can imagine the hundreds of thousands of Euros (he wont be accepting USD) he will earn on his lecture circuits in USA.


     
    wisdomtool, Oct 3, 2008 IP
  17. bogart

    bogart Notable Member

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    #257
    The Banks were going to win this one. They have stopped making loans the last week. In order to put the squeeze on people and create a credit crisis.

    What are the financials doing with all the liquidity that the FED has injected into the system?

    Barney Franks was one of the guys behind the mortgage mess.

    The the size of the entire Federal debt.

    $700 Billion is a drop in the bucket. The FED has been adding $100+ billion a day in liquidity to US and Foreign Banks this week alone.
     
    bogart, Oct 4, 2008 IP
  18. homebizseo

    homebizseo Peon

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    #258
    I called my banker and asked if people could borrow money and he stated yes. He did say they were following the pre clinton loan qualifiers.
     
    homebizseo, Oct 4, 2008 IP
  19. LogicFlux

    LogicFlux Peon

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    #259
    Haha. He used the term "pre-clinton"? homebizlol
     
    LogicFlux, Oct 4, 2008 IP
  20. homebizseo

    homebizseo Peon

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    #260
    I don't get it. Why is that funny? He is just using different formulas to keep people out of default. The old standard was deemed racist and they had to quit but now it will be the standard again.
     
    homebizseo, Oct 4, 2008 IP