US Financial Crisis

[StraightTalk]

How many of you think the US will drag us all down?

[DrEast]

I think the U.S. government will. But the U.S. is not its government.

[Lights]

Depends on how bad it gets.

Depressions are like a bad cold. Once somebody gets one, they have a tendency to go around.

[Evalind]

Well, is this just another part of the money cycle? It's not like this is the first time the U.S. has had major financial issues... it's just the first time since I've been an adult. ;) I mean, there was a day in 1987 that the Dow fell 22%, and then the early 90's weren't exactly a picnic. Anyway, the "great depression" was the longest recession of the 20th century, and it was, what, just shy of three years long? I have a hard time imagining that this is "the end".

[DrEast]

Well, is this just another part of the money cycle? It's not like this is the first time the U.S. has had major financial issues... it's just the first time since I've been an adult. ;) I mean, there was a day in 1987 that the Dow fell 22%, and then the early 90's weren't exactly a picnic. Anyway, the "great depression" was the longest recession of the 20th century, and it was, what, just shy of three years long? I have a hard time imagining that this is "the end".

The point isn't that the cycle will swing upwards again... the goal is to end the cycle and the ridiculous power it gives the government, and the suffering that comes with both cycle and governmental power.

[Evalind]

The point isn't that the cycle will swing upwards again... the goal is to end the cycle and the ridiculous power it gives the government, and the suffering that comes with both cycle and governmental power.
I was supposed to surmise *that* from the four vague sentences posted above my reply? Sorry, my intuition dragged me a different direction. ;) :p

Sooo... in response to the OP... yes, the U.S. will drag everyone down, but it's won't be permanent. I have no idea how to stop the cycle of a few people getting greedy, doing dumb things, and then not taking responsibility.

[DrEast]

I was supposed to surmise *that* from the four vague sentences posted above my reply? Sorry, my intuition dragged me a different direction. ;) :p

Sooo... in response to the OP... yes, the U.S. will drag everyone down, but it's won't be permanent. I have no idea how to stop the cycle of a few people getting greedy, doing dumb things, and then not taking responsibility.

The traditional method for that last bit is the lynch mob.

Not the BEST method, but the traditional one.

[Linn]

Everything in this world evolves in cycles. Life in itself is a spiral. No one can stop that.

[Dave C C]

If the US is capable of dragging down the rest of the world when it has problems, the rest of the world has become too dependent on the US.

[lisakki]

If the US is capable of dragging down the rest of the world when it has problems, the rest of the world has become too dependent on the US.

You could also say that the world has become too dependent on each other. The more globalization progresses, the stronger the pull of economic interdependence will be. Financial disaster in other countries could have the exact same effect on the US.

The problem with globalization is that no country can resist it. It simply offers too much power to be denied. The downside of being dependent on those countries is a small price to pay for the economic flex that it brings.

[Colette]

Fortunately our banks here in New Zealand seem relatively safe from the banking sector and share market collapses; since they don't source their funds from the complex kinds of financial products the US and UK banking sectors do.

And...since I have most of my personal finances sunk into my house rather than on loan to the bank or invested in bonds or shares, I'm not too worried in any case :)

[Cleansed]

Ah, all this as I begin my college career to major in economics, I coulden't have timed it better... or worse?

[DrEast]

Hey guys! There's a new, massive bailout planned, where the government will buy EVERYONE'S bad investments! If we just throw enough money at the problem, it'll go away! Hooray election cycle solutions!

[Mozzes]

Ah, all this as I begin my college career to major in economics, I coulden't have timed it better... or worse?

I would go with 'worse'. If things go really bad your kind will be among the first to be burned at the stake. :evil:

[DrEast]

This just in... in an unprecedented move, the U.S. government has declared that it is going to simultaneously become the word's greatest importer AND exporter of stupidity. Market values of stupidity skyrocketed.

[Krazy P]

This just in... in an unprecedented move, the U.S. government has declared that it is going to simultaneously become the word's greatest importer AND exporter of stupidity. Market values of stupidity skyrocketed.

LOL!!!!!!

Oh My God, that is too funny!

My job is to deal with this shit for the last week - thanks for the chance to laugh about this!

[reb]

Originally Posted by DrEast View Post
This just in... in an unprecedented move, the U.S. government has declared that it is going to simultaneously become the word's greatest importer AND exporter of stupidity. Market values of stupidity skyrocketed.

i am soooo disgusted! i never get in on the ground floor...this exportation started with deming, and i never caught on to it. and then there was 'outsourcing', and 'contracting out', and i never got in on it...now they announce it, and i have enough stored up, i don't need anymore; the law of supply and demand will eventually even this imbalance out, i think, unless one thinks keynes was part of the importation. such is life....
reb

[Marcus]

I've heard an interesting analysis on the subject today. The question was why hadn't the experts stopped the crisis in time. The answer was partly because they did not see the consequences clearly, partly because a lot of people were interested in sustaining the system: they benefited greatly (i.e. become extremely rich) in the process. The analyst pointed out how the distribution of income has changed in the last couple of years in the US.

[reb]

forgive my somewhat awkward paraphrasing-this from an interview with Sherron Watkins, former Enron VP on the fox network this am-i took notes, not perfectly accurate-but what she sez made perfect sense.

'Current crisis is due to Enron behaviour. Corporate CEOs have everyone on the bus, they are making multimillions. They eject before the bus goes off the cliff. Not correlating risk with penalty of failure.(re compensation systems).'

if you want to become paranoid about the stock market (or just like serious entertainment), watch or read 'The Smartest Guys in the Room' about the Enron debacle.

reb

[Tocsin]

In case anyone hadn't noticed:

$700B rescue plan may not save some troubled banks
By STEVENSON JACOBS, AP Business Writer Sat Sep 20, 7:25 PM ET

NEW YORK - A sweeping government plan to buy up to $700 billion in bad mortgages may not be enough to save some banks, which experts say may be forced to absorb big losses if they sell their troubled assets.

The proposal for the government to soak up the mortgage-backed securities would be the biggest bailout plan since the Great Depression, but experts say a critical issue will be how much it actually pays for the troubled assets.

How the government might acquire banks' toxic debt is still being ironed out, but one approach suggested by Treasury Secretary Henry Paulson involves a process under which financial institutions would propose a price for their mortgage-backed securities and the government would choose the lowest bids.

If banks sell at the proposed price — say 50 cents on the dollar — accounting rules would require firms to take the losses on their balance sheets before getting the damaged assets off their books. For weaker banks buffeted by the deepening credit crisis, the losses may hinder their ability to go out raise capital, make loans and ultimately stay afloat, according to industry experts.

"There is a risk that there will be bank failures to come," said Vincent R. Reinhart, former director of the Federal Reserve's monetary affairs division.

Full Article:
$700B rescue plan may not save some troubled banks - Yahoo! News (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts. BB.s0NUE)

Exclusive: Foreign banks may get help
Mike Allen Sun Sep 21, 8:24 AM ET

In a change from the original proposal sent to Capitol Hill, foreign-based banks with big U.S. operations could qualify for the Treasury Department’s mortgage bailout, according to the fine print of an administration statement Saturday night.

The theory, according to a participant in the negotiations, is that if the goal is to solve a liquidity crisis, it makes no sense to exclude banks that do a lot of lending in the United States.

****

The legislative outline that went to Capitol Hill at 1:30 a.m. Saturday had said that an eligible financial institution had to have has “its headquarters in the United States.” That would exclude foreign-based institutions with big U.S. operations, such as Barclays, Credit Suisse, Deutsche Bank, HSBC, Royal Bank of Scotland and UBS. The theory, according to a participant in the negotiations, is that if the goal is to solve a liquidity crisis, it makes no sense to exclude banks that do a lot of lending in the United States.

But a Treasury “Fact Sheet” released at 7:15 Saturday night sought to give the administration more flexibility, with an expanded definition that could include all of those banks: “Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets.”


Full Article:
Exclusive: Foreign banks may get help - Yahoo! News (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.)

[Krazy P]

In case anyone hadn't noticed:



Full Article:
$700B rescue plan may not save some troubled banks - Yahoo! News (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts. BB.s0NUE)



Full Article:
Exclusive: Foreign banks may get help - Yahoo! News (To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.)

My response is: "no shit, sherlock"

The cost to the taxpayer will be greater than $1 trillion. The $700 billion number is after the bailouts that have already happened. It will probably be more than $1 trillion, but less than $2 trillion.

$1 trillion is about 40% of the current market cap of the entire financial services industry and about 8% of the annual GDP. So, roughly half of the businesses in this sector are going to be gone. Poof. Jobs, etc. Gone.

Now, factor in the drag that 8% is on the national economy. Imagine starting a football game and having to come back from an 8% deficit from the beginning of the game. All things being equal, makes it difficult to compete.

In the U.S. we are in for a recession and a LONG, SLOW recovery - maybe 5 years, maybe longer. If the U.S. is having these issues, you can bet the rest of the world is going to be hurting as well.

We have not had a downturn like this since the 80s. Maybe the world economy is so much more efficient than 20 years ago - that would be great - but I wouldn't make any bets on it.

All that being said, there will be huge opportunities for the skilled entrepreneur. Change always begets opportunity. The greater the change, the greater the opportunity. Fortunes will be made.

I would say if you have experience in handling real estate "workouts" and are good at negotiations, and good at crunching numbers - and have some cash - you will be in fat city... if you have the balls for it!

[thod]

The federal gov collects about 2.6 trillion a year in tax with the rest of it budget coming from borrowing. 300 for the housing bailout, 80 for AIG bailout, 700 for this, varied but could be upto 5000 for fannie and freddy, 100's more in the various fed schemes to the banks.

The US is going to have to raise income tax by 20% to pay for all this. That will bring on the mother of all recessions, or they simply default on it, or they inflate it all away.

[reb]

thod said 'they simply default on it, or they inflate it all away.'

funny money; does not exist. phantom numbers on a page. no intrinsic value...the government is and has been bankrupt. the social contract we all go along with, to wit, that the numbers and the green paper bills have meaning is like the tale of the emperor's new clothes. in truth, money means nothing, only in our minds....another human fantasy lol! init fun to watch the implosion of a society?
reb