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you know that the people of america are the blame for the bad economy?
i see most ppl say its the managers or even the new candidates for election. but it's the people who lean money from a bank. when there is more leant then a country can build then there's got to be a time when people want to get savings while a bank doesnt have moeny anymore.
a bank only has to have about 25% of the money they actually say they have. so if your backaccount says you have saved 50 000 dollars than you can get it all. but if an bank would have 1 million in the vault they could have 4 million divided over people. because they think people will not demand their money back all at the same time.
this is not breakable. this is not going away.. i think this is going to be the end of the capitalism in america. at least for now..
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dude...
what the fuck are you talking about, woopy?
anyway, i thought that the fed earns about 6 billion a year and donates its excess (after paying its workers and paying for its expenses) to government coffers. or at least, thats what they told me when i visited the fed building in boston
and one of the best reasons for not voting for mccain is that the would extend the bush tax cuts. with a projected 10 trillion dollar deficit by 2011, there is really no way that we can afford to not repeal the tax cuts, never mind extend them
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On September 20 2008 23:50 kpcrew wrote:
anyway, i thought that the fed earns about 6 billion a year and donates its excess (after paying its workers and paying for its expenses) to government coffers. or at least, thats what they told me when i visited the fed building in boston
Yes, but it's not about the direct benefit, which they give away. It's about their policy and decisions which benefit the corporations built around it indirectly, such as banks, which in fact are the true stockholders of it.
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On September 20 2008 23:50 kpcrew wrote:
dude...
what the fuck are you talking about, woopy?
I think he's implying the end of capitalism will be caused by bank runs due to fractional reserve banking. I disagree.
I do agree that many people took out loans which they shouldn't have down so they could speculate on the housing market. However, the basic economic tenet that people respond to incentives is true in this case. If the banks feel risk is so low and allow people to borrow four or five times their income simply based on self certification then sure, why not? Even if the value of your house falls then you can always default. Not to say everyone likes to default, which is why mortgages on family properties are rated more highly in mortgage portfolios but if you're in negative equity then the incentive to default is certainly there. Especially if the original loan to value ratio exceeded 90%.
Alan Greenspan possibly kept interest rates too low for too long. Understandably, it is hard to recognize the difference between genuine increases in stock prices because of fundamental changes and a "bubble" and even if you could spot a bubble monetary policy is too "blunt" to deflate a bubble without affecting other areas of the economy which you may not want. I'm not sure how to go about deflating asset bubbles, maybe increasing capital gains tax and corporate taxes might provide the needed incentives but then again various perverse outcomes may arise as is often the case. The government's backing of Freddie and Fannie has been and is disgusting. From Steven Levitt's blog:
The government guarantees allowed Fannie and Freddie to take on far more debt than a normal company. In principle, they were also supposed to use the government guarantee to reduce the mortgage cost to the homeowners, but the Fed and others have argued that this hardly occurred. Instead, they appear to have used the funding to rack up huge profits and squeeze the private sector out of the “conforming” mortgage market. Regardless, many firms and foreign governments considered the debt of Fannie and Freddie as a substitute for U.S. Treasury securities and snapped it up eagerly.
Similarly, the attitude large institutions involved in the financial system have regarding the possibility of rescue by the government leads to unacceptable moral hazard. Now the popular sentiment is greater regulation on all the banks. I'm fearful the size of government yet again increases just like it increased after the Great Depression. As I've said before, what has happened cannot be changed so in the current situation the government should act to help consumers and perhaps this means socializing losses through tax money, like the Great Depression led to demand for state welfare. However, after the problems are over (unlikely to be soon) the government will most likely take on an even bigger role. For example, Obama talking about how Freddie and Fannie can be restructured and kept under government control. According to this Obama received the third most amount of money from the two institutions. Top spot went to Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. Which highlights the my main distaste for regulation: the large financial institutions can have a lot of lobbying power. Rather than helping consumers the politicians help the businesses. Stigler coined the term 'Regulatory Capture' back in the 1960s I think. It seems to be a very unrecognized problem.
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i thought it was 10%
in any case, i thought that the banking industry and housing industry were both regulated. why would the government decide that more regulation is the key to solving the current crisis, as well as the answer for future problems, rather than a complete restructuring of the system? Does more bureacracy improve transparency?
how key are freddie and fannie mae to the financial system? would the housing system completely collapse without these institutions? it bothers me that the greed of these corporations led to this financial disaster, and yet the taxpayer, most of whom dont own a single stock of these companies, have to bear the burden of their idiocy.
also, how can the government sustain the projected 10 trillion dollar deficit? if not, how would it go about paying off not only the interest, but also the debt? would raising taxes be the only way?
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I remember one "bank robbery" as two normal guys walks into bank and ask for loan for about 50k euros (converted to euros as this happened 1990 or something) for each person. Because bank officials do get good bonuses giving more loans of course they will give. Bank did know that these guys didn't have any income to pay back but these guys vouched each others if they fail to pay loan back. So they left 50k each to drink or something :D
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On September 20 2008 13:59 dybydx wrote:
lawlz. mccain refuses to rescue the economy. he should know that if they fail, hes gonna have to lower the interest rate, spend a shitload to get the american economy out of a depression.
mccain needs a brain.
Not sure where you are reading your news, because that seems about 3~5 days out of date. McCain initially disagreed with the rescue of AIG, then changed his opinion the second day, and suggested before Paulson on an idea similar to the RTC-esque concept that the Treasury was supposedly working on. The overall cost of this measure could break even, if not end up with a profit for the government pending on the pricing mechanism they used. Anyhow, as far as I know both candidates at the moment support the kind of government bailout that is being placed, with McCain keeping a careful distance from Bush.
Rather unrelated, I am disappointed with how McCain sought to distance himself from Bush and his use of populist jibes. Calling to fire Cox was just...eh, wth, need someone to place the blame on much?
Milton - I agree with much of what has been raised about Freddie and Fannie, though it seems like we might be in a better position than previously anticipated. For all practical purposes we have nationalized Freddie and Fannie, as long as the lawmakers are willing to continue to take a tougher attitude toward these two companies. Personally, the backing for those two companies don't come close to the way that the government is so hard pressed to do anything to Social Security and Medicare. We can still touch those companies given a bad enough problem to act as an excuse, but we project endless problems with those two particular social projects and people are going to be stoned and crucified.
kpcrew - Because we can't restructure the system without it actually collapsing, every time we sought to simplify something some lobbying group works against it. Regulation has always been in place so that people can find loopholes about it while the public is sated by them. Well, that's an awfully cynical point of view and probably rather exaggerated, but the basic point remains.
At the moment, Freddie and Fannie are pretty much the cornerstone to the system. The housing system wouldn't completely collapse without those institutions, but that's only an extension of the cornerstone analogy - we can slowly pull out cornerstones while inserting supporting beams to help keep the foundation firm. However, should we seek to rapidly remove these companies (or in the case as feared, for them to face liquidation), that will cause a huge turmoil that could potentially break the whole system.
Tax payers probably own some part of Freddie and Fannie in one way or another, though. :p
As for national debt, it is reasonable to be scared by what it is and what it could mean. The problem is that we look to simply to try to strech it to the very point of breaking and get away with all the benefits associated with deficit spending. Raising taxes isn't the only way to counter national debt, as Clinton era should've showned, but overall it is an issue that's probably best dealt with by raising tax and decreasing spending - something that politicans particularly loath to do in spite of all their claims.
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well i figured that if we just pull of of iraq and afghanistan, we could save a couple billion dollars a week
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i just heard it on the news now. bush is announcing a 700B package.
u know thats enuf to feed the entire continent of africa for what... a generation?
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And what would feeding the entire continent of Africa for a generation do, and what portion of that money would actually go to the people it was intended for instead of the corrupted government officials there? It might not be fair that we who already have so much in comparison to them is spending that kind of money to deal with problems we have created, but Africa as it is won't be fundamentally changed even if we dump that kind of money at it. The efforts of people from other regions of the world working together with Africans contribute to much more, isn't the more efficient thing to do to allow for these people to have the support from a healthy economy to continue their efforts rather than satisfy your own ego by bringing up "we could be feeding the whole of Africa for years to come with this money"?
EDIT - About the package, Obama's claims about how the package should benefit both main and Wall street is disturbing, I can see it as nothing else but attempts to score political capital at a time of strife when the necessity of liquidity going into main street is still questionable. However, that's probably going to gain him more support than McCain's vague comments about how he looks forward to be able to review the specifics of the plan and all.
The government is in a very unique position right now though, and for all practical purposes, a good one. Even if it can't take this chance to essentially steal the illiquid assets at fire-sale prices due to its position, the kind of price they can get out of it could still be decent to good.
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its up to $700 billion
meaning that this amount is the maximum allowed by bush's proposal
so although our debt ceiling is 11.3 trillion now, this doesnt mean that it will go that high. it is just a projection if the maximum amount of money is used by every company that is in trouble. however, if you take aig for example, the fed offered them $85 billion i think. but the fed is a lender of last resort because the terms arent that great. the interest is steep so the money is there if aig choose to use it, but it will use pretty much any other option first, before they consider the help of the fed
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it doesnt really matter for AIG, its either use that money and pay the loan shark interest rate or go bankrupt the choice is obvious. besides, fed is the 80% shareholder, thus, 80% of the interest is paid back to themselves. 
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On the bright side of things, it looks like I won't have to start looking around for insurance anytime soon. The Feds just bought me mine (and all of America's for that matter).
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... and the rest of the world who bought so much of american stocks and bonds.
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So wont the American dollar be worth like half of what it was worth?!
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no the dollar is more because to buy american stocks and bonds, they have to change their money to american dollars which strangely, inflates the value of the dollar instead of cheapening it. its a short-term phenomena, if companies start failing and the government cant save them...
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On September 21 2008 07:08 dybydx wrote:
i just heard it on the news now. bush is announcing a 700B package.
u know thats enuf to feed the entire continent of africa for what... a generation?
um, UM...
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On September 21 2008 11:14 mahnini wrote:Show nested quote +On September 21 2008 07:08 dybydx wrote:
i just heard it on the news now. bush is announcing a 700B package.
u know thats enuf to feed the entire continent of africa for what... a generation? um, UM...
ya... but then again, he wouldnt do it because "george bush doesnt care about black ppl"
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On September 21 2008 14:45 dybydx wrote:Show nested quote +On September 21 2008 11:14 mahnini wrote:On September 21 2008 07:08 dybydx wrote:
i just heard it on the news now. bush is announcing a 700B package.
u know thats enuf to feed the entire continent of africa for what... a generation? um, UM... ya... but then again, he wouldnt do it because "george bush doesnt care about black ppl"
well, its always good to spend as much federal money (aka, it's not yours) as possible before your term runs out.  i guess this was the best he could think of.
(can't believe this topic is still alive >_<
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On September 21 2008 03:46 Milton Friedman wrote:Show nested quote +On September 20 2008 23:50 kpcrew wrote:
dude...
what the fuck are you talking about, woopy? I think he's implying the end of capitalism will be caused by bank runs due to fractional reserve banking. I disagree. I do agree that many people took out loans which they shouldn't have down so they could speculate on the housing market. However, the basic economic tenet that people respond to incentives is true in this case. If the banks feel risk is so low and allow people to borrow four or five times their income simply based on self certification then sure, why not? Even if the value of your house falls then you can always default. Not to say everyone likes to default, which is why mortgages on family properties are rated more highly in mortgage portfolios but if you're in negative equity then the incentive to default is certainly there. Especially if the original loan to value ratio exceeded 90%. Alan Greenspan possibly kept interest rates too low for too long. Understandably, it is hard to recognize the difference between genuine increases in stock prices because of fundamental changes and a "bubble" and even if you could spot a bubble monetary policy is too "blunt" to deflate a bubble without affecting other areas of the economy which you may not want. I'm not sure how to go about deflating asset bubbles, maybe increasing capital gains tax and corporate taxes might provide the needed incentives but then again various perverse outcomes may arise as is often the case. The government's backing of Freddie and Fannie has been and is disgusting. From Steven Levitt's blog: The government guarantees allowed Fannie and Freddie to take on far more debt than a normal company. In principle, they were also supposed to use the government guarantee to reduce the mortgage cost to the homeowners, but the Fed and others have argued that this hardly occurred. Instead, they appear to have used the funding to rack up huge profits and squeeze the private sector out of the “conforming” mortgage market. Regardless, many firms and foreign governments considered the debt of Fannie and Freddie as a substitute for U.S. Treasury securities and snapped it up eagerly. Similarly, the attitude large institutions involved in the financial system have regarding the possibility of rescue by the government leads to unacceptable moral hazard. Now the popular sentiment is greater regulation on all the banks. I'm fearful the size of government yet again increases just like it increased after the Great Depression. As I've said before, what has happened cannot be changed so in the current situation the government should act to help consumers and perhaps this means socializing losses through tax money, like the Great Depression led to demand for state welfare. However, after the problems are over (unlikely to be soon) the government will most likely take on an even bigger role. For example, Obama talking about how Freddie and Fannie can be restructured and kept under government control. According to this Obama received the third most amount of money from the two institutions. Top spot went to Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. Which highlights the my main distaste for regulation: the large financial institutions can have a lot of lobbying power. Rather than helping consumers the politicians help the businesses. Stigler coined the term 'Regulatory Capture' back in the 1960s I think. It seems to be a very unrecognized problem.
I know that's you Moltke. It's ok. You have nothing to hide.
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EPT
