Finance Crisis

[Happy Times]

There is a superb history book aboiut the link between economy, military spending and state of a nation: Paul Kennedy: "The Rise and Fall of the great Powers. Economic Change and Military Conflict 1500-2000".

Great book indeed.

I just think present situation has other factors also. But searching what to blame just becomes irrelevant, when people have to survive trough this. I spent last day sitting down with my father and brother, talking honestly about each others economic situation. We made plans and promised to support each other if need be. This was just in case, because people, do not underestimate the seriousnes of the situation. Do not keep large sums of money, atleast in the bank, keep cash home, trade it to something that keeps its value or make a long term investment(careful).
EU isnt immune and if i lived in US, i would prepare for the worst case scenario.
People take insurances normally from a company, but if you cant trust the company to even be around long, you have to create your own insurances. Food and other essentials, physical protection of lives and property(guns, security), something that doesnt loose value to trade with(gold is the best).
Now someone might laugh, but if the threat realizes itself, you will be the one laughing.
I just hope all the Subsim people get trough this and lets hope/pray that we get a small miracle, just dont leave it to just that.

[PeriscopeDepth]

My perception is that much of this was caused by people in the finance industry getting away with too much for too long. Am I in the ballpark here?

I think I'm going to go to grad school, hopefully when I come out this will blow over. I have a feeling recruitment advertising isn't going to be a hot market for the next couple years.

PD

[Happy Times]

My perception is that much of this was caused by people in the finance industry getting away with too much for too long. Am I in the ballpark here?

Yes, tough its a debate is it build in the system or could it be controlled. Who cares now.

I think I'm going to go to grad school, hopefully when I come out this will blow over. I have a feeling recruitment advertising isn't going to be a hot market for the next couple years.

Sounds like an OK plan.

[Onkel Neal]

Originally Posted by Skybird

It seems the finance system in Amerika learns that changes are leading that far that it no longer is the same world ....

I think you mean "America".

[Tchocky]

Depends on the language, Neal

ANyway, Sky, it's not just the American financial system that's hurting. The current mess is extremely globalised, it was only the subprime collapse that started the ball rolling.
Only two of the Big Five US independent investment banks remain, I wonder how many there will be in a few weeks. Me, I expect Goldman Sachs to start buying commercial banks for stability. Not sure about Morgan Stanley, apparently half of their workforce is going over the Lehman collapse with a microscope, and the other half are trying to de-link their assets from debt markets.

Tiny twinge of schadenfruede when I saw Merrill Lynch selling itself. They wouldn't give me a job :p

[Hitman]

Hmmmm nobody else here thinks that the high oil prices were one of the most important reasons for the crisis detonation? :hmm:

148$ oil means brutal inflation, which in turn means high interest rates, which in turn means many people can't pay the 45 years variable interest rate mortgage they stupidly signed, which in turn means.....BOOOOMM, a torpedo under the waterline of many banks.

[Jimbuna]

Originally Posted by Hitman

Hmmmm nobody else here thinks that the high oil prices were one of the most important reasons for the crisis detonation? :hmm:

148$ oil means brutal inflation, which in turn means high interest rates, which in turn means many people can't pay the 45 years variable interest rate mortgage they stupidly signed, which in turn means.....BOOOOMM, a torpedo under the waterline of many banks.

...and a lesson about not encouraging people to take out high risk loans that obviously will become problematic to make the repayments on one day....not learnt/heeded by the greedy, profit driven banking sector.

[Konovalov]

Shortage of liquidity in the banking system doesn't help.

[Skybird]

Inflation doesn't help either.

There is a tumor in the system, very deep inside, and it has infested both bones and neural system. Removing it is a very bloody, painful and risky operation. But it needs to be done. when you are sick, it is too late for prevention, and you need to suffer what you have to. Living healthier was for the time before. In the past 12 months, hundreds of billions have been pumped into preventing shaken major players from falling. Longterm stablizing result: almost zero.

And isn't it that when banks can make profits at others' costs, they do not want to share with anybody and even betray customers and make wrong calculations about real costs for investements, but if they mess it up and have to pay and found they brought themselves into troubles, they call for help and social solidarity - and suddenly the taxpayer is expected to pay the damage in their place?

the system itself is th problem, and in the end ou culture. Our culture encourages brutality and egoism at the cost of others - if you can make a profit from that. Seen that way the crisis is what our societies deserved. The problem reaches far beyond the obvious, superficial facade.

[joegrundman]

ZOMG!

85 billion taxpayer dollars just went to bailout AIG. 85 billion! the mind boggles. That's got to be more than the company has ever made!

http://news.bbc.co.uk/2/hi/business/7620127.stm

AIG will get an $85bn loan, in return for an 80% public stake in the firm.

long live nationalisation!

[Hitman]

And isn't it that when banks can make profits at others' costs, they do not want to share with anybody and even betray customers and make wrong calculations about real costs for investements, but if they mess it up and have to pay and found they brought themselves into troubles, they call for help and social solidarity - and suddenly the taxpayer is expected to pay the damage in their place?

Agree. The only way to look at it from the taxpayer's point of view is by considering that you are trying to help some thousands of innocent workers in that bank. But whenever public help is needed, IMHO it should always mean destitution of the whole directives of the bank and forcing them to pay the black hole they have created, elseif going to prison.

The system itself is th problem, and in the end ou culture. Our culture encourages brutality and egoism at the cost of others - if you can make a profit from that. Seen that way the crisis is what our societies deserved. The problem reaches far beyond the obvious, superficial facade.

Agree even more But the sad thing is that probably nobody will learn from this

[Rockin Robbins]

Socialist perspectives on economic issues are always most amusing.

While technically private enterprises, FNMA and FHLMC are quasi-governmental agencies put together for one purpose. That purpose was the feeling that all are entitled to own a home whether they can afford it or not. In the 1990s great pressure was put on financial institutions to grant loans to the "less fortunate," who could not qualify for a loan under present guidelines. These two agencies were formed to purchase these bad loans from banks and thereby insulate them from the consequences of their coerced foolishness. In a way you could call it hush money. People do what they are paid to do* in any sort of society. Greed is irrelevent in this equation. The responsibility lies with who makes the money available and what they are paying for. The government (disguised as mild-mannered FNMA and FHLMC) paid the banks to make bad loans. We got lots of them!

As such entities often do, FNMA and FHLMC proceeded to eat up mortgages until they owned the vast majority of home loans in the country. At this point, they were so large that failure would be catastropic to the economy. When the housing bubble created by the easy money these agencies made available inevitably burst, the US Government had no choice but to reveal the true nature of these fake private corporations by taking over. That was the situation all along. It was just disguised.

What we are seeing is the predictable consequence of dishonestly applying socialist policies in a capitalist society. If we decide that it is in the national interest for the people who earn enough money to be forced to pay for houses of people who do not, then just pass a law, confiscate the money and do it. Setting up paper tigers and knocking them down for public amusement is beneath contempt.

*Rockin Robbinsism #5

[joegrundman]

Does that go for AIG, Merill Lynch and Lehman too?

[Hylander_1314]

This is what happens when loans for homes are made to those who don't qualify, or will knowingly go into default. It all looked great when things were on the upside. Only thing is, nobody was talking about the downside, as if there could never be one.

Same attitude prevailed before the crash of 1929, that sent the world into the dpression that led up to WWII.

This is one of the reasons the Founding Fathers of the United States of America tried to keep a central banking institution like the Federal Reserve from ever coming into being. But they also had a thing called 'debtors prison' in those days. Today we call it bankruptcy. I think the latter makes people think a bit more before they act.

[Gorduz]

In Norway allmost all banks must pay into a fund that the state control. This fund is used to guarantee that all deposits upto 400.000$. This means that you don't get panic withdrawal of money when the banks are in enough trouble allready.
There is nothing wrong with socialistic approaches in a market economy, but they need to be clear and equal for all partisipants, so that the goal of a free competition is conserved.

BTW I read an article in a paper two years ago predicting this, a colapse in the economy. This is of course not sensational but the reason they had was very good and easy to understand. Wearing pink shirts became "in" again!, and thats the clearest sign that the economy is unhealthy..