TeamOrange
Don't be that guy
+84|6312
I stole this from another forum, its long but suck it up and read it:


finally something interesting to talk about. I'll try to briefly cover everything, since the best way to speed the economic recovery is to educate the people so they can tell their elected representatives exactly why they're fucking retarded.

first, the "give every American a million dollars" quote was from a recent cnbc interview, can't remember the guys name but he pretty much said that instead of giving $700 billion to Paulson, that we should have just given an equal amount to every tax paying American. Our economy is driven by the consumer, so the best way to jump start it obviously would start with them. It's an idea that will never be implemented but its interesting nonetheless.

Then paulson going back on his previous statement that he intended to buy the bad assets with the money is laughable. What's even more laughable is that Congress gave the money to someone who played a big part in how all this started. I don't personally dislike him but he has no business getting even a cent of any taxpayer money, much less dictating who does get it. Then we have probably the most laughable part of whats happening now with the automaker bail out. Almost the entire $350 billion (the first part of the $700) has been infused into the banking sector (Goldman, Citygroup, etc.), and then we have GM, Ford and Chrysler going to capitol hill trying to get a government loan for another $35 billion (i think? can't remember exact #). I thought the credit lines were thawing out? What happened to the $350b we just gave the banks? Why aren't they lending that money to the automakers instead of the government?

And now we're asking the question that nobody dares to ask. The harsh reality is that no matter what we do or how much money we throw at the economy, it is impossible for our government or any number of governments to stop what's coming. It was recently speculated that the credit-default swap market (debt leveraged against capital which is traded in worldwide markets) has ~$550 trillion in bad assets, which is more than the GDP of the world several times over. Bad assets meaning a mixture of CDO's and securities that were artificially inflated through corrupt investment firms built on the backs of honest Americans.

People are often quick to draw a link between what's happening now and the Great Depression. Back then, there was no such thing as a "security" or a credit-default swap. There was no worldwide stock exchange, there were no mutual funds, and you couldn't sit at your computer and buy/sell as many stocks as you wanted. There was no Federal Reserve to bail you out if you made a bad investment, and no FDIC to guarantee your deposits. Now we have all of these things, and they will serve to ensure that this crisis will be far costlier than the Depression was. Everyone seems to forget that with capitalism comes the potential for incredible profit and incredible loss. Those responsible have and some continue to this day exploiting the freedom of capitalism for their own benefit, and Congress looks on as they line their pockets with your taxes. Paulson wants to stop the recession when the best thing we could be doing right now is accepting the fact that yes, the banks made a huge mistake and must now pay the price. Yes, there will be painful bankruptcy's, yes people will lose their jobs and their retirement, and life won't be easy.

Clearly we've chosen the path of trying to save what never deserved to be saved in the first place. A good analogy being thrown around is that a drug addict going through withdrawal scores some drugs and feels a lot better for awhile, but then withdrawal starts again and he starts feeling really bad, so he gets more drugs, etc. Eventually the money runs out, and because you prolonged the problem for no fucking reason, it'll be that much worst when we actually have to face the truth.

Its been a long read but hopefully worth it. The automakers are just the beginning. The path we are on is a dangerous one, and I fear once the government gets used to bailing out failing industries, it is going to basically be the end of free market capitalism, even though some would say it died long ago. Why are these industries failing in the first place? Bad business models and bad management, but Morales forbid we let capitalism run its course by getting rid of the bad models and bad management and replacing them with new companies and new leadership. That would be unthinkable! Better write another $350 billion dollar check to my buddy Paulson.

edit: wanted to touch on the new mortgage proposal going around to give banks an incentive to refinance people that can't pay mortgages. First of all, giving a bank $600 per mortgage they refinance is fucking stupid, dont know how you could argue that. Second, although the housing market contributed to this whole thing it is hardly the reason we're still getting fucked. Thirdly, it seems the government doesn't understand how the housing market actually functions. They say they want to get people out of renting and/or get them/keep them in their homes they probably can't afford to start with. Right now, for example, lets say you bought a $350,000 house and your mortgage payments are $3000 a month. You could rent that same house for $1500 a month. If this was left up to the market to fix, you would see people moving into the rent market and away from owning. Then it would become $1800 a month to rent that house and only $2500 a month to own. Then eventually it would be $1950 to rent and $2250 to own. Then investors would say, hey this is a nice neighborhood and I can have 90%+ of my mortgage covered by renting it out and in 3-5 years I'll be turning a profit! That's how the real housing market works, and when that SHIT starts happening you know we've turned the corner.

Now what the idiots at the Treasury department want to do is take John who can't pay his $3000 a month and have the government subsidize his mortgage so he only has to pay half that a month, effectively cutting the amount owed in half. Next door you have Jim who, although he had to give up his Cadillac and take his kids out of private school, barely makes his $3000 payment. He gets nothing. So why would anyone who isn't completely insane make the effort to pay when the government is going to come save you from the consequences of your bad decision? They won't, thats the answer idiots. I hope they find some glimmer of intelligence before they go through with this retarded plan, otherwise you won't see the bottom in housing for another decade at least.


I thought it was a very good read and after reading the headline for the NYTimes, Paulson asking for more money, I thought that i would share it with you guys.

Last edited by TeamOrange (2008-11-18 08:41:10)

CameronPoe
Member
+2,925|6556
Two points:

Giving everyone a million dollars is inflationtastic and makes currency worthless.

Failing industries should not be bailed out. Bailing out banks is an entirely different kettle of fish as they are an important and pivotal part of the capital supply chain that drives free market economics.

Last edited by CameronPoe (2008-11-18 08:44:58)

Agent_Dung_Bomb
Member
+302|6737|Salt Lake City

If the feds want to infuse cash into the economy they need to do it like they did during the depression.  The US has a lot of work that needs to be done to fix infrastructure that has been neglected for a long time.  Put people back to work, and have something to show for it when your done.  Right now the banks are getting all this money, but they still aren't lending.  They were so far in the hole they are just hording this money to bring their cash asset/debt ratios back in line.
san4
The Mas
+311|6689|NYC, a place to live

CameronPoe wrote:

Bailing out banks is an entirely different kettle of fish as they are an important and pivotal part of the capital supply chain that drives free market economics.
Henry Paulson has hijacked CamPoe's bf2s account!
CameronPoe
Member
+2,925|6556

san4 wrote:

CameronPoe wrote:

Bailing out banks is an entirely different kettle of fish as they are an important and pivotal part of the capital supply chain that drives free market economics.
Henry Paulson has hijacked CamPoe's bf2s account!
Allowing the international banking system to collapse, in terms of free market capitalism, is analogous to allowing all roads to be made impassable to vehicular traffic.
san4
The Mas
+311|6689|NYC, a place to live

CameronPoe wrote:

san4 wrote:

CameronPoe wrote:

Bailing out banks is an entirely different kettle of fish as they are an important and pivotal part of the capital supply chain that drives free market economics.
Henry Paulson has hijacked CamPoe's bf2s account!
Allowing the international banking system to collapse, in terms of free market capitalism, is analogous to allowing all roads to be made impassable to vehicular traffic.
That's clever but incorrect. Unlike roads, money moves easily. Saudi (and American) gazillionaires can lend money where doing so would be profitable. Good example: Warren Buffet took over the bond insurance market when the bond insurance companies lost their credit ratings. They can go bankrupt now with no disruption to the world or US economy.
CameronPoe
Member
+2,925|6556

san4 wrote:

That's clever but incorrect. Unlike roads, money moves easily. Saudi (and American) gazillionaires can lend money where doing so would be profitable. Good example: Warren Buffet took over the bond insurance market when the bond insurance companies lost their credit ratings. They can go bankrupt now with no disruption to the world or US economy.
Money is moving less easily than it ever has been recently and it is only getting worse. The conduit for these transactions you speak of are: banks. Insolvent banks and lack of trust = impassable roads. I also find your assertion that the bankruptcy of these bond insurance companies, which are not what I would imagine to be conventional banks, has no disruption to the world economy. You're talking about insurance companies not banks. A price must always be paid.

Last edited by CameronPoe (2008-11-18 09:33:40)

san4
The Mas
+311|6689|NYC, a place to live

CameronPoe wrote:

san4 wrote:

That's clever but incorrect. Unlike roads, money moves easily. Saudi (and American) gazillionaires can lend money where doing so would be profitable. Good example: Warren Buffet took over the bond insurance market when the bond insurance companies lost their credit ratings. They can go bankrupt now with no disruption to the world or US economy.
Money is moving less easily than it ever has been recently and it is only getting worse. The conduit for these transactions you speak of are: banks. Insolvent banks and lack of trust = impassable roads. I also find your assertion that the bankruptcy of these bond insurance companies, which are not what I would imagine to be conventional banks, has no disruption to the world economy. You're talking about insurance companies not banks. A price must always be paid.
There's a big difference between "no disruption" and meltdown. Avoiding all disruption is not a worthwhile goal. The key ought to be avoiding meltdown and disaster.

It's true that the conduit for money has been banks, but the banks that need bailing out are not currently an important part of the banking system. They aren't lending. Even by your standard we don't need them, and I totally agree. Letting them die will cause disruption but it won't cause meltdown.

There are strong banks out there that will resume lending when the dying banks are gone and the financial system becomes reliable again. The bailout just keeps the zombie banks alive and delays that day.
CameronPoe
Member
+2,925|6556

san4 wrote:

There's a big difference between "no disruption" and meltdown. Avoiding all disruption is not a worthwhile goal. The key ought to be avoiding meltdown and disaster.

It's true that the conduit for money has been banks, but the banks that need bailing out are not currently an important part of the banking system. They aren't lending. Even by your standard we don't need them, and I totally agree. Letting them die will cause disruption but it won't cause meltdown.

There are strong banks out there that will resume lending when the dying banks are gone and the financial system becomes reliable again. The bailout just keeps the zombie banks alive and delays that day.
San, ultimately the bad debt will have to be serviced - by someone (not those that defaulted by definition of their inability to pay) - who services this debt?
cpt.fass1
The Cap'n Can Make it Hap'n
+329|6697|NJ
Isn't technology going to dictate us into a socialist government/economic system.. One of the major problem out there is that they're are not that many jobs anymore because Computers can do them (exp toll collectors).. So sooner or later we're going to break into a socialist government for people to be taken care of..

The bad debt can be passed off as a wash, right now we're entering into a new era and need to structure a new soci economic system..
san4
The Mas
+311|6689|NYC, a place to live

CameronPoe wrote:

san4 wrote:

There's a big difference between "no disruption" and meltdown. Avoiding all disruption is not a worthwhile goal. The key ought to be avoiding meltdown and disaster.

It's true that the conduit for money has been banks, but the banks that need bailing out are not currently an important part of the banking system. They aren't lending. Even by your standard we don't need them, and I totally agree. Letting them die will cause disruption but it won't cause meltdown.

There are strong banks out there that will resume lending when the dying banks are gone and the financial system becomes reliable again. The bailout just keeps the zombie banks alive and delays that day.
San, ultimately the bad debt will have to be serviced - by someone (not those that defaulted by definition of their inability to pay) - who services this debt?
I don't see why bad debt has to be serviced. Those holding bad debt will take losses. Lehman Brothers' debts were not paid.
CameronPoe
Member
+2,925|6556

san4 wrote:

I don't see why bad debt has to be serviced. Those holding bad debt will take losses. Lehman Brothers' debts were not paid.
That money belonged to somebody. It didn't belong to a bank. The people whose money/capital was used by the banks to lend to others have to recoup their money: otherwise the system falls apart. Why would anyone deal with banks if all of their capital could be whisked away from them due to banking negligence and malpractice? The circulation of capital is the linchpin of free market capitalism.
san4
The Mas
+311|6689|NYC, a place to live

CameronPoe wrote:

san4 wrote:

I don't see why bad debt has to be serviced. Those holding bad debt will take losses. Lehman Brothers' debts were not paid.
That money belonged to somebody. It didn't belong to a bank. The people whose money/capital was used by the banks to lend to others have to recoup their money: otherwise the system falls apart. Why would anyone deal with banks if all of their capital could be whisked away from them due to banking negligence and malpractice? The circulation of capital is the linchpin of free market capitalism.
Deposits would be repaid by the FDIC. The other sources of capital used by banks are provided by investors who accept risk in exchange for a return on their investment. Removing the element of risk (after the investments were made!) would destroy the capitalist system in the US. Sorry, I mean is destroying it. The centrally-planned economy developing in the US means people can make money without creating profitable businesses.

People will provide funding to banks that are not going to misuse it or go bankrupt. It's hard to know which ones those are while the bailout is propping up the dead ones.
CameronPoe
Member
+2,925|6556

san4 wrote:

Deposits would be repaid by the FDIC. The other sources of capital used by banks are provided by investors who accept risk in exchange for a return on their investment. Removing the element of risk (after the investments were made!) would destroy the capitalist system in the US. Sorry, I mean is destroying it. The centrally-planned economy developing in the US means people can make money without creating profitable businesses.

People will provide funding to banks that are not going to misuse it or go bankrupt. It's hard to know which ones those are while the bailout is propping up the dead ones.
FDIC only guarantees up to $250k. This isn't about the element of risk being eliminated - this is about limiting the potential domino effect a major bank collapse would have on the banking community, which is so intertangled one is hard pressed to tell where one bank ends and another begins. The system was the fuckup - one needn't have and shouldn't have a centrally planned economy: desperate times call for desperate short-term/once off measures. There was no bailout in 1929 and look what happened: 40% unemployment in the US. If one can at least soften the blow through mitigation efforts one might not have to suffer that level of pain and such a massive amount of rebuilding. At the moment even hearsay can cause a run on a decent bank: how can anyone bank their cash in confidence at the moment. The bailout should/will only be aimed at those banks whose collapse is worth avoiding and whose collapse can realistically be averted.

The global financial system needs fixing. Bretton-Woods evidently needs to be torn up and a system reflective of the multi-polar modern world needs to be drafted.

Last edited by CameronPoe (2008-11-18 13:19:44)

KEN-JENNINGS
I am all that is MOD!
+2,973|6633|949

CameronPoe wrote:

Bretton-Woods evidently needs to be torn up and a system reflective of the multi-polar modern world needs to be drafted.
That is a very good point.  A tripolar economic system it is - US, Euro, and Asia/North Asia.

Last edited by KEN-JENNINGS (2008-11-18 13:22:23)

Agent_Dung_Bomb
Member
+302|6737|Salt Lake City

san4 wrote:

CameronPoe wrote:

san4 wrote:

I don't see why bad debt has to be serviced. Those holding bad debt will take losses. Lehman Brothers' debts were not paid.
That money belonged to somebody. It didn't belong to a bank. The people whose money/capital was used by the banks to lend to others have to recoup their money: otherwise the system falls apart. Why would anyone deal with banks if all of their capital could be whisked away from them due to banking negligence and malpractice? The circulation of capital is the linchpin of free market capitalism.
Deposits would be repaid by the FDIC. The other sources of capital used by banks are provided by investors who accept risk in exchange for a return on their investment. Removing the element of risk (after the investments were made!) would destroy the capitalist system in the US. Sorry, I mean is destroying it. The centrally-planned economy developing in the US means people can make money without creating profitable businesses.

People will provide funding to banks that are not going to misuse it or go bankrupt. It's hard to know which ones those are while the bailout is propping up the dead ones.
While I see your point, you have to realize that this isn't just a single sector having some slow times, or a single bank in trouble.  The entire economy is going to hell in a hand basket.  Yes, when you invest there are risks, but many of these toxic investments were misrepresented as AAA rated when they were in fact absolute junk that should have carried nothing but the highest risk rating available.

Just keep in mind that SSI is already in trouble with the baby boomers.  If we let this all just crash and burn, the amount of people that would see most or a large chunk of their retirement disappear would only compound this issue many times over.  Chances are that the time required for the economy to rebound after such a crash would leave anyone who is, as of right now, age 50+ would not have enough time to recover their retirement accounts.

Chances are that some institutions will still fail.  However, if we don't slow it down so that some companies can survive by liquidating their assets, without flooding the market with them and further depressing their worth, this will only get worse, with the bottom being anyones guess.
Kmar
Truth is my Bitch
+5,695|6602|132 and Bush

Hate Shepard Smith for a million other reasons. But how can you disagree with this:
Xbone Stormsurgezz
CameronPoe
Member
+2,925|6556
/embarrassment

The CEO of Ford seems like he has his head stuck inside his rectal cavity...

http://edition.cnn.com/2008/US/11/18/mu … index.html

I hope that my US taxpayer friends don't find themselves saddled with the financial failings of this obvious ignoramus.

Last edited by CameronPoe (2008-11-18 16:17:26)

Kmar
Truth is my Bitch
+5,695|6602|132 and Bush

Something is going to snap.
Xbone Stormsurgezz
Turquoise
O Canada
+1,596|6406|North Carolina
I think the OP and san4 have it right.  Nothing good can come from this bailout, just like nothing good came from the first one.
Catbox
forgiveness
+505|6717
the sentiment is changing on the bailouts... people aren't seeing any action from the 700billion package....people are still nervous...banks aren't loaning and the stock market is a rollercoaster
and they are becoming very anti automaker bailout... i feel bad for the auto folks... but Toyota runs without unions in Tenn... maybe if gm goes into chapter 11 and reinvents themselves... that would be great...   giving them 25 billion to make payroll for a few more months isn't the answer...

Last edited by [TUF]Catbox (2008-11-18 23:08:22)

Love is the answer
ATG
Banned
+5,233|6530|Global Command

kmarion wrote:

We've got a sticky for the economy troubles.

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