5 ms·

The crash is not coming, it's just returning. The original one was never over. Its effects were just postponed by pouring money in it (aka bailouts and buy-outs

by Revisor 16y ago

The crash is not coming, it's just returning. The original one was never over. Its effects were just postponed by pouring money in it (aka bailouts and buy-outs). The real reasons - ultra high debt of all players, errors in the system, for-profit players not controllable by the three political branches - were not remedied, in fact they might have been even worsened (the debt increased because of the bailouts).

cynicalkane 16y ago
Why does this have 23 upvotes? Nothing of any substance is stated here. Vague comments about "the players" and "the debt"--what players? Whose debt? To what extent an opinion can be extracted from this post, it's wrong. For example, I don't know who "the players" he refers to are, but my guess is they are supposed to be for profit.
- joe_the_user 16y ago
  Because it's true?? Seriously, those who have studied this for a while pretty much know the situation. Sorry if it seems vague to you. The players are large bank, investment houses, and the Federal government at the least. But even more, the entire housing market was temporarily re-inflated to sustain the massive over-valuations that built up over the last ten-twenty years. Of course, all the other bubbles; medical, student loans, etc depended on this inflating to keep going (and there's a Chinese property bubble too btw). Did you notice the auction rate bond market cease to exist around the time of the crisis? We are in a fragile respite from result of the unsustainable economy of 2001-2007 (or longer). Seriously, in 2008, a boulder rolled half-way down a hill and massive world wide spending brought it to a halt. Sorry if I can't give a single factual pointer to all this stuff. It's more a matter of the economy's "big picture". I would recommend Doug Noland's Credit Bubble Bulletin. I'd especially recommend the earlier issue, where he extend's Hyman Minksky's idea of Ponzi finance. http://www.safehaven.com/author/2/doug-noland http://www.safehaven.com/author/2/doug-noland
- Rexxar 16y ago
  I understand "all players" as "households + companies + banks + governments"
  - Revisor 16y ago
    That's what I meant, thanks.
- Revisor 16y ago
  As for the indebtedness, I was speaking about the key layers of the economy - personal/household debt[1], corporate debt and public (government) debt[2]. We've grown accustomed to the debt as a regular part of our life, of how our households, businesses and whole countries work. This is very dangerous. Regarding the unaccountability of the for-profit players, mind you, I'm pro-free-market as anyone here. But this piece of news[3] makes you rethink what happens at the highest level of the market, how the largest enterprises become uncontrollable institutions on their own. [1] http://www.federalreserve.gov/releases/housedebt/ http://www.federalreserve.gov/releases/housedebt/ [2] http://en.wikipedia.org/wiki/File:USDebt.png http://en.wikipedia.org/wiki/File:USDebt.png [3] http://www.rollingstone.com/politics/news/12697/64796 http://www.rollingstone.com/politics/news/12697/64796
  - cynicalkane 16y ago
    That third source is the Rolling Stone article everyone has seen a thousand times, wherein many perfectly ordinary market maneuvers are presented mixed in with a few instances of meso-level shady-looking deals, spiced with inflammatory rhetoric to make everything look bad. Then the whole parade of anecdotes and claims is cast as a sinister, company-wide conspiracy to deliberately profit off ruining the American economy, putting Goldman on the same level as the mythical Illuminati. Of the sources you could have chose to cite, that one isn't the best.
- edderly 16y ago
  I wondered that too. There's widely varying opinions on how much debt is bad. Unfortunately the argument gets reduced to "debt is bad" which is frankly stupid.
  - nostrademons 16y ago
    I don't really understand the confusion surrounding how much debt is bad. Debt is good when it allows you to make more money in the future than your cost of capital. It is bad when your cost of capital is higher than the amount of additional income you derive from that capital. If your cost of capital was greater than the income derived, then you lost money over the long run by taking out that debt. There's only one good in play (money), it's completely fungible, and so this should be self-evident. If it's not, it's also covered in first-year econ. Now, there's a lot of uncertainty as to whether a particular investment will yield returns greater than the cost of capital, and this is why CEOs and CFOs get paid big bucks. But the fundamentals themselves are not hard. Nor is it hard to look at $9T in federal debt, $2.5T in consumer credit, or $600K mortgages taken out by families with $30K in income and realize it's virtually impossible that the additional income generated by taking out that debt will pay for the interest on it.
    - edderly 16y ago
      Ask economists how much debt is bad and you will get vastly different answers. There is genuine reason for confusion. See the arguments surrounding for example the bailout of Swedish (previously) and British banks (currently) - some consider it generically a bad idea to bailout for fear of debt generated but in the Swedish case it paid off and appears to be paying off in the British situation too. This sort of debt was useful right? But because it's a difficult question the easiest answer is to consider debt generically bad, and it is absurd at at least two levels. Firstly, one shouldn't have to describe why lending and reciprocally debt is useful. You also have to ask what else could have been done and the "all debt is bad" brigade usually waffle. Secondly, the cause of the financial crisis was "bad debts" in the form of incredibly risky securitisation schemes. Why the hell were risky loans repackaged as triple A securities. It's like making coins out of butter and bills out of sugar paper. The wailing and gnashing of teeth of how it's our own greed caused this is just a smoke screen for the way the regulation system, capitalism and the chain of involved politians let everyone down. Then people think a penance should be paid in terms of austerity - unfortunately that austerity is as likely to cause even more pain down the stretch.
- thewileyone 16y ago
  You do realize that you just challenged vagueness without substantiating your argument.
px 16y ago
"The original one was never over." Do you mean the collapse of the economy or the stock market crash? They are different. The article is about the stock market which is up close to 50% since the March 2009 lows.
- nostrademons 16y ago
  I assume he means the real economy. Unemployment is down maybe 0.3% from its highs, foreclosures are up, consumer spending never really recovered. By most metrics other than the stock market, we never really left recession.
phjohnst 16y ago
Pretty much, yeah. A bunch of my friends are traders, and it seems that the consensus right now is that as far as the stock market is concerned, nobody knows where this is going (either way), and is scared to take any real position (that's why volatility has been up lately, volumes are down (and not just because it's August). My take is that we're most likely headed for a period of Japan-like stagnation. There are huge structural employment issues in developed countries to take care of, properties are likely very much underwater for many homeowners that do still have jobs in the US, and governments are taking the knee-jerk reaction to the stimulus needed in 08/09 by introducing austerity measures, which will only serve to slow the economy further than it is at the moment. The debt levels in developed economies are still waaay too high, but there is a very real risk of taking the crutches away before the economy can walk again (hence Bernanke returning to easing measures: he sees the writing on the wall). So, while governments worldwide go about trying to tackle the debt problem, growth will slow and there will be little job creation in many sectors. But the real change has to come from the people learning that, fundamentally, they can only spend what they earn, and that debt is not a bottomless pit.
- mkr-hn 16y ago
  I've been thinking the same thing. It's why I don't expect to be able to find my first job any time soon--I'm 26 with an AAS degree and no work experience in a terrible economy. I've got an advantage since I have parents with a big house that's above water. My brother and his fiance are going to ride out some portion of it here with us (they both have good, stable jobs). I'm going to take this opportunity to explore the area around Atlanta (where I live) hoping to run in to some kind of opportunity. I've also got the plan B of using this stable spot to consider cheap to create startups that don't make a lot of money, but do provide a small profit. With minimal (or no) expenses, a tiny profit can go a long way. I think anyone who is in a relatively stable position needs to do what I'm doing and consider small entrepreneurial steps. It may put them in a better place, and it has the potential to take off and create economic activity, which could end the recession sooner. Even if all you do is start a blog in your field of knowledge, you keep your skills sharp, improve them through interaction, and possibly give someone else the spark they needed to do something that will create jobs.

by Revisor 16y ago

cynicalkane 16y ago

Why does this have 23 upvotes? Nothing of any substance is stated here. Vague comments about "the players" and "the debt"--what players? Whose debt? To what extent an opinion can be extracted from this post, it's wrong. For example, I don't know who "the players" he refers to are, but my guess is they are supposed to be for profit.

joe_the_user 16y ago
Because it's true?? Seriously, those who have studied this for a while pretty much know the situation. Sorry if it seems vague to you. The players are large bank, investment houses, and the Federal government at the least. But even more, the entire housing market was temporarily re-inflated to sustain the massive over-valuations that built up over the last ten-twenty years. Of course, all the other bubbles; medical, student loans, etc depended on this inflating to keep going (and there's a Chinese property bubble too btw). Did you notice the auction rate bond market cease to exist around the time of the crisis? We are in a fragile respite from result of the unsustainable economy of 2001-2007 (or longer). Seriously, in 2008, a boulder rolled half-way down a hill and massive world wide spending brought it to a halt. Sorry if I can't give a single factual pointer to all this stuff. It's more a matter of the economy's "big picture". I would recommend Doug Noland's Credit Bubble Bulletin. I'd especially recommend the earlier issue, where he extend's Hyman Minksky's idea of Ponzi finance. http://www.safehaven.com/author/2/doug-noland http://www.safehaven.com/author/2/doug-noland
Rexxar 16y ago
I understand "all players" as "households + companies + banks + governments"
- Revisor 16y ago
  That's what I meant, thanks.
Revisor 16y ago
As for the indebtedness, I was speaking about the key layers of the economy - personal/household debt[1], corporate debt and public (government) debt[2]. We've grown accustomed to the debt as a regular part of our life, of how our households, businesses and whole countries work. This is very dangerous. Regarding the unaccountability of the for-profit players, mind you, I'm pro-free-market as anyone here. But this piece of news[3] makes you rethink what happens at the highest level of the market, how the largest enterprises become uncontrollable institutions on their own. [1] http://www.federalreserve.gov/releases/housedebt/ http://www.federalreserve.gov/releases/housedebt/ [2] http://en.wikipedia.org/wiki/File:USDebt.png http://en.wikipedia.org/wiki/File:USDebt.png [3] http://www.rollingstone.com/politics/news/12697/64796 http://www.rollingstone.com/politics/news/12697/64796
- cynicalkane 16y ago
  That third source is the Rolling Stone article everyone has seen a thousand times, wherein many perfectly ordinary market maneuvers are presented mixed in with a few instances of meso-level shady-looking deals, spiced with inflammatory rhetoric to make everything look bad. Then the whole parade of anecdotes and claims is cast as a sinister, company-wide conspiracy to deliberately profit off ruining the American economy, putting Goldman on the same level as the mythical Illuminati. Of the sources you could have chose to cite, that one isn't the best.
edderly 16y ago
I wondered that too. There's widely varying opinions on how much debt is bad. Unfortunately the argument gets reduced to "debt is bad" which is frankly stupid.
- nostrademons 16y ago
  I don't really understand the confusion surrounding how much debt is bad. Debt is good when it allows you to make more money in the future than your cost of capital. It is bad when your cost of capital is higher than the amount of additional income you derive from that capital. If your cost of capital was greater than the income derived, then you lost money over the long run by taking out that debt. There's only one good in play (money), it's completely fungible, and so this should be self-evident. If it's not, it's also covered in first-year econ. Now, there's a lot of uncertainty as to whether a particular investment will yield returns greater than the cost of capital, and this is why CEOs and CFOs get paid big bucks. But the fundamentals themselves are not hard. Nor is it hard to look at $9T in federal debt, $2.5T in consumer credit, or $600K mortgages taken out by families with $30K in income and realize it's virtually impossible that the additional income generated by taking out that debt will pay for the interest on it.
  - edderly 16y ago
    Ask economists how much debt is bad and you will get vastly different answers. There is genuine reason for confusion. See the arguments surrounding for example the bailout of Swedish (previously) and British banks (currently) - some consider it generically a bad idea to bailout for fear of debt generated but in the Swedish case it paid off and appears to be paying off in the British situation too. This sort of debt was useful right? But because it's a difficult question the easiest answer is to consider debt generically bad, and it is absurd at at least two levels. Firstly, one shouldn't have to describe why lending and reciprocally debt is useful. You also have to ask what else could have been done and the "all debt is bad" brigade usually waffle. Secondly, the cause of the financial crisis was "bad debts" in the form of incredibly risky securitisation schemes. Why the hell were risky loans repackaged as triple A securities. It's like making coins out of butter and bills out of sugar paper. The wailing and gnashing of teeth of how it's our own greed caused this is just a smoke screen for the way the regulation system, capitalism and the chain of involved politians let everyone down. Then people think a penance should be paid in terms of austerity - unfortunately that austerity is as likely to cause even more pain down the stretch.
thewileyone 16y ago
You do realize that you just challenged vagueness without substantiating your argument.

px 16y ago

"The original one was never over." Do you mean the collapse of the economy or the stock market crash? They are different. The article is about the stock market which is up close to 50% since the March 2009 lows.

nostrademons 16y ago
I assume he means the real economy. Unemployment is down maybe 0.3% from its highs, foreclosures are up, consumer spending never really recovered. By most metrics other than the stock market, we never really left recession.

phjohnst 16y ago

Pretty much, yeah. A bunch of my friends are traders, and it seems that the consensus right now is that as far as the stock market is concerned, nobody knows where this is going (either way), and is scared to take any real position (that's why volatility has been up lately, volumes are down (and not just because it's August). My take is that we're most likely headed for a period of Japan-like stagnation. There are huge structural employment issues in developed countries to take care of, properties are likely very much underwater for many homeowners that do still have jobs in the US, and governments are taking the knee-jerk reaction to the stimulus needed in 08/09 by introducing austerity measures, which will only serve to slow the economy further than it is at the moment. The debt levels in developed economies are still waaay too high, but there is a very real risk of taking the crutches away before the economy can walk again (hence Bernanke returning to easing measures: he sees the writing on the wall). So, while governments worldwide go about trying to tackle the debt problem, growth will slow and there will be little job creation in many sectors. But the real change has to come from the people learning that, fundamentally, they can only spend what they earn, and that debt is not a bottomless pit.

mkr-hn 16y ago
I've been thinking the same thing. It's why I don't expect to be able to find my first job any time soon--I'm 26 with an AAS degree and no work experience in a terrible economy. I've got an advantage since I have parents with a big house that's above water. My brother and his fiance are going to ride out some portion of it here with us (they both have good, stable jobs). I'm going to take this opportunity to explore the area around Atlanta (where I live) hoping to run in to some kind of opportunity. I've also got the plan B of using this stable spot to consider cheap to create startups that don't make a lot of money, but do provide a small profit. With minimal (or no) expenses, a tiny profit can go a long way. I think anyone who is in a relatively stable position needs to do what I'm doing and consider small entrepreneurial steps. It may put them in a better place, and it has the potential to take off and create economic activity, which could end the recession sooner. Even if all you do is start a blog in your field of knowledge, you keep your skills sharp, improve them through interaction, and possibly give someone else the spark they needed to do something that will create jobs.