10 ms·

The Great Depression II was on the cards in 2007/2008 before governments took on gargantuan debts to brush it under the carpet. We're all paying for that with

by micv 8y ago

The Great Depression II was on the cards in 2007/2008 before governments took on gargantuan debts to brush it under the carpet. We're all paying for that with governments straining under comically heavy debt loads and interest rates held stupidly low long-term to avoid bankrupting the banks. The last thing we should be doing is allowing the same corrupt institutions which created the crisis loose to do it all over again. It will all just happen again with no room for manoeuvre left.

perfunctory 8y ago
> no room for manoeuvre left no room for manoeuvre within the current system. So we'll have to change the system. Unfortunately, I have not yet seen dissent proposals of what the new system should look like (I don't consider crypto a feasible alternative). Nevertheless, I am optimistic.
radicaldreamer 8y ago
That’s already guaranteed, you can see bubbles everywhere you look today and all of these institutions have grown bigger
MagnitudeFC 8y ago
... and th biggest bubble of them all might be in early stage startups..
nuguy 8y ago
What an over-simplification. The crisis depended on so many things. Ratings agencies. Insurance companies. Stupid people getting loans they couldn’t afford. And Goldman Sachs who were very clever in compounding the entire crisis in order to profit from it (good for them in my opinion). The creditors who provided the loans were giving loans to stupid people, those loans were then rated highly as a source of debt by the ratings agencies, all of it being insured by short sighted insurance companies and then Goldman came in and made it all worse by adding more money to the fire. Take away any of those components and you no longer have Great Depression 2.
- blub 8y ago
  Even assuming you're right (and you're not) that "stupid" borrowers somehow contributed to this problem, a system which depends on everybody being smart and acting logically is about as robust as a castle made of playing cards and as useful as a car engine which explodes as soon as your mileage goes 1km past the scheduled oil exchange mileage.
  - nuguy 8y ago
    I stated a simple and correct fact. In order for bad loans to exist there must be two parties involved: Irresponsible creditors and irresponsible (or stupid) borrowers. This is assuming that the terms of the loans are known by everyone. People lied to get loans but the banks, as many have pointed out, knew exactly who they were loaning to. And the borrowers knew very well that they couldn’t afford these loans. The only way they might not have is if they were not very smart. I am completely surprised at how divisive this one simple fact has been. It is literally impossible to refute this. And your comment on how society would be super fragile if I were right — it is.
    - matwood 8y ago
      > The only way they might not have is if they were not very smart. There is another option. They may have been very smart and operating in the environment they saw around them. This is basically what the big flippers were doing. It's a dangerous game though because when the music stops you do not want to be the one without a chair.
- losteric 8y ago
  > Take away any of those components and you no longer have Great Depression 2. The 2008 collapse was caused by parties unscrupulously seeking profit while blindly trusting the word of their dependencies... willful ignorance in a system of unsustainable but mutually beneficial arrangements. That's a cultural problem. If we had outlawed anything you point out, the end result would be a different house of cards built out of the same unwarranted trust in abstraction layers.
hendzen 8y ago
1) The 700B in assets distributed via the Troubled Asset Relief Program (TARP) have all been sold by the government, earning 15.3B in profit in the process [0]. 2) The federal funds overnight rate has been raised 4 times in the last year with more raises planned [1]. 3) While the federal debt load is high, the actual annual interest paid by the government in servicing the debt is in-line with historic norms [2]. [0] https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/ [1] https://fred.stlouisfed.org/series/EFFR https://fred.stlouisfed.org/series/EFFR [2] https://fred.stlouisfed.org/series/FYOIGDA188S https://fred.stlouisfed.org/series/FYOIGDA188S
- shodan666 8y ago
  $15.3B is 2.19% ROI. It's a bad investment.
- dageshi 8y ago
  I wonder how many of those TARP assets were bought either directly or indirectly via the FED via QE? You would also wonder, why not apply this government intervention to all other industries and businesses that are in trouble? Why does Banking get bailed out and others don't?
  - pcr0 8y ago
    Over 90% of the monetary supply consists of credit as opposed to money. If companies and people can't borrow money, the world economy freezes and banks control credit unfortunately.
    - dageshi 8y ago
      Certainly, you would think they ought to be regulated or constructed in such a fashion where taking down the entire world economy through their own greed should be impossible? As it stands, they reap the profit in the good times, they get bailed out in the bad (and still make a profit I expect). Essentially the taxpayer subsidises and protects one of the richest industries in the world from their own mistakes and greed.
drawkbox 8y ago
Naked short selling [1] and short and distort [2][3] were also a big part of the pump and dump then the crash, they nearly broke the entire market. > During the takeover of The Bear Stearns Companies by J.P. Morgan Chase in March 2008, reports swirled that short sellers were spreading rumors to drive down Bear Stearns' share price. Democratic Senator Christopher Dodd felt this was more than rumors and said, "This is about collusion." Chase was victimized by a similar "short and distort" scheme six years earlier when rumors arose about its purported relationship with Enron. Naked short selling rules went into effect Thursday, Sept. 18, 2008 three days after the Sept. 15, 2008 Great Recession cliff that dropped Lehman and kicked it off [3]. Much cheaper to buy value and extract it when it is cheaper from a crash, the worst kind of players in the market extracted the value from the value creators. Lots of the games played then are back with hedge funds creating movement to skim, short and distort and in some cases try to shakeup companies [3][4]. Amazon, Tesla, Apple, and many more are getting these attacks currently, we aren't ready for another big game, they might truly break public markets next time. [1] https://www.sec.gov/news/press/2008/2008-204.htm https://www.sec.gov/news/press/2008/2008-204.htm [2] https://en.wikipedia.org/wiki/Short_and_distort https://en.wikipedia.org/wiki/Short_and_distort [3] https://www.sec.gov/news/press-release/2018-190 https://www.sec.gov/news/press-release/2018-190 [4] https://corpgov.law.harvard.edu/2017/11/27/short-activism-the-rise-in-anonymous-online-short-attacks/ https://corpgov.law.harvard.edu/2017/11/27/short-activism-th...
- cm2187 8y ago
  Lehman was insolvant, short sellers didn't create the crash nor the recession. 2008 isn't the story of a malicious rumor that went wrong.
  - drawkbox 8y ago
    Naked short selling and pump and dump was in effect which is indisputable by the facts, Lehman was just a trigger point. Making it all about Lehman is disingenuous to the full statement and event. The Great Recession was a value extraction event plain and simple, a banking squeeze in the end. Naked short selling, short and distort and pump and dump were the fuel, the value extractors took from the value creators. The Great Recession wasn't an typical market correction but engineered, many banks and funds paid fines for their part [1][2]. Short and distort is back in full force, gearing up for another round [3]. People will not be ok with 'too big to fail' this time around, and if another Great Recession happens, it may permanently harm public markets for good. [1] https://www.nytimes.com/2016/01/15/business/dealbook/goldman-to-pay-5-billion-to-settle-claims-of-faulty-mortgages.html https://www.nytimes.com/2016/01/15/business/dealbook/goldman... [2] https://www.cnbc.com/2015/04/30/7-years-on-from-crisis-150-billion-in-bank-fines-and-penalties.html https://www.cnbc.com/2015/04/30/7-years-on-from-crisis-150-b... [3] https://corpgov.law.harvard.edu/2017/11/27/short-activism-the-rise-in-anonymous-online-short-attacks/ https://corpgov.law.harvard.edu/2017/11/27/short-activism-th...
hueving 8y ago
Care to explain how historically low interest is bad for governments in debt? Because that is completely the opposite of how it actually works for lenders (high interest destroys them).
- icelancer 8y ago
  His point is that we are at risk of high interest rates causing exactly that, and we are getting used to low interest as if it is normal while piling up more and more debt.
yuhong 8y ago
The entire economy has been debt-based since at least the 1970s.
- pas 8y ago
  Or even sooner. Money is the story of wealth, but the real working and growing economy was almost always about debt. The moment someone invented writing someone wrote a letter of credit. Kings used it, and countries got built on next year's harvests, and of course went bankrupt when that harvest turned out bad.
  - yuhong 8y ago
    It was in 1971 that US got off the gold standard, but yea even in the 1960s there was signs of trouble I think.

by micv 8y ago

perfunctory 8y ago

> no room for manoeuvre left no room for manoeuvre within the current system. So we'll have to change the system. Unfortunately, I have not yet seen dissent proposals of what the new system should look like (I don't consider crypto a feasible alternative). Nevertheless, I am optimistic.

radicaldreamer 8y ago

That’s already guaranteed, you can see bubbles everywhere you look today and all of these institutions have grown bigger

MagnitudeFC 8y ago

... and th biggest bubble of them all might be in early stage startups..

nuguy 8y ago

What an over-simplification. The crisis depended on so many things. Ratings agencies. Insurance companies. Stupid people getting loans they couldn’t afford. And Goldman Sachs who were very clever in compounding the entire crisis in order to profit from it (good for them in my opinion). The creditors who provided the loans were giving loans to stupid people, those loans were then rated highly as a source of debt by the ratings agencies, all of it being insured by short sighted insurance companies and then Goldman came in and made it all worse by adding more money to the fire. Take away any of those components and you no longer have Great Depression 2.

blub 8y ago
Even assuming you're right (and you're not) that "stupid" borrowers somehow contributed to this problem, a system which depends on everybody being smart and acting logically is about as robust as a castle made of playing cards and as useful as a car engine which explodes as soon as your mileage goes 1km past the scheduled oil exchange mileage.
- nuguy 8y ago
  I stated a simple and correct fact. In order for bad loans to exist there must be two parties involved: Irresponsible creditors and irresponsible (or stupid) borrowers. This is assuming that the terms of the loans are known by everyone. People lied to get loans but the banks, as many have pointed out, knew exactly who they were loaning to. And the borrowers knew very well that they couldn’t afford these loans. The only way they might not have is if they were not very smart. I am completely surprised at how divisive this one simple fact has been. It is literally impossible to refute this. And your comment on how society would be super fragile if I were right — it is.
  - matwood 8y ago
    > The only way they might not have is if they were not very smart. There is another option. They may have been very smart and operating in the environment they saw around them. This is basically what the big flippers were doing. It's a dangerous game though because when the music stops you do not want to be the one without a chair.
losteric 8y ago
> Take away any of those components and you no longer have Great Depression 2. The 2008 collapse was caused by parties unscrupulously seeking profit while blindly trusting the word of their dependencies... willful ignorance in a system of unsustainable but mutually beneficial arrangements. That's a cultural problem. If we had outlawed anything you point out, the end result would be a different house of cards built out of the same unwarranted trust in abstraction layers.

hendzen 8y ago

1) The 700B in assets distributed via the Troubled Asset Relief Program (TARP) have all been sold by the government, earning 15.3B in profit in the process [0]. 2) The federal funds overnight rate has been raised 4 times in the last year with more raises planned [1]. 3) While the federal debt load is high, the actual annual interest paid by the government in servicing the debt is in-line with historic norms [2]. [0] https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/ [1] https://fred.stlouisfed.org/series/EFFR https://fred.stlouisfed.org/series/EFFR [2] https://fred.stlouisfed.org/series/FYOIGDA188S https://fred.stlouisfed.org/series/FYOIGDA188S

shodan666 8y ago
$15.3B is 2.19% ROI. It's a bad investment.
dageshi 8y ago
I wonder how many of those TARP assets were bought either directly or indirectly via the FED via QE? You would also wonder, why not apply this government intervention to all other industries and businesses that are in trouble? Why does Banking get bailed out and others don't?
- pcr0 8y ago
  Over 90% of the monetary supply consists of credit as opposed to money. If companies and people can't borrow money, the world economy freezes and banks control credit unfortunately.
  - dageshi 8y ago
    Certainly, you would think they ought to be regulated or constructed in such a fashion where taking down the entire world economy through their own greed should be impossible? As it stands, they reap the profit in the good times, they get bailed out in the bad (and still make a profit I expect). Essentially the taxpayer subsidises and protects one of the richest industries in the world from their own mistakes and greed.

drawkbox 8y ago

Naked short selling [1] and short and distort [2][3] were also a big part of the pump and dump then the crash, they nearly broke the entire market. > During the takeover of The Bear Stearns Companies by J.P. Morgan Chase in March 2008, reports swirled that short sellers were spreading rumors to drive down Bear Stearns' share price. Democratic Senator Christopher Dodd felt this was more than rumors and said, "This is about collusion." Chase was victimized by a similar "short and distort" scheme six years earlier when rumors arose about its purported relationship with Enron. Naked short selling rules went into effect Thursday, Sept. 18, 2008 three days after the Sept. 15, 2008 Great Recession cliff that dropped Lehman and kicked it off [3]. Much cheaper to buy value and extract it when it is cheaper from a crash, the worst kind of players in the market extracted the value from the value creators. Lots of the games played then are back with hedge funds creating movement to skim, short and distort and in some cases try to shakeup companies [3][4]. Amazon, Tesla, Apple, and many more are getting these attacks currently, we aren't ready for another big game, they might truly break public markets next time. [1] https://www.sec.gov/news/press/2008/2008-204.htm https://www.sec.gov/news/press/2008/2008-204.htm [2] https://en.wikipedia.org/wiki/Short_and_distort https://en.wikipedia.org/wiki/Short_and_distort [3] https://www.sec.gov/news/press-release/2018-190 https://www.sec.gov/news/press-release/2018-190 [4] https://corpgov.law.harvard.edu/2017/11/27/short-activism-the-rise-in-anonymous-online-short-attacks/ https://corpgov.law.harvard.edu/2017/11/27/short-activism-th...

cm2187 8y ago
Lehman was insolvant, short sellers didn't create the crash nor the recession. 2008 isn't the story of a malicious rumor that went wrong.
- drawkbox 8y ago
  Naked short selling and pump and dump was in effect which is indisputable by the facts, Lehman was just a trigger point. Making it all about Lehman is disingenuous to the full statement and event. The Great Recession was a value extraction event plain and simple, a banking squeeze in the end. Naked short selling, short and distort and pump and dump were the fuel, the value extractors took from the value creators. The Great Recession wasn't an typical market correction but engineered, many banks and funds paid fines for their part [1][2]. Short and distort is back in full force, gearing up for another round [3]. People will not be ok with 'too big to fail' this time around, and if another Great Recession happens, it may permanently harm public markets for good. [1] https://www.nytimes.com/2016/01/15/business/dealbook/goldman-to-pay-5-billion-to-settle-claims-of-faulty-mortgages.html https://www.nytimes.com/2016/01/15/business/dealbook/goldman... [2] https://www.cnbc.com/2015/04/30/7-years-on-from-crisis-150-billion-in-bank-fines-and-penalties.html https://www.cnbc.com/2015/04/30/7-years-on-from-crisis-150-b... [3] https://corpgov.law.harvard.edu/2017/11/27/short-activism-the-rise-in-anonymous-online-short-attacks/ https://corpgov.law.harvard.edu/2017/11/27/short-activism-th...

hueving 8y ago

Care to explain how historically low interest is bad for governments in debt? Because that is completely the opposite of how it actually works for lenders (high interest destroys them).

icelancer 8y ago
His point is that we are at risk of high interest rates causing exactly that, and we are getting used to low interest as if it is normal while piling up more and more debt.

yuhong 8y ago

The entire economy has been debt-based since at least the 1970s.

pas 8y ago
Or even sooner. Money is the story of wealth, but the real working and growing economy was almost always about debt. The moment someone invented writing someone wrote a letter of credit. Kings used it, and countries got built on next year's harvests, and of course went bankrupt when that harvest turned out bad.
- yuhong 8y ago
  It was in 1971 that US got off the gold standard, but yea even in the 1960s there was signs of trouble I think.