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Whenever such threads or articles pop up on here, I rarely ever see good discussion into the details around why the GFC even happened (much of what I will say i

by hd4 4y ago

Whenever such threads or articles pop up on here, I rarely ever see good discussion into the details around why the GFC even happened (much of what I will say is inspired by Jeff Snider and his excellent Eurodollar University project). I am going to tl;dr it and say (and I know this specific aspect is usually well-covered) that central banking and fiat money itself is at the very heart of it. An extreme shortage of good-quality collateral was why the GFC happened. The housing/mortgage crisis were merely a side effect of a collateral shortage. The usually-deflationary Eurodollar system (in my limited understanding) essentially causes all collateral to become extremely rare, because collateral is basically acting as an offset to unlimited money printing (yes I know Snider hates this term and I don't care, because essentially that is what's happening). Bitcoin is a good "out" for people who want to get off the ride of central banks having the power to basically devalue fiat once the collateral is so tight that the only option is to start printing extra dollars to mitigate the deflationary nature of the Eurodollar. It's either that or gold/silver, both would work, Snider (as far as I know) has said as much in his podcasts. Lyn Alden has talked about Bitcoin as the separation of money and state and while this makes sense, I feel like gold/silver already performed this function adequately in the past. As for what I think would be preferable to use in place of fiat money, that would be silver, it's the best placed one-size-fits-all replacement for fiat. It just may take some time/a lot of pain for people to come round to the idea (again).

rhaway84773 4y ago
> I rarely ever see good discussion into the details around why the GFC even happened There are many, many discussions, spanning nearly a decade now, about why the GFC happened, ranging in all levels of quality. There are very few good reasons to believe that fiat money had anything to do with it. The people who predicted it and made money off it based it on their observation that debt was being issued to people who most likely could not pay it off, which is fine. These were marked as low quality debt. But then that debt was bundled with other similarly low quality debt and after bundling and rebuilding the bundles enough times, they were rated at a level which did not mathematically add up. But what converted this from a financial crisis to the GFC was the issuance of CDS’s worth several orders of magnitude greater than the underlying CDOs which also collapsed at a much greater rate than expected because the underlying assets were much shittier than expected. Add to this the fact that Paulson, ex-Goldman Sachs President who did not allow it to be bought at cents on the dollar (I don’t remember if this was because he personally hated Lehman or if he personally hated the purchasing bank getting a good deal, but it was entirely because of his personal feelings, which led him to override nearly everyone else) leading to a massive run on all banks, in a middle of an already complicated situation where they still needed to unwind all the different CDS’s and other exotic instruments. There’s a reason both TARP and Warren Buffett were able to make massive profits by simply promising to backup the Banks’s assets because their biggest issues was a classic bank run, as opposed to them lacking the actual assets (there were some companies that simply lacked assets, such as AIG, but most didn’t). None of this had anything to do with fiat currency. One reason we know that is that crypto currency based organizations have been speed running a version of this same process many times over the past 6-9 months.
- hd4 4y ago
  Misrepresenting what I said, but okay...
- deleted 4y ago
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- deleted 4y ago
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spinchange 4y ago
"An extreme shortage of good-quality collateral was why the GFC happened" It started with a housing boom in America and housing is not generally poor quality collateral. More money was lent than could be repaid because of the way securitization was being done. Then a bunch of "safe" synthetic derivatives we're created off that bad debt too. The real estate collateral underneath it all was probably the only good thing (and part of the justification for the whole mess in the first place)

by hd4 4y ago

rhaway84773 4y ago

> I rarely ever see good discussion into the details around why the GFC even happened There are many, many discussions, spanning nearly a decade now, about why the GFC happened, ranging in all levels of quality. There are very few good reasons to believe that fiat money had anything to do with it. The people who predicted it and made money off it based it on their observation that debt was being issued to people who most likely could not pay it off, which is fine. These were marked as low quality debt. But then that debt was bundled with other similarly low quality debt and after bundling and rebuilding the bundles enough times, they were rated at a level which did not mathematically add up. But what converted this from a financial crisis to the GFC was the issuance of CDS’s worth several orders of magnitude greater than the underlying CDOs which also collapsed at a much greater rate than expected because the underlying assets were much shittier than expected. Add to this the fact that Paulson, ex-Goldman Sachs President who did not allow it to be bought at cents on the dollar (I don’t remember if this was because he personally hated Lehman or if he personally hated the purchasing bank getting a good deal, but it was entirely because of his personal feelings, which led him to override nearly everyone else) leading to a massive run on all banks, in a middle of an already complicated situation where they still needed to unwind all the different CDS’s and other exotic instruments. There’s a reason both TARP and Warren Buffett were able to make massive profits by simply promising to backup the Banks’s assets because their biggest issues was a classic bank run, as opposed to them lacking the actual assets (there were some companies that simply lacked assets, such as AIG, but most didn’t). None of this had anything to do with fiat currency. One reason we know that is that crypto currency based organizations have been speed running a version of this same process many times over the past 6-9 months.

hd4 4y ago
Misrepresenting what I said, but okay...
deleted 4y ago
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deleted 4y ago
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spinchange 4y ago

"An extreme shortage of good-quality collateral was why the GFC happened" It started with a housing boom in America and housing is not generally poor quality collateral. More money was lent than could be repaid because of the way securitization was being done. Then a bunch of "safe" synthetic derivatives we're created off that bad debt too. The real estate collateral underneath it all was probably the only good thing (and part of the justification for the whole mess in the first place)