ViolentPanda
Hardly getting over it.
perhaps, in Thailand, "unmitigated nincompoop" is an especially cruel and vicious insult.
Or perhaps fela saw a chance to wibble about being insulted rather than having to address his own ignorance.
How Bad Do You Think it Will Get?
- Thread starter soulman
- Start date
perhaps, in Thailand, "unmitigated nincompoop" is an especially cruel and vicious insult.
Or perhaps fela saw a chance to wibble about being insulted rather than having to address his own ignorance.
Dillinger4
Es gibt Zeit
perhaps, in Thailand, "unmitigated nincompoop" is an especially cruel and vicious insult.
Or perhaps fela saw a chance to wibble about being insulted rather than having to address his own ignorance.
Again.
I was talking to someone today who wants to believe everything will be sorted next year. I disagreed. No one knows what's going to happen.
I think this 'economic downturn' is going to run and run. Just my thoughts and I could be wrong, but I'm not afraid to share my thoughts.
I think this 'economic downturn' is going to run and run. Just my thoughts and I could be wrong, but I'm not afraid to share my thoughts.
ViolentPanda
Hardly getting over it.
I can utterly understand someone wanting to believe that, because it's our nature that we hope that "bad times" are over as quickly as possible. Unfortunately, though, what we hope for and what we get are usually entirely different things.
As some said earlier, we don't know how much crap is still out there in the financial sector waiting to mature, so "run and run" is probably a sensible perspective to take on the situation.
david dissadent
New Member
As I understand it it is not about 'maturing crap', it is about the market value of assets. Basicaly banks have to have a certain amount of capital on there books for the amounts they lend. Fractional reserve banking. The heart of this has been there CDOs that they have been holding as capital, a CDO is a collateralised debt obligation. These are backed by home loan repayments. This is held on the banks books on a 'mark to market' valuation, that is they are valued against what there current market price is (out on a limb but I believe this is in accordance with tier 1 captial rules under the Basil I treaty.... dont quote me on that). When the confidence in the returns that would be generated from these CDOs fell as the sub-prime crisis began to emerge, the huge rate of defaults in the subprime market as teaser rates ended as repayment rates were reset, people could not meet them. CDS's became 'toxic', people could not work out how much they should be valued at. Banks suddenly had to start writing down vast sums as provision for losses in there CDS portfolios. There was quite a kerfuffle over the mark to market rule as confindence in CDSs became so low it is possible that people were undervaluing them. Banks could not sell them to raise capital in dollars or other means as if they did there market value would be exposed and they would have had to write off many billions in there assets meaning they could no longer lend money, and they would potentialy be undervaluing billions in assets with such low market values.As some said earlier, we don't know how much crap is still out there in the financial sector waiting to mature, so "run and run" is probably a sensible perspective to take on the situation.
That is a pretty simple explanation for it, its not about when they mature but what they are sellable for.
As for running and running, I am going to say something a bit controversial, I dont think this is going to be allowed to run and run. That problem has been identified and people who predicted this are near to the ears of people with influence. As I understand it the banks are to undergo "stress testing", people are running models on the banks books on the basis of double digit unemployment and a mean recession. If the banks fail these stress tests i.e. they will need bigger bailouts, then the solution at hand is full nationalisation and cleaning out of the banks. Ive seen right wingers like George Will and lefties like Paul Krugman basicaly nodding along with this solution.
I could be wrong, hell what do I know anyway, but I think that while we will have an extended and severe recession, the banks will not be permitted to drag on like Japan in the 90s.
Also, and this is very callouos, but in the 30s every job lost was an important componant of the American consumers making the problem of overcapacity worse in a sense. The 20 million Chinese and many millions of other third world people losing there jobs are not big consumers of manufactured goods. The loss of spending power in credit is real, but unlike the 30s I dont think the factory redundancies will be as big a self perpetuating force.
I do think I have a deeply unpopular solution. An international minimum wage in key industries for countries that want to trade in world trade regimes. Industries like car manufacturing, hard rock mining, white good manufacturing etc. If people in low income countries get a bigger slice of the pie, they will be able to buy goods and services, this will place a brake on the race to the bottom. I can see alot of problems with enforcement and objections to it......
But I can see merits in spreading earning power....
david dissadent
New Member
Caveat Emptor: I dont work in financials and this is grossly simplified....... and it might be wrong.
Basic primer on the current economic crisis.
This all started with an over inflated US housing market. There are several terms first.
Subprime – this is a borrower with a low FICO score. A FICO is basically a nationally recognised means of credit rating. These are people with the riskiest credit histories, they are most likely to default. Overwhelmingly they are poor, but many were quite wealthy. Many of these were issued with teaser rates and followed up by nasty adjustments a couple of years after the mortgage was taken out.
Alt-A – this is the next most risky mortgage type.
Prime - Supposedly good credit history with a low expectation of failure to repay.
Jumbo - A loan in excess of about $400 000.
Super Jumbo - A loan in excess of $650 000.
Option ARM – This is a kind of mortgage originally aimed at self employed people with seasonal or variable incomes. Basically you can pay of as much as you want, but if you don’t pay of an amount in excess of the accruing interest you "negative amortization”, you owe more each month not less. These mortgages had real nasty rate adjustments a couple of years into them. They were often used buy people to game the property market, buy a house on a Option ARM, then sell it with minimal repayments when the price was up a year later. When the market crashed large numbers of people were trapped in ticking mortgage timebombs.
McMansion – The derogatory name for very large houses built cheaply in the boom. Normally built in exburbs to find space for this kinda thing.
Exburbs – Dormitory suburbs of major cities often 40 miles from the city they served. Like Reading or MK but without the rail infrastructure to take people to London. Imperial Valley in California is classic Exburb territory.
CDO – Collateralised Debt Obligation, these are complex financial instruments that are used to bundle together a wide variety of assets to spread risk. I will focus on housing loans as an asset... (I could be wrong here and if anyone spots error or omissions please point them out.) Basically a CDO backed buy mortgages will take a group of mortgages and bundle them together.... You take a few good mortgages (prime) a few decent ones (alt A) and some dodgy ones (subprime) and bundle the repayments for these into one single financial vehicle. The high interest rate of a subprime brings in the money and the low risk of the prime mortgage gives the asset stability. (There are dozens of variations on this theme). People then buy Tranches of this, senior tranch is someone who buys a percentage of the CDO that will be first in line to get money if loads of people are not paying back there loans, junior tranches are people who buy percentages that are last to get paid. Buy bundling home loans into CDOs meant that
Bubble State: Florida, California, Arizona, Ohio, Maryland, bits of New England
HELOC – Home Equity Line of Credit. Basically the ability to take out a loan against the value your home is worth, this goes up as you pay down outstanding loans and as the notional value of your house goes up. It is often regarded as turning your home into an ATM.
the banks could lend money and get a big load back in immediately to lend more. (see any problems here people..... at the back...... anyone
)
What happened? The housing market....
The US housing market went ballistic in the 2000s. The prices kept going up and up.
Note the big difference between the national numbers and the 10 biggest cities.
People begun to believe there houses were engines of wealth creation. By owning and possessing one people constantly got wealthier. You could afford to buy a house you could not afford and it would be worth more selling it in a year or two so you could reap a profit by the simple activity of living in a house.
Some of the scams that went on.
Very few people come out of this smelling of roses. This is why I think that the whole ‘blame the bankers’ meme is overdone.
Gaming FICO scores.
One of the games people played was to game there FICO score, your credit rating. People would buy a house they could not afford on something like a subprime or option arm loan, preferably a 120% mortgage or something.... then paydown the loan using the surplus 20% and sell the house when the price went up.... coming out with a better FICO meaning you could move up the credit rung and lend money with lower interest.
“Liar loans.”
People were able to get many loan types (subprime, alt a, option arm) without full documentation of income or assets. You could state your income so people inflated their income to get a loan that would not be approved on the income they had in reality.
Mortgage brokers.
Banks no longer did the due diligence on the loan. Mortgage brokerages emerged who aimed to get the loan for the bank and earn a commission. They encouraged people to lie about their income, showed people how to game there FICO’s, lied to people about the interest payments, found vulnerable people with poor education to bamboozle, mislead people over the mortgage resets.... God the list is endless. Banks ceased to check for themselves on the mortgages they issued and the brokers were out to turn a quick buck. It has now been well established that many people with previous convictions for fraud etc moved into the mortgage market in the 2000s. Worth noting, Texas has a high regulatory standard for estate agents.... in spite of the oil boom and Texas being a ‘usual suspect’ in terms of bubbles they were not a property bubble this time round. Good regulation at almost any level would have headed of the worst of this crisis.
Banks.
They went from solid institutions seeking long term profit to turnover machines. Madness ensued. They did not actually do the work on the home loans, they took in home loans from mortgage companies and gave them a commission for the loans, then sold the loans into CDOs shifting the risk of default to the investor. They took the money from the CDOs and used it to finance new loans.
Rating Agencies.
They turned a profit by rating financial instruments. They were supposed to investigate how each financial instrument was created and assess the risk on them. Did they fuck, they issued AAA (or as Eric Blair would have said: Triple plus good) to anything passed under there noses. They competed with each other to attract CDO issuers business, so they cut corners to generate volume. The ratings they issued were used by regulatory agencies and investors to judge how safe an asset was yet they were in the pocket of the asset issuer.
The press
http://www.dailymotion.com/video/x8lou7_jon-stewart-bashes-cnbc-and-rick-sa_news
This says it all. They sold advertising by marketing infotainment as news.
The politicians and regulators.
They were happy to take contributions from companies and ignore there job to examine the financial industry.
The voters.
Happy in a world of rising wealth not to question why the GDP and there assets were rising. The society belongs to them. Millions died to give them the power to run their own countries. They were more interested in photographs of Britneys fanny.
The mess we are in.
IMO, we offshored jobs to make labour cheaper ignoring the fact that those people without jobs could no longer buy the products they had manufactured and the new workers were never given anything like the income of those they replaced. A gap emerged between the earnings of the labour being put into the products and the cost of products being sold. This gap was made up by increasing credit.
Various housing markets went made (subprime, alt a, jumbo, option arm), people were conned or conned themselves into houses they could not afford. People were able to raise credit on houses values increasing, people with poor credit histories were encouraged to buy houses as the increase in house values meant even on foreclosed the value could be redeemed, people loaned money they could not afford to buy houses to impress people they did not like, status and easy money and easy credit and win win win win win became a heady mix, and liberal politicians (and conservative ones) could point to the increasing ownership by low income and ethnic minorities. It was all sooooooo good. Prices of goods went down and the labour value input of goods decreased. Everything was up up up........ it was the American dream
You had to be asleep to believe it.
Then the subprimes issued on 05 and 06 started to reset and default. Then the prices started rising. Then the clever ones started shorting the financials......
Then people began to wonder and banks became nervous of lending to each other. Then the LIBOR shot up. Then rumours spread and people began to wonder who was safe..... then the credit dried up as people stopped lending to Countrywide and others. This huge contraction in lending hit the UK, rumours spread one bank was very heavily reliant on turning over alot of wholesale debt, Nothern Rock. People became worried and the bank effectively failed.
Then the big boys had to start writing down there exposure to the subprime market.
Then people realised it was not the subprime it was the whole damned shooting match.
Then all the consumption based on debt dried up and the laughing at the credit crazy nations (UK, Spain, Ireland, US, Iceland) stopped......
Then the shit hit the fan.
Then we woke up and realised the party was over.
Basic primer on the current economic crisis.
This all started with an over inflated US housing market. There are several terms first.
Subprime – this is a borrower with a low FICO score. A FICO is basically a nationally recognised means of credit rating. These are people with the riskiest credit histories, they are most likely to default. Overwhelmingly they are poor, but many were quite wealthy. Many of these were issued with teaser rates and followed up by nasty adjustments a couple of years after the mortgage was taken out.
Alt-A – this is the next most risky mortgage type.
Prime - Supposedly good credit history with a low expectation of failure to repay.
Jumbo - A loan in excess of about $400 000.
Super Jumbo - A loan in excess of $650 000.
Option ARM – This is a kind of mortgage originally aimed at self employed people with seasonal or variable incomes. Basically you can pay of as much as you want, but if you don’t pay of an amount in excess of the accruing interest you "negative amortization”, you owe more each month not less. These mortgages had real nasty rate adjustments a couple of years into them. They were often used buy people to game the property market, buy a house on a Option ARM, then sell it with minimal repayments when the price was up a year later. When the market crashed large numbers of people were trapped in ticking mortgage timebombs.
McMansion – The derogatory name for very large houses built cheaply in the boom. Normally built in exburbs to find space for this kinda thing.
Exburbs – Dormitory suburbs of major cities often 40 miles from the city they served. Like Reading or MK but without the rail infrastructure to take people to London. Imperial Valley in California is classic Exburb territory.
CDO – Collateralised Debt Obligation, these are complex financial instruments that are used to bundle together a wide variety of assets to spread risk. I will focus on housing loans as an asset... (I could be wrong here and if anyone spots error or omissions please point them out.) Basically a CDO backed buy mortgages will take a group of mortgages and bundle them together.... You take a few good mortgages (prime) a few decent ones (alt A) and some dodgy ones (subprime) and bundle the repayments for these into one single financial vehicle. The high interest rate of a subprime brings in the money and the low risk of the prime mortgage gives the asset stability. (There are dozens of variations on this theme). People then buy Tranches of this, senior tranch is someone who buys a percentage of the CDO that will be first in line to get money if loads of people are not paying back there loans, junior tranches are people who buy percentages that are last to get paid. Buy bundling home loans into CDOs meant that
Bubble State: Florida, California, Arizona, Ohio, Maryland, bits of New England
HELOC – Home Equity Line of Credit. Basically the ability to take out a loan against the value your home is worth, this goes up as you pay down outstanding loans and as the notional value of your house goes up. It is often regarded as turning your home into an ATM.
the banks could lend money and get a big load back in immediately to lend more. (see any problems here people..... at the back...... anyone
)What happened? The housing market....
The US housing market went ballistic in the 2000s. The prices kept going up and up.
Note the big difference between the national numbers and the 10 biggest cities.
People begun to believe there houses were engines of wealth creation. By owning and possessing one people constantly got wealthier. You could afford to buy a house you could not afford and it would be worth more selling it in a year or two so you could reap a profit by the simple activity of living in a house.
Some of the scams that went on.
Very few people come out of this smelling of roses. This is why I think that the whole ‘blame the bankers’ meme is overdone.
Gaming FICO scores.
One of the games people played was to game there FICO score, your credit rating. People would buy a house they could not afford on something like a subprime or option arm loan, preferably a 120% mortgage or something.... then paydown the loan using the surplus 20% and sell the house when the price went up.... coming out with a better FICO meaning you could move up the credit rung and lend money with lower interest.
“Liar loans.”
People were able to get many loan types (subprime, alt a, option arm) without full documentation of income or assets. You could state your income so people inflated their income to get a loan that would not be approved on the income they had in reality.
Mortgage brokers.
Banks no longer did the due diligence on the loan. Mortgage brokerages emerged who aimed to get the loan for the bank and earn a commission. They encouraged people to lie about their income, showed people how to game there FICO’s, lied to people about the interest payments, found vulnerable people with poor education to bamboozle, mislead people over the mortgage resets.... God the list is endless. Banks ceased to check for themselves on the mortgages they issued and the brokers were out to turn a quick buck. It has now been well established that many people with previous convictions for fraud etc moved into the mortgage market in the 2000s. Worth noting, Texas has a high regulatory standard for estate agents.... in spite of the oil boom and Texas being a ‘usual suspect’ in terms of bubbles they were not a property bubble this time round. Good regulation at almost any level would have headed of the worst of this crisis.
Banks.
They went from solid institutions seeking long term profit to turnover machines. Madness ensued. They did not actually do the work on the home loans, they took in home loans from mortgage companies and gave them a commission for the loans, then sold the loans into CDOs shifting the risk of default to the investor. They took the money from the CDOs and used it to finance new loans.
Rating Agencies.
They turned a profit by rating financial instruments. They were supposed to investigate how each financial instrument was created and assess the risk on them. Did they fuck, they issued AAA (or as Eric Blair would have said: Triple plus good) to anything passed under there noses. They competed with each other to attract CDO issuers business, so they cut corners to generate volume. The ratings they issued were used by regulatory agencies and investors to judge how safe an asset was yet they were in the pocket of the asset issuer.
The press
http://www.dailymotion.com/video/x8lou7_jon-stewart-bashes-cnbc-and-rick-sa_news
This says it all. They sold advertising by marketing infotainment as news.
The politicians and regulators.
They were happy to take contributions from companies and ignore there job to examine the financial industry.
The voters.
Happy in a world of rising wealth not to question why the GDP and there assets were rising. The society belongs to them. Millions died to give them the power to run their own countries. They were more interested in photographs of Britneys fanny.
The mess we are in.
IMO, we offshored jobs to make labour cheaper ignoring the fact that those people without jobs could no longer buy the products they had manufactured and the new workers were never given anything like the income of those they replaced. A gap emerged between the earnings of the labour being put into the products and the cost of products being sold. This gap was made up by increasing credit.
Various housing markets went made (subprime, alt a, jumbo, option arm), people were conned or conned themselves into houses they could not afford. People were able to raise credit on houses values increasing, people with poor credit histories were encouraged to buy houses as the increase in house values meant even on foreclosed the value could be redeemed, people loaned money they could not afford to buy houses to impress people they did not like, status and easy money and easy credit and win win win win win became a heady mix, and liberal politicians (and conservative ones) could point to the increasing ownership by low income and ethnic minorities. It was all sooooooo good. Prices of goods went down and the labour value input of goods decreased. Everything was up up up........ it was the American dream
You had to be asleep to believe it.
Then the subprimes issued on 05 and 06 started to reset and default. Then the prices started rising. Then the clever ones started shorting the financials......
Then people began to wonder and banks became nervous of lending to each other. Then the LIBOR shot up. Then rumours spread and people began to wonder who was safe..... then the credit dried up as people stopped lending to Countrywide and others. This huge contraction in lending hit the UK, rumours spread one bank was very heavily reliant on turning over alot of wholesale debt, Nothern Rock. People became worried and the bank effectively failed.
Then the big boys had to start writing down there exposure to the subprime market.
Then people realised it was not the subprime it was the whole damned shooting match.
Then all the consumption based on debt dried up and the laughing at the credit crazy nations (UK, Spain, Ireland, US, Iceland) stopped......
Then the shit hit the fan.
Then we woke up and realised the party was over.
taffboy gwyrdd
Embrace the confusion!
david dissident. Thanks for that great post. I think it is too simplistic to put it all down to housing and sub-primes. for me it looks like derviatives is being downplayed, perhaps for a reason. god knows, this is such a complete mess.
Do you ever check out Max Keiser DD?
http://www.maxkeiser.com
Do you ever check out Max Keiser DD?
http://www.maxkeiser.com
Any judgement we make is based on existing knowledge .it has been said on this thread that we don't know how far this will go ,all we can do is compare it to times past.Yes we will survive it ,the world will have changed but will it be for the better
I agree, and the obvious reason would be that there must be people somewhere benefitting massively from gambles on exotic financial derivative products. If banks have made massive losses on them, where and into whose hands are those capital obligations (which have led to bail outs by nation states/the taxpayer) disappearing?
Funnily enough, the FT is arguing exactly the same today...
http://www.ft.com/cms/s/0/2ff0c70c-...uid=aa814f68-146e-11de-8cd1-0000779fd2ac.html
No wonder the public are angry.
Then you've got Kaletsky arguing that we might need Dictatorship to get us out of the mess:
http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article5934336.ece
Nice.
kyser_soze
Hawking's Angry Eyebrow
Let's be honest tho - Kaletsky has a track record to rival only that of Mystic Mogg and CNBC stock tipping in terms of success...
I saw on the news last night the guy running AIG getting a bollocking from Congress about the bonuses.
This all rang really hollow when I found out.....
That the guy now running AIG (Edward Liddy) had been brought out of retirement on the salary of $1 a year on the request of the government to take over AIG back at the end of last year.
It also turns out that the Fed (I'm guessing Paulson and Berneke) knew about the bonuses as AIG where contractually obliged to pay them to their staff, yet they gave them the bail out money anyway.
It seems a total joke when you see a bunch of Congressmen giving it the speel on C-Span bollocking this guy who they asked to run the company after government figures had already let the bonuses slide.
If I was this Libby chap I'd tell 'em to fuck of $1 a year and not be the fucking scape goat for the fuckers in government and the Fed and their faux outrage on TV.
Slimey bunch of fuckers the lot of 'em.
Note: Talking of CNBC have a watch of this:
http://www.hulu.com/watch/62203/the-daily-show-with-jon-stewart-thu-mar-12-2009
John Stewart rips that Crammer guy a new arsehole in this. Funniest shit I've seen on TV in a long time. It gets to the point where John Stewart is no longer doing a comdey routine and bollocking Crammer and telling him this isn't a fucking joke.
Worth a watch if you have 20 mins.
This all rang really hollow when I found out.....
That the guy now running AIG (Edward Liddy) had been brought out of retirement on the salary of $1 a year on the request of the government to take over AIG back at the end of last year.
It also turns out that the Fed (I'm guessing Paulson and Berneke) knew about the bonuses as AIG where contractually obliged to pay them to their staff, yet they gave them the bail out money anyway.
It seems a total joke when you see a bunch of Congressmen giving it the speel on C-Span bollocking this guy who they asked to run the company after government figures had already let the bonuses slide.
If I was this Libby chap I'd tell 'em to fuck of $1 a year and not be the fucking scape goat for the fuckers in government and the Fed and their faux outrage on TV.
Slimey bunch of fuckers the lot of 'em.
Note: Talking of CNBC have a watch of this:
http://www.hulu.com/watch/62203/the-daily-show-with-jon-stewart-thu-mar-12-2009
John Stewart rips that Crammer guy a new arsehole in this. Funniest shit I've seen on TV in a long time. It gets to the point where John Stewart is no longer doing a comdey routine and bollocking Crammer and telling him this isn't a fucking joke.
Worth a watch if you have 20 mins.
AnnO'Neemus
Is so vanilla
I've said for a long time that it says a lot about journalism in the US that the best news programme is on a comedy channel.
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