Global Economy Woes?

[NoNameKleenex]

Hi folks,

Completely non-Kendo related, but I got tired of Youtube ninjas all the same.

With all the doom and gloom (nose-diving stocks, economies in tatters, mortgage crisis in the US, etc., etc.) being reported in the media, I'm wondering if any of you folks have been affected by this.

Knock on wood, but I don't know anybody who's been affected either directly or indirectly. Perhaps it's too soon to say who'll be most affected by things. So far, things in Canada seem to be sort of isolated from any major hits, but there are always market fears to contend with.

Thoughts?

Edit: I guess what I'm driving at is that for as much fear-mongering going on with the media, either I'm really blind or I'm really not seeing much actual change happening.

[Neil Gendzwill]

Well, there's a load of people in Saskatoon who are going to regret their real estate purchases as prices come tumbling back to reality.

Other than that, things are still booming along here. Nobody can hire all the staff they need.

[NoNameKleenex]

I hear you - I have a co-worker who has friends in Alberta who bought into the real estate thing when Calgary was just starting to boom. He tells me that they're now struggling just to break even on sales, and that it's steadily gotten worse for a couple of years now.

[Neil Gendzwill]

Well I'm sitting pretty, I bought my house 10 years ago and it's more than doubled. But I feel for all those people that bought $350,000 40 year old bungalows.

[NoNameKleenex]

My wife and I are planning on moving out of our condo into a single house, but we're caught between buying an older house and just outright building on a plot of land. The prices between the two in Winnipeg right now are not that different - only a little more expensive for the brand new option. We'll have to see what the market's like when we start to seriously look around.

Real estate aside, I work for an engineering company that has projects all over Canada and some international stuff, but I'm not hearing any whispers of scaling anything back or waiting until the markets are steadier. As far as I know, it's full speed ahead. We'll see what tomorrow brings :)

[bobdonny]

Ireland is the first country in the Eurozone to "officially" be declared "in recession".

I think property plays a big part in any economic cycle.

[Charles Lockhar]

How can you tell if something is due to the local economy tubing vs. the global economy tubing? And what's local? City, state, country?

Prices here, in the metropolis of Hilo, Hawai'i, for food have jumped quite a bit. In three years milk has drifted from about $3.25 a gallon to $5 a gallon. A lot of other stuff has pretty much followed that trend. I think eggs are selling for something like $3.25 a dozen now. It's not that it's so amazingly expensive now, I've heard that food is even more expensive in Europe and Australia, but what's scary is how fast and how much the prices went up.

A couple bakeries went out of business, places that I thought were pretty solid. Apparently wheat flour jumped from something like $30 a bag to $60 a bag, and because that so directly affected the price of their product, well, they're gone now. Global economy or local, I dunno.

-Charles

[ben]

I dont know how you can say you dont know anybody who is directly or indirectly affected. Everyone is Aus is affected because all superannuation funds have taken massive hits. That translates to the retirement savings of everyone who works effectively losing any value gained in the past 12 months. And they say it isn't over.

What I can't get over is the hypocracy of the free-market neo-cons writing cheques for almost $1 trillion to keep the market working.

I was reading about this guy (http://www.gladwell.com/2002/2002_04_29_a_blowingup.htm) and his black swans today. Very refreshing stuff.

b

[NoNameKleenex]

How can you tell if something is due to the local economy tubing vs. the global economy tubing? And what's local? City, state, country?
....
A couple bakeries went out of business, places that I thought were pretty solid. Apparently wheat flour jumped from something like $30 a bag to $60 a bag, and because that so directly affected the price of their product, well, they're gone now. Global economy or local, I dunno.

-Charles

That's what has me thinking . . . we've all seen the price of everything from food to gas to building supplies go up - sometimes frightingly fast -, but I don't know how much of that is caused by the current market crisis or just caused by market fears (ie. hurricanes not doing as much damage as feared to off-shore rigs and on-shore refineries).

I read an article the other day that stated that wheat producers will need to step up their production by 30% to feed the world's anticipated population by 2030. When they're already having some troubles, I can't imagine what the price at that point will be.

I'm really suspicious about the butterfly effect in markets . . . what was the cause of this latest crisis? Was the impetus the sub-prime mortgage crisis and the need for banks needing bailouts to cover the cost of risky lending? How does that connect to the recession in Ireland as bobdonny mentioned? I just can't connect the dots - maybe I'm overly dense, but that's the way it is.


I dont know how you can say you dont know anybody who is directly or indirectly affected. Everyone is Aus is affected because all superannuation funds have taken massive hits. That translates to the retirement savings of everyone who works effectively losing any value gained in the past 12 months. And they say it isn't over.

What I can't get over is the hypocracy of the free-market neo-cons writing cheques for almost $1 trillion to keep the market working.

I was reading about this guy (http://www.gladwell.com/2002/2002_04_29_a_blowingup.htm) and his black swans today. Very refreshing stuff.

b

I suppose I was thinking who's lost their job, home, etc. due to the recent nose-dives of several different indexes. Sorry if I sounded crass or anything like that - it wasn't my intent. I think I was trying to see if things are really as bad and dire as the media would have us believe.

I do realize that people have been affected - my own investments have taken a couple of hits . . . but I tend to think of it as a known risk of investing in a market that I have no control over. Even slow growth investments have their risks.

The folks I really feel for are those who are close to retirement and are seeing their investments lose value like nobody's business - just as you mentioned. Yet, I haven't heard of anybody I personally know being affected to the degree that I see on the news. Maybe I just don't know enough people :)

Very interesting article, by the way.

[Kapplow]

food..
-Charles


This is mostly due to the big push for ethanol. We are burning our own food supplies for fuel. That's why any product that relates to corn has shot up. And on top of that I'm sure the shipping cost to Hawaii are pretty hefty. We need to make ethanol from plants that aren't used for food.

[Omnis]

The (US) economy isn't broken, it's just incorrect. I wish the government would stop trying to prop up prices (a la 1930s) and just let the recession/depression get over and done with.

[braxtonhicks]

The (US) economy isn't broken, it's just incorrect. I wish the government would stop trying to prop up prices (a la 1930s) and just let the recession/depression get over and done with.

That's just it, isn't it? Do they just let the fall out occur naturally, have a big crash, and then start rebuilding the economy, or a slow decline over the next decade, probably reaching a similar low, and having the US taxpayer picking up the tab.

[braxtonhicks]

At the OP,

I know what you mean. I live in Aurora, a very affluent suburb of Toronto, lots of professionals, captains of industry, etc. I rent, and play music for a living...I think I may be dragging down my town's per capita income! I don't see anything being affected here whatsoever. In fact, I'm busier than ever. People still seem to have enough money to go out to check out live music in Toronto, and hire bands for their weddings, corporate events, whatever. What I do for a living is generally dependent on people having disposable income.

However, I was just in Windsor, Ontario for a gig. Windsor is an auto manufacturing town. Canada's Detroit. People are hurting there, and there's a lot of people that have been laid off, but that's more due to the big 3 auto maker's playing catch up on making fuel efficient vehicles. Mind you we still sold 90% of the seats in the theatre.

My wife was just out in California, and said she saw a ton of foreclosure sale signs, and according to my father in law who works in Detroit, same thing there, things are getting worse.

[Omnis]

That's just it, isn't it? Do they just let the fall out occur naturally, have a big crash, and then start rebuilding the economy, or a slow decline over the next decade, probably reaching a similar low, and having the US taxpayer picking up the tab.

Well subsequent busts after the boom in business cycles are inevitable. There was a depression in the 1920s that nobody talks about because it only lasted a year as opposed to a decade (as was the case for the great depression). That's because the market handled it and everything blew over relatively quickly. Government-- especially today's-- has a vested interest in keeping prices high, however. That's why they try, and ultimately fail (at our expense), at breaking economic law.

[Anime12478]

It's funny to finally realize the reasoning behind what has been going on in the neighborhood these days.

The neighborhood that my parents moved into was a nice, middle-class neighborhood. But after a few years, things started to get a little odd when the original people moved out and were replaced by those that couldn't take care of their homes too well. It has pretty much been a nuisance since the homeowner's association didn't even attempt to regulate anything. Well, fast forward a couple more years and my mom (as nosy as she is) found out about the houses going on the market through forclosures. Who knew that banks were handing out mortgages like candy at a Halloween party?

Of course, my parents are now affected by this, but a bit indirectly. For years, they planned on moving out of the house within a year or two of me graduating college (which has already happened, BTW). But, because of this whole crisis, it will be hard to sell the home unless they take a considerable loss on it.

I have thought about buying a home of my own since it's pretty much a buyer's market, but the financial burden and uncertainty of life in the Cincinnati area is convincing me to just keep the apartment life for the next few years.

[satsumaruma]

I must confess to not being that good when it comes to understanding 'big finances'. From the little I do understand a lot of problems have arisen due to our over-involvement with banking.

It is indeed interesting to note that even though we sit on the cusp of a major recession, the very rich are not really affected. Indeed some are getting richer as each major bank falls. How we allow this to happen I do not know. In UK Brown was always seen (certainly whilst Chancellor) as someone who could be trusted to manage financial affairs on behalf of the country. What is now coming to light is that he was just lucky and his luck has run out now he is Prime Minister. Laughably, some people still blame Blair for all this which is bemusing given that Blair's only real talent was salesmanship - it was always Brown who ran things at Blair's behest.

From what I can gather, although prices of consumables are rising in the UK, it is being controlled by the supermarkets who are getting ever more desperate to keep their market share. This may be all well and good for the consumer but I fear that this will only speed up the demise of the smaller traders which will be bad long term for the country.

What will probably hit the UK harder is the Governments drive to lower taxes which it aims to do by reducing the number of civil servants. Good, some will say. But consider an extra several thousand claiming benefits, not to mention the cost of redundancy packages. The fact that prisons will be run with less staff thus increasing the possibilities of escape; that the Police are being 'modernised' to have less Police Officers and more Community Officers (with no powers of arrest other than a citizens one which we all have), so less people to catch criminals; courts are being cut back and are also being overwhelmed by civil cases.

Our problem will not initially be financial - it will be social disorder. then it will be an increase in claimants (partly through more redundancies, partly through ever more numbers arriving from Europe) and all this will be paid for by an ever decreasing number of 'workers'. And this will not be the Bankers, my friends, it will those who earn just enough not to receive legal aid and not enough to be able to afford an accountant to explain how to avoid the taxman.

And the real sad part is that, whilst in the US, France, Germany and most other countries you enjoy a political system which has diverse political parties with a real difference in they way they will deal with problems, we here in the UK have 3 main parties who all have the same ideas.

Enjoy.

[Charles Lockhar]

Who knew that banks were handing out mortgages like candy at a Halloween party?

Anybody who's gone to get a home lone in the last ten years...

When I went to get a home lone, I was encouraged by both the lender and the real estate agent to buy the most expensive house I could afford, which translated to the largest amount I could borrow from them. It was amazing how much they were willing to loan me, and how high of a monthly payment they thought I should be able to make. Far beyond what I considered to be "within my means."

Everyone I've talked to about it has had the same experience, and often went with what they were being advised to do, that is they took a loan for the maximum amount they "qualified for." And everyone I talked to who went that way regretted it.

If I understand correctly, they loosened up the loan requirements a long time ago to prevent discrimination against, well, I dunno, somebody. People who couldn't afford the loans? That's the claim, anyway. Being cynical, it seems to me that poor folks rarely get much help from the govt when it comes to equality, so I'd be more inclined to think some special interest group found a way to make cash off the whole thing, and pushed it through.

-Charles

[braxtonhicks]

Anybody who's gone to get a home lone in the last ten years...

When I went to get a home lone, I was encouraged by both the lender and the real estate agent to buy the most expensive house I could afford, which translated to the largest amount I could borrow from them. It was amazing how much they were willing to loan me, and how high of a monthly payment they thought I should be able to make. Far beyond what I considered to be "within my means."

Everyone I've talked to about it has had the same experience, and often went with what they were being advised to do, that is they took a loan for the maximum amount they "qualified for." And everyone I talked to who went that way regretted it.


-Charles

How about lenders advertising 110% and 115% loans?

"Here ya go, this might be expensive, but you'll be able to make the payments with today's low interest rates...oh don't worry, it's an adjustable rate mortgage, but interest rates are so low. And with the extra money you'll get because of the 110% loan, you can got take a cruise. Plus housing prices are climbing, you'll still never lose on this!"

Irresponsible to say the least, but the people applying have to use their heads too. It's really sad how many people have been burned by this kind of thing. Interesting I'm not seeing "low, low interest rates, 100% value of your home, get a mortage now!" banner ads when I'm signed into yahoo or hotmail anymore.

[NoNameKleenex]

Anybody who's gone to get a home lone in the last ten years...

When I went to get a home lone, I was encouraged by both the lender and the real estate agent to buy the most expensive house I could afford, which translated to the largest amount I could borrow from them. It was amazing how much they were willing to loan me, and how high of a monthly payment they thought I should be able to make. Far beyond what I considered to be "within my means."

Everyone I've talked to about it has had the same experience, and often went with what they were being advised to do, that is they took a loan for the maximum amount they "qualified for." And everyone I talked to who went that way regretted it.

If I understand correctly, they loosened up the loan requirements a long time ago to prevent discrimination against, well, I dunno, somebody. People who couldn't afford the loans? That's the claim, anyway. Being cynical, it seems to me that poor folks rarely get much help from the govt when it comes to equality, so I'd be more inclined to think some special interest group found a way to make cash off the whole thing, and pushed it through.

-Charles

Yup, same thing happened with my wife and I a couple of years ago. We went to get approved, and were approved for some exceedingly high rates. We said "thanks" and went looking for something about 30 - 50% lower that we knew we could afford even with incredibly high interest rates five or so years down the road.



How about lenders advertising 110% and 115% loans?

"Here ya go, this might be expensive, but you'll be able to make the payments with today's low interest rates...oh don't worry, it's an adjustable rate mortgage, but interest rates are so low. And with the extra money you'll get because of the 110% loan, you can got take a cruise. Plus housing prices are climbing, you'll still never lose on this!"

Irresponsible to say the least, but the people applying have to use their heads too. It's really sad how many people have been burned by this kind of thing. Interesting I'm not seeing "low, low interest rates, 100% value of your home, get a mortage now!" banner ads when I'm signed into yahoo or hotmail anymore.

Exactly - I honestly don't understand how the banks and other lenders couldn't have seen this coming. I think the responsibility mainly lays with the lenders for allowing risky loans for years, but I also think that some buyers are also to blame for a.) unintentionally living outside their means by not doing their homework, or b.) intentionally living outside their means resulting from a sense of entitlement.


I must confess to not being that good when it comes to understanding 'big finances'. From the little I do understand a lot of problems have arisen due to our over-involvement with banking.

It is indeed interesting to note that even though we sit on the cusp of a major recession, the very rich are not really affected. Indeed some are getting richer as each major bank falls. How we allow this to happen I do not know. In UK Brown was always seen (certainly whilst Chancellor) as someone who could be trusted to manage financial affairs on behalf of the country. What is now coming to light is that he was just lucky and his luck has run out now he is Prime Minister. Laughably, some people still blame Blair for all this which is bemusing given that Blair's only real talent was salesmanship - it was always Brown who ran things at Blair's behest.

From what I can gather, although prices of consumables are rising in the UK, it is being controlled by the supermarkets who are getting ever more desperate to keep their market share. This may be all well and good for the consumer but I fear that this will only speed up the demise of the smaller traders which will be bad long term for the country.

What will probably hit the UK harder is the Governments drive to lower taxes which it aims to do by reducing the number of civil servants. Good, some will say. But consider an extra several thousand claiming benefits, not to mention the cost of redundancy packages. The fact that prisons will be run with less staff thus increasing the possibilities of escape; that the Police are being 'modernised' to have less Police Officers and more Community Officers (with no powers of arrest other than a citizens one which we all have), so less people to catch criminals; courts are being cut back and are also being overwhelmed by civil cases.

Our problem will not initially be financial - it will be social disorder. then it will be an increase in claimants (partly through more redundancies, partly through ever more numbers arriving from Europe) and all this will be paid for by an ever decreasing number of 'workers'. And this will not be the Bankers, my friends, it will those who earn just enough not to receive legal aid and not enough to be able to afford an accountant to explain how to avoid the taxman.

And the real sad part is that, whilst in the US, France, Germany and most other countries you enjoy a political system which has diverse political parties with a real difference in they way they will deal with problems, we here in the UK have 3 main parties who all have the same ideas.

Enjoy.

Really interesting point of view. I don't know enough about the political system in the UK to make an intelligent comment on that side, but I see where you're coming from.

I think social disorder is a real possibility in the face of huge economic downturns. Forget about the big-screen TV's that people loot whenever there's a riot or power outage - it'll be folks scrapping for milk and bread and the other basic necessities.

An over-simplification, I know, but WWII effectively ended the Great Depression - would we reach a similar state if the economy isn't able to pull itself out of a recession or near-recession level?

With all the variables that influence the global economy, I'm surprised we haven't hit our current state earlier. I guess something had to give before the snowball effect started.

[Charles Lockhar]

How about lenders advertising 110% and 115% loans?

By 110% loan, you mean a loan for 110% of the "value" of the house?

I guess to me those would make as much sense as anything else involving home purchasing. Once "value" pretty much got tossed out as a relative concept when applied to real estate, it kind of makes sense. Here in Hawai'i, real estate is bizarre. House prices sprint ahead of their "valued" worth pretty fast. If you don't have a sizable down payment to make up the difference, you're probably not going to be buying a place.

Plus, a lot of people I know buy a house, wait a month or two for the "equity" to build, and then take out a second mortgage for home improvement or whatever. Too bad it's not to pay off their credit card debt ;o)

-Charles

[The great I AM]

Ireland is the first country in the Eurozone to "officially" be declared "in recession".

I think property plays a big part in any economic cycle.Have you guys run out of potatos again?

[JCM]

Have you guys run out of potatos again?

That is not funny Gibbo, over a million people died in the famine, considering the population of the country at the time that is about one in five people, is one of the few things you don't hear many any jokes about here.

[NorthernKendoka]

This will probably generate some negative rep but here I go: I can definitely sympathize with people who have lost their home but sometimes people get what they deserve. If you borrow money to buy a house you can’t afford just because someone is giving you a deal to good to be true (which in general mean it isn’t true) you deserve to loose it all. In Sweden we have a growing problem that people 15-35 years take micro loans with astronomical interest to keep up their fashionable life-style and then look ever so surprised when they can pay it back. Then all the bankers who are supposed to know economics looks equally surprised that lending money to people who can’t afford to pay it back might be a bad idea. Who could have guessed that real estate prices would eventually start to decline? It’s not like if the same thing happens every 20 years, wait it does happened every 20 years. Yet everyone is so surprised. So the crisis is a fact and people and banks go bankrupt and the government has to step in. So your valuable tax SEK/USD is used to help the greedy banker who f**ked up in the first place, not the citizen who lost all their savings and probably their job due to the economic decline.

To sum it all up: Bad things will happen if you’re a moron.

[satsumaruma]

Have you guys run out of potatos again?


That is not funny Gibbo, over a million people died in the famine, considering the population of the country at the time that is about one in five people, is one of the few things you don't hear many any jokes about here.

Indeed it is not funny, but I don't think Gibbo meant any harm. The problem during the Famine was the lack of appreciation in Ireland for crop rotation (not to mention an ignorant catholic church and a nepotistic British/Protestant attitude) at the time led to the deaths of a great many Irish.


This will probably generate some negative rep but here I go: I can definitely sympathize with people who have lost their home but sometimes people get what they deserve. If you borrow money to buy a house you can’t afford just because someone is giving you a deal to good to be true (which in general mean it isn’t true) you deserve to loose it all. In Sweden we have a growing problem that people 15-35 years take micro loans with astronomical interest to keep up their fashionable life-style and then look ever so surprised when they can pay it back. Then all the bankers who are supposed to know economics looks equally surprised that lending money to people who can’t afford to pay it back might be a bad idea. Who could have guessed that real estate prices would eventually start to decline? It’s not like if the same thing happens every 20 years, wait it does happened every 20 years. Yet everyone is so surprised. So the crisis is a fact and people and banks go bankrupt and the government has to step in. So your valuable tax SEK/USD is used to help the greedy banker who f**ked up in the first place, not the citizen who lost all their savings and probably their job due to the economic decline.

To sum it all up: Bad things will happen if you’re a moron.

No, not negative rep but you have missed one vital piece of information - supply and demand. The increase in house (also include apartment/flat/bungalow etc into that word) prices can be heavily affected by demand outstripping supply. When builders and agents and vendors realise that people are willing to pay well for a certain area then prices will inevitably rise. Take London for example, its house prices are very expensive compared to most partrs of England and this is simply because most people who come to UK wish to live there. This means that lots of people are 'fighting over' the same property. this pushes the price up and wages do not keep pace with this. Ultimately, people have a choice - if they stay in London they have to either rent or take a large mortgage to buy. If possible they may move to live outside London - but this will (and has) pushed up prices there too (my home town of York became victim to this trend and it is 200 miles from London). Or they try and find a job elsewhere in the country - but then how easy is that? And do people want to move away from family and friends?

I think it is best not to be too judgemental of people when things go wrong for them; especially after the event.

Remember, hindsight is always 20:20 vision - foresight seldom so.

Lee

[JCM]

Indeed it is not funny, but I don't think Gibbo meant any harm

I am sure of that, it just came aout a bit strong the first time I read it

[The great I AM]

That is not funny Gibbo, over a million people died in the famine, considering the population of the country at the time that is about one in five people, is one of the few things you don't hear many any jokes about here.Really? Bite me. You know, when I joke about the potato famine to the Irish guys on their team (and I'm sure they might tell you I have), they joke back as they like. No-one gets uppity about it. Because they know it's a simple joke. You never heard the Irish taking the piss out of the English? I have.

Loosen your sphincter a little and lighten up, like the Irish.

[Maku-san]

Holy cow! 777 point drop?!? :eek: Good thing the stock market's bigger now than it was back in '29!!! :ko:

[Anime12478]

Holy cow! 777 point drop?!? :eek: Good thing the stock market's bigger now than it was back in '29!!! :ko:
Talk about the lucky 7's...

It seems pretty creepy hearing that the economy is getting worse every day as everyone is panicking about everything. It makes me feel fortunate to have a job in a more stable market (knocks on wood) with concerns for what's ahead.

[Alison2805]

My job is hugely affected by the market conditions. Thankfully I have fantastic bosses who have the brains to see this sort of thing coming and prepare for it. I wont lose my job, but it does make my job more restricted.

You are a moron if you get a giant morgage without looking into how the hell you are going to pay it back if rates rise. Thats just common sense. Here in Aus we are lucky enough to have banks that tell you to piss off if you cant afford a loan, but at the end of the day, its your responsibility to look after your own finances.

[yoda-waza]

Holy cow! 777 point drop?!? :eek: Good thing the stock market's bigger now than it was back in '29!!! :ko:
True, it is a bigger market now but the 777 point drop today is a 6.98% drop in the index. 10/19/87 was the biggest one-day drop: 22.6% (508 points). Maybe it gets worse, though, before it gets better.

[Cutie_honey]

You are a moron if you get a giant morgage without looking into how the hell you are going to pay it back if rates rise. Thats just common sense. Here in Aus we are lucky enough to have banks that tell you to piss off if you cant afford a loan, but at the end of the day, its your responsibility to look after your own finances.

Its not that simple
These banks have been trading their customers debt and it only takes one to faulter and you get a chain reaction as they are all becoming reliant on each others investments. This in turn causes the market to panic and then you have a the crash your seeing now.

It makes me wonder though - this money isnt dissappearing in thin air. If the stocks are dropping as much as they are, someone out there must be buying.

[Spendius]

[...] So your valuable tax SEK/USD is used to help the greedy banker who f**ked up in the first place, not the citizen who lost all their savings and probably their job due to the economic decline.

To sum it all up: Bad things will happen if you’re a moron.

There are certainly a lots of factors involved, I enjoyed this interview explaining the problem in simple, understandable terms:
http://www.youtube.com/watch?v=mzJmTCYmo9g&feature=related

[Geordie Bruiser]

Hey All

This is a Kendo forum!!! A place where we can talk about all things to do with the Martial Art we all love.

In other words a chance to escape (if only for a few hours) the fact that the world and its economy is going down the crapper!

We hear about it every where we go at the moment, so we don't need to talk about it on here.

It's depressing man!!!

[NoNameKleenex]

:wink::wink:
Hey All

This is a Kendo forum!!! A place where we can talk about all things to do with the Martial Art we all love.

In other words a chance to escape (if only for a few hours) the fact that the world and its economy is going down the crapper!

We hear about it every where we go at the moment, so we don't need to talk about it on here.

It's depressing man!!!

Sorry Geordie - I disagree. The thing we all have in common is our interest in kendo, iaido, or jodo. I think it'd be a bit of a hollow forum if all we discussed was JSA and nothing but JSA.

Besides, there's nothing forcing you to read the thread :)

[satsumaruma]

Really? Bite me. You know, when I joke about the potato famine to the Irish guys on their team (and I'm sure they might tell you I have), they joke back as they like. No-one gets uppity about it. Because they know it's a simple joke. You never heard the Irish taking the piss out of the English? I have.

Loosen your sphincter a little and lighten up, like the Irish.

Read your first paragraph above and then apply the last sentence. Yes he got a bit over sensitive. And?? You tell someone to lighten up? YOU?

Of course the Irish take the widdle out of the English, so do I. And people take the widdle out of the Irish. But I think what perhaps maybe got his back up a tad was that you didn't take the piss out of the Irish - you laughed at the mass death of Irishmen. Not sure that is particularly funny. And I'm all for anything being open house when it comes to things being funny.


Its not that simple
These banks have been trading their customers debt and it only takes one to faulter and you get a chain reaction as they are all becoming reliant on each others investments. This in turn causes the market to panic and then you have a the crash your seeing now.

It makes me wonder though - this money isnt dissappearing in thin air. If the stocks are dropping as much as they are, someone out there must be buying.

I sort of agree with this but I seem to recall that much of our current wealth isn't real at all; but I can't remember the reasoning behind this. Can anyone elaborate on this?


:wink::wink:

Sorry Geordie - I disagree. The thing we all have in common is our interest in kendo, iaido, or jodo. I think it'd be a bit of a hollow forum if all we discussed was JSA and nothing but JSA.

Besides, there's nothing forcing you to read the thread :)

Too true....but of course he is allowed to say he doesn't agree as much as anyone else is allowed to talk about non jsa stuff. Yes?

[NoNameKleenex]

Too true....but of course he is allowed to say he doesn't agree as much as anyone else is allowed to talk about non jsa stuff. Yes?

Of course Geordie's allowed to state his opinion - that's the power of a public forum!

I've also heard about our wealth being a perceived wealth rather than a tangible wealth, but I can't remember the reasoning either. I've taken exactly one class each of accounting, business management, and economics, and I think I slept through all of them. MBA, I ain't.

[The great I AM]

Read your first paragraph above and then apply the last sentence. Yes he got a bit over sensitive. And?? You tell someone to lighten up? YOU?

Of course the Irish take the widdle out of the English, so do I. And people take the widdle out of the Irish. But I think what perhaps maybe got his back up a tad was that you didn't take the piss out of the Irish - you laughed at the mass death of Irishmen. Not sure that is particularly funny. And I'm all for anything being open house when it comes to things being funny.Deleted.....I really can't be bothered. Perhaps it was a throw away comment to far, but sheesh....it's just a bit of cultural baiting. I'll bet the Irish do it just as much as the English do, and I'll never begrudge them for it.

[bolson]

Things will get worse than they are now. We are nowhere near the end of the tunnel and the light you see is that of the incoming train wreck. Expect 18 months of nasty recession and the Dow well down from it's current levels as the massive housing bubble collapses.

For insight go to www.rgemonitor.com

I knew this was coming last summer and warned everyone I knew. Nobody listened.

Anyway, good luck to everyone and remember that at the end of the day it's only money that is being lost.

[tyler]

A modest....suggestion, if i may. When times get tuff, why not eat babies?

If Ireland had only taken a pro-babyeating stance when J.Swift tabled the suggestion just over a hundred years before the famine in question, Ireland might be in a better condition to weather the current storm.

http://en.wikipedia.org/wiki/A_Modest_Proposal

If Swift, an Anglo-Irish doode writing in 1729, could pen a seemingly serious proposal to eat babies (complete with the logistics right down to recipes) while simultaneously likking shots off at the English, I think we ought to be ready to have a chuckle at passing and clearly well-intentioned remarks like the above.

How long do we have to wait before events become fair game for well-meaning humor anyways? Was the 'bring out yer dead' bit in Monty Python's Holy Grail in bad taste? When the current kings of the sumo world are called 'The Mongol Invasion', should we choose to take it as a clear affront to the countless people who died in that actual event? If you want to find a reason to stress, then stress. The rest of us are taking things in stride.

[zaemon]

Interesting point.

Actually, in times like these humans typically revert to canibilism and usually children are the victims.

Hide the kids, or, if you are a true christian, give them guns.

[Nanbanjin]

That explains the baby famine of 1849.
http://en.wikipedia.org/wiki/Great_Baby_Famine_1849 (http://www.dailymotion.com/video/k2f2KPGIvIkHKb60uR)

In Japan babies are like hen's teeth. We'd be better off eating old people. Or canned oden; take your pick.

Does the poor economy in Ireland mean that the Irish will start emigrating to Australia again?

[ben]

Hopefully Aus will be cushioned by the fact that what we do best, dig up big chunks of our country and sell it to the highest bidder, is going gangbusters right now. Still, people with exotic pastimes (e.g. windsurfing instructors) are starting to get nervous. Good times to be in something solid and boring like teaching. And stand-up comics always do well in hard times.

As an aside, it seems the cost of Chinese-made bogu is on the increase. I'm predicting we'll see a sharp rise in the next 12 months, not as a result of the sub-prime induced meltdown, but from rising labour costs. The Chinese are developing a middle-class that wants a share of the action. Already some bogu factories are moving out of Shanghai and into the provinces as people in the big cities are demanding--and getting--higher wages. This process is taking months, not years.

b

[yoda-waza]

A little boy goes to his dad and asks, "What is Politics?"
Dad says, "Well son, let me try to explain it this way:
I am the head of the family, so call me the President.
Your mother is the administrator of the money, so we call her the Government.
We are here to take care of your needs, so we will call you the People.
The nanny, we will consider her the Working Class.
And your baby brother, we will call him the Future.
Now think about that and see if it makes sense."
So the little boy goes off to bed thinking about what Dad has said.
Later that night, he hears his baby brother crying, so he gets up to check on him.
He finds that the baby has severely soiled his diaper.
So the little boy goes to his parents' room and finds his mother asleep.
Not wanting to wake her, he goes to the nanny's room. Finding the door locked, he peeks in the keyhole and sees his father in bed with the nanny.
He gives up and goes back to bed.
The next morning, the little boy says to his father, "Dad, I think I understand the concept of politics now."
The father says, "Good, son, tell me in your own words what you think politics is all about."
The little boy replies,
"The President is screwing the Working Class while the Government is sound asleep. The People are being ignored and the Future is in deep sh*t."

[bolson]

Here, I'll tell you, but nobody will listen. Cash is king.

[bolson]

Here is the latest...cavet emptor

Financial Eugenics: The Paulson Plan for Survivor Bias

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London Banker (http://www.rgemonitor.com/financemarkets-monitor/bio/621/london_banker) | Oct 3, 2008
As I write this I don’t know the outcome of the attempt to ram through legislation for looting the US Treasury of $700 billion before the end of the Bush administration. I suspect that Congress will force the passage of the bill in some form because the media and political narrative on the necessity of the measure is unremitting and so horribly biased.
No alternatives will be considered.
No constraints on the unilateral executive authority of Hank Paulson will be considered.
No assurances that funds will be used to unlock credit markets or promote lending to the real economy (as opposed to the financial robber barons) will be considered.
Instead, the bill will get laden with an additional 300 pages of pork to sway the dissenters (http://dyn.politico.com/printstory.cfm?uuid=BB1222CE-18FE-70B2-A8207739171EFDA2), adding to the tab imposed on the American taxpayer.
Having listened to all 42 minutes of the late night Treasury briefing of investment banks on Sunday (http://www.nakedcapitalism.com/2008/09/mussolini-style-corporatism-in-action.html), there is no doubt in my mind that this legislation represents the sort of federal largesse for Goldman Sachs, Morgan Stanley, Citibank and JPMorgan Chase that the Iraq war provided for Halliburton and Blackwater.
The most cynical moment in the call is when the Treasury official confirms, ”our preference would be to help the healthy banks become even healthier” rather than helping troubled banks or illiquid banks.
America is now a centrally planned economy (eidted for brevity)

Clearly what is going on here has nothing to do with kick starting the credit markets or stabilising the equity markets or restoring depositor confidence in banks. (Treasury official: “No provision in the legislation that mandates re-lending.”) What is going on here is a blatant attempt to provide government funds to a select cadre of firms (not all banks) which are chosen to be the survivors feasting off the carcasses of their less fortunate and less well-connected brethren as the downturn intensifies in the years to come.
The crash in equities will still happen. The debt deflation of the economy leading to mass commercial and consumer credit defaults will still happen. The collapse of many national, regional and local financial institutions will still happen. The bankruptcy of many municipalities and shortfalls in state budgets will still happen.
This bill is about engineering survivor bias to friends of the Bush administration so that they profit disproportionately from the collapse of these markets using the funds provided by the taxpayer via the unreviewable and unconditional authority of the Secretary of the Treasury.
The basic plan is to set up a federal money laundering operation. Bad assets come in, get laundered by the Treasury (edited for brevity)

The Federal Reserve will support the plan by relaxing the definition of “control stake” (http://www.forbes.com/business/2008/09/22/banks-pe-fed-markets-equity-cx_lm_0922markets34.html) in US banks and bank holding companies to allow secretive cabals to hold through private equity and offshore hedge funds. No one knows the beneficial owners of these ill-transparent private equity investors, and so it is the ideal way to reward loyal and helpful insiders, legislators and officials – as well as cede further ownership of American assets to foreign stakeholders who would be politically unacceptable if publicly acknowledged. Many foreign creditors are irate at the losses their funds, banks and pensioners have sustained from investments in the United States, and this plan provides a secret way to buy them off and keep them lending and investing as their own economies are roiled by the deflation to come.
For the past year the survivor bias has been orchestrated from the Federal Reserve, with its extension of innovative credit facilities and selectively engineered rescues or forced mergers. That has been very useful, but that well is now dry (http://blogs.cfr.org/setser/2008/10/02/give-the-fed-a-bit-of-credit/). The Fed has no more good assets to trade for the bad assets the banks can offer. And the supply of bad assets just keeps growing as market illiquidity spreads further from the core of the mortgage backed securities market. Instability is now leading to a realistic threat that the Fed and Treasury could lose control of the deflationary process.
Part of the reason the Paulson Plan is so attractive is that it recapitalises the Fed by promoting the unwinding of repos and lending facilities which left the Fed holding toxic assets. As the repos and credit facilities gradually unwind, these toxic assets can now be taken back by the banks and exchanged for good cash. The Fed gets its balance sheet Treasuries and cash back to restore its flexibility to intervene anew.
Favoured private equity and insiders who swap US dollars for equity in the banking system will presumably be aware of the survivor bias being engineered on their behalf. Sovereign wealth funds, investment funds and private equity investors ripped off in the first round of recapitalisation may be willing to come back in once it is clear to them that the next round will benefit from official favouritism. Warren Buffett’s timely stake in Goldman Sachs is clearly linked to his confidence the Paulson Plan will benefit them disproportionately.
(edited for brevity...bush cronies get jobs)

And then there is a huge arbitrage opportunity as well so that everyone makes money. According to the conference call, the pricing on offer from the Treasury will be a bit below Level 3 pricing. The toxic assets will be repackaged and resold with a new AAA wrapper, possibly priced well below what the Treasury paid, assuring a huge profit on both immediate liquidation by the banks and ultimate maturity by investors. The Fed gets its cash and Treasuries back; the banks make huge profits; the foreigners and off-shore tax avoiders get disguised ownership of the American financial system; the taxpayer gets ripped off. What’s not to love?
Think back to Fisher’s Theory of Debt Deflation in Great Depressions (http://www.rgemonitor.com/financemarkets-monitor/253222/fishers_debt-deflation_theory_of_great_depressions_and_a_possib le_revision). Dollars become “bigger” as deflation takes hold because each dollar can buy more assets as assets deflate. That means that as these clowns crash the markets, their $700 billion of liquid cash funnelled to their friends and recycled through the Treasury laundrymat can progressively buy up the rest of the pieces on the gameboard at low discount prices. Game over with those who caused the crash and robbed the bank winning.
Deflation is going to happen – globally. Either we can use the course of deflation to shape healthy economies that will provide growth and employment and productive returns on investment in future, or we can allow deflation to further enrich those miscreants whose irresponsible policies led to the violent financial collapse we are about to experience.
There is a fundamentally healthy economy in America – somewhere underneath all the financial excess and chicanery and all the financial/oil/military/healthcare/developer corruption of local, state and federal politics. It will be a painful and slow process to kill off the metastasising cancerous growths on the economy, but if Americans achieved that, they could embrace a healthier and more productive and more prosperous future.
I would like to believe Americans expressed the courage to change over last weekend when they 25 to 1 rejected an unconstrained and unconditional bailout of Wall Street in favour of cold turkey deleveraging of the economy. I wish I could believe that it mattered in the political calculus, but the result of the House vote on the bill will tell us that.
Fight the survival bias. It’s not your survival they’re engineering.

[JByrd]

Its not that simple
These banks have been trading their customers debt and it only takes one to faulter and you get a chain reaction as they are all becoming reliant on each others investments. This in turn causes the market to panic and then you have a the crash your seeing now.


It's even more complex than that. Firms began taking out insurance against the possible default on a loan. That way, they'd either get their money from the borrower, or from the insurer, if the borrower defaults. Of course they have to pay more for that insurance, which cuts into the value they stand to recover from making the loan. Then those insured loans were all packaged into a bundle, sliced and diced, and resold as mortgage backed securities.

It has come to the point that figuring out what a mortgage is actually worth would require the equivalent of returning a dozen scrambled eggs back into their respective shells. So, if the bailout passes, we have to pay the financial wizards to figure out how to apply this huge chunk of bailout change to the market. By and large, they are the same geniuses we paid to screw it all up. How well do you think they'll do it? How much do you think they will keep us in mind while they do it? I'm sure they're already spnning ways to make themselves even richer from this debacle.

[NoNameKleenex]

It's even more complex than that. Firms began taking out insurance against the possible default on a loan. That way, they'd either get their money from the borrower, or from the insurer, if the borrower defaults. Of course they have to pay more for that insurance, which cuts into the value they stand to recover from making the loan. Then those insured loans were all packaged into a bundle, sliced and diced, and resold as mortgage backed securities.

It has come to the point that figuring out what a mortgage is actually worth would require the equivalent of returning a dozen scrambled eggs back into their respective shells. So, if the bailout passes, we have to pay the financial wizards to figure out how to apply this huge chunk of bailout change to the market. By and large, they are the same geniuses we paid to screw it all up. How well do you think they'll do it? How much do you think they will keep us in mind while they do it? I'm sure they're already spnning ways to make themselves even richer from this debacle.


I think that is the single-most succint and logical thing I've heard in a long time regarding this whole thing. +rep for you!

It's going to be interesting to see what the financial wizards are going to do if the bailout does pass. I also find it interesting that the gov't is considering releasing 700 billion dollars to relieve the debt created by greed, but where was this money when so many programs (social, research, scientific, etc.) are woefully underfunded?

[JByrd]

I think that is the single-most succint and logical thing I've heard in a long time regarding this whole thing. +rep for you!

It's going to be interesting to see what the financial wizards are going to do if the bailout does pass. I also find it interesting that the gov't is considering releasing 700 billion dollars to relieve the debt created by greed, but where was this money when so many programs (social, research, scientific, etc.) are woefully underfunded?

The bailout bill passed.

Thanks for the rep, though I think I may have the order reversed; the loans may have been bundled before they were insured. Plus, it's even more complicated than that!

The insurance companies were operating under the assumption that they would pay less money out due to mortgage defaults, than they took in from the fees collected from selling policies. (my guess is they underestimated the default rate, foolishly using actuarial data from an earlier era, when people were not given loans they did not stand a chance of repaying) Many insurance companies bundled those policies and resold their future value as investments. The reason AIG had to be rescued is that they held too many of those defaulted policies that had to be paid out, and had not resold them quickly enough. Thus they found themselves as the last backstop against the onrush of defaults.

My question is, where are those Stanford economists who got the Nobel back in the late 90s for figuring out how derivatives work? Could we get them to explain that to us again? Somebody should recheck their figures.

[Paikea]

My question is, where are those Stanford economists who got the Nobel back in the late 90s for figuring out how derivatives work? Could we get them to explain that to us again? Somebody should recheck their figures.The guy who gets 1/2 credit for the math model that predicted this is the Chariman of the Fed now. Go figure.

Wonder why it took so long to pay attention to his own work?

[Gessho]

The sheer greed and lack of fundamental thinking behind this crash is mind-boggling. JByrd gets rep (if I had any to give...) from me because he hits the nail on the head. I can only add that the combination of gov't ineptitude and corporate mis-management is an embarassment to the US.

I recall how people used to mock the greed and theft in Russia after the fall of communism. Well, I think our $700,000,000,000 takes the cake. Who's laughing now!?

[yoda-waza]

This latest crisis is only the biggest in a string of recent economic debacles:

If you had purchased $1000.00 of Nortel stock one year ago, it would now be worth $49.00.

With Enron, you would have $16.50 left of the original $1000.

With WorldCom, you would have less than $5.00 left.

If you had purchased $1000.00 of Delta Air Lines stock you would have $49.00 left.

If you had purchased United Airlines, you would have nothing left.

But, if you had purchased $1000.00 worth of beer one year ago, drank all the beer, then turned in the cans for the aluminum recycling refund you would have $214.00.

Based on the above, the best current investment advice is to drink heavily and recycle.

If you do kendo, you may already be doing your part after practice being part of economic recovery. Too late to save Budweiser, though.

[yoda-waza]

BTW, it's being called the 401 k(eg) plan.

[The great I AM]

The guy who gets 1/2 credit for the math model that predicted this is the Chariman of the Fed now. Go figure.

Wonder why it took so long to pay attention to his own work?I'm sure a 6 or 7 figure number could come to mind....

[dwez]

Dave Gorman has chimed in with his thoughts on the subject

http://gormano.blogspot.com/2008/10/where-does-money-come-from.html

[ReKru]

Dave Gorman has chimed in with his thoughts on the subject

http://gormano.blogspot.com/2008/10/where-does-money-come-from.html

Printing new money would probably increase inflation too much, devaluating the capitalists assets far too much (if everyone is rich, noone is).
Taking it from the guys who can't do much about it (the taxpayer) is the better solution to save capitalism for the capitalist.

I hope I wouldn't see it in my lifetime ("So do all who live to see such times but that is not for them to decide. All we have to decide is what to do with the time that is given to us."). But I guess capitalism as it is now will not survive it's "Victory" over communism for that much longer.

Making abstract 'capital' and endless growth the centre of an economic system wasn't that great of an idea anyway.
(just for the record - I'm not a communist, either - I hate politics and economy in general and firmly trust in my 'savings' of nice red wine. If everything goes down, at least I shall face it well pissed) :D

[bobdonny]

From comments on gorman
http://theobvious.typepad.com/blog/2008/10/money-as-debt.html

[ReKru]

From comments on gorman
http://theobvious.typepad.com/blog/2008/10/money-as-debt.html

That's a nice presentation, but I have to disagree with the notion that it's some 'secret club of a selected few very powerfull individuals' that control everything.
That sounds familiar enough and scary enough, but in the end, it's the system as such.
The 'main players' are just a symptom. Same thing as in each and every system - monarchy f.ex. - is it really run by the king? Or by the hundreds and thousands of people that think he's the king.

[bobdonny]

there is no such thing as money :)

[JByrd]

That's a nice presentation, but I have to disagree with the notion that it's some 'secret club of a selected few very powerfull individuals' that control everything.
That sounds familiar enough and scary enough, but in the end, it's the system as such.

Here is a link to an interesting article by Paul Krugman (who just won the Nobel in economics) that backs up what ReKru is saying. I found it to be an enlightening analogy:

http://www.slate.com/id/2202165

[kenwakokoro]

This is the best explanation (http://docs.google.com/TeamPresent?docid=ddp4zq7n_0cdjsr4fn&skipauth=true) of the subprime crisis I've seen to date (Warning: strong language). It doesn't fully include the complicity of the the Federal Reserve, the credit rating agencies, Fannie/Freddie, the SEC and the credit default swap market, but it elegantly catches the spirit of the situation.


(http://docs.google.com/TeamPresent?docid=ddp4zq7n_0cdjsr4fn&skipauth=true)

[ReKru]

Salvation is near:
http://www.thedailymash.co.uk/news/business/banks-to-lend-you-your-own-money-200810081308/

[Toecutter]

I think some of them are crying (http://brokershandsontheirfacesblog.tumblr.com/), I wonder what they were doing in their heyday?