So, anyone who's been watching the news or reading the papers over the last few weeks would be forgiven for thinking that the end of the world is nigh. All the banks will collapse, nobody will be able to get paid and we'll all start trading chickens because money will be worthless.
And yet, in my day-to-day life, I haven't noticed any difference. Has anyone actually been affected by all this "turmoil" or are you all as indifferent as I am?
And who caused all this? Is it the banks' fault for lending out too much money to too many people, or is it the governments' fault for leaving interest rates too low so that house prices got out of control?
Does a record one-day fall on the Dow Jones or FTSE100 really mean anything and why should we care about the fortunes of stockbrokers?
The Irish government has (stupidly) guaranteed to bail out, if ever the need arises, the six largest Irish banks to the tune of 400 BILLION euro!
These are the same banks that: never noticed that 700 MILLION euro had been lost by a rogue trader, overcharged their customers by over 70 MILLION euro, evaded 90 MILLION euro in taxes, lost laptops containing the personal information of over 30,000 customers, etc.
Now they are free to behave in a similarly carefree manner, but with the added bonus of a safety net provided by the Irish taxpayer; the very same people they've been screwing for years!
The banks in the US brought this on themselves, and the proposed bailout by the Bush admin seems just as ill-conceived.
As to noticing changes, I can't say I have. Time will tell, I suppose.
As the news over here casually mentioned once, the "crisis" hasn't had any effect whatsoever on the "real" economy (yet). That is, the fincance-only sector has suffered a good whopping, but for those people that trade in real goods (and services), the crisis most likely hasn't made any notable difference (again, yet). You'll probably run into trouble when attempting to get a bigger loan, but apart from that... meh.
And I'm going to start studing an economy-related subject in a week or so, so listen to my words. :=
Quote from: Akatosh on Fri 03/10/2008 19:52:06
As the news over here casually mentioned once, the "crisis" hasn't had any effect whatsoever on the "real" economy (yet).
The crisis affected
me: stupid finance students have real trouble finding a job now :P
Let me state it without arrogance: government is not the solution to our problems, government
is the problem.
159,000 people in the US lost their jobs in September. I bet they think that this crisis is pretty real.
Besides, I seem to remember that about 50% of all Americans have stock market investments, so the Dow Jones does affect them, even before you consider 401k's (retirement funds).
No, at the moment, I am not directly affected but this crisis. However, I'm in a good situation in life where I'm not looking to buy anything large, and I'm not depending on student loans. However, it's hard to say how this would affect me in six months, or a year. I do think this bail out was necessary. The economy is not my area of study, but it seemed when I got actual news on this issue, and not just an injection of fear, it seemed there was real fear, and the thought that something had to be done. There may be some long-term side affects of this, like a weakening of the dollar. But only history will show whether or not the decision lead to anything productive.
I think there is enough blame for many people, and I do think that this could have been prevented. The government is part of the problem, but the government can be part of the solution, as well. And all of us are connected economically enough that we will all rise and fall together.
-MillsJROSS
Not yet, the owner of the GameWorld company has told me the "To Let" sign thats been hanging like a grim reaper over my shop for way longer than I've even worked there will finally be removed as the shop is no longer for sale as it's actually making a profit now. Hooray! (And this will look good on my C.V if I ever need to update it)
US should shut up.
War is most expensive and financially uncaring act in modern world.
If they use hellfire missile to blow up clay cottage - yet you could build a whole city of clay cottages with the cost of one missile, I couldn't translate it other way than 'irresponsible'.
If people want jobs, they better get their leaders and leaders' priorities straight. All hail democracy!
But in general, I'm afraid that capitalism is as self-destructive as other ideologies. General sense of comfort and stability simply masks that until it's too late.
I find the ways of capitalism gotten too far, and really oppressive: Where I live, if you don't have a bank account, in most jobs you cannot get even paid. Nobody uses cash! Anyone, from police to court to companies can freeze your bank account with a simple phone call, thus making you instantly piss-poor.
I have money on my account and I cannot withdraw more than a specific sum (daily). Of my OWN money. Bank won't give it to me. To reach it, I must use a card. Which I pay monthly fee for. While bank is using my money and not paying any interest. If I decide to withdraw money in bank, I must pay some kind of additional fee. So teller could get her paycheck.
What's even worse than local banks belong to some kind of swedishs and finnish banks, and my money and its fate is in hands of someone from another country. Not only mine, but whole nation's. Some fat, rich jerk somewhere holds a whole nation by the balls.
What happens if relations between those two countries somehow get explosive??
Things like this tell pretty clearly who controls the world. Bankers.
And this is gone too far.
Reporting from Portugal:
Here, at Europe's tail, the crisis has arrived. Not because there is a direct implication with American trades or commerce but simply because everybody that can do it, take advantage of this so-called crisis.
Here, where the sun never turns its back and the sea vomits salty fish every 5 minutes, the prices have gone higher than Shaun Ryder's underpants because government regulation fails under the big speculators hands.
Well, at least the banks are holding on and apart from one or two false alarms, there is no indication that one should go bankrupt.
I run a coffee shop on a tourist location in the south of Portugal and I actually did not make a profit this year. Bills are paid but no money in the bank.
Well, zero is always better than having huge debts.
Over and out.
My old man has had to lay off half of the workers in his brickmaking factory because nobody is buying houses, so nobody is bulding houses so nobody is buying bricks... Those good men have certainly noticed the difference.
As an extra note - and to live up to my reputation on these boards as a paranoid nut - I'm a bit worried by the fact that the government is trying to encourage us to be self sufficient, to grow our own food and whatever... sounds to me like they're preparing for another World War, and this "Credit Crunch" is a way for them to slowly leading us into a war economy so that they can spend more on the war efforts.*
*PS... I'm only half joking, please don't flame and/or insult me.
I heard on the radio this morning that in the US, banks were giving people mortgages for homes without even checking their credit or source of income.
They were giving loans to people who were buying homes in which they could not afford. Then they had to foreclose on these homes and the banks were stuck with them. Plus, do these bank executives need to make millions of dollars a year, and also some with signing bonuses in the millions.
I wish it had been that easy when i was buying a car.
None of us own even half of our money. It's pretty simple, you put your money to an account at a bank, where it's immediately transferred into numbers on a screen, ones that currently state an agreed value. Those numbers are used in exchange of ownership in stocks and companies. The bank invests all your money in order to keep its value up. And once you draw money, they need to sell their stock to receive the paper equivalent. Basically what everyone noticed here in the early 90s, was that the stocks were losing their value, and people were realising, that by time, their money would be worth nothing. So everyone went, and drew out their money, stopped their accounts, which forced the banks to sell their stock, thereby dropping the value of the stocks collectively, which then made more people draw out their money. Now smaller banks had nothing to offer to their customers in order to give them their money's worth, and eventually went bankrupt. Because banks need their customers as we all do. And they all need to make money all the time to be able to sustain the currency.
Now people with loans, studies, new houses, all that, couldn't just draw their money out, because at that point, it was those people, that owed moneyto the banks, that were in need of some. With the 700 billion, the point was to transfer these depts to one bank, and pay the real banks so that the common customer didn't have to lose their savings. And with that in the States, it's only 20-30 dollars per person.
Do I see any effect? For example the housemarket is dropping like a rock down a cliff. The prices are higher than ever, and no-one's buying houses. Nobody wants to take a high loan of moeny that has no value, no-one wants to invest in a flat because everyone knows the prices will come down, and the flat will be close to worthless. This already happened in Spain, where they had great big condominiums built for the rich, but are now standing deserted with some 2-3 people living in them. I'm glad at the moment, that I don't have a great deal of money, because once the value starts decreasing, the more you've got, the more you'll lose, speaking in terms of solid currency of course. I think the change is obvious, and I sure hope it's not going to be as bad as it were 20 years ago. Also, I don't think the helping fund to the thrashcan bank is a bad idea. That's because it has a chance of really working, and I don't see anyone having more suggestions. That, and you'll realise, that the republicans only voted against it because the governor of Alaska Mrs. Palin accused them of ideally corrupt right wing politics. There'll be a new vote soon, which will take care of it, I presume.
I've noticed my work (I install windows and do glasswork) has dropped this year pretty strongly. Still though, I keep busy enough, just people aren't building like they used too. Also, there are TONS of houses for sale.
I understand that you can buy a waterfront condo with an included BMW on the California coast for something like $200 000US right now, but that hasn't changed anything here - rents for one-bedroom apartments in the Vancouver area have started to drop below the $1000/month mark, but I still feel like there's no way in hell that I'll ever be able to afford property unless I wait until after the olympics.
I guess that they're having trouble selling a couple of the houses that they've recently built, but that's because they're trying to sell houses for $1.5 million in a neighborhood where my parents paid somewhere in the $400 000 - $600 000 range back in the 1970s. I don't care how much inflation there's been, and I don't care how much more property is worth now; that is not a million dollar neighborhood.
Any good student of free market economics saw this coming 20 years ago, and many of the brightest economists of our age pointed out that this would happen due to overinflating a currency backed only by good will. The US Federal Reserve has been steadily inflating the US currency for roughly 25 years, artificially lowering interest rates (which causes mal-investment or investments people would not otherwise make at the natural rates) and generally trying to cover up for its own ineptitude by dumping money into a system that simply cannot be sustained. The tough but wise medicine is to let the companies who have made these risky ventures liquidate their bad debt and tighten their belts, but instead the government has decided to throw more taxpayer money on companies who have mismanaged themselves into bankruptcy.
If you went to a bank and told them you managed your business poorly and borrowed more than you could hope to repay, do you think they would smile and hand you a check for $100 billion (or any money at all) and say 'here you go, sir! This is yours for free, good luck!'
Fuck no they wouldn't, they'd let your business burn because you're a poor businessman and should go out of business.
The government prop-up days in the US are coming to a disastrous end, it's just a matter of whether we let it happen now or keep dumping good money after bad until it completely collapses the dollar. I've been studying the boom-bust cycle in this country for awhile and the government just isn't listening to market economics or financial trends or even common sense, it's too busy fearmongering the people into thinking the world will explode if they don't bail out these failed banking systems.
This bailout mentality will unfortunately have lasting collateral damage not only on the US but on other countries who are readily embracing this corrupt and foolhardy measure of taking money from the people to save companies who have made critical investment and market errors. Did anyone notice that one of the former CEO's of Lehman left the company with 30 million (or was it 16 million)?
A good site to read for anyone interested in brushing up on their economics is www.mises.org (http://www.mises.org). The more aware you are of the system, the more you can understand its strengths and weaknesses.
As any parent of small children knows, when your kid gets hurt you don't just lecture them on how they shouldn't have been playing with steak knifes or whatever, you take them to the hospital. The attitude of some in the US and UK is "they made this mess, let the bankers suffer" but of course its not that simple.
[Just deleted possibly my worst post of all time.] ;D
The thing to remember about whatever happens over the next couple of years is that economics runs in cycles. Things will improve again, it's just a mater of patience.
I was working as an Estate Agent a year ago. When Northern Rock collapse, faith in the housing market died, the mortgage market froze up completely. I left in October 2007, because simply people couldn't get Mortgages anymore without a 25% deposit and a better credit rating than god.
I recently asked to a big fish professor of economics if this was really going to be so serious as the 29th crack... He said "I wish this is going to be just so serious as that!"
Scary... :)
Quote from: Stupot on Sat 04/10/2008 11:20:34
[Just deleted possibly my worst post of all time.] ;D
The thing to remember about whatever happens over the next couple of years is that economics runs in cycles. Things will improve again, it's just a mater of patience.
You know, that's true, but most of the valleys in the cycles don't include the companies that guarantee more than 50% of all mortgages in the United States going bankrupt. Just based on that, this is an exceptional situation, in a way similar to that of the stock market crash in 1929.
Oh well, at least they gave the appropriate days time for the big investors to sell their share of the stock and to save their moneys.
Imagine if:
There will be a time when about 100 groups/companies own all the money there is, and then, they just may think, why don't we get a place for us (say Nevada) and live happily forever with all the luxury and comfort? Build a barricade, surround it with rocket launchers and let the rest of the world without oil and electricity? Why not? We can do it, we really don't care about the others!
All it takes is a charismatic figure and lots of money.
[Stupot, I didn't delete mine so you should post yours out of sympathy.] :=
Quote from: SSH on Sat 04/10/2008 09:23:46
As any parent of small children knows, when your kid gets hurt you don't just lecture them on how they shouldn't have been playing with steak knifes or whatever, you take them to the hospital. The attitude of some in the US and UK is "they made this mess, let the bankers suffer" but of course its not that simple.
Well, the reason Lehman was allowed to go bust was simply because it didn't take deposits from savers, so there wouldn't be a big outcry from the populace if all their savings suddenly vanished. The other banks are in a position where governments can't afford to let them go under, or the general public would probably start to riot about losing all their savings.
The danger is that by bailing out these banks, they won't learn their lesson and they'll make the same mistakes all over again... which is why we need to ensure that they suffer some form of punishment.
QuoteI heard on the radio this morning that in the US, banks were giving people mortgages for homes without even checking their credit or source of income.
These "celf-certification" mortgages were common in the UK too, and banks were even encouraging people to take out mortgages that they couldn't afford.
I think the blame for this situation lies in three places:
1. The banks giving out loans to people who were obviously not in a position to be able to repay them
2. People accepting these loans, despite knowing that they wouldn't be able to afford to pay them back
3. Governments (especially in the US and UK) leaving interest rates far too low for far too long, which lead to a rapid increase in house prices as people started to think they could afford bigger mortgages than they really could
In the end, what goes around comes around and it looks like the system is finally starting to correct itself now. Personally I'm glad house prices are finally falling as they had become way out of reach for most people, and hopefully if the banks keep their strict lending criteria going house prices will continue to fall back to a more reasonable level.
QuoteMy old man has had to lay off half of the workers in his brickmaking factory because nobody is buying houses, so nobody is bulding houses so nobody is buying bricks... Those good men have certainly noticed the difference.
This sort of short-sightedness by the house building companies is quite ridiculous. People still need houses, the population is still increasing. But because mortgages are likely to be hard to get for the next year or so, these companies completely give up on building anything ... which means that when the financial system does sort itself out, suddenly there'll be another housing shortage because nothing got built for a couple of years.
Quote3. Governments (especially in the US and UK) leaving interest rates far too low for far too long, which lead to a rapid increase in house prices as people started to think they could afford bigger mortgages than they really could.
This in particular is the heart of the matter for anyone well versed in economics. I'm not sure how it came to be in the UK (Parliament fixes a low interest rate?) but here the Fed inflates the currency to make it seem as though there is more money around, making interest rates artificially drop. It's artificial because the money they are printing has lost value for the simple fact that the more of something you have the less it's worth. With all these new dollars out there, though, banks and real estate brokers are encouraged to drop their interest rates down to levels that are unrealistic given the economic climate, which encourages
mal-investment. This trend has been happening over and over in this country since the Fed was established and will not end until the companies responsible for creating the mal-investment are forced to take direct responsibility for it, both financially and personally. Obviously, governments are now in the business of bailing out bad policy and bad business, so the cycle will continue for awhile yet until there's a total collapse of the system itself (or the people just get tired of policymakers trying to protect the jobs of special interest groups).
Oh, and:
QuoteAs any parent of small children knows, when your kid gets hurt you don't just lecture them on how they shouldn't have been playing with steak knifes or whatever, you take them to the hospital. The attitude of some in the US and UK is "they made this mess, let the bankers suffer" but of course its not that simple.
This is the kind of naive view that got us into this mess in the first place. Bankers are not children, though they play with your money like it's Monopoly money and make bad investments. Not allowing the market to adjust by liquidating bad debt and closing companies responsible is propping up the very system that caused this, so no, you don't throw more money at them and say 'there there, son, it'll be alright'. They certainly wouldn't throw any money your way if you were in their position because it's
business.
The banking business (or any business) has absolutely 0 to do with your analogy.
Well, ProgZ, how about "cutting off your nose to spite your face"?
Making sure that the various Wall Street companies pay for their mistakes is certainly something we should strive for. In the long run, it's important to make sure we don't privatize the profits and socialize the risks of financial speculation. However, as in many other things in life, you have to weigh your priorities, and it's not at all obvious that at this moment, guarding against moral hazard is more important than making sure the whole system doesn't collapse, causing major collateral economic damage to people and businesses that had nothing to do with the current mess. That's certainly the view taken by a great many people who are very well versed in economics. (Although a number of economists disagree about the specific measures taken in the rescue plan.)
We have to recognize that there really is such a thing as "too important to fail." The long-term response to that situation should be either (1) split the company up into more manageable pieces, (2) impose regulation to force the company to be more risk-averse, or (3) the government, in recognition of the fact that it will bail out the company if it ever screws up completely, should be given equity so that tax payers also get a share of the profits during good times.
I don't think your little lesson on economics makes a whole lot of sense, either. Increased inflation typically leads to higher interest rates, not lower ones. (Banks know that if they lend you money now and you pay it back in a year, the same sum will be worth less by that time, so they increase interest rates to maintain their profit margin.)
Finally, a major cause of the economic crisis that hasn't been brought up so far is the trade, and subsequent speculation, in bad debt. There was a time when, if a bank gave you a mortgage, they would sit on that loan until you paid it back, so it was in their interest to make sure you wouldn't default on the money you owed them. So they didn't write loans to bad credit risks. Then, clever finance people figured out that you could buy and sell loans (or, more precisely, the right to collect on them). Banks could give you a loan, and immediately unload it on someone else. If you failed to pay up, it wouldn't be their problem. Still, no one's gonna pay much for a risky loan, so this wasn't very good business for the banks.
Then, some even more ingenious finance guys realized that risky loans (subprime mortgages etc.) would be worth more if you took thousands and tens of thousands of them and bundled them all together. Even if some of them defaulted, the high interest rates earned on the others would make up for it. Then you could sell shares in the whole package to a variety of investors at a pretty price. To squeeze even more cash out of the whole deal, these Wall Street wise guys created "tranches" of bonds (essentially, the order in which people will get paid). Since the people in the higher tranches would be the first in line to get any money from any of the borrowers, they were (supposedly) almost guaranteed to get their money back, so those bonds were graded as AAA, very reliable investments, which made them much more valuable.
Through wizardry (or "sophisticated financial instruments," if you prefer) like this, the industry was able to transform risky mortgages into what appeared to be very safe investments. As a result, demand for all these "credit products" shot up, and suddenly there was a booming market in bad debt. Naturally, banks and other credit institutions were happy to provide, and started writing mortgages for anyone with a pulse. As long as the housing market was booming, everyone made money hand over fist, but when the housing bubble burst and people started defaulting on their loans by the billion, the whole house of cards came tumbling down. Investors who thought they'd bought ultra-safe AAA bonds found themselves sitting on worthless shares in a gigantic Ponzi scheme (http://en.wikipedia.org/wiki/Ponzi_scheme). Cue current crisis.
Trade in debt is a genuinely clever idea, and in principle it leads to a more stable and efficient market. The basic problem in this case was that Wall Street got ahead of itself in creating new, complex investment types, which people didn't fully understand, and could only guess the value of based on complicated computer models of risk. Because of all the levels of abstraction and indirection, it wasn't as obvious as it should have been that there was a massive risk unaccounted for in the models.
If nothing else, this will be an object lesson to risk managers. The trade in debt won't stop, but we'll see more conservative credit ratings and more cautious valuations. That's a good thing. Wall Street will no doubt screw up again at some point in the future, but the next crisis will be probably about something else they got wrong.
Quote from: Snarky on Sun 05/10/2008 03:10:48
I don't think your little lesson on economics makes a whole lot of sense, either. Increased inflation typically leads to higher interest rates, not lower ones. (Banks know that if they lend you money now and you pay it back in a year, the same sum will be worth less by that time, so they increase interest rates to maintain their profit margin.)
Interest rates are decided by Central Banks (BCE, FED), not by "private" banks.
When the Central Banks rise the interest rate, it becomes more difficult/expensive to obtain a loan; so to speak "money gets expensive".
The more money is "scarce", the more valuable it is; the more valuable it is, the less inflated it gets (because people are more willing to trade many goods for it).
Running out of money is a side-effect of trading in pretend money (http://en.wikipedia.org/wiki/Shadow_banking_system).
Apparently these people (http://uk.biz.yahoo.com/02102008/389/eight-credit-crunch-crimes.html) are feeling the pinch aswell.
QuoteI'm not sure how it came to be in the UK (Parliament fixes a low interest rate?) but here the Fed inflates the currency to make it seem as though there is more money around, making interest rates artificially drop.
I'm not sure what the Fed's policy is for setting rates, but in the UK the Bank of England is charged by the government with setting interest rates in order to keep inflation as close to 2% as possible. However, because the government defines "inflation" as being the cost of consumer goods and services (ie. not mortgages), over the last 10 years the abundance of cheap imports from China and the far east has lead to consumer inflation being very low -- and thus interest rates have been kept low to match; meanwhile house prices have been rocketing out of control and nobody was doing anything about it.
I don't understand how having low interest rates would artifically inflate the currency -- as Snarky says typically a currency gets stronger when its interest rates rise (because investors see better returns by putting all their savings into that currency, thus the demand for the currency increases).
QuoteBankers are not children, though they play with your money like it's Monopoly money and make bad investments. Not allowing the market to adjust by liquidating bad debt and closing companies responsible is propping up the very system that caused this, so no, you don't throw more money at them and say 'there there, son, it'll be alright'. They certainly wouldn't throw any money your way if you were in their position because it's business.
But the point is that if we allowed the banks to go bust and get their just desserts, normal people would lose their life savings, and it could start a chain reaction in which other banks that were owed money by the bankrupt bank then become bankrupt themselves because they can't get their money back. So just leaving it up to the market isn't really an option here.
QuoteFinally, a major cause of the economic crisis that hasn't been brought up so far is the trade, and subsequent speculation, in bad debt.
Through wizardry (or "sophisticated financial instruments," if you prefer) like this, the industry was able to transform risky mortgages into what appeared to be very safe investments.
This is a very good point, and is probably the major factor that kicked off this situation.
The thing I don't understand is that these sub-prime mortgages haven't suddenly become worthless overnight ... as long as most of the people can still afford their repayments then there's no problem. As long as they don't lose their jobs and interest rates don't rise then there's no reason for them to stop making repayments, and the whole thing should just sort itself out, right?
Quote from: Snarky on Sun 05/10/2008 03:10:48
I don't think your little lesson on economics makes a whole lot of sense, either. Increased inflation typically leads to higher interest rates, not lower ones. (Banks know that if they lend you money now and you pay it back in a year, the same sum will be worth less by that time, so they increase interest rates to maintain their profit margin.)
I guess what you said doesn't directly contradict this, either. After all, you are arguing that the Fed is screwing up the economy.
Quote from: bicilotti on Sun 05/10/2008 10:25:09
Interest rates are decided by Central Banks (BCE, FED), not by "private" banks.
When the Central Banks rise the interest rate, it becomes more difficult/expensive to obtain a loan; so to speak "money gets expensive".
The more money is "scarce", the more valuable it is; the more valuable it is, the less inflated it gets (because people are more willing to trade many goods for it).
The Central Bank cannot decide what banks are going to charge in interest, that's each private bank's decision. It can only
influence, not directly set, these interest rates. In fact, the Central Bank sets interest targets, then uses monetary policy to get banks to change their interest rates towards that target. While the rate charged on loans from the Central Bank is one part of that policy, the Central Bank also employs other tools.
Another way to explain the effect of interest rates on inflation is to say that lower interest rates encourage people to borrow money and spend it on all kinds of things (new car, new house, expand their businesses, etc.). This increase in demand then causes prices to rise, and a general price rise = inflation.
Quote from: Pumaman on Sun 05/10/2008 13:30:38
But the point is that if we allowed the banks to go bust and get their just desserts, normal people would lose their life savings, and it could start a chain reaction in which other banks that were owed money by the bankrupt bank then become bankrupt themselves because they can't get their money back. So just leaving it up to the market isn't really an option here.
Actually, in the US at least, bank deposits up to $100,000 per account are federally insured through FDIC, so even if a bank goes bust, people aren't going to lose their savings.
Quote from: Pumaman on Sun 05/10/2008 13:30:38
The thing I don't understand is that these sub-prime mortgages haven't suddenly become worthless overnight ... as long as most of the people can still afford their repayments then there's no problem. As long as they don't lose their jobs and interest rates don't rise then there's no reason for them to stop making repayments, and the whole thing should just sort itself out, right?
Near as I can tell, it's a combination of three factors: (1) Really an epidemic of foreclosures. You have to realize how insane many of these loans were: they would be cheap for the first year or three, then the interest rate might suddenly triple. Also, some of the people taking out the mortgages may not even have had jobs; so-called "liar loans" involved no background check whatsoever. And of course you have the large number of jobs that have been lost over the last few years, and the fact that nervous banks are raising interest rates on other mortgages, pushing more people over the brink. (2) Due to (1) and the collapse of the housing bubble, the amount of money that can be recovered through a foreclosure has fallen, because houses put up for auction don't sell, or sell for lower sums than they would otherwise have gone for. (3) A market panic around the whole class of assets means that no one wants to buy them, so they're almost impossible to unload. Even though they might be worth money in the long term, they're next to worthless in the short term. Because companies have borrowed money using these assets as collateral, they may find themselves unable to pay when their loans come due. Saying "we could make money on them if we held on to them for another five-ten years" doesn't help you if you can't pay your creditors today.
That's why the government buying up some of this "toxic debt" is not entirely a handout to Wall Street. Someone who can afford to hold on to the investment for long enough, which the government can, might not actually lose a whole lot on the deal.
This here, this is what it's about. (http://www.weebls-stuff.com/toons/Credit+Crunch/)
:)
My parents lost about 50 grand in the stock market in just a few days, so yes I'd say there's definitely a problem. They are debating whether they should take the money out or hope for things to turn around.
I think my family has lost around 50 000 euros in stocks so far, and I'm getting real problems getting a reasonable loan, now that I'm about to buy a condo.
I think the bailout packages are probably good as a short term rescue. However, I'm ideologically opposed the method, since it fuels a fundamentally flawed system. This is the backside of capitalism. It's bound to bubble and burst in cycles.
I've probably lost $2,000 (nothing compared to what you've been talking about. But it's enough to put a dent in my savings). Damn you mutual funds! Damn you. :P
Just to let everyone know ahead of the game, I'm setting up a new Currency, called SamDollars. It is not based on stocks or the gold standard, rather the much more stable, "what i have in my room" standard. Thus on SamDollar is worth 0.00000001 American Dollar. The obvious benefit being that What i have in my room is only going to get MORE valuable over time, and I am out of known disaster areas, so a Sam Market crash is unlikely.
I am Selling them at this exhange rate and will happily take orders from AGS members.
...more valuable, you say?
...mh...
...out of desaster areas....
...mh...
...much more stable, eh?
Count me in. I'll buy every SamDollarâ,,¢Â© you have.
Let' s hope everybody sees Christodollars as a a secure currency and Christopia becomes as rich as Cayman Islands...
..but the currency of Christopia is The Roger. And things are looking pretty grim for the Christopian economy if the dollar's going down...
you know, my gramma's 91, and managed to survive the last big financial doom the US had pretty well, even with a laid-off coal miner husband and two kids. no matter how bad it gets, anything is survivable, it just takes a lot of hard work. in my area the economy's been bad since the 80's, and it's a rural area. there are people who will break into people's houses while they're not home and steal the pipes and wiring from their houses to sell for scrap metal, along with anything else they can find.
and the worst thing is that this country's done it all to itself, there's no one else to blame this time, but we're not alone in the trouble. it's a wartime economy already in the world, thanks to a trigger-happy texan who shall remain nameless. things will get much worse before they begin to get better, and people DO need to be more self-reliant and stop expecting the government to be there ready to wipe our noses for us at every turn.
people have gotten too used to letting everyone else do the work for them, and not keeping track of their own funds until it's too late.
the us is a consumer nation instead of a commercial economy now, most of our industries have been shut down because companies buy from elsewhere in the world for cheaper.
to make what could become a long ranty post short, i'll simply say there's a lot more that needs done other than the tiny bandaid they're trying to patch over the banking and lending industries if we're going to survive this mess.
QuoteMy parents lost about 50 grand in the stock market in just a few days, so yes I'd say there's definitely a problem.
QuoteI think my family has lost around 50 000 euros in stocks so far
In these cases I would argue that nobody has really lost anything. Share prices, like house prices, have a habit of rising year on year; but because they rise faster than inflation, there tends to be a correction every now and then when the prices come back down to earth a bit ... and now is simply one of those times.
The stock markets are just in a dip at the moment, and undoubtedly in a year or two's time will be back up with record highs once more.
I only wish I knew how to buy shares so that I could have snapped up loads of HBOS, RBS and other bank shares yesterday, and sold them on in a year's time for mega profits :D
Though actually, this is effectively what the UK Government has just done today (http://news.bbc.co.uk/1/hi/business/7658277.stm) by announcing that the state is going to buy a large number of bank shares in order to inject capital into the banks, and hope that the share prices have risen again in a couple of years so they can be sold off and taxpayers walk away with a profit. Seems a bit of a risky thing to do with taxpayer's money, though.
Quote from: Pumaman on Wed 08/10/2008 20:19:00
I only wish I knew how to buy shares so that I could have snapped up loads of HBOS, RBS and other bank shares yesterday, and sold them on in a year's time for mega profits :D
I think you'd better steer clear from bank shares just a tad longer...
Quote
I don't think your little lesson on economics makes a whole lot of sense, either. Increased inflation typically leads to higher interest rates, not lower ones. (Banks know that if they lend you money now and you pay it back in a year, the same sum will be worth less by that time, so they increase interest rates to maintain their profit margin.)
But my 'lesson' comes directly from Austrian economics, my friend -- and about the interest rates not making sense, you're absolutely right -- but for the wrong reasons! Under normal circumstances, inflating a currency DOES lead to higher interest rates, discouraging risky ventures. However, the Federal Reserve (in conjunction with the Central Bank) has been operating under a scheme for 25 years of inflating the currency while artificially dropping interest rates by purchasing guarantee shares from the banks. Other methods come into play in their agreement, too, but the end result is that they've been artificially (and by artificially I mean that by all intents and purposes the interest rates SHOULD be higher) lowering interest rates while continuing to devalue the currency. Obviously, either of these things could become a long-term problem, but together they spell disaster to a free market economy as we're seeing play out right now. I'm not saying they're dastardly men doing this intentionally to ruin America, don't misunderstand; I just believe they've been operating under a system they believed in so strongly that they wouldn't let it go even when it proved untenable.
Since you don't appear to disagree with my point that banks/companies need to liquidate their bad debt and take responsibility for their poor choices we'll skip that part of the discussion and move on to your suggestions for handling the problem, in order:
(1) split the company up into more manageable pieces.
This first suggestion won't ultimately solve the problem facing the economy, which is the artificial interest levels supported by the Fed to encourage mal-investment. It's a great idea generally, though, just not a solution to the problem at hand in my view.
2) impose regulation to force the company to be more risk-averse.
More regulation has proven to be historically bad in American policy, even with the best of intentions. Regulating these companies to force them to behave a certain way sounds great in theory, but in practice it would turn into this pile of red tape with more loopholes than you or I could imagine and more government involvement when what we need is less.
(3) the government, in recognition of the fact that it will bail out the company if it ever screws up completely, should be given equity so that tax payers also get a share of the profits during good times.
This also sounds great when said or on paper, but the simple fact of the matter is that the government should not be seizing taxpayer assets to do
anything. If taxpayers do not agree to this plan, their money should not be appropriated for it, because the alternative in my view is fascism.
Before we continue this, I'd just like to make it clear that I believe the Federal Reserve to be one of the main causes of the current crisis. If you believe the Federal Reserve to be a useful and necessary part of the system then we will simply have to agree to disagree on this matter and leave it at that :).
Prog, it is quite acepted that Greenspan pissed it off when lowered the interest rate in 2005... Then the banks needed to "invent" something new to win money, since gathering interests was not worthy, then they invented the "subprime", etc... :)
The car industry in my region is really going downhill, with some 3000 more or less permanent layoffs. This affects well over a quadruple amount of people in the end, with all contractors and subindustries.
Now is probably one of the worst periods for our industry in modern times.
My company just announced no raises this year. And they're reducing our potential bonuses by 30%. And they've hamstrung their share discount scheme to make it pointless for UK employees. :(
And NY, Francfort, London, Madrid, etc... stock markets are downhill and with no brakes... I think this is going to be the biggest crash in the history of the modern economy. Good luck to all. :-\
Unsurprisingly, the new Zeitgeist documentary goes pretty far into detail about this.
Quote from: Snarky on Sun 05/10/2008 14:37:09
Actually, in the US at least, bank deposits up to $100,000 per account are federally insured through FDIC, so even if a bank goes bust, people aren't going to lose their savings.
This is true, but, for people who have all their money in one bank, it could take weeks if not months to get this $100,000 (or $250,000 now, since the law has changed) back. So, no, people wouldn't lose their money, but I would imagine they would be hard pressed for a length of time until that money was reimbursed to them by the FDIC.
Zeitgeist? That documentary whose author recognised that he invented everything to prove that people can swallow everything if it's presented in a documentary format?
You and I probably won't see any difference. But I have already met people over the Internet who have lost their jobs because of this. Although people lose jobs all the time, now there are whole companies going down, half the stuff is let go. And Iceland is a mess also.
One of our banks (Hansapank, now named Swedbank) is going downhill also. People can't take out large amounts of money anymore...
But to call it great economical crisis and downfall, is a bit much, I think. I don't think it will be like in the beginning of 20'th century where there was nothing to eat.
Well, it seems that my cockiness has come back to bite me squarely in the ass, as today the company I work for went bust and I got made redundant. So uh yeah, in a dramatic about turn, I've now decided that the credit crunch is real, people! Sing it from the rooftops! It'll be worse than the Great Depression and we'll only have rice and gruel to eat for the next 10 years.
Time to start selling AGS then. ;)
If you need any good references, just point to this forum (or here (http://www.americangirlscouts.org/agswiki/Chris_Jones))
Damn, sorry to hear that Chris!
Apparently the entertainment industry is immune to stock market fluctuations. You should consider a job in games. Or Game.
Quote from: SteveMcCrea on Wed 22/10/2008 23:46:25
Apparently the entertainment industry is immune to stock market fluctuations.
/me dramatically wipes his brow
PHEEEEWWWWW
Quote from: MrColossal on Thu 23/10/2008 03:53:29
Quote from: SteveMcCrea on Wed 22/10/2008 23:46:25
Apparently the entertainment industry is immune to stock market fluctuations.
/me dramatically wipes his brow
PHEEEEWWWWW
For a while there Eric thought he'd taken all those tap dancing classes in vain.
Ouch, sorry to hear that. Good luck with your job hunt!
Sorry to hear that, Chris... I know you and I am sure you must not only work hard, but also must be one of those guys who keep a good working atmosphere... Things must go really badly in your former enterprise if they must fire you.
But you will find a job soon :) If not, you can come to my home and I will pay you for sexual services :)
At last, you'll have the time you need to make Chris Quest! And make AGS3D!
Seriously, though, if you want any CV advice, or just to increase your professional job hunting network (http://www.linkedin.com/in/amaccormack), then give me a shout!
QuoteTime to start selling AGS then
Watch out for the AGS Donate button, coming soon to a website near you! :=
QuoteIf you need any good references, just point to this forum
Don't worry, I've already lined up Stan and arthur.com as my references.
QuoteBut you will find a job soon If not, you can come to my home and I will pay you for sexual services
Hmm, there could be a conflict of interest there, what with me already paying AGA for similar services. But I suppose they do say you should pay it forward...
QuoteSeriously, though, if you want any CV advice, or just to increase your professional job hunting network, then give me a shout!
Thanks for the offer, but I have a fail-proof plan. I intend to convert my redundancy pay into lottery tickets, and with the moon being on the right alignment it's almost guaranteed to lead to a jackpot win.
Get a job you bum!
Why don't you ask for royalties from commercial AGS games. Write it into the contract! 10% of every sale!
Take that entreprenurial game makers!
Go begging back to Tesco. There's no way *they're* going to go bust.
Quote from: Lay on Thu 23/10/2008 16:31:45
Get a job you bum!
Why don't you ask for royalties from commercial AGS games. Write it into the contract! 10% of every sale!
Take that entreprenurial game makers!
Yeah what with the 10s of copies sold he'll make at least £5 a month.
You likely lost your job because you dared to leave them in the first place. How do you know your new company went bust because of the financial crisis? You really shouldn't have pissed off Tesco.
Oh no!
Hey, if you would like a job making tools/engines for a living and still keep the full rights to AGS, oh and also you don't mind moving to America, send me a message. I work at a small studio and we're looking for people. I've looked at your portfolio (uh... AGS) and I'm pretty impressed. I'm serious. ;D
Well, you can always come to Greece and sell souvlakia(plural of souvlaki), but well, we all rather you didn't. About you being fired, you can whine about it and die of dehydratation, or you can go find a job. There are always crisis ahead and behind us, but once a rock always a rock...whatever.
I wish you the best of luck, CJ. With references like that, you should at least get a cameo in a soon-to-be-released 800x600 res game.
He already has frequent cameo roles in one of the most popular (http://www.grundislavgames.com/benjordan/) AGS game series. Something else to add to his résumé.
Sorry to hear about your job, CJ. Even though my money is worth only pennies now, I'm sure I could throw a few your way if necessary.
I bought a pizza yesterday and the price had gone up like 2 dollars from a week ago :(.
Jesus, now I'm depressed!
Sorry to hear about that CJ, I think you should sell AGS, or at least get a monthly fee, 4000 members at 1euro a month is good money don't you think? And if you loose half of those members just rise the fee to 2euros
all the best luck to you
Chris Martenson, a scientist who over the last 5 years has become extremely concerned with the world economy, produced a really brilliant crash course on economics and the root causes of inflation, debt, and market bubbles.
You can view each part of the course here, http://www.chrismartenson.com/crash-course, and for the less-economically savvy people out there I highly recommend it. There were a few things he touched upon that I hadn't considered before (like how Earth's population growth has reached the vertical phase of an exponential curve), so it's interesting even for people who study the subject!
I highly recommend you all give this a look, especially any proponents of the Federal Reserve banking system and fiat currencies in general.
Thanks for the link to those movies, ProgZmax. They look very interesting, and they've got to make more sense than the talking heads on my TV screen, who all seem insistent that it's the fault of the other political party.
CJ, if money gets tight for you, why not slap up a donate button? I'd throw some money your way for all the AGS goodness you've provided over the years. Things are tough on this side of the pond too, but I'm sure I could cough up twenty dollars or something. (Which is like three pounds and some change, I think).
Hope the job search goes well for you.
Ponch
Quote
Q: Won't you at least accept a donation?
A: If a future situation was to leave me in financial hardship, I would consider accepting donations. However, for now, I have a full-time job and it's not an issue.
Yeah, this had been a nice month for my gambling, so why don't you open a paypal account so that "we the people" can get some love back to you, mr. Jones?