41–48 of 48 posts
I think the better question is to look in the mirror and ask myself "Am I in trouble?"
What the future will bring us: nobody knows, there has never been anything really similar in history... The causes are very simple to describe: our (temporary) so successful economic system didn't follow many moral rules. And now we are all (the responsible and non) forced to pay for that (silly) mistake. You may not agree with me, but I'm convinced that this will be the summary of our current situation, reviewed in…
I'm not sure how morality plays into the mistake. A lot of people deluded themselves into believing that housing prices would never go down. Some people did that because they worked for investment banks and wanted to earn large profits on bonds and some people did that because they wanted to live in California or Florida or Nevada. The only immorality that I have seen is people who lied about their finances on their…
I'm not worried. I've been saving adequately for a while now and I have a good job. Even if the job goes away I'll be alright, because I'm not afraid to wait tables (or perform any other type of manual labor). I didn't buy a house I couldn't afford and I went without when I could (even went so far as to live in a small room rented from a friend, where I slept on a $150 futon from Ikea for over a year and a half [this…
In fact, I have two kids who don't mind all the missing furniture, they still seem to be able to build just about anything out of their mattresses and a few sheets.
http://market-ticker.denninger.net http://globaleconomicanalysis.blogspot.com
Most of what you see in the msm (CNBC, Cramer, newspapers) is either uninformed opinion at best, or deliberate lies.
By the way, Japan's lost decade is now two decades, note the current stock market level and recent 12% drop in GDP. Although to visit there, you would never know, it is an awesome country and everything seems perfectly fine on the surface.
Look, this is all wrapped up in politics. You're not going to get any light shed on this because it is against the interests of the parties involved for that to happen. And watching the news, you can see that one party wants the other one to fail so much that they'd let the country crash and burn.
Some people are going to do fine. Some people are going to end up living under a bridge, or having to make the decision to sell their gun or eat it (weasel words: when I got to that point, I sold mine). 2001 and 2003 were good for some people, and horrible for some (like me).
Read Calculated Risk if you want case studies (look for the Ubernerd series) on why this happened.
Earlier quoted context omitted.
I'm not sure how morality plays into the mistake. A lot of people deluded themselves into believing that housing prices would never go down. Some people did that because they worked for investment banks and wanted to earn large profits on bonds and some people did that because they wanted to live in California or Florida or Nevada. The only immorality that I have seen is people who lied about their finances on their…
The repackaging and reselling of worthless loans, creating money out of thin air, seems pretty immoral to me, and was arguably one of the triggers of the crisis.
The loans aren't worthless now and weren't worthless then. They're just worth less.
Combining loans into a fund doesn't "create money". It merely allows folks to spread their risk over more loans, to diversify.
What happened was that the collective risk was misunderstood. When folks figured that out, they stopped buying those packages. Since US regs require mark-to-market, 0 buyers means 0 "value". Since US regs also require that banks have sufficient assets, marking huge portions of their portfolios to 0 made them technically insolvent.
Note that most of these loans are still performing and the funds are still producing cash, so they're clearly not worth 0.
The other thing that happened is that a lot of folks decided to insure that risk. These folks thought that being paid to cover losses beyond some threshold was free money. Since they didn't get paid enough to compensate them for their actual risk, they're losing gobs of money.
Which is as it should be. If you're willing to take the profit, you should take the loss.
One depressing take: Jim Kunstler's The Long Emergency (a book, summarized here: http://www.rollingstone.com/news/story/7203633/the_long_emer... ). I'm afraid I think he's right (even if he's indulging in a lot of schadenfreude)--it's just a matter of timing. Our society isn't going to survive the peak oil crash intact. The bright side is that we'd have to become hyper-local in our economy, give up the hyperconsumeri…