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Blowing the Whistle on the Mortgage Bubble

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Re: Blowing the Whistle on the Mortgage Bubble

#71

Post by RickHull »

BenoitEssiambre wrote: post #40
martinced wrote: post #15

"industry insiders were ringing the alarm bells" Just as today many economists are ringing the alarm bells: the governments public debt issues (both in U.S., Japan and many countries in the Eurozone) are going to end up very badly. Many central banks (including in the U.S.) have basically become bad banks. Anyone holding medium and long-term public government debt (like many insurance products) are basically bankrupt…

"governments are going to default.", "we live in a socialist world bent on confiscating savings (at the benefit of the state) using inflation" These are contradictory. Governments don't have to default if they inflate their debt away. Also, money is just pieces of paper or a number in a computer. You shouldn't keep most of your savings in money. Cash is just an agreed upon number meant to help with short term transac…

> > "governments are going to default.", "we live in a socialist world bent on confiscating savings (at the benefit of the state) using inflation"

> These are contradictory. Governments don't have to default if they inflate their debt away.

The reconciling position is that inflation used this way is simply default via other means. The holders of debt will not get back what they are owed in terms of purchasing power -- a nominal repayment rather than a real repayment.

Re: Blowing the Whistle on the Mortgage Bubble

#72

Post by patrickgzill »

jcven wrote: post #11

The best whistle blowing before the bubble popped had to be Peter Schiff telling a huge crowd of mortgage bankers they were about to lose their jobs in Nov 2006: http://www.youtube.com/watch?v=jj8rMwdQf6k

For those who don't want to watch an hour long presentation, you can watch a compilation of clips from different news show appearances, "Peter Schiff Was Right" http://www.youtube.com/watch?v=2I0QN-FYkpw

Re: Blowing the Whistle on the Mortgage Bubble

#73

Post by RickHull »

rthomas6 wrote: post #53
BenoitEssiambre wrote: post #40

Earlier quoted context omitted.

"governments are going to default.", "we live in a socialist world bent on confiscating savings (at the benefit of the state) using inflation" These are contradictory. Governments don't have to default if they inflate their debt away. Also, money is just pieces of paper or a number in a computer. You shouldn't keep most of your savings in money. Cash is just an agreed upon number meant to help with short term transac…

I think OP might feel better if they knew about inflation protected securities.

When the issuer of those securities is the one defining the amount of inflation, that issuer has every reason to understate said amount, and the holder of the securities may still lose purchasing power.

Consider e.g. Argentina's official inflation statistics versus 3rd party estimates. The difference is not explained by Argentina being a bunch of meanies but rather the system of incentives and particularly Public Choice Theory.

Re: Blowing the Whistle on the Mortgage Bubble

#74

Post by niggler »

brown9-2 wrote: post #54
niggler wrote: post #28

Earlier quoted context omitted.

> inflation would spike Inflation did spike but what happened was that the definition was redefined in a deceptive way. Look at cereal prices and volumes. Prices have spiked and the containers/volumes have shrunk, but that's not taken into account under measures that exclude food prices. Energy prices have spiked. Gold prices have been running for more than 12 years. It's not to say we are seeing hyperinflation, but…

When people say that CPI doesn't show true inflation, what measure do they prefer to use instead?

Usually it involves taking one common and fixed item, like cereal, and looking at its prices over time. While there are seasonal effects, looking at the price over a number of years gives you a good picture as to the actual inflation.

The key thing here, though, is "fixed". Sometimes companies will make adjustments to the product to reduce costs, and those adjustments make the apparent inflation appear lower than they really are. For example, a jeweler can quote the same price for jewelry next year (assuming gold price rises) if they use less gold and more base metals in the jewelry. CPI measure would say that there was no change, although for all intents and purposes there was a change.

Re: Blowing the Whistle on the Mortgage Bubble

#75

Post by jonpeda »

Shivetya wrote: post #43
josefresco wrote: post #31

Earlier quoted context omitted.

This is an important point, and one that I personally believe explains why we didn't see prosecutions at the highest level. Geithner was instrumental in guiding Obama away from this heavy handed approach, as he recognized (I think quite accurately) that confidence was really the only thing keeping the system from crashing completely. If Obama had given execs the kind of treatment Larry Summers and the other half of h…

Understand that what Presidents say in public is very different from what they do in private. Why anyone would expect Obama to carry through such threats when his staff has mostly been from these very same groups is beyond me. If anything its more like, you guys are going on pikes unless you play ball, here let me connect you to my campaign finance coordinator. Geitner protected his buddies. The real collapse would h…

FYI, Geithner has never been employed by anything vaguely resembling a private bank. He was a consultant for 3 years after school, before joining government.

Re: Blowing the Whistle on the Mortgage Bubble

#76

Post by jonpeda »

patrickgzill wrote: post #69
mpyne wrote: post #35

Earlier quoted context omitted.

Exactly. Even when the money was made of gold, it was still worth exactly what people thought it was worth, nothing more or less.

Gold has an intrinsic value, 1 gram of cotton based paper with some ink on it, does not.

An insignificant fraction of the price of gold is intrinsic value. The rest is derived from it's value as money.

Re: Blowing the Whistle on the Mortgage Bubble

#77

Post by jonpeda »

darkarmani wrote: post #25
cremnob wrote: post #3

This documentary didn't reveal anything that wasn't already known. There aren't any criminal prosecutions because it's hard to prove that there was fraud. It then goes on to speculate why Breuer hasn't been able to charge anyone.

> There aren't any criminal prosecutions because it's hard to prove that there was fraud. No it's not that hard to prove their was fraud. It just takes forever to bring up Federal Grand Juries for some many cases of fraud. The Fed Grand Jury I was on one was dealing with financial crimes from 5-6 years ago. They had so much evidence. My lesson was that only the big fish get fried in federal financial crimes, because…

The only immunity granted is a very narrow immunity: their testimony may not be re-admitted in proceedings against the witness.

Re: Blowing the Whistle on the Mortgage Bubble

#78

Post by aliston »

patrickgzill wrote: post #69
mpyne wrote: post #35

Earlier quoted context omitted.

Exactly. Even when the money was made of gold, it was still worth exactly what people thought it was worth, nothing more or less.

Gold has an intrinsic value, 1 gram of cotton based paper with some ink on it, does not.

Legitimately curious... what exactly is the intrinsic value of gold? Are you basing it's "intrinsic" value on its commercial value or something else?

There are a number of metals that have much more useful applications than gold. From what I've read, gold's intrinsic value was ultimately a western idea that, again, stemmed from a confidence in it's value. When the Spanish discovered gold in central Mexico, the Aztecs had no idea what they were so excited about -- it had no intrinsic value to them. There's a great discussion of the history of gold as money in "The Ascent of Money"

Re: Blowing the Whistle on the Mortgage Bubble

#79

Post by dmix »

kevinwmerritt wrote: post #64
brown9-2 wrote: post #54

Earlier quoted context omitted.

When people say that CPI doesn't show true inflation, what measure do they prefer to use instead?

Here are some alternative CPI charts worth viewing: http://www.shadowstats.com/alternate_data/inflation-charts

Shadowstats has been discredited so many times that not even libertarians (such as myself) would go near that as a reliable source.

Re: Blowing the Whistle on the Mortgage Bubble

#80

Post by cs702 »

The senior banking executives who ignored the early warnings were making tons of money. The mid-level bankers assembling and selling mortgage securities, who also ignored all warnings, were making tons of money too. The ratings agencies and lawyers giving their stamp of approval to these crazy securities, who also ignored all warnings, were making tons of money as well. The mortgage brokers and originators who were making irresponsible loans to home buyers with sketchy credit histories were making plenty of money, and they too ignored the warnings. The home buyers who successfully flipped properties in a matter of months or even weeks were also making money, and also ignored the warnings. The homeowners who borrowed more and more against their home's seemingly ever-rising value were flush with newfound cash, and felt like financial geniuses.

To a close approximation, no one wanted to hear the warnings.

To find culprits, most Americans need only look in the mirror.

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