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The Real Cost of the 2008 Financial Crisis

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Re: The Real Cost of the 2008 Financial Crisis

#351

Post by tomcam »

aero142 wrote: post #313
tomcam wrote: post #294

It seems like, relatively speaking, Iceland sailed through this by acting like capitalists: they let the loans fail, consumers took a haircut, and bankers were sent to jail. Is this a worthwhile comparison or were there fundamental differences that I (very likely) don't understand?

I love the idea, but this really doesn't dispute the central point. Iceland is an economy with a $24B GDP that is smaller than Vermont's, the lowest US state. The claim is that letting large US banks fail is a systemic risk that causes cascading failure. Using Iceland as an example doesn't dispute that point.

But the citizens of Iceland did in fact lose a ton of money. I think maybe it does dispute the point? (Arguing more from ignorance here.)

Re: The Real Cost of the 2008 Financial Crisis

#352

Post by hndamien »

chimeracoder wrote: post #322
hndamien wrote: post #182

Earlier quoted context omitted.

Nationalisation was the alternative. Government acquires the failed banks. Manages the issue (even almost the same way the did). Profits flow back to the public. When happy, privatise again with a healthy profit. Maybe keep one as a public asset.

> Nationalisation was the alternative. Government acquires the failed banks. Manages the issue (even almost the same way the did). Profits flow back to the public. When happy, privatise again with a healthy profit. Maybe keep one as a public asset. Are you unaware that TARP happened?

I'm aware, and it was a joke.

"purchasing the illiquid MBS, and through that, reducing the potential losses of the institutions that owned them. Later, it was modified slightly to allow the government to buy equity stakes in banks and other financial institutions"

Why would any rational investor purchase dog crap knowingly for the good of society, by spending that society's money on dog crap. Instead, buy the dog, discounted by the amount of dog crap it has, and squeezed by how desperate the seller is of what is left. No financial mercy should be shown to the institutions that put themselves in that position. Nobody has ever shed a tear for anybody else financially squeezed, and in this case it would have been good for society and fitting capitalistic justice.

Instead, we pumped their bags, regained the value of equity and then had the debts repaid from the equity that was saved. Its a nice story, we got paid back, but the reality is, the Gov/ people should have made out like bandits while those bankers were kicked to the curb. This is how capitalism is supposed to work.

Re: The Real Cost of the 2008 Financial Crisis

#353

Post by taurath »

smogcutter wrote: post #280
api wrote: post #227

Earlier quoted context omitted.

It also drove house prices crazy, a process that continues to this day and has ironically made housing permanently unaffordable for huge numbers of people. The housing bubble created a "new normal" for house prices that's frankly absurd when considered as a fraction of median income. It's very similar to the story with student loans. Easy student loans have driven tuition costs as crazy as housing costs.

A similar thing is happening with auto loans. There's a ton of bad car debt out there, and easy credit has inflated car prices and (I believe) helped disincentivize auto makers from building cars that are actually affordable. There's no market for simple and cheap if you can get something nicer on credit and not look poor. There's a reason the Dodge Journey retails for 4k+ off msrp. With the inflated mspr they can ge…

To be fair though, safety regulations requiring heavier vehicles on top of requirements for better fuel economies have cut the margins a bit, but the prices have not raised much if at all. The 1995 Honda Civic LX was $14,160 in MSRP, which is ~$22k in 2018 dollars. There are plenty of vehicles for less than that.

You might be referring to the higher margins that SUVs get, which are getting more and more popular in the US... but TBH I'm not sure where you get the idea that car prices have been inflated.

Re: The Real Cost of the 2008 Financial Crisis

#354

Post by tedunangst »

docker_up wrote: post #332
394549 wrote: post #303

Earlier quoted context omitted.

> Don't forget another thing the government did: previous bailouts. When large banks were told they were "too big to fail", they heard "your risks will be subsidized by taxpayers", so of course they took on more risk. We should have let the banks fail, if they really were going to. Why couldn't the stockholders get wiped out when a TBTF bank gets bailed out? To me, that seems like a fair compromise that protects the…

Bear Stearns and Washington Mutual shareholders got wiped out. I know this because I lost tens of thousands of dollars, unfortunately.

AIG stock declined something like 98%, which isn't great either.

Re: The Real Cost of the 2008 Financial Crisis

#355

Post by bradleyjg »

qaq wrote: post #157
lovich wrote: post #121

Earlier quoted context omitted.

That doesn't make it the "right thing". That makes it a "best for me" thing.

Many countries tried to build systems around doing "the right thing" did not work out too well.

Exactly. As an individual one should strive to do that right thing. As a member of society one should support systems that are resilient in the face of people that do not strive to do the right thing.

Re: The Real Cost of the 2008 Financial Crisis

#356

Post by icu »

pas wrote: post #100
icu wrote: post #18

Earlier quoted context omitted.

I'm with you on decent alternatives of which I think a non-Fed based monetary system as well as the end of crony capitalism (not capitalism itself) would probably be a decent alternative. However, the biggest problem is the education of the wider public and garnering the democratic will of the people to make necessary changes. Economics, for all its show of being empirical is really just politics, and politics is rea…

> a non-Fed based monetary system Could you elaborate on that please? > Economics, for all its show of being empirical is really just politics, and politics is really just philosophy. That's very-very incorrect. Economics is about models, and understanding the past, and maybe trying to peek at the future. But at its core, it's about modeling. And it helps us understand what works and what doesn't. Politics should be…

Re: The Fed

The Fed is a privately owned bank that is given the monopoly to issue debt backed by the taxation of the State.

The U.S. could simply issue debt itself. Even though the President appoints the Fed Chairman and it has the word "Federal" in its name it is not a Government organization. If you don't believe me, try getting ownership information from the Fed via the Freedom of Information Act.

For further information see what happened when President Andrew Jackson abolished the precursor to the current Fed. America didn't implode it actually thrived. Also worth looking into is how the current Fed came about. President Woodrow Wilson lived long enough to regret bringing the Fed back.

Fun fact, the Bank of England started off as a private bank before it became nationalized. Nothing is stopping the U.S. from doing the same.

Re: Economics is modelling

If that were the case what is Communism? Is that a model or a political system? What is Capitalism? Is that a model too? No... they are 'societal beliefs in action' which is what politics is.

As for your assertions on philosophy... I would say philosophy is more than finding inconsistencies, it's a framework for thought itself that allows for reasoning.

What is a model anyway? At its essence it's an idea (or set of ideas) that may or may not be true. I think a big part of the problem with Economics today is the hubris modelling can confer by giving the illusion of accuracy.

It's worth looking into the works of Nobel Prize winner in Economics and the Turing Award winner Herbert A. Simon or more recently Nassim Nicholas Taleb.

Simon's Nobel acceptance speech suns things up better than I can.

Re: The Real Cost of the 2008 Financial Crisis

#357

Post by chimeracoder »

hndamien wrote: post #352
chimeracoder wrote: post #322

Earlier quoted context omitted.

> Nationalisation was the alternative. Government acquires the failed banks. Manages the issue (even almost the same way the did). Profits flow back to the public. When happy, privatise again with a healthy profit. Maybe keep one as a public asset. Are you unaware that TARP happened?

I'm aware, and it was a joke. "purchasing the illiquid MBS, and through that, reducing the potential losses of the institutions that owned them. Later, it was modified slightly to allow the government to buy equity stakes in banks and other financial institutions" Why would any rational investor purchase dog crap knowingly for the good of society, by spending that society's money on dog crap. Instead, buy the dog, di…

> Why would any rational investor purchase dog crap knowingly for the good of society, by spending that society's money on dog crap. Instead, buy the dog, discounted by the amount of dog crap it has, and squeezed by how desperate the seller is of what is left.

I don't think you understand how TARP worked if you think that's even remotely applicable as an analogy

> This is how capitalism is supposed to work.

Maybe you should learn a little more about the system you claim to be critiquing, so your criticisms don't fall so completely flat.

Re: The Real Cost of the 2008 Financial Crisis

#358

Post by dragonwriter »

icu wrote: post #356
pas wrote: post #100

Earlier quoted context omitted.

> a non-Fed based monetary system Could you elaborate on that please? > Economics, for all its show of being empirical is really just politics, and politics is really just philosophy. That's very-very incorrect. Economics is about models, and understanding the past, and maybe trying to peek at the future. But at its core, it's about modeling. And it helps us understand what works and what doesn't. Politics should be…

Re: The Fed The Fed is a privately owned bank that is given the monopoly to issue debt backed by the taxation of the State. The U.S. could simply issue debt itself. Even though the President appoints the Fed Chairman and it has the word "Federal" in its name it is not a Government organization. If you don't believe me, try getting ownership information from the Fed via the Freedom of Information Act. For further info…

> Even though the President appoints the Fed Chairman and it has the word "Federal" in its name it is not a Government organization. If you don't believe me, try getting information from the Fed via the Freedom of Information Act.

The Fed's own page on the FOIA indicates that the Fed thinks it's a federal agency covered by FOIA.

https://www.federalreserve.gov/foia/about_foia.htm

Re: The Real Cost of the 2008 Financial Crisis

#359

Post by icu »

wiz21c wrote: post #33
icu wrote: post #18

Earlier quoted context omitted.

I'm with you on decent alternatives of which I think a non-Fed based monetary system as well as the end of crony capitalism (not capitalism itself) would probably be a decent alternative. However, the biggest problem is the education of the wider public and garnering the democratic will of the people to make necessary changes. Economics, for all its show of being empirical is really just politics, and politics is rea…

>>> Economics, for all its show of being empirical is really just politics, and politics is really just philosophy. >>> Are you willing to? You're painfully right. I 100% agree. There lies the issue. I have the philosophy right, but the opportunity and skills to fight for it, well, it's much tougher. If only one could contribute to that like on open source projects ('cos there, I contribute, I find time and energy) B…

Well I think you can make opportunities through persistence and sacrifice and for a given level of intelligence and time, all skills can be learnt.

However the will to do it requires a good enough why... and if you have more pressing whys than you just won't start.

Best I can do for the time being is vote.

Re: The Real Cost of the 2008 Financial Crisis

#360

Post by seppin »

KarlRutnick wrote: post #50
nafey wrote: post #2

But what was the alternative to the bailouts? Another depression? I feel we made it across fairly well.

Both US and EU should have done the same as Norwegian Government did during our banking crisis in the 90s. Let the banks fail, stocks to zero, no bailout of investors or paper/derivatives holders etc... then nationalize their brick and mortar operation so the real economy keeps functioning

Norway is a small country, and in the 90s had very little exposure elsewhere. What you are implying is a meltdown of global assets, to prove a point.
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