The Great Recession - post mortem

[JPhillips]

Originally Posted by molson

Sure, and things would be a lot easier for those people, and they'd have a lot more options, if they were renters and not owners.

So I'm not sure why our government has always been obsessed with promoting home ownership. The personal financial level at which people feel entitled to own a house here is just too damn low.

I agree that we subsidize home ownership too much. My point was that not all people in default were irresponsible in their purchase.

[panerd]

Is it that people are obsessed with owning a home or people are obsessed with owning a home they can't afford?

Here is a cheap house...
http://www.trulia.com/foreclosure/30...troit-MI-48214

[molson]

Originally Posted by panerd

Is it that people are obsessed with owning a home or people are obsessed with owning a home they can't afford?

Here is a cheap house...
http://www.trulia.com/foreclosure/30...troit-MI-48214

That's awesome. Why aren't people at least buying up this land? Taxes? Detroit is bound to have a revitalization someday.

People are obsessed with having a home they can't securely afford. They look at what the make, assume they'll make at least that much every month forever, and then get into a commitment that requires them to make that much forever.

I guess they had mortgages 60 years ago too, but there were also a lot of ordinary people saving up and buying houses with cash. Great deal for them once the government decided everybody had to own a home and the cost of everything exploded.

[sterlingice]

Originally Posted by panerd

Is it that people are obsessed with owning a home or people are obsessed with owning a home they can't afford?

Here is a cheap house...
Laura Street, Detroit MI - Trulia

I think if you moved there, you'd probably not be alive for very long. There's a reason it's so cheap.

That said, there's a lot of chatter that in some of these cities, developers are buying up a ton of that land on the cheap, boarding them up and not doing upkeep to suppress the value of all the surrounding houses even more so those will be abandoned or sold on the cheap. It's a nice way to buy up whole neighborhoods for future development that's ethically (if not legally) dubious.

SI

[lighthousekeeper]

Originally Posted by panerd

Is it that people are obsessed with owning a home or people are obsessed with owning a home they can't afford?

Here is a cheap house...
http://www.trulia.com/foreclosure/30...troit-MI-48214

Reminds me of a house I once bought on Oriental Ave.

[Marc Vaughan]

Originally Posted by sterlingice

I think if you moved there, you'd probably not be alive for very long. There's a reason it's so cheap.

I expect the location and structure are far from desirable - but I've also always considered it likely that there'd be 'leans' against a lot of these places - ie. debts which you'd inadvertantly pickup when you purchased the house.

[JonInMiddleGA]

Heh, just saw this posted by an FB friend
Mortgage Backed Securities are America’s Herpes—the gift that keeps on oozing.

[JPhillips]

It sure looks like a majority of the country's mortgages may not have a legal chain of custody. How the fuck does this get solved?

[SteveMax58]

Originally Posted by molson

Sure, and things would be a lot easier for those people, and they'd have a lot more options, if they were renters and not owners.

So I'm not sure why our government has always been obsessed with promoting home ownership. The personal financial level at which people feel entitled to own a house here is just too damn low.

This is exactly the crux of "progress" that I see right now. Many professionals today are mobile people. They relocate for job opportunities to gain valuable experience & skill sets and then move on when/if there are better opportunities. This mobility is a good thing as those doing the majority of voluntary movements tend to be very talented people who are very good at what they do.

Unfortunately, there is less of this going on these days and businesses have to settle sometimes for who they can get. Not the worst thing if that job goes to (figuratively) you, but not the best way to grow or innovate the business either.

[Marc Vaughan]

Unfortunately, there is less of this going on these days and businesses have to settle sometimes for who they can get. Not the worst thing if that job goes to (figuratively) you, but not the best way to grow or innovate the business either.

I'd argue that with most people once they reach a certain age regardless of whether they rent or own a house they stick in an area - simply because if you have a family then things get complicated by how it affects people other than yourself (for example school performance, partners job etc.).

[Marc Vaughan]

Originally Posted by JPhillips

It sure looks like a majority of the country's mortgages may not have a legal chain of custody. How the fuck does this get solved?

They get made 'wards of the court' and given adoptive parents? ...

(sorry - couldn't resist )

[cartman]

The Fed has released a report to show just how bad things were in the aftermath of the Lehman Brothers collapse. The commercial paper market dried up so completely that the Fed had to lend money to companies like McDonalds, GE, and Toyota so that they could meet payroll and short term accounts payable.

Fed Documents Reveal Scope of Aid to Stabilize Economy - NYTimes.com

[JPhillips]

We'd be so much better off if we'd let the economy implode.

[SteveMax58]

Originally Posted by JPhillips

We'd be so much better off if we'd let the economy implode.

Thank goodness for George Bush, the pragmatist.

[SportsDino]

Well, I guess it all sounds so glorius and gallant when the Fed puts out say 9 trillion in short term loans, has 1.5 trillion credit outstanding, and offering thousands of behind the scenes transactions to SAVE the economy.

Am I the only person who questions where the cash comes from and where it goes? How phenomenon like that described above are pretty rational explanations for why a cash flooded group of corporations are bearish on employment growth?

Never mind, it is pointless to explain that 1% of a trillion dollars is either $10 billion dollars that will be extracted from the real economy or $10 billion dollars (or more) worth of inflation. Particularly in an environment where inventories are falling (less goods to distribute over more dollars would suggest higher prices, although prices tend to be sticky in short term).

Granted, all the numbers are imaginary now, so its hard to quibble too much over more imaginary numbers being thrown around. But when those imaginary numbers come back in the form of a 36% tax rate on the top bracket, a multi-billion cut in unemployment benefits, or debt service in the hundreds of billions, we all seem to forget we could print $X trillion to save a few well placed banks that overleveraged beyond the wildest dreams of anyone else.

I don't want a crashed economy, I want one that is healthy. You get there fastest by letting some of the worst performers die (liquidate them in a way that preserves the overall economy, but extract all of the equity you can out of Mr Paulson and his best buddies). The people at the top are NOT the economy, they are the parasites bringing it down repeatedly. Their 'talent' is unnecessary, and in most cases dangerous and self-destructive.

[SportsDino]

BTW, for anyone who is wondering, a long time ago when I referred to there being more reasons for the turnaround then TARP, the things described in this article are a big part of it. If the media would just do some numbers analysis of these big banks during the crisis they could have seen that there were injections coming from somewhere, and it couldn't be TARP funds. Even I wasn't aware it was in the multi-trillions, but it shouldn't surprise me.

What we really need is transparent public corporations. There is no reason the exact portfolio can not be described in general terms at any point in a company. With such a simple real-time data stream most forms of larger fraud could be detected very easily, not to mention investors could know that someplace like Bear Stearns was loaded up in derivatives... or how much exposure Citigroup had to credit default swaps. I missed a lot of the banking rebound in stocks because I had no idea how to evaluate their worth with their special ability to grab cash from nowhere and obfuscate it in their books. At least with GE or even GM or F you can figure out what is possible from their books and make a prediction with some assumptions.

Everything about Citigroup said it should die a horrible horrible death, in my opinion, but this lifeline that no one could track was there and odd numbers kept creeping out, even crazy declarations of profit (while they were still drawing on the Fed I might add, which made me insane with rage back in early 2009). Most people don't care if there is a shell game, as long as they get their job back and are okay themselves... but this shell game is leaking money out of the economy at terrifying rates, and while Dems and Reps squabble over billions we have these games costing us ten times as much.

[sterlingice]

It's going to all come crashing down and probably in our lifetime. The question are when, how hard is it going to be, and are we going to learn from it and get smarter going forward?

SI

[JonInMiddleGA]

Clients come, clients go, nature of the beast & all that. But it's still kind of depressing to lose a project even when you've known for weeks that it was coming.

Semi-sigh ... at least I've got something else to work on for a change. Not as nearly good as having both projects, but better than having none at all.

[Lathum]

Boeing gets 35 billion dollar air tank refueler contract. Fantastic news for my area, will create 11,000 new jobs over the next few years and 40,000 overall.

[Marc Vaughan]

Originally Posted by JPhillips

We'd be so much better off if we'd let the economy implode.

If the US instead of printing money and giving it to the banks had nationalised (forcibly purchased the banks which needed bailouts) the banks then the economy and GDP balance would be looking far healthier today.

Or to put it another way - bank stocks are generally between 2-4x what they were when the bailout went on, instead of that profit in share price going to rich individuals it'd have gone into government coffers ...

This would also have had the advantage of discouraging stupid investment setups for banks in the future by punishing the people involved by taking their toys (and profits) away from them ... and of course its far easier to regulate an industry if you own a decent chunk of it yourself

[molson]

The financial fear mongering that led to the U.S. government bank takeover was similar in a lot of ways to the security fear mongering that led to the Iraq war.

Take a legitimately serious problem, and convince everyone that there's only one way to deal with it (that happens to benefit the military industry and/or the banks and the rich). There was an escalation in difficulty there too - terrorism fear mongering is pretty easy. But then they managed to convince people who generally support the poor and distrust the rich that handing billions to the rich on taxpayer "credit" (and also giving them all unofficial "pardons" for any financial crimes they committed) was the smartest thing to do.

[SteveMax58]

Originally Posted by Marc Vaughan

If the US instead of printing money and giving it to the banks had nationalised (forcibly purchased the banks which needed bailouts) the banks then the economy and GDP balance would be looking far healthier today.

I was of the same opinion when the bailout happened. There had to be a penalty to those poorly run financial institutions but we also needed to avoid collapse. Nationalize the collapsing banks into (essentially) their own Fed Bank...remove the idiot executives(while not honoring golden parachutes because you force them to insolvency before absorbing)...and then allow the private sector to buy back into the nationalized conglomerate eventually when there was/is a reasonable degree of stability to the market.

[JPhillips]

I said at the time and still believe today that giving the money without strings attached was a major mistake. But, my snide comment was a refutation to the idea that we should have allowed the banks to collapse and that somehow that would have been netter for the economy. That line of thinking is madness.

[sterlingice]

It's interesting to go back and read page 1 of this thread. "Getting worse or bottomed out" ended up just being the beginning. Soon after the thread started, Bear Stearns went for $2 and there went that.

Then at post 207, that's when things heat up. That September was downright scary.

SI

[Noop]

I am thinking this will become the new normal.

High gas prices.
High food prices.
Limited jobs.
A lot of people depending on the government.
A lot of people going back to school to hide for a while.

International Law here I come.

[JonInMiddleGA]

Originally Posted by Noop

I am thinking this will become the new normal.

Yup.

January jobless rate hits record || OnlineAthens.com
10.4% in January 2011, exactly the same as January 2010. The more chilling stat is that long-term unemployed (27 weeks or more) now account for a record high 54.2 percent of the 484,668 jobless workers in Georgia.

[gstelmack]

Originally Posted by Noop

A lot of people depending on the government.

When the people in charge depend on this to stay in charge, the others follow I think.

[JPhillips]

Originally Posted by JonInMiddleGA

Yup.

January jobless rate hits record || OnlineAthens.com
10.4% in January 2011, exactly the same as January 2010. The more chilling stat is that long-term unemployed (27 weeks or more) now account for a record high 54.2 percent of the 484,668 jobless workers in Georgia.

Makes perfect sense that in 2011 we're likely to pass into law policies that will slow economic growth and cost hundreds of thousands of jobs.

[RainMaker]

Originally Posted by JonInMiddleGA

Yup.

January jobless rate hits record || OnlineAthens.com
10.4% in January 2011, exactly the same as January 2010. The more chilling stat is that long-term unemployed (27 weeks or more) now account for a record high 54.2 percent of the 484,668 jobless workers in Georgia.

Don't they stop counting people as unemployed after a year as well? As well as those who get part-time work. Which makes the number in reality worse.

I know my Dad is in that area. He's working a retail job just to have some income coming in until a better job is found.

[Edward64]

Taking a pulse from the folks here. How's everyone doing.

No double dip, commercial real estate didn't seem to explode etc.

• Profession - consulting is doing great, practice's pipeline looks good
  
• Real Estate (Atlanta) - more houses going up for sale in the neighborhood (pretty sure not foreclosures) so sign of healthy real estate activity
  
• Personal - I've fenced in the backyard, hired the TruGreen guys again, bought some other non-essential stuff
  
• 401k - back to pre-Great Recession but only because of my continued contributions. In another IRA where I did not contribute, I am still approx 10% below the all-time high

I'm feeling pretty good.

[JPhillips]

I thought this graph was pretty shocking.

[Edward64]

Originally Posted by Edward64

Taking a pulse from the folks here. How's everyone doing.

No double dip, commercial real estate didn't seem to explode etc.

• Profession - consulting is doing great, practice's pipeline looks good
  
• Real Estate (Atlanta) - more houses going up for sale in the neighborhood (pretty sure not foreclosures) so sign of healthy real estate activity
  
• Personal - I've fenced in the backyard, hired the TruGreen guys again, bought some other non-essential stuff
  
• 401k - back to pre-Great Recession but only because of my continued contributions. In another IRA where I did not contribute, I am still approx 10% below the all-time high

I'm feeling pretty good.

Still not panicking (although did sell some mutual funds to increase my cash position) ... but damn ... not again.

[Edward64]

Thought I would change the thread title. Whether its officially a double dip etc. seems somewhat irrelevant. With EMEA issues, China slowing down and US still in the doldrums I think we have this continued period of struggle.

Interestingly in the IT consulting business, our pipeline is still pretty strong and clients still seem interested in buying.

Does anyone have a link that shows the stocks/mutual funds that did well during the first recession? I've read buying good consumer brand companies like P&G but would like to know the top 10-20 stocks that did well.

[SteveMax58]

Originally Posted by JPhillips

I thought this graph was pretty shocking.

I missed that graph when it was posted...but I think it speaks volumes to some of the problems we have. Look at how people are frantically trying to educate themselves for the "new economy". Unfortunately...I think it is all for naught in most cases.

Notice how most of the problems we seem to face are related to credit, debt, or obfuscating the true cost of something. This is IMHO, the primary source of the wealth disparity we've seen over the past few decades. We've given wealthy people a check to give us something (a house? education? health care/insurance?) and said we will take the gamble and work to pay it back. Meanwhile, what education you need is different than when you went to school. Your house is now worth less than you financed it for (10 years ago). And you must stay in your job because if you get sick or injured...you can't afford the cost of health care service.

[molson]

Originally Posted by SteveMax58

I missed that graph when it was posted...but I think it speaks volumes to some of the problems we have. Look at how people are frantically trying to educate themselves for the "new economy". Unfortunately...I think it is all for naught in most cases.

Notice how most of the problems we seem to face are related to credit, debt, or obfuscating the true cost of something. This is IMHO, the primary source of the wealth disparity we've seen over the past few decades. We've given wealthy people a check to give us something (a house? education? health care/insurance?) and said we will take the gamble and work to pay it back. Meanwhile, what education you need is different than when you went to school. Your house is now worth less than you financed it for (10 years ago). And you must stay in your job because if you get sick or injured...you can't afford the cost of health care service.

We've seen cost explosions in those three areas where politicians have tried (or have claimed to try) to distribute wealth/benefits a bit and make things more available to everyone. At least in the case of the housing bubble, things came back to earth (a phenomenon which of course, does what the government claimed to want to do but ultimately failed to do - give more people the ability to buy houses). Student loans debt is almost a more difficult problem, because there's really no way for the tuition bubble to burst except Americans turning away from education, which is of course not ideal. Schools have gotten billions from the federal government, all in the name of giving more students access, and the universities, predictably, have just hiked up the tuition for everyone and admitted anyone with a pulse to get a bigger share of that pie. It's now more difficult than ever for people of regular means to start life their adult life in anything but huge debt. Healthcare is maybe the toughest issue of the three, because everyone needs it to some degree. But again, our government seems more concerned about giving everyone access (through "insurance", rather than actually providing healthcare or attempting to control costs),which of course, will just make healthcare costs explode even more.

[JonInMiddleGA]

Totally random observation here (and one that largely flies in the face of my own personal reality frankly) but ... TV stations in 9 markets in the MW & SE that I'm currently working with are typically reporting about 90% of their October advertising inventory is already sold. That's up from anywhere from 65%-80% at this same time last year. And 8 of those markets don't have any significant political dollars being spent in them at the moment, so that isn't the source of the increase.

On the one hand that's an indication of a recovery in that sector of the economy. On the other hand, some of the categories for that advertising are certainly not traditional niches. One of the biggies at the moment is things like reverse mortgage lenders, another are 1-888-Some-Lawyer-Somewhere offering to get you a cash settlement for everything from slip & fall cases to medical malpractice/product liability claims to helping you get your disability claim certified.

In short, it's good for the TV stations but it doesn't exactly paint a picture of economic recovery on the whole either.

[bhlloy]

Tech job market in LA seems to have just gone insane in the last 2 months as well.

Purely anectodal but I was getting 2-3 calls from recruiters a day in that period whereas I was lucky to get one a month prior to that and my (now ex-) company has had 15 developers and business management staff leave for greener pastures in the last couple of months alone after a couple of years with no movement and everyone just thanking their lucky stars they were still around.

I'm sure it's nothing other than a local phenomenon but it did strike me as interesting as the financial sector prepares itself for the double dip and the media starts sounding the horn of doom.

[SteveMax58]

Originally Posted by molson

We've seen cost explosions in those three areas where politicians have tried (or have claimed to try) to distribute wealth/benefits a bit and make things more available to everyone.

Yeah, it seems to be the common theme with anything that breaks down. Almost as if we cannot be more deliberate with what we implement and allow a generation to go by. I think the radical changes we've seen in the job market, the economy, the skills one needs, and the massive disparity in wealth earning sorta highlight this. Maybe we're changing things too quickly for the common person to keep up with...or more likely, we haven't adapted our society to be capable of changing rapidly.

Government trying to provide benefit to a group that wouldn't otherwise be able to obtain it on their own seems noble enough. But being unwilling to more gradually phase in policy which enables the common person to rise up; they create programs which immediately provide a "solution" from which the bourgeoisie can create further disparity in wealth while creating the dependency on the ruling class oligarchy. This essentially enables them to create the debt slave culture.

I wish I could be less pessimistic about the future...but I honestly can't see a viable economic model emerging in the US for at least 10 years. And when I say viable, I mean something which will stop the cycle of people becoming debt-slaves just to find a job and take part in the new economy.

[Edward64]

Sell your greek bonds if you have any.

Greek default is just a matter of time - Oct. 5, 2011

NEW YORK (CNNMoney) -- It was once unthinkable but is now widely expected: Greece is headed toward default.

"A default is likely," said Wolfango Piccoli, director of the London office of the Eurasia Group. "At this stage, the question is about the timing."

The timing is important because European authorities are scrambling to build a "firewall" that will protect banks and other euro area nations from the fallout of a Greek default.

The first step is to overhaul an existing bailout fund for Europe, which is expected to be officially approved by all 17 eurozone nations by the end of October.

The goal, analysts say, is to create conditions for Greece to default in an organized way, rather than an abrupt collapse that could cause chaos in global financial markets.

Euro area officials have said repeatedly that Greece will meet its obligations and avoid a default. Yet the inevitability of a Greek default has become conventional wisdom in financial circles.

[cartman]

The housing bubble was caused by government policy, but it wasn't because of the policy advocating home ownership. That had been around since the 1970s. The housing bubble was caused by a removal/drastic lowering of bank liquidity limits on derivatives. So banks were more than happy to hand out loans if they could then bundle them up and leverage them 100 to 1. It wasn't just housing where they got burned, but it was by far the biggest and most visible spot. The banks would have been more than happy to give out the loans with those low liquidity requirements, regardless if there was an official government policy to advocate home ownership or not.

[Marc Vaughan]

Originally Posted by Edward64

Sell your greek bonds if you have any.

The impression I get is the turmoil in the market is simply the governments and financial people arguing over exactly how much of a haircut debt owners are going to take within Europe generally ....

When a default looks likely the market drops in an attempt to scare governments into avoiding the default, but the governments are reluctant to foot the entire bill for things and its likely that debt owners will have to accept a 'cent on dollar' restructuring for their debt imho.

[SteveMax58]

Originally Posted by cartman

The housing bubble was caused by government policy, but it wasn't because of the policy advocating home ownership. That had been around since the 1970s. The housing bubble was caused by a removal/drastic lowering of bank liquidity limits on derivatives. So banks were more than happy to hand out loans if they could then bundle them up and leverage them 100 to 1. It wasn't just housing where they got burned, but it was by far the biggest and most visible spot. The banks would have been more than happy to give out the loans with those low liquidity requirements, regardless if there was an official government policy to advocate home ownership or not.

Agreed on the housing policy but it leads me to ask 2 questions...

1) Why did banks see this is as a viable strategy?
I believe they saw this as acceptable strategy because Freddie/Fannie would buy those loans from them given the lower FHA requirements (or lack thereof). Those lower requirements were not around in the 70s & 80s, but came around in the late 90s/00s coupled with the (practical implementation of) buying ANY loan from a private broker. This isn't to say that just because the requirements are low, that banks should be reckless with what they do from there, but I do think it is evidence of government once again not understanding the practical implications of policy enactment.

In other words...you can't enact a policy of "we will buy all of your bad contracts that you wouldn't enter into without that safetynet" and then wonder why everything collapses when it is leveraged against contracts that would not have a market in the first place. Private market was busy being the private market...trying to make profit within the rules that exist. The private market then failed because of their own poor implementation choices...so we kept them running as reward for becoming such a massive clusterf---.

Its a complicated series of factors and certainly not saying government was completely to blame for it as banks certainly could have been responsible actors in all of this and avoided leveraging bad investments. But this leads me to my 2nd question...

2) How did we fix the collapse?
We didn't...we simply pumped cash into the private accounts of companies that should have been liquidated. Instead...we gave them everything "they" needed to continue their business model which proved to be faulty. This faulty model included everything from people who saw bad contracts as a worthwhile thing to leverage, a salary structure that is incompatible with the value of such people (after all, you could pay me $10M to make bad decisions that collapse your company...but I'm certainly not worth that), and a complete violation of the very reasons we give them the "privilege" to borrow at the fed rate.

All of this is not new news...but it is still holding our economy back. How, you might say? Because those faulty business models are still being rewarded for their incompatibility with success by continuing to try & squeeze every last dollar from customers, the government, and anywhere else they can in order to maintain their bad compensation structures which are not congruent with their value any longer. So while "we" have all adapted, found jobs that don't pay as well, had it outsourced to China, or simply given up...the banks' core management hasn't had to do any of that messy stuff. As a matter of fact...completely anecdotal I realize...the majority of commercial construction I keep seeing in my area is (you guessed it) more banks.

"Let em fail" didn't have to mean "let the economy collapse". It would have meant (massive) temporary measures to be deployed but I'm not sure we will truly recover from this as we keep adding more leaches to the economy every time we hear "something really bad might happen...rich people who made bad decisions might not be rich any more!!!"....and think that is a problem.

[SteveMax58]

Dola,

Holy crap that post is long!! Sorry...didn't realize I wrote a blog entry.

[Marc Vaughan]

We didn't...we simply pumped cash into the private accounts of companies that should have been liquidated. Instead...we gave them everything "they" needed to continue their business model which proved to be faulty. This faulty model included everything from people who saw bad contracts as a worthwhile thing to leverage, a salary structure that is incompatible with the value of such people (after all, you could pay me $10M to make bad decisions that collapse your company...but I'm certainly not worth that), and a complete violation of the very reasons we give them the "privilege" to borrow at the fed rate.

One of the things I find interesting is that this is a 'national debt' crisis - however bear in mind that money is actually a ficticious concept, no currency is linked to anything real today (no Gold Standard in other words) .....

As such the US Government has been effectively printing money willy nilly in recent years to stimulate the liquidity in the economy - this means literally that billions more dollars than before have come into circulation.

This 'billions of dollars' isn't debt - its money printed, why not just use that to pay down some of the debt once its retrieved from the banks it was lent to? ... its replaced the ficticious money the banks were spending (their mutliple of leverage against the funds they really had) with more ficticious money already so it might as well be used for something useful rather than quietly shuffled off the balance books?

[JPhillips]

I've read serious proposals from economists arguing that each American should be given some amount of printed money that would have to be spent on some form of debt reduction. Inflation would be a concern, but given the historically low levels of inflation currently it might work.

But it won't happen because too many people see the economy as a morality tale where those that have are chosen by God and those that don't have should suffer for their sins. So we'll muddle along for a decade or so blaming all of our problems on the poor and powerless.

[sterlingice]

Originally Posted by Marc Vaughan

This 'billions of dollars' isn't debt - its money printed, why not just use that to pay down some of the debt once its retrieved from the banks it was lent to? ... its replaced the ficticious money the banks were spending (their mutliple of leverage against the funds they really had) with more ficticious money already so it might as well be used for something useful rather than quietly shuffled off the balance books?

Honestly, it's probably not even printed. However, it's a convenient way to shuffle monies to where you want them- you inflate the value of your currency which basically makes everyone a little poorer, meanwhile, you create billions out of thin air and hand it out to those who bought Congress. It's simple, really.

SI

[SteveMax58]

Originally Posted by Marc Vaughan

This 'billions of dollars' isn't debt - its money printed, why not just use that to pay down some of the debt once its retrieved from the banks it was lent to? ... its replaced the ficticious money the banks were spending (their mutliple of leverage against the funds they really had) with more ficticious money already so it might as well be used for something useful rather than quietly shuffled off the balance books?

Absolutely its a strategy, in fact, this is what they are doing (where politically possible to pass).

The problem with it is that this strategy continues to benefit the mega-wealthy that have been given the lifeline while being able to hoard their money until such time the market is flooded with all of that money being printed. At that time, very real inflation (by any definition) will occur and many (myself included) believe it will be hyperinflation. So the more that is printed today...the more that those who have the means to maximize returns will have once hyperinflation begins to hit. And what that means from a practical standpoint (imho), is that many of the people who are getting artificially propped up will be the same people that are best prepared for the inflation. In other words...wealth disparity will increase further thanks to government (which in turn, allows them to use this wealth to lobby for more wonderful giveaways in the future) and we'll all just blame outsourcing to China as the culprit when its really a rigged buddy-system to begin with.

If the billions that are being printed never make their way into "real" circulation, then certainly there will not be hyperinflation. There will also not be increased employment as well, though, nor will there be a viable way to pay down debt unless we want to start taxing "stagnant funds" (i.e. raiding the cellar of the rich people).

Its a mess all around and a difficult thing to fix. But I think the fundamental problem in all of this is policy which encourages consolidation of businesses into larger companies. There is a line between allowing for cost-effective scaling and simply sitting on the market with your weight (so to speak)...but I think we need to get back to the fundamentals (for all Western societies) and re-evaluate everything we do to ensure there are checks & balances in place.

[Marc Vaughan]

Originally Posted by sterlingice

Honestly, it's probably not even printed. However, it's a convenient way to shuffle monies to where you want them- you inflate the value of your currency which basically makes everyone a little poorer, meanwhile, you create billions out of thin air and hand it out to those who bought Congress. It's simple, really.

Oh its almost certainly not printed - its just a sequence of zero's added to a tally in a computer somewhere ...

I'm following the unrest in Europe (and the beginnings of it in the US) with interest, I don't think the populace is quite as stupid as the financial powers were hoping - whether they can cause enough ruckus to make a difference remains to be seen.

[JPhillips]

This mortgage deal is a flaming piece of shit.

$3 billion will go toward refinancing for current borrowers who are underwater on their loans, as well as short sales. $5 billion will go as a hard cash penalty to the states, which can use them for legal aid services, foreclosure mitigation programs, and ongoing fraud investigations in other areas (one official close to the talks feared that much of that hard cash payout will go in some Republican states toward filling their budget holes). The federal government will get a cash penalty as well. Out of that $5 billion, up to 750,000 borrowers wrongfully foreclosed upon will get a $1,800-$2,000 check if they sign up for it, the equivalent of saying to them “sorry we stole your home, here’s two months rent.

[JediKooter]

And the lawyers win again.