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  1. #11
    Senior Member Dooraven's Avatar
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    I'm going to sit back in observation mode since I'm completely lost on what you guys are saying.
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  2. #12
    & Badger, Ratty and Toad Mole's Avatar
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    Quote Originally Posted by nomadic View Post
    My point is that people saying " There is no way we could have predicted this" is not being honest. People knew this might happen and were making an informed bet the whole time. And then after the fact, you can't say you had no idea that would happen.
    Everyone and their dog knows that a capitalist economy works in cycles and that government spending on welfare or the military act as a flywheel to even out the cycles.

    Another way to put is is that capitalist economy works on fear and greed and the government regulates this just as moderators regulate these forums.

    Before Adam Smith we thought that fear and greed in the economy were bad and were limited to the usurers, that is, the Jews.

    But after Adam Smith we discovered that private greed led to public prosperity.

    So prior to Adam Smith we looked at the economy intuitively and after Adam Smith we saw the economy counter-intuitively.

    Here for instance astrology is intuitive and astronomy is counter-intuitive.

    It seems to me you want to take us back to an intuitive view of the economy and this is probably because you haven't read Adam Smith.

  3. #13
    mountain surfing nomadic's Avatar
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    I read Adam Smith. It was okay, it was great philosophy for that King that was paying him to write it. But I don't see what was so different compared to the type of trade that was already happening in the middle east for centures before that. It was a concise philosophy spreader for sure though.

    Im speaking more about national psychology when it comes to dealing with problems. Its more along the "national abilities" line of thought. Once Congress became so intertwined with economic policy, it matters more what the average citizen thinks in shaping economic policies.

  4. #14
    half mystic, half skeksis jenocyde's Avatar
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    Nomadic, most people don't care about anything that does not directly affect them. If they can't see how something connects to them, they don't care. For instance, most people who rent apartments glossed over the housing market news since they don't own a house. That's why people are claiming these things in retrospect. They seriously couldn't predict it because it seemed so far away from their own lives.

    As far as the politicians, they knew. Everyone who paid attention did. In 2005, they started to debate the existence of GSEs like Fannie and Freddie, but by then, it was too late. Party politics got in the way of making decisions. Democrats vs Republicans. Who the hell cares? They're both wrong.

    Quote Originally Posted by Halla74 View Post
    and a total lack of regulation of the financial system played prominent roles in setting up such disasters.
    Quote Originally Posted by Dooraven View Post
    This combined with the severe deregulation of the market brought us to this current situation.
    I strongly disagree. The government regulation in the financial market is what led us here in the first place. Forcing banks to make loans to unqualified borrowers (subprime lenders) was the first step. Why get surprised when these people default? The government created Fannie Mae, then created the "private" Freddie Mac to compete with it. These are the only 2 fortune 500 companies that don't have to release their accounting to the public or to investors. This allows them to take risks that no one in the private sector would dream of. They answer to no one.

    The government required that banks have to make subprime lending half of their portfolio, since the mortgages were backed by Fannie and Freddie (ie. tax paying dollars). Banks used to hold your mortgages, now they sell them. They packaged these mortgages and sold them off as mortgage backed securities (MBS) to get rid of all their risk in making what they knew to be bad loans. The buyers of them rated them off by graded tranches (basically rated them by risk) and packaged them off as collateralized mortgage options (CMO) and sold them as investments, such as life insurance. These were hot commodities since they were essentially backed by the government, making them foolproof investments. The banks that sold them used the money to back more subprime lenders. All of this was government regulated. When people started defaulting on their mortgages, these CMOs became useless. Now the credit insurers had to make good on all these bad investment claims at the same time. There were just too many claimants.

    Tons of houses were being sold, loans were forced to be given, shady developers got in on the action, the rest is history.

    But if you ask me, the government has no business playing around in the markets like that, and they have no business getting involved in the private sector and mandating how much of bank must lend and then actually backing those loans.

    By 2007, it is estimated that Fannie and Freddie added over a trillion dollars of bad debt in their investments (but we'll never truly know since they keep their accounts hidden). By Sept 2008, the Dow plunged over 3000 points and the companies that held the most subprime debt by way of securities fell. Lehman Brothers and Washington Mutual were the biggest offenders.

    So yeah, I argue for less intervention, if you ask me. Especially by idiots. I'll manage my own money, thank you very much.

  5. #15
    & Badger, Ratty and Toad Mole's Avatar
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    Quote Originally Posted by nomadic View Post
    I read Adam Smith. It was okay, it was great philosophy for that King that was paying him to write it. But I don't see what was so different compared to the type of trade that was already happening in the middle east for centures before that. It was a concise philosophy spreader for sure though.

    Im speaking more about national psychology when it comes to dealing with problems. Its more along the "national abilities" line of thought. Once Congress became so intertwined with economic policy, it matters more what the average citizen thinks in shaping economic policies.
    I would agree with you in that it matters what the average citizen or subject thinks in the market. But I would disagree with you in that I don't think the average citizen or subject shapes economic policies.

    You're a trader like millions of others and what you think matters in the market, but traders don't make economic policy.

  6. #16
    mountain surfing nomadic's Avatar
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    Quote Originally Posted by Victor View Post
    I would agree with you in that it matters what the average citizen or subject thinks in the market. But I would disagree with you in that I don't think the average citizen or subject shapes economic policies.

    You're a trader like millions of others and what you think matters in the market, but traders don't make economic policy.
    when i trade, i actually trade fixed income. bond traders in general, tend to think this way, strangely enough. although I don't trade enough to affect the market at all.

    well the federal reserve, what they do is completely up to them. but they do most certainly listen to the market. but no, i never had a conversation with greenspan or bernanke. lolz

    btw, yeah, it was well known that the australian federal reserve would be the first to raise rates. u guys do make more money off of commodities, and u guys got china buying a bunch of mineral stuff. if u think that commodities and australian trade doesn't affect economic policy of the australian fed, well, i guess thats ur decision dood.

  7. #17
    mountain surfing nomadic's Avatar
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    Quote Originally Posted by jenocyde View Post
    Nomadic, most people don't care about anything that does not directly affect them. If they can't see how something connects to them, they don't care. For instance, most people who rent apartments glossed over the housing market news since they don't own a house. That's why people are claiming these things in retrospect. They seriously couldn't predict it because it seemed so far away from their own lives.

    As far as the politicians, they knew. Everyone who paid attention did. In 2005, they started to debate the existence of GSEs like Fannie and Freddie, but by then, it was too late. Party politics got in the way of making decisions. Democrats vs Republicans. Who the hell cares? They're both wrong.
    hmm interesting. that does sound right... i guess it does not apply to a lot of people to think retroactively in the first place...




    But if you ask me, the government has no business playing around in the markets like that, and they have no business getting involved in the private sector and mandating how much of bank must lend and then actually backing those loans.
    yeah, but I don't think these banks will start lending until they get these bad mortgages off their books. Man, which makes it even more difficult now to know what the right thing to do is...

  8. #18
    Senior Member matmos's Avatar
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    Quote Originally Posted by jenocyde View Post
    The government regulation in the financial market is what led us here in the first place. Forcing banks to make loans to unqualified borrowers (subprime lenders) was the first step.
    You make a serious error in thinking. You state the "regulation" was the problem; you should have discriminated and claimed this particular regulation failed. This does not assume that other, differing types of regulation will fail (although it just might).

    Sloppy thinking.


  9. #19
    Gotta catch you all! Blackmail!'s Avatar
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    Quote Originally Posted by bananatrombones View Post
    You make a serious error in thinking. You state the "regulation" was the problem; you should have discriminated and claimed this particular regulation failed. This does not assume that other, differing types of regulation will fail (although it just might).

    Sloppy thinking.

    I should even say that's it's rather the lack or the absence of proper regulation that led to this crisis...

    I will always wonder why so many Americans are always so eager to blame their government for all the wrongs they have to endure, just like if it was a reflex action. It probably is an ideological trait.
    "A man who only drinks water has a secret to hide from his fellow-men" -Baudelaire

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  10. #20
    Don't Judge Me! Haphazard's Avatar
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    Crappy commercials advertising crappy services were yelling at everyone about the housing bubble every single day, but "trusted" sources that people see every day did not. This is probably the problem.
    -Carefully taking sips from the Fire Hose of Knowledge

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