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  1. #31
    half mystic, half skeksis jenocyde's Avatar
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    Quote Originally Posted by nomadic View Post
    Well, I clearly said that its wrong to say " No one knew that this financial crisis would happen". Clearly people did. I don't see how that statement can be oversimplifying the whole situation. Again, I am talking about this present moment of looking back to see what happened.
    I guess it's not clear on whether your OP is about the government making these accusations, or the general public.

    Obviously, due to varying levels of interest and education, not every person knew. Nor should they have known. However, this was very clear to our lawmakers. Clear and anticipated. I won't start with conspiracy theories, but re-read Victor's posts about welfare and war.

  2. #32
    Gotta catch you all! Blackmail!'s Avatar
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    Quote Originally Posted by jenocyde View Post
    However, this was very clear to our lawmakers. Clear and anticipated. I won't start with conspiracy theories, but re-read Victor's posts about welfare and war.
    Once again, you are blaming your government, when the real responsible is greed from the private sector. You should rather blame your bankers, your companies, your traders, and the poor fools who accepted to buy houses they couldn't afford (forced consumerism)... but no... according to you, it's only government's fault!

    Governments aren't omnipotents. As a matter of fact, most of the time they are rather slow to react, because of their inherent bureaucratic inertia. Cyclic financial crisis don't happen because of their interference. They mostly occur... because of the financial sector itself. Look for the primary cause, not for consequences!
    "A man who only drinks water has a secret to hide from his fellow-men" -Baudelaire

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  3. #33
    mountain surfing nomadic's Avatar
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    Quote Originally Posted by jenocyde View Post
    I guess it's not clear on whether your OP is about the government making these accusations, or the general public.

    Obviously, due to varying levels of interest and education, not every person knew. Nor should they have known. However, this was very clear to our lawmakers. Clear and anticipated. I won't start with conspiracy theories, but re-read Victor's posts about welfare and war.
    I think part of this whole complaint is that a lot of times, societal problems are not talked about in an honest and open way that will lead to problems actually being solved.

    Like this whole influenza for instance, WTH? So many people probably have it, but its like so HUSH HUSH here. I think thousands of people died already in the US, and maybe its okay this time around to keep it so hush hush how crazy the swine flu really is, but I just see this perpetual denial of a problem leading to bigger and bigger issues. Even like this swine flu, a lot of people I think know about it, and know how serious it is, but don't want to talk about it openly or something bc it might cause panic or negative perceptions. I just think something about this in general is unhealthy to avoid problems going forward. To have this attitude of avoiding talking about the real problems, or the elephant in the room at times.

  4. #34
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    Quote Originally Posted by Blackmail! View Post
    Once again, you are blaming your government, when the real responsible is greed from the private sector. You should rather blame your bankers, your companies, your traders... but no... it's only government's fault!
    Yeah, but to blame them would mean you're just a no good Commie!

  5. #35
    half mystic, half skeksis jenocyde's Avatar
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    Quote Originally Posted by Blackmail! View Post
    Once again, you are blaming your government, when the real responsible is greed from the private sector. You should rather blame your bankers, your companies, your traders... but no... it's only government's fault!

    Governments aren't omnipotents. As a matter of fact, most of the time they are rather slow to react, thanks to the bureaucratic inertia. Cyclic financial crisis don't happen because of their interference. They mostly occur... because of the financial sector itself.
    Once again? Maybe you should re-read what I wrote. I explained why the regulation failed. If this was about the greed of the people who want what they can't afford or the developers or the rampant fraud in the private sector, I would have gladly gone on about that, as well. I am not blaming the government for all the ills of the world, I was responding to the point about regulation only.

    The part you just quoted referred to the cyclical nature of a capitalistic society. It's documented throughout our history. The economy and war are always linked - that's a different discussion that I would be more than happy to get in to with you in a separate thread.

    And in the same way that the government isn't all evil, neither is the private sector. Your quote about the bankers being the ones to blame would be just as ludicrous if I believed that you thought they were solely to blame. It is also ridiculous to assume that greed only exists in the private sector and that the politicians who make our laws don't bend to wealthy corporations. You are opening a can of worms here.

    I know very well that governments are not omnipotent, but we (rightfully) put trust in our governments for our basic protections. I outlined how our US government failed us. If you would like me to go on about how we have failed ourselves, I will do that as well. But please don't make assumptions about my way of thinking. Especially when I clearly said, more than once, that I don't blame the government.

  6. #36
    Vaguely Precise Seymour's Avatar
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    jenocyde, it seems like you are focusing on the abuses and bad decisions that happened at the direct end of the market (home buyers, sellers, appraisers, and lending banks) and how the government enabled those. There was definitely fraud and bad decisions that happened on the direct end, but there were other problems as well.

    One problem was the disconnect between the people directly involved in the transaction and the associated risk. All the people directly involved stood to gain during the initial transaction. Then the bank that made the loan would quickly sell it to another financial institution, so they didn't care about the long term risk either.

    To farther confound things, mortgages were pooled together (high risk mixed with low risk) and then sold as investment vehicles. While pooling mortgages did limit the risk of an individual bad mortgage having an significant effect on a pool, the pooled mortgages were given bond ratings that didn't reflect the systemic risk involved. This made mortgages look like a better investment than they were, making them more attractive to investors, which pumped more money into the housing market and drove up prices. Eventually, investors ran out of good mortgages to invest in (via mortgage backed securities), so even sub-prime mortgages became attractive and were snapped up by financial institutions.

    To farther complicate matters, financial institutions sold insurance to the people holding the mortage pools (look, now they are EVEN SAFER). This insurance (aka credit default swaps) gave an illusion of safety, even though the financial institutions involved were highly leveraged. It was the break down of this interlocking system of mortgage pools and insurance on the same that nearly triggered a financial collapse.

    There's a great video here that explains how the whole system worked (and failed) here:

    Subprime Mortgage Crisis Explained Cartoon

    (Whole thing is 11 minutes)

    One could also argue that the repeal Glass-Steagall Act (which had previously separated investment banks and commercial banks) had a lot to do with crisis as well as the creation of new, unregulated financial instruments. The repeal of Glass-Steagall created a conflict of interest for financial institutions which rated financial instruments. Even Alan Greenspan admitted that the financial corporations failed to regulate themselves as predicted.

    Capitalism only works well when investment, risk and reward are clearly associated, and people understand the trade-offs. Without real transparency, it's entirely possible to create a system in which it appears that you can make money with no risk. Such a system is inherently unsustainable and must break down eventually. Corporations and government working together created just such a system in the housing securities market.

    I think it's hard to argue that there was too much regulation of mortgage backed securities, credit default swaps and the leveraging going on in the system. I think it is arguable that some government actions made the problem worse by making it easier for unqualified home buyers to get loans. However, they didn't create the demand for sub-prime mortgages, and didn't force investment banks to snap them up and make creating them profitable.

  7. #37
    half mystic, half skeksis jenocyde's Avatar
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    Quote Originally Posted by Seymour View Post
    jenocyde, it seems like you are focusing on the abuses and bad decisions that happened at the direct end of the market (home buyers, sellers, appraisers, and lending banks) and how the government enabled those. There was definitely fraud and bad decisions that happened on the direct end, but there were other problems as well.

    Yes, I know. I was responding to the quotes about more regulation. I stated a few times that I was referencing that only. I am aware of the other reasons and issues, as well.

    While you and I disagree about the level of government involvement, I understand your position. There is not only one reason, organization or person responsible.

    Anyway, thanks for your post. I'll watch the video shortly.

  8. #38
    mountain surfing nomadic's Avatar
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    Quote Originally Posted by Seymour View Post
    One could also argue that the repeal Glass-Steagall Act (which had previously separated investment banks and commercial banks) had a lot to do with crisis as well as the creation of new, unregulated financial instruments. The repeal of Glass-Steagall created a conflict of interest for financial institutions which rated financial instruments. Even Alan Greenspan admitted that the financial corporations failed to regulate themselves as predicted.
    I very much agree with this. Also, collateralized securities lawyers made a lot of money too. These CDO, CMO, etc... instruments were very difficult to assess risk for, because they were legally written in such a purposely confusing way. But that was the entire point, to hide the true risk of the collateralized instrument.

    Capitalism only works well when investment, risk and reward are clearly associated, and people understand the trade-offs. Without real transparency, it's entirely possible to create a system in which it appears that you can make money with no risk. Such a system is inherently unsustainable and must break down eventually. Corporations and government working together created just such a system in the housing securities market.
    Completely agreed.

  9. #39
    Gotta catch you all! Blackmail!'s Avatar
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    At last but not the least, we eventually had the voice of reason.

    Thank you Seymour, you managed to explain exactly what I wanted to suggest to Jenocyde, despite my poor choice of words (since English is not my first language). And especially the pervert system around sub-prime mortages.

    I have no doubt that in the future, you will be a great asset to this forum.
    "A man who only drinks water has a secret to hide from his fellow-men" -Baudelaire

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  10. #40
    & Badger, Ratty and Toad Mole's Avatar
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    Thumbs down Imprudent

    How interesting to discover this is not a global problem but a problem of the USA.

    For it was not necessary to bail out even one of our banks or financial institutions.

    And although we abolished tariffs, floated our dollar and deregulated our banking system, we retained prudent regulation of our banks and financial institutions.

    And while the USA and Europe fell into the worst recession since the Depression, the Reserve Bank of Australia raised interest rates to accomodate the coming boom.

    What this means is that our economy no longer follows the economy of the USA and Europe. In fact our largest trading partner is Japan, closely followed by China, South Korea and India.

    And interestingly, we followed prudent banking practices while the USA was imprudent.

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