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ofblong wrote:
sv I understand its a biased video but it still brings out points that are true .

Hi Ofblong

True? 1. I couldn't believe how hysterical it was. It's completely over-the-top both in its tone and in the way it uses that lowering, dramatic music. This is supposed to represent 'truth'? 2. I couldn't get over the depiction of Obama as this evil socialist monster who is going to bring America to its knees when, in fact the guy is basically a conservative with a few pale-pink inclinations sewn on his shirt. 3. I wondered how the makers of the video could get away with the cynical and very naked use of 'guilt by association' to blacken him. But of course they will.

All this should make it ridiculous to any rational human being, but of course it won't.

It's a very sleazy bit of work.

But there was something else that had me totally gobsmacked. It was the sight of republican propagandists pathetically snatching at votes by wrapping up their free-marketeering hides in the suddenly holy cloak of regulation. It's a long time since I've seen conventional politicians being so nakedly hypocritical.

After making a big presentation of the regulation issue the video then says, well it isn't about regulation at all. More cheesyness!

But of course it's right. It's interesting that both politicians and the media have been focussing on the regulation issue and ignoring the real cause. Financial bubbles like this are always driven by the real economy - the regular cycle of boom and bust.

The building boom got under way from about 2000 onwards I seem to recall. There was a fair bit of rogue trading in mortages right from the start (salesmen looking for their bonuses come what may - an inevitable result of a cut-throat competitive system) but sub-prime lending was not such an ineherently risky business so long as the boom in the housing market continued. If a mortgage holder defaulted, Fannie Mae and its like rubbed their delicate hands. Has everyone forgotten that having already sucked a load of interest out of mortgagee, they now reposessed his home in conditions of a rising market. Yum! Yum! Not such a bad business deal at all. Except for the poor home owner, of course.

Trouble is, as always happens in a boom period, business overextends itself in the drive for profit and overproduction results. Suddenly supply has overtaken effective demand. Producers cut back. This has a knock on effect all the way down the supply chain. Demand for production goods falls. People are thrown out of work. Having lost their income they can no longer buy consumer goods. Demand falls off in consumer goods too. Other firms find themselves with excess stock. Their supply chains are hit. Bang! Bang! Bang! all down the line, one link after another. Capitalism's anarchic market mechanism does it again! This is exactly what happened here. The boom in the housing market came to an inevitable halt as it began to overproduce. House prices started tumbling. From that point on income from repossessions was now no longer covering the cost of the loan to the mortgage company. At that point everyone squawks. Governments break their own rules and sell their (cheap) so-called free-marketeering souls to the devils of regulation and intervention to shore up the system. The rest is history.

And it is literally history. It is an almost exact repetition of the bubbles that hit Britain at the end of the nineteenth century - only on those occasions the creditors couldn't securitise the debt and sell it on to others in America and Europe.

Booms and slumps are a permanent condition of capitalism. It's amazing that no-one ever sees them coming.

One half of me is thinking about the misery this is going to cause but the other is just plain -

Boom and slump is a permanent condition of capitalism. It's amazing that no-one ever sees it coming.

Well, this trouble was seen coming.


I agree though about how the cycle went to get us where we are. That's exactly how it happened. But each failure of Congress to address it when concerns were brought up only moved us further up on the 'ladder of risk'. <--- anyone remember that? you MSF and learning riders you?

The circumstances were set in motion and left to run. No one wanted to be the one to stay "STOP". Someone had a connection they wanted to keep happy. It made for a huge, tangly web.

Shorts

Why would a mortgage company sell a mortage it knew it was going to lose money on? It was only after the downturn in the housing market became apparent that morgage lenders began to panic about their existing capitalised debts.

Of course companies are going to take every opportunity to maximise their profits in an unregulated free-market system.

The hypocricy lies in the fact that those who accepted the neoclassical free-market myth (not just Republicans by any means) are now shrieking that the system should have been regulated ages back.

Are we now in for a period of re-regulation and intervention? Or perhaps more accurately are we now in for a period of overt (rather than covert) regulation and intervention? Who knows. The pendulum swings. Free-markets are our saviour until we hit a crisis like this. Then they're not. Another crisis. Then they are again. There are relatively few policies a government can pursue. None of them work.

Am I cynical? Too damn right. I've lived long enough and I remember.

Yeah, the folks who initially cooked the plans up had long made their money and gotten out before things turned down. Those early birds always get their money. By the time we see shows on TV like 'Flip that House', the fad is already sliding down the backside of the hill.


The free market worked exactly as it was suppose to. It crashed in this case. The market is like the laws of physics, it just is. The people within this free market drove it wrong.

Sports cars can go real fast and be absolutely beautiful to watch. In the hands of a skilled driver that understand his limits, the car's limits, the track limits and utilizes correct judgement in order to keep that car not only on the road, but efficiently running at top pace, that car is wonderful.

You put that sports car in the hands of a newly licensed 16yr old kid, who hasn't developed the skills, who hasn't developed the understanding and maturity, and who doesn't make proper judgments - that kid plants the car head first into a light pole. Kid dead. Car totaled. Family sad and angry.


That sports car did what it was made to do. The car just is. The drivers manipulated that car and caused it either to stay on course or veer off.


When you take a system or a tool or an object and use it PROPER it is a great tool. But that tool does not work in a vacuum. We as people do not exist in a vacuum.

Don't let boneheads use your tools (or vacuum).

sv I said some of the parts are true. There are some points I dont know if they are or not.

with that said I read a statistic, cant remember what news site it was on maybe msn, that 95% of current homeowners are paying their mortgages on time. So how is it that these banks dont have the money to loan to others???

Sorry guys, duplication.

ofblong wrote:sv I said some of the parts are true. There are some points I dont know if they are or not.

with that said I read a statistic, cant remember what news site it was on maybe msn, that 95% of current homeowners are paying their mortgages on time. So how is it that these banks dont have the money to loan to others???

Hi ofblong, I haven't been following the current crisis in sufficient detail to have a precise answer to this (and getting accurate information from the media is a dodgy business in any event) but in general terms you have to consider the chaotic and unstable nature of both the capitalist market and the institutions that serve it.

Once the recession in the building industry hit, some mortgage companies who were heavily into sub-prime trading reached a situation where their legally defined capital/asset ratio had fallen to the point where they were declared insolvent. This sent a wave of panic round the banking system.

Then it started to become clear that direct mortgage companies had started securitizing their debts (selling them in packages to other companies) both within the U.S, and in Europe. Nobody knew where these bad debts now were or where they were going to show up. At that point, confidence in the banking system plummeted. Banks became very uncertain and started refusing to lend to each other since they didn't know who else was in danger of insolvency. Capital flows dried up and the system began to grind to a halt.

Banks and other financial institutions only hold on to a very small portion of the money they borrow or receive as deposits. Once they have borrowed at a relatively low rate of interest they lend most of it out again at a higher rate - that's how they generate income for their shareholders. That means that if there is a loss of confidence and people start withdrawing their money in any quantity, the bank or mortgage company won't necessarily have the money in their vaults to pay them. In this situation, they world normally rely heavily on borrowing from other banks. If the other banks are not lending or are lending at a high rate, then they are in trouble. The institution's capital/assets ratio falls [ capital = what they have borrowed; assets = what they own] below the legal limit and they are declared insolvent. When word gets out, people panic, start withdrawing more money. The situation escalates.

This is a very simplifed version of how the system works but it gives an idea of how fragile and interdependent the whole thing is and how it runs on confidence not cash.

But you also have to remember that this sort of situation is usually (possibly always) based on what is going on in the real productive economy which is now in recession. Firms are going bust; there are lay-offs. People who find themselves suddenly unemployed are unable to pay their debts. Confidence in the ability to generate profit is going into free fall everywhere.

It looks like it is going to be a bad one. The Dry Baltic Index, which is generally considered to be the best indicator of economic performance in the immediate future has plunged. So hang on to your hat.

The banking and stock market systems are an unstable gambling where people with capital come to gamble, win and lose. The market is chaotic because it is the result of billions of independent decisions by companies round the world. Each company is is competiton with other companies for profits, so their view of what is happening is limited to the immediate market conditions.

The wonderful model of the 'market mechanism' so beloved of neoclassical economists operates with elegant efficiency only in the mind. That's because there are may features of the real market that it ignores or simplifes. In other words, Adam Smith's invisible hand is a myth, a mere intellectual construct. (Don't forget Smith was writing at a time when capitalism was very scattered and undeveloped as a system and before the business cycle had become apparent - that didn't happen for another forty years).

Just look at the the real economic world around you and ask whether this is the product of a perfectly balanced system miraculously geared to produce the greatest good of the greatest number.

One of the features of the real world which the model ignores is that to obtain profit, money has to be converted into capital and then back into money again through the process of production - and this takes time. Business owners decide to capitalise on the basis of current market conditions. The quite lengthy process of profit generation gets under way. In the meantime the market moves on, and, at a certain point in the regular business cycle, leaves firms well and truly in the do-do. That lengthy process also means that the first signs of a crisis only appear after overproduction has begun.

It's a huge chaotic game being played by wealthy people in the hope that they will gain more wealth. Unfortunately the thing they are playing with is the productive system on which all the rest of us depend for our material survival.

This is rational? What can you say?

cheers

Shorts wrote:

The free market worked exactly as it was suppose to. It crashed in this case. The market is like the laws of physics, it just is. The people within this free market drove it wrong.

Sports cars can go real fast and be absolutely beautiful to watch. In the hands of a skilled driver that understand his limits, the car's limits, the track limits and utilizes correct judgement in order to keep that car not only on the road, but efficiently running at top pace, that car is wonderful.

You put that sports car in the hands of a newly licensed 16yr old kid, who hasn't developed the skills, who hasn't developed the understanding and maturity, and who doesn't make proper judgments - that kid plants the car head first into a light pole. Kid dead. Car totaled. Family sad and angry.


That sports car did what it was made to do. The car just is. The drivers manipulated that car and caused it either to stay on course or veer off.


When you take a system or a tool or an object and use it PROPER it is a great tool. But that tool does not work in a vacuum. We as people do not exist in a vacuum.

Don't let boneheads use your tools (or vacuum).

Unfortunately Shorts, I'd have to disagree (of course I would ). It's a nice idea but it bears no relation to the real world. The pronoucements of economists based on their theories about the 'mechanism' of the market have the same power to predict future events as the 'science' of astrology. I can't say, I'm therefore, very impressed.

A sports car has some straightforward controls and a single-person sitting behind them. The economy is very different. Like I said to ofblong, it is composed of billions of un-coordinated decisions with nobody fully aware from moment to moment what is happening elsewhere or what the results are going to be. And if the market 'mechanism' is like a law of physics then it is clearly derived from chaos theory.

The history of the last two hundred years has been the history of people trying to drive the 'free market' right. If there is any lesson to be learned from history it is that the 'free market' does not take any notice of anyone trying to drive it.

Left-wing politicians and right-wing politicans slug it out, arguing pointlessly about who has the best theories and the best policies. Every so often they do an about face and take up opposite positions as appears to be happening now. It's all a waste of time. What can a poor socialist do but watch and despair Ah well!

(On a more positive note you can rest assured that I'm certainly not going to let any bonehead use my tools ... )

blues2cruise wrote:

ofblong wrote:I havent read this thread since the last time I posted but....

http://www.usawakeup.org/USSA.htm

nuff said and basically sums up why I wont be a supporter of hussein i mean obama.

If all that is true it is frightening.

There is plenty of room in Saskatchewn , Nunavut and Northern Ontario if you want to emmigrate.

Its too cold here in Northern Ontario, too flat in Sask and too close to absolute zero in Nunavut........

lol I missed that part...