Eye on the US Economy.

Jacobfox

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I find it quite hilarious about how everyone wants to blame "Bush mishandling the economy." It's like they think there's a computer terminal in the Oval Office and you have to enter a code every 108 minutes or the economy implodes. It's the Fed and some way pre-Bush policies to blame. "Government bailout" needs to be an alien term, else we're just giving muffins out to greedy moose.

I have nothing against a bank failure - one will be enough for the rest to get their acts together.

Which explains why when IndyMac failed, Lehmann Brothers and AIG got their shit immediately straightened out. Oh wait...they didn't.

The current market situation is largely due to post-9/11 deregulation of the financial sector. To jumpstart the economy again, the republicans, who were in power, deregulated subsectors of the financial sector. This allowed the sale of mortgage backed securities to rise again, for the first time since the recession of the 70s. These products have upsides and downsides; while they help make loans readily available because of the easy profits available for investors when the market is good, they also have a downside. When the market starts to take a turn for the worse, the lowest rated securities go bad because people tend to default, which means the securities go bad and nobody wants to buy them. This puts the smaller banks in deep shit, because they often use these securities to fund the loans. They buy some of their loans from larger banks like Citibank, Barclays, etc. The defaulting of the small banks hurts the larger banks because they don't get their debts paid and they are unable to sell loans, which are huge sources of their profits. So the deregulation of the financial sector basically can (and has) screwed over the whole system. What this bailout says about Paulsen and Bernake is that they're realizing that unimpeded free markets are not working right now. I'm largely a free markets sort of guy, but this is ridiculous. We need to regulate this stuff.
 

ViperVX

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You simply can't fix a 12 Trillion dollar debt. It's the 23% of the Worlds GDP, and, surprisingly enough, 22% of the world's GDP is located in America, 21% in Europe, rest in Asia and so on.
What happens next:
a) Massive price increase for Oil, Gold, brinding USD lower and lower and expanding American deficit even more.
b) When USD is low enough, the 3 largest investors in US economy, which are in that order, China, Japan, Russian Federation, are going to ask for their money back.
c) US will not be able to pay them (and those investments are guaranteed by the Federal Governement) all they can do is announce a default.

Also i've been doing a lot of reading in the past couple'o days, and i am mostly convinced the markets crashed cause of a huge number of floating derevatives, which recently have been called "toxic money" but the Fed Chairman. And the recent 700 Billion dollar Bailout, is created exactly to buy out the 700 Billion worth of direvatives created on Housing market. They have been already temporary banned in European and Russian broker's boards, and the largest companies, who havn't lost much during the crisis, like Microsoft, Shell, basically all the high-tec and fuel giants, are buying out their own shares, so they are not used to pay for those direvatives by independent shareholders.

Also a fact, World's GDB is estimated at 51.6 Trillion USD, There are over 510 Trillion USD's worth of Direvatives floating around, and, of course, they cannot be instated with money, as there's simply not enough money or property, therefore making it a Huge Bubble :mrgreen:
 
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MacGuffin

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You simply can't fix a 12 Trillion dollar debt. It's the 23% of the Worlds GDP, and, surprisingly enough, 22% of the world's GDP is located in America, 21% in Europe, rest in Asia and so on.
What happens next:
a) Massive price increase for Oil, Gold, brinding USD lower and lower and expanding American deficit even more.
b) When USD is low enough, the 3 largest investors in US economy, which are in that order, China, Japan, Russian Federation, are going to ask for their money back.
c) US will no be able to pay them (and those investments are guaranteed by the Federal Governement) all they can do is announce a default.

I remember reading about that scenario 6 years ago or so...
 

Scott

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hahaha that highlarious

Why is this even remotely funny? If you have a differing opinion, please share it with all of us instead of snickering to yourself.
 

Momentum57

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I thought you were being sarcastic. Sorry

Well first the guy is manipulating the facts he projects that this "cash value insurance" and whole life are one in the same. He is speaking to one type of insurance this "cash value insurance" not whole life.
Myth: Cash value life insurance, like whole life, will help me retire wealthy.
Truth: Cash value life insurance is one of the worst financial products available.
Whole life allows the policy to grow beyond the death benefit. Example you buy 100,000 dollars worth of whole life insurance over the years your cash value grows adding to the death benefit and creating a pool of money that you can take a loan against. Also it grows at a rate higher than average investment instruments like CD's or money markets plus tax free. Insurance is one aspect of a healthy investment strategy that can help produce wealth. So lets say at 60 you have 187,000 - you can keep that as death benefit, you can take a loan to bridge your financing till you take SS and IRA payouts, you can liquidate it and take the cash.

Buy term and invest the difference is great if you are a person starting late and who has great discipline. The problem that most don't understand is that you would have to earn that 100,000 not to spend before your term becomes prohibitively expensive. At some point it will become prohibitively expensive sometime after the 40s and when you contrast what you would have been paying if you had bought whole day one its just a huge disparity.

This would require you investing small amounts: the cost for 100,000 whole life for me was $800 annually I do not know how much it would be in term but I can tell you that you won't find any broker that will tell you I will make you 100,000 before your 40's with 500 dollars a year

This takes us to the reason why one has life insurance: debt solvency: lets say you buy a home for you your wife and your kids well you death would throw a big wrench in their lifestyle most likely leaving them homeless and poor. Lets say your a business owner besides the bank wanting you to have insurance for their loan insurance can be an effective business contunation strategy.

Also whole life has a safe savings aspect where as investing the difference would leave you open to market risk at a gigantic rate. My dividends from my company increased last year and this year. In all seriousness find three independent brokers who don't sell insurance and ask them if you should buy insurance and the will resoundingly say YES. I don't know what this guy is selling but it is not sound financial advice.
 

Cobol74

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"It's not a call for assistance; it's a scream for help. US Treasury Secretary Henry Paulson is asking other countries to help buy up bad US debt. The US government is putting up $700 billion in taxpayer money in the hopes that the measure might restore stability in the financial system. Some countries are planning to help. But the German government has answered this call quickly and clearly: no."


Bloody hell, I hope I do not end up paying more money for this fiasco (Norther Rock is a done deal) especially to the Americans, who are more than capable of looking after themselves - well I thought that they were.
 
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smib

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I dun like dees appulz one bit.
 

ViperVX

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I hope American Congress refuses to issue the 700 billion bailout, especially if you take in consideration that the amount of "toxic" money, even in housing, is several times larger.

Basically what it is: A large number of Corrupt and/or terribly smart ppl abused the system for a number of years, got hunders of millions of dollars using "questionable" methods, which lead to a collapse of the system as we know it. Not they are asking the Federal Governement to buy our their debts with hard-earned tax payers money.
As far as i can see, those "general managers, vice presidents, high level executives and shareholders of those banks are more than happy to walk away with thier bonuses and whatever they've earned until this point in time.

Even more, if Congress refuses to issue this bailout, after the "default" of the economy massive inflation will hit US, and tax payers will suffer again and again, not only losing houses, but cars, insurance, not even talking about compromising every single governement institution and international influence. So they are choosing between Terrible and Catasprophically bad.

Is it me or is it a little bit "unfair" ? )
 
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smib

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You've made me a sad panda.
 

Momentum57

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BBC Panorama a good view on how the UK is taking the events of the past few days. My favorite parts is this Leyman Brothers London Branch Secretary who says "they know at the top of the company that this was going to happen and they could have stopped it" proving dumb is the international language.

If you want to know the deep dark secret of the financial world, and more than that the entire swinging spinning blue sphere: THERE IS NO ONE IN CHARGE! there is no all powerful wizard, the train has no conductor, the dice fall where they may.
 

Scooby5

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US Treasury Secretary Henry Paulson is asking other countries to help buy up bad US debt. The US government is putting up $700 billion in taxpayer money in the hopes that the measure might restore stability in the financial system. Some countries are planning to help. But the German government has answered this call quickly and clearly: no."


Yeah, the German Chancellor a few days ago told Paulson and the rest to get stuffed. Along the lines of "It's your problem, you fix it. We've trying to tell you for years this would happen."
 

Blind_Io

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Fannie, Freddie, Lehman and AIG are under investigation by FBI for fraud

http://www.foxnews.com/story/0,2933,426783,00.html

WASHINGTON ? The FBI is investigating four major U.S. financial institutions whose collapse helped trigger a $700 billion bailout plan by the Bush administration, The Associated Press has learned.
Two law enforcement officials said Tuesday the FBI is looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, and insurer American International Group Inc. Additionally, a senior law enforcement official said Lehman Brothers Holdings Inc. also is under investigation.
The inquiries will focus on the financial institutions and the individuals that ran them, the senior law enforcement official said.
The law enforcement officials spoke on condition of anonymity because the investigations are ongoing and are in the very early stages.
Officials said the new inquiries bring to 26 the number of corporate lenders under investigation over the past year.
Spokesmen for AIG, Fannie Mae and Freddie Mac did not immediately return calls for comment Tuesday evening. A Lehman spokesman did not have an immediate comment.
Just last week, FBI Director Robert Mueller put the number of large financial firms under investigation at 24. He did not name any of the companies under investigation but said the FBI also was looking at whether any of them have misrepresented their assets.

Over the past year as the housing market cratered, the FBI has opened a wide-ranging probe of companies across the financial services industry, from mortgage lenders to investment banks that bundle home loans into securities sold to investors. Mueller has previously said the FBI's hunt for culprits in the nation's subprime mortgage crisis focused on accounting fraud, insider trading, and failure to disclose the value of mortgage-related securities and other investments.
The investigations revealed Tuesday come as lawmakers began considering whether to approve emergency legislation that would give the government broad power to buy up devalued assets from troubled financial firms.
The bailout proposed by the Bush administration is aimed at helping unlock credit and stabilize badly shaken markets in the United States and around the globe.
In the past two weeks, the government has taken over Fannie Mae and Freddie Mac, the country's two biggest mortgage companies, with a bailout plan that could require the Treasury Department to put up as much as $100 billion for each of them over time if needed to keep them afloat as mortgage losses mount.
Last week, the Federal Reserve provided an emergency $85 billion loan to AIG, which teetered on the brink of bankruptcy. Lehman Brothers was forced to file for bankruptcy after attempts to engineer a private rescue fell apart. All the companies were laid low from bad bets on complex mortgage-related securities.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke made the joint decision last week that the only way to stop the carnage was to deal with the root cause of all the troubles, billions of dollars of bad mortgage debt sitting on the books of major financial companies. This debt has triggered the worst credit crisis in decades, causing credit markets to essentially freeze up despite the fact that the Fed joined with major central banks around the world to pump billions of dollars of reserves into the financial system.
Additionally, the FBI is investigating failed bank IndyMac Bancorp Inc. for possible fraud. Countrywide Financial Corp., formerly the nation's largest mortgage lender and now owned by Bank of America Corp., is also under scrutiny.
 

marcos_eirik

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I'm mostly pissed that I don't have any money to take advantage of this!
Oh... :comfort: I would buy you a round of drinks and a beer if you were here...

Well, right now it's a really good time to either be on vacation, or be a foreign exchange student in the US. Basically, the Norwegian state pays me about $10K per semester in scholarship to be here. Because I'm part of an official exchange program, I don't have to pay tuition either. Additionally I have about $12-13K in founds to spend from work etc...) The exchange rate is ridiculous, relative to the Norwegian currency (Norske kroner, NOK) the dollar used to be worth about 7,5-8 to one ($1~7,5-8 NOK) about a year ago. Now its more like $1~5,5 NOK.

I really love the Grayte State uh Texus so far... :) Only thing is, the beer is terrible...
 

airmenair

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I really love the Grayte State uh Texus so far... :) Only thing is, the beer is terrible...

What kind have you had? I'm not sure about your taste but there are many local brews that are good.

And to the topic at hand. It doesn't seem like a win with either decision. That said, I'm all up for NOT granting the 700 billion bail out. I'd rather see the US economy get restructured then limp on with bad policies. (This is from my limited understanding of economics). At 700 billion taxpayers would be stuck with a 10K bill each, and if what Glenn Beck says is true (over 2 trillion) then that is over 20K a person. I can't say what the ramifications would be if the bailout doesn't happen (in terms of taxpayers cost) that kind of estimate is way beyond my realm of figuring, but until I hear more convincing arguments I'm against the bailout. This does still have to go through Congress correct? Any ideas on when a decision will be made?

Time to picket DC I say!
 

ViperVX

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I was watching Letterman last night, had Bill Clinton on, i think he covered the subject quite well. Basically nobody knows if the 700b bailout is going to help, but, even if it's issued, he doesn't want it to be a "blank" check, with no possible regulations and control from the governemnt.
 

Censport

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Now the word is that $700,000,000,000 (billion) is the minimum cost of the bailout, and that it could (translated from political speak: will) cost as much as $2,300,000,000,000 (trillion).

I hope the FBI investigation takes out some of Obama's staff of advisors.
 

Elvis313

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what exactly does this have to do with Obama?
 
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