A very stark interpretation of current market economy.

www.theinternationalforecaster.com...

Here is a summary from an economist, who evaluates current conditions as ending in "a complete and systemic breakdown" of the US and world economy.
There are a lot of very interesting points raised in this article; particularly that that bondholders of FreddieMac and Fanny are the central banks. They are going to avoid losing their money because the fed is going to bail these two banks out with $400 billion in tax payers money!
Here's a quote of the opening sentances to get you fired up "What you are witnessing is the acceleration of a complete systemic breakdown of the US and world financial systems and economies. It is happening right before your eyes. It is in your face. The Scylla and Charibdis of real estate finance, Fannie Mae and Freddie Mac, which are currently in possession of, or have insured, over 5 trillion dollars worth of mortgages, a good portion of which are nothing but toxic waste, have imploded and will now be nationalized in the most egregious example of moral hazard in the history of the world."
Please read this article, it seems a very scary and accurate assessment of current conditions. And of course, the rich are still getting richer....

nationalize debt and privatize profit.

nothing new. when all else fails, war can be used to kill a few creditors and it's a racket, too.

Originally posted by Long Lance
nationalize debt and privatize profit.

Man, that is so true. What a scam.
That article really has me disturbed.
Those boys that could do something about it are probably all getting a lick at the cream too, so they wont do anything.
What happened to honesty and ethics? Or is that just for the poor?

Originally posted by cruzion

What happened to honesty and ethics? Or is that just for the poor?

a bit cheaper than bombs, death squads and an army for a police force, isn't it?

So what is with the bail out? What are the consequences if the fed don't bail out these two companies? Or in another way, why would the fed want to bail them out; what's in it for the fed?
As financial institutions, shouldn't they have provisions in place for and if something like this should happen? Or is it incompetent management that has brought this about, or deliberate oversight or profiteering, or just bad circumstance?
I'm still disgusted that the tax payer should be paying for other peoples failures, and those people get to take their profits without suffering the consequnce of a failed investment!
Let them fail! Spend that money on improving education. God knows we need it. $400 billion buys a lot of schools and ammenities.

Man, I feel dirty just knowing about this.
It has always been implied that this is how big business, bank cartels and the government mesh, but I'd never actually seen it in operation like this.

I would guess if something like morality and ethics aren't regulated, then it is OK. Ethics would be a big hindrance to you, if all the other companies didn'tsubscribe to them.

it's frustrated and it makes people cynical and angry.

the issue is that this knowledge has been around for decades, at least it became apparent when gold bullion was outlawed in 1933. yet nothing happend, this alone should tell you something. most people believe in hierachical societies and that somone should 'lead'. the means to this end are irrelevant to them and what we are doing here they will just consider insubordination.

the elite never bothered many people directly, it's the vast majority of willfull zombies who do this to us.

no, i haven't found a solution either, otherwise i would be posting a bit differently if at all.

since it's us, the taxpayers that are bailing out these investors, basically paying off the bad loans they've made to homeowners (that are failing mainly because the banks got greedy with their terms on the loans, neglected to evaluate the ability to repay, and well, committed basic fraud, all they wanted was that peice of paper to sell!)....
well, it seems to me, that we, the taxpayers ARE paying for our homes, right? I mean, we are paying for them every time we fill up the gas tank, every time we go to the store, everytime we go to a resturant.....and we'll probably pay for it more when the tax bills come in. They are driving the dollar through the gutter everytime they bail out, and it's causing everything to cost more.
Considering this, I think they should exert more pressure onto the banks to review the terms of those loans for these people instead of tightening the lending rules now and foreclosing on them. We're paying for their loses anyways.....it's time to bail out the average everyday joe also.

the banks are getting their losses covered, they've conned many into refinancing their houses early and have reaped nice sized penalties with this, should they also get the real estate to put up on the market and sell off to people who are more than likely just a bunch of slum lords also?

What would happen if the tax payer didn't bail them out?
Surely other banks will just buy their mortgages from them, and homeowners will carry on paying their monthly installments. The share-owners will suffer big losses, and the workers will lose their jobs...which is how it should be. The greedy lose their money, and the incompetent their jobs. The tax payer saves $400 billion. Sounds like a better deal to me.

I still don't understand why the govt would bail them out. Is there some unseen consequence of letting them fail?

[edit on 21-7-2008 by cruzion]

Originally posted by cruzion
...I still don't understand why the govt would bail them out. Is there some unseen consequence of letting them fail?

[edit on 21-7-2008 by cruzion]

Because then people would start questioning the validity of banks, and possibly even our monetary system. If people start questioning the value and/or financial stability of banks, they will take out their money. Down comes the ponzi scheme of loaning out $9 for every $1 put into the bank. (Yes, you read that correctly!)

What do you think would happen if people realized that banks can make money up out of thin air, and then LEND IT AT INTEREST? If you or I did something like that, we'd be called "counterfeiters". But if you own a bank, it's all nice and legal.

No question that one major impetus for the bail-out is so the 'banking elite' can protect their investments. But there is also another larger reason.

Remember what happened when IndyMac failed? People lined-up for days in order to take all of their money out of the bank. They had lost their confidence in the bank. That will cripple a bank but the Fed can step-in and make up for the lost deposits. At least for a small number of banks.

In the mortgage business, a bank takes its depositors' money, lends it out in the form of a mortgage and make a profit from making the loan. But if this were the end of the story, banks could only loan out some portion of the deposits they had available and then there would be no more mortgages available. Supply and demand would cause the cost of mortgages to skyrocket.

Enter Fannie and Freddie... they 'buy' the mortgages from the banks for a premium (more than the face value of the mortgage principal) allowing the banks to recover the money and lend it again AND make some more profit on the first mortgage. This allows banks to lend (and make profit on) FAR more than their total deposits. The availability of more mortgages increases the supply and keeps the cost down.

One downside to this is that the banks could make questionable mortgages knowing that they wouldn't have to worry about collecting the money. Fannie or Freddie would. Hence the subprime mess.

Freddie and Fannie are the mortgage banks' safety net. If they were to fail banks would be 'on their own' and far less willing to lend (in any form). We're seeing this now. As credit dries-up (as it largely has), the economy would grind to a halt (as it largely has). For example, the vast majority of retail businesses borrow to finance their operations until the holiday season where they make 70+% of their money. Then they repay the loans and the cycle repeats. If they can't borrow they can't stay in business. Whatever they were selling becomes less available (supply decreases) and prices rise. I have seen this over the last year first hand.

I have a very close relative that has worked in the mortgage industry for a very long time. She told me last week that three prominent reqional banks have told her firm that they are going to entirely stop lending to any new customers for 'the time being'. They are solvent. They have the money. They're just spooked.

A collapse of Fannie and Freddie would panic the banking industry. There would be no more home loans so no more home sales. (this would crash the construction, real estate, home furnishing, home stores (HomeDepot, Lowes, etc.), and all their myriad support businesses). There would be no more car loans. (this would crash the new and used car industries and put a serious dent in the insurance industry) and on and on. The loss of jobs would be massive as would the negative impact on consumer spending. Less jobs equals less income equals greater defaults equals increased bank panic and the cycle tightens.

So as much as a bail-out seems like a bad thing. Just letting them collapse would have disastrous and far-reaching consequences.

reply to post by jtma508


maybe, just maybe, people should be able to pay for these things by themsleves instead of financing everything through debt.

debt creates more money., which results in inflation, which means less purchasing power, therefore more credit is reuired, and so on. how come everyone is deeply in debt nowadays? that's a pathological situation, pure and simple. construction is not a sacred cow and maybe, just maybe, nations are funneling all their resources into ineffcient goods and services for which there would be no buyers without massive debt financing.

if so, the practice had better stop before all of the real (as opposed to virtual) 'economy' is wrecked beyond repair. remember it's no so much about zillions of dollars on bank accounts, it's about getting all the goods.

keeping people out of the game by finanically ruining them complements creating $$ from thin air very well, obviously.