House Bailout Vote Fails!

[Oberon]

...and the Dow is down 600+ points as a result.

Hmmm...

[Jennifer]

...and the Dow is down 600+ points as a result.
Hmmm...

Yay!
Catastrophe!
It's the end of the world as we know it!

*looks out the window at Harrisburg burning*

[Udog]

It's the end of the world as we know it!

And I feel fine!

[Lateralus]

I'm torn. I philosophically agree, but my pocketbook disagrees.

[Modern Nomad]

they are bickering like kids

fkin politicians.

[Eileen]

I'm torn. I philosophically agree, but my pocketbook disagrees.

I think that's probably how most reasonable people feel. There are a zillion reasons to object to the bail out (each appealing to a different group), but now what?

[Jack Flak]

I'm torn. I philosophically agree, but my pocketbook disagrees.
I get that. Being that I'm more philosophically than reality minded, I think it's better overall. Just desserts.

[Oberon]

It's the end of the world as we know it!


That's okay. The world as I knew it wasn't all that great anyhow.

[Jack Flak]

I think that's probably how most reasonable people feel. There are a zillion reasons to object to the bail out (each appealing to a different group), but now what?
Now everyone gets to eat the sandwiches they made for themselves--in their new tiny apartments.

[Udog]

Diets of 90% ramen noodles for everyone!

[ygolo]

I'm torn. I philosophically agree, but my pocketbook disagrees.

Same here.

If I didn't stand to loose my life savings, I would be cheering the news.

Whatever the heck they come-up with, I believe I'll be in the category (upper-middle class) that pays the most taxes, and loose the most as a shareholder at the same time.

The rich are never going to pay the most taxes; they (or rather their highly paid accountants) know how to use the loop-holes.

[kyuuei]

Wait I'm so lost. What happened to start this thread?

[Lateralus]

Now everyone gets to eat the sandwiches they made for themselves--in their new tiny apartments.
You mean in that abandoned McMansion down the street...

[disregard]

Wait I'm so lost. What happened to start this thread?

Half an hour ago, "The U.S. House has rejected legislation to bail out the country's financial industry by a vote of 228-205," according to MSNBC.

[kyuuei]

Oh. =( Well that doesn't sound too good..

[disregard]

I'm a little shaky on politics, but I think it's good for people that hadn't invested in Wall Street and put-a-shotgun-in-your-mouth horrible for those that did.

[ygolo]

Here is one source:
House rejects financial bailout bill - BostonHerald.com (http://news.bostonherald.com/business/general/view.bg?articleid=1122277)
The U.S. House today rejected an historic $700 billion bailout of Wall Street despite legislative leaders’ appeals to rank-and-file members that the bill was needed to save the U.S. economy from possible catastrophe.

The Dow immediately plunged as investors watched the dramatic House vote on television, but recovered a bit after the stunning developments.

After more than three hours of debate, the legislation was rejected by a 228-205 final vote.

Democrats provided the bulk of the votes for the bill, but Republicans reportedly couldn’t round up enough votes from their side.

“We must protect Main Street,” said U.S. Rep. Ed Markey (D-Malden), echoing the sentiments of others who said they disliked having to pass the bill but felt they had no choice to vote for it to avert economic disaster.

U.S. Rep. Barney Frank (D-Newton), a key negotiator as chairman of the House Financial Services Committee, appealed to fellow liberals to vote for the package, despite reservations that it doens’t do enough for the poor.

The poor will “get nothing” if no compromise package was approved, said Frank, insisting Democrats did everything they could to protect taxpapyers and lower-income people in the bill.

Leading Republicans, who faced a mini-revolt within their ranks over the wisdom of the federal government interfering in the markets, also appealed for bi-partisan votes.

“The American people are angry,” acknowledged U.S. Rep. John Boehner (R-Ohio).

But the “imperfect” bill - which authorized the Treasury to buy up billions of dollars in bad subprime-mortgage debt from reeling Wall Street firms - was better than not acting at all and risking a financial-system meltdown, said Boehner.

Rejection of the bill came only a day after the White House and congressional leaders reached a dramatic, tentative agreement after days of grueling negotiations.

Earlier today, President George Bush kept the pressure on lawmakers to pass the bill, which he said was needed to keep the nation’s financial system from seizing up and harming the economy as a whole.

[Eileen]

The rich are never going to pay the most taxes; they (or rather their highly paid accountants) know how to use the loop-holes.

Jerks.


I am, at the moment, happy to be in my very secure career. Too bad I've wasted a workday checking MBTI Central.

[Jack Flak]

I am, at the moment, happy to be in my very secure career. Too bad I've wasted a workday checking MBTI Central.
I laugh at your "J" rhetoric.

[Modern Nomad]

but I think it's good for people that hadn't invested in Wall Street


its going to affect some people's jobs at some point down the line. People who work for non financial companies that are borderline on layoffs too...

imagine the small business owner (possibly your boss) trying to make payroll, but his debtors can't pay him, and the banks won't lend him money.

small business owners will feel the affects pretty soon.

[disregard]

Oh..

Thanks Modern Nomad.

[Lateralus]

This could spiral into a depression if the Fed makes the wrong move, like it has in the past.

[Jack Flak]

This could spiral into a depression if the Fed makes the wrong move, like it has in the past.
http://blog.fantasticbonanza.com/wp-content/uploads/2007/10/the-road-warrior-mad-max-2-t-shirt-ryan-berkley-monsieur-t.jpg

[Modern Nomad]

Oh..

Thanks Modern Nomad.

thats a best case scenario. its difficult to see the effects from what the media tells you, unless you run your own business and depend on lending and borrowing to some degree for employee's wages, paying bills, paying insurance, paying taxes, letters of credit, lines of credit to buy/get paid for goods, etc...

[Eileen]

I laugh at your "J" rhetoric.

And I weep at the piles and piles of papers that you would laugh at if you saw what I have to do.

And yet.
Here I am.

[Udog]

Problem is, if this bill didn't work (very possible, as it's based on the same principles that got us in this mess), things would still eventually crash and dilute the value of the dollar in the process. This would only postpone the inevitable.

I mean, I tend to agree that something has to be done, but a knee jerk reaction when we haven't really acknowledged the root of the problem doesn't seem helpful to me.

[ygolo]

I think there is more to this story than meets the eye.

Notice that the Dow lost a lot of it's value before the vote.

But also notice the zero volume from 1:41PM to 1:58 PM.

http://www.typologycentral.com/forums/attachment.php?attachmentid=2514&stc=1&d=1222715194

Does anyone know exactly when the House deliberated and voted on this?

[Lateralus]

The root of the problem is the Federal Reserve. We're not going to do anything about that. Obama talks about giving the Fed MORE power...

[DigitalMethod]

We should all gather on an island some where and form a MBTIc community. Self supporting. We could set each person in a certain job according to their type. Our efficiency would rival that of a small country. Just don't bring any Kool-aid please.

[ptgatsby]

its going to affect some people's jobs at some point down the line. People who work for non financial companies that are borderline on layoffs too...

imagine the small business owner (possibly your boss) trying to make payroll, but his debtors can't pay him, and the banks won't lend him money.

small business owners will feel the affects pretty soon.

It'll hit big first.

First, you might hit a liquidity trap. The small business there might get squeezed, but it'll be the public companies that get hit first (they tend to have debt convents they have to meet). See: AIG.

Second, there will be less money being transferred, which means that the use of money will decrease. This will cause a few major problems, namely like the liquidity trap, money will be harder to re-raise to cover existing debt, and with that comes an end of existing businesses

Third, it will be harder to raise money for capital projects, meaning projects that would of been financed are not (and they almost all are!). This means less business across the board (this hits small businesses too, either directly or in terms of trickle-down).


Great time to be a long term investor though. Just wish I had income to divert for buying. Ah well.

[Modern Nomad]

I think there is more to this story than meets the eye.

Notice that the Dow lost a lot of it's value before the vote.

But also notice the zero volume from 1:41PM to 1:58 PM.

http://www.typologycentral.com/forums/attachment.php?attachmentid=2514&stc=1&d=1222715194

Does anyone know exactly when the House deliberated and voted on this?

all day. the entire market was watching the house vote and deliberate the entire time.

when votes were being casted, the market would react to the talley at the time.

[Eileen]

The root of the problem is the Federal Reserve. We're not going to do anything about that. Obama talks about giving the Fed MORE power...


I understand that this may be a legitimate point of view, but I'd like to hear an argument for it, because it also seems legitimate to me to view deregulation (essentially allowing for irresponsible and predatory loaning) as the root of the problem.

[Modern Nomad]

It'll hit big first.

First, you might hit a liquidity trap. The small business there might get squeezed, but it'll be the public companies that get hit first (they tend to have debt convents they have to meet). See: AIG.

Second, there will be less money being transferred, which means that the use of money will decrease. This will cause a few major problems, namely like the liquidity trap, money will be harder to re-raise to cover existing debt, and with that comes an end of existing businesses

Third, it will be harder to raise money for capital projects, meaning projects that would of been financed are not (and they almost all are!). This means less business across the board (this hits small businesses too, either directly or in terms of trickle-down).


Great time to be a long term investor though. Just wish I had income to divert for buying. Ah well.

yeah those are public companies. but i imagine most americans work for small businesses which is why i mentioned that part.

its not over though. they HAVE to work something out. i can't imagine them not doing something. i mean, thats their damm job! fkkin congress.

[Modern Nomad]

I understand that this may be a legitimate point of view, but I'd like to hear an argument for it, because it also seems legitimate to me to view deregulation (essentially allowing for irresponsible and predatory loaning) as the root of the problem.

deregulation is huge. it could have prevented all the exotic securities that packaged bad loans, and took it off from the hands of lenders who would not get punished for making bad loans. Lenders could get it off their books by selling the bad loans to people who want to package it into complex securities most people could not understand. So they would sell as many loans as possible, and people who should not be getting homes, would find the allure too great.

these "exotic securities" called collateralized debt obligations, MBS, etc... were supposed to "spread risk" so banks could unload risk from their balance sheets. problem is, they spread it so much, everyone got affected. lawyers were able to make the structures of these instruments so complicated, no one would understand it. and yeah, it could have been prevented with better regulation of the loan/credit markets.

[Oberon]

I understand that this may be a legitimate point of view, but I'd like to hear an argument for it, because it also seems legitimate to me to view deregulation (essentially allowing for irresponsible and predatory loaning) as the root of the problem.

Yes and no.

There would have been no predatory lending if lenders had had to tote their own notes, because predatory lending is ultimately self-defeating. If you're in the lending business, you do not lend your own money to people who can't pay it back... but you might very well lend someone else's money to those who can't pay it back.

Enter Fannie Mae and Freddie Mac, two quasi-federal corporations who played the part of enabler to this national-scale loan-sharking debacle. Without them, this whole deal would never have happened.

[Modern Nomad]

remember.

the dow drop would have been even worse than this. but there is a freeze on short selling on financial stocks.

that 700 dow point drop is mostly from non financial companies.

[Modern Nomad]

people are not sure if the average everyday citizen will be able to use their ATM's in the future, if nothing happens.

[Lateralus]

I understand that this may be a legitimate point of view, but I'd like to hear an argument for it, because it also seems legitimate to me to view deregulation (essentially allowing for irresponsible and predatory loaning) as the root of the problem.
The Fed doesn't really have anything to do with regulation. The part the Fed played was by making credit so cheap that banks found it profitable to make all these ridiculous loans at the time. You see, there's a natural interest rate that the market determines. When the Federal Reserve sets interest rates below the market rate, this causes people to borrow more because the credit is artificially cheap. We can talk about deregulation all day, and it did play a part, but the Fed created the environment for all of this to happen. Banks did what banks do. They were predictable. The Fed knows this and chose that course of action anyway. It makes me wonder whether they're corrupt or just incompetent.

And some politicians want to give the Fed MORE power. :wtf:

[Modern Nomad]

The Fed doesn't really have anything to do with regulation. The part the Fed played was by making credit so cheap that banks found it profitable to make all these ridiculous loans at the time. You see, there's a natural interest rate that the market determines. When the Federal Reserve sets interest rates below the market rate, this causes people to borrow more because the credit is artificially cheap. We can talk about deregulation all day, and it did play a part, but the Fed created the environment for all of this to happen. Banks did what banks do. They were predictable. The Fed knows this and chose that course of action anyway. It makes me wonder whether they're corrupt or just incompetent.

And some politicians want to give the Fed MORE power. :wtf:


mortgage rates are tied to treasuries. i don't think treasuries were aritificially cheap because of the fed.

if you have low mortgage rates, and good credit screening policies in place, then you wouldn't make bad loans to people who shouldn't get them.

market incentives to NOT screen out those with bad credit is key here...

[Udog]

The root of the problem is the Federal Reserve. We're not going to do anything about that. Obama talks about giving the Fed MORE power...

I don't hear McCain talking about doing anything different, though.

people are not sure if the average everyday citizen will be able to use their ATM's in the future, if nothing happens.

People are not sure of alot of things. I'm not clear what your point is here...

You see, there's a natural interest rate that the market determines. When the Federal Reserve sets interest rates below the market rate, this causes people to borrow more because the credit is artificially cheap. We can talk about deregulation all day, and it did play a part, but the Fed created the environment for all of this to happen. Banks did what banks do. They were predictable. The Fed knows this and chose that course of action anyway. It makes me wonder whether they're corrupt or just incompetent.

The average joe has been struggling for awhile now, and keeping the rate low was the way the Fed decided to delay the collapse for as long as they could. Increasing the rate would have cause this to happen much earlier (not necessarily a bad thing).

I'm not a Ron Paul fanatic, but I couldn't agree with him more here:

Ron Paul: Corporatism - not free markets

[ptgatsby]

remember.

the dow drop would have been even worse than this. but there is a freeze on short selling on financial stocks.

that 700 dow point drop is mostly from non financial companies.

It's a knee-jerk reaction anyway.

This act wouldn't of done anything in the short term - so long as the banks remain solvent, things will continue to flow. I don't see this bail out as crucial because it doesn't have much intrinsic value - it doesn't prevent another liquidity trap, etc. That is, so long as things keep moving, things can work themselves out.

On the other hand, I don't think things are resolved - further intervention will be positive. If not in a generic sense, like this package, then probably with more particulars. The reason why this was a good idea is because it would protect a lot more banks (which avoids the whole "limit of consolidation" that would re-invoke the financial collapse - that is, not enough money to make banks solvent)

The fundamental problem is that while it was known that many were virtually insolvent, nothing was done. Bad risk management, bad regulation and bad transparency... and gutless government oversight.

[Modern Nomad]

^ yeah i completely agree

im not sure if its a knee jerk reaction. i think traders are pricing in a lower chance of a fix.

there is definitely more bank failures coming up. sucks...

damm i hope school loans don't freeze up...

[Little Linguist]

...and the Dow is down 600+ points as a result.

Hmmm...

No offense, but you're going *down* folks - BADLY.

My advice - get out while the going's good.

Oh yeah, and btw not because the dow fell like that - THAT has happened before.

The other shit has also happened before, though the last time it was like that was 1929. Heh.

[Jack Flak]

No offense, but you're going *down* folks - BADLY.

My advice - get out while the going's good.

Oh yeah, and btw not because the dow fell like that - THAT has happened before.

The other shit has also happened before, though the last time it was like that was 1929. Heh.
The best part is that it only goes DOWN because everyone's trying to get out before everyone else. The market is entirely based on speculation, not reality.

[Little Linguist]

The best part is that it only goes DOWN because everyone's trying to get out before everyone else. The market is entirely based on speculation, not reality.

Yeah heh - that's the great part. What a study on human psychology. Your whole middle class is based on debt. TOTALLY. Heh and when push comes to shove, the middle class gets shoved in the toilet.


Ahhhhh <leans back in a rocking chair> how I long to see how they will deal with this mess. :devil:

[Modern Nomad]

The best part is that it only goes DOWN because everyone's trying to get out before everyone else. The market is entirely based on speculation, not reality.

the dow hasn't dropped to the point of armaggedon bc there is still a chance of a congress fix very soon.

but it is based on reality. make no mistake about that. there are times people panick and overreact, but it is very very much based on reality.

otherwise, if you think the market overreacts, by all means, the best way to prove that is to put money in the market. if not, then thats as real as it gets.

[Little Linguist]

Heh you know one way the country is trying to handle the situation - print more money. There was another country that tried to get out of a crisis that way, and it ended in the second world war. Lets hope your politicians become smarter.

[Modern Nomad]

Ahhhhh <leans back in a rocking chair> how I long to see how they will deal with this mess. :devil:

a lot of analysts believe that europe's credit and banking crisis will be as bad, if not worse than the us right now.

there was 3 bank failures in europe today.

[Little Linguist]

the dow hasn't dropped to the point of armaggedon bc there is still a chance of a congress fix very soon.

but it is based on reality. make no mistake about that. there are times people panick and overreact, but it is very very much based on reality.

otherwise, if you think the market overreacts, by all means, the best way to prove that is to put money in the market. if not, then thats as real as it gets.

Yeah but they have to do something. lowering interest rates did not help. So let's try printing money, oh yeah, and asking all the other nations in the world to help us get out of debt and make us even more dependent on them than we already are. hahahahahahahahahhaha Oh lord, please tell me Americans are not so naive - PLEASE. :rolli:

[Little Linguist]

a lot of analysts believe that europe's credit and banking crisis will be as bad, if not worse than the us right now.

there was 3 bank failures in europe today.

I KNOW that - we have the brilliant American folks to thank for that. And then they have the balls to come to us and ask US for money after our banks are also in trouble. Ay yi yi. :rolli:

Though I have to admit our bankers were also pretty damned stupid to rely on Americans so much. Don't they know you DON'T put all your eggs in one basket. Shit.

[Lateralus]

mortgage rates are tied to treasuries. i don't think treasuries were aritificially cheap because of the fed.

if you have low mortgage rates, and good credit screening policies in place, then you wouldn't make bad loans to people who shouldn't get them.

market incentives to NOT screen out those with bad credit is key here...
I disagree with the bolded.

The best market incentive would be to have banks loan out their own money, rather than ours, but we all know that isn't going to happen any time soon.

[Modern Nomad]

I KNOW that - we have the brilliant American folks to thank for that. And then they have the balls to come to us and ask US for money after our banks are also in trouble. Ay yi yi. :rolli:

Though I have to admit our bankers were also pretty damned stupid to rely on Americans so much. Don't they know you DON'T put all your eggs in one basket. Shit.

LOL

well, by all means, if people can't think their way out of this situation, then we deserve armaggedon.

[Modern Nomad]

I disagree with the bolded.

The best market incentive would be to have banks loan out their own money, rather than ours, but we all know that isn't going to happen any time soon.

the long end of the bond market isn't tied to banking markets

btw, i agree the long end was artificially cheap. but not for the reasons you stated. the fed can't pump long end treasury prices up.

[Little Linguist]

You guys have got to get rid of the fed. Dude. They always mess things up. You know what prompted the economic downturn towards the end of the Clinton era (among other things???) - raising interest rates - done by the Fed.

You have an independent bank with no public accountability controlling your monetary policy (in effect) and therefore your economy. Don't you feel safe now that private interests over which you have absolutely no control have that much power???? Screw the elections. Get rid of the Fed.

[Little Linguist]

Heh, yeah Nomad, but interest rates are - and they have like sole control over that. A private bank. Heh. Now I don't want to say gov't would do any better. Shit, I don't want a moron like Bush controlling that either, but DAMN. Can't you guys come up with a better alternative?

[Modern Nomad]

. You know what prompted the economic downturn towards the end of the Clinton era (among other things???) - raising interest rates - done by the Fed.


yeah, well that and not enough americans had broadband to support the lofty internet boom projections.

[Modern Nomad]

Heh, yeah Nomad, but interest rates are - and they have like sole control over that. A private bank. Heh. Now I don't want to say gov't would do any better. Shit, I don't want a moron like Bush controlling that either, but DAMN. Can't you guys come up with a better alternative?

i agree that the fed contributed to this housing bubble, specifically greenspan.

but this bubble bursting has wayyy too much systematic risk to every sector of the economy. its much much worse than just feeling poorer and having lower home values.

[Little Linguist]

yeah, well that and not enough americans had broadband to support the lofty internet boom projections.

I'm well aware of the dot-com bubble burst. However, I would also argue that raising interest rates is another big deal.

Do you notice a trend here, apropos???? EVERYTHING that makes America look great is chimera and facade. EVERYTHING. Your middle class is upheld through loans. Your great economy is at the mercy of an independent bank. Your stock market is speculation. Your state is upheld by debt. Shit fire, I'd get out of that country before you can say Jack Robinson.

Oh wait. I already did.

[Jack Flak]

but it is based on reality. make no mistake about that. there are times people panick and overreact, but it is very very much based on reality.

otherwise, if you think the market overreacts, by all means, the best way to prove that is to put money in the market. if not, then thats as real as it gets.
The reality of perception and money transfer BASED on the speculation I spoke of. I'm not going to put money into this mess, lol.

[Modern Nomad]

I'm well aware of the dot-com bubble burst. However, I would also argue that raising interest rates is another big deal.

Do you notice a trend here, apropos???? EVERYTHING that makes America look great is chimera and facade. EVERYTHING. Your middle class is upheld through loans. Your great economy is at the mercy of an independent bank. Your stock market is speculation. Your state is upheld by debt. Shit fire, I'd get out of that country before you can say Jack Robinson.

Oh wait. I already did.

LOL

okay

sheesh! its still good for an education though! ;)

[Little Linguist]

i agree that the fed contributed to this housing bubble, specifically greenspan.

but this bubble bursting has wayyy too much systematic risk to every sector of the economy. its much much worse than just feeling poorer and having lower home values.

The Fed is one of the main disasters that caused the whole damn thing because they have 0% accountability. They could basically shit on everyone's head and screw the system over, and no one could vote those bastids out.

[Little Linguist]

LOL

okay

sheesh! its still good for an education though! ;)

Heh, yeah, and what is *that* financed by??? Oh, yeah, debt, like everything else grand and wonderful in the USA.

Folks, admit it, you're living in Wonderland. And the house of cards is falling down, folks. And you know what's ironic? It only took a false breath on the right card to do it.

[Modern Nomad]

The Fed is one of the main disasters that caused the whole damn thing because they have 0% accountability. They could basically shit on everyone's head and screw the system over, and no one could vote those bastids out.

well true that what greenspan did

but i blame more his ayn rand philosophy more than anything.

bernanke is really a good guy tho... lol

[Modern Nomad]

Heh, yeah, and what is *that* financed by??? Oh, yeah, debt, like everything else grand and wonderful in the USA.

LOL

well i shorted the dollar and bought yen today. i never said i don't agree with you. ;)

[Enyo]

I'm a little shaky on politics, but I think it's good for people that hadn't invested in Wall Street and put-a-shotgun-in-your-mouth horrible for those that did.

I'm not so sure that it isn't good for those who hadn't invested in Wall Street, though.

My sister still lives in then States. She has a 401k. She works as a pharmacy tech for Walgreens. She makes okay money, but the fact that she gets two hours OT every week helps.

But she's not doing as well as she was before. She used to get ten hours of OT a week. How long until she gets cut down to 35 hours a week?

My brother in law runs a stock crew at a big box retailer. It also pays well. But his hours will be cut, as well.

I'm not sure how much this bail out would help them, but I'm certain that this bail out failure will hurt them.

[reason]

Jerks.Really? If they could, then most less wealthy people would do the same. Because I think that everyone pays too much tax, I do not judge the wealthy for trying to avoid it, instead I lament that the poor cannot do the same.

[Little Linguist]

Well, folks, I feel for ya. I really do. Because if politicians don't do something very soon, it's gonna really suck being there....:shock: You guys are going to go into such a recession like no one's kidding. And if they don't stop printing money, you're going to have inflation, and the value of your dollar is going to be so low that you won't be able to live off your income. Dude, I see it coming.

Of course, it doesn't HAVE to end like that. It doesn't have to be like Germany. You just have to have politicians who are courageous. And it doesn't look like anyone like that is going to go into office anytime soon.

[Modern Nomad]

^ politics and economics in the US is more tied together, like never i've ever seen before.

it actually scares me more, that its more tied together. i don't trust politicians, because they have ulterior motives, and if anything they depend on voters, and voters are usually not well informed enough.

[Little Linguist]

^ politics and economics in the US is more tied together, like never i've ever seen before.

it actually scares me more, that its more tied together.

Amen to that.

Let's hope that your Congress and Executive branches get their acts together. Let's just hope. Because if not, you've got a hell of a road coming up. And you better hope and pray that the government doesn't start yet another war to distract people. :shock: But rather attacks the underlying problems that are causing all this crap.

[Modern Nomad]

Amen to that.

Let's hope that your Congress and Executive branches get their acts together. Let's just hope. Because if not, you've got a hell of a road coming up. And you better hope and pray that the government doesn't start yet another war to distract people. :shock: But rather attacks the underlying problems that are causing all this crap.

i wouldn't bet on that in the long term ( i would bet on the short term tho). lets hope im wrong about the long term.

[ptgatsby]

Heh, yeah, and what is *that* financed by??? Oh, yeah, debt, like everything else grand and wonderful in the USA.

Folks, admit it, you're living in Wonderland. And the house of cards is falling down, folks. And you know what's ironic? It only took a false breath on the right card to do it.

Eh, that's not a problem. Debt is very useful in any economic system.

'Someone' raises debt to do something, the money goes to those that do it, enters the economy, and is repaid to the "someone". It really isn't the nightmare everyone talks about... and it is the foundation of every financial system out there. Granted, it has more complex mechanisms than just 'cash', but it does work pretty well. Until it gets out of control, heh. I'm sitting on 100% bank stocks in Canada right now, and I'm down... uhh... 2% since I bought early this year. Good oversight is what is needed.


The world isn't ending. It might slow things down, but the real wealth created through the economic system probably won't pull back much. That is, an actual 1929 depression isn't too likely - that'd require a banking failure (or other economic shock).

[pure_mercury]

Heh, yeah Nomad, but interest rates are - and they have like sole control over that. A private bank. Heh. Now I don't want to say gov't would do any better. Shit, I don't want a moron like Bush controlling that either, but DAMN. Can't you guys come up with a better alternative?

Let the market set interest rates?

[pure_mercury]

well true that what greenspan did

but i blame more his ayn rand philosophy more than anything.

bernanke is really a good guy tho... lol

His Ayn Rand philosophy? Greenspan didn't run the Fed like a libertarian AT ALL. Christ, a lot of libertarians wouldn't even TAKE that job, on principle.

[Modern Nomad]

His Ayn Rand philosophy? Greenspan didn't run the Fed like a libertarian AT ALL. Christ, a lot of libertarians wouldn't even TAKE that job, on principle.

i don't think every ayn rand philosophy person is a libertarian.

[Little Linguist]

His Ayn Rand philosophy? Greenspan didn't run the Fed like a libertarian AT ALL. Christ, a lot of libertarians wouldn't even TAKE that job, on principle.

Eh, no wonder....

[reason]

... but rather attacks the underlying problems that are causing all this crap.Politicians have never been quick to attack themselves, so don't hold your breath.

The market will correct itself, given time. It has been living a lie, and through prices has repeated that lie to countless individuals. Prolonging the lie is not the answer, even though it may appeal to politicians (who have short time horizons). Fortunately, enough people are irked, for various reasons, with the prospect of their tax money being used to bail out these corporations, that the snowball of lies may be stopped early. Or at least that's what I think.

[Risen]

^ politics and economics in the US is more tied together, like never i've ever seen before.

it actually scares me more, that its more tied together. i don't trust politicians, because they have ulterior motives, and if anything they depend on voters, and voters are usually not well informed enough.

Yea... it's a clusterf***. I cannot blame enough the ignorance and inaction of the American people for so many years. Everyone informed on the matter saw something like this coming for MANY years ahead of time. Alas, there seems to be little hope of American people waking up and taking the necessary actions themselves to change the country and government without a huge calamity befalling us first.

With that said I had some hope that the house republicans would display some integrity and keep this bill from passing as it is, because it is still a socialist pile of dung, as they themselves have said. However, it seems the republicans and democrats who voted no today did so mainly because they were offended by the s***y house speaker Pilosy and her hypocritical partisan BS, as opposed to voting no because the bill SUCKS BALLS and goes against their own sense of whats good for the country. I do not know why I expected politicians to actually display some integrity....

I have no idea where the bill is going to go from here. The whole situation bothers me (as a staunch INTP :p ) because unlike most other things such as science and politics, I know very little about the workings of the overly complicated economy, and therefor have little insight of my own as to what a better solution would be. What scares me more than that is realizing that if I know so little about the whole system, then the average American most likely knows even less about it. Not trying to come off as arrogant, I'm just trying to call it how I see it.

[Modern Nomad]

Politicians have never been quick to attack themselves, so don't hold your breath.

The market will correct itself, given time. It has been living a lie, and through prices has repeated that lie to countless individuals. Prolonging the lie is not the answer, even though it may appeal to politicians (who have short time horizons). Fortunately, enough people are irked, for various reasons, with the prospect of their tax money being used to bail out these corporations, that the snowball of lies may be stopped early. Or at least that's what I think.

yeah, short the market if you believe the lies will continue

im long the market right now. i actually believed congress would stop the lies today. they better pull thru tomorrow! bittcchees!! LOL

[Eileen]

Really? If they could, then most less wealthy people would do the same. Because I think that everyone pays too much tax, I do not judge the wealthy for trying to avoid it, instead I lament that the poor cannot do the same.

Well--yeah, really. I think that taxes are necessary*, and I think that it makes sense that the wealthy pay more because they have more.

*I would not call myself a fiscal conservative, clearly. I do think, though, that while taxes are good and necessary, they could be spent more wisely.

[Little Linguist]

Politicians have never been quick to attack themselves, so don't hold your breath.

The market will correct itself, given time. It has been living a lie, and through prices has repeated that lie to countless individuals. Prolonging the lie is not the answer, even though it may appeal to politicians (who have short time horizons). Fortunately, enough people are irked, for various reasons, with the prospect of their tax money being used to bail out these corporations, that the snowball of lies can be stopped early.

Snowball of lies is a good encapsulation of my view on the entire matter.

Quite frankly, I think the Americans have to bail themselves out of this one. They are like a spoiled dog that shit on the floor. Then they look to us to clean it up. We aren't your masters. You are. We are 'old Europe' remember? Well, to hell with that. You take care of your own mess and get back to us when you think you're cool with dealing with us old farts.

Eh, it's not American's fault of course. I bet 85% couldn't care a damn until their money is worth Jack shit. It's the government's responsibility to do what is right, and they are derelict in their responsibility - then, they expect Europe to help them out. *sigh* :rolleyes:

[Modern Nomad]

I have no idea where the bill is going to go from here.

a lot of traders in the market agree with you.

[Little Linguist]

Yea... it's a clusterf***. I cannot blame enough the ignorance and inaction of the American people for so many years. Everyone informed on the matter saw something like this coming for MANY years ahead of time. Alas, there seems to be little hope of American people waking up and taking the necessary actions themselves to change the country and government without a huge calamity befalling us first.

With that said I had some hope that the house republicans would display some integrity and keep this bill from passing as it is, because it is still a socialist pile of dung, as they themselves have said. However, it seems the republicans and democrats who voted no today did so mainly because they were offended by the s***y house speaker Pilosy and her hypocritical partisan BS, as opposed to voting no because the bill SUCKS BALLS and goes against their own sense of whats good for the country. I do not know why I expected politicians to actually display some integrity....

I have no idea where the bill is going to go from here. The whole situation bothers me (as a staunch INTP :p ) because unlike most other things such as science and politics, I know very little about the workings of the overly complicated economy, and therefor have little insight of my own as to what a better solution would be. What scares me more than that is realizing that if I know so little about the whole system, then the average American most likely knows even less about it. Not trying to come off as arrogant, I'm just trying to call it how I see it.

GO YOU!!!!!!! WOOO HOOOO!!!! At least an American with FIRE who knows that something is DAMNED wrong with the way things are going.

I'm not saying this bill was the way to go. Hell, I don't know. Somehow America has to clean off its ass and get back on track. Not that way. But also not for crying to Europe for help after they dissed us for eight freaking years.

[Risen]

Politicians have never been quick to attack themselves, so don't hold your breath.

The market will correct itself, given time. It has been living a lie, and through prices has repeated that lie to countless individuals. Prolonging the lie is not the answer, even though it may appeal to politicians (who have short time horizons). Fortunately, enough people are irked, for various reasons, with the prospect of their tax money being used to bail out these corporations, that the snowball of lies may be stopped early. Or at least that's what I think.

From what I know, you can count on this whole thing costing well over a trillion dollars when all is set and done, unless the bill radically changes (to the level of not even being a bailout :/ ). That vast amount of money wont be siphoned directly from the taxpayers, because I doubt there is any possible way to realistically take that much REAL money. In other words, you know this is all just going to be borrowed and freshly printed, making the problem EVEN WORSE by the same means that got us here in the first place! I'm borderline supportive of just letting the economy do what it's going to do without government interference, so it can adjust itself naturally, even if that does mean a recession/depression in the short term. Compared to the solutions being proposed now by the politicians, it'd be better for us in the long run...

[Little Linguist]

From what I know, you can count on this whole thing costing well over a trillion dollars when all is set and done, unless the bill radically changes (to the level of not even being a bailout :/ ). That vast amount of money wont be siphoned directly from the taxpayers, because I doubt there is any possible way to realistically take that much REAL money. In other words, you know this is all just going to be borrowed and freshly printed, making the problem EVEN WORSE by the same means that got us here in the first place! I'm borderline supportive of just letting the economy do what it's going to do without government interference, so it can adjust itself naturally, even if that does mean a recession/depression in the short term. Compared to the solutions being proposed now by the politicians, it'd be better for us in the long run...

Which goes back to what I said about a combination of inflation/recession.

That's what Germany had in the 20s.

[anii]

...and the Dow is down 600+ points as a result.

Hmmm...

High time for an end-of-the-world Fuckfest.

[ptgatsby]

High time for an end-of-the-world Fuckfest.

:shock:Did I say the world isn't ending?

IT'S THE END! IT'S ALL OVER!

(/me does is best to encourage world-ending morality shifts)

[Risen]

I believe the dow retreated to the 400 range around noon.

[ygolo]

The Dow closed at
10,365.45 (Down 777.68)

I have no idea what happened at the end of the day.

http://www.typologycentral.com/forums/attachment.php?attachmentid=2515&stc=1&d=1222722682

NYSE closed at 7204.01 (down 683.36).
NASDAQ closed at 1983.73 (down 199.61).
S&P 500 closed at 1106.42 (down 106.85).
Russell 2000 closed at 657.72 (down 47.07).

[DigitalMethod]

Franklin-Jefferson revolution plox.

[Didums]

Good, maybe people will learn from their mistakes.

[Eileen]

Good, maybe people will learn from their mistakes.

Well, I think the bailout is a bad thing, but folks on "Main Street" don't deserve for their whole financial lives to go under, no matter how foolish it was for them to sign on for mortgages that they ultimately would not be able to afford because of changing interest rates and such. Fatcats who took advantage of people definitely deserve to "learn from their mistakes" in a pretty harsh way, though.

[Little Linguist]

Well, I think the bailout is a bad thing, but folks on "Main Street" don't deserve for their whole financial lives to go under, no matter how foolish it was for them to sign on for mortgages that they ultimately would not be able to afford because of changing interest rates and such. Fatcats who took advantage of people definitely deserve to "learn from their mistakes" in a pretty harsh way, though.

They should pay with their own money. Then get the death penalty. That'll teach em.

[ptgatsby]

They should pay with their own money. Then get the death penalty. That'll teach em. others

:D

[Lateralus]

Well, I think the bailout is a bad thing, but folks on "Main Street" don't deserve for their whole financial lives to go under, no matter how foolish it was for them to sign on for mortgages that they ultimately would not be able to afford because of changing interest rates and such. Fatcats who took advantage of people definitely deserve to "learn from their mistakes" in a pretty harsh way, though.
Deserve? I can't get behind the idea that anyone 'deserves' anything.

[Magic Poriferan]

Deserve? I can't get behind the idea that anyone 'deserves' anything.

Well, that just cut out I don't know how much of all social as well as ethical theory...

[Magic Poriferan]

So, just wondering. What do all of you think about the fact that investment banks no longer exist in the USA?

[Risen]

Well, I think the bailout is a bad thing, but folks on "Main Street" don't deserve for their whole financial lives to go under, no matter how foolish it was for them to sign on for mortgages that they ultimately would not be able to afford because of changing interest rates and such. Fatcats who took advantage of people definitely deserve to "learn from their mistakes" in a pretty harsh way, though.

There are so many factors at play right now, not the least of which is the need for those who are responsible for this to be held accountable. That means not saving them at the expense of America's well being, and not glossing over the issue without addressing and severely penalizing the ones responsible. If I had the power, I'd f around and get EVERYBODY indicted >:( . Then I'd go on a manhunt for the elitist individuals who are at the very core of this mess (and many more to come) who own the world banks and pull the strings behind the scenes. If you think I'm borderline conspiratorial, you're damn right. Even then the only reason I'm on the border and not a thousand miles in to "conspiracy" land is because this crapola is TRUE and has been predicted for many years, and called out by many people; both the ones at the head of this beast and the people who try to speak out against what they're doing.

And hay, apparently even Chuck Norris agrees with me :p!

Black belt patriot Norris tells We the People Fest to improve U.S. - Cleveland Metro News - The Latest Breaking News, Photos and Stories from The Plain Dealer (http://blog.cleveland.com/metro/2008/09/black_belt_patriot_norris_tell.html)

KENT -- If Chuck Norris were granted one wish, he would walk through Congress with Ron Paul and watch as Paul, the Republican representative from Texas, pointed out corrupt politicians.

One by one, Norris would grab each crooked congressman and choke him unconscious.

"I keep sticking them in a pile, piling them up," said the martial arts star, who, at 68, looks as young and buff as in his "Walker, Texas Ranger" glory days. "The ones that are honest, they stay."

[pure_mercury]

i don't think every ayn rand philosophy person is a libertarian.

Last I checked, hardcore libertarianism is the required political facet of Objectivist philosophy. Of course, you can be influenced by Rand without being an out-and-out Objectivist, but I believe he declared himself to be one as a young man.

[DigitalMethod]

Hmm, yes, I was wondering.. how does this affect bonds?

[The_Liquid_Laser]

"An ounce of prevention is worth a pound of cure."

We missed our chance for "prevention", now our best choice is to apply the "cure". In other words bring on the bailout!
:party2:

I'm The_Liquid_Laser and I approve this message.

[Eileen]

Deserve? I can't get behind the idea that anyone 'deserves' anything.

Well, I believe in justice. People who--at least to some degree--make victims of other people should suffer consequences.

This is not to say that I sanction stupidity and irresponsibility on the parts of individuals, but predatory loaning is some shitty shit.

[heart]

...and the Dow is down 600+ points as a result.

Hmmm...

We'll see Bailout II probably, Bailout I's slightly less offensive cousin. They do this with union contracts these days. Contract I has all sorts of bad things in it that benefit the company and the Union says "You boys better pass this one or it will be the end of the world and you'll lose your jobs etc."

Then membership votes it down.

Then Union leadership and company come up with a slightly less offensive contract (the half deal) and still make the dire warnings. Folks reason "Well this contract is at least not as bad as the last one, look we even got some of the things we wanted along with the bad."

Contract II passes and so do some of the things the company really wanted, the first one was just to break the ice and see what the membership really would not abide.

I'm not saying I am right, just that I'll be shocked if this is not the case.

[ptgatsby]

I'm not saying I am right, just that I'll be shocked if this is not the case.

Oh, it might be a very interesting ride, with the economy being the ticket to presidency.

[heart]

^ Yes, a very elaborate Oct suprise this time. :0

[Modern Nomad]

Hmm, yes, I was wondering.. how does this affect bonds?

different for short end vs. long end

if u are holding to maturity, doesn't matter tho.

[Modern Nomad]

Well, I believe in justice. People who--at least to some degree--make victims of other people should suffer consequences.

This is not to say that I sanction stupidity and irresponsibility on the parts of individuals, but predatory loaning is some shitty shit.

yeah they should be put in jail.

[Gish]

Currently the bailout is like giving someone with a broken leg painkillers and telling them to walk it off, I don't know much about economics but I'm sure there are much better alternatives.

[Modern Nomad]

Currently the bailout is like giving someone with a broken leg painkillers and telling them to walk it off, I don't know much about economics but I'm sure there are much better alternatives.

i see it as more of a way to buy time before finding a real solution...

the bailout is like the emergency abulance (it really is that time sensitive)

later on, the doctor has to give a serious remedy to change lifestyle habits, etc... once they aren't dead.

[Not_Me]

I have no doubt that a bailout will eventually take place. The stock market will take a big jump up again when they announce the deal.

[Oberon]

different for short end vs. long end

if u are holding to maturity, doesn't matter tho.

...assuming the issuing entity remains solvent.

[Modern Nomad]

...assuming the issuing entity remains solvent.

well if everyone thinks the US Treasury can't pay up... thats real armaggedon! Not this dow jones falling!

[Oberon]

well if everyone thinks the US Treasury can't pay up... thats real armaggedon! Not this dow jones falling!

Oh, you mean the Fed bond market. :D

I'm sorry. Munis go bust all the time.

[Modern Nomad]

Oh, you mean the Fed bond market. :D

I'm sorry. Munis go bust all the time.

ahhhh

are muni's pretty liquid? am i right to guess that muni's = more liquid the higher population the municipality???

[Oberon]

ahhhh

are muni's pretty liquid? am i right to guess that muni's = more liquid the higher population the municipality???

I'm no authority, but I would guess that it depends on many factors (such as the city's bond rating).

[pure_mercury]

Sometimes, protesting actually produces something worthwhile:

http://www.myconfinedspace.com/wp-content/uploads/2008/09/jumpyoufackersuo1.jpg

[Modern Nomad]

^ actually a lot of insiders blame the midwestern "good ole boy's" network for putting fannie and freddie mac into failure.

in general, most financial crisis brought on by shady lending is from back room secret handshakes, just look at the IMF crisis in 97. Same cause of shady lending ---> back room secret handshakes.

[the.blanket.on.top]

I guess the right question to be answered is:

Who Really Benefits from the Bailout -- Wall Street or Main Street?

:)

[pure_mercury]

I guess the right question to be answered is:

Who Really Benefits from the Bailout -- Wall Street or Main Street?

:)

I have problems with the denizens of both of those streets, although I hate K Street even more.

[spirilis]

Oh, you mean the Fed bond market. :D

I'm sorry. Munis go bust all the time.

Yeah, recent case in point: Bloomberg.com: Alabama County Misses Bond Payment; Wall Street Talks Continue (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a9wIq5iA4MtQ)


And for the discussion, it looks like Bailout v2.0 is ready to be voted on tonight-
Bloomberg.com: Senate Sets Bailout Vote, Sweetens Plan With Deposit Insurance (http://www.bloomberg.com/apps/news?pid=20601087&sid=aoJ7Et81o4c8&refer=home)

Now starring....... more than doubling the FDIC insurance per account ($250K, used to be $100K) and some kind of TAX CUT to appease the republicans? WTF?

[Udog]

Tax cut? Ugh, I hadn't heard that part.

I did something last night I never thought I would do... I wrote my representative and senators. I thanked my representative for voting no, and implored senator Warner and Webb to vote no tonight.

[spirilis]

Tax Credits

The tax package that's part of the legislation also includes $17 billion in tax credits for the development of solar, wind and other forms of renewable energy. It passed the Senate on a 93-2 vote last week and differs from a version the House also approved. The package would spare 24 million households from a $62 billion alternative-minimum tax that is due to take effect this year.

Fiscally conservative House Democrats known as Blue Dogs opposed the Senate bill because it wasn't fully offset by new tax revenue. The House version of tax breaks was paid for. Senate leaders refused to consider the House bill, saying it would never pass in that chamber. The financial rescue measure won support from 24 of the Blue Dogs on Monday.



...well, alternative energy I can root for.

[pure_mercury]

Tax Credits

The tax package that's part of the legislation also includes $17 billion in tax credits for the development of solar, wind and other forms of renewable energy. It passed the Senate on a 93-2 vote last week and differs from a version the House also approved. The package would spare 24 million households from a $62 billion alternative-minimum tax that is due to take effect this year.

Fiscally conservative House Democrats known as Blue Dogs opposed the Senate bill because it wasn't fully offset by new tax revenue. The House version of tax breaks was paid for. Senate leaders refused to consider the House bill, saying it would never pass in that chamber. The financial rescue measure won support from 24 of the Blue Dogs on Monday.



...well, alternative energy I can root for.


And I'd rather they get tax credits than subsidies, although neither would be best. Also, getting rid of the Alternative Minimum for that many people while simultaneously passing a bailout bill with an almost $700 billion price tag is stupid.

[booyalab]

This is not to say that I sanction stupidity and irresponsibility on the parts of individuals, but predatory loaning is some shitty shit.
It's pretty shitty for the banks too, who end up losing millions of dollars when they loan to people who don't pay them back. Hmm, maybe banks should show more reluctance to loan to people with bad credit history. Except black people are more likely to have bad credit history and denying loans to them is racist! Darn!

[ajblaise]

It's pretty shitty for the banks, too, who end up losing millions of dollars when they loan to people who don't pay them back. Hmm, maybe banks should show more reluctance to loan to people with bad credit history. Except black people are more likely to have bad credit history and denying loans to them is racist! Darn!

The problem is people giving out loans will get paid on commission a lot of the time, so they simply want to pump out as many loans as they can. These fools should be switched to a regular salary.

[booyalab]

The problem is people giving out loans will get paid on commission a lot of the time, so they simply want to pump out as many loans as they can. These fools should be switched to a regular salary.

Banks are actually the most conservative lenders out there, when you don't have the government telling them who to loan to. I don't know what you're talking about.

[ajblaise]

Banks are actually the most conservative lenders out there, when you don't have the government telling them who to loan to. I don't know what you're talking about.

It's been talked about a lot for the past couple weeks. Banks were giving out loans too easily, everyone agrees on that... people working on commission has been cited as a major reason for this. Though I did hear about some federal legislation that was done a while ago that pressured banks to give out loans to poor people also.

[booyalab]

Though I did hear about some federal legislation that was done a while ago that pressured banks to give out loans to poor people also.

Right, and don't you think it's likely that the people administering loans were being paid commission before the legislation, when banks were more scrupulous?

[ajblaise]

Right, and don't you think it's likely that the people administering loans were being paid commission before the legislation, when banks were more scrupulous?

I haven't heard any economist or anyone put the blame squarely/mostly on the government, even though that seems to be the default libertarian/conservative position for all of societies ills. The legislation I referenced I heard on NPR a few days ago, I don't know what it's nature was, but I would doubt they forced banks to give bad loans, or how much it really effected things.

[pure_mercury]

I haven't heard any economist or anyone put the blame squarely/mostly on the government, even though that seems to be the default libertarian/position for all of societies ills. The legislation I referenced I heard on NPR a few days ago, I don't know what it's nature was, but I would doubt they forced banks to give bad loans, or how much it really effected things.

It was a policy of both the Clinton and Bush administrations to try to give to poorer people with low credit scores more loans to buy houses. This crisis was a combination of poor government policy and oversight, greed by stupid banks and stupid prospective homeowners, and the fact that risk has been spread so far throughout the markets that a ripple in one end can cause a wave on the other.

[ajblaise]

It was a policy of both the Clinton and Bush administrations to try to give to poorer people with low credit scores more loans to buy houses.

Expand on that? I've only heard this referenced, not explained further.

Where banks forced/swayed/given incentive to give out these loans?

[Oberon]

I haven't heard any economist or anyone put the blame squarely/mostly on the government, even though that seems to be the default libertarian/position for all of societies ills. The legislation I referenced I heard on NPR a few days ago, I don't know what it's nature was, but I would doubt they forced banks to give bad loans, or how much it really effected things.

Here's part of the problem (http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F9582 60&sec=&spon=&pagewanted=1).

Fannie Mae was not really a public entity at the time, and not really a private one either.

A few things happened at once to make this perfect storm. One, quasi-governmental organizations Fannie Mae and Freddie Mac decided to loosen their lending requirements to make more people eligible for mortgages. Two, the lending industry discovered that it could make a ton of money by bundling mortgages and calling the resulting bundle a security, which it would then resell to investment banks. Three, with the increase in potential buyers, housing prices spiked across the country.

While the real estate boom lasted, homebuyers did not need to pay down a mortgage in order to gain equity... if they could pay enough to stave off foreclosure for two or three years, they could flip the house, pay off the mortgage entirely, and pocket a nice profit besides. The new buyer was working the same plan. So a house that was fairly priced at $150K would sell for $175K, to someone who knew it was too much but who bought anyway because in a few years they'd be able to turn it over for $210K, which seems silly until you realize that that buyer would eventually sell for $275K, a ludicrous sum except when compared against the $350K the house would sell for next... and then all the new homebuyers were used up, and the guy who owed $350K on a $150K house suddenly was stuck with an ARM that had adjusted beyond his means or (worse yet) a reverse-amortization mortgage and nobody to sell his house to.

So what does he do? He walks. He declares bankruptcy and cuts his losses. The bank doesn't get paid, so the company it sold the mortgage to doesn't get paid, so the commoditized mortgage package suddenly isn't worth what it used to be, and everybody down the line takes a screwing because they tried to run the real estate market like a Ponzi scheme.

[ptgatsby]

Expand on that? I've only heard this referenced, not explained further.

Where banks forced/swayed/given incentive to give out these loans?

Companies that fail to maintain profits go extinct; this was profitable (in normal economic terms, it indicates 'efficiency'); others adopted it, and so all were forced to, or they would be left behind.

Rush to the bottom, IOW.

The central problem was the real estate bubble. It triggered the ability to have 'asset backed loans' of high quality, but dubious metrics. The controls in place failed in two ways - they couldn't properly calculate exposure, etc. and no one had enough guts to step in and say this wasn't acceptable.

Can you really imagine the government being able to step in to Fannie and Freddy and terminate their ability to absorb loans? A guaranteed way to cause the political shitstorm. Hell, the non-interventionists would of screamed, the good old boys would of screamed, the banks would of screamed, the people would of screamed... it would of been political suicide.

[Eileen]

It's pretty shitty for the banks too, who end up losing millions of dollars when they loan to people who don't pay them back. Hmm, maybe banks should show more reluctance to loan to people with bad credit history. Except black people are more likely to have bad credit history and denying loans to them is racist! Darn!


That African Americans are more likely to A. have less money and B. have worse credit is a social problem larger than this. Nonetheless, I think that it's reasonable to make loans to people who have credit that indicates that they're likely to paythem back. To not do so is foolish, and it can also be predatory depending on the type of loan. Regardless of whether this makes a person who is borrowing money stupid/ignorant/foolish/what have you, it is *predatory* to give people loans that are almost certainly going to turn out to be more than they can pay back. I think that people should enter into contracts with good sense, but that needs to be the case on both sides.


At the end of the day, people are people and banks are institutions. It is worse for people to be fucked over than institutions. The only thing that is in and of itself WRONG with institutions being fucked is that it affects people and their families.

[pure_mercury]

That African Americans are more likely to A. have less money and B. have worse credit is a social problem larger than this. Nonetheless, I think that it's reasonable to make loans to people who have credit that indicates that they're likely to paythem back. To not do so is foolish, and it can also be predatory depending on the type of loan. Regardless of whether this makes a person who is borrowing money stupid/ignorant/foolish/what have you, it is *predatory* to give people loans that are almost certainly going to turn out to be more than they can pay back. I think that people should enter into contracts with good sense, but that needs to be the case on both sides.


At the end of the day, people are people and banks are institutions. It is worse for people to be fucked over than institutions. The only thing that is in and of itself WRONG with institutions being fucked is that it affects people and their families.

I disagree with almost all of this, especially since the banks themselves lose if they make bad loans (in theory, at least). Repossessing someone's house is a total last resort. The banks screwed up, but so did the people taking the loans. I mean, why were they looking to get loans for houses they couldn't afford to begin with? There is no predation here at all.

[ptgatsby]

I disagree with almost all of this, especially since the banks themselves lose if they make bad loans (in theory, at least). Repossessing someone's house is a total last resort. The banks screwed up, but so did the people taking the loans. I mean, why were they looking to get loans for houses they couldn't afford to begin with? There is no predation here at all.

Because housing prices always went up :D

[Udog]

I disagree with almost all of this, especially since the banks themselves lose if they make bad loans (in theory, at least). Repossessing someone's house is a total last resort. The banks screwed up, but so did the people taking the loans. I mean, why were they looking to get loans for houses they couldn't afford to begin with? There is no predation here at all.

Willful ignorance (or willful lack of common sense) mixed with predation. The brokers got paid commission by making the loan, so they didn't take on any of the risk.

[booyalab]

That African Americans are more likely to A. have less money and B. have worse credit is a social problem larger than this.
Fine, whatever. But it's a social problem whose intended solution contradicts the intended solution of *predatory* lending.
it is *predatory* to give people loans that are almost certainly going to turn out to be more than they can pay back.
I know what you meant by predatory the first time, but it still doesn't make sense. The bank does not benefit when a lender can't pay.

[Udog]

booyalab... Someone correct me if I'm wrong, but brokers made the loans and received a commission. The loans were then passed tothe banks, so the banks themselves did not directly interface with the customers. The brokers didn't care if the loan failed as they already got paid.

So it was beneficial for brokers to use whatever means necessary to get as many loans as possible. It worked because the banks assumed the houses would always be worth the price of the loan, and there was tremendous money to be made.

[booyalab]

I haven't heard any economist or anyone put the blame squarely/mostly on the government, even though that seems to be the default libertarian/conservative position for all of societies ills.

What, so you're suddenly incapable of recognizing causality when the cause isn't business? I'll take your silence on the commission issue to mean you agree that bankers probably received commission before the legislation, so why can't you see that legislation requiring banks to lend to people who won't pay back led to banks lending to people who won't pay back.

booyalab... Someone correct me if I'm wrong, but brokers made the loans and received a commission. The loans were then passed tothe banks, so the banks themselves did not directly interface with the customers. The brokers didn't care if the loan failed as they already got paid.

durrr

[Udog]

So I take it your question has thus been answered?

[pure_mercury]

Because housing prices always went up :D

:doh: Land generally does go up in value, because (except in the Netherlands) they aren't making any more of it. Housing does not, and you can't invest that way. I have no sympathy for house flippers.

[pure_mercury]

Willful ignorance (or willful lack of common sense) mixed with predation. The brokers got paid commission by making the loan, so they didn't take on any of the risk.

It's not predation to give people what they ask for, though. Making money off idiots is absolutely ethical.

[ptgatsby]

:doh: Land generally does go up in value, because (except in the Netherlands) they aren't making any more of it. Housing does not, and you can't invest that way. I have no sympathy for house flippers.

Should go up at based on the rate of population + inflation, for sure.

But the point is that actors tend to be blind to things, especially in a bubble. The principle that everyone is 'rational' is true only in a very narrow context - if you see house prices go up year after year, it is rational to assume they will continue to go up.

Not everyone - in fact, most - do not react with a long term rational approach. We all tend to react to incentives in the short term. Bubbles are just the run away version of it.

It wasn't just house flippers that based their 'economic' decisions on rising markets... capital appreciation also justifies buying more than you can afford. I mean, not knowing that it was a bubble, can you really turn down a 3-4% loan with 5, 10, 15% appreciation, plus rental income? Entirely rational, if you don't consider the reliability of the fundamentals.

[pure_mercury]

Should go up at based on the rate of population + inflation, for sure.

But the point is that actors tend to be blind to things, especially in a bubble. The principle that everyone is 'rational' is true only in a very narrow context - if you see house prices go up year after year, it is rational to assume they will continue to go up.

Not everyone - in fact, most - do not react with a long term rational approach. We all tend to react to incentives in the short term. Bubbles are just the run away version of it.

It wasn't just house flippers that based their 'economic' decisions on rising markets... capital appreciation also justifies buying more than you can afford. I mean, not knowing that it was a bubble, can you really turn down a 3-4% loan with 5, 10, 15% appreciation, plus rental income? Entirely rational, if you don't consider the reliability of the fundamentals.

I didn't mean to suggest that house flippers were the root cause of this crisis, just that I don't feel bad for them if they believed that housing would continue to rise indefinitely. And yes, I could turn down that loan. I hate loans, and I don't even have a credit card.

[ptgatsby]

I didn't mean to suggest that house flippers were the root cause of this crisis, just that I don't feel bad for them if they believed that housing would continue to rise indefinitely. And yes, I could turn down that loan. I hate loans, and I don't even have a credit card.

I don't feel bad for them either. Most of them made a lot of money. It wasn't flippers that suffered - far as I can tell, it isn't the majority of them that were left holding the bag.

It was amateurs following the herd. I do feel bad for them. But hey, humans are humans. No amount of free market or government control can prevent bubbles.

[pure_mercury]

I don't feel bad for them either. Most of them made a lot of money. It wasn't flippers that suffered - far as I can tell, it isn't the majority of them that were left holding the bag.

It was amateurs following the herd. I do feel bad for them. But hey, humans are humans. No amount of free market or government control can prevent bubbles.

This is true. I have a love-hate relationship with Jim Cramer, but he is right on when he says, "Bulls make money. Bears make money. Pigs get slaughtered." I will never be that when I have money to invest.

[Athenian200]

...and the Dow is down 600+ points as a result.

Hmmm...

Well, I didn't particularly think the bailout was a good idea, anyway. I don't think we need that much government involvement in the economy. I agree with their decision not to pass it.

[Udog]

It's not predation to give people what they ask for, though. Making money off idiots is absolutely ethical.

Even if they do it by unethical means?

[pure_mercury]

Even if they do it by unethical means?

If they commit fraud or strong-arm people, it's bad. If they simply present a contract with bad terms to someone who signs it freely, then no, it's fine by me.

[spirilis]

Bailout Bill v2.0 has passed the senate.

Bloomberg.com: Worldwide (http://www.bloomberg.com/apps/news?pid=20601087&sid=aXVuxaSF8c68&refer=home)

U.S. Senate Approves $700 Billion Financial-Rescue (Update1)

By Nicholas Johnston and James Rowley

Oct. 1 (Bloomberg) -- The U.S. Senate tonight approved a $700 billion financial-rescue plan that funds the biggest government intervention in the markets since the Great Depression. The package now goes to the House of Representatives, which rejected an earlier version of the measure.

[spirilis]

Additionally, the SEC's Short-Selling Ban has been extended:

Bloomberg.com: Worldwide (http://www.bloomberg.com/apps/news?pid=20601087&sid=aQTMsp.Vz12A&refer=home)

SEC Extends Short-Sale Ban as Congress Weighs Bailout (Update1)

Oct. 1 (Bloomberg) -- The U.S. Securities and Exchange Commission will extend a ban on short-sales of financial stocks, leaving in place the prohibition on bets companies' shares will fall until Congress approves a $700 billion economic bailout.

The restriction will expire three days after lawmakers give Treasury Secretary Henry Paulson authority to buy illiquid assets that are burdening banks and other financial firms, the SEC said today in a statement. The short-sale prohibition will end no later than Oct. 17 if Congress rejects the legislation.

[Usehername]

Bailout Bill v2.0 has passed the senate.

Bloomberg.com: Worldwide (http://www.bloomberg.com/apps/news?pid=20601087&sid=aXVuxaSF8c68&refer=home)

U.S. Senate Approves $700 Billion Financial-Rescue (Update1)

By Nicholas Johnston and James Rowley

Oct. 1 (Bloomberg) -- The U.S. Senate tonight approved a $700 billion financial-rescue plan that funds the biggest government intervention in the markets since the Great Depression. The package now goes to the House of Representatives, which rejected an earlier version of the measure.

Thanks for the update.


I dunno how I feel about this, exactly.

[pure_mercury]

Here is another good article about the bailout:

Dear comrades: Let's do nothing - The Denver Post (http://www.denverpost.com/harsanyi/ci_10601763)

[Oberon]

I sent my Representative an e-mail strongly urging him to vote "NO" when it comes around to the House again.

[Risen]

I sent my Representative an e-mail strongly urging him to vote "NO" when it comes around to the House again.

Yea, I'm gonna have to look for some phone numbers today and make some calls :( . We can't let this pass. Gotta make our opinion known in the very least.

[Modern Nomad]

A government report said orders to U.S. factories plunged by the largest amount in nearly two years as the credit strains cramped manufacturers.

Yahoo! News (http://news.yahoo.com/s/ap/20081002/ap_on_bi_ge/financial_meltdown)

[Oberon]

It'll only be worse down the road if we put it off.

[Modern Nomad]

meh i agree with you. but im not hoping the house passes it.

i already hedged myself so either way, its not that big of a deal.

i just hope the college/graduate education of the US still is rated top in the world 20-30 years from now. I would hate to have a degree from the equivalent of a canadian or mexican university down the line...

[wildcat]

Here is another good article about the bailout:

Dear comrades: Let's do nothing - The Denver Post (http://www.denverpost.com/harsanyi/ci_10601763)
Why do you think McCain and Obama are for the bailout?
I tell you why.

They do not want to be a President for a nation of paupers.

[Eldanen]

Why do you think McCain and Obama are for the bailout?
I tell you why.

They do not want to be a President for a nation of paupers.

You make them sound altruistic.

[wildcat]

You make them sound altruistic.
Altruism and selfishness are not in conflict.

[pure_mercury]

Altruism and selfishness are not in conflict.


We won't all become paupers if there is no bailout.

[wildcat]

We won't all become paupers if there is no bailout.
Not you waspies with your safely invested old money.
Go to your country club. Play some golf.

[Lateralus]

Not you waspies with your safely invested old money.
Go to your country club. Play some golf.
LOL, that's your comeback? Seriously?

[pure_mercury]

Not you waspies with your safely invested old money.
Go to your country club. Play some golf.

I can't tell if this is real or facetious.

[ygolo]

I am starting to see signs that at least the money market fund I was invested in will be redistributed close to the original value even without the bail-out.

Now, I am feeling guilty for being selfish. I bought into the idea that the credit markets would freeze because I felt some of it myself.

I still hope whatever is done is really best for the economy.

I am confused.

How many people have had their student loans frozen? or other loans?
Have other accounts been frozen?

[Modern Nomad]

I am starting to see signs that at least the money market fund I was invested in will be redistributed close to the original value even without the bail-out.

Now, I am feeling guilty for being selfish. I bought into the idea that the credit markets would freeze because I felt some of it myself.


Bernanke and Paulson backed all money market funds before the House Vote, about a week and half ago.

Here's my take of the credit crisis... in case anyone is interested...

ah if this is about the bailout/rescue plan.

this is the way I see it:

1) Gov't passed easy to buy homes laws. After all, i mean, kind of cool in a way... (remember all those infomercials about flipping properties?? making a quick buck??)
2) banks were reluctant at first, until they found out they can outsource to shadier subprime loan officers. and then turn around and sell those "risky easy to buy home" loans to these complicated things called CDO/MBS (collateralized debt obligations and mortgage backed securities) that few investors understood. (they were made to be hard to understand, usually the top lawyers would work on these). So all that "easy to buy home" risks were hidden in complicated legal language.
3) so easy to buy home risks, got passed from the people---> banks----> investors---> to everyone back in the form of spreading that risk to all business (because all business is connected to financial institutions)
4) and now because everything is so connected, the gov't is called on to help set floor on how bad the risk will take the entire economy.

I think some people need to go to jail for sure. But there really is a lot of blame to go around. Ultimately, the way I see it, those taxes will come from all the property taxes the government collected when so many people saw their property values rise so much bc they were all in on the housing bubble plan.

There's a few more culprits in regards to "regulation".

Will credit default swaps cause the next financial crisis? - Sep. 30, 2008 (http://money.cnn.com/2008/09/30/magazines/fortune/varchaver_derivatives_short.fortune/index.htm?postversion=2008093012)

Thats an excellent article that outlines how this risk was transferred so easily from average homeowner---> banks---> investors...> all businesses that deal with financial institutions. Its worth a read if you are interested in that sort of thing.

[Risen]

An event that would mark the end of an era, and the beginning of a new. Just remember it's always darkest before dawn...

The House has passed the bailout bill.

[Oberon]

Yes, indeed it has.

Did it pass with or without changes that will require another Senate vote?

[Gish]

It was passed with tax breaks that catered to the Republican vote for roughly 100 Billion dollars, I can't see where it requires another vote though.

[Risen]

Alex Jones' Infowars: There's a war on for your mind! (http://www.infowars.com/?p=5043)

Here come the carbon taxes. Hell hath no fury, and God hath no mercy on the day I have to pay a single penny toward something that does not exist (man made global warming).

It's just a little icing on the bill the grants super power to the treasury and the global banks.

Bailout Seeks Broad New Powers For Treasury Chief : NPR (http://www.npr.org/templates/story/story.php?storyId=94921462)

[wildcat]

LOL, that's your comeback? Seriously?
I never intended to leave.

My pipes broke.
The landlord found me a new place out of harm's way.
A good and lovely place. :)
There was no internet connection in the new place, though.
When I came back the MBTIc was a mess.

By the way.
As a Welshman, do you recognize a Celtic substratum in some of the American accents?

It is not overbearing, of course.
It stays behind.. but it affects your ear a little bit. ;)

[Eldanen]

It was passed with tax breaks that catered to the Republican vote for roughly 100 Billion dollars, I can't see where it requires another vote though.

Wait a fucking minute here. $700 billion bailout, $100 billion in tax breaks. Where the hell is the money going to come from? How do they break taxes and do a bailout at the same time? Are they nuts? They're just creating money out of NOWHERE.

[bluebell]

Here's part of the problem (http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F9582 60&sec=&spon=&pagewanted=1).

That article is just sickening to read.

[Eldanen]

That article is just sickening to read.


More of the fucking same. Don't people get it yet, lol? Sub-prime lending. Get a grip.

[bluebell]

More of the fucking same. Don't people get it yet, lol? Sub-prime lending. Get a grip.

What? It's a 9 year old article - it's not more of the same, it's where it started.

[Eldanen]

What? It's a 9 year old article - it's not more of the same, it's where it started.

Woops. My bad. Posted too quick :D.

[The_Liquid_Laser]

We won't all become paupers if there is no bailout.

Heh, not all for sure. Although there will be a higher unemployment rate without the bailout than with it.

[pure_mercury]

Heh, not all for sure. Although there will be a higher unemployment rate without the bailout than with it.

I'll take unemployment and a year or two of financial uncertainty over bailouts and almost-certain inflation that will lead to more problems later.

[TenebrousReflection]

I'm torn. I philosophically agree, but my pocketbook disagrees.

That echoes my sentiments (but probably for different reasons). I was/am opposed to the bailout idea. I'm strongly opposed to the idea of buying things on credit that you have not budgeted for and can not afford in the longterm without changes to income etc. If one buys a house, they should buy it based on what they are making and spending NOW, not what they plan/hope to be making 5 years from now. Part of it is lack of financial eduction of the buyer (personally I think a home buyer should educate themselves on mortgates and real estate to at least a basic level before jumping into that, but I acknowledge thats unrealistic based on how impatient most humans are), but the lending institution also has responsibility to only lend to those that will be in a position to replay their debts. I beleive it may be painful for both the buyer and lender, but they both deserve to learn the hard way from their irresponsibility - unfortunatly it seems that due to chain reaction, the rest of us must also suffer for the ignorance and irrisponsibility of the few. Where I may differ in view from many of you is that I blame the education system for not doing a good enough job of teaching basic economics to the genral polulace as much or more than the predatory greedy lenders. If the majority of home buyers were educated in basic economics and financial concepts such as basic concepts of mortgages and budgeting then I'd like to beleive that a lot of the home buyers would have opted for responsible home purchases and realistic 30 year fixed rate mortgages (ARMs do have their place in the financial world, but it is NOT in the hands of first time home buyers!).

I for one am glad that the house representative and and 1 of the senators that represent me voted against it. I don't know if the one that voted for it is up for re-election this time or not, but if she is I will be seriously tempted to cross party lines and vote for her opponent if she has any opponents that opposed it (since I've not seen any campaing litature for her this year, I suspect shes is not up for re-election tho).

Its more motivated by self interest (not wanting the dollar to fall even more in value, not not wanting the possibility of job loss due to this - I consider those selfish but valid concerns) but I feel something should be done to affect/improve the psychology of the market and prevent a run on the banks and that sort of thing, but I thought the proposed bailout (and its addons the senate gave it) was a poorly thought out panic reaction when the situation should call for calm rational analysist and looking at the pros and cons of all that could be done instead of the Paulson plan. I guess we will never no what would have happened if we had waited a bit longer and let them come up with better solutions but then again expecting partisan government to come up with good ideas may be a bit too idealistic to being with anyway.

[Modern Nomad]

I'll take unemployment and a year or two of financial uncertainty over bailouts and almost-certain inflation that will lead to more problems later.

while debt in general is a bad thing, and i hate credit cards, if you have been following monetary policy of the United States of America then you would have already seen that the past 4 years, the US has been printing money like no tomorrow, and inflation has been rather low. Its a remarkable phenomenom that old school economists cannot explain. That is why its time for a new school of economic thought.

[pure_mercury]

while debt in general is a bad thing, and i hate credit cards, if you have been following monetary policy of the United States of America then you would have already seen that the past 4 years, the US has been printing money like no tomorrow, and inflation has been rather low. Its a remarkable phenomenom that old school economists cannot explain. That is why its time for a new school of economic thought.

If economic growth is steady, it would make sense that printing more money wouldn't be too bad for inflation. If the economy were to get REALLY bad, printing more money may temporarily make things look better, but it would be bad in the long run, especially for the working poor. If you are already at a marginal income (i.e., just getting by), high inflation eats away at your purchasing power, and you will soon be sub-marginal. Eventually, being on public assistance becomes a better deal than working 40-50 hours a week at a job that isn't paying the bills.

[spirilis]

Duck Tales Inflation Lesson

this is uh... more something for the laymen out there. I'm pretty certain most of the folks posting in this thread already know this ;)

[Risen]

this is uh... more something for the laymen out there. I'm pretty certain most of the folks posting in this thread already know this ;)

I don't know whether to laugh my ass off because I remember seeing that as a kid, and it's soooo right on; or if I should cry because the people in power either don't even understand as much (or ignore) what a freaking Disney cartoon from the 90's understood :doh:.

[The_Liquid_Laser]

I'll take unemployment and a year or two of financial uncertainty over bailouts and almost-certain inflation that will lead to more problems later.

We'll be seeing inflation, but it won't be caused by the bailout. However because of the world fuel situation we should expect significant inflation over the next few years anyway. This bailout won't cause inflation though. (I don't think most people understand what this bailout proposes.)

On the other hand without the bailout we could be looking at another serious depression. Actually we might be looking at that anyway, but the bailout is a step in the right direction.

[pure_mercury]

We'll be seeing inflation, but it won't be caused by the bailout. However because of the world fuel situation we should expect significant inflation over the next few years anyway. This bailout won't cause inflation though. (I don't think most people understand what this bailout proposes.)

I think it might in the long run. Not letting the market punish bad investments and giving gigantic lines of credit should lead to more money circulating through the economy than we'd otherwise have. I also am not sure that you're correct about inflation being inevitable. A worldwide economic downturn would more likely bring about stagnation or deflation than inflation. Also, I know it's silly since everyone in developed or developing countries needs energy sources, but core inflation is measured without food and energy prices going into the calculation. They are far too volatile. One of the best things we could do for both food prices and energy prices is to stop subsidizing ethanol. It's literally starving poor people in the world.


On the other hand without the bailout we could be looking at another serious depression. Actually we might be looking at that anyway, but the bailout is a step in the right direction.

We're not at the perfect storm of thing that happened 1929-1933 to make a Great Depression. Our economy is more diversified, there is no Hawley-Smoot tariff, there is no major drought causing farm production to dry up, the Fed won't allow the money supply to contract significantly. It's probably going to be bad, but people must remember that the economy goes down occasionally.

[The_Liquid_Laser]

I think it might in the long run. Not letting the market punish bad investments and giving gigantic lines of credit should lead to more money circulating through the economy than we'd otherwise have. I also am not sure that you're correct about inflation being inevitable. A worldwide economic downturn would more likely bring about stagnation or deflation than inflation. Also, I know it's silly since everyone in developed or developing countries needs energy sources, but core inflation is measured without food and energy prices going into the calculation. They are far too volatile. One of the best things we could do for both food prices and energy prices is to stop subsidizing ethanol. It's literally starving poor people in the world.

I know that CPI doesn't use food or energy in its calculation, but there is no denying that people lose purchasing power when these have a big increase in price like they have lately. (FYI, I basically agree with you on ethanol.)


We're not at the perfect storm of thing that happened 1929-1933 to make a Great Depression. Our economy is more diversified, there is no Hawley-Smoot tariff, there is no major drought causing farm production to dry up, the Fed won't allow the money supply to contract significantly. It's probably going to be bad, but people must remember that the economy goes down occasionally.

I don't think it will be as bad as the thirties, but I think we are headed for our worst time since then. I'm forseeing worse than the 70's but not as bad as the 30's. That's still a pretty big gap in difference in terms of economic woe. I'd like to see the sting of this problem removed as much as possible.

It's true that this bailout is letting people off the hook who have made bad decisions, but if they are made to face the consequences then a lot of other people will suffer too. I normally don't like bailouts, but when it comes to financial institutions I see an exception. When the banks go under then so does the rest of the economy. At this point we can't even be certain how many other financial institutions will collapse. I really don't want to see a huge chunk of our financial industry go under, and the rest of us with it.

[meanlittlechimp]

Inflation is inevitable. Not just because of rising fuel costs, or Wall Street's collapse, but because of our enormous debt (from the right's ridiculous war) and the trade deficits caused by our increasingly LESS competitive companies in industries that we used to dominate.

The reason we haven't felt the full effects of the Fed's irresponsible monetary expansion is because foreigners (China, Japan, Germany, Korea etc) are propping up the US dollar by buying our debt via treasury bonds.

It's just a matter of time before the US dollar will no longer be standard for foreign Central banks to hold "in reserve" instead of gold (since we moved off Bretton Woods in 1971). Governments used to have gold reserves for this purpose (before the dollar replaced gold). This "fiat" system only works when the world views the dollar as good as gold. Which it obviously no longer is. Once they stop pegging their currencies to ours,