The bright side of the stockmarket collapse

At least your Social Security money was not used to "play with stocks", as Bush and McCain wanted.
In 2006, McCain voted for the Social Security Reserve Fund. The
proposal would shift Social Security’s annual surpluses into a reserve account that would be converted into risky private accounts. [SCR 83, Vote #68, 3/16/06; SCR 83, Vote #68, 3/16/06]
By the way, the real issue with banks is that they have negative equity due to fall in values of the securities that they hold (mortgages) and high leverage.
So they are insolvent, in more simple terms.
Lending to them would not address this as it would not increase their equity.
While the authorities are not saying word "insolvent" for obvious reasons, they realized it and are considering giving money to these insolvent banks to make them not insolvent.
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On Oct 9, 2:41 pm, Ignoramus19789 <ignoramus19...@NOSPAM. 19789.invalid> wrote:

I firmly believe there are uncountable shiploads of culpability for this for every member of the federal gummint. More than enough to go around.
Therefore, it follows that notwithstanding our rudely advanced, passionate positions on the issue, our decision on who we vote for in the upcoming election will impact this mess about as profoundly as whether we decide to drive a Chevy or a Ford.
Ron Paul had it right. Unfortunately, nobody took him seriously.
Idealistically,
Vernon
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Very true. Very many parties and groups to blame.
If Social Security money was invested into stocks, mortgages, etc, the likely outcome of that would actually be that the bubble would last longer (so we'd be all celebrating right now, instead of the opposite), and would go higher, but the end result would be even worse.

I would respectfully disagree, and think that at least to some degree, the outcome of election will make a difference.
Keep in mind, however (check intrade.com if you want) that the market is already expecting Obama to win.

I, for one, would love to know what Ron Paul said, I respect him greatly from a long time ago.
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On Oct 9, 3:08 pm, Ignoramus19789 <ignoramus19...@NOSPAM. 19789.invalid> wrote:

Iggy. Have no doubt that my remark about rudeness was in no way directed at you. I've always known you to be a role model of civility. I prefer to think of myself as another one in here. I haven't tallied up the score. But there may be as many as ten... although that might be a stretch.
V
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I never took any offense. So, What did Ron Paul say?
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wrote:

Five days ago, addressing the John Birch Society, Paul said, responding to "pundits who challenged his opposition to the bailout with statements such as, 'Surely you can't believe that we should do nothing.' Dr. Paul's response was that the federal government should return to sound money and lower taxes, and take more care in regulating the regulators. He pointed out that we got into this mess because of too much government spending, too much debt, too much inflation, and too much regulation. Now we are being told that the solution is more of the same!"
Iggy, I'm sure you know the relationship between "sound money" (Paul means gold-backed money) and the money supply, right? They have practically nothing to do with each other. Certainly we have too much debt (duh...). As for regulation, you see what he's saying here: that the problem was caused partly by too much of it.
This guy either has no understanding of economics, credit and money, or he's playing off the fact that most people listening to him don't.
Tell us, Dr. Paul, how would "sound money" have prevented the current crisis? Do you think he really understands how all that money came into being in the first place? (Hint for Ron Paul supporters: it wasn't from printing it. Most of it was never printed at all; it's ciphers on a computer screen. How it got there is the key question -- and the answer has nothing to do with anything Paul said, except for the regulation part.)
-- Ed Huntress
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On Thu, 9 Oct 2008 17:19:34 -0400, "Ed Huntress"

=================For one thing because of fractional banking and the way the securities generated by one bank were counted as assets by another bank, "money" was "amplified" many times if not created.
In spite of the repeated chants of fear-fear-fear, the actual stock "problem" appears to be that the suckers "AKA" stock holders have had enough of the outlandish executive compensation and refusal to distribute dividends when the money was earned, and the dissipation of any profits on highly questionable activities such as stock buy backs at market highs and "investment" in outlandish and farfetched schemes. Every attempt to correct this has been thwarted by the coopted and preempted directors, and the suckers are voting with their feet.
The people have also looked at the claimed corporate "assets" and have concluded these are mainly smoke and mirrors, and are getting out while the getting is good [or at least while they can get some of their money back].
The credit market is a separate issue, but the banks and financial institutions have no problem evaluating the actual credit worthiness of their borrowers and are now rationally acting on this knowledge, i.e. they are saying "NOT ONLY NO BUT HELL NO" to the applications for loans from the other banks and high rollers. The question is why our government continues to pour taxpayer money down this "black hole," including the 25 billion dollar loan guarantee for the US automotive industry.
If the banks are in such dire need of money why aren't they paying inflation + 5% on CDs/time deposits [c. 10%] and possibly a little less on checking? This is still almost no return when tax effect is considered.
And no, we aren't all responsible for this mess.
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wrote:

Bull shit. We all vote.
JC
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John R. Carroll wrote:

and the european collapese? did we cause that too?
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wrote:

They vote, too.
-- Ed Huntress
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Ed Huntress wrote:

AWright, Ed.
Ferinstance...
Johnson said, "I refuse to send American Boys..." Got himself elected, Then ?
I promise not to cum in your mouth!
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wrote:

I'm not following what you're getting at, Richard. My point is that this is a government we elect; we're responsible. That doesn't mean we know enough, individually, to anticipate and direct our voting to solve these problems. But we're still responsible. That's democracy. It sometimes can be frustrating.
But we're still responsible for it. If we elected people who aren't able to understand the economy, either, that's just too bad. It doesn't relieve us of responsiblity.
If you're interested in an article that provides some exceptional insights into who let this situation get out of control, who made the decisions, and how this relates to our responsibility, here's one that just popped up: "The Reckoning: Taking a Hard New Look at a Greenspan Legacy."
http://www.nytimes.com/2008/10/09/business/economy/09greenspan.html?em
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Ed Huntress wrote:

I concede your point, Ed,
Problem is, this government is not responsible to US.
Wallmart gives both sides a $10,000 election fun donation. It called 'buying access' - and they get it.
How the heck does John Q Public compete with that?
AND - just as an aside - we have TWO condidates running for head of the government.
I personally don't want either one of them to be elected. I don't think they are going to do anything in MY best interest.
Theory and reality are only related - in theory.
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You may find this strange, but I've never, ever thought of electing a president in terms of what they're going to do in my best interest. It's always been the country's best interest, and I assume we'll all be better off when that's what they do.
Maybe that's why I find both of our current candidates acceptable. I believe they're both pursuing the country's best interest as they see it. McCain doesn't bother me because I don't think he's a doctrinaire, ideological conservative. And Obama most certainly is no doctrinaire liberal. They both have a pragmatic, one-problem-at-a-time approach, to greater or lesser degrees.
So I can't identify what you wish you had here, in terms of choices, and what you find objectionable about the candidates we have. If you're suggesting you want some more choices, I suggest you look first at Italy and Israel to see what that implies. My opinion about that has been shaped by a year of studying comparative politics in Europe more than by the sketchy history we have of multiple parties in the US, but my conclusion is that real multi-party politics inherently stinks to high heaven. It's all a matter of coalitions ganging up on other coalitions, broad national interests be damned.
As for big business having an excessive amount of political power in this country, yes, during most of our lifetimes. We have four important elites in this country -- business/professional, academic, military, and political. They're all pretty open meritocracies, compared to the elites of most other countries. Fortunately the military elite remains subservient. The academic elite, which ruled during Kennedy's and Johnson's administrations, and part of Carter's, are not held in very high esteem these days. So the political and business/professional elites are in charge. And an elite necessarily will be in charge. There is no successful alternative.
We may be near the end of the business/professional's reign of power; they're currently regarded about the same as the way we regarded the academic elite around 1966 - 1978. They're now regarded as failures in terms of governance, as any individual elite will be if their expertise is interpreted too broadly or for too long. The popular impression now is that their interests are not really the country's interests.
Now we're expecting the political elite to put it all in perspective and to rise to the top, keeping business and academic elites' ideas in check to serve the interests of the country. That's a big order, since we've allowed the business elite to acquire so much power, and for its tentacles to reach into every corner of society.
You can't expect high-level politicians to turn it all around at once. We've been too acquiescent in the process ourselves. I look for the apparent motivations of the candidates and the likelihood that they'll put elite ideas in perspective, and that they'll find a way to implement some shifting of power towards the ideal political, the politics as Aristotle described it, by using power to undermine power. At the same time, I'm looking for real intellegence and popular support for a leader so they'll be able to make some positive things happen.
That doesn't feel to me like a self-interest focus, although, in the end, I'm talking about my own ideas of how things should be, so I guess that's self-interest. It isn't narrow economic self-interest.
Does that sound alien to you? Or are you thinking of something similar, without going to so much length to describe it? <g>
-- Ed Huntress
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I appreciate that you take the time to respond to my whining, Ed.
Ed Huntress wrote:

Ok, so looking back, was that a valid assumption?
IS the country better off?
Is it good for the country to have such a great difference between the rich and the poor?
And what about the shrinking "middle class". It's not shrinking because more of them are getting rich.
We had a great run for a while, but are we really better off?

I think it's the "as they see it" part that bothers me most.
I would doubt anyone who thinks he has answers to today's problems. Most people still wonder what the questions are...

BINGO.
And, pardon my high school education, but wasn't the original idea to PROTECT the individual from the whims of the masses?
AND from the whims of our government?!

Why?
Because they want to be?
Because they would rather tell me what to do than allow me to tell them what to do?
Seems a self serving idea at the least.

Yep. But neither are my concerns.

No, actually, I think you have touched on some of the things that bother me most.
Elitism will always be with us. And always be our curse.
I don't have your faith in politicians. I think I once did. But no longer.
It comes back to motives.
Business wants money. Politicians want to stay in power. Academics want to grade us. Evangelist want to save us.
Who, of all the groups on earth, can help us live together?

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No we don't!
Hawke
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Yes you do, whether you cast a ballot or not. If you don't cast a ballot, you're voting to let someone else rule your life. You're voting to be a serf.
-- Ed Huntress
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wrote:

I'm surprised at you, George. Fractional reserve banking has been with us since at least 1100 A.D. If the complaints about fractional reserve banking had any substance, under a fiat money regime, inflation would have been roughly equal to growth of the money supply. Between 1995 and 2005, for example, it would have been 15% per year or more. In fact, it averaged less than 3%. Here are the graphs if you want to check it out (M2 is considered to be the big factor in inflation):
http://www.gocurrency.com/articles/stories-inflation.htm http://en.wikipedia.org/wiki/Image:Components_of_the_United_States_money_supply2.svg
That old argument is, if you'll forgive the term, bankrupt. <g>
The problem is not fractional reserve banking. The problem is OUT OF CONTROL expansion of credit and debt obligations. In other words, funny money with no regulations, no reserve requirements, no auditing of underlying securities -- the whole deregulation economics schtick. To put it bluntly, it's brain-dead ideological nonsense. It assumes everyone is honest, prudent, and smart. Pffhhht.

I don't think so. There is no evidence that I know of that stock holders aren't perfectly happy to pay outrageous sums to the CEOs as long as their total returns (dividends plus stock evaluation) are humming nicely along. In fact, they let executive compensation pile up to the ionosphere when things were good.They didn't WANT dividends in a lot of cases; they wanted growth, big-time. It's only when they aren't making as much money as they think they should be that they start looking at places to point fingers and to raise hell. Otherwise, everything is hunky-dory. That's a big part of the problem. Nobody gives a damn as long as they're making money.

They're getting out because they think OTHER PEOPLE have noticed that it's smoke and mirrors -- or they think other people will THINK it's all smoke and mirrors. On their own account, they don't care if it's really curds and whey.
The market's irrationality is overstated. It's perfectly rational. It behaves as if EVERYONE ELSE is irrational. Of course, such behavior guarentees that everyone else WILL act irrationally -- only it's really rational, because they've correctly guessed that everyone will act irrationally. d8-)

From what I've read, the fear is not that their borrowers are not credit-worthy, but rather fear that someone else (who might be the source of income for their borrowers) will not be credit-worthy. Or the people who are those sources' sources will not be credit-worthy. And so on, and so on, ad infinitum.

I almost fear to ask this, but what alternative did you have in mind?

You'll have to ask them. Whatever it is, I haven't heard the answer.

Uh...yes, we are. We bought the bullshit. We could have noticed it and raised hell, but we were all too busy.
-- Ed Huntress
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On Thu, 9 Oct 2008 21:26:25 -0400, "Ed Huntress"
<snip> Fractional banking: Everything has its use and everything has its abuse. We have just seen it abused to the point it just may bring down the entire global economy.

When something is not working it is time to try something else. Like Grandma said "don't send good money after bad." Lack of liquidity is a symptom not the problem. The problem is the solvency/honest of the major players, banks and other institutions. Pouring money in the top with a fire hose is not resulting in any trickle down [of money] but a huge waste of taxpayer money and additional wealth for those responsible. If government intervention is needed it is time to inject the money as capital by the purchase of preferred stock or warrants in the smaller regional and local banks that are making and would make more loans if they had more capital. The first tier banks, brokerages, and corporations are "gonners" no how much tax payer money is pumped in [and wasted].
It may well be there will wholesale bank and business failures no matter what is done.

Because the top tier banks can get more money than they need at the FRB discount window. The problem is they won't lend any of it.

We did raise hell, and we voted against the pols that got us here. They still got elected. Questions were raised by the stockholders repeatedly about excessive executive compensation, speculation, dodgy assets, etc. and the Board of Directors in every corporation blocked any action or limits.
This is one reason for the decline in stock prices. The people are voting NO with their feet.
One of the better lines on the financial sites was the ransom note just delivered to the FRB and Treasury. It read "We have kidnaped your 401K. If you want to see it alive again send us 700 billion in small unmarked bills."
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wrote:

IMO, this should not be a surprise. The surprising thing, to me, is that people like Greenspan counted on (he says this in his speeches now) the basic integrity and prudence of the Masters of the Universe. I wonder if Greenspan ever had the tape deck stolen out of his car, or if he learned anything from the Keating affair, or Enron, Monsanto, Parmalat, or the Bank of New York's money laundering for the Russians...Where was his head?
With little regulation or auditing, and billions on the table, what in the hell did he expect to happen?

So, you really want the US government to take equity stakes in banks and other large institutions? I don't. I see trouble with that course of action that we may never get out of, and we'll wind up with a nationalized finance industry.

I'd have to see the details to buy that.

Not enough of them. I don't remember hearing much about such questions and complaints except by minorities of stockholders.

I doubt that very much, George. I think what has their feet moving is that they're afraid they're going to lose big chunks of their capital. I really don't believe that moral outrage is driving the market. And, as outrageous as it is, those salaries are usually small potatoes compared to the wins and losses that result from just a few percentage points of upward or downward swing in stock prices. Stockholders are watching the value of their investments, not trying to purify the morals of CEOs.

Ha-ha! Good one.
-- Ed Huntress
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