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2008-09-18 Home Front Economy

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Posted by Bobby 2008-09-18 11:14|| E-Mail|| Front Page|| [11140 views ] Top

#1 What we are seeing is the deleveraging of Wll Street, du to the failures of the derivative markets.

What it means is that banks are going to be overly-tight with money, which will lead to less money available, therefore less demand for goods, and eventually less goods produced. Its called a deflationary spiral, and can lead to an economic depression if the hoarding of capital and resultant lack of demand (due to lack of cash) eats into production capability.

Basically, a lot of the derivative markets and futures, etc that sprung up in the 90's have demolished the banks because they lent those hedge fund investment fat-cats tons of money that has now vaporized.

Posted by OldSpook 2008-09-18 11:42|| 2008-09-18 11:42|| Front Page Top

#2 An interesting article from the Sun on how the leveraging occurred.

Posted by Nimble Spemble 2008-09-18 11:48|| 2008-09-18 11:48|| Front Page Top

#3 So how about mandatory financial institutional collapse insurance 'tax' upon the players/firms for in the future. Since they're getting us to pay, in devalued inflated spending dollars with the Fed pumping billzions into the market, maybe its time the players fork over sums to finance future cyclic debacles like this. The level of the tax to be graduated by the riskiness of the activity pursued. Since no one 'in charge' is willing anymore to tell them to suck it up and die [because of 'ramifications' or other rationalization], time to get some control on the process.

Talented and ambitious people may move from finance, where they were attracted by exorbitant pay, into more productive industries.

Preferably making license plates.

Posted by Procopius2k 2008-09-18 11:59|| 2008-09-18 11:59|| Front Page Top

#4 I wonder how many of these big bank players and 'managing directors' have 'golden parachute' clauses in their contract?

I'm thinking that that (any any bonuses) should the the very first thing to be forfit up by any bailout.

Posted by CrazyFool 2008-09-18 12:27|| 2008-09-18 12:27|| Front Page Top

#5 The problem is that they separated the risk from the profit and loss. They made money on origination fees on mortgages and then sold the junk to others. Those who made the loans did not lose the money, they made it and cared not a whip what happened either to the homebuyer or the loan. It was one big Ponzi scheme with the American public left holding the bag.

Posted by Betty Grating2215 2008-09-18 13:38|| 2008-09-18 13:38|| Front Page Top

#6 Isn't borrowing money to buy stocks what led to people jumping out of buildings in 1929?

Posted by Ebbang Uluque6305 2008-09-18 15:21|| 2008-09-18 15:21|| Front Page Top

#7 Bingo, Ebbang.

I borrowed money for my house (still paying) and my car (paid off early). I "borrow" money with my credit card each month merely for convenience - I have the money already and the bill gets paid as soon as it comes in - no interest paid.

I don't borrow money to buy intangibles, such as a vacation. And I don't borrow money to buy stocks - otherwise known as buying on margin.

I'll never be Donald Trump (thank heavens!), but I'll also never cost normal people billions of dollars and damage the country's economy by playing fast and loose with other people's money.

**Spit**

Posted by Barbara Skolaut">Barbara Skolaut 2008-09-18 15:45|| http://ariellestjohndesigns.com/]">[http://ariellestjohndesigns.com/] 2008-09-18 15:45|| Front Page Top

#8 Ebbang, I don't see any jumping this time. Perhaps many of them need to be pushed instead, sine they have no honor nor any integrity to make good the results of their dereliction of duty. Defenestration woudl be a proper punishment of the fat cats who demolished the economy.

Posted by OldSpook 2008-09-18 17:15|| 2008-09-18 17:15|| Front Page Top

#9 People were borrowing lots of money 50-60 times for each dollar held. I guess they call this leveraging. I call it poor business practices.

Posted by JohnQC 2008-09-18 19:20|| 2008-09-18 19:20|| Front Page Top

#10 I'd call it RICO.

Posted by Procopius2k 2008-09-18 19:48|| 2008-09-18 19:48|| Front Page Top

#11 ION CNN + FOX AM > seems Wall Street stocks have REBOUNDED APPROXI 410 POINTS + is anticipated to still rise slighlty further as financial markets stabilize???

Posted by JosephMendiola 2008-09-18 20:27|| 2008-09-18 20:27|| Front Page Top

#12 Nothing wrong with leverage in and of itself. Lending is a neccessary tool for growth.

Problem was, money was so cheap that a ton of that leverage went to bad investments because there wasn't enough good ones to keep up with all the money.

Posted by Mike N. 2008-09-18 21:22|| 2008-09-18 21:22|| Front Page Top

#13 BArb: I always thought that Trump was a true American Hero. And today on Larry King, he endorsed McCain. What's your problem? Don't you love McCain?

Posted by General_Comment 2008-09-18 23:14|| 2008-09-18 23:14|| Front Page Top

#14 Correct Mike N., which is why the situation south of the border is fascinating. Some countries are screaming buys needing investment, after centuries of abuse (Brazil/Chile/Peru/Columbia) while others are headed the wrong way in a hurry (Bolivia/Chavezville).

A shame if they get shorted in the fallout, but Brazil is likely finally big enough to thrive regardless, and could drag the other well-behaved types along with it.

Posted by Halliburton - Asymmetrical Reply Division 2008-09-18 23:16|| 2008-09-18 23:16|| Front Page Top