Are we in the middle of a financial meltdown?

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I agree with pretty well everything you're saying @JE but in my mind the root of the problem , in the UK at least, has been the year on year house price inflation massively above the rate of salary increases. This bubble had to burst and has. Now all this Sub-prime stuff is just the obvious result. The banks were happy to fuel the fire for all the reasons you're saying but the root cause was/is a stupid system.

 

When I first bought a property I think I was limited to three and a half times my salary. That hurt but the control was there. They can control house price inflation pretty easily by limiting lending in this way but they didn't.

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The credit problem we are facing now is nothing but a result of the fraudulent derivatives game which was played over the last decade.The sub prime mortgages problem was just the spark which caused the whole house of cards to collapse. People were warned for years and whoever wanted to hear is/was prepared for the calamity. Now we have 2 choices, inflation of immense proportions or a hurting depression. Question is which is the lesser of the two evils?

@Gaberlunzi You really hit the nail on the head.

 

If you're really as "old" as your posts suggest (55 years in Canada, assuming you were c. 15-20 when you emigrated), you might have well been around for at least the tail end of the last one of these "financial panics". If so, do you think it's really comparable in severity?

 

This is a serious question.

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So the German Government have now stepped in as well.

 

I really don't know if all these step in's is the right thing. Can a government go bankrupt or does it just mean increased inflation as they print more money?

 

Merkel steps in.

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If I read it correctly, the government will "only" guarantee private savings deposits.

Hypo Real Estate doesn't have any private savings deposits whatsoever.

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So the German Government have now stepped in as well.

 

I really don't know if all these step in's is the right thing. Can a government go bankrupt or does it just mean increased inflation as they print more money?

 

Merkel steps in.

The German government is guaranteeing only the private savings. This is good as I think the prudent and small-scale investors need to be bailed out first and not the greedy crooks.

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Governments/Countries can go bust. Russia did so in 1998 and Argentina in 2001.

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Technically, they defaulted on their foreign currency debt. Fortunately, Germany doesn't have any foreign currency debt.

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This shit doesn't come about by accident. This shit is planned down to a tee.

 

If you are blaming a particular side of politics you are being severly mislead.

 

The whole thing is simply a transfer of public wealth into private hands but hardly anyone is saying it.

 

Edit - to remove unnecessary aggrevation

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@xargon

 

Why do you consider them to be 'greedy crooks'? Most of the banks currently in trouble are in that position because the interbank loan systems have dried up and speculators have been betting on their share prices. But the banks themselves have not done anything wrong per se and in a normal market would be thriving. I'm really getting rather uncomfortable with the populist rallying cry that this is all the fat cats faults. The financial markets actually underpin everything from mortgages to insurance and pensions as well as personal savings. If they all go down and only savings are protected there will be a lot of ordinary people in very great trouble.

 

If you want to see how bad it could get just look at Iceland

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The whole thing is simply a transfer of public wealth into private hands but hardly anyone is saying it.

Bingo! And both the corporate presidential candidates do not even discuss this in their so called "debates". This will go down as one of the biggest financial heist in history.

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The whole thing is simply a transfer of public wealth into private hands but hardly anyone is saying it.

How do you work that out? The bailout is not just a gift of money to the private sector. It will be used to buy toxic stocks. That is these will be brought into public ownership and will be sold again when markets are a good deal less volatile than they are now. It is theoretically possible that the US treasury could actually make money out of this though at the very worst they will inevitably get some of it back.

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does it just mean increased inflation as they print more money?

The ECB's primary concern has always been to keep inflation low. It's very unlikely that they will print more money.

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Why do you consider them to be 'greedy crooks'?

Simply because some of the banks and building societies are also to be blamed for the current crisis. This is why I like credit unions and cooperative banks. They have been more prudent in their lending and most of them have come out of this without much damage.

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The bailout is not just a gift of money to the private sector.

Really? Where is it stated in the 431 pages that this is a loan...? there is no mention of repayment terms... so I'd safely say that we as a planet will be purchasing worthless crap in the hope of selling it back at a profit in the future? Is that a gamble you would willingly take today... more than likely not! If I were the one who had run my company and several others into the ground and was then presented with 700 Billion dollars to buy my worthless fucking shit, I'd probably consider it a gift!

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It is not a LOAN FFS! It is a fund for the government to acquire high risk parts of banks and other financial institutions as a means to safeguard these institutions from being run into the ground. That is the government will actually own these in the same way as the British government currently owns Northern Rock.

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Really? Where is it stated in the 431 pages that this is a loan...? there is no mention of repayment terms... so I'd safely say that we as a planet will be purchasing worthless crap in the hope of selling it back at a profit in the future? Is that a gamble you would willingly take today... more than likely not! If I were the one who had run my company and several others into the ground and was then presented with 700 Billion dollars to buy my worthless fucking shit, I'd probably consider it a gift!

George Bush and Company essentially have taken a blank signed check from the public and are free to do whatever they want to do with it. Essentially, they will be lining the pockets of fat crooks with money on their way out of the White House.

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I should also note that most of the really dodgy institutions have either gone bust or been purged. The current runs are on institutions that are anything but dodgy and the assets that are considered "toxic" at this particular point in time would not be considered remotely so in less volatile times. If the US government holds on to them until the markets recover there is no reason to believe that they will not be able to sell them back.

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The bailout is not just a gift of money to the private sector. It will be used to buy toxic stocks.

That's exactly the same thing. They are buying things at a price above what anybody else is willing to pay. That is a gift of money, there is no other word for it apart perhaps from subsidy.

 

That is these will be brought into public ownership and will be sold again when markets are a good deal less volatile than they are now. It is theoretically possible that the US treasury could actually make money out of this though at the very worst they will inevitably get some of it back.

The market price of this debt is what it is today, not what it might be at an unspecified time. Paying more than that is a gift of money, I really can't see how you could call it anything else.

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It is not a LOAN FFS! It is a fund for the government to acquire high risk parts of banks and other financial institutions as a means to safeguard these institutions from being run into the ground. That is the government will actually own these in the same way as the British government currently owns Northern Rock.

The whole process has been completely undemocratic. There has been no deliberation, no full disclosure, no NOTHING! The public is just supposed to fork over this ridiculous amount of money with no guarantees and no accountability on the parts of the wall street. What about regulations and taking steps to ensure this does not happen again? How about the public owning equity shares (maybe this will happen)? What about accountability on the parts of the CEOs and the upper management responsible for this mess? They have probably already made their money last year and are probably laughing at the whole country right now.

 

The Government has again used scare techniques to try and convince the public that the skies are going to fall on our heads, if we do not pass this plan now! It is like a bad salesman that wants to buy their crappy products NOW!

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look many of these 'toxic' assets actually have valuations well below their capitalisation values. As I said, there is no reason to believe that when markets recover they will not make their money back.

 

God knows I have no reason to defend GWB but on this matter there really was no option but for this fund to be created.

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