Are we in the middle of a financial meltdown?

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If we as individuals cannot get a grip on our own sense of financial resposibility.(That includes Pols,Bankers,Wall Street Traders and the regular Joe down the street) How do we ever expect to hold a government accountable who is made up of these same people?

Um, because the decision-makers in the government and on Wall Street are supposed to be EXPERTS in these issues. Whereas regular Joe down the street is not.

 

As a private citizen, I could be having problems meeting my mortgage payments every month and have several credit cards maxed out, and STILL have every right to be angry about the failure of the government to manage the taxes I have paid and regulate the financial industry.

 

seth17's attitude is a perplexing example of an issue that is playing into this campaign, and we see it with some voters' enthusiasm for Palin, too. See, government officials are supposed to know better than ordinary citizens do about how the government should be run. That's what we pay them for. They're not supposed to be "just like us," and I find it extremely distressing that so many voters seem to think they should be.

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Interesting article here from Asian Times about Al Qaeda's evidently successful strategy of bleeding America to bankruptcy, and how now would be the perfect time for another attack: Al-Qaeda's opportunity to hurt the US

Perhaps, one effective strategy would be to effect your enemy on multiple fronts, financial included. But, how exactly did OBL evaluate when to short Lehman Bros.? Which, by all accounts is how the meltdown started.

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I wonder if we will see an influx of expats over here in europe.

If USA tumbles, europe will slip into recession too. And if unemployment rates in europe rise, non-german speakers will find it even more difficult to get jobs (or to get a visa). Although I would think that an influx of american enterpreneurship could help us keep our boat afloat.

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See Cinzia I find your response perplexing because I think governemnt should still be..Of The People, By The People, For The People, you know I guess that must seem like nonsense to you.

 

But my point is if no one in the US sees debt as a harmful thing then we will keep electing people with the same attitude. And that is what we have done for generations. At some point We The People have to take responsibility for who we elect. If the people we elect tell us up front that they are going to spend $ we don't have...then we are just as responsible. (On this I am talking Rep or Dem) We as a nation have become too comfortable with being in debt. I think it's the easy way out to just be angry and blame them. We have the power to vote.

 

And at almost every job you get training for that job, unfortunately when you get elected to Congress there was/is no training. Your just on the job. Hopefully people who run come from careers that lead them into this which supplies qualifications. But some run without any true job experience. It's not quite like being an engineer or MD. Oh yea the pay is better in the private sector so I don't think you'll find the Bill Gate's types running for office anytime soon either.

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seth, that middle paragraph makes more sense to me than what you posted before. We do have a current administration that tells us all to go shopping to keep the economy afloat while the deficit balloons.

 

I suppose we are now getting more into discussion that should be on the elections thread, but at the debate on Friday night, moderator Jim Lehrer asked the candidates how a potential $700 billion bailout would affect their abilities to enact their policies. Neither one of the candidates answered the question, but McCain called for a freeze on all spending except defense, veterans, and entitlement programs. (I, myself, would have felt more reassured if he'd noted that we might need to hold off on invading Iran until we could afford it, but alas.)

 

Obama noted that we need to continue to support programs that are an investment in our future (early childhood education, health care.) Which I think makes more sense from a money management perspective than what McCain was saying. You don't keep your money under the mattress while your house is falling apart.

 

By the way, I disagree with you on the Congress job training point. Freshman senators and representatives don't generally get to head up important committees that make policy. They start out sitting on a committee or two and move to more important committees and positions on committees as they gain experience.

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I don't think this proposed solution is a solution at all. All it does is causes an inflation like the Germans had in 1923, the Russians in the 1990's and various other countries in between. The only difference is that the whole economic/financial system is based on the the dollar and the other currencies were more or less local.What that will do to the world and who will come out as victor is anyone's guess.

God help the world if it is Chinese. Many nations whose currencies got destroyed, their Governments and Government systems vanished with it.I hope it is not war.

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But my point is if no one in the US sees debt as a harmful thing then we will keep electing people with the same attitude. And that is what we have done for generations.

Debt, per se, is not the problem. Well-managed, it is the wellspring of prosperity. The truth of that has been empirically proven so many times since Keynes first analyzed it that it is now beyond debate. The problem for the last 30 years or so in the US has been the ascendency of a fiscal philosophy that has been a facade for legalized (and not so legal) theft and fraud from day one. Call it trickle-down, or laissez-faire, or free market, it's been a sham and a scam perpetrated in the name of freedom and democracy by charlatans and greedheads and now we're reaping the whirlwind.

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The whole problem is that, in every human generation, people end up being too clever by half. Every period of economic prosperity eventually runs out of gas.

 

I don't think it's any accident that the peak in world stock markets last October coincided with the first bona fide US baby boomer collecting social Security. The baby boomers have governed every socio/economic/political trend of the past half century; as child consumers in the '50s, as economically independent but socially-minded political activists in the '60s, as inflation-influenced hedonists in the '70s, as "oh, my god I have kids and a mortgage and a retirement to save for" 'neo conservatives' in the '80s, as "hey, this thing is pretty great ... and I have some extra time to watch CNBC and some extra scratch to dump into the markets" in the '90s, as "gawd, that internet stock I bought in 1999 might be down 90%, but the kids are up and out from school and I own my (double-mortgaged) house, and it's only onward and upward from here!" 'lords of all they surveyed' in the '00s." Now they're all just frozen in place waiting around for whatever kind of cancer they're going to get. Not good for markets.

 

Wall Street/The City has always been a dodgy, hit-or-miss place; I've worked in both and should know. The classic joke is that they're the only place in the world where a rich guy in a limousine parks out front and gets financial advice from a guy who came to work on a bus. This goes to an inherent christian aversion to treating one's money seriously, but that's another thread entirely.

 

But it's really all about "The Big L" ... Liquidity. And that's the big deal with the whole (latest) financial crisis now. If people have their clocks cleaned in the stock market, then they're viewed through the same lens as that used for casino goers ... live by the sword, die by the sword. But this time around all of the clever people found a way to take what used to be reasonably-informed local lending (where one could look at the lambchop and still deduce from which part of the the lamb it came) and dumped it all in the sausage grinder. The proverbial sausages are popping up on balance sheets of banks worldwide ... notably European banks who "should have known better" but had AAA ratings with which they were playing the spread. When this cholesterol starts clogging up the arteries of normal, everyday commercial finance, then something must be done, or the Weimar republic with people paying for loaves of bread with wheelbarrows of script ensues.

 

Every massive wave of financial gain eventually peters out ... and demands "financial innovation" to keep the party rolling. Options in the '60s, commodities futures in the '70s, portfolio insurance/program trading in the '80s, index futures in the '90s, CMOs/CDOs/whatever in the '00s. When these are first sprung on markets, they outstrip the ability of the regulatory/internal control systems to value them properly. They eventually do, but only after a crack-up. And then they become part of the furniture.

 

Universal home ownership in the US is an inherently democratic (small 'd') notion ... because (completely unlike Germany, which despite ranting and raveing over the bowler-hat-wearing-cigar-smoking capitalist bosses at work sees no problem in having houseing meted out by (ahem) bowler-hat-wearing-cigar-smoking capitalist landlords) it's seen as economic emancipation. But, like tobacco, which was a simple occasional pleasure industrialized and repackaged for the masses, so was home ownership. With disastrous consequences.

 

There's no "bailout" in terms of what people might have to pay in ... they have already collectively "paid" for it in the form of mortgage interest tax write-offs, and now it's being withdrawn like blood donorship. Zero sum game.

 

In my opinion as a liberaterian, this says it best.

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Obama noted that we need to continue to support programs that are an investment in our future (early childhood education, health care.) Which I think makes more sense from a money management perspective than what McCain was saying. You don't keep your money under the mattress while your house is falling apart.

That's one of my points...where is the money under the mattress???

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From what the candidates were saying in the debate, they weren't so far apart. McCain proposed a freeze on ALL spending, with some notable exceptions such as the military and homeland security, i believe. Apparently to McCain, those types of expenditures don't count as "spending" while everything else which Obama supports spending on, do.

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As I wrote above, McCain proposed a freeze on all spending except defense, veterans, and entitlement programs. Obama replied (in my view, rightly) that that would be like using a hammer where a scalpel was needed. Obama was saying that some programs will get cut back, but not ones that he views as being imperative for our future. Alternative energy, for example.

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I think you would find that most Economist would question reducing spending during a recession. This would just suck demand out of the economy making the recession worse. In times of stagflation (rising inflation and falling demand) it is a different matter as you may be trying to reduce inflationary demand and see that as the worse of the two evils.

 

To me whilst watching the debate, it just said that McCain did not really understand economics..which he had already admited himself...so no big revelation there!!!

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But that might cost him the election, stanford. McCain might be the more experienced candidate overall, but if he can't win voter confidence about his ability to handle the economy (the number one concern of Americans right now), his years in the Senate might not count for much, in the end.

 

All the silly posing and posturing he's done in the past week has certainly not strengthened my own confidence in his abilities to lead, that's for sure. I mean, we all know I'm not voting for him, anyway, but at this point I'm thinking about how terrified I will be if I wake up on November 5th and McCain has won.

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The economist has written keenly on the matter of what type of McCain are we getting in this election: Maverick/Flexibile vs Political/Angry. It seems for those that have followed McCain's career we are getting the more nakedly political McCain. The alleged suspension of his campaign this week to help with the negotiations for the financial bail out an apt example.

In addition, his failure to articulate a policy or intellectual framework in the debate were further examples of his inability to understand the economic woes facing American or more bitingly the inability to answer on how to handle those economic woes are telling.

 

The further credit crunch bites the less McCain and the republicans can really on their security credentials vis-a-vie Iraq and the war on terrorism.

 

Edit: just seen your edited post - there was a great article in the LA times regarding this posturing I will see if I can find it and link it - even if half true it makes for scary reading...

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It was the New York Times - anyhow here is the article:

 

McCain’s Suspension Bridge to Nowhere

comments

 

By FRANK RICH

Published: September 27, 2008

 

Op-Ed Columnist

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Yup, read that (long!) column this morning, won't deny it. Comprehensive McCain tear down, it is.

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I am inclined to believe the article at least on the stuff about the negotiations on the bail out as the Democrat Leaders in the Senate - just slapped his action straight back down but I did not see any equivalent by the Repulican Leaders to Obama...so on that front it sounded like posturing...

 

Also why would you need McCain's intellect on this subject we he had already told us his grasp of economics is wonky... like calling the Pentagon experts into the Treasury to work on the economic policy for the next four years!!! Maybe, he should stick to his bomb bomb Iran and Drill Baby Drill lines...

 

I am so looking forward to the Biden vs Palin debate on Thursday...lets see if she can raise her game after her previous offerings...

 

Must dash time to pack and long drive to Zurich tomorrow.

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The bailout (buyout) will fail, for these reasons, in bold.

 

From the WSJ today:

 

The deal addresses the concerns of House Republicans by adding new taxpayer protections and likely shelving a proposal to devote 20% of potential profits to an affordable housing fund. The plan also would allocate the $700 billion in stages, with the first $250 billion available immediately, $100 billion available "upon report to Congress," and $350 billion "available only upon Congressional action."

 

When DC gets their hands on "oversight" in a rapidly changing market, then investors get leery and head for the hills.

 

Monday's open will be mixed, even up potentially, then by Wednesday it is very likely that the Dow will see 2000-3000 point drop, curbs and all.

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