Economic meltdown!

[Enoch]

I'm dredging this thread up. Not because I want to revisit all the silly "Socialist Dog!"/"Capitalist Pig!" arguments. But because I want to heartily recommend this fantastic article on the collapse of the investment banks to everybody who is at all interested. It's by Michael Lewis, who first made his name by writing Liars Poker, a book about Wall Street in the late '80s (and since made his name bigger with Moneyball, a very influential book about baseball). It's a pretty understandable, well-written account of how the high-finance house of cards (that lots of very smart people thought was rock-solid) came crashing down.

 

Anyhow, here's the link.

[thepixiesrock]

Sweet thanks Enoch. I'm actually writing a paper on the economic crisis in relation to politics and the governemnt right now, so if you or anyone else has any articles or anyhting you can send me, it would be super way appreciated, because I don't really know where to look for information.

[Enoch]

If you're interested in the governmental angle, the WaPo did a great story a few weeks ago on how the head of one small agency tried to impose regulation on the financial derivatives market, but was shouted down by the powers-that-be. Link.

 

That, and read the transcript of the Congressional hearings that've been held on the subject. There was one yesterday, but I don't recall which committee.

[Enoch]

That, and read the transcript of the Congressional hearings that've been held on the subject. There was one yesterday, but I don't recall which committee.

It was the House Financial Services Committee. Past hearings both there and in Senate Banking would be good sources.

Edited November 21, 2008 by Enoch

[thepixiesrock]

Yeah that first article you linked, the nine page one, I'm having trouble understanding most of it because I don't really know what a lot of these terms they are suing mean, and stuff. I don't know if you or anyone else would want to help me understand some of this stuff, I tried checking an online "investors dictionary" but it doesn't really help too much but add more to what I don't understand.

 

For instance, what does it mean to "short" something?

 

And what is a C.D.O.

[Enoch]

Shorting is how you make money by betting that the market is going to go down. Essentially, you're borrowing the asset and immediately selling it at the current price, with the promise that you'll buy a replacement at a defined later date (when you think the price will be lower).

 

I think Lewis explained CDOs a little bit. Collateralized Debt Obligation. It does get rather complicated, which is part of the point of the article-- most of the people selling, buying, rating, and valuing these assets didn't really understand them.

[Wrath of Dagon]

Shorting means borrowing something, like a stock, then selling it immediately and hoping it'll drop in price by the time you have to return it. Try googling the terms you don't understand.

 

Great article, really exposes the Washington attitude of "lets kick the can down the road, until is snowballs into a huge crisis". Also blindly following ideology without applying common sense. I remember ten years back there was a lot of discussion on the danger of derivatives, but nothing was done about it. And of course everyone knew there was a housing bubble, but again everyone made too much money to care.

[thepixiesrock]

Try googling the terms you don't understand.

 

 

I don't like your attitude.

 

Thnaks guys!

[Wrath of Dagon]

Why? It's good advice, that's what I normally do.

[Humodour]

I want to heartily recommend this fantastic article on the collapse of the investment banks to everybody who is at all interested. It's by Michael Lewis, who first made his name by writing Liars Poker, a book about Wall Street in the late '80s (and since made his name bigger with Moneyball, a very influential book about baseball). It's a pretty understandable, well-written account of how the high-finance house of cards (that lots of very smart people thought was rock-solid) came crashing down.

 

Anyhow, here's the link.

 

Excellent article.

[Humodour]

The US officially went into recession a year ago: http://money.cnn.com/2008/12/01/news/econo...sion=2008120115

 

That doesn't bode well for depression prospects.