Poor America... Poor democracy...

[Meshugger]

Does it really matter which political party the politicians like to hide behind as a fake alibi for behaving like idiots? Not really.

 

- F*** the bankers who think that they are "too big to fail" and think that they are entitled to a government-backed bail-out.

- F*** the politicians who cave in to the scary-crow of "total monetary meltdown".

- F*** people like Paulson who are ex-bankers and who demanded healthy banks to sign up for a bail-out. Crooks and s***heads as him should have no political power and should not have a seat in government. F*** the a**hole who it was a sound idea of giving him governmental position.

- F*** those idiots who thought that letting depositories of people's savings(banks) to be allowed as equity in their gambling schemes (investments, as in investmentbank).

 

I could go on forever.

[Wrath of Dagon]

You heard of the Great Depression?

 

"The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (Republican of Texas) and in the House of Representatives by Jim Leach (R-Iowa) in 1999"

With the endorsement of the Clinton administration, and Clinton signed it into law.

So, if a bill is passed and a president signs it he automatically is a supporter of said bill.

Are you saying he's not?

Edited January 31, 2010 by Wrath of Dagon

[Calax]

You heard of the Great Depression?

 

"The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (Republican of Texas) and in the House of Representatives by Jim Leach (R-Iowa) in 1999"

With the endorsement of the Clinton administration, and Clinton signed it into law.

So, if a bill is passed and a president signs it he automatically is a supporter of said bill.

Are you saying he's not?

Personally I didn't find any evidence of this, did you?

[Hurlshort]

I'm all for arguing with Wrath, but I think if the President signs something he is supporting it. But is he the driving force behind it, the one most responsible for its existence? Not necessarily, that would be the drafter.

[Humodour]

The problem is the regulators didn't do their job. But the roots of the financial crisis are far wider than just problems with the banking system, it really has to do with us trying to borrow our way to prosperity by buying Chinese goods with the money we borrow back from the Chinese.

 

China owns about 7% of US debt. Japan about 6%. I don't think you're correct.

 

Here's a run-down of what exactly the 'debt' is, too:

 

This "Oh China owns all the US's debt, the US has to do whatever they want!!" stuff is silly. It shows a lack of understanding of how money and debt work at an international level.

 

So, what China owns are US securities. These are promises to pay a certain amount of US dollars on a certain date from the US government. How long that time frame is depends on the type of security. Also if they pay interest periodically or if it is a lump sum also depends. The treasury sells securities as short as a few days, to as long as 30 years. Now there's a couple important things to understand about these securities:

 

1) They are payable in US dollars. What that means is that they are susceptible to devaluation by large amounts of inflation. If they US wanted to it could simply print the money to pay them and devalue the dollar. That has consequences for the US, but also for the holders of the securities. If the dollars your securities are paid in suddenly worth 10% of what they were when you bought them, your investment goes in the crapper.

 

2) The securities are the equivalents of IOUs. There's no international agency that enforces their repayment or worth. The US just says that their full faith and credit backs them. This means the US could default on payment. That of course has serious consequences for the US, but again for the holder. Suddenly your notes are worth nothing. Countries have defaulted before, though it is rare (the US has never defaulted on payment).

 

What this means is that you China can't simply call the debt due. They can't say "We want all our money now." It is paid out when it is paid out. Also, taking any drastic action with regards to their notes could lead to the notes losing a lot or all of their value. For example they could potentially try and dump the notes, sell them to other people. Doing so would undermine fail in US securities and make it extremely difficult for the US to sell new ones. However, it would also mean that because people were so worried, China would have to take a massive loss on the notes they sell.

 

Further, something like that might even lead to a situation where they lose all their value and the US keeps its credit. Remember the credit of the US is all in what people believe. So suppose the US convinces its allies, particularly the European and Asian nations, that China is waging economic war. As such the US has to null all of China's treasury holdings. Not to worry, the US will still honour notes issued to all other countries, just not China. They pull that off, suddenly China is left with a bunch of worthless notes (well nothing actually, they are just accounting entries at the Department of Treasury) and they are in a world of hurt.

 

What we really have with the US and China, and indeed much of the global economy, is an intertwined system of economic mutually assured destruction. China could create problems for the US economy because of the large amount of US debt they hold, but to do so would create massive problems for their economy.

 

It is not at all a situation like a person faces, where you owe money in a currency you don't control, and they can come and take the items secured by the loan (like your house) if you fail to pay. Treasury notes are paid in US dollars, whatever a US dollar happens to be worth at that time, and only have value because the US says they do, there's no assets that can be seized in the event of non-payment.

 

And here, thanks to Wikipedia, you can see the main holders of US public debt, which is I guess the main type of debt you care about, and the type mentioned in the above quote about securities: http://en.wikipedia.org/wiki/United_States...reign_ownership

 

China owns about 23%

Japan owns about 21%

The rest is spread among reasonably uniformly among the world's countries.

Edited January 31, 2010 by Krezack

[Wrath of Dagon]

The issue is we consume more than we produce, because we buy goods from China and then borrow our own money back from them to buy more stuff. Also buying up our bonds is what enables China to keep their currency artificially low, which in turn makes it more attractive to us to buy Chinese products instead of domestic ones.

 

As far as the President signing laws, of course he's just as responsible for the law as any Congressman that votes for it, since he can always veto any law he disagrees with, in a sense he has a super vote.

[Walsingham]

Does it really matter which political party the politicians like to hide behind as a fake alibi for behaving like idiots? Not really.

 

- F*** the bankers who think that they are "too big to fail" and think that they are entitled to a government-backed bail-out.

- F*** the politicians who cave in to the scary-crow of "total monetary meltdown".

- F*** people like Paulson who are ex-bankers and who demanded healthy banks to sign up for a bail-out. Crooks and s***heads as him should have no political power and should not have a seat in government. F*** the a**hole who it was a sound idea of giving him governmental position.

- F*** those idiots who thought that letting depositories of people's savings(banks) to be allowed as equity in their gambling schemes (investments, as in investmentbank).

 

I agree that we accept too many excuses in general. I'm also annoyed at the way the banking failure has rallied people to their tired political dogma like some sweaty fat man hammering a tattoo on a giant idiot drum. We need level determined methodical action, not arm waving and shouting.

[Asol]

The issue is we consume more than we produce, because we buy goods from China and then borrow our own money back from them to buy more stuff. Also buying up our bonds is what enables China to keep their currency artificially low, which in turn makes it more attractive to us to buy Chinese products instead of domestic ones.

 

Consumption has to go way down and self sufficiency up, production is a problem. Employed people in the US are generally in service jobs or government positons.

 

The bond sales enable deficit spending, spending cuts don't seem forseeable when Pres Obama is talking about spending and borrowing out of a credit crisis.

China is viewed as the market controller imo because financially there is basicly no credible buyer after them to pick up the slack. For the govt to spend over its tax generated revenue someone has to accept IOUs by buying the bonds. China is propping up the bond market and as it gets dodgier they can either keep buying, slowdown stop or sell. In that sense they have the descision making power with major ramifications coming, I don't consider it unfair or misguided to say China 'owns' the bond market or things to that effect.

[Enoch]

Yes, bankers caused it all by themselves. Always good to find a scape goat to throw stones at. Btw, I read the TARP is only going to wind up costing $25 billion or so, as most of the money has been paid back.

As of 9/30/09 (the end of the Federal fiscal year), the estimated net cost of operation of the TARP (meaning, the subsidy cost of all the purchases, plus net losses already booked, plus operational costs) was $41.6 billion. Link. I haven't checked lately, but I don't think that the repayments have gotten to the "most" point yet-- some high-profile entities have gotten out, but there is a lot of money still outstanding.

 

[some stuff on Glass-Steagall and the CRA]

The CRA stuff has been pretty thoroughly debunked.

 

The repeal of Glass-Steagall did have a role in this, but a far far more important immediate cause was the decision by the SEC in 2004 to remove leverage limits on the big investment banks. At the crazy leverage levels these firms quickly got to, a 3% decline in the total value of their assets would be enough to make the whole company insolvent. Once those leverage levels were achieved, it was just a matter of time. The housing crash was the immediate cause, but if that didn't happen, something else would have done it sooner or later.

 

You heard of the Great Depression?

 

"The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (Republican of Texas) and in the House of Representatives by Jim Leach (R-Iowa) in 1999"

With the endorsement of the Clinton administration, and Clinton signed it into law.

So, if a bill is passed and a president signs it he automatically is a supporter of said bill.

Are you saying he's not?

Personally I didn't find any evidence of this, did you?

Treasury Sec'y Robert Rubin was the driving force behind support for "financial reform" in the Clinton Administration. Both parties share a fair amount of blame-- the financial industry really had both sides pretty thoroughly bought. But Rubin's recruitment (from the industry) was a product of deliberate political strategy. Back in the early '90s, the Democrats were tired of constantly getting their asses kicked in fundraising. Their solution was to refine their policies and fundraising pitches to appeal to big business in those sectors that didn't conflict with their support from unions and environmentalists. That meant Silicon Valley and Wall Street.

 

The phrase I like to borrow is that we didn't have a subprime mortgage crisis-- we've had a subprime generation of financial and political elites. I've linked this article here before, but it's worth a read if anybody missed it. (As is the authors' blog.)

[Guard Dog]

@ Enoch & Calax, please do not construe my comments as assigning blame to any political party. As Enoch correctly pointed out there is plenty to go around and policies that enabled the current "crisis" were the culmination of twenty years of small changes that in the aggregate made for big changes. I just found it curious that after spending so many years undoing the regulation they are all in a hurry to renact regulation. Apparently the lessons of 1929 do have an expiration date, The most useful apsect of Glass Stengal that I have yet to hear any politician suggest reinstating is the seperation between deposit banking and investment banking. It's removal in 1999 allowed the creation of the mergerd, too-big-to-fail super banks that found they were much more willing to take risks, I believe, knowing the government may bail them out. Of course, whats done is done and bringing that back now cannot be done without pain since, unlike 1929, these institutions did not fail.

 

@Enoch, I don't want to get into a hyperlink war with you here but I have many on my PC at home that thoughtfully highlights the very large role the CRA played in the "crisis". And, don't take this wrong but I am not impressed by any link to Slate. It is not what you might call "credible and unbiased". It would be like me posting links from World Net Daily to support a position. Only I would not do that.

[Wrath of Dagon]

Good sig.

[Guard Dog]

Good sig.

Thanks, I'm reading the book "The Founding Brothers" by J.P. Ellis. I read that in there this weekend. I'm surprised I've neaver found it before. I read a lot on that subject.

[Guard Dog]

It's got everything to do with deliberately reinforcing your own bias rather than looking at things objectively.

 

Hmmm. I get the feeling that in your terminology those who "look at things objectively" either agree with you or change their minds so that they do and the ones who do not "reinforce their own bias".

 

I have a very clear understanding of what I believe to be, not so much right and wrong, but what works and what does not. And after 38 years, a college degree, and two careers everything I have experienced and learned (oft times at dire cost) has convinced me that my political philosophy is correct.

 

The difference between you and I, Krezack, is that I understand that someone else who led a different life can come to view things a different way and I don't think less of them for it. That is why I make an effort to never be condescending or nasty in my responses on this board and others. I'm not always succesful, but I always try. Would that others did the same around here.

 

Not singling you out, because it happens a lot around here and some are much worse than others (Taks, mkreu), just sayin.

Edited February 1, 2010 by Guard Dog

[Meshugger]

It's removal in 1999 allowed the creation of the mergerd, too-big-to-fail super banks that found they were much more willing to take risks, I believe, knowing the government may bail them out. Of course, whats done is done and bringing that back now cannot be done without pain since, unlike 1929, these institutions did not fail.

 

This.

 

Having investment banks living the dream of government working as a guarantee for their failures is a serious moral hazard.