MeltUp: The Beginning Of A US Currency Crisis And Hyperinflation

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    Quote Originally Posted by EasyEJL View Post
    Obama's budget deficit the first year was more than what was spent on the war combined to date......

    No, it didn't have any significant effect on the economy, if anything it was a positive note as almost all of the equipment and materials used in the war was manufactured in the US. Our shortsighted labor unions have priced most of our production and assembly lines out of competition with imported goods, so this is one area where a war keeps manufacturing alive here. Its not like the money spent on the war got given to Iraqis and Afghanis, it was used to buy Humvee tires and repairs of equipment and ammunition.

    In any case, its not the government's "job" to put people to work - its private businesses who put people to work. The less government spends, the less it taxes people and businesses, the more money there is in a growth potential sector for new jobs to be created. Again, simple math, no flying spaghetti monster necessary to explain it.
    Lol @ flying spaghetti monster...

    As far as the labour unions go. I agree that they have not helped matters but I do think that their culpability has been exaggerated. Even without unions, production costs would have still been lower in 3rd world countries.

    Investors and upper management have been able to extract increasingly larger portions of the 'economic pie' at the expense of the working class. The latter, in order to maintain their standard of living, have had to progressively reduce the amount saved to the point where they are now borrowing - much to the pleasure of the finance industry. Of course this was not sustainable but bankers were making so much money is was impossible for them to quit.

    You are correct that the role of government should not be to directly create jobs. However it is the government's job to ensure that there is sufficient regulation in industries in order to create a sustainable economy. In that sense it has failed miserably. The actions on the part of the banking and investment community are, in my opinion, criminal. To top it all off, the government bailed them out (at guess who's expense!) This begs the question: has the government any spine left or is it completely in the pockets of the leaders of big industry?

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    Quote Originally Posted by Nitrox View Post
    Investors and upper management have been able to extract increasingly larger portions of the 'economic pie' at the expense of the working class. The latter, in order to maintain their standard of living, have had to progressively reduce the amount saved to the point where they are now borrowing - much to the pleasure of the finance industry. Of course this was not sustainable but bankers were making so much money is was impossible for them to quit.
    To me, the problem is that the working class isn't trying to maintain their standard of living, they are continuously trying to increase it. Ipods, cellphones, $100 sneakers, etc. And at the same time, average skill + so far as I can tell intelligence level of the working class has gone down rather than up. So investors (often that same working class via 401ks btw) and upper management seem to get larger pieces of the pie at expense to working class to you, but to me they are only keeping up with the working class's ever increasing standard of living proportionately.
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    Quote Originally Posted by EasyEJL View Post
    To me, the problem is that the working class isn't trying to maintain their standard of living, they are continuously trying to increase it. Ipods, cellphones, $100 sneakers, etc.
    I do agree that the working class has been living above their means and everyone seems to agree that they have had been able to do so through increasingly accessible credit. We're just arguing about the chicken and the egg.

    In the past the finance industry would not give the lower classes that amount of credit; they were classified as too risky. More recently the finance industry not only started to offer increasing levels of credit to them but also implied that they could afford it (ie. subprime mortgages). Consumers were only making decisions based on the info provided by the experts...

    Now this begs the question: should those consumers have known better? Personally, I don't think so. Industries have become more and more specialized over the years. Getting a law degree in order to tell if the lawyer that one hires is doing a good job defeats the purpose of having to hire one in the first place. This would be the same for getting a B.Comm, an accounting designation, or a CFA in order to tell if your banker or financial planner is behaving ethically. These professions are often regulated and supposedly have internal codes of ethics in order to convince clients that they will not behave 'opportunistically.' With increasing drive for more profits and the lack of regulation of the derivatives market, ethics fell by the way side.

    Most people are like sheep, they will do what you tell them, including going to the slaughterhouse...

    I was going to recommend a good, easy enough read, book on the subject
    but I can't for the life of me remember the title. I will try to track it down.
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    Quote Originally Posted by Nitrox View Post
    I do agree that the working class has been living above their means and everyone seems to agree that they have had been able to do so through increasingly accessible credit. We're just arguing about the chicken and the egg.

    In the past the finance industry would not give the lower classes that amount of credit; they were classified as too risky. More recently the finance industry not only started to offer increasing levels of credit to them but also implied that they could afford it (ie. subprime mortgages). Consumers were only making decisions based on the info provided by the experts...

    Now this begs the question: should those consumers have known better? Personally, I don't think so. Industries have become more and more specialized over the years. Getting a law degree in order to tell if the lawyer that one hires is doing a good job defeats the purpose of having to hire one in the first place. This would be the same for getting a B.Comm, an accounting designation, or a CFA in order to tell if your banker or financial planner is behaving ethically. These professions are often regulated and supposedly have internal codes of ethics in order to convince clients that they will not behave 'opportunistically.' With increasing drive for more profits and the lack of regulation of the derivatives market, ethics fell by the way side.

    Most people are like sheep, they will do what you tell them, including going to the slaughterhouse...

    I was going to recommend a good, easy enough read, book on the subject
    but I can't for the life of me remember the title. I will try to track it down.

    I disagree there The subprime mortgages weren't pushed by the finance companies as much as it was forced down their throats by the Community Investment Act. And people should understand the truth in lending form, or shouldn't sign their name to it. Its a contract, it shows the repayment amount. The people who took a variable rate with "i'll sell it or refinance it before it goes variable" deserve losing their homes. At that same point in time, I got a 5% fixed mortgage (2005). It doesn't take a math degree to understand that buying a house that is 7x your annual income won't work in the long run.
    This space for rent

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    Quote Originally Posted by EasyEJL View Post
    The people who took a variable rate with "i'll sell it or refinance it before it goes variable" deserve losing their homes.
    Not the forgiving type are you

    Ok lemme play devil's advocate here. So by extension, all those people that lost their jobs, homes (non-subprime), 401k's, etc due the collapse of the economy triggered by the subprime market also deserved it?
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    Quote Originally Posted by Nitrox View Post
    Not the forgiving type are you

    Ok lemme play devil's advocate here. So by extension, all those people that lost their jobs, homes (non-subprime), 401k's, etc due the collapse of the economy triggered by the subprime market also deserved it?
    More or less, as the 401k values if you had been contributing any amount of time were grossly overinflated (as people had been seeing 10-14% gains per year) with a well diversified portfolio losing less as well, and were unprepared savings-wise to deal with the loss of a job and keep their home. Also, if you look at the unemployment figures its only high for the unskilled/uneducated workers (this is 2009 numbers)



    so its largely people who have no real applicable skills for a 21st century non-third world economy. Not the government nor industry's fault that people refuse to spend the time and energy to educate themselves, but somehow have time to follow baseball, football, and basketball. People choose to invest their time in leisure instead of education/skill building, thats nobody's fault but their own.
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    Quote Originally Posted by EasyEJL View Post
    Seriously, can you keep the religous drivel out of economic discussions? Its one thing the bring it up during a discussion that is based on morality, but quite another on something that is based on numbers. For every someone who comes up and says "heres a solution" there is someone who says how that won't work. There doesn't need to be any vast conspiracy to explain this, its simple math.

    Carter started the CRA (Community Reinvestment Act) to "help those who were underpriviledged" buy homes - ie force banks to write loans they wouldn't normally write because the groups were high risk. Clinton expanded it greatly. Bush removed some of the regulations on ratios at banks. We experienced a huge boom in lending, a huge boom in housing, followed by an equal crash. This was something that affected worldwide markets as lots of them invested in the US markets as well, and most other countries have their currency with a base of US dollars. Just as we (up until 1928) had our currency backed by gold, other countries have their currency backed by US dollars.

    Apart from this is the constant ridiculous "progressive liberal" movement that tries to help people by making them comfortable with the education and employment level they have - removing any urge (and often value) to attempting to do better, and removing the urgency to create savings by guarnteeing a basic level of living even if you have no money. This is a worldwide phenomena, with I think the most notable example recently being Germany and Greece. Germany was forced to greatly increase immigration to create an artifically larger workforce as their birth rate was declining and the number of people on social services growing. Greece, i'm sure you saw the riots over their bankruptcy.

    None of this requires any outside agency to explain - people's expectation of what qualifies as "normal middle class living" is HUGELY different than just 20 or 30 years ago as far as amount of income spent on luxury items. A family now thinks its normal to have flat panels in the living room and every bedroom, 3 laptops in the house and cellphones for everyone 10 or up, forgetting about all the other luxury expenses like starbucks or video games. So all this extra luxury has been financed by this credit and there was never any "real" money moving around, so there is no sinister outsider who took it all.

    ^^^ Perfect. PERFECT!!
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    Quote Originally Posted by EasyEJL View Post
    I disagree there The subprime mortgages weren't pushed by the finance companies as much as it was forced down their throats by the Community Investment Act. And people should understand the truth in lending form, or shouldn't sign their name to it. Its a contract, it shows the repayment amount. The people who took a variable rate with "i'll sell it or refinance it before it goes variable" deserve losing their homes. At that same point in time, I got a 5% fixed mortgage (2005). It doesn't take a math degree to understand that buying a house that is 7x your annual income won't work in the long run.
    Don't forget also that a government sponsored entity(Freddie Mac/Fannie Mae) with an implicit assumption of a government guarantee(Later make explicit), stood by to purchase any mortgage made in the secondary market. Banks on their own, would have been more leery of lending if they didn't have a guaranteed way to offload the risk from those loans to the taxpayer basically.

    Also worth noting, it was these government entities that created the mortgage backed securities and derivatives that are so maligned in the crisis. The government also gave special privileges to these securities by letting banks buy back the securities and use those as collateral, thus giving even more incentive for shaky loans.

    Or it was all just greed, appearing for the first time, and confined to the housing industry.
  

  
 

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