![[dr. bob]](/dr-bob-sm.gif)
Dr. Bob is Robert Hsiung, MD,
bob@dr-bob.orgShown: posts 12 to 36 of 52. Go back in thread:
Posted by Sigismund on September 29, 2008, at 23:22:55
In reply to Re: Oops-- there goes the economy..., posted by Bobby on September 29, 2008, at 23:06:25
So the vote was against?
Posted by Nadezda on September 29, 2008, at 23:30:50
In reply to Re: Oops-- there goes the economy..., posted by Sigismund on September 29, 2008, at 23:22:55
Good grief. I can't believe they didn't pass this bill. I mean, maybe it's not the best bill, but it's the only bill we've got. Can anyone really believe that a deep recession won't be devastating to "ordinary" people who lose their jobs, and their health care, and are already in debt for mortages, credit cards, etc?
Nadezda
Posted by Sigismund on September 29, 2008, at 23:38:45
In reply to Re: Oops-- there goes the economy..., posted by Nadezda on September 29, 2008, at 23:30:50
I actually managed to read this, which is unusual.
Posted by Sigismund on September 30, 2008, at 0:09:11
In reply to Re: Oops-- there goes the economy..., posted by Sigismund on September 29, 2008, at 23:38:45
This is from an article by Guy Rundle, an Australian journo in the States.......
In a coffee shop near the Capitol building, the vote had the same effect as a hurricane, prompting strangers to talk to each other.
"You gotta put your money in silver and gold," said one guy at the counter. Another snorted.
"Silver and gold? Guns and food man, guns and food."
Someone rushed in -- "I just heard that ATM's will be shutting down by this evening," he said breathlessly. Everyone looked at each other, and went back to their coffee, the TV. And then a couple of people quickly paid their cheque and quietly slid out...
At a quarter to five, after the market had closed 777 points down -- spooky -- Treasury secretary Henry Paulson addressed a press conference outside the White House and said, well nothing, what could he say: "I will be continuing to work with Congressional leaders to get a deal they can all support..."
He sounded hoarse like he'd spent the past 72 hours on the phone -- or the past three shouting at people.
The principal question: "Was anything resembling his plan dead in the water?"
...he stonewalled. And then let slip: "Our banking system has been holding up very well, considering the pressures."
Read that again -- he's actually saying the whole banking system could go. Not "our system is solid" but "it's holding up very well".
And it's only Monday.
Posted by Bobby on October 1, 2008, at 1:00:02
In reply to Re: Oops-- there goes the economy..., posted by Sigismund on September 29, 2008, at 23:38:45
Thanks for posting that sig-----makes a lot of sense at the moment. Anger is the best word here on main street. I've no doubt that heads will roll come November. I also agreed with posters who suggested we take the money away from the super rich and put them in a chain gang for a while. they waded into this mess with their eyes and pockets wide open. I find it absurd that they could come up with a plan to "save us" in about a week that would remedy almost a decade of
wreckless and (morally)criminal activity. something has to be done--no escaping that---but the public is sick and tired of finacial whoremongers repeatingly stepping in piles of cowsh_t and coming out smelling like a rose.Oops! do I sound touchy? Civil? I don't tend to be a conspiracy theorist---but manufactured crisis wouldn't surprize me. I do have hope. I'm reminded of the words of the Japanese commander right after the attack on Pearl Harbour, "I fear we have awakened a sleeping giant." The giant being the american public---if we're lucky. Ok I'll quit preaching or pretending to make sense!
Posted by Sigismund on October 1, 2008, at 3:36:56
In reply to Re: Oops-- there goes the economy... » Sigismund, posted by Bobby on October 1, 2008, at 1:00:02
Satyajit Das (a risk analyst) apparently predicted this in
"Traders, Guns and Money. Knowns and Unknowns in the Dazzling World of Derivatives"
and was on the wireless here (I could understand him), saying that this is what de-leveraging an economy looked like, and that the best that could be done was to erect barriers to the storm on an ad hoc basis.
Posted by fayeroe on October 1, 2008, at 14:30:40
In reply to Re: Oops-- there goes the economy... » Sigismund, posted by Bobby on October 1, 2008, at 1:00:02
Fayeroe here! I agree with you!!
Posted by Nadezda on October 1, 2008, at 16:41:59
In reply to Re: Oops-- there goes the economy... » Bobby, posted by fayeroe on October 1, 2008, at 14:30:40
I don't believe it was a conspiracy; it was a combination of greed, irrational belief in the upside of bad loans, and unsecured debt, and looking the other way when problems arose. Inevitably, luck ran out, and the riskiness of years of bad business decisions finally led to this outcome. Years of decreasing to no regulation and the long period of economic expansion, led to the downturn's devastating swiftness, because the people involved lived in their own little bubble of profits and infatuation with risk.
It's hard to know what would happen if this weren't going to affect everyone-- not only wall street-- but what people on "main street' don't see is the impact of this whole thing on their lives. I'm not sure why it hasn't been adequately explained-- maybe the blindness of many people in power to the perspective of everyone else--or the shocking swiftness of the unraveling of the system.
Nadezda
Posted by Sigismund on October 1, 2008, at 17:13:10
In reply to Re: Oops-- there goes the economy..., posted by Nadezda on October 1, 2008, at 16:41:59
You have an election (when?) so soon, and members of the House of Reps may be aware of the anger of their constituents?
When did the deregulation start, anyway? Reagan? Clinton?
This is the way we deal with this sort of thing here.
Australia's richest man, Kerry Packer, who lost 40M one night gambling, appeared before the Senate and explained to the senators that he paid no tax and made no apologies for it because he could spend the money much better than they could. When he died we gave him a state funeral, with Russell Crowe officiating. Those are our values.
Posted by Sigismund on October 1, 2008, at 17:20:08
In reply to Re: Oops-- there goes the economy..., posted by Nadezda on October 1, 2008, at 16:41:59
If a market keeps rising quickly enough there may not be such a thing as a bad loan?
You think?
And vice versa, if a market is falling all loans can become bad.
Maybe?
Posted by caraher on October 1, 2008, at 22:59:07
In reply to Re: Oops-- there goes the economy..., posted by Sigismund on October 1, 2008, at 17:13:10
> You have an election (when?) so soon, and members of the House of Reps may be aware of the anger of their constituents?
Election is in November, same day as the presidential election. They're aware, all right - it's safe to say that direct constituent pressure resulted in the vote Monday, which is heartening as far as there still being some responsiveness to constituents among Congress.
> When did the deregulation start, anyway? Reagan? Clinton?
Yes.
The Reagan years were the beginning of "regulation is bad" ideology among people with government power. Some of the specific restraints relevant to this were removed while Clinton was president with a Republican Congress. Clinton arguably brought about changes that no Republican president could have simply because he was a Democrat; "welfare reform" springs to mind as something that would have caused a Republican to be raked over the figurative coals.
Posted by Sigismund on October 2, 2008, at 14:56:32
In reply to Re: Oops-- there goes the economy..., posted by caraher on October 1, 2008, at 22:59:07
This
http://www.truthout.org/100208A
is probably bad news.
And what is a reverse auction?
Posted by Sigismund on October 2, 2008, at 17:22:53
In reply to Re: Oops-- there goes the economy..., posted by Sigismund on October 2, 2008, at 14:56:32
Here's talking:
Most of my constituents did not earn a $38 million bonus in 2005 or make over $100 million in total compensation in three years, as did Henry Paulson, the current secretary of the Treasury, and former CEO of Goldman Sachs. Most of my constituents did not make $354 million in total compensation over the past five years as did Richard Fuld of Lehman Brothers. Most of my constituents did not cash out $60 million in stock after a $29 billion bailout for Bear Stearns, after that failing company was bought out by J.P. Morgan Chase. Most of my constituents did not get a $161 million severance package as E. Stanley O'Neill, former CEO Merrill Lynch did.
From Bernie Sanders' speech in the senate.
Posted by Nadezda on October 2, 2008, at 18:08:46
In reply to Re: Oops-- there goes the economy..., posted by Sigismund on October 2, 2008, at 17:22:53
About a reverse auction. I'll ask my bf tonight. Usually he gives me a pretty clear answer about this stuff. It's not right up his alley, but he might know.
About the absurageous salaries of Wall Street Execs. Yeah. It's kind of absurageous. I personally think we should all be incensed. But then-- we are. And it doesn't seem to change a thing.
Maybe Robert Reich has a point about the new populism.
Nadezda
Posted by Nadezda on October 3, 2008, at 11:37:31
In reply to Re: Oops-- there goes the economy..., posted by Sigismund on October 2, 2008, at 14:56:32
There are several forms of reverse auction, but the simplest one is pretty much what it sounds like.
The usual auction-- other than on Ebay, which uses a modified form of it-- is the "English call-out auction"-- where bidders are in a room and each one calls out their bid, from the low bid to the high bid each outbidding the last bidder. Bidding ends when no one bids. The basic form of the auction is that any bidder can make multiple bids, bidders know what other bidders have bid, there's no limit on the number of bids, by each bidder, and the price goes higher as the bids are put into place.
A reverse auction (this type) uses a bidding system where there are multiple lots (rather than one individual item) on offer. During the auction period, each bidder puts in one bid, and only one bid, for a specified number of the items. All bids are offered within the bidding period without any knowledge of the bids of other bidders-- so the bidder has to bid enough to insure that s/he wins the number of items wanted. This puts pressure on bidders to bid their highest (reservation) price, so they'll be assured of getting the items they want. Low-ball bids put them in danger of losing out on desired items.
When the bidding period ends, all bidders who have the bids above the "market-clearing" price-- the price at which all items have been sold-- will receive his or her items. So bidders at the top get all of their items, and bidders who bid less may get fewer, or none of the items they bid for.
For example, if there are 50 items, and
bidder 1 bids for 20 items at $70/item, and
bidder 2 bids for 20 items at $60.00 per item, and
bidder 3 bids for 20 items at $50/item, and
bidder 4 bids for 10 items at $50/item and
bidder 5 bids for 10 items at $40./itembidder 1 will get 20 items, at $70/item
bidder 2 will get 20 items, $60/item,
bidders 3 will get 2/3rds of the remaining items
at $50/item,
bidder 4 will get 1/3rd of those remaining items at $50/item
bidder 5 will get no items
(there are several formulas for the pricing of items, but this is one common one)Hope this explains the general idea.
Nadezda
Posted by Dinah on October 3, 2008, at 12:35:20
In reply to Re: Oops-- there goes the economy... » Sigismund, posted by Bobby on October 1, 2008, at 1:00:02
I've been fussing about this for years. Unfortunately, there is more than enough "blame" to go around. It's not just a few greedy superrich. People believed real estate was always safe. People may have been encouraged to borrow more and pay more for homes, but they did choose to do it. There are shows on "flipping houses". It's considered a good way to make money to borrow money to buy a house and resell it. People forgot the seventies. I can't understand that, because it was almost thirty years ago exactly. Not so very long.
Real estate is not always safe. No one should invest more in the stock market or in their home than they can afford to leave invested for the very long term. Being bullish is not always good. Being bearish is not always bad.
When there is a crisis, panic can make what's bad even worse in a market economy.
Leverage works both ways. It's like a teeter totter. The potential for gain is great. But every bump in the personal or national or global economy has the potential to be a disaster.
FDIC insurance rates are the same whether a bank invests conservatively or speculatively. They should be risk adjusted. If a financial institution is willing to take risks to get greater gains, they should have to bear the burden of the risks through higher premiums. High enough to actually negate the value of higher risks. Speculative ventures have no business being funded by financial institutions. They should be the purview of private individuals who are willing to personally shoulder the risk.
Deregulation is risky. The last time this happened was after the deregulation of the savings and loans. The deregulation (which started Pre-Reagan) came about for good reasons. The high interest rates savings and loans were paying out compared with the low interest rates on older home loans (not to mention the growing foreclosure rates as interest went up) led to looming disaster. So deregulation gave these entities a way to get higher rates of return to offset the low rates of return on older traditional mortgages. It was seen as a chance to survive. But savings and loans were skilled in being savings and loans. Not nearly as skilled at being banks. It's easy to think about it in terms of greed. But not all executive decisions have to do with greed. Some have to do with optimism and poor judgment. Others have to do with fear and poor judgment. Poor judgment, moreover, that masquerades as good judgment. Don't you feel darn stupid for putting your money in a low paying investment when higher paying investments are all around you and the recent past would indicate that they aren't all that risky?
We recently had the same situation. I don't know the particulars of it, admittedly. But I have heard enough from newly minted banks to know that suddenly other types of financial entities were becoming "banks". And I vaguely remember hearing something about laws being changed to allow that.
I told my son that in around thirty years, someone was going to try to convince him to buy a bigger home than he could afford. They'd tell him what an excellent investment real estate was. They'd make it seem like the most natural thing in the world. And when they did, he should remember that apparently thirty years is longer than people can remember.
Bubbles burst.
It's easy to point fingers. But doing so has the potential of shifting attention away from the lessons that people have to learn to prevent this happening again. Making it the fault of a few greedy supperrich minimizes the widespread nature of the problem. Awareness is key, and perhaps government monies would be well spent on public service announcements about basic economic theory for the foreseeable future. Do you know how many ridiculously expensive homes there are in my area? Do you know how few people make enough money to actually buy (with comfort and room for economic hiccups) homes that expensive? Believe me, in this area anyway it just doesn't match up.
This isn't a manufactured crisis. At least not manufactured as part of a conspiracy. It's been years in the making, and I have complained about it every step of the way. It was just a matter of time.
It seems to me that the important thing now is to restore confidence enough to prevent another 1929 (although it is highly unlikely to be quite on the same scope) and then enact laws to re-regulate. Maybe put in an explanation for the laws *into* the laws with stern reminders of what happens when the history is forgotten.
Just my opinion, of course. But I do remember the late seventies, early eighties. I remember the savings and loan bailout and the anger at the "greedy" individuals who were supposedly to blame. I also remember that it was a heck of a lot more complicated than that. A few people who got a lot of press did some bad things. But most others were just caught up in the market forces prevailing at the time.
People think of "Wall Street" as being the rich. Wall Street is anyone with money in a 401K or a mutual fund. I wish this crisis could easily be reduced to a late night TV joke, or a sound bite, or a political talking point. But it can't. I'm not given to panic at all. But this is a problem. A serious problem. And one we're doomed to live over and over and over again if we don't learn the lesson we should have learned thirty years ago.
The bailout is going to pass because it has to pass. They're arguing the particulars. And hopefully the cost will not be as great as it appears. This isn't a gimme. They're buying assets. Failing mortgages. Our mortgages. Those are backed by homes. Real homes. These aren't just pieces of paper. Should the government have to do this? Of course not. But why blame just the people who lent and ignore the people who borrowed? FNMA might not have been brilliantly run. But it failed because of the mortgage crisis. Not because of executive salaries.
Posted by Sigismund on October 3, 2008, at 16:26:24
In reply to Re: Reverse auction » Sigismund, posted by Nadezda on October 3, 2008, at 11:37:31
Posted by Bobby on October 3, 2008, at 23:16:59
In reply to Re: Oops-- there goes the economy..., posted by Dinah on October 3, 2008, at 12:35:20
Dinah--my friend,
You're right about so many things--and I've always been amazed at how much sense you consistantly make. However, I remember the 70s well---like, "The world is out of oil!" for example. If I remember also,people thought we were heading for another ice age. I'm hip to those who seek to control the masses through fear. Back then if my memory serves me correctly----Joe Walsh put out an album(remember those?) and the title was, "You can't argue with a sick mind." Well, I confess, I probably fall into that catagory and have suffered because of my ignorance when it comes to the nuts and bolts on some of the issues in the great game of life. I base most of my beliefs on nothing more than personal experiences and neurotic theories. Just for reference, We were having quite a load of financial difficulties a while back. It started when our mortage company --without any warning----chose to raise our payments by a thousand dollars a month----yes $1000 extra each month( and, no, it was not an adjustable loan). We tried to reason with them---but they said tough luck--that's the way it is. We got behind on our credit cards while trying to adjust to the added burden. We had always paid our bills--on time---but then--the credit card companies(both of them) told us that since we were behind on our payments that our interest rates were going up to the maximum percentage allowed--something like 28%. Not only that--but they froze our credit limits immediately--instantly--which mean't that with the added increased interest -- we went over our limits immediately as well--and that was an added charge for exceeding. Forget what they say about companies "willing to work with their customers" I tried personally--multiple times--no quarter. We were not big spenders living high. We were fortunate to rise above our troubles--but not before sinking to the lowest depths. I'm not talking about folks losing their stocks and bonds or second homes-or yet even a retirment fund. I'm talking about families who struggle to put food on the table on a daily basis. They're not thinking about Wall Street. I'm sure that most of the super rich take comfort in the fact that the blame can be spread thin enough not to put their fortunes at risk. After all, "It's the financial environment's fault" It's just when I see corporate CEOs being fired for bad performance--and then retiring with a 20+ million dollar golden parachute---it ticks me off. Just seeing a person driving around in a Hummer, while simultaneously talking on the cell phone and being rude and aggressive on the road----gives me little doubt as to why other people in the world hate us Americans. I think it's greed alright--the love of money. I'm sure that folks will come out of the woodwork trying to convince me otherwise --impressing with their vast knowledge of the global ecomomy and their superior grasp of all thing financial--and in many instances --they'll be right. But a good lawyer can get a guilty client set free or an inocent client put in prison-----night becomes day and day becomes night. The mortgage crisis did set things off----and people "should" have known better--but they have to live somewhere. Somebody had to push those loans and dreams---and who better to know the ultimate consequences of such foolish decisions than the the lenders--the predators. That's what they do for a living. Now, our government is mortaging our kids' futures to remedy --to reward---those practices.They are supposed to be leaders--not followers. And you know what? Maybe the country can't afford that kind of mortage----but the same experts are selling the same old story that fueled our present crisis.And so the vicious cycle continues and history repeats itself. Sure I'm just angry with the whole mess--and I'm lashing out. But I'd like to think that my opinion is representative of a majority of the hard working people who once made this country the envy of the rest of the world. So--I'll wallow in anger for a while at what has just transpired--until I'm capable of making a rational judgment. I guess Joe was right---"you can't argue with a sick mind."
Posted by Bobby on October 3, 2008, at 23:42:00
In reply to Re: Oops-- there goes the economy... » Dinah, posted by Bobby on October 3, 2008, at 23:16:59
I've been recieved two "Pre-approved" credit card offers this week from banks that have gone under--guess they know they'll get paid one way or the other---pad,pad,pad. Please excuse my spelling, grammar and punctuation in my previous post-----I had lots of fun in school and it's late :)
Posted by Dinah on October 3, 2008, at 23:44:44
In reply to Re: Oops-- there goes the economy... » Dinah, posted by Bobby on October 3, 2008, at 23:16:59
I'm sorry, Bobby. I should be careful with the "reply to" button. My post wasn't directed at you. I certainly don't think you have a sick mind (certainly not moreso than me) or that you can't be reasoned with. I'm just frustrated in general. The local politicians on both sides of the aisle are posturing. The local republicans were against the bill, the local democrats were for it. The local radio station is trying to explain what's going on, but it's all in bits and pieces and hard to put together.
I wasn't kidding when I said I don't panic, in general. But this crisis was looming for a while, and I'm pretty upset about it. From what I can decipher, which isn't as much as I'd like, the reason it all came to a head so quickly has something to do with marked to market asset valuation. And trying to figure out whether it's a good or bad thing is beyond my current powers.
The best I can tell from what I'm hearing is that the bailout isn't so much to shore up the market (although that surely is a consideration), but because credit markets are out of money due to the housing crash. Everything from the State of California to people applying for college loans to people trying to get mortgages or credit are affected. So the bailout is to help just the situations you're talking about. Or so they say.
I'm not sure how mortgage companies can ask for more than the amount agreed upon. I suppose the fine print might contain some clause that kicks in when the value of a house drops below a certain percentage of the outstanding loan? I have heard of people having their mortgage line of credit accounts canceled because of the drop in home values.
My general understanding is that right now mortgage companies are being fairly understanding because the last thing they want are more homes. But that may be a local thing.
It *is* a bad situation, and one that everyone should be angry about. I just wish that the anger would be directed in such a way as to make sure this never happens again. The trouble is that politicians are up for reelection every few years, and they don't seem to take a long term stance. It wouldn't be popular to make some of the changes that need to be made. But they do need to be made. Bailing out while continuing the same poor policies is just going to create another problem down the line. I really am frustrated that regulations weren't put in place after the savings and loan crisis. I really am frustrated that something as simple as risk adjusted FDIC premiums isn't a given.
I'm sorry about your personal difficulties with tight credit, Bobby. I do know it's easier to talk about things in abstract than in the particulars. That's what makes all of this so hard.
Posted by Bobby on October 4, 2008, at 0:40:49
In reply to Re: Oops-- there goes the economy... » Bobby, posted by Dinah on October 3, 2008, at 23:44:44
Dear Lord,
I'm sorry if my post was taken as ,in ANY shape ,form or fashion, an attack on you. I think you know I have only love for you. I was thinking more along the lines of the policy of Detente--as set up by Henry Kissinger---speaking of the 70s.---peaceful coexistance. My mind deteriorates at night. I've just lost my faith in justice prevailing for the middle class and lower in the chain. Money buys a lot of influence in government----I've been there and seen it on a national level on a personal level---you'd be surprized at deals made under the table---right and wrong mix and blur when the stakes are so high. this is not some psychotic theory to make my case more convincing---it happens. My youthful idealism has been shattered. Misleading and deception has become a neccesary evil in order to compete with countries who train their kids strive and often meet ungodly expectations. It's always the old smart guys who send the kidsoff to get killed---to do thier bidding. It's the same with the terrorists--ever heard of an old leader blowing himself up for allah? they train thier kids in hatred from a young age.Im sorry --but this whole thing reeks of evill. ake care dianah--one of my oldest ands trusted feinds----it's 1:36 am --and I've got to sleep..............later--when my mind 's workingww! night
Posted by Dinah on October 4, 2008, at 9:39:12
In reply to Re: Oops-- there goes the economy... » Dinah, posted by Bobby on October 4, 2008, at 0:40:49
Bobby, one of my oldest and most trusted friends, I hope we can achieve more than peaceful coexistence. Firm allies don't have to agree on *every* point.
You don't have to convince me about political decision making. I wasn't even surprised by what I read in "Bad Bet on the Bayou" although I admit I couldn't finish reading it. I hate to be distressed about things I have no control over. In fact, I know the economy is one of the factors behind my recent slide. I wasn't surprised, but I wish I could choose to put it aside as easily as the book.
As far as I am concerned, we're just fine. As always.
Posted by Bobby on October 4, 2008, at 20:49:39
In reply to Re: Oops-- there goes the economy... » Bobby, posted by Dinah on October 4, 2008, at 9:39:12
Wow! I got up this morning and read my last post---it was awful! I don't even remember writing the last part of the last post. I must have been really tired. I wasn't taking psych meds----and I don't drink alcohol. I'm sorry Dinah--and anyone else---if I alarmed you. Things are much brighter these days than a year ago for us. I just get really passionate when I see an injustice against people with no recourse in the matter. I would never ever suggest anything like communism as an alternative---but I can see what Karl Marx was talking about when he wrote about the widening gap between the rich and poor----and violent revolution . Desparate people tend to take desperate actions. I plan to vote against all incumbents this election in protest___however counter productive and illogical that may sound
Posted by Deneb on October 5, 2008, at 22:58:15
In reply to Re: Oops-- there goes the economy..., posted by Bobby on October 4, 2008, at 20:49:39
I don't understand anything about the economy. What's happening? (in laymans terms)
I read something about the US printing money to pay for printing money and about dictators, civil war and stuff.
It sounds scary? Is it?
Posted by Sigismund on October 6, 2008, at 0:55:40
In reply to Re: Oops-- there goes the economy..., posted by Deneb on October 5, 2008, at 22:58:15
People lent too much money and now that the loans cannot be repaid they are going broke, and because some of them are too big to be allowed to fail the government will assume some of the debt.
Governments around the world seem to have decided they will not allow a run on the banks, which they have done by guaranteeing deposits.
But this isn't the end of it. It should have some way to go.
Actually, the 700B is going to be borrowed from the oil producing countries and the Chinese, isn't it, and will be a debt owed to them.
So it could affect how the world sees the US dollar as a reserve currency.
That's the best I can do. I know nothing about economics either.
Go forward in thread:
Psycho-Babble Politics | Extras | FAQ
Dr. Bob is Robert Hsiung, MD,
bob@dr-bob.org
Script revised: February 4, 2008
URL: http://www.dr-bob.org/cgi-bin/pb/mget.pl
Copyright 2006-17 Robert Hsiung.
Owned and operated by Dr. Bob LLC and not the University of Chicago.