Analysis: A new financial crisis at the worst time

[Friday on my mind]

http://news.yahoo.com/s/ap/20080711...is_analysis;_ylt=Ai5iS35MFpmtawzjbLlf32ZI2ocA

WASHINGTON - The last thing the Bush White House and the rest of the country needed in these economically trying times was another financial crisis. But they got one.

The Republican administration and Democratic-run Congress now are facing the possibility that mortgage giants Fannie Mae and Freddie Mac, once staid and stable, could need a bailout or even go under."


Related


"IndyMac Seized by U.S. Regulators Amid Cash Crunch"
Bloomberg.com - 21 minutes ago July 11 (Bloomberg) -- IndyMac Bancorp Inc. , the second- biggest independent U.S. mortgage company in 2007, was seized by federal regulators after it failed to raise cash amid the worst housing crisis since the Great Depression.

http://www.bloomberg.com/apps/news?pid=20601103&sid=afqgUyWiMPuY



This is like 1929 except for the very big difference that now most of the money in banks is insured by the govt.But this will cost taxpayers a lot and the snowball affect of all this on the mortgage lenders and banking system as shown in the 1st post on fannie mae and freddie mac may be profound.The federal govt may find this all hard to cover with the existing amount of funds they have in the insurance funds.

 

[Torre82]

::a serious looking man walks into frame and stares menacingly at the camera::

Are YOU ready for the second great depression?

 

[Funkwerkz]

Good bye, Prosperity.
Welcome, Poverty.

 

[Violator79]

Goodbye, America. I'm moving to Europe.

 

[senob44]

More than ever, I am glad I am moving. Granted I'll still be in the US, but housing and cost of living is much cheaper in Wisconsin than New Jersey.

 

[gunslingingbird]

FDIC insured, yes, but what happens when the government itself is bankrupt? This is just fucking wonderful.

More than ever, I am glad I am moving. Granted I'll still be in the US, but housing and cost of living is much cheaper in Wisconsin than New Jersey.

Wisconsin? Why Wisconsin? Something wrong with Jersey?

 

[senob44]

Wisconsin? Why Wisconsin? Something wrong with Jersey?

Becks has all her family in Wisconsin, plus the rents out there cost less than half what they do in Jersey. So, approximately at the end of this month, we're making the move.

 

[gunslingingbird]

Becks has all her family in Wisconsin, plus the rents out there cost less than half what they do in Jersey. So, approximately at the end of this month, we're making the move.

Let me know if you need help with the move. I'll be glad to help. :thumbsup:

 

[D-rock]

I was reading about the debt that those two companies could possibly have in the worst case scenario, and holy crap that's a lot of money. :eek:

 

[Cpt.Obvious]

actually it might be a good thing if the economy bottoms out
we actually might see an impossibility to foreclose on peoples homes and people getting money from mortgage companies and never having to pay them back - ever.

the big problem is Richard Nixon took us off the gold standard - that started the devaluation of the dollar
so the reason the price of homes and gold are increasing is really the spending power of the US dollar decreasing.

there are solutions - but no politician will do it.
cuts taxes and return to the gold standard eliminate oil as the main source for energy - (hydrogen solar nuclear) before the worlds oil is reduced to less than one half (and we have passed the halfway mark all ready).
but the oil companies won’t ever let that happen.

however being obsolete economic and technological systems an economic crash or depression - may actually be the ideal revolution we need .
granted there will be a hard time between the crash and the recovery .
however between the two times people might actually find themselves in a position of power to change things for the better.
if you borrow millions of dollars from someone and then they die leaving no resources or ares - how do you pay them back?
if these are the systems that are responsible for the state of the economy and also the chief victims - what recourses are they going to have to get money from us?
it actually might be a precursor to great prosperity.

IMO

 

[bunker]

There are so many people and organizations, most of them serious, that predict the future of the USA (and the future of USA includes Canada) :

Economical crisis if not disaster
Ecological disasters
Social turmoil
Technology getting obsolete
Some new viruses (or diseases) epidemics
Bacteriological war
etc... etc...
The collapse of the "American Empire"

if not... the end of the world as we know it.


But we don't seem to worry that much. I read things like this in the morning paper and then go to work and talk about it to people who read the same thing and once every body said the line : "That's terrible!" we go on with our daily routine and do not seem to care or worry that much.
Or course we need our pay check... but that should not keep us from really worrying or asking for solutions. Those who do that (I think) are a small minority.

Why ? Could it be that too many people have been crying wolf in the recent years.
Remember :
Mad cow
Bird flu
SARS
E-Coli (?)
West Nile virus
Ebola (we hear of a possible case once in a while)
AIDS (To me the only real threat)

and I probably forgot some.

Far above the mad cow desease there is the mad people desease. This one is truely frightening.

 

[Cpt.Obvious]

Good point
also notice how people like Warren Buffet and Bill Gates are optimistic and somewhat excited.

the people crying wolf are those people not ready or unwilling to accept change.

 

[D-rock]

actually it might be a good thing if the economy bottoms out
we actually might see an impossibility to foreclose on peoples homes and people getting money from mortgage companies and never having to pay them back - ever.

the big problem is Richard Nixon took us off the gold standard - that started the devaluation of the dollar
so the reason the price of homes and gold are increasing is really the spending power of the US dollar decreasing.

I don't think there is enough gold on the entire planet to come close to physically backing up just our money anymore, if that's what you mean. :dunno:

 

[YMIHERE]

the big problem is Richard Nixon took us off the gold standard - that started the devaluation of the dollar
so the reason the price of homes and gold are increasing is really the spending power of the US dollar decreasing.

I don't get the reason for a return to the gold standard. Why should the money supply be determined by the production of gold mines. Since the banking systems creates money with loans of deposited funds, how would going back to the gold standard change anything?

 

[Cpt.Obvious]

because its stable - and a world standard.
our money is quickly approaching the same spending power as Japan's.
close to worthless.
our money isn't expansive - it's over stretched.
to many clever people creating services to service services
look at the TV commercials
debt agencies, reverse mortgages, home equity loans.
its borrowing against borrowing.
we don't have a lot of money.
it's the equivalent of changing a dollar into 4 quarters and saying - I have more money than before.
and how can you prove it without a standard?
yeah it works - but it sets up the economy for one Hell of a crash, especially with foreign trade - you may convince everyone in your house you have 4 dollars - but as far as the neighbors are concerned - you have one dollar.
a standard sets a bench mark to the value of a dollar.
what we have now is what happened in pre Nazi Germany when prices were inflating faster than wages could be earned .
Hitler proclaimed the value of the Deutsche Mark at so many American dollars, (created a standard) cemented the German economy and in doing so set himself in a position of unquestioning power.
we should have never left a standard to begin with.
to return to a standard will cause great problems in the current market - but not as bad as a current economic crises we are heading towards.

 

[historylover]

because its stable - and a world standard.
our money is quickly approaching the same spending power as Japan's.
close to worthless.
our money isn't expansive - it's over stretched.
to many clever people creating services to service services
look at the TV commercials
debt agencies, reverse mortgages, home equity loans.
its borrowing against borrowing.
we don't have a lot of money.
it's the equivalent of changing a dollar into 4 quarters and saying - I have more money than before.
and how can you prove it without a standard?
yeah it works - but it sets up the economy for one Hell of a crash, especially with foreign trade - you may convince everyone in your house you have 4 dollars - but as far as the neighbors are concerned - you have one dollar.
a standard sets a bench mark to the value of a dollar.
what we have now is what happened in pre Nazi Germany when prices were inflating faster than wages could be earned .
Hitler proclaimed the value of the Deutsche Mark at so many American dollars, (created a standard) cemented the German economy and in doing so set himself in a position of unquestioning power.
we should have never left a standard to begin with.
to return to a standard will cause great problems in the current market - but not as bad as a current economic crises we are heading towards.

I'm doubting that a gold "standard" would end our woes, but I do see your point.

However, I believe the longer range issue continues to be this: living beyond our means. If that be the case, then only a moderating continuation of this recession is necessary. A "great depression" will merely weaken our economy to the point where only more debt will strengthen it again. Yet, the "benefit" - if you'll allow me the term - resides in its correcting ability. Gas consumption might be out-running supply. What did this recession do? Focused our attentions towards alternate fuel sources and better driving habits. People were over-borrowing based on over-inflated housing prices. What did this recession do? Housing values "corrected" and lending practices in general became much saner.

I think that two things indicate how constricted the dollar is becoming. One: I'm graduating this December with an Accounting degree, yet even the near 40Gs that I will earn won't cover all my expenses, with rent or mortgage and groceries added. And, two: Apparently some college advisors, according to one radio commentator, are suggesting that recent college graduates remain at home during their first post-graduate year.

No wonder I enlisted in the Navy...

 

[Torre82]

MICHAEL STIPE!!

It's the end of the world as we know it.

http://www.youtube.com/watch?v=zeo0_3gN190

That's great, it starts with an earthquake, birds and snakes, an aeroplane and Lenny Bruce is not afraid.
Eye of a hurricane, listen to yourself churn - world serves its own needs, dummy serve your own needs.
Feed it off an aux speak, grunt, no, strength, Ladder start to clatter with fear fight down height.
Wire in a fire, representing seven games, a government for hire and a combat site.
Left of west and coming in a hurry with the furies breathing down your neck.
Team by team reporters baffled, trumped, tethered cropped.
Look at that low playing! Fine, then.
Uh oh, overflow, population, common food, but it'll do.
Save yourself, serve yourself.
World serves its own needs, listen to your heart bleed dummy with the rapture and the revered and the right, right.
You vitriolic, patriotic, slam, fight, bright light, feeling pretty psyched.

It's the end of the world as we know it.
It's the end of the world as we know it.
It's the end of the world as we know it and I feel fine.

 

[Becks...poamr]

Let me know if you need help with the move. I'll be glad to help. :thumbsup:

I just feel bad for whoever's going to be hauling out the four dressers, the sofabed and the computer table*.

Those are very heavy.




*I don't plan on it being me.

 

[Bigoldowls]

Goodbye, America. I'm moving to Europe.

It's not much better here in the UK.

 

[bunker]

It seems that we all think that the USA are bound to face this crisis alone. I am not sure.
The "fall of the American empire" could be pretty bad news for many countries and I think that all Occidental countries have no interest to see the USA fall, they are so closely linked to each other.
I think the USA could get some litlle help from their friends but may loose some political power in exchange. The "we-rule-the-world-the-way-we-want-it" attitude of Bush has not pleased many traditional friends of the USA but most of the time, Occidental countries share the same view and values (each having their own flavor).
A crisis in the USA will weaken everybody and it is no good news with the great challenges that are ahead.
IMHO the Occident has to prepare itself to face China (I don't mean war but political and econmical power) and (as if it was not enough) India is developping very rapidly as well (2 countries = more or less half of the population of the planet).
The presidents or prime ministers often meet these days and they talk more and more of acting together.
About every new leader elected in an European country choosed China as their 1st official trip outside their own country. I am sure they would feel better with a stronger (but less cowboy-like) USA than a weaker one.