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"We now stand on the verge of victory... take us over the finish line"
The Progressives have almost collapsed American in hopes that we will "fundamentally change" into a socialist nation.
From the rubble comes a glorious One World Socialist-Corporatist Order of, by and for the banking elite, their giant corporations and the political class they own and control like puppets.
In a free market businesses need us and have to earn our money with effective products and services.
But that's too much work.
By limiting our options and mandating our choices "elite" businesses can charge whatever they want for whatever products/services they're willing to provide.
Result = low quality products and inefficient services at exorbitant prices. Sometimes "purchased" beforehand through mandated fees and taxation with no recourse for non-delivery or non-performance.
everything going on in washington is not meant to fix or prevent, its meant to take over and destroy whats left. come on people, didnt you get it yet?
Damn, reasontv has been dropping the ball with these financial reform videos.
"the new regulations won't be any more effective than the ones they replaced in preventing another panic..." That's because those regulations were struck down in 1999 with the Gramm-Leach-Bliley Act better known as the "Financial Services Modernization Act".
@CharlesHorman So, the regulations somehow prevented a meltdown for 8 years after they went out of effect? That's an interesting delusion. The reality is that these regulations replace the regulations in effect in 2007.
There was a recession in 2002 if that answers your question, but nonetheless you have a flawed understanding of the cause of the recession. The recession was triggered by a collapse in the real estate market in 2006. Thus, many banks that held millions of dollars in securitized mortgages saw a decrease in the value of their assets. The GLB act of 1999 allowed these highly leveraged banks to trade in these securities. Unable to raise enough bank capital, most of these banks failed.
We need to see this issue ourselves! The politicians at the Capitol Hill don't give a damn about the recovery because of their partisan bickering. This video tells us a whole lot about the issue and encourages me to act against this regulation. Thanks for the video!
How did I know ReasonTV would blame Fannie, Freddie, and the Fed, but not even mention completely unregulated Naked Credit Default Swaps and over leveraging, which is responsible for the real expansion of credit and liquidity? The reason banks lent risky loans is because they didn't have to hold onto risk, for they could just swap it and make huge short-term profits.
That is a problem that had nothing to do with government intervention, but rather a lack thereof.
@TheAtheistAllegiance Yes and if the interest rates were higher they would not be giving out bad credit so there would not be any credit default swaps.
Incorrect. The reason Credit Default Swaps exist is to diversify risk. It didn't matter how high the interest rates were because banks were going to be hunting for anything they could securitize and gamble on. (Mortgage Backed Securities)
Higher interest rates would have only slowed the demand side, which would have been incremental anyway.
@TheAtheistAllegiance The credit default swaps would still occur, but that's not the problem. The problem with low interest rates is that people think that they can buy a house that they otherwise couldn't afford. That was the main cause of the recession, the illogical demand for housing that created a market that people thought would never go down. As recent as 2006-2007 most middle aged people that I talked to considered housing "the safest investment."
@TheAtheistAllegiance Well credit default swaps were kind of insurance on bonds because the companies did know they were going to fail because of the crappy mortgages they had given out.
Yes, which should be addressed in financial reform. If Naked Credit Default Swaps are banned, then banks have to hold on to their risk, which will encourage them to not make risky loans, verify income, etc.
Canada is the only country that didn't suffer a meltdown, and they are also the only country that bans Naked Credit Default Swaps. This is no coincidence.
@TheAtheistAllegiance I think that if Obama wanted real reform it would be in fixing the SEC, FED, Fannie, and Freddie it would be a lot better to fix the bike we have now than buying a new one.
There's a multitude of regulations that would surely secure banking and prevent anything like this from ever happening again. Whether the Republicans and Blue Dogs will be on board is obviously not the reality, so Obama will most likely sign a bill that is as comparatively weak as healthcare reform.
If you're curious as to what solutions are being proposed by politicians, economists, etc, I can send you a link. It's wiki, but it's only listing people's ideas.
@TheAtheistAllegiance You're just making stuff up. Freddie and Fannie were an FDR-created nightmare that distorted the free market. The free market didn't create Freddie and Fannie, the implicit gaurantee of statist boot-lickers did. I googled "Canada bank bailout" and found plenty of hits, America did fine before fractional reserve banking, the Federal Reserve is a european disaster that Woodrow Wilson lamented after 1913.
Canada did 1 bailout of only $75 billion. The Canadian financial system held up exceptionally well compared to other countries, and has only suffered a minor recession, which has already recovered all lost growth in GDP.
I never asserted Fannie and Freddie were private institutions.
America never had full-reserve banking, and the financial sector was incredibly unstable until the implementation of New Deal policies, along with the Fed. Look at all the panics/crashes before 1913.
@triforcelink. The cost of the bailout has fallen tremendously from an estimate of well over a trillion to hundreds of billion. Seeing that Americans want to maintain the suburban housing economy which is explicitly tied to the credit system, one could say that Obama did a "good" job. The problem is, attempting to delay depressions or letting the market fix itself up, may result to a disaster in the long run.
@triforcelink. Of course not. The bailout was supposed to maintain a highly unsustainable credit system. Most American debt are virtually useless with a high concentration in the housing market. The irony is that most of these properties are located in poorly serviced suburbs. Do remember, Americans are getting older, and these assets are becoming riskier.
US, especially, has seen the largest misallocation of post-war surplus in the history of humankind. It was put into failed instruments.
Because increasing unemployment rates, falling stocks, and GDP decreases all came to a halt shortly after the bailouts. Plus, most of Wallstreet would be under water if not for the bailouts. As much as I hate the idea behind bailouts, it is a necessary evil in this scenario.
@TheAtheistAllegiance Bailouts are a necessary evil? They're only necessary if your goal is to cause severe economic damage, which does make them evil. This will be proven to you over the next 12 months as more bailouts and "stimulus" will be required and our economy spirals into horrific stagflation.
Inflation is barely over 2% and the economy is growing, so stagflation is unlikely.
However, a double-dip recession is very possible because the proper regulations and safeguards are not being put in place due to the Republican block in the House and Senate.
@TheAtheistAllegiance maybe its that canada kept further perversions of the market down when the recession hit. It is the additional transfers of wealth from productive outlets to those currently not producing that has kept the U.S. from current growth. Allow for capital investment from people producing, and employment will go back up, with people earning more than mere survival.
Canada also suffered the least amount of losses, which has something to do with it. Also, Canada has more numerous and strict "perversions" than the US, so your hypothesis doesn't hold up.
their economy went on the basis of those existing perversions; that it would recover to a state similar to before the recession without "new regulations" would not, under market theory, be difficult. That, opposed to NEW healthcare mandates, healthcare taxes, and the possibility of new green mandates, as well as extended unemployment, Freddie, etc.
Canada was doing just as well as anyone else, so the argument that there "wasn't much to lose" is erroneous.
Unemployment went back up in 1937 due to the removal of FDR's policies, which was fueled by the Conservative Coalition in the House and Senate. New Deal policies were re-implemented in 1938, and slow recovery returned. However, it wasn't until the war that the economy fully recovered.
Also, FDR's removal of gold enabled the Fed to print money and quell deflation.
@TheAtheistAllegiance FDR ran for the Presidency by promising to govern the opposite of Hoover's interventionism into the American economy. Yet, he continued Hoover's policies and doubled-down. Investors stayed on the sideline under FDR's hostile business climate, war rationing didn't help either. Read "The Roosevelt Myth" by John T. Flynn. FDR's devaluation of the dollar by 40% was made possible by illegally stealing citizen's gold. FDR's death was the best thing ever to happen to America.
@TheAtheistAllegiance and the Great Depression, with the Federal Reserve firmly at the helm of central planning of interest rates dwarfed all previous panics. Investors sat on the sideline as FDR interfered in the economy with his alphabet agencies, ridiculous tax rates on personal income and hostile attitude toward small and big business. Do me a favor, invest all of your personal wealth in long-term U.S. Treasury bonds. Debt, debt and more debt.
The Great Depression was following a trend of worse and worse crashes as the economy was becoming increasingly industrialized. Calvin Coolidge left office months before the 1929 crash, and he was a Conservative that had lowered taxes to an all time low in history, along with pushing deregulation.
FDR's policies ended out of control deflation, lowered unemployment, consistently grew GDP, and set the country up for 3 of its most prosperous decades. (late 40's, 50's, and 60's)
@TheAtheistAllegiance Where does the Federal Reserve fit into your equation? They massively expanded the money supply between 1921 and 1929, and you're blaming it on Calvin Coolidge.
FDR lowered unemployment? From what to what? You could say that World War II lowered unemployment, but that's because we drafted millions of people into war.
Yes, he grew GDP. We all know FDR spent a lot of money.
The Federal Reserve was partially responsible for the inflated economy, but unregulated actions taken in stock exchanged is #1 to blame. Calvin Coolidge gets blame for being negligent to what was happening. He also appointed the Federal Reserve board like all presidents do.
FDR lowered unemployment from 25% to 14% from 1933 - 1937. GDP growth was also substantial. That much growth can't be done solely by government expenditure - FDR's policies benefited the private sector.
@TheAtheistAllegiance That GDP growth had naturally occurred in economic recoveries beforehand. GDP simply returned to the level it was at before the depression, that's not exactly super impressive. You're basically giving FDR credit for anything positive as if they are inherently related. The federal reserve was PARTIALLY responsible for the inflated economy! You've got to be kidding me.....
Actually, many of the panics of the 1800's resulted in depressions that lasted nearly a decade. The panics that did rebound had large market powers such as JP Morgan and JD Rockefeller step in and liquidate the market and banks by injecting their own personal funds into the market.
Such actions mimic a Central Bank's purpose, and it helped those markets rebound. This is why the US government decided to create the Federal Reserve in the first place.
@TheAtheistAllegiance It created the FED to finance war and welfare, which was supported by the businessmen, naturally. The FED causes bubbles and market misallocations by pumping in fake money into the system, causing people to malinvest. It has also ruined the dollar, which has lost over 90% of its value since the FED's glorious inception.
Market mis-allocations are going to happen whether there is a Central Bank or not. The Fed is designed to correct and dilute the effects of the business cycle; making busts less severe.
As for the dollar losing it's value 90% of it's value over more than a century, that would represent successful inflation targeting. According to most economists, a healthy annual inflation rate is approximately 1-3%.
@TheAtheistAllegiance I've reviewed the economic statistics, and I can't see any "decade long panics." Prices fell for decades at a time, but actually quality of life, average wages, and per capita income increased every decade. I wasn't talking about the entire century of the 1800's anyway. That century had its share of central banking, fiat currency production, and increased fractional reserve banking. Not to mention all of the railroad bubbles created by govt subsidy.
@tkwelge The morgans and rockefeller's did indeed step in and offer liquidity, but not because they were so noble, but because they became very wealthy anytime they were able to print money out of thin air. Each injection of new money simply set the stage for the next bubble.
@TheAtheistAllegiance unemployment went back up after 37, though, until WW2. As for the stock market, that is the stupidity of "owning" something you have little say in. Without Hoover's urging of action at the state level, and without the Smoot-Hawley Tariff, the economy would have rebounded. I wonder what governor did projects in New York to try and slow-down/stop the depression...
oh, and print enough money, you could make the nominal GDP soar substantially. They could do that; FDR took gold
@4lifejackhammer "We have tried spending money. We are spending more money than we have ever spent before(1) and it does not work. And I have just one interest, and if I'm wrong... somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good our promises.... I say after eight years of this Administration we have just as much unemployment as when we started.... And an enormous debt to boot."
So you believe low taxes was the root cause of the great depression?
WOW?
How? Exactly?
You dont think the Fed starting its open market operations in 1922, expanding the money supply with arbitrarily low interest rates the entire decade had anything to do with it huh? Hoover and FDR took what should have been a recession and turned it into a DECADE long Depression with bad policy and idiotic economic planning. Research the Depression of 1921,and why youve never heardofit
I never said taxes were the root cause behind the Depression, but rather a lack of regulatory oversight was. I mentioned taxes to reference why Coolidge was a Conservative.
I also never said the Fed didn't play a role in the Great Depression, but that it didn't play much of a role in the current recession.
@TheAtheistAllegiance so there were crashes followed by recoveries during the 20's, but first one after CC left starts the great depression. Do you see the connection?
Crashes happen b/c ppl make mistakes w/their money. When smarter people come along and do things better b/c they've learned from those mistakes the economy recovers.
FDR & BHO & GWB all prevented recoveries by propping up the ones making mistakes at the expense of those who could've been turning things around. Follow me?
Yes, I follow you, but the facts don't. It wasn't until New Deal policies were initiated that the economy started to recover. The same has been observed recently with the TARP.
In both scenarios, the economy was in severe condition until after the action was taken. Recovery is slower now than in the depression, but the recovery policies are also weaker now than the ones legislated under FDR.
@TheAtheistAllegiance I see your point, I guess we just interpret the facts differently. When stocks are plummeting and people are losing their jobs you think the government is helping when it slows that process down.
I think it's a problem when companies that can't make a profit are prevented from going bankrupt. Companies like AIG & GM are sucking up capital that could be creating new employment for people who can make money without destroying the economy in the process, like BB&T & Ford.
@TheAtheistAllegiance Coolidge had nothing to do with the Great Depression. The central planners at the Federal Reserve sat on the sidelines when the economy desperately needed an infusion of liquidity to keep it going. The Great Depression drug on because of central planning statist nonsense like the National Recovery Act. Once FDR's body was cold, the investing climate in America improved for investors. The economy recovered. "Unemplyment" improved, the draft saw to that.
Actually, the Fed made things worse after the crash by contracting the money supply, which was the opposite of what should have been done.
It wasn't until New Deal policies were enacted that the economy recovered. Unemployment rates were drastically slashed well before the war had began, and investment and growth improved greatly under FDR's policies, which lasted well through the 50's and 60's.
@TheAtheistAllegiance You're failing to acknowledge the fact that private sector employment and public sector employment growth was incredibly lopsided throughout the implementation of such policies as the New Deal. Growth of ONE kind of employment improved greatly under FDR's policies and lasts still today. Unemployment doesn't actually become effectively reduced if its cut through implementation of public projects. I.e. the census today.
FDR's policies did benefit the private sector in job creation.
However, it doesn't really matter because public employment programs rejuvenate the economy in the same manner that private employment does. Employed people have money to spend, businesses gain revenue and ramp up production, hire more people to meet the rise in demand, and ultimately growth in GDP ensues, along with a stabilized and expanding economy.
@TheAtheistAllegiance You should read the "Great Myths of The Great Depression by Lawrenece Reed. "Freed from the worst of the New Deal, the economy showed signs of life. Unemployment dropped to 18 percent in 1935, 14 percent in 1936 and even lower in 1937. But by 1938, it was back up to nearly 20 percent as the economy slumped again."
The economy suffered a double-dip recession because of the Conservative Coalition in the House and Senate, which was successful in removing many of FDR's New Deal policies. The cause of the slump was a premature slash in spending when the economy wasn't ready for it.
@TheAtheistAllegiance lol what history are you talking about? Actually unemployment was at 17% in 1938 and just started dipping down after we started massively selling weapon and food supplies to Europe for "their" oncoming war. Unemployment was at 24% when FDR took over. A 7% drop in 5 years is hardly a recovery, when these keynesian government intervention policies were inacted in order to lower it below 10 percent by 1937. WW2 brought us out, New deal dug us deeper
You contradict yourself in stating that one Keynesian policy is effective, but another isn't when they are one in the same. War has the same effect as New Deal programs, it is just different in method. It is massive government expenditure that employs millions and rejuvenates an abysmal demand.
Not only are your numbers wrong, but you ironically just asserted that war helped the economy while Keynesian economics didn't, when in fact, war is a Keynesian policy on steroids.
Campaign finance reform will solve the dangerous conflict of interest produced the by the Military Industrial Complex. Other than that, what alternative is there?
Germany was taken over by Hitler. Don't you think that had something to do with WWII?
@TheAtheistAllegiance I think Fear and foreign reparations by the treaty of versailles took over Germany and led many to follow Hitler's brand of socialism that had more to with WWII than a lack of alternatives
@TheAtheistAllegiance What? How am I wrong? Give me some statistics that prove I'm wrong. I'm sure you wont find any tho. I wasnt saying our fighting in the war brought us out, it was the buildup of nations prior to our entry where they bought many supplies from the U.S. that took us out of the depression.
@TheAtheistAllegiance, Canada's meltdown is yet to come. They have the world's second largest housing bubble (behind Australia) on a non-affordability basis. Vancouver is the least affordable city of all. Check out "Crack Shack or Mansion" for a depressing (but sobering) illustration of Canada's massive real estate bubble.
This is old news. Canada's housing prices have already subsided, and that was caused by investors herding to Canada, for it was one of the only countries that didn't suffer a real estate bubble/burst.
Canada has some of the strictest banking regulations in the world, and is ranked #1 in the world for safe and efficient banking, right behind Sweden.
@TheAtheistAllegiance Also, the thing that makes banks interconnected and dangerous at the same time is the fact that we have a fiat currency and a banking system backed with little reserves. All banks are insolvent all of the time. If everybody called in their loans and emptied their bank accounts right now, the whole system would collapse. No amount of regulation will save us if we have fractional reserve banking in play.
Fannie and Freddie can make all the loans they want. If they aren't sub-prime, there won't be problems.
I agree the Fed's low interest rates didn't help the situation, but that isn't the fundamental issue plaguing the financial sector.
Also, if fractional reserve banking and fiat currency is banned, credit markets will go extinct, and monetary expansion will be impossible when tied to a commodity. If it weren't for the increased money supply, we would be in deflationary hell.
@TheAtheistAllegiance Even if they aren't "subprime" unnatural increases in home lending were a problem. Especially considering that a lot of them were ARM loans.
Credit markets would not go extinct. They would be different, but lending would not cease. Several people have written on the subject. I also completely disagree with the "deflationary hell" comment. I simply can't get into the intricacies in a youtube comment page, sorry.
@TheAtheistAllegiance Focusing purely on "Subprime" loans completely misses the point. There were plenty of ALMOST sub prime loans that would be wiped out in the event of any disturbance, such as unemployment, adjustments to interest rates, and perceived decreases in home value. Even none subprime borrowers gave up on their houses when they figured that paying their mortgage was no longer meaningful.
Actually, focusing anywhere but sub-prime loans is what misses the point. ARM's are perfectly fine if the borrower has prime credit. Prime borrowers had to leave their mortgages because of the shock waves that went through the US economy when the sub-prime market exploded. If there had been regulations on derivatives and lending standards, the market would be fine right now.
Once again, it points back to the last decade of substantial deregulation under Clinton and Bush.
@TheAtheistAllegiance Overall regulations INCREASED over the last 20 years. There were some key deregulations that occurred, yes. I also agree that tighter regulations might have avoided disaster. However, the low interest rates were the prime driver of demand and any regulation would essentially just be making up for the failures of fractional reserve banking and low interest rates.
Look at the statistics. Option ARMS are defaulting at the same rate as subprime.
@tkwelge Prime ARMs are likely to default anytime housing values go down, because people are unable to "flip" their houses. In many cases, ARM defaults are more likely than subprime defaults.
@tkwelge Oops, ARMs aren't defaulting at the same RATE. What I meant to say is that Prime Mortgages with adjustable rates are defaulting at a similarly increased rate. Prime foreclosures outnumber the subprime foreclosures and have been outnumber subprime foreclosures since the beginning of the crisis. If what you were saying were true, you'd expect to see a huge number of subprime mortgage defaults, followed by a six month lag, and a sudden increase in the number of prime defaults.
@tkwelge What you actually see is an increase in prime and subprime mortgages at the same time, with the the vast majority of the early defaults being ARMs in both cases. Clearly, the real reason that the defaults began to occur is that people with ARMs realized they wouldn't be able to flip their houses before the interest rate went up and decided to get out of dodge.
US regulation of the financial sector has been increasingly deregulated since the 70's - not increased.
ARM's were all defaulting, but the reason prime mortgages also defaulted was because the entire economy crashed because of sub-prime loans. The prime borrowers who walked away from their homes were victims of a crisis caused by loose lending standards that allowed an environment of weak transparency, highly leveraged financial transactions, moral hazards, and sub-prime loans.
@TheAtheistAllegiance I'd point out that the total number of regulations has increased, but I digress.
I already pointed out that Prime mortgages made up a larger number of the total defaults early into the crisis before total subprimed defaults had even hit their 2002-2003 levels that were actually higher. I could just repeat myself, but I won't.
Sub-prime loans made up approximately 20% of the total mortgage market, yet accounted for nearly half of all foreclosures, which is incriminating. Because ARM's are based on interest rates - which are currently very low - ARM delinquencies should be decreasing, but they're not. This points to ARM's being the victims of economic spillover, but not the cause thereof.
It's not the ARM's, but rather the risk of the borrower that has a more significant effect on the chance of default.
@TheAtheistAllegiance Arm defaults aren't based on the interest rate level, but the ability of the owners to flip their houses before any adjustments. Many ARMs were set up with low initial payments, as a short term trade, but since the demand fell out of the market, people with ARMs have nowhere to go but default.
When you point out that prime mortgages made up a larger outstanding number of foreclosures, you're assuming that they had equal market share with sub-prime loans. The fact is, sub-prime loans only made up 20% of the market.
You shouldn't be repeating yourself because you would be repeating a miscalculation on your part.
@TheAtheistAllegiance It doesn't make a difference what proportion of the market subprime was. You're confusing the issue. Proportionality doesn't play a role here. The fact of the matter is that larger number of prime mortgages were defaulting when subprime mortgages were defaulting. I'm well aware that subprime is a smaller part of the market, but in this issue, it is the actual number of defaults that matter,not defaults as a portion of the subprime and prime markets as if they weren't...
@tkwelge .... in the same market. You're also ignoring the fact that subprime defaults were higher in 2002 and 2003 than they were in the beginning of the meltdown. The vast majority of defaults are ARM's whether prime or subprime.
@TheAtheistAllegiance Yes, CURRENT sub prime defaults are higher now, but they were lower than their peak, which was actually in 2002-2003 well until prime defeats had started taking off in a way that they didn't back in 9/11.
@tkwelge Sorry, that came out a little difficult. Subprime defaults jumped after 9/11 to a level that was higher than they were in much of 2008 when prime defaults started increasing too. This crisis supposedly began in 2007 and 2008 (supposedly taking off in 2008) and back then subprime defaults were below their 2002-2003 level. Back in 2002-2003 there was no significant increase in prime defaults.
You must be getting bad information. There were approximately 100K total defaults in 2003, and 450K in early 2008 in the state of California. (Nationwide rates similar) 2003 had nearly the lowest number of defaults since the 1993 recession.
Prime mortgages have been increasingly failing over the last few years, which further indicates that prime borrowers are defaulting due to issues with unemployment, low revenue, etc. Prime mortgages weren't the cause of the housing crisis.
@TheAtheistAllegiance I never said that the total number of defaults was higher in 2003. I said that subprime loans were more likely to default in 2002-2003 than they were in the beginning of the current housing crisis when Prime defaults began to rise in kind.
Prime defaults were rising ever since before the beginning of the official start of the Recession. That was my point.The truth doesn't follow your narrative of an increase in Subprime defaults followed by a lag, then prime defaults.
Prime defaults didn't start until the collapse of the sub-prime market. There was no rise in defaults until the rapid decline in the US economy, which wouldn't take much of a lag either way.
Like I said, you're probably getting bad information. Every one of the hundreds of charts I've looked at (including searching for the one you pointed to) have negated what you're asserting.
The proportion matters because it shows what the underlying cause of the crisis was. If ARM's were the cause instead of sub-prime loans, prime loans would make up 80% of delinquency. ARM's were caught in the tsunami created by the sub-prime market that imploded.
Also, ARM's are definitely based on interest rates. When the Fed started jacking up interest rates, every sub-prime borrower with an ARM defaulted, and the ensuing recession caused the prime borrowers to default as well.
@TheAtheistAllegiance Well, every subprime with an ARM didn't necessarily default but that is besides the point...
This is a hard point to get across in a comment section, but in this case it is the proportion of the number of defaults that matters and where their source is, not their proportion of their respective markets, because they are part of the SAME market. There were plenty of PRIME loans that were essentially built on shakier grounds than many subprime loans.
@tkwelge I've already mentioned that if you look at the graphs of foreclosures, subprime and prime defaults began increasing AT THE SAME TIME. There was NO lag between subprime and prime defaults and in both cases the determining factor was whether or not an ARM was involved.
@tkwelge These graphs are surprisingly difficult to find on the internet a second time. Try googling: prime foreclosures greater than subprime and click on the first link. It has a neat little chart. In the first part of 2008, subprime foreclosures were actually declining as prime foreclosures were increasing, and they both started increasing in the same early point. There is another graph on Reason, but i can't post links here and I can't find it on google in an easy way.
@TheAtheistAllegiance Fannie and Freddie was integral in securitization, and they existed with the express purpose of increasing home ownership rates. Yes, they had little subprime exposure, but that is besides the point. The fact is that fannie and freddie made it easier for Gobs of people to get into housing at lower rates than they would have. Fannie and Freddie securitized those loans and low interest rates kept illogical demand in the housing sector rising.
@Justwosweet What's with all of the libertarian hate? We have opposed every war since at least vietnam and the war on drugs. You can't blame the libertarians for any of the problems that we are in now.
I was studying in Mexico this year and ended up doing a presentation on the 2008 crisis for my Macroeconomics class. My teacher had commented early in the semester that the housing bust was a "failure of capitalism", and then was surprised when I illustrated the government's not-so-small role in it all.
@tivla Have you heard Peter Schiif's 2006 Mortgage Bankers conference speech in which he warned about the upcoming financial crisis? The Federal Reserve creating artifical demand and the federal gov't protecting financial institutions against loses is what lead banks to give mortgages to pratically anyone who wanted them regardless of their credit.
"Never underestimate the difficulty of changing false beliefs by facts"- Henry Rosovsky.
We didn't discuss it at all afterward as it was a final presentation. I hardly think she changed her mind, but I was sure to be thorough with regard to what really happened. The most I can say was that she seemed to make thoughtful expressions and did indicate that she had learned something. A couple classmates seemed interested, too, so I felt good about it.
Definitely true. Attitudes cannot be changed overnight.
felpaluche 2 months ago
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Markos4469 1 year ago
This is a good simple explanation of bubbles
Drivenk 1 year ago
The clip of Tax Cheating Timmy makes me bust up laughing.... and this is our Treasury Secretary!
bittergunowner12 1 year ago
This guy is a dictator with Congress in his pocket.
gunguy54 1 year ago
"We now stand on the verge of victory... take us over the finish line"
The Progressives have almost collapsed American in hopes that we will "fundamentally change" into a socialist nation.
From the rubble comes a glorious One World Socialist-Corporatist Order of, by and for the banking elite, their giant corporations and the political class they own and control like puppets.
yakyakyak69 1 year ago
In a free market businesses need us and have to earn our money with effective products and services.
But that's too much work.
By limiting our options and mandating our choices "elite" businesses can charge whatever they want for whatever products/services they're willing to provide.
Result = low quality products and inefficient services at exorbitant prices. Sometimes "purchased" beforehand through mandated fees and taxation with no recourse for non-delivery or non-performance.
continuityofliberty 1 year ago 2
Sadly, I think this post is 100% true.
trime1851 1 year ago 2
The message is simple and the reasons are clear, Impeach Oblahblah !
hobo59 1 year ago
everything going on in washington is not meant to fix or prevent, its meant to take over and destroy whats left. come on people, didnt you get it yet?
wdcsucks1 1 year ago 15
@wdcsucks1 One would think individuals would understand that government is not their parents but rather is their adversary.
Mechanized0 1 year ago
it's unconstitutional too..
littlerocken 1 year ago 2
Fight Terrorism: Shoot a Banker!!
abe2517 1 year ago
thumbs up
yougiberishtube 1 year ago
Nick you ROCK!
blummedia 1 year ago
"will be" ??? Are and always ... not will be.
adamitshelanu 1 year ago
Yay, Reason!
freesk8 1 year ago
Government = taxation = coerced = violence. Only chaos and destruction can come from the initiation of violence. Just look around.
furyofbongos 1 year ago
Yes, yes, yes!
UndeadProspekt 1 year ago
Nice video on the introduction to the problem.
Chainedorlo 1 year ago
Turbo tax?! Oh my...
WHEN can we fire EVERY single member of our government and start again?!
yamagoof 1 year ago
its the same game; we need more regulation to fix the mistakes regulation was supposed to fix. We need more! LET US HAVE ALL YOUR MONEY!!!!
...
Terribly stupid.
4lifejackhammer 1 year ago
Damn, reasontv has been dropping the ball with these financial reform videos.
"the new regulations won't be any more effective than the ones they replaced in preventing another panic..." That's because those regulations were struck down in 1999 with the Gramm-Leach-Bliley Act better known as the "Financial Services Modernization Act".
CharlesHorman 1 year ago
@CharlesHorman So, the regulations somehow prevented a meltdown for 8 years after they went out of effect? That's an interesting delusion. The reality is that these regulations replace the regulations in effect in 2007.
evensgrey 1 year ago
@evensgrey
There was a recession in 2002 if that answers your question, but nonetheless you have a flawed understanding of the cause of the recession. The recession was triggered by a collapse in the real estate market in 2006. Thus, many banks that held millions of dollars in securitized mortgages saw a decrease in the value of their assets. The GLB act of 1999 allowed these highly leveraged banks to trade in these securities. Unable to raise enough bank capital, most of these banks failed.
CharlesHorman 1 year ago
@CharlesHorman
You are 100% correct. That was among numerous financial deregulatory policies over the last decade.
TheAtheistAllegiance 1 year ago
Turbo Tim needs a prison cell!
ricadrew 1 year ago 11
omg! wtf! spot on! concise!! brilliant !!!
averagejoe040 1 year ago
This regime needs to go!!!!
Sunshine484848 1 year ago
We have elected the best liars money can buy!
MsWanderer1 1 year ago
Let the paper die.
TimothyBragan 1 year ago
We need to see this issue ourselves! The politicians at the Capitol Hill don't give a damn about the recovery because of their partisan bickering. This video tells us a whole lot about the issue and encourages me to act against this regulation. Thanks for the video!
jeripole 1 year ago
How did I know ReasonTV would blame Fannie, Freddie, and the Fed, but not even mention completely unregulated Naked Credit Default Swaps and over leveraging, which is responsible for the real expansion of credit and liquidity? The reason banks lent risky loans is because they didn't have to hold onto risk, for they could just swap it and make huge short-term profits.
That is a problem that had nothing to do with government intervention, but rather a lack thereof.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance Yes and if the interest rates were higher they would not be giving out bad credit so there would not be any credit default swaps.
dukee155 1 year ago
@dukee155
Incorrect. The reason Credit Default Swaps exist is to diversify risk. It didn't matter how high the interest rates were because banks were going to be hunting for anything they could securitize and gamble on. (Mortgage Backed Securities)
Higher interest rates would have only slowed the demand side, which would have been incremental anyway.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance The credit default swaps would still occur, but that's not the problem. The problem with low interest rates is that people think that they can buy a house that they otherwise couldn't afford. That was the main cause of the recession, the illogical demand for housing that created a market that people thought would never go down. As recent as 2006-2007 most middle aged people that I talked to considered housing "the safest investment."
tkwelge 1 year ago
@TheAtheistAllegiance Well credit default swaps were kind of insurance on bonds because the companies did know they were going to fail because of the crappy mortgages they had given out.
dukee155 1 year ago
@dukee155
Yes, which should be addressed in financial reform. If Naked Credit Default Swaps are banned, then banks have to hold on to their risk, which will encourage them to not make risky loans, verify income, etc.
Canada is the only country that didn't suffer a meltdown, and they are also the only country that bans Naked Credit Default Swaps. This is no coincidence.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance I think that if Obama wanted real reform it would be in fixing the SEC, FED, Fannie, and Freddie it would be a lot better to fix the bike we have now than buying a new one.
dukee155 1 year ago
@dukee155
There's a multitude of regulations that would surely secure banking and prevent anything like this from ever happening again. Whether the Republicans and Blue Dogs will be on board is obviously not the reality, so Obama will most likely sign a bill that is as comparatively weak as healthcare reform.
If you're curious as to what solutions are being proposed by politicians, economists, etc, I can send you a link. It's wiki, but it's only listing people's ideas.
No bias.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance You're just making stuff up. Freddie and Fannie were an FDR-created nightmare that distorted the free market. The free market didn't create Freddie and Fannie, the implicit gaurantee of statist boot-lickers did. I googled "Canada bank bailout" and found plenty of hits, America did fine before fractional reserve banking, the Federal Reserve is a european disaster that Woodrow Wilson lamented after 1913.
order9066 1 year ago
@order9066
Canada did 1 bailout of only $75 billion. The Canadian financial system held up exceptionally well compared to other countries, and has only suffered a minor recession, which has already recovered all lost growth in GDP.
I never asserted Fannie and Freddie were private institutions.
America never had full-reserve banking, and the financial sector was incredibly unstable until the implementation of New Deal policies, along with the Fed. Look at all the panics/crashes before 1913.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance how do you know that the bailout actually did anything? maybe the economy picked itself up.
triforcelink 1 year ago
@triforcelink. The cost of the bailout has fallen tremendously from an estimate of well over a trillion to hundreds of billion. Seeing that Americans want to maintain the suburban housing economy which is explicitly tied to the credit system, one could say that Obama did a "good" job. The problem is, attempting to delay depressions or letting the market fix itself up, may result to a disaster in the long run.
raptorkiller2k5 1 year ago
@raptorkiller2k5 youre assuming that it was the bailout which caused the recovery.
triforcelink 1 year ago
@triforcelink. Of course not. The bailout was supposed to maintain a highly unsustainable credit system. Most American debt are virtually useless with a high concentration in the housing market. The irony is that most of these properties are located in poorly serviced suburbs. Do remember, Americans are getting older, and these assets are becoming riskier.
US, especially, has seen the largest misallocation of post-war surplus in the history of humankind. It was put into failed instruments.
raptorkiller2k5 1 year ago
@triforcelink
Because increasing unemployment rates, falling stocks, and GDP decreases all came to a halt shortly after the bailouts. Plus, most of Wallstreet would be under water if not for the bailouts. As much as I hate the idea behind bailouts, it is a necessary evil in this scenario.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance Bailouts are a necessary evil? They're only necessary if your goal is to cause severe economic damage, which does make them evil. This will be proven to you over the next 12 months as more bailouts and "stimulus" will be required and our economy spirals into horrific stagflation.
electroplate 1 year ago 2
@electroplate
Inflation is barely over 2% and the economy is growing, so stagflation is unlikely.
However, a double-dip recession is very possible because the proper regulations and safeguards are not being put in place due to the Republican block in the House and Senate.
TheAtheistAllegiance 1 year ago
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IFknHateUTube 1 year ago
@TheAtheistAllegiance maybe its that canada kept further perversions of the market down when the recession hit. It is the additional transfers of wealth from productive outlets to those currently not producing that has kept the U.S. from current growth. Allow for capital investment from people producing, and employment will go back up, with people earning more than mere survival.
4lifejackhammer 1 year ago
@4lifejackhammer
Canada also suffered the least amount of losses, which has something to do with it. Also, Canada has more numerous and strict "perversions" than the US, so your hypothesis doesn't hold up.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance "suffered the least amount of losses."
hard to lose what isn't there.
"More and stricter perversions."
their economy went on the basis of those existing perversions; that it would recover to a state similar to before the recession without "new regulations" would not, under market theory, be difficult. That, opposed to NEW healthcare mandates, healthcare taxes, and the possibility of new green mandates, as well as extended unemployment, Freddie, etc.
Canada did the least.
4lifejackhammer 1 year ago
@4lifejackhammer
Canada was doing just as well as anyone else, so the argument that there "wasn't much to lose" is erroneous.
Unemployment went back up in 1937 due to the removal of FDR's policies, which was fueled by the Conservative Coalition in the House and Senate. New Deal policies were re-implemented in 1938, and slow recovery returned. However, it wasn't until the war that the economy fully recovered.
Also, FDR's removal of gold enabled the Fed to print money and quell deflation.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance FDR ran for the Presidency by promising to govern the opposite of Hoover's interventionism into the American economy. Yet, he continued Hoover's policies and doubled-down. Investors stayed on the sideline under FDR's hostile business climate, war rationing didn't help either. Read "The Roosevelt Myth" by John T. Flynn. FDR's devaluation of the dollar by 40% was made possible by illegally stealing citizen's gold. FDR's death was the best thing ever to happen to America.
order9066 1 year ago 8
@TheAtheistAllegiance and the Great Depression, with the Federal Reserve firmly at the helm of central planning of interest rates dwarfed all previous panics. Investors sat on the sideline as FDR interfered in the economy with his alphabet agencies, ridiculous tax rates on personal income and hostile attitude toward small and big business. Do me a favor, invest all of your personal wealth in long-term U.S. Treasury bonds. Debt, debt and more debt.
order9066 1 year ago
@order9066
The Great Depression was following a trend of worse and worse crashes as the economy was becoming increasingly industrialized. Calvin Coolidge left office months before the 1929 crash, and he was a Conservative that had lowered taxes to an all time low in history, along with pushing deregulation.
FDR's policies ended out of control deflation, lowered unemployment, consistently grew GDP, and set the country up for 3 of its most prosperous decades. (late 40's, 50's, and 60's)
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance Where does the Federal Reserve fit into your equation? They massively expanded the money supply between 1921 and 1929, and you're blaming it on Calvin Coolidge.
FDR lowered unemployment? From what to what? You could say that World War II lowered unemployment, but that's because we drafted millions of people into war.
Yes, he grew GDP. We all know FDR spent a lot of money.
MooseOfReason 1 year ago
@MooseOfReason
The Federal Reserve was partially responsible for the inflated economy, but unregulated actions taken in stock exchanged is #1 to blame. Calvin Coolidge gets blame for being negligent to what was happening. He also appointed the Federal Reserve board like all presidents do.
FDR lowered unemployment from 25% to 14% from 1933 - 1937. GDP growth was also substantial. That much growth can't be done solely by government expenditure - FDR's policies benefited the private sector.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance That GDP growth had naturally occurred in economic recoveries beforehand. GDP simply returned to the level it was at before the depression, that's not exactly super impressive. You're basically giving FDR credit for anything positive as if they are inherently related. The federal reserve was PARTIALLY responsible for the inflated economy! You've got to be kidding me.....
tkwelge 1 year ago
@TheAtheistAllegiance In fact, massive recoveries took place during the 1800's under the classical gold standard after 1879.
tkwelge 1 year ago
@tkwelge
Actually, many of the panics of the 1800's resulted in depressions that lasted nearly a decade. The panics that did rebound had large market powers such as JP Morgan and JD Rockefeller step in and liquidate the market and banks by injecting their own personal funds into the market.
Such actions mimic a Central Bank's purpose, and it helped those markets rebound. This is why the US government decided to create the Federal Reserve in the first place.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance It created the FED to finance war and welfare, which was supported by the businessmen, naturally. The FED causes bubbles and market misallocations by pumping in fake money into the system, causing people to malinvest. It has also ruined the dollar, which has lost over 90% of its value since the FED's glorious inception.
Soonerliberty 1 year ago
@Soonerliberty
Market mis-allocations are going to happen whether there is a Central Bank or not. The Fed is designed to correct and dilute the effects of the business cycle; making busts less severe.
As for the dollar losing it's value 90% of it's value over more than a century, that would represent successful inflation targeting. According to most economists, a healthy annual inflation rate is approximately 1-3%.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance I've reviewed the economic statistics, and I can't see any "decade long panics." Prices fell for decades at a time, but actually quality of life, average wages, and per capita income increased every decade. I wasn't talking about the entire century of the 1800's anyway. That century had its share of central banking, fiat currency production, and increased fractional reserve banking. Not to mention all of the railroad bubbles created by govt subsidy.
tkwelge 1 year ago
@tkwelge The morgans and rockefeller's did indeed step in and offer liquidity, but not because they were so noble, but because they became very wealthy anytime they were able to print money out of thin air. Each injection of new money simply set the stage for the next bubble.
tkwelge 1 year ago
@TheAtheistAllegiance unemployment went back up after 37, though, until WW2. As for the stock market, that is the stupidity of "owning" something you have little say in. Without Hoover's urging of action at the state level, and without the Smoot-Hawley Tariff, the economy would have rebounded. I wonder what governor did projects in New York to try and slow-down/stop the depression...
oh, and print enough money, you could make the nominal GDP soar substantially. They could do that; FDR took gold
4lifejackhammer 1 year ago
@4lifejackhammer "We have tried spending money. We are spending more money than we have ever spent before(1) and it does not work. And I have just one interest, and if I'm wrong... somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good our promises.... I say after eight years of this Administration we have just as much unemployment as when we started.... And an enormous debt to boot."
blummedia 1 year ago
@TheAtheistAllegiance
So you believe low taxes was the root cause of the great depression?
WOW?
How? Exactly?
You dont think the Fed starting its open market operations in 1922, expanding the money supply with arbitrarily low interest rates the entire decade had anything to do with it huh? Hoover and FDR took what should have been a recession and turned it into a DECADE long Depression with bad policy and idiotic economic planning. Research the Depression of 1921,and why youve never heardofit
jjrglobal 1 year ago
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TheAtheistAllegiance 1 year ago
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TheAtheistAllegiance 1 year ago
This has been flagged as spam show
@jjrglobal
I never said taxes were the root cause behind the Depression, but rather a lack of regulatory oversight was. I mentioned taxes to reference why Coolidge was a Conservative.
I also never said the Fed didn't play a role in the Great Depression, but that it didn't play much of a role in the current recession.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance so there were crashes followed by recoveries during the 20's, but first one after CC left starts the great depression. Do you see the connection?
Crashes happen b/c ppl make mistakes w/their money. When smarter people come along and do things better b/c they've learned from those mistakes the economy recovers.
FDR & BHO & GWB all prevented recoveries by propping up the ones making mistakes at the expense of those who could've been turning things around. Follow me?
natdavi 1 year ago 2
@natdavi
Yes, I follow you, but the facts don't. It wasn't until New Deal policies were initiated that the economy started to recover. The same has been observed recently with the TARP.
In both scenarios, the economy was in severe condition until after the action was taken. Recovery is slower now than in the depression, but the recovery policies are also weaker now than the ones legislated under FDR.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance I see your point, I guess we just interpret the facts differently. When stocks are plummeting and people are losing their jobs you think the government is helping when it slows that process down.
I think it's a problem when companies that can't make a profit are prevented from going bankrupt. Companies like AIG & GM are sucking up capital that could be creating new employment for people who can make money without destroying the economy in the process, like BB&T & Ford.
natdavi 1 year ago
@TheAtheistAllegiance Coolidge had nothing to do with the Great Depression. The central planners at the Federal Reserve sat on the sidelines when the economy desperately needed an infusion of liquidity to keep it going. The Great Depression drug on because of central planning statist nonsense like the National Recovery Act. Once FDR's body was cold, the investing climate in America improved for investors. The economy recovered. "Unemplyment" improved, the draft saw to that.
order9066 1 year ago
@order9066
Actually, the Fed made things worse after the crash by contracting the money supply, which was the opposite of what should have been done.
It wasn't until New Deal policies were enacted that the economy recovered. Unemployment rates were drastically slashed well before the war had began, and investment and growth improved greatly under FDR's policies, which lasted well through the 50's and 60's.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance You're failing to acknowledge the fact that private sector employment and public sector employment growth was incredibly lopsided throughout the implementation of such policies as the New Deal. Growth of ONE kind of employment improved greatly under FDR's policies and lasts still today. Unemployment doesn't actually become effectively reduced if its cut through implementation of public projects. I.e. the census today.
HatemongerNTBSF1129 1 year ago
@HatemongerNTBSF1129
FDR's policies did benefit the private sector in job creation.
However, it doesn't really matter because public employment programs rejuvenate the economy in the same manner that private employment does. Employed people have money to spend, businesses gain revenue and ramp up production, hire more people to meet the rise in demand, and ultimately growth in GDP ensues, along with a stabilized and expanding economy.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance You should read the "Great Myths of The Great Depression by Lawrenece Reed. "Freed from the worst of the New Deal, the economy showed signs of life. Unemployment dropped to 18 percent in 1935, 14 percent in 1936 and even lower in 1937. But by 1938, it was back up to nearly 20 percent as the economy slumped again."
order9066 1 year ago
@order9066
The economy suffered a double-dip recession because of the Conservative Coalition in the House and Senate, which was successful in removing many of FDR's New Deal policies. The cause of the slump was a premature slash in spending when the economy wasn't ready for it.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance lol what history are you talking about? Actually unemployment was at 17% in 1938 and just started dipping down after we started massively selling weapon and food supplies to Europe for "their" oncoming war. Unemployment was at 24% when FDR took over. A 7% drop in 5 years is hardly a recovery, when these keynesian government intervention policies were inacted in order to lower it below 10 percent by 1937. WW2 brought us out, New deal dug us deeper
ltkhokie1 1 year ago
@ltkhokie1
You contradict yourself in stating that one Keynesian policy is effective, but another isn't when they are one in the same. War has the same effect as New Deal programs, it is just different in method. It is massive government expenditure that employs millions and rejuvenates an abysmal demand.
Not only are your numbers wrong, but you ironically just asserted that war helped the economy while Keynesian economics didn't, when in fact, war is a Keynesian policy on steroids.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance So wait you support the military industrial complex how did that work for Germany again
Darkwizzrobe 1 year ago
@Darkwizzrobe
Campaign finance reform will solve the dangerous conflict of interest produced the by the Military Industrial Complex. Other than that, what alternative is there?
Germany was taken over by Hitler. Don't you think that had something to do with WWII?
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance I think Fear and foreign reparations by the treaty of versailles took over Germany and led many to follow Hitler's brand of socialism that had more to with WWII than a lack of alternatives
Darkwizzrobe 1 year ago 2
@Darkwizzrobe
Germany's economy followed more closely along the lines of Fascism rather than Socialism.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance What? How am I wrong? Give me some statistics that prove I'm wrong. I'm sure you wont find any tho. I wasnt saying our fighting in the war brought us out, it was the buildup of nations prior to our entry where they bought many supplies from the U.S. that took us out of the depression.
ltkhokie1 1 year ago
@ltkhokie1
The war was the reason other countries needed our products, which is what helped to employ so many people, thus benefiting the economy.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance, Canada's meltdown is yet to come. They have the world's second largest housing bubble (behind Australia) on a non-affordability basis. Vancouver is the least affordable city of all. Check out "Crack Shack or Mansion" for a depressing (but sobering) illustration of Canada's massive real estate bubble.
WelfareRobot 1 year ago
@WelfareRobot
This is old news. Canada's housing prices have already subsided, and that was caused by investors herding to Canada, for it was one of the only countries that didn't suffer a real estate bubble/burst.
Canada has some of the strictest banking regulations in the world, and is ranked #1 in the world for safe and efficient banking, right behind Sweden.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance Anywhere fractional reserve exists, you have inefficient banking, and that includes Canada.
Soonerliberty 1 year ago
@TheAtheistAllegiance Also, the thing that makes banks interconnected and dangerous at the same time is the fact that we have a fiat currency and a banking system backed with little reserves. All banks are insolvent all of the time. If everybody called in their loans and emptied their bank accounts right now, the whole system would collapse. No amount of regulation will save us if we have fractional reserve banking in play.
tkwelge 1 year ago
@tkwelge
Fannie and Freddie can make all the loans they want. If they aren't sub-prime, there won't be problems.
I agree the Fed's low interest rates didn't help the situation, but that isn't the fundamental issue plaguing the financial sector.
Also, if fractional reserve banking and fiat currency is banned, credit markets will go extinct, and monetary expansion will be impossible when tied to a commodity. If it weren't for the increased money supply, we would be in deflationary hell.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance Even if they aren't "subprime" unnatural increases in home lending were a problem. Especially considering that a lot of them were ARM loans.
Credit markets would not go extinct. They would be different, but lending would not cease. Several people have written on the subject. I also completely disagree with the "deflationary hell" comment. I simply can't get into the intricacies in a youtube comment page, sorry.
tkwelge 1 year ago
@TheAtheistAllegiance Focusing purely on "Subprime" loans completely misses the point. There were plenty of ALMOST sub prime loans that would be wiped out in the event of any disturbance, such as unemployment, adjustments to interest rates, and perceived decreases in home value. Even none subprime borrowers gave up on their houses when they figured that paying their mortgage was no longer meaningful.
tkwelge 1 year ago
@tkwelge
Actually, focusing anywhere but sub-prime loans is what misses the point. ARM's are perfectly fine if the borrower has prime credit. Prime borrowers had to leave their mortgages because of the shock waves that went through the US economy when the sub-prime market exploded. If there had been regulations on derivatives and lending standards, the market would be fine right now.
Once again, it points back to the last decade of substantial deregulation under Clinton and Bush.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance Overall regulations INCREASED over the last 20 years. There were some key deregulations that occurred, yes. I also agree that tighter regulations might have avoided disaster. However, the low interest rates were the prime driver of demand and any regulation would essentially just be making up for the failures of fractional reserve banking and low interest rates.
Look at the statistics. Option ARMS are defaulting at the same rate as subprime.
tkwelge 1 year ago
@tkwelge Prime ARMs are likely to default anytime housing values go down, because people are unable to "flip" their houses. In many cases, ARM defaults are more likely than subprime defaults.
tkwelge 1 year ago
@tkwelge Oops, ARMs aren't defaulting at the same RATE. What I meant to say is that Prime Mortgages with adjustable rates are defaulting at a similarly increased rate. Prime foreclosures outnumber the subprime foreclosures and have been outnumber subprime foreclosures since the beginning of the crisis. If what you were saying were true, you'd expect to see a huge number of subprime mortgage defaults, followed by a six month lag, and a sudden increase in the number of prime defaults.
tkwelge 1 year ago
@tkwelge What you actually see is an increase in prime and subprime mortgages at the same time, with the the vast majority of the early defaults being ARMs in both cases. Clearly, the real reason that the defaults began to occur is that people with ARMs realized they wouldn't be able to flip their houses before the interest rate went up and decided to get out of dodge.
tkwelge 1 year ago
@tkwelge
US regulation of the financial sector has been increasingly deregulated since the 70's - not increased.
ARM's were all defaulting, but the reason prime mortgages also defaulted was because the entire economy crashed because of sub-prime loans. The prime borrowers who walked away from their homes were victims of a crisis caused by loose lending standards that allowed an environment of weak transparency, highly leveraged financial transactions, moral hazards, and sub-prime loans.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance I'd point out that the total number of regulations has increased, but I digress.
I already pointed out that Prime mortgages made up a larger number of the total defaults early into the crisis before total subprimed defaults had even hit their 2002-2003 levels that were actually higher. I could just repeat myself, but I won't.
tkwelge 1 year ago
@tkwelge
Sub-prime loans made up approximately 20% of the total mortgage market, yet accounted for nearly half of all foreclosures, which is incriminating. Because ARM's are based on interest rates - which are currently very low - ARM delinquencies should be decreasing, but they're not. This points to ARM's being the victims of economic spillover, but not the cause thereof.
It's not the ARM's, but rather the risk of the borrower that has a more significant effect on the chance of default.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance Arm defaults aren't based on the interest rate level, but the ability of the owners to flip their houses before any adjustments. Many ARMs were set up with low initial payments, as a short term trade, but since the demand fell out of the market, people with ARMs have nowhere to go but default.
tkwelge 1 year ago
@tkwelge
When you point out that prime mortgages made up a larger outstanding number of foreclosures, you're assuming that they had equal market share with sub-prime loans. The fact is, sub-prime loans only made up 20% of the market.
You shouldn't be repeating yourself because you would be repeating a miscalculation on your part.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance It doesn't make a difference what proportion of the market subprime was. You're confusing the issue. Proportionality doesn't play a role here. The fact of the matter is that larger number of prime mortgages were defaulting when subprime mortgages were defaulting. I'm well aware that subprime is a smaller part of the market, but in this issue, it is the actual number of defaults that matter,not defaults as a portion of the subprime and prime markets as if they weren't...
tkwelge 1 year ago
@tkwelge .... in the same market. You're also ignoring the fact that subprime defaults were higher in 2002 and 2003 than they were in the beginning of the meltdown. The vast majority of defaults are ARM's whether prime or subprime.
tkwelge 1 year ago
@tkwelge
Current sub-prime default rates easily surpassed those of the 2001 peak after 9/11.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance Yes, CURRENT sub prime defaults are higher now, but they were lower than their peak, which was actually in 2002-2003 well until prime defeats had started taking off in a way that they didn't back in 9/11.
tkwelge 1 year ago
@tkwelge Sorry, that came out a little difficult. Subprime defaults jumped after 9/11 to a level that was higher than they were in much of 2008 when prime defaults started increasing too. This crisis supposedly began in 2007 and 2008 (supposedly taking off in 2008) and back then subprime defaults were below their 2002-2003 level. Back in 2002-2003 there was no significant increase in prime defaults.
tkwelge 1 year ago
@tkwelge
You must be getting bad information. There were approximately 100K total defaults in 2003, and 450K in early 2008 in the state of California. (Nationwide rates similar) 2003 had nearly the lowest number of defaults since the 1993 recession.
Prime mortgages have been increasingly failing over the last few years, which further indicates that prime borrowers are defaulting due to issues with unemployment, low revenue, etc. Prime mortgages weren't the cause of the housing crisis.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance I never said that the total number of defaults was higher in 2003. I said that subprime loans were more likely to default in 2002-2003 than they were in the beginning of the current housing crisis when Prime defaults began to rise in kind.
Prime defaults were rising ever since before the beginning of the official start of the Recession. That was my point.The truth doesn't follow your narrative of an increase in Subprime defaults followed by a lag, then prime defaults.
tkwelge 1 year ago
@tkwelge
Prime defaults didn't start until the collapse of the sub-prime market. There was no rise in defaults until the rapid decline in the US economy, which wouldn't take much of a lag either way.
Like I said, you're probably getting bad information. Every one of the hundreds of charts I've looked at (including searching for the one you pointed to) have negated what you're asserting.
TheAtheistAllegiance 1 year ago
@tkwelge
The proportion matters because it shows what the underlying cause of the crisis was. If ARM's were the cause instead of sub-prime loans, prime loans would make up 80% of delinquency. ARM's were caught in the tsunami created by the sub-prime market that imploded.
Also, ARM's are definitely based on interest rates. When the Fed started jacking up interest rates, every sub-prime borrower with an ARM defaulted, and the ensuing recession caused the prime borrowers to default as well.
TheAtheistAllegiance 1 year ago
@TheAtheistAllegiance Well, every subprime with an ARM didn't necessarily default but that is besides the point...
This is a hard point to get across in a comment section, but in this case it is the proportion of the number of defaults that matters and where their source is, not their proportion of their respective markets, because they are part of the SAME market. There were plenty of PRIME loans that were essentially built on shakier grounds than many subprime loans.
tkwelge 1 year ago
@tkwelge I've already mentioned that if you look at the graphs of foreclosures, subprime and prime defaults began increasing AT THE SAME TIME. There was NO lag between subprime and prime defaults and in both cases the determining factor was whether or not an ARM was involved.
tkwelge 1 year ago
@tkwelge These graphs are surprisingly difficult to find on the internet a second time. Try googling: prime foreclosures greater than subprime and click on the first link. It has a neat little chart. In the first part of 2008, subprime foreclosures were actually declining as prime foreclosures were increasing, and they both started increasing in the same early point. There is another graph on Reason, but i can't post links here and I can't find it on google in an easy way.
tkwelge 1 year ago
@TheAtheistAllegiance The cause and effect pattern doesn't follow your narrative. Sorry.
tkwelge 1 year ago
@TheAtheistAllegiance I see your point, actually. That makes a lot of sense! Thanks for the enlightenment :)
jeripole 1 year ago
@TheAtheistAllegiance Fannie and Freddie was integral in securitization, and they existed with the express purpose of increasing home ownership rates. Yes, they had little subprime exposure, but that is besides the point. The fact is that fannie and freddie made it easier for Gobs of people to get into housing at lower rates than they would have. Fannie and Freddie securitized those loans and low interest rates kept illogical demand in the housing sector rising.
tkwelge 1 year ago 2
3 reasons the reform won't work, Republicans, Democrats, and libertarians.
Justwosweet 1 year ago
@Justwosweet What's with all of the libertarian hate? We have opposed every war since at least vietnam and the war on drugs. You can't blame the libertarians for any of the problems that we are in now.
tkwelge 1 year ago 2
3 reasons:
Nr 1 - Obama,
Nr 2 - Wall Street,
Nr 3 - Not reading this comment! ;P
theBritzed 1 year ago
Nick, I'm disappointed you didn't mention the number one reason fin reg won't work... NO TRUE AUDIT OF THE FED AND IT GIVES THE FED MORE POWER.
Solution: END THE FED
iFreedom4ever 1 year ago 29
You tell 'em, Nick.
I was studying in Mexico this year and ended up doing a presentation on the 2008 crisis for my Macroeconomics class. My teacher had commented early in the semester that the housing bust was a "failure of capitalism", and then was surprised when I illustrated the government's not-so-small role in it all.
tivla 1 year ago 18
@tivla Have you heard Peter Schiif's 2006 Mortgage Bankers conference speech in which he warned about the upcoming financial crisis? The Federal Reserve creating artifical demand and the federal gov't protecting financial institutions against loses is what lead banks to give mortgages to pratically anyone who wanted them regardless of their credit.
residentzombie 1 year ago 2
@tivla Of course Fannie Mae and Freddie Mac made these poor lending standards possible.
residentzombie 1 year ago
@tivla
and what does your teacher say now? did he change his mind?
rsobies 1 year ago
@rsobies
"Never underestimate the difficulty of changing false beliefs by facts"- Henry Rosovsky.
We didn't discuss it at all afterward as it was a final presentation. I hardly think she changed her mind, but I was sure to be thorough with regard to what really happened. The most I can say was that she seemed to make thoughtful expressions and did indicate that she had learned something. A couple classmates seemed interested, too, so I felt good about it.
tivla 1 year ago