What Happened To Bear Stearns Explained Simply Part 3

http://www.informedtrades.com/
The third lesson in a series on what happened to bear stearns, moral hazard, the federal reserve, and the JP Morgan Deal.

Category:

Education

Tags:

• Bear
• Stearns
• mortgage
• housepricecrash
• subprime
• sub-prime
• cdo
• crash
• offbalancesheet
• stockmarket
• financial
• moral
• hazard

[EdgeStormcrow]

Ive heard that the American Federal Reserve Bank is a private cartel of international bankers an not an American entity.

If true Wouldn't the feds policies be the cause of the financial crisis?

Is it true David? im no economist.

[InformedTrades]

The fed is a private entity however it is owned by US Banks which some argue creates a number of issues which may have lead to the current crisis. If this was something that was done on purpose however it would seem that the banks would be benefiting from it and not getting crushed and going bankrupt etc as has happened in the current crisis. Best Regards, Dave

[Rhyszj]

There's global inflation and bubble because we have the world's reserve currency, and also because other country's economies mimic us.

It's also possible that as the dollar weakens, the globe can afford more houses. I dunno actually about them as much though.

I love your videos, btw. thanks for making them.

[InformedTrades]

Hey Rhyszj, Thats a good reason and I am glad you have thought it out as I think that the people who were making the fed bubble argument would get through to a lot more people if they were willing to think about and formulate a response like you just gave when someone questions reasoning, rather than simply getting angry. Glad you like the videos, thanks for watching. Best Regards, Dave

[Rhyszj]

You said in one of your lessons that the Fed keeps injecting too much money into the system, which created a housing bubble. That is true.

Inflation is NOT rising prices, but rising money supply against the same amount of goods and services. Prices raise lagging inflation. Don't get distracted by prices, look at money supply. The answer is NOT more money. The ONLY way the Fed can bail out is by printing more money... We all pay more for EVERYTHING. That is WORSE than systemic failure. Sorry.

[InformedTrades]

Hi Rhyszj, Thanks for the comment. I think what I said was that some people believe that what you have stated is the case with the housing bubble. What I try to do here is give people information so they can make decisions for themselves on what is happening so I try not to take sides. The other side of that argument is that if it was the Fed who created the housing bubble then why were their real estate bubbles worldwide and not just in the States. Best Regards, Dave

[averageworkinggal]

The TARP direct capital injection was not sufficient to overcome the credit freeze at the financial institutions.

What should the government do now?

Create a temporary new set of banks (like it did in the GD) capitalized by vapor money from the Fed and bypass the wrecked private banks?

[InformedTrades]

Hi Chasleo, I definately see where you are coming from and I am not sold one way or the other. The question that I think people who are against a bailout many times fail to understand however is that yes while it may cost taxpayers to bail the firm out it may cost them a lot more if the financial system is allowed to implode on itself. Best Regards, Dave