So...don't buy a house? Yes, because if there's one thing that will help reduce the disparity of income and wealth in this nation, it's having the entire middle class rent. You're just a font of great ideas, arentcha? Another idea would be for banks, who also have the responsibility to be cautious in their lending, to not hand gigantic checks to people for houses they're unlikely to be able to afford in the long term. Or for people to realize that home values couldn't rise forever. But see, all of this would require executives and shareholders to look beyond this quarter's profits, which they've become absolutely incapable of doing.

Progressive Caucus Plan Spoiler: show spoiler hide spoiler Spoiler: show spoiler hide spoiler Spoiler: show spoiler hide spoiler

isn't this what happened in japan I know they had a similar situation where housing prices just went up and up and up and then dropped back down. I'm not sure of the specifics of it at all though. A similar thing did happen in Japan, and they haven't had solid economic growth in a decade. Also, our situation is looking more severe.

Well when I was listening to NPR they said it went back up to down 400 points after a low of 700, so that's what I thought it was currently. It's been a rollercoaster, but, it's around 700 right now.

crossposting from the chat thread What does this mean for a college student and for minimum wagers? Do you have any adjustable-rate student debt?

Man Ron Paul was right. That sucks.

isn't this what happened in japan I know they had a similar situation where housing prices just went up and up and up and then dropped back down. I'm not sure of the specifics of it at all though. A similar thing did happen in Japan, and they haven't had solid economic growth in a decade. Also, our situation is looking more severe. weren't they too slow on their bailout, though? I'm only reading these nytimes articles but I have no real scope

So I don't understand this thing about "giving taxpayers interest for financing the bailout." As far as I can tell, taxes aren't actually going to get raised even if the bailout goes through, so we'll just be borrowing from other countries. Do they just mean that when we finally pay it back we won't need to pay back the interest?

This whole thing is such a facepalm with these lawmakers. I dont know much about it but from where i see it its mostly putting reelection ahead of actually saving the economy and if they dont save this in time i hope (but doubt) that the vast majority of the ones that voted against it get kicked out of office.

The market can fix this. I sure as Hell don't want my taxes fixing this. Besides, people shouldn't have been spending outside their limits to begin with. Shame on them and their stupid mortgages. Yes, because it would be so much better for real costs of living to rise due to a failing dollar and stagnant wages, causing the real value of your paycheck to shrink in a completely uncontrolled and unpredictable manner, than it would be to see your tax bill rise a small percentage. Chill, son. Don't OD. It would teach people a lesson about borrowing, though. This goes far, far deeper than just bad mortgages. Yes, the US has a problem with uncontrolled borrowing - in all industries, not just real estate. However, if the banking system fails over this, you know what happens? Foreign countries - like China - pull their investments out. Which causes the value of the dollar to fall. Which causes the prices of goods manufactured overseas, or goods manufactured domestically with petroleum products, to rise. Which makes your paycheck worth less. Which causes our economy to slow down more. I'm not "ODing" but "the market can fix this" attitudes are fucking retarded, because you don't want the market's "fix." That's like saying that we shouldn't put a patient on chemo because "cancer will fix this" - because, hey, if somebody's dead, well I guess they don't have cancer anymore. Correction - if someone is dead then my taxes don't have to subsidize their cancer treatment, anymore. You either didn't understand my post or you are a troll. This issue affects everybody. Even if you have no investments or real estate, even if you are not laid off or lose clients, your money is going to buy less next year than it did last year per dollar. That is inevitable. However, we're talking about a difference between a minor decrease in buying power and a plummeting decrease.

So...don't buy a house? Yes, because if there's one thing that will help reduce the disparity of income and wealth in this nation, it's having the entire middle class rent. You're just a font of great ideas, arentcha? Another idea would be for banks, who also have the responsibility to be cautious in their lending, to not hand gigantic checks to people for houses they're unlikely to be able to afford in the long term. Or for people to realize that home values couldn't rise forever. But see, all of this would require executives and shareholders to look beyond this quarter's profits, which they've become absolutely incapable of doing. I see what you did there. That's sarcasm, right? You choose to blame banks for being predatory. I choose to blame people for being naive. They're both acceptable choices.

Man Ron Paul was right. That sucks. The crisis was caused by deregulation.

Who gives a shit who's fault it is. The country has the very real possibility of going down the shitter economically right now. If you want to be a pathetic selfish wretch and whine that you have to pay some extra taxes to help save the country who's luxuries you have enjoyed your entire life then I have no idea what to say to you other then that you are everything that is wrong with this country.

Man Ron Paul was right. That sucks. Stopped clock. The guy has been saying this would happen for the last thirty-years. And even then, he has been wrong about the cause and how to fix it.

I'm still a little unclear on how failing to pass the bailout = global economic meltdown. Could someone break it down to me like I'm stupid? How is Wall Street losing a bunch of money because they are stupid going to increase the cost of my corn flakes?

They own the corn flakes and if they go broke they will have to charge more for the corn flakes.

So...don't buy a house? Yes, because if there's one thing that will help reduce the disparity of income and wealth in this nation, it's having the entire middle class rent. You're just a font of great ideas, arentcha? Another idea would be for banks, who also have the responsibility to be cautious in their lending, to not hand gigantic checks to people for houses they're unlikely to be able to afford in the long term. Or for people to realize that home values couldn't rise forever. But see, all of this would require executives and shareholders to look beyond this quarter's profits, which they've become absolutely incapable of doing. I see what you did there. That's sarcasm, right? You choose to blame banks for being predatory. I choose to blame people for being naive. They're both acceptable choices. What is their alternative? What do you think would happen if the entire middle class rented?

I'm still a little unclear on how failing to pass the bailout = global economic meltdown. Could someone break it down to me like I'm stupid? How is Wall Street losing a bunch of money because they are stupid going to increase the cost of my corn flakes? Credit wont be available (in theory). If that is the case, you cant get a car loan, a college loan, mortgage, business loan, etc. Businesses dont work on cash. Credit is necessary.

So...don't buy a house? Yes, because if there's one thing that will help reduce the disparity of income and wealth in this nation, it's having the entire middle class rent. You're just a font of great ideas, arentcha? Another idea would be for banks, who also have the responsibility to be cautious in their lending, to not hand gigantic checks to people for houses they're unlikely to be able to afford in the long term. Or for people to realize that home values couldn't rise forever. But see, all of this would require executives and shareholders to look beyond this quarter's profits, which they've become absolutely incapable of doing. I see what you did there. That's sarcasm, right? You choose to blame banks for being predatory. I choose to blame people for being naive. They're both acceptable choices. Don't be naive. There are plenty of villains in this, and the portions of the financial industry involved with the subprime bubble are definitely among them. They abandoned sensible practices to create a Ponzi scheme so they could make off like bandits before the collapse. If they didn't see the collapse coming then they are idiots in addition to being greedy. There are some villains on the consumer side, and I personally know a few of them. They bought up a bunch of real estate to speculate with loans they had no business getting, but their greed was enabled by greed higher up in the system. They are taking a huge hit regardless. Then there are the ratings agencies, like Moody's. Calling a bunch of chopped up shitty debt investment grade is either maliciously criminal or criminally negligent. And then there is the king of bubbles, Alan Greenspan. He's perhaps the one with the most individual responsibility for the mess out of anyone (although others have quite a bit of responsibility), as he created the conditions that led to the mess and furthered the moral hazard by bailing out LTCM. I've said it before, but should be thrown in the Bastille.

Progressive Caucus proposal: 1 - 0.25% tax on financial transactions (stock buys, options, etc). Should generation ~150bUS 2 - US government receives equity shares in exchange for bailout 3 - Bankruptcy reform should be included in an effort to minimize foreclosures and restructure mortgages (this seems like that's a definite plus since the real estate market doesn't need more glut and putting people out on the streets is bad) 4 - Oversight details This would also include the release of money over time to ensure proper use and need. What does everyone think? Would it work? Could it pass?

Can't we at least do something better than shooting bricks of money out of a cannon, though? Yes, but while we argue about what to do instead, the economy sinks. The economy has already sunk. The stocks are now finally reflecting that. Bailing out wall street just props up the stock and delays the inevitable. Stick our heads in the sand doesn't make the problem go away. The stock market must drop now or we're just gonna take a larger dive later. This is the "larger dive later" the only thing that would have prevented this was an induced recession a few years ago. I said this on another board when someone asked me about the bailout. You should read it because you have no clue what is going on Spoiler: show spoiler hide spoiler Necessary. The current problem is largely in two facts. The primary factor of illiquidity in mortgage backed securities, the secondary factor in credit derivatives. The second part hasn't hit, and if it does, there will be no bailout big enough to fix the problem. At this point in the game, the question is not, "what got us into this situation", we know that. And as well, the question is not "who do we punish" the problem is too large for that. A good analogy would be like a refrigerator. If you leave it sitting the food inside will rot. Proper regulation of your refrigerator will assure that a minimal amount of food goes bad and a maximal amount gets eaten. But, at some point of letting it sit, letting it sit further does not fix the problem. Sure molds will grow and end up consuming all the food in the fridge, then die when its expended. Eventually. No, you have to throw it out, as much as you would like to save the energy in the food, its impossible. That is pretty much where we are at with the bailout. It needs to happen and it needs to happen in the manner prescribed(buyout). As i was saying earlier, the primary problem is illiquidity in these securities market. This occurred as people stopped trusting the return on these securities. Why this happened is complicated, it had to do with an increased rate of foreclosure, and the expansion of CROs from rating companies to rating individual securities, deregulations that made trading these types of securities easier and easier to create[I.E. cut up], and a lack of incentive on the part of the brokers themselves to produce deals that produced results(this ties into the CRO issue). This list is by no means complete, but it comes down to the fact that deregulation and maleficence(which is to say, SOP) had created an atmosphere where these securities were valued way above their real value. The core of the illiquidity is that now that people are not trusting these securities at all, they are not trading. Mark to market be damned, that only has to deal with their reporting, if people were doing due diligence they can find the value of these things if they want. Mark to market has nothing to do with whether or not they can get loans unless the other party believes the market price is right. Since everyone is trusting the market in not trusting these assets what you have is a bunch of people who can't get loans because no one trusts what collateral they could pull. Modern financial companies operate on leverage.[another big problem, the sec changed leverage rules for a number of companies]. Basically this means that the companies borrow 10 times more money than they can pay back[SEC ruling changed that to 40 times for a number of companies]. Since very few people want their money all at the same time, they can then use this leverage in order to make more loans and increase their margins. In order to keep this system flowing, they need to keep getting short term loans. If they don't they can't cover their costs during spikes of activity. Now lets combine the two issues. Companies which need loans to operate can't get loans because everyone thinks that if the company fails to pay back its loans[which is entirely possible because they think the company is making bad investments]. Such, the companies fail[its not quite so cut and dry, its gradual and goes through stages, but that is the gist of it]. Loaning them money doesn't do anything[and creates inflation, which is very dangerous], since they use the money to pay off their debts but still can't get loans in order to continue their operation. They can't pay insurance cause they don't have any money, the cost of the insurance would offset the value increase of the securities[since they would then be guaranteed], and no one trusts the securities any more than they did before.[this is a big more complicated, there is also then trust in the Govt to be able to pay out the insurance when it comes due, and trust in the Govt to be able to do that are probably slim, this is a really bad plan]. So, someone has to take the assets off their hands. And that means the U.S. govt has to step in and buy these assets. Will the govt get fleeced? Unlikely. But possible. The markets for these securities are small since they are not commodified across the spectrum. Which means the possibility in power imbalance at the auctions is distinct[holding auctions for non-commodity products is another problem in and of itself]. However, this amount of problem is likely to be low, it doesn't take many sellers to make competition valuable, and since there are very few buyers, the U.S. govt holds a strong negotiating position. As well, the market price of these assets being so low already may offset any gouging that goes on. Now, why does this need to happen? Because there has been a spate of deregulation that has allowed a number of institutions to get so large they "cannot fail". One of the purpose of merger regulations is to keep financial markets diversified exactly for the purpose that if one organization needs to fail, it can[Fannie and Freddie may be an exception, since they had implicit govt backing, which means that they couldn't fail no matter their size]. How do we know when a company is too large to fail? Well, its pretty much when it failing will depress the supply of money to an unacceptable point. Now, i am not talking about money supply, but in the ability of people to secure loans. When the ability of people to secure loans is depressed, the entire basis of a modern economy ceases to function. The basis of a modern economy is basically that capital can be allocated to be most efficient as quickly as possible. This works when someone thinks they can make a profit off of taking out a loan. E.G. you take out a loan to start a business. If you saved to start a business you would start 5 years from now. If you get a loan, you start now, and 5 years later your loan is payed off and instead of starting a business you're making money doing something profitable, you've gained essentially 5 years of start up, so 5 years of profit from your company for the cost of the interest. It works the same way when buying a house, a car, or any capital expenditure. So what happens when loans get depressed? The efficiency gains in capital allocation are depressed. What happens when the efficiency gains in capital allocation are depressed? People stop hiring people. What happens when people stop hiring people? Those people who aren't hired, cut back expenditures. What happens when people spend less? People start firing people. What happens when people start firing people? People spend less Then you have a recession or depression. In this case it would be a depression. A recession might have saved it from being as bad [by inducing inflation or by enforcing proper regulations on the capital markets you stop a violent correction at the cost of a small downturn] The economics are cut and dry here, the Chicago school is holding onto a dying ideology that simply does not work in large currency based economies. Edit: Forgot to talk about CDS. Credit Default Swaps are a credit derivative[which means it gets its value from the credit worthiness of a company] that operate like an insurance policy. One person pays an amount of money regularly and the other one agrees to pay off the return of a debt if it goes south. The catch? You don't have to own an asset to buy a swap. Its basically a bet against a debt failing. The risk involved in a CDS is the liklihood that the debt holder will repay, and the liklihood that the swap issuer can pay you. A lot of companies looked at CDS as basically free money. These companies weren't going to not pay their debts. Because of that there is roughly 60 trillion in CDS that could be collected if these debts are defaulted on. That is more than the GDP of the entire world, and nearly 10 times the value of the entire sub-prime mortgage market[note, values are usually bigger than GDP since they are accumulated capital]. The issuers ignored both systematic risk as well as made unreasonable expectations on these debt repayments for a number of reasons. But basically, once institutions start failing, other institutions may be on the hook for their debt in the form of these default swaps. But the default swaps are likely to, at this point, have to pay out many times over what the debt was. If you have two swaps on the same debt and that debt fails you are on the hook for twice the value of the debt. These institutions are then likely to not be able to pay those. They fail. Anyone hold CDS on those institutions? Well, now they're probably going to fail too. Then the entire market implodes and a slight recession or depression looks like fun, as we would have to rebuild our capital markets from scratch, which would be no easy task given the likely investor mistrust and take a lot of time. fake edit: CRO's play a huge part in this, but i didn't have much time to talk about them. Basically they are a company that rates credit of a company or security at the time the security is issued. However, they are payed only if the security deal goes through and have no implicit guarantee of their ratings. In the past they have been very reliable, but that was before they expanded into rating individual securities where they now have an incentive to lie about the value of the security. An apt analogy would be like trusting a home inspector who said "i do not guarantee my work" and only got paid if the house closed. /end wall of text edit 2: You thought I was done: Electric Boogaloo The other benefit of the buy is that the govt can forgive and restructure any loans it wants[so long as the end result is beneficial to the mortgage owner], so some of the people who got suckered into bad loans and were unable to get out as housing turned down would not lose their home. This can be a pretty important efficiency boost for the govt since it doesn't have to sell it and since it has an interest in the general welfare[which is not necessarily served by anyone buying a house]

Oh what the hell? They didn't pass it? Was it a party line vote and how did the candidates vote on this?

Rally held, run only briefly put it back over -600 Looks to be closing somewhere in the neighborhood of -575 If there's no bailout voting tomorrow, and this happens again ... we sink under 10,000.

Progressive Caucus proposal: 1 - 0.25% tax on financial transactions (stock buys, options, etc). Should generation ~150bUS 2 - US government receives equity shares in exchange for bailout 3 - Bankruptcy reform should be included in an effort to minimize foreclosures and restructure mortgages (this seems like that's a definite plus since the real estate market doesn't need more glut and putting people out on the streets is bad) 4 - Oversight details This would also include the release of money over time to ensure proper use and need. What does everyone think? Would it work? Could it pass? 1 sounds bad based on the sheer volume of transactions made per day... or that were made per day. Adding such a tax would further decrease people wanting to exchange credit.

So what exactly would happen to Canada assuming the US starts economically hemorrhaging? We don't know. As far as our banks or telling us, due to the way they were structured (as including investment arms rather than them being split from banks in the US before this kurfuffle), their exposure in this was not that terrible. But even if our banks escaped it, if the US economy collapses our exports are going to go for shit and since we export 40% of our GDP to the US, I imagine we're going along with it (though to a lesser extent).