The Current Economic "Situation"

[TennTradition]

I say "situation" because I don't want to say crisis...because I honestly don't know....

Is this situation worse than the S&L woes? If so, why? If not, why not? My inclination is to say yes...and that situation was probably the worst since the Great Depression, no?

The markets are struggling, real estate is still not rising, etc.....

I would like to hear your (honest) thoughts on this issue....what is going on...and just how serious is it. Can either presidential nominee do much to help the situation....can the current federal reserve do a better job at addressing the situation? What can George W. Bush do about this....after all, he is our President...is there something "more" our government can do? Is intervention necessary?

 

[allvol123]

Chris Dodd said this country could be just days away from a "financial meltdown".

Completely irresponsible.

 

[TennTradition]

Chris Dodd said this country could be just days away from a "financial meltdown".

Completely irresponsible.

Since he is chairman of the Senate Banking Committee, I tend to agree....if he were just "some other" senator I wouldn't mind that much...but he is in a position where those words can hurt a lot.

I don't want this to turn too partisan if we can help it...I would just like to hear good discussion from those who know. Some have talked about it in other threads to some degree ...but I'm interested to hear what they think as things evolve further (such as last night's bank bail out).

 

[allvol123]

Yea, I have no need nor was I trying to inject any partisanship here. I just thought those comments coming from him were outrageously irresponsible.

From what I am hearing, the markets are booming today, in a good way.

 

[volinasheville]

The markets are booming all over the world because someone is showing some leadership in dealing with the problem not simply affixing blame.

 

[615 Vol]

Chris Dodd said this country could be just days away from a "financial meltdown".

Completely irresponsible.

What if it's true? How is that irresponsible? I prefer that to someone telling me how things really aren't that bad when they are.

 

[WA_Vol]

Here's a good analysis of it: What next for financial capitalism? | What next? | The Economist

Yet AIG’s rescue has done little to banish the naked fear that has the markets in its grip. Pick your measure—the interest rates banks charge to lend to each other, the extra costs of borrowing and of insuring corporate debt, the flight to safety in Treasury bonds, gold, financial stocks: all register contagion. If investors flee the money markets for Treasuries, banks will lose funding and the contagion will suck in hedge funds and companies.

What happens next depends on three questions. Why has the crisis lurched onto a new, destructive path? How vulnerable are the financial system and the economy? And what can be done to put finance right? It is no hyperbole to say that for an inkling of what is at stake, you have only to study the 1930s.
Shorn of all its complexity, the finance industry is caught between two brutally simple forces. It needs capital, because assets like houses and promises to pay debts are worth less than most people thought. Even if some gain from falling asset prices, lenders and insurers have to book losses, which leaves them needing money.

For all the costs of a rescue, the cost of failure to the economy would sometimes be higher. As finance shrinks, credit will be sucked out of the economy and without credit, people cannot buy houses, run businesses or as easily invest in the future. But there is a darker side, too. Unemployment in America rose to 6.1% in August and is likely to climb further. Industrial production fell by 1.1% last month; and the annual change in retail sales is at its weakest since the aftermath of the 2001 recession.

Regulation is necessary, and much must now be done to improve the laws of finance. But it must be the right regulation: an end to America’s fragmented system of oversight; more transparency; capital requirements that lean against booms and flex with busts; supervision of giants, like AIG, that are too big and too interconnected to fail; accounting that values risks better and that everyone accepts; clearing houses and exchanges to make derivatives safer and less opaque.

All that would count as progress. But naive faith in regulators’ powers creates ruinous false security. Banks can exploit the regulations’ inevitable blind spots: assets hidden off their balance sheets, or insurance (such as that provided by AIG) which enables them to profit by sliding out of the capital requirements the regulators set. It is no accident that both schemes were at the heart of the crisis.

 

[KB5252]

What if it's true? How is that irresponsible? I prefer that to someone telling me how things really aren't that bad when they are.

If everyone starts pulling their money out of banks and off the market it could start the chain of events to start a collapse. Ever heard of self fulfilling prophecy?

 

[volinbham]

What if it's true? How is that irresponsible? I prefer that to someone telling me how things really aren't that bad when they are.

It's more of a prediction/assessment than an objective truth - in other words, the economy is so broad and diverse it's a matter of perspective.

That said, a few rumors from Washington caused wild swings (particularly downward) on some of the banking stocks which made the situation worse.

Now is not the time for loaded statements like "meltdown". Nothing wrong with saying things are bad but blanket statements don't help.

 

[615 Vol]

If everyone starts pulling their money out of banks and off the market it could start the chain of events to start a collapse. Ever heard of self fulfilling prophecy?

So lets get lied to instead?

 

[volinbham]

It sucks were in the middle of an election cycle because the "solutions" we get are likely to be so convoluted due to political positioning that they will be ineffective.

Regulation is necessary, and much must now be done to improve the laws of finance. But it must be the right regulation: an end to America’s fragmented system of oversight; more transparency; capital requirements that lean against booms and flex with busts; supervision of giants, like AIG, that are too big and too interconnected to fail; accounting that values risks better and that everyone accepts; clearing houses and exchanges to make derivatives safer and less opaque.
All that would count as progress. But naive faith in regulators’ powers creates ruinous false security. Banks can exploit the regulations’ inevitable blind spots: assets hidden off their balance sheets, or insurance (such as that provided by AIG) which enables them to profit by sliding out of the capital requirements the regulators set. It is no accident that both schemes were at the heart of the crisis.

 

[volinbham]

So lets get lied to instead?

See my above comments - using words like "meltdown" doesn't help anything.

Nothing wrong with the truth but it's certainly a lot more complex than "financial meltdown".

 

[KB5252]

So lets get lied to instead?

See post #9. It may help Obama supporters to believe you are being lied to but I seriously doubt there is anyone claiming we are right where we want to be. It is going to be tough but if we go into panic mode it will only make things tougher.

 

[Vol Mania 21]

So do I need to go get all my money out of the bank before everyone else does?

 

[volinbham]

The Fed just took some major actions including:

1. Insuring Money Market Funds
2. Halting short-selling

There may also be a mortgage/foreclosure bailout.

 

[KB5252]

So do I need to go get all my money out of the bank before everyone else does?

Doing things like that is exactly the kind action that could start chain reaction if done on a large enough scale by enough people.........And then before long that money might be worth half of what was printed on the bill.

 

[Vol Mania 21]

i was joking

 

[KB5252]

i was joking

You never know. Like the new avy!

 

[TennTradition]

Yea, I have no need nor was I trying to inject any partisanship here. I just thought those comments coming from him were outrageously irresponsible.

From what I am hearing, the markets are booming today, in a good way.

I should also note that when I said "some" and "they"...I did not mean to imply you were not included in that group (since I was responding to your post...it could have come off that way).

 

[Vol Mania 21]

You never know. Like the new avy!

understandable. Thanks she is so fine

 

[jcwvolfan]

The markets are booming all over the world because someone is showing some leadership in dealing with the problem not simply affixing blame.

Markets are booming all over the world because the US is being led down the path to Socialism!

Economic ignorance is the breeding ground of totalitarianism. -- John Jewkes

 

[WA_Vol]

Where does the money come from? Uncle Sam is deficit spending. Who's going to keep buying Tbills? China?

 

[KB5252]

Where does the money come from? Uncle Sam is deficit spending. Who's going to keep buying Tbills? China?

I agree but what other choice is there? I simply do not see another way. Maybe others with better knowledge and grasp of the situation can enlighten me.

 

[allvol123]

I should also note that when I said "some" and "they"...I did not mean to imply you were not included in that group (since I was responding to your post...it could have come off that way).

:good!:

 

[OWB]

Bottom line, when you put an idiot in charge of a country for this long, it's only a matter of time before things go completely south. We deserve everything that's happening to us.