At least here in the US I think is far worse than most people imagine: that the economy was just giant ponzi scheme.
Minsky Ponzi Finance .pdf
I guess Minsky's theory was that we would go from Hedging,to Speculative to Ponzi Finance.
With hedging your income covers the finance expense and principal, think of a credit card customer that promptly pays off his interest and principle every month.
Speculative finance would be the credit card customer who pays off his interest but needs to roll over the principle.
Then we get to Ponzi finance, where the customer in question can't even service his interest payments. In other words he is dependent upon the underlying asset that he goes going up in value. i.e. the Refi boom in the US where people pulled money out of their homes, just to cover his interest. If the underlying asset even stabilizes in value he is toast.
Also alot of the "innovations" from the 80-90's were too easily abused, with securitization lenders can now dump their risk onto someone else and have far fewer incentives to do good underwriting.
With less lender involvement loans went from lenders,who actually understood what was being underwritten,to bond holders and credit ratings agencies that didn't understand very much.
In other words risk was transferred from those best able to understand it to those least able to understand it.
Also lets think about the average 30 year fixed rate mortgage, its a crazy product for anyone to underwrite because you have to use variable rate borrowing to finance a fixed rate asset. In other words most bond holders don't want to hold bonds for 30 years so you end up financing your mortgages with bonds that could mature in less time, five or less years.
At the end of the five year period you have to roll over your bonds and refinance the asset. The problem occurs if your asset is paying less than what the market is charging for finance.
In fact Princeton's Economics Department did a great presentation on the financial crisis . In it something like 75% of all borrowing is done under a year. So therefore its very easy to be caught in an interest rate squeeze if the financing costs change.
Of course the most damning thing is that this collapse was predicted by the government itself. In 2003 OFHEO did a systematic risk .pdf , the man who was in charge of the paper "resigned" a week after its publication due to pressure from Fannie Mae and Freddie Mac.
As time progressed even Fannie and Freddie began to realize that the situation had the potential to deteriorate and in 2005 Fannie S V-P of Risk Polich did an interesting .pdf presentation on whether or not there was a risk of a major pricing collapse. He implied that it was quite likely.
Anyone with a shred of sense knew that this collapse was coming and the exclamations of surprise and shock are in retrospect are comical.
PeakOil is You
THE United Kingdom Economics Thread (merged)
Re: Britain on the brink of an economic depression, say expe
by mefistofeles » Sun 25 Jan 2009, 03:39:33
Last edited by mefistofeles on Sun 25 Jan 2009, 03:50:28, edited 1 time in total.
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Re: Britain on the brink of an economic depression, say expe
by ReverseEngineer » Sun 25 Jan 2009, 03:44:40
$this->bbcode_second_pass_quote('jdmartin', '
')I've never been much of a conspiracy theorist, but a discussion on another forum I'm a part of has convinced me that there is a goal among TPTB - to create a permanent world ruling class that cuts across geographic boundaries. This is why everyone gets pissed when rogue nations full of people that don't give two shits about flat screen tvs don't play by the rules of the game, and so we go bomb them back into the stone age. It's hard to create a permanent slave class if they won't subscribe to your method of chains - in this case, tied to the almighty buck.
')I've never been much of a conspiracy theorist, but a discussion on another forum I'm a part of has convinced me that there is a goal among TPTB - to create a permanent world ruling class that cuts across geographic boundaries. This is why everyone gets pissed when rogue nations full of people that don't give two shits about flat screen tvs don't play by the rules of the game, and so we go bomb them back into the stone age. It's hard to create a permanent slave class if they won't subscribe to your method of chains - in this case, tied to the almighty buck.
Its even more difficult to create and maintain a permanent slave class when you don't have a functioning monetary system with which to do it. The most recent spin we got was the problem here is Americans aren't spending enough money. Neglecting for a moment the difficulty of spending money you don't have because you lost your job, I think people are starting to get the clue that their job might be the next one to go, and even J6P isn't going to buy a new car on credit he can't get if he thinks he might run out of beer money.
I don't make 6 figures, but once I stopped consuming every damn product thrown in my face I became quite "rich", relatively speaking of course. It irked me so much that Holloywood actors were paid in the millions while teachers were paid in the thousands I simply stopped going to movies. I still see them occassionally because other friends are not so psycho as I am and they buy the DVDs when they come out. I don't have a television and don't pay for Cable as a result. The one thing I do buy into is telephone service and the internet, which comes to you pretty cheap because all those folks putting up ads on the websites pay for most of it, and I don't even SEE the ads anymore, I adjusted my eyes to skip right over them.
What you have here by NECESSITY is everyone doing this at the same time. People are forgoing the trips to the fast food joint in favor of cheaper food they can prepare themselves at home, forgoing the Starbucks Lattes inf avor of home brewed coffee, forgoing purchases of new cars in favor of the vast number of used ones out on the market and listening to the radio (still free for the most part) instead of buying every CD or iTune Download. When people stop buying, the Pigmen go NUTS. Out of the sky they fall in the thunderstorm. The money sieve stops working.
The real challenge here is how you set up a society where people do not consume non-stop, since it doesn't make a profit greed isn't a good motivator. It needs a spiritual underpinning of some sort, and that is what we don't have, or rather it was squashed out by the consumer culture. The religions we do have became perverted beyond belief, just look at Joel Ostein's "God Wants me to be Rich" books. Its ludicrous beyond belief, but still people are buying this stuff in some measure.
Regardless of how things play out further, I think what we are witnessing here is a sea change in the social mindset. I cannot see how people will ever view conspicuous consumption again as a positive value for society. The consequences are clearly obvious, a degraded earth and vast inequities in the distribution of wealth as a result. The time has come where people can by necessity only take as much as they need from the earth, and no more. The time has come where Pigmen can no longer make a profit off the individual greed of each human being. The time has come for the Meek to Inherit the Earth.
Sadly, the inheritance is a horrifically degraded earth, and many more Meek will go to the Great Beyond than remain to rebuild on it, but of course you can't make an Omellette without Breaking a few Eggs.
So it goes.
Reverse Engineer
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Re: Britain on the brink of an economic depression, say expe
by americandream » Sun 25 Jan 2009, 05:45:24
Capitalism (not modernity I might add) is destined to collapse, very painfully, very messily. Anyone who believes otherwise, I suggest they consider a finitely resourced world dedicated to infinite growth.....the dynamics of the two where the limits to that fantasy are reached.
Britain.....this present fiasco...is a taste of whats to come. Whats even more remarkable is that as this saga unfolds, the cries for more of the malady....unfettered transformation and marketing of these limited natural resources...grows even louder.
This disconnect is why we got here and will remain entrapped until the grisly end.
Britain.....this present fiasco...is a taste of whats to come. Whats even more remarkable is that as this saga unfolds, the cries for more of the malady....unfettered transformation and marketing of these limited natural resources...grows even louder.
This disconnect is why we got here and will remain entrapped until the grisly end.
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Re: Britain on the brink of an economic depression, say expe
by EnergyUnlimited » Sun 25 Jan 2009, 06:41:31
$this->bbcode_second_pass_quote('mefistofeles', '
')Anyone with a shred of sense knew that this collapse was coming and the exclamations of surprise and shock are in retrospect are comical.
')Anyone with a shred of sense knew that this collapse was coming and the exclamations of surprise and shock are in retrospect are comical.
You are correct.
While I was observing society during last 15 years, it was certain to me that the system is heading towards collapse.
1. I was observing increasing proportion of population abandoning any useful activities and joining various useless paper shuffling industries.
2. I was observing, particularly in Britain, promotion of consumer spending as a means of maintaining "growth".
3. I was observing emergence of useless human rights & entitlement culture.
4. I was observing increasingly reckless attitude towards credit facilities.
5. I was observing manufacturing based economy being replaced by finance.
6. I was observing overgrowth of management structures. In some organizations there was comparable numbers of managers and manages.
7. I was observing useless growth of unnecessary government departments on national and local level.
8. I was observing cowardly safety first instead of duty first attitude taking hold in Western societies.
9. I was observing dogmatic, politically correct culture replacing intellectual discussion and democratic process.
10. I was observing collapse of individual responsibility for one's action. Whatever bad have happened, there was always someone to blame (or sue...).
And now I observe all that crap & liberal idiocy going right to hell, where it belongs.
Very good.
Long live collapse!
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Re: Britain on the brink of an economic depression, say expe
by ReverseEngineer » Sun 25 Jan 2009, 07:03:07
$this->bbcode_second_pass_quote('EnergyUnlimited', 'A')nd now I observe all that crap & liberal idiocy going right to hell, where it belongs.
Very good.
Long live collapse!
Very good.
Long live collapse!
Liberal Idiocy? George Bush is a Liberal? Deregulation of the banking industry is a liberal concept? What?
I fail to see how "liberals" caused this, rather it is quite obvious the perpetual greed of free marketeers who threw all caution to the wind and blew up financial bubbles to enrich themselves are the real culprits here. Fortunately for us all, these folks are now offing themselves at a rapid pace, and those that don't will face the Guillotine in short order. Social Misanthropes like this are Zombies, Dead men walking.
Reverse Engineer
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Re: Britain on the brink of an economic depression, say expe
by EnergyUnlimited » Sun 25 Jan 2009, 07:15:04
$this->bbcode_second_pass_quote('ReverseEngineer', '')$this->bbcode_second_pass_quote('EnergyUnlimited', 'A')nd now I observe all that crap & liberal idiocy going right to hell, where it belongs.
Very good.
Long live collapse!
Very good.
Long live collapse!
Liberal Idiocy? George Bush is a Liberal? Deregulation of the banking industry is a liberal concept? What?
I fail to see how "liberals" caused this, rather it is quite obvious the perpetual greed of free marketeers who threw all caution to the wind and blew up financial bubbles to enrich themselves are the real culprits here. Fortunately for us all, these folks are now offing themselves at a rapid pace, and those that don't will face the Guillotine in short order. Social Misanthropes like this are Zombies, Dead men walking.
Reverse Engineer
Examples of "crap" are: 1, 2, 4, 5, 6 in my post above.
Theses can be traced to increasingly defunct capitalist system.
Examples of "liberal idiocy" are: 3, 7, 8, 9, 10.
These can be traced to defunct liberal values.
All these factors (1-10) are contributing to unfolding ruin of the system.
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