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 Credit Crisis Video - Everything Explained

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PostSubject: Credit Crisis Video - Everything Explained   Sat Sep 27, 2008 4:51 pm

This video is very topical and up to the moment. This is the best explanation I've come across that puts the entire credit crisis into focus for us laymen - bar none! Was primarily thinking of cactus flower who has expressed interest in economic matters but will appeal to anyone who has been watching the credit crisis unfold over the last two weeks,

http://krugman.blogs.nytimes.com/2008/09/26/crisis-at-princeton/

It is 1 hour 10 minutes long and presented by several economics professors from Princeton Univ in the US. Don't let that put you off. Most of the presentations are very lucid and easy to understand. (Forget about some of the jargon - TED spreads, etc. - they're incidential to the analysis).

[Mods may want to put this into an existing thread. I posted it as a seperate thread because it's such a lucid explanation of what has just occured and some of the remedies that may be applied.]
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PostSubject: Re: Credit Crisis Video - Everything Explained   Sun Sep 28, 2008 1:50 am

Thanks rockyracoon - that was pretty good. I had wondered if this had followed on from the dot.com bubble (search for new business) and the second speaker was of that view. Krugman is pretty frank with his opinion of Paulson.

Its slightly odd watching these academics who are talking abouth the whole thing with detached amusement. They all must have tenure.
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PostSubject: Re: Credit Crisis Video - Everything Explained   Sun Sep 28, 2008 4:19 am

Interesting video. What worried me slightly was the buying of toxic at above market, which someone seemed to defend.
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PostSubject: Re: Credit Crisis Video - Everything Explained   Sun Sep 28, 2008 10:03 am

Plenty of jargon in it alright - reminded me of lectures I've attended where you'd understand it better if you were given a list of stuff to dejargonise the week before (maturity of loans??) but as I've been following it with some interest on Bloomberg, here and elsewhere a lot of the overall ideas came across very easily. I got the image in my head that, just as the Sixties Hippy Revolution was fuelled by LSD and marijuana - was this massive hemisphere of risk enriched by the snorting of cocaine? Was Gordon Gecko a cocaine blower?

The third (Japanese American?) fella gave a nicely communicative historical overview of it even though he claimed he knew a lot less about what was going on than the others. He was a bubble-student and expert and came across very positively about it in the end - the dotcom burst but left us with huge chunks of technology which everyone uses daily and have value and is it the same for houses with this bubble? There are now tons and tons of houses around - not enough in Dublin I know - but they got built and exist now, the question is will they trade easily enough if needs be? One thing that came up there was that investors seem to want to hold on to houses and not let them go at knockdown or even normal prices ... unless they have to in which case there could be many cashkings around who might pick up bargains.

On the bailout part - "Triple AAA" rated debt was mentioned and I think they said it was most secure in terms of getting your money back - could these be the ones that Paulson wants to give the money to? Was this whole slicing and dicing not a big Casino type of affair and it turns out that a lot of gamblers betted big and are in risk of losing their money and now want the Casino owner to pay them back what they've lost?

Here is the revealing clause that Krugman points out is part of Paulson's deal:



What a Face
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PostSubject: Re: Credit Crisis Video - Everything Explained   Sun Sep 28, 2008 1:38 pm

Auditor #9 wrote:
Plenty of jargon in it alright - reminded me of lectures I've attended where you'd understand it better if you were given a list of stuff to dejargonise the week before (maturity of loans??) but as I've been following it with some interest on Bloomberg, here and elsewhere a lot of the overall ideas came across very easily. I got the image in my head that, just as the Sixties Hippy Revolution was fuelled by LSD and marijuana - was this massive hemisphere of risk enriched by the snorting of cocaine? Was Gordon Gecko a cocaine blower?

The third (Japanese American?) fella gave a nicely communicative historical overview of it even though he claimed he knew a lot less about what was going on than the others. He was a bubble-student and expert and came across very positively about it in the end - the dotcom burst but left us with huge chunks of technology which everyone uses daily and have value and is it the same for houses with this bubble? There are now tons and tons of houses around - not enough in Dublin I know - but they got built and exist now, the question is will they trade easily enough if needs be? One thing that came up there was that investors seem to want to hold on to houses and not let them go at knockdown or even normal prices ... unless they have to in which case there could be many cashkings around who might pick up bargains.

On the bailout part - "Triple AAA" rated debt was mentioned and I think they said it was most secure in terms of getting your money back - could these be the ones that Paulson wants to give the money to? Was this whole slicing and dicing not a big Casino type of affair and it turns out that a lot of gamblers betted big and are in risk of losing their money and now want the Casino owner to pay them back what they've lost?

Here is the revealing clause that Krugman points out is part of Paulson's deal:



What a Face

One of the things made clear in the video is that credit ratings on these products aren't worth the paper they're written on. But I think it is a good point that throughout these crazy booms people worked hard and a lot of real value (use value) was created, whether computers or houses.

This is a quote from a Princeton professor's study of incomes in the US from the 1960s onwards:

“In fact, there are significant data that show a pattern between Republican administrations and slow income growth across the board, and among the poor especially. On the other hand, the data suggest that, under Democratic administrations, inequality temporarily decreases, while more robust income growth is seen overall, and is especially concentrated in the middle- and lower-classes.”

The free market Republican policies with big tax cuts for the rich far from benefitting everyone by "trickle down" have only benefitted a tiny percentage of very rich people. This has not only been unfair and brutal, but has contributed to social and economic instability .

Another writer said this week
Quote :
Income inequality grew significantly in 2005, with the top 1 percent of Americans - those with incomes that year of more than $348,000 - receiving their largest share of national income since 1928, analysis of newly released tax data shows.
The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression.
While total reported income in the United States increased almost 9 percent in 2005, the most recent year for which such data is available, average incomes for those in the bottom 90 percent dipped slightly compared with the year before, dropping $172, or 0.6 percent.
The gains went largely to the top 1 percent, whose incomes rose to an average of more than $1.1 million each, an increase of more than $139,000, or about 14 percent.
Ireland has generally followed the same "Boston" model over the 1980s of creating millionaires and leaving a large underclass of poor people. http://www.iht.com/articles/2007/03/29/business/income.4.php

This tiny percentage of rich bastards now see a lot of their wealth imploding. The "rescue" package from the Treasury appears to be all about rescuing the rich, with the rest of the US population paying for it for generations to come.

Galbraith said that exactly this kind of disparity between rich and poor in America was what lead to the Great Depression. The conclusions are obvious.
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PostSubject: Re: Credit Crisis Video - Everything Explained   Tue Sep 30, 2008 11:38 pm

I think this slideshow entertainingly explains the origins of sub-prime lending quite well I think.

The Subprime Primer
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PostSubject: Re: Credit Crisis Video - Everything Explained   Wed Oct 01, 2008 12:30 am

The Lighthouse Keeper wrote:
I think this slideshow entertainingly explains the origins of sub-prime lending quite well I think.

The Subprime Primer

Fuc*in' AAA Very Happy
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PostSubject: Re: Credit Crisis Video - Everything Explained   Wed Oct 01, 2008 7:50 am

Excellent video and a larff - much needed. Thanks.

Just one point. Someone mentioned aboot the young economist fella saying bubbles were good in that they often lead to innovation and new ideas. Weelll. There was innovation and new ideas (if fact, the dot.com bubble was based on new ideas and almost nothing else) during the 1930 - 1960's (indeed in every decade) which resulted in nationally accumulated wealth, rising standards of living and the creations of whole new industries. All done without the benefit and aide of bubbles. There may have been minor hiccups but the valuation of companies were transparent and the hiccups very minor relative to the amount of growth.

We have to measure the cost of the phenomena of modern bubbles against what I consider to be fundamental and long term benefits. I would argue that the dot.com bubble may have provided short term stimulus to some economies but the ultimte cost outweighed the immediate benefits. The property bubble will ultimately be seen as one that not only caused financial distress but real human distress. Many families standard of living will be impacted in ways they never considered.

The English "hippee" Smile made some good sense and his analogy about the yellow brick road was fairly good and to the point. However, I would add one caveat. The road we've been building for the last 30 years has not been solid. In fact the road has crumbled in places and fell into the abyss. We have been leap-frogging over these chasms as each bubble is created and burst. We've been lucky so far. Will there be one chasm-bubble to wide to leap-frog?
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