#1 One of the reasons I am not a Republican anymoregatorGuest09-15-2008, 03:06 PM
I decided to dump the Republican party last fall because at the end of the day they are only marginally better than the Democrats. Neither party has a clue. Both are big government parties.
The finiacial crisis today has me thinking about debt again and how it is going to eat our lunch.
Our foreign entanglements and our entitlement mindset is causing us to spend a lot more money than we have. The problem is in both the govenment and private sector.
I remember seeing David Walker on the Glen Beck show last year. Walker was the chief accountant for the US and he says we are in bad shape. I think we are in worse shape now than when this was first aired.
We are pretty much screwed and there is not much any politician running for office will do about it. We are past the point where politicans can fix what they broke.
You can dismiss him as an alarmist kook if yoiu want but remember he was the head accountant for the government. He quit his job because nobody wanted to hear the bad news never mind do anything about it.
09-15-2008, 03:42 PM
- Join Date
- Aug 2005
Lehman and the end of the era of leverage By Spengler
Lehman Brothers survived the American Civil War, two world wars and the Great Depression, but today, Monday, the firm that set the standard in fixed income markets will be liquidated. Potential losses are so toxic that none of the major financial institutions was willing to acquire it.
Lehmanís demise follows the failure last week of the two American mortgage guarantee agencies, Fannie Mae and Freddie Mac. It is remarkable that the US authorities, exhausted from their efforts to bail out the mortgage guarantors and other firms, have left Lehman to its fate.
An enormous hoax has been perpetrated on global financial markets during the past 10 years. An American economy based
on opening containers from China and selling the contents at Wal-Mart, or trading houses back and forth, provides scant profitability. Where the underlying profitability of the American economy was poor, financial engineering managed to transform thin profits into apparently fat ones through the magic of leverage.
The income of American consumers might have stagnated, but the price of their houses doubled during 1998-2007 thanks to the application of leverage to mortgage finance. The profitability of American corporations might have slowed, but the application of leverage in the form of mergers and acquisitions financed with junk bonds multiplied the thin band of profitability.
Wall Street and the City of London rode an unprecedented wave of profitability by providing overpriced leverage to consumer and corporate markets. Led by the financial engineers at Lehman, the securities industry grew an enormous infrastructure of staff, systems, and financial exposure. They were so successful that when the music stopped, there was no way to liquidate this mechanism gracefully. It only could be allowed to collapse.
The Great Crash of 2008 has entered a new phase, judging from the market opening in Europe and US equity futures prices. Lehmanís failure and the sharp decline at other financial firms, notably American International Group (AIG), the worldís largest insurer, have pushed equity values down to their lost levels of the year.
As I wrote on May 20, the proximate cause of the Great Crash is the enhancement of poor returns to capital through leverage. The decline of returns to capital, though, stemmed from a global imbalance of supply and demand for capital in response to the rapid aging of the world population. The aging pensioners of Europe and Asia must find young people to pay interest into their pensions, and they do not have enough young people at home. Germans aged 15 to 24, on the threshold of family formation, comprise only 12% of the country's population today and will fall to only 8% by 2030. But one-fifth of Germans now are on the threshold of retirement and half will be there by mid-century.
In effect, Americans borrowed a trillion dollars a year against the expectation that the 10% annual rate of increase in home prices would continue, producing a bubble that now has collapsed. It is no different from the real estate bubble that contributed to the Thai baht's devaluation in 1997, except in size and global impact.
09-15-2008, 08:07 PM
My company is busy buying up these other financial institutions at bargain prices. One man's trash is another man's treasure.
I believe in Christianity as I believe that the sun has risen: not only because I see it, but because by it I see everything else.C. S. Lewis
09-15-2008, 08:14 PM
- Join Date
- May 2008
- In my own private Alamo on The Mountain in Georgia
If you don't mind my asking, what is the alternative you chose, Gator?Hey careful man! There's a beverage here!
09-15-2008, 08:21 PM
The Govt. needs to get the F*ck out of the private sector - the bailouts and the pressuring of companies to take on risky debt is what led to this crap.I long for the days when our President actually liked our country.
09-15-2008, 09:06 PM
It's going to be okay, gator. You'll probably kick the bucket before the real shit hits the fan anyway.
Go out to range and take your aggression out there.
gatorGuest09-15-2008, 10:39 PM
Voting for some big government clown like McCain over Obama is no more going to fix the problem than the Man in the Moon. It will make you feel good because you think you are voting for a Conservative government but nothing will really change. The size of government will continue to grow and so will the deficit. Our country will continue to spend much more money than we earn. We will borrow money from the Saudis and the Chinese to pay for our spending addiction.
Listen to what Walker has to say. The man knows what he is talking about. Everybody will ignore him because they don't want to think about what he is saying.
What happened with the lending market failure today is only the tip of the bankruptcy iceberg.
gatorGuest09-15-2008, 10:44 PM
I actually have no rage. I have lived through the best times this country had. It is just sad to see what is ahead of us.
You can go out and kill your coyotes and then come home and have your drink. Life will be good for you. No worries.
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