Monday, December 01, 2008

It's Official

For almost a year now, I've been saying the U.S. is in a recession. Any questions?

Think about all the ink and airtime devoted to the question of whether "we are or we aren't," most of which concluded the latter...

4 Comments:

Blogger Mrs Panstreppon said...

Subprime surprise? I don't think so. The crooks on Wall Street would have us all believe that no one could have anticipated the extent of the subprime crisis.

Ridiculous. Anyone with a half a brain knows what happens if you lend money to people who can't afford to pay it back.

Out of curiousity, I'd like to read the terms of one of these credit swaps.

Another thing I wish I could do is determine whether the underlying "assets" in these credit swaps were pledged more than once.

In other words, if you totaled the amount of outstanding subprime loans as of a certain date, does that amount approximate the value of all assets secured under these credit swaps or were the assets secured more than once?

Remember being told that Enron's true financial condition was supposed to be too complex for anyone to ascertain?

That was a lot of crap. All you had to do was calculate the 3-year trend in gross margin and you knew what was going to happen. That's why Enron never broke out gross margin in its financials.

Why aren't more hedge funds failing if no one knew what was coming down the pike?

12/01/2008 8:50 PM  
Anonymous Blakenator said...

I agree with Mrs Panstreppon. Not only did they know what was going on, they engineered it. Correct me if I am wrong, but the real crisis started when the thieves had sold all the fraud they could to outside parties and were reduced to trading whatever was left amongst themselves. Of course, the backup plan for redeeming all those wooden nickels was to call in markers from old friends Berneke and Paulson. The timing was bad for the election but the risk of having to deal with a new administration who might balk at the size of the handouts without serious strings attached was greater.

12/02/2008 12:50 PM  
Anonymous Thomas Daulton said...

Ha! It's far worse than you even imagine, Mrs. P. and Blakenator.

In other words, if you totaled the amount of outstanding subprime loans as of a certain date, does that amount approximate the value of all assets secured under these credit swaps or were the assets secured more than once?

If I understand your question right, no, the assets were secured between 20-40 times on average. So if you totaled up the bad mortgages you'd get somewhere in the range of $3-4 Trillion dollars, but the damage being claimed from the bad credit swaps (and other bad instruments) is around $67 Trillion dollars. $67 Trillion, by the way, is somewhat more than the GDP of the entire world. There simply aren't enough poor people in existence to do that much damage to the financial system with bad mortgages.

Poor people have defaulted on mortgages for centuries without causing a global financial meltdown worth $67 Trillion. So, yes, the poor people are responsible for defaulting on their individual mortgages, and should be penalized appropriately. But it is inappropriate to blame poor people for gambling 20-40 times the value of their mortgages, without having the cash to back up their bets. It was the "respectable" bankers and Wall Street types who did that, and that's what caused the meltdown. I think it's been proven beyond any sane person's doubt that Enron's particular shenanigans were only the tip of a very large iceberg, which I think has been TCR's position from the earliest days of this blog. Sources:

http://www.pri.org/business/frightening-show-economy.html

http://www.rollingstone.com/blogs/taibbiunbound/2008/10/first-post.php

12/02/2008 1:16 PM  
Anonymous goldhorder said...

Nothing like a bit of leveraging :)
Now do you understand why I buy gold? LMAO. Don't worry your banks are only leveraged 10 to 1 rather than 30 to one like the investment banks were before the big crash.

12/04/2008 2:32 PM  

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