The Economy

[Tom]

Great posts Tom. I'm glad people like you make it a habit to keep watch on the Government.
You seem to have a good grasp on the financial sector. Do you work in that field?

Thanks for the compliment.

I am not in the financial sector, at least, not anymore. I was a mortgage underwriter for eight years, but that ended a year ago. I don’t miss it at all. While in the beginning it was a decent career, it became wrought with greed and fraud.

When the credit crisis hit in August of ’07, I started looking for the cause. This led me to the study of Austrian economics, as opposed to the Keynesian economics in place today. I began reading the works of Ludwig Von Mises, Murray N. Rothbard, Lew Rockwell and Ron Paul. I found myself studying the business cycle, as defined by Mises (not Krugman); as well, as researching the history of banking, monetary policy in regards to gold, silver and fiat currencies and the role that fiat currencies’ play in socialism.

We wouldn’t be anywhere near the mess we are in today, both financially and militarily, if we didn’t have a fiat currency. It is the life-blood of the State.

Gold and silver money, as defined by the Constitution, were the property of the people and represented true wealth. The only role that Congress played in the monetary system was to determine the weights and measures of gold and silver.

The central bankers didn’t like this at all, as it severally limited their accessibility to other people’s wealth. We struggled from the beginning with the central banks and thier fractional reserve banking policy. We finally lost the battle in 1913 with the passage of the Federal Reserve Act.

Now we trade Federal Reserve Notes which belong to the Federal Reserve Bank (a private corporation created by an Act of Congress). These Notes are not even money, as money, by definition, cannot include instruments of debt. We can no longer truly pay our debt, we can only discharge our obligations.

This fiat monetary system, which the whole world has adopted, is a huge problem. The only way for it to work is to continually grow the money supply, which means we must continually dig deeper into debt. Today the world is going into debt at a break-neck speed. If we paid back all of the debt, there would be no more (paper) money. This is not a road to prosperity, but a road to perpetual servitude.

The system cannot last, however. History has proven that governments, which resort to a fiat currency, end with the destruction of the currency and very likely the government itself. We are witnessing this very thing happening today.

 

[RednekF350]

Always the optimist, I just checked my 401K at 11:30 this morning. Since 9:00 a.m yesterday, my account value grew over $12,000!
At that rate, I will be retiring very early, on or about December 14, 2008, according to my gazintas.
Yaaaay!

 

[Ben Ruset]

I went from $850 to $930 in one day.

 

[Boyd]

At that rate, I will be retiring very early, on or about December 14, 2008, according to my gazintas.

God Bless.... but personally I think we have a long way to go before we're out of the woods. One or two days doesn't make this a "recovery". I'm also up nicely since the beginning of the week, but will it last?

 

[Tom]

Here is a good article from The Market Oracle, regarding the history of hyperinflation from around the globe, for anyone who may be interested: http://www.marketoracle.co.uk/Article2510.html

 

[RednekF350]

God Bless.... but personally I think we have a long way to go before we're out of the woods. One or two days doesn't make this a "recovery". I'm also up nicely since the beginning of the week, but will it last?

Lets hope it does last and lets hope everything that is happening now is a huge wake up call for all the a-holes who have lived beyond their means and the banks that helped facilitate their false, sub-prime lifestyle.
I bought my house when I was 25 in 1983 and the banks, even then, were pushing balloons and the realtors were right behind them telling you to relax and take the bait.
I was just a dumbass that just got married but I knew a ballon was dangerous and I took a 14% fixed rate. Back in 1993 14% was a good rate believe it or not.
We struggled a little in the beginning and as rates dropped as years went by, we went to a 15 yr mortgage 8%, and refinanced again to a 6% and we paid that off early.
Now my Harley payment is my substitute for a mortgage payment.
I never lived beyond my means and my humble starter house is now my finisher house.
My next move will probably be to a trailer down south after I retire.

 

[dragoncjo]

Well said Scott.

I agree many people portray prosperity and wealth and it is all BS its all a image acquired by having massive debt.

Oh and for being out of the woods yet.....no shot. This market really may continue another 1000 points and from there will simply trade between that point and its low from friday. Your looking at 5 years to get out of this mess that people buying houses they couldn't afford got us into. Financial planning is something that should be taught in high schools.....people need to know the basics.

 

[Tom]

Your looking at 5 years to get out of this mess that people buying houses they couldn't afford got us into.

I think it could be more like 10 to 15 years.

While there is a glut of bad debt in the form of mortgage backed securities on the books, the government is exacerbating the problem by interferring in the market. This crisis could be over in about a year if they would just let the bad debt liquidate and let the corporations that took on these risky "assets" go bankrupt. Now, I grant you, it would be a really bad year and hurt alot of people, but it would be over and we could pick up the pieces and rebuild.

Instead, we are nationalizing banks (which the banks, themselves, have no say in and wasn't part of the bailout bill), bailing out corporations, considering bailing out states and injecting liquidity in hopes that the banks will lend and the people will continue to borrow money they can't afford to re-pay. All the while, running a, now, $455 billion budget deficit. This is going to drag this correction out for a long time and won't make it anymore comfortable.

And, while it is true that the catalyst which sparked this crisis was the under-qualified home-buyer, the fault lies with the lenders that made these loans knowing full well that these people didn't qualify. They had no problem lending to risky borrowers because they would then bundle the mortgages up, sell them to a third party and collect their fees. The lenders are who bear the brunt of the blame, they were the ones willing to give money to those they knew couldn't afford it.

Those who sold credit default swaps are also largely to blame. By covering these toxic assets with a CDS, the assets were allowed to carry a AAA rating, so everyone thought they were sound investments, when the reality is those providing the swaps, such as AIG, knew full well they were riddled with junk.

Those who had written this bad debt and assumed these risky loans should be allowed to fail, go into bankruptcy and where fraud was committed, be prosecuted.

 

[dragoncjo]

Tom, I agree with all your points. The lenders who knew they should be lending to certain people like I said she be piled up and jailed. But people buying homes need to be accountable and stop living in fantasy land of what they can afford and stop worrying about how much bigger there home is versus someone else. I agree that the market should have figured itself out on its own, but if no action was taken you would have seen at least another 30-40% drop in the market, which would lead to just all sorts of panic and fear. Like you said the swap was 10-15 years of crap versus one year of just utter chaos.....I wonder if it wasn't an election year if things would be different. I also wonder if the mortgage brokers is able to understand the mess they created. I know a broker who last winter bought a 800,000 dollar house on laurel creek country club......he had to sell the house 6 months later, real financial guru there....and this guy was recommending stuff to clients, but he can't even take care of himself.....oh the financial industry.....what a bunch of crooks(except me

This is a pretty good blog to read, has some real good points in it,
http://market-ticker.denninger.net/

 

[Tom]

Tom, I agree with all your points. The lenders who knew they should be lending to certain people like I said she be piled up and jailed. But people buying homes need to be accountable and stop living in fantasy land of what they can afford and stop worrying about how much bigger there home is versus someone else. I agree that the market should have figured itself out on its own, but if no action was taken you would have seen at least another 30-40% drop in the market, which would lead to just all sorts of panic and fear. Like you said the swap was 10-15 years of crap versus one year of just utter chaos.....I wonder if it wasn't an election year if things would be different. I also wonder if the mortgage brokers is able to understand the mess they created. I know a broker who last winter bought a 800,000 dollar house on laurel creek country club......he had to sell the house 6 months later, real financial guru there....and this guy was recommending stuff to clients, but he can't even take care of himself.....oh the financial industry.....what a bunch of crooks(except me

This is a pretty good blog to read, has some real good points in it,
http://market-ticker.denninger.net/

I agree with you that people need to live within their means. And now, we, as a nation, will be forced to. This isn't a bad thing, although, it is going to hurt and we will be lucky to retain what few freedoms are left us in this Constitutional Republic, when all is said and done.

The real culprit which is killing the credit market, though, is the structured investment vehicle - derivatives. Without these, none of the bad mortgages could have been diced up, re-packaged and re-sold repeatedly. And, ultimately, behind it all is the loose monetary policy, which breeds malinvestment, promulgated by the Federal Reserve Bank.

I like Karl Denninger. I have been reading Market Ticker for quite a while.

Another of my favorite blogs is Lew Rockwell's site: http://lewrockwell.com/

 

[Ben Ruset]

See, I've now created a thread that I can't read without getting upset.

 

[Tom]

See, I've now created a thread that I can't read without getting upset.

Sorry.

 

[Ben Ruset]

Sorry.

No, it's okay. I don't think I can leave my house without being upset anymore.

 

[Sue Gremlin]

Me too, Ben. It's an emotionally charged time for all of us, I think, and it's hard not to get riled up at every turn. I am counting on this abating just a little when the election is over. The whole thing is making me totally mental.

 

[whitingrider]

A partial explanation as to why our governmeny is to blame for this mess:

Another terrible thing is the way both parties shipped our manufacturing jobs out of the US. I guess we the people are to blame for allowing it to happen.
Tom

 

[Tom]

Another piece of legislation that is playing a big role in this, aside from the CRA, is the repeal of the Glass-Steagall Act in 1999. This allowed the the financial industry to consolidate into massive corporations that are now considered "to big to fail."

 

[gipsie]

Another terrible thing is the way both parties shipped our manufacturing jobs out of the US.
Tom

One of the biggest mistakes we ever made, yet we continue to do it!:cry:

 

[RednekF350]

The whole thing is making me totally mental.

That is why the Lord gave us the gift of the fermented juices of the earth's fruits.

Genesis 27:28 Therefore God give thee of the dew of heaven, and the fatness of the earth, and plenty of corn and wine.

and:

Psalm 104-14 He causeth the grass to grow for the cattle, and herb for the service of man: that he may bring forth food out of the earth;

15 And wine that maketh glad the heart of man, and oil to make his face to shine, and bread which strengtheneth man's heart.

Of course there are lot more verses in the Bible that warn one to avoid the wine but with this economy thing, I am skimming lightly over them.

 

[grendel]

That is why the Lord gave us the gift of the fermented juices of the earth's fruits.

Genesis 27:28 Therefore God give thee of the dew of heaven, and the fatness of the earth, and plenty of corn and wine.

and:

Psalm 104-14 He causeth the grass to grow for the cattle, and herb for the service of man: that he may bring forth food out of the earth;

15 And wine that maketh glad the heart of man, and oil to make his face to shine, and bread which strengtheneth man's heart.

Of course there are lot more verses in the Bible that warn one to avoid the wine but with this economy thing, I am skimming lightly over them.

Amen brother. Lets not forget that the Lord's first miracle was to save a jewish wedding that had run out of wine. 60 gallons of the best stuff they had ever tasted. Wine is a gift of God,and he wants us to enjoy it, but we are warned to use it with common sense........I think I will put the cap back on the John Power and go read Psalm 104. Goodnight

 

[Tom]

Another terrible thing is the way both parties shipped our manufacturing jobs out of the US. I guess we the people are to blame for allowing it to happen.
Tom

If you want to forge a global community, the United States Republic has to be removed. What easier way to achieve that goal, than by stripping it of it's industry?

And, while We the People have been quite idle while all of this has been taking place, the public opposition to the bailout bill and the subsequent passage of same, is proof that We the People no longer exercise any control over our supposed representative government.