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Thread: The credit crisis explained in black and white

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    AudreyLeigh
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    Default The credit crisis explained in black and white


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    Banned Melonie's Avatar
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    Default Re: The credit crisis explained in black and white

    ^^^ there you go, the whole structure of mortgage backed securities explained by a cartoonist !

    Unfortunately, the cartoonist hasn't 'drawn' the last few chapters ... as in US taxpayers now involuntarily holding the 'bad' and 'ugly' mortgage tranches !

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    Veteran Member person's Avatar
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    Default Re: The credit crisis explained in black and white

    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

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    Banned Melonie's Avatar
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    Default Re: The credit crisis explained in black and white

    ^^^ no s#!t ... and unfortunately, the taxpayers don't get the choice of disapproving that loan !!!

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    God/dess Deogol's Avatar
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    Default Re: The credit crisis explained in black and white

    We do have the choice of disapproving the loan.

    If only we had the courage to accept something different in our politicians. To throw the incumbents out. To take a risk on some new collection of people.

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    Banned Melonie's Avatar
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    Default Re: The credit crisis explained in black and white

    If only we had the courage to accept something different in our politicians. To throw the incumbents out. To take a risk on some new collection of people.
    not wanting to veer too far towards the political in Dollar Den, but in this case the economics are inexorably intertwined ...

    The fact remains that a large segment of the US population depends on the gov't for a 'check' ! And if you add up the number of social welfare benefit recipients, the number of public sector gov't workers, the number of workers who are ultimately paid by gov't contracts with private sector companies ( defense, computers / software, etc.) the number of Social Security recipients etc. you come reasonably close to having a majority of registered voters. Every registered voter in these groups has a vested interest in the gov't continuing to spend money at existing levels or even higher levels.

    Now throw in another group of Americans who are involved in the financial industry subdivision that deals with gov't. Obviously this involves FNM and FRE and gov't guaranteed / subsidized mortgages, but it also involves gov't guaranteed student loans, it involves US treasury and municipal bonds, etc. It even involves investment services for gov't tax revenues / retirement funds etc. as well as investment services for investors dealing in GSE and gov't securities. Everybody in this financial industry subgroup also has a vested interest in government spending / borrowing continuing at current levels or increasing.

    Now throw in yet another group of Americans that is involved with gov't subsidized / gov't regulated private industry. This includes corn farmers, ethanol refiners, tech industries involved with alternative energy etc. But it also includes 'old school' utility companies, privately owned urban rental housing, private sector higher education, private sector health care etc. who receive 'indirect' gov't subsidies via the gov't paying part of their customers' bills ! People employed by this subgroup also have a vested interest in gov't spending on their own particular subsidies continuing at current levels or increasing.

    The point that I'm trying to make here is that, like ancient Rome, America has reached the point where 50%+ of registered voters now have a vested personal interest in big government borrowing and spending continuing or expanding. I believe the sound byte is 'Bread and Circuses' - see !

    Aggravating the issue is the fact that the vast majority of those 50%+ of registered voters bear very little personal consequences on the downside i.e. the higher taxes necessary to fund the continued gov't borrowing and spending - I believe the statistic is that lower income 50% of taxpayers only actually pay 3% of all federal income tax dollars. Throw in the fact that the top 1-2-3% of highest income taxpayers are able to avoid actually having to pay high 'official' tax rates via their use of tax favored investments, offshore options etc., such that they are able to side-step the higher taxes necessary to fund continued gov't borrowing and spending for the most part (if not actually profiting from it via investing in muni bonds / alternative energy etc !). Arguably this leaves a minority 47% of registered voters actually bearing personal consequences to the downside as a result of continued / increased gov't borrowing and spending, with some portion of that 47% being marginally affected by higher taxes ( to the point where the tax increase is barely noticeable) and/or not understanding the actual reasons WHY they are being hit with higher taxes.

    Circling back to the point ... the realities of the vested personal interests of a (near) majority of registered US voters guarantees that US voters will NOT be offered the opportunity to replace an incumbent 'borrow and tax and spend and subsidize' politician with a different politician who doesn't also support the exact same government economic policies. This couldn't be more obvious than today's increasing inability to tell the difference in economic policies between Democrats and Republicans !!!

    Furthermore, this situation is unlikely to change unless the economic fallout from those 'borrow and tax and spend and subsidize' policies finally becomes altogether untenable ... finally resulting in hungry, broke, unemployed people rioting in American streets a la America of the 1930's ... or perhaps more recently Argentina of a few years ago ( see from the 2001 NY Times ) ! Yes things will have to get THAT bad before any serious change in US government 'borrow and tax and spend and subsidize' policies will become realistically possible.

    ~
    Last edited by Melonie; 07-19-2008 at 07:22 AM.

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