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Thread: What's going on ??????!!!!!!!

  1. #1
    Featured Member Meea's Avatar
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    Default What's going on ??????!!!!!!!

    Hello everyone!

    I've been living under a rock. I don't know what's going on in the financial world, except what I read in the headlines as pass by a newstand every morning.


    Can someone please point me to some easy to read articles about the financial crisis? But seriously, easy to read! Maybe like a "today's economy for dummies"?

    Pretty please

    thanks!

  2. #2
    AudreyLeigh
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    Default Re: What's going on ??????!!!!!!!

    Well pretty much...

    The banks gave lots of loans people couldnt afford. People didnt pay the loans. Banks now have no money because people didnt pay. Banks were bought by other banks. Government did a "bailout" in which they will take over the loans people aren't paying.

    So now, instead of the banks going under our government is going under. Wonderful, isn't it?

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    Featured Member Meea's Avatar
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    Default Re: What's going on ??????!!!!!!!

    OK.... and how is this affecting the rest of the world?

    Also, wasn't this a predictable outcome? Why was this allowed to happen?

  4. #4
    AudreyLeigh
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    Default Re: What's going on ??????!!!!!!!

    Quote Originally Posted by Meea View Post
    OK.... and how is this affecting the rest of the world?
    This Im unsure about.
    Also, wasn't this a predictable outcome? Why was this allowed to happen?
    Once the crisis was here (once people stopped paying) there was really nothing that could be done. Bailout or not the economy would be crap.

    Why? Ask the banks why they gave people $500,000 loans with a $50,000 income. Greed is how it happened.

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    Default Re: What's going on ??????!!!!!!!

    Quote Originally Posted by Meea View Post
    OK.... and how is this affecting the rest of the world?
    One of the things you do as a mortgage lender is to pay someone else to take on the risk of people not paying (eg. investment banks). Over the last few years everyone drastically underestimated the risk of people not paying. So many large companies that thought they had lots of safe money have suddenly realised that they have no money.

    However, lots of big businesses have vital business interactions with other businesses, and people have money with banks. So you get a domino effect when the big ones start going under.

    Quote Originally Posted by Meea View Post
    Also, wasn't this a predictable outcome? Why was this allowed to happen?
    Some people predicted it. They're a little bit richer now. It was allowed to happen because of the free market - if people want to pay $$$ for worthless things then that's their problem.
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    Banned Melonie's Avatar
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    Default Re: What's going on ??????!!!!!!!

    lots of more detailed discussions in other threads ... including a number of discussions as to the reasons that banks were COERCED into writing 'subprime' loans they would have never written of their own accord - based on US gov't laws and banking regulations designed to increase minority / low income home ownership !!!

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    God/dess Mr Hyde's Avatar
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    Default Re: What's going on ??????!!!!!!!

    Here is what happened, in somewhat of a chronological order

    1-in the late 90s, Congress and the Clinton administration passed legislation that encouraged lenders to start giving out mortgages to people who, in the past, could not get them, or at least could not get them without paying HIGH interest rates. These people are the so-called "sub prime" market, obviously because they are under the prime market to lend to (people who are at high risk of defaulting on their mortgage because of unstable income, low income, etc).

    2-Lender ran with this and started giving out mortgages to anyone and everyone...so-called "pulse mortgages" (because if you had a pulse, you got a mortgage).

    3-With all of these new people able to buy homes, demand for real estate went up like crazy. Remember starting around 2000, and going through about 2006, home prices were going up like crazy? That's because demand was outstripping supply. Simple economics says that high demand and low supply = higher prices.

    4-People who got into these homes and then saw their homes increase in value because of 3 started taking out second mortgages to buy....stuff.

    5-While all of this was going on, lending institutions sold tons of these mortgages. What they did was take the really good mortgages, the ok mortgages, and the subprime mortgages, and sold them off in bundles (as above) to investors....and marketed the crappy mortgage bundles as good investments (in reality, they weren't...obviously).

    6-Meanwhile, the sub-prime borrowers, who should never have been lent to in the first place, started defaulting on their mortgages.

    7-As these defaults started to happen, foreclosures started going up in 2007.

    8-As foreclosures started going up, banks suddenly became less able to lend to...anyone....and demand for homes started going down.

    9-The combination of lower demand and higher foreclosures sent home prices down. People started getting buried in their homes as their value got to be less then their mortgage. More people stated defaulting, and home prices continued going lower.

    10-Meanwhile, all of those crappy mortgages sold as investments started to show their true colors. People started losing money.

    To make this long post short, what all of the above means is that because of all of this, credit is so tight, and money supply is so short, that it is becoming difficult to near-impossible to operate businesses. Most businesses rely on credit on a daily basis to make payroll, order merchandise, etc. If that credit is not available, payrolls can't be made, businesses can't order things to sell, etc. This causes a slow down and maybe pull back/recession in business.

    Stock market investors know this, and get nervous about their investments going bad, so they start to sell their stocks. As the selling begins, others get nervous and start selling. Before you know it, the Dow is down 40% from its high and Mr Hyde wants to slit his wrists.

    There is blame all over...congressional democrats and Clinton got the ball rolling, but fat cats on Wall Street ran with the mandate and they were making so much money off of this BS that it just created a big artificial bubble. People who couldn't afford loans but took them out anyway are also to blame. The girl who cuts my hair, god love her, bought a house that was worth about half what she paid, on a mortgage that was way over her head...and she should have known it. But guess what? The lender should never have given her a loan.

    So that's where we are now.

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    God/dess Mr Hyde's Avatar
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    Default Re: What's going on ??????!!!!!!!

    Quote Originally Posted by Meea View Post
    OK.... and how is this affecting the rest of the world?

    Also, wasn't this a predictable outcome? Why was this allowed to happen?
    The world economy is now global....credit flows among countries with ease. If credit in the US is tight, then US lenders can't lend money outside the country either. And also, to an extent, what was happening in the US was also happening in much of Europe.

    Basically, money was cheap...credit was too easy to get.

    And yes, many people predicted this. It was allowed to happen for two reasons...government do-gooders (I don't like being partisan, but it was Democrats) wanted low income people to be able to have homes, and lenders were making (artificial) money doing it, so no one complained..very loudly.

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    Quote Originally Posted by Mr Hyde View Post
    And yes, many people predicted this. It was allowed to happen for two reasons...government do-gooders (I don't like being partisan, but it was Democrats) wanted low income people to be able to have homes, and lenders were making (artificial) money doing it, so no one complained..very loudly.
    I think the dems had the idea that there would be nice low priced utilitarian homes.

    Instead what was built - because of all the easy money - were giant expensive McMansions.

    The same thing is happening with higher education right now. Student loans became more easily available - so the colleges and universities hiked up their tuition. As with housing, it is reaching the point where only the wealthy can pay for an education.

    (Taking cover) One could say the same about dance prices! Lots of easy money raised prices and now...

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    Default Re: What's going on ??????!!!!!!!

    That is only one side of that double edged sword. The other side is that jobs were outsourced overseas and the good paying blue collar jobs disappeared. This also caused people to default on mortgages that would have otherwise been able to pay, if they still had jobs.

    That's why areas like Ohio and Michigan are the hardest hit. They relied on the manufacturing jobs, that are now gone.

    One could argue that the subprime mortgage problem would have been tempered if other economic problems, such as outsourcing, weren't part of the equation.

    Oh, and the war, too. That has hit the economy pretty hard.

    So this is basically a perfect storm creating economic chaos.


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    Default Re: What's going on ??????!!!!!!!

    YES!! Thanks sister.... I was to pissed off to even respond....another perfect example of the greedy republicans taking care of only themselves!!!!!

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    Featured Member Meea's Avatar
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    Default Re: What's going on ??????!!!!!!!

    Wow, thanks everyone.

    Yeah, this is pretty crazy... Over here, about 5000 kilometers away from the United States, people are going nuts.... Construction of new buildings have come to a screeching halt and people are really freaked out about the stock market.

    About a year ago, rents were charged in US dollars because the dollar was strong, but now the rent contracts won't touch the dollar with a ten foot pole. It's kind of silly to pay rent in a foreign currency, but the people who signed contracts to do that are very happy now - they're paying 25% less for their apartments! And the landlords, trying to make up their losses, are charging 25% MORE now for the same apartments! Fuckers (but they`re probably right)

    It`s pretty fucked up... people are having to move to crappier neighbourhoods and smaller apartments just to keep their rent payment the same

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    God/dess Mr Hyde's Avatar
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    Quote Originally Posted by midlifeadventure View Post
    YES!! Thanks sister.... I was to pissed off to even respond....another perfect example of the greedy republicans taking care of only themselves!!!!!
    This is not a Republican or Democratic blame-game...both parties are at fault here.

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

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    Thanks for saying that Mr. Hyde. I'm quite tired of listening to each political party point the finger.

    Outsourcing is terrible for any country that is losing jobs because of it. But, to be quite blunt: Americans are LAZY! I live in Louisiana, and every time a hurricane hits, our government outsources jobs to other states because people down here work sooooo sssslllooowwwllllyyyy. It took Louisiana 2 years to repave a three mile road. It took Mississippi 2 1/2 years to repave all of I-55, which is over 300 miles. Have you ever compared the work ethic of an American to an Indian (I mean someone from India)? It's quite depressing. We come from a society where we feel that we deserve simply because we want. And while this doesn't apply to everyone, it applies to enough people to make a difference.

    The economy is in turmoil right now. I predict that a lot of it has to do with the upcoming election. Everyone is terrified by one candidate or the other. And no one has all of the answers. Once the election is over, the economy will begin to level itself out. The housing crisis was and is devestating, but we will recover from it. Have faith

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    Default Re: What's going on ??????!!!!!!!

    ^^^ to be factually correct, it's difficult to justify your point about Louisianians working sooo sloooowwwwly as a matter of region. As you pointed out, next door neighbor Mississippi was far more efficient in rebuilding after Katrina than Louisiana was. A likely explanation for this is the fact that Louisiana is a 'blue' state whereas Mississippi is a 'red' state ... which makes a difference both in regard to the efficiency of government operations and also in the work ethic of local residents.

    As to the work ethic of many Americans versus people from India or China, arguably this is the direct result of US social welfare policies that in fact provide non-working benefit recipients with a standard of living that matches that of a person working full time for $12-$15 an hour in most 'blue' states. Indians and Chinese people who choose not to work face an entirely different situation !

    As to the economy leveling itself out after the upcoming election, I wouldn't count on that happening any more than the election of FDR in 1932. For a fact Americans still have huge amounts of 'unserviceable' debts - and even more Americans are going to go belly-up on their debts in the next couple of years as more mortgages reset and more layoffs are implemented by (what remains of) US businesses and industries.

    The 'tin foil hat' crowd would also tell you that, in the future, there is simply no way that the current American standard of living is sustainable ... for the poor and middle class at any rate. Employers cannot continue to pay 'above world market' wages for either skilled or unskilled jobs and still remain profitable. Governments cannot continue to pay for social welfare benefits that provide a standard of living for non-working Americans that is far above the standard of living of WORKING unskilled foreigners because there simply won't be enough American tax base left to fund such benefits. And for the same reason gov'ts will be unable to continue paying generous salaries and even more generous benefits to comparatively unproductive public sector workers.

    Thus the 'tin foil hat' crowd will tell you that things can never go back to the way they were a year ago. And the bottom line reason for this ... as well as the arguably 'best' thing to result from this banking / credit crisis ... is that state and local governments will no longer be able to secure low cost municipal bond financing that, in the past, has allowed state and local gov'ts to continue spending more money than they are able to take in via tax revenues. If forced to balance state and local budgets without the option of piling on additional long term debts, state and local officials will face some hard choices in regard to social welfare spending policies, business and personal income tax policies, public sector employee wage and benefit policies etc.

    !~
    Last edited by Melonie; 10-12-2008 at 06:39 AM.

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    God/dess Deogol's Avatar
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    Quote Originally Posted by midlifeadventure View Post
    YES!! Thanks sister.... I was to pissed off to even respond....another perfect example of the greedy republicans taking care of only themselves!!!!!
    Ah. Another one about to have a reality check concerning the democrats when they are older.

    There ain't no one looking out for you in our government.

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    Default Re: What's going on ??????!!!!!!!

    So what can be done to turn this all around?

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    Default Re: What's going on ??????!!!!!!!

    ^^^ every person in America could actually make their loan payments on time before buying food or gasoline !!!???

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