NationStates Jolt Archive

Could be this?

Real effects (http://www.guardian.co.uk/world/uselectionroadtrip/2008/oct/13/uselections2008-useconomy)

We place the blame on evil bankers who sold dodgy mortgages, but were they all that dodgy?

Can you blame people like this for remortgaging to pay for their children's education when the value of their house seemed to be rising indefinitely? Wouldn't they have seemed a reasonably safe bet for banks a year or so ago?

What about the small businesses?

I think the video store is a really poor example as I think there's other factors, such as the Internet, that led to the decline of video rental but I was interested in the remark that landlords were not renegotiating rent, hard to blame them perhaps, I'm sure they're facing their own problems.

Anyway, here's to the next couple of years...

*drinks paraffin*

http://www.cbsnews.com/stories/2008/10/10/cbsnews_investigates/main4514163.shtml?source=search_story

It's all the fault of the bankers: Risk analysis must have comprised of - It'll make money now, who cares about tomorrow?

Really, it's not the fault of the consumer IF the banks hand out loans or credit swaps on shaky grounds.

edit:
Though, getting college education shouldn't depend on the wealth of the student or his/her family.

We place the blame on evil bankers who sold dodgy mortgages, but were they all that dodgy?

Can you blame people like this for remortgaging to pay for their children's education when the value of their house seemed to be rising indefinitely? Wouldn't they have seemed a reasonably safe bet for banks a year or so ago?


Nope. One does not merely need to look at the value of the collateral, but also at the capability of the customers to actually live with the debt.

Refinancing to put your kid through college isn't all that bad actually, at least they didn't blow all the money on an even huger tv, or something like that.

I think that the federal gov in the US should help these people paying of their morgages, this isn't how things are generally done in the US, but imagine the problems the nation will have if all the sub prime people end up on the street.
Wait, no need to imagine, just look at the 29-32 period of the 20th century.

Having 10 credit cards seems excesive though, i've never owned more then one, and i haven't ever maxed it out. (iirc €450,-- is the highest ever on a €2k limit card) Even when i was flat broke borowing money for food, i didn't go on credit.
But in the US, living on credit 24/7/365 seems like a not strange situation, i can't even wrap my head around that level of irresponcibility(sp?).

Your average Joe Bloggs cannot be expected to fully understand the economics and all the risks involved. The banks offered all these deals and sold them as a good idea. The banks - well they should have known better. Their fault. The huge unfairness of it all is that to prevent the disastorous effects of the entire system collapsing, ordinary families are going to lose their homes and also have to pay to help keep these institutions afloat (either directly through increased tax or from decreased social spending as the money is diverted to propping up the banks), meaning those who made the errors will get off scott free, while those who are the victims will suffer.

We hire professional investors to make money, they're competitive and they'll find any means to do so.

We elect politicians to look out for us, they're competitive and they'll find any means to win.

See the difference.

It's like the snake who bites because it's in their nature, except one is lying about being a snake.

We hire professional investors to make money, they're competitive and they'll find any means to do so.

And as we have seen, not giving a damn about the wellbeing of your customers does wonders. Hello bubble !

And as we have seen, not giving a damn about the wellbeing of your customers does wonders. Hello bubble !

Sure, I certainly don't excuse the financial industry but I place the root cause of the problem in politics.

Alas I'm out of battery, I was going to start another thread on the need for qualified politicians, in that we vote for departments not parties and you need to have expertise in that department in order to be qualified for election.

I'm certainly not happy with it as a concept but I think the world is too complicated for amateurs in office whose only expertise is knowing how to win, which essentially entails lying.

There's plenty of blame to go around--it's just that it's political suicide to go to the voters and tell them that they share the blame in their foreclosure. As a consumer, the reality is that it should be common sense that: if I earn X dollars per month and my current expenses+this loan will equal X+100 dollars per month then I cannot afford either my current lifestyle or a home/loan/college of this value. The problem is that no one wants to hear that we need to cut back, or that they cannot afford the "American Dream". The banks bought into this foolishness as well by over-leveraging themselves against a housing market that they knew would have to correct eventually. Ultimately, this crash punished both sides for chronically living beyond their means.
Had these consumers lived according to their income rather than living extensively on credit, or had the banks not floated mortgages to people who clearly did not have the means to repay those loans, much of our current problems could have been avoided. Ahh...personal responsibility. What a novel concept.

That's absolutely frightening. Two years ago, I lived in Moreno Valley, CA (a suburb of Riverside). I had bought a house for $90,000 and refinanced once to get out from under an ARM and get a little extra money to pay of debts. When I sold my house in 2006, I got $305,000 for it, which left me with enough money to pay cash for a house where I am now and furnish it. I've since watched the housing market in that area crash. The house I bought in 1999 for $90,000, which skyrocketed to $300k+, is now going for $115,000. I feel so sorry for the people who bought it from me, but I'm so happy I got out of there when I did.

With hindsight, it's easy to see that things were never going to last and that it was going to crash big time. Bankers are supposed to be watching data like that for a living, which is why it's so inexcusable that they walked right into it.

But if you're going to buy a house, it's not your mortgage broker who's supposed to be doing the sums for you. That's your own job, and this is where better education once again might have prevented worse. You can't help people being idiots, but you can at least give them the tools to be reasonable, should they choose to.

An easy thing to go by to tell a bubble in house markets (or anywhere else): compare the price things are going for with an underlying, discounted cash flow valuation. A house price should be roughly equivalent to the expected future income from rent/"happiness derived from living there", discounted back to the present period. Once it gets higher than that, people should be better off simply renting unless they expect some sort of massive windfall when they sell. Whenever people's actions only make sense with such a big capital gain, you know things are getting shaky.

http://seattlebubble.com/blog/wp-content/uploads/2007/09/caseshiller_price-vs-rent-vs-constcosts.png

Next time, keep that in mind and you might make some money somewhere.

With hindsight, it's easy to see that things were never going to last and that it was going to crash big time. Bankers are supposed to be watching data like that for a living, which is why it's so inexcusable that they walked right into it.


Eh? It was pretty fucking easy with foresight too. Bankers don't watch shit, it's not their money.

Yah, in theory, they should. But if I gave you a whole bunch of premium bonds for free - enough so you could cream on average 7% a year, until you didn't - with the vague threat that when it ends your clients would pay, tell me you wouldn't do it?

It's the nature of the game. That's why bankers are always finding new ways to lose money. I wouldn't really care about it, accept for in the past two decades they have become lobbying crazy, and have sucked money out of productive enterprises.