If you ask me, one of the most pronounced trends in the global economy over the course of my 42-year career has been the growth in the use of credit. And it’s not just governments that have vastly expanded their use of credit over this period. If I wanted to buy something upon my arrival at college in 1963, I had two choices: I could spend money I had in my pocket, or I could write a check against... [more]
If you ask me, one of the most pronounced trends in the global economy over the course
of my 42-year career has been the growth in the use of credit. And it’s not just
governments that have vastly expanded their use of credit over this period.
If I wanted to buy something upon my arrival at college in 1963, I had two choices: I
could spend money I had in my pocket, or I could write a check against money I had in
the bank. The one thing I couldn’t do – now here’s a radical concept – is spend money I
didn’t have. As a result, I had no way to buy things I couldn’t afford.
But attitudes toward debt underwent significant change, and in the last forty years we’ve
seen the following:
Vast expansion of the use of credit cards, the balances on which are never
expected to be paid off.
Innovative mortgages requiring little or no principal amortization; reverse
mortgages, where you owe more at the end than the beginning; declining down
payment requirements; and eventually the availability of mortgage loans
exceeding purchase prices.
Home equity loans enabling owners to drain off any equity in their homes. Fifty
years ago these were called second mortgages, and people who had them were
considered by their neighbors to be in financial trouble.
Growth in corporate debt, and the extension of borrowing power to companies
with “speculative” credit ratings.
The development of the commercial paper market, where companies could access
“permanent” capital with maturities measured in days, on the assumption that the
paper could always be rolled over.
Creation of highly levered investment entities.
Vastly increased steady-state borrowing on the part of nations, whereas,
previously, deficit spending had been limited to occasional efforts to fight
recession through stimulus.
http://www.oaktreecapital.com/MemoTree/Down%20to%20the%20Wire%2007_21_11.pdf[less]
Response by Riversider
over 14 years ago
Posts: 13573
Member since: Apr 2009
I wonder if Keynsians pay off their credit cards each month?
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Response by memito
over 14 years ago
Posts: 294
Member since: Nov 2007
We presently live in a Ponzi/pro-inflationary structured economy where financial firms thrived, until very recently. When prices correct and/or don't go up the system hiccups and shudders - even with trillions of dollars from taxpayers bailing out the "risk" takers (oh, excuse me, the "job creators"). The financial industry has played a game where they have implied that an understanding of individual product/security/derivative risk equates an understanding of systemic risk. A brain-washed and wealth-admiring public has fallen for this lie as it is clear that the Wall Street "geniuses" DON'T know what they are doing (from an ethical perspective); whereas the reality seems to be that Wall Street knows it is running a Ponzi scheme and is doing all it can to keep it going as long as possible.
The problem is that the rest of the world has decided to play out the very same Ponzi scheme - giving the financial industry an even greater litter box to play in. We have been playing a game of monopoly where the "bank" has been replenished time over time and in more creative ways in order to keep inflating asset prices and pushing "growth". People had the illusion that they were getting ahead because housing prices were going up in the early 2000's, but the truth was that prices were reacting to more money being thrown into the system - either via stupid financing, fraud, putting risk on the government books and easy monetary policy. (By the way, this is presently happening in China on a far greater scale - with the fraud amped up by an obscene factor.)
We have refused to take steps to structurally change our economy partly because the vested interests have so much to lose and, more disturbingly, they have convinced the general public that if the "rich" get hurt, everyone else will suffer 10 times as worse.
Yes, we live in an economy where we are openly threatened and held hostage by self-justifying hostile parasites.
That is today's financial industry in a nutshell.
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Response by Brooks2
over 14 years ago
Posts: 2970
Member since: Aug 2011
memito-- True, but why limit it to the financial industry?
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Response by Riversider
over 14 years ago
Posts: 13573
Member since: Apr 2009
As consumers we borrow too much.
Our banks are over leveraged and our countries are over leveraged too much.
When you don't believe you are paying for something or using some else's money dumb decisions get made.
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Response by huntersburg
over 14 years ago
Posts: 11329
Member since: Nov 2010
>they have convinced the general public that if the "rich" get hurt, everyone else will suffer 10 times as worse.
Really? Every time I pick up the paper or watch tv or read something posted on the internet, it seems as if the general public is being convinced of the total opposite.
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Response by memito
over 14 years ago
Posts: 294
Member since: Nov 2007
"Really? Every time I pick up the paper or watch tv or read something posted on the internet, it seems as if the general public is being convinced of the total opposite."
Yes, but when push comes to shove what happens?
We couldn't even claw back Wall Street 2008/2009/2010 bonuses that were openly paid with US taxpayer bailout money because people were too afraid of what would happen if we didn't pay out multi-million dollar contracts - or god forbid! - nullify such contracts!
Any political attempt to change the 15% "carried interest" tax that hedge funds use has been shot down as "anti-investment" and "anti-growth".
People bitch and moan about the "rich" but then either don't have the balls to follow thru with real corrective measures or simply can't because our political system has been captured by our financial elite.
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Response by Riversider
over 14 years ago
Posts: 13573
Member since: Apr 2009
You're confusing two issues. Corporatocacy and free markets. The reason why the 2008-2010 bonuses became a talking point is because they were the result of gov't bail-outs or programs that guaranteed profits to the remaining wall street banks.
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Response by huntersburg
over 14 years ago
Posts: 11329
Member since: Nov 2010
>We couldn't even claw back Wall Street 2008/2009/2010 bonuses that were openly paid with US taxpayer bailout money because people were too afraid of what would happen if we didn't pay out multi-million dollar contracts - or god forbid! - nullify such contracts!
Really? Which people were afraid?
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Response by memito
over 14 years ago
Posts: 294
Member since: Nov 2007
Riversider, I am sorry but I am not following what you said.
I was trying to show an example of where we refused to take action against the Ponzi rich when we had a chance to do so.
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Response by Riversider
over 14 years ago
Posts: 13573
Member since: Apr 2009
There's also the issue of excessive government borrowing to pay for entitlements based on what the people deserve vs what the economy can afford.
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Response by huntersburg
over 14 years ago
Posts: 11329
Member since: Nov 2010
>where we refused to take action against the Ponzi rich when we had a chance to do so.
Why did you refuse to do so?
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Response by andwin
over 14 years ago
Posts: 80
Member since: Jan 2008
Yet NY Coops are perpetually mortgaged to the hilt. Many taking out ballooning interest-only mortgages as equity increases. Debt is one of the defining factors in Coops.
But that's ok right? Just business as usual in NY "real estate".
So what do you do when you're in a situation where someone else keeps you perpetually in debt?
(And the choir sings… "don't buy a coop! ")
memento wrote:
"… we live in an economy where we are openly threatened and held hostage by self-justifying hostile parasites… "
BINGO !
The problem is that they have learned how to so finely tune the economic equation so that there is just enough complacency in the populace to stave off any sort of meaningful retaliation.
We'll see what happens when the "occupy" mindset begins to look attractive to higher rungs of the social ladder. When the efforts exceed beating drums and hand painted signs. It'll resemble something like the French revolution.
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Response by Riversider
over 14 years ago
Posts: 13573
Member since: Apr 2009
People bitch and moan about the "rich" but then either don't have the balls to follow thru with real corrective measures or simply can't because our political system has been captured by our financial elite.
Memito I simply disagree. It's not an issue of clawing back bonuses but recognizing we screwed up when we permitted Geithner to pay out the AIG swaps at one hundred cents on the dollar and screwed up again when instead of forcing the banks to do a reorg as we did to G.M.
why is bankruptcy constructive in all circumstances except when it comes to Wall Street? And we're not talking liquidation as in M.F. but a prepackage bankruptcy like G.M.
I misspelled memito's name.
God I hope Kylewest isn't reading today.
There are only 3 things worse than making a spelling error when you're on kyle's Sht-list. Using Capitol letters inappropriately, disparaging comments about sponsors… and…… uhmmm.. yea… oh…. well…. uhh… I can't remember the third…. ooops!
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Response by falcogold1
over 14 years ago
Posts: 4159
Member since: Sep 2008
Well, it looks like a Romey fan club.
He could be your guy.
WRT to housing, I believe Romey is a "let the chips fall where they may" kind of guy.
That's what everyone is advocating for...am I correct?
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Response by columbiacounty
over 14 years ago
Posts: 12708
Member since: Jan 2009
huntersburg
6 minutes ago
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I wonder if Keynsians pay off their credit cards each month?
We presently live in a Ponzi/pro-inflationary structured economy where financial firms thrived, until very recently. When prices correct and/or don't go up the system hiccups and shudders - even with trillions of dollars from taxpayers bailing out the "risk" takers (oh, excuse me, the "job creators"). The financial industry has played a game where they have implied that an understanding of individual product/security/derivative risk equates an understanding of systemic risk. A brain-washed and wealth-admiring public has fallen for this lie as it is clear that the Wall Street "geniuses" DON'T know what they are doing (from an ethical perspective); whereas the reality seems to be that Wall Street knows it is running a Ponzi scheme and is doing all it can to keep it going as long as possible.
The problem is that the rest of the world has decided to play out the very same Ponzi scheme - giving the financial industry an even greater litter box to play in. We have been playing a game of monopoly where the "bank" has been replenished time over time and in more creative ways in order to keep inflating asset prices and pushing "growth". People had the illusion that they were getting ahead because housing prices were going up in the early 2000's, but the truth was that prices were reacting to more money being thrown into the system - either via stupid financing, fraud, putting risk on the government books and easy monetary policy. (By the way, this is presently happening in China on a far greater scale - with the fraud amped up by an obscene factor.)
We have refused to take steps to structurally change our economy partly because the vested interests have so much to lose and, more disturbingly, they have convinced the general public that if the "rich" get hurt, everyone else will suffer 10 times as worse.
Yes, we live in an economy where we are openly threatened and held hostage by self-justifying hostile parasites.
That is today's financial industry in a nutshell.
memito-- True, but why limit it to the financial industry?
As consumers we borrow too much.
Our banks are over leveraged and our countries are over leveraged too much.
When you don't believe you are paying for something or using some else's money dumb decisions get made.
>they have convinced the general public that if the "rich" get hurt, everyone else will suffer 10 times as worse.
Really? Every time I pick up the paper or watch tv or read something posted on the internet, it seems as if the general public is being convinced of the total opposite.
"Really? Every time I pick up the paper or watch tv or read something posted on the internet, it seems as if the general public is being convinced of the total opposite."
Yes, but when push comes to shove what happens?
We couldn't even claw back Wall Street 2008/2009/2010 bonuses that were openly paid with US taxpayer bailout money because people were too afraid of what would happen if we didn't pay out multi-million dollar contracts - or god forbid! - nullify such contracts!
Any political attempt to change the 15% "carried interest" tax that hedge funds use has been shot down as "anti-investment" and "anti-growth".
People bitch and moan about the "rich" but then either don't have the balls to follow thru with real corrective measures or simply can't because our political system has been captured by our financial elite.
You're confusing two issues. Corporatocacy and free markets. The reason why the 2008-2010 bonuses became a talking point is because they were the result of gov't bail-outs or programs that guaranteed profits to the remaining wall street banks.
>We couldn't even claw back Wall Street 2008/2009/2010 bonuses that were openly paid with US taxpayer bailout money because people were too afraid of what would happen if we didn't pay out multi-million dollar contracts - or god forbid! - nullify such contracts!
Really? Which people were afraid?
Riversider, I am sorry but I am not following what you said.
I was trying to show an example of where we refused to take action against the Ponzi rich when we had a chance to do so.
There's also the issue of excessive government borrowing to pay for entitlements based on what the people deserve vs what the economy can afford.
>where we refused to take action against the Ponzi rich when we had a chance to do so.
Why did you refuse to do so?
Yet NY Coops are perpetually mortgaged to the hilt. Many taking out ballooning interest-only mortgages as equity increases. Debt is one of the defining factors in Coops.
But that's ok right? Just business as usual in NY "real estate".
So what do you do when you're in a situation where someone else keeps you perpetually in debt?
(And the choir sings… "don't buy a coop! ")
memento wrote:
"… we live in an economy where we are openly threatened and held hostage by self-justifying hostile parasites… "
BINGO !
The problem is that they have learned how to so finely tune the economic equation so that there is just enough complacency in the populace to stave off any sort of meaningful retaliation.
We'll see what happens when the "occupy" mindset begins to look attractive to higher rungs of the social ladder. When the efforts exceed beating drums and hand painted signs. It'll resemble something like the French revolution.
People bitch and moan about the "rich" but then either don't have the balls to follow thru with real corrective measures or simply can't because our political system has been captured by our financial elite.
Memito I simply disagree. It's not an issue of clawing back bonuses but recognizing we screwed up when we permitted Geithner to pay out the AIG swaps at one hundred cents on the dollar and screwed up again when instead of forcing the banks to do a reorg as we did to G.M.
why is bankruptcy constructive in all circumstances except when it comes to Wall Street? And we're not talking liquidation as in M.F. but a prepackage bankruptcy like G.M.
anyone remember this? it applies to individuals companies and governments..
http://www.hulu.com/watch/1389/saturday-night-live-dont-buy-stuff
I misspelled memito's name.
God I hope Kylewest isn't reading today.
There are only 3 things worse than making a spelling error when you're on kyle's Sht-list. Using Capitol letters inappropriately, disparaging comments about sponsors… and…… uhmmm.. yea… oh…. well…. uhh… I can't remember the third…. ooops!
Well, it looks like a Romey fan club.
He could be your guy.
WRT to housing, I believe Romey is a "let the chips fall where they may" kind of guy.
That's what everyone is advocating for...am I correct?
huntersburg
6 minutes ago
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alter ego? I am Riversider.