In the wake of Lehman Brothers seeking bankruptcy, the Federal Reserve Bank has promised to step in and, "stabilize broader financial markets". Are these bank failures and market turmoil their ideal of stabilization? At what point do we seriously start looking at other options for this system besides the federal reserve.
- Thread starter rcrosby
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Hitechhunter
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The Federal Reserve is the root cause of the problems we are seeing, not the solution! The government needs to get out of the business of market manipulation, especially as the economy becomes more globalized . McCain and Obama only pledge to make it worse with more regulation.
We keep borrowing from the Chinese and spending in the middle east, our "American way of life" has been funded by debt, and now it's all crashing down.
http://www.youtube.com/watch?v=ji_G0MqAqq8
We keep borrowing from the Chinese and spending in the middle east, our "American way of life" has been funded by debt, and now it's all crashing down.
http://www.youtube.com/watch?v=ji_G0MqAqq8
Hitechhunter
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EL CAZADOR
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<div class='quotetop'>QUOTE (Hitechhunter @ Sep 15 2008, 10:16 AM) <{POST_SNAPBACK}></div>
our government is only mimicking the habits of it's citizens. Too many Americans are trying to keep up with the Jones' by racking up credit card debt, refi'ing homes over and over to get the boat, the luxury cars and the bolt ons.
our government is only mimicking the habits of it's citizens. Too many Americans are trying to keep up with the Jones' by racking up credit card debt, refi'ing homes over and over to get the boat, the luxury cars and the bolt ons.
<div class='quotetop'>QUOTE (EL CAZADOR @ Sep 15 2008, 11:06 AM) <{POST_SNAPBACK}></div>
How much of that kind of behavior is sanctioned by the financial policies we have in place? We have artifically low interest rates which encourages people to take on higher amounts of debt. We have policies that allowed people to qualify for home that they should have never qualified for and could never afford.
I am not taking the blame off of people who take high debts as they should pay the consequences of making bad decisions. But when you interfere in the free market there are consequences, blowback if you will.
How much of that kind of behavior is sanctioned by the financial policies we have in place? We have artifically low interest rates which encourages people to take on higher amounts of debt. We have policies that allowed people to qualify for home that they should have never qualified for and could never afford.
I am not taking the blame off of people who take high debts as they should pay the consequences of making bad decisions. But when you interfere in the free market there are consequences, blowback if you will.
EL CAZADOR
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<div class='quotetop'>QUOTE (rcrosby @ Sep 15 2008, 12:02 PM) <{POST_SNAPBACK}></div>
<div class='quotetop'>QUOTE (rcrosby @ Sep 15 2008, 12:02 PM) <{POST_SNAPBACK}></div>
just because an interest rate is low, doesn't mean you have to borrow the money. People need to learn self constraint.
<div class='quotetop'>QUOTE (rcrosby @ Sep 15 2008, 12:02 PM) <{POST_SNAPBACK}></div>
Those loans are made my private lending institutions who develop their own policies. Those guys are taking it in the chorts right now.
<div class='quotetop'>QUOTE (EL CAZADOR @ Sep 15 2008, 01:09 PM) <{POST_SNAPBACK}></div>
True it isn't forcing anyone to borrow money but when it is being articifically lowered rather than decided by a market funtion there is going to be misallocation. The solution which is the origional objective of this post is to remove that "artificial" part which is the federal reserve and create a free market solution.
<div class='quotetop'>QUOTE </div>
Yah right. Take a look into the funtioning of these private lending institutions. That should have been the case, they should be developing their own policies. When the bank can simply borrow money that is created of thin air from the Federal Reserve and then repackage that lending through Freddie or Fannie and resale it to some investment bank like Lehman or some chicom bank, that isn't a free market function. When you have politicians pushing banks to lend to buyers in certain areas or with certain incomes, that is isn't a free market. The democrats pushed this through on the basis of reallocation, inner city lower income people who had no business owning a home got loans and the dems like that. The republicans liked pumping some money into the investment banks like Bush's appointee Henry Paulson now treasury secretary and formally of Goldman Sachs. It was Mr. Paulsons idea to nationalize Freddie and Fannie from the government cofers with no Constitutional Power and not even a vote. Same guy who gave a little handout to his Wall Street friends by backing with the full faith and confidence of the American taxpayor a buyout of Bear Stearns.
Thank about that for a second, they nationalize Freddie and Fannie, they back a bailout of Bear Stearns but they let Lehman fail. I agree with letting this guys fail but think about the whole other facet of investing or managing risk when you have to guess which players Washington will bailout...
If you think this is all fun and games and some people buying boats and big screens when they shouldn't have... Lets look at Lehman. 130 years in business, made it through the Great Depression and now today 9/15/2008 in bankruptcy. Do a little research on derivatives and the derivatives market. It was how this risk, mortgage debt, was broken up-sold- and repackaged. It is so huge that no one can even tell you the individual exposure to any bank or investment firm mainly because they can't even calculate it.
True it isn't forcing anyone to borrow money but when it is being articifically lowered rather than decided by a market funtion there is going to be misallocation. The solution which is the origional objective of this post is to remove that "artificial" part which is the federal reserve and create a free market solution.
<div class='quotetop'>QUOTE </div>
Yah right. Take a look into the funtioning of these private lending institutions. That should have been the case, they should be developing their own policies. When the bank can simply borrow money that is created of thin air from the Federal Reserve and then repackage that lending through Freddie or Fannie and resale it to some investment bank like Lehman or some chicom bank, that isn't a free market function. When you have politicians pushing banks to lend to buyers in certain areas or with certain incomes, that is isn't a free market. The democrats pushed this through on the basis of reallocation, inner city lower income people who had no business owning a home got loans and the dems like that. The republicans liked pumping some money into the investment banks like Bush's appointee Henry Paulson now treasury secretary and formally of Goldman Sachs. It was Mr. Paulsons idea to nationalize Freddie and Fannie from the government cofers with no Constitutional Power and not even a vote. Same guy who gave a little handout to his Wall Street friends by backing with the full faith and confidence of the American taxpayor a buyout of Bear Stearns.
Thank about that for a second, they nationalize Freddie and Fannie, they back a bailout of Bear Stearns but they let Lehman fail. I agree with letting this guys fail but think about the whole other facet of investing or managing risk when you have to guess which players Washington will bailout...
If you think this is all fun and games and some people buying boats and big screens when they shouldn't have... Lets look at Lehman. 130 years in business, made it through the Great Depression and now today 9/15/2008 in bankruptcy. Do a little research on derivatives and the derivatives market. It was how this risk, mortgage debt, was broken up-sold- and repackaged. It is so huge that no one can even tell you the individual exposure to any bank or investment firm mainly because they can't even calculate it.
easymoney
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I agree with you completely rcrosby. The federal reserve is the root of many financial problems. I saw a post on another site I would like to post, but don't think it is allowed. It is titled "who is really running the country" or some such. It lays out the forming of the federal reserve and just who is the fed. And one clue, it is not the federal government...
And for the US Government (meaning us taxpayers) to step in and bail out all these private financial institutions is obscene. Speculation, greed and super low introductory interest rates all contributed to this mess...
And for the US Government (meaning us taxpayers) to step in and bail out all these private financial institutions is obscene. Speculation, greed and super low introductory interest rates all contributed to this mess...
NatureDriven
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Moral Hazard
The risk that a party to a transaction has not entered into the contract in good faith, has provided misleading information about its assets, liabilities or credit capacity, or has an incentive to take unusual risks in a desperate attempt to earn a profit before the contract settles. Moral hazard can be somewhat reduced by the placing of responsibilities on both parties of a contract.
Adverse Selection
A situation where buyers have information that sellers don't (or vice versa) about some aspect of the transaction.
These two definitions are the core of Financial Stability. It seems the Fed forgot the two golden rules about credit/lending. When you lower rates to obscene lows as they did, you automatically encourage these situations, leading to mal-investment. Although the people are at fault for taking loans they couldn't afford, this is a proven situation that occurs in all aspect of lending when credit becomes nearly free and easy. The Fed is primarily the responsible party as they are the one's that are in control of the lending rates and injecting money into the economy. Further research has proven that each time the Fed manipulates rates as they do, the resulting economic affect is worse than the one prior to the lowering of the rates; increasing in severity each time they do this. And now that they have ruined many people economic stability, the governmnet will now sweep in with greater controls to save the day. This stuff always seems so well planned out. Screw the people and the economy, create havic and turmoil, then take more control and responsibility enlarging and broadening Federal Powers. Doesn't seem to bad of a gig to me.
The risk that a party to a transaction has not entered into the contract in good faith, has provided misleading information about its assets, liabilities or credit capacity, or has an incentive to take unusual risks in a desperate attempt to earn a profit before the contract settles. Moral hazard can be somewhat reduced by the placing of responsibilities on both parties of a contract.
Adverse Selection
A situation where buyers have information that sellers don't (or vice versa) about some aspect of the transaction.
These two definitions are the core of Financial Stability. It seems the Fed forgot the two golden rules about credit/lending. When you lower rates to obscene lows as they did, you automatically encourage these situations, leading to mal-investment. Although the people are at fault for taking loans they couldn't afford, this is a proven situation that occurs in all aspect of lending when credit becomes nearly free and easy. The Fed is primarily the responsible party as they are the one's that are in control of the lending rates and injecting money into the economy. Further research has proven that each time the Fed manipulates rates as they do, the resulting economic affect is worse than the one prior to the lowering of the rates; increasing in severity each time they do this. And now that they have ruined many people economic stability, the governmnet will now sweep in with greater controls to save the day. This stuff always seems so well planned out. Screw the people and the economy, create havic and turmoil, then take more control and responsibility enlarging and broadening Federal Powers. Doesn't seem to bad of a gig to me.
