Originally posted by no1marauderThe fact that you don't agree with assertions made by others in this thread doesn't necessarily make your assertions correct. You apparently believe that simply because large amounts of monies are involved, the central banks *must* have known exactly what they were buying. Yet, you give no facts to back up your beliefs.
Some people on these forums try to personalize everything. Grow up.
I don't agree with the assertions made by some people in this thread (including you). What that has to do with "liking" someone I have no idea.
Any analysis that holds as one of its main tenets that central banks brought hundreds of billions of dolla ...[text shortened]... ss abandoned that argument after his first post on the subject here; I suggest you do the same.
Based on the known nature of these investments, I contend that it's at least *possible* that the central banks didn't fully understand the instruments. I actually gave uzless' statements some "serious thought"; I suggest you do the same.
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Originally posted by no1marauderJebus No.1. Read my frickin post again..you'll notice i give examples of who "investors" are. Central Banks were just one of those of investors. I clarified it for you by stating central banks knew that the US would have to step in and bail them out anyway but you apparently ignored it. Many private banks and insurance companies weren't totally aware of what they bought as was pointed out to you by the other poster here. The securities were wrapped up in very complicated instruments as you can see by reading the quote given to you by the other poster.
Some people on these forums try to personalize everything. Grow up.
I don't agree with the assertions made by some people in this thread (including you). What that has to do with "liking" someone I have no idea.
Any analysis that holds as one of its main tenets that central banks brought hundreds of billions of do bandoned that argument after his first post on the subject here; I suggest you do the same.
You seem to be disagreeing with just about every economics person in the country right now. I'll think i'll give your comments on this a pass from now on.
I sure hope you don't have pension money or mutual funds that you need for retirement soon in the stock market They've just lost about 20% of their value in the past month....and it's going lower.
Originally posted by nook7absolutely...what the market needs is a new round of regulation to fix the mistakes that were allowed to happen during de-regulation.
Would not the debacle the banks find themselves in now give support to the opinion that they perhaps had not done their "homework" befire throwing the $ in the ring?
Originally posted by shavixmirFor the moment, you are correct. It's not really individuals that are suffereing, but rather the corporations themselves. The corporations are going bankrupt. Now this sux if you happen to work at one of these companies for sure, but the average joe hasn't seen the effects to a large degree yet.
I'm still absorbing this information.
As to where I am at the moment, I can only say that I still don't see what the problem is. It looks like fat rich people being screwed, which isn't the worst of scenario's from where I'm standing...
In the US, this is mainly because the US govt has bailed out the companies like Fannie/Freddie with taxpayer money. And by taxpayer money, I mean money that taxpayers will have to pay back over the next say 40 years. These bailouts will come from the treasury and since the treasury is empty because the US is currently spending more money than it receives *400 Billiion this year* it has to issue debt in the form of US treasury bonds. These bonds pay interest so not only are the taxpayers on the hook for what could turn out to be about a Trillion dollars, they also have to pay the interest on that debt. I think the current rate on US bonds are about 5 percent.
Eventually though, as more banks/insurance companies go bankrupt, the stock market will continue to go down. If you have mutual funds, or a pension that is invested in the stock market, you just saw your nest egg decrease by about 20 percent....a Huge loss if you have to redeem anytime soon.
Also, interest rates will rise and the cost of getting a new mortgage on a new house purchase will be higher as a result. Fewer people will qualify too because banks are tightening their lending requirements.
Lastly, the value of your home is decreasing and you are losing most if not all of the equity you have built up in your home. A lot of people bought a house for 300K, and have a 250K mortgage...the value of the homes have dropped so that house may now only be worth 200K but the family still has a 250K mortgage...try going to the bank and askiing for a mortgage that is worth more than the house! The bank will turn you down and you are outta luck.
This story is the ultimate trickle down effect. It will devestate some people and won't hurt others. But, most of us will be affected in some shape or form.
Originally posted by nook7I am referring to foreign central banks which aren't going to suffer at all in this debacle because the American taxpayer is now on the hook to them even more than previously. As I already stated:
Would not the debacle the banks find themselves in now give support to the opinion that they perhaps had not done their "homework" befire throwing the $ in the ring?
It is far more likely that they knew exactly what they were buying, but considered them no-risk because they believed that the US government would make taxpayers pay them if the corporations they brought them from couldn't. This is what came to pass even though the law regarding these two entities specifically stated that their securities were NOT backed by the US government.
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Originally posted by no1marauderPersonally, I don't think they knew. The main problem here was that rating agencies were giving these products cash-equivalent ratings.
It is far more likely that they knew exactly what they were buying, but considered them no-risk because they believed that the US government would make taxpayers pay them if the corporations they brought them from couldn't.
Why were they doing this? Because they were basing their analysis on historical data regarding subprime default rates. It's easy to attack them now because of it, but I think that most analysts made the same mistake. I'm just speculating in this last remark, though.
Besides, even if central banks held a large chunk of FM^2, these holdings would be relatively small in each central bank's balance sheet.
Originally posted by uzlessDubious Appeals to Authority aren't an argument.
Jebus No.1. Read my frickin post again..you'll notice i give examples of who "investors" are. Central Banks were just one of those of investors. I clarified it for you by stating central banks knew that the US would have to step in and bail them out anyway but you apparently ignored it. Many private banks and insurance companies weren't totally aware ...[text shortened]... They've just lost about 20% of their value in the past month....and it's going lower.
The stock market is down 18% for the year. This sounds bad, but considering the market reached a record high in October 2007, some fallback could be expected esp. considering the near recession in the US. Anyone who panics at short term changes in the stock market should just buy government bonds. If you're relying on them for retirement, you're in for the long haul and in the long run stocks' are historically the best investment. The sky isn't really falling, Chicken Little.
Originally posted by PalynkaAccording to this article in Slate http://www.slate.com/id/2199564/
Personally, I don't think they knew. The main problem here was that rating agencies were giving these products cash-equivalent ratings.
Why were they doing this? Because they were basing their analysis on historical data regarding subprime default rates. It's easy to attack them now because of it, but I think that most analysts made the same mistake. I'm ...[text shortened]... hunk of FM^2, these holdings would be relatively small in each central bank's balance sheet.
"official" foreign investors holdings in the two GSE's securities went from $262.9 billion in 2003 to $985 billion in 2008. To think that these central banks increased their holdings of these securities to almost $1 trillion merely based on what rating agencies said seems to me unlikely in the extreme.
Originally posted by no1marauderI actually agree with you on this issue. However, I think it may depend partly on what kind of stocks you own. If you own stocks that have a large exposure to derivatives or that require frequent access to the credit markets to stay afloat, you might just be sweating bullets right about now. But if you've avoided those types of stocks, and if you don't need to sell the stocks any time soon, you can probably weather the current storm just fine.
The stock market is down 18% for the year. This sounds bad, but considering the market reached a record high in October 2007, some fallback could be expected esp. considering the near recession in the US. Anyone who panics at short term changes in the stock market should just buy government bonds. If you're relying on them for retirement, you're in for the long haul and in the long run stocks' are historically the best investment.
Originally posted by no1marauderNot just based on that. It's just hard to imagine why they would have much better methodologies than dedicated credit rating agencies.
According to this article in Slate http://www.slate.com/id/2199564/
"official" foreign investors holdings in the two GSE's securities went from $262.9 billion in 2003 to $985 billion in 2008. To think that these central banks increased their holdings of these securities to almost $1 trillion merely based on what rating agencies said seems to me unlikely in the extreme.
It's not that one cannot argue why they could have better methodologies, but just that the alternative presented by uzless (that they were counting on the bail-out, while private banks were not) seems much more far fetched.
There also the fact that foreign exchange reserves have been increasing massively as of late and sovereign wealth funds were also rising in importance. These funds were usually intermediated by private institutions such as investment banks. Most of the times, it is not the central bank who manages directly those funds. This could also explain the rise.
Originally posted by no1marauderUnderstood.
I am referring to foreign central banks which aren't going to suffer at all in this debacle because the American taxpayer is now on the hook to them even more than previously. As I already stated:
It is far more likely that they knew exactly what they were buying, but considered them no-risk because they believed that the US government ...[text shortened]... e two entities specifically stated that their securities were NOT backed by the US government.
They will not suffer like the US taxpayer, however the certainly will /are negatively affected.
It is amazing how greed can blind many.
Right. So as I'm trying to comprehend what you're all saying on this financial matter (which to me just becomes stranger, in the most Dali-esque sort of a way, each day), yesterday, the British banned some or other sort of trading...
Basically these traders take my T-shirt and 50 euros from me and then sell it back to me for 30 euros... Something like that.
Please tell me this isn't true.
I mean, our whole economy surely isn't based upon this sort of behaviour???
It's madness.