A few months ago, a friend of mine who made a fortune in hedge funds sent me something he wrote entitled, “What went wrong and how to fix it.’’ It was about the economy — 4,880 words — full of terms my brain could hardly wrap itself around.
“Andy,” I asked him. “I’m not sure I can understand this. Can you translate into English?”
Comments
Shallow. Very shallow.
Your friend Andy is either deliberately misleading you or he is clueless. I gather you missed that PBS show recently where an independent film maker, entirely on his own, gathered more evidence of fraud in less than a year than the whole federal government took the trouble to find in the last what, four or five years now. The plan is to do nothing until the statute of limitations runs out and let these guys continue to commit as much fraud as they wish as long as generous campaign contributions continue to flow in the right direction. Maybe you might look up the Glass-Steagall act and it's history. For extra credit look up the Sherman act. To believe this was not deliberately committed you would have to toss out their own unshakable faith in unrestricted capitalism.
Sorry...but it was Barney helping his democratic friends line their on pockets.
A guy pushing a broom (see other piece of globe pablum today) thinks he can afford a $285K house on a $30K salary.... and Barney frank and the democrats threatened to sue the banks if they didn't give loans to guys like this.
As everyone should know (but you apparently don't), most mortgage loans are sold pretty much immediately after they are written. Until the banking crisis, they were mostly chopped up and sold in tiny pieces with lots of other loans. The bank that wrote the loan had zero incentive to find out of it would ever be paid off. The government didn't have to threaten to sue anybody; they didn't even have to ask. Banks and mortgage companies made deeply stupid loans because they profited enormously from doing so...until they didn't.
As anyone who bother to read up on it would know (and you apparently don't want to or cant).... those secondary markets taking the risky mortages only popped up after the banks were forced to offer the risky (no money down) mortgages.
Do read up, please.
"This unrealistic optimism — this “chronic undervaluing of risk,” as Andy called it — fueled bubbles in every nook and cranny of the economy. And the reason was simple: For the previous two decades — from 1983 to 2006 — we experienced a golden age of stability." The second sentence is utter nonsense. First, the tendency to underestimate risk is nearly universal and requires very little to lead to bubbles; that's been going on for at least as long as we've had the ability to identify bubbles. Second, the period from 1983 to 2006 only looks stable from this far away. The author may be too young to have really experienced Black Monday in 1987, but the dot com bubble didn't burst that long ago. In each case, everyone involved was very cautious for a short time and then went right back to their old bad habits. The possibility of creating money out of essentially nothing has an appeal that never goes away for long.
It might be that part of the problem was that those making the investment decisions were from a subculture that valued a certain illegal substance that produces thoughts of extreme optimism. Also fraud.
and we are there again w/ Bernanke's policies