Credit Crisis Explained Graphically

Discussion in 'Politics, Religion, Social Issues' started by obeygiant, Mar 16, 2009.

  1. obeygiant macrumors 68040


    Jan 14, 2002
    totally cool
  2. Drumjim85 macrumors 68030


    Oct 7, 2007
    DFW, TX
    Ya, i saw that a few days ago. I was impressed.
  3. obeygiant thread starter macrumors 68040


    Jan 14, 2002
    totally cool
    I searched the forum to make sure it wasn't posted already and i didn't find it. I just saw this today.
  4. Blue Velvet Moderator emeritus

    Jul 4, 2004
    It is. I've watched it a couple of times over the past month and it explains why it isn't just about foreclosures.

    Everybody should see this. It will make you angry. Or it should.
  5. rdowns macrumors Penryn


    Jul 11, 2003
  6. keysersoze macrumors 68000


    Jan 6, 2004
  7. Mr. lax macrumors 6502

    Apr 6, 2007
  8. mkrishnan Moderator emeritus


    Jan 9, 2004
    Grand Rapids, MI, USA
    This was a really nice explanation. Which just continues to raise the question of how economic stimuli can possibly hold up the house of cards. I still think that we should be focusing on a managed system of allowing the subprime houses to be foreclosed and sold at market prices, to re-achieve a proper economic balance.
  9. GoCubsGo macrumors Nehalem


    Feb 19, 2005
    There was a powerpoint that went around for quite some time. It was harsh and 99% accurate. This is a nice visual, but nothing beats that powerpoint.
  10. steve2112 macrumors 68040


    Feb 20, 2009
    East of Lyra, Northwest of Pegasus
    On a related note: This site has a graphical representation of just what this 1 Trillion dollar spending package looks like. Think about this when they propose Bailout III. Coming soon to a Congress near you!
  11. Drumjim85 macrumors 68030


    Oct 7, 2007
    DFW, TX
    i didn't find it here, this probably is the first thread about it.
  12. sushi Moderator emeritus


    Jul 19, 2002
    Not sure. Seems a bit over simplified and does not address governmental regulations and other factors affecting the mortgages and other.

    However, I will be the first to admit that I am not a financial expert, nor do I play one on TV. It would be interesting to see what the financial experts think about it.

    Cool. Great image.
  13. yojitani macrumors 68000


    Apr 28, 2005
    An octopus's garden
    For an 11 min video, that was pretty informative.
  14. fivepoint macrumors 65816


    Sep 28, 2007
    The Credit Crisis... EXPLAINED

    This is a FANTASTICALLY simple explantation of the credit crisis. It really simplifies the entire system and makes it easy to understand for folks who haven't been following along or don't have a good understanding of how our mortgage system operates...

    One thing this video briefly mentioned, but should have gone into significantly more detail on... is that the entire problem was started by the Alan Greenspan and the Federal Reserve manipulating interest rates (which Obama and Bernanke are currently doing), and hence the market. The artificially low rates created by the Federal Reserve are the fundamental beginning of the entire problem since they halt investment in government bonds, create far too much demand for credit, and stimulate overgrowth in housing which increases supply (thereby lowering demand) which makes all of our houses worth less in the end.

    No matter what anyone tells you, this problem wasn't caused by greed of the private sector. Greed always exists, it's human nature, and truth be told, its what makes our system work. The free market system exists because free people with private ownership rights are allowed to make decisions for themselves, and attempt to grow their own wealth through various business deals. Greed is an ugly word, but if instead you call it the pursuit of happiness and wealth, I think we can all agree that it is not a bad thing. What is actually bad is good people attempting to manipulate the free market with all the best intentions I'm sure... but end up hurting us all in the end. Would you rather trust the free market to determine prices and values of various commodities... or one man and his banking buddies in the Federal Reserve to do it?

    The problem was actually caused by socialistic policies stemming from Washington and the Federal reserve. The problem was caused by government manipulating the dollar, printing endless amounts of fiat money to pay down debt, and thereby artificially lowering interest rates. The problem was caused by the government promoting sales of sub-prime mortgages and illegally influencing the free market. Over and over in history policies JUST LIKE THIS have destroyed economies. Will this time be different? MAYBE. But probably not.

    Sadly, there aren't many people in the mainstream talking about this. Glenn Beck on Fox News, Ron Paul in the Congress, Peter Schiff and other free marketers in economic circles... but you won't hear Matt Lauer talking about this... you won't hear Brian Williams or David Gregory talking about it. It just may be the single biggest issue of our decade, and no one is talking about it! It's all "the investor's fault", it's all "AIG's fault."

    Just a few days ago the Fed approved the printing of 1 trillion more dollars in an effort to stop deflation. Did you even hear about this, or were you too enveloped in the AIG bonus story and watching BO on the Leno show? Did the news sources you so trust even mention it? What they're really doing by printing this insane amount of cash is devaluing the U.S. dollar. What they're really doing is ensuring massive inflation in upcoming years and even the potential collapse of the U.S. Dollar. The wool is being pulled over our eyes, folks.

    That being said... "I hope Barack Obama succeeds."
  15. fivepoint macrumors 65816


    Sep 28, 2007
    In case anyone wants to read any more about this:

    What does 1 Trillion Dollars Look Like?
  16. Blue Velvet Moderator emeritus

    Jul 4, 2004

    That's your fringe interpretation which no credible economist would agree with. The Austrian School doesn't pay credence to outcomes so why should we listen? It's a hypothesis based on flawed reasoning which won't even account for real-world examples.

    You could also put it another valid way:

    That the United States, far from demonstrating the over-powering success of free-market capitalism has instead floated for decades on the standing of global empire with arm-twisting access to global markets, resources and most importantly of all, cheap energy... all assisted by a vast and entrenched military.

    That credit demand was enabled and encouraged by fraudulent actors who preyed on individuals and families who were only trying to maintain or improve their living standards because wages have stagnated since the 1980s relative to GDP, because the trickle-down theories pushed by the supply-siders distributed wealth to those who didn't need it. They then gutted manufacturing and shipped industries overseas, using that cheap energy to offset any costs in transportation.

    Then, deregulated financial industries and credit rating agencies that were poorly oversighted enabled a vast Ponzi scheme that sold financial instruments built on a house of cards to all and sundry, all over the world, sapping investments from plant and personnel into one huge bubble of debt.

    So what we have now is not a crisis of supply, it's one of demand. And you've got the nerve to tell people that they're losing their jobs because of socialism? Like many Americans, you continue to demonstrate that you haven't the slightest clue what the word means.

    Exactly. Lunatic fringe. Extreme right wing. And completely discredited.
  17. fivepoint macrumors 65816


    Sep 28, 2007
    What a sad, sad day for American when free market economics are considered a 'fringe interpretation'. The Austrian School doesn't pay credence to outcomes? Doesn't account for real-world examples? Perhaps you'd like to elaborate on this, Blue... I'm guessing you won't.

    Speaking of FRINGE. Are you truly implying that America's success has nothing to do with free-market capitalism? And that the rest of the world's growth had nothing to do with free market capitalism? I mean... you were referencing 'fringe' ideas earlier, and to in the same post suggest that economic success of the modern 'western' world didn't come in large part because of the extreme efficiencies of the free market system.... wow, just wow.

    I find it particularly pleasing that you brought up the military as a primary reason for growth. While I think we probably share some pretty important views about the Military Industrial Complex and the general American empire, you're way off base saying that the free market isn't the single most important reason for the Western World's economic success... lets do this... let's compare a military powerhouse with a non-free market dictatorship to one with a free-market capitalist democracy. I think one photo says a thousand words:


    I just... I mean, I'm finding it hard, because you accused me of supporting "fringe" ideas in my post... (which just so happen to be the views of our leaders when the United States was founded, but anyway...) and now you're posting THESE theories right and left. Anyway, I'll just let those go if you answer one question for me. Do you honestly believe that one man and his banker buddies should be determining the Federal Interest Rate? Do you believe that the market shouldn't be involved in determining this rate, and that one person should do it instead? You don't have to be knowledgeable about economics to see the problem here... so I'm anxious to see what you think.

    One organization (the fed) was allowed to massively lower the interest rate which completely manipulates the entire market. Houses were built when there weren't enough people to buy them. Investors put their money into housing instead of government bonds. People who should never have been able to buy a house, did. That is why the market exists, to give the power to the people, just like democracy. The market stands for economic democracy, but some people would prefer the dictatorship of the Fed.

    Also, I know EXACTLY what socialism is. Most Americans know EXACTLY what socialism is. What you want to do is redefine a watered down version of it and feed it to the masses. This is exactly what the founding fathers of the United States were trying to avoid. Governments that continually grew out of control. Governments that controlled the people, governments that the people relied on for EVERYTHING in their lives, governments that slowly but surely took away our liberties for the promise of hand-outs and the redistribution of wealth. We point out things as black and white socialism because we don't like the slippery slope. We don't like people saying "oh, it's fine... this one law won't hurt anything, and these poor people NEED this."

    Human nature is to accept things for free. To take less responsibility if they can. We've learned from history though that this is not what we want to obtain. Because in the end... people who are dependent don't produce, and if there's nothing being produced, there's nothing to give back.

    Open your eyes! Medicare is bankrupt. Social Security is Bankrupt. The Post Office is Bankrupt. Is it because we're not TAXING enough?

    Glenn Beck and I don't agree on many things. He's too much of a neocon for me, and frankly, he's not the most intelligent person in the world... but I will say one thing. On this issue, he's 100% right. He's having the right people on, talking about the right issues, and while everyone else complains about a few million in AIG bonuses, he's talking about the 1 Trillion dollars that the Fed just printed. When everyone else is talking about BO on the Leno show, he has brilliant economists on his show talking about REAL situations where this has happened before, and what the results were.
  18. Blue Velvet Moderator emeritus

    Jul 4, 2004
    Like most people who are fringe ideologues, they poorly understand others.

    Is it not true that the Austrian School rejects empiricism? Is it not true that:

    Is it not true that:

    In any other field of endeavour, this counts as fringe and crackpot. Sorry, but it's true. It puts it in the realm of witch-burning and snake-handling.

    Did Von Mises not adhere to and build the fundamentals of Austrian Economics upon his philosophy of Praxeology, which includes the completely flawed assumption that:

    It's clear that you have no idea on the shaky philosophical ground that your castle is built on. Your idea of the 'free market' is nothing more than objectivist Randian warmed-over ramblings and the idea that the Constitution was founded on a school of economics that didn't even formalise and coalesce until the late nineteenth century is laughable nonsense. We've been hearing this bilge for months and no-one has had the foresight or gumption to pull you up on it.

    Did I say it wasn't the sole reason? What has laissez faire capitalism bought to the US? Why did Alan Greenspan recently admit a flaw in the model? Complete systemic collapse where most of your debt is now owned by China, a socialist nation. Why do you think Hillary Clinton's first trip was to Beijing? It was to reassure your financial masters that your debts were good... But I guess that little fact can be 're-interpreted'. You conveniently ignore the evidence of history: that wars (especially global ones) won by empires help amass resources and wealth, giving credence to and helping to rewrite history, placing the philosophical underpinnings of that empire as orthodoxy.

    In reply, are you saying that Saudi Arabia owes all its wealth to market capitalism alone? Or does the fact of having access to vast resources not count?

    What kind of insular arrogance led Francis Fukyama to proclaim that:

    In a completely straight-faced piece called 'The End of History'.

    Great empires, and that includes 'western civilization' have always rewritten history that puts their societal structures and constructs at the pinnacle of human achievement and so it is that your constant repetition of mantra based on nothing more than an deeply flawed understanding of human nature and psychology stemming from the 18th and 19th century offers nothing to solve the problems we face today.

    Cognitive dissonance is difficult. This is true. And they are fringe; no-one is going back to the gold standard.

    Hey, I studied economics for three years in college. Wasn't my favorite subject though. ;)

    I'm probably more inclined to favour the model of the Bank of England and the European Central Bank; politically independent, governed by a council where decisions are taken as a group, and most importantly of all, unlike the Fed where

    the ECB and BoE have limited and stricter goals:

    If you'd like to provide an example of a modern industrial and successful democracy that doesn't have a central bank, I'd be curious to know what it is. And once again, if you think that the path to economic success means reverting to the gold standard and probably relinquishing the status of reserve currency, that's pretty fringe.

    But you've stopped at the crucial point because your model of deregulation collapses. First of all, mortgage lenders chasing more extreme profits being deregulated, they permitted and even encouraged lenders to lie on credit applications forms. And if the trouble had only been restricted to the US housing market and the banks involved, the impact would have been far smaller. The US housing market is not nearly worth the sums of money that have been lost from the global economy.

    So, this flakey debt, pumped up by greed, was repackaged and sold all over the world as valued assets by deregulated banking and insurance firms that were free to do as they pleased. Banks that once would have kept to the safe shores of banking by regulation became entwined with credit default swaps and hedge funds all based on this house of cards.

    But you've also missed the key point which is:

    That since the 1980s and the advent of supply-side policy, that average wages have stagnated compared to the increases of GDP​

    So, since everybody wants and is encouraged to seek the 'American Dream' where successive generations have expected to live in standards better than their parents, but incomes are stagnant... what does that mean?

    It means that houses, which used to be affordable by one fulltime earner in the family back in the middle part of last century, become only affordable by two earners. And then, as rising costs in health care for instance, take their toll, people start to work more hours and leverage their houses as cash machines, extending their credit to make ends meet and to maintain living standards, all assisted by deregulated banking who then sold this worthless paper all over the world to other deregulated concerns. But answer me this: where has all the growth in GDP over the last 30 years gone? Not to the average earner.

    No need to panic. It might surprise you that the roads you drive on, the fire and police service are examples of socialism. Only someone on the fringe would want to do entirely away with them, as well as public schools, another instance of collective wealth-creating, because an uneducated population is a poor one.

    You have no idea what socialism means in practice. You once admitted to wanting to live in London. We have nationalised health here which works very well. Is that something you would opt out of?

    This nation as a whole spends half of what you guys spend by proportion of GDP on healthcare with better outcomes. Does the US model sound efficient to you? You can't even begin to grasp the idea that socialised services help wealth creation by promoting flexible working patterns, for instance. Your view of how things work is entirely devoid of holistic understanding and one of the main reasons why the EU nations is so reluctant to help out with more stimulus spending, is that we already have comprehensive social protections.

    You also continue to labour under the illusion and bore us with the idea that it is you who speaks unerringly for the founding fathers (another sign of ideology, like insisting that you speak for God), but bear in mind that the preamble to the Constitution, the base ground of everything that follows includes the words:

    Could you please tell us how giving tax cuts to the richest 1% promotes the general welfare? Could you please tell us how the fact that there is a bankruptcy every 30 seconds due to healthcare costs in the US is promoting the general welfare? And could you please tell me how 46 million Americans not having any health care is promoting the general welfare?

    Not at all. I'm merely relating my practical experiences of living in various countries under various systems in my 45 years, and also comparing those experiences with others. I also read a far more diverse and international range of opinion than you do, based on your utterances so far.

    There you go again. ;) Speaking for all Americans this time. Shame that a large majority of Americans don't agree with you on a number of issues that are important to them. And even more nastily, you finally revoltingly reveal the dark heart of your self-centred philosophy:

    Your utter contempt for the poor, and this includes the working poor, which includes more 'middle-class' families than you're aware of. You're happy to see old ladies eat cat food to fit your ideology.

    You clearly don't understand that by raising living standards from the bottom up creates wealth by creating customers. And let me pass on an extremely valuable life lesson to you: you have no idea when financial failure will hit. If you think that poor people are somehow born that way, there's a few tent cities in the US full of previously middle-class people.

    This is what is happening in the UK and your country right now:

    And this can quite easily happen to you.

    And all these producers are left high and dry without customers. So how does lowering living standards for the many produce customers? Besides, this glut of consumption is unsustainable over the longer term anyway. You equate personal achievement with wealth, a barren philosophy.

    You're hysterically losing the plot and ending up in the weeds of wingnuttia. You should read more than your fringey journals. Social Security is fully funded for another 32 years past 2017 according to the Congressional Budget Office's projections.

    Of course, this particular projection is based on the rising costs of the existing system. So when the current administration is trying to lower health costs for the majority of Americans you find this objectionable? Your hypocrisy and complete failure to explore the fundamental realities is stunning.

    I don't know about your post office, but remove it or hive it off and you and companies that rely on it will find out the true cost of not having universal delivery.

    Please list these brilliant economists who think that quantative easing is a mistake in a potentially deflationary spiral. You stick with the Fox network who has recently taken to showing month old clips of Joe Biden and pretending they happened recently and please keep on trying to persuade us you're not a far-right conservative. It keeps me amused. :)
  19. Blue Velvet Moderator emeritus

    Jul 4, 2004
    Oh, and as a side note to anyone here who thinks all this talk of Austrian Economics has some validity, be prepared for some inconvenient truths which this extremist fringe promote:

    Read more here on their disdain for the scientific method. :D

    Oh and their views on politics:

    Yes, I say completely and utterly insanely fringe.
  20. joepunk macrumors 68030


    Aug 5, 2004
    a profane existence

    Attached Files:

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