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Going Global
Friday, October 10, 2008
Special: live coverage of President Bush's speech on the financial crisis.
Then, Carl Weinberg, chief economist for High Frequency Economics, react to the remarks and discusses the possible outcomes of today's G7 meeting and the implications for the global economy. Also in the conversation, Jeremy Stein, professor of economics at Harvard University- About the Brian Lehrer Show »
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Alas, with ten trillion dollars in debt, what can Bush do but print money?
if i were a lender i would simply be waiting until i saw how much money i could possibly tap from the governments of the world (in guarantees, bailouts, reduced lending rates, new lines of credit and plain ole cashish.)
$700 billion is NO-THING in that context.
nah, a nanosecond of zen empathy w bankers reveals that they are not socialists but capitalists after all. if their role is to make money, there is no easy money like government cheese.
(naturally the strategy could backfire. if banks do become majority state owned then their share values could be much reduced in the short and medium term -- simply because a government controlled, more regulated banks' likelihood of making money is much lower than an unregulated one. but once again from a banker empathy pov, all the decision makers will have long cashed out and retired so...)
Just what does it mean when an unpopular U.S. president opines that the economy will be fine?
Tom UWS - ye of little faith! Commander Codpiece to the rescue! His speechifications ALWAYS help the economy.
An interesting measure has been sneaked in the bailout law. This was on the second round (might democracy work?), and it allows the government to buy shares into banks.
That would allow the government to wipe out banks, and get a share of future profits. The banks are adamantly opposed to it (I heard), so it might be a good idea.
As financial chaos overwhelms the first world, how much more vulnerable are we to rogue governments or terrorist organizations' attacks? The treasury of Iceland seems to be on the verge of collapse. If European country or even Russia follow suit, is it more possible for such groups to violently take over?
dear bush,
too little too late.
u wanted a legacy.
this is your legacy.
Well, the president ends his tenure the way he began. At this critical moment, there is no call to greatness, just "trust us." The speech this morning is remarkably like his speech in September 2001. What's that word... paternalistic.
Brian,
Could you, with your guests, please go over what Bush said about Money Market accounts? The remarks were around the same part as expanded depositor's insurance etc I believe.
It is malpractice to call this a crisis of confidence!
SOLVENCY MATTERS.
Bush's comments were eerily similar to his addresses in the aftermath of Katrina. I wish there were some way to measure how the loss of confidence in this administration following that disaster is still affecting people during this crisis.
A recommendation to jump-start housing sales and ease the credit crunch
The national credit crunch will not be abated until the housing market is stabilized.
To jump start the creation of stability in the housing market- Sen. McCain should advocate a moratorium on collecting ANY taxes on the profits of all houses purchased after October 1st, 2008 and subsequently sold at a profit. This would create a ground swell of buyers inasmuch as houses are tangible real estate with intrinsic value.
Barry Zelin/ NYC & Jesse Califano/ TPA
can we get the banks to completley open their books to restore some confidence?
I'm 27 and have some extra cash and started buying this week.
What if a big chunk of the bailout money were given to people having problems paying their mortgages. Suddenly the likelihood of foreclosure goes down, the confidence in the mortgage backed securities goes up, everybody's happy.
Would that work?
Brian
The consumer is insolvent
Local governments are insolvent
States are insolvent
The USA is insolvent
Roubini and other experts have RIGHTLY labeled this a SOLVENCY problem, not LIQUIDITY, or CONFIDENCE
One has to work out of INSOLVENCY by cutting CONSUMPTION
Who's buying? The Specialist on the floor of the Exchange is charged with the responsibility of maintaining a market in his stock(s) -- he's buying if no one else is. Your "expert" ought to know that.
Why don't the governments of the G7 simply guarantee all interbank loans?
I have a really dumb question:
Is there no way to assign a value to these 'toxic' instruments by tracing them back to the underlying assets? Declare a bank holiday, require mortgage managers to detail the current status of their portfolios in comparison to some historical base line, and use that as the basis for valuing the securities based on them, and so on up the line. If the problem is no confidence because noone knows where anybody else stands, then surely the answer is to provide information.
Thanks!!!
don't you mean, "mortgage companies were convincing people they could afford houses COSTING TRIPLE THEIR VALUE that they really couldn't. that's the question. the answer is, that thanks to no regulation on creditworthy-ness -- they COULD afford houses that they couldn't.
Hence, today.
Anyhoo, if the problem is lack of cash and oversupply of homes -- solution is EEEZY: print new cash and get rid of that pesky US Mexico Border.
My favorite moment in all of my years of listening to this show just happened.
That looooong, pregnant pause that occurred when your caller asked: "So, tell me why the dollar won't crash?"
"Are you still there?"
(18 -- correct. also computer programs that automatically buy when price hits a number/drop/percentage)
Who really understands this stuff?
Are we talking depression or recession? They're two different things.
@23, @18
There are also shorts covering and "knife catchers".
http://www.youtube.com/watch?v=1RZVw3no2A4&feature=iv&annotation_id=event_597487
Cut through the hype. Anyone paying attention over th past 10+ years as I had been, saw this coming!
This lecturer has it exactly right--we cannot continue to consume our way into a solid economy--I cringe whenever I hear that the American consumer is the backbone of our strong economy!
Subject: Green Lecture Series-The Unsustainability of American Consumer Society
Green Lecture Series
Speaker: Maurie Cohen
Time: Wednesday, October 22 at 3 PM
Location: Kupfrian 117, NJ Institute of Technology, Newark, NJ
Title: The Unsustainability of American Consumer Society
What do sustainability scientists have to say about the current financial meltdown? Might the present turmoil in the banking system ultimately be attributable to a lack of sustainability inherent in our consumption of energy and materials? Indeed, some sustainability scientists have long forecasted the unfolding disaster by considering work on “sustainable consumption.” This presentation will focus on the macroeconomic dimensions of sustainable consumption and present evidence to demonstrate that the United States (along with several other affluent counties) lives substantially beyond its financial means.
Yes, housing is unaffordable, but only because resistance from sellers and banks to comply with supply and demand. Somehow, people got the idea that a house’s value could never depreciate, only appreciate. So, we have people who bought at the top of the market (and treated their building as an investment and not what it is, a dwelling) who want a bail out; we have banks (who lent irresponsibly at the top of the market, thinking housing prices would continue to rise hyperbolically) who want a bail out so they can take the house at the inflated rate instead of what it is really worth; and we have the government who thinks housing prices should be artificially stabilized instead of letting them be on the free market and rise or plummet to whatever the fair market value is. Real estate was treated like the loosest slots in town and everyone wanted to be a high roller; now it’s time to pay the house.
Worker productivity has gone up; and through much of 2007, corporate profits went up, but wages have stayed stagnant since the 80s, which goes to the question about average people not being able to afford expensive mortgages... and choosing sub-prime notes
Sorry the link got cut off.
http://www.youtube.com/watch?v=1RZVw3no2A4&
feature=iv&annotation_id=event_597487
Obama's first 100 days are going to be looked at closely by the market and the rest of the world
I understand what you’re saying #29 (Eric from B’klyn), but I just don’t buy it. Here’s why:
1. I suspect in a majority of cases mortgages are not expensive, what people want or think they deserve is expensive. There is a difference between wanting twenty five or thirty five hundred square feet and being able to afford fifteen. And on need… Not every child NEEDS his or her own bedroom, and if one can only afford a two bedroom dwelling, for example, and feel this way, have one child.
2. In cases where virtually all mortgages are expensive (NYC for example), it is simply the case that the majority of people living on flat wages cannot afford to buy. These people are renters. Shelter is a necessity, having a mortgage in attempt to own that shelter is not. Consequentially, if no one is buying because they can’t afford to, then eventually the market will correct and housing prices will come down.
3. What people don’t seem to be talking about is profit versus building cost. If housing in an area cost $200/SF to build and a developers or FSBOs wants to sell for $400/SF, perhaps it isn’t housing in and of itself which is expensive but the expected rate of return from the developer or seller.
Isn't the US going to run out of money at some point? I don't get how we can guarantee and fund so many bailouts? What if we actually have to cough up the cash for all these promises? I get it that it's supposed to come from taxes, but if we are looking right now at a loss of jobs (income taxes), property values (property taxes), businesses failing (corp taxes), drop in stock market (capital gains tax), then where is this money going to come from? Can the US go bankrupt funding all these guarantees? What does that mean for the FDIC, and all those treasury notes that everybody thinks are so secure?
When they say that 2 trillion, or whatever was lost from the economy, where does it go? Does it disappear or does it actually move somewhere else? If it disappears, then was it ever really there or is all this about psychology, fear, greed and confidence.
If our system is based on fear and greed, then why don't we get rid of it entirely and base it on some healthier values?
Why don't we just declare the credit default swaps illegal and require anyone selling them to have the $$ to back them and anyone buying them should have to actually own the asset that they are insuring, and not for more than the purchase value of their asset. We should void any that currently exist, since they greatly magnify the losses of any actual mortgage defaults.
32 -- your points are easily punctured w statistics. if you are talking about only nyc proper then perhaps your point might at least sound more logical. but outside the city (where the problem exists) it's simply a matter of $200 k homes marketed at -- via the magic of the unsecured mortgage, for $700 k. (350k apt for $1.2 m, etc.)
ps i recommend the long profile on bob toll of toll bros in the latest portfolio mag. he explains much of what i just said from the perspective of a successful marketer of mcmansions, and also points out that expensive homes and cheap homes cost almost the same amount to buy these days.
#35, You’ve just illustrated one of my points (#3) which goes to an earlier point I made. Banks were irresponsible in lending (because they knew they wouldn’t have to be responsible for the loans they made) and seller and developers were greedy (let us be honest, GREEDY) in what they felt their property was worth. The result of both was people over paid, regardless of whether they could afford to or not. Point #2 said if buyers were responsible (and a lot were not) and bought within their means, then that would have forced the hand of lenders, sellers, and developers. Point #1 said people need to buy with what is in their wallets, not with their hearts and dreams. What part of this is illogical?
36 -- addressing your comment, your first point and second point seem to contradict:
(first point: 1500 sq ft is affordable but not desired; second point: 1500 sq ft is desired but not affordable)
chrs
and w regard to your 3rd pt, as i remarked there is oftentimes no correlation (accd to bob toll in this months portfolio mag) between profit and building cost.
incidentally, i do agree w your second point, the problem there is that you are now arguing as a free marketeer. this argument only works if there is zero govt bailouts. every dollar mccain proposes to buy bogus mortgages, for example, is a dollar of fake value that are nauseating to buyers of real value.
#37/ #38 (Superf88): Let’s simplify things…
1. Buy what you can afford, not what you want.
2. If you can’t afford to buy anything, rent. If housing isn’t selling (because everyone is renting or leaving town), the market must correct.
3. Usually there isn’t a correlation between profit and building cost. That being said, profit is more flexible than building cost. [Housing] Value goes up, it can also come down. The government, financial institutions, and sellers take the former as gospel and seem oblivious to the latter.
40 -- we agree!
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