On Demand
Economic Contagion
Wednesday, February 11, 2009
In his previous books, former Goldman Sachs investment banker John Talbott, predicted many of our current economic troubles long before they occurred. His latest book, Contagion, Talbott explains the roots of the current financial crisis and claims it will have long, lasting and life changing effects on all of us.
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how did high oil prices contribute to the recession?
Hey. I (a non-economist) understand that the concept of the CDO (making a collateralized debt) out of consumer debt.
It still is gonna crash..
see here for reasons:
http://sos-newdeal.blogspot.com/2009/02/obama-salary-caps-yes-limits-no.html
PS: I predicted this depression over 2 years ago
in sept 2007
#3 I think that the high oil prices (if we EVER get a Truth and Reconciliation commission) were caused by people SPECULATING in oil futures.
The answer I think to this is to re-regulate oil sales so you (again) have to TAKE DELIVERY of the oil.
The ONLY reason OIL prices dropped so severely last fall was that the so called educated traders who stocked up and KEPT all this oil off the market got scared, and sold...
For the (many!) folks who had been waiting since 2004 for prices to come down to their "real" values so that they could buy -- and are still waiting -- where is the payoff for exercising good ole' American prudence and common sense?
Are you down with Noam Chomsky?
He oft evokes John Dewey's statement that "Government is the shadow cast by business on society"
mark,
i wasn't asking why oil was high. but i know the answer is high demand and speculation.
did oil high end the housing bubble?
Real estate agents can not tell appraisers how to price an apartment. The market sets the price of an apartment not the agents. The BANKS are the ones who agreed to loan this money to the buyers NOT real estate agents. There are a variety of prices available to buyers. It's the buyers responsibility to choose a price point they can afford.
Real estate agents are not criminal!
That was an outrageous statement!
Talbott has got things right.
At last, someone who places the blame where it belongs on the greedy real estate, mortgage and banking professionals who duped millions of hardworking homeowners. "Free market" is mantra of the religious cult of the conservatives. They want us to shut up and drink the cool adie rather than admit they were wrong.
So few people have a stake as to whether it "ever ends."
Greenspan and a handful of others had a stake because of their egos and economist placards.
But any moneymakers long ago realized that this economy (Reagan to current) is a zero sum game of hot potato.
The trick to wealth is well timed short term investing -- not its dull opposite!
"The REAL Golden Rule"
@7: I'd agree the appraisers work for banks. Real estate agents can influence the inspection (ask me how I know!). And it is for buyers to choose a price-point, but when you move to a boom market in the middle of the boom, where are you going to live?
Re 20 year increase in real estate prices:
Not true in NY. After market crash in 1987, real estate dropped and did not rise again until 1996. I know because I bought a home in 1988 and sold it at a loss in 1996.
Friggin best show ever. I am so uneducated and I saw all this coming. Thank you John.
No David, but a lot of Mortgage brokers need to go to jail. The modern day crack dealers.
the hard truth : we are all to blame, we've all been greedy, the party is over, your children will have very different lives than you had. thanks boomers, thanks for trashing america
What percentage of homes built are not usable because of location or deterioration?
Banker Talbott errs in saying all involved are guilty of making the only priority "increasing profits to shareholders." Please. Profits were not redistributed to shareholders, they were shared by management, senior sales and consultants.
This ExxonMobil holder hasn't received a thin dime from the "profits" Exxon earned this past year. Nada, none, nyet, bubkas. This retiree can't benefit from share price gain (THIS IS NOT PROFIT, remember) without the capital gain being offset by my Social Security becoming taxable. Lose, lose, lose.
Call GREED what it is. Nobody on Wall Street gave a damn about passing profits on to shareholders. Dividends? Feh!
Nope Oil and Housing were mutually exclusive and yet inter-twined because of the Sub-prime and CDO and collaterized debt obligations
The problem is that CDO's created originally to spread the wealth were NOT regulated, and the quants got out of control.
It is BECAUSE of the CDO crisis that the Sub-prime debacle happened.
look here:
http://sos-newdeal.blogspot.com/2009/01/gdp-down-so-called-recession-no.html
the PROBLEM is that ALL of our country's debt has been converted to CDO's.
not just mortgages, but also [CREDIT CARD debt, CAR-loans,student loans]
have been converted to collateralized debt obligations, and have been sliced, diced, and sold in microscopic particles to parties ALL over the globe.
I contend that CDO's have ABSOLUTELY no value today. They CANNOT be sold (toxic-debt), and they need to be TOTALLY written off as LOST , despite the fact that there might be some income on these items.
It is NOT only real-estate (as the guest mentions...)
It is REALLY that because the CDO's have been sold GLOBALLY that we're in a global crisis.
we absolutely need to ban CDO's of all kinds, and also (ban deretives.)
AND the last number Leonard mentioned is that
2 trillion dollars... in debt.
I believe that the REAL number of debts that we will be required to cover is more like a TRILLION dollars of REAL ca$h.
sigh
...and think... I predicted a Truth and reconciliation commission 3 years ago, and predicted this depression 2 years ago, and it will take at LEAST two years to BAN CDO's outright.
LL Show: Great guest. Thanks.
Why not give every citizen 1 mil and save the bailout. I am waiting at my mailbox.
"There is no money there" That is the most ridiculous thing I have ever heard. Money is an illusion, its just a concept.It doesn't magically appear or disappear. It gets consolidated and horded or spent and distributed. We are in the hoarding and consolidation phase. Does this guy expect me to believe that money will magically appear in the future when the recession ends?
NO AFTER the super rich have decided that they have driven prices low enough all of a sudden we will find out that money is available. The conclusion I get from this is that supply exceeds demand. If that is true that means that there is more than enough food shelter transportation and the other necessities of life to be distributed to everyone.
Did I mishear, or did John Talbott just call Leonard "Brian" at least a couple times?
What if we tax the richest to finance the stimulus rather than borrowing to finance it?
The stimulus isn't for increasing GDP, it's for decreasing employment.
WWII was a stimulus package.
I am really ticked off that the bailout is mostly about saving the banks who caused much of the problems. There is an interesting process in biology and medicine called apoptosis (greek for "falling of the leaves"). This process allows for the coordinated, selective killing and removal of old, damaged and unwanted cells without hurting the healthy neighbors. I'd like to hear from the guest and other experts why we cannot have a similar process for the banks that are now in trouble. Our money should be used help to start new and healthy banks who will lend money, not giving life support to terminally ill institutions. Remember the old bankers wisdom: don't throw good money after the bad.
mike
u are right
who are the shareholder who sold when the dji was at 14K?
who flipped their homes at the last profitable moment?
Nothing changes until we recognize we have one world economy with one currency and one economic plan. We no longer can all do the same thing over and over. Capitalism is based on deception. Extracting more value then you invest. In the burning movie theater the pick pocket is king. We live in a world where every economic butterfly wing can lead to social hurricanes. The failure to reconcile this will make what ever we try as effective as trying to fill a bucket with water before fixing the hole in the bottom.
This guy is spot on! Bravo! especially about the politicians being bought and paid for.
Except why then, does he give Obama in particular a free pass- only praising his system of using grass-roots small contributors?
Wall St. gave Obama $10 million- more than McCain got - are we supposed to believe that Ma and Pa Kettle's 20 dollar contribution is going to outweigh this?
Also, to state that Milton Friedman had no idea that government's job is to maintain a stable legal environment for business is ridiculous- I don't understand how such a sharp guy like Talbott could make such a claim.
Lenny - in these pressing times you should be protecting your audience from being forced to buy books.
Mr. Talbott's Contagion analysis while interesting and dire is hardly unique to him. I think you should have gone through his setup and diagnosis faster and gotten to his prescription: "How to Protect Yourself from It." That's something we're not hearing much lately and boy do we need it.
Now I'll actually have to buy the book to find out!
That said, his comments on the threat to local schools were much appreciated. As someone who recently bought a home in a good school district for a young child, I'm terrified.
Steve, Westchester has a very fine library system.
agree w mike 21 , steve 30
Peter from Manhattan - you don't need any fancy "apoptosis" - all you need is a simple free market - which we don't have nowadays unfortunately.
If you know the government is gonna bail you out because you are "too big to fail" - you are therefore free to make the craziest and riskiest investments you can think of.
Anyone who ignores the fact that a central bank (Federal Reserve) is a government entity and it is an integrated component of the banking sector, simply doesn't have a clue about how the current system works and what a free market is.
Anyone who ignores monetary policy like it has nothing to do with the crisis, also has no clue about what is going on in our banking sector.
There is no free market failure here! The system is NOT a free market so you can't blame it. It's not even close! You can't blame something that doesn't exist. I suggest some of you think about this before you call for less freedom and more government control.
Thanks for the tip Dan.
http://www.youtube.com/watch?v=iQ-IPb8AOZE&feature=related
This movie, made in 1981, seemed to see this
coming.
1981 Rollover Director Alan Paluka,
with Jane Fonda & Kris Kristofferson.
You Tube has it under this title.
Dollar Collapse! Bank Runs!
80's Movie Predicted it!
I would never call my host Brian. Thanks for all the good comments. And thanks Leonard for doing this.
John Talbott
Everyone whom I have read who predicted our predicament, deplores the bailouts and stimulus plans, and further predicts these efforts will make matters worse. That includes Talbott, Peter Schiff, Michael Moseley and Nouriel Roubini. The great majority of Americans also oppose these "remedies." Our government is in the pockets of Wall Street CEOs and their government cronnies who got us here. We cannot spend our way into a wealthy economy again with borrowed money. That is what the guys who got it right are saying unanimously. They make sense to me, and the others do not.
The one thing that puzzles me is: Just as our politicians believe Wall Street banks are too big to fail, our foreign creditors believe we, the U.S., are too big to fail. Doesn't this mean that they are going to continue to throw their money at us for a long, long time? When will they stop? Does the inflow of foreign money negate the fear of hyperinflation?
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