From Savers to deadbeats


By FortWayne   Follow   Tue, 25 Oct 2011, 4:06pm   8,381 views   97 comments
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http://online.wsj.com/article/SB10001424052970204777904576651400580509200.html?mod=markets_newsreel#articleTabs%3Darticle

The government's latest move to bolster housing marks yet another transfer from savers to borrowers.

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  1. corntrollio


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    58   4:33pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (2)  

    Gentleshinobi says

    If the banks could lend out only a fraction of their deposits from savers and the average savings is $1000 then how the hell did banks lend out Trillions of loans for mortgages on the past 5 years.

    Was it really trillions?

    http://www.bmocm.com/aboutus/aboutbmocm/images/Top_25_North_American_Commercial_Banks_by_Assets.pdf

    Perhaps, it was.

    Securitization is one way. Also, the bank must keep the fraction of deposits as reserves (which also I guess means they lend out a fraction). For an example of how $1000 can turn into $5000 through fractional reserve and creation of commercial bank money, look at the Wikipedia article under money creation for a succinct example (don't usually quote Wikipedia -- but htis is a good example).

    I'm also not sure if that $1000 figure you gave is right -- where'd you get that?

  2. uomo_senza_nome


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    59   4:54pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (2)  

    Patrick says

    But I admit that our widely-accepted fiat money gives America an advantage over all other countries. We sell them debt denominated in a currency that we can and do inflate away. And we buy oil and manufactured goods with that paper too.

    it also makes the dollar the slowest dying of all fiat currencies, everybody holds dollars. Inflating dollars is difficult because there's so much of it already.

  3. ¥


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    60   5:07pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (2)  

    Gentleshinobi says

    So banks lend out money from the fed which is created out of thin air, which in turn creates more money out of thin air. Again like I said in my first post. Think about it. If the banks could lend out only a fraction of their deposits from savers and the average savings is $1000 then how the hell did banks lend out Trillions of loans for mortgages on the past 5 years.

    yes, this is how small increases in the Federal Reserve's balance sheet can expand to trillions in the economy.

    But the problem now is that lending is rather stalled due to everyone blowing themselves up 2007-2009.

    http://research.stlouisfed.org/fred2/graph/?g=313

    shows that net mortgage lending has only increased $600B over the past 5 years, compared to $4T+ the previous 5 years:

    http://research.stlouisfed.org/fred2/graph/?g=314

    But since 2006 the Fed has doubled its balance sheet:

    http://research.stlouisfed.org/fred2/series/FDHBFRBN

    but the lending is still going down.

    Things are a bit more complicated than your current understanding allows.

  4. ¥


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    61   5:11pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (2)  

    Patrick says

    But I admit that our widely-accepted fiat money gives America an advantage over all other countries.

    This is a two-edged sword for us. "America" certainly has an advantage, but this mainly accrues to its owners.

    People who have to compete with third-world labor aren't seeing any advantage now.

    http://research.stlouisfed.org/fred2/series/USGOOD?cid=32307

  5. Gentleshinobi


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    62   5:13pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)  

    Yes it is in the trillions! Look at the following link: the value of the homes bought with debt has lost Trillions! According to this article am calculating total home loans is around 30 trillion!
    http://articles.businessinsider.com/2011-02-09/markets/29954161_1_peak-zillow-total-loss
    Average American savings:
    http://www.heritage.org/Research/Reports/2003/03/Why-Reforming-Social-Security-Is-Not-About-Saving-the-Trust-Fund

  6. Gentleshinobi


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    63   5:17pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)  

    Total deposits of savings accounts:
    http://research.stlouisfed.org/fred2/series/SAVINGS
    So out of 6 billion they lent out 30 trillion. Do the math.

  7. ¥


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    64   5:21pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)  

    corntrollio says

    'm also not sure if that $1000 figure you gave is right -- where'd you get that?

    The whole point of securitization was to get banks out of the retail lending business.

    Chinese bought massive amounts of agency debt:

    (UK, Luxembourg, and Cayman Islands is probably oil money coming back as loans to us)

    The "Saving Glut" of the early 2000s was really a money glut -- the rich were getting so much more money coming to them they didn't have any place to put it . . . so CDOs and stuff were expanded to give people a place to park their loot.

    This was the magic of the housing bubble -- it was a direct injection of TRILLIONS of cold hard (borrowed) cash right into the middle class, 2002-2007.

    It was fake and fraudulent as hell but it's what the system could do to keep itself in power for the 2004 election cycle, especially after its Iraq adventure started going south in late 2003.

  8. ¥


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    65   5:26pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)  

    Gentleshinobi says

    According to this article am calculating total home loans is around 30 trillion!

    No, that's total home valuation. 1/3 of homes are paid off.

    Total mortgage debt is no mystery:

    http://research.stlouisfed.org/fred2/series/HHMSDODNS?cid=32256

    As for your $1000/household savings, there are two problems.

    One is the actual number:

    "After subtracting the debts they owe, the average American family has savings of only about $1,000"

    Secondly, retail banking doesn't profit from the vast masses' savings (because there aren't any). Home mortgages are funded from rich people buying GNMA, and the massive flows into agency debt from corporations and countries looking for a place to park their spare cash.

    The Credit Union fund & hold business model is a real sideline these days.

  9. Gentleshinobi


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    66   5:32pm Wed 26 Oct 2011   Share   Quote   Permalink   Like (1)   Dislike  

    Bill you are just stating what I said earlier. Lending is down even with all the liquidity the fed has pumped check my previous post. So you are just saying what I said earlier. I clearly showed how the banks lend out money not by deposits by savers but by money created out of thin air by the fed and the fractional reserve banking system. Which you dont have a counter for so you are trying to change the subject matter. Btw I'm not entirely against the ideas of the fractional system as I do see a need to expand the money supply during time of " real" economic growth but it should be a lot stricter.
    And no the problem isn't that there isn't more lending, that's what caused the problem in the first place. The problem is that all this money creation is money we don't have and debt is owed. Debt has to be cleared before we can recover and start real growth, not more lending of money created out of thin air. That means pain before recovery. Creating more money and lending will only kick the can down the street. The market will correct itself with or without our assistance.

  10. Gentleshinobi


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    67   5:37pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)  

    Bill they are going by income! They are misusing their monthly payment not the total of outstaning debt vs outstanding savings. You are saying the average person had enough savings to outright pay for the house and have $1000 left. If thats the case why do they even need a loan. I'm sorry bill your not thinking straight.

  11. Gentleshinobi


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    68   5:43pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (2)  

    Bill countries like china and Japan park the majority of their cash in tresuries. You have basic misconceptions of how the global economy and banking system works. And yes countries and investment banks bought MBS's but that still does not change the fact of how the money lent for the initial loan to buy a home was created or originated.

  12. bgamall4


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    69   5:54pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)   Protected  

    Patrick says

    I think hard currency is definitely the answer to inflation and bank bailouts. It gives the little guy more power.

    Hi Patrick, here is a chart that shows big inflation in the teens of the 20th century. Hard money ruled and didn't stop inflation which was the worst decade of the century. Bankers can do what they want no matter what system rules.

    http://inflationdata.com/inflation/Inflation/DecadeInflation.asp

  13. bgamall4


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    70   5:57pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)   Protected  

    corntrollio says

    Securitization is one way. Also, the bank must keep the fraction of deposits as reserves (which also I guess means they lend out a fraction). For an example of how $1000 can turn into $5000 through fractional reserve and creation of commercial bank money, look at the Wikipedia article under money creation for a succinct example (don't usually quote Wikipedia -- but htis is a good example).

    I know how they did it. First, they got reserve requirements lowered. Then they got the hedge funds to fund the SIV's that went to shadow bank lending. And that was off balance sheet as approved at Basel 2 in 1998. That also circumvented seemingly high reserve requirements. It was a SCAM.

    Ban securitization.

  14. corntrollio


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    71   6:07pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)  

    bgamall4 says

    Ban securitization.

    Careful. Banning securitization outright probably wouldn't be a good thing. Securitization has been around for a while and when done prudently, it is a very valuable method of finance. When it has predictable default rates, good underwriting standards, and interests are properly perfected, there's nothing really wrong with securitization. It's when you let the banksters run rampant that shit happens.

    Securitization makes sense for other kinds of loans too, again, if done properly. If you screw it up, yeah, sure, you can really screw things up, as banksters did. Of course, banksters also committed lots of fraud, often by not making certain disclosures, although not even people have been prosecuted for this. However, the bondholders also screwed up -- you're only now seeing some parties pushing loans that didn't meet underwriting standards back onto banksters.

  15. Gentleshinobi


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    72   6:48pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (2)  

    The reason why there was inflation starting from 1913. The federal reserve act of 1913.
    http://www.the-privateer.com/paper.html
    Now inflation can happen without money supply change. If the money supply is static but there is a change in demand, supply or both of a given commodity you can still have price inflation. Example let's say a new study comes out and they say eating an apple a day will increase your life span and real demand goes up and supply stays the same the price will go up( inflation) even if money supply stays the same until demand goes back down or growers increase supply. That's what I call real or price inflation. So we have to make the difference between real inflation and monetary inflation (assets prices go up because of money supply expansion).

  16. bgamall4


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    73   7:24pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)   Protected  

    corntrollio says

    Securitization makes sense for other kinds of loans too, again, if done properly.

    Oh, you mean like student loans? Ha.

    No, if you allow securitization it is almost always accompanied by easy money. It is a scam, a fraud.

  17. ¥


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    74   7:51pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (2)  

    bgamall4 says

    here is a chart that shows big inflation in the teens of the 20th century

    I'm no economic historian, but I think this inflation was WW I-related.

    American industry was making money hand over fist supply the war needs in Europe, but this was a quadruple whammy -- more money flowing into the country, more goods (especially foodstuffs) going out, more people making money, and diversion of production from consumer to war needs. Hello inflation!

    There was 2% inflation 1913-1915, 26% between 1915-1917, 35% between 1917-1919, and 3% between 1919-1921.

    There was actually 4% deflation between 1921-1929.

    Oh noes teh Feds r da debbil.

  18. cc0


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    75   7:54pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)  

    bgamall4 says

    First, there has been leverage in hard currency. [...]

    I never argued otherwise. Your statement could have been interpreted as Ron Paul contradicting himself. I'm simply pointing out that an action taken under one particular system may not be applicable under another.

    I don't think hard currency is the answer because it makes lending too tight.

    bgamall4 says

    No, if you allow securitization it is almost always accompanied by easy money. It is a scam, a fraud.

    These two statements are confusing. There's nothing inherently 'wrong' with easy money - securitized debt isn't substantially different from issuing shares in a corporation or participating in prosper.com. This is just a way to raise money.

    The problems come in when the fascists let corporations write legislation; when investors get government guarantees against their losses; when those losses result in the destruction of the nation's wealth.

    These are each independent, albeit now closely related, issues. Hard money plus securitization minus leverage may even dismantle this destructive system (I haven't fully considered it).

    austrian_man says

    it also makes the dollar the slowest dying of all fiat currencies,

    Do you have any historical reference for this? We've only been dealing with a fiat dollar since 1971 (happy 40th birthdays, fiat bank note, (August 9) and War on Drugs (June 17)).

  19. ¥


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    76   8:01pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (2)  

    Gentleshinobi says

    I clearly showed how the banks lend out money not by deposits by savers but by money created out of thin air by the fed and the fractional reserve banking system

    You still don't understand anything about fractional reserve lending.

    A CD requires ZERO reserve, but this does not inflate the (bank) money supply since people understand they can't spend the money in a CD. One person's savings is another persons loan proceeds. This is how a "hard money" lending system works. Once money is lent out it can't be spent until it is repaid.

    Checking accounts is where the money supply gets expanded 9:1 for every dollar of Fed input. Here one person's checking account is multiplied up to 9 times across the system.

    The problem is that all this money creation is money we don't have and debt is owed.

    Again, you are uttterly wrong here.

    As of Q211 households held $49.4T in financial assets vs. $13.8T in liabilities.

    Plus another $20T+ in RE/property.

    Unfortunately, a big chunk of the "assets" -- $4T -- is debt issued by other components of the system $1.1T is held in treasuries and agency debt, another $1T in municipal bond issues, etc.

    http://www.federalreserve.gov/releases/z1/current/z1r-5.pdf

    B.100 Balance Sheet of Households and Nonprofit Organizations

    That means pain before recovery. Creating more money and lending will only kick the can down the street.

    Sure, I agree with this. Pain all around. You first.

  20. ¥


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    77   8:03pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)  

    cc0 says

    securitized debt isn't substantially different from issuing shares in a corporation

    Ah, but one of these is a savings vehicle and the other is an investment vehicle.

    Securitized debt was getting AAA ratings until it all fell apart.

  21. ¥


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    78   8:05pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)  

    Gentleshinobi says

    You have basic misconceptions of how the global economy and banking system works.

    LOL you're big on blanket assertions but low on facts, and what facts you do post are incorrect. Welcome to ignore, you have a lot of pals there.

  22. cc0


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    79   8:11pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (2)  

    Bellingham Bill says

    Ah, but one of these is a savings vehicle and the other is an investment vehicle.

    Huh? Only because you say it is. I say it's the opposite of whatever you assert, and we can both be right. I use my car as my investment vehicle and my mattress as my savings. Doesn't mean either is better. What are your goals?

    Bellingham Bill says

    Securitized debt was getting AAA ratings until it all fell apart.

    Yeah, that was part of the fraud. Revoke their charters before that's deemed a violation of their 8th amendment rights.

  23. bgamall4


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    80   8:45pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (2)   Protected  

    cc0 says

    There's nothing inherently 'wrong' with easy money - securitized debt isn't substantially different from issuing shares in a corporation or participating in prosper.com. This is just a way to raise money.

    Massive securitization was made possible because of the repeal of Glass-Steagall. That securitization was fraud. Before that there was very little securitization. Either put back Glass-Steagall or ban securitization. Simple as that.

  24. bgamall4


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    81   8:46pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)   Protected  

    Bellingham Bill says

    I'm no economic historian, but I think this inflation was WW I-related.

    That is likely true. We have had fewer and less damaging wars since fiat money. An argument that hard money and war are frequent is a real problem for the Austrians.

  25. Gentleshinobi


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    82   9:03pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)  

    Wow bill I have made clear and concise arguments. You simply can't cope with the facts.

  26. cc0


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    83   9:04pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)  

    bgamall4 says

    We have had fewer and less damaging wars since fiat money.

    Ok, this I have to take exception to. Humanity has far and away become much more peaceful with the passage of time. To attribute this to fiat currency, however, is sorely sorely mistaken.

    To the contrary, WWI and WWII were both funded by bonds. In order to pay for the war the government had to convince the people to buy war bonds to keep the fighting going. With fiat currency there is no longer any need to have the people on your side because you can just borrow the money from the central bank.

    When was the last time someone asked you to buy a war bond? And yet, we've been at constant war on multiple fronts for the last decade. With hard money, war is truly a mandate of the people; with fiat currency, the president doesn't even bother to get congress involved.

    The U.S. sat out of WWII for a very long time. While Europe was fighting, Ford and IBM and numerous other U.S. companies were supplying them with armaments. Even with a very vocal segment of the population urging the president to engage, he did not do so until Pearl Harbor (cue related conspiracy theories).

    War is a complex subject and to attribute hard money - alone or in part - to its formation is beyond folly. And if anyone is going to point fingers at Wilson related to this, point them towards the creation of the League of Nations.

  27. Gentleshinobi


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    84   9:14pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (2)  

    Less damaging wars? Really? The two wars we are engaged in now have brought the USA on the brink of bankruptcy. The two wars have cost us over 3 trillion, we spend something like 10 million dollars an hour on the wars. And that's just hard costs. From an economic stand point world war 2 was highly beneficial for the USA. Not for the reasons you might think. It was beneficial because we weren't involved for most of the war and firing that time all of europe became indebted to us and because our infrastructure was not damaged we were the ones that could produce goods which made us rich and because we won we got to dictate the terms of surrender and the dollar became the world reserve currency. After the war the USA owned 60% of the world gold.

  28. Gentleshinobi


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    85   9:17pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)  

    Fricken autocorrect driving me nuts.

  29. bg


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    86   9:35pm Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)   Protected  

    Patrick says

    Yes, savers in theory should have been rewarded by the "free market" for their prudence in avoiding debt. Interest rates should have surged.


    But in reality, we don't have a free market for interest rates. Instead, we have the Federal Reserve doing central planning of interest rates, and punishing responsible savers to bail out banks that made really stupid lending decisions.


    Ron Paul is criminally insane on health care (just let the uninsured die, or rely on charity, which is the same thing).


    But he's totally right about the Fed. The Fed should be abolished.

    I appreciate you making that distinction. Insanity in healthcare. Sanity on Fed.

  30. bgamall4


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    87   6:04am Thu 27 Oct 2011   Share   Quote   Permalink   Like   Dislike (1)   Protected  

    cc0 says

    And yet, we've been at constant war on multiple fronts for the last decade.

    True, but so far not the WW type of war. All war is hell, but WW's are way more destructive. You have a good point about the support of the people, but the wars we have now are blatantly imperialistic.

  31. bgamall4


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    88   6:05am Thu 27 Oct 2011   Share   Quote   Permalink   Like   Dislike   Protected  

    Gentleshinobi says

    Less damaging wars? Really?

    Millions were killed in World Wars. So, as bad as these wars are, and I oppose them, they are not as destructive as the WW's.

    WW1 alone had 37 million people die.

  32. StoutFiles


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    89   6:41am Thu 27 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    Ron Paul is criminally insane on health care (just let the uninsured die, or rely on charity, which is the same thing).

    Hey! We're just "releasing them from society", it's commonly accepted in many science fiction novels.

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    90   7:10am Thu 27 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    Ron Paul is criminally insane on health care (just let the uninsured die, or rely on charity, which is the same thing).

    Patrick, certainly you are entitled to your own opinion, and it is your site; however, your statement about Ron Paul's position on health care is such a narrowly interpruted view I find it to be ignorant propaganda. For those interested, start with Ron Paul's published position on health care and go from there. Stating that he is "criminally insane" is uncalled for and patently unfounded. And yes, this is a thread for the health care forum.

    http://www.ronpaul2012.com/the-issues/health-care/

  34. cc0


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    91   7:12am Thu 27 Oct 2011   Share   Quote   Permalink   Like (1)   Dislike  

    bgamall4 says

    the wars we have now are blatantly imperialistic.

    Wow. I can't disagree more. Wars used to be about conquest, which is what made them profitable -- to the victor go the spoils, etc. We've spend billions and trillions on war which have only resulted in a very expensive way to dig holes in the ground - while gaining nothing from them economically. We're still waiting for all that Iraqi oil to pay off the costs of that war. And now the USGS is scoping out all the mineral deposits in Afghanistan. I promise you that if those deposits are developed (remember, that was the Soviet plan, too) that cash will be flowing into Afghanistan (it'll be needed to hire the poppy growers).

    bgamall4 says

    Millions were killed in World Wars.

    Millions were killed because the world population was larger and because of the advancement of technology -- machine guns, aerial bombs, poison gas, etc. People can be especially cruel and also very dense; oftentimes things have to go "beyond reasonable doubt" before reason sets in.

    If you want a more rational explanation, how about: War has gotten more precise. This means that because it's not about conquest, the only purpose is to kill people until their leaders change their minds. This means that the people being killed tend to be those who are willing to go to war. As those genes are culled from the population the world becomes a safer place to live.

    Don't like that, how about sanitation? Some 90% of the French are infected with Toxoplasmosis, which tends to make men more violent and women more promiscuous. Those two details combined can make for very stressful situations. If we look at European history, who likes to starts things over there?

    I'm not too familiar with the economic details of WWI (the war has been attributed to secret treaties (along with the assassination)), but I'll also assert that WWII was created out of fiat currency. For most of the WWs, the U.S. wasn't involved -- it was Germany's fiat Mark that drove a lot of the political instability over there. Remember the 1-trillion-to-one conversion to the Reichsmark?

    Typically, fiat currency is a result of war, not a cause of it. For the U.S, it was Vietnam. Societal changes then come about 20 years later. Here are some references (sorry, most are from Wikipedia):

    http://www.scientificamerican.com/article.cfm?id=history-and-the-decline-of-human-violence

    http://www.huffingtonpost.com/2011/10/22/world-less-violent-stats_n_1026723.html

    http://en.wikipedia.org/wiki/Military_history_of_the_United_States

    http://en.wikipedia.org/wiki/List_of_wars_and_anthropogenic_disasters_by_death_toll

    http://en.wikipedia.org/wiki/Toxoplasmosis

  35. Philistine


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    92   8:05am Thu 27 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    corntrollio says

    Yes, because the Swiss economy is doing so well... As cc0 said, you haven't been following the news very carefully

    It was just a sarcastic canard. But I can see how people still get all touchy about currency "investment".

  36. bgamall4


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    93   8:49am Thu 27 Oct 2011   Share   Quote   Permalink   Like   Dislike   Protected  

    cc0 says

    Wow. I can't disagree more. Wars used to be about conquest, which is what made them profitable -- to the victor go the spoils, etc.

    Ok, where to start. The Iraq War was to add reserves to the US oil companies, and British, and to any who didn't get in our way.

    The Afghan war was and is still an effort to build a pipeline to the Caspian Sea for Bush 1 and Halliburton oil investments. Read this and weep, and notice that the Taliban went to Texas in 1997 as guests of Texas oil company Unocal now owned by Chevron:

    http://news.bbc.co.uk/2/hi/world/west_asia/37021.stm

    When the Taliban refused the pipeline Cheney hatched 911.

  37. cc0


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    94   9:27am Thu 27 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    bgamall4 says

    When the Taliban refused the pipeline Cheney hatched 911.

    I'm not quite sure what you're implying there, but I don't think we fundamentally disagree with the broad strokes of this discussion.

    However, I will retract my previous statement of me disagreeing; it is clearly imperialism. I'm not entirely sure what I was thinking, but it was something along the lines of the second Bush era being not imperialism, but either fascism, or if you prefer, corporatism.

    Sadly, I'm not sure that doesn't still apply.

  38. corntrollio


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    95   9:47am Thu 27 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    bgamall4 says

    No, if you allow securitization it is almost always accompanied by easy money. It is a scam, a fraud.

    Again, only if done improperly. It was done for many years without massive bubbles.

    cc0 says

    There's nothing inherently 'wrong' with easy money - securitized debt isn't substantially different from issuing shares in a corporation or participating in prosper.com. This is just a way to raise money.

    Yeah, exactly. It spreads risk too and allows lower rates for everybody. There are things you can do to improve underwriting practices, and some of those have been done, but some of them are the responsibility of the bondholder.

    bgamall4 says

    Massive securitization was made possible because of the repeal of Glass-Steagall. That securitization was fraud. Before that there was very little securitization.

    Oh come on. Securitization has a history: http://financialservices.house.gov/media/pdf/110503cc.pdf

    Securitization certainly went up after the repeal, but so did everything else.

    Do you actually have anything substantive to say about why securitization is inherently flawed?

  39. clambo


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    96   9:55am Thu 27 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    The person who buys CDs is a sucker. They Never pay you more than inflation and taxes. CD like money market, savings account is a parking place for your money, presumably to preserve your principal if you are lucky.
    Vanguard High Yield Corporate Fund pays 7% yield.
    The deal with bond funds is this: the NAV goes up and down with the economic conditions, your return is your interest over time. This particular bond fund is riskier because at any time the NAV may fluctuate down as the stock market does.
    The deal with investing is simple: when interest rates are very low, stocks will be the place to put some dough. The dividend paying stocks are not going out of business soon: Verizon, Exxon, ATT, etc. aren't affected by people feeling too broke to venture out to the mall.
    It's correct that our government and Fed policy punishes savers and rewards fools. Luckily other markets will punish those fools :)

  40. Patrick


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    97   7:09pm Thu 27 Oct 2011   Share   Quote   Permalink   Like   Dislike   Protected  

    Gentleshinobi says

    Fricken autocorrect driving me nuts.

    I don't do any kind of autocorrection on the site. Maybe it's your phone?

    One way to defeat autocorrect is to first type a "z" and then backspace once before typing what you want to say. Since there are very few words than end in z, autocorrect doesn't know what to do and so it leaves you alone.

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