patrick.net

Reality says

FDA gives blank approval to food

You've obviously never worked in a food grade plant.

Reality says

The fact that we can't even agree on which agency regulates what goes to show the irrelevance of regulations.

No offense, but your ignorance doesn't show irrelevance of regulations--I'd argue the opposite. They work so well that you don't need to know. If people were dying from food contamination, you'd sure as hell know which agency was involved...

Reality says

Would you then go buy food from such a company? How long do you think such a company would last without customers buying their goods?

That's the whole point. You wouldn't know. Companies would come and go--they'd change names as needed to avoid the bad publicity. You'd never know until you ate the contaminated food.

Reality says

The big-3 car makers that you are really talking about was an oligopoly resulted from labor union action driving all other carmakers out of business and prevent domestic new entrants from succeeding. So people had no other choices. It was not a free market, but a oligopolistic market due to labor union violence.

Really? Unions? That's where you're going now?

tatupu70 says

You've obviously never worked in a food grade plant.

You don't have to work at a food plant to know that FDA gives you blank approval unless either there is complaint or you are marketing your product as having medicinal value.

tatupu70 says

No offense, but your ignorance doesn't show irrelevance of regulations--I'd argue the opposite. They work so well that you don't need to know. If people were dying from food contamination, you'd sure as hell know which agency was involved...

US food market is one of the safest in the world, especially considering the wide variety of different cuisines offered here. However, there has been a few incidents of food poisoning in recent years. For example, the Kroger Spinach incident, the Listeria outbreak of 2012, etc.. In each case, the merchant initiated the recall. The CDC gives some press release on food borne illness. Only after the outbreak did the FDA propose a new set of rules (i.e. rules that did not exist) that won't be implemented until at least a year from now. You are here praising the FDA for the consumer protecting effect of non-existent rules. How faithful of a government-God religion do you have to be?

As the US FDA promulgate more and more rules in the future, the result won't be safer food for Americans, but more like the 100 times more heavily staffed Chinese FDA controlled Chinese food market: full of sub-par and dangerous food because the food producers have to cut corners after paying for inspection and bribes to the myriads of bureaucrats, and there will be less competition to enable consumers reject sub-part producers.

That's the whole point. You wouldn't know. Companies would come and go--they'd change names as needed to avoid the bad publicity. You'd never know until you ate the contaminated food.

The FDA doesn't do jack about new entrants either, nor should it, as that would be prima facie entry barrier against new competition. Food safety is primarily the responsibility of you the consumer, then the store that you trust. If you really want to be safe, buy only the brands that you know. . . while giving up on all the interesting new food offered. What, you think the Gods working at FDA knows all the food that will ever be invented and check every new food against that list?

Really? Unions? That's where you're going now?

Yes, Union work rules and industry-wide benefit package standards were extremely effective at driving the smaller carmakers out of business and prevent new entries. That's how we got the big-3 car makers. Read some of the memos in the 50's at the GM headquaters; the management realized the labor union was a very helpful tool for breaking the competition.

robertoaribas says

shadowstats. If you don't like reality, make up data to fit your own fake world!

While I'm personally skeptical of all econometrics, Shadowstats does not invent its own methodology but simply extend the consumer basket chosen by the BLS as it existed before the revisions in the last couple decades designed to reduce social security payout and TIPS payout.

Hey, when do I get to print my own moolah? I want to start doing good things for society! I could create so many jobs and lend some of it out at only 2%, how awesome is that for the borrowers? Fuck, I'll just print a 16 trillion dollar note and cure this nation of its debt. Brilliant! Wait, it's illegal? Why do you hate freedom and progress?

Reality says

You were the one truncated a chart attempting to prove that the QE drove up
rates. I knew the original chart quite well, so I pointed your intellectual
dishonesty. Then you show us the original chart showing QE driving down rates
then argue that the bond rates always go down anyway. I don't know if you
realize by making the last statement you are essentially saying the bonds always
go up!

What he was proving to you was that the MARKET was setting the rates, not the Federal Reserve. You can't be this dim.

And I'm not going to debate the FDA with you either, short of saying that I don't think you understand what they do. Their focus is the production, inspection, and recordkeeping. When you say the companies initiated the recall--it's because the FDA requires them to have a recall process that must be initiated under said circumstances. And they must be able to trace every product made from that lot. Things like GMP, HAACP, etc, those are terms you should probably look up before you talk about the FDA.

tatupu70 says

What he was proving to you was that the MARKET was setting the rates, not the Federal Reserve. You can't be this dim.

Market is not magic, especially with extremely thinly traded securities that have no market. Federal Reserve's job is to manipulate the market. You can't be this dim.

tatupu70 says

And I'm not going to debate the FDA with you either, short of saying that I don't think you understand what they do. Their focus is the production, inspection, and recordkeeping. When you say the companies initiated the recall--it's because the FDA requires them to have a recall process that must be initiated under said circumstances. And they must be able to trace every product made from that lot. Things like GMP, HAACP, etc, those are terms you should probably look up before you talk about the FDA.

Do you eat food because the government tells you to? Do you go to bed because the government tells you that you need certain hours of sleep everyday? Do you drink water because the government tells you water is good for you?

Producers and manufacturers initiate recalls even when there is no government requirement, in order to avoid law suits and maintain customers. FDA's regulates drugs much more than it does on food. Comparing these two industries, the detriment of pre-emptive regulation on both product safety and availability/price should be quite obvious.

Reality says

Market is not magic, especially with extremely thinly traded securities that
have no market

Are you implying that government treasuries are a thinly traded security? huh?

Is there any blog that compiles their own CPI data?

Reality says

Do you eat food because the government tells you to? Do you go to bed because
the government tells you that you need certain hours of sleep everyday? Do you
drink water because the government tells you water is good for you?

Do you drink the water in Mexico?

Your questions are completely irrelevent as most of your posts tend to be. The point isn't that I eat or sleep because the government tells me to do so, the point is that I don't have to worry about the safety of the food I eat or water I drink because of governmental regulations.

Reality says

There are plenty ponzi borrowers who do not earn enough profit to pay interest
but have to rely on asset appreciation. Such ponzi borrowers are tremendously
helped by the availability of unlimited amount of money at the Federal Reserve
window at near-zero interest rate.

Low interest rates do not cause a bubble. Who is lending the money to these ponzi borrowers? If they don't have lending standards, it's not their own fault, not the fault of the interest rate.

tatupu70 says

Low interest rates do not cause a bubble.

Is that your own school of economics?

Who is lending the money to these ponzi borrowers?

The FED itself. The ponzi borrowers are the TBTF banks, the US government, and the European banks and governments. We are talking about the 4 years since 2008.

If they don't have lending standards, it's not their own fault, not the fault of the interest rate.

The FED's lending standard to the TBTF is practically non-existent indeed. The standards is not credit-worthiness but political connection.

If we want to talk about the 2005-2008 time period, the low lending standards was due to expected bail-out. The banks and Fannie/Freddie were politically pressured to lower lending standards ever more, which they were all too happy to oblige with understanding of future bailouts. Linear extrapolators probably presented many charts and straight lines "proving" home prices can only go up! "There has never been a simultaneous drop across the country" remember? straight from the mouth of the Money-Czar Bernanke himself in 2006-2007

That's the caliber of men that you central planning advocates are putting in place to play god on the economy.

tatupu70 says

the point is that I don't have to worry about the safety of the food I eat or water I drink because of governmental regulations.

So how are the Cox-2 pain killer drugs doing? I guess the thousands having died from it are resting in peace now. You are living in your fantasy world of government-god taking care of you like mother taking care of baby.

In real life, the regulators are not all-knowing. Over time, the place holders are bought off by the very industries that they regulate with expected fat consulting fees after tenure. Regulators serve only to keep out competition so the consumers have less choice, less safe goods at higher prices. Someone has to pay for the bribery and the monopolistic rent . . . and that would be you!

tatupu70 says

Are you implying that government treasuries are a thinly traded security? huh?

No! The thinly traded reference was to certain/many MBS paper that practically has no market. That's a lot of what FED has been buying since 2008

Reality says

So how are the Cox-2 pain killer drugs doing?

It's utterly amazing that they could make so much $$ promoting crap like Vioxx before the shit hit the fan while capsaicin and turmeric (and many more) as part of the daily diet have been available all along for next to nothing.

mell says

It's utterly amazing that they could make so much $$ promoting crap like Vioxx before the shit hit the fan while capsaicin and turmeric (and many more) as part of the daily diet have been available all along for next to nothing.

Exactly! That's the difference between a regulated industry vs. an unregulated/barely-regulated industry. Can you imagine what will happen to food price if the food industry gets to have stringent regulations (read: barriers to entry), food being "basic human right" (all-you-can-eat without regard to pay) and mandatory food insurance to pay for it?

Reality says

Is that your own school of economics?

Nope--it's econ 101. Lower interest rates will encourage capital investment by making projects that don't generate enough return at high rates to be profitable at lower rates. Now, you have to factor risk into the equation--this is down by lowering the expected return based on the risk factor. Higher risk projects are discounted more than lower risk projects. So, lower interest rates will allow some higher risk projects to proceed, but only those that generate postive returns on average.

The only way you get a bubble is when people don't understand the risk/return of a project (or asset). Regardless of the interest rate. It can ONLY happen when the risk/return information is either not known or poorly calculated.

Reality says

The FED itself. The ponzi borrowers are the TBTF banks, the US government,
and the European banks and governments. We are talking about the 4 years since
2008.

OK-please elaborate on how the banks are Ponzi schemes. This should be interesting.

Reality says

If we want to talk about the 2005-2008 time period, the low lending standards
was due to expected bail-out.

Bullshit. Your theory is that the owners of the bank said--go ahead and lose billions of dollars. It's OK because we won't go bankrupt. That's how it went?? How did it work for IndyMac? or Wachovia? Or Lehman Bros?Reality says

The banks and Fannie/Freddie were politically pressured to lower lending
standards ever more, which they were all too happy to oblige with understanding
of future bailouts.

Again--that's BS.

Reality says

So how are the Cox-2 pain killer drugs doing?

Is Cox-2 pain killer a food? You really need to learn to stay on topic.

Reality says

In real life, the regulators are not all-knowing. Over time, the place
holders are bought off by the very industries that they regulate with expected
fat consulting fees after tenure. Regulators serve only to keep out competition
so the consumers have less choice, less safe goods at higher prices. Someone has
to pay for the bribery and the monopolistic rent . . . and that would be
you!

Of course--it's called regulatory capture and it's a well known phenomena. But, like I said earlier, just because regulation isn't 100% perfect doesn't mean you get rid of it. The good far outweighs the bad.

tatupu70 says

Is Cox-2 pain killer a food? You really need to learn to stay on topic.

No, it's a drug approved by your beloved FDA. I'm very much on topic. Drugs are what FDA's regulatory focus. Luckily for us, food is not as heavily regulated as drugs, for now.

Reality says

No, it's a drug approved by your beloved FDA. I'm very much on topic. Drugs
are what FDA's regulatory focus. Luckily for us, food is not as heavily
regulated as drugs, for now.

My beloved FDA--lol. Here is what the FDA does (from their own website)

What does FDA do?
En Español1

FDA is responsible for

Protecting the public health by assuring that foods are safe, wholesome, sanitary and properly labeled; human and veterinary drugs, and vaccines and other biological products and medical devices intended for human use are safe and effective
Protecting the public from electronic product radiation
Assuring cosmetics and dietary supplements are safe and properly labeled
Regulating tobacco products
Advancing the public health by helping to speed product innovations
Helping the public get the accurate science-based information they need to use medicines, devices, and foods to improve their health

Can we please put to bed your ridiculous notion that all they do is drugs?

Reality says

Luckily for us, food is not as heavily regulated as drugs, for now.

And I don't know where you get the idea that food isn't heavily regulated. That is 100% incorrect.

tatupu70 says

Nope--it's econ 101. Lower interest rates will encourage capital investment by making projects that don't generate enough return at high rates to be profitable at lower rates. Now, you have to factor risk into the equation--this is down by lowering the expected return based on the risk factor. Higher risk projects are discounted more than lower risk projects. So, lower interest rates will allow some higher risk projects to proceed, but only those that generate postive returns on average.

Apparently you took your Econ101 class at a Junior High or a really crappy High School. Did the teacher tell you the difference between nominal interest rate vs. real interest rate? Real interest rate can be less than Zero, and when that happens all sorts of ponzi borrowers emerge and can be profitable for a time until the bubble bursts.

The only way you get a bubble is when people don't understand the risk/return of a project (or asset). Regardless of the interest rate. It can ONLY happen when the risk/return information is either not known or poorly calculated.

Like I said, your economic education is really poor. Since when is risk/return information perfectly known and perfectly calculated in advance? Why would anyone sell you that asset if he and you both know the exact same perfect return into the future? When the future is perfectly known, everyone can be God, and God doesn't need to buy or sell anything. Every investment is speculative and has uncertainty. Bubble is the result of many people being misled by short-term information presented to them that would change after their investment decisions are made. Information imperfection is part of life, and the reason why life carries on.

What the FED does is bailing out the TBTF when the bubble is about to burst, making the bubble bigger so the TBTF can exit, transferring the cost of the bubble to others.

tatupu70 says

OK-please elaborate on how the banks are Ponzi schemes. This should be interesting.

The TBTF banks have been ponzi borrowers in the last few years since 2008 because their honest balance sheet wouldn't allow them to survive. So the FED has been lending money to them at 0% and letting them arbitrage the difference between that 0% vs. inflation, hoping the negative net worth that they have will get whittled down. That's the typical ponzi borrower: borrowing for asset appreciation.

tatupu70 says

Bullshit. Your theory is that the owners of the bank said--go ahead and lose billions of dollars.

Once again you fail to grasp the uncertainty regarding future when making financial/economic decisions. The banks lent to the ponzi home borrowers for short term gain (credit unworthy home borrowers pay higher interest), while statistically such loans will eventually have a very high risk of going bad.

It's OK because we won't go bankrupt. That's how it went?? How did it work for IndyMac? or Wachovia? Or Lehman Bros

IndyMac was a deliberate spin-off from CountryWide to do even higher risk loans. The owner of CountryWide had excellent political connection, and the company was eventually sold to Bank of America, with all the criminal actions somehow escaping prosecution. The take-down and merging of Wachovia, Bear-Stern and Lehman into other big Wall Street banks actually involved massive injection of money into those firms by the taxpayer.

tatupu70 says

Again--that's BS.

You are BS'ing. Fannie and Freddie were explicitly bailed out by taxpayers. The implicit guarantee was always there, now made explicit.

tatupu70 says

Of course--it's called regulatory capture and it's a well known phenomena. But, like I said earlier, just because regulation isn't 100% perfect doesn't mean you get rid of it. The good far outweighs the bad.

That's your assertion, with not a shred of evidence to prove it. You would have to postulate really dumb firms and really dumb consumers to believe that:

1. consumers wouldn't shop somewhere else if the producers screw them;

2. producers wouldn't capture the regulator regulating them.

The dumb do tend to project their own silliness onto others. In real life, most consumers and producers are not dumb.

Call it Crazy says

The problem was with Merck. The population that needs Cox-2 drugs is already health compromised and has other serious medical issues. The adverse reactions from Vioxx was in line with other drugs. ALL drugs have adverse reactions..

The reason why Merck marketed the drug to 65+ is because the drug has marginal benefit over existing pain killers such as Asprin. Only the Medicare recipients would likely cough up the difference via Medicare, making a $15/mo medical bill for generic Asprin into a $500-1000/mo medical bill for patent Cox-2 drugs, on taxpayers of course.

Reality says

Real interest rate can be less than Zero, and when that happens all sorts of
ponzi borrowers emerge and can be profitable for a time until the bubble bursts.

If that's the case, and I've seen no evidence from you that is was or is, then it's the lender's fault. The lender should know what the inflation rate is and always lend their money out at inflation + their risk spread. And to your original point--real interest rates have very little dependence on nominal interest rates. So there's no reason to think this would happen when interest rates are low.

Reality says

Since when is risk/return information perfectly known and perfectly calculated
in advance?

It's not. I didn't assume that it was. But you should have a best estimate. Sometimes it's off too high, sometimes too low, but it should average about right.

Reality says

Bubble is the result of many people being misled by short-term information
presented to them that would change after their investment decisions are made.

And we have a winner. Notice how the above statement has NOTHING whatsoever to do with interest rates?

tatupu70 says

Reality says

Luckily for us, food is not as heavily regulated as drugs, for now.

And I don't know where you get the idea that food isn't heavily regulated. That is 100% incorrect.

Shouldn't that be obvious? When was the last time you need a multi-year FDA trial process to introduce a new dish or new pizza? Of course, with dumb regulation-lovers being churned out by public schools everyday who can not take care of themselves and think nobody else can either, we may indeed get drug-like regulations on food someday.

Reality says

That's the typical ponzi borrower: borrowing for asset appreciation.

You need an education on what a Ponzi scheme is. Borrowing for appreciating is investing on margin. Not a Ponzi scheme.

Reality says

Once again you fail to grasp the uncertainty regarding future when making
financial/economic decisions. The banks lent to the ponzi home borrowers for
short term gain (credit unworthy home borrowers pay higher interest), while
statistically such loans will eventually have a very high risk of going bad.

Your misuse of Ponzi scheme again notwithstanding, most of what you say here is correct. But it doesn't square at all with your earlier statements. They ignored the high risk because they were making so much money. It had NOTHING to do with any implicit guarantee that they wouldn't go bankrupt.

Reality says

The take-down and merging of Wachovia, Bear-Stern and Lehman into other big Wall
Street banks actually involved massive injection of money into those firms by
the taxpayer.

Nice misdirection. The point is that there was obviously no implicit guarantee to those banks that they wouldn't go bankrupt.

Reality says

Shouldn't that be obvious? When was the last time you need a multi-year FDA
trial process to introduce a new dish or new pizza? Of course, with dumb
regulation-lovers being churned out by public schools everyday who can not take
care of themselves and think nobody else can either, we may indeed get drug-like
regulations on food someday.

Regulation involves more than just trials. You need to look at the bigger picture. Like I said--go to any FDA regulated plant and ask them if they are heavily regulated. I guarantee you that their answer will be a resounding yes.

What has been happening prior to 2013 is that for the most part since 2008 the "retail investors" have actually been yanking money from stock funds and putting money into the bond funds. And the difference was in hundreds of billions of dollars. In fact, the increase in stock prices largely benefited the institutional investors no the retail investors due to this issue. I don't believe that the Fed was actively trying to promote a bond bubble. Yes they wanted lower interest rates to stimulate the economy and to increase stock prices, however the increase in bond prices appears to be incidental since bond prices rise as interest rates fall and vice versa. And the retail investors have exacerbated the "bond bubble" as they have been putting money into the bond funds during the stock market run up from march 2009 - present. Most likely the "retail investor" has been suffering from stock market PTSD due to nasdaq burst in 2000 and the 50% collapse from highs of 2007 to 2009 march lows.

Reality says

tatupu70 says

Reality says

Luckily for us, food is not as heavily regulated as drugs, for now.

And I don't know where you get the idea that food isn't heavily regulated. That is 100% incorrect.

Shouldn't that be obvious? When was the last time you need a multi-year FDA trial process to introduce a new dish or new pizza? Of course, with dumb regulation-lovers being churned out by public schools everyday who can not take care of themselves and think nobody else can either, we may indeed get drug-like regulations on food someday.

Actually we can argue that there's not enough regulation in regards to what is available. In fact it's so bad that I don't really trust many of food providers. I stopped buying frozen "lunch and dinners" years ago because I don't trust the chemical crap that they put in there. I haven't gone to mcdonalds and burger king for years because in my opinion they are poison on wheels. I am not saying that government should ban them but I don't think that there's enough education out there for the masses to educate them on potential and actual dangers that stem from these products.

tatupu70 says

If that's the case, and I've seen no evidence from you that is was or is, then it's the lender's fault. The lender should know what the inflation rate is and always lend their money out at inflation + their risk spread. And to your original point--real interest rates have very little dependence on nominal interest rates. So there's no reason to think this would happen when interest rates are low.

Of course bad loans are fundamentally the lender's fault. However to say that the lender should always know what the inflation rate is goes to show how bad your economics education is. You do realize a loan is made to be paid back in the future, don't you? In fact, proper economics education should have taught you that inflation rate number even at the present is very much disputed, never mind the future. That being said, it does not exculpate the bankster making the loan, as the bank is in the risk assessment business, and that includes future as well as present inflation uncertainty.

Real interest rate is a function of nominal interest rate and money supply. It is not however an independent function of the two without memory of immediate previous state, but a stochastic process with very strong memory of the immediate preceding state . . . because people, the actor in economics, has memory.

Economics is not simply mathematical formula, but the understanding of (likely) human action. Mathematical formula are useful for modeling in some hypothetical steady state, but breaks down in detail and especially at turns. If life were steady state, there wouldn't be trade because there wouldn't be profit at all to motivate trade or getting people out of bed in the morning.

tatupu70 says

It's not. I didn't assume that it was. But you should have a best estimate. Sometimes it's off too high, sometimes too low, but it should average about right.

Don't you just love that averages? Tell the bankruptcy judge the next time you were once rich, and ask him to average it for you.

Comes to think of it, aren't the derivative bombs result of people winding themselves too tightly on "averages"?

tatupu70 says

Reality says

Bubble is the result of many people being misled by short-term information

presented to them that would change after their investment decisions are made.

And we have a winner. Notice how the above statement has NOTHING whatsoever to do with interest rates?

Interest rate is one of the most important pieces of short-term information mentioned above. For example, most of those bought their homes at the top of the bubble were motivated by the availability of low adjustable rate mortgages, and thought they'd be able to roll over the mortgages when adjustment comes, and for a few years it was indeed possible as the FED worked on bailing out the stock market (bailing out the banks that made bad loans to dot-coms and stock portfolio). Then the roll over became impossible in the mid-to-late 2000's.

dublin hillz says

Actually we can argue that there's not enough regulation in regards to what is available. In fact it's so bad that I don't really trust many of food providers. I stopped buying frozen "lunch and dinners" years ago because I don't trust the chemical crap that they put in there. I haven't gone to mcdonalds and burger king for years because in my opinion they are poison on wheels. I am not saying that government should ban them but I don't think that there's enough education out there for the masses to educate them on potential and actual dangers that stem from these products.

I'm all for people putting together education material for the masses to learn more about their food. In fact, I think that has been taking place in recent years, to the degree that even McD's has to emphasis their salad offerings. Regulation however is a whole different manner: the strong arms of the government would only drive out the innovative food vendors who bring forth better food and would have a strong interest in educating the public, and leave the field to huge industrial food vendors that stick to bureaucratic standards therefore boast the government seal of approval while continuously figure out ways to substitute. Just look at the pink slime sold to public school lunch programs and prison systems, all with government bureaucratic approval of course!

Reality says

You do realize a loan is made to be paid back in the future, don't you? In fact,
proper economics education should have taught you that inflation rate number
even at the present is very much disputed, never mind the future

We're not talking about the future. We're talking about investing in the present time using borrowed funds. Please try to stay on topic.

Reality says

For example, most of those bought their homes at the top of the bubble were
motivated by the availability of low adjustable rate mortgages,

Teaser mortgages are not a reflection of the overall interest rate. It's simly a sales gimmick. The false information was that housing only goes up. And that could be the case no matter what the interest rates were.

tatupu70 says

You need an education on what a Ponzi scheme is. Borrowing for appreciating is investing on margin. Not a Ponzi scheme.

I never said Ponzi Scheme itself, but "Ponzi Borrower" You should read up what it is before you tell others to get an education. A business that can not generate enough productive return to service a loan but has to rely on appreciation of the purchased asset to pay off the loan is by definition a "Ponzi Borrower"

tatupu70 says

Your misuse of Ponzi scheme again notwithstanding, most of what you say here is correct. But it doesn't square at all with your earlier statements. They ignored the high risk because they were making so much money. It had NOTHING to do with any implicit guarantee that they wouldn't go bankrupt.

Once again, you need to read up on what "Ponzi borrower" is. As Hyman Minsky laid out, there are 3 types of borrowers: hedge borrowers, speculative borrowers, and Ponzi borrowers. Those who have to rely on (borrowed money purchased) asset appreciation to service loans is by definition Ponzi borrower. There is a market dynamic reason for that name as a gathering of Ponzi borrowers automatically create a Ponzi-scheme like financial trap.

The frenzy of lending to sub-prime NINJA loans had everything to do with the FED:
1. the artificially low interest forced savers all over the world to look for higher yield in risky borrowers
2. the money for those NINJA loans ultimately were from or funneled through the big Wall Street banks backed by the FED. That's how they were found to be leveraged 50:1 or 500:1 when the bubble burst.

tatupu70 says

Nice misdirection. The point is that there was obviously no implicit guarantee to those banks that they wouldn't go bankrupt.

Of course there is. That's why the Lehman event was such a big surprise and shock to the financial industry. More importantly, even through bankruptcy, most ex-Lehman employees and managers came through just fine, and kept their ill-gotten gains, and moved onto similar firms that got extra money and have extra bonus to hand out as a result of Lehman event giving the industry billions of bailout money. The average shareholders who got screwed never had a say in the daily operation of the firms anyway. It's the mangers' own risk/reward that matters in corporate decision making at those firms.

tatupu70 says

We're not talking about the future. We're talking about investing in the present time using borrowed funds. Please try to stay on topic.

"Future" as in the time after the loan is made. Every loan involves estimate of the "future." The "future" for a loan made on January 2nd, 2006 starts on March 1st, 2006, when the first payment is due.

tatupu70 says

Teaser mortgages are not a reflection of the overall interest rate. It's simly a sales gimmick. The false information was that housing only goes up. And that could be the case no matter what the interest rates were.

I'm not talking about negative amortization loans, but adjustable rate loans. For about the same time, people could jump from one credit card to another taking advantage of their 1yr 0% interest rate period. Young people based on that real life experience had good reason to believe they'd be able to roll over loans 3 or 5 years in the "future" when the adjustment comes.

The housing price keep going up in the early 2000's was very much the result of FED keeping interest rate low to bail out the big banks from the dot-com bubble. The dot-com and stock market bubble got as bad as it did in 1999 and early year 2000 because the FED kept interest artificially low to bail out the big banks that had too much exposure in the 1997 Russian credit default and "contagion" in Southeast Asia and Latin America.

Reality says

More importantly, even through bankruptcy, most ex-Lehman employees and managers
came through just fine, and kept their ill-gotten gains, and moved onto similar
firms that got extra money and have extra bonus to hand out as a result of
Lehman event giving the industry billions of bailout money.

How Wall St. firms treat their managers is a private issue. If other firms chose to pay Lehman employees handsomely with money they were loaned is their own business. I don't think you are right, but it's not important. The owners of the firms should be the ones policing that activity. And if they have perverse incentive plans for their managers, it's something the owners should fix.

Reality says

I never said Ponzi Scheme itself, but "Ponzi Borrower" You should read up what
it is before you tell others to get an education.

You're right--I didn't know you were using obscure terms like Ponzi borrower. My mistake.

Reality says

The frenzy of lending to sub-prime NINJA loans had everything to do with the
FED:
1. the artificially low interest forced savers all over the world to
look for higher yield in risky borrowers

Again--low interest rates do allow for riskier investments, but they don't create bubbles. I've already explained how it works. As rates are lower, you can slightly increase the risk of the loans and allow slightly lower credit ratings. Lower interest rates don't create ninja loans. The loss of all underwriting standards was not caused by lower interest rates.

Reality says

I'm not talking about negative amortization loans, but adjustable rate loans.
Young people based on
that real life experience had good reason to believe they'd be able to roll over
loans 3 or 5 years in the "future" when the adjustment comes.

Sure and that could happen whether interet rates were 2%, 4%, or 10%. Adjustable rates are almost always lower than fixed rates.