These derivatives had not been sold if not for the euphoria generated
by cheap credits deliberately promoted by the central Banks and the
craziness of credit for everyone even if no assets, no income, no job, by
Clinton´s Freeddy & Fanny and the pressure of ACORN over the banks. So the
ball goes again to the regulations.

The markets optimize the assignment of resources for what you want. It ever
gives what you want. if you demand pencils, you will receive cheap pencils.
If you demand madness, euphoria, inmorality, then the market amplifies that.

What money and capitalism produces is to align the individual goals with
the social goals by forcing you to work doing what the others demand,
receiving a payment for your needs.

If the social goals are right, then even  inmoral people  are forced to
créate right things and services trough the market. That is the desired
thing.

If the social goals are perverse because people has lost the contact with
reality (for example by the promises of cheap money build of thin air)
then the market forces virtuous, moral and hardworking people to do evil
things.


2013/7/16 chris peck <chris_peck...@hotmail.com>

> Hi Roger
>
> hmmm. sort of. Lowering interest rates, creating cheap money, in part
> encouraged banks to lend to people they ordinarily would not have. This put
> more buyers on the market and that increase in demand led to a rise in
> house prices. Of course, when the interest rates went up, those loans
> became much more expensive and people found they couldn't afford the
> mortgages they had taken. People began to default, demand decreased and
> then so did the house prices.
>
> But, there was a whole lot more to it than that. Deregulation, (ie. free
> market sensibility), allowed banks to collect together and carve up loans
> into complex derivatives and sell them on as 'high quality' assets. In
> other words, free market sensibility led to a situation in which banks no
> longer bore responsibility for the loans they made. They just made the IOUs
> and then sold them on to pension schemes. Consequently, they loaned to
> anybody because these derivatives enabled them to get an immediate return
> on the loans, rather than have to wait 40 years. Crucially, they made loans
> to people without demanding any kind of equity in the underlying asset.
> This meant that defaulting became an extremely attractive proposition once
> interest rates went up. So people defaulted willy nilly because they had no
> stake in the houses they had bought.
>
> So really it was deregulation that buggered things up and generated false
> hopes and deregulation that led to massively inflated house prices and then
> .... bust.
>
> ------------------------------
> Date: Sat, 13 Jul 2013 20:11:45 -0400
> Subject: Re: Capitalism : the way of creating wealth OUT OF THIN AIR
> From: jami...@gmail.com
> To: everything-list@googlegroups.com
>
>
> How can an otherwise well educated and smart person write such stupidity?
> Capitalism creates wealth out of the sweat of the expolited and enslaved
> workforce they (the capitalists) keep on an economical/political leash.
> MONEY does not grow on trees.
> Doctor, you should know better!
> Dr. phil - D.Sc. John M
>
> On Sat, Jul 13, 2013 at 11:05 AM, Roger Clough <rclo...@verizon.net>wrote:
>
>  *Capitalism : the way of creating wealth OUT OF THIN AIR*
>
> There are two ways of cheapening money: mechanically, by printing it,
> and emoltionally, by making it more easily available
> (less desirable) by lowering the interest rates.
>
> There is also a way of enriching money, and that is by NOT doing either of
> the above,
> by not interfering with the market.
>
> Here is why.
>
> If somebody came along and told you that you can make gasoline out of
> water, you'd call him a
> con man. Can't be done. But I am here to tell you that you can create
> money out of thin air.
> The govt creates it by printing it, which is bad, for it cheapens money
> and thus creates no real wealth.
> This is the mechanical creation of wealth. But wealth can also be achieved
> by simply believing
> that it can be done (by naturally rising prices in hopes of future gain).
>
> Profit, the magic ingredient of capitalism, is the creation of wealth OUT
> OF THIN AIR, where nobody loses,
> if they both choose wisely enough. Both parties can profit-- the seller by
> receiving a higher price and
> the buyer by paying a higher price in the hope that he can resell it at an
> even higher price or make use of
> it in some other profitable way, such as buying in bulk. So the hope of
> the seller-- for a brighter day tomorrow--
> is what creates wealth in the economy.
>
> Before the bubble burst, the housing market was an example of this, except
> that there was a third party-- the govt--
> who made cheap money available by lowering the interest rate. That screwed
> things up by luring the buyer
> into thinking that the housing price would rise, but it didn't. That's not
> a free market, and that's why
> the bubble burst, because it was an unrealistic hope.
>
>  Dr. Roger B Clough NIST (ret.) [1/1/2000]
> See my Leibniz site at
>  http://independent.academia.edu/RogerClough
>
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-- 
Alberto.

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