We now know how the system failed to work properly. How about applying
a little simple logic to a few facts? Application of simple logic to
the system a few years ago would have clearly predicted the outcome,
which many people successfully did. These are the people who made sure
they were not in a position to be hurt by the process. The bailout
will also produce easily predictable consequences that need to be
avoided by individuals. We can not change what is happening no matter
how hard we complain. We can only protect ourselves and our families.
1. A huge amount of unfunded money is being pumped into the system. By
some accounts, as much as 1.3 trillion dollars. As a result, the
national debt is growing rapidly.
2. The government will continue to pump money into the system based on
the fear of total collapse. As a result, this debt will grow.
3. Government income will go down because of the recession and because
taxes will be lowered in order to buy votes and stimulate the economy.
4. Long term interest rates will rise as banks and foreign lenders
demand more reward for the risk.
5. Inflation will increase as the price of food, gas and other goods
increases.
6. As a result, stagflation will come again. The Obama administration
will look a lot like the Carter administration.
The solution, sell bonds and stocks, and buy gold.
Ed
On Oct 2, 2008, at 8:54 AM, Jed Rothwell wrote:
This is kind of off-topic but also on topic.
Here is a broadcast and transcript from the radio program "This
American Life." It explains the subprime mortgage fiasco more
clearly than I have seen elsewhere:
http://www.thislife.org/Radio_Episode.aspx?episode=355
This resembles the "Bird and Fortune - Subprime Crisis" video (http://www.youtube.com/watch?v=mzJmTCYmo9g
) except that the interviews are real.
Below is a fascinating segment of the transcript that illustrates
'the will to deceive oneself.' Bankers and loan officers
deliberately set up procedures that to hide the truth from
themselves. The procedures to check people's credit worthiness
became more and more far-fetched and removed from reality. We see
the same trends in arguments against cold fusion, as Mike Melich
described:
"I see no value in anymore 'panels' of experts looking at this
subject. The choice of the "Terms of Reference" and the choice of
the panelist is likely to be in the hands of the Garwin's/Jasons
and the ERAB/Bard groups who have thoroughly enjoyed seeing how
successful they manage to avoid answering technical questions
seriously or doing any homework that informs them or facing the
possibility that they may
have made an error."
Here is the segment from the radio show transcript:
. . . And so Mike [Garner] noticed that every month, the [credit
check] guidelines were getting a little looser. Something called a
stated income, verified asset loan came out, which meant you didn't
have to provide paycheck stubs and w-2 forms, as they had in the
past. You could simply state your income, as long as you showed that
you had money in the bank.
Mike Garner: The next guideline lower is just stated income, stated
assets. Then you state what you make and state what's in your bank
account. They call and make sure you work where you say you work.
Then an accountant has to say for your field it is possible to make
what you said you make. But they don't say what you make, just say
it's possible that they could make that.
Alex Blumberg: It's just so funny that instead of just asking people
to prove what they make there's this theater in place of you have to
find an accountant sitting right in front of me who could very
easily provide a W2, but we're not asking for a W2 form, but we do
want this accountant to say yeah, what they're saying is plausible
in some universe.
Mike Garner: Yeah, and loan officers would have an accountant they
could call up and say "Can you write a statement saying a truck
driver can make this much money?" Then the next one, came along, and
it was no income, verified assets. So you don't have to tell the
people what you do for a living. You don't have to tell the people
what you do for work. All you have to do is state you have a certain
amount of money in your bank account. And then, the next one, is
just no income, no asset. You don't have to state anything. Just
have to have a credit score and a pulse.
Alex Blumberg: Actually that pulse thing. Also optional. Like the
case in Ohio where 23 dead people were approved for mortgages. . . .
- Jed
