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Yes support, financial systems support economies. When you trade what do you trade in? Dollars. Yes there are rent seekers in the financial system, but that does not change the fact that the financial system supports and facilitates transactions in the general economy.
The US could replace its financial system while maintaining the same economy. Every financial system has different benefactors, there is no way around that. The alternative is barter.
The financial system is taking tax payer money and using it to program trade and to invest in derivatives. This action is producing nothing for the economy in the way of trade or jobs. It is only making money for the institutions at the risk of over inflating equity values and causing another crisis due to derivative collapse.
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Here you go again conflating a financial crisis with the economy. The crisis was a financial crisis that had ramifications in the economy. But these are two separate matters. The fiscal stimulus was not implemented to help the financial crisis, rather to help the economy. It is the FED who has been trying to add liquidity into the financial markets and end the financial crisis (the Treasury also helped with TARP). As a result, the end of the fiscal stimulus will not result in another panic. Furthermore, the fiscal stimulus was modest by any account and its effects will gradually decline over time.
No one in there right mind could argue that you can separate the financial crisis from the economy, they are intertwined. To differentiate between TARP and Stimulus is only a ploy to distract people who are not aware that they are both on the same taxpayer bill. The panic will come from the inevitable problems and insolvencies already baked into the derivatives cake. The Trillions of dollars in derivatives contrived by crooks on Wall St. to make obscene profits at the expense of investors are still out there. They are waiting to blow up and take down the next large institution just as they have done in the past. The financial system runs on confidence, and confidence cannot be maintained on the lies and assumptions built into derivatives.
The financial system is taking tax payer money and using it to program trade and to invest in derivatives. This action is producing nothing for the economy in the way of trade or jobs.
Firstly most of the money used to the support the financial system has not come form tax payers, rather the FED. Secondly, to suggest that it has done nothing for the economy is not accurate. Businesses rely on the credit markets and they were frozen after Lehman brothers collapsed.
Lastly, the cost to tax payers is completely undermined. Contrary to popular belief the treasury did not hand out money to financial institutions, they borrowed money to them. Most of these loans will be paid back, some already have. The tax payers could potentially profit from it! Most than likely the will be a loss though, but no where near the amount that was loaned.
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Originally Posted by jimhcom
To differentiate between TARP and Stimulus is only a ploy to distract people who are not aware that they are both on the same taxpayer bill.
Rubbish, TARP was used to stabilize the financial system and the stimulus bill was used to help stabilize the economy. That is a rather important distinction. Individuals, businesses, etc will benefit directly from the fiscal stimulus.
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Originally Posted by jimhcom
The panic will come from the inevitable problems and insolvencies already baked into the derivatives cake.
This is just silly, you suggest that the problems are "already baked in" yet the panic will come in some time in the future. Let me guess, all the traders/investors are just not as smart as you huh?
Firstly most of the money used to the support the financial system has not come form tax payers, rather the FED.
Maybe so because the Fed is a private money system that can print at will, however this has no bearing on what you were responding to. The poster said that taxpayer money was being used to prop up the financial system and this is correct. Congress appropriated TARP which was a commitment of close to ~$850B in direct bailout money. This money becomes an obligation of the taxpayers deposited into the Fed.
Firstly most of the money used to the support the financial system has not come form tax payers, rather the FED.
This is great, so you are saying money given to institutions by the FED does not incur interest that the taxpayer must pay? How about the losses? You are saying the taxpayer is not on the hook for funds not paid back to the FED? Either you do not understand how the FED works or you believe the people reading this forum don't.
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Most of these loans will be paid back, some already have. The tax payers could potentially profit from it! Most than likely the will be a loss though, but no where near the amount that was loaned.
This is BS, lets see your figures on this. You will not provide any because you can't.
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Rubbish, TARP was used to stabilize the financial system and the stimulus bill was used to help stabilize the economy. That is a rather important distinction. Individuals, businesses, etc will benefit directly from the fiscal stimulus.
What you have is a large basket of taxpayer money. You take the lions share and give it to financial institutions and a small share and provide some stimulus in the form of government give always, unemployment benefits, and a tiny fraction actually goes into infrastructure. The taxpayer is on the hook for all of it. The government give always are a one time deal and whatever benefit the economy was going to reap from them is already consumed. The tiny fraction going into infrastructure will pay dividends going forward, and the lions share given to financial institutions is basically government welfare to protect the interests of the rich at the expense of the taxpayers.
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This is just silly, you suggest that the problems are "already baked in" yet the panic will come in some time in the future. Let me guess, all the traders/investors are just not as smart as you huh?
Do you even understand the derivatives problem? it does not seem as if you do. The derivatives and the CDC's are what caused the credit collapse. They are still there, and not only are they still there; much of the TARP money is going into new ones! That is where Goldman is making its recent profits. As far as the rest of investors being as smart as me, I think most investors know the risks, (present company excluded) they just believe they can beat them.
About 17 percent of Troubled Asset Relief Program (TARP) loans issued since the program began a year ago have been repaid, according to a 252-page report released Wednesdayby TARP's Special Inspector General Neil Barofsky. (washington times)
that is right, 17%.
that is not a very good repayment rate for the taxpayers, especially when companies are asking for more money again, like GMAC.
As an old guy I would agree 30 years isn't that long, however, I think it's safe to say that thre aren't many properties in this country worth less than they were 30 years ago even after several busts. In fact, I'd be surprised if thre's any 30 years period in this country where prices have fallen on real estate.
As to your point about carry costs, no agrument there. My point was simply to the issue as to whether or not prices would "ever" return to the past, not whether or not real estate was a good/better investment now than ever before.
Have nominal prices increased? Of course so has the nominal cost of everything else. That has little bearing on its value as an investment. The true measurement of an investment is its inflation adjusted value. The inflation adjusted value of real estate remained relatively stable until about 2001 when the housing bubble began. It then went to levels never before seen. I personally purchased houses that I tripled my investment on in a few short years. That kind of market is something you only see once in a lifetime. (Unfortunately) When markets like that occur, a lot of money is made and a lot is lost. Usually the losers out number the winners, and are either unable or unwilling to take those kind of risks again. (Once burned, twice shy) So when I say we are not returning to where we came from, we are talking inflation adjusted values, but I am sure you already knew that.
"If you can bear to hear the truths you have spoken, twisted by knaves to make a trap for fools"
Maybe so because the Fed is a private money system that can print at will, however this has no bearing on what you were responding to. The poster said that taxpayer money was being used to prop up the financial system and this is correct. Congress appropriated TARP which was a commitment of close to ~$850B in direct bailout money. This money becomes an obligation of the taxpayers deposited into the Fed.
When did you get your bill for the 850 billion? You did not, because the money was borrowed (partly from the FED mind you). But wait, the TARP funds were not given out for free rather they were loans! Thus to what degree it is an obligation of the tax payers is completely unknown! The TARP funds could be paid back before the treasuries mature!
This is great, so you are saying money given to institutions by the FED does not incur interest that the taxpayer must pay? How about the losses? You are saying the taxpayer is not on the hook for funds not paid back to the FED? Either you do not understand how the FED works or you believe the people reading this forum don't.
Apparently you don't know that the tax payers give nothing to the FED, why would they after all? The FED can create money! The FED has been doing a variety of things during this crisis. For example to increase liquidity they have essentially given secured loans to financial institutions, the collateral being hard to price assets (often mortgage related securities). The tax payer is not on the hook for anything. The only thing that keeps the FED's actions in check is the possibility of inflation.
So yes, I believe you and many others on this forum don't understand how the FED works.
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Originally Posted by jimhcom
This is BS, lets see your figures on this. You will not provide any because you can't.
Figures on what exactly? I'm talking about future! If you were not aware that some of the money has already paid back then please get your head out of the sand.
The point of the comment is that these are LOANS as a result the loss to tax payers is unknown until all the loans mature. Get it? I think there will be a loss, but it will be no where near the amount loaned. The amount borrowed is the maximum loss. But its possible there is a profit.
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Originally Posted by jimhcom
Do you even understand the derivatives problem? it does not seem as if you do. The derivatives and the CDC's are what caused the credit collapse. They are still there, and not only are they still there; much of the TARP money is going into new ones!
Yeah you are not addressing the absurdity in your comment. Again, you are suggesting that another crisis is "already baked in"....yet currently there is no panic. So I can conclude that 1.) traders/investors are all stupid, 2.) jimhcom has a time machine, 3.) jimhcom has no idea what he is talking about.
Gee, I wonder which I'll pick. By the way isn't the CDC busy with H1N1?
The next leg down in housing is in Spring 2010 and I feel this is going to be much worse that what has been experienced in the past. We have a huge overhang of shadow inventory poised to hit the market just as foreclosures are rising.
The cheerleaders just keep saying everything is good but they fail to provide any hard data as to why all the negative factors out there (shadow inventory, rising foreclosures, job losses etc.) are not going to have any effect.
When did you get your bill for the 850 billion? You did not, because the money was borrowed (partly from the FED mind you). But wait, the TARP funds were not given out for free rather they were loans! Thus to what degree it is an obligation of the tax payers is completely unknown! The TARP funds could be paid back before the treasuries mature!
Your questions are irrelevant to what I posted. Like the post I quoted, you are addressing points with red herring fallacies.
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