Incompetent and greedy bankers?

[mrgrumpy]

The stock market meltdown and financial problems, I hesitate to call it a crisis yet, of national banking sytems, the credit crunch and wildly volatile currencies and commodities illustrate one conclusion for Canadians; thank goodness for our regulatory systems.

In the US , where the current problems started, market incompetence, borrower ineligibility and outright fraud where rampant during the last few years; the banks and investment houses saw an opportunity, based on false assumptions to make billions,borrowers could live well beyond their means, credit rating agencies went along with all this wishful thinking and governments turned a blind eye, or weren't empowered to impose regulatory enforcement.

In our country the opposite is true - we have a well managed and conservative banking sytsem and regulatory mechanism, Canadians are generally disposed to live within their means and saving is not yet an abandoned concept.

We will feel the effects of this severe problem no matter what we do, but we won't lose our homes, futures and jobs at the rate the Americans will, or anywhere close to it.

Next time you are feeling unhappy with bank charges or think you're being hassled on loan requirements, consider that we and the Europeans have the best, most stable and secure banking systems in the world.

 

[MHz]

Do you have any info on just how the crash started in '28? I don't at present but I'm under the assumption that when Wall Street stocks collapsed the American economy tanked along with it. Canada wasn't immune to those effects. Wasn't the 'final effect' pretty much the same (eventually) on both sides of the border? If the American economy went down first how long before the Canadian one followed, again I assume it was so close it could be referred to as a single event?

 

[MHz]

What a sweet way to make a 'tidy profit' in one single day.
http://www.amatecon.com/gd/gdtimeline.html

1934

• January 30th, Gold Reserve Act passed
  • Establishes Exchange Stabilization Fund
  • Allows the U. S. Treasury to seize all gold held by Federal Reserve banks
  • Private possession of gold made illegal except for "legitimate" purposes (jewelry, artwork, and industrial and scientific uses)
• January 31st, FDR issues an executive decree, changing the price of gold from $20.67 an ounce to $35 an ounce

 

[mrgrumpy]

The stcok market correction of 1929 was the result of inflated values ( real estate, commodities, futures), wishful thinking, and speculative investors contibuting to a pyrimidal rise in company values.

At some point the saner investors realized it was a psycholgical game built on over -confidence and prices that could not be profited from and investments that were over rated.

The situation was made worse by crop failures, here and in the US and relieved only partially by the war economy of 1939 - 1953 when real returns , based on solid value were returned to the economy.

The situation today is similiar, but not identical. Lack of regulatory oversight, free market eneterprise and financial incompetence, or outright fraud, will be the hallmarkrs of a new poverty economy already showing up in vast areas of the American sunbelt. And spreading.

 

[Avro]

Would you say this could become a depression?

 

[mrgrumpy]

Would you say this could become a depression?

The current situation in markets around the world suggest a lot of investors will lose heavily, and already have. The US circumstances at the moment clearly indicate a recession is likely; world markets are responding accordingly; certainly a time of slowdown in national economies is imminent.

If the situation worsens and central banks are unable to control the decline something like we know as a depression may occur. A number of other factors/scenarios will be played out before that becomes clear.

Stay liquid.

 

[Toro]

Would you say this could become a depression?

No.

We are in a recession that will likely be mild or a bit worse, but will probably last longer than most are expecting.

 

[Avro]

No.

We are in a recession that will likely be mild or a bit worse, but will probably last longer than most are expecting.

As bad as the 90's or worse?

Could an international incident like a terror attack designed to hurt us fanancialy put us into depression?

 

[darkbeaver]

NOTE: Some Americans are discovering that they are able to keep their homes and save themselves from becoming refugees by challenging the banks. All they are doing is asking the courts for proof that the banks own the mortgage notes that they claim to own. “Judges in at least five states have stopped foreclosure proceedings because the banks that pool mortgages into securities and the companies that collect monthly payments haven't been able to prove they own the mortgages.” More on this at “Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish.” I personally know what I would be doing if I owned a mortgage in the United States. Good luck, and remember, according to the ex-Comptroller General of the United States, the top accountant for the United States of America, “deficit spending and promised benefits for federal entitlement programs have put every man, woman, and child in the United States on the hook for $175,000”. In essence, the United States is bankrupt.
http://www.chycho.com/?q=node/1631


US economist calls financial crisis worst since 1930s
19 Mar, 2008, 1659 hrs IST, IANS
WELLINGTON: The current financial crisis is the worst the world has seen since the Great Depression of the 1930s and the US Federal Reserve move to cut interest rates will not make much difference, the Nobel Prize winning economist Joseph Stiglitz said on Wednesday.

"It will have some impact - it will do a little bit to stem the blood - but it's not addressing the fundamental problems underlying the collapse of the financial sector," Joseph said.

Stiglitz, who won the Nobel Prize in economics in 2001, is a former chief of the World Bank and chaired former US president Bill Clinton's council of economic advisers. He is in New Zealand on a lecture tour.

He said the Federal Reserve's move to cut its funds rate by three-quarters of a percentage point was "just trying to ease the economy down rather than try to address the underlying problems."

Stiglitz said the main problem was the fact that an estimated 2 million Americans were going to lose their homes because they could not repay mortgages which exceed the value of their property as house prices fell dramatically.

"As people walk away from their mortgages there will be more and more defaults - that undermines the whole financial system," he said.

Stiglitz said the Bush administration was bailing out banks, but accused it of refusing to do anything to help poor people stay in their homes which would stabilise the housing market.

"It's very easy to do something about it," he said, suggesting the administration could give assistance to write down mortgages to about 90 per cent of the value of a house which would enable people to stay in their properties.

However, the Bush administration has unveiled plans designed to help homeowners in danger of losing their homes by allowing holders of sub-prime mortgages to borrowers with poor credit to more easily apply for refinancing. The government will also send out tax rebate cheques in May.

Stiglitz said it was ironic that former Federal Reserve head Alan Greenspan had said it was the world's worst economic problem in the last 50 years, adding, "He is the source of much of the problem."

He said mismanagement by the Federal Reserve over the last seven years was one of the major factors underlying the current problem.

"They had the regulatory authority to prevent some of these bad practices that we are now paying for and he chose not to do it."

Stiglitz said the reason related in part to the war in Iraq and the very negative effect on the economy.

"They didn't want Americans to know exactly how bad the war was for the economy so they flooded it with liquidity, they looked the other way with regulations and they deliberately, I think, postponed the problem into the future and now we're paying the price."

 

[normbc9]

There are some investment types in my community who join in weekly for coffee. Today was the day. Most are quietly withdrawing from the US markets when their break even point is reached and investing into gold, silver, diamonds and uranium. All are found on the world market and all have a universal value rather than one tied to specific currency. One has a lot of Euro's but they too are vunerable and he intends to covert those into a precious metal market soon. This bailout was in my opinion ill advised and ill timed. Worst of all the US taxpayer will take this hit for a group of well heeled greedy banker groups. The costs will go on for a long time when they are finally amortized. Those who benefitted will never feel a thing.

 

[MHz]

Those rebate cheques will be classified as income for next years taxes, so it amounts to it being a loan and nothing more

 

[Kreskin]

And the US dollar was to drop 90%...

 

[Kreskin]

There are some investment types in my community who join in weekly for coffee. Today was the day. Most are quietly withdrawing from the US markets when their break even point is reached and investing into gold, silver, diamonds and uranium. All are found on the world market and all have a universal value rather than one tied to specific currency. One has a lot of Euro's but they too are vunerable and he intends to covert those into a precious metal market soon. This bailout was in my opinion ill advised and ill timed. Worst of all the US taxpayer will take this hit for a group of well heeled greedy banker groups. The costs will go on for a long time when they are finally amortized. Those who benefitted will never feel a thing.

These are the types of investors who will tell stories of how much they lost well after this is over, and their actions are signs of capital markets nearing the end of a down cycle in my opinion. Look at the back of line to see who buys gold next. If there isn't anyone else in line, well you know the picture. Perhaps they should've gone into the metals market a year or two ago. Chasing yesterday's winners won't work. Gold was about $800 an ounce in 1981. What is it today after doubling in the last two years? Not much more.

 

[Toro]

As bad as the 90's or worse?

Could an international incident like a terror attack designed to hurt us fanancialy put us into depression?

I think the recession could be a bit worse than the 1990s. Afterwards, we will move in fits and starts, I think, not growing particularly fast.