whatever said:
Kasz216 said:
whatever said:
Kasz216 said:
whatever said:
Kasz216 said:
whatever said:
Kasz216 said:
There were other factors involved. However that very much WAS a factor. A major one.
The US actually spends more money per capita then most countries when it comes to "spreading the wealth".
This is something most people don't realize.
The derivitives market itself was an extension of this... as is allowed home ownership to skyrocket to levels it shouldn't of skyrocketed too.
Said market wasn't made "because greed was good". Said market was made because people wanted to "Spread the wealth of houses".
Because owning your own home is the cornerstone of the "American Dream."
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Your way off base here. You seem to be repeating the conservative mantra that it was Fannie Mae and Freddie Mac via the Communities Reinvestment Act that caused the crisis. This has been thoroughly debunked by many sources. Its just a way of blaming poor people for the problems created by the wealthy. It's morally reprehensible.
The derivatives market is much bigger than anything mortgage related. By many accounts, it is in the quadrillions. The mortgage crisis was just the trigger that started the implosion. It was inevitable that this implosion was going to occur, it was just a matter of when.
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I'm not the one who's off base. Again, the countries who are more conservative fiscally are fine, only liberally economic countries were hurt. Why do you think that was?
Why do you think deritivitives only hurt fiscally liberal countries?
Derivitives are used to push off risk, that companies take, often at the behest of governments... and also often at their own wishes.
Why do these exist? Because people are convinced to do so. People are convinced to spend beyond their means... espiecally in fiscally liberal countries.
The problem didn't happen because of banks. The problem happened because too many people got loans in general that couldn't pay for them. Too many people were living beyond their means and too many people and coutnries had negative savings rates. Throw in massive government spending and you've got a huge inflation of value with no real value to back it up.
Everytime someone takes out credit it creates "fake" value... when enough defaults happen, either by us, the government or both... bad things happen as everything shrinks back to were the value should naturally be.
Anyone who blames it on the banks just wants to avoid the real problem. Government and decades of people being taught poor financial discipline.
Even the government has realized this. Well the poor financial discipline part anyway. If your wondering why credit and loans are so hard to get now even with the bailout... the reason is, the fed greatly increased the benefits of having high cash on hand in banks. The government basically made it more profitable for banks to sit on their money then to lend it out unless they're stone cold solid that they're getting that money back.
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Sorry, but you don't seem to understand what happened in the derivatives markets at all. The real problem was that it was completely unregulated. Derivatives were originally created to push off risk, but they became much more than that. They started to be used in ways that they were not intended. They could be used to bet that a company would fail. They could be bought without owning the underlying asset. It became a casino. All the companies that bought and sold these became interlinked. AIG couldn't be allowed to fail because they would have brought a lot of others down with them.
Obviously there is not enough time or space here to go into all of this. There is plenty of info out there on it. Try:
http://www.pbs.org/wgbh/pages/frontline/warning/view/
Again, your falling back on the lie that it was "too many people got loans in general that couldn't pay for them". Did this happen? Yes. Was it a bad thing? Yes. But it pales in comparison with the "bets" made by these investment bankers. To say it had nothing to do with the banks is to competely disregard reality. The deregulation that started with Reagan allowed investment banks to merge with commercial banks. This led to much freer lending as the assets could be sold off by the investment branch.
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Er... your still not getting it. Do you know the value of the deritivitives market?
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LOL. I'm trying to help you understand, but you apparently aren't open to it.
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No, it's just a matter that you don't seem to understand the derivitives market.
What regulations exactly are supposed to prevent a crash of something that's market is like 20 times the world's GDP?
Short answer? Nothing, except stopping the things that trigger said crash. Which would be overdefaulting.
You can't get rid of the derivitives market or even properly regulate it... because it's bigger then the banks that were "too big to fail".... by a lot.
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Because it is so large, you can't regulate it? Huh? Transparency is a start. Not allowing swaps to be used as bets, requiring you to own the underlying asset to buy a swap. They could also be abolished completely going forward.
So your solution is to let this market crash and bring the world into a depression like we've never seen? Yes, it may happen no matter what, but I'd rather we take a shot at lessening the impact.
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No... it's to actually stop it from happening by stopping the underlying principles.
Think of derivitives like HIV.
It can't kill you alone, but if you catch a cold.... watch out.
Derivitivies are world wide... yet the countries that avoided the derivitives crash were largely financially healthy, fiscally conservative countries.
The housing bubble is what triggered the derivitives collapse.
The reason is because a lot of derivitives were morgages involving many different houses in different states... or in europe countries. (They actually had a near simaltanious housing bubble.)
This was completly unexpected because, generally that's now how realestate works. Real estate goes up here or down there... it's never always up and always down. Except it ended up being always up and always down due to the previously mentioned overextended lending.
A giant devaluation of this caused those derivitives to fail, which led to people not having enough money to cover other derivitives. (Hence why they failed and the number of derivitives that failed wasn't only subprime morgages.)
There is literally no way to prevent this from happening, except by stopping things like housing bubbles. The derivitives are out there already. They are worth more then 20 times the amount of money that actually exists. There is no regulations that can allow such a thing to be covered. There isn't enough money in existance to prevent deritivitives from crashing the market if something happens.
Stopping derivitives right now will hurt economic growth and cause a double dip in the recession.
In reality we probably shouldn't regulate derivitives and instead take a defensive stance against bubbles, untiil we get far enough out that we can suffer another huge recession. Either that or do it veeeeery slowly.
