Re: OT: Please Shut Up!

On 10/10/08 1:12 PM, in article 48EFB728.DBE84971@xxxxxxxxxxx, "Eeyore"
<rabbitsfriendsandrelations@xxxxxxxxxxx> wrote:



John Larkin wrote:

But the Dow is up about 200 points on the day.

They're trying to kid themselves. It's a casino, has been for ages, never will
be anything else unless stern action is taken. The idea of true investment
vanished years ago.

Graham


I agree. It used to be that companies sold shares to finance capital
expenses - growth. Now they sell stock just to raise money for no
particular reason, except maybe huge wages for officers. But the cause of
the current economic failure have a different cause.

I haven't had time to research the timing of the following changes, but it
spans years from the 70s to now.

In the late 60s I completed a series of 400 and 500 level university courses
in economics. At that time banks were allowed to create loans in the amount
of three times their reserves. Just before the recent failure, I believe
they were up to more than forty times their reserves.

The Federal Reserve couldn't manage all that directly, so other tiers of
non-banks were created to whom the banks could sell their held mortgages and
other debt, relieving themselves of that debt. In doing this, the banks
improved their reserves so they could create even more multiples of loans.

Every time a debt package was moved from one tier to another, everyone
"earned" more money. Credit became easy so they could keep making ever more
money. They were very innovative in creating credit cards, for example,
initially only for people with a good credit standing, and then only for
$300 max. But as you have seen, today anyone can get as many credit cards
as they want, and each can be good for 10's of thousands of dollars.

Every administration, Dem or Rep, shared in the many changes made to the
economic system, either by allowing the Federal Reserve to change the rules
that created this mess or by ignoring their Federal Reserve responsibilities
of oversight, or by being aware, but not wanting to stop the flow of cash to
their buddies

The media has been fairly clear in pointing out the final blow came from
poorly made mortgages. But looking only at that ignores HOW it came to be.


.

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