Economics for idiots

[RedinSweden]

I can't be arsed reading any of the explanations. Can someone do it for me in picture form?

[Spy Bee]

[RedinSweden]

 

Cheers. I have it now. Any questions?

[Elmyn Noos]

Noos, much as it pains me to say it, I feel I must admit that you make me laugh on an all too frequent basis.

 

*Whispers*

 

You were confused, too - right?

 

*Whispers*

 

Yes, but don't tell any of the cunts on here or I'll get called names.

[tokyojoe]

A major problem is the sub prime lenders have 'packaged' their loan books and sold them on to larger financial entities, which are then rolled into various derivatives. Most major banks throughout the world are unsure what their exposure is, Goldman Sachs being one, who alledgedly, are in deep shit over this. One German bank went down the tubes a couple of weeks ago due to US sub prime debt on their books.

[RedinSweden]

A major problem is the sub prime lenders have 'packaged' their loan books and sold them on to larger financial entities, which are then rolled into various derivatives. Most major banks throughout the world are unsure what their exposure is, Goldman Sachs being one, who alledgedly, are in deep shit over this. One German bank went down the tubes a couple of weeks ago due to US sub prime debt on their books.

 

no, sorry, that was just noise

[RJ Fan club]

no, sorry, that was just noise

 

me too... defo a wooosh sound...

[G Richards]

The plus side is that there are loads of houses to be bought on the cheap in America right now. It's a small possiblity we'll move over there in the coming months (Indiana area), and we've had a look at houses online. You can get a lot more for your money, and the prices are coming down too.

 

The downside on this is that if you view owning a house as an investment (rather than a place to live), then it is not a good investment.

[Dirk]

http://www.ft.com/indepth/subprime

[cochyn]

The sub-prime market, basically, gave mortgages to people who were deemed as bad debtors with poor credit history, the interest payments were high. A lot of these people have defaulted on their mortgages.

QUOTE]

 

 

At the risk of muddying the waters slightly; Was it not he case that these 'sub-prime' (let's say 'redneck' for simplicity's sake) loans were charged at 1% interest and below - which was silly fucking money in anyones book. The Rednecks got to move out the trailer park for next to nowt.

 

The rates rose and Cletus couldn't pay back = defaults and bad debt piling up at the banks. Banks then raised rates on prime loans to cover losses on the redneck loans = more breadline loanees geting into trouble = more defaults? etc. Meanwhile, hike in interest rates = rise in inflation rate = weaker dollar as prices rise faster in the US than elsewhere? Or am I totally off beam?

[Red Dawn]

Here's a *guaranteed little forumula I remember from back in the day. This may help to really simplify things :

 

Interest rates go UP, Savings go UP, Spending goes DOWN, Value of money goes UP, ergo Value of currency goes UP

 

Interest rates go DOWN, Savings go DOWN, Spending goes UP, Value of money goes DOWN, ergo value of currency goes DOWN

 

Hence the constant shifting of interest rates.

 

 

 

 

 

 

 

* this is not a guarantee and I could have got this arseways

[Dirk]

The sub-prime market, basically, gave mortgages to people who were deemed as bad debtors with poor credit history, the interest payments were high. A lot of these people have defaulted on their mortgages.

QUOTE]

 

 

At the risk of muddying the waters slightly; Was it not he case that these 'sub-prime' (let's say 'redneck' for simplicity's sake) loans were charged at 1% interest and below - which was silly fucking money in anyones book. The Rednecks got to move out the trailer park for next to nowt.

 

The rates rose and Cletus couldn't pay back = defaults and bad debt piling up at the banks. Banks then raised rates on prime loans to cover losses on the redneck loans = more breadline loanees geting into trouble = more defaults? etc. Meanwhile, hike in interest rates = rise in inflation rate = weaker dollar as prices rise faster in the US than elsewhere? Or am I totally off beam?

 

 

They had teaser rates. They offered ridiculously low rates for x number of years and then wham, after this period the interest rate went up, it went up to a rate well above the what a normal borrower would pay(this is where they made their money and why they were prepared to risk lending to poor people.), and they got stung and couldn't afford to keep up the repayments.

[Flying Pig]

I have A'Level's in politics and business studies & if someone asked me a question, I would tell them what I could remember. You know why? Because I'm not a cunt!

 

 

I have a c.s.e in woodwork and I could defo make a shelf and I'm not gonna waste my time if no one cares anymore.

[Dropkick]

Right so the worlds markets have lossed confidence over fears about the US sub-prime markets and potential bad debts? Why would this effect businesses that can repossess houses and give even more profits to shareholders?

 

Even weirder, how come in the last couple of weeks while this has been going on the dollar has strengthened significantly against the pound?

 

Yours confusedly (and also somewhat apathetically)

 

AdamS

 

Are you talking about banks? They make their money shifting mortgages.

 

Foreign exchange rates are based on supply and demand over small time scales. That is there is no economic reason for market fluctuations.

[Spy Bee]

Are you talking about banks? They make their money shifting mortgages.

 

Foreign exchange rates are based on supply and demand over small time scales. That is there is no economic reason for market fluctuations.

 

I think you just made less sense than me.

[Stu Monty]

But I gave Fred the apples for free?

 

I love the fact that Federal Reserve is privately owned and they choose when to print and not to print more money.

 

This was mentioned in that Zeitgeist documentary I started the thread about. The Federal Reserve in itself is unconstitutional and there is no law that stands which states you must pay your tax to it, apparently. The stuff in that documentary where it details how the Rockerfellers, Rothchilds and other banking families were influential in causing the depression to enrich themselves was scary. Former president, Woodrow Wilson's words after being bankrolled, literally, by the families to the presidency and then aiding their accumulation of wealth and control said:

 

"A great industrial nation is controlled by its system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the world - no longer a government of free opinion, no

longer a government by conviction and vote of the majority, but a government by the opinion and duress of small groups of dominant men." --President Woodrow Wilson

 

This, and other intesting quotes on the federal reserve issue can be found here: http://www.freedomdomain.com/bankquot.html

[Dropkick]

I think you just made less sense than me.

 

That was certainly more apothectic.

[Gym Beglin]

Just a catch-all for those who want to share and have a decent conversation from time to time.

 

I haven't got anything to start this off, other than saying that I've been reading and listening to a fair bit of Naseem Nicholas Taleb. This is the guy who wrote exactly how the banks would fall apart and published it in his book about a year before it all happened. Laughed at, ridiculed, and then one of the most sought-after economists in the World a year later.

 

Actually, for those of you who might want to switch off straightaway, don't, the truth is that you've never had a good teacher or found a way 'in' for you to explore these subjects.

 

Taleb is something of a guru for me, though I hate the word guru. But he makes perfect sense to me and it frustrates me that people don't follow him. David Cameron is said to have borrowed much of his thinking, and the Coalition's unwavering pursuit of being debt-free would suggest that.

 

Nassim Taleb: my rules for life | Books | The Observer

He comes across as a bit of a dick at times, but I can't relate to his life experiences so I dont know how it would affect me too, being so rich but also his experiences growing up, and in stockbroking, and his current standing as something of a philosopher/economist.

 

In short, making this relevant to perhaps LFC by way of example, he argues that small is beautiful and less likely to be destroyed. We, as a company, are always seeking to get bigger, and bigger, and make more, and obtain more. But that's not nature's way, and so much of economics is based on nature, on models of nature. Animals start small and grow big, but then a healthy animal stays at an optimum size. It doesn't grow and grow and get massive, that;s then a problem, you are not robust. He says that small things can boom and bust quite regularly, without big reprecussions, but the massive corporations have huge consequences for millions of people when they go wrong. You can't go 'a bit' wrong with massive things. He says his dream is for the world to work in a way where mistakes are made, are factored in, and where the public are not punished for mistakes. Look at the bankers, it was THEIR mistakes, and the public were punished for it.

 

I find it all fascinating, look here for more Taleb stuff (Nassim Nicholas Taleb | Books | The Guardian). I find him the most accessible of the modern economists, I mean, aside from stuff like Freakonomics.

 

You can also download the EconTalk podcast from itunes, also great stuff from Russ Roberts who interviews someone different in each podcast. Taleb has been on a couple of times, but I also enjoyed Art de Vany and his views on sports and exercise. Like I say, economics applies to everything, it's ace.

[VladimirIlyich]

Just a catch-all for those who want to share and have a decent conversation from time to time.

 

I haven't got anything to start this off, other than saying that I've been reading and listening to a fair bit of Naseem Nicholas Taleb. This is the guy who wrote exactly how the banks would fall apart and published it in his book about a year before it all happened. Laughed at, ridiculed, and then one of the most sought-after economists in the World a year later.

 

Actually, for those of you who might want to switch off straightaway, don't, the truth is that you've never had a good teacher or found a way 'in' for you to explore these subjects.

 

Taleb is something of a guru for me, though I hate the word guru. But he makes perfect sense to me and it frustrates me that people don't follow him. David Cameron is said to have borrowed much of his thinking, and the Coalition's unwavering pursuit of being debt-free would suggest that.

 

Nassim Taleb: my rules for life | Books | The Observer

He comes across as a bit of a dick at times, but I can't relate to his life experiences so I dont know how it would affect me too, being so rich but also his experiences growing up, and in stockbroking, and his current standing as something of a philosopher/economist.

 

In short, making this relevant to perhaps LFC by way of example, he argues that small is beautiful and less likely to be destroyed. We, as a company, are always seeking to get bigger, and bigger, and make more, and obtain more. But that's not nature's way, and so much of economics is based on nature, on models of nature. Animals start small and grow big, but then a healthy animal stays at an optimum size. It doesn't grow and grow and get massive, that;s then a problem, you are not robust. He says that small things can boom and bust quite regularly, without big reprecussions, but the massive corporations have huge consequences for millions of people when they go wrong. You can't go 'a bit' wrong with massive things. He says his dream is for the world to work in a way where mistakes are made, are factored in, and where the public are not punished for mistakes. Look at the bankers, it was THEIR mistakes, and the public were punished for it.

 

I find it all fascinating, look here for more Taleb stuff (Nassim Nicholas Taleb | Books | The Guardian). I find him the most accessible of the modern economists, I mean, aside from stuff like Freakonomics.

 

You can also download the EconTalk podcast from itunes, also great stuff from Russ Roberts who interviews someone different in each podcast. Taleb has been on a couple of times, but I also enjoyed Art de Vany and his views on sports and exercise. Like I say, economics applies to everything, it's ace.

 

Cant be much cop if Cameron is 'borrowing' his line of thinking.

[Bobby Hundreds]

Is it the concept of interest that's causing all this shit. Jib off interest you have what you have. If its nothing to do with interest, job it off anyway its totes ridick... Or something. I don't get it.

[Gym Beglin]

Cant be much cop if Cameron is 'borrowing' his line of thinking.

 

We owe a lot of money, a lot. You cannot survive on debt, not when the banks and people who lend money are becoming increasingly nervous.

 

Our basic problem here is that we don't produce anything anymore, we import, and so our ability to battle back from debt is hampered to the point where we have no option other than to stop spending money until a point we can, if you like, start again in a more controlled way. Of course, it won't happen, because labour will probably get in on the back of attacking the Tories for the cuts, and then it'll have all have been for nothing. That's the issue and that's why it's so severe, because the terms of office are short, and so they're trying to cut as much as they can in a matter of 4 years, to get to a point where growth begins again, and they can then point to their measures having worked.

 

Labour will likely get back in and then pledge to spend a fuck ton of money on anything that Councils want.

 

I don't agree with the Tory decisions on expenditure mind, the high speed railway to cut down a 3 hour journey is a complete waste of billions. "Ooo, I need to be in Leeds by 11am....", yeah, the captains of industry need that high speed link to get work done, yeah.

 

Protecting defence budgets, also fucking shit and classic Tory. I bet we build the biggest warship the world has ever seen.

[AngryOfTuebrook]

Right so the worlds markets have lossed confidence over fears about the US sub-prime markets and potential bad debts? Why would this effect businesses that can repossess houses and give even more profits to shareholders?

 

Even weirder, how come in the last couple of weeks while this has been going on the dollar has strengthened significantly against the pound?

 

Yours confusedly (and also somewhat apathetically)

 

AdamS

 

It seems that way back then, young "Adam S" (not Smith?) was not the only one to fail to grasp what was going on.

 

Alan Greenspan - Wikipedia, the free encyclopedia

 

In Congressional testimony on October 23, 2008, [Alan] Greenspan [former Chairman of the Federal Reserve] acknowledged that he was "partially" wrong in opposing regulation and stated "Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity – myself especially – are in a state of shocked disbelief." Referring to his free-market ideology, Greenspan said: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.” Rep. Henry Waxman (D-CA) then pressed him to clarify his words. "In other words, you found that your view of the world, your ideology, was not right, it was not working," Waxman said. "Absolutely, precisely," Greenspan replied. "You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well." Greenspan admitted fault in opposing regulation of derivatives and acknowledged that financial institutions didn't protect shareholders and investments as well as he expected.

[AngryOfTuebrook]

Angelo Mozilo - 25 People to Blame for the Financial Crisis - TIME

 

This provides an interesting little summary on all the many things that went tits up recently.

[Stu Monty]

We owe a lot of money, a lot. You cannot survive on debt, not when the banks and people who lend money are becoming increasingly nervous.

 

Our basic problem here is that we don't produce anything anymore, we import, and so our ability to battle back from debt is hampered to the point where we have no option other than to stop spending money until a point we can, if you like, start again in a more controlled way. Of course, it won't happen, because labour will probably get in on the back of attacking the Tories for the cuts, and then it'll have all have been for nothing. That's the issue and that's why it's so severe, because the terms of office are short, and so they're trying to cut as much as they can in a matter of 4 years, to get to a point where growth begins again, and they can then point to their measures having worked.

 

Labour will likely get back in and then pledge to spend a fuck ton of money on anything that Councils want.

 

I don't agree with the Tory decisions on expenditure mind, the high speed railway to cut down a 3 hour journey is a complete waste of billions. "Ooo, I need to be in Leeds by 11am....", yeah, the captains of industry need that high speed link to get work done, yeah.

 

Protecting defence budgets, also fucking shit and classic Tory. I bet we build the biggest warship the world has ever seen.

 

Not wanting to turn things political but doesn't this, from ConservativeHome yesterday sum up the situation better with regards to the battle to cut the debt:

 

"Our government added £120 billion to the national debt last year. It'll add another £120 billion this year and another £120 billion next. In what parallel universe does that add up to deficit reduction or fiscal responsibility?"

 

On the railway investment building things puts money in people's pockets, they then put money in other people's pockets, you also get them of unemployment benefits. It's pretty much economics 1.01 that you cannot aggressively cut your way out of a recession, isn't it?

 

I don't think it's about economics. It's about an ideology of how they want the country to be, and that is less government services and major functions done privately.

[Pureblood]

The Laffer curve. Something "oo" economics.