I read a lot of buzz from my well educated friends calling for the heads of Wall Street bankers. While I am not a big fan of the Street, the US consumer helped create this mess and really you should be calling for the head of your complacent local senator who let the economy get to this state.
Greed is not limited to Wall Street, while they have it mastered, the greed of American consumers contributed to this mess. The “toxic assets” are mortgages that over leveraged consumers can not pay back. Blaming Wall Street is like blaming the drug dealer for your drug problem (you know who you are)
Remember a few years ago when everyone became a real estate mogul. People were euphoric and borrowed against their new house "wealth" to buy a new Hummer or trip to France.
Yeah well, they should have read the fine print, done some math and kept a rainy day fund. Party is now over. OK the bankers put lipstick on pigs (sorry too easy) and injected too much easy money into the market, but hello they need suckers to sell this easy money to. (you know who you are)
This current bail out package provides a distraction from the real economic crimes that the government let go on for too long.
First: A never ending war in Iraq whose costs are now close to $600 billion, sorry no assets from that investment, not even toxic ones.
Second: The
price of oil started to spike when US troops moved into Iraq. This brought in speculative investors who can buy oil futures on loan with only 10% down. The more prices moved up the more debt investors moved in and it accelerated the increase in the price of oil.
Results, debt spending reduces the credit worthiness of the dollar, so the cost of all imports, including oil, goes up. Almost everything you consume is somehow touched by oil, so the costs of food, clothes, heat, paint, etc, all up in a big way.
Now that all of peoples daily costs have gone up, they can not pay the mortgage payments they could barely afford three years ago....the whole thing unwinds....you get the picture, toxic.
Now the banks are in a mess and need help. For every dollar you put into a bank, they will loan or invest approximately $.90 and keep $.10 in reserve. In a simple case the $.90 is secured by an asset like real estate. If the underlying asset value drops to $.70 the “liquid” value of YOUR dollar is now the $.10 in reserve plus the $.70 value of the loan, so in total $.80.
But they still owe you $1.00. So where do they get the $.20 which evaporated, especially if all their assets are dropping at the same time.....loans, stocks, bonds....oh shit, ouch?
That is where the Federal Reserve comes in to inject some cash and make sure you can get that $1 to buy some bread. They also need to have enough deposits to give you a loan to buy a new SUV to pick up the bread and get yourself to work. If you can not buy a new car, the people at Chevy and the drive through Starbucks don't get paid. They will not click on the internet ad you created...you get it..we are all brothers and sisters.
Sooooo the real economic criminals are the government who did not find a solution to the war and allowed also investors to speculate in commodities with bank debt. This drove costs of living so people could no longer pay their mortage....now the whole thing melted down. Now politicians step in as heroes and blame Wall Street...politicians....blech.
What now: I recommend support the proposed $700 billion bail out....or the next time you go to the ATM it may say "sorry try back later when congress is done bickering"
Or the Fed Reserve will print a lot more paper money. Then gas, food and Barbie dolls will skyrocket in price, this hyperinflation WILL destroy your savings, if you have any.
But wait, if the fed steps in, those will be your assets. If the government takes over those mortgages, they are the taxpayers property....aka you.
Write your local senator, congressman, state politician and make sure they put those assets (houses) to work.
Maybe subsidize housing for math and economics teachers? Free housing for nurses and other public workers? If these houses sit vacant and fall apart, I do not think the value will go up, then we will pay again in a few more years.
Also, ask them to put some minimum capital requirements on those who want to buy a house. The goverment should help first time and low income buyers keep it out of the hands of the sharks.
Finally regulate, regulate, regulate to get rid of the speculative investors of commodities. Commodities should be limited to the companies who are going to actually use the products and have the cash to back it up.
Peace in the Middle East….umm yeah, let’s get out of there as soon as practical.
