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More Clarity

Because the current US economic problems have global implications, the BBC has The US sub-prime crisis in graphics, which is a decent, if simplified, explanation of what has been going on the US mortgage market, and why it’s a mess.

The Dow is down a couple of hundred points again today, and this thing is not even close to over. The worst is, indeed, yet to come, and a major British bank is up for sale, while a major German bank may soon be because they invested in the US mortgage bonds.

Frankly at this point I think the Republicans are hoping for a recession, as it is very possible that the mortgage gamblers may have ignited a total collapse and a Depression. Every time the government let’s these people off the leash they crap in middle of the living room. They can’t be trusted without regulation, because they will engage in this destructive behavior every time you leave them unattended. They don’t learn. They aren’t trainable. They need keepers.


1 The Culture Ghost { 11.26.07 at 9:00 pm }

Thank you for the primer-the BBC article and all its charts are very informative. Not being well versed in the science of economics, I am generally out of my element in a matter of a few paragraphs. I am somewhat grateful for the onset of this damned flu bug this evening as it prevents me from experiencing the dread and fear a “well” person would feel reading about this looming disaster.

2 Bryan { 11.26.07 at 9:54 pm }

These people keep building these puzzle palaces that they don’t understand to convince themselves that there is a free lunch. The Wall Street crowd are solidly in the middle of the group that can be fooled all of the time. They produce nothing and sell smoke.

After one of the big Dow drops when he was still alive, some financial reporter asked Sam Walton what it felt like to lose a billion dollars. He told the reporter that he didn’t lose anything, because that billion dollars didn’t really exist, it was just a guess on paper, and people who didn’t understand that wouldn’t last very long in a real business.

Wal-Mart once featured American-made products and made a lot of money on volume alone. After he died they became the blood-sucking institution they are today.

3 Badtux { 11.27.07 at 5:53 pm }

Bryan, Bryan, Bryan… there are two pieces to this puzzle that you are not putting together:

1. This is fostering a *gigantic* transfer of wealth from working people to the elite. First of all, homes owned by working people are being transferred to the elite. Secondly, the foreclosed/evicted people have to live somewhere, and where will that be? Either houses rented from the elite, or apartment complexes owned by the elite.

2. Furthermore, by taking some houses or even entire neighborhoods off the market, this raises the price of other houses still on the market, houses which the elite are now more likely to own since they foreclosed on the working people who once lived in those houses.

So who are the losers?

1. Working people, who lose all their assets, both their houses and future pension earnings due to the collapse of the bond market
2. Foreign investors, who have bought gigantic amounts of those mortgage-backed bonds.
3. People who owe money to *anybody* for *any* reason, because when the banks collapse it will cause Great Depression style deflation, which will in turn result in a massive transfer of wealth from those who owe money to those who are owed money.

It’s all just part and parcel of the elite’s plan to loot and gut the American working class. Which working class nowdays, BTW, includes you and me.

– Badtux the Economics Penguin

4 Bryan { 11.27.07 at 7:22 pm }

Badtux, there are Repubs in control – the wealth transfer from the poor to the rich is a given. It was probably Terry Pratchett who noted that criminals steal from the rich because only the government has managed to figure out how to steal from the poor.

The shift of which you speak can’t take place until zoning laws and building codes are altered, because the rents haven’t come down enough for those with jobs to afford them, at the same same time that housing prices are dropping like a rock. You must live in an area with too few houses, because we have too much stock here, due to the tourist trade. We have dozens of empty condos at the beach that haven’t been rented in a year, and certainly aren’t going to sell. I’ve watched one brand new house that has been on the market for almost two years with no nibbles.

People stopped holding cash a long time ago, and without cash, nothing is going to move.