Current Financial Mess 22

[cjd97]

I thought that a group of Engineers would be the perfect audiance to ask the question......Is this financial crisis being talked about on TV for real? What do you guys think?

A large part of me doesn't feel sorry for people who bit off more than they could chew with their mortgage. I also don't feel sorry for the banks who wrote the bad mortgage. I personally think we should let the banks fail, let the people lose their houses, and get back to the old times of actually sharing risk when lending/borrowing money, ie having 20% down to buy a home.

Kind of a side note, with everyone supposedly losing their homes and the banks not being able to liquedate them, where does the PMI insurance come into play? I would assume these folks are paying PMI if they are "subprime" loan canidates. Isn't PMI designed for situation such as this?

Just wondering your thoughts.

 

[IRstuff]

Of course, it's unreal. Buying $310B in assets for a piddly $2B is, by definition, unreal.

But go ask those let go from Lehman Brothers if it's unreal, and you'll get a radically different answer.


TTFN

FAQ731-376

 

[Unotec]

I found this article and thought it to be interesting

http://www.stockhouse.com/Blogs/ViewDetailedPost.aspx?p=82804

<<A good friend will bail you out of jail, but a true friend
will be sitting beside you saying ” Damn that was fun!” - Unknown>>

 

[BigInch]

How not to build an economy... On credit.

"Make everything as simple as possible, but not simpler." - Albert Einstein (1879-1955)
***************

http://virtualpipeline.spaces.live.com/

 

[evelrod]

Perhaps my view is too simplistic...You just cannot spend your way out of debt. Any correction is going to hurt. If not all of us, certainly most of us. Either through loss of income, higher taxes, greater inflation or, increased energy cost. No simple solution, at least not one that fits the current financial problems.

Rod

 

[MasterMaxter]

Maybe my views are because im young, but here’s my two cents.

I don’t think we are going to see the financial system crash everyone keeps talking about. Lets take the most stabile and required industry in the nation, power. Power is needed for everything and will always be in demand thanks to cities, drinking water demands, hospitals/military/government, and the rich needing to waste money amongst just a few. More personal uses are lighting, computers, to sewage/water treatment plants, factories, offices, etc. We live in the digital age.

In order to generate power, we need fuel, which must be gathered, processed, and transported. Fuel is useless without the generation equipment, so factories, workers, and more transportation are required for production. Not to mention, someone needs to build the transportation and service it as well. Support and repair personal will be a required for this equipment on the suppliers end. On the actual generation end, people will be required to maintain, watch, supervise, protect, and engineer new systems. The power has to be transmitted and blah blah… I’m sure you get the picture by now, but it’s a never ending web of interconnection and dependence.

In 1929, the power grid barely existed. Most people lived where they worked, and even more people bought goods locally as mass transportation didn’t exist for food or goods or services.

In today’s world, no one can produce the goods to do even simple things. There is no town blacksmith or trade routes to even make hammers, much less provide enough food and water for our population. (yes the world can support us, but it would take a gradual change to ween off of tap water simply because so many people live far away from clean water. If we lost the ability to tap wells and treat water, we would end up in civil war over the scare resources). People live so far away, that anyone with even a 30 minute commute by car would not be able to go to work . The great depression could happen in 1929, and people could survive because they didn’t live the styles we live today.

I think in today’s highly dependant and interconnected world, if one system came to a complete stop, we aren’t talking a great depression like scenario, we are talking apocalypse. That is exactly why the financial system will keep chugging along. I named one industry (albeit an important one) but this exercise could be done for several other vital industries. Times will get tight as the market adjusts itself, but I really do not believe the market will come down around us if the bailout doesn’t happen.

Sorry for the longer post, my lunch break got boring and had to rattle out these thoughts because everyone in the office is pretending their 401Ks arent being demolished.

 

[bvanhiel]

MasterMaxter,

Let me paraphrase what you wrote.

In 1929 a catastrophic failure of the financial system was merely inconvenient. Today the results of such a failure would be apocalyptic, with no one able to work or buy necessities and we'd all be living in a Mad Max dystopia. Therefore it can't happen today.

While I agree that I think this current mess can sort itself out without too much interference, your logic leaves a bit to be desired.

-b

 

[MasterMaxter]

That’s not at all what Im saying.

Im not an economy expert, but the market is not going to stall, simply because there are too many forces which make it impossible.

My point being, in 1929, we didn’t need china to make our hammers for us. In fact they were probably produced "locally". That’s not the case today, and the world market will be forced to keep moving because people need the essentials and they aren’t available locally, thus requiring the market. As I said, perhaps I am young and naive, but I don’t think a market stall is possible with how the world operates today.

 

[KENAT]

MasterMaxter

The transport system in the US was well developed by the time of the Great Depression.

The Emphasis was on rail roads not roads but none the less, the priniciple of mass production in one (or few) location(s) then distribution from there was well established.

This was part of the Industrial Revolution which as I recall had happened before 1929.

No China didn't make the Hammers, but they were quite likely made in a big dirty factory in a different states, not by your local blacksmith.

KENAT,

Have you reminded yourself of faq731-376 recently?

 

[DesignerGuy16]

Before there was "money" people traded in product and services to get the basic necessities of life.

Now we still operate under that principle, but "money" is the middle man means to the end. So as long as people have some "money" that is backed by product or services, supply and demand will keep the market afloat. Since we're constantly trading, buying, selling, the likelyhood that "money" will fail to the point where that trading stops is unlikely. People will always need those goods/services, and sometimes the only place to get them is another country, etc.

I don't feel bad for the financial industry, it should go down. Someone will fill the gap in it's place. Maybe they'll learn a lesson from it in the process.

James Spisich
Design Engineer, CSWP

 

[Unotec]

Bah, the more I read, the more confused I am. I've read a bunch of articles, most have been against the bail-out, and still doesn't make sense to me.
I guess that's why I love engineering. If it ain't working, beat it until it does or breaks and the you replace it.

<<A good friend will bail you out of jail, but a true friend
will be sitting beside you saying ” Damn that was fun!” - Unknown>>

 

[MasterMaxter]

Actually I just managed to discuss the entire issue with the accountant in the company, and again, found that my in-expierance was showing.

Ah, the joy of being young and stupid (and wrong).

 

[TheTick]

I'm not saying that I am an expert, but, over the last few months I've averaged well two hours per week (sometimes much more) studying (not just perusing) the situation. Self-interest, trying to keep my money safe, maybe even profit.

That is what it takes to really understand what is happening. It's not going to reveal itself in soundbites. I doubt that the majority of our congressman truly understand.

Money makes the world go 'round. Right now, the money isn't even going 'round. Left unmitigated, it will be a problem for all.

Word of the day:: "Credit Default Swap"
If you don't know what one is, then you are far from seeing.

 

[TDAA]

MasterMaxter,

You did link to one important industry, and there are many that will keep going off of that and other key industries and thier related support.

But here is the key: The current economy doesn't runn on a few key industries, it runs off of capitalism. Sure, the power is generated, and gives those workers funds to live off of, but they do not go out and blow it on junk made in China, get a new car, buy a new house, etc.

That is where this crunch will eventually lead, is the other consumer driven industries. There are a lot of people that make thier living off of them, that are likely to loosejobs, afford less, etc.

The idustry on the forefront of this issue, is also an example of a key industry that has had a slow down - the housing industry. Sure, it plugs along, and is still here, but there are a lot of people out of work, from the laborers building the homes to the engineers that design them. In my mind these people have lost the capitalistic "consumer " status.

No, the world will not end without a bailout.

Some bailout info for perspective:
The U.S. Federal Government collected $2,568 billion in fiscal year 2007, while spending $2,730 billion, generating a total deficit of $162 billion. This proposal asks for more than 25 percent of last year’s collections. This is more than the government spent on defense ($549 billion), Social Security ($581 billion), or Medicare and Medicaid ($561 billion) last year.

The latest U.S. Census information indicates there are 116 million households in the U.S. – given that information, the cost per household for this proposal equals approximately $6,000.

The legislation will increase the national debt to $11.3 trillion.

Personally, I like the fact that it was asked for to be used without oversight. :rolls eyes: How stupid do they think we are?

 

[civilperson]

There is no crisis, there is only hype and stupidity among the media. The lack of easy credit is a LIE. I can borrow with no notice on my credit cards and the commercial paper market is churning with transactions. Capital can be raised by stock offerings or bond sales as opposed to bank loans. The "Marked to market" rule says bonds that do not trade or can not trade are valued at zero. This is fiction and even defaulted bonds have value, (less than 100% or par, but still value). Right now I am buying CMO's and CDO's at bargain prices in the speculation that 90% of the morgages are not in default and the ones in default still have brick/mortar and land as backing.

 

[stanier]

If the US pulled out of Iraq they could fund the debt with the savings.

 

[KENAT]

stanier, although if done too quickly the likely increased unrest may have some unpleasent side effects.

KENAT,

Have you reminded yourself of faq731-376 recently?

 

[SomptingGuy]

stanier, a bit naive.

The army/navy/air force still costs unless inactive personnel are fired. The fact that they are firing live rounds overseas rather than blowing up bits of the US desert doesn't change the price.

Firing inactive personnel would have quite an effect on the economy.

- Steve

 

[TheTick]

Selling stock to raise capital works fine when your stock prices are not in the gutter. Most bank stocks have fallen below a point where it is not practical. Besides, no one is buying.

 

[vpl]

Hopefully all of you who are Americans have written to your Representative and Senators and asked them to support/reject the bill (depending on your viewpoint). Don't just waste time posting here, waste it by writing to the folks actually voting!

Patricia Lougheed

Please see FAQ731-376: Eng-Tips.com Forum Policies for tips on how to make the best use of the Eng-Tips Forums.

 

[swearingen]

Star for you, vpl...



If you "heard" it on the internet, it's guilty until proven innocent. - DCS