The Housing Bubble

[trivas7]

An asset bubble exists when asset price inflation rises beyond what incomes can sustain. We are now going through the largest financial bubble in all of history, and it will probably be the most destructive. :(

http://www.chrismartenson.com/crash-course/chapter-15-bubbles

[Bud Struggle]

It has little to do with the housing bubble. I has to do with gambling on mortage derivatives and credit swaps. The housing bubble was just what the people bet on--the real problem is that the investment banks don't have the money to pay off their bad debts.

[TheCultofAbeLincoln]

It has little to do with the housing bubble. I has to do with gambling on mortage derivatives and credit swaps. The housing bubble was just what the people bet on--the real problem is that the investment banks don't have the money to pay off their bad debts.

Agreed.

Let me ask Tom, do you agree with the government bailing out the bad debts of thse banks? I think it's a helluva lot better than at least one alternative, in Japan when they simply pretended all the bad debts were behind them for years and refused tackle the issue...

[Bud Struggle]

Agreed.

Let me ask Tom, do you agree with the government bailing out the bad debts of thse banks? I think it's a helluva lot better than at least one alternative, in Japan when they simply pretended all the bad debts were behind them for years and refused tackle the issue...

A couple of things are at stake here. Bets were made, companies like AGI had to be bailed out from their debts--their debts had to be paid to somebody--and there are people that made HUGE sums of money on this crisis. The hedge funds that bet that people wouldn't pay off their mortages--made fortunes and that is where lots of this bail out is going. Why? To show the world that America pays its debts.

I'm kind of thinking the hedge fund managers kind of knew how this would all play down. I sort of did myself and maybe so did a lot of other people in the real estate business. If you turned on your car radio last year and heard all the mortage ads saying: "buy a house no money down, no worries about bad credit...etc." You had to know there was something wrong--business just doesn't run on bad credit. I wasn't smart enough to think to buy credit default swaps :rolleyes: but there were some guys in the market that were. So the money for the bailout is going to a bunch of very rich guys.

The hedge fund managers don't need to money, but if they were defaulted on we couldn't trust the financial institutions--and the entire Capitalist system is based on trust. Personally, I am against the bailouts as I am against credit markets in general. Most business are drawn out too far in their need to pay off creditors and still make a profit so they become rapacious and preditory. When business are ruled by their lines of credit they become ruthless and that makes for bad Capitalism.

I would have rather the system take a hit (it's going to get that hit sooner or later) and see businesses straighten themselves out and ruin themselves on what they earn rather than what they could borrow--but I guess it would have meant a world depression and millions (more) starving children, and it's hard to be gung ho for that.

Difficult issue.