9/22 Roaring 20s --> Great Depression
Roaring Millenium --> Great Depression II
\_ does our state have a BUDGET yet?
More concerning is we are about to hand $700B to one person and our
Fed chief Ben Bernanke fully supports this idea--and if you Dems,
Republicans, and libertarians haven't figured out by now:
He who controls the money has the power.
\_ Oh, I get it! In our crisis, we're appointing a Dictator.
\_ but he knows much more about finances than you do and he wants
to help you
\_ Right after he helps himself and his former i-banking
buddies.
\_ but Ben Bernanke supports the plan, and he has a Ph.D.
in Economics from MIT, did his dissertation on the Great
Depression, got his B.S. in Economics from Harvard, was
class valedictorian and got the highest score on the SAT
in his state when he took it. He wrote three books on
macroeconomics! He chaired the Princeton Economics dept
for 7 years before joining the Fed!
\_ Obviously smart and probably knows much more about
economics than I do. Perhaps not very wise, though.
\_ the idea that turning ONE knob in a stereo
system to make it sound pleasing to everyone,
is ridiculous.
\_ huh?
\_ Hey, we could have had Harriet Miers.
\_ Should he have seen this coming? He sure didn't
seem to from his past comments. Not that I'm blaming
him per se, since this is really complicated and
unpredictable stuff, but I don't feel like any of
these guys are sure how this plan is really going
to turn out. So it's basically a $700 B hunch/prayer.
\_ "Large amounts of risk, particularly
credit risk, have become concentrated in
the hands of relatively few derivatives
dealers, who in addition trade
extensively with one other. The troubles
of one could quickly infect the others....
[leveraged] derivatives severely curtail
the ability of regulators to curb
leverage and generally get their arms
around the risk profiles of banks,
insurers and other financial
institutions. Similarly, even experienced
investors and analysts encounter major
problems in analyzing the financial
condition of firms that are heavily
involved with derivatives contracts. The
derivatives genie is now well out of the
bottle, and these instruments will almost
certainly multiply in variety and number
until some event makes their toxicity
clear. Central banks and governments have
so far found no effective way to control,
or even monitor, the risks posed by these
contracts. In my view, derivatives are
financial weapons of mass destruction,
carrying dangers that, while now latent,
are potentially lethal." --Warren
Buffett, 2002
[Yes, he should have seen it coming. -tom]
\_ Predictions are all fine and good, and someone
is bound to get it right, but I don't think
anyone really saw it coming to this extent.
\_ Buffett wasn't making a prediction;
he was describing a risk. A large
portion of his business is managing
risk, and he's very good at it. He
didn't say "in fall 2007, some
weird activity by hedge funds will
trigger a liquidity crisis which
will eventually cause multiple
major financial institutions to
fail during calendar 2008." He simply
pointed out that the proliferation of
derivitive contracts in a deregulated
financial market set up a situation where
numerous institutions were taking on
risks they could not measure, and
declaring assets they could not quantify,
and that it was likely that some trigger
event would cause massive problems for
the entire industry. And it's not like
there wasn't any warning; the LTCM bailout
was a foreshock that was pretty much
ignored. -tom
\_ He described a risk and predicted it
would cause pain in the industry. I'm
just saying no one really thought it
would cause this much pain. Anyway,
back to the real point -- if the guys
on top didn't clearly see this coming,
then they probably don't clearly see
a way out.
\_ Or more likely, they just didn't care,
since it's "not my problem."
\_ The Invisible Hand will take care
of it. |