WHAT DO THE FINANCIAL CRISES IN GREECE, PORTUGAL, SPAIN, IRELAND, BRITAIN AND THE USA ALL HAVE IN COMMON?
UNBRIDLED GOVERNMENT SPENDING AND DEBT AND STATIST POLICIES WHICH PERVERTED THE FREE MARKET.
NEITHER GREECE, PORTUGAL, SPAIN, IRELAND, OR BRITAIN HAD EIGHT YEARS OF BUSH POLICIES; THE GOP DID NOT DRIVE THEM INTO A DITCH.
THEY WERE DRIVEN INTO THE DITCH BY UNBRIDLED GOVERNMENT SPENDING AND INTERFERENCE WITH THE FREE MARKET.
IN THE USA IT PRIMARILY TOOK THE FORM OF FANNIE MAE AND FREDDIE MAC AND THE CRA.
THE PROBLEM ISN'T AND WASN'T WALL STREET OR GREED.
THE PROBLEM IS AND REMAINS BIG GOVERNMENT.
IOW: SOCIALISM.
THE ANSWER ISN'T MORE DEBT.
IT'S AUSTERITY. AND LOWER TAXES.
THE USA FEDERAL GOVERNMENT SET A RECORD IN RECEIPTS WITH THE CURRENT TAX RATES. IN 2007.
NOW - WITH THE SAME CURRENT TAX RATES, THE USA FEDERAL GOVERNMENT IS SETTING RECORD DEFICITS.
WHY? WHAT CHANGED?
THE ECONOMY. THE ECONOMY SHRANK.
THE SOLUTION ISN'T RAISING TAXES. NOT FOR ANYONE.
THE ANSWER IS MORE GROWTH.
AND RAISING TAXES WON'T LEAD TO MORE GROWTH.
IT'S THAT SIMPLE.
ANY AND ALL POLITICIANS WHO FAVOR RAISING ANY TAXES SHOULD BE THROWN OUT OF OFFICE. AND UNTIL THEY ARE, THEY SHOULD BE IGNORED.
DEDICATED TO EXPOSING DISINFORMATION AND PROPAGANDA AND TO PROMOTING UNIVERSAL HUMAN RIGHTS - WITH SHARP ANALYSIS AND BLUNT COMMENTARY. NO ADS. NO TIP-JAR. JUST THE TRUTH.
2 comments:
greed is a minor factor but does come into play.
It led investment banks to buy big into mortgage backed securities without due dilligence when it came to analysing their true stability and value.
But there were other factors involved there too, mostly the extremely complex nature of these financial instruments which even those who created them didn't fully comprehend, and the mistaken idea that the housing bubble was no bubble but a stable state caused by an eternally growing population needing an eternally fixed amount of housing divided between them and thus be willing to pay ever higher prices into eternity.
Having worked on data analysis and presentation of some mortgage backed instruments, I've seen firsthand the ignorance about them among the very people preparing the analyses on which trades in them were based.
I'm still under NDAs so can't comment on all the details, but let's just leave it at that we (who were computer scientists with degree in things like mathematics and physics, not finance) found glaring errors in the math and statistics used to analyse the data and make predictions about future developments in risk and value, predictions that because of those errors more often than not were completely unreliable even if the market hadn't rather suddenly collapsed through to forces outside the market itself.
We didn't however get involved until after the collapse was already inevitable.
And it might never have happened (or certainly not at the speed it did) had not in 2006/2007 the trading in these instruments become nearly fully automated (and thus possible at the same speed as trading in other financial instruments like stocks and bonds).
Before that time, all or most trade in mortgage backed securities had been performed either in person or over the phone, with individual trades being reported to the markets at the end of each day only. From 2007 however it was possible to do the same through trading applications, enabling trading volume in mortgage backed securities to explode, and allowing many more companies and people, most with not a clue about what they were trading in, to become involved in what at least the early adopters understood to a degree were high risk investments.
A CDS by its very nature is a high risk after all, but most people never realised that because they never read up on what it actually is, an insurance policy against the risk of a lender defaulting, the price of the policy being (in theory at least) directly proportional to the risk of defaulting happening.
FANNIE AND FREDDIE WARPED THE MARKET BY IMPLICITLY GIVING ALL THE LOANS AND THEIR DERIVATIVES A GOV GUARANTEE.
THIS DEGRADED THE MORAL HAZARD.
Post a Comment