Financial meltdown explained

Posted: Tue Sep 23, 2008 2:38 pm Post subject: Financial meltdown explained

This is one straightforward easy to digest explanation of the current financial situation in the US. It has an agenda of course, but I think the underlying facts are spot on.

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Today's banking crisis is the THIRD trillion dollar plus
US-caused financial meltdown in the last twenty years.

Each one of these crises came into being through the same basic mechanism...the fraudulent over-valuing of financial assets by Wall Street - with a "wink and a nod" (and sometimes a lot more) from the White House and Congress.

The fraudulently valued assets stimulate the economy, impart the illusion of health and then, inevitably, the fraud goes too far and the whole house of card comes painfully crashing back to earth.

The three trillion dollar plus frauds were:

Fraud #1: The so-called "Savings and Loan Crisis" of the late 80s

Fraud #2: The so-called "Tech Bubble" of the late 90s

Fraud #3: The so-called "Credit Crisis" of today

*** How the scam works

The mechanism of these frauds is simplicity itself...

...Take a shaky financial asset and blow up its value and then sell as much of it as you can.

In the "Savings and Loan Crisis," the instrument was junk bonds.

In the "Tech Bubble" it was Internet stocks.

In the "Credit Crisis" it was individual mortgages collected
into pools and then re-sold to investors.

In each case, normal, well established "bread and butter" financial principles were consciously thrown away by Wall Street
with no hint of protest from federal regulators.

***The "Savings and Loan Crisis" dissected

Junk bonds caused the Saving and Loan crisis which resulted in the US taking over the assets of hundreds of banks and selling them back over time to the marketplace at fire sale prices.

Junk bonds, which caused the "Savings and Loan Crisis" were shaky bonds that were pumped up by deliberate misrepresentation
and what I call "staged dealing."

Bonds get their value from two things: the amount of interest
they pay and how safe they are.

"Junk" bonds have to pay higher interest because they are less safe. Therefore, until the "Savings and Loan Crisis," savings and loan banks banks were not allowed by law to buy them and call them assets.

Reagan/Bush changed all this and then a group of Wall Street fraudsters used the new loophole to kick off an orgy of junk bond creation and junk bond selling to banks and insurance companies.

The crooks would deal the junk bonds back and forth amongst themselves thereby establishing their "value" and then they'd sell them to outsiders. The bonds then became "assets" which could be borrowed against
and leveraged to buy even more bonds.

When the bonds failed, the banks failed and in stepped the US government to "fix" the problem that it created at the cost
of at least one trillion dollars to US tax payers.

Deja vu, eh?

***The "Tech Bubble" dissected

The instrument of fraud in the "Tech Bubble" was Internet
stocks, start ups in particular.

A stock gets its value from the underlying company's sales, its growth and its overall prospects for the future.

Pre-tech bubble, companies used to have to prove themselves by being in
existence for several years before they could be sold on major exchanges. That standard was thrown away during the tech bubble.

To pump of their values, the companies engaged in"staged dealing" just like the junk bond crooks.

Company #1 would "sell" 20 million dollars in banner ads to Company #2 which would in turn "sell" 20 million in banner ads to Company #1.

In fact, nobody sold anybody anything. Company #2 ran ads for Company #1 and billed it for them. Company #1 ran ads for Company #2 and billed for an equal amount.

These should have been called media trades not sales, but Wall Street was happy to claim them as legitimate cash sales and then use the sales numbers to fraudulently value these companies - many of them totally worthless - in the hundreds of millions and sometimes even the billions.

***The "Credit Crisis" dissected

By now, you see how the scheme works.

It's not complicated at all.

You take near worthless pieces of paper (junk bonds, stock of start up Internet companies, etc.) and declare them to be good as gold.

Then you create as many junk bonds and Internet start up stocks as you get and sell them as fast as you can.

In the case of our current crisis, the instrument of fraud was so-called sub-
prime mortgages.

Previously, sub-prime mortgages had very little trading value. Only people in the sub-prime industry itself dealt in them and for good reason. They're tricky to value and packed with financial peril.

But Wall Street changed all that.

Wall Street said: "If we take LOTS of these mortgages and assemble them into large pools and then slice and dice the pools in various ways, we can sell the slices to banks and other investors as AAA paper."

It sounds crazy, doesn't it?

If the underlying pieces of paper are garbage, how does assembling a whole bunch of garbage into one place make it "better?"

It doesn't, of course, and this is a principle even a three year old child can
understand.

But greed and the need to pump up a shaky economy for propaganda purposes are two very strong motivators.

Banks created these mortgage pools, sold them to each other, and they by virtue of these "staged sales" declared them valuable.

Do you recognize the pattern now?

If you do, then you are now smarter than all the assembled j@ck@sses who dofinancial reporting because they apparently can't - or won't.

This is the THIRD trillion-dollar plus fraud driven financial meltdown in twenty years and apparently no one in the financial news media can see how it happened.
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Posted: Tue Sep 23, 2008 5:55 pm Post subject:

It makes me sick!

This crap needs to stop!

Let it crumble and rebuild it's self, that's the way it should be.
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Posted: Tue Sep 23, 2008 8:19 pm Post subject:

Congress demands that lending institutions provide loans to people who cannot possibly pay them back, under threat of prison for discrimination if they don't make the loan. Then act surprised and blame it on the private sector and capitalism when the chickens come home to roost. What is that old adage about the definition of insanity, "Continuing to do the same thing over and over again expecting a different result." Evil or Very Mad

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Despite all my rage I am still just a rat in a cage!

Posted: Tue Sep 23, 2008 9:19 pm Post subject:

I would love to just cut off the IRS completely and chose to use the gold standard for any of my finances, thus cutting off the fed 100%. Why can't I make that choice?

Tax money should have absolutely nothing to do with stocks, bonds, retirements or mortgages... basically nothing to do with other consumers bad choices, and corporations bad choices.

WTF happened to capitalism? Why can't these big-wigs fail anymore? Now more crooks are just going to profit on the image of rebuilding some infrastructure inside and out, while the dollar crumbles in value, and our paychecks are at a ratio that has been stuck for 20 years.

GREED is the friggin' root of all evil. Some people should not be allowed to use our tools to feed themselves with.

A warning to all, don't buy in to all this new stock trading crap and short term BS.

If you want to invest in something... find an every day product that you use and like. Wait for that companies stock to have a sale, and buy. Think long term.

401K. I am lucky that the company I work for matches 100% up to 4%, and then matches 50% for the other 2% making a complete 6%. Thats a 100% match for the first 4%. The last company I worked for only did 50% for the first 4%. With the stock market the way it is, my additions fell to a -20%. I just froze it, and plan to roll it over. But in just a small period of time, I lost 40% of my total investment. I throw 40% into international, and 60% into domestics.

For now look at money markets with guarantied positive interest. It's your only hope for now. And CD's maybe.

Posted: Tue Sep 23, 2008 9:29 pm Post subject:

ha fools you forget how easy it is to print more money!

uh that is a joke ...but you knew that right

Posted: Tue Sep 23, 2008 10:00 pm Post subject:

Posted: Wed Sep 24, 2008 1:39 am Post subject:

I've often considered counterfieters to be the dumbest of criminals... Here in the US, most of them print $50 and $100 bills... Some even print $20's... Those are rarely caught, although most places use the "magic pen" on $20's now days too, and sometimes even $10's... I often wondered how "profitable" it would be to print $1's... Granted, you can't buy the big ticket items with them... But how much money could you save if you never really paid for your fast food and convenience store purchases again... And most people never look at ones... The kids behind the counter at McDonalds have usually yelled "Who's next???" before they even have the bills stuffed in the drawer...

Anyhow, didn't mean this as an attempt to hijack this thread... Just one of the hundreds of random thoughts that go through my brain on a continuous basis...
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Kill 'em all and let God sort 'em out!

Posted: Wed Sep 24, 2008 9:38 am Post subject:

Hell, Morgoth, I'll tell you why these guys aren't allowed to fail - it has become just another cultural more for us. Listen to the radio any day of the week and you'll hear all the ads for companies that help people "avoid bankruptcy" by paying off their credit card debt for pennies on the dollar.

WTF!!! So let me get this straight, you can run up a debt by buying crap you can't really afford and then not pay that debt?!!! How about the company that provided you with the ability to buy all that crap? Well, guess what, we bail them out too. GAHHHHHHHHHH!!!!!

Beam me up, Scotty! Mad

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Despite all my rage I am still just a rat in a cage!

Posted: Wed Sep 24, 2008 11:10 am Post subject:

It's time for a Boston Tea Party!

Wait, I like my lemon tea.

I know, let's just drown all the politicians! Twisted Evil

We could pull out the US Constitution and start using it again.

That would be nice for a change. Wink

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Posted: Sat Sep 27, 2008 1:47 pm Post subject:

I got this from a recent E-mail. I didn't check the math, but still thought the idea was worth a good laugh.

To my fellow Americans......

I'm against the $85,000,000,000.00 bailout of AIG.

Instead, I'm in favor of giving $85,000,000,000 to America in
a We Deserve It Dividend.

To make the math simple, let's assume there are 200,000,000
bonafide U.S. Citizens 18+.

Our population is about 301,000,000 +/- counting every man, woman
and child. So 200,000,000 might be a fair stab at adults 18 and up..

So divide 200 million adults 18+ into $85 billon that equals $425,000.00.

My plan is to give $425,000 to every person 18+ as a
We Deserve It Dividend.

Of course, it would NOT be tax free.
So let's assume a tax rate of 30%.

Every individual 18+ has to pay $127,500.00 in taxes.
That sends $25,500,000,000 right back to Uncle Sam.

But it means that every adult 18+ has $297,500.00 in their pocket.
A husband and wif e has $595,000.00.

What would you do with $297,500.00 to $595,000.00 in your family?
Pay off your mortgage housing crisis solved.
Repay college loans what a great boost to new grads
Put away money for college it'll be there
Save in a bank create money to loan to entrepreneurs.
Buy a new car create jobs
Invest in the market capital drives growth
Pay for your parent's medical insurance health care improves
Enable Deadbeat Dads to come clean or else

Remember this is for every adult U S Citizen 18+ including the folks
who lost their jobs at Lehman Brothers and every other company
that is cutting back. And of course, for those serving in our Armed Forces.

If we're going to re-distribute wealth let's really do it...instead of trickling out
a puny $1000.00 ( "vote buy" ) economic incentive that is being proposed by one of our candidates for President.

If we're going to do an $85 billion bailout, le t 's bail out every adult U S Citizen 18+!

As for AIG liquidate it.
Sell off its parts.
Let American General go back to being American General.
Sell off the real estate.
Let the private sector bargain hunters cut it up and clean it up.

Here's my rationale. We deserve it and AIG doesn't.

Sure it's a crazy idea that can "never work."

But can you imagine the Coast-To-Coast Block Party!

How do you spell Economic Boom?

I trust my fellow adult Americans to know how to use the $85 Billion
We Deserve It Dividend more than I do the geniuses at AIG or in Washington DC.

And remember, this plan only really costs $59.5 Billion because $25.5 Billion is returned
instantly in taxes to Uncle Sam.
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Posted: Sat Sep 27, 2008 1:57 pm Post subject:

Maybe we need to go hunting for some pork:

http://www.foxnews.com/video2/video08.html?maven_referralObject=3115804&maven_referralPlaylistId=&sRevUrl=http://www.foxnews.com/
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