Red Shield
Global Domination
Lol. We're in 3 bubbles and one of them is the same housing crisis from 2008
Folk thinking they fixed shyt with that bailout.. nah.. only delayed and made the storm worse.
A decade after the 2008 financial crisis: The lingering effects
- Thread starter FAH1223
- Start date
Folk thinking they fixed shyt with that bailout.. nah.. only delayed and made the storm worse.
The “Next” Financial CrisisLol. We're in 3 bubbles and one of them is the same housing crisis from 2008
Paul Sliker: So, Michael, over the past few months the IMF has been sending warning signals about the state of the global economy. There are a bunch of different macroeconomic developments that signal we could be entering into another crisis or recession in the near future. One of those elements is the yield curve, which shows the difference between short-term and long-term borrowing rates. Investors and financial pundits of all sorts are concerned about this, because since 1950 every time the yield curve has flattened, the economy has tanked shortly thereafter.
Can you explain what the yield curve signifies, and if all these signals I just mentioned are forecasting another economic crisis?
Michael Hudson: Normally, borrowers have to pay only a low rate of interest for a short-term loan. If you take a longer-term loan, you have to pay a higher rate. The longest term loans are for mortgages, which have the highest rate. Even for large corporations, the longer you borrow – that is, the later you repay – the pretense is that the risk is much higher. Therefore, you have to pay a higher rate on the pretense that the interest-rate premium is compensation for risk. Banks and the wealthy get to borrow at lower rates.
Right now what’s happened is that the short-term rates you can get by putting your money in Treasury bills or other short-term instruments are even higher than the long-term rates. That’s historically unnatural. But it’s not really unnatural at all when you look at what the economy is doing.
You said that we’re entering into a recession. That’s just the flat wrong statement. The economy’s been in a recession ever since 2008, as a result of what President Obama did by bailing out the banks and not the economy at large.
Since 2008, people talk about “look at how that GDP is growing.” Especially in the last few quarters, you have the media saying look, “we’ve recovered. GDP is up.” But if you look at what they count as GDP, you find a primer on how to lie with statistics.
The largest element of fakery is a category that is imputed – that is, made up – for rising rents that homeowners would have to pay if they had to rent their houses from themselves. That’s about 6 percent of GDP right there. Right now, as a result of the 10 million foreclosures that Obama imposed on the economy by not writing down the junk mortgage debts to realistic values, companies like Blackstone have come in and bought up many of the properties that were forfeited. So now there are fewer homes that are available to buy. Rents are going up all over the country. Homeownership has dropped by abut 10 percent since 2008, and that means more people have to rent. When more people have to rent, the rents go up. And when rents go up, people lucky enough to have kept their homes report these rising rental values to the GDP statisticians.
If I had to pay rent for the house that I have, could charge as much money as renters down the street have to pay – for instance, for houses that were bought out by Blackstone. Rents are going up and up. This actually is a rise in overhead, but it’s counted as rising GDP. That confuses income and output with overhead costs.
The other great jump in GDP has been people paying more money to the banks as penalties and fees for arrears on student loans and mortgage loans, credit card loans and automobile loans. When they fall into arrears, the banks get to add a penalty charge. The credit-card companies make more money on arrears than they do on interest charges. This is counted as providing a “financial service,” defined as the amount of revenue banks make over and above their borrowing charges.
The statistical pretense is that they’re taking the risk on making loans to debtors that are going bad. They’re cleaning up on profits on these bad loans, because the government has guaranteed the student loans including the higher penalty charges. They’ve guaranteed the mortgages loans made by the FHA – Fannie Mae and the other groups – that the banks are getting penalty charges on. So what’s reported is that GDP growth is actually more and more people in trouble, along with rising housing costs. What’s good for the GDP here is awful for the economy at large! This is bad news, not good news.
As a result of this economic squeeze, investors see that the economy is not growing. So they’re bailing out. They’re taking their money and running.
If you’re taking your money out of bonds and out of the stock market because you worry about shrinking markets, lower profits and defaults, where are you going to put it? There’s only one safe place to put your money: short-term treasuries. You don’t want to buy a long-term Treasury bond, because if the interest rates go up then the bond price falls. So you want buy short-term Treasury bonds. The demand for this is so great that Bogle’s Vanguard fund management company will only let small investors buy ten thousand dollars worth at a time for their 401K funds.
The reason small to large investors are buying short term treasuries is to park their money safely. There’s nowhere else to put it in the real economy, because the real economy isn’t growing.
What has grown is debt. It’s grown larger and larger. Investors are taking their money out of state and local bonds because state and local budgets are broke as a result of pension commitments. Politicians have cut taxes in order to get elected, so they don’t have enough money to keep up with the pension fund contributions that they’re supposed to make.
This means that the likelihood of a break in the chain of payments is rising. In the United States, commercial property rents are in trouble. We’ve discussed that before on this show. As the economy shrinks, stores are closing down. That means that the owners who own commercial mortgages are falling behind, and arrears are rising.
Also threatening is what Trump is doing. If his protectionist policies interrupt trade, you’re going to see companies being squeezed. They’re not going to make the export sales they expected, and will pay more for imports.
Finally, banks are having problems of they hold Italian government bonds. Germany is unwilling to use European funds to bail them out. Most investors expect Italy to do exit the euro in the next three years or so. It looks like we’re entering a period of anarchy, so of course people are parking their money in the short term. That means that they’re not putting it into the economy. No wonder the economy isn’t growing.
Sticky this thread. 10 year anniversary. We made it .
Dude has something against Obama lol. Unfollwed him a long time ago.
BushidoBrown
Superstar
subs ju hurrrrd
Then add the student loans on top of all this. How are you going to let the bankers gamble away the economy, then make students trying to enter the job market who did everything right in school pay back their loans when there were no jobs? This generation deserved a New Deal. All those fines should have went to this.THERE WERE NO JOBS FOR THE CLASS OF ’08
Krystle Champagne-Norwood
Howard University / B.A., Radio, Television, and Film
“I was taking any kind of gig I could get so that I could stay in the industry and feel like my degree wasn’t a waste. My husband and I talk about how we know what it’s like to be broke, and we don’t want to go back that way. You could feel the desperation at the time.”
Josh Troutman
Liberty University / B.S., business with a finance specialization
“When I was in college, I wanted to do investment banking. I worked really hard but couldn’t quite get there, so I went to B-school in part to ‘catch up’ to where I’d be had I not dealt with the recession. If the recession never really happened, where would I actually be?”
Jocelyn Galloway
UCSD / B.S., molecular biology; B.A., economics
“I ended up going to law school. I think I’ve found a career path that I’m passionate about. That being said, it did come at a cost: A good portion of my paycheck goes toward paying student loans, and it’ll be like that for quite some time.”
Kelly Howard
Iowa State / B.A., Journalism and Mass Communications
“After I graduated I was working at a local grocery store during the week. People I went to school with, they would come through and be in my line, and they would be like, ‘Didn’t you graduate?’ It was a very humbling time in my life.”
Jordon Derr
Florida A&M / B.S., graphic design
“I had an internship. After it ended, I went around looking for work. But people who had the experience were dropping their rates. They were charging the same amount that I was, fresh out of school, but with more experience. We were, like, cannibalizing ourselves.”
As told to Rachel Bashein
Lol, he is very and perhaps overly critical of Obama. I think it stems from the fact he thought Obama would have been way tougher on the banks (many of us here thought that too) and that the foreclosure crisis would have been handled way better.
On the sum of policy its clear that the creditors got bailed out. The debtors didn't.
My parents bought a house in 2003... it was an adjustable rate mortgaged... in 2007-08, shid spiked up (thanks Wells Fargo), they re-financed which took months and then Obama's program came in but the issue was that mortgages weren't written down... people were still underwater.
In 2012-13, I was 23 years old and had to take the lead in short-selling the house since my dad went to Somalia to start his business with my grandfather's property he left behind. Me and my mom got an agent and I had to do all this damn paper work. It was an eye-opening experience.
Last 5 years, me and my fam have been renting.
So many people in this situation... its unbelievable.
intra vires
Glory to Michigan
Subbed, I'll be back for it later I have to go to bed.
NZA
LOL
even i must admit that i bought the lie that the bail out was a necessary evil 
there will always be winners and losers.
the more knowledge you have about how the game is played the harder it is for you to lose. the scum bags created the game.It'd be nice if the losers were the scum bags who cause the crises though