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Tilted Cat Head
Administrator
Location: Manhattan, NY
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Quote:
Originally Posted by Tully Mars
So you think the date a bank fails is the meaningful date? All the banks that failed were in trouble long before they failed.
You can look at it anyway you want. I think last summer/fall is when the shit hit the fan. That shit had been piling up for years, IMO largely due to dereg. I know my 401K and other holdings lost about 43% between July and late Oct. In the spring I was sailboat shopping, by winter I was wondering if selling my truck might not be a bad idea.
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That underlines exactly the point I'm stating and why I don't think that we're in a better position now.
The big banks that were too big to fail, some of them got bigger. Why is that? How is that possible? If we bailed them out so that they would not fail how did we provide any safety net to make sure that it can't fail? Stress tests are just as a reasonable a solution to making sure they cannot fail as Sarbanes-Oxley is to making sure that companies don't cheat in their processes.
---------- Post added at 08:47 AM ---------- Previous post was at 08:42 AM ----------
Quote:
Originally Posted by Baraka_Guru
The thing to note is that in the fallout of the economic shitstorm of last year, banks are generally going to be more cautious when it comes to lending. And if new regulatory practices come into play (as they should), then that's something more stabilizing. Looking at the 3.5% increase in GDP, much of that is consumer spending, auto sales, and home building. How much of it was done on credit? I don't know, but I'm guessing the credit used wasn't the toxic kind we've come to know about all too well.
There will likely be a mortgage aftershock. But there are still some things that need to take their toll before the recession will finally end. No one in their right mind is confidently declaring the recession behind us, but there are signs here and there that a) the worst is probably behind us, and b) there are signs of growth in certain meaningful areas. The economic hemorrhaging will eventually slow and then stop before things get back on track to something sustainable.
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BG, people were using their housing equity like it was an ATM, even if they had not bought toxic mortgages. People actually have to work to earn money and have some disposable income to dispose in order to stimulate the economy. Yet they need to also save money for a rainy day. Saving money puts money into the banks. Banks are then building up resources and able to give out loans backed by real cash.
Did suddenly people get raises? I didn't get one last year. This year I got one, 1.25% which with the increase in property taxes, water, and other goods and services, I'll see none of that increase. But I was "lucky" I got something, which is 1.25% more money going someplace. I don't believe others are able to spend money.
So how could the economy be better if the problems haven't been solved?
What or where is the money coming from? It's not credit, it's not their houses... people didn't magically start making money... so what is it?
Consumer credit falls for 8th month in record streak - Nov. 6, 2009
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Consumer credit falls for 8th month
Longest streak of declines since Federal Reserve started keeping records 56 years ago.
By Julianne Pepitone, CNNMoney.com staff reporter
Last Updated: November 6, 2009: 3:56 PM ET
NEW YORK (CNNMoney.com) -- Consumer credit fell in September for the eighth straight month, the longest streak of declines since the Federal Reserve started keeping records in 1943.
Total consumer borrowing fell a seasonally adjusted $14.8 billion, or 7.2%, to $2.456 trillion in September, according to the Federal Reserve.
Economists predicted a decline in total borrowing of $10 billion in September, according to a consensus survey from Briefing.com. August saw a downwardly revised $9.9 billion decrease in total consumer borrowing.
September's total borrowing is down 7.3% from last year. Last August, consumer credit contracted for the first time since January 1998.
"These are not minor declines we've seen over the past few months," said Sean Maher, economist at Moody's Economy.com. "Credit is falling at a fairly rapid pace."
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Karen Dynan testified before the Joint Economic Committee at the end of October. The link is a transcript of what she testified.
Quote:
Part of this increase in precautionary saving may occur as a reduction in borrowing. Households have just had a vivid lesson about the risks associated with high leverage, and many will be more reluctant to take on large amounts of debt to fund spending.
Households’ borrowing to finance consumption is also likely to be crimped by a more restrictive supply of credit. Since the financial crisis and economic downturn began, lenders have sharply reduced their willingness to extend credit to households. With unemployment rates remaining very high in coming quarters, lenders are likely to continue to see heightened risk in lending to households for some time to come. Further, the supply of credit seems unlikely to return to the levels seen earlier this decade even after the economy returns to full strength, as lenders, like households, have probably marked up their expectations of economic volatility over the long run. Regulatory actions should serve to reinforce the greater restrictiveness of lenders; indeed, the Federal Reserve and Congress have already taken steps to restrict some types of mortgage lending and certain practices among credit card lenders.
All told, I expect that consumer spending will move up at a modest pace in coming quarters because of weak income growth as well as higher saving and lower borrowing. Although this outlook contributes importantly to my expectation of a relatively weak overall recovery, I should note that higher household saving and lower household borrowing have the important positive aspect of leaving the economy in a more solid and more sustainable position. At the household level, the restructuring of balance sheets will leave households less vulnerable to disruptions to their incomes and to unexpected spending needs. At the national level, higher saving will help to correct what many analysts believe are unsustainable imbalances in trade and capital flows between countries.
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Massive government spending is behind the GDP upswing, consumers aren’t exactly in a spending money since many don't have it, given that unemployment rate this week hit 10.2 percent and raises are close to flat.
So let me try to circle back to Obama, $159 billion in grants and loans made so far under the economic stimulus package has created or saved about 640,000 jobs. Created or saved? really? Is that the best they can say? ADDING saved to it? Because in my opinion adding the word SAVED allows you to pad the number as opposed to saying CREATED. So how many were saved and how many were actually created? You can't truly believe that saying "saved" means they really saved it does it? Because it's like anything in life, it either happened or it didn't. I can't say I saved $50,000 yesterday because I didn't buy a BMW 5 Series any more than I can say that the jobs at work were saved because they didn't lay more people off. Supposedly the stimulus package has some generous school incentives so schools are buying our products. Besides being unsustainable, did it really save some of our workforce? How or when can we know for sure?
If we're expecting transparency, they why pad it? Why not live with the number that it is?
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