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IVNORD
Forum Senior Member
Joined: December 13 2006
Location: USA
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Points: 1191
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Topic: Bear Sterns collapsed Posted: March 16 2008 at 21:58 |
The # 5 investment bank has been taken over by JP MOrgan Chase at $2 a share. It was $90 just 3 weeks ago, $130 last October.
The consequences are hard to predict.
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rileydog22
Forum Senior Member
Joined: August 24 2005
Location: New Jersey
Status: Offline
Points: 8844
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Posted: March 16 2008 at 22:00 |
That whole thing was a complete disaster. It looks scarily like the events that led to the Great Depression.
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IVNORD
Forum Senior Member
Joined: December 13 2006
Location: USA
Status: Offline
Points: 1191
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Posted: March 16 2008 at 22:15 |
It's impossible to guess how many banks will follow. The Fed creates new liquidity out of thin air, and the dollar is being crushed because of that. We are facing hyperinflation of unprecedented proportions.
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rileydog22
Forum Senior Member
Joined: August 24 2005
Location: New Jersey
Status: Offline
Points: 8844
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Posted: March 16 2008 at 22:19 |
I'm no expert, but I'm not convinced that the Fed actually helps anyone by printing money and using that to try to stop the recession. It seems to me that all they can really do is hurt US interests in the international market.
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IVNORD
Forum Senior Member
Joined: December 13 2006
Location: USA
Status: Offline
Points: 1191
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Posted: March 16 2008 at 22:40 |
Printing money in a contracting economy is like pouring water into wine - you get more of it but it tastes like sh*t. That's probably what we'll get in the long run.
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Slartibartfast
Collaborator
Honorary Collaborator / In Memoriam
Joined: April 29 2006
Location: Atlantais
Status: Offline
Points: 29630
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Posted: March 17 2008 at 06:15 |
Don't you just love it when a company is "too big to fail" and we get stuck with the bill? Free market, my ass.
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Released date are often when it it impacted you but recorded dates are when it really happened...
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Padraic
Special Collaborator
Honorary Collaborator
Joined: February 16 2006
Location: Pennsylvania
Status: Offline
Points: 31169
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Posted: March 17 2008 at 12:45 |
Bernanke is a student of the Great Depression and is trying to apply what he learned of it to his current decisions - namely, the Fed making very aggressive moves to stop the bleeding. Only time will tell if his philosophy has merit.
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MikeEnRegalia
Special Collaborator
Honorary Collaborator
Joined: April 22 2005
Location: Sweden
Status: Offline
Points: 21817
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Posted: March 17 2008 at 12:48 |
We're not living in the 1920s/1930s ... so much has changed in this world, I think it's unlikely that models based on the big recession apply to our times.
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Padraic
Special Collaborator
Honorary Collaborator
Joined: February 16 2006
Location: Pennsylvania
Status: Offline
Points: 31169
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Posted: March 17 2008 at 13:05 |
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IVNORD
Forum Senior Member
Joined: December 13 2006
Location: USA
Status: Offline
Points: 1191
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Posted: March 17 2008 at 13:50 |
Slartibartfast wrote:
Don't you just love it when a company is "too big to fail" and we get stuck with the bill? Free market, my ass. |
The "too big to fail" policy is ok when conditional and applied selectively as it was with Continental Illinois in 84 and Chrysler before it. When the entire industry is bailed out, the ultimate outcome will not justify the means.
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IVNORD
Forum Senior Member
Joined: December 13 2006
Location: USA
Status: Offline
Points: 1191
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Posted: March 17 2008 at 13:58 |
NaturalScience wrote:
Bernanke is a student of the Great Depression and is trying to apply what he learned of it to his current decisions - namely, the Fed making very aggressive moves to stop the bleeding. Only time will tell if his philosophy has merit. |
Each and every aggressive move creates a bubble which the Fed fights with a new aggressive move. Meanwhile prices are moving up and you are told that inflation is under control. In addition to his studies of the Great Depression Bernanke should have taken a few classes on the Weimar Republic.
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Jim Garten
Special Collaborator
Retired Admin & Razor Guru
Joined: February 02 2004
Location: South England
Status: Offline
Points: 14693
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Posted: March 19 2008 at 08:27 |
MikeEnRegalia wrote:
We're not living in the 1920s/1930s ... so much has changed in this world, I think it's unlikely that models based on the big recession apply to our times. |
I agree - it's too simplistic to extrapolate "this happened then, so this could happen again now"; the current world economy is completely different now to the late 1920s.
I think we will see further failures to compare with Bear Sterns, both in the USA & the UK - a while ago in the UK we had a smaller scale (by comparison) collapse in Northern Rock; smaller scale, but same basic causality: sub-prime lending. Commonly blamed on the US economy, the UK are by no means guilt free - similar over-lending led to a housing market crash in the late 1980s, from which the market took nearly 5 years to recover. The problem we are currently facing is that lenders have become too complacent/blase in the last few years - I sincerely hope we will not see another housing crash, but only time will tell
Unsettling times, certainly, but no need (yet  ) to forecast market meltdown.
I hope.
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Jon Lord 1941 - 2012
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bhikkhu
Special Collaborator
Honorary Collaborator
Joined: April 06 2006
Location: AČ Michigan
Status: Offline
Points: 5109
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Posted: March 19 2008 at 12:50 |
What gets me is how no one will say that there is a recession. Face it, it's true. I have watched the value of my investment portfolio go down since last sumer. I think we've passed that six month downturn marker. Economies go through cycles. We've been through recessions before. We just have to ride it out.
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Finnforest
Special Collaborator
Honorary Collaborator
Joined: February 03 2007
Location: The Heartland
Status: Offline
Points: 17566
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Posted: March 19 2008 at 13:07 |
Jim Garten wrote:
MikeEnRegalia wrote:
We're not living in the 1920s/1930s ... so much has changed in this world, I think it's unlikely that models based on the big recession apply to our times. |
I agree - it's too simplistic to extrapolate "this happened then, so this could happen again now"; the current world economy is completely different now to the late 1920s.
I think we will see further failures to compare with Bear Sterns, both in the USA & the UK - a while ago in the UK we had a smaller scale (by comparison) collapse in Northern Rock; smaller scale, but same basic causality: sub-prime lending. Commonly blamed on the US economy, the UK are by no means guilt free - similar over-lending led to a housing market crash in the late 1980s, from which the market took nearly 5 years to recover. The problem we are currently facing is that lenders have become too complacent/blase in the last few years - I sincerely hope we will not see another housing crash, but only time will tell
Unsettling times, certainly, but no need (yet ) to forecast market meltdown.
I hope. |
True. And yet there is a saying, "those who ignore history are doomed to repeat it." I don't believe our coming depression will *look* like the one from the 30s, but it could still be as devastating. Our currency is dropping like a rock, the Prez keeps dumping billions into his war sewer, and the aging population will have astronomical medical cost needs. ON top of that, our citizens (in USA) are not as hardy and frugal as our grandparents. We're pretty spoiled. We are a people now who consider cell phones and cable TV as essential needs, not wants. My father was happy if they had shoes. I know people already who are pulling money out of stocks and taking some assets out of major banks. These are actions that would have been laughed at 6 months ago. My sense is that this is no joke, but I hope I'm wrong.
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progaeopteryx
Prog Reviewer
Joined: June 03 2005
Location: Refrigerator
Status: Offline
Points: 3613
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Posted: March 19 2008 at 19:06 |
bhikkhu wrote:
What gets me is how no one will say that there is a recession. Face it, it's true. I have watched the value of my investment portfolio go down since last sumer. I think we've passed that six month downturn marker. Economies go through cycles. We've been through recessions before. We just have to ride it out. |
I think the main reason no one says we are in a recession is because we're waiting for the National Bureau of Economic Research to announce it. They are the so-called official source on when and if we are in one. Their president Martin Feldstein has already made statements that we could be "facing a severe recession." According to NBER's web site it could take from 6 to 18 months to determine if we are "statistically" in a recession. I'm afraid I don't know why this takes as long as it does, but yes, from where I live and what I hear about other locations, it sure does feel like a recession. That's not to say that other parts of the country aren't doing well. I have my doubts that that is so, but I honestly don't know. I could be wrong. A recent CNN poll says that 3/4 of the people polled thought we were in one. Whether that means anything is arguable, but it does mean a good number of people are concerned and the economy is strongly affecting them in negative ways.
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IVNORD
Forum Senior Member
Joined: December 13 2006
Location: USA
Status: Offline
Points: 1191
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Posted: March 19 2008 at 21:12 |
Jim Garten wrote:
MikeEnRegalia wrote:
We're not living in the 1920s/1930s ... so much has changed in this world, I think it's unlikely that models based on the big recession apply to our times. |
I agree - it's too simplistic to extrapolate "this happened then, so this could happen again now"; the current world economy is completely different now to the late 1920s.
I think we will see further failures to compare with Bear Sterns, both in the USA & the UK - a while ago in the UK we had a smaller scale (by comparison) collapse in Northern Rock; smaller scale, but same basic causality: sub-prime lending. Commonly blamed on the US economy, the UK are by no means guilt free - similar over-lending led to a housing market crash in the late 1980s, from which the market took nearly 5 years to recover. The problem we are currently facing is that lenders have become too complacent/blase in the last few years - I sincerely hope we will not see another housing crash, but only time will tell  |
The housing market is tightly coupled with the demographics. There's a limited number of housing units people need for shelter (however big it may be). In 2006, about 25% of all new housing was owned by speculators and investors. THe former held it to flip for a quick profit, the latter to rent out. What will happen to all those units?
Jim Garten wrote:
Unsettling times, certainly, but no need (yet ) to forecast market meltdown.
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Probably a meltdown will be avoided at the expense of the middle class by ripping it off by means of huge inflation as the central banks will print money effectively decreasing the buying power of their respective currencies.
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IVNORD
Forum Senior Member
Joined: December 13 2006
Location: USA
Status: Offline
Points: 1191
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Posted: March 19 2008 at 21:36 |
bhikkhu wrote:
What gets me is how no one will say that there is a recession. Face it, it's true. I have watched the value of my investment portfolio go down since last sumer. I think we've passed that six month downturn marker. Economies go through cycles. We've been through recessions before. We just have to ride it out. |
The problem is that the Fed (and other central banks) has interferred with the natural process of economic cycles. Recessions are normal in a healthy economy as they take care of the excesses of over-production of the boom times. Trying to avoid one at all costs only makes it worse, and after years of creatin bubble after bubble in an attempt to stave it off, the critical mass has been accumulated. It seems that a recession may turn into a severe downturn. THey fight it by inflating assets and theoretically they may succeed, but your savings will be wiped out.
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IVNORD
Forum Senior Member
Joined: December 13 2006
Location: USA
Status: Offline
Points: 1191
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Posted: March 19 2008 at 21:38 |
Finnforest wrote:
I know people already who are pulling money out of stocks and taking some assets out of major banks. |
Just curious, what do those people do with the cash?
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Finnforest
Special Collaborator
Honorary Collaborator
Joined: February 03 2007
Location: The Heartland
Status: Offline
Points: 17566
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Posted: March 19 2008 at 21:53 |
If I knew I'd be out there digging with my shovel  Kidding aside, some of the younger folks moving assets out of stocks are either moving to lower paying but stable money market/CD investments, or simply using it to pay down their mortgage which gives a tangible return. The people I know who are actually removing cash from the bank....I have no idea where they're putting it. Hopefully they have a safe or something.
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rileydog22
Forum Senior Member
Joined: August 24 2005
Location: New Jersey
Status: Offline
Points: 8844
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Posted: March 19 2008 at 21:56 |
It's better to have it in a CD or even T-Bill, as either of those will most likely beat inflation for you. With the Fed dumping bills into the economy, the cash sitting in your safe is slowly but surely wasting away.
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