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 FINANCIAL MESS......Economics 101

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DA DOGG
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PostSubject: FINANCIAL MESS......Economics 101   Fri Oct 10, 2008 4:57 pm

PostPosted: Fri Oct 10, 2008 7:49 pm Post subject: GLOBAL FINANCIAL MESS!!! Economics 101 Reply with quote
Now, lets get something straight! I am not an authority on finance but common sense so please read this with a grain of salt.

I think it goes without saying that our world as we know it will never be the same in the next 6months. The very foundations of Capitalism is under intense threat of collapsing and the least said about investor confidence or the lack thereof and market volatility, the better.

I think we all agree that GREED, lack of oversight, deregulation and most importantly misplaced priorities of the Bush Administration are the cumulative culprits here.

This problem was largely set in motion by the Bush admin's preoccupation with an ill-advised war and the consequences of which caused severe oversight problems on the domestic economic front.

The economy was pretty stable before 911 and it rebounded shortly after. What happened was America became obsessed with the Iraq war and forgot all about the homefront. I could count on one hand the number of times this Administration mentioned the economy in their press releases the 4yrs directly following the 911 attacks. Yes the economy rebounded because of the resilience of the American people but guess what, somebody fell asleep at the switch. The best way to describe this is, is the cat and mouse analogy....u know what they say, when the cat is away, the mouse will come out and play.

Now whats the real real culprit? Real Estate, Real Estate, Rea Estate!!! Caution was thrown to the wind, greed set in, corruption reigned supreme, false hope and dreams were auctioned to the highest bidders and what happened? A once staple of financial and military superiority came crashing down because it has spent way more than it can afford. And whats most troubling is, this problem is from the bottom up. Now enough of the finger pointing......whats the way forward???

In my humble estimation, the bailout/rescue bill is a move in the right direction. Some may argue otherwise on the basis of the potential socialist state this threatens to create. I say, you have a point but inaction woulda been so worse, you woulda wish you were living in the former Soviet Union.

Whats happening is, there's still alot of cash in the system but there's a freeze as a result of the declining real estate values. Think about it, if banks finance a home worth 400k and find out 6months down the line that, that home's value has taken a 30% dip (which has been happening for the last 2yrs), dont you think they'll be gun shy the next time round??? Oh yeah, they will but the silver lining in all of this is, this is only temporary because of the bailout/rescue bill.

This is what the bill will do.......The Fed Reserve Bank will start operating as a commercial bank by giving loans to all who are qualified. What this will do is, it will stimulate the economy but more importantly it will create the necessary competition not to mention build CONFIDENCE between them and the banks. Now do you think these banks sitting on all that money will stay idle while somebody else makes all the money and the feds will make some money when they go into that sector simply because banking has and will always be a very profitable venture.

In short, this will create competition and viola........the problem will be solved. The only missing link now is getting investors to at least move from fear and anxiety to cautious optimism.

Also they need to curtail the unnecessary bail out of some of these firms because its becoming evidently clear that some of these folks are opting for bankruptcy in hopes of the government jumping in to bail them out with free money. Who doesnt want free money??? Its just bad news and bad news rocks the market!!!

In partial conclusion, this crisis is borne more out of fear than of fundamentals. The World needs to do a better job of calming the fears of their populace cos this really is much ado about nothing.

Copyrighted by Da Dogg!!!

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