[Botany Bay]

I know what you are getting at, Horatio. But let me add a political perspective: People easily forget and barely remember anything that happened longer ago then two weeks. To change things an outrage can be a very healthy thing. To say the current economic crisis was caused by a misorganized system of incentives is putting the people asleep.

Sometimes one simply has to shout out loud to make people wake up. I think this crisis is such a moment. In the U.S., in Europe and here in Germany too.

Tell people the actions of speculants in this mortgage crisis may have been legal but wrong nontheless. Wrong, evil, bad, immoralic - fraud!

It isnt even an exageration. Its a healthy wake up call. If you let greedy people have it their way they will rip you off. You dont want to get ripped off? Then wake up and regulate the markets to prevent further fraud and cheating.

As simple as that.

PS: And by the way, by your logic the victims of fraud are to blame because they where to stupid. Fraud allways plays with the naivity and the greed of its victims. Like the old grandma, geting a phonecall that says she will win in a lottery if she buys a worthless carpet for a thousand bucks. Is she to balme for her naivity and her greed? Sure! But again, thats how fraud works. Thats why every society installs laws and regulations to prevent fraud. Without a healthy outrage nothing will change though.

[horatio]

I have to repeat that borrowers as well as lenders, banks as well as house buyers have believed that house prices would continue to rise. So even when the house owner defaults on his credit, the bank makes a gain. There is profitable business, so banks give loans to people who are not credit-worthy, but in a world with rising house prices, the bank always wins.
Now what about the house owner who got cheated in your opinion? He played this game as well, because buying an asset on pump which becomes more valuable in the future is a rational way of self-finance.
I don't see any immoral or evil about this behaviour by the way, that's how we all behave, we all want the job with the highest wage, the stock of the company with the highest profits.

Rather the main problem was the self-fulfilling prophecy of rising house prices which always leads to a bubble until believes are just too far away from fundamental values, then the bubble bursts. And most important, both parties, borrowers and lenders created the bubble, not merely the evil banks as you suggested. Even more important, rational people create such a irrational market behaviour or short, capitalism is inherently unstable!
No regulation can prevent this, unless it is a regulation which tries to change humans instead of changing incentives for a given human behaviour. I think the last century showed us what happened when someone tries to achieve the former ...

Concerning the poor souls who lost their houses and thus a large part of their wealth, better education and financial literacy are the means to help them. Or telling your grandma to not do any business at the phone, mine claims to be get pretty mad when someone bothers her on the phone

Concerning naive, the most naive people were the ones who bought the subprime securities with the same rating agency labeled risk as government bonds yet significantly higher yields. There is no free lunch, a higher yield is only possible if the asset is riskier. Some highly paid CEO should have smelled that foul smell and concluded that the rating agencies were wrong. Which is another problem, making rating agencies responsible if their judgement is wrong.
But please let's not play this old scapegoat game when there is general dissent about which institutions mainly caused this crisis, central banks, banks, regulation agencies, rating agencies ... or hedgefonds and other evil locusts

[Zardoz]

Wall Street Shuffle by 10CC

Do the wall street shuffle
Hear the money rustle
Watch the greenbacks tumble
Feel the sterling crumble
You need a yen to make a mark
If you wanna make money
You need the luck to make a buck
If you wanna be getty, rothschild
Youve gotta be cool on wall street
Youve gotta be cool on wall street
When your index is low
Dow jones aint got time for the bums
They wind up on skid row with holes in their pockets
They plead with you, buddy can you spare the dime
But you aint got the time
Doin the....
Doin the....
Oh, howard hughes
Did your money make you better?
Are you waiting for the hour
When you can screw me?
`cos youre big enough
To do the wall street shuffle
Let your money hustle
Bet youd sell your mother
You can buy another
Doin the....
Doin the....
You buy and sell
You wheel and deal
But youre living on instinct
You get a tip
You follow it
And you make a big killing
On wall street

[Botany Bay]

Originally Posted by horatio

I[...] Some highly paid CEO should have smelled that foul smell and concluded that the rating agencies were wrong. Which is another problem, making rating agencies responsible if their judgement is wrong.
But please let's not play this old scapegoat game when there is general dissent about which institutions mainly caused this crisis, central banks, banks, regulation agencies, rating agencies ... or hedgefonds and other evil locusts

I think we are both agreeing on the situation. I tried to express my reasons for using far harsher words on discribing this situation and I guess the reasons are clear. I want something to happen and I want it to happen now. You know how politicians are. They need a kick in the butt from time to time as everyone else, including myself. It forms the character.

When talking whom to blame and whom to blame most: Everybody in this ponzi scheme has his fair share of guilt. Thats why I want to see international regulations that forbid this kind of games.

Isnt it hillarious that ponzi schemes in Germany are considered fraud, but on Wall Street and the Dax in Frankfurt the very same game is called an investment?

Ponzi schemes are illegal in Germany. You know that, Horatio?

[horatio]

Originally Posted by Botany Bay

I think we are both agreeing on the situation. I tried to express my reasons for using far harsher words on discribing this situation and I guess the reasons are clear. I want something to happen and I want it to happen now. You know how politicians are. They need a kick in the butt from time to time as everyone else, including myself. It forms the character.

When talking whom to blame and whom to blame most: Everybody in this ponzi scheme has his fair share of guilt. Thats why I want to see international regulations that forbid this kind of games.

Isnt it hillarious that ponzi schemes in Germany are considered fraud, but on Wall Street and the Dax in Frankfurt the very same game is called an investment?

Ponzi schemes are illegal in Germany. You know that, Horatio?

They are? Why do we have a pay as you go pension system then? Can our generation sue the very first one who benefited yet did not pay anything? Time to write a letter to the BVG

But seriously, it is pretty hard to distinguish speculative and Ponzi financing, to use Minsky's terms, in reality. If you wanted to forbid them, you would have to analyse every credit contract and draw arbitrary line which is impossible. All I want is that banks have to underlie their laons with equity even when the convert them into bonds, sell and repurchase them. This hole in the rules is my humble opinion the main reason why so many loans were 'bondified' (which is no bad thing, because clumpy credit risks in a few banks can thus be spread on a wider base, which should make the financial system more robust).

Concerning the kick in the butt, nothing wrong about that, but media already do that and in a few weeks, no one will talk about it anymore. Let's call it fittingly a media-bubble.

[Botany Bay]

Originally Posted by horatio

They are? Why do we have a pay as you go pension system then? Can our generation sue the very first one who benefited yet did not pay anything? Time to write a letter to the BVG

[...]

Concerning the kick in the butt, nothing wrong about that, but media already do that and in a few weeks, no one will talk about it anymore. Let's call it fittingly a media-bubble.

Naw, dont get me started on the "generation treaty". Nazis screwed Europe up and the students of 68 had to pay their pensions. No wonder they revolted.

Wich reminds me there is a new movie about the Red Army Faction coming. That puts a completely new perspective on Baader and Enslin.

However, your remark about the media circus is true. And thats sad. There will be half hearted reforms and in a few years we will have the next crisis and the circus will start all over again. Thats why the people have to remember. You plus me makes two people. Not much, but a start nontheless.

[kevin]

Isn't that the basic problem though? As soon as the boom time comes back around (which it inevitably will in a few years), all the turmoil gets forgotten and it's back to game as usual?

[Zardoz]

Originally Posted by kevin

Isn't that the basic problem though? As soon as the boom time comes back around (which it inevitably will in a few years), all the turmoil gets forgotten and it's back to game as usual?

Yep....exactly!