Understanding the current economic situation - Toyota Yaris Forums

eTiMaGo · 02-21-2009, 05:54 AM

I'll admit, I am really overwhelmed by modern financial practices, and can't really explain why the whole world is now in the mess it's in (apart from greed, really)... But this information video explains it pretty well! It's in two parts:

http://www.youtube.com/watch?v=Q0zEXdDO5JU

http://www.youtube.com/watch?v=iYhDkZjKBEw

spooked · 02-21-2009, 06:14 AM

That has to be the nicest summary of the current situation I have seen. I have read about it in the paper and seen it on the news and I have a good idea about why it is going on but that sums it up pretty tidily. Nice post!

vios7 · 02-21-2009, 09:13 AM

That explain well..great graphics.
but not sure the facts is true or not.. i look some of comment most are disagree.

*tk-421* · 02-21-2009, 11:16 AM

Nice video... It does make things a bit easier to understand.
It's amazing how greedy bastards will lose out every time in the end, yet more greedy bastards keep popping up all over the place.
Darwinism at work?

bobselectric · 02-21-2009, 01:12 PM

There seems to be no mention of ACORN and their suit against the banking industry to force the banks to make loans to risky borrowers. If you flip burgers for 10 bucks an hour, you can't pay off a 100,000 dollar mortgage at a rate of 5-6% and live any kind of decent lifestyle. If you get an ARM at 1.5% for a short specified amount, with yearly escalations until the rate tops at 10-12%, you shouldn't borrow against future promotions ( I.E. asst. manager or manager) that may not come to fruition at all.
ARMs are a tool for investors, who would buy investment property, improve (or not) and flip for a profit. They are not meant to be the credit solution for well meaning folks who would just as soon get behind in their payments in the event of calamity (lack of promotion, loss of job, illness, divorce, etc.)
there are a lot of greedy bankers, investors, and common people who shoulder the blame; I was always taught that if it seems to good to be true, it probably is.

jkuchta · 02-21-2009, 01:52 PM

Bob, the only thing can find about ACORN and a suit againts lenders is a Class Action case they were bringing/brought against the lenders for predatory lending practices. I'd love to find out more about the suit you're talking about. Could you send me a link?

As far as the video, there were only a couple problems I had with it:

1) A sub-prime loan is not a loan made to sub-prime people, but rather a loan whose interest rate (at least for the first few months/years) is less than the prime rate. This means that for the time that the interest rate is sub-prime, the lender is actually loosing money (if they're not leveraged or otherwise recouping that money).
As Bob pointed out, sub-primes (ARM's) are really for investors for the short term, not the average joe for 30 years.

2) The video did not deal with the "slices" very well. These slices (AAA, BBB, and unrated) were not made up only of loans with those ratings. A "AAA" slice would contain just enough good loans to be given tha "AAA" rating, and the rest of that slice would be made up of the more risky loans. This was done to move the risky loans, which on their own were pretty much worthless.
In addition, the way risk was assigned to any of these loans was based on mortgage default data from the last 20-30 years, in which there was no such thing a a "no doc" loan or a "NINA" loan (no income, no assets). This means that the default data that was used to calculate the risk of these loans was based on borrowers that could actually prove they could pay the loan back, not the avg. "Joe" that was sold a loan the loan officer knew he couldn't pay back.
What this means is that the rating that these slices were given was not accurate, such that most of these "AAA" slices were actually not worth any rating. This is why so many mutual funds and pension funds went bust. These institutions do not expose themselves to much risk as a rule, but when offered the opportunity to invest in "AAA" rated investments that showed a good return, they were suckered in.

GeneW · 02-21-2009, 03:14 PM

The Community Reinvestment Act was a fact, and created an industry convention of making shaky loans to "deserving" people.

I also recall reading that Fannie Mae and Freddy Mac were pressured to make shaky loans by Cuomo and Clinton back in the 1990s.

I think blaming the Federal Reseve is fair - fiat currency is at the root of this problem. Fiat currency began in the US because of "panics" and because of two world wars, which required inflation to fund. The collapse of Bretton Woods in 1971 was in part caused by the Viet Nam war.

So US Imperial ambitions are at the root of this.... and the legalized fraud of "fractional reserve banking".

Blaming "greed" is fair, just be fair about it and blame EVERYONE"S GREED, government and the private sector together.

Trouble is that the US Media is owned by Corporate Interests, who want to stomp on potential competitors. So they will advocate for more government regulation, which they have the money and manpower to circumvent and comply, leaving their competition in the dust.

Add a few ideologues who fancy themselves protectors of the Common Man, and who like the idea of Regulators stomping on the "private sector" and you get a demand for more government.

Except that a collusion of Goverment and the Super Rich were the ones who started this mess in the first place, with their demands for a currency that would let them Study War.

Gene

yaris-me · 02-21-2009, 03:40 PM

Crisis of Credit is not correct. The banks would like you to believe that the sub-prime mortgage and the CDO are to blame for the banking crisis but it is actually a small part of the problem. Crisis of Credit is in all probability sponsored by the banks so you take sympathy with the mortgage holders and your federal dollars will bail them out.

The truth is the problem started with the bond market and why is it that AIG which has nothing to do with mortgage is a pivot that will bring banks down?

The news is uninformed and in turn provides information that is misleading. The banks want you to be confused and sympathetic to mortgage holders.

ddongbap · 02-21-2009, 05:54 PM

Lol ematigo, you're going to open up a HUGE political debate up in HURRR.

supmet · 02-21-2009, 06:01 PM

Pretty much the entire world started taking stupid pills somewhere in the late 90s.

Banks - giving a $500,000 dollar loan to someone making $40,000 dollars a year is stupid
Car Industry - continuing production on hummers and large trucks when gas hit 4 dollars a gallon is stupid.
Consumers - buying a $500,000 dollar house when you make 40k a year is stupid. buying a hummer when gas is 4 bucks a gallon is stupid.

Talking about government is pointless, and blaming specific politicians or groups is ridiculous. The politicians are just puppets, bought out by corporations. America is a plutocracy/corpocracy. If you think it is a democracy, you haven't even begun to see the problems.

Blame who you want, but there are very few people who didn't play a part in getting us into this mess. No one forced banks to give out retarded loans. No one forced consumers to buy way outside their means. When I was 14 - FOURTEEN YEARS OLD - I saw houses double in price seemingly overnight. I knew something was wrong, and preached to everyone I could about the impending bubble burst. Somehow all PHD economists in the world missed the point a child could see.

The problem now is, the banks are using their last bits of money to control the media into portraying this as the next great depression. I got news for everyone - we have more people and better technology than we did 10-20 years ago. 10% of the population in hot water over bad decisions isn't the end of the world. A lot of dumb people lost a lot of money, yes. Other countries still need our products, and we still have ways to make money. We need to stop giving money to people who let greed get them into this spot, learn our lessons, and move on with our lives. The market will settle itself out eventually, and artificial interference will only prolong the symptoms we are experiencing.

02-21-2009, 05:54 AM	#1
eTiMaGo vroom vroom View User's Garage Drives: lil red 5-door Join Date: Sep 2006 Location: Bangkok, Thailand Posts: 7,744	Understanding the current economic situation I'll admit, I am really overwhelmed by modern financial practices, and can't really explain why the whole world is now in the mess it's in (apart from greed, really)... But this information video explains it pretty well! It's in two parts: http://www.youtube.com/watch?v=Q0zEXdDO5JU http://www.youtube.com/watch?v=iYhDkZjKBEw __________________ The price of freedom of religion, or of speech, or of the press, is that we must put up with a good deal of rubbish. - Robert Jackson Bye bye 1NZ...

02-21-2009, 11:16 AM	#4
tk-421 Super Moderator View User's Garage Drives: 5D-07-LB Join Date: Jan 2007 Location: Dagobah Posts: 4,263	Nice video... It does make things a bit easier to understand. It's amazing how greedy bastards will lose out every time in the end, yet more greedy bastards keep popping up all over the place. Darwinism at work? __________________ --[ FORUM RULES ]--[ SEARCHING TIPS ]--[ EYELIDS PICS ]--[ RBK SPOILER ]--[ BEST/WORST INVESTMENTS ]--

02-21-2009, 06:14 AM	#2
spooked Drives: 2008 Yaris HB RS Join Date: Jan 2009 Location: Vancouver, Canada Posts: 2	That has to be the nicest summary of the current situation I have seen. I have read about it in the paper and seen it on the news and I have a good idea about why it is going on but that sums it up pretty tidily. Nice post!

02-21-2009, 09:13 AM	#3
vios7 Guy Next Door View User's Garage Drives: Vios S Sedan Join Date: Oct 2008 Location: Malaysia Posts: 93	That explain well..great graphics. but not sure the facts is true or not.. i look some of comment most are disagree.

02-21-2009, 01:12 PM	#5
bobselectric Kickin' Yaris Drives: 07 Yaris liftback Join Date: Oct 2008 Location: west harrison, ny Posts: 523	There seems to be no mention of ACORN and their suit against the banking industry to force the banks to make loans to risky borrowers. If you flip burgers for 10 bucks an hour, you can't pay off a 100,000 dollar mortgage at a rate of 5-6% and live any kind of decent lifestyle. If you get an ARM at 1.5% for a short specified amount, with yearly escalations until the rate tops at 10-12%, you shouldn't borrow against future promotions ( I.E. asst. manager or manager) that may not come to fruition at all. ARMs are a tool for investors, who would buy investment property, improve (or not) and flip for a profit. They are not meant to be the credit solution for well meaning folks who would just as soon get behind in their payments in the event of calamity (lack of promotion, loss of job, illness, divorce, etc.) there are a lot of greedy bankers, investors, and common people who shoulder the blame; I was always taught that if it seems to good to be true, it probably is.

02-21-2009, 01:52 PM	#6
jkuchta View User's Garage Drives: 2007 Yaris hatch (red) Join Date: Sep 2007 Location: L.A. Posts: 557	Bob, the only thing can find about ACORN and a suit againts lenders is a Class Action case they were bringing/brought against the lenders for predatory lending practices. I'd love to find out more about the suit you're talking about. Could you send me a link? As far as the video, there were only a couple problems I had with it: 1) A sub-prime loan is not a loan made to sub-prime people, but rather a loan whose interest rate (at least for the first few months/years) is less than the prime rate. This means that for the time that the interest rate is sub-prime, the lender is actually loosing money (if they're not leveraged or otherwise recouping that money). As Bob pointed out, sub-primes (ARM's) are really for investors for the short term, not the average joe for 30 years. 2) The video did not deal with the "slices" very well. These slices (AAA, BBB, and unrated) were not made up only of loans with those ratings. A "AAA" slice would contain just enough good loans to be given tha "AAA" rating, and the rest of that slice would be made up of the more risky loans. This was done to move the risky loans, which on their own were pretty much worthless. In addition, the way risk was assigned to any of these loans was based on mortgage default data from the last 20-30 years, in which there was no such thing a a "no doc" loan or a "NINA" loan (no income, no assets). This means that the default data that was used to calculate the risk of these loans was based on borrowers that could actually prove they could pay the loan back, not the avg. "Joe" that was sold a loan the loan officer knew he couldn't pay back. What this means is that the rating that these slices were given was not accurate, such that most of these "AAA" slices were actually not worth any rating. This is why so many mutual funds and pension funds went bust. These institutions do not expose themselves to much risk as a rule, but when offered the opportunity to invest in "AAA" rated investments that showed a good return, they were suckered in.

02-21-2009, 03:14 PM	#7
GeneW Banned Drives: 2008 Yaris Join Date: Oct 2008 Location: Pennsylvania Posts: 1,034	The Community Reinvestment Act was a fact, and created an industry convention of making shaky loans to "deserving" people. I also recall reading that Fannie Mae and Freddy Mac were pressured to make shaky loans by Cuomo and Clinton back in the 1990s. I think blaming the Federal Reseve is fair - fiat currency is at the root of this problem. Fiat currency began in the US because of "panics" and because of two world wars, which required inflation to fund. The collapse of Bretton Woods in 1971 was in part caused by the Viet Nam war. So US Imperial ambitions are at the root of this.... and the legalized fraud of "fractional reserve banking". Blaming "greed" is fair, just be fair about it and blame EVERYONE"S GREED, government and the private sector together. Trouble is that the US Media is owned by Corporate Interests, who want to stomp on potential competitors. So they will advocate for more government regulation, which they have the money and manpower to circumvent and comply, leaving their competition in the dust. Add a few ideologues who fancy themselves protectors of the Common Man, and who like the idea of Regulators stomping on the "private sector" and you get a demand for more government. Except that a collusion of Goverment and the Super Rich were the ones who started this mess in the first place, with their demands for a currency that would let them Study War. Gene

02-21-2009, 03:40 PM	#8
yaris-me Learn to Relax Drives: 2007, Meteorite, LB Join Date: Dec 2008 Location: Anaheim, CA Posts: 2,070	Crisis of Credit is not correct. The banks would like you to believe that the sub-prime mortgage and the CDO are to blame for the banking crisis but it is actually a small part of the problem. Crisis of Credit is in all probability sponsored by the banks so you take sympathy with the mortgage holders and your federal dollars will bail them out. The truth is the problem started with the bond market and why is it that AIG which has nothing to do with mortgage is a pivot that will bring banks down? The news is uninformed and in turn provides information that is misleading. The banks want you to be confused and sympathetic to mortgage holders.

02-21-2009, 05:54 PM	#9
ddongbap Banned Drives: yw calls me douche and racist. Join Date: Aug 2007 Location: hay Posts: 2,183	Lol ematigo, you're going to open up a HUGE political debate up in HURRR.

02-21-2009, 06:01 PM	#10
supmet Banned View User's Garage Drives: 2007 4 Door Yaris Join Date: Jan 2009 Location: Southern California Posts: 1,357	Pretty much the entire world started taking stupid pills somewhere in the late 90s. Banks - giving a $500,000 dollar loan to someone making $40,000 dollars a year is stupid Car Industry - continuing production on hummers and large trucks when gas hit 4 dollars a gallon is stupid. Consumers - buying a $500,000 dollar house when you make 40k a year is stupid. buying a hummer when gas is 4 bucks a gallon is stupid. Talking about government is pointless, and blaming specific politicians or groups is ridiculous. The politicians are just puppets, bought out by corporations. America is a plutocracy/corpocracy. If you think it is a democracy, you haven't even begun to see the problems. Blame who you want, but there are very few people who didn't play a part in getting us into this mess. No one forced banks to give out retarded loans. No one forced consumers to buy way outside their means. When I was 14 - FOURTEEN YEARS OLD - I saw houses double in price seemingly overnight. I knew something was wrong, and preached to everyone I could about the impending bubble burst. Somehow all PHD economists in the world missed the point a child could see. The problem now is, the banks are using their last bits of money to control the media into portraying this as the next great depression. I got news for everyone - we have more people and better technology than we did 10-20 years ago. 10% of the population in hot water over bad decisions isn't the end of the world. A lot of dumb people lost a lot of money, yes. Other countries still need our products, and we still have ways to make money. We need to stop giving money to people who let greed get them into this spot, learn our lessons, and move on with our lives. The market will settle itself out eventually, and artificial interference will only prolong the symptoms we are experiencing.