# The world economy falling apart???



## Thonex (Oct 24, 2008)

Hi guys,

I like watching the stock market (it appeals to my geeky side) and all those who live here in the U.S. knows about the terrible financial news we've been having starting with the Countrywide sub-prime loan announcement back in August 07. 

Here in the U.S. there are record home foreclosures, record drops in the stock market (not lows... just drops), record bank failures, high gas prices, rising national unemployment is at 6.1%, GM may very well cease to exist the way we know it, banks are consolidating at an unprecedented rate, etc..etc.

Yesterday Ben Bernanke said he was shocked at the results of the financial system and that he thought (that because it was in the financial institutions best interest) that the financial institutions would regulate themselves.

This morning when I woke up the Nikkei had almost lost 10% overnight. Probably due to Sony's and Samsung's poor numbers (and maybe because the U.S. is not ordering as much because of the fear of low sales?).

Anyway, since we have an internationally diverse community here, I though it would be interesting to hear your perspective on how the economy is in your country. When did it become the #1 story on the news, who is being blamed? What solutions are being talked about, what are the visible affects you've sen... etc.

Cheers,

T


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## Nick Batzdorf (Oct 24, 2008)

Wasn't it Greenspan who was shocked, not Bernanke? In any case, this looks like the nail in the coffin of strict conservative economic theory. Money can't be allowed to rule all like there's no tomorrow.


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## Thonex (Oct 24, 2008)

Nick Batzdorf @ Fri Oct 24 said:


> Wasn't it Greenspan who was shocked, not Bernanke? In any case, this looks like the nail in the coffin of strict conservative economic theory. Money can't be allowed to rule all like there's no tomorrow.



Yes.. it was Greenspan... I was going to correct that... and I also misspelled "Economy" in the title of the thread, but i couldn't correct it because for some reason the site is not letting me "edit" my own posts.


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## José Herring (Oct 24, 2008)

I dunno guys. We've been through this "sky is falling" economic troubles before and the world just readjust and keeps on going.

If anything I hope that businesses and people learn that debt isn't really money and that sooner or later you gotta pay it back and if you don't then everything falls apart.

Personally I'd just love for the world to go back to actually earning the money they spend.

But, maybe I'm too old fashion and I drive old cars too.

Jose


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## midphase (Oct 24, 2008)

Well, on the positive side....most of those "Lending Tree.com" TV ads are gone!

Now if we could get rid of that singing guy from "Free Credit Report" we'd be making some real progress.


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## Thonex (Oct 24, 2008)

josejherring @ Fri Oct 24 said:


> Personally I'd just love for the world to go back to actually earning the money they spend.
> 
> But, maybe I'm too old fashion and I drive old cars too.
> 
> Jose



Agree 100%


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## Hannes_F (Oct 24, 2008)

josejherring @ Fri Oct 24 said:


> If anything I hope that businesses and people learn that debt isn't really money and that sooner or later you gotta pay it back and if you don't then everything falls apart.
> 
> Personally I'd just love for the world to go back to actually earning the money they spend.



You have said in so short words what I was going to in much more.


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## PolarBear (Oct 24, 2008)

The current monetary system is not working without debt. That's the problem.


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## Thonex (Oct 24, 2008)

PolarBear @ Fri Oct 24 said:


> The current monetary system is not working without debt. That's the problem.



Debt is ok... but not when it's leveraged 30:1... and not when people can buy houses with 0% down and no Doc filing. It just got insanely out of hand... there does have to be better oversight.

Debt is not the root of the problem.. it's the abuse of the debt instruments and greed.

IMO.

T


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## José Herring (Oct 24, 2008)

Debt isn't bad if you have the money to pay it immediately back.

The problem imo is that nobody can know the future. And to stretch out huge amounts of debt over the long hall is risky.

But, I agree that the most risk of all is lending to people that can't in any way pay it back. That's just stupid. That's what banks have been doing and it's terrible.

Jose


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## JonFairhurst (Oct 24, 2008)

The root of the problem has been a lack of information. Open information is a key part of the open market, even according to Adam Smith. Otherwise we pay too much for three day old fish.

Home borrowers didn't have information about how their loans would go up. (Well, they did, if they were lawyers who could decipher fine print in a stack of documents.) Bankers didn't have information about how risky the bundles were. Hedge fund managers didn't have information about the risks of their bets. And it all got interlinked.

Today, banks aren't loaning to each other, since they don't know how exposed each other really are. Again, there is a lack of information. The only difference is that it's a time of pessimism, rather than exuberance.

What we need are full, simple disclosure laws. And easy ways to obtain, search and filter the information. And punishments for those who hide or lie about the truth.

We take risks all the time. But better an informed risk than blind faith.


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## Ed (Oct 25, 2008)

PolarBear @ Fri Oct 24 said:


> Well... there is a comedian in Germany that once said: In order to get a credit from your bank you have to proof that you don't need one - and I think he's not too far off there: what's the sense of debt then anyway,



Thats almost correct. For example if you are applying for a credit card the banks preferably would like to see a certain pattern of behaviour. Remember the banks want to make money so they are actually less likely to give you credit if you always pay back the balence each month because they dont get to charge you interest. That doesnt mean that they want someone that is swamped in debt either, because that person doesnt pay them back at all and they have to work to get the money ouf of them. To be of interest to banks is when you have gone into debt, dont pay back everything 100% each month and have to pay some interest BUT you still pay them in the end. In other words, the banks WANT to see you perpetually in debt because they make money from you, what they dont want is to lend you money that you CANT pay back. If that makes sence.


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## Hal (Oct 25, 2008)

Thonex @ Fri Oct 24 said:


> PolarBear @ Fri Oct 24 said:
> 
> 
> > The current monetary system is not working without debt. That's the problem.
> ...



!! >8o u do that in the states...0% and no doc


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## synergy543 (Oct 25, 2008)

deleting triple posting - how'd that happen?


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## synergy543 (Oct 25, 2008)

synergy543 @ Sat Oct 25 said:


> Thonex @ Fri Oct 24 said:
> 
> 
> > [Debt is ok... but not when it's leveraged 30:1... and not when people can buy houses with 0% down and no Doc filing. It just got insanely out of hand... there does have to be better oversight.
> ...



Yeah, but the bank still has the house. The real problem is the house isn't worth what they said it was. If the house, still did have reasonable value, the banks wouldn't be out of much money and we wouldn't have such a big problem - they'd just sell the house (for a small loss). But that's not the case. So excessive price valuations in the real estate market are the real trigger of the credit collapse. The greed of "flip this house and double the price with a can of paint" collapsed like a stack of cards. And strangely, the rest of the world got dragged into our internal problem.

Now its a crisis of confidence and forced selling by hedge funds and speculators that cause a self-perpetuating spiral.

btw, if anyone's interested in some Tulip bulbs...I've got some for sale. :wink:


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## José Herring (Oct 25, 2008)

Hal @ Sat Oct 25 said:


> Thonex @ Fri Oct 24 said:
> 
> 
> > PolarBear @ Fri Oct 24 said:
> ...



Yeah if you new half the shit that was going on here you would be shocked and surprised. It came as no shock to ordinary Americans that the economy tanked. We've been talking about it for about 3 years now.

The fact that it came as a shock to Alan Greenspan is surprising to me. Just shows you how out of touch the Republicans are and how much missed placed faith they had in trickle down theories and of laizze-faire capitalistic philosophies.

But in truth the first time I heard of sub-prime mortgages and the ability to get a loan based on Fica scores alone without proof of actual income and the ballooning of property values across the state of California, I new that some day the balloon was gonna pop.

There's been a faux economy working in America for a while. It's gotten so big that it's overshadowed America's real economy. Luckily America's real economy is still pretty strong and it will emerge over the next year. The bad thing about all those foreign nations is that they bought into America's faux economy. Instead of focusing on products and trade they tried to play the markets and banks to make a quick buck. Now the markets are tanking and many of the European nations are realizing at the end of the day that they don't have anything to sell to make money.

So over the next 2 years countries like America, Japan and China and even Russia that have resources to sell and that actually produce products will recover. Other countries won't be so lucky and they'll have to fall back on traditional ways of surviving. 

I fear in all this that the 3rd world will collapse back into itself and much of Europe too.


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## Nick Batzdorf (Oct 25, 2008)

What confuses me is why unemployment is still relatively low. I can't imagine that continuing, unfortunately, and of course it's the worst part of this.

The thing is, in America our standard of living has been going up for the past few years while real incomes have been going down. And the first reason is that we've shipped all our manufacturing overseas, which means both cheaper goods and unemployment; the second reason is that all that real estate equity was creating a money machine.

It's the second part that makes this more than just the bad loans, since the equity was pumping air into the world economy. No question, we've been using up resources way too quickly, and a slower economy is good for that. But people in China, India, etc. are going to go back to starving if we can't afford to buy their goods. It's hard to see that as a good thing.


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## Reegs (Oct 25, 2008)

Agreed, Nick. You can see signs of the slower economy everywhere. I was in a Best Buy yesterday and the surplus stock of blenders they had was alarming. That the blenders and microwaves were in the front of the store opposed to the big TV is also saying something.

It stings right now, and it will for a few years, but I'm trying to see it as a good thing. Kind of like a dope slap.


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## Frederick Russ (Oct 25, 2008)

*Re: The world econmy falling appart???*

Aside from the temporary benefit to consumers, the problem with falling gas prices over the long term: if the cost for a barrel of oil dips below $55 its actually costing oil producers more to produce oil than their overhead. The short answer they'll use to address this is to cut production to drive up prices and spike market demand. They've already cut production last Thursday to try to stop the downward spiral meaning a man-made oil shortage. The general consensus with oil producers is "Why pump when it drives prices down?" My prediction is that they figure if they wait it out and supplies run out, they can get it back to the price levels they were last month while in the interim market demand increases until oil prices sky-rocket altogether. Bad for consumers - great for oil companies.


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## Nick Batzdorf (Oct 25, 2008)

OPEC is trying to get the price per barrel between a range - they're not trying to get so high that demand goes down. And if I understand that much, the whole system has to be a lot more sophisticated than that!

Meanwhile using less oil is a good thing for the future of civilization. Hopefully peoples' memories won't be so short that they'll go back to their old ways.


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## synthetic (Oct 25, 2008)

Nick Batzdorf @ Sat Oct 25 said:


> OPEC is trying to get the price per barrel between a range - they're not trying to get so high that demand goes down.



Too late, according to an oil trader I know. Oil demand has slowed to a surprising low and SUVs are sitting unsold at car dealers. According to him, their greed got out of control and that's why they're scrambling to raise the price now. Try not to shed too many tears for Iran and Venezuela. o/~


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## Nick Batzdorf (Oct 25, 2008)

Not for their governments, but their people really have it rough.


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## synthetic (Oct 25, 2008)

True dat.


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## Fernando Warez (Oct 25, 2008)

synthetic @ Sat Oct 25 said:


> Nick Batzdorf @ Sat Oct 25 said:
> 
> 
> > OPEC is trying to get the price per barrel between a range - they're not trying to get so high that demand goes down.
> ...



I dough the super powers of this world would let oil producing countries make such important decision, i dough they would let them have all this power. Somebody else else is in charge if you ask me.


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## Fernando Warez (Oct 25, 2008)

And did you guys forget what was the price of oil before the invasion of Afghanistan and Iraq? I find it odd that you guys would blame OPEC for hight prices of oil.


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## Nick Batzdorf (Oct 25, 2008)

I don't think anyone is blaming OPEC for the high price of oil. If you read "Oil on the Brain," you'll see that it's very hard to point your fingers at what does cause the prices to rise. Ultimately it's up to the refineries, but they also buy oil on the spot market, which is like the stock market, and the whole thing is a big jumbled mess.

OPEC is trying to raise the price by cutting back production, but they're not going to succeed very far. They don't have the power they used to have, since supply and demand depends on excess capacity, and there is none.

Plus the demand falls with the world economy. You know, we're not buying Chinese goods since we don't have any money, which means that the Chinese need less oil.

Again, this is the silver lining in the cloud. And it was the silver lining in the cloud of $4.75 gas (not $4 in California). Hopefully people will remember that the price can go up again and not go back to driving all over the place in SUVs...although it's going to take a lot more than that to stop global warming.

Meanwhile I'm really enjoying my 75MPG motor scooter.  In places like Taiwan that's what people use to get around, and I think it would be a great idea here too.


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## Dave Connor (Oct 25, 2008)

One of the reasons jobs are shipped to other countries is that those countries are still under developed. The British Empire of old actually saw to that as a way of exploiting a country's resources. If you can keep education and opportunity down than you can exploit resources and cheap labor in under developed countries. If the world's largest economies tried to help these countries develop more, an even playing field could emerge. This would keep jobs from leaving borders too much and allow nations to spend more and pay better wages locally.


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## Nick Batzdorf (Oct 26, 2008)

Right now India and China are taking care of that themselves, actually. They're turning out way more college graduates every year than we are, and as I've posted before, they're competing with our graduates for the same jobs - ones they're willing to do for a fraction of the price.

The big problem is that the world doesn't have the resources to support first world living conditions for everyone. That's one of the things Jared Diamond explains very clearly in "Collapse," a book that everyone should read.

You don't look it




but you're the same age as i am, Dave. The population of the world has doubled in our lifetime!


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## synergy543 (Oct 26, 2008)

Nick Batzdorf @ Sun Oct 26 said:


> Right now India and China are taking care of that themselves, actually. They're turning out way more college graduates every years than we are, and as I've posted before, they're competing with our graduates for the same jobs - ones they're willing to do for a fraction of the price.



http://release.theplatform.com/content.select?pid=x7aVOMrlfkkijQwcLllwk6WjB5JE0zrF (http://release.theplatform.com/content. ... WjB5JE0zrF)


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## Nick Batzdorf (Oct 26, 2008)

Now that is cool!

But where did they get all the information? I'd like to see references, because it's easy just to say stuff like that.


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## synergy543 (Oct 26, 2008)

Nick Batzdorf @ Sun Oct 26 said:


> Now that is cool!
> 
> But where did they get all the information? I'd like to see references, because it's easy just to say stuff like that.



Yeah, I thought so too. 

Got the link from Guy Kawasaki via twitter. Not sure about the source (it says Sony BMG Rome 2008 so it was probably a corporate promo). Whether numbers are all spot on or not, its eye-opening and stimulates a lot of thought about issues worthing thinking about!

Everything in the world economy has changed in the last two weeks - we certainly live in interesting times!


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## Evan Gamble (Oct 26, 2008)

synergy543 @ Sun Oct 26 said:


> Nick Batzdorf @ Sun Oct 26 said:
> 
> 
> > Right now India and China are taking care of that themselves, actually. They're turning out way more college graduates every years than we are, and as I've posted before, they're competing with our graduates for the same jobs - ones they're willing to do for a fraction of the price.
> ...



I'm so depressed now. :cry:


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## Nick Batzdorf (Oct 26, 2008)

I'm sorry if it was my fault, Evan!

Just remember that you're unique among all those people in the world, and you have something to offer that nobody else can.


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