Bubblenomics

Discussion in 'Economy' started by sparky, Mar 27, 2011.

  1. sparky
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    sparky VIP Member

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    OpEdNews - Article: Here Comes Another Bubble, and a Crash That Will Dwarf the Last One, Unless . . .


    And now, our newest bubbles

    As economist Danny Schecter recently pointed out, the bubblenomics game is back on. Two years of essentially zero interest rates, limitless guarantees, and a $2 trillion I.V. drip-feed from the Fed, has lifted Wall Street up off its back and put the greed-head speculators back in the center of things. It's a miracle: Who would have thought that Bernanke could engineer another bubble this fast after the disaster the last one led to? But he pulled it off! Mergers and Acquisitions (M&A) are increasing, LBO's (Leveraged BuyOuts) are on the rise, revolving credit ("plastic") is expanding, and wild eyed investors are scarfing up low-yield junk bonds wherever they can find them.

    Don't believe it? Take a look at this from Businessweek:

    "Home loans that inflated the U.S. housing bubble...are fueling the fastest gains in the mortgage-bond market....Prices for senior bonds tied to option adjustable-rate mortgages (ARMs), called "toxic" by a government commission, typically jumped from 6 cents to 64 cents on the dollar in the past month, according to Barclays Capital.

    Rising values show Federal Reserve efforts to stimulate the economy by purchasing an additional $600 billion of Treasuries and holding interest rates near zero percent are driving investors into ever-riskier securities.....


    <snip>


    Please recall that it was the ever growing amount of borrowing to buy stocks in 1929 that led to the crash that year.

    Yowsa, it's bubble-time once again. Everyone is borrowing to the hilt so that everyone can keep spending to the hilt. But you're probably wondering how consumer credit can expand when households and consumers got whacked for $11.4 trillion in the meltdown, and their ratio of debt-to-disposable income is still way above normal? Well, just go to Google News and take a peak at all the zero-down intro offers on auto loans. Virtually anyone can buy a new car these days. Bad credit? Pay a lawyer to clean it up. So, we're back to Square 1 -- selling products to people with shaky credit who can't come up with a few hundred bucks for a down payment. Credit expansion is easy when you offer people something for nothing. It's getting repaid that's hard.

    The other big area of bubblenomics credit expansion is student loans, the government-backed scam of the century. The banksters have figured out how easy it is to swindle college kids with promises of hefty 6-figure salaries when they finish their 5-year stint at the for-profit Bunko University. Of course, when they finally do graduate, drowning in red ink, they will discover that their job has been outsourced to Bangalore and they're left with the prospect of either taking a "McJob" or moving back in with mom and dad. Here's the way student loan expert Alan Nasser lays it out:


    "The student loan industry is huge. It was announced last summer that total student loan debt, at $830 billion, now exceeds total US credit card debt, which is itself bloated to the bubble level of $827 billion. And student loan debt is growing at the rate of $90 billion a year....It estimated that over their lifetime, between 19 and 31% of college freshmen and sophomores will default on their loans (depending on the type of loan and when it was taken on). For community college students, the prospects were grimmer still: between 30 and 42% were expected to default. And the future was most discouraging for students at for-profit colleges: between 38 and 51% were expected to default



    ya really gotta read the whole thing , and consider the history of economic bubbles
     
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  2. Toro
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    Toro Diamond Member

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    Today's economy is more rooted in asset markets than at any time I can remember. It's frightening. And I don't think mainstream economics understands it.
     
  3. sparky
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    sparky VIP Member

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    well i'm probably not as up on the pro's & con's of an asset market as much as you might be Toro, but i would hope the average Joe can figure out that atrifically inflating the vale of any given asset usually ends badly....
     
  4. editec
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    editec Mr. Forgot-it-All

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    They are bundling student loans and selling them as bonds, folks.

    If, as we are witnessing now, enough college grads cannot find employment that pays high enough for them to satisfy the conditions of their loans, they do go into default.

    so the question is who is issuing those student loans?

    Goverment backed loans, the borrower simply cannot default on.

    Those debts are not discharged by bankruptsy, and the interest accrues regardless of whether or not it can be repaid.

    Now students loans that are not government guaranteed? Those, if there's enough of them CAN be defaulted on.

    I don't have the numbers to know how much of that kind of student loan debts exist.
     
  5. Truthmatters
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    Truthmatters BANNED

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    Nice little movie called the shock doctrine shows why they do this shit.

    It makes them money
     
  6. Norman
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    Norman Gold Member

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    You can default on student loan.

    It's called leaving the country.
     
  7. william the wie
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    william the wie Gold Member

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    Student loans are the secret plan for bailing out Social Security, they get garnisheed from Social Security. A huge hunk of people born after roughly 1962 will never see a social security check and post grads from even earlier eras are in the same boat.
     

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