Why We Need More, Not Less, Government

[The T]

How about the$120 TRILLION at the hands of government. YOU cannot hang this on Wall street. They aren't elected Government.

But you continue the class warfare shit Chrissy.

You can't re-write history.

The derivatives bomb brought down the financial system.

Where have you been?

The Community Reinvestment Act (CRA) forced banks to loan money to those with bad credit creating toxic assets which were bundled as derivative packages and sold to other banks. You need to look farther upstream. The complaining about derivatives is just the normal BS you hear about 'speculators' during any crisis. People haven't by and large heard the word 'derivatives' much so it sounds fresh, therefore it gets more press. If they're bitching about the mortgage derivatives you simply have to remember that regulations and rules can allow and even promote the creation of bad debt, but without buyers what the hell is anyone going to do with that debt, much less derivatives/structured products based on it? The Fed provided the buyers, plain and simple. It's an odd application of Keynesianism I think in that people seem to believe "if you produce it, they will buy" which is not true. In order for people to buy bad debt they needed and got three things: easy money and credit; the lower interest rates for which also fueled a hunger for high yield, high risk debt; and explicit and implicit guarantees of bailout should the debt go tits up. Without those three things, all provided by the government and The Fed, any bad debt or derivatives that were produced would have been sold to...no one.

Derivatives have received such a bad press that it is necessary to point out that the insurance policy on a home is a derivative. And many of the derivatives that were sold and which are now creating problems of insolvency and bankruptcy, namely, "credit default swaps (CDSs)," were insurance policies in one form or another. Their flaw was that unlike ordinary homeowners' insurance, they did not have a sufficient list of exclusions. But decades of brainwashing by the government, the media, and the educational system had convinced almost everyone that such collapse was no longer possible. The Federal Reserve would save us from any disaster. So there was no reason to create sound derivatives. And many of these same big businesses received bailouts, and were indeed "saved."

The FED's days of manipulation are over. We're broke.It cannot be sustained. Inflation is taking over...bigtime. Kudos on a good post.

 

[The T]

Wow! Lots of extreme views here. Government solves everything. Government is the source of all problems.

I've lived in lots of places. Countries with little or no government tend to be dangerous and unstable. Countries where corporations are left to "govern themselves" make our homeless problem look extremely mild. So yes, I'm glad we have a government. And for all its' faults, I like our government. That is why I have always returned to the United States.
I wish we had a more efficient government but we have a really big country. Just like really big companies operate less efficiently than smaller ones. But we are after all, the UNITED States of America.
Do I like that we have agencies to check food, products etc... for safety? Sure. I've lived in places where it is left up to "the market" to take care of that and guess what? People get sick or die and the companies just keep on going. So no, "the market" won't make those bad ol' companies go away. People won't quit doing business with them because they weild so much power, no one ever gets an accurate picture of what really happened.
On the other side, there is SO much waste and duplication in our government, there's obviously room for cuts. Do you know we spend tens of millions every year on the Rural Electrification Agency? Yup. It's job since the 1920? Making sure rural America has electricity. Yeah. We still need that one. WTF?
Anyway, just my two cents...

I see your point, but with all due respect your argument seems like the typical "If we don't have government we will all have food poising and die and turn into zombies." Can you tell me what places and countries you are referring to? As for our government, if states had the powers they were supposed to have we wouldn't have to worry about being to big. Yet the 10th amendment is largely ignored today.

But yet look at the State Government that are in the black, and are fast becoming that way due to dire measures that had to be taken? States MUST have balanced budgets. For many? it's in thier Constitutions.

 

[ShackledNation]

Government cannot create wealth. All money the government spends is drained from the private economy. Individuals are much better at improving their own lives than the government.

That's total bullshit.

The government pays the police, the fire department, the military, the highway system, the schools, etc...

Who built the Hoover Dam? The government.

Who built the interstate highway system? The government.

Who developed the internet? The government.

You are assuming that we wouldn't have those things without government, which is the real bullshit that we are brainwashed to believe. You are ignoring the unseen consequences of everything that was not created because the money used to fund all those projects was taken from the private economy, which may have produced even better technologies. In the case of the schools, that should be more than apparent, for private schools outperfom public schools tremendously.

Even the internet would have existed without government. ARPANet was a computer network that connected US defense installations and also some universities. It was not the only network in existence at that time. But such a system is not that revolutionary. Computers were the true revolution, and connecting them was simply the next logical step. We had telephone networks before computer networks and telegraph networks before that and courier networks before that. But what makes the Internet categorically unique from all prior communications technologies is the capacity for the computers to intelligently process the data stream according to pre-programmed instructions. That is not even to mention that almost all of the internet's current applications, including the world wide web without which the internet would be useless to us — unforeseen by its original designers — have been developed in the private sector.

Again, it is the fallacy of the broken window and ignoring the unseen. The fact that government created the internet does not mean it would not have been created without government. Maybe we would have something even better. There is no reason to think such technologies would not exist had government not created them. Government did not create wealth simply because that wealth was expropriated from individuals who may have made another technology potentially superior to the one the government created.

 

[Chris]

Government cannot create wealth. All money the government spends is drained from the private economy. Individuals are much better at improving their own lives than the government.

That's total bullshit.

The government pays the police, the fire department, the military, the highway system, the schools, etc...

Who built the Hoover Dam? The government.

Who built the interstate highway system? The government.

Who developed the internet? The government.

You are assuming that we wouldn't have those things without government, which is the real bullshit that we are brainwashed to believe. You are ignoring the unseen consequences of everything that was not created because the money used to fund all those projects was taken from the private economy, which may have produced even better technologies. In the case of the schools, that should be more than apparent, for private schools outperfom public schools tremendously. Even the internet would have existed without government. ARPANET was the government funded project of connecting computers together. almost all of the internet's current applications, including the world wide web without which the internet would be useless to us — unforeseen by its original designers — have been developed in the private sector.

Again, it is the fallacy of the broken window and ignoring the unseen. The fact that government created the internet does not mean it would not have been created. Something better may have been created. What makes you think such technologies would not exist had government not created them instead?

Because the government funds our schools and universities, Brainiac.

 

[Chris]

Wow! Lots of extreme views here. Government solves everything. Government is the source of all problems.

I've lived in lots of places. Countries with little or no government tend to be dangerous and unstable. Countries where corporations are left to "govern themselves" make our homeless problem look extremely mild. So yes, I'm glad we have a government. And for all its' faults, I like our government. That is why I have always returned to the United States.
I wish we had a more efficient government but we have a really big country. Just like really big companies operate less efficiently than smaller ones. But we are after all, the UNITED States of America.
Do I like that we have agencies to check food, products etc... for safety? Sure. I've lived in places where it is left up to "the market" to take care of that and guess what? People get sick or die and the companies just keep on going. So no, "the market" won't make those bad ol' companies go away. People won't quit doing business with them because they weild so much power, no one ever gets an accurate picture of what really happened.
On the other side, there is SO much waste and duplication in our government, there's obviously room for cuts. Do you know we spend tens of millions every year on the Rural Electrification Agency? Yup. It's job since the 1920? Making sure rural America has electricity. Yeah. We still need that one. WTF?
Anyway, just my two cents...

I see your point, but with all due respect your argument seems like the typical "If we don't have government we will all have food poising and die and turn into zombies." Can you tell me what places and countries you are referring to? As for our government, if states had the powers they were supposed to have we wouldn't have to worry about being to big. Yet the 10th amendment is largely ignored today.

But yet look at the State Government that are in the black, and are fast becoming that way due to dire measures that had to be taken? States MUST have balanced budgets. For many? it's in thier Constitutions.

It's a stupid idea.

Why?

Because when the economy goes into a deflationary cycle like it did in 2008, the government MUST be the demand of last resort.

Otherwise, you have another Great Depression.

 

[ShackledNation]

Wow! Lots of extreme views here. Government solves everything. Government is the source of all problems.

I've lived in lots of places. Countries with little or no government tend to be dangerous and unstable. Countries where corporations are left to "govern themselves" make our homeless problem look extremely mild. So yes, I'm glad we have a government. And for all its' faults, I like our government. That is why I have always returned to the United States.
I wish we had a more efficient government but we have a really big country. Just like really big companies operate less efficiently than smaller ones. But we are after all, the UNITED States of America.
Do I like that we have agencies to check food, products etc... for safety? Sure. I've lived in places where it is left up to "the market" to take care of that and guess what? People get sick or die and the companies just keep on going. So no, "the market" won't make those bad ol' companies go away. People won't quit doing business with them because they weild so much power, no one ever gets an accurate picture of what really happened.
On the other side, there is SO much waste and duplication in our government, there's obviously room for cuts. Do you know we spend tens of millions every year on the Rural Electrification Agency? Yup. It's job since the 1920? Making sure rural America has electricity. Yeah. We still need that one. WTF?
Anyway, just my two cents...

I see your point, but with all due respect your argument seems like the typical "If we don't have government we will all have food poising and die and turn into zombies." Can you tell me what places and countries you are referring to? As for our government, if states had the powers they were supposed to have we wouldn't have to worry about being to big. Yet the 10th amendment is largely ignored today.

But yet look at the State Government that are in the black, and are fast becoming that way due to dire measures that had to be taken? States MUST have balanced budgets. For many? it's in thier Constitutions.

Most states are in a far better situation than the federal government. And the fact that there are 50 of them allow for some to remain successful even in times of crisis. I am not arguing they are infallible, but as you say many must balance their budgets, a requirement the federal government does not have.

 

[Chris]

How about the $120 TRILLION at the hands of government. YOU cannot hang this on Wall street. They aren't elected Government.

But you continue the class warfare shit Chrissy.

You can't re-write history.

The derivatives bomb brought down the financial system.

Where have you been?

The Community Reinvestment Act (CRA) forced banks to loan money to those with bad credit creating toxic assets which were bundled as derivative packages and sold to other banks. You need to look farther upstream. The complaining about derivatives is just the normal BS you hear about 'speculators' during any crisis. People haven't by and large heard the word 'derivatives' much so it sounds fresh, therefore it gets more press. If they're bitching about the mortgage derivatives you simply have to remember that regulations and rules can allow and even promote the creation of bad debt, but without buyers what the hell is anyone going to do with that debt, much less derivatives/structured products based on it? The Fed provided the buyers, plain and simple. It's an odd application of Keynesianism I think in that people seem to believe "if you produce it, they will buy" which is not true. In order for people to buy bad debt they needed and got three things: easy money and credit; the lower interest rates for which also fueled a hunger for high yield, high risk debt; and explicit and implicit guarantees of bailout should the debt go tits up. Without those three things, all provided by the government and The Fed, any bad debt or derivatives that were produced would have been sold to...no one.

Derivatives have received such a bad press that it is necessary to point out that the insurance policy on a home is a derivative. And many of the derivatives that were sold and which are now creating problems of insolvency and bankruptcy, namely, "credit default swaps (CDSs)," were insurance policies in one form or another. Their flaw was that unlike ordinary homeowners' insurance, they did not have a sufficient list of exclusions. But decades of brainwashing by the government, the media, and the educational system had convinced almost everyone that such collapse was no longer possible. The Federal Reserve would save us from any disaster. So there was no reason to create sound derivatives. And many of these same big businesses received bailouts, and were indeed "saved."

Only 6% of homes were in default when the system collapsed.

Nice try, though.

The $516 TRILLION DOLLAR derivative bubble is what brought down the economy.

Just to give you an idea of how big a bubble that was, the GDP of all the economies in the world in one year is $50 trillion.

 

[ShackledNation]

I see your point, but with all due respect your argument seems like the typical "If we don't have government we will all have food poising and die and turn into zombies." Can you tell me what places and countries you are referring to? As for our government, if states had the powers they were supposed to have we wouldn't have to worry about being to big. Yet the 10th amendment is largely ignored today.

But yet look at the State Government that are in the black, and are fast becoming that way due to dire measures that had to be taken? States MUST have balanced budgets. For many? it's in thier Constitutions.

It's a stupid idea.

Why?

Because when the economy goes into a deflationary cycle like it did in 2008, the government MUST be the demand of last resort.

Otherwise, you have another Great Depression.

Deflationary cycle? What on earth are you talking about? There was massive expansion of the money supply and prices have been on the rise. And government is the cause, not the solution. And what does that even have to do with the post you are responding to which was about state power vs. federal power?

 

[Toddsterpatriot]

For the moron rightys ~ who could provide no proof of their rightwinged propaganda, and blatantly come here to spout lies and distortions of facts.

Economist Stan Liebowitz wrote in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry. He also charges the Federal Reserve with ignoring the negative impact of the CRA.[98] In a commentary for CNN, Congressman Ron Paul, who serves on the United States House Committee on Financial Services, charged the CRA with "forcing banks to lend to people who normally would be rejected as bad credit risks."[108] In a Wall Street Journal opinion piece, Austrian school economist Russell Roberts wrote that the CRA subsidized low-income housing by pressuring banks to serve poor borrowers and poor regions of the country.[109]

However, many others dispute that the CRA was a significant cause of the subprime crisis. Paul Krugman[110] noted in November 2009 that 55% of commercial real estate loans were currently underwater, despite being completely unaffected by the CRA.[111] According to Federal Reserve Governor Randall Kroszner, the claim that "the law pushed banking institutions to undertake high-risk mortgage lending" was contrary to their experience, and that no empirical evidence had been presented to support the claim.[106] In a Bank for International Settlements (BIS) working paper, economist Luci Ellis concluded that "there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust", relying partly on evidence that the housing bust has been a largely exurban event.[112] Others have also concluded that the CRA did not contribute to the financial crisis, for example, FDIC Chairman Sheila Bair,[107] Comptroller of the Currency John C. Dugan,[113] Tim Westrich of the Center for American Progress,[114] Robert Gordon of the American Prospect,[115] Ellen Seidman of the New America Foundation,[116] Daniel Gross of Slate,[117] and Aaron Pressman from BusinessWeek.[118]

Some legal and financial experts note that CRA regulated loans tend to be safe and profitable, and that subprime excesses came mainly from institutions not regulated by the CRA. In the February 2008 House hearing, law professor Michael S. Barr, a Treasury Department official under President Clinton,[63][119] stated that a Federal Reserve survey showed that affected institutions considered CRA loans profitable and not overly risky. He noted that approximately 50% of the subprime loans were made by independent mortgage companies that were not regulated by the CRA, and another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. Barr noted that institutions fully regulated by CRA made "perhaps one in four" sub-prime loans, and that "the worst and most widespread abuses occurred in the institutions with the least federal oversight".[120] According to Janet L. Yellen, President of the Federal Reserve Bank of San Francisco, independent mortgage companies made risky "high-priced loans" at more than twice the rate of the banks and thrifts; most CRA loans were responsibly made, and were not the higher-priced loans that have contributed to the current crisis.[121] A 2008 study by Traiger & Hinckley LLP, a law firm that counsels financial institutions on CRA compliance, found that CRA regulated institutions were less likely to make subprime loans, and when they did the interest rates were lower. CRA banks were also half as likely to resell the loans.[122] Emre Ergungor of the Federal Reserve Bank of Cleveland found that there was no statistical difference in foreclosure rates between regulated and less-regulated banks, although a local bank presence resulted in fewer foreclosures.[123]

Community Reinvestment Act - Wikipedia, the free encyclopedia

However, many others dispute that the CRA was a significant cause of the subprime crisis. Paul Krugman[110] noted in November 2009 that 55% of commercial real estate loans were currently underwater, despite being completely unaffected by the CRA

OMG! A crashing real estate bubble impacted all real estate, not just the part screwed up by government mandates. I'll alert the media!
LOL!

 

[ShackledNation]

You can't re-write history.

The derivatives bomb brought down the financial system.

Where have you been?

The Community Reinvestment Act (CRA) forced banks to loan money to those with bad credit creating toxic assets which were bundled as derivative packages and sold to other banks. You need to look farther upstream. The complaining about derivatives is just the normal BS you hear about 'speculators' during any crisis. People haven't by and large heard the word 'derivatives' much so it sounds fresh, therefore it gets more press. If they're bitching about the mortgage derivatives you simply have to remember that regulations and rules can allow and even promote the creation of bad debt, but without buyers what the hell is anyone going to do with that debt, much less derivatives/structured products based on it? The Fed provided the buyers, plain and simple. It's an odd application of Keynesianism I think in that people seem to believe "if you produce it, they will buy" which is not true. In order for people to buy bad debt they needed and got three things: easy money and credit; the lower interest rates for which also fueled a hunger for high yield, high risk debt; and explicit and implicit guarantees of bailout should the debt go tits up. Without those three things, all provided by the government and The Fed, any bad debt or derivatives that were produced would have been sold to...no one.

Derivatives have received such a bad press that it is necessary to point out that the insurance policy on a home is a derivative. And many of the derivatives that were sold and which are now creating problems of insolvency and bankruptcy, namely, "credit default swaps (CDSs)," were insurance policies in one form or another. Their flaw was that unlike ordinary homeowners' insurance, they did not have a sufficient list of exclusions. But decades of brainwashing by the government, the media, and the educational system had convinced almost everyone that such collapse was no longer possible. The Federal Reserve would save us from any disaster. So there was no reason to create sound derivatives. And many of these same big businesses received bailouts, and were indeed "saved."

Only 6% of homes were in default when the system collapsed.

Nice try, though.

The $516 TRILLION DOLLAR derivative bubble is what brought down the economy.

Just to give you an idea of how big a bubble that was, the GDP of all the economies in the world in one year is $50 trillion.

First of all, cite sources. Second of all, what does the number of homes in default have to do with the points I raised? Government and the Federal Reserve caused such bad derivatives to be favorable in the market. These derivatives were largely based on the housing market and mortgage loans. When the housing market bubble popped, the absurdity of these derivatives was revealed. Had the housing bubble never been created by the government such derivatives would never be profitable anyway.

There could be no collapse of the derivatives market without the rise. And the rise was wrongly caused by government. The market in derivatives should never have existed in the first place. Fannie Mae and Freddie Mac subsidized such derivatives. The government essentially encouraged bad loans and investments.

 

[Toddsterpatriot]

The financial crisis was caused by the $516 TRILLION DOLLAR derivative Ponzi scheme that Wall Street was running....

Not for nothing did US billionaire Warren Buffett call them the real 'weapons of mass destruction'

The market is worth more than $516 trillion, (£303 trillion), roughly 10 times the value of the entire world's output: it's been called the "ticking time-bomb".

It's a market in which the lead protagonists – typically aggressive, highly educated, and now wealthy young men – have flourished in the derivatives boom. But it's a market that is set to come to a crashing halt – the Great Unwind has begun.

Last week the beginning of the end started for many hedge funds with the combination of diving market values and worried investors pulling out their cash for safer climes.

Some of the world's biggest hedge funds – SAC Capital, Lone Pine and Tiger Global – all revealed they were sitting on double-digit losses this year. September's falls wiped out any profits made in the rest of the year. Polygon, once a darling of the London hedge fund circuit, last week said it was capping the basic salaries of its managers to £100,000 each. Not bad for the average punter but some way off the tens of millions plundered by these hotshots during the good times. But few will be shedding any tears.

The complex and opaque derivatives markets in which these hedge funds played has been dubbed the world's biggest black hole because they operate outside of the grasp of governments, tax inspectors and regulators. They operate in a parallel, shadow world to the rest of the banking system. They are private contracts between two companies or institutions which can't be controlled or properly assessed. In themselves derivative contracts are not dangerous, but if one of them should go wrong – the bad 2 per cent as it's been called – then it is the domino effect which could be so enormous and scary.

Financial Weapons of Mass Destruction: A $516 Trillion Derivatives 'Time-Bomb'

Maybe you could explain how derivatives caused the crisis?
After you show that 400 Americans control half the nations wealth.
Please tell me your source isn't Michael Moore.
LOL!

 

[xsited1]

Why We Need More, Not Less, Government

"Increased government efforts could do much more to improve our lives in significant ways."In the face of increasing threats to our wellbeing and the inability of the market or individual efforts to effectively address them, we need to expand public sector programs.

For decades, conservatives have been pushing for smaller government, and have consistently called for reduced social spending, less regulation, and more tax cuts. But not everyone agrees. When the financial crisis hit in the fall of 2008 and the economy began to melt down, suddenly there were calls for bigger and more active government. Many people wanted a massive federal stimulus plan to ward off an economic depression, and others demanded the widespread re-regulation of financial markets to prevent a recurrence of these problems.
Government is Good - Why We Need More, Not Less, Government

After years of writing about how governments abuse, murder, and imprison innocent people and destroy life around the world, I find that I have been wrong, really wrong. All this time, I wrongfully tried to convince readers that terrible things are done in the name of “good government,” and now I have to apologize to them.

Why this turnaround? I have seen the light. Government is good, yes, very, very good. How do I know this? Why Douglas J. Amy, a professor of politics at Mount Holyoke College in Massachusetts (an island of True Political Correctness in America's Most Politically-Correct State) has opened a world of Truth and Beauty to me with his website, Government Is Good.

You see, until I read this wonderful site praising the Great Accomplishments and Missions of Government (or at least government when run by the Democratic Party), I had no idea that government constantly did wonderful things for me. I was ungrateful, but no more!

...

Government Is Good, Don’cha Know by William L. Anderson

 

[Oldstyle]

"Because when the economy goes into a deflationary cycle like it did in 2008, the government MUST be the demand of last resort. Otherwise, you have another Great Depression."

What you fail to take into account is the government's role in creating economic bubbles in the first place. Holding them out as the "last resort" to save our economy when their policies were in large part responsible for the bubble is rather ironic. Bottom line? Most times when the Federal Government inserts itself into how the economy functions there are unintended consequences. The CRA is a perfect example of that. In an effort to allow more Americans the chance to own houses the Feds pressured lending institutions to loosen lending standards or face economic sanctions. As a result sub prime mortgages become the norm rather than the exception. Contrast that with Canada where sub prime mortgages are practically non-existent. They didn't have the bubble and bust cycle that we did...they didn't have the foreclosure problems we did. Why? It's quite simple, really...THEIR banks continued to write loans to people who legitimately qualified for them.

 

[Uncensored2008]

The CRA had absolutely nothing to do with the collapse. Zero. Zilch.

ROFL

Gawdamn but you're stupid.

Bundled Mortgage Securities have any meaning to you, sparky? Know the source of them? That would be the "liars loans" of CRA/LMI - on the basis that property values always increase and thus the fact that the borrower can't and won't repay the loan doesn't affect it's status as a marketable security.

When those loans turned toxic, then the Ponzi scheme played out, resulting in 2008 - but no worries, Bush and Obama made sure their crooked friends got out unscathed.

Goldman Sachs and Chase have never been better.

And the "artificially low interest rates" were set by the Bush administration in an effort to "Starve the Beast"

Gawd DAYUM you're a fucking moron...

You ever even heard of the Federal Reserve? (You ever even heard of the 6th grade?)

 

[Uncensored2008]

Government brings food to the store and built your home? Really?

Well yeah - he's in the projects and living on food stamps.....

 

[Uncensored2008]

HUH?

Do you live in a foxhole?

.

No, but he has his head up his asshole....


Does that count?

 

[ShackledNation]

For those of you claiming we need more government, read Economics in One Lesson by Henry Hazlitt and them come back to me.

 

[shintao]

First of all, cite sources.

The right doesn't have to cite sources, so screw you with my pleasure.

These derivatives were largely based on the housing market and mortgage loans. When the housing market bubble popped, the absurdity of these derivatives was revealed. Had the housing bubble never been created by the government such derivatives would never be profitable anyway.

OK, nitwit, where is your source you are supposed to cite??

There could be no collapse of the derivatives market without the rise. And the rise was wrongly caused by government. The market in derivatives should never have existed in the first place. Fannie Mae and Freddie Mac subsidized such derivatives. The government essentially encouraged bad loans and investments.

Still no sources.........................must be hump hump day, huh? LMAO!

 

[shintao]

HUH?

Do you live in a foxhole?

.

No, but he has his head up his asshole....


Does that count?

Actually I have my cock buried down your throat twit. Does that count?

 

[Toddsterpatriot]

The Community Reinvestment Act (CRA) forced banks to loan money to those with bad credit creating toxic assets which were bundled as derivative packages and sold to other banks. You need to look farther upstream. The complaining about derivatives is just the normal BS you hear about 'speculators' during any crisis. People haven't by and large heard the word 'derivatives' much so it sounds fresh, therefore it gets more press. If they're bitching about the mortgage derivatives you simply have to remember that regulations and rules can allow and even promote the creation of bad debt, but without buyers what the hell is anyone going to do with that debt, much less derivatives/structured products based on it? The Fed provided the buyers, plain and simple. It's an odd application of Keynesianism I think in that people seem to believe "if you produce it, they will buy" which is not true. In order for people to buy bad debt they needed and got three things: easy money and credit; the lower interest rates for which also fueled a hunger for high yield, high risk debt; and explicit and implicit guarantees of bailout should the debt go tits up. Without those three things, all provided by the government and The Fed, any bad debt or derivatives that were produced would have been sold to...no one.

Derivatives have received such a bad press that it is necessary to point out that the insurance policy on a home is a derivative. And many of the derivatives that were sold and which are now creating problems of insolvency and bankruptcy, namely, "credit default swaps (CDSs)," were insurance policies in one form or another. Their flaw was that unlike ordinary homeowners' insurance, they did not have a sufficient list of exclusions. But decades of brainwashing by the government, the media, and the educational system had convinced almost everyone that such collapse was no longer possible. The Federal Reserve would save us from any disaster. So there was no reason to create sound derivatives. And many of these same big businesses received bailouts, and were indeed "saved."

Only 6% of homes were in default when the system collapsed.

Nice try, though.

The $516 TRILLION DOLLAR derivative bubble is what brought down the economy.

Just to give you an idea of how big a bubble that was, the GDP of all the economies in the world in one year is $50 trillion.

First of all, cite sources. Second of all, what does the number of homes in default have to do with the points I raised? Government and the Federal Reserve caused such bad derivatives to be favorable in the market. These derivatives were largely based on the housing market and mortgage loans. When the housing market bubble popped, the absurdity of these derivatives was revealed. Had the housing bubble never been created by the government such derivatives would never be profitable anyway.

There could be no collapse of the derivatives market without the rise. And the rise was wrongly caused by government. The market in derivatives should never have existed in the first place. Fannie Mae and Freddie Mac subsidized such derivatives. The government essentially encouraged bad loans and investments.

FYI, bundled mortgages are not derivatives.