"It's Different This Time" ??

Hopefully this will lead to a more fiscally responsible society. High down payments sound good if it keeps morons from spending like there's no tomorrow.
 
http://en.wikipedia.org/wiki/John_Law_(economist)

The wars waged by Louis XIV left the country completely wasted, both economically and financially. And the resultant shortage of precious metals led to a shortage of coins in circulation, which in turn limited the production of new coins. It was in this context that the regent, Philippe d'Orléans, appointed John Law, as Controller General of Finances.


"In May 1716 the Banque Générale Privée ("General Private Bank"), which developed the use of paper money was set up by Law. It was a private bank, but three quarters of the capital consisted of government bills and government accepted notes. In August 1717, he bought the Mississippi Company, to help the French colony in Louisiana. In 1717 he also brokered the sale of Thomas Pitt's diamond to the regent, Philippe d'Orléans. In the same year Law floated the Mississippi Company as a joint stock trading company called the Compagnie d'Occident which was granted a trade monopoly of the West Indies and North America. The bank became the Banque Royale (Royal Bank) in 1718, meaning the notes were guaranteed by the king. The Company absorbed the Compagnie des Indes Orientales, Compagnie de Chine, and other rival trading companies and became the Compagnie Perpetuelle des Indes on 23 May 1719 with a monopoly of commerce on all the seas. The system however encouraged speculation in shares in 'The Company of the Indies' (the shares becoming a sort of paper currency) and inflation. In 1720 the bank and company were united and Law was appointed Controller General of Finances to attract capital. Law's pioneering note-issuing bank was extremely successful until it collapsed and caused an economic crisis in France and across Europe.

Law exaggerated the wealth of Louisiana with an effective marketing scheme, which led to wild speculation on the shares of the company in 1719. In February 1720 it was valued for a very high future cash flow at 10,000 livres. Shares rose from 500 livres in 1719 to as much as 15,000 livres in the first half of 1720, but by the summer of 1720, there was a sudden decline in confidence, leading to a 97 per cent decline in market capitalization by 1721. Predictably, the 'bubble' burst at the end of 1720, when opponents of the financier attempted en masse to convert their notes into specie [gold].

===

During year 1720 some traders may have attempted to hide or smuggle out of France gold, silver or copper. Today we have another mechanism called international business. Big companies just take wealth out of the USA and move it to another country leaving behind a USA hollow shell economy otherwise known as a bubble.
 
A few of my favorite quotes that are very thought provoking:

"I believe that banking institutions are more dangerous to our liberties than standing armies . . . If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered . . . The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." --

Thomas Jefferson -- The Debate Over The Recharter Of The Bank Bill, (1809)


"The real truth of the matter is that a financial element in the large centers has owned the government since the days of Andrew Jackson."
-Franklin D Roosevelt

"I am a most unhappy man.I have unwittingly ruined my country.A great industrial nation is now controlled by its system of credit We are no longer a govn by free opinion or conviction and the vote of the majority,but a govn by the opinion and duress of a small group of dominant men."
-Woodrow Wilson- 9/25/1919

"Give me control of a nation's money supply,and i care not who makes its laws."
Mayer.Rothschild,Banker

Enjoy!

Even though i'm sure these are not new to most.
 
Seen them all before. The only thing I can add is that it's always different this time. The only thing that remains the same is the result. The people get screwed.
Any time you here "It's different this time" Prepare to drop 'em and bend over.
Nothing like being a central bank, You get in trouble you can just print money. Problem solved and if you work it right you end up owning everything.
 
Quote from gnome:

Is it really? I think perhaps it is.

Economic cycles since 1913 have always been orchestrated by the Fed... easing and expanding credit, interest rates and money supply.

This time, however, we might have experienced "credit exhaustion"... that is, the Fed kept the "pedal to the metal" (and lied about the inflationary impact) until the "marginal credit-based spender"... SHOT HIS WAD...

If that's the case, trying to re-ignite the consumer and re-ignite the economy is tantamount to "pouring gasoline on the burnt-out ashes of a camp fire".

There is NO precedent for this experience in the economic history of the US since the creation of the Fed.
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I think we're doing 1990's Japan.

Consumers are tapped because lenders haven't passed cheap liquidity to the market. Rather, they've kept it for themselves to recapitalize.

Japanese banks and financials did the same in the 90's. The spread between prime to banks and a 30-year street-level mortgage was ~6-8%. Same in America now.

The effective interest rate is around 8-9%. This is rather high and tight by most standards. Rampant supply-side inflation adds a 70's-era recessionary pressure by jacking prices and reducing real income.....

So the net effect is recessionary, largely due to the liquidity trap and second from energy/oil.

I didn't see it coming. But the overall situation still jives with what economic fundamentals are known.

Once banks recapitalize and pass on low rates to business and consumers, things should temporarily pick up. Although, inflation will be smoking hot by then.

The question is how long will it take American banks to get profitable?
 
Quote from Hook N. Sinker:

http://en.wikipedia.org/wiki/John_Law_(economist)

During year 1720 some traders may have attempted to hide or smuggle out of France gold, silver or copper. Today we have another mechanism called international business. Big companies just take wealth out of the USA and move it to another country leaving behind a USA hollow shell economy otherwise known as a bubble.
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I love the John Law story. I wonder if the US will outlaw private ownership of specie again.
 
I'll agree with all posts three pages into this thread. I'm a retail Broker (Independent, thank the Lord! B/D and IAR)

I'm losing some of by best top Clients over this mess that's been created, and it's hurting my family as well. No, I'm not a rich Broker. Why does everyone I meet think that if I'm a Broker, I'm wealthy? Sadly, this in not the case.:( :eek: :D

I've had the bank (I hate banks! GRRRR!) calling about the mortgage being 10 days late more than a few times this year. They always get paid in 10-12 days, but they're like vampires right now. We own a home with 50k in equity, and the vampires know it. So what do they do? Put the heat on people with homes that they can turn a quick/big profit on, and the rest with negative equity don't have to even make a payment, as the bank won't take posession of it for obvious reasons. What a mess.

I'm getting more and more prospective Clients in front of me with $300,000 in inv. assets But, a home they owe $490,000 on, (now worth 20-25% less than original purchase price), re-financed it with the all too famous ARM loan in 2002-2004 (which is now going up, and up...), $55,000 in Credit Card debt with an average 7-18% interest rate (the rates are really varying, so it's hard to pin this down to a certain number), two cars with 72 month loans (one a big SUV, 1 of 3 times thus far. LOL!), etc., OVER-LEVERAGED!!!!!!!! It's sad. I don't get this from my 70 year-old+ Clients. It's the 35-60 year old's who are in the most trouble from what I'm seeing weekly.

I personally think Credit Cards are the next mess on the horizon, and people are in a position now where they can't pay for what they shouldn't have bought. Another "nail" in the financial coffin. Don't think there's going to be any bailouts on these puppies, so I wonder what lies ahead.

The moral of the story: it's going to be one big sh** sandwich up into late 2009, and we all need to be nibbling around the edges, rather than following the herd, biting right into the middle. So, I guess pick what works, and don't deviate, or you'll be eating with the herd.:D
 
Quote from swtrader:

what seems to be forgotten from the public's collective memory, is that greenspan went into severe desparation in rates cuts in 2001-2002 that were veeeeery delayed in their effect - for quite a while, they seemed to have no effect at all - a deflationary depression was feared at the time

he basicly conscripted the assets of prudent savers (through near zero interest rates and ultra credit expansion/dollar dillution) and transfered the wealth to the hands of spenders via housing inflation/cash out refi

its was trillions of dollars of outright theft to keep the economy going - 'spend it, or we'll give it to someone who will'

spenders/borrowers seemed to have money fall from the sky - savers saw their hard earned savings evaporate

assets saved from foreginers, newfound wealth from globalization was also injected into the economy due to *relative* and *perceived* stabilty of the dollar vs their own currency

but eventually, you run out of savers to steal from, and foreigners catch on to what's going on - gloablization continues to feed the strength of their own countries, causing them to re-evaluate their perceptions of their own currency vs the dollar. 3 card monte doesnt create wealth, it only transfers it, and you have to have someone to transfer it from - we're running out very quickly. And the wealth generating capacity of the this country has been packed up and shipped away

and you end up like the story of the farm that ran out of coal, and wood, so they burned the wooden windbreak fence to keep the fire going

well now that's burned, the fire's going out, and the wind is howling.....

you can have all the faith in this country you want, you can salute the flag and bleat patriotic mantras, but when you replace wealth creating traditions with wealth destroying habits, poverty is the result no matter who and where you are

Ayn Rand's Objectivist newsletter in the 1960s articulated very well how this works and how evil it is, and the most bazzare thing is, her economics editor was none other than Allan Greenspan himself
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excellent read,my friend.
 
I need some help understanding the trickle down effect here.

Americans are net borrowers so obviously this is a huge huge problem when combined with the mortgage melt down. I know that the mortgage melt down is killing banks and they are avoiding taking control of the homes because it will crush their balance sheet. Well when people can't pay their credit card bills will the banks not put that on their balance sheets as well and just wait for another bail out? This is all pretty sketchy to me and i understand it only on the basic level. The detailed analysis of this must be a shit storm.


The gov can't keep bailing out these financial institutions especially if the consumer credit market busts next. What will happen?
 
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