Too Big to Fail is a MYTH.

[jem]

I am not sure anyone knows. But I suspect as long as there is intervention this real estate problem is going to be around for a very long time.

by the way why would it have been so bad to let these big banks fail anyway.

The quality people in them would have formed new ventures... and we could have fixed the credit problem by just giving every man woman and child in america 50 grand.

 

[tradecalm]

Quote from achilles28:

In Jan 2008, the total asset value (pre-crash) of all US banks was ~12 Trillion USD.
http://www2.fdic.gov/idasp/main.asp

Current losses suffered by US banks are estimated at ~2 Trillion USD.
http://www.reuters.com/article/idCNL554155620091105?rpc=44

To date, the total cost of Government intervention to stabilize the economy is estimated at ~3.5 Trillion USD.
http://money.cnn.com/news/storysupplement/economy/bailouttracker/index.html

Total Losses (Public and Private) = ~6 Trillion.

If the bailout never happened, half of US Banks would have survived. The prudently managed Regional Banks would quickly grow to fill the vacuum left by irresponsible National Banks. These would become the new Citi's, BoA's and Goldmans. This is how Capitalism is supposed to work.

We are still thinking of Capitalism, when it's no longer the case. I don't know what it is, but it not Capitalism. The governments have been playing by the new rules since governments moved away from currencies backed by gold.

The bail out is a new form of tax. Governments would have to go bankrupt otherwise.

Any government that acknowledge the fact it's mismanaged the budget would have to raise taxes. This would mean they will have to step down and give up all the power (simply because people will not tolerate taxes).

Bailout is a new form of tax. It creates inflation and force people work harder to get the same result. The same net effect achieved without raising taxes. As long as people remain ignorant and buy all the bull$#!t that government tells people they remain slaves.

So I repeat: bailout is a way to impose more tax while remain in power.

Those that are "too big to fail" are in the business with the government.

 

[tradecalm]

Quote from Martinghoul:

Achilles, with all due respect, I don't think you comprehend fully what the crisis was all about. I know that you think you can look at the numbers and say that "there's always a bottom". And yes, I agree, there IS always a bottom, but it's all about what sort of bottom it is. After all, the bottom that the world mkt found after the Great Depression was World War II. Do you think that was a good thing?

Interesting conclusion. Do you have sufficient data that WWII was a consequence of the Great Depression? The WWII was the World War, with many nations involved, while Great Depression was purely American. Unless you want to say that US orchestrated the WWII...

 

[ammo]

don't know if it's fact but in the el doctorow book"ragtime"the inference was that the depression was caused in part by the world becoming a global economy rather than several national markets that were self sufficient for the most part,....not unlike the present where the currrencies,commodities,and products are exchanged en masse,and countries are borrowing billions from each other..,trading debt....,and seemingly no one on the planet seems to have a handle on an efficient way to pull this off...which leaves an opening for the sharks to exploit the government s financial institutions managing the moneyand subsequently ,the lack of laws needed to corral economies,hence offshore,ungoverened pirates creating vehicles trading thru onshore institutions

 

[Martinghoul]

Quote from tradecalm:

Interesting conclusion. Do you have sufficient data that WWII was a consequence of the Great Depression? The WWII was the World War, with many nations involved, while Great Depression was purely American. Unless you want to say that US orchestrated the WWII...

Why do you say that the Great Depression was purely American. In fact, it was worldwide. It had a particularly painful effect on Germany with unemployment reaching arnd 30% by 1932. I am not alone in drawing a link between the depression and the collapse of liberal democracy in Germany, followed by subsequent slide into political extremism. You may, of course, disagree.

I certainly don't mean to say that the US orchestrated WWII.

 

[Martinghoul]

Quote from achilles28:
To be honest, I don't think you comprehend the self-corrective nature inherent in economic cycles/prices and your understanding of the Great Depression is way off. Which probably explains why you hold to the Chicken Little theory of market crashes. So no disrespect taken. I don't mean any disrespect either, btw.

As far as the Great Depression, the market and unemployment bottomed nearly a decade before WW2, in ~1933. By the time America entered the War, the market had recovered nearly half it's losses since the crash. Not coincidentally, the market bottomed in 1933 when the US went off the Gold Standard and loosened credit. That said, the severity and length of the crash was more the result of FED unwillingness to sell their gold hoards and prop banks through treasury purchases. That decision to throttle credit by a full 1/3rd and allow depositor bank runs, vaporized capital reserves, money supply and made the Big D "Great".

As far your example, I'm well aware the effect a banking crisis has on leveraged companies that rely on credit lines to meet payrolls. That's the nature crashes: a quick, sharp, severe flushing of overleveraged business, banks, consumers (and soon, Governments!). Businesses that don't have sufficient retained earnings, cash flow or assets to meet payrolls during a crash are evidently over-leveraged in a precipitous market and simply shouldn't exist. Most non-banks survived the '08 crash for that reason alone (sufficient cash flow/retained earnings = "cash rich"). But, to answer your question, yes, I'm gainfully employed (daytrader), withdraw once every ~3 months, and yes, I enjoy my paycheck

achilles-san, you are most certainly entitled to your opinion regarding my level of understanding. Thus, no offense taken.

My point about the Great Depression had nothing to do with its effect on the US (there are other nations out there, you know ?). The downturn had an effect on other countries, including Germany. Unemployment in Germany peaked arnd 1932 and I think you know what happened after that.

My point, to summarize, is simple. Banking crises, if not contained, have a way of "accidentally" growing into political crises. Political crises have a way of "accidentally" growing into wars. Such drastic developments are not very likely, but the losses they cause are painful indeed. That's all there is to it.

 

[achilles28]

Quote from Martinghoul:

achilles-san, you are most certainly entitled to your opinion regarding my level of understanding. Thus, no offense taken.

My point about the Great Depression had nothing to do with its effect on the US (there are other nations out there, you know ?). The downturn had an effect on other countries, including Germany. Unemployment in Germany peaked arnd 1932 and I think you know what happened after that.

My point, to summarize, is simple. Banking crises, if not contained, have a way of "accidentally" growing into political crises. Political crises have a way of "accidentally" growing into wars. Such drastic developments are not very likely, but the losses they cause are painful indeed. That's all there is to it.

My bad. I didn't know we're arguing history. I'm not sure Germany is the best example since reparations from the Treaty of Versailles played a large role in the national malaise, discontent and economic turmoil. But in general, yes, I agree, economic crashes can precipitate wars that are used as a political tool of distraction or scapegoating. What I don't agree with, is the notion that crashes necessitate Government consumption (ie Make War) because economies naturally recover losses, create new wealth, which fuels new demand.