Take A Deep Breath: Some Perspective On The Financial Crisis
I thought this article did a good, and concise, job of explaining how we got here. It also deals with issues such as "Will the bailout work?" and "Doesn't the bailout encourage banks to make risky decisions again?"
It's worth the time I took to read it. I think you guys will agree.
I'd say the This American Life radio show they referenced is a must-listen.
Excellent article. I also can't wait to hear that edition of American Life.
Having lost >$50,000 recently I am nervous for all the reasons cited in the article. IF it were anyone but the Gubbyment running the thing I would not be as apprehensive. Throw an election into the mix, Pelosi posturing, McCain trumpeting and my butt starts twitching.
I cannot predict what will happen, nor can I change it. I have no choice but to ride out the storm and NOT change my investments. To get back to where I was a month ago would take forever with a piddly savings account.
Bigger risk = bigger dividends. Maybe I can pilot a boat full of crack into Miami. 
Just kiddiing, Dan
The markdown of the crack from the Cuban Market to the US market wouldn't pay for the gas. I am thinking about running meth into Mexico and selling it in Pesos.
One thing I found interesting (not specifically stated in this article) is that if the bailout is not done, credit will be very hard to get. I can see this would be a problem for businesses, but I almost see it as a good thing for consumers. They talk about not being able to get as much credit on credit cards, not being able to get car loans as easy etc. What would the result of that be, tragedy of tragedy, people would actually have to only buy things they can afford!!
Obviously the damage to businesses would likely out weigh the potential societal upside of less credit but I am hopeful (and it is probably very likely) that whatever the outcome credit access is generally more restrictive.
How does this relate to cars? Well, it would seem that used cars would rise in value (since more could not afford new) and people would become more interesting in maintaining / repairing older cars. New cars may also actually return to a simpler time, with small less "gagety" vehicles that the now credit hampered consumer can actually afford.
For me, any restricted access to credit would have almost no effect, so maybe that is the upside for those of us who did not take part in all this stupidity.
aircooled wrote: For me, any restricted access to credit would have almost no effect, so maybe that is the upside for those of us who did not take part in all this stupidity.
Almost no effect? it directly affects most businesses, which directly effects any employee of said businesses. A tightening/remoal of business credit will have wide ranging effects even on people not involved in those industries.
I'm with Dan, it's best to ride out the storm.
At inception, I put my 401's in fairly conservative stuff. The advisor said I should go with a more aggressive mix, but the 10 year ups and downs didn't look too sporty. So I went with my instincts, keeping in mind the time horizon- I still have 15 years till retirement. They took a hit, but not nearly as bad as friends with more aggressive portfolios.
During the last stock market downturn, my stuff lost value but within 18 months everything was back to previous levels and kept gaining ground until now.
My investment in large quantities of beer has proven to be wise. 
I have not lost a single one...well, except for the ones I drank. I just pissed those away.
bastomatic wrote: I'd say the This American Life radio show they referenced is a must-listen.
Very excited there doing an update next week. The giant pool of money podcast was fantastic.
Chris_V wrote:aircooled wrote: For me, any restricted access to credit would have almost no effect, so maybe that is the upside for those of us who did not take part in all this stupidity.Almost no effect? it directly affects most businesses, which directly effects any employee of said businesses. A tightening/remoal of business credit will have wide ranging effects even on people not involved in those industries.
Chris' last sentence is key. Credit, when used responsibly, can be an excellent way to effectively and accurately manage your money.
I purchased a washing machine and a dryer 3 years ago and got a 12 months(same as cash) 0% deal. I could have paid cash for the units, but by utilizing the 0% deal, I:
Yes, ignorant, but... That 0% interest wasn't really 0%. It was probably closer to 10%. In other words, if you would have pulled out pictures of Benjamin Franklin and waved them in the face of the salesman, you probably could have got 10% off that "same as cash" price, which would more accurately be described as "same as cash asking price." So, your financing deal probably cost you 10%, less the return on your savings account of 3-4%? for a net of 6-7%. And, these places usually have their fine print rigged so that if you're 10 minutes late with a payment for anyone's fault, including the bank, post office, internet, them, whatever, that 0% suddenly becomes 20%. It all worked out OK for you, but one has to be careful with those things.
I see that Circuit City is about to go under. http://www.forbes.com/business/2008/09/29/retail-economy-recession-biz-commerce-cx_tvr_0929retail.html That's what they get for outsourcing their IT and firing all their people, then offering to hire a few back at reduced pay. Good riddence.
Dr. Hess wrote: Yes, ignorant, but... That 0% interest wasn't really 0%. It was probably closer to 10%. In other words, if you would have pulled out pictures of Benjamin Franklin and waved them in the face of the salesman, you probably could have got 10% off that "same as cash" price, which would more accurately be described as "same as cash asking price."
three years ago cash price bargaining for applicances in the middle of the housing boom didn't happen... Well thats not quite correct.. I mean it did happen at local small stores that had prices so out of line with the big boxes that even if I was to get a 10% reduction in price I'd still pay 20% more than the big box...
and the rest of it.. read your loan and know the terms. You think any of my money was late? nope.. hell no.. I didn't want to acrue those crazy penalties and "conversion costs"
Chris_V wrote: Almost no effect? it directly affects most businesses, which directly effects any employee of said businesses. A tightening/remoal of business credit will have wide ranging effects even on people not involved in those industries.
Well yes, I was referring to what I suspect will be a general tightening of credit even after whatever sort of "bailout" happens (I am certain there will be some form of one). I am saying a general tightening of consumer credit is likely a good thing since it is clear the "common" consumer has NO idea how to properly use credit. In a tightening of credit I am assuming those that have a good concept of credit will likely have good credit scores and still be able to get reasonable amounts of it, as it likely should be (and should have been).
I know that most of our economy is (sadly) based on people buying crap they cannot afford, it just seems like moving away from that may not be such a bad thing. Besides, it's really the only upside I see for those of use who did not participate in all this idiocy but are still saddled with paying for it.
Dr. Hess wrote: I see that Circuit City is about to go under. http://www.forbes.com/business/2008/09/29/retail-economy-recession-biz-commerce-cx_tvr_0929retail.html That's what they get for outsourcing their IT and firing all their people, then offering to hire a few back at reduced pay. Good riddence.
And here I thought it was because they sucked. I only go to Circuit city after hitting: Fry's, Comp USA (before they closed), Best Buy, Target, and Radio Shack first. Generally I don't even bother because any other similar store will offer better selection, prices that are at least as good, and superior service.
Dr. Hess wrote: Yes, ignorant, but... That 0% interest wasn't really 0%....
This is another excellent point about all this "credit". Most people do not realize that the widespread use of credit cards (I just "love" it when someone buys something for $5 with a CC) is basically a hidden tax on everything. Because CC have a charge when they are used stores are forces to raise prices to compensate. The end result of course is that even non CC purchasers end up paying more (unless you can make cash deals, which I believe are contractually are not allowed by the CC companies).
Of course none of this "tax" is not going to the government (and whatever tiny trickle might make it down to public use)
aircooled wrote:Dr. Hess wrote: Yes, ignorant, but... That 0% interest wasn't really 0%....This is another excellent point about all this "credit". Most people do not realize that the widespread use of credit cards (I just "love" it when someone buys something for $5 with a CC) is basically a hidden tax on everything. Because CC have a charge when they are used stores are forces to raise prices to compensate. The end result of course is that even non CC purchasers end up paying more (unless you can make cash deals, which I believe are contractually are not allowed by the CC companies). Of course none of this "tax" is not going to the government (and whatever tiny trickle might make it down to public use)
So do what I do and use a credit card that gives me a real 5% back on everything.. so I get that "tax" back in my pocket... Just for using their card I got over $800 back last year.. HA!
i wasn't actually talking about consumer credit. I'm talking about BUSINESS credit, like stocking for inventories, and the like, as well as all the other ways businesses use credit. Like builders using credit to build houses or commercial buildings before selling/leasing them out. Like financing machinery. If businesses can't get credit easily, they may not expand, or they may be forced to cut back, thereby losing jobs. Loss of jobs affects a wide range of people not just those that have lost them in any given industry.
I agree, business credit is certainly not a bad thing (although super easy credit likely is). It's the consumer credit tightening that might actually be a good thing (but not if you ask most economists).
Then again apparently our entire money / economic system is based on a requirement for an ever expanding economy, which seems absurd to me and completely unrealistic.
Salanis wrote:Dr. Hess wrote: I see that Circuit City is about to go under. http://www.forbes.com/business/2008/09/29/retail-economy-recession-biz-commerce-cx_tvr_0929retail.html That's what they get for outsourcing their IT and firing all their people, then offering to hire a few back at reduced pay. Good riddence.And here I thought it was because they sucked. I only go to Circuit city after hitting: Fry's, Comp USA (before they closed), Best Buy, Target, and Radio Shack first. Generally I don't even bother because any other similar store will offer better selection, prices that are at least as good, and superior service.
Funny thing about the local CC and BB: Best Buy has HORRIBLE customer service. Their computer repair desk is staffed by nerds who have absolutely no concept of how to deal with people. The CC desk guys are nerds too but they appear to have had customer service training of some sort.
http://www.techcrunch.com/wp-content/uploads/2008/09/septembermadnessb.jpg
HA ha
and chris business credit especially for capital projects like you showed has a trickle down effect on the economy.. but i wanted to show consumer credit implications which can be positive as well as the lastest negative connotation.
aircooled wrote: One thing I found interesting (not specifically stated in this article) is that if the bailout is not done, credit will be very hard to get. I can see this would be a problem for businesses, but I almost see it as a good thing for consumers. They talk about not being able to get as much credit on credit cards, not being able to get car loans as easy etc. What would the result of that be, tragedy of tragedy, people would actually have to only buy things they can afford!! Obviously the damage to businesses would likely out weigh the potential societal upside of less credit but I am hopeful (and it is probably very likely) that whatever the outcome credit access is generally more restrictive. How does this relate to cars? Well, it would seem that used cars would rise in value (since more could not afford new) and people would become more interesting in maintaining / repairing older cars. New cars may also actually return to a simpler time, with small less "gagety" vehicles that the now credit hampered consumer can actually afford. For me, any restricted access to credit would have almost no effect, so maybe that is the upside for those of us who did not take part in all this stupidity.
A buddy of mine has no credit history. He makes in the area of 60k a year, and his own bank, Chase, denied his credit card application.
Again, he doesn't have bad credit, he has no credit. He's never had a credit card, or property in his name, or any monthly bills. At 25 years old and living with his folks, he's been living off his check card.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aDy9UdLRu6Xw&refer=us
Mcdonalds to franchisee's "no more loans for you"
looks business credit is already drying up....
Jensenman wrote: Funny thing about the local CC and BB: Best Buy has HORRIBLE customer service. Their computer repair desk is staffed by nerds who have absolutely no concept of how to deal with people. The CC desk guys are nerds too but they appear to have had customer service training of some sort.
I was an employee of Best Buys Geek Squad. Not only did we not receive ANY customer relation training, we weren't allowed to fix any customer issues. You can yell at the guy behind the counter all you want but he's just as frustrated with the situation as you are. Honestly, if we did anything except extract more money out of an upset customer we got in trouble.
I eventually left and started my own PC repair/service business. I make lots more money now and I actually get to make my customers happy! Credit tightening up has certainly had an impact on me, though.
You'll be much better off using a local, small company to get your pc work done. No one at the big box stores gives a E36 M3 about you or your problems and no one is accountable for anything there.
Well, I never go to a retail store to get help fixing a technical problem. I go there to buy items to fix my own problems. I don't really like Best Buy. I do like Fry's. But between BB and CC, I feel like I can walk into BB and at least find a person that I can ask, "Excuse me where can I find item X?" And they'll be able to point me to it. Maybe it's just my local CC. I feel like it's staffed by a bunch of punks who don't know crap.
Actually, it's more in a poor location. And their inventory is worse than BB's.
I <3 Fry's.
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