The credit freeze isn’t the crux of the issue – it’s the solution. The issue was the massive credit bubble originating in 1980.
I call it asset stripping.
The commercial press calls it “financial innovation,” “globalisation” and “dynamic, flexible Anglo-Saxon capitalism” (as opposed to “Euroschlerotic” Germany which doesn’t allow nearly as free a hand for the people involved in the rape-and-run version of capitalism).
What do you call it when American Hedge Fund managers do the same thing ?
what are you trying to say, i dont understand. money is something so you could exchaing for something else that has some or more value. without money how would you buy food?
appraisal is a scam. if theres no unaccountability for the valuation, it is worthless.
Your on the right track. On our money is printed “In God We Trust.” This is true.. God help us if people no longer believe in the value of the dollar. Or, in this situation, the exact opposite. People believed too much in the value of the dollar instead of the real wealth. As was pointed out in the video, people DID gain real money (even including inflation), but the banks thought it was worth more than it was in reality.
We need to stablize the market somehow. I say, build more homes….
Price is an illusion
At the point where you leave off, it’s not clear that wealth has been destroyed. The houses still exist. They haven’t been foreclosed, put up for an auction with no buyers, boarded up, and allowed to fall into ruin.
Ill-advised consumption has taken place. Instead of investing for their retirement, people have counted on their house value to sustain them and thus have considered themselves free to spend all their income on current consumption. But that’s not the same as wealth destruction.
I am a stay at home mom. I need to learn about wealth and the terms related to it on a beginning learning level. These two classes are great. The instructors voice is pleasant and clear. Thanks for these two great classes!
…continued
When using fiat money to measure wealth. It is easy to creat illusions of wealth simply by printing more and more, making it cheaper and easier to obtain. People and governments buy things, bidding prices up, and when the system can’t sustain it any longer, the prices adjust and the illusion is gone and people are left with reality that their asset column dissapeared and all is left is the liability side.
The Federal Reserve is like steroids for capitalism.
Any thoughts?
Sal, I’ve only seen a few of your videos and I am totally psiched. I am excited to learn more from them. Expect a doation from me soon. Can I get your feedback on this point? It is a different way of looking at money. Money is wealth because we know we can somone else will give me something of value for it. Here it is: If all the money in the world was destroyed the total amount of wealth would remain unchanged. Money is an idea, concieved in the mind of man. Continued…
Im a little confused as to how consumption (is this the same as spending) on granite countertops, hardwood floors, etc. leads to wealth destruction. My best guess which I think is wrong is that you mean spending on a vacation as opposed to spending/investing on something that leads to future profits (build factory or through financial intermediary) causes wealth destruction. But in this case doesn’t the wealth just transfer to hardwood floor and granite countertop makers? Thanks for your video.
That’s a pretty good description of the *proximate* causes. But if you want to know the real reason for the Bush Depression, you should go here:
v=akVL7QY0S8A
See if you can spot Ronnie Raygun’s presidency in her graphs…
This video better explains the situation, where bad loans were insured, created the whole mess:
v=0Y9A0C45KZI
Thank you for this. Can you exapin to me about the subprime market and how it effect the world.
Amen.
The bubble (and the IT bubble before that) permitted people to ignore this reality for a while – which meant, of course, that more of your industrial base got moved abroad than would have otherwise been the case.
When Russian oligarchs do that, it’s called “asset stripping.”
In the current US case, it is even worse, because there is a political dimension that often fails to come across: The asset bubble permitted the US political economy to camouflage declining median real incomes. Why did median real income decline? Because your oligarchs – sorry, *tycoons* – moved much of your industrial base to China and other low-wage, low-regulation countries (i.e. countries that have no problem with pollution and slave labour).
Another thing is that (more or less) the only people who have money to buy stuff with are the people who stayed in cash during the bubble – everybody else is seeing their margins wiped out. And the people who stayed in cash during the bubble are probably either risk-averse or think that this area is outside their competence.
Nothing wrong with consumption when you know its consumption (and an argument could be made that it makes you happier which is the best return).
Well, i’m sure purchasing all those marked down assets, and getting them off bank balance sheets should get lending (money creation) back on track. It’s true though, no matter how they’re financed, once money is consumed, the opportunity cost (investment) has been paid. Unless you’re running some kind of socialist state where people can’t buy luxuries that’s always going to happen. I’ll take our system over that any day, I love my Playstation and Lakers tickets.
I assume your talking about real estate? If that is the case, you should wait until inventories stabilize (stop growing) for a few months. If you’re talking about the stock market, we could see some rallies but stocks tend to over-correct relative to fair value implying that we could see some significant downside over the next 1-3 years (punctuated by sharp rallies).
Hi Sal
Given the governments measures that seem bound to fail, how long do you see declines playing out? And what factors will bring about the bottom to this market. i.e. when will we know know that its safe to buy again?
Dear Sal.
I am very new to the banking / financial sector and I cannot afford to goto college or the time to read books as my current job is so demanding. I needed some urgent knowledge on the banking / financial system and I came accross your videos, I am learning so much from your videos, as well as becoming more and more confident in myself to follow my dreams. Thank you so much for your wonderful training.
I’d also add that there is no shortage of sophisticated investors with 6-10 year time horizons with cash so there is probably good reason for them to be taking a pass on this stuff. Its also hard to know what the underlying assets look like/are worth.
The credit freeze isn’t the crux of the issue – it’s the solution. The issue was the massive credit bubble originating in 1980.
I call it asset stripping.
The commercial press calls it “financial innovation,” “globalisation” and “dynamic, flexible Anglo-Saxon capitalism” (as opposed to “Euroschlerotic” Germany which doesn’t allow nearly as free a hand for the people involved in the rape-and-run version of capitalism).
What do you call it when American Hedge Fund managers do the same thing ?
what are you trying to say, i dont understand. money is something so you could exchaing for something else that has some or more value. without money how would you buy food?
appraisal is a scam. if theres no unaccountability for the valuation, it is worthless.
Your on the right track. On our money is printed “In God We Trust.” This is true.. God help us if people no longer believe in the value of the dollar. Or, in this situation, the exact opposite. People believed too much in the value of the dollar instead of the real wealth. As was pointed out in the video, people DID gain real money (even including inflation), but the banks thought it was worth more than it was in reality.
We need to stablize the market somehow. I say, build more homes….
Price is an illusion
At the point where you leave off, it’s not clear that wealth has been destroyed. The houses still exist. They haven’t been foreclosed, put up for an auction with no buyers, boarded up, and allowed to fall into ruin.
Ill-advised consumption has taken place. Instead of investing for their retirement, people have counted on their house value to sustain them and thus have considered themselves free to spend all their income on current consumption. But that’s not the same as wealth destruction.
I am a stay at home mom. I need to learn about wealth and the terms related to it on a beginning learning level. These two classes are great. The instructors voice is pleasant and clear. Thanks for these two great classes!
…continued
When using fiat money to measure wealth. It is easy to creat illusions of wealth simply by printing more and more, making it cheaper and easier to obtain. People and governments buy things, bidding prices up, and when the system can’t sustain it any longer, the prices adjust and the illusion is gone and people are left with reality that their asset column dissapeared and all is left is the liability side.
The Federal Reserve is like steroids for capitalism.
Any thoughts?
Sal, I’ve only seen a few of your videos and I am totally psiched. I am excited to learn more from them. Expect a doation from me soon. Can I get your feedback on this point? It is a different way of looking at money. Money is wealth because we know we can somone else will give me something of value for it. Here it is: If all the money in the world was destroyed the total amount of wealth would remain unchanged. Money is an idea, concieved in the mind of man. Continued…
Im a little confused as to how consumption (is this the same as spending) on granite countertops, hardwood floors, etc. leads to wealth destruction. My best guess which I think is wrong is that you mean spending on a vacation as opposed to spending/investing on something that leads to future profits (build factory or through financial intermediary) causes wealth destruction. But in this case doesn’t the wealth just transfer to hardwood floor and granite countertop makers? Thanks for your video.
That’s a pretty good description of the *proximate* causes. But if you want to know the real reason for the Bush Depression, you should go here:
v=akVL7QY0S8A
See if you can spot Ronnie Raygun’s presidency in her graphs…
This video better explains the situation, where bad loans were insured, created the whole mess:
v=0Y9A0C45KZI
Thank you for this. Can you exapin to me about the subprime market and how it effect the world.
Amen.
The bubble (and the IT bubble before that) permitted people to ignore this reality for a while – which meant, of course, that more of your industrial base got moved abroad than would have otherwise been the case.
When Russian oligarchs do that, it’s called “asset stripping.”
In the current US case, it is even worse, because there is a political dimension that often fails to come across: The asset bubble permitted the US political economy to camouflage declining median real incomes. Why did median real income decline? Because your oligarchs – sorry, *tycoons* – moved much of your industrial base to China and other low-wage, low-regulation countries (i.e. countries that have no problem with pollution and slave labour).
Another thing is that (more or less) the only people who have money to buy stuff with are the people who stayed in cash during the bubble – everybody else is seeing their margins wiped out. And the people who stayed in cash during the bubble are probably either risk-averse or think that this area is outside their competence.
Nothing wrong with consumption when you know its consumption (and an argument could be made that it makes you happier which is the best return).
Well, i’m sure purchasing all those marked down assets, and getting them off bank balance sheets should get lending (money creation) back on track. It’s true though, no matter how they’re financed, once money is consumed, the opportunity cost (investment) has been paid. Unless you’re running some kind of socialist state where people can’t buy luxuries that’s always going to happen. I’ll take our system over that any day, I love my Playstation and Lakers tickets.
I assume your talking about real estate? If that is the case, you should wait until inventories stabilize (stop growing) for a few months. If you’re talking about the stock market, we could see some rallies but stocks tend to over-correct relative to fair value implying that we could see some significant downside over the next 1-3 years (punctuated by sharp rallies).
Hi Sal
Given the governments measures that seem bound to fail, how long do you see declines playing out? And what factors will bring about the bottom to this market. i.e. when will we know know that its safe to buy again?
Dear Sal.
I am very new to the banking / financial sector and I cannot afford to goto college or the time to read books as my current job is so demanding. I needed some urgent knowledge on the banking / financial system and I came accross your videos, I am learning so much from your videos, as well as becoming more and more confident in myself to follow my dreams. Thank you so much for your wonderful training.
I’d also add that there is no shortage of sophisticated investors with 6-10 year time horizons with cash so there is probably good reason for them to be taking a pass on this stuff. Its also hard to know what the underlying assets look like/are worth.