economy

[Mopar Fanatic]

so what do you guys think about the current state of the economy?

from what i've gathered, there are several big problems that have caused the current recession (which i'm pretty sure we're in the midst of, even though some people are hesitant to call it that).

the first thing is the decline in the US housing market, which is tied to the subprime mortgage market. housing prices dropped, people couldn't refinance their ARMS loans and after a few years, couldn't afford their mortgage payments.

when people with bad credit were buying houses, they were usually going through a mortgage broker. these broker's didn't give a shit if the person could afford the mortgage they were signing up for or not, because they weren't giving them any money. they would just link the borrower up with a bank, collect a fee and then be done with it. people were allowed to take out mortgages that had very low payments for the first few years, and much larger payments in later years. these loans did not require the borrowers to prove their income, were very confusing (many of the brokers themselves didn't understand the product they were selling). the mortgage brokers told them they would be able to refinance to a fixed rate, low interest loan in later years, because home values always increased in the US. the problem was, home values stopped increasing. now, many people who should never have bought homes in the first place were unable to refinance, because they paid more for the home than it is currently worth. the date for their payments to expand came and all of a sudden, many could not afford their mortgages.


on wall street, bankers who had all of these high risk subprime loans figured out a way to move them off of their balance sheets, collect cash for the face amounts, and collect huge fees in the form of mortgage backed securities (MBS).

basically, they would take a pool of subprime mortgages, and carve them up into slices (tranches). each tranche was rated by moody's and S&P. investors who would buy a slice would collect on the mortgage payments made by the borrowers. when the mortgages were paid off, the cash flow would go to the investors. the top slice was rated AAA (implying extremely low risk) carried the lowest interest rate, while the lowest rated tranche carried the highest interest rate. in the event of borrowers defaulting, the lower rated tranche's owners would not get paid. when tons of defaults in the subprime began to happen, many MBS investment holders were losing out on payments. this lead investors to question the rating agencies ratings of these securities. this adversely effected the commercial mortgage backed security (CMBS) markets as well. the idea behind a CMBS is the same as a MBS, except the collateral is commercial real estate loans. large banks were funded through the CMBS, MBS and CDO markets. in order to have money to lend out to commercial real estate borrowers, MBS and CMBS trading desks needed to package up the loans they originated and sell them off at a premium to investors. they could then loan out money again.
without the ability to move the loans off of their balance sheets in these markets, they weren't able to lend money...hence, the credit crunch.

finally, skyrocketing oil prices. i don't understand how inflation can be avoided when oil prices are increasing at the rate they are.

oil is necessary for food production and food transportation, so food prices go up. oil is necessary for the transportation of goods, so the price of all goods go up. oil is necessary to heat homes, so it becomes more expensive to keep a house warm in the winter. oil is necessary for gasoline, so gas prices go through the roof. some people think that oil prices are increasing because of trader's speculations. others think that we've hit and maybe passed the peak of oil supply, and as supply dwindles, prices will continue to increase.
a few years ago analysts at goldman sachs stated that US oil prices would hit $100 a barrel. people all over the place were saying that was ridiculous and if it did happen, the US would have a second great depression. well, here we are.

I've talked to an economist in a month or two ago to talk about the things going on in the world. he said that any one of the things above would cause a recession by themselves. now we have all three hit at once.

are things going to get worse? how bad? what needs to be done in order to fix things?

[Homyrrh]

Invade Iran.

[Gordon]

Cut taxes!

[Moviefan1234]

How to fix the economy? Legalize marijuana.

[Gordon]

Well now I just feel bad we all didn't take shit seriously.

Alright to put it simply, more government.

[SpoonMan999]

Government needs to stop wasting any left over funds for all the thousands of programs it has and start using that money to start building more oil refineries so we can start becoming more self-reliant. The oil supply really isn't that bad yet but we do need to start drilling more ourselves instead of buying so much oil from other countries. Another thing that would help a ton would be to establish one minimum octane level for the entire country, because with the lack of refineries and there being about 26 different minimum requirements in the US it just becomes even more difficult to get the gas out there and therefor it costs even more. These are just a few things we could do that would greatly improve our current state.

[Gordon]

Government needs to stop wasting any left over funds for all the thousands of programs it has and start using that money to start building more oil refineries so we can start becoming more self-reliant. The oil supply really isn't that bad yet but we do need to start drilling more ourselves instead of buying so much oil from other countries. Another thing that would help a ton would be to establish one minimum octane level for the entire country, because with the lack of refineries and there being about 26 different minimum requirements in the US it just becomes even more difficult to get the gas out there and therefor it costs even more. These are just a few things we could do that would greatly improve our current state.

Are you being serious or kidding?

: /

[Mopar Fanatic]

Are you being serious or kidding?

: /

I think he was serious.

the oil problem is the scariest, because it's probably the most difficult thing to fix. everything else could just be part of a regular business cycle. shit goes bad on wall street, everyone feels the effects, but after a year or two, things get back on track for a few years, until it goes bad again, repeat.

with oil, if there is actually a supply issue around the corner, we could all be in really deep shit. and to my knowledge, no alternative energy source is going to come close to putting a dent in our energy requirements....

[shoe1985]

You know the funny thing is that gas prices are really not that high in this country. Look at the wages, minimum wage was $5.15 in 1990, gas was around $1, maybe less. Minimum wage has gone up to $7.15, soon $7.25. Gas is around $4. So, wages have gone up, and gas has too. I think the biggest problem is people who haven't really had increases in their incomes, like those making in the teens, have seen their budgets cut drastically. Lower income earners really haven't noticed any change because they are really making about the same amount.

Maybe it is time to raise prices of products and give raises to even everything out. Of course that won't happen.

I had a thread a while ago, maybe a year ago, that said we were heading towards a recession, nobody believed me.

I believe one of the biggest problems is that if you look at the housing market. Everyone and their mother was a realitor. How can you have so many people doing one profession and expect things to keep going good?

I am hearing a lot of companies are looking at trains to transport their products now, that means a lot of truckers will lose their jobs.

I believe we need to start educating our country's citizens a little better, and providing more diverse jobs. We can't all be doing the same jobs.

I want to bring back oil prices again. People complain they are so high, but if you look at their profit margins, they are making less than Wal-Mart, Google, and Microsoft. I hear how we should have windfall profits for oil companies, maybe we should do the same to these companies.

People say we should drill in Alaska. Well some of us don't want that. I am not a tree hugger, or whatever people call them. I just want to be able to go to Alaska and see the animals that live there. We are running out of land, and these are things we won't get to see because all we do is destroy things. Maybe it is time to place population limits.

[Jon Lyrik]

Yeah, seriously, there is no fucking way in this plane of reality that we can become "self-sufficient" on our own oil supply. US oil production peaked almost forty fucking years ago, and no, Alaska is not going to save us.

Yes, I know the oil price will probably crash soon because 70%+ of it is pure spec, but that won't matter as demand increases at a geometric rate worldwide and production is slowly decreasing.

We should have had a crash program installed to make oil obsolete in this country two decades ago. We're fucked. Five years from now we'll be at $10+ a gallon and the entire third world (and some in-betweener countries) will be starving in the streets while we're going through an economic shithole not seen in several decades.

[Mopar Fanatic]

You know the funny thing is that gas prices are really not that high in this country. Look at the wages, minimum wage was $5.15 in 1990, gas was around $1, maybe less. Minimum wage has gone up to $7.15, soon $7.25. Gas is around $4. So, wages have gone up, and gas has too. I think the biggest problem is people who haven't really had increases in their incomes, like those making in the teens, have seen their budgets cut drastically. Lower income earners really haven't noticed any change because they are really making about the same amount.

Maybe it is time to raise prices of products and give raises to even everything out. Of course that won't happen.

I had a thread a while ago, maybe a year ago, that said we were heading towards a recession, nobody believed me.

I believe one of the biggest problems is that if you look at the housing market. Everyone and their mother was a realitor. How can you have so many people doing one profession and expect things to keep going good?

I am hearing a lot of companies are looking at trains to transport their products now, that means a lot of truckers will lose their jobs.

I believe we need to start educating our country's citizens a little better, and providing more diverse jobs. We can't all be doing the same jobs.

I want to bring back oil prices again. People complain they are so high, but if you look at their profit margins, they are making less than Wal-Mart, Google, and Microsoft. I hear how we should have windfall profits for oil companies, maybe we should do the same to these companies.

People say we should drill in Alaska. Well some of us don't want that. I am not a tree hugger, or whatever people call them. I just want to be able to go to Alaska and see the animals that live there. We are running out of land, and these are things we won't get to see because all we do is destroy things. Maybe it is time to place population limits.

I got into to this discussion with Mrs. Mopar about the feeling on the housing which she thinks is that a lot of people bought houses they couldn't afford and failed to lock in a fixed rate. when the rates changed, that put their payments enough out of reach that it would only take a few months before they were impossibly behind. she said something else about it, but by that time, i was already daydreaming.

But it's not so much floating rate loans, because right now with fed rate cuts, you might be doing better with one of those. there were these funky loans out there where you'd be paying the equivelant of about 2% interest with a minimum payment, but they were actually charging about 6% interest. the shortfall in your monthly payments would get added back on to the principle balance of your loan. so instead of paying down your loan, it would actually be getting larger. each year, the minimum amount you were required to pay would go up, until finally, it turned into a regular loan with MUCH higher payments. it was at this point that everyone was planning to refinance. their homes decreased in value, so no bank would lend out enough to pay off those huge loans.

As For your point about oil

I think that China and other emerging markets will sop up any excess oil that hits the market, although it may take a little time to adjust.

You are starting to see articles almost every day about how Asia and the Middle East are getting tired of absorbing our inflation by buying up our debt. It is only a matter of time before pegged nations begin to decouple, and our major creditors begin to slow their buying, or even begin to sell, their dollars. I think there is a huge, huge bubble in the bond market right now, and when it bursts and our government has to pay interest rates that at least have a resemblance to the economic reality in this country, all bets are off.

I do apologize if the points I am trying to make are a bit scattered but it's a Friday night and I'm severly shit faced.

[shoe1985]

Mopar Fanatic, you have it pretty much right on. I can't disagree. Our country is in terrible shape, and we going to need to make massive changes. We can put the blame on whoever we want, but this has been building for a long time. We depend on others too much, and we don't do anything ourselves anymore.

I had a discussion with someone the other day who complained about the lack of jobs, and jobs that we did have paid nothing. I explained that there was a tomato farmer looking for help paying $16 an hour. The funny thing is that the guy advertised all year long, but couldn't find anyone to do the work but illegal immigrants. The legal workers would work about half a day and quit because it was too hard to do for them. Too much bending, and crap.

We have become too ignorant, and I don't feel sorry for anyone hurting right now. We all make our own paths in life.

[Mopar Fanatic]

Mopar Fanatic, you have it pretty much right on. I can't disagree. Our country is in terrible shape, and we going to need to make massive changes. We can put the blame on whoever we want, but this has been building for a long time. We depend on others too much, and we don't do anything ourselves anymore.

I had a discussion with someone the other day who complained about the lack of jobs, and jobs that we did have paid nothing. I explained that there was a tomato farmer looking for help paying $16 an hour. The funny thing is that the guy advertised all year long, but couldn't find anyone to do the work but illegal immigrants. The legal workers would work about half a day and quit because it was too hard to do for them. Too much bending, and crap.

We have become too ignorant, and I don't feel sorry for anyone hurting right now. We all make our own paths in life.

You had some strong firm points that I couldn't quite argue, rather just expanding as to what you said. Touche' about the ignorance, as you said earlier I think the whole case scenario goes hand and hand correlating with the fact that we do indeed need to start educating our country's citizens a little better.

[shoe1985]

You had some strong firm points that I couldn't quite argue, rather just expanding as to what you said. Touche' about the ignorance, as you said earlier I think the whole case scenario goes hand and hand correlating with the fact that we do indeed need to start educating our country's citizens a little better.

You could expand upon them, yes, I tried to make it simple though. I am not sure if anyone has been reading, but a lot of states are starting to cut the education budget like crazy. I was reading that California is doing it, and there is a good chance teachers will begin to get layed off. And the teachers still there will have more students.

There isn't just one crucial problem affecting the state of our economy, but many. This country has been run poorly for the last 10 years. Too much money is being thrown towards nonsense. You can blame the Democrat Congress, which should take some of the blame, but a lot of goes to the previous Republican Congress. We need better leaders, not people promising certain things.

I want to look at something quickly. Voting is huge this year, but people are so stupid, yes stupid. Take gun lovers, which my state of PA is one of them, if the candidate is nay for guns, not getting their vote. They would vote for the worst candidate all because of one issue. This is why we have so many problems. Vote for people who that fits you the best. There many questionaires out there that help you by having you fill out questions, and they will tell you the person you should vote for.

People always want change, but they really don't want to do it.

[Moviefan1234]

I want to look at something quickly. Voting is huge this year, but people are so stupid, yes stupid. Take gun lovers, which my state of PA is one of them, if the candidate is nay for guns, not getting their vote. They would vote for the worst candidate all because of one issue. This is why we have so many problems. Vote for people who that fits you the best. There many questionaires out there that help you by having you fill out questions, and they will tell you the person you should vote for.


With Pennsylvania, it depends what part you live in. For my area (Philadelphia Suburbs), gun control is looked upon very favorable, at least in my district. I live in a fairly liberal area that is 60%+ democrat, and they surely don't like guns or hunting for that manner. Pennsylvania is a tough state to predict because of the extreme areas. You have Philadelphia and Pittsburgh which vote democrat for the most part, and then you have the rest, which sadly is all red.

[SpoonMan999]

Are you being serious or kidding?

: /

I'm completely serious...we'll never be completely off of foreign oil but we can at least decrease the amount we're using and lower production costs.

[The Heart Collector]

Yeah, seriously, there is no fucking way in this plane of reality that we can become "self-sufficient" on our own oil supply. US oil production peaked almost forty fucking years ago, and no, Alaska is not going to save us.

Yes, I know the oil price will probably crash soon because 70%+ of it is pure spec, but that won't matter as demand increases at a geometric rate worldwide and production is slowly decreasing.

We should have had a crash program installed to make oil obsolete in this country two decades ago. We're fucked. Five years from now we'll be at $10+ a gallon and the entire third world (and some in-betweener countries) will be starving in the streets while we're going through an economic shithole not seen in several decades.

But, but.. THE FREE MARKET!

[Mopar Fanatic]

You could expand upon them, yes, I tried to make it simple though. I am not sure if anyone has been reading, but a lot of states are starting to cut the education budget like crazy. I was reading that California is doing it, and there is a good chance teachers will begin to get layed off. And the teachers still there will have more students.

There isn't just one crucial problem affecting the state of our economy, but many. This country has been run poorly for the last 10 years. Too much money is being thrown towards nonsense. You can blame the Democrat Congress, which should take some of the blame, but a lot of goes to the previous Republican Congress. We need better leaders, not people promising certain things.

I want to look at something quickly. Voting is huge this year, but people are so stupid, yes stupid. Take gun lovers, which my state of PA is one of them, if the candidate is nay for guns, not getting their vote. They would vote for the worst candidate all because of one issue. This is why we have so many problems. Vote for people who that fits you the best. There many questionaires out there that help you by having you fill out questions, and they will tell you the person you should vote for.

People always want change, but they really don't want to do it.

In the 1980s, and again in the 1990s, the government tweaked the way they calculate inflation. Of course they said it was to improve accuracy, but really it was because increases in Social Security and other pension payments were tied to the inflation number, and the government had to find a way to lower it in order to reduce that expenditure. It's a lot more politically convenient than coming out and saying "We're reducing your SS payments, old people."

Under the inflation equation that was used in the early 1970s, 2007 inflation ran at 8.9%. A guy named John Williams runs a site called shadowstats.com that has inflation under each of the different calculations, and he also breaks down how the government arrives at other official numbers and breaks down the changes that have taken place in those.

You pretty much nailed it by implying that we need new leaders. The government can say what they want in an election year... we are in a recession, it will be a lot worse by November, and between now and the election, both candidates will probably make a bunch of ridiculous promises(as you addressed)that will only make things much worse once they're held to them as President.

I wanted to add this in previously with my final contribution to further address and dust of my previous statement about subprime

No house sales means no new houses being built, too many homes were constructed in the early 2000s being apart of the problem. The growth of new homes was faster than the growth of families, so we had way too much supply. Which puts a lot of construction guys out of work, putting a decline on building materials, pushing home improvement project to the wayside(sell your home depot stock if you hadn't already)

[Homyrrh]

We need to further the class divisions. The incompetent and weak and incapable go to permanent camps to perform intensive manual labor to support the top 20% driving the economy with inventiveness, ingenuity and overall superiority. All of the lower 80% not willing to participate in these labor enterprises will be exterminated, consequently reasing the availability of all goods and services to those above them (i.e. - same amount of gas available to fewer people...cheaper prices...).

Eventually, since the bottom 80% will be strictly disallowed to reproduce, they will almost entirely die out within a century. The superior rest will by then have developed ways to automatically (robots, automated manufacturing, etc.) perform the task that the expendable bottom 80% had done previously.

Any questions?

[QUENTIN]

I'm sure we're all familiar with the Pareto principle, but I don't think there's a single thing I hate more than the monstrosity of social Darwinism. The idea that anyone could dismiss 240 million human beings as "the bottom 80%" makes me sick and the Player Piano world you've described sounds like a nightmare.

Furthering class divisions is the last thing we need to do, the overall problem with this country and much of the world is the completely uneven and arbitrary distribution of wealth and power. If we're serious about fixing anything, we need to strive towards economic and social equality, not eugenics aided by robots.

[shoe1985]

Quentin, you make a great point that the wealth is uneven. The problem, I am not sure I would call it a problem, is that we live in a free market society. Most people, not all, decide their paths in life. There will be hurdles and many people can't get passed them though.

In America, I believe we have become lazy. Take an illegal immigrant, why do many companies like to hire to them anymore? They will work for cheap, but they are willing to meet the goal, and go over it. Say you need to paint a house in a week, they will work to get it down faster. They will overachieve, for less money too. Take the average American, they will be in no rush to get the job done, and it could take even longer than the week.

Then we can use parents as an example. They will spoil their kids, and once the kid comes into the real world, they are not prepared to face anything. I have a friend who was spoiled beyond belief. He got everything handed to him. Well his first job he thought he could sit in the break room and didn't have to do anything. He usually works a day or two then gets fired. Then his parents will tell him it will be fine, buy him something, and it starts all over again.

As a business guy, I want employees that will overachieve. They need to be self motivated, and want to suceed for themselves, and the company to also.


This country has a lot of problems. We could be here for a while to discuss them all, and they would all be related to the economy being in such poor shape.

I was watching some news thing on tv, it is being said that if you don't make at least $100,000 a year, consider yourself lower class. How many people here make that much? The average wage in the USA is around $17-18 an hour. This is well below $100,000 a year. That means that the average American is in the poverty line now. Then we have a company like Wal-Mart, whose average employee is in the poverty line, and their CEOS are making billions each year.

It is time for companies to pay their employees. Employees should be the most important part of a company. You should keep the hardworking ones, pay them more, and get rid of the lazy ones. Instead, from my experience, companies get rid of the hardworking ones, and keep the lazy ones. Then they complain that nothing ever gets done. America, you gotta love it.

[Homyrrh]

Actually the Social Darwinist suggestion was wholly tongue-in-cheek, but ultimately it would work. Obviously it's among the shittiest possible things to be done to such a group of people, but it would likely prove succesful.

Also, shoe, are you trying to say that $100,000/yr is the poverty line? It's more like 20k or so I believe. Obviously that program was incorrect, since we all know 4+ person families survining comfortably on less. To be considered "lower class" (economically), it would seem sensible that one must be eligible for aid and welfare programs. No one making even half of $100k would be able to successfully apply for food stmaps, wlefare, etc.

Also, CEOs aren't compensated billions. Millions upon millions, but nowhere close to a billion. Don't confuse your CEO/Presidents (C. Michael Armstrong) with your founders and owners (Gates, Buffett). Regardless, controversial.

As for your parents+children note, yeah, I partly grew up in the upper-middle class suburbs. Kids being bought BMW 5-series, new Toyotas, full college tuition, all the toys they want. MY pops gave me $20 a week out of my salary, told me to save the rest. This one chick in my math class used to bitch behind me EVERY day that she'd kill her parents if they didn't buy her a brand new Audi A4. If I thought for a second she wouldn't get hers in five years, I'd surely have pimp slapped that bitch to no end...

[shoe1985]

Actually the Social Darwinist suggestion was wholly tongue-in-cheek, but ultimately it would work. Obviously it's among the shittiest possible things to be done to such a group of people, but it would likely prove succesful.

Also, shoe, are you trying to say that $100,000/yr is the poverty line? It's more like 20k or so I believe. Obviously that program was incorrect, since we all know 4+ person families survining comfortably on less. To be considered "lower class" (economically), it would seem sensible that one must be eligible for aid and welfare programs. No one making even half of $100k would be able to successfully apply for food stmaps, wlefare, etc.

Also, CEOs aren't compensated billions. Millions upon millions, but nowhere close to a billion. Don't confuse your CEO/Presidents (C. Michael Armstrong) with your founders and owners (Gates, Buffett). Regardless, controversial.

As for your parents+children note, yeah, I partly grew up in the upper-middle class suburbs. Kids being bought BMW 5-series, new Toyotas, full college tuition, all the toys they want. MY pops gave me $20 a week out of my salary, told me to save the rest. This one chick in my math class used to bitch behind me EVERY day that she'd kill her parents if they didn't buy her a brand new Audi A4. If I thought for a second she wouldn't get hers in five years, I'd surely have pimp slapped that bitch to no end...

The program awknowledged that the considered poverty line is $20,000, with the idea that a family of 4 should be making at least $35,000. But with the costs of everything gone up, you should be making $100,000 a year. It also considered that you should be putting so much away to be able to retire at what is it 65 to retire now?

The main idea behind the program is that most people live beyond their means, and in this country you need to make at least 100k a year to live the American dream.

As for the CEOS comment, I am adding in stock options and things. We have discussions all the time in my business classes about people making hundreds of millions of dollars. What can you really buy with that much money?

Like your example of that girl, that is how a lot of kids are these days. A lot of parents are maxing out their credit cards to keep their kids happy. I am only in my 20's, still in college, but I understand the value of a dollar.

At work, we talk about people owning 2 houses or more, and you see people struggle to have one home. These people work 2, sometimes 3, jobs to pay for that one home, while the person owning 2 or more homes works one job with less hours. Things are not equal at all. All we see is the raising of prices, but wages stay the same.

I can actually say that when I got home from school everyday, my mom was waiting for me and my siblings. Around 6 my dad would be coming home, and we would have dinner together, talk about what we did that day, watch some tv or play a game. We spent time with our friends, but we were a family first bunch.

Tomorrow is Memorial Day, many people will not be celebrating this holiday, but rather be working. I am shocked by how businesses are open almost every holiday. When I was a kid, everyone was home enjoying the holiday. Tomorrow, everyone in my family will be working.

How times are changing.