The Economy
So, to say I think our way of life is about to change, would be a bit of an understatement.
I have been following a lot of the developments through podcasts, and its a bit scary... don't you think, most frightening is how economics professors are confused by how this happened. It also is encouraging that I might figure it out someday, since they are having trouble wrapping their heads around it.
I am torn about the whole idea of a bailout, I understand that in many cases some financial institutions are failing by no real fault of their own, that the company under them in the chain is having trouble and in our quick flight to safe credit scores they got down graded out of fear, and not that they were really in trouble, but our Wall Street run lives any fear reasonable or unreasonable instantly devalues your company. So, instantly a company is in serious trouble and everyone up the chain freaks out, and all the creditors of companies up the chain freak out, and money dries up every where.
That disturbs me too, the way I was raised is contrary to how the economy apparently works, I always thought to start a business you had to save some money, and work your way up, or something, but I guess, you just need an idea and you play with other peoples money, so everyone's in debt to everyone else, even the banks are in debt to other banks, where is the real money?
Now, about mortgage back securities, so, on the surface these are great ideas, a bank or mortgage company makes loans to new home owners, but they only have so much money. That makes sense, so, once they make those loans, and they are out of money to lend, they sell the mortgages, like you would sell your lottery claim to the cash now guy. And the banks lend more money. Now I think the folks who buy the mortgages, are retirement funds, IRAs mutual funds.
Now it gets a little weird , the mortgages are not sold off individually, they are bundled with a bunch of mortgages, and if a small percentage of those default, the whole bundle is considered worthless.
Now the answer they tell me is we should spend more, did doesn't seem to matter that a lot of people don't have a lot of extra money, and that a bunch of people are fretting about their retirement funds, and other investments.
But I don't hear people saying companies should not lay off people, to just live with a smaller profit margin, to keep money flowing into the economy.
The whole system seems untenable somehow. And I am still confused.
I have been following a lot of the developments through podcasts, and its a bit scary... don't you think, most frightening is how economics professors are confused by how this happened. It also is encouraging that I might figure it out someday, since they are having trouble wrapping their heads around it.
I am torn about the whole idea of a bailout, I understand that in many cases some financial institutions are failing by no real fault of their own, that the company under them in the chain is having trouble and in our quick flight to safe credit scores they got down graded out of fear, and not that they were really in trouble, but our Wall Street run lives any fear reasonable or unreasonable instantly devalues your company. So, instantly a company is in serious trouble and everyone up the chain freaks out, and all the creditors of companies up the chain freak out, and money dries up every where.
That disturbs me too, the way I was raised is contrary to how the economy apparently works, I always thought to start a business you had to save some money, and work your way up, or something, but I guess, you just need an idea and you play with other peoples money, so everyone's in debt to everyone else, even the banks are in debt to other banks, where is the real money?
Now, about mortgage back securities, so, on the surface these are great ideas, a bank or mortgage company makes loans to new home owners, but they only have so much money. That makes sense, so, once they make those loans, and they are out of money to lend, they sell the mortgages, like you would sell your lottery claim to the cash now guy. And the banks lend more money. Now I think the folks who buy the mortgages, are retirement funds, IRAs mutual funds.
Now it gets a little weird , the mortgages are not sold off individually, they are bundled with a bunch of mortgages, and if a small percentage of those default, the whole bundle is considered worthless.
Now the answer they tell me is we should spend more, did doesn't seem to matter that a lot of people don't have a lot of extra money, and that a bunch of people are fretting about their retirement funds, and other investments.
But I don't hear people saying companies should not lay off people, to just live with a smaller profit margin, to keep money flowing into the economy.
The whole system seems untenable somehow. And I am still confused.