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Started by mingmong on May 27, 2014 12:19:19 AM
How many people here believe the root causes of the 2008- crash have been effectively addressed?

I thought not.

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mingmong - 27 May 2014 00:23:05 (#1 of 84)

Key symptoms:

1) Fucked US trade deficit.

2) Massive indebtedness, private and public

3) Low interest rates; sluggish growth = an epic monetrist fail

RunnyBabbit - 27 May 2014 00:32:14 (#2 of 84)

If THEY knew we were fucked they would have viciously turned the screw on the workers and unemployed, syphoned-off huge amounts of taxpayers' money by 'privatising' public services, and massively robbed the financial system in front of our very eyes.

Oh....

Tangent - 27 May 2014 00:46:19 (#3 of 84)

The key cause for me is global over-confidence in the long-term rate of return for most classes of assets in a low-inflation environment. That fed the rest.

Brunothecat - 27 May 2014 00:51:05 (#4 of 84)

Yes. They failed to allow for the fact that US property values can go down, as well as up. Still, you can't expect suits paid millions per year to consider such events possible.

Pentecost - 27 May 2014 00:51:30 (#5 of 84)

Widely accepted main cause - exposure to sub-prime mortgage risks in the US.

Basic extrapolation of that: irresponsible expansion of debt because everyone else in the same business was irresponsibly expanding debt. That was the driver - that to deliver the short-term results each lender had to be more irresponsible than the others. To offer loans based on ever more optimistic views of future asset value. Any housing market readjustment would kill that, but the pressure (as it is within any bubble) is to pass the parcel hoping the music doesn't stop with you. Any long-term responsible lender didn't get enough business, didn't increase market share, didn't deliver short-term results, was rated lower than competitors, etc. No proper incentive to stay in control because all the competitors were moving out of it. Pass the parcel and hope for the best. Wherever it falls, it may not be you specifically that's holding it but the whole country picks up the bail-out costs for those who do.

What's been addressed, as in what's changed? To some extent there's a curb on openly irresponsible lending, but there's still too much debt overall in the economy, and the risk of bubble-burst will be with us until it recedes. Bank of England are signalling "baby step" as in slow, planned and controlled increases in base interest rates to 3% or 3.5 % over the coming 2 to 3 years so that there's no panic in the economy but everyone knows that mortgages will go up and spare cash will be limited. Tightening up a bit without shock.

What else? Maybe not the causes, but the effects have not been addressed properly at all. Much is made that "The Deficit" is "Coming Down", but that just means that the rate at which our total national debt is going up is slowing. National debt is still going up, we still import more than we export, we are in hock massively more than we were 5 years ago and it's going to go a lot higher yet. There will be more squeezes on pensioners by raising qualifying ages and years of NI contribution regs so that fewer qualify for full whack, there will be continuing squeezes on savers who have paid by using capital for living income to replace interest income for the last 5 years, and who will continue to do so.

mingmong - 27 May 2014 00:53:33 (#6 of 84)

What's been addressed, as in what's changed?

Fuck all. Both the FTSE and house prices are back up where they were in 2007, or so we are told.

It doesn't bode well.

Tangent - 27 May 2014 00:54:06 (#7 of 84)

They failed to allow for the fact that US property values can go down



There was a global asset boom, on a broader basis than US property values, which is arguably continuing for some classes to this day,

Basic extrapolation of that: irresponsible expansion of debt because everyone else in the same business was irresponsibly expanding debt.



“A 'sound' banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him.”

Pentecost - 27 May 2014 00:55:05 (#8 of 84)

Alas.

Ebadlun - 27 May 2014 00:58:17 (#9 of 84)

The key cause for me is that nobody really knew what the fuck was going on.

We need a system where people know what's going the fuck on.

Brunothecat - 27 May 2014 00:58:22 (#10 of 84)

There was a global asset boom, on a broader basis than US property values, which is arguably continuing for some classes to this day,

Indeed but the header asks about the 2008 crunch, which was provoked by the widespread holdings of CDI investments and debt secured on them permeating the system.

Tangent - 27 May 2014 01:00:42 (#11 of 84)

which was provoked by the widespread holdings of CDI investments and debt secured on them permeating the system.



But that's tied in with the fundamental factor I mentioned.

Brunothecat - 27 May 2014 01:02:42 (#12 of 84)

What, you are saying all their other assets crashed at the same time?

mingmong - 27 May 2014 01:03:38 (#13 of 84)

All their other assets were overvalued, and still are, AFAICS.

Brunothecat - 27 May 2014 01:05:11 (#14 of 84)

Maybe so, but they didn't cause the crash. They might cause another crash, of course.

mingmong - 27 May 2014 01:07:52 (#15 of 84)

They will, in my view. Pretty much inevitable.

The current false dawn may well run for a little while longer though.

Ebadlun - 27 May 2014 01:12:15 (#16 of 84)

It's not hard to see that property can't rise indefinitely. You can't have million-pound studio flats when the average salary is around £25K. Do people really expect this, or do they just hope to get out quickly enough?

Pentecost - 27 May 2014 01:17:25 (#17 of 84)

When you play pass the parcel, you simply hope the music doesn't stop while you are holding it.

Tangent - 27 May 2014 01:27:12 (#18 of 84)

but they didn't cause the crash



I strongly disagree. The basic element of the crash was over-confidence in asset values. CDOs were mainly a way of exploiting expected returns efficiently.

LegalEyesAsh - 13 Nov 2014 14:01:42 (#19 of 84)

Paul Mason of C4 News yesterday: http://www.youtube.com/watch?v=Wf7a53y9RRM&

An excellent and coherent rant about the state of banking.

HerrWalrus - 13 Nov 2014 14:03:56 (#20 of 84)

Hang on - I thought everyone had been convinced it was the fault of the Euro?

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