The Root Cause's of the Crisis and How Do We Survive

deMolay · Intermediate Crude Joined: Sep 04, 2005 Posts: 698

Seeing as none of the World Leaders are talking about this subject. And they are merely reacting by spending and printing money, I thought it would be good if we discussed this subject. To fix something you first have to know what is broken. How did we get here to this point in time and this crisis. I think the roots of this problem have been the devaluation of the currency through deficit spending for programs and entitlements that we cannot afford. All of N. America is guilty of the mismanagement of our currency. Personally I don't see a way out quickly. It may take a full generation. In my opinion prolifigate spending on entitlement programs that we cannot pay for is at the root of the problem. For example in Canada, the low dollar policies of Chretien, allowed our manufacturing industry to become uncompetative. They didn't need to stay sharp and quick on their feet to survive. Because even when they couldn't compete, the Government would bail them out with tax dollars. The fall in the value of the US dollar brought this all to a head eventually. The massive borrowings to finance US entitlements the same in Canada, huge Government Deficit spending to finance huge entitlement programs. One of the most important functions of government is to maintain the value of our currency and defense of the realm. Countries can be destroyed basically in two ways. From within by destroying the value of its currency or from without by a foreign military. Anyway hopefully some of you will offer insight here. Here is a good article on the devaluation of the US dollar and the massive Trade imbalances. I think that is the problem. And the same in Canada. Overspending. Writing cheques our bodies can't cash....... http://www.merkfund.com/merk-perspective/info/what-causes-dollar-fall.html
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"Since you have chosen to elect a man with a timber toe to succeed me, you may all go to hell and I will go to Texas." Davy Crockett

vtsnowedin · Heavy Crude Joined: Jul 11, 2008 Posts: 342

As bad as all the deficit spending you cite is I am coming to believe that the current crisis comes directly from the rise of credit default swaps. An interesting article in Fortune magazine which states that there are now 55 TRILLION dollars of them now outstanding and that is more than the worlds GDP. I think the flaw in them is that you do not have to be the owner of the debt to buy a swap policy on it so more than one person or company can bet that a certain debt will go bad. People will tend to place bets where they have inside information so a likely performing debt will have only one swap sold on it if any at all and a likely losser will have dozens of swaps purchased against it. So if you say average 20 swaps per bad debt all you have to have is a five percent failure rate to wipe out an amount equal to all the bad debt out there. Leveraging at its worst. Why did no one see this coming?? I expect to know more about this soon. Sad

ReverseEngineer · Intermediate Crude Joined: Jul 16, 2008 Posts: 828

The problem started long before the deficit spending, the root of it all has ben apparent since before the Roman Empire existed. Its a Resource/Population problem.

You can trace resource depletion vs population back to civilizations before the Roman Empire, but the best records extant come from that time period.

I have analyzed this at some length already here, the short version coming to present time would be that although the shenanigans played in the financial markets over the last decade exacerbated the problem, it was inevitably going to hit us once the human population swarmed over the surface of the earth and consumed everything in its path.

The rise of Fascist states in the 30s? Quite predictable by the numbers 1000 years before it happenned. Individually human beings are complex creatures, but in aggregate they are very simple, they reproduce and consume, and are the top of the food chain. No predator can touch a human being since well before the agricultural revolution, we vaulted up past the whole lot once we got a grasp of toolmaking. Spears, Bow and Arrow, Trebuchet, Dynamite, Nuclear Bombs. The tools of survival are also the tools of war, dontchya know.

The seeds of our destruction are in the very thing that enabled us to survive and BECOME the top of the food chain. The only way there ever was or ever will be to stop this is to conquer the Evil within us all. You have to sqash DOWN the desire to live at the expense of others, be this other human beings or other species. Market Traders don't DO that, they suck the wealth out of everyone they touch, and they revel in living at the expense of others. Its EVIL. If you do not grasp this is evil, you are a lost soul, you will burn in hell for it.

I am sorry to see it come to this end, but really it has little to do with the derivatives market, the seeds were sown long ago for this end, and nothing short of a complete repudiation of inherent greed could have stopped it. It was compeltely predictable based on human nature, thus the reason it was predicted so long ago on the pages of the Bible. Its OBVIOUS. Even a dope 2000 years ago could figure this one out. Its not Rocket Science.

Reverse Engineer

vision-master

Duende

Whether you want to look at the climate crisis, resource depletion, or financial instability, the root cause of the problem is the re-enforced belief that you can get something for nothing.

The brand of capitalism we practice, based in self-interest, requires the exploitation of the earth and its poorest people toward the ultimate goal of personal mastery of the universe at the expense of everyone else. The accumulation of all these externalities reaches a critical mass, and we face meltdown.

Until our culture acknowledges the validity of TINSTAAFL, and we collectively stop trying to rip off the earth and each other, we are doomed to reap the ill effects of our hubris. The only question is whether the end will come in the form of a climate meltdown, a resource depletion meltdown, or an economic meltdown. Pick your poison.
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Where there once were hopes and dreams, now there is smoke and rubble. And zombies.

evilgenius

The picture of peak oil in the minds of the powers that be is what caused this. Wtf are you talking about, you might say? Just like they had to implement cheap oil policy decades ahead of seeing the success of fruit of it, in the fall of the Soviet Union, in this current instance they had to find a way to do something with the inflationary pressures that they knew were building with development of globalization and the supply lapses they knew they would see in energy. Something that could hold trillions of dollars in an illiquid form and yet could be utilized to transform those dollars into liquid form had to be created. Something really vast that could straddle massive inflation/deflation fluctuation had to be created. It is not by accident that they decided not to regulate the CDS market in the late 90's.

I think up to a few months ago they (Bernanke and Paulson and crew) thought they had this well in hand. They had inflated housing to get out from under the dot com crash that they could predict knowing that Y2K was a load of crap, but that the investment that went into it would be over. They thought that they could ramp down housing. I think that in the attempt to moderate housing they found out that too many of them had been taking cookies from the CDS cookie jar and that it was so out of line that it didn't work the way they needed it to. The final straw was when Lehman went down, but that didn't cause this. The hubris of taking on so much responsibility and failing to take it seriously (allowing untold corruption and malfeasance) is what caused this IMO.
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"Hope encourages men to take risks; men in a strong position may follow her without ruin, if not without loss. But when they stake all that they have to the last coin (for she is a spendthrift), she reveals her real self in the hour of failure."

pedalling_faster · Intermediate Crude Joined: Dec 10, 2005 Posts: 847