MY THEORY OF ECONOMICS/present situaion

by badboy 11 Replies latest jw friends

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  badboy

  Where the `masters of he universe' went wrong, is they dressed up complex financial instruments(ie sub-prime mortages) as great things to invest in.

  It appears that they may have violated a economic law, namely they were not producing any product or service.

  If everyone were dealing in dirvaives ,socks or shares etc with the idea that is how to make your money,but not producting any goods etc, you wouldn't have any people making wealth from goods and services.

  Greed can also bring down an economy.

  Perhaps someone should have helped these sub-prime morttagees by training them for high quality jobs, making it less likely that they would default..
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  sir82

  the `masters of he universe' went wrong

  I knew it! It's all He-Man's fault!
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  Fadeout

  The problem is not greed, as without greed there IS no economy.

  The problem is greed without accountability, which is doomed to screw up the system as we are seeing.

  The mortgages were indeed a product or service, this was not a violation of an economic law. If you have a promissory note, that is a valuable item. Its value depends on the likelihood of repayment. Taking large numbers of mortgages, its possible to predict very accurately what the default rate will be and therefore how much they are worth. This is why packages of mortgages were considered such "safe" investments by institutions. However, the predictions were based on assumptions that proved untrue... like the future value of the real estate, the impact of ARM rate adjustments, the ability or desire of low-income or low credit-score buyers to make payments, etc.

  But it all comes back to accountability. The homeowner who decides to stop paying on a house that's worth more than he owes on it loses nothing. He passes the loss along to the bank. The bank passes the loss along to the government (which is us... taxpayers) in the form of the bailout. Our losses are socialized. When it's everyone's responsibility, it's no one's responsibility.
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  Octarine Prince

  Ambition isn't bad. Greed is always bad. Forget the movie.
  
  Money is a tool. Greed is an INORDINATE love of money, such that it causes you to do stupid/ill-advised/illegal/immoral things. You can have an economy without that.
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  Octarine Prince

  Just like stubborn is always bad. STEADFAST is the pure expression of that concept. Stubborn is the warped expression of that concept.
  
  Ambition = pure
  Greed = warped
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  Fadeout

  Well now it depends on how you define greed. if you define it in such a way that it necessarily implies harm to others, then yes it is bad. So it may be a matter of semantics. I think of greed not as an action so much as an attitude or an emotion. And I don't think of myself as having it, for the most part. But it's unrealistic to think it can be eliminated or that an economic solution can be found that ignores it. Accountability for one's actions, I feel, is enough to check greed. This involves having certain laws, "rules of the game," that must be followed, with appropriate consequences otherwise.

  There are no consequences. The greedy persons who created this mess pass the suffering along to others, and knowing this emboldened them to engage in such profitable but unpunishable actions.
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  leavingwt

  Greed is perfectly legal. To spend time plotting the end of greed is an exercise in futility.
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  slimboyfat

  It appears that they may have violated a economic law, namely they were not producing any product or service.

  If everyone were dealing in dirvaives ,socks or shares etc with the idea that is how to make your money,but not producting any goods etc, you wouldn't have any people making wealth from goods and services.

  That is exactly right. Economies based almost exclusively on "modern sophisticated instruments of finance" rather than actually producing anything useful for the world at large face a very rocky time ahead. Where Iceland has led the way I am afraid to say the United Kingdom is destined to follow. Until we go through painful process of realising wealth is not created by simply building houses and providing financial services, the UK is in line for a significant downturn. Resource rich economies that also still manufacture will fare better. The earthquake may have started in the US, but they are perhaps better equipped to withstand it.

  As for the European Union - who knows.

  All this is bound to end in war at some point. It is just a matter of where, when and on what scale. Let's hope it is a small war and most of us escape.
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  heyfea

  "

  The reason that a home is worth some amount of money, any amount of money for that matter, is because that is the amount of money that someone else is willing to pay for it. This is the way free markets work. The value of a commodity, in this case a home, is determined by supply and demand and a buyer’s willingness to pay."(http://realestatezebra.com/the-market-determines-price-not-the-government)

  Therefore, I say that consumers created this rise in real estate property and it's consequences. The banks and real estate agents took advantage of this, but they knew that houses did not cost so much money in the first place. Why does a 1 or 2 family house HAS to cost $500K, $700K, or more? The ones who paid that much are morons. And shame on the banks and real estate agents.
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  badboy

  BTT