So You Want to Renegotiate? Banks Hands May Be Tied.

There is a very clever hidden problem with trying to get banks and other financial agencies to renegotiate the debts for homes, businesses, and other borrowers. Behind the mortgage contracts, behind the lines of credit, and behind a lot of other debts there are contracts that are seldom revealed.

Why? Simple. The contract holders hidden behind these are BETTING on mortgages going into default, lines of credit and other loans also going into default, even the banks are being bet on to fail. Sound crazy? Crazy like a fox in the henhouse!

Take for example a simple mortgage on a house worth, say $200,000 and that mortgage is under water. Then the bank has separated itself from the mortgage by a contract to someone else, and that entity has use Credit Default Swaps to ensure they get something. The contract between the entity and the bank binds up any change in the mortgage, because the entity holding the contract WANT to see you lose, want to see the bank lose! That is where the entity makes more money from the default.

This same process is done with lines of credit for business, using the material wealth of the company for collateral.

Unless and until the entities who have these Credit Default Swaps are either put behind bars, investigated for forcing you and the banks to maintain a very unhealthy situation so the entity makes money, or the CDS contracts themselves are judged to be a hindrance to both you and the banks in renegotiations by the courts, you and the banks are going to stay in trouble.

Perhaps the smartest move here is to hire a lawyer, and take this to a court, using warrants to find out who holds the banks hostage to contracts like this. Unless and until the banks can get themselves out of these contracts by either using law or by the Federal Government outlawing Credit Default Swaps entirely, the economy cannot reasonably regain any stability.

When anyone bets on failure, and makes millions from the economic failure of banks, ordinary families, and businesses, then the whole of society has a huge problem.

The time has come to uncover these entities, reveal just how much damage has been created, and publish the terms of these very nasty contracts. The time is long overdue to find the roots of the problem and investigate just how much power some of the entities have over everyday lives.

So, if anyone is wondering why the banks are sweating and making things tough for renegotiation, then perhaps look behind the banks to the contracts betting on YOU going under, along with your banker, and the entity will be taking the money to another bank or hiding it for future abuse of others.

Credit Default Swaps took down Merrill Lynch, put many banks into such a mess they will take years, if they even survive, to get back on solid ground. My belief here is that, even now, someone is putting out Credit Default Swaps on the banks that do exist, the businesses, and even some of the major corporations like General Motors, Chrysler, and the casinos owned by Donald Trump.

Outlaw the damn things, now!

Credit Default Swaps are Insurance without Regulation, click here for fuller information

Going Down? How Long Do You Think This Will Last?

Books to read, and a previous post that should be referred to when devising any solutions. Click here

Jobs going out the window, literally. Companies going under, literally. Houses and foreclosures happening so often now the news services no longer cover this issue. Wow! Like watching a huge ship sink, except this is in very slow motion.

My question here is how long do you think this is going to last?  I thought it may last a couple of years, but when I look at this like an injury to a body, with the bleeding so profuse, and the cuts all over, the outlook for this patient is tentative at best.

So, what do you think? What treatments are out there to stop the bleeding, the damage still happening? The more minds working on this, the better, is my thinking here.

President Obama used words like “Catastrophe, disaster” and, by looking at the damage even now, I have to agree with this.

Solutions! We will work through this, there is no other choice. But how? Come on, give it a go!

My somewhat brief understanding of CDS and loans that sank the banks. Click here.

This is the End of an Era

The Government is NOT doing what is necessary, there is a better way.

Well, after watching a huge number of news broadcasts, reading until I feel like putting every written word into a huge pixel black hole, I have come to see that the way things have been working for the last 25-30 years is over, done like our Thanksgiving turkey this weekend.

People have had the expectation that they could borrow up to 6% over their income and still keep going. That is bizarre to me. Spending 106% of your income and expecting to keep things going is expecting yourself to become more than you can ever be!

Housing prices have risen so fast that the costs have ballooned way over the true price, the real value, of those same houses. Speculators, agents who took fees to sell off the bundled mortgages managed to make the whole market balloon to the point where things went BANG!

Make no mistake, just like Milken, et al , the agents had no compunction about taking the fees, and putting ordinary mortgages into a highly risky place, leaving those who were the original lenders and the house purchasers in a position where it became impossible. There became a distance between the lender, the mortgage and the purchaser. The agents did not care, do not care, and will not care who the purchaser is or was, and furthermore the agents have their money and can walk away without even blinking.

The Paulson idea of taking out the toxic sludge is never going to work. Why? Because it is impossible to put a value on paper that is basically completely impossible to unwind again.

The markets should go down again this week. Why? Because the toxic sludge from the collapse of Lehman Brothers is going to be due. Those who were tied into that sludge are going to have to take some huge losses again.

There has to be a complete understanding from main street here. No longer can we use credit to solve problems, no longer can anyone expect to have a charge card without realizing they are literally borrowing money at exhorbitant interest without that interest being a huge balloon that also goes BANG! The worst thing that older people can do right now, in my opinion, is to take out a reverse mortgage. Why? Because they may end up with a home that is never going to be worth what they are borrowing against, and end up being forced to repay instead.

Whether this all ends up being a very long, very harsh road, or a bumpy ride that is shorter depends on how banks deal with the mortgages that are not in default, yet, and the people who have taken those mortgages out rewriting the mortgages to reflect the true price of the houses in THIS current market.It also truly depends on how the various administrations in the US, Europe, Britain, Hong Kong, Australia and others deal with this. They can either make it a hell of a lot worse or shorten the drop. My gut feeling is that, unfortunately, the advice that most of the governments, administrations and other are getting is wrong, totally wrong.

Unfortunately I have been watching this all happen and, some years ago, realized the way things were going would end up dropping like a huge boulder on house at the bottom of the hill. In other words, although this seems surreal, I am not all that surprised. The idea that capitalism is self-regulating is just flat silly. Greed cannot be regulated, only controlled, using laws and regulations. Yes, there are flaws to what humans do, but at least we all SHOULD be learning WHAT NOT TO DO!

This could get very, very ugly.

Recession, Depression, Whatever You Call It

John Kenneth Galbraith has authored a number of books, “The Crash of 1929” and others on political economics. He has been an ambassador, a writer of books and he has a solid take on the ways American influence has affected the world, good and bad. Ironically, he is a Canadian. If you want to read some enlightening books on economics and the world, find his books. They may have been written years ago, but they are certainly relevant now. If you want to cut to the relevant part here, go to around the 43 minute mark on this video. You will be astounded at how much things are almost duplicated then, and now! Bloody scary, bloody ridiculous!

There is an impression that if left alone, the government to stay out of the market that the financial markets, by some God given power, will solve the problem.

This is from the years just before the  Great Depression Do these words sound like some of the current Congressional leaders? The Senators? Even the President himself? Take a look at how Eisenhower, Roosevelt managed to deal with economics, the withdrawal of the US in unpopular war (Korea) and realize how much history has to teach the current administration and any administration to come!

Even if they manage to pass the bill facing the US right now, the economies of the world are NOT going to be in any kind of rosy state for quite a while. This bill, in whatever form it takes, will NOT solve the problems, it is just a start. Period.

The massive consumption of goods is not going to continue. I figure that this will affect all of us for at least 5 years, maybe more, so if any of us figure that we can resume spending, borrowing using credit cards and other lines of credit, we are WRONG.

There are going to be jobs lost in Asia, China, the US, and Europe, but what this bill may do is to keep those losses to a lower level, not stop them. Business will not resume as it did before the banks and  the toxic waste they devised became known. What is really mind boggling is that most of the very banking “experts”, the economists, and the ordinary people don’t even understand this. Most of us, including the banking and economics experts find this far too complicated, far too extensive, far too large in scope to figure out.

Regardless of how this comes down, I am going to see property prices drop more, although here the property prices are still way over the true level in value anyway. The foreclosures in the US will continue, they will rise and so will bank failures.

Get the idea? This bill is NOT a cure, not a way to solve the problem, just a small beginning, with pain still to come. The international news knows this, why on earth do the Americans in the administration, including Paulson and Bernanke not know it, nor the President?

Stupidity Explained, Now It “Figures” Literally

http://scienceblogs.com/goodmath/2008/09/economic_disasters_and_stupid.php

This one says a lot about the way this whole thing got so tangled up, so obscene in the ways banks, investment bankers, and insurance companies got into the game. Let it be no mistake, this was a game to them, without any families, any real touch with the pain that bad loans created.
The person who wrote this is NOT a politician, NOT someone whose specialty is economics, but IS someone with math skills, and logic.
I read just this posting and started to swear, my eyes bugged out completely at some of the sneaky, underhanded and just plainly obscene practices here.
Unfortunately it appears to be just another version of the Savings and Loan fiasco, with a few new twists.
How this all works out is beyond my capability to foretell, and what happens to those who pulled off some of the game strategies, I don’t know.
What I do know is that I live in a country where the banks, the investment firms, the insurance companies are regulated.
Paulson, the Federal Reserve Bank, and you, the unwitting tax payers, will be the ones to deal with this. International banks will get some of the funds here, but remember, they also built parts of your economy. Maybe some of them got suckered, like a lot of people apparently did, but with the international banks far more regulated, far higher scrutiny on them, at least your taxes will go to help you out with ethics being the underpinning on the international banks.
Paulson, the FRB, the Senate, the house of Representatives all knew the foreclosures, the money, the sucker loans and the insurance between each other were going on as long as two bloody years ago. This should never have come as a surprise, period. All of them experienced the fiasco with the Savings and Loans institutions, and definitely John McCain would be well aware because he was in with one of the Savings and Loans in Arizona.
However this works out, and it may well take a couple of DECADES to even get the strings unwound here, there will be some pain, there will be a serious slowing of the entire world economy, and maybe, although I hope not, a full recession which turns into a real depression.
Maybe this is what NEEDS to happen. People will learn to live without borrowing to buy a new tie, or a sandwich, by putting the charge to a bank charge card. People will learn that money that they put into deposits does have risk, some of it high, some of it very low. Maybe some will learn to be a lot smarter when dealing with the financial version of the Barnum and Bailey circus.
Remember, there is a sucker born every day. Maybe it is time even the bank CEO’s recognize their own faces in the “Great Mirror of Sucker”.
This is a harsh way to learn some lessons, but maybe that is what is needed now. I don’t know the future, and maybe that is a good thing. I DO know the day has come where the sucker punches to the economy finally took it down. Hard.

Depression Thinking when Money Goes Poof

I guess I am glad I had generations ahead of me who did live through the last depression and knew how to get through and be able to still share what they had with others.

First thing they did was to PUT MONEY ASIDE, even if it was a few pennies, a few dollars and keep it. The little bit may not have bought a house, but if you KNOW you have something, even a paltry bit, to fall back on, you are far less fearful.  Then they became inventive. They found ways to take something that had become broken, worn, and turn it into something useful. They took clothes that had hole in the knees and either patched the knees or turned the clothes into other items.

Why on earth am I even going here? From watching this, hearing the histories of the older generation, and doing some reading on the internet, I am about 50/50 on this going sour, becoming a full and very nasty depression, world wide.

So, instead of trying to play “catch up” I am saying get some practice in being innovative in your living, inventive, even thrifty! Habits can only become habits if you do them, and repeatedly.

Bartering was one of the ways people now are getting things done and without paying any taxes. Almost anything from baking bread, laying brickwork, to running people around in your car can be bartered. Yeah, yeah, I know, the tax man does not like this, but when you are the one feeding your kids, you need to find ways to lessen the strains on your wallet.

Gardens and putting in gardens saved a lot of people from going hungry, so if you live in the city, even in an apartment, you can save at least a few dollars by growing something. Peas grow up, trained on vines, even growing things like lettuce can be done indoors. Herbs can be traded or used to flavour bland, boring food. Maybe you have a neighbour with some free yard space. Talk to them and see if you can barter some raking of leaves for the space, then plant raspberries, blueberries or what you can in your area.

Here is a totally revolutionary idea! If you are up to debt to your eyeballs, then maybe you HAVE to learn to do this because otherwise you face some nasty consequences.  Saving a few pennies, saving a couple of dollars IS POSSIBLE in almost any condition, ask the people living on the streets, they have to.

People lived through the Great Depression and yes, they did manage to save. Why not now when you can do it with far less pain? Your survival, you children’s survival may well depend on this and your own abilities are worth more than money any day, any year, any financial circumstance, use your abilities for what they are, you best asset.