Oh, and by the way, this is the second of two reasons why government mandated retirement plans are stupid: 1) It requires an infinitely increasing population/workforce in order to work (i.e. ponzi scheme) 2) The contributed funds will always be subjected to raiding by the government by the stroke of a pen. Such as in the case of Ireland's government.
Indeed. Ultimately, power rests with those who make law. I think everyone can agree that we would be better off with less centralized power - such as that wielded by the lawmakers.
And in America's case. I and many of us on this board will not see a drop of Social Security because we are quickly approaching the point where it implodes (along with the rest of the government).
Ramen, I couldn't have said it better myself. But I think I'm going to try. This whole crisis was precipitated by one thing: the United States federal government absorbing the risk for mortgages through Fannie Mae and Freddie Mac. When the Federal Reserve (another state invention) drove interest rates into the ground to "stimulate" the economy, it worked. People could borrow money very, very cheaply. What do you buy when money is cheap to borrow? Big things, like houses. But what if you can only nominally afford a house, even with cheap money? Fannie Mae to the rescue; the federal government will GUARANTEE your loan to the bank. THIS IS IMPORTANT: the federal government has PROMISED to be responsible for loans made to a LARGE NUMBER of the bank's customers. If you're a bank, this is as strong a guarantee of getting paid as it gets, right? The government is putting its faith and credit behind the loan. So, banks buy and sell mortgages. The bank that originally made the loan may sell it to another bank. Since loans return a set amount of interest, they're investments. They're packaged up and sold in groups. They're priced based on return and also by risk, which is determined by separate agencies. How much risk does a loan GUARANTEED by the federal government carry? If you're an investor, not very much. So, you fill your portfolio with mortgages and mortgage derivatives (packaged shares of mortgages) and plan on getting a modest, consistent return with little risk. As long as most people continue to pay their mortgages, everything's cool; the government will cover any who don't. Government policy has now caused a bubble to form. People are able to borrow more and more and more, the government covers them for more and more and more, more people hear about the killing others are making "flipping" houses, more people rush into the game, the amount of risk the government carries accumulates and... The economy has a little bit of a downturn. Suddenly, a lot of folks who could narrowly afford their homes CAN'T. They scramble to re-finance, but there are so many people doing the same that credit tightens up. People can no longer borrow their way out. They try to sell and that doesn't work; the slowing economy coupled with the sudden glut of houses on the market keeps them from selling. Defaults on mortgages sky-rocket and the economy gets caught in a downward spiral. Banks suddenly find themselves short of capital because they're paying interest faster than they're earning it. Big banks, highly leveraged on investments that are considered secure, begin to go bankrupt. Fannie Mae and Freddie Mac require infusions of hundreds of billions of dollars to stay solvent. Large banks are international, and the ramifications are felt everywhere. Everywhere money dries up because nobody's got any to lend anymore. Economies slow, governments find they can no longer afford their current levels of expenditures. Deficits skyrocket as we try to borrow from foreign countries, inflation takes off as we begin printing money to pay our debts. That's how we got to where we are now. EVERYONE was operating without a margin of safety because they believed the underlying promise: the U.S. government would back the loan. What the people who created Fannie Mae and Freddie Mac didn't envision was the perfect storm of rising real estate prices and cheap, plentiful money. Where would more regulation have helped without hurting something else or having even more unintended consequences? It's hard to see. If the U.S. government would not have been in the business of backing loans, the banks would never--could never--have made so many of these loans. They would've had to risk THEIR OWN money on these loans. But, hey, the government tells the bank they'll back the loan and the bank takes them at their word...then when the system breaks, it's the bank's fault because they believed it.
Indeed. [/Teal'c] I remember my entire contribution to that thread was while I was intoxicated. Much like I am now.
You should be more worried about why your country was in a crises in the first place instead of trying to point fingers at what was done to stop the bleeding. Sometimes a crises is just too big for any remedy to fix.
Right. Because WF is home to the belief of high minimum wages and high unemployment benefits. Ireland tanked because it's effectively tied to the old Deutschmark via the Euro. Really, you'd think the UK's fuck-up with the ERM would have given the hint of what happens when you link your cart to a horse you cannot handle. You took advantage of cheap credit to over-inflate a housing market, and now you can't do any currency manipulation to get out of it, and are still tied to an economic powerhouse in the form of Germany. And if you wish to disagree, take a look at Iceland who also went in for tax rises and spending cuts, but most importantly were not tied down to the Euro and also allowed their banks to fail. They're currently on one hell of an upward curve some two years after being bankrupt.
