Is the dollar going to become worthless?

In my case, the honor is bestowed on me as a "character reenactor". I will be representing an actual ancestor of mine, Col. Abram Fulkerson. A lot of what I'll be doing is not so much actual command, but as teaching about him and representing him at events. I've done quite a bit of research on him and look enough like him to do it. I'll be mostly hanging out with the Generals Lee, Jackson, and Forrest reenactors.

And it's even scarier when you realize that the sale price comes after a $30,000,000,000 bailout by the government and includes transfer of Bear Stearns's headquarters building in Manhattan, which on its own is worth about four times the purchase price.

Basically this deal amounted to Bear Stearns paying JPMorgan Chase $750,000,000 to take over administration of Stearns's "assets" and the assets' upside potential while the feds took the massive downside risk for free in a bailout.

President who???

He's not a real colonel.

Good thing we save our Confederate money, huh Maud ?

I'm surprised Bear Stearns held on as long as it did. If I'd had anything invested in it, I'd have pulled it out after Jim Cramer's rant about how the Fed wasn't bailing it out enough - it should have been obvious at that point that it was in long-term trouble. Or better yet, right after the Fed rate cut that saved it.

I'm not familiar with the whole Bear Stearns deal. Aside from the fact that they were just bought for pennies on the dollar, can someone explain why they in particular were so significant?

^ Because it was the 5th largest of the Wall Street banks and heavily invested in subprime mortgages.

There's more trouble ahead this week when the other banks present their results (Goldman Sachs seems to be in trouble too). That, and growth numbers as well as unemployment numbers will be presented too, deciding if there is already a recession or not. One of those weeks I wouldn't want to be a Wall Street trader.

Bear Stearns wasn't bought: Bear Stearns and the fed paid JPMorgan to take over Stearns's bad assets.

It will be interesting to see how the Fed reacts tomorrow to all of this during the FOMC meeting.

Yes, he was. Too bad history's not one of your strong points.

To me a Confederate officer is about the same as Spanky being an Admiral in the Little Rascals Fleet.

So you don't think that General Lee was a real General, right?

What about General Rommel, was he not a real General either since he was on the losing side?

I suppose you're one of those people who would hold that John Hanson was never president either.

I don't really support the concept of the Confederate government, but to say that Jefferson Davis wasn't really president and that Confederate officers weren't really officers is just ignorant.

Thread derailment!

Start a new one.....cause both points being made here are fairly interesting on their own.

I know it's a fine line when you talk about banking but I have to wonder what the point of a free market is when businesses aren't left to die. The government's always bailing them out in one form or another.

Well, the somewhat legitimate point of bailouts like this is to avoid a more widespread panic, but the net effect is to privatize the upside potential of risky investments while the downside potential is socialized. This is turn leads to market actors taking risks they'd never take in a truly free market, leading to even higher profits for them in good times and even higher costs to the taxpayer in bad times. Now, if we had a much more progressive tax system, or if corporations were statutorily required to fund their own inevitable bailouts through purchasing insurance run by the federal government, then bailouts might not be such a mixed blessing. As is, they're market-warping corporate welfare given in the hopes of averting corporate meltdown.

Indeed. Just another side of what I described above: profits are being taken and often not even properly paid tax on. Losses are being socialized. Thus works the silent shifting of wealth from the bottom to the top. Welcome to a globalized world where the rich get richer and the poor get poorer by default.

I rarely agree with you in things like this, but you nailed it. People are taught to live on credit and re-fi their homes to pay off that debt because it's cheap money. It's ridiculous that kids younger than myself can have debt as much as the price of a new car.

Yes.

In this case "buying completely useless stuff on credit" is pretty much exactly the problem. Someone comes up with the bright idea that housing prices go up 15%/yr forever, and that mortgage backed bonds--even those backed by subprime mortgages--that return 7%/yr are therefore investments as safe as government bonds that return half that much. A company with a billion dollars in capital uses those assets to secure another 14 billion in loans, all of it invested in securities backed by questionable mortgages. Then when the housing market turns out not to go infinitely up, housing prices drop 10-20% in rapid order, people drop into negative equity and start defaulting on their mortgages, and lenders either ignore the missed payments or collect 50 cents on the dollar in foreclosure. All of a sudden those "safe" mortgage backed bonds have dropped 20%-50% in value and their liquidity is gone because no one knows exactly how much they've dropped in value. The investment company that started with $1bn in real assets now has $7.5bn-$12bn in illiquid assets with which to pay back $14bn in loans, and it's forced to sell at that bottom value.

So, rather than a hard to swallow loss of a few hundred million dollars on a billion dollar investment, a loss that might have been ridden out by holding onto the illiquid assets until the panic stopped and everyone figured out exactly what they were worth, "buying completely useless stuff on credit" has resulted in the entire initial stock of capital being wiped out and the necessity of joining the panicked sell-off of the bad securities in order to pay off what portion of the loans can be paid off. That means even more panic by other bond holders, driving down prices more, and the general collapse of the market in mortgage backed bonds, with the ancillary credit markets taking an even bigger hit.

^ By useless I didn't mean houses. A house is useful, the only stupid part is the financing and speculation with borrowed money. I was talking about consumer credit. Europeans are, for example, not so tempted to buy ultimately superfluous consumer electronics on credit just because the neighbors have it too. More people here will rather pay cash than put such things on a credit card and only borrow money for the big stuff - cars, houses and such. Not all of course, but as a tendency. Which amounts to less overall debt. Which gives more flexibility when you get in financial trouble: all the debt won't choke you to death immediately and you might be able to strike a deal with your mortgage lender.

There's also the problem here in the U.S. of people being encouraged to buy a bigger house just because they qualify for it in the premise that one can pull out more money if/when they need it, builds up equity, ect. Which is stupid to cut it sop damn short, and why there are so many people who are facing foreclosure now. They could barely afford the house payments before, and certainly can't now.

Aurora, in the US, they offer credit for many things. Furniture, Electronics, carpeting, dental care, eye surgery, computers, plazma tvs, you name it. Very easy to obtain credit. Many stores offer their own credit cards. They will defer interest and payments for a year.

Are you saying that this is not done on a large scale in Europe?

^
I think she's saying that many Europeans just don't get sucked in to using that as their main form of payment.

Neither did I; it's the mortgage backed bonds that are useless. They're the kind of investment that returns 7% a year until they inevitably all of a sudden collapse in value. They're a game of hot potato, and whoever has them at the end is really stuck.

But America has rampant credit. They offer it to you left and right. Your dog could get credit.

Americans are being sucked in. YOU can have what you want NOW!!!

My dog did get credit back in the day. Well, at least he got several credit card offers in his name.

Offer? Yes, there are many such debt accumulation schemes like get it now - pay later and the like. It's just not a widely accepted form of financing as people will rather go to their banks when they absolutely need something on credit. Banks offer tons of different products for various purchases at vastly different interest rates. Mortgages are very cheap for example. Credit to use for whatever you want is more expensive but still a lot cheaper than 'store credit' or credit cards of any kind.

It's also easier to get credit with banks when you've had a long relationship with them. For smaller amounts they don't even check your credit score - just goes over the counter if you have had dealings with the clerks for a some time and they know your situation. Bank teller, btw, is a highly qualified job over here. The same guy who'll pay you out 20 euros when you forget your ATM card can usually also advise you on and sell you a 200.000 euro mortgage.

Indeed. That doesn't work to the same extent here. From what I hear, tho, more and more people give in to the relentless advertising machine. GET IT NOW!!!!

Santos L. Halper agrees!

And that's a problem. My first year at college, I went to get some free pizza, and all I had to do was apply for a credit card. "Well, that's harmless enough," says I, who only worked one day a week and expected to be turned down.

The next week, my mom calls me to say I got two credit cards in my name worth 800 dollars. EACH. I made 150 dollars a goddamn month. What business did a credit card company have giving someone with that little income such a huge amount of credit? That's stupid.