• it is a black hole that everyone is looking for and anyone who gets close enough to find is sucked in at a fair price... sad but true
  • The economic melt down is for excessive reliance on functioning based on free market concept without placing in desired level of regulatory infrastructure. Man by nature is ingenious and in the lust for wealth at times crosses the boundaries of moralresponsibility and all rational reasoning. His actions therefore puts all the systems based on credibility and goodwill at danger and stops the wheel of economic cycle.
  • The US economy has been running on debt-based consumption for years. When enough people stopped paying on that debt, the economy began to implode, bank portfolios became worthless (e.g., Countrywide, WAMU, and 41 other banks in 2008) taking major investment firms with them (e.g., Bear Stearns, Lehman Bros, etc.) and their insurers (e.g. AIG) in the cascade to the bottom, causing a daisy-chain of finance-dependent industries (e.g,, construction) and their peripherals (e.g., building products producers and services) began to fail and lay-off in a big way. This caused fear in the marketplace, short-selling, and people became afraid to borrow causing a drop in consumption of services, depressed markets in entertainment and consumer goods from cars to computers, in turn causing more shrinkage and more lay offs and even more people to default on their debts, reducing consumption further, spreading fail throughout all economic sectors. As for who is responsible, the undisciplined American consumer is complicit, but for the architects of this catastrophe, look here: Add to the above information the US Congress, after years of intense lobbying pressure from the major investment banks such as Goldman Sachs et al and their political minions, they enacted the 1999 Gramm-Leach-Bliley Act which repealed the Glass-Steagall Act of 1933 and allowed, among other things, commercial banks to diversify into financial instruments beyond mortgages and collateralized loans, effectively permitting them to function as brokerages while practicing fractional reserve banking. More importantly, it allowed commercial banks to transfer FDIC insured savings to their new investment divisions thereby putting those savings at risk. Fractional reserve banking allows a bank to loan out ten times more money than it actually has. This means that when a $100 million bank goes down, it doesn't just take out $100 million in savings, it takes 1 billion dollars of uninsured human effort with it, leaving devastation in its wake and the consumer to pay back loaned money that never existed in the first place. Additionally, when enough of these banks go down, FDIC can't cover the savings losses. On top of that, today's consumer is not only expected to pay back their loans to these failed institutions, but to also finance the bailout of these very same institutions through future taxation. WTF is that? This is just the start of the downward spiral. There is no real money. It's all debt markers that were being traded back and forth and suddenly, when the consumer stopped paying off that debt, the paper quickly became worthless. The big investment banks along with insurance companies, pension funds, etc., that bought that paper at the top, have been caught holding the bag at the bottom; a situation that the investment bankers designed, but now want the taxpayer to bail them out of. The economy has yet a long way to go to the bottom and the bailouts, which are just more borrowed money to the tune of one trillion dollars in the last 30 days (one tenth of our GDP) -- the paper of which is treasury bonds backed by future tax revenues from an increasingly fatigued citizenry -- will at best slow the collapse. The guys that arranged the bailouts are the same guys that created the credit environment by recklessly backing deregulation such as the Gramm-Leach-Bliley Act, the neutering of private and government oversight mechanisms (enabling the manipulation of financial instrument rating criteria, among other things), and the removal of the net capital rule in 2004. In 2004, at the request of the major Wall Street investment houses, including Goldman Sachs, then headed by our present Secretary of the Treasury, Hank Paulson, the U.S. Securities and Exchange Commission agreed unanimously to release the major investment houses from the net capital rule, the requirement that their brokerages hold reserve capital that limited their leverage and risk exposure. The complaint that was put forth by the investment banks was of increasingly onerous regulatory requirements -- in this case, not U.S. regulator oversight, but European Union regulation of the foreign operations of US investment groups. In the immediate lead-up to the decision, EU regulators also acceded to US pressure, and agreed not to scrutinize foreign firms' reserve holdings if the SEC agreed to do so instead. The 1999 Gramm-Leach-Bliley Act, however, put the parent holding company of each of the big American brokerages beyond SEC oversight. In order for the agreement to go ahead, the investment banks lobbied for a decision that would allow "voluntary" inspection of their parent and subsidiary holdings by the SEC. During this repeal of the net capital rule, SEC Chairman William H. Donaldson agreed to the establishment of a risk management office that would monitor signs of future problems. This office was eventually dismantled by Chairman Christopher Cox, after discussions with Paulson. According to the New York Times, "While other financial regulatory agencies criticized a blueprint by Mr. Paulson, the [new] Treasury secretary, that proposed to reduce their stature — and that of the S.E.C. — Mr. Cox did not challenge the plan, leaving it to three former Democratic and Republican commission chairmen to complain that the blueprint would neuter the agency. Changes to the net capital rule are thought to be an important factor in the credit market meltdown of 2008. We have two wars, a healthcare system that completely ignores 30 million American men, women and children, primary and secondary educational systems that are in shambles, and now this. As citizens of a democracy over which we were not vigilant, we made this bed together. Shall we now all sleep in it? Here's a cute video that best describes the evolution of the problem:
  • There are a lot of people to blame; mostly those that don't care how they make money.

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