there are three parts of the collapse that haven't been discussed, that i've seen. the intertwining debt mentioned came about from banks and lending groups bundling together toxic assets (failure mortgages, bad loans) and selling them to people who didn't know any better. the organizations would give them billions in credit to take up these bundles of loans, assuming the loans would then pay off and return a profit.
many of these organizations were international entities, based in china and europe. the joke that's been going around economic circles is, "yeah, china's been selling us all these toxic toys, foods, and everything else. all we've been selling them is toxic assets."
the third part of this is all that credit these outside organizations are extending in exchange for toxic assets is that once they caught a smell of what was happening, when the loans started really turning sour, they stopped extending that credit to companies like lehman and bear sterns, not to mention freddy and fannie. without those credit lines, these companies could no longer afford to continue making bad loans, which meant they could no longer make any money.
but they had so much credit they were trying to cover from previous bad loans that the debt over just a few days of not earning retard money collapsed companies worth hundreds of billions of dollars.
if these companies aren't saved, their creditors crumble in the same way they have.
and now two interesting solutions i've heard, one which bails out the world market at the sacrifice of the US dollar and economy in general, and one that erodes the world economy, lowering all world currency to be competitive with the dollar again. both plans include a few depression years, but, honestly, i don't think there's any avoiding that at this point.
the first plan extends the bailout money to money managers who have proven themselves responsible by avoiding this huge collapse. spread it evenly among as many of these banks, funds, groups, whatever you can find. attain the real value of the assets that are currently showing highly inflated value (which is one reason the paulson plan was so bad: he wanted to buy toxic assets at the value the companies who tanked set them, or close to it, with no way to assess their true market value) and have a big auction. smart money managers will obviously pay only the closest thing to their true appraisal of market value as they can get and still profit from it, so they will not assume toxic assets, they will be granted privilege to refinance the deals in an appropriate way after getting the assets at cost.
this would lead to profit and, in the end, ways to reduce the pressures on outside creditors.
the other option is to take the bailout money and use it to invest in infrastructure and industrial programs, new deal-style. create jobs, factories, etc. then use those factories to produce american goods at affordable prices, sell them to other countries, and actually have an american product worth exporting for the first time since cheap chinese goods came on to the market. after a few years of global depression, quality goods flooding the world market could put america back on top.
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Topic: It's the economy, stupid! (Read 68913 times)