BlkKnight

The Crisis of Credit Visualized on Vimeo

boxst

That was really good -- I especially liked the representation of the sub-prime mortgage people

Steve

S3TH

iTrader: (2)

good post, thanks for sharing.

Leslie

Very well presented explanation, thanks for that.

Les

LG John

Very interesting and informative, thanks.

How did it get to that stage though? How did we allow these debts to be repackaged and sold to so many different people with everyone taking a slice off the top. I mean, if you look at the part of the video where the home owner is happy and everyone in the chain is getting rich you think to yourself...'great'. However, that strikes me as something akin to a pyramid scheme; everyone is promised the goodies but somebody has to lose out somewhere? You'd think there's be laws against such things and the creation of so many 'middle men'.

I might be wrong with this but surely there should only be the one middle man....the bank or building society. Thus, you have people that need credit in the form of mortgages and loans, etc and you have savers and investors that want return on their money. So, the savers/investors put money into the system and get say 4% return. The bank lends that money in the shape of mortgages, loans, etc and charges 6% and they make a 2% profit. People get credit and mortgages, real sums of money are used to fund it from real investors/savers and the bank acts simply to put one group in touch with the other. Simple and surely far safer, no? Is that not the way it used to be with traditional building societies?

It's not just credit either. It seems there are like a million middle men with nearly everything these days and surely that sh*t has to stop? I mean, buy almost anything and there's probably 10 people between you the customer and the factor floor where it was built or the institution where it was dreamt up taking a cut. Sod that!

paulr

My take is this. If you were a banker and someone said, here's a way of making 10 million quid over 5 years, its all legal, and you get to keep the money, but at the end the economy will be knackered.

Would you take it?

LG John

No.

Here is why.

As you possibly know I play poker for a living and in poker we have a saying, "you can sheer a sheep many times but you can only skin one once" Given most poker players multi-table and there is regular traffic of new/poor players the saying has much less relevance in the modern game but the principal stands. That is to say, when a bad player sits down you want to be nice, friendly and polite to him. You want him to have a good time and to enjoy his experience playing poker. You even want him to win sometimes and to enjoy the buzz of success. Most importantly though, you want him to slowly bleed his funds into your account without ever realizing how badly it's happening. If you destroy him in a few hours flat and he takes that as a kick in the bum to leave the game for good then you have failed as he otherwise might have played many months and lost a lot more before finally calling it a day.

In short, I think the banks got stupid and greedy. If I was told there was a way to make £10M over 5 years before it would all go Pete Tong or £500,000 per year sustainably then I'd take the second option.

hodgy0_2

but that’s the point no one will guarantee that second option

Good link by the way, essentially a pyramid sell, when they ran out of people coming in at the bottom, it all imploded


may someone should forward the link to the Darling and Osborne

hodgy0_2

but that’s the point no one will guarantee that second option

Good link by the way, essentially a pyramid sell, when they ran out of people coming in at the bottom, it all imploded


may someone should forward the link to the Darling and Osborne

leverage essentially confirms my first rule of finance, you never get rich using your own money

LG John

Yeah, but you'd think the governments would put in some sort of safeguards. I mean, at the and of the day at some point someone, somewhere has to stump up real cash! We can't all go around making investments on borrowed time with borrowed money. How could somebody have not realized that!

I sort of feel we need to get a little old school here. I mean, money was created to act as a fixed value medium to allow the trade of goods. Thus, if person A had 10 bread sticks to sell and they were worth 1 litre of Person B's paraffin which in turn was worth 30 minutes with the local hooker (Slag C) then through the medium of money trade of these good of parts of these goods can happen. The guy with the bread sticks can sell 5 of them to the guy with the paraffin and then enjoy a 15 minute **** However, having money to trade seems not to have been enough in the modern world. Now we have idiots trading the promise of the bread and the promise of the **** and somebody else selling the used knickers on ebay, and another guy the voyeur footage.... and then another guy setting up a pimp company and yet another guy selling shares in that company and so on and so forth. There's just too much **** happening on 'paper' and 'in theory' and the governments should have stepped in somewhere to simplify and trim everything down.

Of course, the irony is that I'm advocating here that things should be simplified such that people work, make something or provide a service to acquire the medium of exchange (money) and then they can use that to buy goods and services. All this while my means of making a living is essentially a 'paper' exercise. I play a game in which an electronic version of money is used as a score card