Concise explanation of the Mortgage Meltdown

[Truett Neathery]

There is an article in this month's Atlantic magazine that would be of interest here - written by Professor Robert J. Schiller (of Schiller-Kase fame), entitled "Infectious Exhuberance", where he likens the current runup in values which were not supportable, and the subsequent collapse to a disease that has rippled through worldwide markets. He states that "those who came to the game most recently are generally the least sophisticated", and emphasizes the need to diseminate financial advice from "advisers'" , and not salespeople with the agenda of making a commission, and how the melt-down can cause the destruction of the social fabric on a wide scale by exhibiting itself in reactionary impulses such as intolerance and racism.

The previous month's issue spoke to the fact that many suburbs located far from economic centers are in danger of becoming ghost towns in which these "mini-mansions' are converted to illegal apartments and rooming houses, especially with the speculative run-up in energy costs (which, BTW, we haven't seen the full effect of yet as food producers, processers, distributers, etc. are affected even more widely than the typical residents of Yourtown, USA).

I tried to pull the article up on the Atlantic website, but could not find it, I guess if you don't subscribe, you are going to need to report to your nearest Public Libraty to become a member of the well-informed!

Schiller' new book "The SUbprime Solution" is to be published in August by Princeton University Press.

TN

 

[Mike Kennedy]

old-fashioned.....greed.

 

[Randolph Kinney]

Many decried Shiller and his works on the housing bubble. In effect, the bubble destruction is no surprise to any who listened to Shiller.

Now that the bubble destruction is under way, you would think that Shiller would have gained credibility. Not so apparently. The loss of value to the nation's wealth is and will be immense. It may be beyond the government's control to "fix".

Thanks for the heads up.

 

[Big ole Boy]

Sisyphus is the soul of Schumer and banking

Greed ..... now the payment for that greed .......

..... pump and dump the US economy .....

....started with pump and dumping of traders, selling off jobs in the name of globalism ....

.... the decoupling and cloning of the american fiancial system .......

... is now a ubiquitous rock that is rolled up a hill only to come back down again and again ...

..... the greedy king from Corinth

 

[Terrel L. Shields]

This analysis is nothing new. This one was written 8 years ago by a 90 year old professor...Manias, Panics, and Crashes: A History of Financial Crises comments about it below

As Peter L. Bernstein summarizes nicely in his introduction, Professor Kindleberger's argument boils down to four principles:
(1) Irrational behavior does occur from time to time in financial markets.
(2) There is a general, repeatable pattern in how this irrational behavior plays out (a positive economic displacement is followed by euphoria that takes the form of overtrading, then distress following revulsion, discredit by lenders in the overtraded assets, and then panic leading possibly to a crash brought on by those who bought high).
(3) The economic system needs a lender of last resort to step in at the right time and in the right way to restore confidence and liquidity. (4) Trying to solve these problems by being doctrinaire is "wrong . . . and dangerous."

And the real classic is MaKay Popular Delusions and the Madness of Crowds http://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds
written in the 19th century. Oft quoted is this axiom

Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one!" Charles Mackay