NY Gov. Spitzer Says Bond Insurer Woes Could Become Market "Tsunami"

[SummerSailing81]

Yet more bad news about our economy.

http://today.reuters.com/news/articlebusiness.aspx?rpc=77&type=ousiv&storyID=2008-02-14T132753Z_01_N13400935_RTRIDST_0_BUSINESSPRO-USA-ECONOMY-SPITZER-DC.XML

Does the subprime mortgage disaster have an end? First the credit card companies are in trouble because debt strapped consumers can't pay their bills and now it's effecting the bond insurers. Things must be getting really bad because you don't often - or want to - hear a government official mention the words "market" and "tsunami" in the same sentence. But, they're still trying to convince the public that things aren't so bad and will be getting better very soon. So, how far into the Great Depression of 2009 or 2010 do you think we'll be before our officials will be willing to use the "D" word? Is there anything the government can do? I know little about economics, but it seems to me there should be something that can be done! Even I know throwing trillions and trillions of dollars trying to bail out all the greedy banks, mortgage companies, and people who KNEW they couldn't afford these homes isn't going to work. What's the answer?

[Nova]

The two biggies that involve trillions of dollars in losses are the bond insurers & the derivative market. Both are concerns that aren't getting alot of press. Probably because few people know about them. Or understand them. I had to read up to figure our what they are. And still can't say I have more than a cursary understanding.

The bond insurer mess will impact pension plans & local/municipal governments. Most pension plans have requirements for the ratings of their investments. If the bond insurers lose their AAA ratings (like Ambac just did), then pension plans will sell. At a big loss. And the value of those pensions will drop. Which results in lower payments to retirees.

Yesterday, Warren Buffet offered to "pickup" the municipal bonds (those bonds that are the most stable) from Ambac. Local governments would benefit. But I think Ambac would fold. Because these are currently their biggest profit generators.

http://www.iht.com/articles/2008/02/13/business/buffett.php

[Biblenuggetlady]

Oh, folks....don't panic, once the American's get their "economic incentive" checks and go on a spending spree, all will be well again. :doh

[RobertB]

Is there anything the government can do? What's the answer?
What's the answer? No one knows, especially the FED. The fed can lower interest rates, fueling inflation and weakening the dollar, and jawbone the consumer trying to get people to spend money, but most everyone in a policy making position is as lost as the next person. Uncertainty reigns.

[SummerSailing81]

What's the answer? No one knows, especially the FED. The fed can lower interest rates, fueling inflation and weakening the dollar, and jawbone the consumer trying to get people to spend money, but most everyone in a policy making position is as lost as the next person. Uncertainty reigns.


Trying to get people to spend money, I fear, is why the government isn't telling the public the truth. Tell them the truth - that we're pretty much up the financial creek without a paddle - and the majority of the public might just stop spending money they don't have on things they don't need and actually save some. Gee, if the majority of us, including the government, had just learned the lesson that you don't spend more than you have and put a little aside for a rainy day then we wouldn't be in this financial mess to begin with! Didn't Shakespeare say that those who forget the past are doomed to repeat it? Obviously we have forgotten the lessons we should have learned from the Great Depression of the 20th century.

[Issachar]

What's the answer? It depends on what the question is. From our (the general public) perspective, the question is what must be done to make our economy be healthy again. The answer, which will not be implemented, is to get away from the fiat system and pretty much "reset" everything. From the international banker's perspective, the question is how can we make sure that what we have going here will keep going. The answer, which is being implemented, is keep debt levels very high and keep the general public spending. If they back off on spending, let prices rise so that they will not be able to save. Saving is anathema to a fiat economy. Fiat economies don't just happen. They are carefully crafted for the purpose of giving much ... eventually, total, control. I already know that many won't accept this concept, but if you don't, it is understandable. I do not believe that those at the top of the economic ponzi scheme are worried. In fact, I believe that they are smiling. They do not see the economy from the same perspective we do. I think that sometimes people think that and so they wonder "why can't they see what's going on and fix it??!" The fact is, they do know what is going on and don't see it as needing to be fixed.

Didn't Shakespeare say that those who forget the past are doomed to repeat it? Obviously we have forgotten the lessons we should have learned from the Great Depression of the 20th century. I don't know if it was Shakespeare or not, but it is true. That is why I have the tag line about history. :)

Issachar

[SummerSailing81]

Sage advice and wise words all the way around, Issachar. I understand now that it's not that the "powers that be" aren't aware of what many of us regular folks see as a coming disaster. Instead, it's exactly the way they want it to be. Makes perfect sense since you explained it. Thanks.