I already told you: the bubble started before than the .com crash and it isn't specific to the US.quest_for_silence wrote:where are the actual and greatest differences from the Economist and what I said?"
You apparently quote-mined the articles according to your preconceptions and ignored the data. Try again: look at the data.
By the way you will not find your "0.75% effect" either (check the Case-Shiller data from my other link if you want since it's much more detailed for the US than the graphs in the articles).
No. It hadn't popped in the USA at that point and the articles predicted global, non-financial consequences.quest_for_silence wrote:As it's the 2005, they can write that the bubble popped dramatically in the USA and that would have affected (first, directly) the US Financial market.
I've adressed the latter part of your summary above. As to the earlier part, it is a fact that newspapers printed articles about these things in that order. But what they printed is an interpretation (as opposed to things like a change in some price or a default which are facts). It's not yours but what you're repeating is an interpretation.quest_for_silence wrote:Up to 2010 the worldwide financial crisis started with the US subprime mortgage crisis ...
Is this extremely summarized recollection wrong? Are they facts or mine interpretations?
Since that part of your summary doesn't explain anything, it's not wrong. But if by "started with" you actually meant "was caused by", you would be wrong.
This link works for me without subscription: http://www.nytimes.com/2008/07/14/opini ... ref=sloginquest_for_silence wrote:It's an interview at NY Times of 14th july 2008, but I have just read excerpts as here (as it's a subscriber-only matter to read those issues right now).
From what I can piece together he's separating "the height of the housing bubble" from "the housing bubble". And he says the GSEs aren't responsible or affected by the height. That's an exageration of course (newspaper articles must be short and he's being deliberately "contrarian" in this one) but it's basically right.
The problem is: on what basis is he separating the bubble in two parts? And why would the fundamental part of the bubble not be a part of "the mess we're in" just like the top? Partly I think because he doesn't expect the full bubble to burst, only the worst part. And also apparently because he expects a bailout of the GSE's ("since it’s already clear that that rescue will take place, their problems won’t take down the economy") while the damage at the top mostly affects banks instead. And he's probably afraid about banks and panic (it was 2008).
But what about the real damage (what The Economist talks about) as oppposed to the damage to financial corporations? And what about the cost of the bailout? He doesn't talk about that except to say that it happened before to other people (what a poor excuse!). It's somewhat understandable because there were bigger fears at the time. But it's a very biased and incomplete explanation (like I said you'd often get with his articles).
In this article he also explains the basic problem with GSEs: "The most important of these privileges is implicit: it’s the belief of investors that if Fannie and Freddie are threatened with failure, the federal government will come to their rescue. This implicit guarantee means that profits are privatized but losses are socialized. If Fannie and Freddie do well, their stockholders reap the benefits, but if things go badly, Washington picks up the tab. Heads they win, tails we lose." What he doesn't say is how that distorts prices and expectations and therefore influences everything in that market including the subprime stuff.
No. This is about financial reform and the GSEs are simply off-topic.quest_for_silence wrote:Krugman has gone further from that arguments in another 2010 NY Times issue where the GSEs are not taken into account looking for the main causes for the financial crisis.
As far as I know that's got nothing to do with Krugman. It was mostly made by politicians and their staff.quest_for_silence wrote:"The other reference is the "Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States" (see from page xxvi)."
It used to be different and how it used to be is what matters to explain the past. See what Krugman said about their "priviledge".quest_for_silence wrote:It's already so, without taking into account GSEs: now the biggest banks know that worldwide governments will protect from bankrupcy.
Definitely. Like I said in another thread, people should have been concerned about the GSEs years ago. Now it's history. But the damage is done and won't go away.quest_for_silence wrote:I'm more concerned about this "moral hazard" (irresponsible behaviours) than the ones actually coming from GSEs.
Moral hazard is not irresponsible behaviors by the way. Maybe one could put it this way: moral hazard is when it's responsible to behave in a way which would be irresponsible without the moral hazard.
quest_for_silence wrote:Just the last example: "...The combined percentage of loans at least one payment past due or in foreclosure was 12.63 percent on a non-seasonally adjusted basis, a nine basis point increase from last quarter, but was 115 basis points lower than a year ago..."
I usually start to read from the top where they give the numbers separately. I recommend you adopt this cunning reading method of mine.
What's that supposed to mean?quest_for_silence wrote:Or we just have different ethics and crises happen out of the blue.
Your "out of the blue" has to be ironic. It sounds like a priori denial but it's hard to tell with irony...
The bubble itself is the disaster.quest_for_silence wrote:So, add your systemic risk to small actual capitals and those inherently high risks securities (for an higher yeld, of course), shake together, put it at the foam of a bubble, and you'll go very close to something nearby the almost perfect disaster.
The loss doesn't happen because of the securitization or because the result is a risky instrument but because the junk mortgages were signed at the top of the bubble. If there is a bubble, there are going to be losses somewhere at some point. That can't be helped.
All the securitization does is to spread the risk. The loss doesn't increase. It's not a bad idea in principle. Only some organizations concentrated the risk instead by holding many of these securities. And then you get failures and panics. But that's not a special phenomenon caused by these instruments. If banks are not regulated well enough, they'll find another way of making a mess sooner or later.
Small "actual capital" without regulation is OK only if a default would be acceptable (systemic consequences included). That's a general problem unrelated to securitization, subprime and so on.
You assume people are in a position to know what safeties are effective.quest_for_silence wrote:Perhaps you are underestimating groundlessly several people: several people know that if you systematically underestimate the safety distances sooner or later you crash into something hard, whether we are talking about traffic and financial markets.
TANSTAAFL is always true.
People who know how to drive a car usually don't know how to safely pilot a plane or manage financial risk. There's simply no connection between these skills and your analogy is therefore a crude fallacy.
Again, I have no idea what you mean with "there is no such ...".
Aside from what I said above (no evidence), this effect isn't even supposed to happen. As the saying goes, monetary policy is a "blunt tool". It doesn't affect asset prices directly in a predictable manner, especially in the middle of a bubble (expectations of prince increases are self-sustaining). The link with real estate is even weaker than usual because of the difference between short-term and long-term interest rates and because housing is not the first expense you cut, especially in the US where it wasn't uncommon to refinance a mortgage to pay the bills.quest_for_silence wrote:The negative interest rates such the ones set by Fed discount rate in late 2002 fast paced the housing bubble: why is this a mere, wrong, not authorized my interpretation?
Want to control housing prices? Tax housing and/or regulate mortgages, sales and rents. It's more effective and you can do that without wrecking the rest of the economy in the process...
http://www.federalreserve.gov/monetarypolicy/fomc.htmquest_for_silence wrote:I don't know not even to pick up them, bla bla bla... ok point me out the repository, I'll give them a skimming check.
About skimming, you know what would be funny? A script that counts the occurences of words like "oil" in their minutes and plots them on a chronological chart. Maybe someone's done it.