The economy explained..

[Tailgate]

Worth the read...

This Woman Just Explained Economics In A Nutshell. And It's So True It Hurts.

...here are the opening paragraphs...
Mary is the proprietor of a bar in Dublin. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar.

To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

 

[daylatedollarshort]

Worth the read...

This Woman Just Explained Economics In A Nutshell. And It's So True It Hurts.

...here are the opening paragraphs...
Mary is the proprietor of a bar in Dublin. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar.

To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

That article should be in every high school economics class textbook.

 

[robnplunder]

That article should be in every high school economics class textbook.

+1. Now, I understand the 2008 recession clearly. I understand the Greek issue, too.

 

[NW-Bound]

The above is not too far from the real crisis in 2008.

People should read Michael Lewis's The Big Short: Inside the Doomsday Machine (2010), where he described how in California mortgage lenders loaned out money to even illegal aliens to buy homes with liar loans.

 

[Major Tom]

I haven't yet read it properly, but was very distracted by the grammatical error in the 4th paragraph. The possessive apostrophe in the word " customers' " is unnecessary.

Believe me, this affliction I have of noticing small details is a right royal PITA sometimes

 

[Ed_The_Gypsy]

Eats Shoots and Leaves, eh, Major Tom?

 

[Major Tom]

Eats Shoots and Leaves, eh, Major Tom?

Precisely. This stuff is important!

 

[Dash man]

+1. Now, I understand the 2008 recession clearly. I understand the Greek issue, too.

And the upcoming $1.3 trillion student loan crisis...and the $63 trillion unfunded debt crisis...


Sent from my iPad using Early Retirement Forum

 

[Jack_Pine]

Loved that article.

 

[NanoSour]

free guinness at a dublin pub. Sounds like heaven on earth. I'm there!

 

[Walt34]

People should read Michael Lewis's The Big Short: Inside the Doomsday Machine (2010), where he described how in California mortgage lenders loaned out money to even illegal aliens to buy homes with liar loans.

I read that book and it is astonishing what they did. In one instance the bank loaned a lettuce picker making $7/hour enough money to buy a $700k house! (I think those were the numbers but it was similarly outrageous.) Clearly there's no way that loan is going to be repaid.

But then they could bundle up the loans and sell them, truthfully saying they were mortgage backed securities.

And no one went to jail for it.

 

[robnplunder]

I read that book and it is astonishing what they did. In one instance the bank loaned a lettuce picker making $7/hour enough money to buy a $700k house! (I think those were the numbers but it was similarly outrageous.) Clearly there's no way that loan is going to be repaid.

But then they could bundle up the loans and sell them, truthfully saying they were mortgage backed securities.

And no one went to jail for it.

I felt like I went to jail for it when everything came crashing down. I've heard stories of people buying multiple houses, and declare bankruptcy even if they have money to pay back. The rest of us paid for their greed, misjudgment, ...

 

[HFWR]

There was plenty of guilt to go around...

 

[Totoro]

Fond of this cartoon for a simple explanation of everything financial:
8373.jpg Photo by sw_coder | Photobucket

 

[travelover]

There was plenty of guilt to go around...

Right. Let's start with that lettuce picker.

 

[HFWR]

Right. Let's start with that lettuce picker.

I wasn't necessarily picking on the lettuce picker.

I realize that some aren't sophisticated about things financial, and thus might not have understood exactly what they were getting into. And, well some just got caught up in the tulip, er, uh, housing craze, because, you know, housing never goes down. But the bankers coulda/shoulda been the adults in the room. Except, of course, OPM. No risk management, nod-and-wink credit ratings, lax or non-existent regulation, excessive leverage; so, yeah, lots of blame to go around, but not many perp walks...

 

[NW-Bound]

In a recent interview, Bernanke is quoted as saying somebody should have gone to jail over the mortgage fiasco in 2008-2009. Of course nobody did.

The problem was so pervasive that if we tracked down to the brokers who helped ineligible borrowers obtain the liar loans, it would take a lot of money and manpower. And we might even have to build more jails. So, they walked free, and the taxpayers picked up the tab.

 

[travelover]

I wasn't necessarily picking on the lettuce picker. ......

Sorry, forgot to turn on the sarcasm font.

 

[audreyh1]

Right. Let's start with that lettuce picker.

Sorry, forgot to turn on the sarcasm font.

I'm glad you said that because I was thinking - really?!?

 

[travelover]

I'm glad you said that because I was thinking - really?!?

Well, some people are too big to jail, so ya gotta prosecute somebody.

 

[youbet]

Well, some people are too big to jail, so ya gotta prosecute somebody.

I wonder who should do the jail time for giving loans to students persuing degrees in traditionally low paying fields?

 

[M Paquette]

I wonder who should do the jail time for giving loans to students persuing degrees in traditionally low paying fields?

The students, obviously. You can't expect bankers and specialty finance people to be able to take time from their busy schedules to understand forward prospects for the economy and job markets. That sort of decision has to be left to persons with sufficient time available to do the necessary research work, such as high school seniors.

Really, people have to take some responsibility for their actions. It is hardly the banker's fault if someone takes advantage of their generosity. Loan officers have always relied on the kindness of strangers.

 

[daylatedollarshort]

Some of the marketing people at the colleges kids we know attended are nothing but grifters: Hey we'll give you a 50% scholarship so you can only be $100K in debt with a useless major instead of $200K, deal?

 

[travelover]

...........
Really, people have to take some responsibility for their actions. It is hardly the banker's fault if someone takes advantage of their generosity. Loan officers have always relied on the kindness of strangers.

Back when banks kept their loans, as opposed to reselling them, I don't recall bankers being generous to strangers........ or anyone else.

 

[aja8888]

Back when banks kept their loans, as opposed to reselling them, I don't recall bankers being generous to strangers........ or anyone else.

My mother got a toaster for opening an account at the local bank. I think we needed one at the time.