People believed they need investments for their future and everyone owning a bit of stocks was not only a way for corporate america to get their hands on main street’s cash, but it was a way to spread the hurt around and avoid all the little guys from complaining about propping up their share value.

The little guys get sucked down.. just as they did with Enron.

Foolish people to play the investment game. You can lose. And many will.

economy based on credit = ponzi scheme

How long can Japan offer low interest rates?

How long can Countrywide (or others) hold assets?

How long can the Fed keep liquidity in the markets?

How long will the Chinese prop us up?

How long do we have to fix things?

…

A few points I would add:

1. The Japanese are still loaning money at 0.5%.

How long can they do that?

2. As you note, the US has been lying about inflation. …

3. Interest rates in the US are below the real rate of inflation. When that happens, money is free. No one saves. And you get speculative bubbles.

Our economy moved away from savings after the 1970s when it became apparent the corporations weren’t actually going to let anyone save. They forced people into the spend-everything-now mode we’re now in. Also, banks didn’t help by refusing to pay decent interest rates for savings. The Rich control the system, even through politics, and THEY are to blame.

4. One way to fight inflation is to outsource well-paying jobs to China. Wall-Mart can keep its prices low, which masks the real rate of inflation.

Thank God for Wall-Mart which has helped to protect the People from being ravaged even faster by the loss of jobs and prices they couldn’t afford.

We might well begin to see even more falling prices from other retailers as economic difficulties become more obvious.

5. The US consumes 25% of the world’s resources with <5% of the population. This over-consumption drives the world economy. The world depends on it. …

6. We desperately need to raise interest rates to encourage saving. That’s the only way out of a debt crisis. However, raising rates will bring about a global recession (or worse). … We’re damned if we do, damned if we don’t.

Bernanke is a globalist hack, just like Greenspan before him. The “decade of stupid” just about sums it up.

I like your summary points. It explains WHERE we are, but leaves open where we should go from here.

We’re definitely in a time of transition as the world economy cranks up. We need to adjust — and fast. We’ve got dummies in charge who think politics is everything.

We need to put in new leadership if only to get fresh minds to look at this new situation and give it another go.

I think we need to get our economic house in order by directing more wealth to everyone but the super rich and, as you suggest, to help them sock it away as savings of some kind (obviously not in real estate they can’t afford), so we’re more sound, better suited for the transition we’re going through.

http://wallstreetexaminer.com/?p=1550

So is the Fed’s action as a big deal as the market’s subsequent action and the punditic (yeah, I just made up that word) euphoria would have you believe?

No.

The Fed does not buy securities at the discount window. It makes emergency loans there, and since the rate is at a premium to the market, no one would use the Window if they weren’t in deep squat and were locked out of the Fed Funds market. How much lending is done at that Window? As of Wednesday of last week the total outstanding was $294 million. Not billion, million! Compare this with the total size of the Fed’s asset base of over $800 billion, and you get some idea of how truly insignificant the Fed’s symbolic ploy was.

But the market took the bait, hook, line, and sinker. The flipping and flopping will be something to see when the fish have their oxygen cut off.

Ian Welsh @ 95

Someone’s gonna pay, that much I know. …

That may be a whole new post, but I’m suggesting that the economy sort of dictates the political situation.

LS @ 104

Okay…so if somebody promised to perform something…like say..look after your money..and they messed up…and they are no longer able to demonstrate their ability to do that…well…

Throw RICO in there and Breach of Fiduciary duty…just for good measure..

…

Good luck trying to find somebody at DoJ who would do that with the Bush crowd in charge!

idahojim @ 37

the idea that letting people buy houses with nothing down is part of the problem is a bunch of bullshit.I put nothing down on my home and even under the current bubble busting I am still going to make double my money when I sell.the problem is that people were allowed to buy houses they could not afford.its that simple.If you buy a house that fits your income than you will be able to afford the payments weather you put down 20% or nothing.

But people were clearly misled about how high, and how quickly, their ARMs could re-set. In the next fourteen months, a trillion dollars of ARMs will re-set higher, in a time of wage stagnation. How are people to meet these new payments? How many of them will lose their homes?

…

It looks like we can legislate to avoid these problems in the future: fixed rates, required down payments and the like.

But, to fix the current problem we might need to raise the minimum wage again, as Edwards suggests and do some other government required refinancing to avoid a horrendous swathe of lost homes as well as another even larger crash in the markets.

But, how much should we protect the Big Guys from their own greed and ignorance? I’d suggest as little as possible…just enough to protect against total market crash.

After all, just how much money does the federal government have to throw around? We’re overly dependent on the Asians as it is. Another crisis and we’ll not only have trouble keeping people in house and home, but protecting the markets and everyone’s savings and a complete all-around disaster.

Bush is doing so much to destroy the world it might even become possible to convince Republicans that he needs to be evicted before the end of his term.

I want to point out a partial solution to the sub-prime problem. We amend the bankruptcy code to permit debtors to amend the terms of their mortgages to something they can actually pay. This cuts the Gordian knot of CDOs, and will rationalize the assets underlying these securities. …

I agree, so long as these readjustments can be made within government regulations which protect all the parties.

We have to smooth out the kinks and bubbles to protect against massive crashes which would cost a lot of retirees (common folk) their savings.

The Big Guys WANT bubbles. They make money off of them. They make a bubble structure and suck in the vulnerable people like so much air to fill the bubble and then they crash the bubble (like Greenspan increasing interest rates in 2000 to crash the .com bubble and ruin Gore’s presidential hopes) to push out the weakies and (basically) steal their wealth. It’s a fancy scam.

If we can keep the paper value in line with the asset, then we’ll all win bigger, even the Super Rich.

Economics baffles me, but I know one thing, we’re all f*cked.

So what’s the solution?

Don’t expose yourself by using credit too much.

Vote for John Edwards.

Support your local unions.

Do anything which will tick off a Rich person.