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Old 09-20-2008, 08:12 PM   #1
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Get ready for your Brave New World of austerity

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The Western world — Britain, Europe and the U.S. — has moved from excess to
austerity overnight. This week’s financial typhoon will savagely impact living
standards.

In due course, it will topple governments and lead to a permanent transfer of
economic and political power from Europe and America to the emergent and, in some
cases, such as China, semi-barbarous economies in the East.

I know I will be accused of being unnecessarily apocalyptic and irresponsibly
negative, but I believe that the greatest mistake we can now make is to
downplay the seriousness of the situation and bury our heads in the sand.




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Let us examine, first, the fate of City bankers from firms such as Lehman Brothers — all summarily dismissed when their firm went under this week.

They will receive no severance payment and almost no chance ever again of benefiting from the six-figure salaries and massive bonuses they have taken forgranted over the past few years.

That means they cannot service the huge mortgages they have taken out on hugely expensive houses. So this weekend they have become forced sellers —which means that thousands of new For Sale signs will be going up in London and the South-East in the coming weeks.

If these unemployed investment bankers had the misfortune to buy anywhere near the top of the market, they now face the prospect of personal bankruptcy.

This is because they will find that their houses are worth much less than they paid for
them, and will therefore be unable to repay their loan.

With so many vendors on the market obliged to sell at any price, it can be assumed that any London house will fetch 25 per cent less this weekend than it would have done this time last week.



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For the past 25 years we have lived through a glorious party.

We have all — governments, companies, banks and, of course, consumers — lived beyond our means and are paying the price.

This weekend the hangover begins. It will be prolonged.

Life will be much closer to the austerity that followed World War II than the frenzied, debt-fuelled boom of the past two decades.

Perhaps our lives will be none the worse for all this. Our values will certainly change — many will say not before time.

Material objects should count for much less.

Almost overnight we have entered a new world, and we must learn to make the best of it.


Apocalypse Now?: New world order could have devastating implications for Western nations | Mail Online

Peter Oborne, writing in the Daily Mail.

He's right, in my view, completely right.

On a side note, honestly and truly, I am amazed at the lack of interest in financial and economic matters on this forum.

Please, please, please educate yourselves, and make whatever adjustments - if any - to your lifestyle you deem necessary.

Please, at the very minimum, read the entire article.
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Old 09-20-2008, 08:37 PM   #2
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luckily for me, my net worth is already in the red.
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Old 09-20-2008, 09:17 PM   #3
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This weekend, all sensible families will go through their finances, anticipate the inevitable problems that lie ahead, and cut back at once on unnecessary spending such as eating out, second cars and foreign holidays.
Hmm...I have one car (completely paid for, but not worth a whole lot), I never eat out, and the last foreign holiday I took was in 1978 (damned responsibilities ).
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Old 09-20-2008, 10:06 PM   #4
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Originally Posted by financeguy View Post
On a side note, honestly and truly, I am amazed at the lack of interest in financial and economic matters on this forum.
I completely understand and agree, but, I suspect that what you're seeing is less a "lack of interest" in the topic than an embarrassed inability to discuss it at the level that, say, you or ntalwar could. Most Americans have never taken an economics or personal finance class, aren't employed in a field or position that requires such knowledge, and (at least in a setting like Interference) don't earn enough to have the kinds of savings that would motivate them to do some serious seat-of-the-pants learning on the topic, whether that's investments or trimming unnecessaries like the second cars and vacations abroad that I doubt most of us have/take.
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Old 09-20-2008, 11:13 PM   #5
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I didn't see much original material in the article that I haven't seen recently. I also don't like the way the Daily Mail author lumps "Britain, Europe and the U.S" together, and then talks later about the Euro's resiliency. There are differences in laws as well. It's also not clear if the author wrote it before or after the bailout was announced in the US (and the Dow rallied 1000 points). The Shanghai index gained 9.5% after the news as well, which demonstrated that the US economy is not decoupled from the rest of the world.
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Old 09-21-2008, 12:27 AM   #6
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Originally Posted by yolland View Post
I completely understand and agree, but, I suspect that what you're seeing is less a "lack of interest" in the topic than an embarrassed inability to discuss it at the level that, say, you or ntalwar could. Most Americans have never taken an economics or personal finance class, aren't employed in a field or position that requires such knowledge, and (at least in a setting like Interference) don't earn enough to have the kinds of savings that would motivate them to do some serious seat-of-the-pants learning on the topic, whether that's investments or trimming unnecessaries like the second cars and vacations abroad that I doubt most of us have/take.
I think this is true. A lot of the stuff just sounds really daunting - I actually hate business and economics (how I ended up doing what I do for a living, I'll never know), but I've been forced to pick it up to some degree.

At the same time I do think that a lot of people are failing to completely grasp how badly we are doing at the moment, and that's precisely because apart from some tangibles like increased gas and food prices, it hasn't really hit them personally yet.
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Old 09-21-2008, 04:44 PM   #7
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I thought this cartoon from one of the Irish Sunday papers was pretty apt:-
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Old 09-21-2008, 04:48 PM   #8
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Originally Posted by yolland View Post
I completely understand and agree, but, I suspect that what you're seeing is less a "lack of interest" in the topic than an embarrassed inability to discuss it at the level that, say, you or ntalwar could. Most Americans have never taken an economics or personal finance class, aren't employed in a field or position that requires such knowledge, and (at least in a setting like Interference) don't earn enough to have the kinds of savings that would motivate them to do some serious seat-of-the-pants learning on the topic, whether that's investments or trimming unnecessaries like the second cars and vacations abroad that I doubt most of us have/take.

I do think you are right about not many Americans taking an economics or personal finance course, something that is certainly not unique to America.
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Old 09-21-2008, 06:18 PM   #9
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Has anyone here taken a look at this proposed bill?

What a bunch of bullshit! If the Democrats have one millionth of a testicle left, they will demand a re-write. It is so, so bad.
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Old 09-21-2008, 06:22 PM   #10
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Has anyone here taken a look at this proposed bill?

What a bunch of bullshit! If the Democrats have one millionth of a testicle left, they will demand a re-write. It is so, so bad.
I haven't really looked at the legal details, but to me, fundamentally, the whole thing is wrong because they've abolished the free market, as far as I'm concerned.

What they're saying is you can only bet on financial stocks one way.

It reminds me of Henry Ford's old quip that you can have any color of car you want, provided that it's black!

Someone in the comments section of one of the UK newspapers made the very good point that HBOS's need to refinance £180bn worth of debt is surely more significant than a few short-sellers shorting their stock.
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Old 09-21-2008, 06:29 PM   #11
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I agree with you.

The ban on short-selling is, IMO, a quick fix because these are the easiest people to demonize. Ooooh they wanna have stock prices drop, they must be the devil! Very foolish, because shorting often plays an important role in actually stabilizing the market place.

But as for the bill itself - it essentially gives unfettered discretion to a single person, without an avenue of appeal. Does anybody in their right mind want a President McCain appointing a Secretary to be singlehandedly in charge of this?

And until you've introduced some real guarantees, the taxpayers are going to be bending over and taking it. Unprecedented transfer of wealth from the middle and lower classes.

I did have a good chuckle today when I read about the Lehman Bros execs getting $2.5 billion bonuses for being "instrumental" - HAHA!
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Old 09-21-2008, 06:33 PM   #12
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I did have a good chuckle today when I read about the Lehman Bros execs getting $2.5 billion bonuses for being "instrumental" - HAHA!
Not only that, but according to this article - published in a usually very pro-US British newspaper - the US-based Lehman senior management bankers basically made off with the funds for paying the final month of salaries in the European division:-

Fury at $2.5bn Lehman bonus - Times Online

I'm starting to think there are good reasons for some Europeans' anti-Americanism.
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Old 09-21-2008, 07:14 PM   #13
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That's interesting - and thanks for commenting on the usual lean of the paper - it's really hard to know that unless you read it on a daily basis so I like when locals give us a heads up.

Seems like a pretty obvious case where repayment should be very aggressively demanded (although in reality the chances of recouping anything at this point may be very slim).
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Old 09-21-2008, 07:18 PM   #14
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I don't think the bill will go through as written (like the Patriot Act did). Some of Senator Dodd's comments on the matter are at least a bit encouraging. The bill will bail out foreign banks as well supposedly.
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Old 09-21-2008, 07:20 PM   #15
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The bill will bail out foreign banks as well supposedly.
Yes there is such a provision in the bill.
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