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Discussion Starter · #1 ·
The current NY Review of Books https://www.nybooks.com/articles/22556 has an article by English philosopher John Gray writing a review of Margaret Attwood's CBC Massey Lectures they are still up on the site at and also in book form, I have a copy to pick up and contemplate once I get through Chasing a Mirage: the tragic illusion of an Islamic state by Tarek Fatah, highly recommendable IMHO.

What prompted me to post this was 1) Gray's take on the GFC and 2) that an email was sent around the Catholic Girls High School where my wife works. The sender highlighted the passage below.

While having previously read the article I thought was an interesting to point to make, that of trust in the governance of society and our participation in that trust.

"When it becomes clear that debts cannot be paid off, it is not just that people may walk away from them-as many who were induced to take on subprime mortgages have been doing. Their trust in the society that encouraged them to incur the debts is also destroyed. Again, the shock that is felt when a major part of a lifetime's savings vanishes, seemingly overnight, does not come only from the prospect of a diminished standard of living. It comes also from the collapse of the narrative according to which people have hitherto understood their lives."

I am not an economist (Thank god for that) but like most of us I am watching with bated breath what is happening and how and when the economy will recover.(if it does)

I know of people who were contemplating retirement this year but due to GFC now have to keep working which is going to impact upon the progression of a lot of Graduates who came on board in the past five years or so with the promise of swift rise in the public service. These graduates who were promised a swift rise are going to just to stay put and wait for that advancement to materialise. That's just one small issue of trust and its impact. If you look around the notion of a civil society and the role we all play in it is based on trust, so what happens if that trust evaporates?

One more thing, in the past couple of days the Australian Dollar which at one stage in 2008 was about to achieve parity with the US dollar then once TSHTF dropped to about 60cUS has now climbed back to 70cUS. So who knows by the end of this year I might be able to start buying online again.

Another site of interest is https://www.voxeu.org the link was emailed around work recently.
 

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...What prompted me to post this was 1) Gray's take on the GFC and 2) that an email was sent around the Catholic Girls High School where my wife works. The sender highlighted the passage below.

While having previously read the article I thought was an interesting to point to make, that of trust in the governance of society and our participation in that trust.

"When it becomes clear that debts cannot be paid off, it is not just that people may walk away from them-as many who were induced to take on subprime mortgages have been doing. Their trust in the society that encouraged them to incur the debts is also destroyed. Again, the shock that is felt when a major part of a lifetime's savings vanishes, seemingly overnight, does not come only from the prospect of a diminished standard of living. It comes also from the collapse of the narrative according to which people have hitherto understood their lives."

.....
Indeed, there are many that are hurting in our society but, our expectations of instant success and our sense of entitlement to immediate gratification (usually through the acquisition of 'just' one more credit card) were in dire need of a radical readjustment. It is not much of a stretch to suggest the our global financial structures had become less stable than a miasmatic ponzi scheme! It was bound to fail and if we ever get to the point that we quit whining about it and accept the fact that we did it to ourselves, we just might grow and become stronger from this experience!

The government didn't do it to us. The OPEC community didn't do it to us. Emerging third world economies didn't do it to us. Our unbridled greed and excessive expectations, led us down this present path of destruction! If we live within our means, save for the future and, during the recovery, show sufficient compassion for our fellow men, we can be better for this..."Calm skies, do not a skilled pilot make!" ;)
 

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"Their trust in the society that encouraged them to incur the debts is also destroyed. Again, the shock that is felt when a major part of a lifetime's savings vanishes, seemingly overnight, does not come only from the prospect of a diminished standard of living. It comes also from the collapse of the narrative according to which people have hitherto understood their lives."

Indeed.

On one hand, for some (like this lady
) trust in a society that is going to give them a home they can't afford; then promise to pay their mortgage and buy their gas SHOULD be destroyed. That narrative should be diminished and people should demand the true skills and opportunities to create real wealth for themselves and their descendants.

What's going to be true in some cases, and the indications are, that most people who will walk away will do so because they didn't have a lifetime's savigs invested. I've heard numbers in the 94-96% range of people that are current on their mortgages. How do you end up in a house with no money down? You have no savings. I'm active in our HOA and most of the people I talk to with their true life's savings invested are planning to try to stick it out 5, 10, however many years to break-even. We have a bunch of people who cashed out up north and put their last $500k into a home here in Orlando and it's now worth $250k on paper. They are stuck. They are not going to walk because they are 50,60,70 years old and they can pay the mortgage. It beats renting and they or their children will recover "some day."

Also to contemplate is what about the "trust" of lenders. Alot of the so-called fat cats were little old ladies invested in bonds. Take for example, my own GrandMother who has a HUGE portfolio of bonds. Fortunately she has an 'ok' GrandSon who looks out for her $, but think how many people bought 7% bonds to hold? Think of the pension funds full of retirees and widows that are now taking huge losses in their bonds which were supposed to diversify the risk in equities which are also down.

Looking at bonds: compare what the interest deduction for bonds says about incentives with the cramdown of GM bond holders. Conflicting signals? We just destroyed confidence in one of our most important sources of capital. We just turned bonds into credit cards with one stroke of a person's pen that has zero experience in business or financial matters that is simply paying off his campaign supporters. The unintended consequences of that are going to haunt us a lot longer than some excess real estate inventory and/or whatever some people may learn that never learned the lesson before. I mean if you didn't already know, are you really going to learn your lesson or just get a new bankroll and double down again on a promise?
 

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Also to contemplate is what about the "trust" of lenders. Alot of the so-called fat cats were little old ladies invested in bonds. Take for example, my own GrandMother who has a HUGE portfolio of bonds. Fortunately she has an 'ok' GrandSon who looks out for her $, but think how many people bought 7% bonds to hold? Think of the pension funds full of retirees and widows that are now taking huge losses in their bonds which were supposed to diversify the risk in equities which are also down.

Looking at bonds: compare what the interest deduction for bonds says about incentives with the cramdown of GM bond holders. Conflicting signals? We just destroyed confidence in one of our most important sources of capital. We just turned bonds into credit cards with one stroke of a person's pen that has zero experience in business or financial matters that is simply paying off his campaign supporters. The unintended consequences of that are going to haunt us a lot longer than some excess real estate inventory and/or whatever some people may learn that never learned the lesson before. I mean if you didn't already know, are you really going to learn your lesson or just get a new bankroll and double down again on a promise?
Maybe the lesson to be relearned is: Don't trust anyone over 30. :icon_smile_big:

More seriously, all investments carry risk, taking on that risk is what the investor gets paid for. Some risk can be managed through diversification, but not all. The problems arise when the market has improperly priced risk or when the market is uncertain of how to evaluate and price the risk. Mortgage lenders were obviously mispricing the risks of mortgage backed securities and when that mess spilled over into the credit markets as a whole it was the uncertainty that influenced the prices of other investments.

We now have the uncertainty of the governments actions, as learned by Chrysler and GM bond holders, as well as the risk of increasing inflation to contend with. Both of these risk factors are brought about by government actions. Until investors can confidently predict government actions the markets are going to be adding an additional risk premium to all investments.
 

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Discussion Starter · #7 ·
Further to this The New York Review of Books has an article "The Crisis and How to Deal with it" on line at present well worth a read.

And here in Oz the news for the economy is looking good, the Oz dollar is maintaing its health.

But only time will tell if indeed we have turned the corner, personally I think its still a case of don't hold your breath or break open the champagne just yet.
 

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Further to this The New York Review of Books has an article "The Crisis and How to Deal with it" on line at present well worth a read.

And here in Oz the news for the economy is looking good, the Oz dollar is maintaing its health.

But only time will tell if indeed we have turned the corner, personally I think its still a case of don't hold your breath or break open the champagne just yet.
I heard the gold bugs are more popular than ever there in Oz. I always thought the advice to hoard scotch vs. gold was well taken. Champagne is probably just as good as a trading medium. ;) I agree to not hold your breath. This is a pretty big scam IMHO.
 

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Discussion Starter · #9 ·
I heard the gold bugs are more popular than ever there in Oz. I always thought the advice to hoard scotch vs. gold was well taken. Champagne is probably just as good as a trading medium. ;) I agree to not hold your breath. This is a pretty big scam IMHO.
Actually if you want to horde anything try Mornington Peninsula Pinot Noir. Oh and the Tasmanian is good for short term investments.:icon_smile_big:

Yes Gold is very popular here a couple of friends of mine were big on it in the late 80's at one stage they had about 5lb stashed in their house.
 

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Actually if you want to horde anything try Mornington Peninsula Pinot Noir. Oh and the Tasmanian is good for short term investments.:icon_smile_big:

Yes Gold is very popular here a couple of friends of mine were big on it in the late 80's at one stage they had about 5lb stashed in their house.
Ah, good advice!

I like to tease the gold bugs although I share a lot of their views and probably appear to be one to a lot of people.

I will say, "I had about 20 ozs, but with the inflation it probably weighs a lot less than that now. Wait; inflation means it weighs more, right?" And then watch their heads spin off! :devil:
 
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