1) what makes these securities values better now? I mean, in a time of record defaults, foreclosures, and falling home prices; how can these guys know these securites “intrinsic” values? Everyone keeps talking about ‘unpresidented’ and ‘never before seen since the depression’. What is it that makes the new assumptions about the long term worth of these securities so much better than the old ones? I have been hearing from morgage broker/securities traders all year about how “the worm has flipped” and how the valuations are gonna pop back up soon on bloggs and other more bullish websites. It is now very overdue according to them.
I dont question that our friends have a good understanding of these securities, nor that they recognized the bubble before. It was so obvious even a drunk rhino should have recognized it. What I question is why, if they are actually able to get their heads around it all, are we still heading toward a recession/depression? Why all the bailouts and secrecy and hand ringing? Why cant we now put a price on it all and move on? (What I was really hoping for is alittle bit more data)
Also:
2) Why do you keep talking about a depression? I can understand and even, maybe, support certain bailouts to avoid a depression. But I just dont believe we are on course for a depression. Maybe I am a pollyana, but I find little creditability in either our investment banking sector nor the people regulating them. It isnt like the bank/auto/insurance companies got hit by a metor or something, they have been poorly managed for a decade or more. I sometimes feel that the banking sector, in which many of my family work, is trying to blackmail us into saving them from themselves by having the government assume their debt.
Now if it is really just gonna be a strong/terrible recession, not a depression, (say 6-8% off GDP) we need to start recalculating the utility of that 2T in bailouts/tax payer rapeing you are talking about. Repairing bridges and fixing roads dont bring the same ROI as building them in the first place. Why would taxpayers taking it in the arse be better than just letting better managed companies devour the the good and letting investors learn the downside of risk/reward with the rest?
The stock bubble burst in 2000, and we had a recession, but it subsided as the RE bubble was inflated until that bubble burst as well, spreading far more pain than if we had just taken our recession, learned it isnt different this time, and made the necessary sacrifices. Instead we get to suffer more now for our unwillingness to suffer then. How is this time any different? How will we not pay in spades to ‘avoid a depression’ in the same way we pay now for trying to ‘stimulate’ our way out of the previous “jobless recovery”?
I guess what all this really is asking is why is it different this time?
(edit: or should we bail them out everytime?)
