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Wed Sep 12, 2018, 08:04 AM

What Happens When the Next Financial Crisis Strikes?

As the 10-year anniversary of the last crash nears, pundits are predicting the next one. That’ll bring another problem: Who’s going to solve the crisis when our president has poisoned relations with the institutions that helped fix the last one?

by Allan Sloan Sept. 11, 6 a.m. EDT

This article was co-published with the Washington Post.

It came as a nasty surprise to almost everyone a decade ago when we found ourselves on the cusp of a worldwide financial collapse.

Most business journalists — including me — failed to see the 2008 disaster until it was almost upon us. But these days, predicting meltdowns has become positively trendy. With stocks at or near record levels, unemployment low and the economy booming, it’s become conventional journalistic wisdom to predict that evil days lie ahead. And not very far ahead. The recent New York Times editorial, “Inviting the Next Financial Crisis,” is just one example.

But I don’t think that today’s obvious problems will cause tomorrow’s crisis. Why? Because obvious problems usually don’t cause crises. You get a crisis when problems combine in unpredictable and unforeseen ways.

In 2008, complex financial instruments that almost no one understood — based on various pools of shaky loans — inflicted huge losses on giant companies like Bear Stearns, Lehman Brothers and American International Group almost overnight. Those institutions didn’t realize their portfolios were toxic until financial sepsis had already set in. Worse, a series of financial relationships among those players and others, intended to reduce risk, ended up accelerating it

However, there is one clear and present danger to the financial system that almost no one seems to be discussing in public. In fact, multiple experts whispered about it to me and said they discuss it behind closed doors but don’t breathe a word elsewhere for fear of becoming the target of a presidential tweetstorm. So I’ll do it, at the risk of being called a peddler of “fake news.” I think the biggest danger of financial problems exploding into a worldwide meltdown involves … Donald Trump.

https://www.propublica.org/article/what-happens-when-the-next-financial-crisis-strikes



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Response to turbinetree (Original post)

Wed Sep 12, 2018, 08:42 AM

1. There were many people claiming those complicated financial instruments were dangerous

Those weird financial instruments based on shaky loans were being called out left and right as dangerous to the larger naturally wobbly, capitalist economy. But no one really cared to intervene. You know because rich people were getting richer.

The problem now is that the middle class is much, much poorer then in the last crash. And the tax give away to the uber rich is taking billions out of circulation and giving it to people who are already hoarding money. It will take a year or more for the more than 300 million person, shaky, capitalist economy to react to the withdrawal of billions.

But, yeah, any crash will be made worse by Traitor Trump.



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Response to Farmer-Rick (Reply #1)

Wed Sep 12, 2018, 09:01 AM

3. Check this out from the Guardian...........All I thought was Paul "ayn rand" Ryan........

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Response to turbinetree (Reply #3)

Wed Sep 12, 2018, 12:06 PM

9. Thanks

That is very interesting.



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Response to turbinetree (Original post)

Wed Sep 12, 2018, 09:01 AM

2. It makes my blood boil when people say that nobody knew

Fuck that! I knew!

I sat around watching people who make less than I do buying houses that I would never consider on my salary. I watched while housing prices doubled when salaries stayed flat. I am no economics expert but those numbers don't add up no matter how advanced your calculus.

I was especially perturbed by the business model of these banks. On what planet was it a good business deal to refinance long-performing loans at 10% into new loans at 5%. It was a grab for quick fees by the individuals involved but could not have been a better business deal for the actual lenders.

By 2005 I was questioning the whole system. I didn't understand why it was happening but I knew already that the system was broken. I even had a shoe shine boy moment when a young guy with a marginal high school education started bragging to me about real estate investments.

I started researching and had it pegged by the end of 2007. I took money out of the stock market within weeks of the relative high 10 months before the collapse. I have emails to friends and co-workers predicting a 50% collapse in the real estate market that I wrote months before it happened.

Fuck that! I knew! The people that were supposed to know better than me were just blinded by greed.

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Response to genxlib (Reply #2)

Wed Sep 12, 2018, 09:17 AM

4. It as always about greed................and mismanagement ......

My experience was being in the airline industry and watching how CEO's bankrupt the system, it didn't happen overnight, but you could always tell, when they started cutting flights, and using the model revenue per set mile.

Hell, when I worked with USAIR, when they went to the British Airways to get some funds, $750,000.00 in vcapital.

I get up to ask two questions, how do you fly from Denver to San Francisco, and if you have a gates in Hawaii, why aren't you flying there.

To fly to San Fran from Denver you had at that time fly back to Pittsburgh.................don't continue on, just fly back, no layover and continue on, go back to the hub

And as for Hawaii, they were renting the gate space............................

Then after the funding fell they cut 1500 jobs, after they just had hired them.....................they had a former baggage handler running the place, because he married the CEO' daughter, and the financial wizzes, couldn't get past the ownership Federal laws of the airline, because British Airways wanted over 25% of the company, for the money.............. ........................

They wanted to stay in the East Coast market place

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Response to turbinetree (Reply #4)

Wed Sep 12, 2018, 10:03 AM

6. I don't envy you having worked in that industry

Once upon a time it paid well and had great perks. It has been all down hill from there.

Unfortunately, the consumer experience on plains has tracked with the employee experience. I used to love to fly but now it is just miserable.

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Response to genxlib (Reply #6)

Wed Sep 12, 2018, 10:11 AM

8. I loved the industry, and enjoyed what I did...............flight safety....

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Response to genxlib (Reply #2)

Wed Sep 12, 2018, 12:10 PM

11. It seems to be happening again, at least where I live.

I bought my house in 2014. Today, Zillow says it is worth 28% more than what I paid. My salary is about 5% higher than it was then. I couldn't afford to buy in this neighborhood today. It's even worse in some parts of the city. This situation is unsustainable.

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Response to turbinetree (Original post)

Wed Sep 12, 2018, 09:24 AM

5. The republicans will immediately blame democrats for it of course.

 

Just like always.

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Response to workinclasszero (Reply #5)

Wed Sep 12, 2018, 12:18 PM

14. Of course

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Response to turbinetree (Original post)

Wed Sep 12, 2018, 10:05 AM

7. The Great Depression started in 1929, right after the election of '28...

FDR wasn't elected until 1932.

Are we on a similar path? Lots of differences between then and now, of course, but history does rhyme.

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Response to Wounded Bear (Reply #7)

Wed Sep 12, 2018, 12:14 PM

12. My mom use to call it the Republican Great Depression

I asked her why. She said her Dad always called it that. He lost his job during the depression but managed to find enough work to raise 3 daughters.

She said almost all the adults she knew called it that - the Republican Great Depression.

I guess we should have called it the Republican Great Recession too.

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Response to turbinetree (Original post)

Wed Sep 12, 2018, 12:09 PM

10. Easy

They blame Obama and pass a tax cut.

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Response to turbinetree (Original post)

Wed Sep 12, 2018, 12:15 PM

13. The same thing that has happened every other time...

the few wealthy people it affects simply file bankrupcy and they're back in business the next day using somebody else's money, the way they always do. For the people of moderate means, well, they just get f*cked, like they always do.

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