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In Defence Of The 'sheeple'


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How does that platitude go again!?

By your own logic, the savers must also be held to account, given that they were the ones handing over the bullets.

By leaving your down payment lolly in the bank it enables them to lend out huge multiples of it for BTL mortgages - your sworn enemy.

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I wouldn't describe banks as being constrained by reserves, this last decade. Would you?

it was an excuse, a variable that enabled the computer to say...yes. Having savings is also helpful when running with a banking licience.

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it was an excuse, a variable that enabled the computer to say...yes. Having savings is also helpful when running with a banking licience.

No, and your line of argument is pure sophistry. The 'excuse' for the computer saying Yes was the ever-increasing value of the collatoral - houses. Savers of currency were irrelevant. Boomers' pension funds greedy for MBS yield are another matter.

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How does the banks and borrowing public differ from the used car buyer who trusts the used car salesman? I'd expect the buyer, even if they don't know and aren't interested in every detail about how a car works, to be at least a little bit suspicious by the patches of rust and the fact that the car won't start and not simply accept the salesman's claims that they're minor issues, easily sorted and nothing to worry about.

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Boomers have left their children and grandchildren holding the dirty debt bag, while they enjoy a pension and a nice house bought for a few coppers. :blink:

Housing has never been a few coppers and juicy guaranteed inflation proof pensions are a relatively new phenomenon.....houses have always been hard to buy for most, hard to save a 20% deposit and hard to pay for with high interest rates.

Easy money with low interest rates and no deposits changed all that......not long and unsustainable house prices and pensions will come down to reality of affordability......money no longer grows on houses, we can't afford the inflation it creates by pricing our economy out of the market place. ;)

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How does the banks and borrowing public differ from the used car buyer who trusts the used car salesman? I'd expect the buyer, even if they don't know and aren't interested in every detail about how a car works, to be at least a little bit suspicious by the patches of rust and the fact that the car won't start and not simply accept the salesman's claims that they're minor issues, easily sorted and nothing to worry about.

wow another classic HPC like for like comparison!

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No, and your line of argument is pure sophistry. The 'excuse' for the computer saying Yes was the ever-increasing value of the collatoral - houses. Savers of currency were irrelevant. Boomers' pension funds greedy for MBS yield are another matter.

Both credit and collaterals were reinforcing each other, in a ascendant spiral - allowed by our monetary authorities, in that "tripartite" structure... They could have curbed that bubble very easily, by increasing reserve requirements, or interest rates, or even more directly and targeted by regulating mortgages better. (Eric was right.)

But the FSA didn't see any problem, as individual bankers were covered by the ascending collaterals.

The BoE focused narrowly on inflation.

The Treasury (Brown), not wanting to pop the party before the 2005 general election, even removed housing costs from the inflation index (in Dec 2003, effectively stopping the BoE from curbing the bubble in 2004).

After the 2005 election ... I have no idea what Brown was thinking then. Obsessed with removing Blair? And took his eye off the ball?

And our media did not warn the people.

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Boomers have left their children and grandchildren holding the dirty debt bag, while they enjoy a pension and a nice house bought for a few coppers. :blink:

And are too busy enjoying their SUV's to care...

For every winner there is and equal and opposite loser, many fail to acknowledge this believing everyone can win in the same ponzi scheme they made big in.

The young and savers are the current losers and will continue to be so while ever policy preserves the unearned wealth of the feckless.

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wow another classic HPC like for like comparison!

Never heard of an analogy? The point is that you shouldn't go into anything significant without a basic level of knowledge and common sense, and borrowing so much that you can only just afford it at a very low interest rate demonstrates about the same level of common sense as buying a car that's mostly rust held together with gaffer tape. You'd shake your head at the latter, so why defend the former? It's not requiring an in-depth knowledge of financial systems, just a very basic modicum of knowledge.

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And are too busy enjoying their SUV's to care...

For every winner there is and equal and opposite loser, many fail to acknowledge this believing everyone can win in the same ponzi scheme they made big in.

The young and savers are the current losers and will continue to be so while ever policy preserves the unearned wealth of the feckless.

This is why the USA system of winner takes all - trashes society.

The greediest money grabbers get themselves into power then fiddle the system to their whole advantage eg US/UK financials - also we see whats happening in the UK as the Eton/toffs are trying their utmost to destroy our welfare systems for the poorest in society. (whilst letting their Big Business mates outsource skilled jobs)

They have been steadily eroding it (ie not allowing social housing to be built since the 70's) to reduce us to the state USA is in with millions on emergency food vouchers living underground in storm drains.

Constant threats to privatise NHS so the rich can extract even more money out of you thru corrupt medical insurance companies that will not pay out or argue when you come to make a claim if you fall ill.

The ultimate endgame is corrupt India - where 1 million die every year from starvation and unavailability of basic medical care - whilst their Govt blows Billions on Space and military hardware.

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Never heard of an analogy? The point is that you shouldn't go into anything significant without a basic level of knowledge and common sense, and borrowing so much that you can only just afford it at a very low interest rate demonstrates about the same level of common sense as buying a car that's mostly rust held together with gaffer tape. You'd shake your head at the latter, so why defend the former? It's not requiring an in-depth knowledge of financial systems, just a very basic modicum of knowledge.

Except when everyone else's buying similar cars, and the salesman, who in theory needs to make sure that the car in front of you keeps running (i.e. you need to keep repaying the mortgage), and when there are no other better cars for sale to compare too...

This isn't really a dispute about whether borrowers have some responsibility for the screw-up - of course they do - but the car analogy will need some fine tuning to fit the circumstances.

Also, don't forget that, with the new mantra of 'no more boom and bust' and endless HPI, what could possibly go wrong?

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Except when everyone else's buying similar cars, and the salesman, who in theory needs to make sure that the car in front of you keeps running (i.e. you need to keep repaying the mortgage), and when there are no other better cars for sale to compare too...

This isn't really a dispute about whether borrowers have some responsibility for the screw-up - of course they do - but the car analogy will need some fine tuning to fit the circumstances.

Also, don't forget that, with the new mantra of 'no more boom and bust' and endless HPI, what could possibly go wrong?

...Isaac Newton lost part of his fortune in the South Sea Bubble...and he worked out the laws of gravity..!..clever but not enough when it comes to greed and bubbles....greed was the main driver in Browns bubble also.... :rolleyes:

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I do not think that is a reasonable comparison. There was clearly something very wrong with the housing market back in 2005-2007. People who were on 18k were coming into work telling everyone how they had 'made' 50k on their flat in the last 18 months.

If you were about to get on a plane - and one of the wings was falling to pieces then that would be a fair comparison.

You didn't have to be an expert to see the housing market was ******ed in 2007. Anyone with a few minutes of thought could work that out. Exactly what was behind it ? How the banks and politicians were involved ? Of course - that would take far more delving to worj out.. However simply knowing something was very wrong ? Nah - anyone could see it if they put a bit of effort in.

Back in the early 80's I started on a engineering apprenticeship how ever I lost my job because Britain didn't need to make anything any longer we didn't need manufacturing we just needed service industries.

Knowing things are going to break and knowing when they are going to break is the problem.

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Back in the early 80's I started on a engineering apprenticeship how ever I lost my job because Britain didn't need to make anything any longer we didn't need manufacturing we just needed service industries.

Knowing things are going to break and knowing when they are going to break is the problem.

Indeed. Timing is everything. However I think the basic point remains. The vast majority of people who bought during the bubble did little to no research at all. Personally I think if they get burnt then tough shit.

One bird I know said she spent more time buying a pair of shoes than the flat she bought. And no - I am not kidding.

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What we should see is far fewer products sold and strict guidelines as to how they are priced. For instance, how many electricity products do we really need and why? How have we managed to introduce the equivalent of the past issues problem on savings into all utility contracts now?

No - more regulation, far fewer and closely regulated products allowed. No more rip off promotional type offers that simply subsidise the canny versus the unabe/uninterested/uneducated. The weak need protection.

I actually think the people working at the companies themselves would also like to go down this route, because without it, the competitive imperative becomes too powerful in pushing behaviour the wrong way.

What you propose is a reasonable suggestion, but completely defeats the object of competitive industry.

If product choice is to be almost completely removed and tightly regulated, what purpose creativity or competitiveness? Indeed, is creativity or competitiveness even a desirable property in retail banking and mortgage lending?

I do not disagree that this could be a good model, but in that case we might as well nationalise the entire core banking industry (as many of us suggested at the point of collapse).

Edited by libspero
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If you were about to get on a plane - and one of the wings was falling to pieces then that would be a fair comparison.

No it wouldn't- a fair analogy would be a plane that the engineers claimed could fly twice as fast and twice as high. What they overlooked was that the subsequent strain on the airframe would crash the plane.

Now tell me that the passengers should have diagnosed that technical screw up when they boarded the plane. At the time of take off financial engineers were putting the chances of a catastrophic crash as about as likely as the sun going nova in the next five minutes.

Trying to blame joe public for the utter mismanagement of the financial sector of the last decade is absurd. As the old bumper sticker says- anyone can make a mistake, but to really screw things up takes an expert.

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No. They compete on competitive advantage in meeting consumers needs. Efficiency for instance.

Not concentrated on sophisticated consumer research to see how they can fleece the customer. Or complicated products and limited time promotions.

No, if an electricity company develops a distinct advantage in supplying that basic product cheapest, then let them win custom.

Oddly enough I would argue similarly for many primary utility companies where there really isn't any competition anyway because they essentially share the same infrastructure.

Instead you are paying for duplication of services in the name of efficiency and choice.

Equally with banking, why should five banks competing over identical government controlled products necessarily offer better efficiency than a single bank offering the same product? If it is tax payer owned dividends are returned anyway. You could further argue that state run infrastructure is more likely to operate with long term investment in mind.

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I thought I'd stick in a word of support for the 'sheeple' (or at least the suggestion that it's a demeaning and illogical construct).

Many on this site like to characterise them as X-Factor watching, fag-smoking chavs (another suspect word imho), and even those who admit that that is rather reductionist seem to happily heap scorn on them for their financial naivety.

I would humbly suggest that a working knowledge of MBSs, CDSs, FRB, shadow-banking, fiat, etc. should not be essential in life. If I'm unlucky enough to become seriously ill with, say, heart-disease, I would sincerely hope that I can count on the knowledge of a cardiologist, rather than being dependant on my own rather rudimentary understanding of biology. And that very same cardiologist might well not be able to explain FRB, but why the hell should he? His spare research time is, I hope, spent reading cardiology papers rather than trawling financial blogs.

I don't know - cardiologists aren't exactly renowned for being disinterested in money!

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I thought I'd stick in a word of support for the 'sheeple' (or at least the suggestion that it's a demeaning and illogical construct).

Many on this site like to characterise them as X-Factor watching, fag-smoking chavs (another suspect word imho), and even those who admit that that is rather reductionist seem to happily heap scorn on them for their financial naivety.

I would humbly suggest that a working knowledge of MBSs, CDSs, FRB, shadow-banking, fiat, etc. should not be essential in life. If I'm unlucky enough to become seriously ill with, say, heart-disease, I would sincerely hope that I can count on the knowledge of a cardiologist, rather than being dependant on my own rather rudimentary understanding of biology. And that very same cardiologist might well not be able to explain FRB, but why the hell should he? His spare research time is, I hope, spent reading cardiology papers rather than trawling financial blogs.

I've been taking an off-hand interest in economics for a couple of years now, and I still need a bit of paper to check that I've remembered the details...

... so, a lot of people took out loans that, realistically, they can probably not pay back, particularly if/when interest rates go up. And if I was a cardiologist, I might feel rightfully annoyed with a patient who ate nothing but chips all day... however, in this case, the cardiologist has been the one prescribing the chips, telling us all that they were a perfectly healthy diet, and crashing the whole financial system in the process.

Bottom line, we should be able to trust professionals enough not to need a first class degree in economics every time we want to use a cash point, and when they screw up, we should hold them to account, not the 'sheeple'.

I tell my little story again.

When I was about 25 (early 80s) we wanted a mortgage.

I just wanted a normal capital & interest mortgage.

The crook (salesman) offered a thing called an endowment mortgage.

He told me I would have to pay the interest only ..... plus buy into an endowment that would pay back more than the loan.....I'd make a profit.

I asked a simple question........ (I was not formally qualified in any form of economics.)

............"Can you guarantee there will be enough return to repay the capital".

He said

........ "No"

I said

........"Feck off"

end of little story

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No it wouldn't- a fair analogy would be a plane that the engineers claimed could fly twice as fast and twice as high. What they overlooked was that the subsequent strain on the airframe would crash the plane.

Now tell me that the passengers should have diagnosed that technical screw up when they boarded the plane. At the time of take off financial engineers were putting the chances of a catastrophic crash as about as likely as the sun going nova in the next five minutes.

Trying to blame joe public for the utter mismanagement of the financial sector of the last decade is absurd. As the old bumper sticker says- anyone can make a mistake, but to really screw things up takes an expert.

I don't care what the financial engineers were saying. Anyone capable of rational thought could see that the housing market was unsustainable and prices were just crazy.

I was in a position in early 2007 where I might have bought, after coming back from living oversees for quite a long period of time. I was pretty financially clueless at the time but I took one look at the prices and concluded that something was very, very, wrong. A few hours on the internet confirmed this and when I found this site I quickly came to the conclusion that we were in for a very, very big financial crisis.

With the internet it's never been easier to find out any information that you need to know if you are prepared to put in the work and apply yourself.

If you are about to borrow a massive amount of money (probably the most you ever will borrow) to buy a house and don't bother to do your homework, I have zero sympathy. Personal Responsibility - not a popular concept in the last decade.

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Here are some comments I've heard the last few weeks:

From a financial advisor: 'I have two flats that aren't making me any money right now, but you've got to play the long game with property'.

Somebody else (cool guy but gutted to hear his views): 'It's always been tough to get a house. Just get your foot on and work your way up - doesn't have to be your ideal home'

SURELY if you think prices are going to rise then you want to get the best home as soon as possible before it increases disproportionately in 'value'? I guess income growth (raises) are assumed in this sort of thinking.

They still believe the property miracle, housing best bet for gains long term etc.

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No it wouldn't- a fair analogy would be a plane that the engineers claimed could fly twice as fast and twice as high. What they overlooked was that the subsequent strain on the airframe would crash the plane.

Now tell me that the passengers should have diagnosed that technical screw up when they boarded the plane. At the time of take off financial engineers were putting the chances of a catastrophic crash as about as likely as the sun going nova in the next five minutes.

Trying to blame joe public for the utter mismanagement of the financial sector of the last decade is absurd. As the old bumper sticker says- anyone can make a mistake, but to really screw things up takes an expert.

Disagree. People need to do their own research when signing away much of their life.

You do appreciate that LOADS of people bought houses with literally 5 minutes of thought going into it ? This is not an exaggeration. This happened all over the shop. I know many people like this myself. We all do.

You say blaming Joe public for the above is absurd ? The Financial sector IS Joe Public. So many people fail to see this over and over again. People working in banks. Financial advisors. Estate agents. Experts on BBC news. Are they all robots or something ? NO !! They ARE Joe public.

I don't care what the financial engineers were saying. Anyone capable of rational thought could see that the housing market was unsustainable and prices were just crazy.

I was in a position in early 2007 where I might have bought, after coming back from living oversees for quite a long period of time. I was pretty financially clueless at the time but I took one look at the prices and concluded that something was very, very, wrong. A few hours on the internet confirmed this and when I found this site I quickly came to the conclusion that we were in for a very, very big financial crisis.

With the internet it's never been easier to find out any information that you need to know if you are prepared to put in the work and apply yourself.

If you are about to borrow a massive amount of money (probably the most you ever will borrow) to buy a house and don't bother to do your homework, I have zero sympathy. Personal Responsibility - not a popular concept in the last decade.

Totally agree. Whilst I appreciate why people would start to be sucked into it - this doesn't mean they couldn't have spent a little time seeing if it really was too good to be true.

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You do appreciate that LOADS of people bought houses with literally 5 minutes of thought going into it ? This is not an exaggeration. This happened all over the shop. I know many people like this myself. We all do.

+1

You say blaming Joe public for the above is absurd ? The Financial sector IS Joe Public. So many people fail to see this over and over again. People working in banks. Financial advisors. Estate agents. Experts on BBC news. Are they all robots or something ? NO !! They ARE Joe public.

anyone who has worked in financial services or in some way associated with financial services would know this, I cannot emphasise enough how utterly correct this paragraph is

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You do appreciate that LOADS of people bought houses with literally 5 minutes of thought going into it ?

Why would you not buy an asset that was guaranteed by experts to increase in value and never lose money?

Can you- honestly- expect joe public to have forseen a series of events like this:

In third place is Goldman Sachs’s CFO, David Viniar. In August

2007, Goldman reported heavy losses on its flagship GEO hedge

fund, which Viniar explained by saying, “We were seeing things that

were 25-standard deviation moves, several days in a row” (Larsen

2007). A single 25-standard deviation event was widely cited in the

press as one that we would expect to see 1 day in a 100,000 years—

that is, very unlikely. Goldman must have been very unlucky

For the record, the true probability of a 25-sigma event is in fact almost inconceivably smaller than what the estimated 1-day-in-a-100,000 years waiting time would have us believe.

If Goldman’s models were right, calculations suggest that we would expect to have to wait about 1.31e+135 years—that is, 1.31 years, but with the decimal point moved 135 places to the right—to see a single 25-event, let alone several (Dowd et al. 2008). To put this into context, the number of particles in the universe is believed to be no more than a mere 1.0e+85 (Clair 2001).

So your complaint is that joe public failed to predict an event so unlikely that the span of years involved exceeded the number of particles in the entire universe?

I think you are being a bit harsh here. :D

Edited by wonderpup
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