tomclarke wrote:It is a free market. If a country relies on other countries to buy its debt there should be no complaint when they decide (for whatever reasons - economic, political, etc) to stop.
Nothing needs to be investigated here except the willingness of US consumers and politicians to risk high personal & institutional debt.
The current crisis was precipitated by individuals having innappropriate high debts (mortgages). Easy to blame the sellers - but in an imperfectly regulated free market it is caveat emptor. And I doubt anyone things perfect regulation is possible, or desirable!
Islam - as the most recent of the three interlinked "book" religions - has still an enlightened, rather old-fashioned, view of debt. That it is morally corrupting to both lender and debtor. But I don't see many people taking notice of this.
Best wishes, Tom
LOL, amazing to see a liberal decry debt. And yes, the current crisis was precipitated by Democrats passing a law that required banks to lend inappropriately high amounts of money to people based on things like race and zip code rather than things like credit score and whether the borrower had a job and sufficient income.
Of the last three recessions, I've been able to track the cause back to some law written by Democrats that attempted to violate basic and sensible rules of economics.
1989-91: Caused by Democrats forcing Bush to appoint a banking regulator who pushed up S&L then bank reserve ratios so high that they forced banks into insolvency and mass recall of loans that forced mass bankruptcies of many real estate projects and homeowners.
2001: Caused by a Democrat negotiated amendment to the Telecom Reform Act of 1996 that sabotaged the act's intent to help telecoms fulfill the 'last mile' of fiber optic to everyones homes. The amendment said that any telecom that ran fiber to a home had to provide access to that customer to their competitors for less than their cost. The telecoms said no way and refused to invest in fiber for over a decade thereafter. This failure to complete the last mile made the investment of tens of billions of dollars in fiber backbone by Enron, Worldcom, and Global Crossing useless, and that backbone fiber remained dormant for a decade, and forced those three companies into bankruptcy. Enron's failure was compounded by California defaulting on their energy debts to Enron and Enron's attempt to hide its losses via accounting schemes that were normally used to hide profits from the IRS. The collapse of the last mile also forced thousands of startup dot coms that were relying on that high bandwidth to consumers homes for their own business models to work.
Today: Community Reinvestment Act forced banks to lend irrespective of credit score, and attempts by republicans like John Sununu to end these bad practices were blocked by democrats in 2005-2006. These practices forced other banks to adopt similarly loose policies in order to compete (see WaMu for example). These bad mortgages poisoned the mortgage securities put out on the capital markets, and the associated credit default swaps underwritten by AIG and other major underwriters (of course AIG losing its AAA rating also negatively impacted their ability to back their CDOs).