Originally Posted by kincsem
I found an article about three or four years back that showed that persoanal debt in the USA around 2006 was at a level higher than before the 1929 Wall Street crash.
What happened then (and now) was a big gap between personal incomes at the top and bottom. Then the bottom incomes borrowed on easy credit to close the gap. They couldn't meet the repayments. Crash.
This isn't the article but is something like it
i can't remember where but it could be in a Michael Moore movie
There was an explaination of the crash of derivatives. It was explained in terms or the old "redline" scandel. A similar ruse used by [i]Steptoe and Son[/n] in the comedy film.
It works like this:
Redlines were drawn around black areas in the US. No one lent money to blacks. Reverse redlining occurs when a lender or insurer particularly targets minority consumers, not to deny them loans or insurance, but rather to charge them more than would be charged to a similarly situated majority consumer, specifically marketing the most expensive and onerous loan products.
so in the example of Detroit say a hundred million in sub prime loans were given to mostly poor blacks but the small minority ( say ten million) of high earners when the loans were sold on as derivatives in Chicago. Eventually Finnish and Icelandic public companies might but these derivatives which were based on pure speculation and only had a few actual real earners propping them up.
some parallels come to light WRT Ireland
1. Relaxation of regulation and oversight on financial institutions
Gillian Tett, in an article in the Financial Times (8/27/07), noted that market collapses have been associated with innovations that seem to have changed the rules. However, as in 1907 and 1929 our present dilemma is not due to a new innovation but one packaged as new
The origins of the present subprime crisis can be found in the Nixon Administration when his appointment to the SEC, Mitchell, removed the prohibitions to trades in futures and similar "bets" that has made our markets so unstable.
we should recall John Maynard Keynes' caution that we should not mistake what is probable for either knowledge or reality.
Some have come to regard American debt as money in a most strange view of value.
the "shadow banking system" that created the current subprime balloon and the derivative industry has been shunting off the risk to the public purse.
Basically what it means is people believe you can eliminate risk and remove controls on risky business.
In Ireland they lent a lot to property based risks. At least in the end NAMA has some property. In many cases you could have nothing under it all.
The significance for Ireland in terms of construction however is that it leaves a lot of property in state hands.
Some of it is partly or fully built. Is there a role for construction to either adapt or demolish these properties?