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Financial Crash - now and then


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2 contrasting articles

 

In the first Yellen says no new financial crisis in our life time. Is that a prediction she can guaranty. I don't think so - can only hope so. However, I have thought for some time that our next big crisis may

be in state govts. The 2nd article touches on it.

 

http://www.cnbc.com/2017/06/27/yellen-banks-very-much-stronger-another-financial-crisis-not-likely-in-our-lifetime.html

 

 

 

 

http://observer.com/2017/06/illinois-is-venezuela-and-the-solution-is-cryptocurrency/

 

This opinion article is about the crisis in state govts in particular - Illinois.

While much of it is about cryptocurrency - bitcoin and the like, he does get into the financial crisis of underfunded states. (remember also P Rico, the funding crisis in several other like Kansas and my state of Okla. These crisis have been brought about by both conservative and liberal governing practices. So no need to point fingers - it is OUR issue.

 

Some quotes:

 

Illinois faces financial distress that’s unprecedented for any American state. Without a budget for two years and sitting on top of over $15 billion in unpaid bills, the state is, to use a phrase that State Comptroller Susana Mendoza borrowed from Bonfire, “hemorrhaging money as the state’s spending obligations have exceeded receipts by an average of over $600 million per month over the past year.”

While the United States Constitution prevents a state from declaring bankruptcy the way places like Detroit and Orange County have, the situation is so dire that the Tribune’s prestige columnist, John Kass, is only partially kidding when he calls for the state to be divided up between its five Midwestern neighbors.

Again, this is not just wonky penciling. The people of Illinois are being crushed by the burden imposed by a state that cannot pay its bills. The Chicago Public Schools, for example, must now pay 9 percent on its adjustable bonds because they are rated as junk. S&P is warning of a “negative credit spiral” and threatened to lower its rating even further if the state cannot hammer out a budget by July 1, which is less than a week away.

In other words, a bridge that used to cost $100 million to build because that’s what it cost to borrow the money from bondholders, now might cost $150 million. Just as we saw in the gasoline example, anytime something costs more US dollars for the exact same product, you can look at it as the cost of a bridge going up, or you can look at it as the value of a dollar falling.

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I haven't read the articles other than the clip posted in your post.....but.....

 

As far as Illinois goes, that state and city government has been so corrupt for so long they should have to go back and milk every dime from anyone who has been mayor of Chicago or Governor of the state or any department head in either level of government before a dime comes from the US government. Throw in the Chicago Police Department.

 

I have absolutely no desire for my tax dollars to go towards bailing out a state and city who have openly and proudly had such corrupt people handling their finances for so long.

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Yellen is an idiot if she thinks she can predict something like a crash. Especially considering that we heard the same thing from Bernanke in the months leading up to the 2007 crash (and from Greenspan before him).

Yes, when I saw that - I thought - time to get out of the market!! Well not really but that kind of over confidence just invites a contrary self fulfilling prophecy.

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Shrug?

 

U.S. Federal Reserve Chair Janet Yellen said on Tuesday that she does not believe that there will be another financial crisis for at least as long as she lives, thanks largely to reforms of the banking system since the 2007-09 crash.

 

"Would I say there will never, ever be another financial crisis?" Yellen said at a question-and-answer event in London.

 

"You know probably that would be going too far but I do think we're much safer and I hope that it will not be in our lifetimes and I don't believe it will be," she said.

 

Yellen said it would "not be a good thing" if reforms of the financial services industry since the crisis were unwound, and urged those who had helped manage the fallout at the time to be vocal in preventing such a dilution.

(https://www.reuters.com/article/us-usa-fed-yellen-idUSKBN19I2I5)

Seems pretty reasonable to me, but what do I know? (I actually don't know, to be clear...) I equally hope these regulations aren't unwound and don't understand why we're jumping on Yellen for it. Is she lacking in credibility in some way? She seems like a remarkably competent Fed Chair.

 

I have zero idea on what basis you guys feel qualified to armchair assess her financial acumen. It doesn't even seem as if either of you have read this story.

 

"After the financial crisis, those who see the damage in that type of thinking have played a major role in ensuring that we have a more appropriate system of supervision and regulation, hopefully for a good long time," she said.

(CNBC, emphasis mine)
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I didn't pay attention enough then to care what was going on. I was barely out of HS, but wasn't the financial issue due to a bunch of dumbass banks giving home loans to anyone and everyone?

That was the final straw, so to speak. There wasn't any single cause that led to the 2007 crash, but rather a whole bunch of them that separately may not have led to a crash.

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No, she's probably really dumb.

 

Or...........

 

She very much has a clue, and that's (partly) why she's publicly praising those regulations and emphasizing the importance of keeping them.

The history of capitalism says she's wrong. The history of her own predecessors' predictions at the Fed says she's wrong. And most importantly Dodd-Frank has failed to prevent the banks from becoming/remaining a systemic risk (too big to fail). It's just a matter of time.

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I don't think any of her claims were as bold as TGHusker portrayed in the opening line of this thread. Try to see what she's trying to say here. We're not in the midst of a "Shall we strengthen Dodd-Frank further" debate. We're more than a few ticks south of that.

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