Systemic Collapse: The Basics

[love detective]

Suddenly subprime mortgages become liabilities that you know will not recoup their value. Interest rates reflect perceived risk, and suddenly the perceived risk was much higher.

Just to clarify (once again), the reason for the increase in payments was not this, but a much more simpler and straight forward technical reason - it was the expiry of the teaser interest rate period that increased the payment so much, as mentioned typically moving the interest rate from something like 7% to 12%.

Once your mortgage has been agreed, the interest rate doesn't go up on it if the bank thinks you are now riskier than it thought when they gave you it (interest rates can go up in general across the board, but that effects all borrowers, and the margin that lenders charge on the loan is set at the commencement of the mortgage - it can't be altered once the mortgage has been agreed - mortgage providers/banks can't target individual borrowers and raise their interest rate on their loans just because they've re-assessed the risk on that loan). If you are now a worse risk than they originally thought, they are stuck with that and it's their problem (or whoever ultimately ends up owning the debt) that they didn't assess the risk properly at the outset. Increased rates for lending, due to a reassessment of risk, can only be applied to new business/new mortgages, not already transacted ones

While it clearly did become apparent that sub prime lending was not going to recoup what it had lent out (once the housing market started to stutter then crash) it wasn't a case of interest rates going up on that lending because of that to reflect increased risk. It was the inability of borrowers to meet the payment at the original normal interest rates (i.e. the rate after the teaser period had expired) that broke the back of the thing

edit: I know that in hindsight looking back at this in the position we are in now, it seems completely absurd that this situation could have ever happened in the first place, but i guess that just shows the inherent absurdities of not just financial capitalism but capitalism in general

 

[Falcon]

oil prices were not the primary factor of the financial crisis - you may know something about energy but you appear to know very little about anything else

It is called the GLOBAL financial crisis for a reason. It impacted the GLOBAL economy. I am describing an event (oil stagnation and crippling price rise) that took place in and impacted the Global economy. You are describing (accurately) an event that took place in the US Domestic mortgage market, but are denying the role of oil price in that event as an antecedent.

There are two possibilities:

(1) an event in the Global economy fully accounts for the event in the US Domestic mortgage market (my proposition)

(2) an event in the US Domestic mortgage market fully accounts for the events in the Global economy (your proposition)

(There is a third possibility, which is that the event in the US Domestic mortgage market, and the event in the Global economy, are unrelated. I can't believe you would be that absurd.)

Which is more likely? Some data:

1. The original conditions for subprime lending in the US Domestic housing market were created by the easy credit conditions arising from the low interest rates created by the US's high and rising current account deficit following the 2001 attack. The deficit was funded by borrowing large sums from overseas. US households used those funds to bid up the price of housing, and financial institutions used them to finance the resulting mortgage-backed securities. The overall health of the US domestic mortgage market was therefore fundamentally contingent upon the health of the global economy, to sustain both a current account deficit and an adequate flow of foreign funds to drive speculation and fund mortgages. The increase in the Fed funds rate between 2004-2006 undoubtedly drove up the ARM rate and acted as the trigger on mortgage default, but it was the deteriorating global economy that forced the rate rise and choked the inflow of funds.

2. You correctly state that US mortgage repayments doubled. You incorrectly consider only US prices and wages, and describe the increase in food energy prices as "gradual and slow". In the period from the stagnation of the oil supply in 2005 to the resulting global crash in 2008, global commodity prices *tripled*. This is neither gradual, nor slow, and impacted all economies, including those overseas economies relied on by the US mortgage market to sustain house price speculation and mortgage funding.

For comparison:

3. You state that "oil prices were not the primary factor of the financial crisis". Hamilton, J. (2011), Historical oil shocks, Handbook of Major Events in Economic History shows that 10 out of 11 post-World War II recessions in the United States were preceded by a sharp increase in the price of crude petroleum, equivalent to about $90 at today's price. The oil price rose sharply and exceeded $90 at the beginning of 2008, and the US and Global economies crashed in the same year.

So. You are arguing that:

(1) Although 10 out of the last 11 post-World War II recessions were caused by an oil price in excess of $90, an oil price of $140 didn't cause this one;

(2) The seizure of global economies in 2008 was caused by the doubling of mortgage payments in a narrow sector of the US domestic mortgage market, not the tripling of the global price index in all global economies following stagnation of the global petroleum supply in 2005, despite the dependence of the US mortgage market on deficit inflows deriving from the global economy;

(3) The persistent failure of global economies to recover from the global crash you assert was caused by a failure in the US mortgage market, and the persistent inability to significantly increase global production or reduce the oil price below the threshold of economic failure, are unrelated.

I respectfully disagree. I'm sorry you believe I appear to know little about anything else.

 

[love detective]

sorry but you're barking - you haven't read nor understood a word of the posts that you are trying to repsond to - there are far too many errors, incorrect assumptions and illogical thought processes in your post above that I can't be arsed going through them in detail - i've wrote enough on this to state my case, I've no time to entertain your nonsense any further i'm afraid

stick to what you're good at, which is not this - you've already shown on various threads that you don't have a clue about things outside your narrow specialist topic - you're overreaching and it shows

 

[Falcon]

sorry but you're barking - you haven't read nor understood a word of the posts that you are trying to repsond to - there are far too many errors, incorrect assumptions and illogical thought processes in your post above that I can't be arsed going through them in detail - i've wrote enough on this to state my case, I've no time to entertain your nonsense any further i'm afraid

stick to what you're good at, which is not this - you've already shown on various threads that you don't have a clue about things outside your narrow specialist topic - you're overreaching and it shows

I think it would be enormously helpful if you would offer a succinct rebuttal of points (1), (2) and (3) as a summary of your thesis. It's entirely legitimate to enquire how your theory accounts for them. But if you can't be arsed with your own argument, then presumably neither should anyone else be.

 

[love detective]

(3) talks about the inability of economies to recover from the crash - not what about caused it so not sure why you bring this in here (nowhere have i denied that the a post crash environment combined with looming resource/energy/environmental problems is a toxic and unappealing mix)

(2) talks about a tripling of commodity prices in a three year period (the graph you quote looks closer to a doubling however) - I'm talking about the sustained doubling of monthly mortgage payments overnight (in a 1-2 trillion dollar market) on a rolling monthly basis for 2 years for millions of mortgage holders - and posted at length comparing the relative impacts of these two things (using figures for price inflation provided by free spirit and i generously used his higher 'average' figures of an annual increase of $1000 in food/energy costs rather than the more appropriate $500 or so that was relevant to the lower two quintiles of the income distribution that he provided in a later post) on a typical sub prime mortgage holder, all of which you have ignored and been unable to challenge. You seem unable to grasp that a doubling of your biggest single monthly cost overnight has a far more violent & dramatic impact than the doubling of your food/energy prices over a three year period (in a period where nominal wage increases either partly or entirely offset price inflation for a substantial part of that three year period you refer to - remember real wages only really started to fall from around 2008/2009 onwards not just at the average/median but lower deciles as well)

(1) merely pins your assertion for this crash to the cause of previous crisis/recessions - it proves it no more than you have proved it for this one - i.e. not at all

Now i'm afraid that's me on this - you clearly have a dogmatic and a priori view on this that the presentation of any kind of logical argument or presentation of empirical facts are unlikely to change, so i see little point in wasting my time any more on it

 

[Falcon]

(3) talks about the inability of economies to recover from the crash - not what about caused it so not sure why you bring this in here

You seem to be suggesting either that (1) the inability of economies to recover from the crash, and oil supply stagnation, are unrelated or (2) a factor that now prevents recovery from the crash (supply stagnation) could not have accounted for the crash. Neither seem plausible.

(2) talks about a tripling of commodity prices in a three year period (the graph you quote looks closer to a doubling however) - I'm talking about the sustained doubling of monthly mortgage payments overnight

Yes. *Global* commodity prices. *US* monthly mortgage payments. What you conspicuously haven't talked about is how US mortgage payment dynamics accounts for the decimation of the Portuguese, Irish, Greek, and Spanish economies, French credit rating downgrade, German growth stagnation, Chinese trade deficit, etc. and why it is more likely to be that than a supply stagnation led tripling of global commodity prices and quintupling of oil price. Your theory would be so much more convincing if you did.

(1) merely pins your assertion for this crash to the cause of previous crisis/recessions - it proves it no more than you have proved it for this one - i.e. not at all

10 out of the last 11 crashes were caused by oil price. Are you saying you need 100% correlation, not 90%, before conceding the possibility of causality? It would be a devastatingly effective demonstration that your beliefs were not dogmatic and a priori if you could explain why it didn't do so on this occasion, and that your belief better accounts for the global crash.

 

[love detective]

the size & depth of the US mortgage sub prime market (and the fact that these mortgages were packaged up and sold globally as part of CDO structures) and both the impact of this and the wider knock on impact on the US housing market in general, far outweighs the same localised issues that impacted the housing markets in Ireland & Spain and the problems in Greece (the us sub prime mortgage market was probably around 5-10 times bigger than the total GDP of greece for example)

sorry but every post reveals a greater ignorance on your part about the topic you are pontificating about

I'll leave you to it

 

[Falcon]

chinese trade deficit? you're going from bad to worse - i'd give up now if i were you sorry but every post reveals a greater ignorance on your part about the topic you are pontificating about

Compare with:

China reports large trade deficit as imports surge: China posted its largest trade deficit in at least a decade in February, after imports of commodities jumped as companies built up supplies. The deficit was $31.5bn (£20bn) after imports rose 39.6% from a year earlier and exports rose 18.4%, the customs bureau said. Analysts said the widening trade gap may signal deeper economic issues that China will need to address. China has an export-led economy, but global economic growth remains slow. Meanwhile, prices for many of the raw materials that China needs to fuel its growth are climbing. ... Price growth has been one of the biggest problems facing China over the past few years, not least because it imports most of the oil and commodities it consumes.


-- Source: BBC, 12 March 2012

Oddly, quite a lot about global economic growth, raw material prices, oil imports, and trade gaps. Not a lot about the US mortgage market.

 

[love detective]

yes i edited out that as i thought you were referring to chinese trade deficits being a casual factor in the run up to the crash, when in fact the opposite was the case, trade surpluses were seen pretty much exclusively in the decade or so running up to the crash

 

[Falcon]

yes i edited out that as i thought you were referring to chinese trade deficits being a casual factor in the run up to the crash, when in fact the opposite was the case, trade surpluses were seen pretty much exclusively in the decade or so running up to the crash

No. I specifically invited you to explain why a failure four years ago of the US mortgage market accounts for current global economic stagnation better than a tripling of commodity and quintupling of oil prices, in the context of your assertion that oil price is not a causal factor.

 

[Falcon]

Just to help us get our eye in on love detectives assertion that oil price was not a factor in the 2008 global economic crash. The economy doesn't function above $90, which it has remained above since 2010 (hence the Quantitive Easing programmes). Now even China is in deficit as the oil price returns to its 2008 crash price, exports fall, and costs rise.

 

[love detective]

No. I specifically invited you to explain why a failure four years ago of the US mortgage market accounts for current global economic stagnation better than a tripling of commodity and quintupling of oil prices, in the context of your assertion that oil price is not a causal factor.

the problem is you keep inviting me to explain things to you which I do yet you don't take any of this on board, you don't address/responsd/challenge my posts, you just ignore the responses to your invitations and repeat your stock assumption that it's all about oil (because oil is the only thing you know about, hence the sense of comfort you desire to feel that something that you know about caused everything else in the world to happen, hence giving you a false comfort that you understand the world around you)

i've pointed out the impacts on household incomes of these increases in commodity & oil prices you keep going back to, i've pointed out that despite these increases, real wages continued to rise right up until the year of the crash. I've then placed these price inflation impacts in the context of the much bigger and dramatic impact caused by the build up and fallout of subprime & mortgage in general lending. This has shown the relative impact of both of these things and so far you have been unable to rebut the evidence which shows that the price inflation had a much less marked, sustained and violent impact on the ability of households to service their debts than the build up of pressure and eventual fallout of the sub prime lending bubble had. The impact of the crash and related knock on impacts means of course the world is far more vulnerable to any other shocks that are likely to come its way, oil price related or otherwise. But the simple fact is that the facts for this are staring you in the face, yet you continually assert that something that caused between 1/10th to 1/30th of the impact of sub prime lending fallout is somehow the major contributory factor to the crisis/crash.

Unless you actually start to address the points i've made in the series of long posts on this matter there's no point in discussing this with you - you just ignore them and keep stating the same fuckwitted argument that has no empirical basis to support it

 

[littlebabyjesus]

I largely agree with ld here, but there is a bit of an explanatory gap in his story, I think. A whole load of subprime mortgages reaching the end of their initial rate would have been no problem if the same conditions of easy money had existed and house prices had continued rising. In such a situation, they would have been able to remortgage for a similar deal. That they could not do so can only have been because their risk was recalculated, in particular, because the value of the asset being mortgaged suddenly did not look so secure. The structure of those US mortgages doesn't look very different from the structure of most UK mortgages - an initial 3-year rate that is set to rise at the end, but a hope/anticipation that you will be able to negotiate a new deal at the end of this first one. If the same conditions exist at the end of that rate as at the start - house value maintained and availability of credit the same - the borrower can expect to get a similar deal again. Something has to change to worsen conditions to start the spiral downwards.

The bubble burst pretty quickly and spectacularly as soon as confidence that house prices would continue rising disappeared, but the source of that crisis in confidence is unlikely to have come purely from inside the housing market. The more inflated the market is, the easier it is to pop it - with such an extraordinarily inflated market, just a short-term spike in oil prices could cause that pop. Such a spike did happen in 2007-08.

 

[Falcon]

the problem is you keep inviting me to explain things to you etc.

To be clear, what I keep inviting you to do is explain your claim that $140 oil didn't cause the 2008 crash, given the empirical evidence that $90 oil caused 10 out of the previous 11 crashes, and that the global oil supply saturated in 2005. It's a pretty simple question which you studiously avoid answering.

I'll ask it again: why does $140 oil not fully account for the ongoing financial crash which commenced in 2008 shortly after the saturation of the global oil supply, given that $90 oil fully accounted for 90% of the previous dozen crashes?

Put it another way: if we have to choose between whether the failure of the US mortgage market made the global economy more vulnerable to the structural price of oil, or the structural price of oil made the global economy more vulnerable to the failure of the US mortgage market, why would we choose the former explanation, given the overwhelming empirical evidence that it is likely to be the latter?

Please understand: the US economy accounts for only 25% of nominal global GDP. An explanation of the global crash expressed as a restatement of the dynamics of US prices, mortgage payments etc., no matter how elaborate, will fail to explain why it should be more explanatory than the oil price which systemically affected 100% of the global economy.

Understanding what caused what matters, which is why I persist despite the tedious ease with which you resort to poorly executed ad hominem attack. If the problem lies merely with financial irregularity and capitalism, it is theoretically fixable. If the problem is with oil price, it is not, given the oil price trajectory ...

 

[love detective]

I largely agree with ld here, but there is a bit of an explanatory gap in his story, I think. A whole load of subprime mortgages reaching the end of their initial rate would have been no problem if the same conditions of easy money had existed and house prices had continued rising. In such a situation, they would have been able to remortgage for a similar deal. That they could not do so can only have been because their risk was recalculated, in particular, because the value of the asset being mortgaged suddenly did not look so secure. The structure of those US mortgages doesn't look very different from the structure of most UK mortgages - an initial 3-year rate that is set to rise at the end, but a hope/anticipation that you will be able to negotiate a new deal at the end of this first one. If the same conditions exist at the end of that rate as at the start - house value maintained and availability of credit the same - the borrower can expect to get a similar deal again. Something has to change to worsen conditions to start the spiral downwards.

The bubble burst pretty quickly and spectacularly as soon as confidence that house prices would continue rising disappeared, but the source of that crisis in confidence is unlikely to have come purely from inside the housing market. The more inflated the market is, the easier it is to pop it - with such an extraordinarily inflated market, just a short-term spike in oil prices could cause that pop. Such a spike did happen in 2007-08.

while the structure of those US mortgages may not seem that different to the UK, the essence of those US mortgages were very different, in that most mortgage providers were well aware that when the teaser rates expired the mortgage owners would be unable to afford the payments once they reverted to the normal rate (and bear in mind the normal rate for a poorly rated credit person is very high - well into double figures in terms of interest costs). No such mortgages were ever made in the UK on that kind of basis - what did happen in the UK was giving mortgages for 100%+ of the value and on self certified income in a lot of cases which led to a lot of problems, but these were still not in the same league as these 2/28 and 3/27 ARM mortgages in the US. So what we had was a much more dubious & self destructive practice happening in a much bigger & deeper market

the proces you outline that it wouldn't be a problem if everything had just kept on rising is fine in theory, but it ultimately was the recognition of the pipeline of built up pressures within the subprime market itself that was the pricking points for the whole thing to unfold, first as a ripple and then a tsunami. the fact that around a trillion dollars of these type of morgages had been written in a short period of just three years (and then packaged up and sold globally to all kinds of investors in the form of CDO's) eventually started to show through in terms of what the system had been building up in those proceeding years (which is why some astute hedge funds who anticipated it were able to make billions from it). it seems so simple now in retrospect and bizarre that this thing actually happened, but happened it did

but regardless of that I still can't understand why people don't see that an increase in household costs due to price inflation that represented something around 1/10th to 1/30th of the increased cost of the step change in their mortgage payments, every month, was the thing that made the bubble burst?

 

[littlebabyjesus]

That's another 'cliff' graph. How come the line changes direction so dramatically right at the point that it becomes dotted? Are you not suspicious of such things? I am. Very.

 

[elbows]

Both of these questions had been answered in my previous posts on this topic - for example here & here. You're welcome to dispute what i've said and argue with the facts as i've presented them and i'm happy to go into more detail on them, but it would add more to the discussion if you did this rather than just ignore what's already been said on these points and put forward the possibility that the reasons for these two things 'have the potential to lead back to oil' - state your case man. My one is that it's near impossible to weave a story into these events that places oil supply as the underlying driver for any of these things - that's because the underlying drivers for them are very clear, and they don't involve oil.

Thanks for all the detailed responses, despite my failure to make a strong case. I didn't make a strong case because I don't have one that is compatible with this level of detail or that narrow time period.

Im just picking at the issue really, musing at whether all the neoliberalism and various bubbles would actually have developed in the way they did in the last 30+ years if the energy picture had been different. For example I am quite interested in the political & economic developments in the USA in the 70's and 80's. The oil shocks of the 70's altered the trajectory, and I wonder what different responses might have been developed if, for example, the USA had the capacity to ramp up its domestic energy exploitation at the time.

I am aware that there are too many factors at play to have a really meaningful discussion about this, Im painting with very broad and sloppy brushstrokes that are a poor fit for the detailed discussion of economic & financial conditions this century.

 

[elbows]

That's another 'cliff' graph. How come the line changes direction so dramatically right at the point that it becomes dotted? Are you not suspicious of such things? I am. Very.

That is the basis of most of my disagreements with Falcon. Those making a case that there is a cliff to fall off should be clear as to when they are suggesting the plunge comes, and should be careful not to say 'now' if they actually expect things to wobble along for some time to come. Otherwise surely its only their credibility that falls off a cliff at this point?

 

[love detective]

I'll ask it again: why does $140 oil not fully account for the ongoing financial crash, given that $90 oil fully accounted for 90% of the previous dozen crashes?

again you just assert that correlation proves cause - you haven't showed at all how these things were the causes - you just keep reasserting the cause to other periods without once presenting any kind of empirical evidence to show why you think this

a bubble within capitalism caused by something else (in this case financialised capitalism) is clearly likely to in itself produce an increase in commodity prices at the same time as it's a time of optimism & boom - which in turn pushes up demand for capital & commodities and other scarce resources. So just because oil & commodity prices are higher in boom times and then collapse when the boom busts doesn't mean anything in terms of their casual factors - these are just as likely to be an effect of the situation rather than its cause. Your argument here is equivalent to saying that firemen are the cause of house fires as they can usually be found at the scene of them - hatstand logic

you can't see beyond this though - and i really wish i would stop responding to your posts

Understanding what caused what matters, which is why I persist despite the tedious ease with which you resort to poorly executed ad hominem attack. If the problem lies merely with financial irregularity and capitalism, it is theoretically fixable. If the problem is with oil price, it is not, given the oil price trajectory ...

Where have i claimed that the only problem we face lies within capitalism? i've mentioned several times specifically on this thread that just because i don't see the main drivers for the current crash as being energy related it doesn't mean that i don't think we are heading into a big energy/resource crisis. But i can detach the later from the former when they have to be - and in this case they have to be

 

[8ball]

My vague feeling would be that the oil price was inhibiting growth and possibly undermining the robustness of the economy, but the big 'kick' came from the realisation that a great many leveraged derivatives were contaminated with this toxic debt.

I think the latter would have caused a great deal of trouble even without an oil price spike, though.

The 'cliff' had already been passed, but like Wile E. Coyote, the markets do not plunge until they realise there is nothing holding them up.

 

[elbows]

The 'cliff' had already been passed, but like Wile E. Coyote, the markets do not plunge until they realise there is nothing holding them up.

Part of the cliff face confusion stems from the fact that there are multiple different cliffs we could be talking about, such as:

Growth
Easy/cheap oil
Actual oil production levels
Debt
Optimism/confidence

 

[littlebabyjesus]

Part of the cliff face confusion stems from the fact that there are multiple different cliffs we could be talking about, such as:

Growth
Easy/cheap oil
Actual oil production levels
Debt
Optimism/confidence

And of course, ld is right that cause and effect are not always obvious here. There is a very close correlation between oil production and growth, for instance, but where is the cause? Growth needs more oil, so growth stimulates more oil extraction. Simply pumping a load of extra oil out of the ground will not in itself cause growth, just as simply printing a load of money through QE doesn't in itself stimulate demand for loans.

 

[Falcon]

That's another 'cliff' graph. How come the line changes direction so dramatically right at the point that it becomes dotted? Are you not suspicious of such things? I am. Very.

You need to make sure you understand context before speaking, lbj. It is the non-investment rate, which provides a baseline to compare required investment rates by, explained here and here. There is no conspiracy. Curve H is perfectly sufficient to tank the economy.

That is the basis of most of my disagreements with Falcon. Those making a case that there is a cliff to fall off should be clear as to when they are suggesting the plunge comes, and should be careful not to say 'now' if they actually expect things to wobble along for some time to come. Otherwise surely its only their credibility that falls off a cliff at this point?

We covered this, elbows. There has been no claim that we will follow N. We have discussed the fact that 80% of the area under H cannot be produced if we are to take climate change seriously. You are manufacturing an argument I never made and attacking that.

 

[8ball]

Part of the cliff face confusion stems from the fact that there are multiple different cliffs we could be talking about, such as:

Growth
Easy/cheap oil
Actual oil production levels
Debt
Optimism/confidence

Ok, iffy metaphor - to clarify:

Oil-related factors = gravitational constant
Optimism = height of body that is proceeding along/falling off cliff
Toxic debt led housing bubble = volcano that has shifted bedrock making cliff much higher than it would have been otherwise
Optimism/economic factors = cliff substrate
Economic deregulation = failure to pack parachute
Media = seagulls

 

[elbows]

We covered this, elbows. There has been no claim that we will follow N, and you are manufacturing an argument I never made and attacking that.

We covered it to an extent sufficient to demonstrate how slippery you are in debates.

You conflated several things and only provided clarity when challenged. You made erroneous statements about year-to-year comparisons of oil production from specific fields. Im sure I made some errors when discussing this stuff too, but I certainly don't think you got out of it without stains to your rep.

 

[littlebabyjesus]

while the structure of those US mortgages may not seem that different to the UK, the essence of those US mortgages were very different, in that most mortgage providers were well aware that when the teaser rates expired the mortgage owners would be unable to afford the payments once they reverted to the normal rate (and bear in mind the normal rate for a poorly rated credit person is very high - well into double figures in terms of interest costs). No such mortgages were ever made in the UK on that kind of basis - what did happen in the UK was giving mortgages for 100%+ of the value and on self certified income in a lot of cases which led to a lot of problems, but these were still not in the same league as these 2/28 and 3/27 ARM mortgages in the US. So what we had was a much more dubious & self destructive practice happening in a much bigger & deeper market

the proces you outline that it wouldn't be a problem if everything had just kept on rising is fine in theory, but it ultimately was the recognition of the pipeline of built up pressures within the subprime market itself that was the pricking points for the whole thing to unfold, first as a ripple and then a tsunami. the fact that around a trillion dollars of these type of morgages had been written in a short period of just three years (and then packaged up and sold globally to all kinds of investors in the form of CDO's) eventually started to show through in terms of what the system had been building up in those proceeding years (which is why some astute hedge funds who anticipated it were able to make billions from it). it seems so simple now in retrospect and bizarre that this thing actually happened, but happened it did

but regardless of that I still can't understand why people don't see that an increase in household costs due to price inflation that represented something around 1/10th to 1/30th of the increased cost of the step change in their mortgage payments, every month, was the thing that made the bubble burst?

Ok, I take your point that the bonkers US subprime were a whole level of recklessness up from UK mortgages, but to just clarify, those issuing the initial subprimes, were they never intending to renew the mortgages at the same rate if the same conditions prevailed at the end of the three years?

Just a tiny wobble is needed to start a collapse, because once it starts, it's self-fulfilling, but do you think that the wobble was caused solely by internal factors?

 

[Falcon]

again you just assert that correlation proves cause - you haven't showed at all how these things were the causes - you just keep reasserting the cause to other periods without once presenting any kind of empirical evidence to show why you think this

... apart from a selection of rigorous, widely cited, peer reviewed academic studies of causal factors from which the conclusion is quoted? What exactly does constitute evidence in your world?

a bubble within capitalism caused by something else (in this case financialised capitalism) is clearly likely to in itself produce an increase in commodity prices at the same time as it's a time of optimism & boom - which in turn pushes up demand for capital & commodities and other scarce resources. So just because oil & commodity prices are higher in boom times and then collapse when the boom busts doesn't mean anything in terms of their casual factors - these are just as likely to be an effect of the situation rather than its cause. Your argument here is equivalent to saying that firemen are the cause of house fires as they can usually be found at the scene of them - hatstand logic

An explanation during which, once again, you studiously ignore the empirically observable fact that the global oil supply stagnated 24 months before the crash, despite strong BRIC demand. Can you explain - exactly - why the price rise *was* caused by the bubble and *not* by supply constraint?

 

[Falcon]

We covered it to an extent sufficient to demonstrate how slippery you are in debates.

You conflated several things and only provided clarity when challenged. You made erroneous statements about year-to-year comparisons of oil production from specific fields. Im sure I made some errors when discussing this stuff too, but I certainly don't think you got out of it without stains to your rep.

Jesus elbows, it's a debating forum, not a place for posting fully formed essays. How about, instead of stained reps and hurt feelings, we just accept that the truth emerges through a process of good natured debate between reasonable fellows. What the fuck is it with Urban75 and being pissed off all the time?

 

[elbows]

Jesus elbows, it's a debating forum, not a place for posting fully formed essays. How about, instead of stained reps and hurt feelings, we just accept that the truth emerges through a process of good natured debate between reasonable fellows. What the fuck is it with Urban75 and being pissed off all the time?

Im not pissed off all the time, I think its just the way my words come out in text.

I prefer a good debate to a good natured one, and sometimes Im afraid I will get personal if I think it can shed light on the truth,or if Im just being arsey.

Some of your posts infuriate me at times, so I use them to try to zoom in on certain details. Sometimes this may cause me to lose sight of the bigger and more important picture, sometimes it may add to that picture. Im sure you can live with this, as can I, so lets just carry on, I don't think it does any harm so long as we don't indulge in this every week.

 

[Falcon]

but regardless of that I still can't understand why people don't see that an increase in household costs due to price inflation that represented something around 1/10th to 1/30th of the increased cost of the step change in their mortgage payments, every month, was the thing that made the bubble burst?

I think everyone can. Your problem is that they are more interested in why there was a bubble in the first place, why the mortgage rate had to go up, why the mortgage instruments could no longer be funded, and what prevents it from all happening again. Your argument is the fly - the broader argument is the elephant's bum the fly is on.