October 12, 2008

The Credit Collapse

In layman's language, in less than a page.

I don't provide anything in way of backup here. But this is a precis of this really great NPR program, which is much longer (about 20 pages). Highly recommended.

The Credit Collapse

There's a global pool of money available for investment. This money is everything that everyone is saving - pension funds, central banks, insurance funds. This pool was 36 trillion in 2000. It was 70 trillion in 2006 - due to developing countries coming online. That's more than all the money spent and earned by every entity on earth in one year.

So in 2006, we had an army of investors looking for good, safe investments with a return of a few percent/year. There just aren't enough of them! Alan Greenspan, head of the US treasury, then says "US T-bills are only going to pay 1%". In other words, one of the major safe ways that the global pool can invest is now gone. Where can they find some new investments?

Well, residential mortgages are returning between 5 and 10 percent! Sure, they're higher risk, but if a broker buys them, bundles them up and then divides them into "mortgage securities", the risk of defaults is spread out and the global pool can make money for the life of the mortgage!

So 2 factors:
Demand for mortgage backed securities became crazy intense.
Banks and mortgage companies were no longer KEEPING the mortgages for more than a few months.

The drive to generate mortgages led to riskier and riskier mortgages being given. First there were mortgages based on "assets and POTENTIAL earnings". Then there were NINA mortgages - No Income, No Assets. And because these mortgages were for 'resale' and commission, there was no incentive to ensure that the mortgagaes were actually reasonable. So people were getting mortgages who should never have gotten mortgages in the first place.

And for a while, it worked!

Because it was easy to get a mortgage, demand for house prices soared. The possiblity of major real estate return led more people to get crazy mortgages and buy houses that they couldn't afford. When they couldn't afford to pay their mortgage, these people then took out ANOTHER mortgage to pay their bills - which they could do because the supposed 'value' of their house had gone up.

Finally, they started to default on their mortgages. And because of foreclosures, house prices began to fall. The cycle that spiralled up was now spiralling down.

The global pool of investors started to say: "We're not buying these kind of securities anymore. They're starting to go down! Who said these were risk free, triple-A investments anyway? We're not buying anything but NO RISK investments, even if they only pay 1%."

So the mortgage companies and banks that were holding billions of dollars of mortgages, ready to bundle and sell up the chain, had no place to sell them. These companies had BORROWED these billions to provide in mortgages, and now no one wanted to buy them. They go bankrupt.

And here we are. Financial firms going bankrupt. House prices in a downward spiral. People unable to pay their mortgages. Investors with investments that are bleeding money and are not lending money to ANYONE - which spreads the financial problems in the mortgage and real estate area to all other sectors of the economy. This "credit crunch" prevents new businesses from being started, which prevents jobs from being created.

Poor People: 0, Rich people: 0

Posted by JAY at 02:05 PM | Comments (0)

October 25, 2008


Rasterbator is neat program that converts a picture to a multipage PDF of any size. So - what a great way to make cheap art! This is The Great Wave Off Kanagawa. It's not particularly original - someone else did a HUGE rasterbation (hee) and this is just a smaller version.

However, what started as a cheap and cheerful project (just some toner and paper, right?) ended up costing a good deal of money! I -totally- blame Sean! A box of foam core mounting board, some gloss paper, cutting mat, razors (actually, Sean gave me those), adhesive sprays, adhesive wall mounting tabs... Not so cheap any longer! Though I do have extra supplies to do more projects for just the price of the toner. Sean lent me a laser level to help put it up.

As a first try, it worked out pretty good. I didn't have a metal ruler (doh!) so I freehanded the cutting on the pieces, but it still turned out relatively well. There's a definite knack to cutting foam core, and I gradually acquired it as I went from the top pieces to the bottom ones.

Posted by JAY at 09:08 PM | Comments (0)

October 26, 2008

Trev's New House

It's more like a new foundation - Trev's house is the firebreak, so it won't be done until months after the other houses around his are done. So there are houses down the street that are the same model that are almost done.

It's a really nice layout, with 4 big bedrooms upstairs and a second floor laundry room. The basement is nice and clear too. It'll be nice to see once it's done! Below the jump is a shot of the same model further on down the road.

Posted by JAY at 07:22 PM | Comments (0)

Restaurant: Sofra Grill

This is my new favorite restaurant. Trev and I came here after looking at his new house's foundation. I always order the same thing: a chicken shawarma pita which is tasty, stuffed with curry spiced chicken and big enough to satisfy amply as a meal. At $6, it's an absolute steal. Ask for pepper sauce on the side - it's very spicy and sometimes the cooks put in a LOT.

Even though the pita would be enough for a meal, we usually get the red potatoes - fried potatoes doused liberally (and I mean LIBERALLY) with garlic. A small portion ($3) is large enough to share if you're having a pita. The large portion ($5) is double that amount. Drinks are a bit on the expensive side at $2 a can, but the servers leave a pitcher of ice water at the table without being asked. Baklava was over the top in sweetness - even for baklava - and lacking in crispness.

So two can dine amply for about 10 bucks each, including tax and tip. Other items on the menu look wonderful too, but it's hard to order anything else when the chicken shawarma pita is so good. On weekdays, the large dining room fills up very quickly, so getting there a bit before noon is best.

Sofra Grill
8707 Dufferin Street, Unit 21
Thornhill, Ontario, L4J 0A2
Delivery Available
Tel: (905) 907-9999

Posted by JAY at 07:46 PM | Comments (0)

October 29, 2008

Freeform Apple Tart

Cheap apples plus leftover pastry in the freezer = freeform tart! Because the bottom crust is so important on this kind of tart, I cooked in on an aluminum tray on the middle lower rack. It came out rustic looking but really good. A mix of Cortland and Gala apples meant that the apples kept their shape as they cooked.

Posted by JAY at 07:51 PM | Comments (0)