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Post by PushyGuyFanClub on Sept 26, 2008 18:12:02 GMT -5
I don' t understand what you mean. Things like LIBOR no longer exist because people are hoarding cash. Without cash, there is no growth. If we assume illiquid MBS (not necessarily bad), cash replaces illiquidity. What problem has already resolved itself?
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SirSaxa
Silver Hoya (over 500 posts)
Posts: 747
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Post by SirSaxa on Sept 26, 2008 18:48:08 GMT -5
I don' t understand what you mean. Things like LIBOR no longer exist because people are hoarding cash. Without cash, there is no growth. If we assume illiquid MBS (not necessarily bad), cash replaces illiquidity. What problem has already resolved itself? Agreed Pushy, but not only would there be no growth, there will be a rapid contraction of the economy on a scale not seen in decades. Understanding Global credit markets and the highly interconnected global economy is not an easy task... even for those who work in it every single day. It is no wonder that Main St. doesn't get it. Bush can't explain it because, frankly, he doesn't get it either. That doesn't make it any less real. But because it is so difficult to understand, it is tough to explain to Mr. & Mrs. John Q Public how things work, and what is so scary about things right now. For those on the board who would like to understand things a little better, I would suggest you might try watching CNBC and/or Bloomberg TV. Both available on many/most cable providers, at least on their digital tiers. Another one is CNBCW -- for CNBC World. Also, during the off hours, CNBC and Bloomberg cover Asian Markets and European Markets (DAX, FTSE, etc). None of these channels favor either party or any ideology except economic growth and making $$$. Watching will BEGIN to give you some background on the issues -- credit markets, equities, bond markets, commodities, For Ex (Foreign Exchange) and so forth. Universally, the TV hosts and virtually all the guests are calling for the Bailout -- in some form or other -- ASAP. The guests are all market folks, Corp. CEOs, stock/market analysts, economists, and so forth.
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Post by sleepyjackson21 on Sept 26, 2008 18:51:59 GMT -5
Bando, our financial system depends on money flowing freely between banks and companies. Right now banks are hoarding their cash because of all the toxic/illiquid assets they own. Alot of these banks were leveraged to the hilt and now that many of these mortgages have gone sour, they don't have the cash on hand to lend. We've gone from the extreme of easy money to the other end of the spectrum where companies/households who need it and should be getting it, can't get it. Paulson wants to take these illiquid assets off balance sheet, thus freeing up existing capital. The obvious other solution is to have the banks keep their toxic assets and then pump them with enough equity to the point where they feel they can lower their lending standards. An interest rate cut really won't have much of an effect since its not the cost of the credit that is an issue but rather access to credit (i.e. banks unwillingness to lend).
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EasyEd
Platinum Hoya (over 5000 posts)
Posts: 7,272
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Post by EasyEd on Sept 26, 2008 19:06:13 GMT -5
What the bailout opposition crowd doesn't understand here is that credit now funds more than 90% of our GDP. The credit markets are totally frozen. Unless something is done to lubricate them, even good companies are going to go down since they can't finance inventory. Unemployment will skyrocket since small business cannot invest in growth. Seemingly strong business will have debt called early, which they may or may not be ready for, and they will be unable to get another revolving credit facility. That means liquidations, layoffs, etc., in order to pay the bills. These are extremely tangible consequences for all Americans. The purchasing of illiquid securities will free up capital. The approval to do so, however, needs to make sure the buyers of these securities (taxpayers) reap any reward of their increase in value. Furthermore, we should get warrants and our preferred shares for our help in recapitalizing these businesses (with terms similar to or better than what Buffett got with GS). It's the only way out. The U.S. government is the only actor with the resources to have any kind of significant effect at this point. I hate that that's true, but it is. Pushy, I understand what you are saying about how credit drives our economy but it is also the root of our problems. And it's not just banks and companies and housing. It's now the accepted thing to run our credit cards up to the max; to go far, far into debt to pay for college education; to buy BMWs instead of Fords because we can borrow and pay over time; to buy and charge ever more exotic cell phones, I-phones, blackberries, digital cameras, camcorders and the like; to finance ever more extensive overseas vacations, including university course work; to pay on time for the most up-to-date large flat-panel TVs and accompanying DVRs, TIVOs and the like; and the list goes on. We have become a nation of borrowers with one of the smallest amount of savings in the world. This is the culture we have assumed in this country so it's not surprising it extends to buying a home we cannot afford and companies buying and selling mortgages and insurance they cannot afford since it's the same people that do the borrowing in their private lives. If we bail out the financial markets today we will surely be faced with bailing out many other markets and industries in the future unless we change the culture and, unfortunately, I think the only way to accomplish this is to suffer a severe crash. Very, very painful but if we attempt to prop up the current system through a bailout the only thing we are doing is delaying the crash. Everyone has been complaining the Bush administration has resulted in huge deficits and we haven't even addressed the humongous problems of Social Security and Medicare. Now we want to add $700B or so? Does anyone really believe the bailout package(s) being discussed will solve our country's financial problems? Or is it a mere temporary bandaid?
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Post by jerseyhoya34 on Sept 26, 2008 19:46:34 GMT -5
No WMD in Iraq also came as a surprise to Minority Leader Boehner. It also came as a surprise to EVERY SINGLE INTELLIGENCE AGENCY IN THE WORLD. Can't stand all these morons that pretend they knew better before the war. There was consensus around the world, even among the Russians, Germans and French, that Iraq likely still had WMD. There is a reason that it came as a surprise to many intelligence agencies. Many of them (including the French) were buying our stuff and we're fed the same stuff from a poisoned well. My point was not that I knew better or that the Dems knew better. Many of us did not, and votes reflected that. My point is that they should have known better, and, in any event, the assessment that was made - WMD in Iraq - was empirically incorrect, and, for that, people (like Boehner) should be held accountable. This response (and hifi's) is akin to the kid in the classroom, who, after a test, asks a teacher to throw out a question because "everyone else got it wrong." Issues of war and peace, in my view, can't be graded on a curve, despite the "curveballs" out there. And, this kind of thing is not something where you can ask for a mulligan. I say this with even greater emphasis because of the degree to which Republicans questioned the patriotism of even pro-war Democrats in this process. I choose to hold the people who gave voice to our "intelligence" accountable. In the case of the Iraq War, there were opportunities to get the WMD issue correct. It would not have been hard to do, but those opportunities were turned down or otherwise disrupted. Again, that was a choice that was made, and many people still agree with it. That is their (or your) right. I happen to think the bravado was disgraceful and still damages us today. To this extent, I give credit to the few who through their lot in with the people who turned out to be empirically correct about the state of affairs in Iraq. Again, Barack Obama's words before the war come close to what we actually found to be the case once we invaded: "But I also know that Saddam poses no imminent and direct threat to the United States, or to his neighbors, that the Iraqi economy is in shambles, that the Iraqi military a fraction of its former strength, and that in concert with the international community he can be contained until, in the way of all petty dictators, he falls away into the dustbin of history." I challenge anyone to explain how the Bush/Cheney pre-war assessment was factually more accurate than this.
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Bando
Golden Hoya (over 1000 posts)
I've got some regrets!
Posts: 2,431
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Post by Bando on Sept 26, 2008 19:52:52 GMT -5
What the bailout opposition crowd doesn't understand here is that credit now funds more than 90% of our GDP. The credit markets are totally frozen. Unless something is done to lubricate them, even good companies are going to go down since they can't finance inventory. Unemployment will skyrocket since small business cannot invest in growth. Seemingly strong business will have debt called early, which they may or may not be ready for, and they will be unable to get another revolving credit facility. That means liquidations, layoffs, etc., in order to pay the bills. These are extremely tangible consequences for all Americans. The purchasing of illiquid securities will free up capital. The approval to do so, however, needs to make sure the buyers of these securities (taxpayers) reap any reward of their increase in value. Furthermore, we should get warrants and our preferred shares for our help in recapitalizing these businesses (with terms similar to or better than what Buffett got with GS). It's the only way out. The U.S. government is the only actor with the resources to have any kind of significant effect at this point. I hate that that's true, but it is. Pushy, I understand what you are saying about how credit drives our economy but it is also the root of our problems. And it's not just banks and companies and housing. It's now the accepted thing to run our credit cards up to the max; to go far, far into debt to pay for college education; to buy BMWs instead of Fords because we can borrow and pay over time; to buy and charge ever more exotic cell phones, I-phones, blackberries, digital cameras, camcorders and the like; to finance ever more extensive overseas vacations, including university course work; to pay on time for the most up-to-date large flat-panel TVs and accompanying DVRs, TIVOs and the like; and the list goes on. We have become a nation of borrowers with one of the smallest amount of savings in the world. This is the culture we have assumed in this country so it's not surprising it extends to buying a home we cannot afford and companies buying and selling mortgages and insurance they cannot afford since it's the same people that do the borrowing in their private lives. If we bail out the financial markets today we will surely be faced with bailing out many other markets and industries in the future unless we change the culture and, unfortunately, I think the only way to accomplish this is to suffer a severe crash. Very, very painful but if we attempt to prop up the current system through a bailout the only thing we are doing is delaying the crash. Everyone has been complaining the Bush administration has resulted in huge deficits and we haven't even addressed the humongous problems of Social Security and Medicare. Now we want to add $700B or so? Does anyone really believe the bailout package(s) being discussed will solve our country's financial problems? Or is it a mere temporary bandaid? PushyGuy, I admit this confused me, but sleepy explained it well enough that I now withdraw my question as ill-informed. Ed, I get what you're saying, but surely you recognize the human cost involved here. We're talking about people losing their homes, their jobs, and their way of life? Is capitalism really a suicide pact?
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Post by PushyGuyFanClub on Sept 26, 2008 22:06:02 GMT -5
The issue of credit/leverage is a tricky. As easyed points out, it is the root of our problems. But it is also the reason why our economy has been the most successful in the world.
Capitalism is not a suicide pact, but you have to understand that it will deliver boom and bust cycles. Consider that you have four examples when it comes to economics: 1)High growth, high volatility (USA) 2)High Growth, Low Volatility (Utopia) 3) Low Growth, Low Volatility (Western Europe) 4)Low Growth, High Volatility (Brazil, up until the last few years).
Obviously, scenario 2 is optimal, but no one has pulled it off. Scenario 1 is the next best, but it comes with some painful periods. Unfortunately, this is looking like a very painful period regardless of what the reality is (banks actually DO have cash). Just remember what Ben Graham said. In the short term, the market is a voting machine. In the long term, it's a weighing machine. We just have to give the market enough time to get out of voting machine mode and into weighing machine mode. That's what I think this "bailout" allows us to do and why it needs to pass. We need time. We won't see 100% defaults. This can be handled in a responsible manner.
Also, can we take the WMD stuff to a separate thread? It's not relevant here.
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Post by Coast2CoastHoya on Sept 26, 2008 23:25:52 GMT -5
What the bailout opposition crowd doesn't understand here is that credit now funds more than 90% of our GDP. The credit markets are totally frozen. Unless something is done to lubricate them, even good companies are going to go down since they can't finance inventory. Unemployment will skyrocket since small business cannot invest in growth. Seemingly strong business will have debt called early, which they may or may not be ready for, and they will be unable to get another revolving credit facility. That means liquidations, layoffs, etc., in order to pay the bills. These are extremely tangible consequences for all Americans. The purchasing of illiquid securities will free up capital. The approval to do so, however, needs to make sure the buyers of these securities (taxpayers) reap any reward of their increase in value. Furthermore, we should get warrants and our preferred shares for our help in recapitalizing these businesses (with terms similar to or better than what Buffett got with GS). It's the only way out. The U.S. government is the only actor with the resources to have any kind of significant effect at this point. I hate that that's true, but it is. Pushy, I understand what you are saying about how credit drives our economy but it is also the root of our problems. And it's not just banks and companies and housing. It's now the accepted thing to run our credit cards up to the max; to go far, far into debt to pay for college education; to buy BMWs instead of Fords because we can borrow and pay over time; to buy and charge ever more exotic cell phones, I-phones, blackberries, digital cameras, camcorders and the like; to finance ever more extensive overseas vacations, including university course work; to pay on time for the most up-to-date large flat-panel TVs and accompanying DVRs, TIVOs and the like; and the list goes on. We have become a nation of borrowers with one of the smallest amount of savings in the world. This is the culture we have assumed in this country so it's not surprising it extends to buying a home we cannot afford and companies buying and selling mortgages and insurance they cannot afford since it's the same people that do the borrowing in their private lives. If we bail out the financial markets today we will surely be faced with bailing out many other markets and industries in the future unless we change the culture and, unfortunately, I think the only way to accomplish this is to suffer a severe crash. Very, very painful but if we attempt to prop up the current system through a bailout the only thing we are doing is delaying the crash. Everyone has been complaining the Bush administration has resulted in huge deficits and we haven't even addressed the humongous problems of Social Security and Medicare. Now we want to add $700B or so? Does anyone really believe the bailout package(s) being discussed will solve our country's financial problems? Or is it a mere temporary bandaid? Very well put, ed.
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Post by Coast2CoastHoya on Sept 26, 2008 23:35:12 GMT -5
Funny thing about all of this is that if people acted a little more responsibly (i.e. living below their means, saving, not borrowing more than they're able to pay back) all of this goes away.
Or am I living in fantasy land?
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Bando
Golden Hoya (over 1000 posts)
I've got some regrets!
Posts: 2,431
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Post by Bando on Sept 27, 2008 1:53:42 GMT -5
Funny thing about all of this is that if people acted a little more responsibly (i.e. living below their means, saving, not borrowing more than they're able to pay back) all of this goes away. Or am I living in fantasy land? I agree that there's a personal responsibility aspect to all this, but the current crisis can't be boiled down to "it's poor people's fault". No one forced banks to lend to the less than credit worthy (and no, citing some law from seventies that's doesn't apply to most of these loans doesn't count as a rebuttal), and no one certainly forced them to package these mortgages as securities and sell them off.
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Post by Coast2CoastHoya on Sept 27, 2008 9:59:03 GMT -5
I'm totally not talking about poor people, dude. I'm also very much talking about very rich people who played with their own and other people's money irresponsibly---i.e. the unethical lending practices you alluded to, ever-larger houses and cars, etc---for the purpose of short-term gain.
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Post by strummer8526 on Sept 27, 2008 10:16:41 GMT -5
Funny thing about all of this is that if people acted a little more responsibly (i.e. living below their means, saving, not borrowing more than they're able to pay back) all of this goes away. Or am I living in fantasy land? I actually do agree. On the other hand, there should be corporate checks and oversight that prevent (not necessarily poor, but just) dumb people from living wildly beyond their means. I'm sorry. If you're an auto mechanic and your wife is a part time teacher's aid, you may NOT be able to afford a $750,000 home, 3 cars, and private school for your 2 kids. But no one ever wants to tell a constituent, "No you can't."
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hifigator
Platinum Hoya (over 5000 posts)
Posts: 6,387
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Post by hifigator on Sept 27, 2008 11:35:21 GMT -5
Tons of stuff to respond to:
In no particular order:
sleepy wrote:
Right now banks are hoarding their cash because of all the toxic/illiquid assets they own. Alot of these banks were leveraged to the hilt and now that many of these mortgages have gone sour, they don't have the cash on hand to lend.
Exactly, and that's the two-edged sword that I haven't heard hardly anyone mention. One edge is the lost expected income through loans gone sour, which results in a lower payback level after the "bad" credit has been sold at a discount. The compounding effect is that by hoarding the money, to avoid future risky loans, the banks are also losing the opportunity costs of loans that would otherwise go well. I understand why they do this and am not criticizing them for it. When times are tough, the last thing they want to do is assume more risk. But just as they are avoiding an opportunity expense in the form of the risk avoidance, they are also losing out on the opportunity income. It really is a two edged sword, and unfortunately one which will perpetuate itself until something different happens.
Ambassador wrote:
There is a reason that it came as a surprise to many intelligence agencies. Many of them (including the French) were buying our stuff and we're fed the same stuff from a poisoned well. My point was not that I knew better or that the Dems knew better. Many of us did not, and votes reflected that. My point is that they should have known better, and, in any event, the assessment that was made - WMD in Iraq - was empirically incorrect,
I agree that it would be nice if forsight was as crystal clear and perfect as hindsight, but I'm not sure that agreeing on that point gets us anywhere. I'm not going to dredge up the WMD issue again, other than to say that the intelligence from drastically diverse sources was virtually unanimous. Now if you want to suggest that those at the top of the financial markets should have had the similar "intelligence" with regards to the current and ongoing capital markets, then I see your point, but again, don't think it gets us anywhere. There is a natural tendency to want heads to roll when things fail. Just last week a good friend of mine was calling for Jack Del Rio's head as we listened to the Colts go right down the field to take the lead for the first time late inthe game. After the Jags came back to win with a last second field goal, he had to recant his view. Are such reactions to disaster emotionally driven? If so, then by definition they may very well not be the proper intellectual decision. In other words, the world's best intelligence thought one thing. It appears to have been wrong. But why should we think that "inferior" intelligence would somehow be any different, except to be wrong even more often? Similarly, I'm not sure that the knee-jerk reaction to focus all of the blame on certain people "in charge" is neceassarily the best avenue. It might be, but let's put a bit more thought into it.
Ambassador wrote:
This response (and hifi's) is akin to the kid in the classroom, who, after a test, asks a teacher to throw out a question because "everyone else got it wrong." Issues of war and peace, in my view, can't be graded on a curve, despite the "curveballs" out there. And, this kind of thing is not something where you can ask for a mulligan.
Your analogy doesn't hold water here. I am all for difficult tests and all for merit-based pay for teachers. How does that play in here? Simple. You totally missed the boat suggesting that I would ever be making excuses for difficult questions. The contrary is true. Now I understand what you mean on the grander scale. And yes, if literally everyone is of the same view on an issue, then that does lend tremedous credibility to that view, but it still doesn't make it perfect. To use a sports comparison, a lot of journalists will routinely pick some ridiculous underdog for an upset. Whenever they miss, no one holds them accountable because it was such an outlandish pick. So then when they do get lucky and get one right, they are able to stand on their soapbox and thump their own chests. But on the grand scale, they have still been consistently wrong, not randomly and rarely "right."
C2C wrote:
Funny thing about all of this is that if people acted a little more responsibly (i.e. living below their means, saving, not borrowing more than they're able to pay back) all of this goes away.
I agree with you 100%. At the risk of charges of patting myself on the back, that has been our personal philosophy all along. I drive an 86 Nissan 4 cylinder pickup truck. Am I somehow "better" than others with fancy cars? No, but I just have little interest in "wasting" money, and in my mind, when you buy something and then drive it around the block, only to have it lose a third of its value, that is a bad move. I don't have a rolex, or even a watch for that matter. My cheap but very functional Nokia phone works fine for both calls and telling time. No, I don't have the blackberry or the GLide/slide/razor/etc.. that I see so many of. Again, I'm not trying to salute myself, as much as point out that I see people all the time buying stuff well beyond what would seem to be smart means. I have people spend 4 or 5 thousand dollars on car entertainment systems, when the car itself probably blue books at $1500. Many of these same customers have the latest greatest phone hanging from their side on prepay accounts. I don't resent it, and actually appreciate it, as it has been our way of life for some 30 plus years. BUt it is still a valid observation.
Enough for now. It's football time.
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Post by jerseyhoya34 on Sept 27, 2008 11:49:35 GMT -5
I would probably give the debate to McCain on substantive points, but say that he scored the wrong points. In ostensibly a non-incumbent election (leaving aside the issue of the parallels between the Bush and McCain records), the election will be won in the middle. States like VA, CO, OH, FL, and PA will decide this thing.
I watched the CNN meter throughout, and, usually when McCain attacked, the independent and mean lines would go down considerably. The post-debate polling bears this out too. Obama managed to sustain better numbers among independents for most of the debate. Style may be important to these voters too as much as anything else, and not looking Obama in the eye during the debate, muttering expletives, and so forth, is unlikely to help him.
My take overall is that McCain stopped the bleeding, but he needed to do more. David Gergen had a similar take. Obama's ground game is now re-activating in states like NC and MO, where McCain simply cannot afford to get bogged down. IA and NM seem to be off the table, and electoral map options for Obama seem to be expanding.
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Boz
Blue & Gray (over 10,000 posts)
123 Fireballs!
Posts: 10,355
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Post by Boz on Sept 27, 2008 19:07:58 GMT -5
You're aware there are still three more debates and 6 weeks left, right?
I don't necessarily disagree with all of your analysis, but I made the same mistake when McCain surged at the beginning of September. If I've learned anything these past couple weeks, it's that no trend is safe and that events are more likely to dictate trends than the campaigns will.
Iran conducts a missile test in October, for instance, and I guarantee McCain takes the lead again.
EDIT: Two notes on reflection (since I am in a good mood with the Michigan win and don't want to start an argument)
1. Basically, the point of this is not to dispute any analysis, but just to give a little Han Solo: "Great kid, don't get cocky."
2. I do not mean to imply in any way that bad news around the world is something to root for so that it helps John McCain. Absolutely and unequivocally not. I was just trying to state the importance of events. I think recent events have emphasized Obama's strong points, but there are many others that emphasize McCain's.
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Post by jerseyhoya34 on Sept 28, 2008 11:57:21 GMT -5
Yes, there is still time left. My point is only that McCain is on a slippery slope right now. (And, I think we agree more than we disagree in terms of what you've said.)
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Post by AustinHoya03 on Sept 30, 2008 23:47:45 GMT -5
You know, Southerners also had regional term for African-Americans that a lot of frat boys used back in the day. This didn't make such a term excusable, and your rationale is just as weak. Hate to bump this thread over something so petty, but I don't believe the term you are referring to was ever regional. It's still said too often in all parts of the country, but I heard it spoken more than a few times at Georgetown by privileged and sheltered Northeasterners. Pretending racism has a southern accent takes a very narrow and misinformed view of racism.
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hifigator
Platinum Hoya (over 5000 posts)
Posts: 6,387
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Post by hifigator on Oct 1, 2008 13:09:32 GMT -5
You know, Southerners also had regional term for African-Americans that a lot of frat boys used back in the day. This didn't make such a term excusable, and your rationale is just as weak. Hate to bump this thread over something so petty, but I don't believe the term you are referring to was ever regional. It's still said too often in all parts of the country, but I heard it spoken more than a few times at Georgetown by privileged and sheltered Northeasterners. Pretending racism has a southern accent takes a very narrow and misinformed view of racism. He fully knows that. He wasn't suggesting anything to the contrary. What he was trying to suggest was that the "n" word is/was accepted/acceptable in the South, when it shouldn't be and likening that to my explanation of the "b-b" phrase. But there is a drastic difference. The "n" word is widely known and is outright insulting, even though it is acceptable among blacks when said by blacks. Still, my only point was that the phrase I chose is never taken as a serious comment as to someone's sexual preference. In a sense, it's used just as some kids will say something like "well that's gay," seemingly attributing some sort of sexual preference to an inanimate object. In any case, nothing more than that was meant in my comment. He chose to try to liken it to someone using the "n" word, and that analogy is totally unfounded. Either way, it's in the past, and Bando and his pals are now on the same page.
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