Is the world ending?

nesf · 18-09-2008 11:59pm

leninbenjamin wrote: »

from talking to people who work in MNCs they are also quite disparaging at the standard of these Indian graduates. i know of one high profile company that replaced a few very highly paid specialist engineers with a team of lower wage Indian graduates and is really suffering because of it. A move that cut only a few hundred thousand from their wage bill is potentially costing millions in inefficiencies.

I've heard similar things about outsourcing more complex IT stuff to India but it is improving I think. They certainly have a few companies that are rapidly improving on the quality side of things from what I've heard from a few IT people who've been over there.

colly10 · 19-09-2008 12:28am

Celia Obnoxious Income wrote: »

Im so happy with all this economic turmoil, it might bring the Irish people down a peg or two.

Its great how the average joe has now realised how economically vulernable we are, and have been for the past few years.

Im hoping its recession 1929, and the government turns to focusing on social programs, and I can say 'thats what we deserve when a country like Ireland embraces capitalism'

but yeah, on a serious note, looking at the words of Max Kaiser - "It is only a doomsday scenario for America and Britain that have been living on borrowed money for generations."; I feel we really are in for a hard time in the coming years, I wonder how will our country actually cope without the large MNCs in bad shape, and worst of all, what will become of Irish materialism and all it brought with it?

Id say most people knew the country was vunerable in fairness, but anyway the Government will hardly be better eqiped to deal with the issues of the people when they're broke.
When you speak about capitalism, do you believe that everyone should get paid the same? If that was the case id be doing **** all in a job with no responsibility

g5fd6ow0hseima · 19-09-2008 2:04am

colly10 wrote: »

Id say most people knew the country was vunerable in fairness, but anyway the Government will hardly be better eqiped to deal with the issues of the people when they're broke.
When you speak about capitalism, do you believe that everyone should get paid the same? If that was the case id be doing **** all in a job with no responsibility

Yes, ive held the same view, Im not much of a marxist, as the essence of communism seems to be inefficiency in my view, people arent going to throw their weight around workplace.

Its just I dont feel the liberalisation of global markets and the rise (perhaps future corporate feudalism) of the MNCs is just as bad a scenario as a life under communism. Either way, we as individuals would be just another number in the system, and, well......, thats all humans have ever been.

But, its just I feel capitalism is reckless, I feel that this downturn has been caused by the capitalists who felt no harm in throwing money out left, right and centre for the past few years.... But, now that things are taking a bad turn, all im reading is 'economists see no end to the crisis'.

So where does it end? Surely capitalism has an answer, if its able to generate billions while all things are rosy, sure the fall of a few financial institutions should do little to the system. Damn this 'living on borrowed money' - it didnt get us too far did it?

derry · 19-09-2008 9:42am

Celia Obnoxious Income wrote: »

....Snip.....

So where does it end? Surely capitalism has an answer, if its able to generate billions while all things are rosy, sure the fall of a few financial institutions should do little to the system. Damn this 'living on borrowed money' - it didn't get us too far did it?

If you want to understand the pile of mess your in you really have to look up this flawed and vile concept fractional banking

Fractional banking loaning out money that effectivily doesn't really exist means the economies of the western world and those that copy it are living in some sort of Dysney land econonomy which has the only got one possible outcome in its final anaylisis to unravel in a worse than the mad hatters tea party :eek:

like what we see today:pac::pac::pac:

Any system that pays interest on money both for borrowing and lending is doomed to collapse in the long run:eek:

Whatever model of economy you want that has stability and some degree of fairness to all the citizns of the country and preferably the world built in it if it includes fractional banking it will mean it will then unravel

Invest in sea shells
As one african tribe discovered one day when their inland location economy built on sea shells collaped when a truck load of sea shells arrived you need to chose the gold standard for the currency well to eliminate sudden hidden mother loads of gold arriving on the scene

But the fractional banking guys are not going to give up without a fight and will turn the elite 25% at the top against the impoverished 75% at the bottom if you let them

As a Christian myself brainwashed on the Fractional banking system we may have something to learn from muslims about non interest banking systems

Derry

damnyanks · 19-09-2008 10:42am

Where are you getting all these stats of 25% / 75% of the world and so on.

3 Years of bad times is not down to "fractional banking" leverage has existed for a long long time. Whenever bad times come around its the people who went after a quick buck that got hit.

nesf · 19-09-2008 11:45am

Celia Obnoxious Income wrote: »

But, now that things are taking a bad turn, all im reading is 'economists see no end to the crisis'.

I'm not sure if it's available to non-subscribers but here's an example of an article that isn't all doom and gloom: http://www.economist.com/printedition/displayStory.cfm?Story_ID=12263158

derry · 19-09-2008 1:24pm

damnyanks wrote: »

Where are you getting all these stats of 25% / 75% of the world and so on.

3 Years of bad times is not down to "fractional banking" leverage has existed for a long long time. Whenever bad times come around its the people who went after a quick buck that got hit.

Typical minutia brained economic thinkers picking on stats

Ok to keep you happy Lets say minotity rich and majority impoverished

I never infered three years of bad times
If there is a total collapse it could be several generations or more of hard times to extract from this mess

Fractional banking will always need those at the bottom to lose out subtancialy either thriough high interest rates or inflation whatever
Those at the top of the money stack will remain level or often ahead rarely losing too much if they don't milk the system too much
I suspect they did milk everything too much this time and even they could lose out when it goes into total melt down where there is nothing left of any real value after the nuclear event

Then from that total melt down if it occors this time will arise a banking system that has no fraction banking with interest accrued both for lending or borrowing attached to it

But the transition from the old banking to the better new banking will risk a severe possibly to incurr victims as in the majority of the population denied food shelter and social facilties like schools hospitals etc

Its really a bit like green sheild stamps
The plebs who go the shops see product x a really good product for 10 books
They save up 10 books and they now see its it 15 books
They save up 15 books and now it is 17 books
They save up 17 books and now it is 18 books
They save up 18 books and the product is removed from the catalogue
The 18 books now are offered cheapo made in China crap that is often founsd in £1 shops

The majority the bottom even they save the money buy a house take out pension will get their faces ripped due to fraction banking vile and scurlious nature hiding in the so called reputable banks

Now we see the big reputable banks for what they are demons from hell if your a run of the mill joe soap ripping their faces

Now the Big banks are devouring each other in a feeding frenzy from which the the whole system might implode

Some would hope this time around this is the big implosion and others would hope it later but its coming down the tracks that fractional banking is going out of buisness very fast my guess before 2015 we will see fractional banking world wide go the way of the DO DO
then buy 2030 the newer better solutions will start to operate

It that 15 to 30 year in between time or longer period as fractional banking is being replaced of absolute choas that will be the problem

Derry

leninbenjamin · 19-09-2008 1:59pm

derry wrote: »

Typical minutia brained economic thinkers picking on stats

Economists tend to use stats to back up and prove their theory. If you're incapable of doing so, or see a problem with it, then i think that the economics forum isn't for you.

Minder · 19-09-2008 2:12pm

derry wrote: »

Any system that pays interest on money both for borrowing and lending is doomed to collapse in the long run:eek:

Whatever model of economy you want that has stability and some degree of fairness to all the citizns of the country and preferably the world built in it if it includes fractional banking it will mean it will then unravel

Why will it?

derry wrote: »

As one african tribe discovered one day when their inland location economy built on sea shells collaped when a truck load of sea shells arrived you need to chose the gold standard for the currency well to eliminate sudden hidden mother loads of gold arriving on the scene

You seem to be suggesting that a return to the gold standard will somehow do away with the fractional reserve banking system.

It won't.

Kama · 19-09-2008 2:32pm

Ok, the merits and demerits of fractional reserve banking probably deserve a thread; it's not wholly irrelevant to the current issue which (I think) had a lot to do with lowered capital requirements in the shadow banking system, but it is a significantly different topic imo. It's an interesting one, but the thing for me for anyone who opposes a fiat fractional reserve system is what they would prefer? Again, a different topic, and yes, Islamic banking was seen as a model in this area (malaysia is an interesting model). There are problems with debt-based expansion in a finite world, Bouldings quote about 'either a madman or an economist' comes to mind. I blame the thread title tbh, covers a lot of apocalyptic ground

As to Derry's 75/25, I roughly read that as Pareto/Power Law distribution of income, so its not as risible a statement as people seemed to imply; or you could take as progressive a position as the IMF that:

The concentration of world income in the wealthiest quintile (fifth) of the world's population is indeed shocking and cannot meet any plausible test of legitimacy.

Dated publication, but the point remains...There are costs to inequality, both economic and in legitimacy, and when access and availability to capital is narrowly focused in a small group, it damages both the ethical and pragmatic arguments for a market system of distributed decision-making. When the Economist says 'Finance is the brain of the economy. For all its excesses, it allocates resources to where they are productive better than any central planner ever could' an argument could be made that a less centralized form of allocation than the current concentrated form could allocate better again; preaching the effectiveness of the current system of allocation now takes a little chutzpah to my mind.

There are concerns, as the Economist article notes, that the system was being essentially gamed by a few 'spivs' to enrich themselves (which doesn't seem entirely unjustified) and in the US case the 'healthy growth' it refers to had stagnant median incomes coeval with massive accumulation in capital markets, which I don't consider 'healthy'. I agree with much of the regulatory suggestions, especially transparency. Currently there is little, and the system is run off trust, or currently its lack. Regulators may make poor decisions, but self-regulation isn't an option either.

Derry, if I could honestly proffer a piece of advice? If posting, try and keep it shorter initially. Work out a key point or question and state it, the conversation might go a lot easier.

nesf · 19-09-2008 3:02pm

Kama wrote: »

Ok, the merits and demerits of fractional reserve banking probably deserve a thread; it's not wholly irrelevant to the current issue which (I think) had a lot to do with lowered capital requirements in the shadow banking system, but it is a significantly different topic imo.

What I find interesting about it is that the whole sub-prime mess is a really good example of how not to design a market. It's combination of a number of issues that together created a financial meltdown and it's not really fractional reserve that's at the heart of it.

One of the key big issues with sub prime in the US was the securitisation of mortgages. In layman's terms what this means is that the guy who sells someone a mortgage gets to sell it on and can turn an immediate profit without having to take on the risk of the mortgage that they just sold. Now, the whole mortgage/fractional lending system works well if and only if reasonable lending practices are adhered to. The mortgage seller in the US, since they could immediately sell on the mortgage, has no incentive to lend reasonably, in fact the incentive for them is to sell as many mortgages as possible not sell ones to people who can repay. Contrast this with the Irish system where essentially if AIB give you a mortgage, that mortgage is going to be on AIB's books until the loan is paid off. This is a completely set-up and it's one which encourages AIB (and other Irish Banks) to be far more long sighted in their mortgage lending because any defaults on the loans will be affecting them, not someone else. Essentially this is a really good example of moral hazard. Towards the end of the sub prime boom in the US it was possible to get no-paperwork mortgages, i.e. walk in and get a mortgage without having to prove your current income, which gives you an idea of how crazy things were getting.

The second key problem is that in the US they have no-recourse mortgages. This means that if I defaulted on my mortgage and my home had dropped in value to the point where selling it didn't pay off the mortgage the mortgage holder couldn't come after me for what's left to pay on the mortgage. In the Irish system the bank can come after you for what ever is left over. The difference between the two systems is that in the first one, this creates another moral hazard, people taking out mortgages will take more risks because if the property bubble bursts they can just walk away from the mortgage and take the hit to their credit history but owe nothing on the loan. In the Irish system borrowers are far less likely to take out mortgages they won't be able to pay simply because they can't walk away from the mortgage loan without financial consequences.

Combine the first with the second problem and you get a system that practically guarantees huge amounts of defaults on sub prime (i.e. low credit score) mortgages, which means all those securities that were created and being sold were going to become worthless really quickly (it also distorts the risk analysis because you'll go from few to loads of defaults very very quickly turning a profitable security to a worthless one without warning). One crucial factor was the use of teaser rates to get the initial mortgage sale, i.e. a heavily discounted initial loan rate which switched up into one perhaps twice or three times higher after a set amount of time. Hide the details of this rate switch in the small text and you'll find it easy to sell mortgages, there was quite a lot of this going on. This kind of product just makes the above two problems even worse and adds further fuel to the flames.

There's more stuff, but the above two I think should be instructive for people who haven't been following the crisis or the markets that closely. It really is a very good example of what to avoid in market design, which is something that crises like this one help to point out. None of it is damning of fractional banking per se, it's more damning of poor and/or inefficient regulation of financial markets and instruments.

leninbenjamin · 19-09-2008 3:33pm

that's a really good post nesf, couldn't have put it better myself.

I do find it somewhat ironic that you have the likes of Derry and others getting all angry blaming the big people with the power for all this, when in reality it was as much the little man on the ground fronting the banks (as well as the little man who knew he wouldn't be able to repay who still went in and get his/her mortgage) who bear the responsibility for this.

but still, you would have thought the American's would have learned not to deregulate so much from the S&L scandals...

Kama · 19-09-2008 3:41pm

Eh, disagree on there being 'innocent parties' in this, saw a lot of rhetoric in the States during about 'financially unsophisticated African-American buyers' destroying the financial system (I was in the South, it was often put a lot...blunter...than that). So I'm not a huge fan of the 'blame the little guy' approach. Like nesf said, there was a system in place with oodles of moral hazard; it's not the players, it's the game. Sub-prime buyers didn't make the system, they behaved pretty 'rationally' given what they were presented with.

Risk was sytematically externalised and underpriced, and risk analysis of what Nassim Taleb calls 'Black Swan' events just wasn't there, or rather the perception of risklessness (trash dressed as AAA) contributed to this systemic risk. Securitization spread the risk, seems like it which work when there's a small hit, and seems to go down hard on a big hit.

But I'm not an economist...mind you, a lot of highly qualified economists seemed to think it would work indefinitely...

Time Magazine · 19-09-2008 3:52pm

derry wrote: »

Typical minutia brained economic thinkers picking on stats

Infracted for personal abuse. Last warning.

Fractional banking will always need those at the bottom to lose out subtancialy either thriough high interest rates or inflation whatever

Fraction reserves lower interest rates. Inflation is best kept at bay with independent central banks. If your main desire is low interest rates and low inflation, therefore, the best thing to do is have a wholly independent central bank with plenty of fractional reserves.

But the transition from the old banking to the better new banking

If fractional reserves lower interest rates, what's better about the new system?

will risk a severe possibly to incurr victims as in the majority of the population denied food shelter and social facilties like schools hospitals etc

"[T]he majority of the population denied food [and] shelter." If that wasn't off-topic, I'd ask for a link.

leninbenjamin wrote: »

that's a really good post nesf, couldn't have put it better myself.

+1

but still, you would have thought the American's would have learned not to deregulate so much from the S&L scandals...

http://www.marginalrevolution.com/marginalrevolution/2008/09/glass-steagall.html

nesf · 19-09-2008 4:40pm

Kama wrote: »

it's not the players, it's the game. Sub-prime buyers didn't make the system, they behaved pretty 'rationally' given what they were presented with.

Essentially this is exactly what economists are talking about when they talk about market design. We know people will behave this way, if they can make a quick legal profit and pass on the risk to someone else legally then they will (or more accurately, there are enough people who will for it to happen). It doesn't matter what country you are in, human nature is what it is, and markets need to be regulated to combat it when necessary. This is why few serious fiscal conservatives believe in fully unregulated markets, the whole market system is based on trust and that trust needs (unfortunately) to be guaranteed by law and regulation in some places.

Kama wrote: »

Risk was sytematically externalised and underpriced, and risk analysis of what Nassim Taleb calls 'Black Swan' events just wasn't there, or rather the perception of risklessness (trash dressed as AAA) contributed to this systemic risk. Securitization spread the risk, seems like it which work when there's a small hit, and seems to go down hard on a big hit.

It's not a 'Black Swan' at all. The problem here wasn't an improbable event that struck the markets (which is what Taleb uses the term to describe) but a system so complex that risk was hidden within it and very hard for the purchasers of the derivatives to be cognisant of. Essentially the problem was that the guys buying the derivatives weren't knowledgeable about the chain of risk leading down to the guy buying the mortgage. A lot of the time people weren't able to say exactly what was in some of these instruments (one of the biggest problems after the sub prime crisis was figuring out exactly where the sub prime bits were in the system and how much exposure different banks had to the sub prime market).

The problem with securitization in this scenario was that the risk became invisible to anyone without full knowledge of both the residential loan and financial markets (and these are separate fields in banking, so you wouldn't get a lot of people specialised in both). After the event it's quite clear where the problems were, but that's just because we know where to look.

Kama · 19-09-2008 5:08pm

It's not a 'Black Swan' at all....The problem with securitization in this scenario was that the risk became invisible to anyone without full knowledge

Sorry nesf I don't get it, seems to contradict to me. Surely a large unforeseen event (emergent from a systemic lack of knowledge/transparency) was a Black Swan in Talebs terms? Perceptions and quant-based projections didn't price in the 'improbable' invisible risk (according to their models), with possibly somewhat catastropic results. I've seen this widely referred to as such, and he seems to say something similar (and has got a *lot* more coverage since sub-prime).

Could you explain why its not? If its way off-topic a PM would be sweet.

derry · 19-09-2008 7:20pm

leninbenjamin wrote: »

Economists tend to use stats to back up and prove their theory. If you're incapable of doing so, or see a problem with it, then i think that the economics forum isn't for you.

God be with the
good old days and when maya and benji would sit on the park bench and pontificate the world while all irealnd looked on to Frank halls pictorial weekly

Maya and benji can tell you all about econimists and statistis twenty plus years ago
so in Frank Halls imortal words truer today than even that period

"Economists can only tell you where you went wrong when its to blooby late "

For which in this PC modern world Frank hall would recieve personal attack infracion brownie points

So I dont do stats I do economic pitures warts and all that include people and less boring numbers

Derry

leninbenjamin · 19-09-2008 7:30pm

derry wrote: »

So I dont do stats I do economic pitures warts and all that include people and less boring numbers

I think you mean you do massive sweeping generalisations without any sound basis in reality or knowledge of the systems and institutions involved?

using your methodology you might as well be trying to prove the earth is flat.

SoCal90046 · 19-09-2008 8:28pm

nesf wrote: »

What I find interesting about it is that the whole sub-prime mess is a really good example of how not to design a market. It's combination of a number of issues that together created a financial meltdown and it's not really fractional reserve that's at the heart of it.

Thanks for the great post. It does sum up in a nutshell the issues in the US.

There was, arguably, an agency problem here in that what was good for the individual wasn't good for the system. It sounds perverse, but I will try to dig up a link to a radio problem on National Public Radio that gave some interesting examples.

The other issue is lack of regulation in certain markets, including credit default swaps. I am not the biggest fan of government regulation--well extreme regulation--but a referee is needed in every game. It was missing in this one. That issue needs to be examined.

There's nothing intrinsically wrong in a sub-prime or an Alt-A loan, but they were clearly abused in the US. In fact, in most societies what happened would have been treated as a crime.

The final question I have asked is where was the Fed? Every crash has been presaged by an expansion of credit. Now, I am not saying that an expansion of credit inexorably leads to a crash, but in the US there were clear indicators that things were getting out of whack. One good statistic to look at is the average price of a home compared to average household income: it reached highs never before seen. I don't know why the Fed missed that there was a problem brewing, but it's hard to avoid the conclusion that the system in the US failed.

derry · 19-09-2008 8:30pm

nesf wrote: »

...snip...

What I find interesting about it is that the whole sub-prime mess is a really good example of how not to design a market. It's combination of a number of issues that together created a financial meltdown and it's not really fractional reserve that's at the heart of it.

One of the key big issues with sub prime in the US was the securitisation of mortgages. In layman's terms what this means is that the guy who sells someone a mortgage gets to sell it on and can turn an immediate profit without having to take on the risk of the mortgage that they just sold.

...snip...

.

A typical example of thinking that the rest of the forum hasnt a bog about Sub prime

Also you started the lecture in the middle of history of the sub prime the mess which distorts the piture in your favour

If you want to more exact then please to include the beginning middle and end

So the missing chapter 1 to Sub prime mess

Once apon a time as per every ten year cycle the banks due to the inherant flaw in fractional banking were again faced with the vexxing problem how to loan out piles of cash that they were sitting on

How that happens in every ten year cycles is another story so we will look at what the banks did to solve the problem

The minions mostly bean pushers and Economists with stats coming out of every orifice were called to boot camp

Long hours later after much data mining they stuck the mother load

A very obsure form of morgaging loan rarely if ever seen possibly one loan in a million called sub prime threw up a wonderful statistic

The few hundred of these loans world wide had as low a defalt rate as normal morgages

Well the bean pushers and economists massaged these numbers and subprime as tripple A rated loan was born

And it came to pass that as subprime was accepted into the economic models it was guickly sold onto the whole economic system as a AAA resale able item

And the rest is history

But its much the same story as the south amercan loans dished out in the 1980's for the same reason lots of money to loan out to going broke regimes in South America or moneys dished out to Japans property bubble whatever

So we can see the real issue is that fractional banking every ten years accumulates this huge wad of cash that has to be loaned out preferably in such a way as to ensure most of it is destroyed in unpaid depts and triggers a fall out event

This is due to the fact that those at the top of this so called earth shatering economic event can now run riot and buy up everthing for cents on the dollar

But the minions bean pushers and economist EMPLOYED by the Banks who make this grow and destroy policy will alway find a WAY TO CIRCUMVENT ALL REGULATIONS

Therefore Fractional banking is the ONLY reason for these events and not some tweaking by minions like economists who went slightly astray and who repeat this cycle at the masters bidding every ten years or so

The differnce is now the majority are now starting to see the king has no cloths and the size of this event is so giant that that it will cause the start of the break up in the idea of Fractional banking as a useable economic model

This will probably mean the need for so many econonmists will be lot lower :pac::pac::pac:

as the need for finding those that can sow invisible threads will be removed:p

Derry

SoCal90046 · 19-09-2008 8:34pm

leninbenjamin wrote: »

that's a really good post nesf, couldn't have put it better myself.

I do find it somewhat ironic that you have the likes of Derry and others getting all angry blaming the big people with the power for all this, when in reality it was as much the little man on the ground fronting the banks (as well as the little man who knew he wouldn't be able to repay who still went in and get his/her mortgage) who bear the responsibility for this.

but still, you would have thought the American's would have learned not to deregulate so much from the S&L scandals...

There was a web of lies going on. In fact, it's the fiscal equivalent of original sin in that even if we didn't get involved in the action, you're going to end up paying for it anyway.

I agree that it's not fair to blame the banking system exclusively, but, IMHO, the system does share a lot of responsibility for what happened. Form a practical point of view, the controls weren't there: the necessary controls to protect the shareholders' investment in companies like Merrill Lynch or Washington Mutual.

It's a lesson learned, but when the dust settles, we're likely to discover that it's the same lesson that the market has taught us many times before.

nesf · 19-09-2008 9:01pm

Kama wrote: »

Sorry nesf I don't get it, seems to contradict to me. Surely a large unforeseen event (emergent from a systemic lack of knowledge/transparency) was a Black Swan in Talebs terms? Perceptions and quant-based projections didn't price in the 'improbable' invisible risk (according to their models), with possibly somewhat catastropic results. I've seen this widely referred to as such, and he seems to say something similar (and has got a *lot* more coverage since sub-prime).

Could you explain why its not? If its way off-topic a PM would be sweet.

It would have to be actually improbable, in this case it was inevitable that once the property bubble eventually went into decline that the whole house of cards would almost inevitably have to collapse since there would be little incentive for sub prime mortgage holders not to default when they ran into difficulty. It's only improbable if you ignore the structure of the problem which is a mistake (in my opinion). The term Black Swan should only really be applied to events that truly are improbable and unpredictable, something like a series of Category 4 storms hitting the Gulf coast and devestating oil production there causing a major oil spike.

nesf · 19-09-2008 9:03pm

derry wrote: »

A typical example of thinking that the rest of the forum hasnt a bog about Sub prime

Also you started the lecture in the middle of history of the sub prime the mess which distorts the piture in your favour

If you want to more exact then please to include the beginning middle and end

So the missing chapter 1 to Sub prime mess

Once apon a time as per every ten year cycle the banks due to the inherant flaw in fractional banking were again faced with the vexxing problem how to loan out piles of cash that they were sitting on

How that happens in every ten year cycles is another story so we will look at what the banks did to solve the problem

The minions mostly bean pushers and Economists with stats coming out of every orifice were called to boot camp

Long hours later after much data mining they stuck the mother load

A very obsure form of morgaging loan rarely if ever seen possibly one loan in a million called sub prime threw up a wonderful statistic

The few hundred of these loans world wide had as low a defalt rate as normal morgages

Well the bean pushers and economists massaged these numbers and subprime as tripple A rated loan was born

And it came to pass that as subprime was accepted into the economic models it was guickly sold onto the whole economic system as a AAA resale able item

And the rest is history

But its much the same story as the south amercan loans dished out in the 1980's for the same reason lots of money to loan out to going broke regimes in South America or moneys dished out to Japans property bubble whatever

So we can see the real issue is that fractional banking every ten years accumulates this huge wad of cash that has to be loaned out preferably in such a way as to ensure most of it is destroyed in unpaid depts and triggers a fall out event

This is due to the fact that those at the top of this so called earth shatering economic event can now run riot and buy up everthing for cents on the dollar

But the minions bean pushers and economist EMPLOYED by the Banks who make this grow and destroy policy will alway find a WAY TO CIRCUMVENT ALL REGULATIONS

Therefore Fractional banking is the ONLY reason for these events and not some tweaking by minions like economists who went slightly astray and who repeat this cycle at the masters bidding every ten years or so

The differnce is now the majority are now starting to see the king has no cloths and the size of this event is so giant that that it will cause the start of the break up in the idea of Fractional banking as a useable economic model

This will probably mean the need for so many econonmists will be lot lower :pac::pac::pac:

as the need for finding those that can sow invisible threads will be removed:p

Derry

Honestly, I hope you're trolling mate and don't actually buy into that conspiracy crap.

derry · 19-09-2008 9:15pm

SoCal90046 wrote: »

Thanks for the great post. It does sum up in a nutshell the issues in the US.

There was, arguably, an agency problem here in that what was good for the individual wasn't good for the system. It sounds perverse, but I will try to dig up a link to a radio problem on National Public Radio that gave some interesting examples.

The other issue is lack of regulation in certain markets, including credit default swaps. I am not the biggest fan of government regulation--well extreme regulation--but a referee is needed in every game. It was missing in this one. That issue needs to be examined.

There's nothing intrinsically wrong in a sub-prime or an Alt-A loan, but they were clearly abused in the US. In fact, in most societies what happened would have been treated as a crime.

The final question I have asked is where was the Fed? Every crash has been presaged by an expansion of credit. Now, I am not saying that an expansion of credit inexorably leads to a crash, but in the US there were clear indicators that things were getting out of whack. One good statistic to look at is the average price of a home compared to average household income: it reached highs never before seen. I don't know why the Fed missed that there was a problem brewing, but it's hard to avoid the conclusion that the system in the US failed.

Before you ask where was the federal reserve stop and think
Who are the federal reserve
Who owns and controls the federal reserve

When you check and find out that the federal reserve is not owned buy the USA government then you have to take a rethink and see the reality

If fractional banking did not exist there would be no need for Federal reserve

This so called free agent federal reserve is not answerable to the USA government

This so called neutral agent working for the benifit of keeping the USA economy on the straight and narrow with interest rates work more for it own profits first more like a blood sucking creature always keeping the victim close to death but never quite killing it

But even with all the economic buttons at the control of the Federal reserve mess after mess happens and the USA depts mount

Now For me its a no brainer the USA is more like the victim of a date rape
The federal reserve is the rapist who has the all the latest date rape drugs

The USA rape victim nightly goes to the bar and lets the rapist federal reseve bank buy the drinks and then spike the drink

The USA victim each night brings a new test kit to test the drink for the types of date rape drugs that have been used the previous history as in the the night before

When the drink passes the test as having not been spiked as the date rapist Federal reserve has a completly new type of date rape drug the USA test kit hasnt got a test for

The USA decides to risk it for a biscuit and drink this spiked drink and Kapow get date raped again and again

Fractional banking allows the banking systems to rape the USA and Europe and all of the world who practice this vile and evil three card trick banking practice

The biggest victims of fracional banking are the poor with some of the middle class finding that its including them more often these days

Derry

SoCal90046 · 19-09-2008 9:17pm

Has anyone here read a book called "The Trillion Dollar Meltdown by Charles R. Morris? It's a very interesting read. I got it in May shortly after it was published. Here's an excerpt to whet your appetite!

The stage is set for a true shock-and-awe surge of asset writedowns through most of 2008. Widespread collateral defaults, particularly in credit hedge funds, will trigger forced selling from margin accounts. Rolling downgrades will require divestitures by pension funds and insurance companies that find themselves in violation of rules on holding investment-grade paper. Holders of senior CDO tranches will liquidate their holdings as credit protection dissolves, as they have the right to do. Add in even mildly bad outcomes for the monolines and in the credit insurance markets, and the global financial system will be in catastrophe.
It amazes that we have come to such a place.
(page 133)

I found the book very thought provoking.

nesf · 19-09-2008 9:17pm

SoCal90046 wrote: »

There's nothing intrinsically wrong in a sub-prime or an Alt-A loan, but they were clearly abused in the US. In fact, in most societies what happened would have been treated as a crime.

Yeah, some of the lending practices in the sub-prime and Alt-A markets would be illegal here, for damn good reasons. You need tight regulation on how financial products are sold and marketed precisely to stop this kind of mess from happening.

SoCal90046 · 19-09-2008 9:22pm

nesf wrote: »

Yeah, some of the lending practices in the sub-prime and Alt-A markets would be illegal here, for damn good reasons. You need tight regulation on how financial products are sold and marketed precisely to stop this kind of mess from happening.

Agreed. For those interested, here's a link to an NPR program that runs through the process for getting a loan without money or the prospect of repayment. The show was the Global Pool of Money. I just checked the link and it still works. NPR is non-commercial radio in the US that takes a lot of content from outlets in Europe such as the BBC.

nesf · 19-09-2008 9:27pm

SoCal90046 wrote: »

Agreed. For those interested, here's a link to an NPR program that runs through the process for getting a loan without money or the prospect of repayment. The show was the Global Pool of Money. I just checked the link and it still works. NPR is non-commercial radio in the US that takes a lot of content from outlets in Europe such as the BBC.

Yeah the Economist had a story where a guy who was employed part time took out 3 different mortgages on properties with the hope of selling them on in a few months time for major profits. The whole "no paperwork" mortgage product was never going to have a happy ending.

SoCal90046 · 19-09-2008 9:32pm

nesf wrote: »

Yeah the Economist had a story where a guy who was employed part time took out 3 different mortgages on properties with the hope of selling them on in a few months time for major profits. The whole "no paperwork" mortgage product was never going to have a happy ending.

It only had a happy ending for those on commission selling the products who were, perversely, incentivized to destroy the system! :mad:

derry · 19-09-2008 9:47pm

nesf wrote: »

Honestly, I hope you're trolling mate and don't actually buy into that conspiracy crap.

I dont see what end of CT you can find in how Subprime came about

Thats how sub prime was born

It was a statistical fluke form of loaning with a low default rate that was allowed to mushroom

Thats the origins of the Sub prime and is the facts and is not CT

It goes to show you that I too know a some nitty gritty details about economics and dont need lectures on the blow by blow daily events and the mess it caused

But where you want to hide behind stats and figures and its all just one big muddle puddle of accidental events which suits the keep me employed feeble cry from the hoping not to be come unemployed soon type
It reminds me of the orstrich sticking thier heads in the sand and the lion is onlya bad dream and a CT issue anyway and if I shove my head far up my ........ the lion will go away

Face facts the latest installment of dysneyland adventures of false economics brought to you through fractional banking where the ballon will always expand probaly doesn't have your name on it of those who survived with mega bucks of cash in this the new ballon popping event

Me I will pursue the pattern and the pattern is well tried out and repeats itself without fail every ten years or so

Hopefully the pattern will end soon with the collase of fractional banking as economic model

Even the unconvinced about CT smell a big a dirty fish in this weeks of whirl wind economic melt down events especialy when the same big directors will walk away with lots of loot and the poor will be stuck on pay pauses

Derry

Is the world ending?

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