Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
Understanding the Financial Crisis
I sat down for several hours over the past couple days, and really wanted to get to understand the current financial crisis affecting the world. I got most of this (below) from Mark Zandi's excellent book "Financial Shock". This is a summary in my own words of what economist Zandi wrote:
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The first thing to understand is that financial crises are not new. They have been around since the beginning of time, and in their modern form, at least since the 1600s. They are built into human psychology and social psychology.
The current crisis, while mostly originating in the U.S., is truly global, and is not limited to one country. Financial crises tend to happen every 10 years, and each time, the reason is different (partly because it takes 10 years for people to forget about “the last one”, and start to buy into the “bubble psychology” again !). The basic hubris was the belief that “the economic rules don’t apply anymore” and that there is a “new economy” or new paradigm that cancels out economic reality. This time, it centered around the idea that housing prices would always rise, and could not fall (and that despite the fact that land, while limited, is not nearly as limited as the promoters of the housing bubble have claimed, because new housing is constantly being built on new land, cities just expand).
At the core of the financial crisis is the hubris surrounding the housing market. The psychology of the real estate bubble is the cause of the crisis. In the U.S., home ownership was over-promoted. Overly aggressive mortgage lenders conspired with buyers to create a bubble in housing prices. Borrowers bought into the notion of ever-increasing housing values, and were lax (to put it mildly). Rating agencies, Fannie Mae and Freddie Mac, all fueled the bubble.
Central banks flooded the markets with cash. After 9/11 and the invasion of Iraq, the central banks slashed interest rates, starting with the U.S. Federal Reserve and Alan Greenspan. This provided the “fuel” for the bubble. Alan Greenspan did not fear inflation, but rather, deflation after 9/11 and the dot.com crash. And he and other central bankers believed that Chinese manufacturing would soak up any inflationary tendency (it did), so they were not afraid to drastically cut interest rates, because they feared deflation, not inflation. Greenspan’s mistake was to think that housing was immune to bubbles.
Capital that had sought the highest returns in the dot.com stock market bubble of the 1990s, now (after the stock market “crash” in 2000) flowed into real estate, and began to create a bubble there.
American consumers bought Chinese (and other countries’) manufactured goods, and the money that paid for those imports to the U.S. went back to China as capital. Instead of investing that capital in Treasury bonds (T-bills), the Chinese now increasingly (as did others) invest in the real estate bubble.
At the same time, banks and other financial institutions created “securitized” (bundled) bonds backed by mortgages, including sub-prime mortgages. These securitized bonds were supposed to spread risk. But what they really did was fog who owned what, and where the real risk was. In effect, they magnified risk, rather than to minimize it. Fannie Mae and Freddie Mac backed sub-prime loans and thus freed up mortgage lenders to pursue even more mortgages. Standards in the banking and mortgage industry became extremely lax (to put it mildly) and borrowers did not even have to show that they were employed to get a sub-prime mortgage. Buyers lied about the real reason for buying a house, that they were using it to “flip”, and as a speculative investment.
The 1990s was a period of intense technological and financial innovation. Wall Street began to meet this with a blizzard of super-complex securities (“structured investment vehicles” [SIVs], etc. and securitized asset-backed bonds). Investors relied ever more on leverage (borrowing) to finance ever more investing (i.e., they went into debt to invest).
Global investors flush with cash from the rising oil price and exports to the U.S. (China, the Arab Gulf States, Russia, etc.) flooded the U.S. housing market with capital. This resulted in mortgage rates dropping, because there was so much capital available. China gained entry into the World Trade Organization in 2001, which led to a massive expansion of Chinese manufacturing and an integration of China into the world economy. Flush with cash from exporting to America, the Chinese got into the real estate bubble.
There was a sea of worldwide liquidity created by rising oil prices, slashed interest rates, and exports to the U.S.. This global cash surplus sought, as it always does, the highest returns, which at that time were to be found in “securitized” bonds, backed by the U.S. government (Fannie Mae) and packaged into new complex securities on Wall Street.
Mortgage originators (those initially lending to people to buy a home) no longer cared about the risk of default. Wall Street did not think much (or care much) about the risks being bundled into securitized assets. And the people in foreign countries buying the new-fangled securities also did not think about how much risk was built into them. Risk was spreading throughout the system, worldwide.
The U.S. government aggressively pushed home ownership as a kind of economic ideology. The government also pressured banks to loan to sub-prime borrowers. The sub-prime crisis was particularly centered in California and Florida, where there were the highest number of sub-prime borrowers (Wisconsin had the least, by the way).
At some point in 2007, people began to question the value of the securities floating around the world, and the real price of them. As in all bubbles that burst, this led to asset prices falling fast. The doubt as to the real price of the assets and securities grew and grew and a panic began as people began to see their assets fall. This is classic social psychology or mass psychology in which people are “infected” by the emotions of others. Suddenly, houses that cost $ 450,000 in San Diego were falling in price and were now only worth $ 300,000 (note: for the first time, people who could not afford a house, now could, so falling prices are not all bad !). This led to a domino effect worldwide.
Banks began to throttle back their buying of assets as they saw their prices fall. The money markets (where billions are loaned and bought overnight in order to keep the “wheels” of the worldwide economy going, and that are based on trust) began to freeze up. At this point, a worldwide meltdown of credit was feared, with people “hoarding their cash”, and banks massively scaling back their lending and borrowing.
At this point, the government stepped in and began a bailout.
The next bubble and crisis probably will hit 10 years from now. All the lessons will most likely again be forgotten and people will maybe talk about a “new paradigm” in which the laws of economics no longer apply. The next crisis will most likely not be related to housing, but probably will be related to the governmental debt now being taken on to bail out the current mess (which will increase interest rates, by the way).
And here’s the most incredible thing of all: 18 months into the most spectacular man-made financial calamity in modern experience, nothing has been done to change that, or any of the other bad incentives that led us here in the first place.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I am not sure I would agree with that. Banks are not lending much at all, which is the opposite of what we had 18 months ago. In that sense, a lot has changed. I also think that so many people have been "burned" by this, that things have to change.
BTW, some upsides to the financial crisis:
- Apartments are now affordable again in places like Dublin and London
- The price of oil has fallen dramatically
- Housing in the U.S. is now affordable to young couples previously locked out of the housing market
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch
- Housing in the U.S. is now affordable to young couples previously locked out of the housing market
That of course depends on what city the young couples are in. And the young couple, even if they have good credit, may find it difficult to obtain a mortgage in today's credit environment.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I read an article recently on how one single cable TV network fueled the housing boom, almost single-handedly. The reason is that, according to the author, every time you turned the channel on, they were profiling the house of someone and all the new amenities in it ("the new stainless steel Viking range", etc.) and then people were encouraged to "keep up with the Joneses". This playing off people's social insecurities vis-a-vis their neighbors no doubt fueled the boom and the housing bubble.
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch on January 5, 2009 2:58 PM
This playing off people's social insecurities vis-a-vis their neighbors no doubt fueled the boom and the housing bubble.
Not only did it fuel the housing bubble, but the need to keep up with the Jonses has been the driving force of US consumerism for several decades. People have been made to feel that if they don't have flat screen TVs, SUVs, cell phones and trips to Disney World they are somehow deficient.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
That is true. And our "I'll buy it now and pay for it later" attitude, fueled by easy credit, was a big part of that. On the one hand, one might argue that this is good because it shows that Americans are optimists who think that their lot in life will soon improve. Also, I highly doubt that the people building and selling Viking ranges, BMWs, Lexuses, laptop computers, high-definition TVs, etc. minded that Americans were buying so much. Let's face it, but the U.S. consumer over the course of the last 25 years has "driven" the world economy and kept it from falling into recession (I personally don't think that the world can count on the Japanese and Germans, with their low economic growth rates and thrift to do that). And let's just say also that one sign of pessimism is the opposite of all this - i.e. I would argue that when the situation is really bad, people hide their cash under their mattress. So I am not sure that a high savings rate is always good.
But there is no doubt that American consumerism has now been exposed and is not exactly the model that other countries will want to follow.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by John Bunch on January 6, 2009 6:23 AM And our "I'll buy it now and pay for it later" attitude,
That has to be a good move if the prices are doubling or tripling each day as in the case of Zimbabwe, and the people there must be the most patient and law-abiding in the world.
No riots! They are queue lovers, surprise! You can never understand the world, I suppose.
The value of Professor Makumbe's monthly salary, he reveals, is equivalent to US $30. That is just a little more than the price of a jar of instant coffee in the supermarkets which have become a refuge of the dollar rich.
Charles Morris's informed and unusual book, The Trillion Dollar Meltdown, provides a decisive rebuttal to all such excuse-making and blame of "government." Morris makes it clear that it was an unquenchable thirst for easy profits that led commercial and investment banks in the US and around the world—as well as hedge funds, insurance companies, private equity firms, and other financial institutions—to take unjustifiable risks for their own gain, and in so doing jeopardize the future of the nation's credit system and now the economy itself. In fact, government-sponsored entities, Fannie Mae and Freddie Mac, did have a part in the crisis, but not because they were principally trying to help the poor buy homes. Rather, they were also trying to maximize their profits and justify large salaries and bonuses for their executives. They had been made into publicly traded companies in 1989.
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MBA cachet set to be lowered by Wall St implosion
The level of financial and social destruction that has been wrought by the performance of those who led financial institutions, regulatory agencies and political offices under whose stewardship this financial implosion has occurred – our so-called “leaders” – should, hopefully, burst another bubble: MBA worship.
What other profession, led by holders of such degrees, could unabashedly advertise that past performance is no guarantee or indicator of future performance? What degree of confidence would it inspire in you if such a slogan appeared over the entrance to the office of your surgeon? The so-called wizards of Wall Street have been revealed to have more in common with that other wizard from the land of Oz, whose fraudulent powers were exposed by a little cairn terrier. How many self-anointed leaders have presumed that the holding of a degree from the most exclusive (translation: most expensive) universities conferred a Midas touch to every decision they made?
The performance of business and finance in 2008 should lead to a devaluation of the cachet that the holding of an MBA degree used to confer. The disproportionate compensation commanded by those holding such degrees exposes the inability of free-market forces to award compensation in proportion to real long-term value created for society. The destruction of trust and value in the western capitalist system has made western markets resemble a Ponzi scheme that makes the Madoff affair look like a misdemeanour.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
My view: it indeed was government that caused this bubble, because the more I read about it, the more I realize that it was GREENSPAN who caused the bubble, or I should say, let it get out of control. And pardon me, but Greenspan was, as the Federal Reserve Chairman, a government official, he was not in the private sector. So government was very much the source of the bubble. The government regulates and sets interest rates, and they set the main rates far too low from 2001-2007. Of course, people all over the world reacted to the ability to make more money with "greed", but what allowed that greed to be there and do such damage ?
I don't want to exonerate Wall Street, the mortgage industry, etc., because they were co-responsible. But the main issue here is that interest rates were too low for too long, and government went along with it because it was in their interest to do so.
For instance, I heard a radio program on NPR by two very smart economists who worked directly below let's say the level of the president/Federal Reserve. They both said that they warned the government and the Fed that a bubble was going to burst, but were told that no one wanted to hear it. Both the Clinton administration and then the Bush administration allowed the bubble to expand and then either did not have the courage to burst it, or they just used it politically. Who is going to vote you out, when their 401k is skyrocketing and their house rises by 10 % in value every year ??
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on January 24, 2009 3:10 AM
but what allowed that greed to be there and do such damage ?
Individuals' personal irresponsibility.
As much as I am aware of macroprocesses, I always hold individuals, not the government, accountable for their deeds. Jérôme Kerviel may be a scapegoat (Post #167636) but for me it is ultimately he and not SG who bears responsibility for his acts. The fallacy of the government being responsible for the fact that people served totalitarian regimes, for example, ("most people belonged to the party for material gains" says a recent post) is just that: a fallacy.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Meanwhile, as reported this week, Obama's own government forecasters now state that the very earliest any stimulous package could have an affect on the economy would be in the year 2012 (and by that time, we might be in a boom !). The notion that the stimulous will help the economy this year is sheer fantasy.
The GOP has suggested immediate tax cuts for corporations and individuals, and a tax holiday for business, which would have an effect, um,... tomorrow.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I hate to rebut my own post, but I found this today, on the Weekly Standard (a conservative site). It basically rebuts what I just posted above, and in the interests of fairness, I post it here:
More to It Than Meets the Eye
The hidden coherence of Obama's recovery plan.
by Irwin M. Stelzer
02/02/2009, Volume 014, Issue 19
It grieves me to say so, but President Obama's conservative critics just don't get it. The new president has put forward a plan for economic recovery that is more coherent than they are willing to admit. Start with the stimulus package of some $825 billion. A lot of money, more even than George W. Bush's $700 billion Troubled Asset Relief Program, but not much more as money is counted these days, especially as Obama's will be spent over two or three years. Critics complain that stimulus spending will add to the swollen federal debt. True: President Bush did leave his successor a $1.2 trillion annual deficit. To which Obama will add about $400 billion per year. Query: What empirical evidence is there that deficits of $1.6 trillion are more harmful during a period of economic recession than deficits of $1.2 trillion?
True, too, such deficits might in the long run make foreigners worry about holding onto dollars and Treasury IOUs, which would trigger a bout of sales of Treasury bills and notes, and drive interest rates up to recovery-squashing levels. But so far, so good, as the man who jumped from the Empire State Building shouted at the 50th floor. The dollar has not sold off for two simple reasons. First, where is a seeker-after-safety in this troubled world likely to find a safer haven than the U.S. currency? Second, China and other holders of trillions in our dollars and dollar-denominated assets are not eager to start dumping their holdings on the market, a move that would drive down the value of their remaining dollar assets.
Conservatives have also jumped on the report by the Congressional Budget Office that about half of the planned $355 billion in infrastructure spending will not occur until after the 2011 fiscal year starts on October 1, 2010. True. But if--and this is a big if--the projects to be funded have a net social value, that is, are likely to yield net returns to society for decades to come, they should be built whether part of a stimulus package or not. The objection should not be to the construction of the projects, but to the assumption that they cannot be built by the private sector, given proper incentives. Toll roads, schools financed with vouchers, health care facilities selected by patients and paid for with health care vouchers--all are possible, but all are off the Obama radar screen.
Democrats are, in the end, Democrats after all, and unlikely to be swayed by such as Harvard economics professor Robert Barro, who pointed out in last week's Wall Street Journal that it might be better to "emphasize instead reductions in marginal income tax rates." But the need for the projects themselves is in no way diminished if they get built next year, or the year after that, so long as they "pass muster from the perspective of cost-benefit analysis," to use Barro's--and Larry Summers's--test. Whether the Harvard crowd will be able to persuade Nancy Pelosi, Barney Frank, Charlie Rangel and other key Democrats that they have it right is another matter.
In fact, there is something to be said for the postponement of the expenditures. The Great Depression was characterized by a modest recovery, followed by a relapse when monetary and fiscal policy were tightened, a so-called "W" pattern. The postponement of some of the stimulus spending into the out years, coming at a time when the economy is healing but still vulnerable to a relapse, might, just might, turn that "W" into a "V" and provide the juice to keep the upswing moving along.
That leaves open the question of whether we are living in a fool's paradise, like the chap at the 50th floor. Here is where the hidden coherence of the Obama plan shows itself, in a two-part fiscal and monetary policy strategy.
When the time comes to unwind the stimulus, and finally slow the Fed's keep-the-presses rolling monetary policy, Obama is counting on two developments. The first is a grand bargain to bring the potentially budget-busting entitlements programs under control. The president plans to convene a "fiscal responsibility" panel before he presents his first budget to the Congress, and then move on to an attack on the unsustainable projected costs of Medicare, which is a far bigger problem than getting the Social Security system on a firm footing.
The outlines of a health care deal seem obvious. The cost of Medicare can be cut by a means-tested system of copayments, to prevent the current overuse of the system by patients for whom a visit to the doctor or some optional procedure has no cost. Friends living among their retired colleagues in Florida tell me that folks in their community often schedule an away-day to include a visit to some doctor, perhaps en route to a movie. That health care, when it's a free good to the user, is over-consumed should come as no surprise.
The copayments will probably be used to fund health care benefits of some sort for lower-income workers now without adequate insurance. Never mind what you think of such a plan, or any of the others that will emerge from the fertile mind of health care czar Tom Daschle. The point is that if Obama succeeds in reducing the level of spending now built into the entitlements system, he will have the cake he has eaten--deficit-increasing stimulus spending--followed by deficit-reducing entitlement reform. A return to the fiscal probity long since abandoned by a Republican administration.
Meanwhile, back at the Fed, either Ben Bernanke or Larry Summers, if by then the latter has been moved over into the chairman's chair (you'll know when sighs of relief erupt from White House staffers, and groans from the Fed boardroom), will be implementing the exit strategy Bernanke laid out in his speech at the London School of Economics, not exactly a bastion of conservative economic thought. "Put out the fire first and then think about the fire code," he said. The steps he has taken to use the Fed's balance sheet to take on troubled assets, bail out banks and insurers--these put out the fire that would have consumed the financial system in America, and most probably in the world. When the fire is out, and the economy chugging along, the excess liquidity can be siphoned off by selling Treasury bonds in return for cash, which will by that route be withdrawn from circulation. At that time, with a recovery underway, the banks will presumably want to pay back the loans they have accepted under rather onerous terms. Also, money that has been lent to banks or used to prop up the commercial paper market on which so many businesses rely has been made available under short-term contracts. Allow them to expire, the extra cash disappears, inflation is slain. And if the timing is exquisitely right, the cash will be withdrawn gradually, in pace with the unfolding recovery.
Sounds like a wonderful exit strategy, from a central banker in whom we have reason, given his performance during this financial crisis, to have confidence. But withhold the cheers until taking a look at Robert Samuelson's The Great Inflation, which describes how difficult it is for vote-seeking politicians to rein in inflation, and for central bankers to take away the punch bowl in sufficient time to prevent the party from becoming raucous, to borrow from William McChesney Martin, who served as chairman of the Fed under five presidents, from 1951 to 1970.
There you have it. Spend now, cut taxes now, and run deficits now. Build stuff that has a positive social value. Maintain faith in the currency by brokering a grand bargain to bring entitlement spending and therefore post-recession deficits under control. At the right time, call in all that extra cash that is sloshing around, thereby preventing inflation. And all will be well in this best of all possible worlds.
That, at least, is the theory of the Obama brain trust. But if hyper-spending by government freezes out at as much or more private-sector investment; if consumers, seeing tax increases in their future, rein in spending even more; if the government cannot impose its cost-benefit test on politically directed infrastructure spending--then Obama will not have kept his head when conservatives about him lost theirs.
Obama might have it wrong, just as many of his critics say Franklin Roosevelt had it wrong. But nitpicking around the edges of this recovery program won't be enough either to derail or to lay the basis for a "we told you so" campaign in 2010 or 2012. That will take a coherent counter-proposal..
Irwin M. Stelzer is a contributing editor to THE WEEKLY STANDARD, director of -economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Just a couple of brief points:
- Financial crises are nothing new, they have been around as long as there have been financial markets
- Human nature is more or less irrational, and people will learn from this crisis, but that will not prevent the next bubble and it will burst (the next one probably will relate to all this government debt we are taking on, which will jack up interest rates)
- The overreaction is also dangerous
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Jacek, I was listening today to George Friedman on NPR. Friedman is the CEO of Statfor, the "private CIA", in Austin, Texas. He has a new book out called "The Next 100 Years". In it he predicts what will happen in the world up to 2099. One big prediction is that the U.S. will dominate the 21st century even more than today (maybe dominate is the wrong word, but the U.S. will be the big winner, according to Friedman). He also predicts that the big winner in Europe will be Poland. Reasoning: like in the 1950s for Germany and South Korea, for Poland, due to its strategic position as a bulwark for NATO, will see a flood of U.S. defense aid, and like South Korea and Germany, this will boost Poland to big power status. (Friedman's other predictions are that the U.S. has already won the war against Islamic terror and that Russia will be the big power that will confront the U.S. China, which Friedman called "an extension of the U.S. economy", is still a very poor country and will "disintegrate", according to Friedman.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Well, no one believed in 1940 that South Korea could be turned into a world power, or at least a powerhouse economically. Friedman's point is that Poland will receive a flood of U.S. aid, which will indeed help it build all kinds of infrastructure, as in Germany in the Marshall Plan in 1947-1955. South Korea jumped overnight from being poor, to being a powerhouse, and so did Germany from 1947 to 1955.
If you want, watch Friedman's fascinating interview on yourtube:
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on January 26, 2009 4:29 PM
- Financial crises are nothing new, they have been around as long as there have been financial markets -
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Well, there are already better ways. You can just keep your money in cash, invest in gold, etc. People already have methods other than the 401k, so we don't need new legislation on that.
What we do need is transparency and rules on leverage (which, Jacek, you have posted about, and I agree with that).
The problem is, if people choose a super safe investement (T-bills or gold), and they see their neighbor's 401k rising by 10 % every year, do you think that they will stay with the bonds and gold and cash, or will they jump ship and "get on the train" ?
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
One guy who really gets it is John Bogle, CEO of Vanguard. Vanguard is unique in the financial services industry, I think, because they have no-load funds, meaning that you don't pay the finance people a lot of money. From everything I know, Bogle is a very honest man, and he decries the excesses on Wall Street. He has shown that it is possible to build a successful financial services company, help the investor, make some money, and sleep well at night. His new book is called "Enough", about the excesses of Wall Street.
Bogle's investment principles:
Bogle is famous for his insistence, in numerous media appearances and in writing, on the superiority of index funds over traditional actively-managed mutual funds. He believes that it is folly to attempt to pick actively managed mutual funds and expect their performance to beat a well run index fund over a long period of time.
Bogle argues for an approach to investing defined by simplicity and common sense. Below are his eight basic rules for investors:
Select low-cost funds
Consider carefully the added costs of advice
Do not overrate past fund performance
Use past performance to determine consistency and risk
Beware of stars (as in, star mutual fund managers)
Beware of asset size
Don’t own too many funds
Buy your fund portfolio – and hold it
Mother tongue: Spanish Posts: 4572 Joined: May 9, 2003 Location: United States
RE: Understanding the Financial Crisis
Originally written by Marie Glück on January 28, 2009 1:26 AM
The rich, educated CEO practically stole money from the poor and continue
exploiting even amidst this big scandal by ordering jets, expensive office decors, etc...
Obama is their last chance to turn aroun and redeem themselves,
Citigroup – now depending on billions of taxpayers dollars--was about to spend 50 millions on a new corporate jet. (?!) Little did these idiots imagine the new president would prevent them from getting their new toy. Kudos to Obama.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
It bothers me that we are now in a situation in which the president of the U.S. is telling private companies what to spend and what not to spend, like a dad telling his kid not to buy something. It is ridiculous. But on the other hand, Obama can say that the "bailout" now gives the government the right to do this, and up to a point, he is right. But there are those who claim that the real goal of the stimulous is to "redefine" the U.S. economy, making it far more statist and "command-control", which to me is really very, very questionable.
And let's face it, the job of the president is to protect us and give us overall direction, not to micromanage individual companies. IF there is a terrorist attack on the U.S. in the next 4 or 8 years, and Obama is president, the majority of people, I think will say "Obama was micomanaging Citibank while he should have been protecting us from these terrorists". and if that happens, it will destroy the Democatic party as a force, for the next 15 years.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Obama's Stimulous Package is the largest pork barrel spending in U.S. history (maybe in world history), and includes $ 1 billion for Amtrak (which perpetually operates in the red and is - even by government standards, poorly managed), $ 21 million for "sodding the Mall" in D.C., and various other items on the Democratic (read: AFL/CIO) wish list. It should be called the "Pork Package". We are going to be pouring our tax dollars into these black hole projects. And by next year, these things will be part of the budget, so to cut any of this tax and spend, will be derided as "slashing social spending" and will be resisted by Congress. Meanwhile, we go more and more into debt with China and our interest rates rise. Only 12 % of Obama's plan actually goes into real infrastructure like bridges and roads. It is very, very sad:
Say what you will, but I see only two main reasons for crises (inflation - certainly!). 1 is (needless?) people buying needless things (this seems to be good enough to become a Dodoism; I suppose I should make it one), and 2 is money not earned is still money. Sorry, guys and gals...
Mother tongues: German, French Posts: 1014 Joined: March 8, 2005 Location: Austria
RE: Understanding the Financial Crisis
Originally written by Bertha S. Deffenbaugh on January 28, 2009 11:28 AM
Originally written by Marie Glück on January 28, 2009 1:26 AM
The rich, educated CEO practically stole money from the poor and continue
exploiting even amidst this big scandal by ordering jets, expensive office decors, etc...
Obama is their last chance to turn aroun and redeem themselves,
Citigroup – now depending on billions of taxpayers dollars--was about to spend 50 millions on a new corporate jet. (?!) Little did these idiots imagine the new president would prevent them from getting their new toy. Kudos to Obama.
Bertha
I watch cnn and bbc and I dont believe they are kidding us- the ceo´s and the manager who spent almost 2mn in his office, and filed for a 10mn bonus obviously reads no newspaper. He must be too busy doing important things like spending money.
I have an economist acquaintance working for the UN who considers his job rather as a vocation. He sees himself as a humanitarian. He sees what he does as a means to promote a better life among people and explains in detail why. Hard to put his thought into words but one can perceive some kind of love of neighbhour in his approach to his work. Why can´t we get some more of such ones in wall street? There was once a very upright NYSE chairman in the 80´s- am wondering what happened to this gentleman.
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by Marie Glück
I have an economist acquaintance working for the UN who considers his job rather as a vocation. He sees himself as a humanitarian. He sees what he does as a means to promote a better life among people and explains in detail why. Hard to put his thought into words but one can perceive some kind of love of neighbhour in his approach to his work. Why can´t we get some more of such ones in wall street?
Corporate CEOs are responsible to their shareholders and have a legal duty to maximize profit. "Love of neighbor" is not a corporate mission, nor is it something the owners of the company generally care much about, certainly not to an extent that it would significantly decrease profit margins.
It is certainly laudable that your aquaintance views himself as a humanitarian, but there is a danger in being too smug here. Your acquaintance does the work he does because it maximizes his own personal interests, which in a major sense makes him no different than any other business person. His interests may be different, but maximizing shareholder profits is also a worthy goal. Many people view supporting their family as their primary duty, and maximizing profits can enable them to send children to college or care for an elderly relative. Let us not be too quick to condemn those who pursue profit, as you don't always know what their situation is.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I agree with David, everyone, as a human being, tries to maximize the benefit to himself or herself. That does not mean that that is bad, it often results in good (for instance, I think Steve Jobs is "greedy", but his greed has benefitted millions).
Regarding the UN, no offense intended, because I am sure your friend is a hard-working caring person, but I recently heard a funny line on the radio. They were interviewing George Friedman, CEO of Stratfor, and he had a funny line "I was recently in the United Nations building, and I can tell you, the UN cannot control the world. They can't even control their own building".
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
That thing with Obama telling Citi not to buy that plane is kind of odd. In a way, I really wonder what Obama is doing. He seems really smart to me, but this seems kind of dumb. First off, why get involved ? What is the upside ? I can see a lot of downside, and no upside for him. For instance, the next time a CEO flies in on a corporate jet, is Obama supposed to, before meeting him, check his balance sheet "to make sure it is o.k." ? It seems like a lot of work. And where does he draw the line ? How "successful" does your company need to be before you get the Obama seal of approval to go ahead and get that plane ? And what is that based on ? For instance, Obama met Google CEO Schmidt, who I assume flew in on a Jetstream. Is that o.k. ? Who decides, and on what basis ?
I also kind of think there might be the following scene at the corporate jet plant, which I assume is in the U.S. "Sorry guys, that Citi deal didn't come through and they are not buying that jet after all, we are going to have to do layoffs" [and I thought the idea was to protect jobs]... [just one of the mirad unintended consequences that people never think of].
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I stand corrected: Obama didn't screw U.S. workers by having Treasury pressure Citi to cancel their jet, they screwed the French worker:
"People close to Citi said the troubled bank could end up paying around $4m to cancel the order for the jet – believed to be a Falcon 7X made by France’s Dassault – unless it can find a buyer for the aircraft." (Financial Times)
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
This corporate jet issue is shere demagoguery. Private jets are not a luxury for corporations, they are a necessity. High-level executives need to be taken to far-flung meetings quickly, and having a private jet is often the quickest and most cost-effective way to get them from place to place. This is like saying that unemployed people who go on job interviews shouldn't be allowed to buy the "luxury" of a suit. It's just populist nonsense that exploits class envy and ignorance.
Full disclosure: I did once get to fly in a client's corporate jet in my lawyer days, and it was, I must admit, really, really cool.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by David Kallans on January 29, 2009 8:50 PM
This corporate jet issue is shere demagoguery. Private jets are not a luxury for corporations, they are a necessity. High-level executives need to be taken to far-flung meetings quickly, and having a private jet is often the quickest and most cost-effective way to get them from place to place. This is like saying that unemployed people who go on job interviews shouldn't be allowed to buy the "luxury" of a suit. It's just populist nonsense that exploits class envy and ignorance.
Full disclosure: I did once get to fly in a client's corporate jet in my lawyer days, and it was, I must admit, really, really cool.
Well, if you go by the tens of millions that top executives in U.S. are paid, the time saved would probably pay off the corporate jet but that is of course assuming that they put that time to good, productive, and profitable use. This is not for me to judge.
It was only not too long ago that China got its equivalent of Air Force One (unfortunately engulfed in electronic spying device controversy, that finally seems to point to internal affairs rather than planted U.S.) and there are many other countries in the world where the head of sate still flies the scheduled commercial airlines.
BTW, Obama seems to look stressed out at times compared to the always relaxed appearance of Bush.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by David Kallans on January 29, 2009 9:18 PM
Originally written by Shiong-Fong Lew
there are many other countries in the world where the head of sate still flies the scheduled commercial airlines.
Care to name some? I find this claim highly dubious.
Put it this way: Many countries still do not maintain a dedicated plane for the head of state and many of this countries do not have business jet hiring business within the country or in neiboring countries.
Singapore does not maintain a dedicated plane for its head of state (as far as I know) and it is not unusual for the ministers to travel on commercial airlines (the Prime Minister salary can beat that of U.S. presidentail salary (official salary only) hands down). A bit of tidbits:
Singapore Prime Minister Lee Hsien Loong flew Tiger Airways back from Hanoi last November. I wonder how much he paid for his fare, if he ordered any of those cup noodles, and whether he paid to request more leg room. Not that he would have had to worry about depleting government funds by opting for an exit row seat - Temasek Holdings, the Singapore Government’s investment arm, owns 11% of Tiger Airways.
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch
Obama didn't screw U.S. workers by having Treasury pressure Citi to cancel their jet, they screwed the French worker:
Well Obama has pretty much already demonstrated that he is just another say-one-thing-and-do-another politician, despite all of his false talk of "change." His new man at Treasury, Timothy Geitner, didn't think he himself had to follow the tax laws, but he was deemed "too important" to be held to the same laws that all other Americans are (he failed to pay taxes he owed when he was employed at the IMF, and his "explanations" have been, in my view and those of many others, woefully inadequate). To top it off, Geitner and Obama now want to hire as Geitner's chief deputy a former lobbyist, and they are asking for a waiver from the policy of no lobbyists in federal jobs that they just announced, with smug self-satisfaction, just days ago. Change, indeed. The policy really is "we believe in ethics, except when other considerations are more important," which is really the same policy Bush had.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
David, what is going on here, I agree with you on all of your posts. What is next, eclipses and locusts ?
But seriously, I agree. To be honest, I really don't know where Obama is. I do know that he is very smart. Conservatives think that he is really a stealth (or not so stealth) socialist who is going to use the crisis to "re-define" the economy (read: bring in statism). Liberals are mad that Obama is already jettisoning things like universal health care plans (already put on the back burner), and that he will reform Social Security as a payoff to Republicans for all the spending. I heard a man who I would describe as pretty far Left yesterday on NPR (National Public Radio) complaining about this. The NY Times labeled Obama's cabinet "center-right".
To be honest, I don't know what they are doing and what their goal is.
What I do like so far:
- Ending the "Mexico City Rule" (which banned health care aid to foreign countries if they mention contraceptives).
- Stem cells
- Increasing fuel efficiency standards
What I find very questionable:
- Accusing China of currency manipulation, exactly when we should be working together with China to solve this mess
- $ 900 billion in pork-barrel spending, about 50 % of which maybe makes sense, but the rest is just throwing money around (and throwing money down holes, in my opinion).
- Refusing to consider Monetarist solutions to the crisis (a 1-year corporate tax holiday, dropping the corporate tax from 35 % to 15 %, etc.).
So far, Obama remains a mystery to me, i.e. he is very hard to read. He is highly intelligent and extremely articulate (especially compared to Bush). His mentors were basically Marxists, more or less, but he also loves Abraham Lincoln. Hmmm. I admire Lincoln greatly and consider him our 2nd best president, but he also did have a dark side in terms of how he unified the U.S. and some of the civil liberty things he did. Lincoln used extreme force (he had to) to make the U.S. one country, and was a very, very powerful president. So here we have a president from a more or less Marxist background, who admires Lincoln. What will that result in ???
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Some have even begun to call Obama "George W. Obama", because of all the Bush-era things he is going to leave in place, such as warrantless wiretaps and most of the GWOT stuff (Global War on Terror). Obama has the same Treasury guy as Bush and the same Defense Secretary. If Bush was so bad and incompetent, why keep those people ? Obama now is putting health care reform on the far back burner, and wants to reform Social Security. He seems to be moving to the right as we speak.
I agree that Obama is saying one thing and doing another, David. But he already did that during the campaign. Remember when he said he would only take public money for his campaign and not be corrupted by private money. Oh, and then he figured out that he could outspend McCain by at least 3-to-1 on the circuit of fund raisers in L.A. and Manhattan and Long Island ? So he then reversed his original plan and did indeed take the money from the billionaiers and millionaires. And he basically then spent his way in. So the rule seems to be: Change when it is convenient, and whatever I feel like otherwise.
BTW, a good essay on the Stimulous Package, by Ben Stein:
A Bleak Day
By Ben Stein on 1.29.09 @ 9:31AM
I love this. The new kind of politics of hope. Eight hours of debate in the HR to pass a bill spending $820 billion, or roughly $102 billion per hour of debate.
Only ten per cent of the "stimulus" to be spent on 2009.
Close to half goes to entities that sponsor or employ or both members of the Service Employees International Union, federal, state, and municipal employee unions, or other Democrat-controlled unions.
This bill is sent to Congress after Obama has been in office for seven days. It is 680 pages long. According to my calculations, not one member of Congress read the entire bill before this vote. Obviously, it would have been impossible, given his schedule, for President Obama to have read the entire bill.
For the amount spent we could have given every unemployed person in the United States roughly $75,000.
We could give every person who had lost a job and is now passing through long-term unemployment of six months or longer roughly $300,000.
There has been pork barrel politics since there has been politics. The scale of this pork is beyond what had ever been imagined before -- and no one can be sure it will actually do much stimulation.
Further, no one can be sure that we are not already at the trough/inflection point of the recession such that this money will be spent mostly after the recovery is well under way.
How long until the debt incurred under this program is so immense that it causes a downgrade in the sovereign debt of the USA? What happens to us then?
This has been a punch in the solar plexus to the kind of responsible, far-seeing, mature government processes that are needed to protect America. This is more than the pork barrel. This is a coup for the constituencies of the party in power and against the idea of a responsible government itself. A bleak day.
Unfortunately, it is only the latest in a long series of such days stretching across decades of rule by both parties, to the point where truly responsible government is only a distant echo of our forgotten ancestors.
Ben Stein is a writer, actor, economist, and lawyer living in Beverly Hills and Malibu. He writes "Ben Stein's Diary" for every issue of The American Spectator.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
One thing that needs to be looked at is the role of credit default swaps (CDS). These are like insurance on an underlying security (typically, a bond). They allow people to hedge risk. Unfortunately, in the past 10 years, the CDS market has become massive and at the same time untransparent (traded "privately", not publicly). The market for CDSs was $ 45 trillion in 2007 (yes, trillion !), or twice the size of the entire U.S. stock market. George Soros has said that the CDS market is at the heart of the financial crisis. Warren Buffett called CDSs "weapons of mass destruction". The problem is that the CDS contracts are traded maybe up to 30 times, constantly changing hands. And you can buy it for a risk that you don't own. Someone compared it to buying fire insurance on your neighbor's house ! (and then one might have an incentive for a fire to take place, is the insinuation !!). Banks then had these CDSs on their books, and by the time the crisis hit, no one knew how much they were worth. They were also used as a cynical speculative tool, along the lines of "let's bet on Company X crashing and burning".
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I don't understand why Obama couldn't scale back his Stimulus Package, so that it is something that everyone can support. For instance, most Americans support infrastructure spending and saving the banks. I think that even the GOP supports that. Public spending to promote national broadband has broad support.
The problem is that Obama's Stimulus Package is weighted down with pork and transfer payments (i.e. welfare) and has ballooned out of control, so that now, it risks totally failing in the Senate. Charles Krauthammer called it "The worst bill in galactic history", and David Brooks of the NY Times wrote that it is "a sprawling, undisciplined mess". The Financial Times today is calling it "Obama's Iraq" (because the result would be Obama spending more in the first year than Bush did in 8 years of war).
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch
The problem is that Obama's Stimulus Package is weighted down with pork and transfer payments (i.e. welfare).
"Pork" is the fiscal equivalent of "terrorist." Just like a "terrorist" is a soldier in your opponent's army, "pork" is government spending you don't happen to support. If we eliminated all "pork" from the budget, the government would spend nothing.
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch
I don't understand why Obama couldn't scale back his Stimulus Package, so that it is something that everyone can support.
It is not necessary that everyone support it. All he needs is a majority in the House and a majority in the Senate. A majority of Americans seem to support the package, for whatever that is worth.
One is tempted to recall Dick Cheney's famous comments when a reporter told him that 80 per cent of Americans opposed a particular policy: "so?"
Yes, Obama promised that things would be different under his administration, but he did not really mean it. Plus les choses changent...
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I think that the majority of Americans are now against the "Stimulus Package". I can find the percentage on that, if you want...
I think that there are different types of spending. Aid to help kids get lunch at school is different than the "bridge to nowhere" in Alaska, for instance.
The truth is that this bill has so far, in my view been a huge failure. Not one single Republican supported it in Congress. Thus, the notion of "crossing the aisle" and being "bi-partisan" has totally failed and the GOP gains strength every day due to this colossal mess. Back in the period 2003-2006, the Democrats were screaming about the costs of Iraq and Afghanistan, but Obama's bill would in effect spend more in one month (if signed) than those two wars combined ! Gone are the days when the Democrats were for fiscal responsibility. Now we get $ 6 billion public spending for "winter weatherization" and $ 21 million to "resod the Mall" in D.C. Far from being a real stimulous (a tax cut would be a real stimulus), it is very obvious that what the Dems have done is dust off every pet spending project of the past 10 years and tied a bow around it and presented it as job growth.
The GOP is now comparing Obama with Jimmy Carter: weak and naive and "platitudinous" [I love that word !].
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
600,000 people in Kentucky are locked into their homes without power or heat, and that a week after the ice storm hit.
Question: If Bush was responsible for a feeble response to Hurricane Katrina in New Orleans, is Obama not responsible for this delay in getting help to these people ? Where is FEMA and the U.S. government ? Why is this not on Obama, as Katrina was "on" Bush ?
That is the true joke of this. I for one would be in favor of big spending on FEMA and other responders. Don't you think it is a joke that they are voting on an $ 850 billion bill, and 600,000 people can't even leave their houses ? Maybe instead of $ 21 million of sod, we could fund emergency services. Just an idea. And now that the Democrats have decided to play "daddy" with the funding, don't they own problems like this ?
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch
Gone are the days when the Democrats were for fiscal responsibility.
I didn't know Democrats were ever for fiscal responsibility
But it is a concept that is in short supply all around. Republicans can hardly claim to be the party of fiscal responsibility after Bush squandered the surplus he inherited from Clinton, made a series of irresponsible tax cuts, and then made the biggest step towards socialism America has ever made when he bailed out his Wall Street buddies at the expense of the American taxpayer.
To Republicans and Democrats alike, I say a pox on both your houses!
This brings us back to the "generation gap" issue: for decades members of both parties have short-changed my generation through a series of irresponsible fiscal programs.
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch on February 1, 2009 10:37 AM
600,000 people in Kentucky are locked into their homes without power or heat, and that a week after the ice storm hit. Question: If Bush was responsible for a feeble response to Hurricane Katrina in New Orleans, is Obama not responsible for this delay in getting help to these people ? Where is FEMA and the U.S. government ? Why is this not on Obama, as Katrina was "on" Bush ?
There are a number of differences between Katrina and Kentucky that answer your question:
1. Katrina involved significant loss of life; in Kentucky loss of life has been minimal, if it has happened at all.
2. Hurricane response has long been understood to be a matter of federal concern; ice-storm response has long been viewed as a matter of state and local responsibility. Perhaps that is unfair, but it is the way state-federal powers are understood to be divided.
3. New Orleans has a treaured spot in the American mindset and is an exotic and popular travel destination. Kentucky is a marginal, remote place that people seldom think about, and when they do, most people conjure up the stereotype of the druknen inbred hillbilly. In fact, Kentucky may be thought of only one day a year - on Kentucky Derby day - and the rest of the year is readily forgotten. It is one of the states that most Americans could not locate on a map (although that, sadly, is true of almost every state, Florida and your Texas possibly being the only exceptions). There is a hierarchy of lives in the media and the American mind. American lives, of course, are worth more than European lives, and both are worth more than Asian or Hispanic lives. All of these are worth more than African lives, which have the least value (the genocide of millions of Africans may get less media attention than one pretty white girl being "kidnapped" from an affluent suburb). Within the US there is a similar hierarchy - people in cities are worth more than people in rural areas (how many TV shows take place in rural areas?), whites are worth more than blacks, coastal states are worth more than land-locked states, and hillbillies are way, way, way at the bottom of people of interest, unless they are the subject of jokes.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I agree that under Bush, spending was out of control.
But the standard Republican answer to that is the following: Bush inherited a recession (the economy was in recession when Clinton left office), and the war was forced on the U.S., so the costs of Afghanistan + Iraq were necessary. I am not sure I agree with that logic, but that is the GOP response to that.
Re Kentucky, I agree with you. The reason you won't see this issue plastered all over Harpers, The Nation, the Huffington Report, and the NY Times for the next 2 years (as with Katrina) is that Kentucky does not fit into the narrative of the evil Republican president, denying the poor their aid. In my view, it is very similar, but of course, I won't convince many of that.
BTW, when Katrina devastated Lousiana, it also hit next-door Mississippi just as hard, but the response by the local government in Mississippi was vastly better and far less incompetent than in New Orleans, so we never heard much about it.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on January 26, 2009 11:45 PM
Friedman's point is that Poland will receive a flood of U.S. aid, which will indeed help it build all kinds of infrastructure....
I still haven't seen that video, John, but considering that Western investors have successfully managed to take 50% off the value of the Polish currency over the last few months, the scenario of pushing Poland into the arms of the US (military) aid grows more and more likely. I am afraid that the (military) infrastructure may be the only kind of infrastructure we will see being built in Poland in the coming years. (See also Failure to save East Europe will lead to worldwide meltdown)
ExxonMobil reported $45 billion in earnings in 2008, the largest annual profit in U.S. history;15Wall Street was found to have distributed $18.4 billion in bonuses, its sixth largest payout ever;16 and international leaders gathered in Davos, Switzerland, to discuss the economic crisis. “Let's be careful,” said Stephen Roach of Morgan Stanley, “that we don't let this blame game get out of hand.”17http://harpers.org/archive/2009/02/WeeklyReview2009-02-03
Paul Krugman: Bailouts for Bunglers a classic exercise in “lemon socialism”: taxpayers bear the cost if things go wrong, but stockholders and executives get the benefits if things go right.
* * *
Across the United States, people have been reacting to dire circumstances with extreme acts, including murder, suicide and suicide attempts, self-inflicted injury, bank robberies, flights from the law, and arson, as well as resistance to eviction and armed self-defense. And yet, while various bailout schemes have been introduced and implemented for banks and giant corporations, no significant plans have been outlined or introduced into public debate, let alone implemented by Washington, to take strong measures to combat the dire circumstances affecting ordinary Americans. http://www.tomdispatch.com/post/175027
[snip] Last week the Federal Reserve released the results of the latest Survey of Consumer Finances, a triennial report on the assets and liabilities of American households. The bottom line is that there has been basically no wealth creation at all since the turn of the millennium: The net worth of the average U.S. household, adjusted for inflation, is lower now than it was in 2001. ...
Yet until very recently Americans believed they were getting richer, because they received statements saying that their houses and stock portfolios were appreciating in value faster than their debts were increasing. And if the belief of many Americans that they could count on capital gains forever sounds naïve, it's worth remembering just how many influential voices - notably in right-leaning publications like The Wall Street Journal, Forbes and National Review - promoted that belief, and ridiculed those who worried about low savings and high levels of debt. ...
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I just tonight read an article on that, blaming not western investors, but rather, the fact that Poland is not in the euro zone, and so is subject to exchange rate fluctuations, which the euro zone countries are not subject to.
Mother tongue: English Joined: April 28, 2004 Location: United States
RE: Understanding the Financial Crisis
Originally written by Jacek K. on February 17, 2009 4:22 AM
Yet until very recently Americans believed they were getting richer, because they received statements saying that their houses and stock portfolios were appreciating in value faster than their debts were increasing. And if the belief of many Americans that they could count on capital gains forever sounds naïve, it's worth remembering just how many influential voices - notably in right-leaning publications like The Wall Street Journal, Forbes and National Review - promoted that belief, and ridiculed those who worried about low savings and high levels of debt. ...
Um...no. I subscribe to all three, and can state that there was a diversity of opinion on the subject.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
When we talk about capital gains, let's just be clear what we mean. Historically, stocks indeed have increased on average by about 7 % per year (check it out if you don't believe me). Housing on the other hand, has not nearly increased by that much. I for one used to have pretty intense debates about this, about 5 years ago, with people on the Internet, and also family members. I tried to explain that if incomes are more or less flat, house prices cannot increase indefinitely. This is also backed up by historical data. I read a book about 3 years ago called "Sell Now !" that explained in absolute detail what would happen with the housing market, and it happened. So we need to separate stocks - which really do have a historical trend upwards, from housing, which does not. Housing was pushed politically, for various reasons, by our government. And let's face it, most Americans don't have a very solid grounding in economics, and even if they do, it is very easy to buy into the myth that housing prices would always increase (unless one really took the time to study the fundamentals, and has a solid understanding of economics).
I agree that Forbes, NR and the WSJ are not the same. For instance, the WSJ takes a much different position on immigration than NR, and the WSJ is also much more socially liberal than NR (which takes a pro-religious right stand, etc.).
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on February 22, 2009 2:39 AM
Historically, stocks indeed have increased on average by about 7 % per year
I have always found this argument very deceptive because it is very seldom that we all invest in 1927 and choose to cash on it in 2007. What happens too often is that those who invested in 1927 had to cash in say 14 years later, in 1941, taking a loss on their original investment. Or that those who invested in 1998 had to withdraw 10 years later, in 2008, again taking a loss. The argument always goes: Yes, but had you waited a few years more, you would have made a profit because the historic performance... etc. The problem is that most people cannot wait a few years more when they retire and find themselves screwed up by their 10 or 14-year waiting for profits.
So, yes, historically, US stocks indeed have increased impressively (the table at http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html shows that $100 invested in 1927 was worth almost $113,000 last year), but people should be aware that, like in a casino, this strictly depends on when you decide or simply have to get up and leave the table. I once won in Reno 300% of the capital invested. Three hours later, with a net loss of 50%, I walked out. Yeah, had I continued to play for another two hours, I am sure I would have been ahead again. To lose it all shortly afterwards.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on February 18, 2009 6:26 AM
I just tonight read an article on that, blaming not western investors, but rather, the fact that Poland is not in the euro zone, and so is subject to exchange rate fluctuations, which the euro zone countries are not subject to.
The fact that Poland is not part of the euro zone (for nationalistic reasons, I suppose, so the current predicament serves it well) is very well a reason why it is not immune to exchange rate fluctuations (cf. what Soros did with the pound sterling years ago) but this is not why it should be subject to such fluctuations. Unless rabid attacks by other tribes are the rule of the game in the human jungle. See one typical example of what foreign investors are all about, John (emphasis mine):
Goldman Sachs said it closed a trade betting that central European currencies including the Polish zloty and the Czech koruna will depreciate further, news agency Bloomberg reported. It noted that in one of its top trades for 2009, Goldman Sachs recommended selling the koruna and zloty against the euro on speculation currencies in Europe.
"The weakness in eastern European currencies is shifting from a macro trend towards speculative overshooting and we would not like to chase it any further as part of our strategic trades, particularly since we are through our 6% target," the bank said in a client note cited by Bloomberg. (http://www.gowarsaw.eu/en/news/goldman-sachs-withdraws-from-speculative-trade-in-pln-and-czk)
How kind of them! Of course, you know that traders most of the time work against the trend, i.e., they say one thing and do exactly the opposite to obtain profit. Meanwhile, millions of Polish households with loans in Swiss francs are on the verge of bankruptcy because of the 60% appreciation of that currency against the zloty.
Yeah, let's overshoot'em! That will help everyone else to recover more quickly!
A couple other examples of "investing": Post #162986
Originally written by Jacek K. on February 23, 2009 8:18 AM
Originally written by John Bunch on February 18, 2009 6:26 AM
I just tonight read an article on that, blaming not western investors, but rather, the fact that Poland is not in the euro zone, and so is subject to exchange rate fluctuations, which the euro zone countries are not subject to.
The fact that Poland is not part of the euro zone (for nationalistic reasons, I suppose, so the current predicament serves it well) is very well a reason why it is not immune to exchange rate fluctuations (cf. what Soros did with the pound sterling years ago) but this is not why it should be subject to such fluctuations.
Sigh...I don't understand it! Denmark is not in the euro zone and I don't think that the Danish krone is subject to such (as above) fluctuations.
How about a 'Understanding the Financial Crisis 101'. Please!
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Nanna Mercer on February 23, 2009 10:34 AM
Denmark is not in the euro zone and I don't think that the Danish krone is subject to such (as above) fluctuations.
But of course! Denmark and other Western countries (barring what Soros did with the sterling years ago) are mature economies and not promising emerging markets which are a dream playground for speculators, sorry, "investors."
In the news today: "Falling zloty makes Poland's foreign debt burden greater. Polish Treasury debt rose 4.6% or PLN 25.26 bln in December." (The Warsaw Voice) It is only by frigthtening them, with Iranian missiles, for example, and shackling them in debt that you can get them to accept the US antimissile shield in their territory. Are there any talks of US star war installations in Denmark? Is there any need to bash the Danish currency then? You only bash and exploit outsiders and new arrivals to squeeze the maximum out of them.
Mother tongues: Polish, English Posts: 2906 Joined: September 13, 2008 Location: United States
RE: Understanding the Financial Crisis
Originally written by Jacek K. on February 23, 2009 5:16 AM
Originally written by Nanna Mercer on February 23, 2009 10:34 AM
Denmark is not in the euro zone and I don't think that the Danish krone is subject to such (as above) fluctuations.
But of course! Denmark and other Western countries (barring what Soros did with the sterling years ago) are mature economies and not promising emerging markets which are a dream playground for speculators, sorry, "investors."
In the news today: "Falling zloty makes Poland's foreign debt burden greater. Polish Treasury debt rose 4.6% or PLN 25.26 bln in December." (http://www.warsawvoice.pl/newsX.php/7859/4661322043) It is only by frigthtening them, with Iranian missiles, for example, and shackling them in debt that you can get them to accept the US antimissile shield in their territory. Are there any talks of US star war installations in Denmark? Is there any need to bash the Danish currency then? You only bash and exploit outsiders and new arrivals to squeeze the maximum out of them.
Jacek
Do you have a lot of homeless people now? Where do they live? Do they still have the soup kitchens my mother told me about : they had something like that for the hungry, which a lot of people found very degrading as a solution to the continuous crisis that had been a fact with varying degrees of visibility for over the last twenty plus years. For me all of this is totally unknown in relation to Poland and sounds like fiction? In the Poland I remember there was only ideological hunger, and this has not changed, I guess, except for the mask.
Some things cannot be helped, however: they are whatever they are, at the particular moment in time.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Liliana Boladz-Nekipelov on February 23, 2009 11:36 AM
Do you have a lot of homeless people now? Where do they live? Do they still have the soup kitchens my mother told me about : ....
Poland does have homeless, but so do UK, Canada, Australia, US. In 2005, an estimated 100 million people worldwide were homeless (http://en.wikipedia.org/wiki/Homelessness). The ones I see live at the Warsaw Central train station, for example, and yes, we do have shelters for them, soup kitchens and social workers, but so does everybody else in the world. I am unable to tell you how bad this phenomenon is statistically speaking. I haven't heard of it being a very big social problem, although each such case is certainly very dramatic.
Originally written by Jacek K. on February 23, 2009 11:47 AM
Originally written by Liliana Boladz-Nekipelov on February 23, 2009 11:36 AM
Do you have a lot of homeless people now? Where do they live? Do they still have the soup kitchens my mother told me about : ....
Poland does have homeless, but so do UK, Canada, Australia, US. In 2005, an estimated 100 million people worldwide were homeless (http://en.wikipedia.org/wiki/Homelessness). The ones I see live at the Warsaw Central train station, for example, and yes, we do have shelters for them, soup kitchens and social workers, but so does everybody else in the world.
It's the same in Denmark. In spite of the socialist eh...social democratic system here, we have homeless people in the streets and in the CPH Central station. Some of the homeless people come from other countries but many of them are born and bred Danes.
Originally written by Jacek K. on February 23, 2009 11:16 AM
Originally written by Nanna Mercer on February 23, 2009 10:34 AM
Denmark is not in the euro zone and I don't think that the Danish krone is subject to such fluctuations.
But of course! Denmark and other Western countries .... are mature economies and not promising emerging markets which are a dream playground for speculators, sorry, "investors."
It is only by frigthtening them, with Iranian missiles, for example, and shackling them in debt that you can get them to accept the US antimissile shield in their territory. Are there any talks of US star war installations in Denmark?Is there any need to bash the Danish currency then?
No!
Would it be more than a little naive to suggest that the "bashee" (arguably squeezed by a big bear demanding that the "bashee" leaves off dealing with asses and elephants), stops leaving itself open to bashing by giving the whole circus a good poke in the rear?
"...millions of Polish households with loans in Swiss francs are on the verge of bankruptcy because of the 60% appreciation of that currency against the zloty."
Why do millions of Polish households have loans in Swiss francs?
Have the mortgage holders sold the original mortgage which I assume must have been in zloty to Swiss banks? Is that how?
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Nanna Mercer on February 23, 2009 2:00 PM
Why do millions of Polish households have loans in Swiss francs?
Because of the greed, if you will. Interest rates on such loans were very low compared to loans in zlotys and with the Polish currency so strong last summer, everybody wanted to have a piece of the pie. Except that Messrs. "investors" mentioned earlier (i.e., international investment banks) decided to eat the cake themselves so they just pulled the rug from under the festive table and BOOM!
According to the FT, about 70 per cent of Polish mortgages are denominated in foreign currency.
FT also describes another madness over here: "A year ago, the smart money in Poland and other central European emerging markets was that local currencies would continue to strengthen against the euro and the dollar, so many companies took the precaution of hedging their foreign currency exposure. Trouble came when the global economic slowdown hit the region late last year, causing currencies like the Hungarian forint and the Polish zloty to drop sharply as investors fled to the safety of the dollar. To make matters worse, some companies had taken particularly aggressive hedges, hoping to use what was seen as a sure bet to make extra profits. Now the estimated loss faced by Polish companies could be as high as 5.5bn zlotys ($1.7bn ... )...
To reduce their costs, some companies, including those with low foreign currency revenues, set up hedging options with several banks that would allow them to buy euros at a preferable rate, but the transaction was then financed by bets in the opposite direction, exposing them to significant risk if the zloty ended up falling instead of rising.
“These companies wanted to in some way protect themselves against a drop in revenue due to the strengthening zloty,” said Zbigniew Szczerbetka, managing partner for Poland at Deloitte, the consultancy. “They began to look for ways of improving the achievable rate, and the only way to do that was to increase the level of risk.” ...
“In retrospect I can only say we chose bad instruments. But in the summer they were widely promoted. The offer was very attractive and it seemed a good way to protect ourselves against the strengthening zloty. All the opinions we had in the summer showed that the zloty would continue to strengthen.”...(http://www.ft.com/cms/s/0/520a3faa-ec93-11dd-a534-0000779fd2ac.html)
Anyway, I suspect that as long as individuals are lurred to make bets when taking out loans, instead of just working and repaying those loans, and companies are busy hedging instead of manufacturing, the world will keep collapsing, with the same winners building higher and higher marble palaces on the ruins around them.
Mother tongues: Polish, English Posts: 2906 Joined: September 13, 2008 Location: United States
RE: Understanding the Financial Crisis
Originally written by Jacek K. on February 23, 2009 8:34 AM
Anyway, I suspect that as long as individuals are lurred to make bets when taking out loans, instead of just working and repaying those loans, and companies are busy hedging instead of manufacturing, the world will keep collapsing, with the same winners building higher and higher marble palaces on the ruins around them.
Originally written by Jacek K. on February 23, 2009 2:34 PM
Originally written by Nanna Mercer on February 23, 2009 2:00 PM
Why do millions of Polish households have loans in Swiss francs?
Because of the greed, if you will. Interest rates on such loans were very low compared to loans in zlotys and with the Polish currency so strong last summer, everybody wanted to have a piece of the pie. ....
Anyway, I suspect that as long as individuals are lurred to make bets when taking out loans, instead of just working and repaying those loans,
Last year, housing prices in DK went through the roof. Everybody borrowed heavily on their incredible equity that rose almost every day. Suddenly people who used to be just comfortable were rich and they borrowed and borrowed against their equity and then bought and bought one useless item after another. I have no idea why any sane person could have thought that this would last forever. Not to mention the whole buying with borrowed money.
Of course, now all the nouveau riche are moaning and groaning about their, arguably, horrible losses and very uncertain economic futures. They also want the government to bail them out... Greed is scary!
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Who's the fairer of them all?
Originally written by Jacek K. on February 23, 2009 9:34 PM
FT also describes another madness over here: "A year ago, the smart money in Poland and other central European emerging markets was that local currencies would continue to strengthen against the euro and the dollar, Jacek
In this case, we can have an international beauty parade as there are no shortage of eligible candidate nations.
The run-up to the Asian Financial Crisis of 1997 involved a falling low-interest rate USD versus high-interest rate rising Asian currencies. Similarly, the crisis also reversed the currencies.
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by Jacek K.
The problem is that most people cannot wait a few years more when they retire and find themselves screwed up by their 10 or 14-year waiting for profits.
Actually, most people can wait a few more years before they retire. There is no good reason why people must retire in their 60s and then live for 20 or more years without working, often at the expense of the younger generations.
Investment is a gamble. Wise investors diversify their investments and take calculated risks to minimize the chances of risk. The foolish are not subsidized in Las Vegas, nor should they be in the investment world.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by David Kallans on February 23, 2009 4:52 PM
Wise investors ... take calculated risks
I wouldn't if I were anywhere near retirement. In other words, I would settle for the few percentage points from Treasuries rather than risking to earn the "historic 7% average from stocks."
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Jacek K. on February 24, 2009 12:10 AM
I wouldn't if I were anywhere near retirement. In other words, I would settle for the few percentage points from Treasuries rather than ...
What if your insurance agent pops in and says:
"Our in-house experts have come up with a revolutionary plan created especially for retirees just like you. It is a form of reverse mortgage where you place your savings with use, and we give you back treasuries+1% for the rest of your life so that you are practically hedged for the ever-lenghtening lifespan of humans."
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Jacek,what you describe is what retirees do: they transfer their stocks to bonds as they approach retirement. The people who are now complaining that their retirement is gone are unfortunately often those who did not get good advice on that.
I remember, back when Enron hit, there were people who had all their savings in Enron stock, which is totally insane. A good portfolio might include 250 stocks and about as many bonds + money market funds. Diversification is it. And the best stock portfolio is just an index that mirrors the stock market as a whole. So we don't even need financial intermediaries (stockbrokers). They are literally "parasites" (from an economic perspective, not a human perspective) on our society, because they siphon off money that would be used elsewhere.
Unfortunately, I don't think that there is any way to rid ourselves of them. I use the word "parasite" very carefully, because it really is a very harsh word. But Vanguard CEO John Bogle used it, and I believe him. The problem is that our society turns out way too many MBAs and finance people (and not enough engineers). And our government cannot control them. I mean, look at the SEC: around since 1933 and it failed to prevent this crisis. Why ? Look at Enron. One of the biggest things out of Enron was Sarbanes-Oxley, which was supposed to make things transparent and save us from these people (LOL). Well...
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by Laurent Chiacchierini on February 23, 2009 10:56 AM
Originally written by David Kallans on February 23, 2009 4:52 PM
Actually, most people can wait a few more years before they retire. There is no good reason why people must retire in their 60s....
Are you applying this to blue-collar workers too?
Especially blue collar employees. Part of being blue collar means that you have a short retirement, working until you are physically unable to do so, then dying a few years later. This is one of the reasons people should be encouraged to get an education early in life.
Originally written by David Kallans on February 23, 2009 8:36 PM
Originally written by Laurent Chiacchierini on February 23, 2009 10:56 AM
Originally written by David Kallans on February 23, 2009 4:52 PM
Actually, most people can wait a few more years before they retire. There is no good reason why people must retire in their 60s....
Are you applying this to blue-collar workers too?
Especially blue collar employees. Part of being blue collar means that you have a short retirement, working until you are physically unable to do so, then dying a few years later. This is one of the reasons people should be encouraged to get an education early in life.
They die like flies the moment they stop working. Blue collar workers are often completely worn out and finished in their early 50s, so why suggest that there is "no good reason why people must retire in their 60s"? As well, if everyone chooses University rather than trade, who will build our houses, fix our leaky toilets, plough the fields and pave the roads etc.?
Originally written by Jacek K. on February 23, 2009 8:34 AM
Because of the greed, if you will.
Not "if you will" but "in fact", I`d say. Not to mention the fact that greed, and money not earned still good to buy real things, is what causes crises.
Selling rainbow-colored farts for hard cash...
Originally written by David Kallans on February 23, 2009 10:52 AM
There is no good reason why people must retire in their 60s and then live for 20 or more years without working, often at the expense of the younger generations.
Which, in their turn, hope to live at the expense of the still younger generations. Or should I say have subsidized the (a) living of the previous generations?
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Nanna Mercer on February 24, 2009 3:48 AM
...if everyone chooses University rather than trade who will build our houses, fix our leaky toilets, plough the fields and pave the roads etc.?
Do I understand that in the event that the asking price of a plumber rises to US$/200-US$300 per hour versus that of US$20-US$60 per hour for translators, you would not become a plumber even assuming that you were to be just fresh out of college?
Originally written by Shiong-Fong Lew on February 24, 2009 4:46 AM
Originally written by Nanna Mercer on February 24, 2009 3:48 AM
...if everyone chooses University rather than trade, who will build our houses, fix our leaky toilets, plough the fields and pave the roads etc.?
Do I understand that in the event that the asking price of a plumber rises to US$/200-US$300 per hour versus that of US$20-US$60 per hour for translators, you would not become a plumber even assuming that you were to be just fresh out of college?
Likely so! I'd rather translate than do plumbing, though if I have to, I can swing a whatsmacallit to fix a leaky toilet, as taught by a real plumber. No problem!
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Nanna Mercer on February 24, 2009 3:43 PM
Originally written by Shiong-Fong Lew on February 24, 2009 4:46 AM
Originally written by Nanna Mercer on February 24, 2009 3:48 AM
...if everyone chooses University rather than trade, who will build our houses, fix our leaky toilets, plough the fields and pave the roads etc.?
Do I understand that in the event that the asking price of a plumber rises to US$/200-US$300 per hour versus that of US$20-US$60 per hour for translators, you would not become a plumber even assuming that you were to be just fresh out of college?
Likely so! I'd rather translate than do plumbing, though if I have to, I can swing a whatsmacallit to fix a leaky toilet, as taught by a real plumber. No problem!
Nanna
OK.
Nana the Translator will stand unwavering as Joe the plumber works a 3-hour day, drives a Benz, flashes a gold-gilded namecard, boosts of ISO certification and liability insurance, sends kids to private schools, . . .
The plumber who taught me what I know about plumbing had a Benz and various other gold-plated goodies that, once obtained, he kept close at hand for fear that they would disappear. It's hard to enjoy something when all you can do with it is clutch it in your sweaty palms.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on February 23, 2009 7:20 PM
there were people who had all their savings in Enron stock, which is totally insane.
The Sanity thread having been frozen, let me continue over here:
Individuals vary in their willingness to take financial risks. Here we show that variants of two genes that regulate dopamine and serotonin neurotransmission and have been previously linked to emotional behavior, anxiety and addiction (5-HTTLPR and DRD4) are significant determinants of risk taking in investment decisions. We find that the 5-HTTLPR s/s allele carriers take 28% less risk than those carrying the s/l or l/l alleles of the gene. DRD4 7-repeat allele carriers take 25% more risk than individuals without the 7-repeat allele. These findings contribute to the emerging literature on the genetic determinants of economic behavior. http://www.plosone.org/article/info:doi/10.1371/journal.pone.0004362
Fox News reports on the possibility of the demise of the death penalty in the country where something similar to the phrase "if you can't afford a lwayer, one would be appointed for you" is often heard as legal costs in death-penalty cases are found to be much higher than life-sentence cases.
Maybe, it would be cheaper for police officers to be the judge, jury, and executioner?
Originally written by Jacek K. on February 23, 2009 2:34 PM
[FT also describes another madness over here: "A year ago, the smart money in Poland and other central European emerging markets was that local currencies would continue to strengthen against the euro and the dollar, so many companies took the precaution of hedging their foreign currency exposure. Trouble came when the global economic slowdown hit the region late last year, causing currencies like the Hungarian forint and the Polish zloty to drop sharply as investors fled to the safety of the dollar. To make matters worse, some companies had taken particularly aggressive hedges, hoping to use what was seen as a sure bet to make extra profits. Now the estimated loss faced by Polish companies could be as high as 5.5bn zlotys ($1.7bn ... )...
..., the world will keep collapsing, with the same winners building higher and higher marble palaces on the ruins around them.
Is the above also related to this:
...After chairing the talks on Sunday, Czech Prime Minister Mirek Topolanek said: "We need a Europe without barriers but also a just and fair Europe." ... "I think that it was perfectly clear that the European Union isn't going to leave anybody in the lurch," he told a news conference.
But there was no announcement of any new EU aid package for the badly-hit economies of Central and Eastern Europe..."
I have just read that the EU (meaning about half of it) is not going to bail out the other half that is in dire trouble. 'Nevertheless, we will surely look for other ways to ensure that the bottom doesn't fall out of these frail economies' (NM sarcastic paraphrase).
Excuse my naiveté, but didn't the rich half of the EU export jobs, nay, whole factories, to countries like Poland in order to make (a lot of) money. Nothing wrong in making money, but here we are discussing how say, Denmark moved many jobs and whole companies to the new EU countries. They didn't do it to help these countries, did they. No, they did it to make a killing on the market and now that it's akin to throwing money down a bottomless pit, they're pulling out.
That's too naive and simplistic. Will someone explain it, please?
Mother tongue: English Posts: 845 Joined: March 9, 2008 Location: United Kingdom
RE: Understanding the Financial Crisis
No Nanna, you have it about right. The funny thing is that the Poles and other might still get their own back on the rest of the EU. Recent figures showed that the flow of Eastern Europeans moving westward in search of jobs has slowed and might even be starting to turn the other way. Thus, the UK economy (for example) , which has benefited from the inflow of cheap labour, might have another problem to overcome.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Nanna Mercer on March 2, 2009 10:44 AM
Czech Prime Minister Mirek Topolanek said: ... "I think that it was perfectly clear that the European Union isn't going to leave anybody in the lurch,"
That's exactly the way the EU Sunday summit was sold here in one press report I read this morning. Obviously, the tone of press reports will vary depending on the neswpaper and its political orientation. But your second sentence, below, was not given any prominence in what I read, as if not to destabilize Poland's internal political situation:
"But there was no announcement of any new EU aid package for the badly-hit economies of Central and Eastern Europe..."
Originally written by Jacek K. on March 2, 2009 11:17 AM
Originally written by Nanna Mercer on March 2, 2009 10:44 AM
Czech Prime Minister Mirek Topolanek said: ... "I think that it was perfectly clear that the European Union isn't going to leave anybody in the lurch,"
That's exactly the way the EU Sunday summit was sold here in one press report I read this morning. Obviously, the tone of press reports will vary depending on the neswpaper and its political orientation. But your second sentence, below, was not given any prominence in what I read, as if not to destabilize Poland's internal political situation:
"But there was no announcement of any new EU aid package for the badly-hit economies of Central and Eastern Europe..."
The Danish news is filled with words like: protectionism.
" Protectionism is the economic policy of restraining trade between nations, through methods such as tariffs on imported goods, restrictive quotas, and a variety of other restrictive government regulations designed to discourage imports, and prevent foreign take-over of national companies. ... " en.wikipedia.org/wiki/Protectionism
"»Der var enighed om, at nødvendigheden af at undgå protektionisme,« sagde EU-Kommissionens formand Jose Manuel Barroso, der var yderst tilfreds med graden af »solidaritet« på mødet. ..." http://www.berlingske.dk/article/20090302/verden/703010099/
"There was agreement about that the necessity of avoiding protectionism"
,said the EU commission's chairman Jose Manuel Barroso, who was very satisfied with the degree of "solidarity" at the meeting."
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Nanna Mercer on March 2, 2009 11:38 AM
"There was agreement about the necessity of avoiding protectionism", said the EU commission's chairman Jose Manuel Barroso, who was very satisfied with the degree of "solidarity" at the meeting."
Exactly the message I got here this morning. In fact, I was surpised that words like "solidarity" were still in use in politics. Last time I heard it was in the context of a multinational where they decided to lay off 1/10 of staff across the world and the rule to be follwed was to be based on solidarity, i.e., 1/10 had to go in every country where they have offices.
It's a complex issue, Nanna. On the one hand, Poles in small villages have to be grateful to Dell for moving its operations from Ireland to Poland because here the hourly pay is, I dunno, EUR 1.5 instead of, I dunno, EUR 6 in Limerick. While EUR 1.5 an hour is peanuts, it is still better than unemployment...
On the subject of the split between EU's rich and poor this is really nothing new. That divide has been there all along and is to stay there for decades to come.
Originally written by Jacek K. on March 2, 2009 2:16 PM
It's a complex issue, Nanna. ...
Yes! For me, it really is a case of the more I try to understand world affairs, the more complicated they become - and they change daily. Just as I think I have got a handle on what's going on, it's clear that I know huey.
Irrespective of my frustrating attempts to understand world affairs, poor people are becoming poorer, more frustrated and more distraught. And I whine...
We are bound to expierence crises, for there is some difference between money earned and money taken, only, for some reason I cannot fathom, the difference is neither acknowledged nor recognized.
I do not approve of people emigrating, yet the people emigrate to earn. Monopolies and governments and thieves and robbers do not earn, they just take. Still, money taken buys goods not worse than money earned. Thence the crises.
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by Dodo Kaipdodo . Still, money taken buys goods not worse than money earned. Thence the crises.
The goods themselves may not be physically any different, but the karma associated with their acquisition is quite different. Karma, of course, is what one "earns" with every action.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Yup. That state is known as Moksha. For some the atma becomes one with Brahman, though, while for others, at the point of moksha, he attains the spiritual abode of God, known as Vaikuntha.
Originally written by Jacek K. on March 2, 2009 1:32 PM
As often as not or more often than not?
Originally written by Dodo Kaipdodo on March 2, 2009 1:24 PM
I prefer Maya as long as I know it is Maya.
More often than not.
But I don`t like Maya money.
As often as not and even more often.
Back to the crisis:
How do you know your tax money is spent not wasted?
Another issue concerning crises: what one gets as a present is not earned by one, but someone has earned that! Does this enhance crises? Still not sure...
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Back to the topic, then.
Originally written by Jacek K. on March 2, 2009 11:17 AM
...as if not to destabilize Poland's internal political situation...
and also the external one:
There has been much rhetoric in the days running up to Sunday’s summit about the need to avoid splitting Europe along east-west lines, ...
But in the end for very different reasons, a consensus formed among EU leaders that such talk is dangerous. For countries like Poland or the Czech Republic, whose economies are in relatively robust shape, there are strong arguments against allowing the impression to form that there is a single disaster area in the east of Europe, which worldwide investors enter at their peril. http://www.economist.com/daily/news/displaystory.cfm?story_id=13209335&fsrc=nwl
Unfortunately, The Economist would not specify what kind of investors it has in mind. Earlier, it only said:
The fate of the [EU] newcomers is of acute interest to those western countries whose banks have invested heavily in the east, including Austria, Greece, Italy and Belgium. Further north, Scandinavian banks are heavily exposed in the Baltic republics.
I hope that by "invested heavily" they do not mean all the gambling in the form of options, futures and other derivatives peddled by Western bankers which, as was mentioned before, brought scores of companies and individuals here to the brink of bankruptcy...
Well what with our new taxes and the Polish goods about twice as cheap as our national products and the citizens of South (and not only) Lithuania flooding and storming the shops in North Poland... some say - and write - that`s Lithuanians helping Poles to survive the crisis... Some newspapers even write the Poles say so... Haven`t heard them talking, myself, so dunno whether to believe that or better not...
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Dodo Kaipdodo on March 2, 2009 9:34
...Polish goods about twice as cheap as our national products and the citizens of South (and not only) Lithuania flooding and storming the shops in North Poland...
Incidentally, the same is happening along the Slovakian border after the Slovaks adopted the euro. All of a sudden everything became so much cheaper in Poland. But frankly, not only have I not yet heard any conspiracy theories about Poland having concocted that to fend off the crisis, but I have such a low opinion of this government that the very idea of it having successfully managed to devalue its own currency by 50% over the last few months sounds like a fable to me. Why would they do that? So that the servicing of the public and private debts balloon and go through the roof, ruining everybody around?
Should Poland choose to switch to the euro at the current exchange rates, I estimate that the average monthly take-home salary here would settle at the level of ca. € 490 instead of € 750 last summer.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Cash Cows falling from the sky
Originally written by Jacek K. on March 3, 2009 5:03 PM
Should Poland choose to switch to the euro at the current exchange rates, I estimate that the average monthly take-home salary here would settle at the level of ca. € 490 instead of € 750 last summer.
Wonder what would the French and German workers say when their industrial behemoths then move en masse to Poland (which may possibly also lead to wage inflation in Poland)? Cash cows for foreigners buying property in Poland?
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Nanna Mercer on March 2, 2009 4:38 PM
the more I try to understand world affairs, the more complicated they become - and they change daily.
"In fact, it is impossible to understand what is happening in the somewhat surreal world of European political economy at the moment without first tossing out every stereotype, every cliché, and every assumption that has ever been made about Europe's political geography: East, West, North, South—none of it helps make sense of what is going on. Look harder: The first and sharpest economic crisis on the continent was not in the East but in Iceland, far to the west. The deepest recession is not in the traditionally slow South but in Ireland, part of the recently dynamic North.
Look harder still: While the bankrupt government of Latvia, a new member of Europe, has been besieged by angry demonstrators, far more violent demonstrations have engulfed the government of Greece, a much older member of the union, which is also a member of the common European currency. While the Hungarians have, it is true, requested, and been denied, an extraordinary $240 billion loan, a single British bank—the Royal Bank of Scotland—has requested, and will receive, a far more extraordinary $425 billion bailout from the British government.
For that matter, the bad debts accumulated by British financial institutions alone far exceed, by many tens of billions, the governmental debt of the Poles and the Czechs, two countries that have had no domestic banking failures to speak of. (Czech banks are net lenders to their mostly foreign owners.) Which leads me to an interesting question: Who proved, in the end, to be the most responsible capitalists? The London bankers who spent the 1990s dispensing expensive privatization advice in Warsaw and Prague—or the newly elected, shabbily dressed politicians who paid them for it?
In fact, what this crisis has revealed is not an old fault line between East and West (let alone a "new Iron Curtain," as the petulant and ineffectual Hungarian prime minister put it) but an even older and more obvious truth: Most people prefer to blame their problems on somebody else, even when those problems are clearly self-inflicted. Thus, the French president has been hinting that his country's weak industrial output is somehow the fault of the Czechs because they build cheaper Renaults; the Hungarians are angry that their richer neighbors won't rescue them from years of irresponsible public spending; British workers demonstrate against the foreign workers who mostly do jobs they long refused. There is something similar going on in the United States—people who shouldn't have taken loans are furious at the people who shouldn't have offered them—but in Europe, these passions inevitably have national overtones as well."
Sorry... Seems I got carried away... Yet, for some strange reason, this reminds me: Do you guys and gals have to pay for payments? I mean, when a bill comes and you pay, do you have to pay the price of payment?
Oh my! Cannot put this right... Anyway, that`s what is called "selling price" in my country... and a source of various misunderstandings, especially if you are a translator and have to translate that correctly. But when we pay bills, we have to pay an additional price for the money to be delivered to the recipient. I find this strange. Or is it?
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Dodo Kaipdodo on March 3, 2009 9:40 PM
when we pay bills, we have to pay an additional price for the money to be delivered to the recipient.
Dodo,
Many (retired) people in Poland still travel across the city to the offices of gas, water or electricity companies or telephone operators to save the EUR 0.50 commission by making the payment directly to the relevant window. Couldn'd you save a couple euros a month by doing the same?
Originally written by Jacek K. on March 3, 2009 5:00 PM
Many (retired) people in Poland still travel across the city to the offices of gas, water or electricity companies or telephone operators to save the EUR 0.50 commission by making the payment directly to the relevant window.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Dodo Kaipdodo on March 3, 2009 11:12 PM
I might find myself paying a salesperson for taking money paid for some goods bought in a shop.
You already do due to credit cards. Merchants are charged a fee for the credit card service by banks which they pass on to you by factoring that fee in the prices you see in the shop, regardless of whether a given customer uses a credit card or not at a given moment...
Originally written by Dodo Kaipdodo on March 3, 2009 11:26 PM
Originally written by Jacek K. on March 3, 2009 5:00 PM
Many (retired) people in Poland still travel across the city to the offices of gas, water or electricity companies or telephone operators to save the EUR 0.50 commission by making the payment directly to the relevant window.
Did they have to do that a decade or two ago?
When paying through banks, sure. When paying at the post office, no (at the cost of waiting in lines) but only for some time because then the post office also imposed fees, although lower than banks. Also, new discount outlets were created for utilities payments, at supermarkets, etc., not to mention the fact that many banks offer account packages with domestic Internet payments free of charge. I have never considered this to be a problem. Transferring money is a service as any other and it is logical that it costs.
Originally written by Jacek K. on March 3, 2009 11:00 PM
Originally written by Dodo Kaipdodo on March 3, 2009 9:40 PM
when we pay bills, we have to pay an additional price for the money to be delivered to the recipient.
Many (retired) people in Poland still travel across the city to the offices of gas, water or electricity companies or telephone operators to save the EUR 0.50 commission by making the payment directly to the relevant window.
I must say that I am fairly ticked off having to pay to be allowed to pay. Last, I took my bill from TDC (tele communications) down to their office which is just across the street from the grocery store, because I wanted to pay it directly. No such luck!
On the bill was a charge of DKK 39. - because I refuse to allow TDC (who always charges too much) to deduct money directly from my account. On top of that, I had to pay DKK 19. - to pay the bill at the office. TDC is charging me more than US$ 10. - to pay their bill. I refused! Said that I would pay the bill minus the greed & extortion charges.
Was told that if I didn't pay the whole bill on time, TDC would add a further DKK 200. - to the bill. They would, I know. I took the bill, walked home and wrote a letter of complaint. The sent me a new bill with the extra charges deducted. They apologised too. Everything is fine and dandy - no. TDC somehow got into my account, how I don't know (I am investigating), and the original amount with extra charges and all have been deducted. Yeah!
Originally written by Jacek K. on March 3, 2009 11:53 PM
...Transferring money is a service as any other and it is logical that it costs.
I accept that! I also charge non-DK clients for the transfer and exchange of money. I charge them exactly what it costs me and not a penny more. Many of my clients do not believe me when I tell them that the bank charges US$ 35. - for transferring and exchanging foreign currency, on top of which they "float" the deposit for over a week.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Cash Cows falling from the sky
Originally written by Jacek K. on March 3, 2009 10:03 AM
Should Poland choose to switch to the euro at the current exchange rates, I estimate that the average monthly take-home salary here would settle at the level of ca. € 490 instead of € 750 last summer.
That's according to official stats... Everyday reality may differ and is not indicative of future performance.
Front page news this morning in my paper: Scrambling for €200 jobs. That's monthly take home pay. Of course, their costs of living, in the center of Europe, are lower. They have no good roads or trains so they don't need to move around anyway.
Yeah, frighten them with missiles from Iran and shackle them in debt!
Originally written by Jacek K. on March 3, 2009 5:53 PM
You already do due to credit cards.
No I don`t. I prefer cash. I only use a card for international payments.
Transferring money is a service as any other and it is logical that it costs.
It is. But in my country at least that used to be part of non-taxable production costs, and therefore the provider`s problem. What`s curious, only monopolies demand that, because any seller that has any competition would lose buyers.
Anyway, what I really mean is another thing. For about a year now, we have a new meaning of the term "selling price". It`s on the bill and is explained as "charging additional payment to cover the seller`s expenses of selling". Transferring money costs is what we pay on top of that.
What makes me disgusted is not having to pay, it is the petty theft and swindle legalized. Compare: 'bout a coupla years ago I paid my bank a lump sum of 15000 LTL for health insurance/investment policy; last time I checked I saw only about 8000 was left. I`m not very happy about that, but I`m not angry, either, because the choice was mine, nobody forced me to buy that. Quite another thing, the newly-born "selling prices" and such! Money not earned... but I have already mentioned that...
Mother tongues: English, German Posts: 7846 Joined: September 26, 2003 Location: Canada
RE: Understanding the Financial Crisis
Was told that if I didn't pay the whole bill on time, TDC would add a further DKK 200. - to the bill. They would, I know. I took the bill, walked home and wrote a letter of complaint. The sent me a new bill with the extra charges deducted. They apologised too. Everything is fine and dandy - no. TDC somehow got into my account, how I don't know (I am investigating), and the original amount with extra charges and all have been deducted. Yeah
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Dodo Kaipdodo on March 4, 2009 1:06 PM
Originally written by Jacek K. on March 3, 2009 5:53 PM
You already do due to credit cards.
No I don`t. I prefer cash.
As I said, regardless of your method of payment, the merchant's credit card service fee is already factored into his prices.
we have a new meaning of the term "selling price". It`s on the bill and is explained as "charging additional payment to cover the seller`s expenses of selling".
Could you elaborate? Logically, merchant's retail prices include a mark-up over his wholesale purchases. In what is Lithuanian selling price different from retail price everywhere else in the world? According to http://www-personal.umich.edu/~lormand/poli/nike/nike101-8.htm, the Indonesian cost of a shoe to Nike is $20. They sell it wholesale for $35 and you buy them for $70. Should this all be nicely written out on my cashier receipt, I would be thrilled! Is that what you, guys, do in Lithuania?
Originally written by Jacek K. on March 4, 2009 7:38 AM
Could you elaborate?
I`m afraid I can`t,
Logically
because it`s not logical, it`s just New.
Is that what you, guys, do in Lithuania?
As far as I know, only my hometown... I remember a colleague in the Capital surprised ( http://www.translatorscafe.com/tcterms/LT/thQuestion.aspx?id=12318 ) at my question, asked, I must admit, just to tease Jane, who is, BTW, a real expert in terminology... But I think they have something like that in Vilnius too, by now... Another curious thing is these "costs" or "prices" differ depending on the municipal administration. Have enjoyed something like that?
Mother tongue: English Posts: 845 Joined: March 9, 2008 Location: United Kingdom
RE: Understanding the Financial Crisis
Originally written by Jacek K. on March 4, 2009 2:23 AM
Oh no, I didn't mean it that way. It's just that the more someone is excellent the more I feel like pulling their leg. Some sort of perversion?
Maybe a psychologist might suggest jealousy. Mind you, I think many people have the cheeky streak of winding up people who care about things, maybe just as an attempt to get them to lighten up. I have a friend who is studying theology and he knows of my love for interpreting & translation theory. We wind each other up all the time.
Originally written by Jacek K. on March 4, 2009 9:23 AM
Some sort of perversion?
Nobody likes a smart guy
(or gal), to put it rather cynically. couldn`t tell ya who`s the author, for I have seen this sentence written in different books by different authors. Of course, Stephen King formulates that a bit more precisely:
Nobody likes to see a stupid guy wise up; yet that is not the case, in this case...
Back to the crisis. John Steinbeck:
Grampa killed Indians, Pa killed snakes for the land. Maybe we can kill banks...
CALABASAS, Calif. — Fairly or not, Countrywide Financial and its top executives would be on most lists of those who share blame for the nation’s economic crisis. After all, the banking behemoth made risky loans to tens of thousands of Americans, helping set off a chain of events that has the economy staggering.
So it may come as a surprise that a dozen former top Countrywide executives now stand to make millions from the home mortgage mess.
Stanford L. Kurland, Countrywide’s former president, and his team have been buying up delinquent home mortgages that the government took over from other failed banks, sometimes for pennies on the dollar. They get a piece of what they can collect.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Cash Cows falling from the sky
Originally written by Shiong-Fong Lew on March 3, 2009 10:35 AM
Originally written by Jacek K. on March 3, 2009 5:03 PM
Should Poland choose to switch to the euro at the current exchange rates, I estimate that the average monthly take-home salary here would settle at the level of ca. € 490 instead of € 750 last summer.
Cash cows for foreigners buying property in Poland?
For the time being it's new cars. Since the German government will wisely give you EUR 2,500 if you scrap an old car and buy a new one, Germans are flocking to Polish dealers along the border and buying new cars in Poland instead of in Germany. So, it looks like not only Lithuanians and Slovaks but also Germans are keeping the Polish economy afloat* as my personal vacations abroad cost me 40% more than last summer.
---
* Polish companies face huge potential losses on currency options. Polish financial market watchdog KNF sees unrealised losses on open FX option positions of Polish companies at PLN 15 bln (The Warsaw Voice)
Originally written by Jacek K. on March 6, 2009 9:52 AM
Polish companies face huge potential losses on currency options.
Yet the EU consultans recommend that the Baltic states should follow the Polish example and devaluate their currencies. Or so I understand while reading the not-so-easy-to-understand expatiations...
Originally written by Jane Lamb-Ruiz on March 5, 2009 6:29 PM
I PAY A LOT OF ATTENTION TO CONTEXT
Could you suggest another term for "selling price" in the context of "charging additional payment to cover the seller`s expenses of selling", as explained by the provider? This is not teasing; I`m really curious about the precise term, if such a term exists. I know what the "traditional" term means, but that seems not to be it, in this case, and therefore not the term I want. I hope the right term would give some further insight into the crisis issue, so this is not really OT...
Originally written by Dodo Kaipdodo on March 6, 2009 7:34 PM
Could you suggest another term for "selling price" in the context of "charging additional payment to cover the seller`s expenses of selling", as explained by the provider? ...
Please use TCTerms for your terminological queries.
"...Stanford L. Kurland, Countrywide’s former president, and his team have been buying up delinquent home mortgages that the government took over from other failed banks, sometimes for pennies on the dollar. They get a piece of what they can collect. "
Irrespective of my understanding, the devaluation of currency and thus what can be purchased with it, continues along a slippery slope. I want to understand some of what is happening and devote part of my Sunday morning to investigate the term devaluation.
Devaluation is a reduction in the value of a currency with respect to other monetary units. In common modern usage, it specifically implies an official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. In contrast, (currency) depreciation is used for the unofficial decrease in the exchange rate in a floating exchange rate system. The opposite of devaluation is called revaluation. … “
I am reading along, seemingly understanding till I get to this opening sentence in a new paragraph:
“Present day currencies are usually fiat currencies with insignificant inherent value….”
Alright! I know the word ‘fiat’ but not in relation to currency…
“Fiat currency (fiat money) is money that exists because an authority or custom declares it to be money. (From the Latinfiat, which means "let it be done"). It achieves value because a government requires it in payment of taxes and says it can be used to pay debt or buy goods and services and because people trust that the currency will be reasonably stable. Fiat money is a subset of credit money (money backed by promise to pay in goods or services controlled by the creditor) in which a government, often through a central bank or reserve bank, is the major creditor backing the currency…”
It is terribly clear to me how little I know when, because I am not wearing the right glasses, I initially read the term 'fiat currency' as flat currency and I don't even stop to ponder it...
"[snip]Conservatives have set the terms of debate for decades, introducing their ways of thinking about government, markets, human nature, and yes, prosperity. Their view of prosperity should be familiar. Just think of the glorification of wealth in our media-saturated, celebrity-worship society and you'll get a solid impression. Conservatives typically view wealth as material accumulation within a rampant form of capitalism. A "good" business person exploits everything possible to increase the riches of his estate.
This view of wealth is appalling to progressives. Our sentiments are motivated more by the empathetic bonds we feel with other people and the natural world. So, what happens when we recoil with disgust at this exemplar of selfishness and greed? A negative stereotype is introduced - that the progressive businessperson or political activist must oppose the accumulation of wealth. We must "take the moral high road" and sacrifice personal comforts for the sake of our communities. … These stereotypes are not merely internalized at a personal level. Our scarcity mindset has been built into many of our institutions, as we can see with progressive philanthropy and the hiring practices at nonprofits. The guiding principle of the progressive world is to starve our own for the greater good. ..."
In common modern usage, it specifically implies an official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency. In contrast, (currency) depreciation is used for the unofficial decrease in the exchange rate in a floating exchange rate system.
Thanks for pointing out this basic difference, Nanna. Polish zloty was not devalued by the government; it merely depreciated 40% and more. One reason which transpired from my earlier Bloomberg link is that all the emerging markets are perceived as a whole by investors. During previous downturns, I would read for example that the collapse of the Argentine peso triggered a sell-off of Eastern European currencies. Logical, isn't it? Now, it's also logical: A Rising Dollar Lifts the U.S. but Adds to the Crisis Abroad. The article answers the question why, on earth, the one place having a considerably easier time attracting money is, perversely enough, the same place that started much of the trouble: the United States. And if the dollar rises, other currencies have to fall.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: The rooster went home
Originally written by Jacek K. on March 9, 2009 6:55 PM
... why, on earth, the one place having a considerably easier time attracting money is, perversely enough, the same place that started much of the trouble: the United States. And if the dollar rises, other currencies have to fall.
U.S. is still the largest economy in the world, and in times of global crisis, the rooster probably chose what it thinks is a better safe haven (or so I read).
The power of the greenback is still a force to be reckoned with (boosts markets, inflates currencies, buoys markets, etc) in a world populated by many midgets.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: The rooster went home
Originally written by Shiong-Fong Lew on March 9, 2009 1:32 PM
the rooster probably chose what it thinks is a better safe haven
Interestingly, Polish media reported today, the market value of the largest US bank, Citigroup, is now equal to the market value of the largest Polish bank, PKO ($5bn+).
The only way to address this problem is to get at the root cause - our deepest understandings of wealth and prosperity. We need to recognize that "doing good" versus "making money" is a false choice.
I see not much thinking going on, and rightly so, considering that Adam Smith, a pioneer of political economy, seemed to postulate exactly that some 250 years ago... And?
Smith viewed markets and capital as doing good work within their own sphere, but first, they required support from other institutions—including public services such as schools—and values other than pure profit seeking, and second, they needed restraint and correction by still other institutions—e.g., well-devised financial regulations and state assistance to the poor—for preventing instability, inequity, and injustice. If we were to look for a new approach to the organization of economic activity that included a pragmatic choice of a variety of public services and well-considered regulations, we would be following rather than departing from the agenda of reform that Smith outlined as he both defended and criticized capitalism. ...
Smith called the promoters of excessive risk in search of profits "prodigals and projectors"—which is quite a good description of issuers of subprime mortgages over the past few years. Discussing laws against usury, for example, Smith wanted state regulation to protect citizens from the "prodigals and projectors" who promoted unsound loans:
A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into those which were most likely to waste and destroy it.
The implicit faith in the ability of the market economy to correct itself, which is largely responsible for the removal of established regulations in the United States, tended to ignore the activities of prodigals and projectors in a way that would have shocked Adam Smith. ...
Thank you so much for that great link. I am slowly (ever so slowly) finding something I can hold on to rather than going round and round in the same old circles. It's good!
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Yet another speed barrier crumbles . . .
Originally written by Jacek K. on March 10, 2009 5:09 AM
The Short and Simple Story of the Credit Crisis.
Should laws and regulations be enacted first before innovation and invention be allowed to be attempted?
Lest the accusation of stifling innovation be hurled, we can probably cite the many disasters ... Chernobyl, Bhopal, Minamata, ...and many others that predate financial innovations. Would we see a nuclear implosion of the financial markets one of these days? Should we just be intellectual cowards worthy only of just being other animals on planet earth? Any Patriot missiles to shoot down the inter-continental financial storms hurling from the enclaves of ...
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Yet another speed barrier crumbles . . .
Originally written by Shiong-Fong Lew on March 10, 2009 10:49 AM
...innovation and invention...
But... casinos date back to at least the 17th century! They have been tested and retested for almost 400 years! I thought we all knew very well what gambling is about by now and who profits from it. Because all this was and still is about more and more sophisticated forms of gambling, isn't it?
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Yet another speed barrier crumbles . . .
Originally written by Jacek K. on March 10, 2009 6:13 PM
Originally written by Shiong-Fong Lew on March 10, 2009 10:49 AM
...innovation and invention...
But... casinos date back to at least the 17th century! They have been tested and retested for almost 400 years! I...
Tested for product appeal, marketability, legality, and profitability?
How about testing for consumer safety, environmental hazards, and kid proofing?
Or... the tendency to market innovative products in less regulated markets at a much cheaper price by stripping away the safety and environmental aspects of the products (e.g. motor vehicles, leaded paints, ).
I have just been asked to pay DKK 25.- to deposit DKK 55.06 in cash to my landlady's account which is in a bank different from mine.
I went over to my bank (just across the street) and they almost lost their lunch when I told them. They also, strangely enough, do not charge for this service.
They are known as “quants” because they do quantitative finance. Seduced by a vision of mathematical elegance underlying some of the messiest of human activities, they apply skills they once hoped to use to untangle string theory or the nervous system to making money.
This flood seems to be continuing, unabated by the ongoing economic collapse in this country and abroad. Last fall students filled a giant classroom at M.I.T. to overflowing for an evening workshop called “So You Want to Be a Quant.” Some quants analyze the stock market. Others churn out the computer models that analyze otherwise unmeasurable risks and profits of arcane deals, or run their own hedge funds and sift through vast universes of data for the slight disparities that can give them an edge.
* * *
What if the crisis of 2008 represents something more fundamental than a recession, and 2008 was when we hit the wall
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Yet another speed barrier crumbles . . .
Originally written by Jacek K. on March 10, 2009 10:16 PM
What if the crisis of 2008 represents something more fundamental than a recession, and 2008 was when we hit the wall— when Mother Nature and the market both said: “No more.”Thomas L. Friedman: The Inflection Is Near?
The customer is King till it is but a mere shadow of its former self? Upon which, new faces may emerge out of the shadows...
While Fogh is running around Europe polishing his personal halo and repeating the mantra that 'Everything is Fine' ...
Danish economy is a disaster
Professor Jørgen Goul Andersen says that the government has ignored the warning signs regarding the Danish economy
The Liberal-Conservative Danish government ignored disturbing economic developments, despite the fact that there were all sorts of reasons to act, and the Danish economy is steering towards a national economic disaster, according to Aalborg University Professor Jørgen Goul Andersen.
“The current situation is a national economic catastrophe. The Tax Commission proposals should have been shelved until better times. Denmark has more use of a Crisis Commission,” Jørgen Goul Andersen of the Department of Economics, Politics and Public Administration tells Reuters.
Bad prospects According to Goul Andersen, the population has been lulled into deception by the mantra that the Danish economy is ‘basically strong and sound’, as Prime Minister Anders Fogh Rasmussen has repeatedly said.
But he adds that the outlook for the Danish economy is a lengthy weakening.
He says that Danish GDP – not including investment in stockpiles – has dropped 4.8 percent since the fourth quarter of 2007. GDP growth for the past eight quarters is at the lowest average for all OECD countries, he says.
“The economic decline in Denmark started long before the financial crisis, and the prospects for the Danish economy are actually more disturbing than in many other countries. Apart from several years of economic rashness and other self-made problems, there are now major problems with competitiveness and exports,” Andersen says.
Government has been irresponsible He adds that government has ignored many of the ground rules for responsible economic policy.
“It was not sensible to introduce instalment-free loans at a time when the housing bubble was so extended. And it was not sensible to conduct an expansive financial policy which fanned the flames of an already overheated economy,” Goul Andersen says.
He points out that the government allowed the housing bubble, with its great indebtedness, to grow until it burst.
Difficult to turn around Goul Andersen says that Denmark may now find it very difficult to improve its situation.
He says that Denmark has been hit by the heavy depreciation of currencies in countries that are some of Denmark’s main export markets – Norway, Sweden and Great Britain – and that exports are now the major problem.
He says that the new tax reform package is unlikely to improve the situation, among other reasons because the business community will have to finance some of the tax relief in the package, putting a further strain on competitiveness.
...[Adam] Smith called the promoters of excessive risk in search of profits "prodigals and projectors"—which is quite a good description of issuers of subprime mortgages over the past few years. Discussing laws against usury, for example, Smith wanted state regulation to protect citizens from the "prodigals and projectors" who promoted unsound loans:
A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into those which were most likely to waste and destroy it.
The implicit faith in the ability of the market economy to correct itself, which is largely responsible for the removal of established regulations in the United States, tended to ignore the activities of prodigals and projectors in a way that would have shocked Adam Smith. ...
Re-reading the article, I have a question:
Much as it pains me to think so let alone post about it, would it be correct to say that the removal of established regulations in the United States (and elsewhere for that matter) was done on purpose and in order to create more wealth for the already wealthy?
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Beyond Scarcity ...
If you mean taxes such as capital gains taxes, yes, they always favor the wealthy, but when the wealthy get rich, the other classes also gain (but they gain far less then the rich).
I just want to add my thoughts on this. In my opinion, the following caused this crisis (the worldwide financial crisis), in descending order of importance as a cause:
1. The U.S. Federal Reserve holding interest rates artificially low, particularly from 2001-2007.
2. The worldwide liquidity (cash) glut, particularly after the end of the USSR in 1991 (China + India having lots more cash that could be invested internationally).
3. The housing boom in the U.S., in part fed by the high artificial interest rates
4. The U.S. government (again) in the form of Fannie Mae and Freddie Mac, which "had a hand" in 50% or more of the mortgages. Fannie and Freddie are "government-sponsored entities", but the key thing to remember is that their profits go to the shareholders, but their losses are paid for by the taxpayer in the U.S. The U.S. goverment, under both Clinton and Bush, put pressure on the major banks and Fannie and Freddie to reduce loan standards, to achieve social/political aims (getting lots of poor people into houses). Thus, the reduction in loan standards was not really necessarily pushed by the banks, but also by our government (and Obama and many leading Democrats received big money from Fannie Mae to not look too hard at what was going on over at Fannie, or at least, that is the allegation).
5. Wall Street and the creation of complex derivates which then spread risk around the globe
6. Banking rules such as "mark to market" and Basle II
7. Lack of regulation, particularly, that banks can now be so highly leveraged and don't have to have traditional reserves
8. The "culture of greed" on Wall Street
9. The total inability of the SEC and other government agencies to police the financial sector.
I could not say that it is either free enterprise or the government. Please remember that we in the U.S. do not have a free enterprise system like the Swiss do. We already have a highly-regulated economy, and I do not think that government can blame the "free market" for this, when the government pushed artificially-low interest rates for decades and pushed banks to lower their lending standards, in the name of getting poorer people into houses that they could not afford (and the Chinese provided much of the money for that).
"Lack of regulation" is a nice thing to blame, but in my view, it is a minor part of this. (BTW, when Japan's banking system hit the wall in 1990, it was heavily regulated, which suggests to me that lack of regulation is not necessarily the bad-guy. The Swiss have a much more free-market society and economy than the U.S., and Switzerland is a center of monetary stability, wealth, environmental protection [people tend to protect what they own, and societal stability). If lack of regulation were the cause of the crisis, the Swiss would have been the first society to hit the wall, because their economy is one of the least regulated. (Not many people in Europe talk about this, but Switzerland is far more of a free-market society than France, Spain, Italy, or Germany, and is also about 30 % richer, per person than Germany and France, and has far higher social cohesion, less crime, and overall is a nicer place to live).
What the solution should look like: The government should do very little. Let the banks that are already underwater go bankrupt. Let the "Big 3" (the U.S. auto industry) go bankrupt. Bankruptcy does not mean you stop making things and doing business, it means the ownership changes. And that is good. We need a hard recession in the U.S. for however long it takes (1 to 2 years) to wash the bad, toxic stuff out of the system. After that, we would have growth. Reagan and Paul Volcker did this in 1981-82, and it worked. It was a hard recession, but it washed out the bad and let us (the world) have a boom for the next 20 years.
What we are getting instead: Pure "actionism", because our government is using this crisis to push an agenda (socialism). Massive, jaw-dropping debt (fighting debt with more debt !!) that the next generation of Americans will have to pay for. Propping up "zombie" banks. Rewarding the people who got us into this. Not learning the lessons. Creating moral hazard. I have very little confidence in Obama to get us out of this. Obama's administration so far is a revolving door between Washington and Wall Street, and the Wall Street people (Geithner, Bernanke, etc.) are just helping out their friends now, so that their friends get to keep their Ferraris. And the public pays for it. Japan did the same thing in 1990, they did a massive Keynesain "stimulous package", and it didn't work. They built bridges that today lie mostly unused. They followed that first stimulous packages with 9 more, and they never got out of the hole.
Mother tongue: German Posts: 843 Joined: December 31, 2002 Location: Mexico
RE: Beyond Scarcity ...
Originally written by Nanna Mercer on March 10, 2009 11:58 PM
..the removal of established regulations was done on purpose and in order to create more wealth for the already wealthy?
It can't be that simple...can it?
Things can always be considered in a more complicated way..
- Regulations or not, some of the wealthy and educated people will be the smartest ones to exploit any regulations or lack thereof.
- Wealthy or even rich people emerge from any system I know. I blame this not to any political system but to the money system, which still seems to work like a stone-age mace, with only minor formal differences.
- If the money system won't be changed, I don't see any end of this process, except for a dirty trick of natural evolution: wealthy people don't make many children, so they will quickly become extinct..
(Wow! Where do all these dark thoughts come from? )
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Beyond Scarcity ...
I actually used to think that going back to the gold standard was an idiotic idea, but I have heard Ron Paul (a libertarian Texas Republican; if you want, view some of his videos on youtube.com). He promotes the gold standard as one cure to the situation we are in. Ron Paul is a very smart guy, and unlike 90 % of our politicians, is not a lawyer, but a medical doctor by profession.
I actually agree with you that the richest 10 % or 15 % of people will end up "on top", and that is true in any system. Even in the Soviet Union or Maoist China, there was a top elite of maybe 10 % who had probably 80 % of the societal wealth. And socialism has shown itself totally incapable of ending that, even the most radical forms of communism (I have no doubt that this 10 % rule holds true in Cuba and North Korea). There is a law in economics called the "Pareto Principle", that states this, aka the "80-20 rule". I also think that no matter what regulations the bureaucrats in Washington dream up, there will always be Harvard MBAs who find a way to get around it. It always happens. In Italy they say "Se trove la legge, si fatta lingano" (<- my bad Italian, but it means "As soon as they make the law, we find a way around it".
Originally written by Harry Bornemann on March 10, 2009 5:24 PM
Things can always be considered in a more complicated way..
Or again, a simple Might Overcomes Right...
the money system, which still seems to work like a stone-age mace, with only minor formal differences
I beg to disagree! Subsistence (or natural, or stone-age) economy is really and essentially different in that no one, however mighty, could use what has not been produced.
a dirty trick of natural evolution: wealthy people don't make many children, so they will quickly become extinct..
...to make way for nouveau riches !
(Wow! Where do all these dark thoughts come from? )
Originally written by Harry Bornemann on March 10, 2009 11:24 PM
Originally written by Nanna Mercer on March 10, 2009 11:58 PM
..the removal of established regulations was done on purpose and in order to create more wealth for the already wealthy?
- Regulations or not, some of the wealthy and educated people will be the smartest ones to exploit any regulations or lack thereof.
Hi Ducky, how are you doing?
Of course, yes, that it takes money to make (a lot of) money is true. People with only just enough extra (whatever that means to the individual) are not likely to gamble with it but will have and maintain a conservative portfolio with a low level of risks attached.
The more extra you have beyond a certain point, the more willing you are to spend large sums on risky money schemes with a high return. The riskier the play, the higher the return and the more you win, the more you can play an even more risky game with an even higher return...
What I wanted to get at was the idea that deregulating the financial sectors was done on purpose and that the aim was to make money and a lot of it. That is was clear that greed would run rampant and the devil (would) take the hindmost...
Mother tongue: German Posts: 843 Joined: December 31, 2002 Location: Mexico
RE: Beyond Scarcity ...
Originally written by John Bunch on March 11, 2009 1:08 AM
3. The housing boom in the U.S., in part fed by the high artificial interest rates
You certainly meant the low artificial interest rates?
I actually used to think that going back to the gold standard was an idiotic idea, but I have heard Ron Paul (a libertarian Texas Republican; if you want, view some of his videos on youtube.com). He promotes the gold standard as one cure to the situation we are in.
I have read that today's money is mainly based on debts instead of assets, and the gold standard could probably cure this, but it would only put us back before the current financial crisis, while the problem of the money system itself would not be solved. (What Dodo describes as money "taken" instead of "earned", while I rather criticise its disproportionate distribution.)
Originally written by Nanna Mercer on March 11, 2009 2:00 AM
What I wanted to get at was the idea that deregulating the financial sectors was done on purpose and that the aim was to make money and a lot of it.
I got your point, but I would even feel worse if they were regulated for the same purposes. Anyway, all you need at stock market is insider knowledge.
Hi Ducky, how are you doing?
Not good, I am steering right into a desaster: I can hardly clear out my flat in the given time frame and I am not sure I can paint even one wall before the landlord will come for his first visit. The only good side is that it could all be solved with money, so it will probably not trouble me for more than a year, and I see some lights at the horizont..
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Beyond Scarcity ...
Yes, I meant low interest rates.
Nanna, I actually see the problem as more being that the real risk was obscured. I mean, let's concretely look at how this happened.
1. Person A goes to his mortgage company and asks for a sub-prime mortgage.
2. The lenders have been indirectly (or directly) told by the government that it is a societal goal to "get people into homes", and this is massively pushed by Greenspan and the Fed, who, after the dot.com bubble burst, have artificially held interest rates low, so as to boost this bubble, and have also convinced everyone in the U.S. that their home is not just a home, but an asset that they can use like an ATM machine. And I blame the government, our banks, but also EVERY American - hundreds of millions - who fell into this mentality (I rent, by the way). If big banks don't back this overall political plan, they get a letter from a "community group" such as ACORN, and/or the U.S. Justice Department, telling them to stop "redlining". (Inherent in the Greenspan/Clinton/Paulson/Bush worldview was that the U.S. would buy up goods from China, and China in effect would be America's lender, and that China would somehow "soak up" any inflationary tendencies. The American consumer would be given cheap credit and money and would buy lots of stuff to fill that big house up with, which would keep the Chinese, Japanese, and German economies humming along; and that is how it worked up until last September, and now it is collapsing).
3. The bank then sells the person a mortgage and resells it to Fannie Mae, which is a government-chartered company. The key thing here is the Fannie gets the profits if it "wins", but the taxpayer picks up the bill if Fannie loses. For this reason, there is no reason for Fannie Mae to not create a bubble and buy and back as many mortgages as possible. At the same time, the Harvard MBAs working on Wall Street are designing über-complex securities like SIVs that only they can understand, so as to do two things: a. justify and pay for that Ferrari, and b. make things complex so as to make the risk opaque. (I personally think that what Wall Street did was very similar to what Enron did, but the only reason that the Enron guys were sent to prison and not the guys at AIG or Citi was that the Citi and AIG guys all know Bernanke and Paulson and Geithner, and they probably all get their kids into the expensive Manhattan schools for each other [whereas, in their New York/Washington minds, Enron was just a bunch of rednecks in Houston, so hanging them out to dry was much much easier]. So there is fraud and an "incestuous" relationship there among the bankers and regulators (who often are the same people, just at different times !) that continues under Obama).
4. The bank and/or Fannie bundle mortgages with other mortgages and then resell them as complex financial instruments to people in places like Singapore and Zurich.
The key in my view is that the risk is constantly pushed down the line, and government had a major role in this. To me it is not how much money a person has, but rather, to what degree that person is "covered" by society (the government and taxpayer) for any losses. This is what is referred to as "moral hazard". In a true free market, everyone would "own" his or her own risk, and not be covered by the government or others for it, and would not be "bailed out" by his friends.
The sad thing is that the U.S. government, far from clearing this up, is now creating more debt, is re-capitalizing Fannie Mae, and is creating yet more moral hazard. The people who should be out on the street, looking up at their old office, are being paid for their incompetence by their friends in the Obama administration.
Despite what socialists think, the resources of society are not limitless (socialist thinking implies that societal resources are not limited). It is actually good when bad companies (like Enron) fail. When Enron failed, it made available a lot of resources for more societally-worthwhile things. The same should happen now. AIG, Citi, GM, should all be allowed to fail, so that their scare resources can be better used by society.
I often have trouble with your explanations because I have to weed what I thinkis rhetoric from the knowledge and information you present.
I have taken the liberty of cutting your original post into a few small bites that I believe contain the information I was looking for. Have a look - please see what you think.
-----
"Nanna, I actually see the problem as more being that the real risk was obscured. I mean, let's concretely look at how this happened. 1. Person A goes to his mortgage company and asks for a sub-prime mortgage.
I would simply ask for a mortgage. Why would I ask for a sub-prime mortgage?
2. The lenders have been indirectly (or directly) (do we know this?) told by the government that it is a societal goal to "get people into homes", and this is massively pushed by Greenspan and the Fed, who, have artificially held interest rates low and have also convinced everyone in the U.S. that their home is an asset that they can use like an ATM machine.
3. The bank then sells the person a mortgage and resells (I know this happens, but why resell it and why to Fannie Mae?) it to Fannie Mae, which is a government-chartered company. The key thing here is the Fannie gets the profits if it "wins", but the taxpayer picks up the bill if Fannie loses. For this reason, there is no reason for Fannie Mae to not create a bubble and buy and back as many mortgages as possible. (Great, so far, but then you lose me)
At the same time, the Harvard MBAs working on Wall Street are designing über-complex securities like SIVs that only they can understand, so as to make things complex so as to make the risk opaque. (how is this done, John?)
Despite what socialists think (is that what socialists think?) the resources of society are not limitless (socialist thinking implies that societal resources are not limited).
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Beyond Scarcity ...
Originally written by Nanna Mercer on March 11, 2009 11:04 AM
1. Person A goes to his mortgage company and asks for a sub-prime mortgage.
I would simply ask for a mortgage. Why would I ask for a sub-prime mortgage?
Because that mortgage company is not in the business of making profit, Nanna. It is in the business of increasing its profits year after year for which it needs to constantly find new ways. One of such ways is bundling and reselling debt, as if merely servicing it were not enough. Take our friends from Exxon Mobil who reported $45 billion in earnings in 2008, the largest annual profit in U.S. history. Wanna bet that in 2009 they will bend over backwards to make even more money? After all, what is $45 billion these days? Would you just get complacent and sit on such a pile of, sorry, money? Or would you rather be spending sleepless nights thinking how to multiply it? The answer is obvious, my dear.
Originally written by Jacek K. on March 11, 2009 11:25 AM
Originally written by Nanna Mercer on March 11, 2009 11:04 AM
1. Person A goes to his mortgage company and asks for a sub-prime mortgage.
I would simply ask for a mortgage. Why would I ask for a sub-prime mortgage?
Because that mortgage company is not in the business of making profit, Nanna.
No, no, no...why would I, who is coming hat in hand, ask for a sub-prime mortgage?
I just want to borrow money, like I did back in 1969 when I bought a house. I had a decent down payment of $ 7,000.- and the house which cost $ 21,400. - had a first and a second mortgage. The first mortgage had a lower interest rate than the second mortgage, which I paid off as quickly as I could. When I sold the house, I took back a second mortgage from the buyer. Even back then I understood the transactions, but now...
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Beyond Scarcity ...
In John's example, the customer obviously has no adequate credit record to qualify for a prime mortgage and the mortgage company, which, let me stress again, is not in the business of simply making profit, instead of turning him down, recklessly offers him other people's money it keeps in its vaults. It's all the government's fault, John would say. No, it's all because of that branch manager's greed, says the undersigned who would never ever allow for his establishement to corrupt best business practice and standards of decency in lending other people's money. But, the undersigned would never be made manager of that branch because he would refuse to spend sleepless nights thinking how to multiply those profits which are the only criterion of success.
Allow me an example about Polish banks and all those loans in Swiss francs they lent. Do you know that Polish banks forbid their customers to repay those loans with cash brought from outside the bank, forcing them to purchase foreign exchange from their lender which imposes exorbitant commission to exchange Polish currency for Swiss francs? One or two guys who have succeeded in their court battles about this usury have saved tons of money by simply buying Swiss francs wherever it is cheaper and bringing them to their lenders to repay their loans.
Mother tongues: Polish, English Posts: 2906 Joined: September 13, 2008 Location: United States
RE: Not a verbose litany...
Laurent, I meant of course not as any hostile expression towards the French language, but because I understand Russian, I did not not want to bother people to translate the rest for me.
Originally written by Jacek K. on March 11, 2009 12:07 PM
Allow me an example about Polish banks and all those loans in Swiss francs they lent. Do you know that Polish banks forbid their customers to repay those loans with cash brought from outside the bank, forcing them to purchase foreign exchange from their lender which imposes exorbitant commission to exchange Polish currency for Swiss francs? ...
This boogles the mind... I just can't ...
I have to clear some cobwebs from my overload and will therefore take Aria for a long walk, hoping that the spring air...
Originally written by Laurent Chiacchierini on March 11, 2009 6:47 AM
Aux quatre pelés et un tondu
"hardly a soul"
Um... Seems my idea as to the meaning of the French saying was totally wrong... somehow I thought it was similar to the Lithuanian pusiau skustas, pusiau luptas (half shaved, half skinned)... Thanks, Laurent! Yet this means my other post is nonsensical and must be removed. I`ll do that at once.
Mother tongue: French Posts: 5568 Joined: December 31, 2003 Location: France
RE: Not a verbose litany...
Laurent, I meant of course not as any hostile expression towards the French language, but because I understand Russian, I did not not want to bother people to translate the rest for me.
No problem, Liliana.
Then you can easily imagine how the rest of us feel when seeing untranslated sentences in whatever language in this thread.
Showed up and instantly disappeared, more or less.
Can you translate the French "There was hardly a soul" by saying раз-два и обчёлся in Russian, as on that website?
Can you provide more context for the French expression, Hardly a soul where, under which circumstances, like at a meeting, for example?
I think think it can be translated as hardly a soul in certain contexts, a few, very little, something that instantly disappeared, like snow, for example. Something that ended before even starting.
Mother tongues: Polish, English Posts: 2906 Joined: September 13, 2008 Location: United States
RE: Not a verbose litany...
Originally written by Laurent Chiacchierini on March 11, 2009 7:47 AM
Laurent, I meant of course not as any hostile expression towards the French language, but because I understand Russian, I did not not want to bother people to translate the rest for me.
No problem, Liliana.
Then you can easily imagine how the rest of us feel when sseing untranslated sentences in whatever language in this thread.
Laurent
(hopefully) end of OT
I only know how I felt in Quebec. Only then I appreciated the gift of languages. Everybody was very friendly, but I did not understand a word, and ended up eating pizza a few times in a row, too embarassed to ask for anything else.
This thread, which contains information that is important to many of us, is not going to be whittled down by members complaining about a few words left in French, which even I can deal with.
I sincerely hope this is the end of that off topic.
Mother tongues: English, German Posts: 7846 Joined: September 26, 2003 Location: Canada
RE: Understanding the Financial Crisis
It is a common courtesy to translate foreign language quotes into the common language, and as we are translators, we are adept at it. I find untranslated French words as objectionable as Bulgarian, Chinese, Polish, or German words. If a thread is important, than its contents should be comprehensible to all.
The best pizza is to be found near the eastern borders are you get toward the Maritime provinces. If you get tired of "le pizza" you can always ask for "un hamburger", stressing the last syllable in each case. If you try to speak French to a Quebecois, chances are he'll answer you in English, but if you address him in English, he may remain stubbornly unilingual French - unless of course he actually is unilingual French. All the better for us translators .... and that's "financial".
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Regarding French in Canada (sorry that that isn't the exact topic, but I am a bit off topic), but I heard George Friedman on NPR talking about this issue, and how much conflict there is between French and English speakers in Canada (or, better stated: conflict between the languages and their place in the nation). He compared it to the way Spanish will be in the U.S. soon. It will not be - according to Friedman - a peaceful coexistence, but a zero-sum battle, like it, according to him, is in Canada.
Mother tongues: English, German Posts: 7846 Joined: September 26, 2003 Location: Canada
RE: Understanding the Financial Crisis
Apparenlty Mr. Friedman is an American political scientist: http://en.wikipedia.org/wiki/George_Friedman Perhaps some Canadians should speak on the issue. A large number of us are bilingual, our political leaders believe it the norm to address the population in two languages, and I suppose we are somewhat bi-and multicultural. It is an intriguing idea for the U.S. to follow the Canadian model as you suggest. Would the President be addressing his nation in English and Spanish? If all documents had to be written up in Spanish and English, it would be translator heaven!
He compared it to the way Spanish will be in the U.S. soon..
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Friedman's point I think is that the Spanish-speakers in the U.S. have a different situation than, say, Polish-speakers in Chicago. People who speak Polish in Chicago know that Polish is not in any way an "official" language in the U.S. But Mexicans, according to Friedman, can claim (with some historical justification) that the U.S. "took" or "stole" their land. Thus, their position is much different and speaking Spanish in the U.S. has the flavor of a kind of "revolt". He said that speaking French in Canada is the same because the French consider the English to be the conquerors and themselves to be the oppressed minority, so their language-use is always political. I think that is what he meant. I wrote that French and English, according to him, live in a zero-sum relationship to each other, which is the opposite of harmony.
I really don't know, because I am not Canadian, but I think it is interesting. From what I know about Quebec, the relationship between Quebec and Canada as a whole is let's say less than full harmony (the indepence movement, etc.).
Mother tongues: English, German Posts: 7846 Joined: September 26, 2003 Location: Canada
RE: Understanding the Financial Crisis
It sounds as if Friedman is extrapolating onto Canada thew views that he has from where he is. I did a quick read about him since you mentioned him - his ownearly life story and subsequent life would have coloured his views just like it does for all of us. What he writes does not seem to be a reflection of the realities of this country and its people.
One important point is that we chose to be a bilingual nation and it is an act of inclusion one of another. I would say that we are like a healthy family that is strong enough jostle and bicker about preferences but knowing that it is a strong enough unit to withstand the stresses and strains of individuality.
It is interesting that he has looked north of the border for other scenarios. It is unfortunate that he did not take a more positive view in doing so.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Well, I think that it is safe to say that most countries would love to have "Canada's problems". If you compare Canada to almost any country, Canada is a model of peace and prosperity, by any measure. And a bit of "friction" liguistically can make things interesting.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Beyond Scarcity ...
Originally written by Jacek K. on March 11, 2009 12:07 PM
It's all the government's fault, John would say. No, it's all because of that branch manager's greed, says the undersigned who would never ever allow for his establishement to corrupt best business practice and standards of decency in lending other people's money. But, the undersigned would never be made manager of that branch because he would refuse to spend sleepless nights thinking how to multiply those profits which are the only criterion of success.
Now what do you do to become president of a bank? Here is one example of creativity rewarded:
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Beyond Scarcity ...
BTW, just to clarify, I never stated that it was "all government's fault". I personally believe that the main cause of the financial meltdown was three-fold:
1. Government setting interest rates (artificially low), and promoting home ownership, through Fannie Mae and Freddie Mac as a social/political goal, and then pressuring the banks to make their lending standards lax in order to promote that. The MAIN cause of the bubble was the U.S. government setting interest rates too low (in a true free market, the bubble might not have been caused, because in a true free market, interest rates in the years 2001-2007 would have set themselves much higher, and thus the bubble would not have formed).
2. The global liquidity glut, caused by the fall of the USSR in 1991, and "too much" cash sloshing around the world's financial markets.
3. Lack of a sound overall financial regulatory and legal framework. In essence, we have a legal framework from the 1980s or maybe even the 1950s, which seems inadequate to today's world.
I dislike "greed" as a motive, because it assumes for example, that people are greedier now than, say, in 1995, and I just don't believe that. And my second question would be, can government be "greedy", or is it just private enterprise ? Does greed stop when a person enters government ? Is Obama "greedy" by wanting so much money now ? As Milton Friedman would say, "who is greedy?", "is the government greedy ?". (greedy for power ?). "Who are these angels that are not affected by this primary human drive ?". (socialism assumes that there are these "angels" out there who will be divorced from such base human drives as greed, and as Friedman points out, that is a very dangerous illusion).
I personally find it a bit ironic that the main (not the sole) cause of the bubble was distortions of the market (the capital market and housing market), caused by direct government actions. And now, the "solution" is of course, more distortion of the market and more debt. It really is ironic.
BTW, a good article by Stanford University Economics professor John Taylor, on what caused the crisis: http://www.stanford.edu/~johntayl/FCPR.pdf
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Beyond Scarcity ...
Originally written by John Bunch on March 13, 2009 6:42 PM
I dislike "greed" as a motive, because it assumes for example, that people are greedier now than, say, in 1995, and I just don't believe that.
This would make for an interesting topic. Globally, not individually, speaking I think that manking was greedier (the technical term is "more innovative") in 2008 than in 1995.
I already illustrated that in the first paragraph of Post #159270 and would now also refer to a couple of highlights from the timeline in Post #157014, such as the years 1997 and 2003. I am sure that human "innovation" and "creativity" will find brand new forms after the current crisis.
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 11, 2009 8:10 PM Well, I think that it is safe to say that most countries would love to have "Canada's problems". If you compare Canada to almost any country, Canada is a model of peace and prosperity, by any measure. And a bit of "friction" liguistically can make things interesting.
Linguistic diversity is a major impediment to democracy, and linguistically diverse countires tend to either be 1) un-democratic (many African states), 2) of limited effectiveness (India), 3) unstable (Belgium, Russia) or 4) successful and democratic only through a federal system in which the central government is comparatively weak and different linguistic/cultrual regions are granted substantial autonomy (Canada, Switzerland, Spain).
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 14, 2009 3:00 AM I agree, but Russia is not linguistically diverse.
Not true. While the Russian language is predominant in most of the Russian Federation, approximately 100 languages are spoken in Russia, some of which by substantial numbers (Tartar, for example has over 5 million speakers), and other languages have co-official status along with Russian in many of the republics within the country's political system. Chechen, for example, is official within the Chechen Republic, and Ossetic in the Republic of North Ossetia-Alania. Both of these regions have proved to be the sources of immense instability.
Of course, the former Soviet Union was even more linguistically diverse, which was, as history demonstrated, highly unstable. Whether the Russian Federation will prove to be any more stable has yet to be determined.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Well, I stand corrected, David. Thanks. I didn't realize that. I thought that if you take all the "Stans" out of the USSR, it was very linguistically monolithic, but as noted, I stand corrected.
Jacek, someone once compared the financial crisis to a highway in which the police (Greenspan and the Fed and U.S. government) allowed and even encouraged everyone to speed. Pretty soon, everyone is going 100 miles an hour. Now, you could point to individuals and ask "why are they speeding", but if the government encourages it, they will do it "too keep up with the others". I think that that is what happened. Our government allowed the balloon to inflate and then was "shocked" when it burst. And yet, there were many PhDs in govenment warning of the bubble bursting. But try to explain to a politician that he needs to burst a bubble. Can you imagine if Clinton or Bush had done that ? Suddenly, everyone's 401k goes down and their house is no longer skyrocketing in value. A good way to lose an election.
... but Greenspan is not elected and it is designed that way. And he should have pulled the plug. The Fed Chairman is supposed to see the big picture and do what is right. That is why he is so insulated from politics. He is not supposed to be a media star and bask in the light of being the man who made the stockmarket skyrocket. Was it "greed" on the part of Greenspan, to want to bask in that light ?
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
The backstory on that is that Jon Stewart is a liberal and he doesn't attack Obama the way that he attacked Bush (and yes, the comedians really do miss Bush, a lot !), so he goes after easier targets like Cramer. Bush is much easier to parody than Obama, and it has been stated that one main reason that Stewart doesn't go after Obama is that he doesn't want to.
Regarding what I said about Greenspan, the private sector is also to blame. For instance, it has been shown that finance companies based their models on the notion that housing could never decline as an asset. And then the ratings agencies protected them. Also, we should not forget the more or less dysfunctional international system that also helped fuel the bubble:
- America runs trade deficits with China, year after year
- China then accumulates U.S. capital and then "reinvests" it, in U.S. real estate
This was a fundamental cause, along with low interest rates, of the bubble in housing. The fact is, our "financial architecture" was designed in the 1940s and 1950s, and is not set up to deal with the shocks caused by this "new world". I hope that "they" can find a new system that works better. What we need is regulated capitalism that allows the free market to work, without running amok.
If the observers who say that part of our economic troubles result from a mass case of narcissism, from consumers who thought they should have the house of their dreams financed on bad debt to bankers who thought they deserved eight-figure bonuses for packaging that bad debt, then perhaps we are about to be cured. Twenge and Campbell point out that the 1920s was a narcissistic era whose economic collapse led to the Great Depression and the greatest generation. Perhaps its time to dig out those Depression-era recipes for humble pie.
"At a time when some economists fear an onset of deflation, and economic certainties melt away like a drenched wicked witch, what can be learnt from Oz?
[…]
SYMBOLISM OF CHARACTERS
Dorothy: Everyman American
Scarecrow: Farmer
Tin Woodman: Industrial worker
Lion: William Jennings Bryan, politician who backed silver cause
Wizard of Oz: US presidents of late 19th Century
Wicked Witch: A malign Nature, destroyed by the farmers' most precious commodity, water. Or simply the American West
Winged Monkeys: Native Americans or Chinese railroad workers, exploited by West
Oz: An abbreviation of 'ounce' or, as Baum claimed, taken from the O-Z of a filing cabinet?
Emerald City: Greenback paper money, exposed as fraud
For gamblers, a near miss at a payoff can trigger the same neurological reaction as winning, according to Science News. Even if the subjects lose money, having two cherries line up in a slot machine, with a third one close by, can activate the same areas of the brain as a win. After a near-miss, the subjects reported that they wanted to gamble more, which could explain some of the allure of gambling. ...
* * *
Imposing a distance on wealth, by calling money “stocks” or “derivatives” or “mortgage-backed securities” makes it easier for people to cheat, behavioral economist Dan Ariely told the TED conference. Ariely’s research has also found a social factor in cheating, where people feel more comfortable lying when they know that others in their social group are lying, too. The distance factor and the social factor have converged in the stock market, and in places like Enron, where money doesn’t seem like real money and cheating runs rampant. You can watch the whole talk below: How the Stock Market Encourages Lies
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Regarding:
"If the observers who say that part of our economic troubles result from a mass case of narcissism, from consumers who thought they should have the house of their dreams financed on bad debt to bankers who thought they deserved eight-figure bonuses for packaging that bad debt, then perhaps we are about to be cured. Twenge and Campbell point out that the 1920s was a narcissistic era whose economic collapse led to the Great Depression and the greatest generation. Perhaps its time to dig out those Depression-era recipes for humble pie."
My comment: the 1930s and 1940s were horrendous times for the world ! Let's just recall what followed "narcissism" (I personally don't think that the 1920s were that bad, compared to what came before and what came afterwards !): fascism in Italy and Germany as the "cure" to the problem, and in half the world, a murderous socialism which would commit mass murder to "save" mankind.
I will take 1920s-sytle greed over that any day !!!
I find it really disconcerting that people are so blithely talking about the 1930s as a "cure" (the worst year for the U.S. economy was not 1929, but 1937, about 5 years into FDR's New Deal). As Nobel-Prize winning economist Gary Becker (U-Chicago) has pointed out recently, even if you assumed the worst, and we head into a depression, the average growth rate for the entire world, since the free market revolution by Reagan and Thatcher in 1981, would still be 2.7 % per year [from 1981 to 2008] (it is over 3.5 % per year for the world, without the current mess being a real depression). And as Becker points out, capitalism lifted more people around the world out of dire poverty than socialism ever will. To now throw that growth rate out the window for protectionism and 1930s-style central planning, would be a huge distaster for the world (and might even set the stage for the type of major wars that the 1930s set up, a decade later).
The "cure" for bad capitalism is better capitalism, not central planning and statism.
Mother tongue: English Joined: November 2, 2002 Location: United States
RE: Understanding the Financial Crisis
The debate is not about capitalism versus socialism. It's about making capital work for people and not just for wall street assholes who play with numbers to create paper weatlh. Your Republican fundamentalism is so boring so is all this exceptionalism. People from other countries must read these posts and think: there goes another American who is trying to shove his discourse down everybody's throat. And those people would be right. We don't need elucidators of the dominant ideology. Late night television is much better at it. At least those guys are funny.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Jane, maybe we can let the others decide for themselves what they think of my post. As for being a "Republican fundamentalist", that is just a label that you decided to throw around (in my post, I was mostly quoting the "Financial Times", and an essay by Nobel Prize-winning economist Gary Becker [U-Chicago]; so if that makes me a "Republican fundamentalist" in your mind, well, so be it, but your label doesn't fit well.
Regarding capitalism vs. socialism: you don't think that is a topic of debate these days ?? That is almost the only thing one hears today (recent Newsweek cover: "We are all Socialists Now"), and the Left (or at least some on the Left) has come out very strongly for it, stating that they want statism and a very strong government control of the economy and a "New New Deal". This is a huge topic of debate, all over the world.
I have noticed a tendency on the Left of trying to "end the debate" by basically accusing the person they are debating with of having "base" news sources, or "being like the guys on radio [or TV". Obama and his team have done this with the entire GOP, basically trying to tie them with Rush Limbaugh. I constantly hear "Fox News" being used as that kind of bogey-man, to try to "end the debate", and unfortunately, you are using this same rhetorical debating device to try to end the debate, accusing me of being "like the guys on TV" or whatever phrase you used.
This thread is a place for people to discuss topics of the day with each other, not to make accusations and toss (cheap) labels at others.
BTW, I opened this thread with the first post in it, so maybe I get to decide what is "off topic" here.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Welcome to the Forums, David. People hate me when I do this instead of politely answering questions in an original way, but maybe you will find interesting the following threads:
Originally written by David Fleischer on March 21, 2009 11:09 AM
And how has the financial crisis affected the translation sector?
Hi David,
Welcome to TC.
The translation sector is likely affected in different ways depending on where you live and what language combinations you can handle. Have you had less work or more work in the last five - six months?
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
I will reply here to Post #172002 because I think that answering this kind of questions may help to understand the reasons of the financial crisis, which is what this thread is about.
Originally written by Nanna Mercer on March 21, 2009 12:24 PM
... hoped to rent the apartment out for a while and someday sell it for a nice profit. ...
But... what was exactly the value he added to the world so that he wanted to make profit on it? When I receive as raw material a source text, I use all the know-how which cost me a lot of work to create over the years to process this source text and transform it into a target text, while all the time using additional work, time and resources. Will someone, please, tell me exactly what the collapsed Madoffs and AIGs tangibly contributed to the world so that they dared to charge all those millions and... keep charging them by way of hefty bonuses? What is the added value for which the protagonist of the piece above was hoping to earn "a nice profit" one day? Some nice improvements to the condo?
Mother tongues: English, Italian Posts: 3 Joined: March 3, 2009 Location: Israel
(removed)
RE: Understanding the Financial Crisis
And so we're getting into philosophical issues... the answer is that business is a very non-linear phenommenon, unlike work and education. Society is willing to reward someone who is only a fraction smarter of faster by a reward which is not proportional. This leads to impossible schemes such as MLM and such, where the ones who reap the rewards do no work at all. Maybe this is the connection between the Madoff activities and the dynamics of the stock market in the US. Every ten years or so there is a crash related to a "sub-prime" equity. Maybe the US financial market, and society as a whole, have a tendency towards Ponzi schemes.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by David Fleischer on March 21, 2009 1:41 PM
the ones who reap the rewards do no work at all.
Well, they do work but, as you said, their effort is not proportional to what they produce. (See fly-by-night translation agencies operating as Web mailboxes.) Our condo protagonist did spend time and effort locating a suitable condo and lender, coming up with the down payment, and eventually looking for a tenant and then a buyer, but what he produced in the meantime is zilch. So I hate to say it serves him well in the end, because the crisis he contributed to by speculating, i.e., dealing in illusory values and thus inflating the bubble, has affected also those who needed apartments to meet their real residential needs. Yes, that particular co-culprit got punished but so did others who were, for the time being, innocent. Of course, next time around, with the next inevitable bubble as you say 10 years from now, today's innocent will be as 'guilty' as the delicatessen guy from Nanna's NYT story. I put 'guilty' in quotation marks because we are simply talking about human nature which, as history has taught us, is uncontrollable. Maybe, just maybe, people are not driven by "something like self-expression, certain inner values, a search and longing for beauty both in its finding and creation" to the extent we think they are.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I think that human psychology has a lot to do with these bubbles, as does a lack of understanding of basic economics. I mean, how many people in the 1990s bought into the "New Economy" thing, and the notion that "the old laws of economics" no longer apply ?
Bubbles have been occurring with regularity since at least the 1600s, and they occur in all countries at all times, from the most regulated (Japan 1990), to less regulated (some Asian countries in the late 1990s). Some of the most regulated industries in the U.S. were caught up in the bubble.
BTW, the new tax on AIG and financial company employee bonuses is already having a perverse side-effect (unintended consequence): it is bleeding talent from U.S. financial companies, and the Europeans are profiting from that, already:
"In Frankfurt one employee at a US investment bank said the new tax measures would “send [the US] back to the stone age”.
“Commodity traders are already moving to companies like BP where they can make as much money as they used to,” said another banker at a US firm.
Bankers at Deutsche Bank said it could benefit from the proposed legislation by poaching its US rivals’ most talented employees." (source: "Financial Times", March 21, 2009)
Mother tongue: English Joined: November 2, 2002 Location: United States
RE: Understanding the Financial Crisis
You clearly have a propagandistic agenda and it is clearly right wing. And it is tiring and old and boring. And I'm calling it like it is, even if no one else will. A flood of posts that go on and on about anything and everything under the sun using broad political categories to criticize and belittle just about everything.....and this is my last post as I think this is really a waste of time.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
We have had the most bizarre stuff put up on this site (example: people blaming the U.S. for Sep.11, 2001), and I don't recall you posting that they had a "propagandistic agenda". You seem very selective in that.
BTW, I am a libertarian, not "right wing". I believe in personal freedom in all things.
I have actually been contacted by people who read my posts (my rants, as you might call them), and wrote me to thank me for expressing them. I think that if my posts were as you state, that would not happen.
Mother tongue: English Joined: November 2, 2002 Location: United States
RE: Understanding the Financial Crisis
One last thing before I quit this discussion: Statements such as: I think everyone thinks he or she is being objective....are quite misleading. I think all opinions are SUBJECTIVE. See: philosophy: Subject Versus Object.....Opinions come from Subjects. People. And I, on the contrary, know my opinions are subjective, as are all opinions, that they come from me as a person and concern Objects. And I never forget that when I am speaking or writing.
Anything produced, written, or spoken by a human being is subjective. We are not objects. We talk about objects. The subjectivity of opinion is not "bad" or incorrect. But it is of the person. And it needs to be owned. And arguments are constructed subjectively...what was the point of my saying all this? To criticize the myth of objectivity, which is total hogwash, and typical of a certain kind of naiveté prevalent among certain Americans, especially, the press. There is this myth that a reporter can be "objective"....whenever one looks at or examines an object, one's subjectivity comes into play. Even science is done through subjects. The scientist is the ultimate subject as it were..
Mother tongues: Polish, English Posts: 2906 Joined: September 13, 2008 Location: United States
RE: Understanding the Financial Crisis
Originally written by Jane Lamb-Ruiz on March 21, 2009 10:58 AM
One last thing before I quit this discussion: Statements such as: I think everyone thinks he or she is being objective....are quite misleading. I think all opinions are SUBJECTIVE. See: philosophy: Subject Versus Object.....Opinions come from Subjects. People. And I, on the contrary, know my opinions are subjective, as are all opinions, that they come from me as a person and concern Objects. And I never forget that when I am speaking or writing.
Anything produced, written, or spoken by a human being is subjective. We are not objects. We talk about objects. The subjectivity of opinion is not "bad" or incorrect. But it is of the person. And it needs to be owned. And arguments are constructed subjectively...what was the point of my saying all this? To criticize the myth of objectivity, which is total hogwash, and typical of a certain kind of naiveté prevalent among certain Americans, especially, the press. There is this myth that a reporter can be "objective"....whenever one looks at or examines an object, one's subjectivity comes into play. Even science is done through subjects. The scientist is the ultimate subject as it were..
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Well, I agree up to a point. A lot of things in life are subjective. But for instance, Einstein did not believe that ALL things are subjective. He once said that just because in the physical world there is relativity, that doesn't mean that he believed all things are subjective. I think that if you read Immanuel Kant, you get a picture of this: there is subjective reality in the physical realm, but there are moral absolutes too.
Unfortunately, for the past 50+ years, we have been teaching kids "value-free education", and one result of that has been the mess we are in financially now. (I am sure that Madoff would find the notion of there being no objective reality to be comforting, for instance).
I was listening to NPR, and most of what I just wrote was reflected by the person being interviewed, whose name is Rush Kidder. He runs a website on global ethics, and does a lot with global ethics:
http://www.globalethics.org/
At a risk of going off on a tangent, Kidder states that there are some very objective ethical things that all people believe in (in his experience of travelling around the world and talking about ethics), and they are for instance:
- Honesty
- Responsiblity
- Keeping one's word
- Respect (for others, for oneself, etc.)
- Compassion
Those are the universals. Of course, "postmodern discourse" and "values-free education" would deny that there are absolutes, but I think that the vast majority of people know that there are absolutes, and live their lives as if there are. [If you want to read a very funny parody of postmodern education and the notion that everything is subjective, pick up the book "Postmodern Pooh", a series of invented essays by U-Cal Berkley literature professor F. Crew, in which modern Crit-Lit professors "deconstruct the Winnie the Pooh story". A very, very funny skewering of the entire postmodern movement in literature.
Originally written by Jane Lamb-Ruiz on March 21, 2009 4:09 PM
... I'm calling it like it is, even if no one else will. ..
The last time, many years ago, I heard someone say, 'I am just telling it like it is' I objected to his "telling" on the grounds that being drunk, he thought that he could somehow let loose and obnoxiously tell a few "truths" as he saw them.
Since then I have not been subjected to such "telling" and one reason could be that I stay away, way away, from drunks of any kind.
Whatever the reason (and drinking need not be the reason), someone thinks he has the right to tell a few unsolicited truths that are likely untrue, it is surely counter-productive since, in my opinion, this particular type of "telling it like it is" is not directed towards the possible understanding of a higher purpose, but merely a way to get rid of some static aggression at the expense of the other.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 21, 2009 5:26 PM
Kidder states that there are some very objective ethical things that all people believe in (...), and they are for instance: - Honesty - Responsiblity - Keeping one's word - Respect (for others, for oneself, etc.) - Compassion Those are the universals.
While I agree that those should be human universals, they are not objective at all.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Jane Lamb-Ruiz on March 21, 2009 5:51 AM
...and not just for wall street assholes who play with numbers to create paper weatlh...At least those guys are funny.
Would this be what the financial gurus call "recognition of negative goodwill" or would it be "marking to market" in order to reflect the actual worth of things?
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
I frequently disagree with John, but I think it is entirely inaccurate to label him as a Republican "fundamentalist" (whatever that is). John's philosophy is rather complex and not readily reduceable to simplistic labels. His opinions often show substantial thought, even if I don't agree with them.
Documents turned over to the office of Connecticut's attorney general by American International Group (AIG) show the company paid out 218 million dollars (£150m) in bonuses, higher than the 165 million dollars (£114m) previously disclosed.
Attorney General Richard Blumenthal's office received the documents after issuing a subpoena.
Mr Blumenthal said the documents show that 73 people received at least 1 million dollars (£690,000) apiece, and five of those got bonuses of more than 4 million dollars (£2.76m). ..
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Nanna Mercer on March 21, 2009 8:43 PM
Mr Blumenthal said the documents show that 73 people [AIG employees] received at least 1 million dollars (£690,000) apiece, and five of those got bonuses of more than 4 million dollars (£2.76m). ..
I didn't undertand the Financial Crisis until I heard B. Obama repeating on Jay Leno's show the mantra that AIG could not be allowed to fail because that would have brought down the entire US economy.
And then today on another channel I heard a detailed explanation of why Italy could not crush the Mafia because that would bring down the entire Italian economy, of which the Mafia's turnover represents about 40%.
I am not really sure about the 40% figure but now suddenly everything is crystal clear.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Hi David (and others), thanks for your support and your kind words.
I think one problem with the Internet in general is that we don't really know each other, and thus, the tone is removed, and one can perhaps assume too much from various posts. And yes, we do have differing opinions on this forum, and I hope it remains that way. Christopher Hitchens is going to be in town this Sunday and will be talking about his atheism at a local Christian conference. There will be very spirited debate, but in the end, the overall tone will be friendly. I think that is great too, that that can happen.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 22, 2009 1:23 AM
we do have differing opinions on this forum, and I hope it remains that way. Christopher Hitchens is going to be in town this Sunday and will be talking about his atheism at a local Christian conference. There will be very spirited debate, but in the end, the overall tone will be friendly. I think that is great too, that that can happen.
Bringing together diverging opinions is important. Otherwise, we would be in a circle of mutual adoration here and for that we have various circles in town already: the parish or congregation, animal rights organizations, various political parties, etc. All pretty much to the exclusion of everybody else.
This anti-anger consensus among our political elites is exactly wrong. The public rage we're finally seeing is long, long overdue, and appears to be the only force with both the ability and will to impose meaningful checks on continued kleptocratic pillaging and deep-seated corruption in virtually every branch of our establishment institutions. The worst possible thing that could happen now is for this collective rage to subside and for the public to return to its long-standing state of blissful ignorance over what the establishment is actually doing.
It makes perfect sense that those who are satisfied with the prevailing order -- because it rewards them in numerous ways -- are desperate to pacify public fury. Thus we find unanimous decrees that public calm (i.e., quiet) be restored. It's a universal dynamic that elites want to keep the masses in a state of silent, disengaged submission, all the better if the masses stay convinced that the elites have their best interests at heart and their welfare is therefore advanced by allowing elites -- the Experts -- to work in peace on our pressing problems, undisrupted and "undistracted" by the need to placate primitive public sentiments.
While that framework is arguably reasonable where the establishment class is competent, honest, and restrained, what we have had -- and have -- is exactly the opposite: a political class and financial elite that is rotted to the core and running amok.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Jacek K. on March 22, 2009 12:55 PM
quoting The Wall Street Journal: While that framework is arguably reasonable where the establishment class is competent, honest, and restrained, what we have had -- and have -- is exactly the opposite: a political class and financial elite that is rotted to the core and running amok.
Reading some of the messages in this thread and watching some of the US TV channels available in Europe (CNN, CNBC, Bloomberg) I cannot help getting the impression that the entire US has relapsed into a totally debilitating neurosis, the like of which this world has never seen before.
OK, so unbridled capitalism has collapsed, so what? Communism collapsed too but the same people are still there and everybody is doing a lot better than before and only a few incorrigibles dream of getting back to the bad old ways.
Why then is the (seen from Europe) visible US ignoring the obvious lesson and frantically planning and striving to get back to their bad old ways? And using all the same bad old discredited methods to get there?
Almost every day I am get e-mails from US-based "investment advisers" exhorting me not to miss this opportunity to "make a killing out of the recession", "get my share of the bail-out money", "be one of the rich getting richer rather then the poor getting poorer", etc. effectively: to position myself financially to make the maximum advantage for myself out of other people's misfortune (yes, I know, many of the world's richest lost a packet - but the claim is that they mostly fell on their feet and are ready to spring up to new heights when the "recovery" comes while the others settle down to their well-deserved lower standard of living).
Isn't it time for the USA to consider shifting to a European-style social market economy? All that is the very worst in the European economy appears to be centered around those who decided to follow US practices and ended up dragging everybody else down into the merde.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Interesting posts. Let me start off with the last point. The "Economist" magazine actually dealt with this last week (is the U.S. becoming more like Europe, or should it). One point is that Obama has very little connection to Europe. His roots are in Kenya, Kansas, and Indonesia, and he only mentions Europe very briefly in his books, if at all. So to him, Europe is not some kind of model (whereas Bill Clinton had studied in Europe).
Secondly, yes, there are some aspects of western European social market economics I would like to see here. For instance, Sweden and Holland allow school choice and vouchers, and we in the U.S. do not, in our public schools. The German and French corporate tax of 25 % is much more competitive than our high 35 % corporate tax, so I would also like to see that.
But let's also not forget that there are big differences in Europe. French economic practice is not the same as Swiss or Italian ! The Swiss do a LOT of things right, and to be honest, I would emulate a lot of what they do (universal health care, combined with private competition among health insurance providers, to keep costs down). The Swiss have low taxes and their state sector is lower than the U.S.'s and they have a far more free market system than the U.S.
Originally, in Germany for instance, the government was supposed to only play the role of a referee, and not that of a "nanny" or protector. If you read the original theories behind the "Wirtschaftswunder", and Karl Schiller, you realize that what they originally planned was a much less, but much more effective state. I think that the role of the state in the U.S. and Europe should be:
a. To prevent cartels from dominating the country and fixing prices among themselves
b. To guarantee a "level playing field" for free market competition
c. To provide a basic "safety net" for anyone who cannot afford it, due to for instance, old age and/or physical or mental disability.
d. Provide security with justice, through the police
e. National security
However, there are things that the Europeans do that I would not emulate. Barring agricultural products from outside the EU is bad policy. All the guilds in Germany that make opening a business prohibively costly and time-cosuming, increase unemployment. British health care is a disaster, in my view. I don't like the British "police state", in which it is now illegal for instance to photograph a policeman. The French state can detain anyone for up to 55 days without charges being filed. The Italian economy is basically in permanent decline (with garbage left on the streets of Naples for weeks, due to persistent union strikes). Do I need to mention Greece and the 3-weeks of rioting and looting by disgruntled youths in Athens ? How about the fact that youth unemployment in Spain and France is over 20 % ?
Let's not forget that France, Italy, and Germany have underperfomed for about 30 years, and, in my view, would be much richer, more powerful countries, had they not implemented all the "protections" that they did. Germany recently has done a very good job at the company level of being successful, despite the high regulations, and France has also done o.k., but I really believe that they would be far richer, had they gone in a more free market direction.
Switzerland is for instance, what that would look like, because they have a far more free market situation there than even the U.S. (there is a reason that the Swiss are, per person, so rich !).
I also think that there is a reason why the big western European countries have center-right govenrments (Merkel in Germany, Sarkozy in France, Berlusconi in Italy). It is because, even though socialism has much appeal for Europeans on an intellectual level, most Europeans also know - through bitter experience - that there is a big downside to socialism and protections. So right now, the U.S. has a far more left-of-center government, than, say, France or Germany. I personally think that it is the Americans who are in for some shocks in future, when they find out what that type of economy means for them, and what it does in terms of growth, prices, inflation, unemployment, personal wealth, and personal choice.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 22, 2009 5:40 PM
The Swiss do a LOT of things right, and to be honest, I would emulate a lot of what they do ....
Switzerland .... they have a far more free market situation there than even the U.S. ...
This is not going to be a value judgement, just a personal opinion: I would never ever trade the latter country for the former, so please don't scare me...
Mother tongues: Polish, English Posts: 2906 Joined: September 13, 2008 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 22, 2009 11:40 AM Interesting posts. Let me start off with the last point. The "Economist" magazine actually dealt with this last week (is the U.S. becoming more like Europe, or should it). One point is that Obama has very little connection to Europe. His roots are in Kenya, Kansas, and Indonesia, and he only mentions Europe very briefly in his books, if at all.
For some strange reason, he does not sound to me like a stereotypical Kenyan, Kansas dweller or an Indonesian. He sounds to me, having in mind his ideas and his whole way of being, as an open-minded American, exhibiting also a lot of European characteristic of well educated people. Maybe it is just the way he is, or perhaps Harvard had something to do with it: I do not know.
Not that there is anything wrong with those places: they just seem very distant to me in relation to Obama.
Mother tongue: English Joined: November 2, 2002 Location: United States
RE: Understanding the Financial Crisis
. So right now, the U.S. has a far more left-of-center government, than, say, France or Germany. I personally think that it is the Americans who are in for some shocks in future, when they find out what that type of economy means for them, and what it does in terms of growth, prices, inflation, unemployment, personal wealth, and personal choice.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
So you think that Angela Merkel, who is the CDU (Christian Democrat) Chancellor, is to the left of Barack Obama and Nancy Pelosi ?
I might be inclined to believe that the majority of French politicians are to the left of Obama and Pelosi, but Sarkozy isn't. And Berlusconi is not to the left of Obama.
The truth really is that there are left-wing, socialist parties in France, Germany, and Italy and Switzerland, but they have not done very well recently. Segoline Royal was pretty roundly defeated by Sarkozy, and the socialists were defeated by Berlusconi.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 22, 2009 10:17 PM
there are left-wing, socialist parties in France, Germany, and Italy and Switzerland, but they have not done very well recently.
John,
You know very well that the pendulum goes constantly back and forth so I would not draw any serious conclusions from the fact where it is now. Sooner or later it will be elsewhere...
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
And to be fair, the left-wing parties have done well in Spain and Britain. Labour has dominated British politics since the 1990s. In Spain, the Left has been successful, so it is not that there are no successful Left parties in Europe. But Labour was successful because it gave up the more atavistic elements of the old Labour movement and redefined itself. I think that all parties must redefine themselves to keep up with society, too.
No doubt, all parties must evolve and change with society. Nothing, or very little, is static in life.
I personally would like to see the Republicans "evolve" [now I am in trouble !!! ] into a more libertarian, and less moralistic party (in short, I would like to see them be more "western" [the U.S. West] in their conservatism, and less "southern"). I would also like to see the GOP represent people more and big money less, and be far less obsessed by religion and social issues like gay marriage and abortion.
As for the Democrats, I would like to see them less dominated by the coasts (Vermont, San Francisco) and by the obsession with race and gender. In short, less obsessed by the 1960s and its themes of class, gender, race, and class warfare ("identity politics"). I would also like to see them represent real individuals, instead of groups and special interests.
Actually, if both U.S. parties became more "western" (i.e more "live and let live"), and less moralistic and polarizing, it would be a huge success. The vast majority of us Americans fall somewhere between the extremes of the Christian Right southern Baptist and the far-Left liberal in San Francisco or Berkeley, and it would be kind of nice if our politics reflected that (but gerrymandering makes that hard, as does the entire polarized debate atmosphere).
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
From a review of
Payback: Debt and the Shadow Side of Wealth
by Margaret Atwood
Toronto: House of Anansi, 230 pp., $15.95 (paper)
[snip] Atwood's project is to show how human thought has been deeply shaped by notions of debt. ...
In Christianity the relationship between humankind and the divine is represented in terms of borrowing and lending:
Christ is called the Redeemer, a term drawn directly from the language of debt and pawning or pledging.... In fact, the whole theology of Christianity rests on the notion of spiritual debts and what must be done to repay them, and how you might get out of paying by having someone else pay instead.
Sociologists have observed how capitalism developed using ideas borrowed from religion, with Max Weber and others observing how the belief that wealth creation is virtuous invoked Protestant ideas about an elect, divinely privileged section of humanity. As Atwood astutely comments, the conceptual traffic is not just one-way. If economic life trades on religious belief, religion has in turn been shaped by market practices. Religious beliefs about sin and redemption draw on patterns of thinking that partly derive from the practices of borrowing and lending. ...
Concepts of debt figure centrally in Western religion, while the notion that debt is something to be avoided, or incurred with caution, has long been important in Western capitalism. Without institutions facilitating borrowing, capitalism would not have developed to the degree that it has; but the belief that debt could be dangerous was until recently also an important part of capitalism. It is only lately, Atwood notes, that debt has been celebrated as positively benign, "a thing we've come to feel is indispensable to our collective buoyancy." From being a necessary tool in productive enterprise, debt came to be viewed as an instrument of wealth creation. Using cheap credit, hedge funds and investment banks were able to multiply their profits, while society at large—including some in its poorest groups—came to see taking on large amounts of debt as a way of building up capital. Now that this structure of debt is unwinding, older ideas may be on their way back: "We seem to be entering a period in which debt has passed through its most recent harmless and fashionable period, and is reverting to being sinful."—here Atwood is talking mainly of Americans, though the same is true in Britain—to enjoy the standard of living to which they had grown accustomed. The credit crunch began when some among them were persuaded to incur debts they had no prospect of repaying, debts that were packaged and sold on in complex financial instruments that few of those involved in the transactions fully understood.
From one angle Payback can be read as a defense of traditional beliefs about the hazards of debt. Atwood recalls the cautionary lessons she was taught at Sunday school in the 1940s and recounts how her mother kept an account book for fifty years, which records that "debts were always paid back within a few weeks, or a few months at the latest." What she describes as "snake-oil debt" undermined these practices. Being in debt came to be seen as an entirely normal condition. It was debt rather than current income or past savings that sustained consumption and enabled people
Implicit in Payback is the notion that we may now be returning to older and simpler practices of thrift and saving, and there seems little doubt that Atwood would welcome such a shift. Yet it looks unlikely that these old-world virtues will be rewarded in the foreseeable future. ...
In a fascinating chapter, Atwood discusses the role of debt "as a governing leitmotif of Western fiction." Particularly in nineteenth-century novels, but also in Christopher Marlowe's Doctor Faustus, incurring debts of one kind or another formed a major plot line. Debt meant more than having an obligation to discharge; it was central to the stories people told of their own and others' lives. It has a similar role today. When it becomes clear that debts cannot be paid off, it is not just that people may walk away from them—as many who were induced to take on subprime mortgages have been doing. Their trust in the society that encouraged them to incur the debts is also destroyed. Again, the shock that is felt when a major part of a lifetime's savings vanishes, seemingly overnight, does not come only from the prospect of a diminished standard of living. It comes also from the collapse of the narrative according to which people have hitherto understood their lives. ...
If Atwood's Payback contains a lesson it is that debts must be repaid. The type of political economy that operated in the US over the past twenty years, which some imagined would spread throughout the world, was based on the belief that this old-fashioned maxim no longer applied. A new era had arrived, in which sophisticated techniques of financial management could transform debt into a means of wealth creation from which even the poor could benefit.
The new era turned out to be short-lived, or else nonexistent. ...
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Sen. Charles Grassley (R-Iowa) is so angry over AIG bonuses that he said: “The first thing that would make me feel a little bit better towards them if they’d follow the Japanese model and come before the American people and take that deep bow and say I’m sorry, and then either do one of two things — resign, or go commit suicide.” http://www.politico.com/news/stories/0309/20083.html (via Harper's Weekly Review)
While media sometimes report on suicides, I have yet to hear a "Sorry"...
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Jacek K. quoting Atwood on March 24, 2009 1:55 PM If Atwood's "Payback" contains a lesson it is that debts must be repaid. The type of political economy that operated in the US over the past twenty years, which some imagined would spread throughout the world, was based on the belief that this old-fashioned maxim no longer applied. A new era had arrived, in which sophisticated techniques of financial management could transform debt into a means of wealth creation from which even the poor could benefit. The new era turned out to be short-lived, or else nonexistent.
Isn't that what is colloquially called "boom-and-bust" economics? By talking about "recovering" from or "jump-starting" the present state of the US economy and "it is going to get better soon", the politicians are merely pining for those same bad old days.
Why is it so difficult to accept that things are not "going to get better soon", that the US economy is not going to "recover" and it is not going to be "jump-started". The US economy is now back down to base-line where it belongs, this is it, folks! The only way to get it "back up" again would be to start another gigantic Ponzi scheme, another national confidence trick, and that is unlikely to happen any time soon.
No, face up to it, folks. This is the way it is going to be or even worse still if by "printing" endless amounts of money and thus devaluing the currency, the final step is taken into the abyss. What they are doing now is not even printing money, all they do is set a counter in a computer to another new value and carry on from there.
It seems to me that there ought to be some clear distinction between those two different types of dollar, real dollars backed up by a strictly limited supply of paper notes (dollar bills or $p) and imaginary dollars ($i) that exist only in people's minds. Somebody buys a house for $p500,000 with real dollars and then a year later hears that the value of his house is now $600,000. Where is that $i100,000 difference to be found? It can't be found anywhere, they do not exist and never have, they are imaginary dollars. We see headlines saying that a trillion dollars was wiped off equity values on the stock exchange overnight. Where did they go? Nowhere, they never really existed!
The same applies to the trillion dollars that Obama wants to use to help out the US banks. Where is he going to get them from? Why, nowhere, they are imaginary dollars, so all he has to do is to imagine them and they are there.
What I would like to see is an understandable explanation of the economic theory that makes that kind of manipulation possible!
What is the downside to it, if there is one? Isn't the whole thing nothing more than yet another massive confidence trick? Fooling all of the people some of the time? Has anybody really thought this thing through? If not then the awakening when it comes is going to be terrible indeed.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on March 24, 2009 11:52 PM [The same applies to the trillion dollars that Obama wants to use to help out the US banks. Where is he going to get them from? Why, nowhere, they are imaginary dollars, so all he has to do is to imagine them and they are there.
Are you suggesting that U.S. treausries are akin to mirages? Is that why China just suggested that international reserves be based on a new currency based on IMF drawing rights?
Mother tongue: English Joined: November 2, 2002 Location: United States
RE: Understanding the Financial Crisis
Derek: It's not just the 100,000 part of the "value". It's the 500,000 also. Any Value is given by the Market's Willingness to Give Something a Value. In other words, in this view, there is no intrinsic value, just market value. (That is the Adam Smith : Invisible Hand).
That is precisely why there is a problem, Houston. As long as numbers are somewhat low, it works. With bubbles (really high numbers), it doesn't. Also, he invented the Labour Theory of Value, taken over by Marx to explain the place where value is created. "Modern" economists say Pfft...it's all about supply and demand...and price. Which brings us back to that invisible hand....And this guy seems to have a good round-up of this:
And my big however, here, is that labor, by not being allocated a value, is a pawn. The argument that only the people who "start" something by "risking" their "capital" should reap the benefits is highly moot (debatable). After all, it takes a match of Capital AND Labor, to make anything work...You can have all the capital in the world, but without people working, you ain't gonna get a return.
So, there is a Point where argument breaks down on both sides and it becomes a question of Belief, just like religion, imo....do you believe that the capital-side people deserve mostly everything? Or do you believe that the labor-side people deserve mostly everything? OR, is it reasonable to say that ONLY the relationship BETWEEN capital and labor makes production and a return possible? If one answers yes, to that last bit, then, as even Ole Buffet says, his secretary should not be paying the same Rate of Taxes as he does. (He believes in a progressive rate).
And, I say that in the US, there is taboo, basically, re the labor bit. For example, at Dunken Donuts, they pay the employees basically, just a smidgen over minimum wage. It is not a living wage. Now, the owners seem to make several million on one shop per year. Wouldn't it be Reasonable, if the owner makes One Million a year in Clear Profit, for his employees to make, say, 35, 000 a year? Even if he is giving up, say, 300,000 a year to make that possible? In other words, shouldn't there be some kind of reasonable ratio here? Or should we just say to hell with labor and workers and allow the capital side of the equation to rule? That is the brass tacks of the issue for me. I think that there needs to be pricing of the social value of entreprise....and since Reagan, the only ones who seem to matter are the folks on the capital side. It seems to me that it is inherently unfair to always come down on the capital side, because of the "risk" factor. It's just bull...Without the labor side, there would be a Big Zero.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Chapeau bas, Jane.
Originally written by Jane Lamb-Ruiz on March 24, 2009 5:34 PM
Now, the owners seem to make several million on one shop per year. Wouldn't it be Reasonable, if the owner makes One Million a year in Clear Profit, for his employees to make, say, 35, 000 a year? Even if he is giving up, say, 300,000 a year to make that possible?
The problem with this model that I see is that while corrections do get occasionally implemented (like with the AIG bonuses), the system, which remains dynamic, quickly offsets them. Why? Because the essence of capitalism as we see it is not to make profit but to increase that profit year after year indefinitely. This is the kind of news the stock exchanges always apparently wait for: Profit (no doubt that it is always there) was in the last quarter not as high as anticipated, hence the sell-off. Why would sharks, piranhas and hyenas (not the small folk to start!) liquidate their investments? Not because they want a return on their capital but because they want a higher return than last year. Indefinitely!
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Jacek K. on March 25, 2009 12:54 AM
Why would sharks, piranhas and hyenas (not the small folk to start!) liquidate their investments? Not because they want a return on their capital but because they want a higher return than last year. Indefinitely!
When extrapolated, would that mean the US treasuries would one day be marketable to loansharks only?
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Shiong-Fong Lew on March 24, 2009 4:31 PM Are you suggesting that U.S. treasuries are akin to mirages?
US treasury bonds are far less than a mirage. You can photograph a mirage but you cannot photograph the value of a US treasury bond because it does not have an intrinsic value. As I understand it, they were first issued to help pay for WWI and when that was over and the bills matured, the US treasury did not have enough surplus to be able to redeem them so they had to borrow some more - and have never managed to get out of the mess even to this very day. They are sold at a discount and are auctioned off so their value depends on the result of an auction. If, or when, the day comes that big buyers no longer want or trust them (or for some other nefarious reason) and no longer bid for them then good night!
Is that why China just suggested that international reserves be based on a new currency based on IMF drawing rights?
It is pretty obvious, to me at any rate, that the future world economic system will be based on the Chinese system. So far it works where all the others have failed. The time to give it a try will come when the Chinese decide that it has come, and US currency gets devalued 100:1 to reduce the crushing national debt to manageable proportions.
Thereafter the world will no longer trade on the basis of the US dollar and any future US debt will not be in dollars but in some other currency and then the US will get to know what hard times are.
That is my economic theory and it keeps me awake at night.
AFTERTHOUGHT a la Nostradamus: That might then mean the end of the Union because some states would be in a better economic position than others and would try to save their skins by seceding. Some of the states would probably emerge as majority Spanish-speaking states. Nobody except a few nut cases would have the stomach for another Civil War but somebody might very well get the idea to burn Washington DC down to the ground just in case.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Regarding China, there are those like billionaire Jim Rogers, who totally believe that China will be the country of the 21st century. Rogers has even gone so far as to move to Singapore (mainland China has too much air pollution for him) and teach his child Mandarin. Rogers also sees the U.S. in relative decline, and Asia in the ascendency.
There are however, others, who take the opposing view. For instance Stratfor (Strategic Forcasting) CEO George Friedman sees China in the 21st century in decline: fracturing economically between a rich coast run by the Japanese corporations, and an interior of impoverished peasants, in an increasingly arid and desert-like interior (not to mention the Islamic population challenge in the western part of China). Friedman shows how Chinese history is full of such periods of disunity and regional conflict. Friedman points out that up to 65 % of assets on Chinese banks are "non-performing" (i.e. bad and will not be recouped), and that this will be a major problem for China. Friedman feels that Japan will be the Asian country of the 21st century, because it is now, per person, vastly richer than China, and will continue to hold that lead.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 24, 2009 9:25 PM There are however, others, who take the opposing view. For instance Stratfor (Strategic Forcasting) CEO George Friedman sees China in the 21st century in decline ... Friedman points out that up to 65% of assets on Chinese banks are "non-performing" (i.e. bad and will not be recouped), and that this will be a major problem for China.
On the other hand, it might be better for the US if China does well. I see tonight that China has announced that they are going to buy up more US debt. What happens if one day China calls in that debt, even decides to foreclose? Can't you see the US population getting notice to quit? Five hundred million Chinese waiting to move over as soon as the premises are vacated?
If I was living in the US I am sure that I would be carefully assessing my long-term prospects, if any.
In colloquial English, China has the US by the short and curlies. They don't need an army to confront any US threat, all they need to do is to get the US to default and you all will be well and truly scuppered. I don't expect for a minute that they would do it but it sure must be comforting to them to have that weapon in the hand.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Jane Lamb-Ruiz on March 24, 2009 4:34 PM It seems to me that it is inherently unfair to always come down on the capital side, because of the "risk" factor. It's just bull...Without the labor side, there would be a Big Zero.
I get your point but you haven't mentioned "growth". The capitalists appear to believe that the beginning and end is "growth". Once you have "growth", the economy is healthy, without it we are toast.
I read somewhere that productivity increases almost everywhere longterm at 2.5% per year. That means that for employment to remain the same production also has to increase at 2.5% for the economy to be at a standstill. Long-term that can only mean that eventually the earth wíll be buried in products and nobody will have a job or be able to buy them.
I can't help feeling that this craving for increased productivity is at the root of our problems. Maybe we should try for negative growth, reduced productivity, more manual labor, ban the electric motor, for example.
I hear people on the business channels predícting that gold will be all "used up" by 2043. They cannot really be "using up" gold. What they mean is that by 2043 all the gold will have been extracted, converted into ingots and buried in vaults. This means the total collapse of a vast gold mining and refining industry and an urgent bail-out will undoubtedly be required. When they extract gold, they also extract silver at the same time so that branch will collapse as well. Homo sapiens will have to think of something else to dig up, refine and store underground, like uranium, for example. I am glad that I won't be around when gold runs out. By extension, the end of industrial capitalism will be marked by the day that the entire earth has been separated into all its elements, refined to a purity of 99.999% and neatly stored underground (under a gigantic block of pure silicon, that is).
Of course, to look on the bright side, I expect that clean drinking water and basic food will also have run out long before that happens anyway.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on March 25, 2009 8:38 AM On the other hand, it might be better for the US if China does well. I see tonight that China has announced that they are going to buy up more US debt. What happens if one day China calls in that debt, even decides to foreclose? Can't you see the US population getting notice to quit? Five hundred million Chinese waiting to move over as soon as the premises are vacated?
Germany settled its WWII debt (remainder amount after debt relief) in 1960 in German DM but it took UK until 2006 to pay off its WWII debt to U.S. (reportedly pegged at 10 cents per dollar of aid).
A strengthening DM wasn't an issue, and a falling pound wasn't an issue, but this time with a likely strengthening of the Chinese RMB versus a falling USD in the long term? A Mao Plan ala the Marshall Plan (but the Chinese GDP is still less than half the U.S. GDP)?
Mother tongues: Polish, English Posts: 2906 Joined: September 13, 2008 Location: United States
RE: Understanding the Financial Crisis
Originally written by Shiong-Fong Lew on March 25, 2009 4:08 AM
Originally written by Derek Thornton on March 25, 2009 8:38 AM On the other hand, it might be better for the US if China does well. I see tonight that China has announced that they are going to buy up more US debt. What happens if one day China calls in that debt, even decides to foreclose? Can't you see the US population getting notice to quit? Five hundred million Chinese waiting to move over as soon as the premises are vacated?
Germany settled its WWII debt (remainder amount after debt relief) in 1960 in German DM but it took UK until 2006 to pay off its WWII debt to U.S. (reportedly pegged at 10 cents per dollar of aid).
A strengthening DM wasn't an issue, and a falling pound wasn't an issue, but this time with a likely strengthening of the Chinese RMB versus a falling USD in the long term? A Mao Plan ala the Marshall Plan (but the Chinese GDP is still less than half the U.S. GDP)?
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on March 25, 2009 1:58 AM
The capitalists appear to believe that the beginning and end is "growth".
Apart from everyone's inner growth, the only kind of growth that makes sense is one that meets the needs of the present without compromising the ability of future generations to meet their own needs, which is clearly not the case now.
“In decaying societies, politics become theater,” begins Chris Hedges’ lucid, scathing critique of American culture in the era of corporate bailouts. His Truthdig column, “America is in Need of a Moral Bailout,” argues that our society’s moral collapse is just as horrific as our economic one.
Hedges starts by decrying the hypocrisy of the ruling elite, who feed into the political theater while clinging to their power at all costs.
“The elite, who have hollowed out the democratic system to serve the corporate state, rule through image and presentation,” he writes. “They express indignation at AIG bonuses and empathy with a working class they have spent the last few decades disenfranchising, and make promises to desperate families that they know will never be fulfilled.”
Hedges then traces our “moral nihilism” to the decline of both education and mainstream media: “We have trashed our universities, turning them into vocational factories that produce corporate drones and chase after defense-related grants and funding...Our press, which should promote such intellectual and moral questioning, confuses bread and circus with news and refuses to give a voice to critics who challenge not this bonus payment or that bailout but the pernicious superstructure of the corporate state itself.” ...
The result is a “timid, cowed and confused population”, which champions “a childish hyper-masculinity” over the complexities of moral choice, as evidenced in everything from the rise of reality television (think Survivor) to our indifference to torture and war.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Where someone loses, someone else has to gain. That's the idea of hedge funds.
As major markets and economies careened downward last year, 25 top managers reaped a total of $11.6 billion in pay by trading above the pain in the markets, according to an annual ranking of top hedge fund earners by Institutional Investor's Alpha magazine, which comes out Wednesday. http://www.iht.com/articles/2009/03/25/business/25hedge.php
Tim Geithner's plan to remove toxic assets from the books of crippled financial institutions is receiving mixed reviews. Nobel Prize-winning economist Joseph Stiglitz said the plan "amounts to robbery of the American people. " ...
The Geithner plan is designed to benefit professional investors: It provides them with lots of easy credit, limits their losses, and allows them to reap a disproportionate chunk of the benefits if the investments pan out. This will be a boon to outfits such as the Blackstone Group and big hedge funds. ...
The design of the Geithner plan reinforces the notion that there are two sets of rules in the market, one for the really big players (matching investments, generous loans) and another for small investors and homeowners (expensive bailouts and foreclosure).
If we taxpayers are going to be financing something close to guaranteed returns for hedge funds and private-equity firms, why can't we get in on the sweet deal that's being offered to Wall Street? ...
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Jacek, this is where I disagree with both the Left and the Right (conservatives). I do not think that this is about "moral decline". People are what they are, and they don't change that much. Most people are - in my view - neither very good, nor very bad. We are all limited and make mistakes and are kind of self-absorbed (and to be honest, I like it that way ! Would you want to live around people who are "morally perfect"? I sure wouldn't. As P.J.O'Rourke once put it, "that would make Saturday night pretty boring"). The reality is that 99 % of people are somewhere in between, and are mostly ethical, but also pretty self-serving, and until you redesign human DNA, that will not change much. (actually, our entire American system of government is, in my view, built around this view of human nature, because our Founding Fathers realized that people are what they are and they had a more or less realistic view of human nature, and that is why there are so many checks and balances built into our system, to prevent any one group from taking power. The opposite of that view is the view which began in the French Revolution [and maybe going back to Plato] of the "perfectibility of man", and which was then taken up by Marx... and we all know where that led... People should be very wary of any system that attempts to, as its goal "perfect" human beings, because, historically, those sytems are very, very violent]).
What we need is a system in place that punishes people when they make dumb decisions. Actually, in a true free market, that works very, very well. If we as translators set our prices too high ("get greedy"), the market punishes us by work drying up. We don't have to be convinced to be less greedy, because it is already built into the system.
The problem with the current financial crisis is that we prop people up who should have failed. Why did Fannie Mae ex-CEO Franklin Raines get to walk away with $ 100 million and become an advisor to Obama, after massive, "Enron-like" accounting fraud at Fannie ? That is just one example, but we obviously now have a political class which is protecting their friends (other guys who went to Harvard and have mansions on Long Island, etc.). That is not the free market, but some kind of oligarchy.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 25, 2009 4:19 PM
People are what they are, and they don't change that much.
Agree
Would you want to live around people who are "morally perfect"?
No, but for reasons different from yours. I don't know how to define the term "morally perfect"...
What we need is a system in place that punishes people when they make dumb decisions.
Sometimes they are automatically punished (compare 1997 with 1998 in Post #157014), but the problem is that the losses and suffering they inflict on others are so exorbitant that they are beyond repair. Should we hang them? What for? There are crowds of others waiting to replace them...
We don't have to be convinced to be less greedy, because it is already built into the system.
I know that comparisons not always work, but your comparison with translators sticks out like a sore thumb. First, we are not in the business of creating fictitious assets (I started talking about derivatives almost 10 months ago in Post #147404). Second, we are not in the business of selling that thin air for tons of cold cash. And third, we are not in the business of cheating that massive. Profits from a lousy translation cannot be worth millions. To compare bankers and financial jugglers with translators is a miss.
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch
Most people are - in my view - neither very good, nor very bad.
I would agree with you on this, but add that there is no such thing as "good" or "bad" other than whatever contingent definitions an individual chooses to assign to it. Generally speaking, most people say that what they do is "good" and "bad" is what someone else does. Whether any event is considered at a given point in time and space by a given individual to be "good" or "bad" is solely dependent on his limited perspective. Few people, for example, contemplate that they exist only because a number of things that are now widely considered "bad" happened - for example, many people alive today exist only because Hitler existed, his actions having made the meeting of their ancestors possible. Every action sets off an infinite number of chain reactions, some of them "good" and some "bad," making the underlying action itself neither good nor bad.
Both poltical parties are premised on lies about human nature - they exagerate the "goodness" of the American people. For some reason the Wallstreet "fat cat"'s greed is "bad" but the "hard-working" taxpayer's greed is not.
I think Congress, under the leadership of the Democrats, has reached a new low - they are now complaining about legislation that they passed (re the AIG bonuses) on the grounds that - guess this - they didn't read it before they voted for it.
I had a professor in law school who frequently explained legislation by saying that Congress was a group of idiots. At the time I thought this was rather harsh, but I think he was right. Their "the dog ate my homework" excuse is just lame, and their attempt to remedy their idiocy by means of a retroactive punitive and confiscatory tax is unconstitutional, as almost every serious constitutional scholar will tell you. But then again, the US abandoned constitutional government in 2000 with the Bush v. Gore decision, and we have had nothing but a trashing of the constitution ever since.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Hi David, yes, I agree. This of course gets back to the question of, is there an objective "good" and "bad", and that of course has been debated at least since Plato and then on through Nietzsche, etc. I am really not sure, but I think if pressed, I would not find too much fault in what Immanuel Kant thought (i.e., there is some form of objective morality), or what Aristotle wrote (our notions of good and bad flow from our nature as biological beings, in other words, the virtues such as not eating too much, being fair, etc. are compromises between two extremes [eating too much, treating others with excess, etc.)]. I personally think that our notions of right and wrong come from evolution and our morality evolved to reflect evolution, and I think that that does not contradict either Aristotle, or Nietzsche.
Regarding what Jacek wrote, I totally agree. We translators are part of the REAL economy (as opposed to the unreal financial economy), because what we produce is real and is not some piece of paper tied to another piece of paper.
Regarding that, economist Hernando de Soto recently had a good essay on derivatives:
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 25, 2009 3:19 PM What we need is a system in place that punishes people when they make dumb decisions. Actually, in a true free market, that works very, very well.
No, it doesn't. All kinds of people are making all kinds of dumb decisions every day and never get punished for it. Why should they? Being stupid is not illegal.
All kinds of smart criminals are deliberately doing wicked things every day and don't get punished. The odds for most crimes are that the criminal gets away with it, it is often a matter of sheer bad luck if they get punished. Even then they have a good chance if they can hire a smart lawyer, especially one that went to law school with the judge (happened to me when I picked a lawyer at random from the yellow pages, i.e. I was lucky). The lesson is: Thou shalt not be unlucky and thou shalt know the right people.
If we as translators set our prices too high ("get greedy"), the market punishes us by work drying up. We don't have to be convinced to be less greedy, because it is already built into the system.
That is not my experience. In my experience the amount of work a translator gets is hardly related to the price charged at all. That is an illusion. High-end translators work for three or four times the price that run-of-the-mill translators work for, are snowed under with work and turn out pretty much the same quality.
The problem with the current financial crisis is that we prop people up who should have failed.
I just heard a US citizen on minimum wage explaining on TV with resignation what is happening now with AIG with the biblical words "Dem dat has, gits and dem dat doant have doant git." That has been true since time immemorial and it is probably too late to change things now.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Economist Hernando de Soto explains how capitalism is the best system to help the poor. This makes a lot of sense to me. According to de Soto ("The Mystery of Capital"), the real reason for "Third World" poverty, is not oppression, but rather, lack of transparency and lack of laws that protect capital (he refers to capital not protected by laws as "frozen" capital; and according to him, one reason that for instance Europe was richer historically than, say, Africa or Latin America is because there is so much "frozen capital" in those places, which, through proper laws, could become "unfrozen"):
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 25, 2009 4:19 PM
The problem with the current financial crisis is that we prop people up who should have failed.
To prop up car manufacturers is different from propping up banks because the bankruptcy of the latter could potentially lead to riots right away as a result of the likely panic. We all know that the money we keep in banks is not physically there except for the limited statutory reserves required for day-to-day operations. No one wants to play with the public trust in the banking system...
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on March 25, 2009 11:48 AM
Originally written by John Bunch on March 25, 2009 3:19 PM What we need is a system in place that punishes people when they make dumb decisions. Actually, in a true free market, that works very, very well.
No, it doesn't. All kinds of people are making all kinds of dumb decisions every day and never get punished for it. Why should they? Being stupid is not illegal.
I don't think John was suggesting that those who make dumb decisions, which we all occasionally do, should be punished CRIMINALLY, but ratther through natural market mechanisms. It is entirely appropriate for those who made unwise financial moves (whether it be investing in a bank that's supposedly "too big to fail," buying a house that they can't afford, or giving all their money to Bernie Madoff) be made to suffer the natural economic consequences of their "investment." Those who seek the reward must also bear the risk. To do otherwise alters the moral hazzard that controls behavior and leads to inefficiency.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Yes, I also think that in a true free market (which we obviously don't have), people would not be "backed" by the government (read: taxpayer) for the risks they take. For instance, my understanding of Geithner's new plan is that it is like "heads I win, tails you lose", from the Wall Street perspective. They (govt.) are going to use (work with) private hedge funds to buy up "toxic assets" from financial institutions. And if it later turns out that the toxic assets are worth more (for example, if they get rid of mark-to-market accounting), the private hedge fund keeps 50% of the profit, and the U.S. govt. keeps 50%. But if the toxic asset turns out to really be junk, we, the taxpayer get to pay for that.
And that is not free market economics, in which the public sector backs "bets" made by rich guys driving Bentleys and living in mansions on Long Island. I am not sure what we have now "corporative socialism/capitalism" ?? Who knows, but it is very far from the free market, in which the risks would be bourne 100% by the capitalists who take them (I am talking about a true free market, which we obviously don't have).
From where I am sitting, this looks like a bunch of guys from the NY-DC corridor, helping each other out, paid for by the taxpayer.
BTW, Martin Wolf of the Financial Times had an essay yesterday in which he referred to the current U.S. plans as "extremely alarming", because the end result is going to be rising anger among average Americans, and at the same time, nothing will really get fixed. Obama is going to head into the G20 Summit in April with no real plan, and Wolf finds this extremely alarming. A headline in the Fin.Times today states that EU leaders are referring to the Obama/Geithner plans as "The road to hell" (!).
According to what Wolf thinks, the U.S. should have nationalized (for a short time, not permanently) the bad banks, and/or do debt/equity swaps, rather than what they are doing now, which is buy up toxic assets, thereby creating massive moral hazard. The U.S. is thus making the same mistake that Japan made from 1990-2005, which was to allow "zombie banks" to live, and trying to spend its way out of recession with "stimulous packages" (you can visit the barely-used high-tech billion-yen bridges that were built during Japan's "Lost Decade". And Japan did 10 Stimulous Packages...
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 26, 2009 1:53 PM Obama is going to head into the G20 Summit in April with no real plan, and Wolf finds this extremely alarming.
Well, he is just plain wrong, Obama does have a plan and it is clearly set out in the US 2010 Obama administration budget:
The plan is that he cunningly lets the US public debt rise exponentially until the end of 2009 to get everybody thinking that it is about to go through the roof and then he quietly brings it down in one magnificent step at the beginning of 2010, like a US government New Year's Resolution! How is he going to do that? That is the one little detail that they haven't yet figured out but he has another 8 months to go before Auld Lang Syne and the fireworks so they still have time for that.
A headline in the Fin.Times today states that EU leaders are referring to the Obama/Geithner plans as "The road to hell".
A slight exaggeration - it was not "EU leaders" but the Czech prime minister who said that and he has just been kicked out anyway. Now if it had been the prime minister of Luxembourg who had said it people here might be taking notice but he didn't and they aren't.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
What Wolf wrote is that yes, they have a plan, but it won't work. Which to me is worse than having no plan, because with no plan, at least you are uncommitted and could develop a better plan later.
Regarding the Czechs, you are right, it was not the total EU. But my understanding is that the Czech position mirrors what the Germans are thinking too, and of course, the Germans have a more or less big "say" in the EU.
Perhaps the Europeans will indeed 'miss' Bush, because for all his bluster and bumbling (and horrible communication skills), they could in many instances live with his economic plans. But I think that they really don't know what to do with Obama.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 26, 2009 3:31 PM What Wolf wrote is that yes, they have a plan, but it won't work. Which to me is worse than having no plan, because with no plan, at least you are uncommitted and could develop a better plan later.
Doing nothing is not necessarily better than doing the wrong thing and then reversing it. That is known in the artillery as "bracketing".
Obama said quite clearly in his press conference the other day that his plan is to do what he is doing now until it is clear either a) that it is working or b) that it is not working. If b) then the decision will be taken to either a) do a lot more of what he is doing now (the dose was too small) or b) do the opposite of what he is doing now (it was the wrong medicine).
This is exactly the same treatment plan as is used by dermatologists except that they use ointments. You try one and either it works or it doesn't. If it doesn't you try a different one. In the end you are either cured or else the accumulated side effects of all those ointments requires 4 weeks in a skin clinic just to treat them alone and by that time the original complaint has usually disappeared on its own.
As plans go, that is a lot clearer and more logical than any plan that Dubbya ever proposed and shows that whatever else Obama is not, at least he is committed.
But my understanding is that the Czech position mirrors what the Germans are thinking too, and of course, the Germans have a more or less big "say" in the EU.
You are never going to see the Germans admit that they are adopting a Czech position. Nor will you hear Germans talking about "ways to hell". The German position is simply that they are not going to come up with any more money and they are not going to send any more troops to Afghanistan. If that does not fit in with Obamas plan then what is he going to do about it? Impose sanctions?
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Jacek, I am not really even sure anymore what is a "progressive" and what is a "conservative". Conservativism used to mean, in the Burkean sense, a "healthy" regard for tradition, along with progress and distrust of statism. And I agree that it mutated under Bush to mean expansions of government and social and religious polarization. At the same time, what does "progressive" mean ?
I am thinking more and more that our current economic issues require pragmatism ("to hell with ideology, just get it done") rather than some sort of ideological postion. For instance, I am a free marketer, but I am actually futher to the "left" than Obama on some issues, because for instance, I think we should nationalize the U.S. banks for however long that is needed.
BTW, there is a thing called the Nolan political chart. It basically shows you where you are on a grid. The basic quadrants or options are:
- Conservative (believes in economic freedom and social control of the individual; i.e. the modern Republican Party; the Christian Democrats, etc. in Europe).
- Liberal (believes in economic control [by govt.] and social freedoms [for the individual]). Obama, Pelosi, social democrats, etc. Democratic socialism.
- Authoritarian (believes in economic control and social control by the state; i.e. fascist or communist or monarchist, Hugo Chavez, Castro, Iran, etc.).
- Libertarian (believes in economic freedom and individual/social freedom). Ron Paul in the U.S., the FDP or "Free Democrats" in some European countries; some western Republicans like Schwarzenegger).
So we should not look at this as "left" vs. "right", or "progressive" vs. "conservative, because that leaves the authoritarians and liberatarians out of the picture.
You can take a quiz on this and after answering the questions, it will show you where you are on the Nolan grid !:
http://www.goldengiven.net/polimatrix/thetest.php
The Nolan Chart:
http://upload.wikimedia.org/wikipedia/commons/3/3e/Nolan-chart.svg
Not satisfied with having once referred to Barack Obama as "sun-tanned", Silvio Berlusconi today returned to the subject, telling a reporter he was paler than the US president.
After a journalist commented that his response to the global economic crisis made him seem like Obama, Italy's prime minister, who is famed for his even, year-round tan, shot back: "I'm paler, also, because it's been so long since I've been in the sun." He quickly added: "He is more handsome, younger and taller."
The Quiet Coup Former IMF insider Simon Johnson reveals how bankers took power—and how they’re impeding recovery now.
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
Mother tongues: English, Swahili Joined: October 25, 2005 Location: Kenya
RE: Understanding the Financial Crisis
Originally written by Shiong-Fong Lew on March 25, 2009 11:08 AM
Originally written by Derek Thornton on March 25, 2009 8:38 AM On the other hand, it might be better for the US if China does well. I see tonight that China has announced that they are going to buy up more US debt. What happens if one day China calls in that debt, even decides to foreclose? Can't you see the US population getting notice to quit? Five hundred million Chinese waiting to move over as soon as the premises are vacated?
Germany settled its WWII debt (remainder amount after debt relief) in 1960 in German DM but it took UK until 2006 to pay off its WWII debt to U.S. (reportedly pegged at 10 cents per dollar of aid).
A strengthening DM wasn't an issue, and a falling pound wasn't an issue, but this time with a likely strengthening of the Chinese RMB versus a falling USD in the long term? A Mao Plan ala the Marshall Plan (but the Chinese GDP is still less than half the U.S. GDP)?
Actually more of a Deng Xiao Ping than a Mao plan. I grew up near the Chinese embassy, so I became aware of them fairly early, and tended to follow their affairs both on their information board and from western sources.
Mao kept the Chinese entertained and -for some reason- motivated, in uniform and on bicycles. When he died China's GDP, despite all the rhetoric was less than 70 billion.
Modern China is Deng's creation in my opinion - though Zhou Enlai ran a mercurial foreign office.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Hi Jacek, I actually agree with you on "The Quiet Coup", and I agree that Wall Street has "taken over Washington". I mean, look at it objectively, no matter where you stand (and I think that almost everyone would agree with this): we have a situation now in the U.S. where there is a very "incestuous" relationship between Wall Street (Manhattan) and Washington D.C. I do not disagree, and I really agree. You mentioned derivatives, and I totally agree that they are one big factor in this mess.
But let's provide the full picture: not just Goldman and AIG and Citi and the big banks, but also Fannie Mae and Freddie Mac. If you say "the banks", you should also include the "government-sponsored entities" like Fannie Mae, which were also protected by people like Barney Frank and Chris Dodd (and Fannie "donated" to not just them, but also Obama), and in return presumably got a "pass" when it came time to look at what they were doing (so say the critics of Frank and Dodd). And ex-CEO of Fannie, Franklin Raines left the company (in utter chaos and with Enron-like accounting) with $ 100 million, and is now an "advisor" to Obama.
What we now have, and you are right, is a bunch of guys in the northeast (Manhattan and D.C.) who went to Harvard, driving Bentleys and living in villas, protecting each other. And yes, it is just like would happen in Russia or Argentina. There was a good essay yesterday about this by a guy who used to advise Russia and Argentina for the IMF and he wrote about how the U.S. now resembles those countries in terms of finance. I don't live in Manhattan or D.C. In fact, I live very far from the northeast, and I just feel a "victim" of these financiers and politicians from the northeast, just like someone living in a foreign country. Because it was not people out here in "middle America" that did this mess, it was the bankers and derivatives people and the politicians.
And the root cause was "easy money" (artificially-low interest rates), provided by, yes, our government. If you look at every country that has a crisis now, almost all of them or all of them had "easy money" (artificially-low, centrally-set interest rates, set by our government). And of course, if you provide such easy money, the bankers will take it. And it is very easy for Frank and Dodd and Pelosi and Obama to blame "the bankers" for taking the easy money. But it is too easy and obscures the real cause of the bubble.
And now the solution to that is to use the government to create massive moral hazard (!?).
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
BTW, Jacek, you often talk about "greed" being one of the causes of the crisis (I tend to think it is an effect, not a cause).
But what about the "greed" and self-interest of those in government ? Public choice theory is a theory of political science that states that individuals in government makes decisions to maximize their own power, not to serve the "greater good".
If you want to read more on it: http://www.econlib.org/library/Enc/PublicChoice.html
As James Buchanan (Nobel Prize, 1986) wrote, about the foundational principles of public choice theory:
As James Buchanan artfully defined it, public choice is “politics without romance.” The wishful thinking it displaced presumes that participants in the political sphere aspire to promote the common good. In the conventional “public interest” view, public officials are portrayed as benevolent “public servants” who faithfully carry out the “will of the people.” In tending to the public’s business, voters, politicians, and policymakers are supposed somehow to rise above their own parochial concerns.
In modeling the behavior of individuals as driven by the goal of utility maximization—economics jargon for a personal sense of well-being—economists do not deny that people care about their families, friends, and community. But public choice, like the economic model of rational behavior on which it rests, assumes that people are guided chiefly by their own self-interests and, more important, that the motivations of people in the political process are no different from those of people in the steak, housing, or car market. They are the same human beings, after all. As such, voters “vote their pocketbooks,” supporting candidates and ballot propositions they think will make them personally better off; bureaucrats strive to advance their own careers; and politicians seek election or reelection to office. Public choice, in other words, simply transfers the rational actor model of economic theory to the realm of politics.
This explains what is happening in our government, completely. Human beings don't shed their nature and become unselfinterested "angels" when they enter government, but rather, according to this theory, seek to then also maximize their power. This to me completely explains Washington D.C. and people like Nancy Pelosi, the entire GOP, the Democrats, Obama, the unions, etc. If you look at the "stimulous package" in terms of public choice theory, it makes total sense as the "greed" of the politicians (and special interests).
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 27, 2009 4:41 PM
people are guided chiefly by their own self-interests and, more important, that the motivations of people in the political process are no different from those of people in the steak, housing, or car market. ...
Human beings don't shed their nature and become unselfinterested "angels" when they enter government, but rather, according to this theory, seek to then also maximize their power.
John,
In addition to your description of the US scene, my having watched the political scene for decades in Poland confirms your description 99%.
My having watched the same for years in Italy confirms your description another 99%.
So your description is instantly corroborated 198%!
Originally written by Jacek K. on March 27, 2009 12:30 PM
The Quiet Coup Former IMF insider Simon Johnson reveals how bankers took power—and how they’re impeding recovery now.
I have just read the whole article (four pages in all) that explains some of the basic issues about the financial crises here and there. Very well written, scary as hell but easy to understand. A few excerpts from The Quiet Coup
[snip] Wall Street’s seductive power extended even (or especially) to finance and economics professors, historically confined to the cramped offices of universities and the pursuit of Nobel Prizes. As mathematical finance became more and more essential to practical finance, professors increasingly took positions as consultants or partners at financial institutions. Myron Scholes and Robert Merton, Nobel laureates both, were perhaps the most famous; they took board seats at the hedge fund Long-Term Capital Management in 1994, before the fund famously flamed out at the end of the decade. But many others beat similar paths. This migration gave the stamp of academic legitimacy (and the intimidating aura of intellectual rigor) to the burgeoning world of high finance.
As more and more of the rich made their money in finance, the cult of finance seeped into the culture at large. … Michael Lewis noted in Portfolio last year that when he wrote Liar’s Poker, an insider’s account of the financial industry, in 1989, he had hoped the book might provoke outrage at Wall Street’s hubris and excess. Instead, he found himself “knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share. … They’d read my book as a how-to manual.”
Even Wall Street’s criminals, like Michael Milken and Ivan Boesky, became larger than life. In a society that celebrates the idea of making money, it was easy to infer that the interests of the financial sector were the same as the interests of the country—and that the winners in the financial sector knew better what was good for America than did the career civil servants in Washington. Faith in free financial markets grew into conventional wisdom—trumpeted on the editorial pages of The Wall Street Journal and on the floor of Congress. ...
From this confluence of campaign finance, personal connections, and ideology there flowed, in just the past decade, a river of deregulatory policies that is, in hindsight, astonishing:
• insistence on free movement of capital across borders;
• the repeal of Depression-era regulations separating commercial and investment banking;
• a congressional ban on the regulation of credit-default swaps;
• major increases in the amount of leverage allowed to investment banks;
• a light (dare I say invisible?) hand at the Securities and Exchange Commission in its regulatory enforcement;
• an international agreement to allow banks to measure their own riskiness;
• and an intentional failure to update regulations so as to keep up with the tremendous pace of financial innovation.
The mood that accompanied these measures in Washington seemed to swing between nonchalance and outright celebration: finance unleashed, it was thought, would continue to propel the economy to greater heights.
[snip]... major commercial and investment banks—and the hedge funds that ran alongside them—were the big beneficiaries of the twin housing and equity-market bubbles of this decade, their profits fed by an ever-increasing volume of transactions founded on a relatively small base of actual physical assets. Each time a loan was sold, packaged, securitized, and resold, banks took their transaction fees, and the hedge funds buying those securities reaped ever-larger fees as their holdings grew.
[...]
The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great Depression.” This view is wrong….
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
We should not forget that it was not just Wall Street, but rather, the worldwide housing boom. And what caused that ? Answer (I think): "easy money" by central banks around the world, and also high savings rates around the world, which then translated into low interest rates. This resulted in lots of "easy money" and it fueled Wall Street, but not just Wall Street, but also London, Dubai, Singapore, and created bubbles in Ireland, Spain, Australia, etc. It was not just Wall Street. People often forget that there were housing bubbles in the Uk, Ireland, Spain, and Australia, to name a few. To me, the entire Wall Street thing (derivatives, "greed", etc.) is not the cause of the crisis, but rather, an effect of it. The real cause was a worldwide liquidity glut fueled by under-consumption and oversavings, low interest rates, and that fed the worldwide housing bubble.
One "culprit" (if one absolutely must find one and blame this on someone) might be the consumer in China, Japan, and places like Singapore and Dubai, for not consuming enough, and putting too much of their excess liquidity in savings. This led to lowered interest rates worldwide, which then fed the bubble. It is now common to blame America, and of course, there is plenty of blame that America should accept. But at the same time, the bubble was a worldwide phenomenon, not just an American one, and the capital came from the entire world, not just the U.S.
Regarding this becoming a "depression", I seriously doubt it. For one thing, we have a lot more protections in place in the U.S., that didn't exist in the 1930s. Also, the Great Depression resulted in mass unemployment and economies being reduced in size by 25 %. So far, the declines are far less than that. For me the worst-case scenario would be the U.S. defaulting on its debt and going bankrupt, which experts now calculate has a 10% chance of happening, along with inflation, and a "lost decade". And Obama's and Geithner's plan gives me no confidence that that will not happen, because it relies on half-measures and massive public sector spending, combined with leaving "zombie banks" alive. Those were exactly the mistakes made by Japan in 1990. Japan didn't have a depression, but did have a 13-year, long recession.
The real solution would look like this:
1. Do debt/equity swaps (the U.S. govt. takes on parts or all of banks, in return for buying their "toxic" assets. This is like partial nationalization of the banks. The U.S. government takes on the bad debt, and in return, gets equity - stock - in the bank).
2. Some limited public infrastructure spending (particularly in the hardest-hit areas like the industrial north).
3. A 1-year tax holiday for all business in the U.S. (this would result in massive new jobs and might get us out of the crisis very quickly).
4. Removal of "mark-to-market" accounting rules (already done)
5. Reducing the U.S. corporate tax rate from 35 % to 17 % (would result in new jobs)
Unfortunately, we don't get that. We get half-measures and debt.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 28, 2009 5:00 PM Regarding this becoming a "depression", I seriously doubt it. For one thing, we have a lot more protections in place in the U.S., that didn't exist in the 1930s. Also, the Great Depression resulted in mass unemployment and economies being reduced in size by 25 %.
I think that you are being unduly optimistic, John. My impression is that a financial breakdown is a depression if enough people think that it is a financial depression. One thing is certain and that is that it has already become a US national nervous depression, and the real indisputable financial depression cannot be far behind.
Meanwhile, back at the ranch, it is interesting to see how easily giant corporations can get their knickers in a twist. The auto companies GM and Chrysler are having a marketing nightmare. On the one hand they are conducting a massive marketing campaign to convince Congress and the US government that they are in dire financial straits and urgently need a massive injection of capital. At the very same time they are conducting a massive marketing campaign to convince the US public, the potential auto buyers, that they are not in any financial trouble at all and that it is a future-safe decision to buy one of their cars.
They appear to be making the assumption that the two messages will not clash because the two target groups, the establishment and the general public are completely out of touch with each other - and they could even be right on that one.
Over here, Volkswagen et al are having to run extra shifts to keep up with the demand. If you go to a Volkswagen or Peugot dealer to buy a new car you will go on a waiting list and cannot expect delivery before late July at the moment. That shows that it can be done, GM! Just build the right vehicles and they sell themselves!
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on March 29, 2009 11:21 AM
...they are in dire financial straits ...
No doubt German car manufacturers are in better financial straits (Strait up) considering that the German government will wisely give you EUR 2,500 if you scrap an old car and buy a new one...
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Jacek K. on March 29, 2009 10:55 AM ... considering that the German government will wisely give you EUR 2,500 if you scrap an old car and buy a new one...
That is one of the reasons why there is such a demand for new cars here but the real reason is that the "global" financial crisis has largely passed Germany by. At least, we are not feeling the effects of any "global" financial crisis, real or imaginary, here.
The author of the article about straits to which you linked must be short of content because in my opinion that is mostly pedantic nonsense that he writes there, particularly the passage in which he apparently claims that "dire straits" is a double negative. In modern English usage "straits" (pl.) is a difficult or distressing situation and "dire" is an intensifier, making "dire straits" (Google 5,310,000) a very difficult or very distressing situation.
The expression "better straits" (Google 425) does not exist in idiomatic English - at the most you could build a comparative with "less dire straits" (Google 611). The antonym can be only "not in dire straits" (Google 9670).
The "narrow dangerous waterway" analogy is falacious, it lost its meaning when sailing ships went out of commercial use. If he wants to revive that metaphor then he needs as antonym something like "open seas" (Google 265,000), if he wants to make sense instead of just wanting to fill up a regular column, that is.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I drive a 2000 VW New Beetle, so you don't have to convince me of the quality of German cars.
When I lived in Germany, I often wondered why one sees no old cars on the road. I personally like to drive a car that is not brand new, and I also wonder about the environmental and other costs of buying a new car every few years (which many Americans and Germans do). To me there is something nice about maintaining things and keeping it on the road as long as I can.
Regarding the crisis being a depression, I just disagree. It could turn into one, but it is very far from being a depression right now. World GDP will decline I think 1.5 % to 2 % this year, which is quite bad, but not the 25 % + drop that a depression would bring.
Specific sectors are being hit very hard (Japanese and Korean exports), but you mentioned yourself that Germany has not been hit very hard.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 29, 2009 3:21 PM Regarding the crisis being a depression, I just disagree. It could turn into one, but it is very far from being a depression right now.
I have been saying all along that it is not a depression from baseline but simply a return to baseline from the top of a bubble.
There was more evidence of this today on CNNI. They reviewed complaints from all over the US about severe cutbacks in public transportation in many communities, hitting mostly the low-income sections of those communities.
To hear the people interviewed talk, it would seem that they are all hoping for a "return to normality" soon. Nobody appears to be willing to consider that the reduced public transportation is "normality". What they have been doing up to now is "living beyond their means". The only way to "recover" in the way they mean it is to start creating another bubble. A large part of the US population appears to be in denial on this point. The "crisis" is not a "crisis" at all but is itself a "return to normality" - what they have now is the baseline standard of living or getting near to it, the best standard of living that a profligate society that was based on unlimited and unsecured credit can afford after the bubble has burst.
All that Obama's "rescue plans" can accomplish is to try to prevent the slide going any further. They cannot make things any better.
Specific sectors are being hit very hard (Japanese and Korean exports), but you mentioned yourself that Germany has not been hit very hard.
I don't believe that Germany has been hit at all. We have had no housing bubble nor anything ressembling it. Hence the only effect of the US crisis was felt by some banks that were unable to resist the temptation to invest in US-backed derivatives and some of those already have been reimbursed out of TARP through AIG.
The decision that Germany has to make is whether to isolate itself and watch the Eastern European states default or bear its share of preventing that default.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 29, 2009 3:21 PM
When I lived in Germany, I often wondered why one sees no old cars on the road.
You would see even fewer now. Cars are being certifiably scrapped that are still in good running condition, just to get the 2500 EUR give-away but the Law of Unintended Consequences has taken effect without mercy and now the used-car trade in Germany is practically dead. It would not surprise me to learn that people have been buying used cars cheap just so that they could scrap them and qualify for the 2500 EUR premium towards a new car.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on March 30, 2009 12:16 AM
Cars are being certifiably scrapped that are still in good running condition, just to get the 2500 EUR give-away but the Law of Unintended Consequences has taken effect without mercy and now the used-car trade in Germany is practically dead. It would not surprise me to learn that people have been buying used cars cheap just so that they could scrap them and qualify for the 2500 EUR premium towards a new car.
Disregarding the environmental cost of manufacturing a new car and proper scrapping of the old car, the brighter side of things is that the city air may become cleaner. The qualifying cut-off at 9 years means that exchanging Euro II or older vehicles for Euro V vehicles. Comparing some of the differences between Euro II diesel car and Euro V diesel car:
Euro II diesel car: 0.10 g/km of particulate matter (soot);
Euro V diesel car: 0.005 g/km of particulate matter (soot).
Or in other words, in terms of PM pollution, 20 Euro V diesel cars equal 1 Euro II diesel car, What a difference!
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on March 29, 2009 2:29 PM
The author of the article about straits to which you linked must be short of content because in my opinion that is mostly pedantic nonsense that he writes
It's a "she"... Isn't her first name, Jan, self-explanatory?
Mother tongues: Polish, English Posts: 2906 Joined: September 13, 2008 Location: United States
RE: Understanding the Financial Crisis
Originally written by Jacek K. on March 30, 2009 5:11 AM
Originally written by Derek Thornton on March 29, 2009 2:29 PM
The author of the article about straits to which you linked must be short of content because in my opinion that is mostly pedantic nonsense that he writes
It's a "she"... Isn't her first name, Jan, self-explanatory?
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Back to the labor, I was waiting for pieces like this to inevitably start appearing:
The secret war against American workers The deepening recession is giving some businesses the excuse to fire people they'd have had to keep on in better conditions.
In some cases, under the guise of "recession" pressure, they may be waging a secret war against their own workers, using even the most innocuous transgressions of workplace rules as the trigger for firings -- and so, of course, putting the fear of God into those who remain. In this way, company payrolls are not only being reduced by mass layoffs, but workers are being squeezed for ever greater productivity in return for lower wages, worse hours and fewer benefits. The weapon of choice is the specter of unemployment, a kind of death by a thousand (or a million) cuts.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Derek, another possible view of the crisis is not that Americans have been living "over their means", but rather, that others in the world have been living below theirs. I mean, if the Japanese and Chinese had been buying more of their own products and not saving so much money, their banks would not have had all that "extra liquidity", which in turn led to lower interest rates worldwide, more lending, and a glut of capital worldwide, which then turned the U.S. housing market into a bubble (along with other factors like Greenspan holding interest rates low, etc.).
People always state that saving is better than consuming, but it is really not the case. One sign of trouble is when people are afraid to spend (=have little optimism about the future) and stick their money in their mattresses, so to speak. And one sign of optimism is consuming and taking out debt, because one is hopeful for the future. For example, economists view "housing starts" (new homes) and consumer spending as signs of the health of an economy, not of it being unhealthy.
Jacek, that article confuses me. If an employer wants to fire a worker, it means that the cost of the worker overall is higher to the employer than the benefits of having the worker there, right ? So it seems to me that in such a scenario, it would be better for all sides that the worker goes and puts his or her "societal resources" (work) into something that does not generate net economic waste. The opposite of that would be to maintain the worker "over cost" and everyone is unhappy [and because societal resources are not infinite, it would also in effect waster resources, which would reduce a society's overall wealth]. I realize that it seems harsh to say that, but I think it is true (I was laid off in 2007, so I know what it is like). If companies felt that by taking on a worker, they would have to provide "permanent" (whatever that means) employment, even in an economic downturn, that would - in their calculation - add to the total costs of adding new workers, and it would then be very, very hard to find a job. (actually, this scenario happens, all over western Europe).
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 30, 2009 10:44 PM Derek, another possible view of the crisis is not that Americans have been living "over their means", but rather, that others in the world have been living below theirs. I mean, if the Japanese and Chinese had been buying more of their own products and not saving so much money, their banks would not have had all that "extra liquidity", which in turn led to lower interest rates worldwide, more lending, and a glut of capital worldwide, which then turned the U.S. housing market into a bubble (along with other factors like Greenspan holding interest rates low, etc.).
Not quite. Before the economic slowdown in China at the end of last year, the lending rate of above 7% and one-year deposit rate of above 4% can hardly be said to be low when compared to U.S. and Europe. The average GDP per capita in China is just a fraction of that in U.S.
The 90s saw the Japanese as the biggest arriving tourists in Asian markets such as Singapore and Malaysia but had now been grossly overtaken by the Chinese. The late 90s and early this decade saw Japanese factories in Malaysia and Singapore closing down and shifting production to China but now the Japanese are relooking at investing in Southeast Asia again.
It's true that the rates in Japan were low but their economic growth was a fraction of that in U.S. for the past 15 years or so. When their growth was high in the late 80s and Tokyo-listed companies monopolized the global top 10 in terms of valuation, they started buying up American real estate such as the Rockefella Center and the Americans complained loudly!
If China starts to buy up U.S. companies, will it tango with you?
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on March 29, 2009 5:07 PM
The "crisis" is not a "crisis" at all but is itself a "return to normality" - what they have now is the baseline standard of living or getting near to it, the best standard of living that a profligate society that was based on unlimited and unsecured credit can afford after the bubble has burst.
A little close-up from Harper's Weekly Review:
Seven U.S. states were found to have unemployment rates above ten percent.16 State prison systems were releasing convicted criminals to offset budget shortfalls,17 and Hoovervilles were rising in Fresno.18 Financially strapped American families were going camping,19 while American men, troubled by the economic crisis, were undergoing vasectomies.20
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Jacek K., quoting Harper's Review, on March 31, 2009 3:14 PM ... American men, troubled by the economic crisis, were undergoing vasectomies.
As further evidence that the Gods are making Americans mad before destroying them, I would like to mention the reports that Ford is offering special incentives for the sale of new cars to all purchasers who can prove that they have recently become unemployed. GM is soon to follow suit.
Is that really what Americans do when they lose their jobs? Rush out and buy a new car?
The mental State of the Union is obviously even worse than I had imagined! Destruction cannot be far away!
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on April 1, 2009 12:01 AM
Originally written by Jacek K., quoting Harper's Review, on March 31, 2009 3:14 PM ... American men, troubled by the economic crisis, were undergoing vasectomies.
As further evidence that the Gods are making Americans mad before destroying them, I would like to mention the reports that Ford is offering special incentives for the sale of new cars to all purchasers who can prove that they have recently become unemployed. GM is soon to follow suit.
Is that really what Americans do when they lose their jobs? Rush out and buy a new car?
The mental State of the Union is obviously even worse than I had imagined! Destruction cannot be far away!
Derek
You missed out on the Mother of all Warranties.
And I don't think you should reasonably expect a nation with such a long history of inventiveness not to hedge its way out, lest it trudges the same road as UK (all those marques that were once truely and proudly British).
Originally written by Derek Thornton on March 31, 2009 5:01 PM
... even worse than I had imagined! Destruction cannot be far away!
I am so disgusted with the whole thing. Rant alert!
I have just read that Danish bank customers aren't innocent victims, for they did not spend time investigating what was happening with this and that bank, and if they had, they would have known what was coming. Baloney! I am so fed up with this horrible blame game.
People are stepping over each other to blame somebody else. Meanwhile, frail and old bank customers in their 80's, who trusted the bank they have used since they were teens, have lost everything but are not eligible for any help since on paper they are rich. The bank is bankrupt and under receivership but nothing is cleared yet.
Disgusting to leave especially old and frail people in the lurch like that.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Nanna Mercer on April 1, 2009 2:49 AM
I have just read that Danish bank customers aren't innocent victims, for they did not spend time investigating what was happening with this and that bank, and if they had, they would have known what was coming. Baloney! I
Dear Nanna,
If you are looking for some exemplary examples of moral hazard, you may wish to know that some banks in HK and Singapore actually refunded some of the Lehman minibonds to certain categories of investors (my guess is the retiress and the less educated).
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Nanna Mercer on April 1, 2009 3:53 AM
Thank you, Shiong-Fong, it's good to know that decency is alive and well.
Nanna
And you can rest assured that it is not obscene to know that mere passing of information deserves a thank you on par with an act of Victorian chivalry.
Mother tongue: English Joined: November 2, 2002 Location: United States
RE: Understanding the Financial Crisis
There are only so many ways to Prime the Economic Pump in Capitalism.
If nobody spends anything, everything comes to a halt. Because what makes an economy "go" is the business cycle created by Supply and Demand. If there is no demand, everything stops. And if there's no money for demand, you print it (increase in M1)...
Now, one either primes the pump (Keynes) or one just cleans out the pump (liquidation, massive bankruptcy)...the problem with the latter is that the poor etc. would suffer more than the rich.
Until the economy gets going again, nothing can be done about anything really. So even with massive debt, massive deficit and massive doldrums, something has to start moving again on the consumption side or we'll all be planting vegetable gardens and be back to bartering. Not a bad idea if you have a garden.
What I think is interesting in all this, is that finally those with capital will, it is hoped, have some kind of curb placed on their excesses (products only Phd's in math understand) AND some of them will try and do something other than just accumulate more wealth for themselves. The Greed is SICKENING. The Inflated Egos due to Money is Sickening. The recognition that things will have to change in a major way for survival's sake should help the financial elites (not talking about intellectual elites) get some sense into their discourse...and stop the "all for me"....
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Well, I mostly agree with you, but printing money can also be dangerous. Ask Argentina about that (or any country that had mass inflation due to printing more money). And inflation hurts those on fixed incomes the most (i.e. the poor).
One solution would be not the Keynesian one (which is one possible solution), but rather, a supply-side solution, combined with a monetary solution. In other words, you allow U.S. businesses to have a 1-year tax holiday (they would pay 0 % tax for one full year). Nobel Prize-winning economist Robert Mundell has suggested that as a solution. He also suggested reducing the corporate tax from 35 % to say 15% to create jobs. Also, the "zombie banks" should be allowed to fail, rather than us propping them up (there are still plenty of banks around that would fill that void). Instead, what we have is a "solution" in which the rich on Wall Street and in D.C. are "covering" each other's "backs". It is very "incestuous". We also have a "solution" depending on leverage and on solutions that failed abroad. As Einstein said, you can't solve a problem using the same logic that got you into it in the first place ! As economist Robert Samelson has pointed out, the U.S. is now - under the Geithner plan - operating as a huge hedge fund. And Geithner is now inviting hedge funds in to help him out with buying up the toxic debt, and if they succeed, they can get very rich, and that of course ends probably in an AIG-like situation in which Congress then calls for their heads ? So who is going to do that ???
The base problem is not liquidity, as Obama and Geithner state. Rather, it is solvency and confidence. And you don't solve that by pumping "zombie banks" with cash, or by massive public spending. As I have written before, the Japanese attempted Keynesian solutions from 1990 to 2000 and failed miserably (they did 10 stimulus packages). It was a "lost decade". And it appears that the U.S. is now making the same mistake.
I am actually very disappointed in this. I was hoping that Obama might come in with fresh ideas, call in international experts to give him objective advice. Then, first deal with the banking mess. Only then, try to tackle issues like health care reform and energy. Unfortunately, what Obama has done is put it all together and hand it off to Geithner and people Bush appointed, who have very "incestuous" relationship with Wall Street, and hand off the budget to Nancy Pelosi and Harry Reid, who basically have used this "opportunity" to create the largest pork barrel spending plan in U.S. history. So it is not a bailout and a solution. It is a half-solution, combined with massive pork spending, and I think no one is happy with it.
Originally written by John Bunch on March 31, 2009 10:21 PM
... printing money can also be dangerous. Ask Argentina about that (or any country that had mass inflation due to printing more money). ..
I just watched the second instalment in a series of four 'The Ascent of Money' where Argentina and mass inflation was mentioned in the same breath.
The four hour series presents the ascent of money in a very interesting and also very easy to understand way.
"One week before a new President who campaigned on a promise to fix the economy takes office, public media provider WNET.ORG is putting the meaning of money into context – where it came from, where it goes, and why it has always been (and always will be) the fulcrum of civilization. THE ASCENT OF MONEY, a two-hour documentary based on the newly-released book The Ascent of Money: A Financial History of the World (Penguin Group USA), will premiere on Tuesday, January 13 at 9 p.m. (ET) on PBS (check local listings). The film is written and presented by the bestselling author, economist, historian, and Harvard professor Niall Ferguson. An expanded, four-hour version of THE ASCENT OF MONEY will air on PBS later in 2009. …"
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Jane Lamb-Ruiz on March 31, 2009 8:33 PM If nobody spends anything, everything comes to a halt. Because what makes an economy "go" is the business cycle created by Supply and Demand. If there is no demand, everything stops. And if there's no money for demand, you print it (increase in M1)...
Yes, but then logically if there is no demand, you create it artificially. You make people think that they really do need all that junk that they found they could do without when the money was not there.
Is it really as easy as that? Every day I hear that the only thing that is going to "get the economy going" is for the banks to start lending money again in grand style and for everybody to go and take on as much credit as they can get - credit is what makes the US economy tick.
And then some experts get talking about the way that the low price of houses is crippling the economy and that what is needed is for the price of houses to rise sharply because the housing market is the motor of the economy and at present the housing market is at a standstill and all those construction workers are out of work.
What kind of an economy is that? Can the poor go out and get all the credit they need, could they do that even in the bad old days? Do high house prices benefit the poor or even the middle classes? It seems to me that by that logic, if the retail trade is suffering from the "turndown" then what the US economy needs is a sharp rise in food prices. A massive increase in the cost of imported oil would surely help, too?
Ah, I get it now! The US will experience all that when the inflation resulting from printing all that bailout money finally kicks in - housing, food, transportation prices will all soar, the stock exchange indexes will go from high to new high. Everybody will be happy again (except the poor, of course) but is that free market economy? Is that unbridled capitalism at its worst or is it political manipulation?
It seems to me now that the US might have been on the edge of empirically discovering a new type of economy, the economy based on credit that does not need to be paid back, got cold feet and turned back at the last possible minute and spoiled the experiment completely. Wouldn't it have been better if the US government had committed itself wholeheartedly to the non-repayable credit economy while it was still running at full speed? Now that it has come to a sudden stop, it will be hard to get it back up to full speed again. It is like walking on hot coals - you have to keep going, stop and you get burned.
So in spite of all the contributions to this thread, I still do not fully Understand the Financial Crisis, sorry.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on March 31, 2009 9:21 PM Well, I mostly agree with you, but printing money can also be dangerous. Ask Argentina about that (or any country that had mass inflation due to printing more money). And inflation hurts those on fixed incomes the most (i.e. the poor).
I still don't believe that you are doing justice to the historic situation that the US is in.
The 1.75 trillion dollars that Obama has planned for the US National Debt for 2009 is put into proportion by the well-known calculation that if you had spent a million of today's dollars each day since the birth of Christ you would still not have reached 1.75 trillion dollars, in fact you would have to keep on spending a million of today's dollars every day for another 730 years to reach that amount.
What is historic about it is that this amount can NEVER be paid back. The compound interest alone exceeds the USA's future possibilities for payment (unless there is a massive devaluation of the dollar on the order of 1000:1). No wonder that the Chinese are getting worried at last.
I do not believe that this notion has yet sunk in generally in the USA. It has on the business channels but not amongst the general public. To compare the situation with that of Argentina or even Zimbabwe is really to make light of it.
On CNBC today there was talk of a need for a unit of money comparable with the light-year which is the distance light travels in a vacuum in one Julian year or 9.5 trillion kilometers. The US national debt is quantitively approaching the dimensions of an astronomical distance!
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Well, I did call Obama's budget the biggest pork spending program of all time, right ? I don't know how much more I can say other than parts of what Bush/Paulson/Obama/Geithner either have done, and/or are now doing, is almost surely unconstitutional, too (nowhere in our Constitution does the Treasury have such powers as they are now using, and large parts of what they are doing are unconstitutional, as many such as George Will have pointed out).
And I think I have written on this site that our grandchildren will be paying for this. I consider that to be fundamentally unconstitutional, in that our grandkids (I don't have kids myself, so I am speaking about America in general) have no ability to vote on this, but they will have to pay for it. I consider that fundamentally undemocratic, and no amount of rhetoric about "change " will alter that. It is a huge money grab by the baby boomer generation, who in essence are going to hold future generations hostage (because those not born yet cannot vote), and make them pay for the excesses of this generation, in order to maintain their lifestyle. And god help you if you get in their way !
And you are right, this is massive debt the likes of which we have never seen before. Put another way, Obama (I sometimes want to call him "Barack Pelosi") is amassing more debt than the past 43 presidents COMBINED, and the debt will be 28 % of GDP, which is an insane figure.
But if the end effect is massive government control over the economy, that is what they want (Rahm Emanuel, Obama's chief of staff, even admitted this, saying "never let a good opportunity go to waste", and he has in his books talked about such a transformation of the U.S.).
I have mentioned public choice theory before on this site, which is the theory that people in government use their power to fulfill private gain (greed for more power), rather than the public good. And if you look at the so-called "Stimulus Package", it makes total sense, viewed form the lense of public choice theory, in that it is a greedy power-grab by many, many people, and is just pork barrel spending on an epic scale, with almost no sense of the public good or what this does to our country.
Is that strong enough for you ?
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on April 1, 2009 9:38 AM
On CNBC today there was talk of a need for a unit of money comparable with the light-year which is the distance light travels in a vacuum in one Julian year or 9.5 trillion kilometers. The US national debt is quantitively approaching the dimensions of an astronomical distance!
Derek
Rather than attempting to go the whole distance at warp speed and creating sonic booms when merely able to overtake the sound barrier every now and then, inventive America may want to seek out the wormhole in Einstein's four-dimensional continuum of spacetime.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on March 31, 2009 11:24 PM
Every day I hear that the only thing that is going to "get the economy going" is for the banks to start lending money again in grand style and for everybody to go and take on as much credit as they can get ....
And then some experts get talking about the way that the low price of houses is crippling the economy and that what is needed is for the price of houses to rise sharply because the housing market is the motor of the economy ....
What kind of an economy is that?
Maybe it's a rather unique kind of economy which does not manufacture anything itself but mostly relies on imports?
And if you do find me something that is actually "made in the U.S.A.," show me how much of that is exported. Do you, guys, consume anything American abroad apart from greenbacks (which I myself keep in the Polish bank)?
So how about if Americans, apart from securitizing, investing in stocks and houses to rent and banks that will repackage their debt, start actually manufacturing something to kickstart their economy?
Yeah, I know, no one would buy it cos it would be too expensive...
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Jacek K. on April 1, 2009 7:33 AM
...show me how much of that is exported.
P.S. No entries containing American politics (wherever exported) and American movies (i.e., dreams and illusions, no matter how well made) will be accepted.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Jacek K. on April 1, 2009 2:56 PM
Originally written by Jacek K. on April 1, 2009 7:33 AM
...show me how much of that is exported.
P.S. No entries containing American politics (wherever exported) and American movies (i.e., dreams and illusions, no matter how well made) will be accepted.
If you won't go the whole hog to believe in the power and miracle of a knowledge-based economy, you would threaten the survival of the pork industry and set off a chain reaction affecting the pork-barrel feedstock suppliers. Remember the butterfly effect?
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Jacek K. on April 1, 2009 4:48 PM
Originally written by Shiong-Fong Lew on April 1, 2009 8:11 AM
.... the power and miracle of a knowledge-based economy ....
You mean F-16s, AWACS, Patriots, Humvees, star wars and all that?
Those would require nodding heads in Congress and the White House. That means politics. I draw your attention to the sanctions you imposed earlier on:
Originally written by Jacek K. on April 1, 2009 2:56 PM
Originally written by Jacek K. on April 1, 2009 7:33 AM
...show me how much of that is exported.
P.S. No entries containing American politics (wherever exported) and American movies (i.e., dreams and illusions, no matter how well made) will be accepted.
Of course, you can plead ignorance for the inadvertent violations of your own sanctions.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 1, 2009 2:01 AM
Put another way, Obama (I sometimes want to call him "Barack Pelosi") is amassing more debt than the past 43 presidents COMBINED, and the debt will be 28 % of GDP, which is an insane figure.
Watching the Obama/Brown press conference in Downing Street on British TV this morning, I got the impression that Obama is about to ban rear-view mirrors.
I understood this from the argument he offered that the action he proposes (flooding the global economy with vast amounts of virtual liquidity) was by definition the right thing to do because it would be "going forward" (everybody wants to "go forward", right?) whereas what the opposition (clearly Sarkozy/Merkel) wanted was to "look backward" and it is obviously impossible to "go forward" if you are "looking backward" (i.e. rearview mirrors presumably must be banned).
Brown argued that the option of "standing still" was not available (I suppose because we would all fall over but he didn't explain the reasoning), we have to keep on "going forward" (this sounds like an extension of my proposed "walking on hot coals" policy). A distinctive and very convenient feature of both their approaches is that "forward" is always the direction in which they happen to be going at the time, whichever that is.
Using that reasoning, it should be possible to justify every conceivable course of action, however ill-advised - "forward is where I am going"! They can even justify a 180° about-turn with that argument.
How is it going to be possible to escape the conclusion that what the US is secretly trying to bring about is a global currency collapse in which all debts will be wiped out overnight and everybody starts over from scratch?
Is it time for a poll here to see how many of us now Understand the Financial Crisis, yes/no/what crisis?/other?
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on April 1, 2009 1:28 PM
Brown argued that the option of "standing still" was not available (I suppose because we would all fall over but he didn't explain the reasoning),
I am surprised, Derek, that as a technical mind you don't appreciate the fact that even when we seem to be standing still, we are still moving forward with the Earth's surface due to the Earth's rotation around its axis AND, more importantly, due to the Earth's rotation around the Sun. I am sure that's what PM Brown had in mind. Indeed, a real standing still is not available.
Now, as for reconciling our constant looking forward with our looking back, I feel like, after I have done 12 hours of rotation around the axis, that I am facing again what was behind me the day before, without having to use the rearview mirror...
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on April 1, 2009 8:28 PM
Originally written by John Bunch on April 1, 2009 2:01 AM Put another way, Obama (I sometimes want to call him "Barack Pelosi") is amassing more debt than the past 43 presidents COMBINED, and the debt will be 28 % of GDP, which is an insane figure.
How is it going to be possible to escape the conclusion that what the US is secretly trying to bring about is a global currency collapse in which all debts will be wiped out overnight and everybody starts over from scratch?
Japan's national debt is at 180% of GDP and rising. Yet, it is a big purchaser of US Teasuries, second only to China.
Would that be a double whammy? What's the logaithmic superlative to "insane" ?
I thought we are still on Planet Earth.
The big difference is that Japan's debt is financed domestically while the US debt is not. The Japanese yen, in fact, strengthened close to upper end of single digit percentage versus the dollar during the current crisis.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on April 1, 2009 1:28 PM
Is it time for a poll here to see how many of us now Understand the Financial Crisis, yes/no/what crisis?/other?
What is there to understand? I've seen collapse one system which was based on illusory money (although that non-convertible communist construct was also a legal tender), so I am not suprised at all by the current financial crisis where money is unrelated to any tangible goods and is a product of sheer mental gimmicks made possible by the virtual nature of the world in which we live.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Yes, the excellent economist Hernando de Soto has talked about how many of the toxic assets are pieces of paper not tied to some real, physical asset, but rather, to other pieces of paper.
The only thing is that I don't buy the argument that bankers, because they bought something that they ultimately didn't know the value of, need to now be publicly bailed out. I would think that if one buys something without knowing the real value, then caveat emptor ("let the buyer beware") would apply. But that simple rule of business and purchasing is obviously lost on all those Harvard MBAs.
I still think that we, the public, should not have to bail people out who bought something of questionable value. Let them deal with that.
I actually also agree with Paul Krugman, an increasingly vocal critic of Obama-Geithner, who not only criticizes what they are doing, but also feels that Geithner, while not being part of Wall Street, through a process of "osmosis" (being around Wall Street too long), has come to believe that if the bankers on Wall Street go under, the world ends. I tend to think that that would be a good end result, at this point.
Someone recently said, regarding the G20 summit: the more heads of state at these "G" meetings, the less actually that gets done.
Meanwhile in London, the modern British police state cannot deal with the "anti-capitalist carnival" of more or less violent protesters who have rolled into town before the G20 summit. Even though the most minute aspects of modern life are "regulated" by security cameras and police in Britain, the advice of the London police is basically: "let's give in, don't open your shop today":
"The protests have caused some shops to remain shut for the day. ”Following police advice regarding the G20 protests we have taken the decision to close this store today,” read a sign outside a Robert Dyas store on Moorgate." (Financial Times).
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 1, 2009 2:36 PM Meanwhile in London, the modern British police state cannot deal with the "anti-capitalist carnival" of more or less violent protesters who have rolled into town before the G20 summit. Even though the most minute aspects of modern life are "regulated" by security cameras and police in Britain, the advice of the London police is basically: "let's give in, don't open your shop today"...
Watching the Siege of the Royal Bank of Scotland on TV today, I noticed that the shop windows were ringed by cameramen from the various news channels with a couple of rioters smashing the glass in close-up.
Police were actually inside the RBS to catch the rioters after they climbed in through the broken windows. I presume that if they had been arrested before they broke the glass then they could not have been charged with anything so is this entrapment? You hide policemen inside and then leave a large window unprotected to tempt the hooligans and catch them that way?
I noticed protesters carrying signs saying "Eat the bankers!" That must be an offense at least, encitement to cannibalism or something like that?
I once worked for the BBC in London in the old days when the outside cameras were very big and heavy and took time to set up. One experienced TV reporter told me that when they went to a riot, by the time the cameras were set up, often the riot was over. So they would cruise about looking for a group of rioters and pay them a few pounds to stage a bit more rioting where there were street lights so that they could get some good camera shots. He told me that just in case there were no suitable rocks around to smash the shop windows with, he always kept a selection of rocks in the trunk of his car ...
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Hi Jacek, something tells me that Madison and Jefferson would have frowned on such mass vandalism (they were against factions, if you recall).
Martin Wolf explains in the "Financial Times", why the argument that the U.S. consumer overspent, and that is the cause of the crisis, is facile and probably wrong. He argues that is was underconsumption and too much excess savings (as a result of that) in Germany, China, and Japan, which led to the bubble:
-----------
Why G20 leaders will fail to deal with the big challenge
By Martin Wolf
Published: March 31 2009 19:10 | Last updated: March 31 2009 19:10
The summit of the Group of 20 leading high-income and emerging countries in London on Thursday seems set to achieve progress. But achievement must be measured not just against past performances, but against “the fierce urgency of now”. Unfortunately, it will come up short.
The Organisation for Economic Co-operation and Development now forecasts a 4.3 per cent contraction in the economies of advanced countries this year, followed by stagnation in 2010. In advanced member countries, joblessness may rise by 25m by 2010. Meanwhile, the International Monetary Fund forecasts that the global economy will shrink by between 0.5 and 1 per cent this year. This would be an increase in the “output gap” (gap between actual and potential output) of some 4 per cent.
Will the G20 rise to these exceptional challenges? No, is the answer. What is needed is a large increase both in aggregate demand and a shift in its distribution, away from chronic deficit countries, towards surplus ones. On both points, progress will be far too limited.
The OECD argues that the discretionary stimulus measures taken by governments in response to the crisis will on average boost gross domestic product by just 0.5 per cent in 2009 and in 2010. In addition, the extra demand is coming at least as much from deficit as from surplus countries. This is not a recipe for resolution of global imbalances, but for their indefinite prolongation.
Unfortunately, no consensus exists on the underlying causes of this crisis or on the best ways to escape from it. The US and UK agree that the excesses of the financial sectors have their roots not just in deregulation, but also in the massive excess supply of surplus countries, of which China, Germany and Japan (with respective current account surpluses of $372bn, $253bn and $211bn in 2007) are the most significant. But China and the continental European countries, led by Germany, argue it is all the fault of profligate deficit countries. Yet China also hopes that the world will soon be able to absorb its excess supply again.
In last week’s FT interview with Angela Merkel, the German chancellor said that: “The German economy is very reliant on exports, and this is not something you can change in two years.” Moreover, “It is not something we even want to change.” To paraphrase: “The rest of the world needs to find a way of absorbing our excess supply, but sustainably, please.” Yet what happens if that cannot be achieved for the excess potential supply of all surplus countries together? In 2007, the three countries ran current account surpluses of $835bn (€629bn, £585bn). Logically, counterpart deficit countries must spend that much more than their incomes. Yet today deficit countries have run out of willing and creditworthy private borrowers.
That change is what this crisis is all about, as the charts show. Between 2007 and 2009, the crisis-hit private sectors of the US, UK and Spain will, on these forecasts, shift their financial balances (the difference between their incomes and expenditures) massively towards surplus, as savings rise and spending is cut. In Spain, the shift is forecast to be 11.7 per cent of GDP. The main offsets in these deficit countries will be huge jumps in fiscal deficits, although the current account deficits are also, inevitably, shrinking.
Surplus countries, which relied on the private sectors of deficit countries to do their irresponsible borrowing for them, show a very different pattern: their private sector balances will change rather little and, in all cases, will be in large surplus throughout: big current account surpluses nearly always mean private sector excess savings. But, as their external surpluses shrink, fiscal deficits will grow, partly because of deliberate policy but also because of the automatic consequences of recessions.
So fiscal positions are deteriorating and current account surpluses and deficits are dwindling everywhere, as the private sectors of deficit countries cut back their spending dramatically. But the expected fiscal deterioration is bigger in the deficit countries than in the surplus ones. With the exception of Japan, the fiscal deficits will also be bigger in the deficit countries. The small size of the expected shift in China’s fiscal deficit, the modest level of its 2009 fiscal deficit and the persistence of the massive surpluses of its private and state-owned enterprise sector is striking. This is a country expecting (or at least hoping for) a recovery in external demand.
What this analysis is telling us is quite simple: next to no adjustment in underlying structural imbalances is occurring. In particular, the non-fiscal sectors of the three big surplus countries are expected to continue to run huge surpluses. The change – temporary, the surplus countries surely hope – is that domestic fiscal expansion is modestly offsetting the decline in demand coming from deficit countries with over-leveraged private sectors. But that decline in private demand is also offset by massive fiscal boosts in deficit countries.
This is not a path towards a durable exit from the crisis. It is a path on which the fiscal deficits needed to offset persistent current account deficits, and collapsing private spending in external deficit countries, continue indefinitely. Unless and until surplus countries recognise that this cannot continue, no durable escape from the crisis will be achieved. Understandably, but foolishly, they are unwilling to do so.
So what is to be done? That must be a central agenda item of the next G20 summit. The world economy cannot be safely balanced by encouraging a relatively small number of countries to spend themselves into bankruptcy. The answer lies partly in changing the policies of surplus countries. But it lies as much in rethinking the international monetary system. The case for sizeable and ongoing allocations of special drawing rights – the IMF’s reserve asset – is powerful, as, among others, Zhou Xiaochuan, governor of the People’s Bank of China, has argued in a fascinating recent paper*. I hope soon to return to this huge challenge and opportunity. In the meantime, the G20 summit is largely dealing with the immediate symptoms of the illness. Finding a longer-term cure for chronic global excess supply still lies ahead.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Hi John,
I've heard for years about the danger of there being too much money around the world. Two questions:
1) Why, then, just when and where we need it (like to build roads in the heart of Europe), that money is not available? And, strictly related:
2) Could it be that at least a part of that huge surplus was artificially (virtually?) created and is a phantom mankind has neverthless to take into account(ing), which inevitably raises the question of accountability?
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Jacek K. on April 1, 2009 4:43 PM Under English criminal law could this qualify as "Encouraging or assisting crime"
Judging by the TV news reports from the "group of small islands off the coast of northern Europe"*** there is no scope for much more encouragement of that.
Derek
(*** = quote from the Obama G20 team's press information leaflet describing the UK in its capacity as sponsor of the G20 that has people in the UK all worked up already)
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 1, 2009 5:45 PM
Martin Wolf explains in the "Financial Times" .... that is was underconsumption and too much excess savings (as a result of that) in Germany, China, and Japan, which led to the bubble
John,
I agree with Derek's old-fashioned belief that the colossus people build on credit may turn out to have feet of clay. I also believe that we cannot desperately cling to the same old rut all the time. Think India. You may have seen The Economist's Structural shift in India:
India's high savings rate has been a crucial driver of its economic boom, providing productive capital and helping to fuel a virtuous cycle of higher growth, higher income and higher savings. Since the 1990s, the gross domestic savings rate has risen steadily from an average of 23% to an estimated high of 35% in the 2006/07 fiscal year (April-March). The latter rate compares very favourably not only with developed economies (the US and the UK have savings rates of around 14%), but also with other emerging economies—with a few exceptions such as Malaysia (38%) and Chile (35%). ...
The last five years have seen a surge in corporate savings as companies became more competitive and increased their profitability.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Hi Jacek, Because a Chinese, Japanese, or German (or Swiss, etc.) investor (bank) could get a higher return on their invested capital by buying a new-fangled commercialized mortgage obligation (a securitized mortgage bond) than by buying a bond from some country anywhere in the world.
After the dot.com bubble burst, all that capital that had been tied up in it, went to the U.S. (and worldwide) housing market. Why ? Several reasons:
a. Interest rates were very low in the U.S. (Greenspan feared deflation, not inflation)
b. Central banks all over flooded the market with cash
c. Fannie Mae and the government backed the banks, who were then free to write even more loans and issue more bonds.
d. The Chinese/Japanese/German/Swiss purchaser of those bonds did not ask "What are they really worth ?" (BIG mistake !!).
Regarding India, I think what led to that high savings rate was:
a. Abandoning the "Soviet model" back in around 1990, in favor of a more free market model
b. Globalization
That led to the huge increases in income in India that we have seen since 1990.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
And an optimistic piece of news from Poland: http://www.polskieradio.pl/thenews/business/?id=105418
Poland has repaid the last installment of its debt taken out in the 1970s to the so-called Paris Club.
The loans were taken out by the Gierek government during the golden decade of communist, sorry: real socialist, consumption. So who says life on credit is not possible? If you can have the system which follows your own real socialist bankruptcy repay your real socialist debts and the whole process takes just under 40 years, why not? So what that it will be not the system who will be repaying the debt, but all the people? Those who were taking out those loans are dead anyway. It's not their problem. Make it a trillion next time! It surely will stimulate the economy and its owners' bank accounts.
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch
something tells me that Madison and Jefferson would have frowned on such mass vandalism (they were against factions, if you recall).
They may have been against factions, but they certainly approved of vandalism against British property (remember the Boston Tea Party?), to say nothing of their belief in the moral justice of killing others (Brits again) to obtain their political objectives.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Jacek K. on April 2, 2009 7:38 AM And an optimistic piece of news from Poland:
Poland has repaid the last installment of its debt taken out in the 1970s to the so-called Paris Club.
That line gives the impression that Poland is now out of debt but:
"The last installment amounted to some 886 million dollars. Poland still has to pay back debt to commercial banks, however, amounting to some 340 million dollars. The deadline is 2024."
That might be a very good bet! What are the odds against the US dollar being worth very much in 2024?
What was the effective rate of interest over the 40 years? I see that:
"In total Poland was to pay back some 2.4 billion dollars. The operation of repayment started in 2001 when Poland paid Brazil some 3.3 billion dollars. In 2005 due to early repayment, Poland paid back some 5.8 billion dollars to other countries, and in 2008 France received its share to the tune 0.5 billion dollars."
So Poland was to pay back 2.4 billion dollars but actually paid back 3.3 + 5.8 + 0.5 and now 0.886 billion = $ 10.486 billion and still owes 0.340 billion which makes a total of $10.826 billion in all paid back on a loan of $2.4 billion. That must surely be principal plus interest or have they also been paying interest all this time? That sounds something like my dealings with banks. No wonder the zloty is in a bad way!
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 1, 2009 10:19 PM
20 Reasons to be optimistic about the economy (Forbes Magazine):
Yeah, I like reasons #1 and #20 best:
#1: The price of Depression Chili in Prescott, Arizona, now stands at $2 a bowl.
#20: "The Ides of March have passed. Spring is here."
All the others are nothing more than typical stock exchange junkie mantras.
I can give you 20 Reasons to be optimistic about the chances of the next gigantic asteroid not hitting the earth but that doesn't mean that I can tell the future any more than old man Forbes can.
If he had been any good at it at all then he would have been able to predict the present mess - and on a far more secure basis!
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on April 2, 2009 2:49 PM
If he had been any good at it at all then he would have been able to predict the present mess - and on a far more secure basis!
We don't know what the old man Forbes knew. Rule no. one is not to share any of your insights with the crowds and work your way against the herd instinct. Maybe the man was buying when everybody else was selling ("Buy when there is blood on the streets") and maybe he will be selling when everybody else starts buying. He may also have a strong position in hedge funds which work both ways: they make money when everybody is losing and when everybody is gaining they make even more money. It's called win-win. But it's not for us who can only foot the bill.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Jacek K. on April 2, 2009 2:17 PM Maybe the man was buying when everybody else was selling and maybe he will be selling when everybody else starts buying. He may also have a strong position in hedge funds which work both ways: they make money when everybody is losing and when everybody is gaining they make even more money.
I was refering to the present owner of the magazine, Steve Forbes. He is much smarter than you appear to believe because he contrived to inherit it all from his father who inherited it all from his father.
The magazine's motto is "The Capitalist Tool" and it is very successful. I think that it is highly possible that he does not invest at all but makes his living from peddling information to those who do.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Hi David, Well, the Boston Tea Party was before the Consitution was written. Of course the Founding Fathers favored using violence to achieve independence, but only when the British tried to impose force on us, after we declared independence.
But the Founding Fathers also built a lot of things from Britain into the Constitution, and most of the checks and balances in our system stem from the strong distrust of factions and oppressive majorities, and the overall philosophical bent of our Founders was in favor or reason, and against emotion and ill considered action.
Not to mention all the protections in the constitution that support property...
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
However inane and illogical this might be, I found it in the mail yesterday:
Dear Friends,
the University of East London (UEL) was supposed to host an
alternative summit today in the context of the G20 meeting tomorrow.
Following the media and police hype about possible disruptions to the
city, the UEL withdrew its support for the alternative summit and the
UEL management decided to close down the university all together today
and tomorrow (no summit and no lectures).
Please sign this petition and let UEL know that universities should
encourage political debate and not eliminate it.
http://www.petitiononline.com/openUEL/petition.html
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch
Of course the Founding Fathers favored using violence to achieve independence, but ... the overall philosophical bent of our Founders was in favor or reason, and against emotion and ill considered action.
Revolutions may be conceived in reason, but they are fueled by, and succeed or fail by, the emotions that they engender (or fail to do so). Intellectuals may craft manifestos outlining the reasonableness of their cause, but unless they can whip a crowd of thugs up into a frenzy and encourage them to smash some skulls, they fail. The Marxists failed in their first attempt to incite a revolution in Russia in 1905 for this very reason. After the misery that followed in the train of WW I, they had better luck in 1917.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I agree, but to me there is a big difference between impoverished peasants organizing a real revolution, and rich people texting each other to have some fun yelling at the police, before all meeting up later for a latte at Starbucks, and congratulating each other on how their "anti-capitalist action" was so successful (before getting into their Volvos for the trip home to their condo).
And one thing I noticed is that some of the people in these "protests" are always the same people. The "rage" stays the same, but the cause just changes: last year it was Iraq, this year the G20, and next year it will be "globalization".
But Jacek, I do agree that the G20 is inane too. That picture of Berlusconi and Obama was one of the worst political photos I have ever seen. They looked like frat boys yucking it up on Friday night, instead of heads of state, trying to deal with a very serious issue.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
What is actually wrong with Berlusconi. I mean, can't he pretend to act like a head of state ? Even Bush was able to do that...
On a more sombre note, the fate of Afghan women under the new "arrangements":
http://www.realclearpolitics.com/articles/2009/04/silence_meets_despair_of_afgha.html
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Hi Jacek, Going back to one point you made earlier, which is that, if there is so much "excess liquidity" (excess capital or cash) floating around the world (at least up to 2007), why are so many infrastructure projects around the world not being built. And I think that that is an excellent question.
It gets me back to a major point: the entire bailout and "stimulus package" that is being put through in the U.S. is being financed by capital that we Americans right now do not have. Why is that important ? Well, it means that we are borrowing it from future generations of Americans. And they don't get a say in that at all (which I consider fundamentally undemocratic). And it also sucks capital from poorer countries into the U.S., which is also unfair and unjust. Let's face it, the average Chinese factory worker or peasant has no health care or insufficient health care. And most Americans have excellent health care (that figure of 46 million without health care forgets to mention that 50 % of them make over $ 50,000 a year, and many are between jobs - i.e. only temporarily are without coverage, not permanently, and many are illegal aliens, and many are eligible, but have just not signed up for their free health care). And now, Obama is "setting aside" $ 650 billion as a "down-payment" on universal health care. The now $ 3.5 trillion U.S. budget is financed by borrowing from the next generation, and the actual capital comes from places like China. The Third and Second worlds lose so that America can keep the Baby Boomer generation in the standard of living it had before the bubble burst.
China now owns so many dollars that it can’t sell them off without driving the dollar down and triggering the very capital loss its leaders fear: Paul Krugman: China’s Dollar Trap
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I am starting to agree more and more with Krugman.
In my original post, the one that opened this thread, I mentioned that I had read that Greenspan created the bubble by keeping interest rates (artificially) low. One reason he did that was because after the dot.com bubble burst, the capital sort of "didn't know where to go", to put it crudely. So central banks kept interest rates too low from 2002 - 2006 to in effect create a bubble in real estate (and notice that every country that had a housing bubble [Ireland, the UK, Spain, etc.] had aggressive interest rate policies by their central banks, whereas those countries spared by the housing bubble did not have that). And one main error that Greenspan made was to think that "there can't be a bubble in housing". That idea became promoted and was very popular about 5 years ago not just in the U.S., but all over the world. And Greenspan thought that it was not inflation, but rather, deflation that was the real danger, so he was not afraid to do that. He believed that Chinese manufacturing would "soak up" inflation, and it did for a while.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 3, 2009 4:28 PM<br> ... the entire bailout and "stimulus package" that is being put through in the U.S. is being financed by capital that we Americans right now do not have.
I still do not understand what is going on. According to the Washington Post today, many potential recipients of "stimulus" money are likely to refuse to accept it if Congress places any restrictions at all on the way that the money can be used.
Apparently the only way that many can be persuaded to accept it is if they are allowed complete freedom to do what they like with it, invest it at a profit, pay giant bonuses, keep it in an account doing nothing, anything they fancy. The Obama administration is said to be frantically looking for ways to legally or semi-legally circumvent any restrictions that Congress might succeed in placing on the use of the stimulus funds, like making it available through middlemen.
Now I for one am willing to take stimulus money and to accept any restrictions that Congress might place on my use of it, just try me out with a few millions, Congress! I will even be willing to let you all check my books and keep a tally of what I do with the money which is something that most of the others are apparently not willing to do. Unlike those others, apart from to my wife and to my immediate family, I would not pay gigantic unjustified bonuses to anybody at all. Naturally, I would be willing to compensate in cash all interested members of Congress for any expenses they might incur in checking me out.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Well, there is now rumor that Obama doesn't want the bankers to pay it back, because he wants the government to control the financial sector. I think that Obama and Geithner are obviously trying their best to do the right thing, but they are sending terrible mixed messages like "bankers are evil and they have blown up the system. No wait, we need them, they are the only ones who can help us !".
The entire AIG bonus fiasco is one example of that. Trying to use Congress to target a 90 % tax at specific people is like something Hugo Chavez would do (and it is also unconstitutional, probably). And then after vilifying the financiers, they say, "please help us save the world".
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch
I think that Obama and Geithner are obviously trying their best to do the right thing, but they are sending terrible mixed messages like "bankers are evil and they have blown up the system. No wait, we need them, they are the only ones who can help us !". The entire AIG bonus fiasco is one example of that. Trying to use Congress to target a 90 % tax at specific people is like something Hugo Chavez would do (and it is also unconstitutional, probably). And then after vilifying the financiers, they say, "please help us save the world". It is crazy.
I don't trust Geithner - who cheated on his taxes and is part of the Wall Street crowd that marched us into the disaster - to either know what the right thing is or to act upon such knowledge. Nor do I expect Obama, who has proved that he is essentially no different from the politics as usual that he pretended to decry, to do the "right thing."
The problem with the constitution is that almost nobody gives a damn about it, regardless of their political stripes.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Very true. I think that the only politician who still respects the Constitution is Ron Paul. I also think that Paul is the only politician who really understands economics. Obama was heavily influenced by Saul Alinsky, who was a socialist activist who believed deeply in redistribution of wealth. Obama has never run a company and has very, very little real business world experience. His entire worldview and experience comes from getting "institutions" to cough up money and then he would redistribute it, as a "community organizer". And you are right about Geithner. He is like an arsonist who set the building ablaze, and now is in "shock" that it is burning.
The entire actions of our government since Sept. 2008 have been unconstitutional and have done the opposite of restoring confidence. They have taken confidence away. To me it is shocking to see such lack of good judgement, by the people who supposedly are elected to solve this thing. It is just shocking to me that they fail to see all the unintended consequences and moral hazard that they are now creating.
What I don't understand is why people expect our government, the same government that could not forsee Sep.11 (despite 16 intelligence agencies), the same government that could not get aid to New Orleans after Hurricane Katrina, and the same government that screwed up Iraq from 2003-2006, is supposedly going to provide a solid solution to a crisis that is much, much more complex. I just don't buy it. I don't think that our government is that good.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 6, 2009 1:00 AM
...And then after vilifying the financiers, they say, "please help us save the world". It is crazy.
That sounds very altrusitic
If it's any consolation, this time it seems like a big global imaginary conspiracy that's a quantum jump of anything else before. By the way, I don't think they will be restricting James Bond's opulent expense account too.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Someone recently pointed out that banks are only financial intermediaries. All they do is act as an intermediary between lenders and borrowers. If banks ceased to exist tomorrow, does anyone really believe that lenders and borrowers would not somehow, some way, find one another ?
For instance, over the Internet ???
We are supposed to believe, by our "betters" in New York and D.C, that Enron can just sink into the ground, and that is o.k. (even though Enron was hugely capitalized in 2001, and was the very center of the stockmarket in 2001), but if a bank goes under, the world ends. Why is it o.k. if a non-finance company goes under, but it is a total disaster if the financiers go under ?
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 6, 2009 1:21 PM
We are supposed to believe, by our "betters" in New York and D.C, that Enron can just sink into the ground, and that is o.k. (even though Enron was hugely capitalized in 2001, and was the very center of the stockmarket in 2001), but if a bank goes under, the world ends.
But cash is king. Cash can bankroll almost anything. If a utility supplier goes under, another can simply take over the assets and provide the services.
If you put your money into an organization, you are buying into the trust purportedly offered by that organization. The government would want to see that these organizations that climb the rostrum of power are those that "we can do business with" as financial muscle talks, lest they become hindrances to political goals. Credible theory?.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 6, 2009 6:21 AM
Someone recently pointed out that banks are only financial intermediaries. All they do is act as an intermediary between lenders and borrowers.
John,
Apart from the current curbing of lending, the only exception to lending in the world of banks were investment banks who were intermediaries between companies issuing bonds or stocks (i.e., borrowers) and the buying public (lenders). I think that since last fall, though, just about all of investment banks have converted to universal banking. Are there really still 'banks' around that do not do banking, i.e., lending?
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 3, 2009 9:41 PM
In my original post, the one that opened this thread, I mentioned that I had read that Greenspan created the bubble by keeping interest rates (artificially) low.
You keep blaiming the government, John, for all the evil of the world, but a more careful reading of the Wall Street Journal shows that the truth is more nuanced.
In just the past 40 years there were two other housing bubbles, with peaks in 1979 and 1989, but the largest one in U.S. history started in 1997, probably sparked by rising household income that began in 1992 combined with the elimination in 1997 of taxes on residential capital gains up to $500,000. Rising values in an asset market draw investor attention; the early stages of the housing bubble had this usual, self-reinforcing feature.
So it is not that the vilain Greenspan alone created the bubble. The Fed's Federal Reserve unusually expansionary monetary policy only reinforced the trend and helped to blow it out of proportion.
What is more interesting for me, though, is how the Journal of the Wall Street sees the role of bankers in all of this excess:
Both the Clinton and Bush administrations aggressively pursued the goal of expanding homeownership, so credit standards eroded. Lenders and the investment banks that securitized mortgages used rising home prices to justify loans to buyers with limited assets and income. Rating agencies accepted the hypothesis of ever rising home values, gave large portions of each security issue an investment-grade rating, and investors gobbled them up.
OK, Clinton and Bush aggressively pursued the American Dream (shame on them!) SO CREDIT STANDARDS ERODED. Excuse me? Did Clinton and Bush really tell lenders, i.e., banks, to relax lending standards? What is the logic of that sentence? A Wall Street logic maybe? Certainly not that of an educated English speaker.
Fortunately, the next sentence sheds some more light on the bubble mechanism: "Lenders and the investment banks that securitized mortgages used rising home prices to justify loans to buyers with limited assets and income." Aha, so it was the bankers, not the government, who justified loans to buyers with limited assets and income. And why did they do that, dear John? Are they not professionals trained and paid to know much, much more about the inevitable hell around the corner than a regular dumb American Dream believer? Why did they come up with the concept of "subprime" in the first place? Because the government told them to? So why did they not cry blue murder to tell the whole world that the basic rules of lending safety are being violated in the United States? Why did the banks keep pushing the fishy subprime loans which were doomed to fail?
I know, you will now get on your Fannie Mae hobby horse to convince me that that government-sponsored lending intermerdiary is to blame for the erosion of lending standards in the US because it is they who came up with the concept of subprime loans and it is they, and not the banks, who monopolized all the mortgages in the US. In other words, US bankers are all good people who stuck to their stringent lending standards and never caved in to greed to peddle a few million mortgages more to people with no income, no job and no assets (NINJNA). Enter the vilain Greenspan with his low interest rates and his Bush administration cronies Fannie Mae and Freddie Mac who start buying those impeccable mortgages from our ublemished lenders to virtually give them away to all the NINJNAs just for the asking. The bankers are unaware of what is going on. They keep lending only to customers who meet the normal best banking creditworthiness test and simply do not know that the socialist Bush administration and its Fannie Mae and Freddie Mac have done away with any lending criteria on the market and are reselling all those prime mortgages to people who will never be able to repay them.
Yeah, all those intermediaries should be hanged for having tarnished the spotless reputation of US bankers who have for centuries sacrificed their lives and careers to earn the good name and protect the public good and are now so unjustly accused of plain greed in chasing NINJNAs and peddling mortgage loans to them, which they obviously never did.
Originally written by Jacek K. on April 6, 2009 12:15 PM
Originally written by John Bunch on April 3, 2009 9:41 PM
I had read that Greenspan created the bubble by keeping interest rates (artificially) low.
"Lenders and the investment banks that securitized mortgages used rising home prices to justify loans to buyers with limited assets and income." (emphasis NM)
In the four-hour series, The Ascent of Money, mentioned earlier in this thread, they say exactly the same thing.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Jacek, if you read the excellent book by Thomas Woods called "Meltdown", you can indeed see how government created and sustained the crisis (Woods is a Harvard and Columbia-educated economist, Jeff Miron at Harvard also agrees, and so does economist John Taylor at Stanford).
Here is how government created the crisis:
- A tax code that funneled excess capital into housing (no capital gains on home price increases, free land for developers at all levels of govt. - city, state and federal, etc.). Our entire tax code is designed to funnel capital into housing, and to "promote home ownership".
- Banks found it impossible to expand or have the U.S. government sign off on their plans to do so or to merge, if they did not relax their lending standards, to promote home ownership to sub-prime borrowers. And this is exactly what the government wanted. The banks did not relax lending standards, Fannie Mae and the U.S. government did. This relaxation of loan standards eventually found its way to all loans made by the financial industry.
- The Fed created more money (it does so by buying long-term loans on the open market, and thus injecting money into the money supply) from 2002-2006 than in ALL previous years of U.S. history. This massive expansion of the money supply then found its way into the housing market.
- Fannie Mae, through First Boston, was the first to create the commercialized mortgage obligation (CMO), one of the first new-fangled asset classes. Fannie bought up massive mortgages from banks. This allowed banks to sell yet more mortgages. This artificially increased the amount of capital available for home lending.
- The rating agencies failed, and they have a monopoly position, like Fannie, through the government.
- The SEC failed, another government agency. It failed to see Enron coming and it failed to stop this crisis, despite Sarbanes Oxley, (the only thing that "Sarbox" has done is make it prohibitively expensive to start a business, because it costs $ 3.5 million to comply with Sarbox).
- Greenspan dropping the Fed Funds rate to 1 %. This created artificial demand, which fueled the housing boom. (isn't it interesting, that those countries whose central banks were creating this artificial demand via such low rates all had housing bubbles, but those countries that didn't, didn't have bubbles ?).
- The Fed then encourages Fannie Mae to lend even more.
- Fannie Mae acted as a "Piggybank" for the Democratic Party. Obama and Barney Frank and others got money from Fannie, and "surprise" !, got a pass when it came time to oversee Fannie Mae.
- The "Greenspan Put" - Greenspan in the 1990s and from 2000-2006 put a lower limit on assets (the Fed put a floor below asset prices, below which the Fed would not let the price fall). This is known by econmists as the "Greenspan Put". It allowed Wall Street to take ever more risks, because they knew the government would back them. This is known as "moral hazard".
The main takeaway for me is that the finance sector did EXACTLY what the government wanted it to do: issue subprime loans to people with little credit history, and expand lending. There is a myth that the financial sector was going against the government, but the exact opposite is true.
Now we have the government owninig Fannie Mae's assets, creating more moral hazard, and injecting constant uncertainty into the markets. Capital is now being allocated not on economic logic, but politically. And government ownership of a thing does not mean that risk is taken out. Quite the opposite.
End result: higher taxes (no doubt a major aim now of Obama and Pelosi and Reid), and also inflation, as Bernanke prints more money.
The handwriting of government is all over this financial crisis, and is there for anyone to see. People blame "greed", but that begs the question. Why was the greed there ?
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 6, 2009 3:24 PM
Banks found it impossible to expand or have the U.S. government sign off on their plans to do so or to merge, if they did not relax their lending standards ....
The banks did not relax lending standards, Fannie Mae and the U.S. government did. This relaxation of loan standards eventually found its way to all loans made by the financial industry.
We agree on details but not on fundamentals, John. Nothing and no one will make me change my principles.
Banks found it impossible to expand or have the U.S. government sign off on their plans to do so or to merge? THEN THEY SHOULD NOT CONSIDER EXPANDING OR MERGING.
It's the same with translations. You can't compete with $0.01 translators churning out 5,000 words a day? THEN YOU STOP TRANSLATING. No, you don't follow the suit and emulate mediocrity "because everybody else does."
Therefore, as I said earlier, your argument that "the banks did not relax lending standards, Fannie Mae and the U.S. government did and this relaxation of loan standards eventually found its way to all loans made by the financial industry" makes me laugh. So you steal, accept bribes and join the totalitarian party in a totalitarian regime because others do? Come on, John. You should try harder than that. No, the cancer did not "find its way" to the industry. It was planted there by the disgustingly greedy scrupleless individuals each of whom has a name, can be easily identified and should cough up what they stole. And then we can go back to continue playing the same game because obviously, as we agreed, DNA will not volunteer to modify itself.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
But banks do not operate in a free market void, Jacek. Here in the U.S., there is a very tight net of regulations and laws that in effect govern what banks do (I mentioned Sarbanes Oxley, which is one example).
Imagine you are a bank like Citibank in 2003. Every other bank is expanding its businesses and you have gotten very strong "suggestions" from the U.S. government that it is a major policy to expand lending to "groups previously shut out from home ownership" (i.e. subprime borrowers). Do you really think that a bank would say, "well, no thanks, we don't want to do that". What would follow would be mails from "community organizations" and a letter from the Justice Department complaining of racism and "red-lining". So the question is, do you "stand by your lending principles" and be a "racist", or do you "go with the flow", and take the "easy money" from the government, and the next time your merger comes up for approval, the government green lights you because you were so good about lending to "subprime" borrowers ?
Someone compared this to the police allowing people to drive 100 miles per hour. And pretty soon, each car is driving faster and faster. You could look at each car and say "why are you speeding ?". And they would answer: to keep up, everyone else was speeding.
And that is exactly what our government did with subprime lending and easy money.
I think it is fine to stand by your principles Jacek, but I hope that that would not include ignoring stuff like this. I am not saying that the government is 100% to blame, because that would be absurd. But to say that government did not play a big role in the crisis is also ridiculous.
BTW, I am almost 100% sure that our government is now sowing the seeds for the next crisis. But this time, the core of it will not be the housing bubble, but rather, the vast debt that the U.S. is taking on, inflation, and/or high taxation which follows.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 6, 2009 4:50 PM
So the question is, do you "stand by your lending principles" and be a "racist", ...
John, I have a hunch that even in the United States the best lending practices have been described by someone somewhere and it should not be difficult to invoke them when accused of racism in lending.
Someone compared this to the police allowing people to drive 100 miles per hour. And pretty soon, each car is driving faster and faster. You could look at each car and say "why are you speeding ?". And they would answer: to keep up, everyone else was speeding.
Not in Poland, that's why we probably have different perspectives. The correct answer in Poland is: Because it is only by driving 100 mph wherever possible on regular roads (not motorways which as you know do not exist here) that you can reach the blinding average cruising speed of 45 (forty-five) mph when driving across the country.
More seriously, yes, I know what "go with the flow" means (and do it myself all the time as soon as I can spot a bit of civilized road somewhere in the world) but you will not convince me that the urge to shorten the commute or an interstate journey, where you take all the risk and pay when caught by a police radar, can be even remotely compared to the mass robbery of entire nations' wealth we have witnessed where no one, except for the dumb Madoff, will be ever caught and made cough up. It is a different ball game.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
In theory, you are right. But I am not talking about rational debate here. I am talking about "arm-twisting" by the government, to get the banks to do what politicians like Clinton wanted the banks to do. Of course, as an academic exercise, one could convince a Justice Department attorney that there is a "good" way to loan. But that is not the point. The point is that that attorney had a very clear directive to "get sub-prime borrowers into homes".
Politics tends to trump pure logic, unfortunately.
I mean, after all that is the entire point of Fannie Mae, which was created in the 1930s under the "New Deal" and whose mandate was to supply housing to poorer people (in itself a noble goal). But Fannie Mae had $ 5 trillion in mortgages when the bubble burst, and as I have pointed out, by buying loans from banks, was a major force in why banks had so much money to lend. The entire "secondary market" for mortgage-backed securities was set up by Fannie Mae (with First Boston) in the early 1980s. Authors usually state that "First Boston set up the secondary market in commercialized mortgage obligations for Fannie Mae". I think that the "for" is critical.
And of course the "racism" logic is bogus because even a racist banker would not be opposed to making a profit from minorities, if there was one to be made.
ID: 128402, Published in The New Yorker March 30, 2009
Unfortunately incompetence is repeatedly rewarded in contemporary America. Unions have long provided protection for incompetent employees. Anti-discrimination laws, while well intended, have made it difficult, and at times impossible, for employers to fire incompetent employees who happen to be black, female, or fall into another protected class (as one whose former life involved a great deal of EEO law, I have seen this first-hand many times).
The most egregious instance of failure being rewarded, however, is the response to the 9/11 attacks. That was a collossal failure of the intelligence community. The director of the CIA, the head of the National Security Agency (Condoleza Rice, at the time), and perhaps the Secretary of Defense should have had the decency to take responsibility and resign, failing which they should have been summarily fired. That is what would have happened in many countries in light of such a failure. Moreover, the airlines should have been held accountable for their failures, but Congress passed a law that specifically provided them with immunity for their gross negligence which contributed to the tragedy (among other things, they failed to have adequate cockpit security).
When failure is not punished, it is repeated. The failures which led to the financial meltdown should come as no big surprise.
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 6, 2009 5:15 PM Jacek, can we just agree that: Guilt: - Private sector = 50 % - Public sector (govt.) = 50 % ? Would work for me...
This is far too facile and ignores the fact that the private sector controls the public sector, more specifically, corporate interests, through their well-paid lobbyists and generous campaign contributions, effectively dictate government policy on everything. There is no meaningful distinction between the private and public sectors anymore.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by David Kallans on April 6, 2009 10:49 PM ... the private sector controls the public sector, more specifically, corporate interests, through their well-paid lobbyists and generous campaign contributions, effectively dictate government policy on everything.
I believe that to be nothing more than an illusion. How can you still believe that after seeing the heads of 18 states walking across the footbridge over the Rhine at Kehl in a bunch exactly like a herd of sheep to shake hands with the very same Sarkozy they had been talking to on dry land only a short while before? Only one was absent, Berlusconi, and he was making a cellphone call some place else. It is pretty obvious that extraterrestrial aliens have taken over the body of that zombie Berlusconi and through him are taking over control of the entire world. Somebody should take a look at his cellphone, he must be in contact with them somehow.
How else is it possible to explain how those 18 heads of state, who are virtually masters of all they survey in their own countries, let themselves be herded across the Rhine in that humiliating fashion? I have been past that bridge a few times but nobody except an invisible alien power would get me out of my car to walk across that bridge as far as the middle of the river just to shake hands with Sarkozy but there they were, the 18 most powerful people in the world being manipulated like little lambs.
It is pretty obvious to me that the USA, despite all the evidence, is not to be blamed for the present financial crisis (real or imaginary) but that it is part of a cosmic computer game being played out by creatures from another galaxy for their own amusement and that our leaders, public or private, are nothing but puppets being manipulated for the entertainment of a cosmic audience we cannot even imagine.
That reminds me, I haven't taken my medication this morning yet.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on April 7, 2009 7:32 PM
How else is it possible to explain how those 18 heads of state, who are virtually masters of all they survey in their own countries, let themselves be herded across the Rhine in that humiliating fashion?
.... just to shake hands with Sarkozy but there they were, the 18 most powerful people in the world being manipulated like little lambs.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Shiong-Fong Lew on April 7, 2009 4:45 PM Sarkozy's charm offensive? Was he grinning?
That is not a grin, that is a nervous twitch. Sarko did not even dare to venture out onto his side of the bridge without a flunkey in tow.
The whole spectacle was sickening if you think about what is at stake. The commentators were saying immediately after the G20 meeting that, as expected, the other countries promised to inject a few stimulus billions into their economies just to please Pres. B. H. Obama without having even the slightest intention of following through. You only have to look at all the other promises of money that have been made at G meetings in the past, and that have also never materialized, to realize that.
Again just to please B.H.O., they all solemnly promised to send more troops to Afghanistan but carefully avoided any hint in the final communique of what those extras soldiers were going to do there (fix bayonets and charge at the Taliban regardless of losses or train policemen in some pacified part in the north? - they didn't say) nor how long the extra troops would stay there (a long weekend would fulfill any promises made).
I suppose that all those millions that were spent on the meetings helped to stimulate somebody's economy just a tad so some good might have come out of it.
I imagine that the EU will be grateful for B.H.O. promising Turkey to put the full weight of the USA behind Turkey's futile attempt to join the EU, despite all the problems he has back home trying to get the USA to put its full weight behind his attempts to get the US economy back up to full bubble speed. The very least that the EU could do in return would be to promise to put its full weight behind persuading the USA to accept Guatemala and Haiti as the 51st and 52nd states of the union respectively.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on April 8, 2009 7:09 AM
Originally written by Shiong-Fong Lew on April 7, 2009 4:45 PM Sarkozy's charm offensive? Was he grinning?
That is not a grin, that is a nervous twitch. Sarko did not even dare to venture out onto his side of the bridge without a flunkey in tow.
The whole spectacle was sickening if you think about what is at stake.
With all the news splashes of a few years ago, I would have thought for a fleeting second that the raison d'être for the then fashionable "freedom fries" would disappear from the menu just as the name of Freedom Tower seems to have burst in thin air into something more realistic from the marketing point of view.
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Shiong-Fong Lew on April 8, 2009 5:22 AM
...something more realistic from the marketing point of view.
Polish-born Daniel Libeskind, who won the 2002 competition to develop a master plan for the World Trade Center's redevelopment, also designed an apartment/office tower in the very center of Warsaw. The developer, who managed to sell half of the condos there for up to $11,000-18,000 per sq.m. (depending on when you were exchanging your money), had to freeze the construction the other week at the height of the 17th floor due to the crisis...
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 6, 2009 3:50 PM BTW, I am almost 100% sure that our government is now sowing the seeds for the next crisis. But this time, the core of it will not be the housing bubble, but rather, the vast debt that the U.S. is taking on, inflation, and/or high taxation which follows.
And it is not getting any better. Financial gurus (one is the ex-head of the budget department) were agreed today on CNBC that the gap at end of December 2008 when for the first time the US total debt exceeded the net worth of all its citizens together has now widened significantly.
Total US budget deficit for the first 6 months of 2009 is estimated to be $953 billion rising to $1.8 trillion by end 2009.
The cost of the US financial sector bail out is now said to be $167 billion more than originally predicted.
Italian Prime Minister Silvio Berlusconi .... told a German TV reporter that the 17,000 earthquake survivors should simply pretend they are on a "camping weekend," reports the Times Online.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Jacek K. on April 8, 2009 2:46 PM Italian Prime Minister Silvio Berlusconi .... told a German TV reporter that the 17,000 earthquake survivors should simply pretend they are on a "camping weekend, ..."
I quite agree with him. It works for all those happy campers in Dafur, why not for your average Italian?
By the way, I saw a Dafur report that was different from the usual coverage. The TV reporter pointed out that the shots shown on TV are usually of a vast encampment appearing to be way out in the desert, hundreds of miles from anywhere inhabited but in fact the camps are not far away from a good-sized town with shops, hotels, restaurants, etc., sometimes even within the city limits. All they would have to do is to pan the camera around but that would spoil the dramatic effect so they don't do it.
I have no doubt whatever that to qualify for financial help from the Italian government it is necessary to actually be homeless so the entire population has been digging out all their summer camping gear and setting themselves up in a location where they are most likely to get into the TV coverage. That is probably not lost on such an old fox as Berlusconi, you can't fool him - he even owns most of the Italian TV stations - been there, done that!
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on April 8, 2009 4:34 PM
Berlusconi, you can't fool him
Right, Il Cavaliere earned a degree in law with honors so he knows that campers will not qualify for earthquake relief, which will save his government a few euros.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Meanwhile, as reported in the "Financial Times", some interesting new consumption and lifestyle trends, in the U.S. and all over the world. Along with "de-stuffing" (having less stuff and concentrating more on quality and on value) and living more in harmony with the social community as a whole, people will be less blatant and show-offy in their buying and lifestyle habits:
"Conspicuous consumption will be frowned upon. Women will no longer buy a handbag as a mere badge of affluence. Men may be more self-conscious about extremely expensive cars. Luxury goods will still be with us but they will be judged by their authenticity and craftsmanship, not price tag."
And people will not brag that they are in investment banking, for a while...
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 9, 2009 12:03 AM
for a while...
These are all very temporary changes. After John Paul II's death, we experienced "more harmony" in Poland for exactly one week. Then it was back to the usual business.
A number of big national banks stand accused of systematically bilking black and Latino borrowers. And the administration of our first black president is siding with the banks.
At the end of April, the Obama administration will go before the US Supreme Court to argue that those banks—including bailout recipients Bank of America, Citi, Wells Fargo, and JPMorgan Chase—should be allowed to duck a state investigation into their lending practices.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Well, that was Elliot Spitzer suing the banks in state court. The article does not say much other than that Spitzer asked them for information, and they said it should be federal, not state.
Also, if someone offers you a high interest rate loan, you do not have to take it. I get such offers in the mail, and I never fill them out. In addition, let's just imagine this: Big Bank A offers a very high-interest rate loan. If the interest were too high, some other financier could step in and undercut them, right ? So that article to me makes no sense from an economic point of view. If Bank A offers a 20 % interest rate and it is "too high", Bank B could come in and undercut them by offering 15 %. IF the "true" rate should be 10 %, Bank B still pockets a nice 5 % profit, per transaction. This is always how prices work in a free market. If there is room for profit, someone will find it. The notion that the price of credit is "too high" is in the eyes of the beholder. If someone is willing to pay for something, that means that for him or her, it was worth that exact amount at that moment. And it seems kind of presumptuous for someone else to come in and say, "well, you paid too much". How can anyone say that. Perhaps for that person, it was worth that much at that moment.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
How a financial anlalyst with over 18 years of experience in Asia explains the current crisis. I think this is spot-on and I think it is a bit foolhardy to try to blame one group of people, private or public for this mess, because, as the author points out, the causes were truly global, and had as much to do with Asia as with the U.S. (not to mention, "greed", or "capitalism" (per se), or the government):
PRUDENTBEAR.COM: Next in line was the United States bubble. Does that mean we can blame foreigners for our bubble trouble?
RICHARD DUNCAN: First, I think we should be very careful about assigning “blame” to anyone. This is a global problem that evolved over decades. There are simply too many variables to untangle all the cause and effect relationships that produced the extraordinary economic imbalances we are discussing. Rather than pointing fingers, global policy makers need to work together to find a solution to prevent the occurrence of a world wide economic crisis when the US current account deficit inevitably unwinds.
Having said that, it is true that the surplus countries played a role in fueling the New Paradigm Bubble in the United States during the late 1990s. At that time, the US government temporarily enjoyed a budget surplus (leaving aside the issue of the unfunded Social Security program).
That budget surplus was due to all the bubble tax revenues, mostly from capital gains taxes on stocks. During those years, 1998 to 2000, the government stopped selling new Treasury Bonds.
Yet that was also the period, following the currency devaluations of the 1990s, that the current account surpluses of the United States’ trading partners expanded very sharply, hitting $400 billion by 2000. Since there were no new US treasury bonds for those countries to buy with their dollar surpluses, they bought agency debt (Fannie Mae and Freddie Mac) and corporate bonds instead. That sparked off the property boom in the US and also facilitated the incredible misallocation of corporate credit at that time. It is no coincidence that the peak of the US economic bubble occurred when there were no new treasury bonds being issued to absorb the growing dollar surpluses of the United States' trading partners. In large part, that bubble happened because the rapidly growing dollar stockpiles of the surplus countries had to be invested in other kinds of US dollar-denominated assets if they were to generate a positive return.
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch
Evidently, our new president thinks that "Austrian" is a language
I saw the press conference live and noticed this. I seriously doubt that Obama is unaware that Austria is a German-speaking country. The most likely explanation, I think, is that this is a lingusitic slip, that he started to say "in Austria" and it became "in Austrian."
Obama does not actually say that Austrian is a "language." He says rather that he does not know how a particular slangy phrase is said "in Austrian" (i.e. "wheeling and deeling"). That is exactly the kind of slang term that might vary from one dialect to another, and as I expect you know, John, as a German translator, there are substantial differences between Austrian German and standard German. Different versions of German are used on television, and Austria insisted and obtained a treaty commitment from the EU that certain Austrian terms would be permissible variants for the German standard used in the EU (for example, the Austrian "Erdapfel" is, since Austria's accession to the EU in 1995, an acceptable variant to the standard German "Kartoffeln" for "potato.") One possible interpretation of Obama's utterance, then, is that he was referring to the "Austrian" form of German. I do think, however, that the slip of the tongue explanation is more likely.
On a more fundamental level, who is to say that "Austrian" is not a language? What is the definition of a "language"? The distinction between a "language' and a "dialect" is, as I and virtually every academic linguist you will ever meet will tell you, is arbitrary and is a political, not a linguistic, decision. The oft-given definition is that a language is a dialect with an army and a navy. By this definition, then Austrian would seem to be a language. It is true that Austrians do not, by and large, think of Austrian as a "language" per se. But the subjective thoughts of a people are never dispositive to their objective classification by outside analysts.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I recall Obama saying "I don't know how to say that in Austrian".
That to me is a Dan Quayle moment. Quayle's reputation was ruined due to 2 or 3 of those ("I am glad to be in Latin America, because now I can practice my Latin"). I think that the media would have reported it widely if Bush had said it (do you think that Jon Stewart made a joke about that ? I don't think so. You have to dig this out of blogs now, because most media gives Obama a giant pass on stuff like this.
BTW, if it doesn't have its own dictionary, it is not a language. If you can show me an "Austrian Dictionary" (for instance, on Amazon.com, I will believe that it is a language).
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Another example of Obama fumbling words (this one from "The Guardian"):
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The question that flummoxed the great orator
John Crace
The Guardian, Friday 3 April 2009
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Barack Obama, the World's Greatest Orator (™all news organisations), didn't exactly cover himself in glory when the BBC's political editor Nick Robinson asked him a question about who was to blame for the financial crisis. Normally word perfect, Obama ummed, ahed and waffled for the best part of two and a half minutes. Here, John Crace decodes what he was really thinking ...
Nick Robinson: "A question for you both, if I may. The prime minister has repeatedly blamed the United States of America for causing this crisis. France and Germany both blame Britain and America for causing this crisis. Who is right? And isn't the debate about that at the heart of the debate about what to do now?" Brown immediately swivels to leave Obama in pole position. There is a four-second delay before Obama starts speaking [THANKS FOR NOTHING, GORDY BABY. REMIND ME TO HANG YOU OUT TO DRY ONE DAY.] Barack Obama: "I, I, would say that, er ... pause [I HAVEN'T A CLUE] ... if you look at ... pause [WHO IS THIS NICK ROBINSON JERK?] ... the, the sources of this crisis ... pause [JUST KEEP GOING, BUDDY] ... the United States certainly has some accounting to do with respect to . . . pause [I'M IN WAY TOO DEEP HERE] ... a regulatory system that was inadequate to the massive changes that have taken place in the global financial system ... pause, close eyes [THIS IS GOING TO GO DOWN LIKE A CROCK OF SHIT BACK HOME. HELP]. I think what is also true is that ... pause [I WANT NICK ROBINSON TO DISAPPEAR] ... here in Great Britain ... pause [SHIT, GORDY'S THE HOST, DON'T LAND HIM IN IT] ... here in continental Europe ... pause [DAMN IT, BLAME EVERYONE.] ... around the world. We were seeing the same mismatch between the regulatory regimes that were in place and er ... pause [I'VE LOST MY TRAIN OF THOUGHT AGAIN] ... the highly integrated, er, global capital markets that have emerged ... pause [I'M REALLY WINGING IT NOW]. So at this point, I'm less interested in ... pause [YOU] ... identifying blame than fixing the problem. I think we've taken some very aggressive steps in the United States to do so, not just responding to the immediate crisis, ensuring banks are adequately capitalised, er, dealing with the enormous, er ... pause [WHY DIDN'T I QUIT WHILE I WAS AHEAD?] ... drop-off in demand and contraction that has taken place. More importantly, for the long term, making sure that we've got a set of, er, er, regulations that are up to the task, er, and that includes, er, a number that will be discussed at this summit. I think there's a lot of convergence between all the parties involved about the need, for example, to focus not on the legal form that a particular financial product takes or the institution it emerges from, but rather what's the risk involved, what's the function of this product and how do we regulate that adequately, much more effective coordination, er, between countries so we can, er, anticipate the risks that are involved there. Dealing with the, er, problem of derivatives markets, making sure we have set up systems, er, that can reduce some of the risks there. So, I actually think ... pause [FANTASTIC. I'VE LOST EVERYONE, INCLUDING MYSELF] ... there's enormous consensus that has emerged in terms of what we need to do now and, er ... pause [I'M OUTTA HERE. TIME FOR THE USUAL CLOSING BOLLOCKS] ... I'm a great believer in looking forwards than looking backwards.
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch
BTW, if it doesn't have its own dictionary, it is not a language.
I've never heard anyone impose this requirement before. There are numerous problems with your formulation:
1. You logically must believe that most people who have ever lived, and some that are alive today, do not speak a language. What do you call the speech systems of people who don't have writing and therefore do not have dictionaries.
2. Your formulation would indicate that English did not become a language until the Renaissance. What we call "Old English" was not a language, as there was no dictionary for it. It only became a language in more modern times when dictionaires were written for it.
3. Do you also mean to say that if something has a dictionary that it is a language? (This is not an automatic corrollary of your statement). I have seen dictionaries for such things as Southern English, Texas English, Yorkshire English, and Gay English. Are these languages because they have dictionaries?
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch
I recall Obama saying "I don't know how to say that in Austrian". That to me is a Dan Quayle moment.
Your recollection is imperfect. What he says is "I don't know what the term is in Austrian." This makes a difference, as I believe what he meant to say is "I don't know what the term is in Austria," and the name of the country got turned into an adjective. There would have been nothing wrong with saying "I don't know what the term is in Austria," and that would not imply that one thinks Austria has its own language, just that it may have its own set of terms for slangy phrases such as "wheeling and deeling."
I think the comparison to Dan Quayle is not apt. Dan Quayle was genuinely and objectively an idiot; his academic credentials were very week, as were George W. Bush's (he got some of the lowest grades in the history of Yale, which he almost certainly got into only because of family connections). Obama was president of the Harvard Law Review.
There are many legitimate things to criticize Obama about, as I have done in other postings. But this is not, in my view, one of them.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Ok, we can give Obama the benefit of the doubt, I guess. My overall point was not that presidents never make mistakes. What I meant really is the double standard, and how, had Bush said that, the reaction would have been different.
Regarding dictionaries, of course the languages before dictionaries were not codified into a dictionary (ancient Mayan is a language, even if no one wrote it down). What I mean is today, current languages. A language, as you mentioned is defined as a system of communication used by a group of people. I think it would be absurd to say that the German spoken in Vienna is a different "system of communication" than the German spoken in Munich (I would as a rough estimate put the lexical differences between German and Austrian at about 2 %, max.[I just got done doing a translation from Swiss German, and I did not notice anything in it that to me diveraged from standard High German, as written in Germany]). The differences in German within Germany are vastly more significant than the differences between Germany and Austria. Even inside a state like Baden-Württemberg, there are vast differences, and also inside Bavaria. But no one would say that from one village or province in Bavaria to the next (there are over 200 differing dialects in Bavaria), you are dealing with different languages.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
The most recent controversy is the bow that Obama took, while meeting the king of Saudi Arabia. Um, memo to President Bush: U.S. presidents don't bow to kings:
&feature=related
Wow. This is real "on the job learning". Last week it was calling Austrian a language, and this week it is bowing to kings. What is next, a takeover of GM by the government ? No, wait, that already happened.
Mother tongues: English, German Posts: 7846 Joined: September 26, 2003 Location: Canada
RE: Understanding the Financial Crisis
Thanks for the link, John. Your president is gaining the respect of the world. Does anyone know the cultural background of that bow? I assume that President Obama has read up on protocol of different cultures and customs and is showing himself as informed and open minded.
Mother tongue: English Joined: November 2, 2002 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 11, 2009 11:57 AM The most recent controversy is the bow that Obama took, while meeting the king of Saudi Arabia. Um, memo to President Bush: U.S. presidents don't bow to kings:
&feature=related Wow. This is real "on the job learning". Last week it was calling Austrian a language, and this week it is bowing to kings. What is next, a takeover of GM by the government ? No, wait, that already happened.
Controversy SAYS WHO?.....More BS by the master troller.....
Obama Bows Down to Saudi King! The Controversy Continues….
Posted by: Scott Lucas in Middle East & Iran, US Foreign Policy, Uncategorized, tags: Barack Obama, Camille Paglia, Conservapedia, King Abdullah of Saudi Arabia, Mike Dunn
Latest Video! Do We Care about the Obama Bow?
This blog entry should be considered a very important update on a very important event. In no way should it be seen as a shameless reminder that we have the video of the Obama bow/non-bow to Abdullah.
Full credit to my colleague Ali Yenidunya, who broke the story last Thursday of President Obama’s bow of greeting to King Abdullah of Saudi Arabia and wrote ominously, “One thing we do know is that a younger Muslim always shows utmost respect to an older Muslim in public and is expected to kiss the latter’s hands. Hmm, we should think more about it.”
Ali did get the Internet, or at least the right-thinking portion of it, moving.
His challenge, “It is time for Conservapedia to take some action,” has been met. Our favourite on-line encyclopedia has updated its entry for Barack Hussein Obama, “Never before in the history of the U.S. has a president displayed such shocking deference to a foreign official.”
The Weekly Standard initially fretted, “There’s [a] fawning you’ll never, ever know anything about and that is President Obama’s grovel before Abdullah bin Abdul Aziz of the House of Saud,” but a few days later, everyone was a-flutter about it (perhaps because The Weekly Standard kept banging on). Heck, even Camille Paglia wrote about it, and apparently she was a really important writer once upon a time.
Mother tongue: English Joined: November 2, 2002 Location: United States
RE: Understanding the Financial Crisis
Here's what anti-Obama trollers do....
Quote: Yesterday, Think Progress reported on Republican lawmakers planning to speak at anti-Obama “tea party” protests taking place nationwide on April 15. Last night, Eric Odom of the DontGo website — one of the organizers of the protests — wrote a blog post stressing that these protests are displays of “regular American[s] in protest of government spending and extreme taxation,” rather than something affiliated with a political party or special interest agenda.
Today on Fox News — which has actively been promoting the protests — Glenn Beck pushed the tea party talking points, similarly claiming that the protests aren’t “coordinated” and are fully organized by “regular” people. Watch it:
****Despite these attempts to make the “movement” appear organic, the principle organizers of the local events are actually the lobbyist-run think tanks Americans for Prosperity and Freedom Works. *****The two groups are heavily staffed and well funded, and are providing all the logistical and public relations work necessary for planning coast-to-coast protests:
– Freedom Works staffers coordinate conference calls among protesters, contacting conservative activists to give them “sign ideas, sample press releases, and a map of events around the country.”
– Freedom Works staffers apparently moved to “take over” the planning of local events in Florida.
– Freedom Works provides how-to guides for delivering a “clear message” to the public and media.
– Freedom Works has several domain addresses — some of them made to look like they were set up by amateurs — to promote the protests.
– Americans for Prosperity is writing press releases and planning the events in New Jersey, Arizona, New Hampshire, Missouri, Kansas, and several other states.
This type of corporate ‘astroturfing‘ is nothing new to either organization. While working to promote Social Security privatization, Freedom Works was caught planting one of its operatives as a “single mom” to ask questions to President Bush in a town hall on the subject. Last year, the Wall Street Journal exposed Freedom Works for similarly building “amateur-looking” websites to promote the lobbying interests of Dick Armey, the former Republican Majority Leader who now leads Freedom Works and is a lobbyist for the firm DLA Piper.
Americans for Prosperity is run by Tim Phillips, who was Ralph Reed’s former partner in the lobbying firm Century Strategies. The group is funded by Koch family foundations — a family whose wealth is derived from the oil industry. Indeed Americans for Prosperity has coordinated pro-drilling ‘grassroots‘ events around the country.
UpdateThis afternoon, former Republican House Speaker Newt Gingrich, leader of the corporate-funded American Solutions for Winning the Futures (ASWF), blasted an e-mail to his supporters with a reminder to attend the protests, along with a "Toolkit" of talking points. Gingrich's ASWF is funded by polluters and helped orchestrate the "Drill Here, Drill Now" campaign last summer. ASWF has been an official "partner" in the tea party effort since at least March.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 11, 2009 4:57 PM The most recent controversy is the bow that Obama took, while meeting the king of Saudi Arabia. Um, memo to President Bush: U.S. presidents don't bow to kings:
Ah, well, if you want to make a comparison with Dubbyah, he is on film record kissing the very same king on the lips and strolling down the garden path holding the king's hand in his little paw.
If Dubbyah got on that way in public, what part of King Abdullah do you think that he kissed in private back at the ranch?
The truth is: US presidents will do anything, without exception and however servile the gesture, if it is in the US national interest (except tell the truth, of course).
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 12, 2009 12:57 AM
The most recent controversy is the bow that Obama took, while meeting the king of Saudi Arabia. Um, memo to President Bush: U.S. presidents don't bow to kings:
You sound like a simple bow means signing away some bargaining power. If Saudi Arabia is not a major oil exporter, would U.S. Presidents behave differently?
Alas for the Son of Heaven and his nation, the Opium War followed a few years after the demi-prostration of the British envoy, and it was established that China was subordinate to the cannons, guns, and warships ...
President Obama voluntarily bent his knee and bowed his head before the most important ruler in the Islamic world. Let us hope that it does not require a war to right this insult to American sovereignty.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
First off, I would just say that I think Bush's actions with respect to the Saudis were also pretty unacceptable. But have we already gotten to the point in the new Obama adminstration, in which we justify Obama's missteps with the motto "Well, Bush did it too" ?? I thought that Obama was to be about "change" and transformation.
Jane, welcome back. About 10 days ago you promised not to respond to me anymore, but now we hear from you again. Well, that is o.k. I would like to think that this site is open and tolerant. I personally have major problems with what Obama is doing, as I have pointed out on this site. His economic plans will probably result in "stag-flation" (stagnation + inflation), as most Keynesian programs do. We are basically taking on massive debt to "solve" the problem of too much debt. Does that make any sense to you ? The groups you mentioned, I have never heard of. The attempt to state that anyone who disagrees with this insanity that Obama-Geithner are putting into action (and yes, Bush also did it) is "bought" by some special interest groups just amazes me, because I oppose this insane budget by Obama, and I have never even heard of such groups (still waiting for my check from them for being against Obama).
Does it bother you at all that Obama's budget will literally put 4 generations of Americans in debt to the Chinese, and will also suck capital from the Third World (where it is needed), to the U.S. ?
The people most hurt by high inflation are the poorest people, and it is very likely that Obama's budget will result in inflation.
I think we really should think these things through and debate them rationally, rather than throwing around accusations.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 12, 2009 1:24 PM
I personally have major problems with what Obama is doing, as I have pointed out on this site. His economic plans will probably result in "stag-flation" (stagnation + inflation), as most Keynesian programs do. We are basically taking on massive debt to "solve" the problem of too much debt. Does that make any sense to you ?
Perhaps, then and only then, the unthinkable would happen: wiping out the U.S. trade deficit (foregin goods becoming less affordable on the basis of a weakened dollar?)
If the downward slide of the U.S. dollar is maintained, you probably don't have to worry about money flowing from needy developing countries to the U.S. (namely China financing the U.S. debt) unless the U.S. is willing to issue bonds denominated in foreign currencies at higher cost and risk.
Mother tongue: English Posts: 1752 Joined: April 13, 2007 Location: United States
RE: Understanding the Financial Crisis
Originally written by John Bunch
I think it would be absurd to say that the German spoken in Vienna is a different "system of communication" than the German spoken in Munich (I would as a rough estimate put the lexical differences between German and Austrian at about 2 %, max.[I just got done doing a translation from Swiss German, and I did not notice anything in it that to me diveraged from standard High German, as written in Germany]). The differences in German within Germany are vastly more significant than the differences between Germany and Austria. Even inside a state like Baden-Württemberg, there are vast differences, and also inside Bavaria. But no one would say that from one village or province in Bavaria to the next (there are over 200 differing dialects in Bavaria), you are dealing with different languages.
I don't know why this strikes you as absurd. Of course the "system of communication" (which, by the way is not a good definition of language, because some "systems of communication" are not languages - e.g. honking a car horn to warn someone) is dfiferent in Munich than it is in Vienna. No two snowflakes are identical, and no two people speak exactly alike, to say nothing of two different groups of people. The question isn't whether they are "different" - because they inevitably are - but rather how different they are, and how much difference is required for people to make a subjective determination that the two "systems of communication" constitute different languages. In the case of German - and many other languages - there are strong historical, social and political reasons related to the sense of a common German identity which operate to make people see the commonalities of the German dialects. In Scandinavia, on the other hand, people operate differently, and see strong differences between the closely-related "systems of communication" known as Danish, Norwegian and Swedish, these being systems of communication that have their own armies and navies.
I'm somewhat surprised by your comments about "Swiss German." Schwyzerdeutsch differs substantially from standard German, but it is primarily a spoken, and not a written, language. Very few things are written in Schwyzerdeutsch, and most newspapers and documents from Switzerland are written in standard German. Your translation project does not seem to have involved "Swiss German," but merely a standard German text produced in Switzerland.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by John Bunch on April 12, 2009 5:24 AM First off, I would just say that I think Bush's actions with respect to the Saudis were also pretty unacceptable. But have we already gotten to the point in the new Obama adminstration, in which we justify Obama's missteps with the motto "Well, Bush did it too" ?? I thought that Obama was to be about "change" and transformation.
What a monumental cop-out! Your statement about US presidents not bowing to kings was generic and not restricted to Bush and Obama. It is plainly untrue. It is not a matter of whether you think that it is acceptable or not. There must have been a good sound reason for it and one which we are not going to be told about, that is clear.
There are obviously circumstances in which US presidents will always be forced to metaphorically (or in simulation) kiss some foreign potentate's backside and that will happen even more frequently now that the USA has been significantly weakened, both financially and militarily. You are just going to have to live with it.
Wen Jiabao is the next one to be given the US presidential genuflection in public, you mark my words! It has probably happened already in private but now it has to be in public so that the world can witness the humiliation. It is all a matter of trade-offs in which only the inner circles will get to know the full details of the deal.
Originally written by John Bunch on April 12, 2009 5:24 AM Does it bother you at all that Obama's budget will literally put 4 generations of Americans in debt to the Chinese, and will also suck capital from the Third World (where it is needed), to the U.S. ? The people most hurt by high inflation are the poorest people, and it is very likely that Obama's budget will result in inflation.
I trust Obama to have, unlike Bush, an exit strategy. It seems to me very likely that Obama is going for the all-or-nothing solution. He is pointing the USA at total financial collapse and betting on the rest of the world intervening to prevent that happening but at their own expense, and at a time of the US's choosing, before that can happen. The US debt is going to be spread out globally so that we will all be in the same position and we can all start over from scratch. My bet is that it will be done with the currencies so that all the world's currencies will become simultaneously worthless overnight.
That seems to me to be the only way that anybody can make sense of the US government's financial activities and policies at the moment and this explanation enables me, for one, to Understand the Financial Crisis at long last!
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Taken from the Washington Post, April 11th, 2009
The identity of the first puppy -- the one that the Washington press corps has been yelping about for months, the one President Obama has seemed to delight in dropping hints about -- leaked out yesterday. This despite White House efforts to delay the news until the big debut planned for Tuesday afternoon.
The little guy is a 6-month-old Portuguese water dog given to the Obama girls as a gift by that Portuguese water dog-lovin' senator himself, Edward M. Kennedy of Massachusetts. The girls named it Bo -- and let it be noted that you learned that here first. Malia and Sasha chose the name, because their cousins have a cat named Bo and because first lady Michelle Obama's father was nicknamed Diddley, a source said. (Get it? Bo . . . Diddley?)
Bo's a handsome little guy. Well suited for formal occasions at the White House, he's got tuxedo-black fur, with a white chest, white paws and a rakish white goatee.
Clearly, the identity of the dog was information too big to contain. A mysterious Web site called http://firstdogcharlie.com published a picture of a Portie yesterday morning, complete with a Q and A with the dog, which it said was originally named Charlie. The celebrity gossip Web site http://TMZ.comlinked to the picture. So much for the big White House unveiling.
For an Obama team that ran a famously tight-knit press operation during last year's presidential election campaign, it was a sign of how tough it can be to keep a leash on information in Washington.
It's not for lack of trying, though. Bo's story starts sometime around the Ides of March. Word on the street was that the White House was going to plant a vegetable garden. Health gurus had been pushing the Obamas to plant seedlings for months, hoping it would set a good example for children everywhere.
Ladies and Gentlemen, you have just witnessed a 21st century equivalent of Nero fiddling while Rome burns. Nero did not officially start the fire but he did have Rome rebuilt from the ground up and out of marble instead of the wooden buildings that were wiped out by the fire and he used the debris to fill in the swamps. Obama might be doing something similar.
This dog is a smoke bomb to distract the attention of the suffering public from the economic misery, e.g. the retirees who have seen their retirement income evaporate. I predict that this dog will grab the headlines on cue whenever required, crap on the Oval Office carpet, bite a reporter, whatever is necessary to distract attention from some unfortunate derailing of the master economic plan.
The theory is probably that people will say that the situation cannot be so bad after all if the US president and the national media have the time to spend on trivia of this kind while the economy is burning.
Nobody can convince me that this "dog show" hasn't been planned for years now for no other purpose than to manipulate the electorate. Properly executed, you can fool all of the people all of the time!
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I was hoping that Obama would be more like Clinton (i.e, fiscally conservative, but socially liberal), which would have been fine with me. And I agree that he is going for all or nothing. What he should have done is use his very high popularity to put through a real banking plan (i.e. set up a "bad bank" where you can store the "toxic assets", then say to the banks 'we are giving you a one-time opporunity to sell your toxic assets to us for $ 0.40 on the dollar, take it or leave it). Then, you park the toxic debt in the "bad bank". Also, I think a "smallish" real infrastructure project (building broadband, highways, etc.) would make sense and almost all Americans would support that. Had Obama done this, people like me would now be singing his praises (really !).
Instead, what we got is a half-baked bank "rescue" (written by guys like Geithner, to protect their cronies on Wall Street, not the average American), and a totally out-of-control $ 780 billion budget basically written by Nancy Pelosi and which is 80 % transfer payments (welfare), not real infrastructure spending. And the budget almost guarantees inflation and higher taxes for most Americans. This will, as I have pointed out, suck capital in from all over the world to basically pay for welfare. And it will guarantee that Americans who are not even born yet will pay for this ("generational theft", as McCain called it). Many projects in places like Africa and China will not be paid for because of this "stimulus". In addition, there are some very troublesome things in the new budget legislation, like "card check", which ends secret ballots in the workplace. Even George McGovern (hardly a conservative !) has criticized this as undemocratic.
The Germans are right to be afraid of this, because they know the damage that hyper-inflation can cause.
Mother tongues: Polish, English Posts: 2906 Joined: September 13, 2008 Location: United States
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on April 12, 2009 11:27 AM
Taken from the Washington Post, April 11th, 2009
The identity of the first puppy -- the one that the Washington press corps has been yelping about for months, the one President Obama has seemed to delight in dropping hints about -- leaked out yesterday. This despite White House efforts to delay the news until the big debut planned for Tuesday afternoon.
The little guy is a 6-month-old Portuguese water dog given to the Obama girls as a gift by that Portuguese water dog-lovin' senator himself, Edward M. Kennedy of Massachusetts. The girls named it Bo -- and let it be noted that you learned that here first. Malia and Sasha chose the name, because their cousins have a cat named Bo and because first lady Michelle Obama's father was nicknamed Diddley, a source said. (Get it? Bo . . . Diddley?)
Bo's a handsome little guy. Well suited for formal occasions at the White House, he's got tuxedo-black fur, with a white chest, white paws and a rakish white goatee.
Clearly, the identity of the dog was information too big to contain. A mysterious Web site called http://firstdogcharlie.com published a picture of a Portie yesterday morning, complete with a Q and A with the dog, which it said was originally named Charlie. The celebrity gossip Web site http://TMZ.comlinked to the picture. So much for the big White House unveiling.
For an Obama team that ran a famously tight-knit press operation during last year's presidential election campaign, it was a sign of how tough it can be to keep a leash on information in Washington.
It's not for lack of trying, though. Bo's story starts sometime around the Ides of March. Word on the street was that the White House was going to plant a vegetable garden. Health gurus had been pushing the Obamas to plant seedlings for months, hoping it would set a good example for children everywhere.
Ladies and Gentlemen, you have just witnessed a 21st century equivalent of Nero fiddling while Rome burns. Nero did not officially start the fire but he did have Rome rebuilt from the ground up and out of marble instead of the wooden buildings that were wiped out by the fire and he used the debris to fill in the swamps. Obama might be doing something similar.
This dog is a smoke bomb to distract the attention of the suffering public from the economic misery, e.g. the retirees who have seen their retirement income evaporate. I predict that this dog will grab the headlines on cue whenever required, crap on the Oval Office carpet, bite a reporter, whatever is necessary to distract attention from some unfortunate derailing of the master economic plan.
The theory is probably that people will say that the situation cannot be so bad after all if the US president and the national media have the time to spend on trivia of this kind while the economy is burning.
Nobody can convince me that this "dog show" hasn't been planned for years now for no other purpose than to manipulate the electorate. Properly executed, you can fool all of the people all of the time!
Derek
The economy is burning, but you still have to live. People just can't stop enjoying life and merely whine about the ecocomy all the time. It won't do anybody any good. There is time for everything in life: for working on the economy and for introducing a great dog. Do you honestly believe this was planned for years to distruct people's attention from the economy subject?
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Liliana Boladz-Nekipelov on April 12, 2009 4:41 PM The economy is burning, but you still have to live. People just can't stop enjoying life and merely whine about the ecocomy all the time. It won't do anybody any good. There is time for everything in life: for working on the economy and for introducing a great dog.
Yes, I agree, and everybody is entitled to a little private family life. And I bet that Obama keeps all the family life that he wants to keep private, just that - private. But this "dog for the kids" charade has been going on for a long time now, too long for it to have been a purely private family matter. Obama has included mention of it in many major speeches, including his professionally choreographed acceptance speech.
This is not just "enjoying life" nor has it much to do with the dog itself, this is presidential positioning - and PR and there is more to it than just something to keep the kids happy while papa is busy saving the world - papa has invested time, effort, speech minutes, even prime TV time, on this dog.
He could have kept the kids happy without saying one word about it in public. No, this is manipulation of public opinion. Nothing wrong with that, it has to be done but let's tell it like it is.
Originally written by Liliana Boladz-Nekipelov on April 12, 2009 4:41 PM Do you honestly believe this was planned for years to distruct people's attention from the economy subject?
It is not a matter of honest belief but of following the clues. There has been no sign so far that Obama leaves anything important to chance, everything appears to be planned down to the finest detail and in the event also runs apparently completely according to plan. He even made this dog one of his "campaign promises" and there it is, honored in full! Another tick in the "campaign promise fulfilled" column!
This guy is no bull-in-a-china-shop like Bush43. Something like this which predictably would get prime time TV attention and appear above-the-fold on the front pages of all the major national newspapers has just got to have been meticulously planned and therefore to have had a significance in Obama's master plan.
I am only making this point to get in a prediction. Whenever that dog manages to get into the national headlines again or onto prime time TV news coverage then there will be something important going on behind the smoke screen.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Nanna Mercer on April 12, 2009 9:55 PM Right about now, you could have had Sarah to bitch about. Maybe John, too...
Who is "you" here, Nanna? Is that a singular "you" or a plural "you"? Who is "bitching"? To which "John" are you referring? Is this the "Sarah" your "you" could have been bitching about?
Originally written by Derek Thornton on April 12, 2009 11:56 PM
... Is this the "Sarah" your "you" could have been bitching about?
Looking fondly at that winky rinky dinky face again, I realise that I misspoke. I should have said, "Right about now, we could have had..." It was fun, making fun of this turkey saver.
Mother tongues: Polish, English Posts: 2906 Joined: September 13, 2008 Location: United States
RE: Understanding the Financial Crisis
I do not think President Obama knew about the dog a few years ago: his daughters were very little then, and I do not think he would have postponed buying them a dog for a few years, untill the time the economy collapsed and he became the President, if they had asked for it then. It would have been like telling them, I will buy you a dog when the first dog lands on Mars.
Plus, the media in America is different than the media in some European countries. People want know all, just out of curiosity or for entertainment purposes. Daily news shows are not boring, as in some countries I remember, but full of interesting stories of different sorts. The news people cook on tv, dance, sometimes, etc. If people just started talking about the economy on tv, and only about serious things, I would have to donate my tv to charity.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Liliana Boladz-Nekipelov on April 13, 2009 11:02 AM I do not think President Obama knew about the dog a few years ago ...
I have heard Barack Obama claiming on TV that his presidential election campaign lasted over 2 years from beginning to end. It seems reasonable to assume that he had given some thought to political tactics well before that time. Playing on popular sentimentality (babies and pets) could well have been a part of that. I do not believe that he takes uncalculated chances.
Originally written by Liliana Boladz-Nekipelov on April 13, 2009 11:02 AM People [in the US] want [to] know all, just out of curiosity or for entertainment purposes. Daily news shows are not boring, as in some countries I remember, but full of interesting stories of different sorts.
Sure, but the consumers of the daily news are being manipulated in cold blood just the same. Politics and the news media are just another branch of marketing, find out what needs are there and satisfy them for a profit. It happens that the population of the US is conditioned and is more susceptible to being manipulated by marketing machinations than the less advanced populations of Old Europe. And it is not beneath the dignity of a US president to politically market via the news media his wife, his own offspring and their pet for short-term political gain.
Please don't tell me that he would have done the same even if it had put him at some political disadvantage. Or that the news media would still have metaphorically flogged the president's family and that dog to death even if it had cost them advertising audience.
There is nothing really new about all that.
Meanwhile, back at the Forum, the economic smoke is beginning to thicken. Nero strikes up a new tune ...
Originally written by Liliana Boladz-Nekipelov on April 13, 2009 11:02 AM I was myself very interested to see this dog.
Why were you interested to see this particular dog over all the other dogs that are adopted by US families every day? Why do you choose to buy a particular crappy breakfast cereal over all the other crappy breakfast cereals lined up on the supermarket shelf? It is all a matter of branding - this particular dog is being branded as "The First Dog".
The real mystery to me is why people cannot see what is happening when their emotions are being manipulated so brazenly.
Mother tongues: Polish, English Posts: 2906 Joined: September 13, 2008 Location: United States
RE: Understanding the Financial Crisis
Derek. I do not agree that this was all planned. Barack Obama is not a conceited person, in my mind, and based on my intuition which is an integral part of my way of living. Don't ask me why I was interested in that dog: I don't know, like I do not know often why I like something as opposed to not liking. I would not even want to know why I like something, because this is in the sphere of liking, not in the sphere of reason
As for cereal, I do not buy cereal nor do I eat it, except for old fashioned oats. Any nice dog, perhaps even not so nice, is welcome on tv. This is better than the, often boring, economists.
Plus, he does not need to gain too many people, he is quite liked and his support rate is about 68% according to some polls, as opposed to Bush 36%, or something in that range.
Mother tongues: English, Swahili Joined: October 25, 2005 Location: Kenya
RE: Understanding the Financial Crisis
Originally written by Liliana Boladz-Nekipelov on April 13, 2009 1:02 PM
I do not think President Obama knew about the dog a few years ago: his daughters were very little then, and I do not think he would have postponed buying them a dog for a few years, untill the time the economy collapsed and he became the President, if they had asked for it then. It would have been like telling them, I will buy you a dog when the first dog lands on Mars.
Plus, the media in America is different than the media in some European countries. People want know all, just out of curiosity or for entertainment purposes. Daily news shows are not boring, as in some countries I remember, but full of interesting stories of different sorts. The news people cook on tv, dance, sometimes, etc. If people just started talking about the economy on tv, and only about serious things, I would have to donate my tv to charity.
I was myself very interested to see this dog.
My modem tends to get screwed up most times I post here. Maybe it is some form of configuration incompatability, but this I could not miss. As one of the former unfortunate subjects of The British Empire. I think there is something about this dog story that needs more intercultural awareness. A good place to start to understand the dog theory being given here could be some very authoritative British Journals such as Beano, Dandy and Beezer. If journals are not your thing, authors such as Kingsley Amis and Martin something or Martin Amis and Kingsley something- I have not had time to read much of late, so I can't quite recall the names properly- may give a better understanding of the plot-unless my outlook is past sell by date.
Mainwhile perhaps Jacek could offer a few useful links for one to get the nuance of the quoted post above from a different perspective.
PS:JK I have not forgotten the table at the cafe, one day I will brew something outrageous to be worth the wait.
Mother tongues: English, Swahili Joined: October 25, 2005 Location: Kenya
RE: Understanding the Financial Crisis
John, I may have to resit your online economics 101. Either I have not been attentive in class or I have been missing too many lessons.
What I have picked up so far is these:
a) The tax rate does not matter, what is actually collected remains constant.
b) By inference to a few posts- social spending is wasteful but spending over 50% of the world's defence budget is useful because it makes America 'secure from its enemies'. I hope this does not include Reagan/Weinburger's 500 dollar army toilet seats in the eighties.
c) Tax cuts stimulate the economy, but I do not understand how the resultant deficit is filled.
Assuming that this is a responsible government, won't the deficit have to be financed with debt, and sooner or later won't this lead to higher interest rates as government elbows out the private sector from access to credit? Won't this higher interest rates be a form of secret taxation, and if companies are given a tax holiday this year, how will government expenditure be met?
There was a time in America when some of the economic policies that have become part of the Republican bible, were referred to by a man who later, together with his son became presidents as voodoo economics.
On a different note, there is something suspicious about a developing nation such as China subsidising the consumption of a nation such as America. It raises questions about how the money was made in the first place.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Liliana Boladz-Nekipelov on April 13, 2009 12:47 PM Derek. I do not agree that this was all planned. Barack Obama is not a conceited person, in my mind, and based on my intuition which is an integral part of my way of living.
OK, but don't get me wrong, Liliana, I think that he is doing a good job. The one thing I miss is a rational explanation for his grand economic plan. If he had one that he could safely make public, I feel sure that he would have done so by now. That leaves only the options
a) that he has no coherent plan, i.e. he is flying by the seat of his pants, throwing the dice with his eyes shut and I choose to think that is unlikely. That leaves only the option
b) that he has a plan but that it is so risky or non-conformist that he cannot possibly put his cards on the table yet.
An example is that I just heard him say on live TV that over 2000 of his stimulus projects have been approved in 40 days, mostly all infrastructure repairs and upgrades. If this national procedure were to be applied personally by all US citizens it would mean that if you have just lost your job, have maxed out all your credit cards, are having trouble paying your mortgage, are up to your ears in consumer debt, your bank is insolvent, your retirement income has gone with the wind, what is the soundest economic plan to follow? Why, you start renovating your house, you fix the garage door, you repave the driveway and you renew all the sanitary fittings, and all on credit. Then you claim that by the end of the year you will have reduced your personal debt by half. How does that work? He still hasn't explained that yet. Does anybody else have any ideas?
Meanwhile, back at the ranch, there is a new dog in town and the US is celebrating a military victory of heroic proportions - the president personally giving three snipers orders to shoot dead three wild Somali pirates to free one hostage US seaman, and in doing so, putting the lives of at least some of the other 209 hostages who are still in the hands of pirates in the gravest danger. I do hope that they have thought this one through.
OK, at least he is doing something but it stll looks like too many balls in the air at the same time - where is the long-term plan for the economy that does not just involve throwing more money out of the window?
Originally written by Liliana Boladz-Nekipelov on April 13, 2009 12:47 PM Any nice dog, perhaps even not so nice, is welcome on tv. This is better than the, often boring, economists.
That is OK for you, you cannot do any harm. What worries me is that the Obama administration has the same view as you about boring economists and cute little dogs.
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
I think that as long as we let government print money out of thin air, we will have these problems. The thing that created these financial bubbles was expanding government, at the same time that we (the U.S.) left the gold standard. Up until 1971, the U.S. dollar was tied to the gold standard ($ 35 USD = 1 ounce of gold). Before 1971, we had far fewer bubbles. Leaving the gold standard has allowed our government to print money, and that has allowed us to run continuous trade deficits (which would have been self-corrected, if we were on the gold [or silver] standard).
If you combine that with the Federal Reserve basically creating money and pushing the interest rates down, artificially, it is not a huge surprise that we have these huge financial bubbles that then burst.
And now Bernanke, the current chairman of the Federal Reserve, says he wants "moderate inflation", becuase it helps borrowers pay back their debt. Once again, the solution is to fire up the governmental printing presses, and print more money.
Hopefully, Bernanke can hold this "tiger" by the tail. As I have mentioned before, the Germans are getting very nervous about this (but not just them).
Mother tongues: Polish, English Posts: 2906 Joined: September 13, 2008 Location: United States
RE: Understanding the Financial Crisis
Originally written by Raymond Anthony on April 13, 2009 12:06 PM
Originally written by Liliana Boladz-Nekipelov on April 13, 2009 1:02 PM
I do not think President Obama knew about the dog a few years ago: his daughters were very little then, and I do not think he would have postponed buying them a dog for a few years, untill the time the economy collapsed and he became the President, if they had asked for it then. It would have been like telling them, I will buy you a dog when the first dog lands on Mars.
Plus, the media in America is different than the media in some European countries. People want know all, just out of curiosity or for entertainment purposes. Daily news shows are not boring, as in some countries I remember, but full of interesting stories of different sorts. The news people cook on tv, dance, sometimes, etc. If people just started talking about the economy on tv, and only about serious things, I would have to donate my tv to charity.
I was myself very interested to see this dog.
My modem tends to get screwed up most times I post here. Maybe it is some form of configuration incompatability, but this I could not miss. As one of the former unfortunate subjects of The British Empire. I think there is something about this dog story that needs more intercultural awareness. A good place to start to understand the dog theory being given here could be some very authoritative British Journals such as Beano, Dandy and Beezer. If journals are not your thing, authors such as Kingsley Amis and Martin something or Martin Amis and Kingsley something- I have not had time to read much of late, so I can't quite recall the names properly- may give a better understanding of the plot-unless my outlook is past sell by date.
Mainwhile perhaps Jacek could offer a few useful links for one to get the nuance of the quoted post above from a different perspective.
PS:JK I have not forgotten the table at the cafe, one day I will brew something outrageous to be worth the wait.
Lives of all politicians might be plots to a certan extent, but the claim that the dog for Obama's girls was planned a few years in advance is ridiculous.
Mother tongues: Polish, English Posts: 2906 Joined: September 13, 2008 Location: United States
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on April 13, 2009 2:01 PM
Originally written by Liliana Boladz-Nekipelov on April 13, 2009 12:47 PM Derek. I do not agree that this was all planned. Barack Obama is not a conceited person, in my mind, and based on my intuition which is an integral part of my way of living.
OK, but don't get me wrong, Liliana, I think that he is doing a good job. The one thing I miss is a rational explanation for his grand economic plan. If he had one that he could safely make public, I feel sure that he would have done so by now. That leaves only the options
a) that he has no coherent plan, i.e. he is flying by the seat of his pants, throwing the dice with his eyes shut and I choose to think that is unlikely. That leaves only the option
b) that he has a plan but that it is so risky or non-conformist that he cannot possibly put his cards on the table yet.
An example is that I just heard him say on live TV that over 2000 of his stimulus projects have been approved in 40 days, mostly all infrastructure repairs and upgrades. If this national procedure were to be applied personally by all US citizens it would mean that if you have just lost your job, have maxed out all your credit cards, are having trouble paying your mortgage, are up to your ears in consumer debt, your bank is insolvent, your retirement income has gone with the wind, what is the soundest economic plan to follow? Why, you start renovating your house, you fix the garage door, you repave the driveway and you renew all the sanitary fittings, and all on credit. Then you claim that by the end of the year you will have reduced your personal debt by half. How does that work? He still hasn't explained that yet. Does anybody else have any ideas?
Meanwhile, back at the ranch, there is a new dog in town and the US is celebrating a military victory of heroic proportions - the president personally giving three snipers orders to shoot dead three wild Somali pirates to free one hostage US seaman, and in doing so, putting the lives of at least some of the other 209 hostages who are still in the hands of pirates in the gravest danger. I do hope that they have thought this one through.
OK, at least he is doing something but it stll looks like too many balls in the air at the same time - where is the long-term plan for the economy that does not just involve throwing more money out of the window?
Originally written by Liliana Boladz-Nekipelov on April 13, 2009 12:47 PM Any nice dog, perhaps even not so nice, is welcome on tv. This is better than the, often boring, economists.
That is OK for you, you cannot do any harm. What worries me is that the Obama administration has the same view as you about boring economists and cute little dogs.
Derek
Hi Derek. I must admit that I find the subject of economy totally boring, incomprehensible, and for me, it does not have any basis in the reality, at least in the state it is now. It consists of some apparently authentic laws that should work, but to me, all of this is more like some kind of sorcery. I am not interested in economy at all, as a science, because I believe the way it is formulated right now has no basis in the reality. The laws are supposed to work somehow and aspire to be real, scientific laws based on the laws in the Universe, But I really doubt it.
The economy in its present state is nothing more than some kind of a theory like the one that the Earth was flat in the Middle Ages: I do not think it could ever work in the long run. So what does Obama have to do: the best, in this disastrous situation without destroying his personal life, the enjoyment of life and sense of humor. As for the pirates, they got whatever they deserved, although I am generally against capital punishment. If they think is is funny to abduct people, this is what they got. Not that this was a form of a capital punishment, since there was no trial. Let's say I am just against killing people in general, but what can be done in such situations? Even one life of a hostage in danger is worth the whole rescue operation: it is not the masses, but the individual that counts. Even one life lost is an inconsolable loss.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Liliana Boladz-Nekipelov on April 14, 2009 10:35 AM I must admit that I find the subject of economy totally boring, incomprehensible, and for me, it does not have any basis in the reality, at least in the state it is now.
There is, of course, no such thing as "reality", only different "perceptions". I firmly believe that if there is a circle of experts who have a pretty good idea of what is going on then just about the last thing they would do is let the masses in on the secret. The fewer the people who know what is going to happen, the bigger the killing that can be made from it. Typical are the recent reports about the guy who shorted sub-prime before the crash, bet that they would all default and they did, and he made over $4 billion before anybody else caught on [CNBC]. He is said to be keeping it all in cash at the moment.
Originally written by Liliana Boladz-Nekipelov on April 14, 2009 10:35 AM So what does Obama have to do: the best, in this disastrous situation without destroying his personal life, the enjoyment of life and sense of humor.
OK, but I very much doubt that he is going to lay his and his family's private life bare for all the world to goggle at so what he needs (and presumably always knew he would need) is a kind of front, a simulated family life that can be made public and can be run by his staff to present the best image. Cue the dog.
Originally written by Liliana Boladz-Nekipelov on April 14, 2009 10:35 AM Even one life of a hostage in danger is worth the whole rescue operation: it is not the masses, but the individual that counts. Even one life lost is an inconsolable loss.
Aha, I see that you are an idealist, Liliana! That is nice. I am a cynic and I fear that the world has long ago ceased to concern itself with individuals. This was not emotional concern for an individual but a cold geopolitical decision: "Take 'em out!" This was "breaking news", with a geopolitical significance. The guy's death could well have been inconsolable to his immediate family but not to anybody else.
If one life lost was really inconsolable, we would all be in permanent mourning. A million people die of malaria every year worldwide, that is about 3000 dead from preventable malaria since this time yesterday and hardly anybody gives it a thought. Yet an effective course of treatment could be made available for less than 20 cents per person. Those individuals who die of malaria are mostly under the age of 5 years and have no geopolitical significance whatever.
That guy's capture was also preventable. His employers knew about the pirates and did not need to send that ship there but they took the risk of his capture and possible death for sound commercial reasons.
Understanding it all is just like trying to understand the economy, it probably cannot be done.
Mother tongues: Polish, English Posts: 2906 Joined: September 13, 2008 Location: United States
RE: Understanding the Financial Crisis
I think each death diminishes us, but I think Hemingway said it. I think I really am an idealist, but let it be. As for the economy, I want to repeat that I not a great economist at all, I have almost no knowledge about the economy, but how can things work just on paper? How can people invest on paper and get rich on paper: they cannot eat on paper, unless one means paper plates. What is this saving every penny and investing it on paper all about? Shouldn't people just spend a little bit, give somebody some opportunities to earn money, start some enterprises which create jobs and produce and also bring profit, but real one, based on production of something, not just on paper?
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Hi Derek, et. al., yes. And the people in power want us to think it (the economy) is "too complex" and "too boring" to understand. If the average person realized for instance what the U.S. Federal Reserve does, and how much power it has over every person in the entire world (direclty or indirectly), the governent knows that we might demand changes. So to them, it is perfectly fine if we think that it is all "too complex and boring:". (the image that comes to mind just now is the wizard in the movie "The Wizard of Oz", who is behind a huge curtain, but when we see him for real, he is far smaller and less imposing than his image).
One of the most incredible things I have seen in recent years is when Texas GOP (libertarian) Congressman Ron Paul was asking Fed Chairman Bernanke some "hard" questions, during a Congressional hearing on the Fed and the money supply as it relates to the current crisis. And Bernanke was genuinely stifled and at a loss at times to answer Paul's very incisive questions. Basically, Bernanke would come back with the answer "because that is just how it is".
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Liliana Boladz-Nekipelov on April 14, 2009 8:37 PM Shouldn't people just spend a little bit, give somebody some opportunities to earn money, start some enterprises which create jobs and produce and also bring profit, but real one, based on production of something, not just on paper?
No, not in an unmitigated capitalist society, they normally shouldn't. The motivation there is to make more money than anybody else if you can. There is no obligation to give anybody else an opportunity to get some of what could have been yours.
Originally written by Liliana Boladz-Nekipelov on April 14, 2009 8:37 PM I have almost no knowledge about the economy, but how can things work just on paper?
I don't understand it either. That is why I am hanging about this thread in the the hope that somebody who does understand it will explain it all to us. In the meantime, this is my best shot at explaining it:
What you are proposing would make the stock market obsolete. Generally speaking, they are making a profit based on other people producing something. In the case of the present US economy in which very little is being produced, they are making a profit out of other people who are making a profit without producing anything. They can even make a profit out of people who are making a loss but I don't understand how.
It doesn't really matter that nobody is actually producing anything, what does matter in the USA is that people consume something, the profit is being made from what people consume, not from what they produce. It is only when they stop consuming for some reason that the whole house of cards collapses.
That is why it is difficult to understand what is going on: the giant US economy Ponzi scheme has come to a standstill because consumers have lost confidence in the con and are not consuming enough. The administration's answer is to spend money on infrastructure projects that also do not consume anything substantial but the hope seems to be that the consumers will see the government spending money they don't have like there is no tomorrow and also be deluded into going out and indiscriminately buying things they don't need and can't afford once again. Naturally, to do that if they have no money, they will need credit and that is not readily available in sufficient quantity and the money that was poured into the banks (who also make a profit without producing or consuming anything) so they could hand out the largesse has got stuck somehow or been diverted elsewhere so there is a need to pour in some more.
The theory seems to be that the US economy is a carousel that has come to a stop. The "stimulus packages" are intended to overcome the inertia. All that is needed is to get the carousel moving again and it will eventually keep itself turning. Once it is up and running, all that excess money can be bled off with high interest rates and taxation, or so the theory seems to be.
I have worked it out thus far all on my little own. It seems to make some kind of sense to me but I don't know what to call it, it sure does not fit the name "capitalism" that I was brought up on nor is it socialism that I was also brought up on and it is not fascism so what is it?
Provisionally, I will call it "house-of-cards" economics.
I hope that somebody can convince me that it is going to be sustainable but I doubt it somehow.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Understanding the Financial Crisis
Originally written by Derek Thornton on April 15, 2009 1:12 AM
Originally written by Liliana Boladz-Nekipelov on April 14, 2009 10:35 AM I must admit that I find the subject of economy totally boring, incomprehensible, and for me, it does not have any basis in the reality, at least in the state it is now.
There is, of course, no such thing as "reality", only different "perceptions". I firmly believe that if there is a circle of experts who have a pretty good idea of what is going on then just about the last thing they would do is let the masses in on the secret. The fewer the people who know what is going to happen, the bigger the killing that can be made from it.
...which leads to the postulation that fund managers, who earn fees and commisions out of managing other people's money, are not "experts" within that privileged circle by virtue of their publicizing their favored approach, sectors, markets, and holdings?
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Shiong-Fong Lew on April 14, 2009 10:35 PM ...which leads to the postulation that fund managers, who earn fees and commissions out of managing other people's money, are not "experts" within that privileged circle by virtue of their publicizing their favored approach, sectors, markets, and holdings?
I must say that I have never understood how that works. If they are smart enough to advise other people, why don't they just take their own advice and invest everything they have, make their fortune and retire? My guess is that they make their modest commissions whether their clients do well or do badly. If I remember correctly, the fund managers also failed to predict the present financial disaster and make their killing out of it. It seems that a good many of them even failed to see through Bernie Madoff.
Maybe I shouldn't have used the term "experts", I was thinking more of "people in the know". Of course, that is itself a wild assumption. It is conceivable that nobody really knows what is happening even though they might be getting paid for just that. That would mean that we are lost, drifting without a helmsman. Nothing that anybody has said so far anywhere about the situation inspires in me much confidence that anybody is in charge. Some people might be making some lucky guesses and will do well out of it, that is all.
I heard Ben Bernanke saying on CNBC today that the first priority is to "unclog" the market. Well, if something is "clogged" the obvious thing to do is to "unclog" it. Clogged with what? He didn't say. What are they waiting for? However, reducing the whole thing to the level of blocked drains makes me wonder if he really knows what he is doing, there must be a better way of describing the problem than that!
That would suggest that there isn't anything to "understand" about the financial crisis, any more than you can "understand" a series of random syllables - or a blocked drain!
Mother tongue: English Posts: 1805 Joined: February 1, 2008 Location: United States
RE: Understanding the Financial Crisis
Yes, exactly. Remember that TV commercial from about 1998, and it showed this kind of flabby, unkempt middle aged guy getting out of bed and wandering like a zombie down to the train station to take the train into the city, with his briefacase and raincoat ? And the voice-over said "If your financial advisor is so good, why does he still have to work ?". And that is so correct.
As John Bogle has pointed out, the $ 650 billion financial intermediary sector does not add value, it removes value that is already there. They function like a cartel, so the end result is that people like me (a free market guy), and people like some of you ("progressives", or democratic socialists) can dislike these guys and be in agreement on that. For me, they make capitalism look bad, and capitalism is, in my view, the greatest invention ever. (BTW, there were people who predicted this crisis. For instance, me ! I am not kidding. I went back and read a book review on Amazon that I wrote in 2006, about a book on the economy,and I mostly parroted the author, but I in effect said that Greenspan had flooded the market with "easy money", which then created the housing bubble, and I predicted that it would burst and "bring down the world economy" (and yes, I was mostly just quoting the author, but I guess I picked the right author to quote. Wow. And I don't have a PhD in Economics (I have a B.A. and a masters, where I dabbled in Economics). So predicting it was not that hard, if you just read things like "The Economist" magazine. The only reaosn I mention that is not to brag, but to just say, if a guy like me can read some books and magazines and predict the crisis, I think most people can.
In addition, our political class is incestuously "wedded" to this sector (Summers, Paulson, Geithner, etc.). They are from the same group that got us into this mess. And what keeps the stock markets from rallying is the insane amount of government we now have, tampering with this all.
The dirty little secret that most economists know is that doing nothing might be the best answer. But they (the politicians) can't "do nothing" (even though it would be brilliant), because:
a. They want more power, and doing nothing does not add to their power
b. Doing nothing makes the average person very nervous
The result we get is "actionism" - doing something for the sake of doing something, because the sheer action of doing something is confused by most people for having a solution. It seems like every week, Geithner and Obama and Pelosi come up with some new scheme to "save the world". It really is very funny. And the end result of it is that all this "actionism" makes the markets more and more nervous, and depresses any real rally.
And add to that the entire political class's overall view of the economy, as expressed in their budget, which Robert Samuelson of "Newsweek" (hardly a shill for the Republicans or conservatives) calls a "mirage":
http://www.realclearpolitics.com/articles/2009/04/obamas_postmaterial_economy.html
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Understanding the Financial Crisis
I don't understand why classical economics cannot explain that the accumulation of idiocy has to crash. Can anyone also explain to me why it takes a German scientific society to understand that?
Leverage: The Root of All Financial Turmoil
According to a new analysis reported at the German Physical Society meeting, leverage--the practice by hedge funds and other investors of borrowing money to buy investments--is the root of many nettlesome properties of financial markets that classical economics cannot explain, including a propensity to crash.
Mother tongue: English Joined: April 30, 2007 Location: Germany
RE: Understanding the Financial Crisis
Originally written by Jacek K. on April 24, 2009 10:11 AM I don't understand why classical economics cannot explain that the accumulation of idiocy has to crash.
I find that to be one of the easiest aspects of economics to understand - classical economics can operate only if there are enough idiots to go around. Run out of idiots and we are going to need a completely new economic sys
It's like watching Aria worrying away at a hard knuckle-bone... 
) to TCTerms.
Meanwhile, back at the Forum, the economic smoke is beginning to thicken. Nero strikes up a new tune ...