Expert Mother tongue: English Posts: 1807 Joined: February 1, 2008 Location: United States
RE: Economy
Well, it will continue to be bad if they (government) continue to cover any transparency that there might be in the system as to who owns what. It seems like lack of transparency is to me the main issue (example: I am buying a securitized asset, but how do I know what it is worth ?). This is partly the fault of the private sector and banks who intentionally made such securities über-complex so that only they and their PhDs in math could understand them. And many of the most intelligent people in the world STILL don't understand them and what they are worth.
Another problem is "mark to market accounting", which is another rule that means that assets held show a lower value in accounting terms than they are really worth.
The notion that "people should be able to stay in their homes" is misleading. I rent an apartment, but I don't consider it "mine". A house is only "yours" if you can make the payments. The politicians talking this nonsense are just making things worse. In future, people will be more reluctant to sell someone a home if the government backs that person as saying that the house is "theirs", regardless of the ability to pay for it.
Keynesianism - the U.S. government now wants to use old, failed Keynesian "solutions" to solve this problem. The problem is, though, that these "solutions" of giving people more money and letting the economy grow "from the ground up" has been shown not to work. Many times, people sit on the money. That is what the "stimulus check" from Bush was about, by the way. The better solution would be a monetary solution of making the overall business climate better (lower taxes and regulations on business). This worked in 1982-83 to stimulate the biggest world economic expansion of all time, which literally brought 1 billion people out of abject poverty. Monetarism is not the problem, but the solution. When I hear Obama talk Keynesianism, I think, "uh oh".
And now they are taking it one step further and talking about FDR-era public works projects to inject money in the old-fashioned Keynesian way. The problem is, by the time such projects are done, the world is in a different situation, because they take so long. Read about the "Big Dig" in Boston some time and what a waste it was and how over-budget it was.
[Edited by John Bunch on November 21, 2008 1:00 PM]
Mother tongue: Polish Joined: February 18, 2003 Location: Poland
RE: Economy
Originally written by John Bunch on November 21, 2008 6:59 PM I am buying a securitized asset, but how do I know what it is worth ?
Generally, in the world of speculators, you don't know. Look at these two pieces of news from the Warsaw Stock Exchange from the last couple of days:
1) Poland’s financial industry regulator on Friday informed the prosecutor’s office about a possible case of market manipulation involving a person acting in the name of JPMorgan Securities.
The complaint stems from the unusual end to trading on the Warsaw stock exchange on November 12. The market’s blue-chip WIG20 index had slumped by 9.1 per cent during the day, but minutes before the session’s close a series of buy orders worth 130m zlotys ($42m, €34m, £28m) were executed on all the companies making up the index, driving the WIG20 sharply upwards.
It ended the day down 4.93 per cent, and would have closed even higher had the exchange’s circuit breakers designed to dampen wild swings in prices not gone into effect.
2) Polish oil refiner Lotos denied Monday it is facing bankruptcy as it sought to calm investors unnerved by a Unicredit analyst report which said the company is likely to collapse.
Grupa Lotos SA, Poland's second-largest crude oil refiner, said the UniCredit recommendation, released Friday, to sell the company's stock was "entirely without foundation."
On Monday, shares fell 20 percent at the start of the trading session, but recovered to close down only 6 percent at 12.72 zlotys ($4.05), company spokesman Marcin Zachowicz said.
The Polish news agency PAP said the UniCredit report warned that Lotos has only about a 50 percent chance of surviving in its current form. UniCredit also reportedly slashed its target price for Lotos to zero from 25 zlotys ($8.08). http://www.chicagotribune.com/business/sns-ap-eu-poland-lotos,0,1458118.story
When you are in the market for shares and minutes before the closing bell someone throws on that market $42 million worth of purchase orders, how much are your target shares worth?
And when an analyst issues a report slashing its target price for certain oil stocks you own down to zero (!), how much are they worth?
I guess the answer has invariably been: Whatever people are ready to pay...
Expert Mother tongues: Arabic, French Posts: 2093 Joined: February 5, 2003 Location: Qatar
Christian Science Monitor reporting about Islamic Finance in Britain
The land of Adam Smith now teems with a vibrant Islamic banking sector, with even non-Muslims being lured by the model's promise of transparency and stability.
'No interest' gains interest with British Muslims
By Peter Ford| Staff writer of The Christian Science Monitor
By Ben Quinn | Correspondent of The Christian Science Monitor from the November 28, 2008 edition
London - Shabaz Bhatti is proud to be a devout Muslim – but his plans to remortgage the family home with one of Britain's new generation of Islamic banks isn't just about religion.
The 30-something driving instructor wants reliability, and believes Britain's growing Islamic finance sector offers this in a way that myriad traditional main street banks no longer do.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Christian Science Monitor reporting about Islamic Finance in Britain
Originally written by Abdelouadoud El Omrani on November 28, 2008 3:34 PM
The land of Adam Smith now teems with a vibrant Islamic banking sector, with even non-Muslims being lured by the model's promise of transparency and stability.
I suppose that it's still a willing buyer and willing seller basis. Adam Smith dealt with supply and demand. If there are potential profits to be made out of the Islmaic banking segment, I suppose the banks would consider coming out with the products especially with the Arabs filled up with oil money in recent years.
Anyway, I don't suppose the "administrative fee" would be the same for a 100K house and that of a 200K house?
Islamic principles aside (which I'm not interested in questioning), would there be added cost in the title transfer?
Expert Mother tongues: Arabic, French Posts: 2093 Joined: February 5, 2003 Location: Qatar
RE: Economy
I don't think administrative fees are significant. The banker in the islamic principles is a business entity, a trader. One of its most used tools is Murabaha.
Simplified explanations: You need a loan to buy a car or a house. The bank buys it and then sells it to you. it makes profit out of material assests, not out of renting or leasing money itsef, since Islamic principles state that money does not produce money by itsef.
You need cash. the bank studies your refunding capacity (mainly the salary, it needs fixed guaranteed income). It may then buy stocks for you (you decide which ones) and it sells them to you. Once you have the stocks, you sell them immediately and you have cash. You pay back in comfortable monthly payments.
There are other tools of course used in Islamic finance, as Islamic insurance for example called Takaful.
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Economy
Originally written by Abdelouadoud El Omrani on November 28, 2008 7:08 PM
You need cash. the bank studies your refunding capacity (mainly the salary, it needs fixed guaranteed income). It may then buy stocks for you (you decide which ones) and it sells them to you. Once you have the stocks, you sell them immediately and you have cash. You pay back in comfortable monthly payments.
Shall I assume that the profit sharing ratio had been decided in advance as the asset had already changed hands so that the scheduled payments would not change in a falling interest rate environment (such as presently on a global basis)? Thus the borrower would not have the shceduled repayment reduced, just as not having the repayment increased in a rising interest rate environment?
Expert Mother tongues: Arabic, French Posts: 2093 Joined: February 5, 2003 Location: Qatar
RE: Economy
Yes, once the profit sharing (division) has been established through a contract between the seller (bank) and the buyer (customer) it doesn't change. Exception: the client has very serious problems (death, bankruptcy), at that point Takaful (Islamic insurance, or exactly Islamic solidarity to be precise) arranges the situation.
BTW, you know who are the leaders of Islamic finance? Malaysians. Kuala Lumpur is probably the most important center for Islamic financial studies and research. There's an academy and many institutions among which IFSB (see website)
Salaam
[Edited by Abdelouadoud El Omrani on November 28, 2008 10:26 PM]
Mother tongue: English Joined: March 28, 2004 Location: Malaysia
RE: Economy
Originally written by Abdelouadoud El Omrani on November 29, 2008 11:09 AM BTW, you know who are the leaders of Islamic finance? Malaysians. Kuala Lumpur is probably the most important center for Islamic financial studies and research. There's an academy and many institutions among which IFSB (see website) Salaam
It's probably true that Malaysia is currently the leader in Islamic banking, at least in Asia. In recent years, Singapore just like many other countries had also jumped onto that bandwagon to help maintain its status as a global financial hub.
With all that oil money in the Middle East, don't you think that Dubai would emerge as the global Islamic Banking leader?
[Edited by Shiong-Fong Lew on November 29, 2008 2:54 AM]
Reply
Quote
Edit
Delete
TC Mobile