SkipTracer
Member
- Reaction score
- 0
JayBear you are correct they will keep trying!
Economy in meltdown?
- Thread starter Lucky_UK
- Start date
SkipTracer
Member
- Reaction score
- 0
Yes, they twist and turn and it will bite and burn.
The Gardener
Senior Member
- Reaction score
- 25
Starseed... I agree that Congress' disapproval of the initial bailout was indeed a victory for grass roots democracy. It's good to know that citizens can literally flood their congressman's inbox with their thoughts on a measure, and that this opinion is in turn reflected on the floor of the House in the vote, and even more impressively was that it was a VERY important vote. The grass roots stood up to the banking elites and, basically, told them where they can shove it.
http://www.marketwatch.com/news/story/s ... C0363C9%7D
That issue is on the front line of this crisis. Here's where it stands:Slartibartfast said:
http://www.marketwatch.com/news/story/s ... C0363C9%7D
Starseed
Member
- Reaction score
- 0
I agree, and I'm not advocating refusing the bail-out per se. I'm just impressed how the "Establishment" can be stopped in its tracks by the people, and then asked to "think again". There's no reason the bailout shouldn't occur, given the lockup of credit, but Paulson etc. need to have some pain too IMHO.
Incidentally, in case we Europeans are getting a little smug, here's what's been happening on this side of the Pond:
http://www.telegraph.co.uk/finance/...-much-for-tirades-against-American-greed.html
It took a weekend to shatter the complacency of German finance minister Peer Steinbrück. Last Thursday he told us that the financial crisis was an "American problem", the fruit of Anglo-Saxon greed and inept regulation that would cost the United States its "superpower status". Pleas from US Treasury Secretary Hank Paulson for a joint US-European rescue plan to halt the downward spiral were rebuffed as unnecessary.
By Monday, Mr Steinbrück was having to orchestrate Germany's biggest bank bail-out, putting together a €35 billion loan package to save Hypo Real Estate. By then Europe was "staring into the abyss," he admitted. Belgium faced worse. It had to nationalise Fortis (with Dutch help), a 300-year-old bastion of Flemish finance, followed a day later by a bail-out for Dexia (with French help).
Within hours they were all trumped by Dublin. The Irish government issued a blanket guarantee of the deposits and debts of its six largest lenders in the most radical bank bail-out since the Scandinavian rescues in the early 1990s. Then France upped the ante with a €300 billion pan-European lifeboat for the banks. The drama has exposed Europe's dark secret for all to see. EU banks took on even more debt leverage than their US counterparts, despite the tirades against ''le capitalisme sauvage'' of the Anglo-Saxons.
We now know that it was French finance minister Christine Lagarde who begged Mr Paulson to save the US insurer AIG last week. AIG had written $300 billion in credit protection for European banks, admitting that it was for "regulatory capital relief rather than risk mitigation". In other words, it was underpinning a disguised extension of credit leverage. Its collapse would have set off a lending crunch across Europe as banking capital sank below water level.
It turns out that European regulators have allowed even greater use of "off-books" chicanery than the Americans. Mr Paulson may have saved Europe.
Most eyes are still on Washington, but the core danger is shifting across the Atlantic. Germany and Italy have been contracting since the spring, with France close behind. They are sliding into a deeper downturn than the US.
The interest spreads on Italian 10-year bonds have jumped to 92 points above German Bunds, a post-EMU high. These spreads are the most closely watched stress barometer for Europe's monetary union. Traders are starting to "price in" an appreciable risk that EMU will break apart.
The European Commission's top economists warned the politicians in the 1990s that the euro might not survive a crisis, at least in its current form. There is no EU treasury or debt union to back it up. The one-size-fits-all regime of interest rates caters badly to the different needs of Club Med and the German bloc.
The euro fathers did not dispute this. But they saw EMU as an instrument to force the pace of political union. They welcomed the idea of a "beneficial crisis". As ex-Commission chief Romano Prodi remarked, it would allow Brussels to break taboos and accelerate the move to a full-fledged EU economic government.
As events now unfold with vertiginous speed, we may find that it destroys the European Union instead. Spain is on the cusp of depression (I use the word to mean a systemic rupture). Unemployment has risen from 8.3 to 11.3 per cent in a year as the property market implodes. Yet the cost of borrowing (Euribor) is going up. You can imagine how the Spanish felt when German-led hawks pushed the European Central Bank into raising interest rates in July.
This may go down as the greatest monetary error of the post-war era. The ECB responded to the external shock of an oil and food spike with anti-inflation overkill, compounding the onset of an accelerating debt deflation that poses a greater danger. Has it committed the classic mistake of central banks, fighting the last war (1970s) instead of the last war but one (1930s)?
After years of acquiescence, the markets have started to ask whether the euro zone has the machinery to launch a Paulson-style rescue in a fast-moving crisis. Who has the authority to take charge? The ECB is not allowed to bail out countries under EU treaty law. The Stability Pact bans the sort of fiscal blitz that has kept America afloat. Yes, treaties can be ignored. But as we are learning, a banking system can implode in less time than it would take for EU ministers to congregate from the far corners of euroland.
France's Christine Lagarde called yesterday for an EU emergency fund. "What happens if a smaller EU country faces the threat of a bank going bankrupt? Perhaps the country doesn't have the means to save the institution. The question of a European safety net arises," she said.
The storyline is evolving much as eurosceptics predicted, yet the final chapter could end either way as the recriminations fly. Germany has already shot down the French idea. The nationalists are digging in their heels in Berlin and Madrid. We are fast approaching the moment when events decide whether Europe will bind together to save monetary union, or fracture into angry camps. Will the Teutons bail out Club Med? If not, check those serial numbers on your euro notes for the country of issue. It may start to matter.
Incidentally, in case we Europeans are getting a little smug, here's what's been happening on this side of the Pond:
http://www.telegraph.co.uk/finance/...-much-for-tirades-against-American-greed.html
It took a weekend to shatter the complacency of German finance minister Peer Steinbrück. Last Thursday he told us that the financial crisis was an "American problem", the fruit of Anglo-Saxon greed and inept regulation that would cost the United States its "superpower status". Pleas from US Treasury Secretary Hank Paulson for a joint US-European rescue plan to halt the downward spiral were rebuffed as unnecessary.
By Monday, Mr Steinbrück was having to orchestrate Germany's biggest bank bail-out, putting together a €35 billion loan package to save Hypo Real Estate. By then Europe was "staring into the abyss," he admitted. Belgium faced worse. It had to nationalise Fortis (with Dutch help), a 300-year-old bastion of Flemish finance, followed a day later by a bail-out for Dexia (with French help).
Within hours they were all trumped by Dublin. The Irish government issued a blanket guarantee of the deposits and debts of its six largest lenders in the most radical bank bail-out since the Scandinavian rescues in the early 1990s. Then France upped the ante with a €300 billion pan-European lifeboat for the banks. The drama has exposed Europe's dark secret for all to see. EU banks took on even more debt leverage than their US counterparts, despite the tirades against ''le capitalisme sauvage'' of the Anglo-Saxons.
We now know that it was French finance minister Christine Lagarde who begged Mr Paulson to save the US insurer AIG last week. AIG had written $300 billion in credit protection for European banks, admitting that it was for "regulatory capital relief rather than risk mitigation". In other words, it was underpinning a disguised extension of credit leverage. Its collapse would have set off a lending crunch across Europe as banking capital sank below water level.
It turns out that European regulators have allowed even greater use of "off-books" chicanery than the Americans. Mr Paulson may have saved Europe.
Most eyes are still on Washington, but the core danger is shifting across the Atlantic. Germany and Italy have been contracting since the spring, with France close behind. They are sliding into a deeper downturn than the US.
The interest spreads on Italian 10-year bonds have jumped to 92 points above German Bunds, a post-EMU high. These spreads are the most closely watched stress barometer for Europe's monetary union. Traders are starting to "price in" an appreciable risk that EMU will break apart.
The European Commission's top economists warned the politicians in the 1990s that the euro might not survive a crisis, at least in its current form. There is no EU treasury or debt union to back it up. The one-size-fits-all regime of interest rates caters badly to the different needs of Club Med and the German bloc.
The euro fathers did not dispute this. But they saw EMU as an instrument to force the pace of political union. They welcomed the idea of a "beneficial crisis". As ex-Commission chief Romano Prodi remarked, it would allow Brussels to break taboos and accelerate the move to a full-fledged EU economic government.
As events now unfold with vertiginous speed, we may find that it destroys the European Union instead. Spain is on the cusp of depression (I use the word to mean a systemic rupture). Unemployment has risen from 8.3 to 11.3 per cent in a year as the property market implodes. Yet the cost of borrowing (Euribor) is going up. You can imagine how the Spanish felt when German-led hawks pushed the European Central Bank into raising interest rates in July.
This may go down as the greatest monetary error of the post-war era. The ECB responded to the external shock of an oil and food spike with anti-inflation overkill, compounding the onset of an accelerating debt deflation that poses a greater danger. Has it committed the classic mistake of central banks, fighting the last war (1970s) instead of the last war but one (1930s)?
After years of acquiescence, the markets have started to ask whether the euro zone has the machinery to launch a Paulson-style rescue in a fast-moving crisis. Who has the authority to take charge? The ECB is not allowed to bail out countries under EU treaty law. The Stability Pact bans the sort of fiscal blitz that has kept America afloat. Yes, treaties can be ignored. But as we are learning, a banking system can implode in less time than it would take for EU ministers to congregate from the far corners of euroland.
France's Christine Lagarde called yesterday for an EU emergency fund. "What happens if a smaller EU country faces the threat of a bank going bankrupt? Perhaps the country doesn't have the means to save the institution. The question of a European safety net arises," she said.
The storyline is evolving much as eurosceptics predicted, yet the final chapter could end either way as the recriminations fly. Germany has already shot down the French idea. The nationalists are digging in their heels in Berlin and Madrid. We are fast approaching the moment when events decide whether Europe will bind together to save monetary union, or fracture into angry camps. Will the Teutons bail out Club Med? If not, check those serial numbers on your euro notes for the country of issue. It may start to matter.
Aplunk1
Senior Member
- Reaction score
- 9
On the other side (and I won't delve into the subject), some Americans are envious of the secularist British government-- at least, its representatives. Religious fanaticism is a serious factor to look at in American politics.
Please don't ban me. :freaked:
Please don't ban me. :freaked:
The Gardener
Senior Member
- Reaction score
- 25
Good piece, and I've heard the same. There's rumor circulating in the banking contacts I talk to that there's a terrible disaster lurking at a European bank, and I mean something on the scale of the US's AIG. Something HUGE, a real disaster... and with lots of counterexposure.Starseed said:
Some of the folks I talk to point to some big leveraging deals that were made by Santander and Fortis... after the interest rate environment took a turn for the worse a year and a half or so back, these banks have been in lock down mode. Then again, it seems now that the regulators have at least Fortis under thumb... Who knows where it is, but there's chatter to the effect of "the other shoe is going to fall, and its in Europe."
Today we heard the first news of the freeze in the money markets affecting the ordinary economy. In testimony, Senator Reid revealed the alarming news that "one of the country's premier insurance companies was about to go bankrupt if the crisis was not quickly resolved". AT&T also publicized today that they were having serious problems securing cash for operations. Just today, General Electric was unable to completely roll over its short term debt in the capital markets... and this is a company that has an AAA credit rating.
To be frank, I'm at a point where I'm not sure that this bailout will stop the deleveraging. We're talking about amounts of money that dwarf the size of the annual US federal budget. It's pretty scary, I don't think anyone knows how this is going to all end up.
Here's a chart showing a banking statistic that is measured by the Federal Reserve... the stat is "Non-Borrowed Reserves of Depository Institutions". This chart shows the nominal dollar value of lend-able assets that the collective American banking system has on hand, and the graph is an historical measure of this going back to the 1950s. Give the table a minute to load, its linking to live data, so it takes a few to display the graph.
http://research.stlouisfed.org/fred2/series/BOGNONBR
There it is for you all, crystal clear in black and white, on an official government website, for all who have the curiosity enough to do some research to see.
powersam
Senior Member
- Reaction score
- 18
what would happen, if instead of buying the failing assets from the bank, they distributed the 700 billion among everyone in the US with an income below $50k ?
nb/ this has nothing to do with Russell Crowe's shocking maths
http://forum.mindfood.com/Forum2-1.aspx
nb/ this has nothing to do with Russell Crowe's shocking maths
http://forum.mindfood.com/Forum2-1.aspx
Starseed
Member
- Reaction score
- 0
One of the benefits of CoastToCoast is that, at a time like this, you get expert views from financial people who are like the Che Guevaras of Wall Street.
People like Catherine Austin Fitts
http://solari.com/
and Andrew Gause
http://www.andygause.com/
They're both opposed to the "revised" bailout, pointing out that Paulson is still granted the power of any "unreviewable" actions that he deems necessary. Zero accountablity! He's got 700 mil of stock options in Goldman Sachs anyway.
And the banks have a gun to the head of congressmen with their campaign financing.
Fitts speaks sound common sense, pointing out that banking is basically about borrowing money from savers, and lending it out to borrowers at a higher interest rate, as the Savings and Loans did.
In Britain we still have this principle adhered to in our wonderful "Building Societies", which is where all my cash is deposited. They're not allowed to use the wholesale money markets, and not one has gone bust in over a hundred years. Worst thing that happens to them is that smaller ones get absorbed by bigger ones. No shareholders, so the "markets" can't get near them and attack them through their share price.
Years ago, the then Conservative government encouraged them to convert to banks, and it's instructive to see that not one of those that did exists as an independent entity today: Northern Rock, Halifax, Alliance Leicester, Abbey National, Bradford & Bingley...they all became banks, and have either collapsed or been eaten by bigger banks.
BS members were encouraged to vote for the conversion to a bank by the promise of free shares, which would provide typically a $1000 windfall. I always voted "No f***ing way" but lost out to the majority in most cases. ( took the money though
)
Now the Building Societies are being undermined by the wild guarantees governments are putting behind banks which are in trouble. The standard savings guarantee has always been £35,000, but Northern Wreck has no limit under a government guarantee, and the BS's face a drain of funds as savers switch. To make things worse, the Irish government has just guranteed ALL funds in Irish banks, so our BS's face even more potential drainage. As usual, the good guys are being undermined by the bad guys.
Is it true that the S&Ls are now defunct in the US? I recall the corruption crisis of some years back when the US government had to step in.
Do Americans have any equivalent place as our Building Societies today? The two people above mentioned "Credit Unions" & "State Chartered Banks"? What are these exactly?
People like Catherine Austin Fitts
http://solari.com/
and Andrew Gause
http://www.andygause.com/
They're both opposed to the "revised" bailout, pointing out that Paulson is still granted the power of any "unreviewable" actions that he deems necessary. Zero accountablity! He's got 700 mil of stock options in Goldman Sachs anyway.
And the banks have a gun to the head of congressmen with their campaign financing.
Fitts speaks sound common sense, pointing out that banking is basically about borrowing money from savers, and lending it out to borrowers at a higher interest rate, as the Savings and Loans did.
In Britain we still have this principle adhered to in our wonderful "Building Societies", which is where all my cash is deposited. They're not allowed to use the wholesale money markets, and not one has gone bust in over a hundred years. Worst thing that happens to them is that smaller ones get absorbed by bigger ones. No shareholders, so the "markets" can't get near them and attack them through their share price.
Years ago, the then Conservative government encouraged them to convert to banks, and it's instructive to see that not one of those that did exists as an independent entity today: Northern Rock, Halifax, Alliance Leicester, Abbey National, Bradford & Bingley...they all became banks, and have either collapsed or been eaten by bigger banks.
BS members were encouraged to vote for the conversion to a bank by the promise of free shares, which would provide typically a $1000 windfall. I always voted "No f***ing way" but lost out to the majority in most cases. ( took the money though
)Now the Building Societies are being undermined by the wild guarantees governments are putting behind banks which are in trouble. The standard savings guarantee has always been £35,000, but Northern Wreck has no limit under a government guarantee, and the BS's face a drain of funds as savers switch. To make things worse, the Irish government has just guranteed ALL funds in Irish banks, so our BS's face even more potential drainage. As usual, the good guys are being undermined by the bad guys.
Is it true that the S&Ls are now defunct in the US? I recall the corruption crisis of some years back when the US government had to step in.
Do Americans have any equivalent place as our Building Societies today? The two people above mentioned "Credit Unions" & "State Chartered Banks"? What are these exactly?
The Gardener
Senior Member
- Reaction score
- 25
The inevitable outcome of this would be inflation. The price index would increase at a rate equal to the amount of added currency, and the purchasing power of the market participants would decrease at a rate equal to the amount of currency added to it.powersam said:
Why? Let me share a concept of economics with you all that will probably make no sense until you think it through a little bit:
Money is debt.
If everyone in the market paid off all their debts, there would be no money in circulation.
If you increase the amount of money in an economy, and don't add an equally valued asset or liability to it, then you get inflation.
If the government prints money, it creates inflation. Now, lets say the government prints money, but also issues treasury bonds to the market, that yield interest, at an equal face value as the currency printed. Inflation would be negated, because someone bought a treasury note of the same value, and is making interest on it. So, in effect, money is being TAKEN from the economy when a "net saver" decides to exchange his cash for an interest bearing note. In exchange, the government is giving the money to the banking system and re-introducing that same value of money TO the economy... but the net saver is being rewarded by getting interest on the transaction. In other words, US currency is completely BASED on debt, and we pay a penalty by using dollars that is equal to the current interest rate of US treasury bonds.
In a nutshell, "money" is a commodity that allows us to store and save our labor, and convert it into goods later on. We pay a fee to treasury bond holders for the ability to do this. If each and every debt in our economy were "paid off", there would be no money in circulation. The value of money in an economy is the collective sum of ALL outstanding debts between market participants.
You might think "well, if I pay off all my debts, and all the people who owe me money pay off all their debts to me, then I'd STILL have money in the bank! So how can you say that there would be no more money in circulation if everyone paid off all their debts?"
My reply is that if you have money in the bank, someone is still in debt to you. That money is, in effect, an outstanding debt from your former employer. You gave your employer a certain amount of value of your labor, and in return, you are owed a certain level of purchasing power in compensation. That money in the bank is purchasing power that you earned from your employer, but you have not used it yet. It is still OWED to you, and in effect, it is a debt.
What you are referring to in England would be referred to as a Credit Union in the states. I bank at a Credit Union and I love it. Each account holder is a shareholder, so the firm is "privately held" and there are no external shareholders that demand exhorbitant profits or risks. (Given the idiosyncracies between the US and British dialects of the language, I'm guessing that a British person would refer to this as being a "publically held" company...lol).Starseed said:
I'm not familiar with the term "State Chartered Bank"... the only potential reference might be to the three pseudo-government banks that FDR set up to securitize mortgage finance in the US (FNMA, FDMC, GNMA). These aren't depository institutions, they are merely banks that buy up mortgages from public banks given that the mortgages conform to certain government risk criteria. They then package and sell these mortgage obligations in the form of bonds. These bonds are referred to as "agency debt" and have a notch lower yield on them because they are guaranteed by the government.
I remember when the bail out was voted down, the stock market actually climbed a few hundred points that same day. Then it dropped about 300 points after the bail out finally was approved.
Was anyone else scared by the fact that Obama, Bush, and McCain all used the exact same words to describe what would happen if we did not pass the bail out? They say we still have a recession to deal with, but that it would have been a lot worse without it. Yeah, like we can ever prove either way now.
Everyone in congress was obviously bribed to pass it even though over 90% of citizens did not want it to pass.
Was anyone else scared by the fact that Obama, Bush, and McCain all used the exact same words to describe what would happen if we did not pass the bail out? They say we still have a recession to deal with, but that it would have been a lot worse without it. Yeah, like we can ever prove either way now.
Everyone in congress was obviously bribed to pass it even though over 90% of citizens did not want it to pass.
blueshard
Established Member
- Reaction score
- 0
The Gardener
Senior Member
- Reaction score
- 25
Truth. I'm wondering the same thing.CCS said:
Frankly, I think that a "technical" depression might be inevitable, regardless of whether or not they did this bailout... which raises the question, why spend that much money delaying an inevitable deflation of credit? We may very well end up needing that money more on the back end of the crisis... $700B goes a long way to rebuild infrastructure, etc.
Starseed
Member
- Reaction score
- 0
Bryan said:
You're right. There's a lot of chaff, especially down the "weird" end of the spectrum, and Alex Jones seems to be rather too "alarmed" all the time. But hey, where else is there any alternative media to listen too? I simply can't read stuff all the time (websites). I've always liked good old "steam radio". ( and maths...
)(an as a subscriber, I get to pick & choose what I listen to, at a time of my own choosing, & can avoid the way-outs who phone in during "open lines" with their wonderful experiences & insights..)
(& thanks for that Gard. I'll back up & see what the reference to Satandard Chartered said once more...)