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Old 2008-11-21, 14:29   Link #661
Vexx
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Very apt moment at the G20 conference:

http://www.huffingtonpost.com/2008/1..._n_145141.html

I can see that CNN is jamming their gears to reposition for the new situation since they weren't much out of lock-step with Fox for a number of years.
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Old 2008-11-21, 16:12   Link #662
4Tran
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http://online.wsj.com/article/SB122729804822648663.html
Quote:
Originally Posted by Wall Street Journal
New York Federal Reserve Bank President Timothy J. Geithner is to be nominated as President-elect Barack Obama's Treasury secretary, according to a person close to the transition process.
Well, well, well. This seems to be a very interesting and promising move. More on Geithner: http://www.nytimes.com/2007/02/09/bu...edit.html?_r=1.

Quote:
Originally Posted by Cluelessly View Post
No, I am saying debt is the biggest and somewhat independent. Liquidity is a problem stemming from confidence.

I will address the rest in one go. This will explain why we cannot continue the spending. As of a month ago global equities were down about 30tril altogether. The amount of total notional destruction is probably much more at 50tril+ by now. Now that is not the net, it is impossible to calculate the net, but it is obvious we are in a deflationary spiral and so the net must be positive too.
I agree that the over-aggressive use of debt to generate money was at the very heart of the crisis, and that it remains a huge problem that will have to be eventually tackled; but I don't see how you can justify it as such an immediate problem that it has to be addressed first at the expense of the rest of the mess. This is an especial concern since this is precisely the kind of trade off that's necessary if the government does if what you suggest is preeminent issue.
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Old 2008-11-22, 11:00   Link #663
ZephyrLeanne
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Quote:
Originally Posted by panzerfan View Post
Well I am a Canadian in Canada... but anyways.

Bretton Woods conference is what I meant. This was the point where nations ruined financially by the 2nd World war negotiated the current economics order, basically pegs everyone to USD, with US guaranteeing that foreign nations can redeem USD in Gold, and of course IMF. Smithsonian Agreement came during Nixon's time in Vietnam war, when US was bankrupting its Gold reserves to take US off of gold forever, no longer pegging the exchange rate of US dollar and allow USD to 'float' against world currencies.

To be honest, this whole affair goes back further...

1913 marks the creation of the US Federal reserves, and that reserve was successful in wresting the money creation power from the US government essentially on the get-go and pump out 'money' in the form of debt. Following that, US stopped tying the currency to Gold standards, the only remaining check really of the Federal Reserved under the Franklin Delano Roosevelt Administration as that administration disparately debt financed its way into numerous spending projects, and of course WW2, the most costly war of them all. The story before 1913 is interesting too... but we're gonna have to go all the way to the formation of Bank of England, first central bank of the world and then some.

(dear god, I should be studying IT and Oracle instead of getting interested in Keynesian vs Austrian economics 101)
Very informative, really.
Still I guess that the US really pulled the world down. Again. '97 crisis was caused by Soros, an American, no less.

For Lols.

Quote:
In 1997, during the Asian financial crisis, then Malaysian Prime Minister Mahathir bin Mohamad accused Soros of using the wealth under his control to punish ASEAN for welcoming Myanmar as a member.
From wikipedia
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Old 2008-11-22, 11:55   Link #664
Cluelessly
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No. If you really want to talk about the massive size of the current credit bubble, it was the European banks' fault for starting leveraged play. American banks overleveraged in order to keep up. American banks are an example of sound system in comparison to them. But it's not the European banks' fault either. The world decided to take advantage of the past few decades together. The blame lies with everyone.

What ashesatdusk is talking about is what I was hinting at earlier. This is not nations vs nations. This is a game where those in control stomp on the unsuspecting victims. There is no better way to control a country than to have the power to inflate and deflate a currency at will. The fact that much of East Asia are savers helps the Fed. They must continue to buy the short term T-bills. I'm thinking the Fed actually wants a dislocation on the longer end of the curve in order to force everybody into T-bills. This is creating one last bubble. Since the short terms are bought at below the actual value...once everybody is in them I believe that the Fed will use a controlled inflate. This will be the ultimate looting of the century.

Should have put my death spiral post in this thread. The other countries are basically being forced into T-bills now as there is no other way to keep their currency pegs viable. Unsurprisingly G20 didn't even address anything important.

It's not just the Fed either. Notional and net losses are no doubt off by a giant margin. I know people who are up 1000% and more this year. On the good days they make more in a morning than the average person makes in a year. Everybody without experience has become canon fodder. I'm sure the real big wigs are making millions at this point.

@ 4Tran

It has to do with rolling over our current debt. Bond dislocations result in people waking up one morning and finding that their credit cards no longer work and the government has announced 75% cuts across the board as they can no longer fund operations. I'm almost certain it will result in all entitlements being gone overnight. Our government spends a lot more than it makes and everything is basically just the debt rolling over. Spending your way out of a collapse only works when you have the surplus to do it with. It's pretty obvious by now that the U.S. is broke. Bond dealers are most likely just looking the other way since once we dislocate and hit the default button the entire world would follow. If it's true that the Fed is eating the other end of its tail then it's likely we only have one or two more quarters until this happens. On top of all this there is also the problem of oversaturation even if people want to keep buying. Rescuing everybody only guarantees that they will fail later while leaving us even deeper in the hole. Companies like GM are dirt cheap right now, and yet nobody wants to absorb them because they are no longer viable in any form and are nothing more than a black hole that would suck up money endlessly. Walking dead. The more we spend in an effort to dig our way out of the hole, the faster we approach critical mass.

As for Treasury securities in general, if their plan is indeed to force everybody out of the long end and devalue, all this is probably perfect as long as they keep control. On one hand I don't want to see the entire world ruined, but on the other there is so much moral hazard if this should work that I'm not sure the former would be worse.

@ panzerfan

It started way before than. The credit/debt cycle has been going on since the very first medieval bankers began to use interest as an integral part of banking. However, the folly of 1913 is giving a bank the power to inflate and deflate at will. Usually a currency (last time British sterling) does not stay in power after a cycle. The crash is imminent and catastrophic. However this time around, the Fed, if they play everything right, will be able to "fix" things internally by pushing the debt away. U.S. imports deflation, exports inflation. etc. I'm guessing they'll try to push the next credit bubble onto China while still maintaining the pegs. Timing is absolutely critical as they must do this devaluation without causing interest rates to shoot through the roof. All of this must be done during the worst section of the deflation. If they overshoot or undershoot our regularly scheduled global economic collapse will continue. It must be done in such a way that as the debt is devalued away the inflation in other sectors is exported abroad.

It's not really about the gold standard and debt = money. It's more about the system that is prejudiced to inflation. Hence the medieval bankers. Inflation deflation play is the most important element here. Everything else is just a side-effect. The youtube video is great for explaining things, but it's solution also seems biased to inflation. Of course the problem right now is our credit bubble, but the credit bubble will reiterate itself no matter what as long as we are biased towards inflation. Theoretically government regulation is supposed to control these bubbles but...yeah that hasn't been working out so well.

Edited a ton because I don't know how to put the words in my head down on paper properly. I'm sure I still missed stuff.

Last edited by Cluelessly; 2008-11-22 at 16:03.
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Old 2008-11-22, 20:25   Link #665
panzerfan
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Normally, the severity of inflation does not appear alarming unless if wartime requirements pop up. Just with USA during the American Revolutionary War, American Civil War, both World wars, Vietnam, and this current conflict, the issue of credit bubble and government backed bonds have all been alarming examples of how currency heads to the direction of hyperinflation.

To be honest, Central banks not operating with sufficient checks and balances leads it not needing to be held accountable by the taxpayers, and unfortunately the taxpayers really didn't have stakes in it technically. Standards such as Gold was a form of deterrent in checking the amount of Money of zero maturity that can possibly be introduced (I am not suggesting that it's the core of the issue), but today there's few deterrents other than the discretion of the Central banks on the matter.

I hope wealth disparity doesn't worsen. At a certain point, things will get ugly if usury runs too rampant.
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Old 2008-11-23, 05:04   Link #666
zhurai-tsuki
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hm... just wondering, what was the reason the Silver (and Gold) standard was refused?
cause... maybe it'll be a good time to introduce Silver into the standard (of at least the US >>) and then maybe the economy might get a little better? o.o
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Old 2008-11-23, 06:24   Link #667
Navel
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Quote:
Originally Posted by zhurai-tsuki View Post
hm... just wondering, what was the reason the Silver (and Gold) standard was refused?
cause... maybe it'll be a good time to introduce Silver into the standard (of at least the US >>) and then maybe the economy might get a little better? o.o
You can see a funny story of what happened here : The Gnomes of Zurich Will Have Their Revenge

It comes down to the fact that resources of gold, silver, platinum, or of any other metal, are limited and it takes time to "harvest" them, while the economy moves faster and requires paper money to be printed that soon outgrows the quantity of the precious metal available.

So, there was this situation:
1. an ounce of gold was worth a fixed price of 35 USD
2. the US Central Bank had the obligation to give gold in exchange of USD paper money to anyone asking for it
3. there were more money printed than the quantity of gold that could have been bought with all those paper money
4. people knew about this, and they just happened to have lots of gold bullion (they were bankers, after all)
5. they thought they would get richer if they would have forced the price of gold to increase from 35 USD an ounce to more (that means, the amount of gold they had would be worth more USD paper bills)
6. the way to increase the price of something is to make that resource scarce.
7. so all they had to do was to keep on redeeming gold from the US CB in exchange for paper bills (they were bankers, again, so they had plenty of paper bills too). In the end, the US Central Bank found it was getting close to having no more gold in its reserves, but the redemptions kept on coming as there were plenty of paper bills.

All that shows the model is unsustainable. It would have worked if mining for gold and casting ingots could keep pace to how fast the economy grows (and therefore, to how many paper money are printed), but that's never the case. Finding a new gold deposit, building a mine, harvesting it, is always going to take a lot of time. There's a long lead time from when a metal deposit is found up until the first ingot is being cast, and there's a limit to how many ingots per day can be cast as well. "Making" paper money is instantaneous and has no limits to the value, either: you just write a value on some accounting sheet and "poof... money... lots of them !". This is what Central Banks do. Looking at a more recent example, China had such a need for all kinds of metals and other commodities (up until the crisis), that even the price of scrap metal went soaring, the mines couldn't keep supplying enough.

Last edited by Navel; 2008-11-23 at 06:50.
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Old 2008-11-23, 08:42   Link #668
gfd333
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The cost of debt has suddenly shot up over the week, which means that credit has all but dried up for many individuals and businesses. That could, in turn, affect the real economy, as many companies might suddenly find it harder to manage their cash flow.
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Old 2008-11-23, 09:21   Link #669
panzerfan
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It is not to say that a company has to operate on a credit basis, although I think that the whole idea is deeply ingrained within the psyche of business management. I think that debit-based model where one cannot leverage and has to live with zero maturity capital will be how businesses operate for the next little while. What this means is that with confidence from leveraging gone, companies are expected to have capital payments outright and use their own productivity as collateral to back the worth of the capital payments.
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Old 2008-11-23, 15:28   Link #670
Cluelessly
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@ panzerfan

It's not about the severity of inflation. A system that is biased towards inflation will always see a trend in which credit grows faster than the underlying economy. It is human nature, and cannot be stopped. The problem is not hyperinflation. It is the credit bubble that inevitably results. You could say all the other bubbles in things such as commodities so far have been nothing more than the overleveraged T money finding an outlet. It's doomed to fail.

But, that is why we have such a system. The wealth disparity will only continue to grow. There is no better way for an individual to accumulate wealth than by exploiting the inflation deflation cycle. This is what most people don't realize I feel. Sell at the top, buy at the bottom does not only refer to the stock market. This is the winning play of anybody who controls a financial system. A sharp U-turn is actually the best for those at the top. The force created by the ability to control a currency is greater than anything that could be exerted by politics and armies. There's no better way to rob everybody blind than through a deflation.

Actually the Fed, USD, currency pegs, none of these have to survive. Just like the dead investment banks. Underneath the surface everything has just moved to a different vehicle. One trick ponies and the average Joe are the only two who will suffer losses. It's a rigged game to say the least.

As for what could happen to companies, interesting chart:

Accompanying post: http://www.nakedcapitalism.com/2008/...ofits-for.html

Not quite sure what that all means in the end though. We'll have to see.

Random: Be wary, the next turn (such as T-bills...) will be just as dramatic as the last. The parasite can't kill its host, but once in a while it can suck the host dry.

@ gfd333

It's gone on for a long time now, only going to get worse. No credit would be bad for people who rely on credit in order to roll over their debts too. Wonder what would happen to people when people who have no savings can't get credit...

@ zhurai-tsuki

Supply issue like Navel said. Perhaps a peg to commodities. USD is kind of like an oil peg anyway. Possibly several new global currencies. But of course, the game is still rigged. We'll always end up revisiting this "crisis" every few generations. Inflation biased system + giving control to a banking entity = lol.
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Old 2008-11-24, 00:03   Link #671
ZephyrLeanne
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Well, the system may well crash and Soviet Russia will laugh at (and own) us. If this goes on.
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Old 2008-11-24, 20:21   Link #672
TigerII
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The 700 billion dollar bailout just became a $7.7 Trillion bailout.

http://www.bloomberg.com/apps/news?p...d=arEE1iClqDrk
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Old 2008-11-24, 20:22   Link #673
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i don't think anyone here thought it will only take 700bil to get us out of this.

it would be cheap if it were.
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Old 2008-11-24, 20:28   Link #674
TigerII
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That is only proposed, but it could happen.
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Old 2008-11-25, 01:04   Link #675
Thingle
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I will burn my American printed economics textbooks if your economy fails.
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Old 2008-11-25, 01:14   Link #676
TigerII
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Yes, I know. I get it. You hate my country. You have said this before. Also, my sig is bad because I respect those who have died? Or because I don't worship Japan?
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Old 2008-11-25, 01:38   Link #677
Thingle
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Originally Posted by TigerII View Post
Yes, I know. I get it. You hate my country. You have said this before. Also, my sig is bad because I respect those who have died? Or because I don't worship Japan?
Huh?

But if there's a country I hate it would be Japan.

At least the USA didn't try to send us barges filled with their (toxic) garbage.
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Old 2008-11-25, 01:43   Link #678
TigerII
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Eh, I assumed you remarked about my sig, but it seems that remark came 15 minutes before my post. I apologize for that.
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Old 2008-11-25, 01:49   Link #679
mg1942
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At least the USA didn't try to send us barges filled with their (toxic) garbage.
Can you imagine the uproar if Japan did that to PRC and ROK?
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Old 2008-11-25, 01:51   Link #680
TigerII
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Can you imagine the uproar if Japan did that to PRC and ROK?
Well, considering the ROK and PRC have very large militaries....yeah.
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