What you propose makes all the sense in the world to me. In fact, I would love for you to have been on Obama's economic team or the FED Board of Governors or any other policy making agency that could have enacted your plan. Unfortunately, I believe (and I think you also do) that the damage has already been done, and long before Obama took office.
In order to re-regulate and rearrange the financial industry here, means that you have to first find a way to unravel the "shadow banking industry", which is global. Now, I have heard many evaluations of the derivatives markets ranging from around 500/600 trillion all the way into the quadrillion + range. Whatever it is, it's like pondering the big bang. A lot of analysts I have read over the past months are willing to discount this "notional" amount because the vast majority of it is in currency and interest rate swaps. These have been considered "predictable" or "stable" by the same analysts and therefore should be considered as "a wash", and should not be considered in future analysis.
After reading this news item from Reuters, I'm not so sure anything in the global financial system is predictable. Everyone is worrying about China discontinuing its purchases of Treasuries, which is certainly a cause for some concern on a macroeconomic scale. But what would happen to the global financial system if China defaulted on her CDS contracts? Think of the counterparty clusterfuck that would ensue!!
No matter how I look at our predicament, and I mean globally, all that I see is a bad moon rising. I am just hoping that we don't reach the scenario presented by Michael Hudson, in his interview on Guns and Butter radio August 26th, in which he discussed A Dress Rehearsal for Debt Peonage"
without the daytrading money, we cannot open up the factories...but yes, you say, daytraders lose money, so instead of losing it, they should plow it into those factories...but the daytraders who make money are the ones who stay in the game, those who lose money are gone...therefore true daytraders make money from the market, which you want to use to open factories, but if there were no more daytraders, there'd be no money for you to open those factories in the first place! I will trade, but I will not open up a factory because the risk in trading is waaaaay less than opening up a factory, trust me!
Especially if you used *coin*, not just paper money but real coins, to transfer between the banks.
In other words, no accepting a counter check from an Investment Bank for deposit into a retail bank; one needs to get it converted to *real money* to transfer through the firewalls.
Put your money into a MB or a PFB that doesn't have enough coin to back up it's trades? Sorry, you've just lost the value of your shares.
And credit cards- should be under retail banks, and limited to coin-on-hand; if the bank comes even close to being leveraged more than 1:1, credit limits should be cut.
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Maximum jobs, not maximum profits.
Yes this will cause instability but at least we would have finally had our medicine. There is too much bad investment here to really secure anything. The FDIC should reassure the deposits and just assign a bank the deposits of this failed business. Otherwise what we got here is a slow moving car accident, where it is adding more and more cars to the pile on. Banks are businesses, nothing more, businesses succeed and fail. Let them fail if they are improperly run, shareholders should know the risks and if they get wiped out so be it. Depositors are guaranteed, and really that should be the ONLY thing the government should be guaranteeing.
Like I said, this will cause instability, and possibly choke up the credit markets. But better to accept the pain now and amputate a few fingers than lose the whole arm or worse later on. Honestly, is it too hard to put in the right regulation here? There should only be two types of banks, as there was in Glass-Stegall, investment banking and retail. In fact, I dare say we reclassify and create new types of banking, with a risk scale. Retail savings banking should operate like a public utility, there is no need for a local bank to get into derivatives trading. If you wish to take on risk, then you cannot take on depositors. And if you decided to be in investment banking with an orientation towards speculating in the markets then you should be classified as such and not recieve FDIC protection.
Investment banking should really be two types, Market Banking and Public Finance Banking, "Investment Banking" is too nebulous of a meaning. The former would fund hedge funds and private equity or speculate itself in the markets, and the latter deal in M&A activity and helping companies with their IPOs. Now the only time I could see Market Banking receive FDIC treatment is if they are facilitators to credit market operations. Here again, perhaps we need a new classified bank.
Do you see what I'm doing here? We need to break down the 'Investment Banking' field. Risk Market/Hedge Banking with zero FDIC protection, let them come up with their own pool. Credit Market Banking for dealings in the capital markets and private or government debt securities. Finance Banking to help businesses in their IPOs or if their client wishes to buy or merge with another firm. Finance Banking and Credit Market Banking could work together under a new set of regulations that still keeps a "Chinese wall." Lastly, you have retail banking, which would be FDIC insured, and run like a public utility. They could interact with the Credit Market Banking, but I see no reason for them to deal with Hedge Banking or Finance Banking.
Who is stupid enough to *sell* a PUT option at only $.125, if corn moves at least 10%? If the put appreciates, the guy selling the put has lost money- he should have charged at least $.319 for it, so that he doesn't lose money on a 10% change.
Derivatives sellers are either real idiots, or just plain stupid, and I'm not sure which.
That's why we need to do away with commodities and stocks altogether- people should make money by actually adding wealth, not moving paper around.
-------------------------------------
Maximum jobs, not maximum profits.
Wage arbitrage and globalization sent a good chunk of those jobs overseas under the guise of "free" trade."
Yes they have- but what if we took the money *wasted* in day trading to actually open those factories back up, to form co-ops that compete locally with foreign goods? What if we actually, gasp, lobbied our local governments to create sales taxes on shipping, so that our local goods could compete better?
And wouldn't that be better than say, playing the odds that your corn futures will come out right, especially given the fact that you have NO ability to know that the piece of paper you've been handed actually is a corn future and not just a piece of paper created to look like one?
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Maximum jobs, not maximum profits.
"between a wire transfer between a parent sending cash and a day trader?"
I would assume that a parent would open a joint account in a bank that has branches in both cities to avoid doing wire transfers to begin with. Other big plus means that the parent can monitor the college kid's account and help avoid overdraft fees.
"Still, even there, say you set a limit as a trigger, how do you know it is for funding speculation? Secondly, banks don't have to wire anything to move money, they just press a button on their keyboard and zap...a branch in Luxembourg can see the money."
I would assume that any given *TRADE* would involve moving money between account numbers of the traders involved.
Of course, this would also have a tendency to put a damper on exports and imports- but that's just a bonus.
-------------------------------------
Maximum jobs, not maximum profits.
regarding breaking up these banking behemoths, you just may be on to something! Glass-Steagall, for the most part, meant stability. When they broke that wall, they let the barbarians in.
between a wire transfer between a parent sending cash and a day trader? I mean, other than the amount. Still, even there, say you set a limit as a trigger, how do you know it is for funding speculation? Secondly, banks don't have to wire anything to move money, they just press a button on their keyboard and zap...a branch in Luxembourg can see the money.
Wage arbitrage and globalization sent a good chunk of those jobs overseas under the guise of "free" trade. Look, seebert, speculation will go on whether it's the stock market, or folks peddling rice; there is a long history of it all over the world. As for "gambling", yes there is that, sadly. But let me tell you what a mentor said to me, and this guy was an old timer on the CBOE and CBOT and a good liberal, who said "gambling is creating risk, trading is assuming risk." Now you may ask, what the heck is the difference? Well, in the former you don't know all the variables and odds are it will blow up in your face, the latter you know (for the most part) most of the variables and one can hedge or even back out.
For example, say we have a casino and a commodities exchange (yes, I know, "Oh gee, ain't they just two of the same thing?" Yes, but the exchange has less cocaine in it's premisis...booyah..drum roll please! Yes, you can catch the rest of my act at the Green Room...try the veal!), anyways, you have these two places. Now you walk into the casino and lets say you want to play the slots, since those are the most used casino vehicles. For arguments sake, say you picked those machines that require $100 coins and you plunk in 10 coins for ten swipes of the one-armed bandit.
At each incident, there is a chance you could win the big prize (lets say $1 million bucks). Now I don't have my math with me here, but I believe you got 1-in-10 chances given the coins you've put in. Obviously, the odds are much more crazier, because you have to take into account all the possible combinations, especially if this is a progressive slot machine. Chances are, you will not win that million bucks after that last of 10 coins is used up. You have risked 100% and your reward is bupkis.
Now let us say you walked into the commodities exchange, a dubious place, I grant you. You decided, for $1000, I will trade corn. Now you put down your $1000 margin (I've simplified it here, but the margin for corn is about 50% more), which is a down payment to control 1 contract. Corn is considered a "beginners" future contract, though you can still get wiped out. Each contract (also known as a "car" or "lot") represents 5000 bushels, and is priced per bushel, which at the going rate $3.190 or $15,950. Each $.0025 move = $12.50, or $50/per each penny. So here you own this one futures contract, now one of three things can happen. A)Corn goes up, you make money. B)Corn does nothing, you make nothing. C)Corn goes down, you lose money. The only question is, by how much for the first and last possibilities?
This is where the guys who last differ. You can set a limit prices, say if corn drops 2 cents, you want out. Corn is pretty liquid, LOTS of speculators who will buy that lot from you easily under normal market conditions. "Wait...normal market conditions?" Like I said, this is where the guys who last differ. In order to trade, really no matter what methodology you use, you need to have risk management and that means knowing your product and knowing when to get out (note I didn't say get in). That's the key. If you study that "beginners" future, you will notice that in the Summer months, between July and early September, it can get crazy and go up up up because of fears of future crop. Folks who have survived and been around, study seasonal cycles. So say you did this and you bought corn thinking it will make a Summer rally.
But lets say it doesn't rally to the point you wanted or even it starts going down because a Dept. of Ag. report says we should expect a bumper crop. Well there are three things you can do here, one if you moved up that exit limit you can potentially lock in a gain, two you can just try and exit and terminate that limit order, or lastly purchase a Put option. Yes, one of those vile and evil derivatives, a Put option gives you the right-but-not the obligation to sell something at a specific price within a certain time. Using today's data, and say you purchased that Put when you bought that Corn lot, you paid $.125 for that "At-the-Money" 320 Put, or $625. So, until December, if Corn should drop, you're protected, this is a basic form of hedging. If it goes up, you win. If it does nothing, you're only out what you paid for the Put, unless you sold that back. Given that corn tends to move at least 10%, you could make 30-50 cents or $1500. If it drops (corn really never stays still), say from $3.19 to $3, that Put appreciates and you sell it back and hopefully make the difference (either way you won't lose 100% like you would have at the casino).
I would add that it is a philosophy or school of thought that the financial sector and financial oligarchy must be strong. Fu*k that, the financial sector is an intermediary service that allocates resources/capital. I agree we need a healthy financial sector but that doesn't mean that it needs to strong and the source of illusory economic growth.
I knew a guy who was fired as a Steel Executive. Lost a huge salary, bonuses. Well, he ended up saying "family first" and his son liked donuts, wanted to be a donut maker...so he scrapped together money to start a donut shop as a family small business.
But while he was a Steel executive he really looked down and emotionally "beat up" his son. The kid didn't want to go to college, terrible at school...just wasn't doing that whole corporate/executive fast track.
They ended up making millions on donuts, but the original motivation for him was to repair his relationship with his son.
That said, not everyone can or even should start their own business, but it is a way out if one has the inspiration, work ethic and right business model.
I agree with that one and they seem to be the government by and for the financial oligarchy. It's pretty clear from U.S. history, with strong regulation, one can make massive profits just fine and dandy and it actually can help keep economic Armageddon away....uh, Lehman Brothers...AIG?
I sincerely doubt that's going to happen, although the increasing smaller bank failures might be another story.
A good overview on how much money has already been lost, how much is the taxpayer on the hook for now, what is the projected with the smaller banks, as a good research blog post ....
On the derivatives market, it sure looks like these Zombie banks simply want to go back to their old tricks. Not only do we have the SIGTARP report and the COP report, but we also have individuals/MSM press reporting that this is what's happening. That Bloomberg piece really delved into it.
What you propose makes all the sense in the world to me. In fact, I would love for you to have been on Obama's economic team or the FED Board of Governors or any other policy making agency that could have enacted your plan. Unfortunately, I believe (and I think you also do) that the damage has already been done, and long before Obama took office.
In order to re-regulate and rearrange the financial industry here, means that you have to first find a way to unravel the "shadow banking industry", which is global. Now, I have heard many evaluations of the derivatives markets ranging from around 500/600 trillion all the way into the quadrillion + range. Whatever it is, it's like pondering the big bang. A lot of analysts I have read over the past months are willing to discount this "notional" amount because the vast majority of it is in currency and interest rate swaps. These have been considered "predictable" or "stable" by the same analysts and therefore should be considered as "a wash", and should not be considered in future analysis.
After reading this news item from Reuters, I'm not so sure anything in the global financial system is predictable. Everyone is worrying about China discontinuing its purchases of Treasuries, which is certainly a cause for some concern on a macroeconomic scale. But what would happen to the global financial system if China defaulted on her CDS contracts? Think of the counterparty clusterfuck that would ensue!!
No matter how I look at our predicament, and I mean globally, all that I see is a bad moon rising. I am just hoping that we don't reach the scenario presented by Michael Hudson, in his interview on Guns and Butter radio August 26th, in which he discussed A Dress Rehearsal for Debt Peonage"
without the daytrading money, we cannot open up the factories...but yes, you say, daytraders lose money, so instead of losing it, they should plow it into those factories...but the daytraders who make money are the ones who stay in the game, those who lose money are gone...therefore true daytraders make money from the market, which you want to use to open factories, but if there were no more daytraders, there'd be no money for you to open those factories in the first place! I will trade, but I will not open up a factory because the risk in trading is waaaaay less than opening up a factory, trust me!
Especially if you used *coin*, not just paper money but real coins, to transfer between the banks.
In other words, no accepting a counter check from an Investment Bank for deposit into a retail bank; one needs to get it converted to *real money* to transfer through the firewalls.
Put your money into a MB or a PFB that doesn't have enough coin to back up it's trades? Sorry, you've just lost the value of your shares.
And credit cards- should be under retail banks, and limited to coin-on-hand; if the bank comes even close to being leveraged more than 1:1, credit limits should be cut.
-------------------------------------
Maximum jobs, not maximum profits.
Yes this will cause instability but at least we would have finally had our medicine. There is too much bad investment here to really secure anything. The FDIC should reassure the deposits and just assign a bank the deposits of this failed business. Otherwise what we got here is a slow moving car accident, where it is adding more and more cars to the pile on. Banks are businesses, nothing more, businesses succeed and fail. Let them fail if they are improperly run, shareholders should know the risks and if they get wiped out so be it. Depositors are guaranteed, and really that should be the ONLY thing the government should be guaranteeing.
Like I said, this will cause instability, and possibly choke up the credit markets. But better to accept the pain now and amputate a few fingers than lose the whole arm or worse later on. Honestly, is it too hard to put in the right regulation here? There should only be two types of banks, as there was in Glass-Stegall, investment banking and retail. In fact, I dare say we reclassify and create new types of banking, with a risk scale. Retail savings banking should operate like a public utility, there is no need for a local bank to get into derivatives trading. If you wish to take on risk, then you cannot take on depositors. And if you decided to be in investment banking with an orientation towards speculating in the markets then you should be classified as such and not recieve FDIC protection.
Investment banking should really be two types, Market Banking and Public Finance Banking, "Investment Banking" is too nebulous of a meaning. The former would fund hedge funds and private equity or speculate itself in the markets, and the latter deal in M&A activity and helping companies with their IPOs. Now the only time I could see Market Banking receive FDIC treatment is if they are facilitators to credit market operations. Here again, perhaps we need a new classified bank.
Do you see what I'm doing here? We need to break down the 'Investment Banking' field. Risk Market/Hedge Banking with zero FDIC protection, let them come up with their own pool. Credit Market Banking for dealings in the capital markets and private or government debt securities. Finance Banking to help businesses in their IPOs or if their client wishes to buy or merge with another firm. Finance Banking and Credit Market Banking could work together under a new set of regulations that still keeps a "Chinese wall." Lastly, you have retail banking, which would be FDIC insured, and run like a public utility. They could interact with the Credit Market Banking, but I see no reason for them to deal with Hedge Banking or Finance Banking.
--------------------------------------------
www.venomopolis.com
Who is stupid enough to *sell* a PUT option at only $.125, if corn moves at least 10%? If the put appreciates, the guy selling the put has lost money- he should have charged at least $.319 for it, so that he doesn't lose money on a 10% change.
Derivatives sellers are either real idiots, or just plain stupid, and I'm not sure which.
That's why we need to do away with commodities and stocks altogether- people should make money by actually adding wealth, not moving paper around.
-------------------------------------
Maximum jobs, not maximum profits.
The government is of, by, and for the people.
This current adminstration appears to be of, by, and for the banks.
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Maximum jobs, not maximum profits.
Yes they have- but what if we took the money *wasted* in day trading to actually open those factories back up, to form co-ops that compete locally with foreign goods? What if we actually, gasp, lobbied our local governments to create sales taxes on shipping, so that our local goods could compete better?
And wouldn't that be better than say, playing the odds that your corn futures will come out right, especially given the fact that you have NO ability to know that the piece of paper you've been handed actually is a corn future and not just a piece of paper created to look like one?
-------------------------------------
Maximum jobs, not maximum profits.
The buildings are still here, aren't they? Perhaps instead of day trading, the day trader could invest his funds in re-opening the factory.
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Maximum jobs, not maximum profits.
"between a wire transfer between a parent sending cash and a day trader?"
I would assume that a parent would open a joint account in a bank that has branches in both cities to avoid doing wire transfers to begin with. Other big plus means that the parent can monitor the college kid's account and help avoid overdraft fees.
"Still, even there, say you set a limit as a trigger, how do you know it is for funding speculation? Secondly, banks don't have to wire anything to move money, they just press a button on their keyboard and zap...a branch in Luxembourg can see the money."
I would assume that any given *TRADE* would involve moving money between account numbers of the traders involved.
Of course, this would also have a tendency to put a damper on exports and imports- but that's just a bonus.
-------------------------------------
Maximum jobs, not maximum profits.
regarding breaking up these banking behemoths, you just may be on to something! Glass-Steagall, for the most part, meant stability. When they broke that wall, they let the barbarians in.
--------------------------------------------
www.venomopolis.com
between a wire transfer between a parent sending cash and a day trader? I mean, other than the amount. Still, even there, say you set a limit as a trigger, how do you know it is for funding speculation? Secondly, banks don't have to wire anything to move money, they just press a button on their keyboard and zap...a branch in Luxembourg can see the money.
--------------------------------------------
www.venomopolis.com
Wage arbitrage and globalization sent a good chunk of those jobs overseas under the guise of "free" trade. Look, seebert, speculation will go on whether it's the stock market, or folks peddling rice; there is a long history of it all over the world. As for "gambling", yes there is that, sadly. But let me tell you what a mentor said to me, and this guy was an old timer on the CBOE and CBOT and a good liberal, who said "gambling is creating risk, trading is assuming risk." Now you may ask, what the heck is the difference? Well, in the former you don't know all the variables and odds are it will blow up in your face, the latter you know (for the most part) most of the variables and one can hedge or even back out.
For example, say we have a casino and a commodities exchange (yes, I know, "Oh gee, ain't they just two of the same thing?" Yes, but the exchange has less cocaine in it's premisis...booyah..drum roll please! Yes, you can catch the rest of my act at the Green Room...try the veal!), anyways, you have these two places. Now you walk into the casino and lets say you want to play the slots, since those are the most used casino vehicles. For arguments sake, say you picked those machines that require $100 coins and you plunk in 10 coins for ten swipes of the one-armed bandit.
At each incident, there is a chance you could win the big prize (lets say $1 million bucks). Now I don't have my math with me here, but I believe you got 1-in-10 chances given the coins you've put in. Obviously, the odds are much more crazier, because you have to take into account all the possible combinations, especially if this is a progressive slot machine. Chances are, you will not win that million bucks after that last of 10 coins is used up. You have risked 100% and your reward is bupkis.
Now let us say you walked into the commodities exchange, a dubious place, I grant you. You decided, for $1000, I will trade corn. Now you put down your $1000 margin (I've simplified it here, but the margin for corn is about 50% more), which is a down payment to control 1 contract. Corn is considered a "beginners" future contract, though you can still get wiped out. Each contract (also known as a "car" or "lot") represents 5000 bushels, and is priced per bushel, which at the going rate $3.190 or $15,950. Each $.0025 move = $12.50, or $50/per each penny. So here you own this one futures contract, now one of three things can happen. A)Corn goes up, you make money. B)Corn does nothing, you make nothing. C)Corn goes down, you lose money. The only question is, by how much for the first and last possibilities?
This is where the guys who last differ. You can set a limit prices, say if corn drops 2 cents, you want out. Corn is pretty liquid, LOTS of speculators who will buy that lot from you easily under normal market conditions. "Wait...normal market conditions?" Like I said, this is where the guys who last differ. In order to trade, really no matter what methodology you use, you need to have risk management and that means knowing your product and knowing when to get out (note I didn't say get in). That's the key. If you study that "beginners" future, you will notice that in the Summer months, between July and early September, it can get crazy and go up up up because of fears of future crop. Folks who have survived and been around, study seasonal cycles. So say you did this and you bought corn thinking it will make a Summer rally.
But lets say it doesn't rally to the point you wanted or even it starts going down because a Dept. of Ag. report says we should expect a bumper crop. Well there are three things you can do here, one if you moved up that exit limit you can potentially lock in a gain, two you can just try and exit and terminate that limit order, or lastly purchase a Put option. Yes, one of those vile and evil derivatives, a Put option gives you the right-but-not the obligation to sell something at a specific price within a certain time. Using today's data, and say you purchased that Put when you bought that Corn lot, you paid $.125 for that "At-the-Money" 320 Put, or $625. So, until December, if Corn should drop, you're protected, this is a basic form of hedging. If it goes up, you win. If it does nothing, you're only out what you paid for the Put, unless you sold that back. Given that corn tends to move at least 10%, you could make 30-50 cents or $1500. If it drops (corn really never stays still), say from $3.19 to $3, that Put appreciates and you sell it back and hopefully make the difference (either way you won't lose 100% like you would have at the casino).
--------------------------------------------
www.venomopolis.com
I would add that it is a philosophy or school of thought that the financial sector and financial oligarchy must be strong. Fu*k that, the financial sector is an intermediary service that allocates resources/capital. I agree we need a healthy financial sector but that doesn't mean that it needs to strong and the source of illusory economic growth.
RebelCapitalist.com - Financial Information for the Rest of Us.
Why we bailed them out? The Revolving Door. How much has Hank Paulsen made since leaving Treasury?
Frank T.
I knew a guy who was fired as a Steel Executive. Lost a huge salary, bonuses. Well, he ended up saying "family first" and his son liked donuts, wanted to be a donut maker...so he scrapped together money to start a donut shop as a family small business.
But while he was a Steel executive he really looked down and emotionally "beat up" his son. The kid didn't want to go to college, terrible at school...just wasn't doing that whole corporate/executive fast track.
They ended up making millions on donuts, but the original motivation for him was to repair his relationship with his son.
That said, not everyone can or even should start their own business, but it is a way out if one has the inspiration, work ethic and right business model.
Sorry, but our factories have gone to Mexico and we are left with only this casino.
Frank T.
I agree with that one and they seem to be the government by and for the financial oligarchy. It's pretty clear from U.S. history, with strong regulation, one can make massive profits just fine and dandy and it actually can help keep economic Armageddon away....uh, Lehman Brothers...AIG?
I'm poking fun, firstly the idea is to target GS, those high frequency trades.
Secondly, I was thinking for oil futures speculation maybe this is something to try.
One could also maybe scale such a thing to PI, say the tax only goes in when profits from trades is > $500k or something.
The day traders comment is my interpretation from the AFL-CIO messaging. Don't worry, we still love ya JV!
I knew you'd know the ins and outs of getting around a potential transaction tax.
I sincerely doubt that's going to happen, although the increasing smaller bank failures might be another story.
A good overview on how much money has already been lost, how much is the taxpayer on the hook for now, what is the projected with the smaller banks, as a good research blog post ....
On the derivatives market, it sure looks like these Zombie banks simply want to go back to their old tricks. Not only do we have the SIGTARP report and the COP report, but we also have individuals/MSM press reporting that this is what's happening. That Bloomberg piece really delved into it.
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