AIG just can't get a clue here. Don't they realize that in spite of their holding the globe hostage that at this point they risk all being lynched? Seriously, people are completely pissed about the entire TARP thing...
we sure were warning high and low on the stupidity of this but now the public is about to take their wrath out on every single person in any way associated with this company.
Timmy "the fast-draw mouth" Geithner has finally joined a long line of world leaders having to furiously back-paddle after incurring the ire of the Chinese. What was he thinking? I hoped, no I prayed, that Geithner made the currency manipulator accusation to purely appease the domestic China-bashing audience. My prayers have been answered. Seeing Hillary Clinton appealing for more Chinese loans on Chinese TV and seeing the swift assurances made by the the US in response to Wen Jiabao's worries about America's credit-worthiness have convinced me that the Obama team is grounded in reality. A big sigh of relief. Now, onto the next urgent matter: should we offer GE, California, and Florida as guarantees for the debt we owe China?
lets say we went to a basket. Ok, then you would have to pick currencies from a set criteria:
Mature economies with fairly stable economies and governments (Japan, the US, Germany, etc)
Commodity based economies with stable governments (Russia, Canada, South Africa, etc)
That currencies included in the "basket" to move in a currency band, that is each can only get so strong relative to the others up to a certain point. We had this system for decades.
Eliminate or strictly regulate the trading of currencies, particularly those done over the counter.
Insure that each new global currency unit can be exchanged with the basket.
The reason for 1) is because you want currencies where though the growth maybe slower than say China or India's, you are basically getting a known quantity that only shifts so much. For all the doom and gloom I've been hearing about the US, it doesn't swing from year to year like mad when it comes to things like the rate of inflation or GDP growth, and only had recessions. The reason for 2) is that currencies in commodity-based economies tend to act like a proxy for that commodity. That future Global Treasury would have to stockpile things like gold and oil or what have you by God knows how much. Why bother when you can buy the currency that acts like that. You may have noticed that I included Russia but not Saudi Arabia, I'm not saying Russia is stable, but long-term compared to Saudi Arabia it is.
Now just to say a basket of currencies will be the "reserve currency" would be futile in the present form. You would be surrenduring the devil you know for a host of devils you don't know. The theory someone once put to me on this was that if one economy goes, there would be a buffer with the others. The problem with that is that buffer's stength is tied to who is in that basket, you don't want the "weakest link" in the chain to have the ability to take down the whole thing. You would have to impose a much more strickter currency band system than what was even in the old Bretton Woods agreement.
Instead what I've been reading is that they want something akin to another fiat monetary system. They claim "hard" currency, but what, gold? You would need some sort of super fed with the ability to buy this gold. Secondly, to create a global version of the euro, you would need to harmonize the economies of virtually every nation state. The reason the US dollar works here in the states because our economies, for bettor or worse, are linked and in sync. At this moment, the best you could do is regional currencies, like the Euro, or a North American Dollar or South American Peso. A lot of this countries demanding this, like Russia, aren't doing it for the economic well being of the planet. Moscow, for example, is still up to it's old Cold War nonsense, and its in their best interest to have a commodity based global currency; they produce things like gold, oil, etc. The Chinese are just looking for another currency where they can a) serve as another tool for folks to buy their things, and b) another benchmark to devalue their currency and make themselves cheaper. Right now the Chinese are losing work to Vietnam and others.
Of course, the Chinese could be playing with fire. If we truly went to a single planetary currency, then it would be easier to implement a global minimum wage. If it costs say W$30/hr (pretend that dollar sign is the symbol for that new currency) in Germany and W$3/hr in China, you think that would last long in a global sync'd economy? No way. A global currency means a barrier-free trading system, like we have here between say California and Ohio, only this time it would mean China and the US. You would have no choice because you would have a global federal reserve and treasury that has to make sure that the flow of capital is maintained.
"In the Old Testament Book of Leviticus, God commands the children of Israel to observe a jubilee every 50 years. Nowadays we tend to associate the word with celebrations of royal anniversaries such as Queen Elizabeth’s golden jubilee in 2002. But the biblical conception of a jubilee was more precise: that of a general cancellation of debts.
This point is spelt out in Deuteronomy: 'Every creditor that lendeth ought unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother; because it is called the Lord’s release.' Such injunctions may strike the modern reader as utopian. How could any sophisticated society function if all debts were cancelled twice a century – much less, as Deuteronomy seems to suggest, every seven years? Yet we know that such general cancellations of debt really did happen in the ancient world. In 1788 BC, for example, about 500 years before the time of Moses, King Rim-Sin of Ur issued a royal edict declaring all loans null and void, wiping out some of history’s earliest known moneylenders."
--Niall Ferguson
See:http://www.niallferguson.com/site/FERG/Templates/ArticleItem.aspx?pageid...
secondary market because these "toxic assets" are worth less? You said it "no one wants to buy assets that have lost considerable value".
A market has buyers and sellers. Buyers ask price and seller bid. In this case, buyers want $1 and sellers are saying no more like $.47. Buyers can't afford $.47 because that means they are insolvent. But that is what sellers are will to buy the "toxic assets" for - so there is no meeting of the minds - no sale.
Getting rid of Mark to market is not going to change that dynamic. These toxic assets are, at best, heavily discounted to worthless.
Mark to Market is a made-up concept as it is. If there is no market how much are these "toxic assets" worth? And yes, they are worth something. These loans are backed by property deeds. The problem is that there is no secondary market to purchase and resell these assets like there used to be. For good reason, no one wants to buy assets that have lost considerable value, and may lose more.
Regardless, these mortgage backed securities ARE worth something and keeping them "Mark to Market" is not fair. We have already beat the banks with a bloody stick. We cannot tell them that these assets are worth nothing and tell them that they have to deleverage at the same time. We shouldn't get rid of Mark to Market all together, but, at the very least, allow them to account for 60-70 of their former value. This would be well below the over all decline of housing prices accross the nation so would remain fair.
Then the banks can use fair leverage and by doing so a market will materialize as housing prices stop falling.
Banks will be much safer investments in the long run.
Right the trade tariffs though as a pattern really were not that big of an effect, at least in the U.S. for the U.S. at that time was primarily a domestic economy.
Now what I find interesting that i have never read anything on.....
is tracing through the WWI war debt, national debt as a cause of the Great Depression.
I know in the United States we had a Ponzi scheme stock market ride but also massive consumer debt, everything was bought on credit.
I don't know precisely what the federal and state budget deficits were...
The reason I'm asking about this angle is it sure seems to me that all of these nations are now at risk of causing global default simply trying to prop up these derivatives, these fictional contracts of fictional money and pay them out.
I'm starting to think this entire system is completely hosed and the cause behind it are those hedge fund managers and other vested interests in keeping this shadow banking system, derivative Ponzi scheme alive.
i.e. beyond being a pure failure, the TARP plus the Federal Reserve actions, they are prescribing solutions that are trying to keep all of this toxic waste as valid instead of letting it collapse and die and rebuilding from there.
But it will not work, never could work because you cannot build an economy on fictional money.
I'm talking out loud but in terms of global war debt, the only nation I really am aware of is the Weimar Republic of Germany.
According to Michael Hudson (the only account of this conference that I've read), our WWI Allies were desperate to get out from under their war loans. However, Wall Street was refusing to to accept that idea, and they held control over Washington.
The WWI loans were so onerous that other nations had to keep devaluing their currencies and raising tariffs, in order to gain trade advantages, which were then used to pay interest on those war debts.
The whole cycle was killing world trade, which was making the Great Depression worse.
Also, our allies were forcing Germany to live up to its crushing burden to England and France, because that was the only way that England and France could avoid defaulting on their debts to America.
By 1933 England and France had mostly depleted their gold reserves paying the war debts, and had in fact already paid more interest than the original principle. England and France were begging for help.
Hoover had hinted at letting our allies off, but never got around to doing. FDR never showed any mercy. He took at hard stance at the London Conference. The Conference was a complete failure.
Within a year both England and France had defaulted on their war debts to America.
Marginalist worshippers at the alter of the perfectly competitive market may not wish to admit it ...
... but for some things, you need a going concern operating under effective regulation. Insurance is one of those things, with the moral hazard of the ability of the insurer to make good on the claims, the moral hazard of the temptation of the insured to falsify claims, and the problem of multiplying systemic risks in the case of over-insurance.
The developers of Credit Default Swaps figured they were very clever in paying off against an externally verifiable credit event, but they do nothing for the moral hazard of the insurer to make good on claims, and are open to massive over-insurance.
Those problems are intrinsic ... in particular, you cannot trade insurance coverages in a competitive secondary market if coverage is limited to those with an insurable interest.
Do you know the results of this or more details? It looks like FDR put the national interest above "globalization", i.e. the U.S. taking the hit for the global economic crisis, but not clear.
I just found a fairly in depth article on seeking Alpha which has a host of graphs, analysis on how Central banks are "printing money" around the globe, per country.
He is also talking about the "race to the bottom" on currency evaluations around the globe.
Of course, my point of view is that 6/7 products from Oregon that now have tariffs against them in Mexico, are FOOD. We have a shortage of food at St.Vincent DePaul in Tigard, and every other food bank and soup kitchen in Oregon due to unprecedented demand. Maybe these companies should be keeping those pears, french fries, grapes, wine, cherries, and apples here at home- in the food banks- before exporting them elsewhere.
FEED YOUR OWN FIRST!
-------------------------------------
Moral hazards would not exist in a system designed to eliminate fraud.
That "functional banking system" is an oxymoron. I never realized just how incredibly far from anything I'd consider sound, wealth-backed money our system had gotten to. We'd be better off with local, person-to-person barter and NO foreign trade than continuing to have these crooks in charge of our economy.
I've got to look into what it would take to amend the constitution to remove the right to coin money and negotiate treaties from the federal government and turn it over to the states. It's obvious that the banking system has gotten too big to succeed.
-------------------------------------
Moral hazards would not exist in a system designed to eliminate fraud.
But somehow, I seem to think that class consciousness in America is restricted to a one way street: only rich people are allowed to be class conscious.
At least Mexico is giving us a gift- we need that food that we would have sent down there for our food banks.
-------------------------------------
Moral hazards would not exist in a system designed to eliminate fraud.
WAS to bring down the United States and make the dollar no longer a reserve currency.
-------------------------------------
Moral hazards would not exist in a system designed to eliminate fraud.
easy access for shareholders. I've seen this happen with companies trying to avoid union members attending their meetings during union contract negotiations. Companies will select a town not easily accessible via air or highway. Shareholder meeting location was selected 7-12 months ago, changing location will cost a great deal of additional money. So companies have a choice, face the music or run away.
I'm kind of like, "why did it take this long" but I suspect we might see people in the streets.
These same TARP recipients are raising interest rates on credit cards to 30%. I have great credit and I just received a "notice" from one of my cards so they are clearly just going for the squeeze.
I think people have had enough of this continual squeeze them yet "do whatever a corporation wants".
AIG just can't get a clue here. Don't they realize that in spite of their holding the globe hostage that at this point they risk all being lynched? Seriously, people are completely pissed about the entire TARP thing...
we sure were warning high and low on the stupidity of this but now the public is about to take their wrath out on every single person in any way associated with this company.
Timmy "the fast-draw mouth" Geithner has finally joined a long line of world leaders having to furiously back-paddle after incurring the ire of the Chinese. What was he thinking? I hoped, no I prayed, that Geithner made the currency manipulator accusation to purely appease the domestic China-bashing audience. My prayers have been answered. Seeing Hillary Clinton appealing for more Chinese loans on Chinese TV and seeing the swift assurances made by the the US in response to Wen Jiabao's worries about America's credit-worthiness have convinced me that the Obama team is grounded in reality. A big sigh of relief. Now, onto the next urgent matter: should we offer GE, California, and Florida as guarantees for the debt we owe China?
http://www.washingtonmonthly.com/features/2009/0903.galbraith.html#Byline
lets say we went to a basket. Ok, then you would have to pick currencies from a set criteria:
The reason for 1) is because you want currencies where though the growth maybe slower than say China or India's, you are basically getting a known quantity that only shifts so much. For all the doom and gloom I've been hearing about the US, it doesn't swing from year to year like mad when it comes to things like the rate of inflation or GDP growth, and only had recessions. The reason for 2) is that currencies in commodity-based economies tend to act like a proxy for that commodity. That future Global Treasury would have to stockpile things like gold and oil or what have you by God knows how much. Why bother when you can buy the currency that acts like that. You may have noticed that I included Russia but not Saudi Arabia, I'm not saying Russia is stable, but long-term compared to Saudi Arabia it is.
Now just to say a basket of currencies will be the "reserve currency" would be futile in the present form. You would be surrenduring the devil you know for a host of devils you don't know. The theory someone once put to me on this was that if one economy goes, there would be a buffer with the others. The problem with that is that buffer's stength is tied to who is in that basket, you don't want the "weakest link" in the chain to have the ability to take down the whole thing. You would have to impose a much more strickter currency band system than what was even in the old Bretton Woods agreement.
Instead what I've been reading is that they want something akin to another fiat monetary system. They claim "hard" currency, but what, gold? You would need some sort of super fed with the ability to buy this gold. Secondly, to create a global version of the euro, you would need to harmonize the economies of virtually every nation state. The reason the US dollar works here in the states because our economies, for bettor or worse, are linked and in sync. At this moment, the best you could do is regional currencies, like the Euro, or a North American Dollar or South American Peso. A lot of this countries demanding this, like Russia, aren't doing it for the economic well being of the planet. Moscow, for example, is still up to it's old Cold War nonsense, and its in their best interest to have a commodity based global currency; they produce things like gold, oil, etc. The Chinese are just looking for another currency where they can a) serve as another tool for folks to buy their things, and b) another benchmark to devalue their currency and make themselves cheaper. Right now the Chinese are losing work to Vietnam and others.
Of course, the Chinese could be playing with fire. If we truly went to a single planetary currency, then it would be easier to implement a global minimum wage. If it costs say W$30/hr (pretend that dollar sign is the symbol for that new currency) in Germany and W$3/hr in China, you think that would last long in a global sync'd economy? No way. A global currency means a barrier-free trading system, like we have here between say California and Ohio, only this time it would mean China and the US. You would have no choice because you would have a global federal reserve and treasury that has to make sure that the flow of capital is maintained.
"In the Old Testament Book of Leviticus, God commands the children of Israel to observe a jubilee every 50 years. Nowadays we tend to associate the word with celebrations of royal anniversaries such as Queen Elizabeth’s golden jubilee in 2002. But the biblical conception of a jubilee was more precise: that of a general cancellation of debts.
This point is spelt out in Deuteronomy: 'Every creditor that lendeth ought unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother; because it is called the Lord’s release.' Such injunctions may strike the modern reader as utopian. How could any sophisticated society function if all debts were cancelled twice a century – much less, as Deuteronomy seems to suggest, every seven years? Yet we know that such general cancellations of debt really did happen in the ancient world. In 1788 BC, for example, about 500 years before the time of Moses, King Rim-Sin of Ur issued a royal edict declaring all loans null and void, wiping out some of history’s earliest known moneylenders."
--Niall Ferguson
See:http://www.niallferguson.com/site/FERG/Templates/ArticleItem.aspx?pageid...
secondary market because these "toxic assets" are worth less? You said it "no one wants to buy assets that have lost considerable value".
A market has buyers and sellers. Buyers ask price and seller bid. In this case, buyers want $1 and sellers are saying no more like $.47. Buyers can't afford $.47 because that means they are insolvent. But that is what sellers are will to buy the "toxic assets" for - so there is no meeting of the minds - no sale.
Getting rid of Mark to market is not going to change that dynamic. These toxic assets are, at best, heavily discounted to worthless.
it's saying one needs to put on the books the actual value of an asset in the real world.
Don't try to just listen to some pundit and not read for yourself.
Mark to Market is a made-up concept as it is. If there is no market how much are these "toxic assets" worth? And yes, they are worth something. These loans are backed by property deeds. The problem is that there is no secondary market to purchase and resell these assets like there used to be. For good reason, no one wants to buy assets that have lost considerable value, and may lose more.
Regardless, these mortgage backed securities ARE worth something and keeping them "Mark to Market" is not fair. We have already beat the banks with a bloody stick. We cannot tell them that these assets are worth nothing and tell them that they have to deleverage at the same time. We shouldn't get rid of Mark to Market all together, but, at the very least, allow them to account for 60-70 of their former value. This would be well below the over all decline of housing prices accross the nation so would remain fair.
Then the banks can use fair leverage and by doing so a market will materialize as housing prices stop falling.
Banks will be much safer investments in the long run.
Right the trade tariffs though as a pattern really were not that big of an effect, at least in the U.S. for the U.S. at that time was primarily a domestic economy.
Now what I find interesting that i have never read anything on.....
is tracing through the WWI war debt, national debt as a cause of the Great Depression.
I know in the United States we had a Ponzi scheme stock market ride but also massive consumer debt, everything was bought on credit.
I don't know precisely what the federal and state budget deficits were...
The reason I'm asking about this angle is it sure seems to me that all of these nations are now at risk of causing global default simply trying to prop up these derivatives, these fictional contracts of fictional money and pay them out.
I'm starting to think this entire system is completely hosed and the cause behind it are those hedge fund managers and other vested interests in keeping this shadow banking system, derivative Ponzi scheme alive.
i.e. beyond being a pure failure, the TARP plus the Federal Reserve actions, they are prescribing solutions that are trying to keep all of this toxic waste as valid instead of letting it collapse and die and rebuilding from there.
But it will not work, never could work because you cannot build an economy on fictional money.
I'm talking out loud but in terms of global war debt, the only nation I really am aware of is the Weimar Republic of Germany.
According to Michael Hudson (the only account of this conference that I've read), our WWI Allies were desperate to get out from under their war loans. However, Wall Street was refusing to to accept that idea, and they held control over Washington.
The WWI loans were so onerous that other nations had to keep devaluing their currencies and raising tariffs, in order to gain trade advantages, which were then used to pay interest on those war debts.
The whole cycle was killing world trade, which was making the Great Depression worse.
Also, our allies were forcing Germany to live up to its crushing burden to England and France, because that was the only way that England and France could avoid defaulting on their debts to America.
By 1933 England and France had mostly depleted their gold reserves paying the war debts, and had in fact already paid more interest than the original principle. England and France were begging for help.
Hoover had hinted at letting our allies off, but never got around to doing. FDR never showed any mercy. He took at hard stance at the London Conference. The Conference was a complete failure.
Within a year both England and France had defaulted on their war debts to America.
... the reforms that are needed.
Marginalist worshippers at the alter of the perfectly competitive market may not wish to admit it ...
... but for some things, you need a going concern operating under effective regulation. Insurance is one of those things, with the moral hazard of the ability of the insurer to make good on the claims, the moral hazard of the temptation of the insured to falsify claims, and the problem of multiplying systemic risks in the case of over-insurance.
The developers of Credit Default Swaps figured they were very clever in paying off against an externally verifiable credit event, but they do nothing for the moral hazard of the insurer to make good on claims, and are open to massive over-insurance.
Those problems are intrinsic ... in particular, you cannot trade insurance coverages in a competitive secondary market if coverage is limited to those with an insurable interest.
Do you know the results of this or more details? It looks like FDR put the national interest above "globalization", i.e. the U.S. taking the hit for the global economic crisis, but not clear.
I just found a fairly in depth article on seeking Alpha which has a host of graphs, analysis on how Central banks are "printing money" around the globe, per country.
He is also talking about the "race to the bottom" on currency evaluations around the globe.
And I've yet to see any mention of it here.
Of course, my point of view is that 6/7 products from Oregon that now have tariffs against them in Mexico, are FOOD. We have a shortage of food at St.Vincent DePaul in Tigard, and every other food bank and soup kitchen in Oregon due to unprecedented demand. Maybe these companies should be keeping those pears, french fries, grapes, wine, cherries, and apples here at home- in the food banks- before exporting them elsewhere.
FEED YOUR OWN FIRST!
-------------------------------------
Moral hazards would not exist in a system designed to eliminate fraud.
That "functional banking system" is an oxymoron. I never realized just how incredibly far from anything I'd consider sound, wealth-backed money our system had gotten to. We'd be better off with local, person-to-person barter and NO foreign trade than continuing to have these crooks in charge of our economy.
I've got to look into what it would take to amend the constitution to remove the right to coin money and negotiate treaties from the federal government and turn it over to the states. It's obvious that the banking system has gotten too big to succeed.
-------------------------------------
Moral hazards would not exist in a system designed to eliminate fraud.
But somehow, I seem to think that class consciousness in America is restricted to a one way street: only rich people are allowed to be class conscious.
At least Mexico is giving us a gift- we need that food that we would have sent down there for our food banks.
-------------------------------------
Moral hazards would not exist in a system designed to eliminate fraud.
WAS to bring down the United States and make the dollar no longer a reserve currency.
-------------------------------------
Moral hazards would not exist in a system designed to eliminate fraud.
easy access for shareholders. I've seen this happen with companies trying to avoid union members attending their meetings during union contract negotiations. Companies will select a town not easily accessible via air or highway. Shareholder meeting location was selected 7-12 months ago, changing location will cost a great deal of additional money. So companies have a choice, face the music or run away.
I'm kind of like, "why did it take this long" but I suspect we might see people in the streets.
These same TARP recipients are raising interest rates on credit cards to 30%. I have great credit and I just received a "notice" from one of my cards so they are clearly just going for the squeeze.
I think people have had enough of this continual squeeze them yet "do whatever a corporation wants".
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