what wallstreet is doing with your money

[loutil]

... can someone do an english version summary of that article? it had a lot of words that I'm not sure are really words at all, and made no sense to me... I'm a soldier, not an economist...

basically this is what happens: Instead of using deposits to help the people and the economy as a whole by giving out loans, which is what the FED printing policy is all about, the banks are using the people's money to invest in derivatives further making the financial sector even more interconnected and more unstable. They are making the pre-2008 situations even worse than they already were.

With all due respect...it is not the banks responsibility to "help the people and the economy as a whole by giving out loans". That is also an oversimplification of Fed policy. Further, while some banks do use derivatives it is absurd to suggest banks are not making loans. You do recognize that millions of people have refinanced their loans over the past few years? Have bank lending standard become more strict? Yes, of course. Is that a bad thing? No, not in my opinion. Our previous problem was the direct result of too much credit, especially to people who had no business being extended credit. Banks are in business to make money. They are not in business as a tool of social engineering...even if you would like them to be .

Did I say that banks were giving zero loans? I said that there is a huge gap nowadays with which banks prefer investing in the stock market rather than investing in the real economy. This is not how you drive an economy to growth. According to the FED's own statements, their goal is to stimulate economic growth, but for that sufficient money needs to flow to the real economy. This is thus a huge mistake that the FED is making. All they are doing is propping up another stock market bubble.

The criticism here is that this is an unsustainable situation.

Banks do not prefer to invest in the stock market. In fact, very few banks actually do so. They do tend to sit on their money as they have significantly raised their loan standards. Credit is tight because of all the failures in 2008/2009. Banks used to feel safe with as little as 10% equity ( less with government backed loans ). Now they prefer 30 - 40% equity. Can you blame them?
The stock market "bubble" you speak of is not from a lack of lending nor from banks investing in the market. I could argue, quite well I believe, that there is no bubble as the forward PE on the market is quite average in historical terms. The cost of capital has become cheaper than the cost of labor. This drives business growth and improves the bottom line. Better earnings...higher stock prices. Not a bubble, just a reality .

[BigBallinStalin]

... can someone do an english version summary of that article? it had a lot of words that I'm not sure are really words at all, and made no sense to me... I'm a soldier, not an economist...

basically this is what happens: Instead of using deposits to help the people and the economy as a whole by giving out loans, which is what the FED printing policy is all about, the banks are using the people's money to invest in derivatives further making the financial sector even more interconnected and more unstable. They are making the pre-2008 situations even worse than they already were.

With all due respect...it is not the banks responsibility to "help the people and the economy as a whole by giving out loans". That is also an oversimplification of Fed policy. Further, while some banks do use derivatives it is absurd to suggest banks are not making loans. You do recognize that millions of people have refinanced their loans over the past few years? Have bank lending standard become more strict? Yes, of course. Is that a bad thing? No, not in my opinion. Our previous problem was the direct result of too much credit, especially to people who had no business being extended credit. Banks are in business to make money. They are not in business as a tool of social engineering...even if you would like them to be .

Did I say that banks were giving zero loans? I said that there is a huge gap nowadays with which banks prefer investing in the stock market rather than investing in the real economy. This is not how you drive an economy to growth. According to the FED's own statements, their goal is to stimulate economic growth, but for that sufficient money needs to flow to the real economy. This is thus a huge mistake that the FED is making. All they are doing is propping up another stock market bubble.

The criticism here is that this is an unsustainable situation.

Banks do not prefer to invest in the stock market. In fact, very few banks actually do so. They do tend to sit on their money as they have significantly raised their loan standards. Credit is tight because of all the failures in 2008/2009. Banks used to feel safe with as little as 10% equity ( less with government backed loans ). Now they prefer 30 - 40% equity. Can you blame them?
The stock market "bubble" you speak of is not from a lack of lending nor from banks investing in the market. I could argue, quite well I believe, that there is no bubble as the forward PE on the market is quite average in historical terms. The cost of capital has become cheaper than the cost of labor. This drives business growth and improves the bottom line. Better earnings...higher stock prices. Not a bubble, just a reality .

Maybe, but if one pushes the mortgage rates (price) below the market price through... oh I dunno! buying $45bn per month or so of MBS for roughly 6 months--maybe another 6-12 months, then wouldn't we get an abundance of mortgaged homes? That led us to our problem in 2008, and we're already seeing housing prices climb again. (Combine this with the decreased lending standards for select, potential home owners---funded/subsidized by that federal housing authority (I forget the name).

And consider the years of people chasing alpha. Plenty of junk bonds and crazy investments have been made, and it'll take some time for us to see what happens (possibly, another bubble/misallocation of resources). I view this as a problem mainly because it's a reaction to the Fed's monetary policy of pushing down interest rates.

Average inflation as recorded by the government has been steady, and IIRC people aren't rushing into those TIPS--as they were shortly after 2008/2009 IIRC, so that's good--as far as average inflation can reveal. The price of 'gold' is around... $1300 per ounce. If it was around $300, I'd feel safer about the economy (as it was before 2008).

I think the central banks have mitigated the intensity the 2008/2009 recession; however, their general policies have not only prolonged it, but also have created unintended consequences which will come into fruition... soon. *(It depends on when the misallocation of all those resources, which have been spurred on by a change of incentives from the central banks through expansionary monetary policy, becomes realized).

[loutil]

Actually, they are buying $90 billion per month . But that is not what created the problem in 2008. It actually started back in the late 90's with the proposition that everyone should be able to own a home. A good cause/idea but not rooted in common sense. So the government forced the GSE's Fannie and Freddie to loan more money to people who should not have been lent money. Lower credit scores? No problem. Bad credit? No problem. No down payment? No problem. No earnings history? No problem. We eventually got to NINJA loans...no income or job verification to get a loan. Credit got to easy. This was then exacerbated by Wall Street who bundled these sub prime loans and sold them as "safe" investments. Some firms even leveraged them over and over to acquire excess yield. When it started to unravel it became an avalanche...
As for TIPS, people are still buying them as the auctions sell out each month. As for gold...you would need to go all the way back to 2003 to find gold at $300 per ounce. The average price for gold in 2008 was $871/ounce. While gold is an inflation hedge it could be argued it is better at being a dollar hedge. Our Fed has supported a weak dollar policy for 10 years. Given that it is not surprising that gold has risen through that time period. Remember, gold, like oil, is denominated on the world market in dollars. Therefor, a drop in the dollar pushes up the price of any commodity that is denominated in dollars .
The Fed is doing what it can to help stimulate growth. Once they had lowered rates to near zero they had to find other ways to quantitatively ease. Buying treasuries is the route they chose. Time will tell if it was a good move. For now, the economy is weak but growing. Corporate America is thriving on cheap capital and increased productivity through technology...

[waauw]

Interesting points...
I had a conversation recently with Jeff Gundlach (look him if you need to but he is an intellectual high thinker in the world of finance and money) and he proffered an interesting question: what would happen if the the government decided NOT to pay back the notes the Fed was buying? What if that debt was just "canceled". Who would be harmed?

Think about that for a few moments ...

Is that just the debts to the FED your talking about or all debts?

Obviously, just the debts to the Fed. Otherwise, the system would collapse ...

well then it would make for a good temporary solution it would seem to me. The government expenses toward debt repayments would drop and the numbers of debt/gdp would seem a lot more comfortable. So I'd think it would create some sort of temporary optimism.

But the domestically held bonds were never really the problem for the US. Everybody knew the FED would never massively sell those bonds. The problem is what might happen to the foreign held bonds and the foreign held USD's. I don't think this move would really change anything about relationships with these other countries. What matters is what else they plan doing. They will still have to solve several problems and how they deal with those is what matters.

[loutil]

Interesting points...
I had a conversation recently with Jeff Gundlach (look him if you need to but he is an intellectual high thinker in the world of finance and money) and he proffered an interesting question: what would happen if the the government decided NOT to pay back the notes the Fed was buying? What if that debt was just "canceled". Who would be harmed?

Think about that for a few moments ...

Is that just the debts to the FED your talking about or all debts?

Obviously, just the debts to the Fed. Otherwise, the system would collapse ...

well then it would make for a good temporary solution it would seem to me. The government expenses toward debt repayments would drop and the numbers of debt/gdp would seem a lot more comfortable. So I'd think it would create some sort of temporary optimism.

But the domestically held bonds were never really the problem for the US. Everybody knew the FED would never massively sell those bonds. The problem is what might happen to the foreign held bonds and the foreign held USD's. I don't think this move would really change anything about relationships with these other countries. What matters is what else they plan doing. They will still have to solve several problems and how they deal with those is what matters.

I believe the bulk of our debt being held by foreigners is in China and Japan. Both of those countries have an interest in holding those bonds and not creating a vast sell off. Both of those countries are VERY dependent on trade with us. They would only hurt themselves by dumping our bonds...

[waauw]

... can someone do an english version summary of that article? it had a lot of words that I'm not sure are really words at all, and made no sense to me... I'm a soldier, not an economist...

basically this is what happens: Instead of using deposits to help the people and the economy as a whole by giving out loans, which is what the FED printing policy is all about, the banks are using the people's money to invest in derivatives further making the financial sector even more interconnected and more unstable. They are making the pre-2008 situations even worse than they already were.

With all due respect...it is not the banks responsibility to "help the people and the economy as a whole by giving out loans". That is also an oversimplification of Fed policy. Further, while some banks do use derivatives it is absurd to suggest banks are not making loans. You do recognize that millions of people have refinanced their loans over the past few years? Have bank lending standard become more strict? Yes, of course. Is that a bad thing? No, not in my opinion. Our previous problem was the direct result of too much credit, especially to people who had no business being extended credit. Banks are in business to make money. They are not in business as a tool of social engineering...even if you would like them to be .

Did I say that banks were giving zero loans? I said that there is a huge gap nowadays with which banks prefer investing in the stock market rather than investing in the real economy. This is not how you drive an economy to growth. According to the FED's own statements, their goal is to stimulate economic growth, but for that sufficient money needs to flow to the real economy. This is thus a huge mistake that the FED is making. All they are doing is propping up another stock market bubble.

The criticism here is that this is an unsustainable situation.

Banks do not prefer to invest in the stock market. In fact, very few banks actually do so. They do tend to sit on their money as they have significantly raised their loan standards. Credit is tight because of all the failures in 2008/2009. Banks used to feel safe with as little as 10% equity ( less with government backed loans ). Now they prefer 30 - 40% equity. Can you blame them?
The stock market "bubble" you speak of is not from a lack of lending nor from banks investing in the market. I could argue, quite well I believe, that there is no bubble as the forward PE on the market is quite average in historical terms. The cost of capital has become cheaper than the cost of labor. This drives business growth and improves the bottom line. Better earnings...higher stock prices. Not a bubble, just a reality .

credit is tight? Looking at the fed policy until now, they should be less tight. That's what all the money printing is for. Wall street got massive amounts of almost free liquidity.

As to the stock market. The Shiller P/E ratio shows that the S&P is at 24.70. This is still far beneath the tops of 1929 and the tech bubble levels, but the rise in it's ratio shows that one should be very cautious with investing in the stock market right now. A bull market doesn't start at 24 or 25 times earnings. It starts at 10 or below. Looking at the average of 16.47 should be daunting. Returning to averages would mean a decline of the markets of about 30% approximately. This is not the moment to invest in stocks.

[BigBallinStalin]

LT, we're in agreement here. I was just commenting on the "bubbles v. reality" bit.

Question regarding the USG defaulting on its debts:

From what I've seen, people usually hinge a country's average business interest rates with its respective government's interest rate (cost of borrowing). (If this is a correlation or causation, I'm not sure). Anyway, if the government's cost of borrowing increases, then so do the costs of borrowing for businesses within that country.

So, if the Fed is defaulting on all that debt, then wouldn't interest rates for both the US government and businesses/their operations* within the US increase?

If that's the case, then wouldn't the rise of interest rates have a short-term 'negative' impact on the economy?


*(It's hard to say since a lot of "American" businesses aren't based in the US. I guess it depends on where their respective financial subsidiaries are located).

[waauw]

Interesting points...
I had a conversation recently with Jeff Gundlach (look him if you need to but he is an intellectual high thinker in the world of finance and money) and he proffered an interesting question: what would happen if the the government decided NOT to pay back the notes the Fed was buying? What if that debt was just "canceled". Who would be harmed?

Think about that for a few moments ...

Is that just the debts to the FED your talking about or all debts?

Obviously, just the debts to the Fed. Otherwise, the system would collapse ...

well then it would make for a good temporary solution it would seem to me. The government expenses toward debt repayments would drop and the numbers of debt/gdp would seem a lot more comfortable. So I'd think it would create some sort of temporary optimism.

But the domestically held bonds were never really the problem for the US. Everybody knew the FED would never massively sell those bonds. The problem is what might happen to the foreign held bonds and the foreign held USD's. I don't think this move would really change anything about relationships with these other countries. What matters is what else they plan doing. They will still have to solve several problems and how they deal with those is what matters.

I believe the bulk of our debt being held by foreigners is in China and Japan. Both of those countries have an interest in holding those bonds and not creating a vast sell off. Both of those countries are VERY dependent on trade with us. They would only hurt themselves by dumping our bonds...

Except you forget one thing. These countries have troubles of their own. China is already having troubles with inflation, which is why they can't print money to help their banks. And Japan is well on it's devaluation way for devaluating their currency. With both countries already or will be under inflationary pressure, they might both get tempted to use their vast foreign reserves as they can't just print into eternity. This would be the same as just passing the ball to the US to make the next move. I'm not saying they will create a panic per sé, but even if they only gradually get rid of those US treasuries it would put pressure on the US intrest rate and force the FED and/or US government to find solutions.

Additionally consider this following little story:
There was once an island with 10 little chinese and 1 fat american. The 10 little chinese men each had their jobs. One did the fishing, one the cooking, another the foraging, etc. The fat american on the other hand, his job was to consume all the products and only leave a survival minimum to the chinese. But one day the fat american dies and all these chinese are suddenly out of a job as there is nobody to consume their products. After a while the chinese start working again as they need to survive. What they notice is that now they can work a lot less, but earn a lot more. They can actually enjoy life a bit more now the fat american is dead.

==> moral of the story: The chinese might need the americans in the short term as any crash would lower demand for chinese products. But this would only be a transitional phase. On the long term the chinese have everything to win from seeing the americans lose their wealth. Currently americans consume vast amounts of the world's resources. If the americans were to consume less because of financial turmoil, there would be more left for the rest of the world.

Basically the best option for the chinese is to prepare for a crash by diversifying away from the USD and away from the american economy and then watch the american dream crash and burn. They are already in the process of doing so. The chinese are for example the only country on the planet actively propagating to their own population to buy gold and silver. And that's not all. It should be plain obvious by now that the chinese are purchasing businesses, lands, resources and know-how all over the globe.

[Phatscotty]

another thing, and forgive if already pointed out, the Federal Reserve has bought so much of America's debt, it makes China's and Japan's holding combine look like chump change.

The stimulus, the omnibus, Obamacare, cash for clunkers, bailout of Detroit, bail out of wall street. 2009 alone engulfed the amount of debt held by China and Japan and all the rest. AND we ran a record deficit that year! The Fed owns that debt too, with compounding interest.

And nothing has been fixed or recovered either

[loutil]

... can someone do an english version summary of that article? it had a lot of words that I'm not sure are really words at all, and made no sense to me... I'm a soldier, not an economist...

basically this is what happens: Instead of using deposits to help the people and the economy as a whole by giving out loans, which is what the FED printing policy is all about, the banks are using the people's money to invest in derivatives further making the financial sector even more interconnected and more unstable. They are making the pre-2008 situations even worse than they already were.

With all due respect...it is not the banks responsibility to "help the people and the economy as a whole by giving out loans". That is also an oversimplification of Fed policy. Further, while some banks do use derivatives it is absurd to suggest banks are not making loans. You do recognize that millions of people have refinanced their loans over the past few years? Have bank lending standard become more strict? Yes, of course. Is that a bad thing? No, not in my opinion. Our previous problem was the direct result of too much credit, especially to people who had no business being extended credit. Banks are in business to make money. They are not in business as a tool of social engineering...even if you would like them to be .

Did I say that banks were giving zero loans? I said that there is a huge gap nowadays with which banks prefer investing in the stock market rather than investing in the real economy. This is not how you drive an economy to growth. According to the FED's own statements, their goal is to stimulate economic growth, but for that sufficient money needs to flow to the real economy. This is thus a huge mistake that the FED is making. All they are doing is propping up another stock market bubble.

The criticism here is that this is an unsustainable situation.

Banks do not prefer to invest in the stock market. In fact, very few banks actually do so. They do tend to sit on their money as they have significantly raised their loan standards. Credit is tight because of all the failures in 2008/2009. Banks used to feel safe with as little as 10% equity ( less with government backed loans ). Now they prefer 30 - 40% equity. Can you blame them?
The stock market "bubble" you speak of is not from a lack of lending nor from banks investing in the market. I could argue, quite well I believe, that there is no bubble as the forward PE on the market is quite average in historical terms. The cost of capital has become cheaper than the cost of labor. This drives business growth and improves the bottom line. Better earnings...higher stock prices. Not a bubble, just a reality .

credit is tight? Looking at the fed policy until now, they should be less tight. That's what all the money printing is for. Wall street got massive amounts of almost free liquidity.

As to the stock market. The Shiller P/E ratio shows that the S&P is at 24.70. This is still far beneath the tops of 1929 and the tech bubble levels, but the rise in it's ratio shows that one should be very cautious with investing in the stock market right now. A bull market doesn't start at 24 or 25 times earnings. It starts at 10 or below. Looking at the average of 16.47 should be daunting. Returning to averages would mean a decline of the markets of about 30% approximately. This is not the moment to invest in stocks.

You do, of course, recognize that the Shiller P/E ratio is a 10 yr average and therefore overstated at this point given the extreme conditions in 2008/2009. The actual P/E ratio is much less than you state and within historical norms.

[loutil]

Interesting points...
I had a conversation recently with Jeff Gundlach (look him if you need to but he is an intellectual high thinker in the world of finance and money) and he proffered an interesting question: what would happen if the the government decided NOT to pay back the notes the Fed was buying? What if that debt was just "canceled". Who would be harmed?

Think about that for a few moments ...

Is that just the debts to the FED your talking about or all debts?

Obviously, just the debts to the Fed. Otherwise, the system would collapse ...

well then it would make for a good temporary solution it would seem to me. The government expenses toward debt repayments would drop and the numbers of debt/gdp would seem a lot more comfortable. So I'd think it would create some sort of temporary optimism.

But the domestically held bonds were never really the problem for the US. Everybody knew the FED would never massively sell those bonds. The problem is what might happen to the foreign held bonds and the foreign held USD's. I don't think this move would really change anything about relationships with these other countries. What matters is what else they plan doing. They will still have to solve several problems and how they deal with those is what matters.

I believe the bulk of our debt being held by foreigners is in China and Japan. Both of those countries have an interest in holding those bonds and not creating a vast sell off. Both of those countries are VERY dependent on trade with us. They would only hurt themselves by dumping our bonds...

Except you forget one thing. These countries have troubles of their own. China is already having troubles with inflation, which is why they can't print money to help their banks. And Japan is well on it's devaluation way for devaluating their currency. With both countries already or will be under inflationary pressure, they might both get tempted to use their vast foreign reserves as they can't just print into eternity. This would be the same as just passing the ball to the US to make the next move. I'm not saying they will create a panic per sé, but even if they only gradually get rid of those US treasuries it would put pressure on the US intrest rate and force the FED and/or US government to find solutions.

Additionally consider this following little story:
There was once an island with 10 little chinese and 1 fat american. The 10 little chinese men each had their jobs. One did the fishing, one the cooking, another the foraging, etc. The fat american on the other hand, his job was to consume all the products and only leave a survival minimum to the chinese. But one day the fat american dies and all these chinese are suddenly out of a job as there is nobody to consume their products. After a while the chinese start working again as they need to survive. What they notice is that now they can work a lot less, but earn a lot more. They can actually enjoy life a bit more now the fat american is dead.

==> moral of the story: The chinese might need the americans in the short term as any crash would lower demand for chinese products. But this would only be a transitional phase. On the long term the chinese have everything to win from seeing the americans lose their wealth. Currently americans consume vast amounts of the world's resources. If the americans were to consume less because of financial turmoil, there would be more left for the rest of the world.

Basically the best option for the chinese is to prepare for a crash by diversifying away from the USD and away from the american economy and then watch the american dream crash and burn. They are already in the process of doing so. The chinese are for example the only country on the planet actively propagating to their own population to buy gold and silver. And that's not all. It should be plain obvious by now that the chinese are purchasing businesses, lands, resources and know-how all over the globe.

Interesting story...
It should be plain and obvious by now that the Japanese purchased businesses, lands, resources and know-how all over the globe back in the 80's and early 90's. We know how that turned out ...

[notyou2]

... can someone do an english version summary of that article? it had a lot of words that I'm not sure are really words at all, and made no sense to me... I'm a soldier, not an economist...

basically this is what happens: Instead of using deposits to help the people and the economy as a whole by giving out loans, which is what the FED printing policy is all about, the banks are using the people's money to invest in derivatives further making the financial sector even more interconnected and more unstable. They are making the pre-2008 situations even worse than they already were.

This ofcourse is not a durable environment. It's a ticking time bomb. It's hard to know when it'll implode but at some point it will unless something changes drastically. And as the governements and central banks have already shot their last bullets. There will be nothing to stop a global financial collapse, which might even result in a crisis worse than the great depression of the 30's.

And if you don't know what happened in the 30's, just imagine what is happening in Greece to happen to the entire world. One big bank might be all it takes to drag down everybody else.

A global financial collapse would result in the fact that everybody holding paper money(bonds, derivatives and unbacked currencies) will lose wealth and those who hold tangible assets(businesses, houses, lands, ...) will gain from it. It's pretty much a game of musical chairs where it's certain most people will lose and only a small part of the population will gain from it. And unfortunately as always it'll probably be the super rich who gain most from it. The middle class and the lower parts of the upper class are probably going to be the biggest victims of this.

With all respect, I can make it even shorter.. the banks are reselling loans to themselves with nothing "real" to back it. Since not enough real outside money is coming in, the system will fail. You could call it a kind of pyramid scheme or just say its the mortgage crisis all over, except this time, its just banks that will fail.

That might seem OK, since most of us have insured deposits, but remember how just propping up a bunch of bad housing loans almost collapsed the system and you see why its time to worry.. again.

When you do this same scheme to a couple of banks, it is called kiting, it is illegal and they really hate it. Here's a link http://en.wikipedia.org/wiki/Check_kiting

[waauw]

You do, of course, recognize that the Shiller P/E ratio is a 10 yr average and therefore overstated at this point given the extreme conditions in 2008/2009. The actual P/E ratio is much less than you state and within historical norms.

Yet if you go look at the actual P/E ratio, it is still above average, same as with the Shiller P/E. It's about 20% above average. And looking at the exteme conditions of 2008/2009, if anything they drove up the averages. so when ignoring those two years, the average would be lower and the P/E would be even further above it.



and compared to the following graphs, it doesn't seem like the stock market is following the same direction as main street:

[waauw]

Interesting story...
It should be plain and obvious by now that the Japanese purchased businesses, lands, resources and know-how all over the globe back in the 80's and early 90's. We know how that turned out ...

Except the Japanese never really had as much potential as the Chinese do. Japan was never able to replace the US hegemony. China on the other hand, even though they might not be ready yet, should be able to in the future. The impact of China on the world is and will be immensely bigger. The coming of China's power sheds a different light on the global power struggle.

[The Voice]

Interesting story...
It should be plain and obvious by now that the Japanese purchased businesses, lands, resources and know-how all over the globe back in the 80's and early 90's. We know how that turned out ...

Except the Japanese never really had as much potential as the Chinese do. Japan was never able to replace the US hegemony. China on the other hand, even though they might not be ready yet, should be able to in the future. The impact of China on the world is and will be immensely bigger. The coming of China's power sheds a different light on the global power struggle.

My money's still on India becoming more powerful (economically speaking) than China.

[waauw]

Interesting story...
It should be plain and obvious by now that the Japanese purchased businesses, lands, resources and know-how all over the globe back in the 80's and early 90's. We know how that turned out ...

Except the Japanese never really had as much potential as the Chinese do. Japan was never able to replace the US hegemony. China on the other hand, even though they might not be ready yet, should be able to in the future. The impact of China on the world is and will be immensely bigger. The coming of China's power sheds a different light on the global power struggle.

My money's still on India becoming more powerful (economically speaking) than China.

Could be, but India is somewhat of a missfit. Their development path is completely different as most other nations. So it will be interesting to see whether that'll have some consequences.

[Nobunaga]

Interesting story...
It should be plain and obvious by now that the Japanese purchased businesses, lands, resources and know-how all over the globe back in the 80's and early 90's. We know how that turned out ...

Except the Japanese never really had as much potential as the Chinese do. Japan was never able to replace the US hegemony. China on the other hand, even though they might not be ready yet, should be able to in the future. The impact of China on the world is and will be immensely bigger. The coming of China's power sheds a different light on the global power struggle.

And the Chinese tend to be heartless mercenary bastards. A potentially frightening future.

[Fruitcake]

Interesting story...
It should be plain and obvious by now that the Japanese purchased businesses, lands, resources and know-how all over the globe back in the 80's and early 90's. We know how that turned out ...

Except the Japanese never really had as much potential as the Chinese do. Japan was never able to replace the US hegemony. China on the other hand, even though they might not be ready yet, should be able to in the future. The impact of China on the world is and will be immensely bigger. The coming of China's power sheds a different light on the global power struggle.

My money's still on India becoming more powerful (economically speaking) than China.

I agree with you on this.

Culturally India has a more commercial attitude and is far more pragmatic (an absolute requirement in business) in its approach. Chinese can get too wrapped up in respect, face etc etc. India is also some way ahead in the race. Although China is now off the starting blocks.

Just compare purchases of luxury brands as a general rule of thumb as to where a country is in its development, it has always proved a good indicator in the past.

[waauw]

Interesting story...
It should be plain and obvious by now that the Japanese purchased businesses, lands, resources and know-how all over the globe back in the 80's and early 90's. We know how that turned out ...

here's an article declaring that both Russia and China are in the midst of preparations to tackle the USD reserve currency status:

http://rbth.asia/business/2013/07/25/china_russia_working_to_undermine_dollars_central_role_48177.html

[PLAYER57832]

... can someone do an english version summary of that article? it had a lot of words that I'm not sure are really words at all, and made no sense to me... I'm a soldier, not an economist...

basically this is what happens: Instead of using deposits to help the people and the economy as a whole by giving out loans, which is what the FED printing policy is all about, the banks are using the people's money to invest in derivatives further making the financial sector even more interconnected and more unstable. They are making the pre-2008 situations even worse than they already were.

This ofcourse is not a durable environment. It's a ticking time bomb. It's hard to know when it'll implode but at some point it will unless something changes drastically. And as the governements and central banks have already shot their last bullets. There will be nothing to stop a global financial collapse, which might even result in a crisis worse than the great depression of the 30's.

And if you don't know what happened in the 30's, just imagine what is happening in Greece to happen to the entire world. One big bank might be all it takes to drag down everybody else.

A global financial collapse would result in the fact that everybody holding paper money(bonds, derivatives and unbacked currencies) will lose wealth and those who hold tangible assets(businesses, houses, lands, ...) will gain from it. It's pretty much a game of musical chairs where it's certain most people will lose and only a small part of the population will gain from it. And unfortunately as always it'll probably be the super rich who gain most from it. The middle class and the lower parts of the upper class are probably going to be the biggest victims of this.

With all respect, I can make it even shorter.. the banks are reselling loans to themselves with nothing "real" to back it. Since not enough real outside money is coming in, the system will fail. You could call it a kind of pyramid scheme or just say its the mortgage crisis all over, except this time, its just banks that will fail.

That might seem OK, since most of us have insured deposits, but remember how just propping up a bunch of bad housing loans almost collapsed the system and you see why its time to worry.. again.

When you do this same scheme to a couple of banks, it is called kiting, it is illegal and they really hate it. Here's a link http://en.wikipedia.org/wiki/Check_kiting

That was a very short version. Its sort of like a true pyramid scheme is illegal, but you can have a lot of variations that are close, but legal. In this case, I am sure there are some technicalities that make it legal.

Although, it does seem that at least a few in the mortgage loan debacle are going to be brought into court. Whether they get convicted, is another story. And, basically nothing to the millions who were hurt.

[Woodruff]

Is The Telegraph a good unbiased source of info?

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10219333/US-regulators-find-evidence-of-banks-fixing-derivative-rates.html

[BigBallinStalin]

Is The Telegraph a good unbiased source of info?

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10219333/US-regulators-find-evidence-of-banks-fixing-derivative-rates.html

I'm not sure why, but the news reporters from the WSJ are shitty in explaining exactly how "the banks" are "fixing" derivative rates and so on--and the WSJ prides itself on providing good financial information.

There was this opinion piece from a lawyer who dealt with such issues, and she mentioned how the vagueness of the law can be used to bludgeon anyone since the standards of evidence were so low. This in turn causes unnecessary punishment, which doesn't help any participants in the markets. Given this (plus more), I don't find the US regulation to be impressive or useful.

[thegreekdog]

Is The Telegraph a good unbiased source of info?

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10219333/US-regulators-find-evidence-of-banks-fixing-derivative-rates.html

I'm not sure why, but the news reporters from the WSJ are shitty in explaining exactly how "the banks" are "fixing" derivative rates and so on--and the WSJ prides itself on providing good financial information.

There was this opinion piece from a lawyer who dealt with such issues, and she mentioned how the vagueness of the law can be used to bludgeon anyone since the standards of evidence were so low. This in turn causes unnecessary punishment, which doesn't help any participants in the markets. Given this (plus more), I don't find the US regulation to be impressive or useful.

Could the vagueness in the law be used to let anyone off the hook? I ask that rhetorically of course. Rent-seeking BBS!

[mordigan]

why are so many people happy to sit around watching programs like Cribs and flicking their bean to footage of fifty cent's solid gold stripper poles, but when it comes to bankers they're suddenly out on the street angrily waving illiterate placards in everyone's faces?

surely the bankers (elite education, 80 hour-weeks) should be celebrated as examples of meritocracy at work while rappers (unable to talk properly, glorifiers of crime) should be vilified as feckless degenerates. why does the mainstream so eagerly demonize hard-earned success while celebrating incompetence?

[Gillipig]

Nuting