Financial Crisis

[Gambles]

He is there for the same reason why George Soros was in Thailand in 1997

Actually Soros got screwed in Thailand from what I remember. The hedge fund trick with Greece is that they dont have any easy options. Either they default or they get bailed out. By prevaricating they are simply digging a bigger hole. Both are the end of the Euro dream. I was told (emphasis on 'told') that Euro7bn left Greece from domestic deposits last week.

that is not correct. Soros made a bundle with THB and GBP and was on the verge to make a bundle with MYR too till Mahathir stepped in and drew a line in the sand. Soros got screwed in Russia 1998... as was my [not so] humble self.

I don't think that's correct - Soros' known vehicles actually lost money on his published Asian currency trades during the summer of 97 and I think that Dr. Mattahir's misinformation still lingers today but simply isn't true.

[Gambles]

The topper is Greenspan admitting he was wrong his entire career to believe that the free market would solve everything. He's a crushed man acknowledging that his faith in Ayn Rand and her libertarian theories was absolutely wrong.

Have not watched the program but...That would be a topper for Greenspan to claim he followed or had faith in Ayn Rand during his tenure. While he may have had faith long before like in 1966 when he wrote his essay "Gold & Economic Freedom".

He was more like a Darth Vader turning against any previously held faith during his tenure.

like many others, when he joined the Dark Side, he didn't admit that he'd really changed - I agree there's a huge sea-change in him when he went to Washington. His previous career displayed quite a reasonable and pragmatic approach; he got to DC and did things that he would have been the first to criticise just a few years before. All the way through "Age of Turbulence" he can't quite get over his creepy intellectual crush on Ayn Rand; don't get it myself, she just seems a dangerously disturbed lady to me (as a lot of people probably would be growing up during the trauma that she did)

[Gambles]

Stupid? It's brilliant!

Well maybe the stupid customer is actually Germany.

Exactly! The thing people need to understand about these "mai bpen rai", "no worries mate" cultures, is that it's not that they don't recognize a problem; they're just not going to make their own problem.

To be honest the Greeks have been very upfront about their abuse of the euro. They would argue that any accusation of bad faith was made on an assumption of good faith.

I just want to know how many countries Germany is going to bailout before they realize that if you cant see the sucker you are the sucker. Whether their political commitment or financial discipline goes first.

Some people argue that Greece should be bailed out because it could bring down the Euro. I hope they realize that if that is the case then it simply isnt worth preserving in the first place. To be honest I feel bad for Germany they are about the only honest major economy and they are about to realize how futile that has been.

To be honest Germany's motivation is entirely political (isn't everyone's?)

In America politicians are too afraid of the electorate and too duped by self-interested bankers to let the banks fail

I Europe, Germany's too afraid of the break-up of the EU

The only central bankers who did the right thing were the Asian ones a decade ago who were too frightened to say no to the IMF......

[Naam]

"To be honest Germany's motivation is entirely political (isn't everyone's?)"

you must be joking! our politicians behave as if Germany is still the àsshole of this world and kowtow to the real àssholes after kissing them on both cheeks.

[Naam]

I don't think that's correct - Soros' known vehicles actually lost money on his published Asian currency trades during the summer of 97 and I think that Dr. Mattahir's misinformation still lingers today but simply isn't true.

i submit to your superior knowledge (is it based on Fàckipedia?). i was "with" Soros in South-East Asia and made a bundle early 1998 and lost much more than a bundle in autumn 1998 because i was "with" Soros in Russia.

thanks for not listening

[Naam]

I understood that it was pretty universally accepted now that Soros was actually betting against devaluation in the region at the time of the crisis? Happy to be proven wrong but I thought that Mattahir used Soros as a bogeyman but the evidence has always contra-indicated and today this is only kept alive as just blog conspiracy theory?

universally accepted by your housemaid and your dog?

[sokal]

"The number one cause of the financial crisis was GOVERNMENT CONTROL OF INTEREST RATES."

governments do not control interest rates, the market does.

In the US the FED sets the interest rate...albeit in reaction to the market

At least that is my understanding

your understanding is wrong. the FED (and that applies to most central banks) sets short term interest only. the rates for any time period beyond that is determined by the market, i.e. offer and demand. example: auction of government bonds. having said so, of course short term interest influence up to a certain degree market interest too.

The Fed is in the market spending money that it printed out of thin air. How is the feds money any different then my money or anyone elses money that is in the market ?

[Naam]

I thought.....

The Federal Reserve

The Bond Market

Multiple Forces in The Economy

Perhaps I have order & influence misunderstood...

Honourable Sir Flying, Esq.;

both of us should leave the thinking to elephants and only take facts into consideration when trying to reason or reach conclusions.

reason: elephants have bigger brains than we do.

[Naam]

i wonder whether the Austrian Schoolboy of Economics is present. don't see him since i put him on "ignore"

[Naam]

yep he is. i can see it indicated down. good that i can't read his comments

[sokal]

yep he is. i can see it indicated down. good that i can't read his comments

Everyone else can still see that I proved you to be wrong.

Why would the FED buy a trillion dollars worth of mortgaged backed securities if they thought their was legit demand for them ?

If the FED did not purchase a trillion dollars worth of mortgage backed securities then interest rates would be higher.

[flying]

All the way through "Age of Turbulence" he can't quite get over his creepy intellectual crush on Ayn Rand; don't get it myself, she just seems a dangerously disturbed lady to me (as a lot of people probably would be growing up during the trauma that she did)

Well you know Atlas Shrugged sold more than 500,000 copies in 2009....in just the US I believe ( not certain )

Seems folks are still interested.

Did you ever read it?

I have not but am interested enough that I may.

Edited February 20, 2010 by flying

[Gambles]

I don't think that's correct - Soros' known vehicles actually lost money on his published Asian currency trades during the summer of 97 and I think that Dr. Mattahir's misinformation still lingers today but simply isn't true.

i submit to your superior knowledge (is it based on Fàckipedia?). i was "with" Soros in South-East Asia and made a bundle early 1998 and lost much more than a bundle in autumn 1998 because i was "with" Soros in Russia.

thanks for not listening

'98 maybe

97 - there were quite a few papers written - I can probably dig them out and email if you like - at the time that analysed Soros' main funds, what they disclosed, how they performed etc and smarter people than me figured that Soros was, if anything, long the Asian currencies in mid 1997

'98 was a whole new ball game - LTCM selling vol and everyone buying!

FYI from Jan-Jun '97 I did write several pieces forewarning Baht devaluation - mind you I did call Songkran holiday as the likeliest time so not 100% right.....

[Gambles]

All the way through "Age of Turbulence" he can't quite get over his creepy intellectual crush on Ayn Rand; don't get it myself, she just seems a dangerously disturbed lady to me (as a lot of people probably would be growing up during the trauma that she did)

Well you know Atlas Shrugged sold more than 500,000 copies in 2009....in just the US I believe ( not certain )

Seems folks are still interested.

Did you ever read it?

I have not but am interested enough that I may.

I hated it and the ideas behind it but would recommend reading it - it's challenging but it does seem to overpower some people - this promotion of the logical self business seemed like a poor man's existentialism to me (for the little that I know)

Still got my well-thumbed copy if you want to borrow it....

[Gambles]

I understood that it was pretty universally accepted now that Soros was actually betting against devaluation in the region at the time of the crisis? Happy to be proven wrong but I thought that Mattahir used Soros as a bogeyman but the evidence has always contra-indicated and today this is only kept alive as just blog conspiracy theory?

universally accepted by your housemaid and your dog?

no ! They both believe the popular story that Soros did it!

;-)

[lannarebirth]

"The number one cause of the financial crisis was GOVERNMENT CONTROL OF INTEREST RATES."

governments do not control interest rates, the market does.

In the US the FED sets the interest rate...albeit in reaction to the market

At least that is my understanding

Fed = Tail. Meet the Dog:

http://www.barchart.com/futures/Financials

Edited February 20, 2010 by lannarebirth

[flying]

I hated it and the ideas behind it but would recommend reading it - it's challenging but it does seem to overpower some people - this promotion of the logical self business seemed like a poor man's existentialism to me (for the little that I know)

Still got my well-thumbed copy if you want to borrow it....

Thanks I have heard the same but will see about getting a copy.

Thanks too for the offer to borrow..... but with its size I think the shipping would be more than the cost new

[12DrinkMore]

Well really, now the Germans are being accused of creating the PIGS economic problems.

http://www.irishtimes.com/newspaper/financ...4264788899.html

The current account imbalances reveal that the competitiveness between various members of the euro zone has diverged steadily and significantly since the creation of European Monetary Union, and that this potentially destabilising trend began in the mid-1990s.

Germany adopted a wage deflation strategy in response to the strong increase in unit labour costs that followed reunification. This process was largely complete when EMU began in 1999, yet the wage restraint persisted through the decade that followed, with the annual average nominal unit labour cost growth at zero compared to 2 ½ per cent or more in some other member states.

So the Germans, pursuing a course of restraint and prudence and trying to live within their economic means, are responsible for the PIGS irresponsible debt building and inflation and means busting wage increases? Oh dear, oh dear. Surely some fundamental flaw in the reasoning.

It is about time that people understood that constant real growth is simply not possible. Wages should not constantly rise, the GDP does not have to increase every year (generally by some accounting fiddle), it is not a disaster if companies' profits remain static. And in particular the idea that property should always go up providing a never ending source of "income" and "wealth" has to be reset.

If the PIGS have priced themselves out of markets then they have to stop being so generous to themselves with other peoples' money.

[flying]

Well slow week in the US...Only 4 banks down...so far today.

They always close on a Friday. As it gives the FDIC the weekend to refresh accounts to a new bank.

http://www.fdic.gov/bank/individual/failed/banklist.html

If you click the bank & then the PR number you can see their stats.

2 would be called puppies by my pal Herr Naam as they held 50-120 million

But the other two were decent sized.

half a billion for one & 3+ Billion for the other...

Ah well a billion here a billion there

Edited February 20, 2010 by flying

[12DrinkMore]

Heads you lose, tails we win.

http://www.guardian.co.uk/business/2010/feb/19/rbs-bonus-row

Loss-making Royal Bank of Scotland is braced for a row over City pay next week when it is expected to admit that its bonus pot for 22,000 investment bankers has reached £1.3bn – against last year's £1bn

How the fuc_k can they award a single quid in bonuses? Two years losing tens of BILLIONS and the bastards think that they deserve a BONUS! They should be repaying all the bonuses they have received in the past and have their pay slashed for another piss-poor result.

Brown should introduce legislation preventing any loss-making concern paying bonuses.

RBS owes BILLIONS to the UK tax payer.

I am utterly fed up with the continued arrogance of the bankers. And what on earth are all these TWENTY TWO THOUSAND employees doing? What do they do all day?

I just checked out the interest rates these guys offer.

http://www.rbsinternational.com/offshore/c...rest-rates.ashx

Depositors = 0.05%

Debtors = 19.24%

That should surely bring on a surge in debt deflation.

[Abrak]

The number one cause of the financial crisis was GOVERNMENT CONTROL OF INTEREST RATES.

The number two cause of the financial crisis was GOVERNMENT SPONSORED MORTGAGE INSURANCE (FANNY MAE AND FREDDIE MAC.)

And the future currency crisis in the making will be caused GOVERNMENT INSURED BANK DEPOSITS (FDIC)

Does this look like free market, laissez faire ideology to you ? because it sure as hel_l doesn't look like it to me.

This argument definitely swings both ways.

The number one reason for the financial crisis was that THERE WERE NO SUITABLE GOVERNMENT REGULATION OF THE BANKING SYSTEM.

The reason that China has escaped the worst ravages of the last two financial crises is BECAUSE THEY HAVE CAPITAL CONTROLS, CONTROL THEIR EXCHANGE RATE AND THEIR BANKING SYSTEM.

The reason Canada escaped without a serious banking crisis is that they have SENSIBLE COLLATERAL CONTROLS OVER LENDING BY BANKS.

Markets are essentially irrational and dumb driven by sentiment fear and greed. Even when you say that the problem is that interest rates are controlled by the Government and were too low for too long why would rational agents use this to borrow stupidly and lend stupidly apart from the fact they are stupid. Individual desires wants and needs do not aggregate to anything approaching a sensible equilibrium because to justify that the basic minimum assumption is that we act as totally independent agents which is ridiculous. I do sympathsize with the view that the crappy results you achieve with laissez faire are probably not much worse than we get with crappy Government intervention.

[Abrak]

I don't think that's correct - Soros' known vehicles actually lost money on his published Asian currency trades during the summer of 97 and I think that Dr. Mattahir's misinformation still lingers today but simply isn't true.

I do not know whether he made money or not but although he was shorting the baht (the story went at the time) that he was forced to unwind them when the BoT introduced limited capital controls a couple of months before the devaluation. However what Soros says and does are often not that closely related.

[midas]

An opinion posting from here:

http://ampedstatus.com/the-economic-elite-...-america-part-i

(Midas you should read this one for sure).

Thanks so much Alex

People are waking up ..............it is not the Great American Dream .......its the Great American Illusion.

[Abrak]

i submit to your superior knowledge (is it based on Fàckipedia?). i was "with" Soros in South-East Asia and made a bundle early 1998 and lost much more than a bundle in autumn 1998 because i was "with" Soros in Russia.

thanks for not listening

Although Soros is a bit pompous he explains the concept of 'reflexivity' (circular, non-linnear relationship between predictions, decisions, actions and reactions within markets). And he made a good deal of his money by manipulating market psychology. Certainly Sokal should read it so he doesnt have any more romantic dreams about laissez faire producing something bearing some resemblance to a sensible result. The market is always right is only something that nobody who has ever traded a market would say. I would have liked to have spent some time working for Soros.

[lannarebirth]

i submit to your superior knowledge (is it based on Fàckipedia?). i was "with" Soros in South-East Asia and made a bundle early 1998 and lost much more than a bundle in autumn 1998 because i was "with" Soros in Russia.

thanks for not listening

Although Soros is a bit pompous he explains the concept of 'reflexivity' (circular, non-linnear relationship between predictions, decisions, actions and reactions within markets). And he made a good deal of his money by manipulating market psychology. Certainly Sokal should read it so he doesnt have any more romantic dreams about laissez faire producing something bearing some resemblance to a sensible result. The market is always right is only something that nobody who has ever traded a market would say. I would have liked to have spent some time working for Soros.

Lying and frontrunning being another way of putting it. Even Buffet is reduced to that these days.

I like to say the market is never right, but it always wins.

Edited February 20, 2010 by lannarebirth

[sokal]

The number one cause of the financial crisis was GOVERNMENT CONTROL OF INTEREST RATES.

The number two cause of the financial crisis was GOVERNMENT SPONSORED MORTGAGE INSURANCE (FANNY MAE AND FREDDIE MAC.)

And the future currency crisis in the making will be caused GOVERNMENT INSURED BANK DEPOSITS (FDIC)

Does this look like free market, laissez faire ideology to you ? because it sure as hel_l doesn't look like it to me.

This argument definitely swings both ways.

The number one reason for the financial crisis was that THERE WERE NO SUITABLE GOVERNMENT REGULATION OF THE BANKING SYSTEM.

The reason that China has escaped the worst ravages of the last two financial crises is BECAUSE THEY HAVE CAPITAL CONTROLS, CONTROL THEIR EXCHANGE RATE AND THEIR BANKING SYSTEM.

The reason Canada escaped without a serious banking crisis is that they have SENSIBLE COLLATERAL CONTROLS OVER LENDING BY BANKS.

Markets are essentially irrational and dumb driven by sentiment fear and greed. Even when you say that the problem is that interest rates are controlled by the Government and were too low for too long why would rational agents use this to borrow stupidly and lend stupidly apart from the fact they are stupid. Individual desires wants and needs do not aggregate to anything approaching a sensible equilibrium because to justify that the basic minimum assumption is that we act as totally independent agents which is ridiculous. I do sympathsize with the view that the crappy results you achieve with laissez faire are probably not much worse than we get with crappy Government intervention.

None of these exotic products could have ever existed without ultra low interest rates. There would have never been enough velocity in the housing market to support these products without government/Fed/Treasury controlled interest rates.

The Canadian housing market is as bloated and bubbled as any other place in the world thanks to low interest rates, the only difference is that this bubble is contained in a more traditional banking system. The fallout will eventually be the same when interest rates go up. Canada skipped round one of the financial crisis but it will not skip round 2 when interest rates go up.

[lannarebirth]

The number one cause of the financial crisis was GOVERNMENT CONTROL OF INTEREST RATES.

The number two cause of the financial crisis was GOVERNMENT SPONSORED MORTGAGE INSURANCE (FANNY MAE AND FREDDIE MAC.)

And the future currency crisis in the making will be caused GOVERNMENT INSURED BANK DEPOSITS (FDIC)

Does this look like free market, laissez faire ideology to you ? because it sure as hel_l doesn't look like it to me.

This argument definitely swings both ways.

The number one reason for the financial crisis was that THERE WERE NO SUITABLE GOVERNMENT REGULATION OF THE BANKING SYSTEM.

The reason that China has escaped the worst ravages of the last two financial crises is BECAUSE THEY HAVE CAPITAL CONTROLS, CONTROL THEIR EXCHANGE RATE AND THEIR BANKING SYSTEM.

The reason Canada escaped without a serious banking crisis is that they have SENSIBLE COLLATERAL CONTROLS OVER LENDING BY BANKS.

Markets are essentially irrational and dumb driven by sentiment fear and greed. Even when you say that the problem is that interest rates are controlled by the Government and were too low for too long why would rational agents use this to borrow stupidly and lend stupidly apart from the fact they are stupid. Individual desires wants and needs do not aggregate to anything approaching a sensible equilibrium because to justify that the basic minimum assumption is that we act as totally independent agents which is ridiculous. I do sympathsize with the view that the crappy results you achieve with laissez faire are probably not much worse than we get with crappy Government intervention.

None of these exotic products could have ever existed without ultra low interest rates. There would have never been enough velocity in the housing market to support these products without government/Fed/Treasury controlled interest rates.

The Canadian housing market is as bloated and bubbled as any other place in the world thanks to low interest rates, the only difference is that this bubble is contained in a more traditional banking system. The fallout will eventually be the same when interest rates go up. Canada skipped round one of the financial crisis but it will not skip round 2 when interest rates go up.

Prolonged periods of low interest rates can certainly create bubbles, but bubbles can correct and generally speaking the risk takers lick their wounds, regroup and move on to the next economic cycle. The systemic risk is not from low interest rates, it is from excessive leverage and the use of portfolio/security "insurance" products, such as CDS's. CDS's create significant imbalances as they are not marked to market daily, nor are counterparties required to show ability to pay out on claims. That's the recipe for a calamity.

Edited February 20, 2010 by lannarebirth

[Abrak]

Lying and frontrunning being another way of putting it. Even Buffet is reduced to that these days.

I like to say the market is never right, but it always wins.

Ok there is all that but the way he dismantled the UK's and sterling's commitment to the Euro was really excellent work.

And quite unintentionally it resulted in perhaps the most important and successful economic decision made in the last 20 years by the UK, not that the bar is that high.

Robertson et al dismantling the baht was peanuts compared to that.

[midas]

i submit to your superior knowledge (is it based on Fàckipedia?). i was "with" Soros in South-East Asia and made a bundle early 1998 and lost much more than a bundle in autumn 1998 because i was "with" Soros in Russia.

thanks for not listening

Although Soros is a bit pompous he explains the concept of 'reflexivity' (circular, non-linnear relationship between predictions, decisions, actions and reactions within markets). And he made a good deal of his money by manipulating market psychology. Certainly Sokal should read it so he doesnt have any more romantic dreams about laissez faire producing something bearing some resemblance to a sensible result. The market is always right is only something that nobody who has ever traded a market would say. I would have liked to have spent some time working for Soros.

Lying and frontrunning being another way of putting it. Even Buffet is reduced to that these days.

I like to say the market is never right, but it always wins.

And that is why I cant see where the satisfaction is these days.....on top of trying to

analyse which direction the market will go, it seems you also have to look behind every set of statistics,

every statement, every report for the hidden lie or catch. And when you say " market is never right, but it always wins "-

would it always win even when it would be against the strategic plans of government players ?

[Abrak]

Prolonged periods of low interest rates can certainly create bubbles, but bubbles can correct and generally speaking the risk takers lick their wounds, regroup and move on to the next economic cycle. The systemic risk is not from low interest rates, it is from excessive leverage and the use of portfolio/security "insurance" products, such as CDS's. CDS's create significant imbalances as they are not marked to market daily, nor are counterparties required to show ability to pay out on claims. That's the recipe for a calamity.

Bubbles correcting. I seriously believe that without very concerted Government intervention the financial system would have totally collapsed 2 years ago. Do you think that Naam thinks that multilateral guarantees are the 'correct' solution for the Euro. He just wishes to avoid the potential of a financial implosion.

Marx is very interesting on his analysis of risk. He essentially believes that all financial products from loans to derivatives (obviously there werent deriviatives then) do not reduce risk but simply build it up over time into a bigger crisis. The Euro is a classic case where the stabilization of the currency has resulted in increased destabilizing of countries fundamentals. Rakesh Saxena very much traded on this philosophy.

But Bernanke and Greenspan have the belief that bubbles cannot be spotted or effectively intervened in but that the Fed needs to intervene to cushion the fall out. The average 12 year old can see there is no logic to that argument (and they have written papers on it.)