Financial Crisis

[MJP]

as a young man i served 15 months with the 101st Airborne in Viet Nam and studied 1½ years in Boston. before coming to Thailand i lived as a retiree for 15 years mainly (8 out of 12 months) in Florida. after more than 30 years of marriage my wife still mutters once in a while "you have to improve your english" and i bark back "mine enklish is mutch besser zan yewr tchermann!"

To be honest it is conversations like that, that explain why me and my first (and only) wife are no longer married.

You too, eh? Enjoy the peace and quiet.

[Gambles]

The chart is a showing of personal net worth. What don't you understand ? If you have allot of debt you are poorer then the person with no debt and 0 dollars.

the graph claims but does not show the personal net worth of any person. it shows nothing but an interesting fiction as a country's debt cannot be evenly distributed per capita on its citizens, especially because neither country mentioned will ever be able to pay back the principal. moreover, a German (like me) living in Thailand gives a flying fart on how indebted the country is which issued his passport.

I always thought you were an American.

I used to work for Bilfinger. Over in Germany once the boys said to me, "Mike, you're English is really improving!"

Cheeky sods!

Who said Germans don't have a sense of humour?

er...didn't everyone?

Dear all,

Please find below the latest daily update from MBMG International.

A list of the 15 countries most likely to default on their debt was recently compiled by Citywire’s Richard Lander based solely on the cost of credit default swaps - in other words the costliest debt to insure in the market, Lander obtained the data from Business Insider:

As with all good lists, we go in reverse order of pain:

15. Bulgaria where CDS cost 214.6 basis points (i.e. 2.146% of the sum you want to

insure or $21,460 per $1m of debt)

14. Hungary 247

13. Vietnam 249.6

12. Lebanon 250.2

11. Romania 250.9

10. Egypt 264.3

9. Lithuania 274.9

8. Greece 384.4

7. Latvia 483.3

6. Dubai 497.2

5. Iceland 674.6

4. Pakistan 877.4

3. Ukraine 896.8

2. Argentina 1002.5

1. Venezuela 1008.3

Interesting that for all the publicity and problems, Greece (bouncing everywhere lately in the 350-700 range) and Latvia don’t make the top 5 and that Iceland barely sneaks in. Asia Europe and South America feature, Africa, Australia and North America don’t. We suspect that the credit markets are underestimating debt risk on all continents. Watch out it’s only going to get uglier.

Enjoy your day!

Once again, very best regards,

MBMG International

Please Note: While every effort has been made to ensure that the information contained herein is correct, MBMG International cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG International. Views and opinions expressed herein may change with market conditions and should not be used in isolation.

[12DrinkMore]

http://www.independent.co.uk/news/business...ds-1914890.html

Michel Barnier, the new European commissioner for the internal market, is on course for a bruising showdown with hedge funds and private equity firms, leading City figures are warning. Key players in both sectors said that Mr Barnier, who was in London yesterday for talks with the City and the Chancellor of the Exchequer, had signalled an unwillingness to compromise over plans to regulate hedge funds and private equity more aggressively, despite their threats to leave Britain.

I'm with that man.

But catch the comment

THE BEST NEWS IN A LONG TIME !

At this point in time it seemed that nothing would be done by legislators anywhere in the world to address the reasons for the financial crisis that have forced taxpayers around the world to put up trilllions to support financial institutions.

In the US, the financial industry owns both parties and the president and it is now clear that no serious new legislation will be put in place and nobody will be prosecuted in the massive fraud that took place there.

Same thing in the UK where nothing at all is being done to regulate the financial industry and the banks are back to the good old time with casino banking and record bonuses.

One of the big question an outside observer has to ask is why has nobody proposed any legislation to stop naked Credit Default Swaps.

The idea of having an insurance against companies defaulting on loans and bonds is not completely crazy. But it should be called “insurance” and not Credit Default Swaps and regulated as normal insurance policies. For example, the issuer of these "insurance" contracts should be required to have sufficient funds in case they need to pay up. It is hard to believe but this is not the case at the moment.

The main problem is, however, that the masters of the universe took over these derivatives and started taking out swaps on deals that they were not part of. This is pure gambling. Banks and hedge funds were betting on other companies going bust. There is nothing wrong with gambling in principle, but the problem here is that the financial industry bet the entire world’s financial system and lost and then had to be bailed out by the taxpayers.

One of the biggest issuer of Credit Default Swaps was AIG. Its management was so stupid that it did not even hedge its bets. So there were a lot of gamblers (i.e. banks) who wanted to collect their winnings. And since AIG wrote CDSs without having the means to pay up if they lost, the American taxpayers had to pay the lucky winners.

Look at the size of the CDS market: 45 trillion in 2007 !

Conclusion 1. This is not an insurance market but mostly casino bets since this amount is similar to the GDP of the entire world.

Conclusion 2. The institutions that issue these swaps do not have assets to cover them if there is a financial crisis and many bets are lost.

Conclusion 3. The institutions like AIG that issue these swaps typically take an annual fee of 2-3% i.e. these parasites sucks out about one trillion dollar from the financial system every year.

This form of gambling has no value at all to society as a whole. But it has been shown to have the potential to destroy the world’s financial system. Swaps that are not between primary parties should therefore BE MADE ILLEGAL! There are good reasons why we cannot make bets on our neighbor’s house burning down. There are even better reasons why institutions should not be allowed to make bets on companies or entire nations burning down.

AND TAXPAYERS SHOULD NEVER AGAIN BE FORCED TO BAIL OUT LOOSING GAMBLERS !

So a large thank you to Mr. Barnier for at least trying to do something about this huge and unregulated casino business. The financial industry will immediately attack him in all ways possible and the usual blackmail will start with the financial industry threatening to move if it can not do what it wants. For the sake of all taxpayers in Europe, lets hope Mr. Barnier will succeed.

Come on Barnier, don't let the bastards win!

But <deleted> was this <deleted> on about?

Michael Hampden-Turner of Citigroup Securities said: "You can't blame the mirror for your ugly face."

I wonder if any bankers still have a mirror?

[teletiger]

How did MBMG get hold of Goldman's "to do" list?

Regards.

[flying]

Thanks Flying.

That cartoon sums it all up beautifully.

A person with debts which can be repaid from an income stream and some assets is better off than the person with neither.

Yes as long as the person with debts & a income stream does not become so overwhelmed by his debts that he ends up the guy with the cup

[Naam]

as a young man i served 15 months with the 101st Airborne in Viet Nam and studied 1½ years in Boston. before coming to Thailand i lived as a retiree for 15 years mainly (8 out of 12 months) in Florida. after more than 30 years of marriage my wife still mutters once in a while "you have to improve your english" and i bark back "mine enklish is mutch besser zan yewr tchermann!"

To be honest it is conversations like that, that explain why me and my first (and only) wife are no longer married.

You too, eh? Enjoy the peace and quiet.

both of you would still be married if you had (like me) the best wife that ever walked the surface of this planet

[Gambles]

How did MBMG get hold of Goldman's "to do" list?

Regards.

what worried me was the way that above all those it had written in large black script

***** Reminder: relaunch Goldman Sachs Trading Corp tomorrow

[MJP]

as a young man i served 15 months with the 101st Airborne in Viet Nam and studied 1½ years in Boston. before coming to Thailand i lived as a retiree for 15 years mainly (8 out of 12 months) in Florida. after more than 30 years of marriage my wife still mutters once in a while "you have to improve your english" and i bark back "mine enklish is mutch besser zan yewr tchermann!"

To be honest it is conversations like that, that explain why me and my first (and only) wife are no longer married.

You too, eh? Enjoy the peace and quiet.

both of you would still be married if you had (like me) the best wife that ever walked the surface of this planet

That would've helped, yes. Got a great mother-in-law though!

[flying]

Discussion based on cycles.....

Transcript: Nine Shocking New Predictions for 2010-2012

[flying]

Secretary Geithner's Got Some Explaining to Do

The Deal

Specifically, the deal Geithner put together in September 2008 was for the NY FED to pour up to $85 billion of debt funding into AIG to solve its liquidity crisis as the Credit Default Swap counterparties, the banks which had insured themselves against the sub-prime mortgage meltdown, demanded payments under their AIG insurance policies. AIG ended up drawing down $60 billion almost overnight.

But Geithner was not content with a straight debt deal where AIG promised to pay back principal and interest and handed over almost all of its assets as collateral. Geithner wanted real ownership and control (77.9%, to be exact) of AIG's equity and the voting rights to go along with that.

The problem Geithner knew he had to confront, however, was that the FED was not authorized to take ownership in AIG or any other financial institution. The law authorized the FED only to loan money and take collateral. While the FED might end up with ownership after a default and foreclosure on the collateral, the Federal Reserve Act does not authorize the NY Fed to structure the debt deal with an equity piece.

The Criminal Artifice

So what did Geithner do? He took equity, but he used a fictitious "Trust" to accomplish that which he could not do legally. The AIG Credit Facility Trust has three so-called independent, non-governmental trustees owning the 77.9% of the legal interests of AIG, and the Trust agreement assigns the U.S. Treasury the beneficial interests in the 77.9%. The highly-touted "independence" of the trustees is quite obviously critical to save the Trust from the claim that it is merely a ruse for FED ownership and control.

But there is only one problem with this Trust structure: It is invalid and illegal for two important reasons, not the least of which is that its independence is nonexistent.

Full article at link above...........

[Naam]

Discussion based on cycles.....

Transcript: Nine Shocking New Predictions for 2010-2012

Joining us today is Richard Mogey, Research Director of the Foundation.

Richard Mogey

Richard, you are the Research Director of the Foundation and have been with them for many years.

Richard Mogey: Twenty-two years!

Our research is based on the simple fundamental principle that all of nature — and most of history — is driven by regular cyclical patterns.

Martin: But identifying those cycles is not so simple.

Richard: No. We have sorted through historic data going back 5,000 years, and we have put together data series on most major markets going back at least 300 years.

[flying]

Richard: No. We have sorted through historic data going back 5,000 years, and we have put together data series on most major markets going back at least 300 years.[/i]

hahah

I know I know.....makes you wonder what data is available for 5k years eh?.... But I do find cycles interesting.

Would be interested in hearing cycles of other things if they exist.

Such as rise & fall spans of great empires. I think I have read 225- 250 years average but never saw it charted

Just out of curiosity mind you

[Abrak]

Richard: No. We have sorted through historic data going back 5,000 years, and we have put together data series on most major markets going back at least 300 years.[/i]

Well it is possible that they went back 5,000 years and found that the Greeks were consistently a pain in the neck.

[flying]

Well it is possible that they went back 5,000 years and found that the Greeks were consistently a pain in the neck.

Well 2800 years or so ago The Persian's would agree

[flying]

Dont like Faux News but like Ron Paul

[Naam]

"...and we have put together data series on most major markets going back at least 300 years."

[citizen33]

"...and we have put together data series on most major markets going back at least 300 years."

Did anybody notice that the economic historians seem less dismayed than the City about the current UK deficit?

http://www.guardian.co.uk/business/2010/ma...-on-public-debt

[12DrinkMore]

Did anybody notice that the economic historians seem less dismayed than the City about the current UK deficit?

http://www.guardian.co.uk/business/2010/ma...-on-public-debt

I doubt whether many people have read that obscure letter by a bunch of academics worried about whether their grants will be cut.

But to take on the closing statement.

Economic growth enabled Britain to escape from crushing debt burdens in the early 19th century and during the 1950s and 1960s. It could do so again, if the public spending cuts that would endanger such knowledge-based growth are ruled out in the short to medium term.

The world has moved on considerably since those years in which there was no industrial competition from the East. There is doubtless still room for innovative and creative technology developed in the West. But unfortunately the fruits of such labour are enjoyed by few in the UK, as the manufacturing will take place outside of the UK. There is simply not going to be the number of research jobs available in science and manufacturing to keep millions of UK researchers employed. We need manufacturing jobs.

There is a lot of competition from the Asians, a large number of whom are educated in the West, in technological progress. They are building up their academic worlds, and, to be sure, do not spend a lot on "History of Art", but more on science and engineering.

Take note that Brown spent ten years of his life from 1972 to 1982 in putting together his PHD, "The Labour Party and Political Change in Scotland 1918-29", which goes some way to explain his failures in government and economic policy.

But anyway, those academics who put their names to the letter are all economic historians, who, IMO have hardly made a positive contribution to preventing, forecasting or solving the world's economic problems.

Economics is the dismal science and studying history is pretty dismal too, it may be vaguely interesting to all those studying it, and might somehow give the insecure amongst us a sense of belonging to "something", but I somehow resent the tax payers' money spent on supporting somebody's passion to find out how life was in Bedfordshire 2000 years ago.

Edited March 4, 2010 by 12DrinkMore

[Abrak]

"...and we have put together data series on most major markets going back at least 300 years."

Did anybody notice that the economic historians seem less dismayed than the City about the current UK deficit?

http://www.guardian.co.uk/business/2010/ma...-on-public-debt

I do think this is a massively interesting topic of debate but the world really has changed.

(1) 200 years ago if your country took on large amounts of debt on your behalf there was little you could do about it. Nowadays in the era of financial liberalisation your country's debts do not have to be your responsibility.

(2) Essentially we live in a world of ultimate micro-economics whereby you choose your debts for yourself and (in theory) bear responsibility for them.

I think if say a country takes on a large burden of debt on its citizens behalf, those citizens will move their wealth to places that they do not have to bear responsibility for it.

Financial liberalization is a very new concept - really no more than 30 years old - the rules of the game have changed (just look at Russia). Collective responsibility has gone out of the window.

[12DrinkMore]

I do think this is a massively interesting topic of debate but the world really has changed.

(1) 200 years ago if your country took on large amounts of debt on your behalf there was little you could do about it. Nowadays in the era of financial liberalisation your country's debts do not have to be your responsibility.

(2) Essentially we live in a world of ultimate micro-economics whereby you choose your debts for yourself and (in theory) bear responsibility for them.

I think if say a country takes on a large burden of debt on its citizens behalf, those citizens will move their wealth to places that they do not have to bear responsibility for it.

Financial liberalization is a very new concept - really no more than 30 years old - the rules of the game have changed (just look at Russia). Collective responsibility has gone out of the window.

I must be misunderstanding your arguments.

For almost all Brits, particularly those 1 to 2 million living outside the UK, Brown's fiscal imprudence has led to a 30% loss in assets/income. So, although they may not end up directly responsible for paying for the debts, they are still forced to take the financial hit. And it is impossible for maybe 90% of the population to move out of the UK and avoid paying taxes. But there are doubtless a small minority who are able to avoid the burden piled on the rest. But this is surely a very small number.

The US, I believe, assesses taxes on its citizens wherever they might be.

And your point 2 is, IMO, also well off the mark. An example would be the subprime lot, who took out debt to buy up property and thereby inflating property prices, after they defaulted the banks started to collapse and the rest of the world ends up paying.

Or take two individuals working at the same job, one spends everything and takes on debt. The other saves and builds up savings. If they end up jobless, the spendthrift will receive benefits whilst the saver will receive less until he has spent down his savings.

I would say that individual responsibility for debt has now been replaced by enforced collective responsibility, with the savers paying the largest part. And the tax payers being called up to bail out the banks and now even countries.

[12DrinkMore]

http://www.newdeal20.org/?p=7981

“There is No Return to Self-Sustaining Growth”: An Interview with James K. Galbraith

[Abrak]

I must be misunderstanding your arguments.

For almost all Brits, particularly those 1 to 2 million living outside the UK, Brown's fiscal imprudence has led to a 30% loss in assets/income. So, although they may not end up directly responsible for paying for the debts, they are still forced to take the financial hit. And it is impossible for maybe 90% of the population to move out of the UK and avoid paying taxes. But there are doubtless a small minority who are able to avoid the burden piled on the rest. But this is surely a very small number.

The US, I believe, assesses taxes on its citizens wherever they might be.

And your point 2 is, IMO, also well off the mark. An example would be the subprime lot, who took out debt to buy up property and thereby inflating property prices, after they defaulted the banks started to collapse and the rest of the world ends up paying.

Or take two individuals working at the same job, one spends everything and takes on debt. The other saves and builds up savings. If they end up jobless, the spendthrift will receive benefits whilst the saver will receive less until he has spent down his savings.

I would say that individual responsibility for debt has now been replaced by enforced collective responsibility, with the savers paying the largest part. And the tax payers being called up to bail out the banks and now even countries.

Well 12D,

I would start doing your maths.

Very, very few people own everything. Approximately 5% of the US population own 60% of total assets and approximately 100% of net assets. Obviously when Governments screw up everyone suffers but do not believe the rich are going to be around to bail everyone out.

In particular you imply that say the middle classes will shoulder much of the burden - they have nothing to give!!

[citizen33]

Well economic historians do tend to be academics! The arguments seem interesting to me, though I accept that the world does change. 12D obviously has a jaundiced view of research, not shared by governments in the tiger economies like Singapore and Hong Kong.

Edited March 4, 2010 by citizen33

[Abrak]

12D,

There is an often 'youtubed' character in this thread called 'Elizabeth Warren'. She is a very serious, well respected, academic. She is not a Ron Paul or some blogger. Her works are easily understandable but that is because she is so smart she doesnt need to impress. I really recommend her works, it is eye opening and to some extent unbelievable. (Certainly I found much of it unbelievable.)

Her book 'The two income trap' is a classic. But she has written loads of shorter stuff 'financial collapse and class status'. 'The over-consumption myth' is only 20 pages long but it turns on its head peoples popular conception of the US economy. You will very quickly see that there cannot be 'enforced collective responsibility' because the 'collective irresponsibility' has destroyed the fabric of the economy.

[flying]

There is an often 'youtubed' character in this thread called 'Elizabeth Warren'. She is a very serious, well respected, academic. She is not a Ron Paul

I like her a lot. She explains in a clear concise manner.

The only thing is she has not teeth to do anything about it....perhaps by design/appointment?

It is all fine & well that she point out the problems but we need folks with teeth who can help

cure/reverse these problems too.

Edited March 4, 2010 by flying

[Abrak]

I like her a lot. She explains in a clear concise manner.

The only thing is she has not teeth to do anything about it....perhaps by design/appointment?

It is all fine & well that she point out the problems but we need folks with teeth who can help

cure/reverse these problems too.

I agree she should be President.

But some of the problems she tackles and explains are very interesting.

(1) Given the underlying strength of the US balance sheet how could banking losses be so high.

(2) Why have personal bankruptcies gone up 5x over the last 30 years while corporate bankruptcies are unchanged. (Bear in mind it is the middle class that go bankrupt because the dregs dont have any assets.)

(3) Why is a kid more likely to see his parents go bankrupt than get divorced. That to me was a shocker. I thought she was only half counting divorces as the numbers dont quite add up but it is parents that are most susceptible to bankruptcy (and single parents a disaster.)

Her central thesis is the total decimation of middle class America.

[flying]

Currency Wars, by Song Hongbing, is a bestselling book in China, reportedly selling over 200,000 copies and is reportedly being read by many senior level government and business leaders in China. Originally published in 2007 the book gained a resurgence in 2009 and is seen as a prominent exponent of a recently emerged genre labeled "economic nationalist" literature. Another bestselling book within this genre is Unhappy China, however, unlike this and other books within this genre, Currency Wars has been received more positively by the Chinese leadership as its recommendations are seen as less aggressive towards the US. The premise of this book is that Western countries are ultimately controlled by a group of private banks, which according to the book runs their central banks. This book cites the fact that the Federal Reserve is a private body to support its role.

According to the book, the western countries in general and the US in particular are controlled by this clique of international bankers, who uses currency manipulation (hence the title) to gain wealth by first loaning money in USD to these developing nations and then shorting their currency. The Japanese Lost decade, the 1997 Asian Financial Crisis, the Latin American financial crisis and others are attributed to this cause.

The book's author predicted a banking crisis in the US in 2008.

- Wikipedia

I saw this while reading the new installment at FOFOA

Of Currency Wars

[Naam]

Currency Wars

According to the book, the western countries in general and the US in particular are controlled by this clique of international bankers, who uses currency manipulation (hence the title) to gain wealth by first loaning money in USD to these developing nations and then shorting their currency. The Japanese Lost decade, the 1997 Asian Financial Crisis, the Latin American financial crisis and others are attributed to this cause.

[Abrak]

According to the book, the western countries in general and the US in particular are controlled by this clique of international bankers, who uses currency manipulation (hence the title) to gain wealth by first loaning money in USD to these developing nations and then shorting their currency.

Well good theory but unfortunately it doesnt work in reverse. China manipulates its own currency through the peg and forex controls and lends huge amounts of USD to the USA. Then, of course, the USA simply shorts its own currency.

One of the central tenets of a Country that is the Central Reserve Currency is that it cannot provide global liquidity and preserve the value of its currency (which is why it cannot be backed by gold or it would go bust.) The more a country generates surpluses and accumulates the reserve currency the more they undermine it. It is therefore crucial that a country with a large surplus acts to reduce it as for the country with a large deficit to reduce that. If countries with large deficits have to make all the adjustment it will be at the expense of overall growth.

Edited March 5, 2010 by Abrak

[flying]

Hallelujah it is all fine & good now............Whew that was close.