Saturday, May 26, 2012

That's one sick banking system

Spain's, that is.  Five big banks downgraded and the biggest bailout in that country's banking history.

The media in the last couple of days has been full of stories with a common theme: worldwide economic conditions are not getting any better.  Downturns from China to India to Europe.

Then, of course, there's the People's Republic of Obamica, where insane policy is the rule.

Any pockets of activity bucking this trend have a common trait as well: People are allowed to keep their own money, and governments place the highest priority on being solvent.

12 comments:

  1. The urgent need for a paradigm shift in economics and its financial and mathematical models has been widely recognized for decades. Recently, Credit Suisse research as well as complexity theorists at the Swiss Technical University in Zurich have demonstrated the concentration of companies in the current global economic system.

    This concentration of corporate power and its outcomes are now evident in today's global financialization and led to the financial bubble which burst in 2007-9, still causing widespread human misery. Re-inflating these too-big-to-fail banks allows them to continue dominating the actual activities of real-world, local ‘main street’ economies, rather than serving their banking and credit needs. Thus, efforts to reform today's financial system simply have bailed out the past mistakes so that more crises, booms and busts are likely to continue.

    From: http://ipsnews.net/news.asp?idnews=106860

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  2. Big banks in Europe have sold large amounts of insurance in the form of financial instruments known as credit-default swaps to protect against the risk of countries defaulting on their sovereign debt, That has increased the number of parties that could incur losses if such defaults occur.

    "We don't know the full depth of these links," Kaufman said in an interview with Reuters. That makes the European financial situation "hazardous" despite the ongoing effort by European policymakers to gain time, he said.


    Read more: http://www.ibtimes.co.uk/articles/269047/20111218/eurozone-bank-failures-could-causes-credit-squeeze-kaufman.htm#ixzz1w0JTyG00

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  3. The main causes of Europe's problems are

    1.) early retirement ages, with big fat government-provided pensions

    2.) All manner of cradle-to-grave government services, resulting in huge deficits.

    3.) "Green" hooey

    4.) Shrinking native populations.

    5.) Secularism.

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  4. Suit yourself and make sure you find a way to suit up for World War III, oh bloggie of certitude.

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  5. If your exalted banks could make good on their ridiculous lies we would not be in this shape. This global economic meltdown is primarily the result of banks not being able to make good on their promises, not governments, although they certainly try to bail them out. What choice do they have? I know, let it all blow!!!!!

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  6. I recall you ascribe the Great Depression to something(s) other than banks "miscalculating." What a completely different set of reasons now for what might end up being the same result. Them banker boys & girls can't get a break with so many people blaming them now as well. Thanks for setting me straight.

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  7. Where you get the idea that the wisdom and intgrity or lack thereof of particular groups of bankers has anything to do with whether economic freedom is better than socialist tyranny is beyond me. LITD certainly makes no such connection.

    Smoot Hawley and regulation generally was the main cause of the Great Depression.

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  8. Now it's regulation and Smoot Hawley. That's the main cause of the Great Depression. We got even more regulation with Glass Steagall in '37 and many fingers point to its repeal in the 90s as a large part of the problem, not the solution to the mess we find ourselves in now. We did not have the socialist tyranny thing going on leading up to the Great Depression, did we? I don't think you can absolve the bankers this time around. This "class" of elites, they are like flawed gods recklessly flinging our money around for sport. I think it's way too big to even get a handle on.

    "devastation by reverse leverage" is an apt summation of generally the main cause of this nasty economic situation we find ourselves in globally. The sudden reversal of the US housing market and the rising number of mortgage defaults has cascaded up through the financial system, where trillions of dollars of bonds and other derivatives have relied on that underlying income stream for their value. Now we have the lock-down on bank lending, as financial institutions struggle to repair the damage, fortifying themselves, of course, first and foremost, because that's what it's all about: Them. How long must we wait for them to be satiated with their crooked riches before it all begins to trickle down to us again?

    You will try to paint me as a lib on board with social welfare (not at all the same thing as social insurance) but I'm just a guy who is not there who only knows what he reads. You?

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  9. How is social welfare different from social insurance?

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  10. 2 articles (3 if you count the one on unemployed Brit grads) in today's Columbus Republic address the Fire This Time. I'd guess you'd reject them, in whole or in large part. You know what you read, I know what I read. Hello/Goodbye...

    http://hneolive.therepublic.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=TheRepublic&BaseHref=TRP/2012/05/27&PageLabel=B6&EntityId=Ar01601&ViewMode=HTML

    European financial crisis isn’t that far away (editorial
    appeared in the St. Louis Post-Dispatch

    Odd that the president would have more success preaching stimulus to Europeans than he does to Republicans. Like the British under Prime Minister David Cameron and the French under the recently deposed President Nicolas Sarkozy, the GOP is convinced that pure austerity is the way to growth. It’s not likely to work here any better than it’s working there. Ms. Merkel’s countrymen are less than enthused about pledging Germany’s full faith and credit to bail out more profligate nations. EU leaders are to meet in Brussels today; absent some agreement, Greece might be cut loose, and the contagion could spread. European nations, particularly Germany, should be acutely sensitive to how trouble spreads. And having been lifted by the Marshall Plan out of the devastation that their grandfathers caused, the Germans should understand their obligations to the rest of the world.


    When bankers become bettors
    By LYNN STOUT
    Los Angeles Times

    Betting - including betting with derivatives - is a zero-sum game. Winners' gains always come from losers' pockets. Worse, unless a bet is truly insurance, both sides take on risks they weren't exposed to before.

    So when banks turn away from the boring business of making loans and helping real companies raise money by issuing stocks and other securities, to focus instead on risky trading primarily to make profits, we should expect to see exactly what we have seen. There are more big winners - hedge fund manager John Paulson made billions betting on the subprime mortgage crisis - but more big losers, more dramatic institutional collapses and much more systemic risk.

    The 2008 credit crisis has proved, painfully, how systemic risk harms our economy. And banks' gambling in the zero-sum attempt to earn more dividends for bank shareholders and bigger bonuses for bank executives doesn't provide investment capital directly to real businesses, the way lending and "underwriting" (helping companies raise cash by selling stocks and bonds) do.

    Read more here: http://www.sacbee.com/2012/05/23/4510688/when-bankers-become-bettors.html#storylink=cpy

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  11. Social welfare is something for nothing (charity). Social insurance is something for something (insurance).

    I think you get it.

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  12. See, if you let me stew on it I sometimes figure it out. What I read is false, what you read is true. Such a dichotomous lie...

    "The whole modern world has divided itself into Conservatives and Progressives. The business of Progressives is to go on making mistakes. The business of the Conservatives is to prevent the mistakes from being corrected." G. K. Chesterton

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