Author Topic: Derivatives Are The Root Of The Credit Crunch  (Read 84 times)

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Derivatives Are The Root Of The Credit Crunch
« on: April 14, 2009, 02:56:51 AM »
from my understanding, the main root of the problems the world is in now is because of the relaxing of banking rules during the reagan and thatcher era's

banks were basically running similar ponzi type schemes madoff is being locked up for, like basically selling peoples mortgages(on a worldwide level big boy level) to finance other banking operations and schemes witout telling anyone through hedge funds and so on and so on, to the point were, witout real money bankrolling these operations, just paper mortgages to the point were banks were left witout no liquidity. These schemes were called MBS

we're in these problems because of greedy, short sighted rich bankers not because of banks letting human beings buy mortgages they couldn't afford, even though thats a tiny part of it, but its not the major part, what i have broke down already, on a worldwide, big boy level is what is the real cause, truss me on that

virtuoso

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Re: Derivatives Are The Root Of The Credit Crunch
« Reply #1 on: April 14, 2009, 04:40:51 AM »

Sorry but you are wrong on this, you can thank Alan Greenspan and Bill Clinton, during Bill Clinton's reign he repealed the Glass Steagalz Act and as for Alan Greenspan, a very easy to kill a currency is to slash interest rates when the manufacturing base has been taken away. Now clearly anyone who points at the dollar at the moment is barking up the wrong tree, look how much value the dollar has lost and clearly before this recovery it was losing huge chunks of value also. The only reason why it's being propped up is because it's the reserve world currency and so the debt continues to be monetised by the chinese buying more treasury bonds.

However note that even right now derivatives continue unimpeded, derivatives have brought the entire world to it's knees and will they restore the Glass Steagaz Act? will they fuck!. I notice how it's acceptable to approve warantless wiretapping against the domestic population and yet they can't do this, something which would abolish this financial weapon of mass destruction.
 

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Re: Derivatives Are The Root Of The Credit Crunch
« Reply #2 on: April 15, 2009, 03:48:26 AM »



derivatives continue unimpeded, derivatives have brought the entire world to it's knees

i'd definetly co-sign this

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Re: Derivatives Are The Root Of The Credit Crunch
« Reply #3 on: April 15, 2009, 04:51:36 AM »
The only reason why it's being propped up is because it's the reserve world currency and so the debt continues to be monetised by the chinese buying more treasury bonds.



I'm interested to know what effect that can have. Apparently China  holds about US$490 billion in U.S. Treasury securities and has foreign exchanges reserves totaling more than US$1.5 trillion.


Apart from future generations having to deal with the debt, what else is the effect?

Can China, I don't know, use it's US Treasury securities somehow against the US?


And does it really matter at all? People are resigned to paying taxes anyway, its just part of life...

It dosn't seem to be stopping the US military from running. Maybe the debt is like MAGIC, if the government stops worrying about it so much publicly and believing in it so much, it won't matter so much...after all, the only reason money has power is because people take it seriously...
« Last Edit: April 15, 2009, 05:31:56 AM by Overfiend ILLuminati Click brrrrrrap! »
 

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Re: Derivatives Are The Root Of The Credit Crunch
« Reply #4 on: April 15, 2009, 06:18:04 AM »

The effect of it in practical terms is that China holds a gun to America's head and therefore means that yes potentially they would acquire vast areas of real estate. The second line of thinking is that the chinese are puppets of the anglo elite and this therefore explains why they continue to buy more treasury bonds. However even if the latter is true, this represents a very dangerous game because at some point the said puppet government could be overthrown and the next government could indeed call in the debt.
 

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Re: Derivatives Are The Root Of The Credit Crunch
« Reply #5 on: April 15, 2009, 07:16:39 AM »
Specifics, how exactly can China use this as leverage, in what way are they metaphorically holding a gun to America's head? How exactly?



Maybe a positive to this (or a negative depending on your idea of what the world should be), is that, China now holds a greater stake in America's success and continuation, and this instead has the effect of tying both economies closer together.....


 

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Re: Derivatives Are The Root Of The Credit Crunch
« Reply #6 on: April 18, 2009, 12:06:01 PM »
the chinese goverment does seem beholden to the western global elite on certain things, like the fact they were the first ones to say to the mainstream public that a new global currency is needed, which a lot of conspiracy theorists say has been on the global elite's timetable for a while now

check this out from the telegraph.co.uk...


The G20 moves the world a step closer to a global currency
The world is a step closer to a global currency, backed by a global central bank, running monetary policy for all humanity.
 

By Ambrose Evans-Pritchard
Last Updated: 3:45PM BST 07 Apr 2009

Comments 59 | Comment on this article

A single clause in Point 19 of the communiqué issued by the G20 leaders amounts to revolution in the global financial order.

"We have agreed to support a general SDR allocation which will inject $250bn (£170bn) into the world economy and increase global liquidity," it said. SDRs are Special Drawing Rights, a synthetic paper currency issued by the International Monetary Fund that has lain dormant for half a century.
 
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In effect, the G20 leaders have activated the IMF's power to create money and begin global "quantitative easing". In doing so, they are putting a de facto world currency into play. It is outside the control of any sovereign body. Conspiracy theorists will love it.

It has been a good summit for the IMF. Its fighting fund for crises is to be tripled overnight to $750bn. This is real money.

Dominique Strauss-Kahn, the managing director, said in February that the world was "already in Depression" and risked a slide into social disorder and military conflict unless political leaders resorted to massive stimulus.

He has not won everything he wanted. The spending plan was fudged. While Gordon Brown talked of $5 trillion in global stimulus by 2010, this is mostly made up of packages already under way.

But Mr Strauss-Kahn at least has resources fit for his own task. He will need them. The IMF is already bailing out Pakistan, Iceland, Latvia, Hungary, Ukraine, Belarus, Serbia, Bosnia and Romania. This week Mexico became the first G20 state to ask for help. It has secured a precautionary credit line of $47bn.

Gordon Brown said it took 15 years for the world to grasp the nettle after Great Crash in 1929. "This time I think people will agree that it has been different," he said.

President Barack Obama was less dramatic. "I think we did OK," he said. Bretton Woods in 1944 was a simpler affair. "Just Roosevelt and Churchill sitting in a room with a brandy, that's an easy negotiation, but that's not the world we live in."

There will be $250bn in trade finance to kick-start shipping after lenders cut back on Letters of Credit after September's heart attack in the banking system. Global trade volumes fell at annual rate of 41pc from November to January, according to Holland's CPB institute – the steepest peacetime fall on record.

Euphoria swept emerging markets yesterday as the first reports of the IMF boost circulated. Investors now know that countries like Mexico can arrange a credit facility able to cope with major shocks – and do so on supportive terms, rather than the hair-shirt deflation policies of the old IMF. Fear is receding again.

The Russians had hoped their idea to develop SDRs as a full reserve currency to challenge the dollar would make its way on to the agenda, but at least they got a foot in the door.

There is now a world currency in waiting. In time, SDRs are likely evolve into a parking place for the foreign holdings of central banks, led by the People's Bank of China. Beijing's moves this week to offer $95bn in yuan currency swaps to developing economies show how fast China aims to break dollar dependence.

French President Nicolas Sarkozy said the summit had achieved more than he ever thought possible, and praised Gordon Brown for pursuing the collective interest as host rather than defending "Anglo-Saxon" interests. This has a double-edged ring, for it suggests that Mr Brown may have traded pockets of the British financial industry to satisfy Franco-German demands. The creation of a Financial Stability Board looks like the first step towards a global financial regulator. The devil is in the details.

Hedge funds deemed "systemically important" will come under draconian restraints. How this is enforced will determine whether Mayfair's hedge-fund industry – 80pc of all European funds are there – will continue to flourish.

It seems that hedge funds have been designated for ritual sacrifice, even though they played no more than a cameo role in the genesis of this crisis. It was not they who took on extreme debt leverage: it was the banks – up to 30 times in the US and nearer 60 times for some in Europe that used off-books "conduits" to increase their bets. The market process itself is sorting this out in any case – brutally – forcing banks to wind down their leverage. The problem right now is that this is happening too fast.

But to the extent that this G20 accord makes it impossible for the "shadow banking" to resurrect itself in the next inevitable cycle of risk appetite, it may prevent another disaster of this kind.

The key phrase is "new rules aimed at avoiding excessive leverage and forcing banks to put more money aside during good times." This is more or less what the authorities agreed after the Depression. Complacency chipped away at the rules as the decades passed. It is the human condition, and we can't change that.