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The results of CAPITALISM

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5 minutes ago, XavierOnassis said:

Before the War on Poverty, there were lots of places in Appalachia and the South where  people lacked running water and electricity.

 

But as the chart I posted shows, the poverty rate was in a STEEP decline up till the WOP.   That decline stopped shortly after the WOP began.  

 

Do you know that the poverty rate among black families fell from 87% in 1940 to 47% in 1960 ( http://www.capitalismmagazine.com/politics/poverty/3864-War-Poverty-Revisited.html ).  

 

According to http://www.friesian.com/stats.htm , between 1959 and 1964, again before the War On Poverty (WOP) began, the non-white poverty rate dropped from 58% to 50%.  

 

Between 1950 and 1964, the total poverty rate dropped from 30% to 19%.  

 

The WOP didn't accomplish these reductions, because the WOP had not even started.  

 

Capitalism was making the country wealthy ... and even the people in Appalachia and the South were going to benefit from that.   

 

But then WOP, which LBJ promised would end poverty AND racism, came along.

 

And what happened?

 

First note that the poverty rate was at 19% in 1964 and bottomed out at 11.1% in 1973.  Now you know doubt will say, "see it worked", but the reality is that much of that decrease must be attributed to capitalism, not the WOP, since it took time to organize the WOP and get funding flowing to it's "clients".  For example, there was a 4% drop in the poverty rate between 1964 and 1966 when WOP spending was still very, very, very tiny.  Look at this graph: http://www.heritage.org/research/reports/2010/06/~/media/Images/Reports/2010/b2427/b2427_chart2.ashx?w=500&h=459&as=1 .  Between 1959-1968 only $0.09 trillion dollars was distributed in the WOP.  Compared to $0.47 trillion between 1969 and 1978.  And almost $10 trillion between 1979 and 2008.   If that tiny amount of welfare spending between 1964 and 1968 was responsible for a 4% reduction in the poverty rate,  then why didn't it go down even faster as far, far more money was handed out a few years later?   Instead, it bottomed out and then start rising again, as even larger and larger amounts of welfare were distributed?  You can't deny this, XO.
 

Any thinking person should be able to see that something other than WOP spending must be responsible for most of the drop that occurred in poverty rates in the 60s and early 70s.  

 

And that something was still capitalism … and not the crony sort.  

 

It was the same force that had dropped the total poverty rate by 11% between 1950 and 1964.  

 

The same force that dropped the non-white poverty rate 8% between 1959 and 1964 is what dropped it in the first 4 years after the WOP began … and even thereafter.  

 

So clearly, even without the WOP, poverty rates would have continued to drop dramatically.

 

Even without the WOP,  the folks in the South and Appalachia would have seen better days.
 

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This country was unusually  prosperous after WWII because factories and agriculture in Europe and Japan were devastated by the War. By the mid-1960's, Japan and Europe were basically rebuilt and US agriculture and industry had a lot more competition.

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27 minutes ago, XavierOnassis said:

Obama SAVED the economy from a serious depression, he sure as hell did not kill it. No American president since Lincoln began his term with the country in worse shape.

 

This is more absolute GARBAGE.   

 

First of all, Obama lied about the recession from the very beginning, causing people to panic.

 

On January 11th, 2009, near the bottom of the recession, Obama stated to ABCNews that "Whether it’s retail sales, manufacturing, all of the indicators show that we are in the worst recession since the Great Depression". That statement was simply not true.  There were lots of indicators that were worse throughout the 1981-82 recession.

 

When Obama claimed back in February of 2009 that "we have inherited an economic crisis as deep and dire as any since the days of the Great Depression," he lied. In terms of unemployment rate, inflation rate, what was thought to be the delta in real GDP at the time, the delta in industrial production, the 30 year mortgage rate, and even the "misery index", the 81-82 recession was worse at the time.

 

The February 27th, 2009 issue of the leftist New York Times supported my view, not yours or Obama's. It said "Current conditions are not even as poor as during the twin recessions of the 1980s, when unemployment exceeded 10 percent". In fact, unemployment and many of the other measures NEVER exceeded the levels that occurred during 1981-1982 recession.  To claim that "all" did was a bald-faced lie on Obama's part.    One you apparently bought into ... hook, line and sinker.

 

Obama's gloom and doom lies, and the Tax and Spend rhethoric and actions that he and the Democrat Congress voiced at the time made things worse than they otherwise would have been. The fact that the contraction ended up longer than that earlier one (if you don't count the 1980 recession and many economists say the 1981-82 downturn was simply the second dip in a double dip recession) and as severe in some respects is likely due to government interference which prolonged it ... due to the great uncertainty that interference caused in the free-market decisions needed to end the recession.

 

What liberals simply refuse to understand is that recessions happen, they end naturally, and they actually serve an important purpose.  They aren't the end of the world.  

 

And the recessions that ended the fastest, were the ones where the government didn't interfere or actually cut spending and taxes.   

 

You must think that what happened in the Great Depression was a big success.  It wasn't.   The fact is the unemployment rate was 4.4% when Herbert Hoover took office.   And when the recession hit, his response was Obama's … massive government interference in the market and massive increases in government spending.  Hoover almost doubled government spending with the largest public works projects in history to that point.   And by the time he left office, the result was an unemployment rate close to 25%.   Stimulus spending and government interference did not work.   Hoover turned a recession into a depression.   Exactly what Obama came close to doing.

 

And the Great Depression is not the only example that proves you are dead wrong.   I can provide numerous examples.  

 

Like the Depression of 1837, where Van Buren, who was philosophically opposed to government intervention, did nothing.   The Depression of 1837 saw 4 million (or more) people lose their jobs (which was a lot back then) and almost half the banks in the country failed.   Property values collapsed and it looked a lot like what Democrats warned would happen if we didn't intervene in a massive way this time.  Things were so bad there were food riots in a number of large cities.  But the President at that time, Van Buren, was philosophically opposed to government intervention and did nothing.   And guess what?   That depression was over in far less time than the Great Depression, with the economy surging again.  Without a war to stimulate it.    Without massive stimulus spending.  That depression was over in less time than Democrats are now suggesting this current *recession/depression* will drag on despite trillions and trillions in *stimulus* dollars. 

 

Or consider the Depression of 1893, which happened under Grover Cleveland's watch.  It was one of the worst in American history. Again, the situation wasn't all that different from that in the 1930s.  Unemployment went from 4% to over 12%.   GDP dropped 10%!  And again, because of Grover Cleveland being opposed to government intervention, the government did little to intervene.   In fact, Cleveland cut taxes AND spending.   And again, that economic crisis was over within about 6 years with unemployment back down to 5% and the economy booming.

And how about the example of 1921, when President Harding inherited (like Obama claims he inherited) one of the sharpest recessions in US history.  Unemployment rose over 700% in just one year (reaching 12% according to one source).  Production fell 23%.  The stock market lost 18%.   Yet within within two years (by now), it was over.   Unemployment had returned to what was considered full employment and the economy was booming.  And what happened to make this possible?  President Harding cut government spending by 40%, instead of massively increasing it.  He lowered taxes and reduced regulation, all of which helped America's entrepreneurs and capitalists create new jobs and push the economy to recover rapidly.   

 

Harding's free market policies … and then Calvin Coolidge's (who wisely said "Four-fifths of all our troubles would disappear, if we would only sit down and keep still") … led to the Roaring Twenties, known for technological advances, women's rights, the explosion of the middle class, and some of the most rapid economic growth in American history.  All of this without a government stimulus robbing peter (a privately employed taxpayer) to pay paul (a government worker).  

 

Between 1922 and 1929, the country experienced amazing prosperity.   Real GNP grew at nearly 5% a year and unemployment fell from about 7% to 3%.  All that Hoover did by overreacting in 1929 to what would probably been a relatively brief correction in the economy was undo that prosperity.   Just like Bush Jr and Obama did.  All of this because Democrats and some top Republicans nowadays lack the wisdom to know that recessions are a time when government needs to make itself more efficient … by CUTTING programs and people that are not needed or meeting their goals. 

 

If you actually take the time to look at the historical data, XO, you will find there are four types of historical cases: 

 

- cases where recessions/depressions were ended in a relatively short time through cuts (or at least no or very minor increases) in government spending, taxes and regulations (and there are lots of these cases). 

 

- cases where recessions/depressions did not end in a relatively short time after cuts (or at least no or very minor increases) in government spending, taxes and regulations (As far as I can tell, there are hardly any of these).  

 

- cases where recessions/depressions ended in a relatively short time after massive government intervention (As far as I can tell, there are none of these).  

 

- and cases where recessions/depressions ended after a long period of time following massive government intervention (And there are several of these, including the Great Depression and the current Great Recession).  

 

Get a clue and draw the logical conclusion.  You don't have to be an economist or an expert to reach the rational conclusion from the historical data.  And that conclusion is this: it is foolish to bet that massive stimulus spending and higher taxes will bring the next recession/depression to an end more quickly. In fact, that data suggests that massive government intervention will likely only lengthen and deepen a recession/depression.   Which is exactly what Obama did.    Learn from history.
 

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17 hours ago, chairmanOFTB said:

It was proven that the banks who were in trouble and needed bailing out didnt fall  under the glass steagall repeal, or the part that was repealed, glass steagall still exists, its just weakened.

 

the Dot com , real estate and credit derivative crash wasn't because of lack of regulation

This is not correct.  The banks who were in trouble and needed bailing out ALL had deposit banks as part of their operations and those deposits were at risk because of the other activities of the institutions.  That's why Glass-Steagall strove to separate the types of institutions, so that FDIC insured deposits wouldn't be endangered by riskier investment banking activities, and they could sink or swim.  However, it is true that by the time Glass-Steagall was repealed, the banks had circumvented much of this separation through the use of derivatives, which allowed them to shift risk around in ways that regulators were simply not up to speed on.

 

The lack of regulation is mainly in regards to credit derivatives and other assorted derivatives, which enabled banks to ratchet risk up far beyond their ability to actually manage it, and created securities so complex not even the bankers could tell what was going on.  And this happened OTC, outside the reach of any clearing house or exchange or regulatory agency, other than rubber stamping the risk models that the banks themselves gave to the regulators to use as tools to analyze the risks they were taking.

 

This is still the case.  

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17 hours ago, XavierOnassis said:

I doubt that most transgendered people would agree with that.

Being born with the notion that one has a different gender in one's mind than one has in one;'s body is the essence of being gay or lesbian.

There is a reason we put LGBTQ all together as similar people that should all have the same rights as heterosexuals.

I don't see any reason for all the intolerance of  LBGTQ people.

Actually, two groups who might intuitively seem to be allied with transgendered folks who turn out to oppose them at times are homosexuals and women.  Women, of course, have fought long and hard to be treated equally in our society.  They have made tremendous strides.  Some feminists take exception to the notion that gender is sort of...irrelevant or made-up.  Especially when men start to declare they are women and start encroaching on hard-fought territory, such as athletic scholarships and other opportunities earmarked for women.  Gay men and lesbians may similarly find themselves in opposition to the transgender agenda, because their status as homosexual depends utterly on the fact that there is a difference between a man and a woman. 

 

So it's not just a big whitewash of people who all think everyone should be free to be themselves all pushing together, as the acronym suggests.  There is a lot of nuance and even some animosity there, direct opposition to each other's goals and ideas.

 

The transgender agenda is disruptive to many elements of society, in particular the extreme variety that holds that there is no difference between a man and a woman.  Hence the resistance from various quarters.  

 

I chalk resistance to homosexuals up to simple bigotry, religious programming, etc.  But the transgender folks are pushing at some pretty important pillars that would have profound impacts on society if they fall.  Gay marriage?  I don't know why anyone cares; I'm still married and as far as that goes it's just a legal contract, a corporation of sorts.  Zero impact for me.  Changes nothing.  Put biological men directly into competition, in sports, with women, and grant them access to their Title IX scholarships???  That's going to change plenty, just for one example.  

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58 minutes ago, splunch said:

Put biological men directly into competition, in sports, with women, and grant them access to their Title IX scholarships???  That's going to change plenty, just for one example.  

I don't think that transsexual men  should be allowed to compete as women, but that is hardly a big deal.

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4 minutes ago, splunch said:

However, it is true that by the time Glass-Steagall was repealed, the banks had circumvented much of this separation through the use of derivatives, which allowed them to shift risk around in ways that regulators were simply not up to speed on.

 

 

exactly Splunch and you brought up the point I was going to make, they found ways of circumventing the regulation that existed.

 

1 hour ago, splunch said:

This is not correct.  The banks who were in trouble and needed bailing out ALL had deposit banks as part of their operations and those deposits were at risk because of the other activities of the institutions

 

 

While that may be true but how do you explain why no main street bankers got in trouble or needed bailing out? how many main street bankers failed?

 

1 hour ago, splunch said:

The lack of regulation is mainly in regards to credit derivatives and other assorted derivatives, which enabled banks to ratchet risk up far beyond their ability to actually manage it, and created securities so complex not even the bankers could tell what was going on.  And this happened OTC, outside the reach of any clearing house or exchange or regulatory agency, other than rubber stamping the risk models that the banks themselves gave to the regulators to use as tools to analyze the risks they were taking.

 

This is still the case.  

 

no, its not the lack of regulation , the problem is the regulation and the enforcement of the regulation, too many agencies have people are not skilled at handling these complex contracts, hence why these "bankers" and "lobbyists" help write or influence legislators write these laws and regulations to their benefit

 

You mentioned OTC outside the reach of any clearinghouse or exchange, very true, why? because Wall street and their lobbyist fought tooth and nail to keep the contracts as OTC where no one could see what the real price was, they had a monopoly so to speak and they charged huge fees.

 

My opinion we dont need more regulations , what we need is to untangle the vague laws and existing regulations and enforce transparency, I still have friends in the industry as I used to work for Goldman back in the day, everyone knew what was going on , everyone knew what we could and could not do and how to get around the legislation, its like Dodd Frank today, a useless act as the boys ( and gals) of the big firms knows how to circumvent the existing laws.

 

By the way the problem is not  the derivatives itself, the problem is the  bespoke derivatives as there are untradable, they are one of a kind, and you cannot mark to market them and the gang on Wall street had total control over them and of course sponged it off on dupes like AIG , the EBRD ( the European Bank of restriction and development) 

This is what caused the problem.

 

 

 

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1 hour ago, chairmanOFTB said:

exactly Splunch and you brought up the point I was going to make, they found ways of circumventing the regulation that existed.

 

While that may be true but how do you explain why no main street bankers got in trouble or needed bailing out? how many main street bankers failed?

 

My opinion we dont need more regulations , what we need is to untangle the vague laws and existing regulations and enforce transparency...

First, the banks got around Glass-Steagall by trading in products that the regulators had no clue how to deal with.  They were way behind, and still are.

 

Main street banks didn't get in trouble because they lack the resources, political clout, and the comfort of TBTF status to go out onto those very thin limbs and start jumping up and down.  The giants could get leveraged up way past their eyeballs, entangled beyond anyone's ability to reliably parse, and if it all went wrong, what's the U.S. government going to do?  Let them fail?  It was never a realistic option, and obviously they knew that.  They are run by people who spend a lot of money and earn a lot of money to know that sort of thing.  Small time bankers lacked that bulletproof status, but they also lacked the resources and the market-making ability to get into those trades the way that the big banks could.  They made deals the size of countries; how the hell is Smalltown First National going to put together a credit derivative that covers Greece like Barclay's did?

 

More regulations, transparency, enforcement, call it whatever you want, we're saying the same thing.  The banks are not being effectively regulated to keep them out of trouble.  They should not be able to concoct schemes that nobody can understand and then tell their regulators not to worry, just look at this model we have for managing risk...and that model is literally ALL the regulators have to know what's going on.  That is "insufficient" or "inadequate" or 'improperly managed" regulation, whatever you choose to call it, it is most certainly "ineffective" and has to change.

 

Instead, people like Elizabeth Warren have been battling against well funded adversaries who have been tearing down Dodd Frank since before it was even signed.  We have a handful of people struggling to stop this from becoming even worse than it is.  The banks keep booking record shattering profits while they complain that they are over-regulated, and while they don't do a whole lot to serve the economy at large.  I'm not impressed.

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1 hour ago, XavierOnassis said:

I don't think that transsexual men  should be allowed to compete as women, but that is hardly a big deal.

It is if you're a feminist facing a challenge from a transsexual man who says he's a woman and wants a tennis scholarship.  The big deal is built into how the law works in terms of protected classes and discrimination.  If the courts rule transsexuals are protected classes to the point that we must legally treat them as if they ARE the gender they identify with, in EVERY WAY, then all of those Title IX scholarships are threatened.  And if anyone who says they feel like a woman must be treated as a woman in every way, according to the law, that threatens everything feminists have had to work for for decades.  And if the more radical of the bunch gains some traction, their doctrine is that there is literally no difference between men and women.  People have been pilloried for affirming their belief that there IS a difference, so there is already some movement on that.  If that somehow were ruled upon in court, ostensibly to protect the rights of transgender or transsexuals, it would most certainly play out in all sorts of ways that would indeed be a very big deal.

 

Hence, the feminists' opposition to the trans agenda in some quarters.

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On 4/9/2019 at 6:13 AM, Scout said:

The results of capitalism are $20 trillion of federal gov't debt and trillions more in personal debt.

 

The results of the Federal Reserve Act, the 17th Amdt and Keynesian economic theory.

 

You are quite the Treason Monkey.

 

 

 

 

kj

 

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22 minutes ago, splunch said:

First, the banks got around Glass-Steagall by trading in products that the regulators had no clue how to deal with.  They were way behind, and still are.

 

agree with you there.

 

23 minutes ago, splunch said:

Main street banks didn't get in trouble because they lack the resources, political clout, and the comfort of TBTF status to go out onto those very thin limbs and start jumping up and down.  The giants could get leveraged up way past their eyeballs, entangled beyond anyone's ability to reliably parse, and if it all went wrong, what's the U.S. government going to do?  Let them fail?  It was never a realistic option, and obviously they knew that.  They are run by people who spend a lot of money and earn a lot of money to know that sort of thing.  Small time bankers lacked that bulletproof status, but they also lacked the resources and the market-making ability to get into those trades the way that the big banks could.  They made deals the size of countries; how the hell is Smalltown First National going to put together a credit derivative that covers Greece like Barclay's did?

 

Main street I agree with, plus its not just because they lacked bullet proof status , its because they did it the right way, most refused to jump on the subprime bandwagon and the ones that did went out of business not long after.

 

I have to correct you , credit derivatives wasn't the problem, every body small, medium and large was doing , its a way of minimizing risk, the problem was the big boys who used  bespoke derivatives , every one of them got in trouble world wide, not just America.

Canadian banks were involved in Credit derivatives but not Bespoke derivatives hence why their banks leverage and positions were lower than any of the big wall street firms

 

32 minutes ago, splunch said:

More regulations, transparency, enforcement, call it whatever you want, we're saying the same thing.  The banks are not being effectively regulated to keep them out of trouble.  They should not be able to concoct schemes that nobody can understand and then tell their regulators not to worry, just look at this model we have for managing risk...and that model is literally ALL the regulators have to know what's going on.  That is "insufficient" or "inadequate" or 'improperly managed" regulation, whatever you choose to call it, it is most certainly "ineffective" and has to change.

 

 

Herein lies the problem Splunch, legislators cannot come up with legislation for things they cannot understand , its like congress coming up with legislation to ban bump stock without understanding how a bump stock actually  work, all regulations today are knee jerk reaction to whatever crises they come with

This is why they ( congress) always seek out "professionals" and these professionals are executives in the industry or lobbyists representing the industry

 

How do you legislated against credit default swaps when only a handful of people in the world understands them?

 

What is next the president hiring Blythe Masters as Treasury secretary to keep an eye on Wall street because she was the one that created the Credit default swap.

 

45 minutes ago, splunch said:

Instead, people like Elizabeth Warren have been battling against well funded adversaries who have been tearing down Dodd Frank since before it was even signed.  We have a handful of people struggling to stop this from becoming even worse than it is.  The banks keep booking record shattering profits while they complain that they are over-regulated, and while they don't do a whole lot to serve the economy at large.  I'm not impressed.

 

Its not that they are tearing down Dodd Frank, the problem is Dodd frank was weak to begin with.

I don't know if you've read that act, but its a joke.

 

There are no clear definition in the act when it comes to systemic risk

 

There is a provision in the act that allows Insolvent banks that are not subject to FDIC  to sell off the assets and shut down the business, wouldn't it been better to reform the bankruptcy laws so the process will be easier and simpler, but because its not in the best interest of the lawyer the act does not allow it, and Elizabeth Warren a bankruptcy expert acknowledge that once but hasn't said much about since.

 

 there  are roughly more than 200 rules that are fallow in violation of their statutory deadline , and to give you one more

the Volcker rule to vote on it, requires 22 separate people voting, 7 fed governors, 5 commissioners of the SEC, 5 commissioners of the CFTC and other agencies

 

The current fed chair Jay powell was one of the fed governor appointed by Obama led the charge to loosen the restriction around the volcker rule because its too expensive for banks to comply with because its complex and his words "inefficient", Powell believes there is an easier and not expensive way of dealing with it.

 

And he is our Fed Chairman today, thanks to Trump and the senate, and of course being appointed by Barack Obama.

 

I dont have faith in any politician today to right a wrong, 

 

 

 

 


 

 

 

 

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18 minutes ago, chairmanOFTB said:

 

agree with you there.

 

 

Main street I agree with, plus its not just because they lacked bullet proof status , its because they did it the right way, most refused to jump on the subprime bandwagon and the ones that did went out of business not long after.

 

I have to correct you , credit derivatives wasn't the problem, every body small, medium and large was doing , its a way of minimizing risk, the problem was the big boys who used  bespoke derivatives , every one of them got in trouble world wide, not just America.

Canadian banks were involved in Credit derivatives but not Bespoke derivatives hence why their banks leverage and positions were lower than any of the big wall street firms

 

 

Herein lies the problem Splunch, legislators cannot come up with legislation for things they cannot understand , its like congress coming up with legislation to ban bump stock without understanding how a bump stock actually  work, all regulations today are knee jerk reaction to whatever crises they come with

This is why they ( congress) always seek out "professionals" and these professionals are executives in the industry or lobbyists representing the industry

 

How do you legislated against credit default swaps when only a handful of people in the world understands them?

 

What is next the president hiring Blythe Masters as Treasury secretary to keep an eye on Wall street because she was the one that created the Credit default swap.

 

 

Its not that they are tearing down Dodd Frank, the problem is Dodd frank was weak to begin with.

I don't know if you've read that act, but its a joke.

 

There are no clear definition in the act when it comes to systemic risk

 

There is a provision in the act that allows Insolvent banks that are not subject to FDIC  to sell off the assets and shut down the business, wouldn't it been better to reform the bankruptcy laws so the process will be easier and simpler, but because its not in the best interest of the lawyer the act does not allow it, and Elizabeth Warren a bankruptcy expert acknowledge that once but hasn't said much about since.

 

 there  are roughly more than 200 rules that are fallow in violation of their statutory deadline , and to give you one more

the Volcker rule to vote on it, requires 22 separate people voting, 7 fed governors, 5 commissioners of the SEC, 5 commissioners of the CFTC and other agencies

 

The current fed chair Jay powell was one of the fed governor appointed by Obama led the charge to loosen the restriction around the volcker rule because its too expensive for banks to comply with because its complex and his words "inefficient", Powell believes there is an easier and not expensive way of dealing with it.

 

And he is our Fed Chairman today, thanks to Trump and the senate, and of course being appointed by Barack Obama.

 

I dont have faith in any politician today to right a wrong, 

Powell has represented the banks he is supposedly regulating today.  The revolving door is a problem.  And if the derivatives defy understanding then they shouldn't be tolerated.  The idea of banks so large that their failure is not tolerable engaging in enormous deals that nobody can even parse let alone regulate is offensive.  The proposition that this is somehow necessary is absurd.  The use of derivatives to sell risk around and around and around without any regulation is a relatively new development and so far has led us to one crash that tested the ability of the United States to cover it, which it largely did by taking on debt.

 

There is no need for any of it.  Investors can make money by investing but they want more.  They want to hedge, sell off risk, claim it no longer exists, and claw back their capital and use it again, and again, and again, and again.  Nobody, not even the banks, know where the risk actually ends up, out the back door and round and round for a while, then in through the side door, then re-packaged again and back out another side door, through the wash cycle again and back in the front door...  The entanglement is inscrutable and they know it.  But they're taking massive fees out in real time right now, so they aren't going to stop.  And the web is so complex and so ingrained into our system that untangling it would take years.

 

None of this is necessary.  All it does is allow people to pretend they have taken risk and made it disappear.  We've seen that it does not disappear, and when somebody calls in their loans, the whole machine grinds to a halt.  Nobody even knows what to do except throw money at it.  Our money.  I never got my dividend, or my bonus check from Goldman Sachs, or Citigroup, or JP Morgan.  I'm the one who bailed their ass out.  The people who are supposedly so much smarter than I am screwed up everything, nearly plunged us into utter chaos, and then paid themselves handsomely for their efforts, on my dime.

 

If the derivatives were locked down, cleared methodically so that we could actually tell what's going on, it would slow down the pace of these money machines, but that means nothing to me, because these money machines do not deliver any value to me whatsoever.  They would operate at a slower pace and the world would be a safer place for it.

 

When they blow it all up again because nobody has the will to clean this up, and their own lawyers are appointed to "regulate" them, and everybody just looks the other way and pretends we're all making money here when all we're doing is playing another game of house of cards, I don't know that we'll be able to just throw our children's and grandchildren's future economic growth at the problem.  We've already done that.  Can we count on our great grandchildren to pay for this pointless pursuit of bigger numbers, built on nothing?

 

Whoops!  We're sorry!  How were we supposed to know?  Say, can you help me out here?  If not, I mean, no big deal...it'll probably just plunge the whole world economy into utter ruin, but you know, no problem, I'm cool....

 

The banks should be split up.  Crisp rules about the types of activity permissible under one roof must be crafted.  And limits on market share must be set, simply to prevent any one institution from becoming TBTF.  That's actually my favorite piece, because it does a lot to address the problem of how to regulate these banks without having to depend on some government wizard to know how to make the right move all the time.  You just let the losers die.  There absolutely has to be some sort of speed limit, though.  If the problem is that government cannot possibly keep up with regulating these securities because you need a PhD in mathematics to even have a chance, then you take a reasonable capital requirement and just double it or triple it, and roll with that.  Yes, they'll have to live with less profit.  But they'll still be the richest people on the planet, and in the end, when they make mistakes, they will have the resources to take care of their own mess.

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14 minutes ago, splunch said:

Powell has represented the banks he is supposedly regulating today.  The revolving door is a problem.

agreed

 

14 minutes ago, splunch said:

The proposition that this is somehow necessary is absurd.  The use of derivatives to sell risk around and around and around without any regulation is a relatively new development and so far has led us to one crash that tested the ability of the United States to cover it, which it largely did by taking on debt.

 

This one I don't agree with, because derivatives are not the problem, the problem is a particular type of derivative that is the problem , we all use derivatives at one or another especially if you're a homeowner.

 

Most financial derivatives does what its supposed to do but when you have those that insists on Bespoke derativites without mark to market , that is a problem and as we seen in the last recession it contributed to the problem.

 

17 minutes ago, splunch said:

There is no need for any of it.  Investors can make money by investing but they want more.  They want to hedge, sell off risk, claim it no longer exists, and claw back their capital and use it again, and again, and again, and again.  Nobody, not even the banks, know where the risk actually ends up, out the back door and round and round for a while, then in through the side door, then re-packaged again and back out another side door, through the wash cycle again and back in the front door...  The entanglement is inscrutable and they know it.  But they're taking massive fees out in real time right now, so they aren't going to stop.  And the web is so complex and so ingrained into our system that untangling it would take years.

 

you've just described what is wrong with the agencies today including rating agencies

 

19 minutes ago, splunch said:

None of this is necessary.  All it does is allow people to pretend they have taken risk and made it disappear.  We've seen that it does not disappear, and when somebody calls in their loans, the whole machine grinds to a halt.  Nobody even knows what to do except throw money at it.  Our money.  I never got my dividend, or my bonus check from Goldman Sachs, or Citigroup, or JP Morgan.  I'm the one who bailed their ass out.  The people who are supposedly so much smarter than I am screwed up everything, nearly plunged us into utter chaos, and then paid themselves handsomely for their efforts, on my dime.

 

Its a little more complicated than that, you just cant say its derivatives that caused it, there were plenty of factors, cheap money, terrible policies, some say loosen policies , but the reality was banks were following the government lead and one thing led to another.

 

23 minutes ago, splunch said:

If the derivatives were locked down, cleared methodically so that we could actually tell what's going on, it would slow down the pace of these money machines, but that means nothing to me, because these money machines do not deliver any value to me whatsoever.  They would operate at a slower pace and the world would be a safer place for it.

 

 

you have the same issue I have with it, transparency 

but I can add it that these sophisticated investors privatized their gains and socialized their losses because they obviously knew they could count on the government to bail them out, and that is wrong and immoral 

 

 

26 minutes ago, splunch said:

The banks should be split up.  Crisp rules about the types of activity permissible under one roof must be crafted.  And limits on market share must be set, simply to prevent any one institution from becoming TBTF.  That's actually my favorite piece, because it does a lot to address the problem of how to regulate these banks without having to depend on some government wizard to know how to make the right move all the time.  You just let the losers die.  There absolutely has to be some sort of speed limit, though.  If the problem is that government cannot possibly keep up with regulating these securities because you need a PhD in mathematics to even have a chance, then you take a reasonable capital requirement and just double it or triple it, and roll with that.  Yes, they'll have to live with less profit.  But they'll still be the richest people on the planet, and in the end, when they make mistakes, they will have the resources to take care of their own mess.

 

Banks on wall street should be split up

Crisp rules? smaller regional banks have the right plan

what do you mean limit on market shares?

Letting losers die.. we are on the same page

I think we should stop listening to nobel prize economists particularly those with a political ideology eg. Krugman.

Big bankers in New York have always profited, the problem is the government wants to control them, and they come up with all these rules and regulations and the bankers lawyers figures out ways to circumvent it.

 

what we need is to eliminate lobbyists, that is a good start

we need to stop the revolving door from Wall street to congress to lobbyists or back to Wall Street.

 

How many many treasury secretaries have been wall street executive? including the current one.

 

 

 

 

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18 hours ago, chairmanOFTB said:

Its a little more complicated than that, you just cant say its derivatives that caused it, there were plenty of factors, cheap money, terrible policies, some say loosen policies , but the reality was banks were following the government lead and one thing led to another.

I think we're on the same page.  Derivatives are at the heart of the matter, albeit not all sorts of derivatives.  Just the ones that look like this:

 

Eyes Of Satan

 

We cannot let banks grow to a size and complexity where letting it fail would kill the economy.  That's what I mean by limiting market share, keeping banks under a certain size relative to the market.  

 

Other than that, increasing transparency at the expense of short-term profits is the only protection we can possibly have against catastrophic meltdowns, which we have seen enough in history to know better than to think they are unfounded doomsday prophecies. 

 

Here is a financial type arguing in defense of bespoke derivatives:

Quote

For example, a pension fund with a large corporate bond portfolio might decide that it needs to reduce its exposure to 40 specific bonds that have a total notional amount of $100bn. The pension fund could enter into a portfolio default swap with a dealer in which the dealer agrees to protect the pension fund against the first $20bn of default-related losses on the reference portfolio (the 40 identified bonds) over the next 5 years, in exchange for quarterly premiums from the pension fund. This kind of situation happens all the time, and it's perfectly legitimate for the pension fund to enter into the swap with the dealer.

http://economicsofcontempt.blogspot.com/2009/06/bespoke-derivatives.html

 

Having that sort of activity going on with no real regulation (the regulators just take the dealer's assessment as gospel) is insanity.  How much exposure does the dealer have?  How much capital does the dealer need to keep on-hand to cover this?  How is it even remotely possible that the risk associated with the bonds is reduced at all?  if there is a market risk, and the corporate portfolio doesn't want to keep the required capital on-hand to cover that risk, and they off-load it to a dealer, who charges them, shouldn't the dealer then have to keep that capital on-hand?  Shouldn't somebody?  Except they keep passing it around, and nobody knows where it ends up, and nobody is holding the capital in reserve to cover the risk.

 

When you look at the profits and the amounts of money we're talking about, how could they?  Nobody has that much money!  If there were a margin call somehow that were logically imposed across the whole system and it somehow actually proceeded rationally (I know this is a fantasy), the bottom line is there would wind up being a whole lot of losses that nobody has the money to cover.  Except the U.S. government, of course.

 

So yes, bespoke derivatives, zero transparency (which amounts to zero real regulation), and a revolving door.

 

The only thing I don't agree with is the idea that the banks followed the government's lead.  It looks like the other way around to me.  The government did not invent these instruments, or the risk models.  Between the revolving door and enormous funding for politicians, I see regulatory capture and the government enabling or rubber stamping these schemes as they progressed, but not initiating or leading the process.

 

Looking back, that's a lot of text to basically say I agree with you except that I don't think the government led the way on this.

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5 hours ago, splunch said:

Looking back, that's a lot of text to basically say I agree with you except that I don't think the government led the way on this.

 

except the government has lead the way

every time they come up with some legislation the brain trust figured out ways to circumvent it

 

Think about this, why did bespoke derivatives exist in the first place? bespokes were huge pre crises, because it was a way of minimizing risks, and a way of circumventing certain legislation for institutional investors.

 

AIG surely understood this along with many of the wall street banks and they knew they could and would be bailed out even though their models detailing systemic risk was wrong.

 

Today bespokes are making a comeback and the last I checked into it its now a 100 billion dollar industry, a far cry from the 500 billion pre crises, the reason why its making a comeback

 

there's been a quest for yield and where do you find yield if you're an investor in this field?

 

you find yield in areas where there's typically a high amount of leverage, this will blow your mind again or scare you,

 

Today's  bespoke trench benefit  is that not only you're getting exposed to some leverage companies and getting some yield  getting rewarded with some yield for that but also you are getting very low haircuts from specific banks in the US

 

Wall street and some regional  banks are providing financing to investors who want to buy those bespoke trenches and the types of haircuts if things goes south can be in a range of 2 to 15%  

 

Remember the issues with over leverage?  will in this case  you can ultimately be leveraged up to 80 times on a basket of US companies

 

Some investors portfolio will either blow up and the selected few is going to create a new batch of millionaires and billionaires, and remember this is in the age of Dodd frank.

 

So how useless is Dodd Frank?

 


 

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16 hours ago, chairmanOFTB said:

 

except the government has lead the way

every time they come up with some legislation the brain trust figured out ways to circumvent it

 

So how useless is Dodd Frank?

Completely useless.  It was almost completely de-clawed before it was even signed.

 

I suppose it's about the chicken and the egg.  If the politicians are in bed with Wall Street because they finance their campaigns, and Wall Street executives and lawyers are appointed by politicians to regulate Wall Street...is that the government leading the way, or Wall Street using its influence to weaken and manipulate the government to prevent it from doing anything that would meaningfully curtail their business?

 

I suppose it doesn't matter what we call it.  The truth is whether we point the finger at government people and say they caused it, or point the finger at the people essentially bribing them, in the end, it leads me to lean heavily in favor candidates who will release their tax returns and forego campaign financing from not only Wall Street, but the other corporations that have used their enormous wealth and size and power to corrupt the government in ways that I regard as harmful, such as the net neutrality debacle.  I want to know who owns them before I put them in office.

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