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Thursday, November 12, 2009
In case you thought no one predicted the economic crisis...
Posted by Hugh MacIntyre on November 12, 2009 | Permalink
Comments
Actually Mahmoud, the grandkids all got screwed by someone else other than their grandparents.
The above mentioned grandparents probably had the best of intentions: to build wealth for their family.
I totally agree with your last sentence.
Posted by: Ed Ellison | 2009-11-12 10:41:46 AM
Never listen to brokers. They are biased. Investment brokerage firms make more money from investment banking than from trading. For example, would anyone here ever publish a negative report on one of your largest clients?
As for foreseeing financial calamity, check the savings rate of a country. If the rate falls to the low single digit rates, it's a dead giveaway. Consumer debt, investor, and corporate debt levels are very important as well. If people have too much debt it's a sure sign the central banks have been inflating. Finally, examining the banking industry is key. Leverage ratios and valuations (over twice book) can be perfect signals. Finally, if your grandmother is into flipping homes or buying Internet stocks ... it's probably a bubble ;)
Posted by: Charles | 2009-11-12 11:35:44 AM
Oh ... and how stupid of me. Low interest rates and an increasing money supply are always a precursor to inflation (bubbles and CPI). Check the money supply. When the rate of growth slows down or reverses (and obviously rates are going up); the party will soon be over.
Posted by: Charles | 2009-11-12 11:40:40 AM
Great Video!
I wish more people had access to it! I search for Ron Paul almost everyday in the news, but I've never seen this particular clip. I have seen many of the interviews and such that are shown in this video, but never in a well-organized fashion such as this.
Thanks Hugh.
Posted by: EndtheFed | 2009-11-12 2:42:45 PM
"I agree with best intentions, but greed forced them to lose more than half a million which could been easily turned into cash and secured their grand kids educational futures. Instead like any gambling junkies, they kept rolling the dice until the economy crapped out."
Greed didn't force them to do anything. Investing your savings is the biggest driver of economic growth. So the relevant question is why were investors speculating to that large an extent? Here's the answer: the central banks inflated the money supply, forcing rates to fall, and injecting too much money in the system. Prices of bonds were bid up almost immediately, resulting in falling yields; which were not sufficient to compensate for risk and inflation. So investors took all that excess liquidity and legitimate savings and speculated in stocks and commodities.
The moral of the story is don't mess with interest rates and the money supply. That way, the result is less speculation, no asset bubbles, no overproduction, no overconsumption, etc. etc. etc.
Posted by: Charles | 2009-11-12 3:02:35 PM
If only more people had listened to Ron Paul back in 1988 we wouldn't be in this mess.
For those that are interested, search for The American Power Structure on youtube.
I found it very interesting.
Posted by: EndtheFed | 2009-11-12 3:11:21 PM
mahmoud said:
"to me it is a reminder of how important it is to learn how to think for yourself, so brokers and everybody else cannot bullshite you into bankruptcy."
Very true. It's also a good reminder to keep an eye on your government, and don't give up your liberties for anything. It is not your best interest that most members of today's government have in mind.
Posted by: EndtheFed | 2009-11-12 3:16:34 PM
Charles said:
"The moral of the story is don't mess with interest rates and the money supply. That way, the result is less speculation, no asset bubbles, no overproduction, no overconsumption, etc. etc. etc."
Agreed. Interest rates should be determined by market forces. The level of increase in the money supply should not exceed the level of growth in the economy.
Posted by: EndtheFed | 2009-11-12 3:21:43 PM
And no cartel of bankers should have a monopoly on the supply of dollars.
Posted by: EndtheFed | 2009-11-12 3:25:31 PM
Lending money that doesn't exist should be fraud.
(I already said this, but it's not showing up... i guess the server is being slow? Excuse me if this turns out to be a repetition.)
Posted by: EndtheFed | 2009-11-12 3:48:31 PM
We should all be grateful to the financiers who take risks!!
A Grateful Financier Thanks the Taxpayers
By Stephen J. Gray
Dear Taxpayers,
As I languish by the pool, martini in hand, in my favorite offshore tax haven, I want to give you the ordinary people, the backbone of society, some recognition. You taxpayers are paying to keep our free market system afloat and the financial industry in business. Your hard earned tax dollars were there for us in the financial system when we needed them most, and for that we are eternally grateful. I know many of you have lost your jobs and your pension funds are in the dumpster. Some of you have lost your homes and are in debt to the banks. Still you soldier on amidst all these negatives. But do not worry, be happy, the day of recovery is coming soon, and once again it will be back to business as usual in the market.
The market as you all know had a bad and troubling experience. We were all selling loads of useless paper throughout the financial system. Some beneficiaries of our selling expertise were; your pension funds, state governments and everybody and anybody we could suck in. We were selling this crap, oops, I mean collaterized debt opportunities like there was no tomorrow. But, unfortunately tomorrow arrived and you the taxpayers are picking up the bill for our free market fraud, pardon me, I mean errors. Mistakes were made and some of us, the greedy ones, were left holding this useless lousy paper that we were selling. Now it is being called “toxic paper,” though some of our marketing experts are calling it “troubled assets,” in the hope that it can be sold at a later date when the market recovers. And make no mistake the market will recover as long as there are politicians out there to bail out, oops, I mean stimulate the system, with your tax dollars.
Dollars are important in the financial system, and your tax dollars have been a boon to us. A press of a button and we can move money offshore to our tax free haven. As I sit here, and write this, I think of all you wonderful people who are giving up so much to keep us in the style we are accustomed. Without your help, we might all be broke, just like some of you. But hey, you came through for us and I am sure you will again, when the time comes, as it will, and the market once again plunges after we take our profits.
Profits are good and a blessing to us all. That old saying: “profit from your mistakes,” comes to mind. A good example is some of the bankers who made “mistakes” selling the “toxic paper,” I mean, “troubled assets,” now they are profiting from the bailouts, pardon me, I mean stimulus packages of your tax dollars. Big bonuses are being handed out by them, courtesy of your tax monies that helped them stay in business. So we are all raising a glass in your honor and toasting our successes.
Success is important to us all, and I include you the taxpayers. Without successful bailouts, I mean stimulus packages of your tax dollars, we moneychangers would be devastated. Now we are all stimulated and watered and fed by your generosity. So thank you for all you have done for us. Keep smiling, keep faith in the market, think positive and know that we financiers depend upon you for our bread and butter. I will close by quoting one of our esteemed banker friends, who said just the other day that: “We are doing God’s work,” though I am sure that some cynical people will say the false God Mammon is more appropriate. Anyway, thank you all for your assistance in keeping the “free market” functioning and I hope to see some of you at my next investment seminar.
Sincerely,
Mr. B.S. Baloney c/o Cayman Islands
Stephen J. Gray
November 11, 2009.
Posted by: Stephen J. Gray | 2009-11-12 4:44:22 PM
Lightning Rod. I explained to you why people were speculating too much. When you force interest rates too low you encourage speculation. People will always be greedy. You can't change it and you can't regulate it. Blaming the crisis on greed is like blaming a plane crash on gravity (can't remember where I read that but thought it was a great analogy).
I'll go through it again. When the central banks flood the system with money, they artificially lower rates. This has devastating consequences for two very important reasons. First, it results in overproduction and overconsumption (the book "Meltdown" I recommended has a good explanation of this phenomena). Second, it discourages investments in lower risk assets resulting in speculation in higher risk assets. Think about it. Currently, where are bond yields? Do you really think these rates are attractive to investors? Take a look at what's happening in the stock and commodity markets right now.
Posted by: Charles | 2009-11-13 7:16:03 AM
Charles said:
"Blaming the crisis on greed is like blaming a plane crash on gravity (can't remember where I read that but thought it was a great analogy)."
A great analogy indeed. Greed should be looked at as a constant. Just because some people are more or less greedy than others doesn't change the fact that greed is a natural phenomena. It can be traced all the way down to the molecular level with "selfish DNA". Unfortunately, greed is a successful strategy for gene replication, and therefore humans are naturally inclined to behave that way. Because of this, we can be reasonably accurate when predicting that humans will base choices on the wellbeing of themselves, or family members. (Family members share genes. A direct offspring has 50% of your genes, and a neice or nephew has about 25%).
Posted by: EndtheFed | 2009-11-13 8:18:49 AM
haha i love the vid it is perfect
Posted by: debt reduction | 2009-11-13 11:45:17 AM
Greed is a measure by which those who have not figured out that they too can be rich, belittle those who have already figured it out.
Posted by: set you free | 2009-11-13 1:33:33 PM
Set you free said:
"Greed is a measure by which those who have not figured out that they too can be rich, belittle those who have already figured it out."
Only in the Player Hater Club.
Posted by: EndtheFed | 2009-11-14 7:28:35 AM
Wasn't this crisis predicted sometime in the 1970's. As to what caused it is easy, the Government trying to fix the economey. The Solution: Government leave the economy and scrap any policies that prevent competition ie taxes, tarifs, patents, anti-trust laws, substidies. Socialism is both left-wing and right-wing. (Remember the Nazis, a fascist party, the name means National Socialists. This is for people who don't know their history but want to yap about things that they know nothing about.)
Their are two types of people in the world. Socialists and Individualists. Socialists are people who want to control other people, people who need the government to tell them what to do, people who like government laws that protect their interests, (ie. patents, substidies, anti-trust laws, anything that prevents real competition on the real market. The invisible hand) Individualists on the other hand, want government to stay out of their lives.
Politicians should get out of the economy and do their job. Which is governing the country.
As of now I hope their is a perpetual minority government until the politicians grow up and work on good policy and not good politics.
Posted by: Doug Gilchrist | 2009-11-14 10:41:56 AM
I can read. I read a book that was published in the 70's. Are you just a moron or are you just too lazy to cite your sources. I know your a coward because you can't even use your real name.
Posted by: Doug Gilchrist | 2009-11-15 9:12:11 AM
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