USA Debt Crisis

[rsh01]

Bit of a joker aren't you - give it to women with big breasts... 😆

QUOTE]

yawn i have risen to the bait, i asked a question, you ignored it & deflected attention away from your wildly innaccurate statements by then asking me a few.......therefore i am in the wrong, i feel sorry for whoever has to deal with your poor reasoning on a daily basis.

i thought you were joking (lol) re your questions, they were so poor, anyway.....

"How would it stop global economy from functioning?" banning derivs? do you seriosly not know the answer to this, crikes. one example.....most large flows of fx (so this includes any business, bank, investment vehicle and the like which operates in >1 country (its a globalised economy we live in btw) with diff ccy's wld be hedging their ccy expsure in derivs mkts, & if they didnt exist this wld severely restrict their scope to foreign mkts etc (not saying we shld be so globalised, but we are). thats just ccy risk, there is interest rate risk, mkt risk (another example?....farmers have been hedging against global price fluctuations for hundreds of years in futures mkt), blah blah blah etc which can and are hedged in derivs mkts. read a book.

"Why are derivatives so highly leveraged?" dunno - perhaps a question for the regulators / gov'ts, doesnt mean they shld be banned though. you mentioned mortgage backed securities example which is interesting, cos these are as per the name suggests, underpinned by mortgages.....lent to households who were leveraged far too high i.e. incomes cldnt afford the repayments. these are not derivs, its securitised debt, bundled into derivs. stop the loose credit facilities (govts / regulators etc) and the MBAs wldnt have been around. we live in a consumer economy, we are encouraged to spend more than we earn, get into highly leveraged debt (mortgages), and buy the latest stuff - only way to continue this is to continue lines of credit, as soon as they freeze up (blackrock) we are ****ed. uk labour govt reduced unemployment by creating uselss middle m'ment jobs in public services to increase not only tax receipts, but the number of ppl who can spend more than they earn. the only feasible way out of this is to raise interest rates and admit this model doesnt work and take a huge hit, but will the big businesses let the gov'ts do this? no way. this has sweet fa to do with derivs, or employment contracts, or whatever mumbo jumbo pops into your head and you decide to regurgitate for the detriment of everyone reading this thread. in fact it cldnt be further from it. though in other posts you seem quite measured, weird.

"How does this help the global economy? What useful function does it serve?" see first answer.

Not sure if you actually make money trading derivs, but if you do perhaps you shld show the industry some respect and learn a little about its history instead of spouting twaddle about short selling being the root of all evil. god, have you seen, theres been a lot of short selling in the global stock mkts recently, all those dastardly hedge funds & big greedy institutions playing silly buggers again. darn them. if only we cld stop them the world wld be a rosy place again.

you left a lol emoticon after repeating my 'joke', these are to represent your emotions at the time of writing (there is no sarcastic emoticon), so i am glad you appreciated it.

short selling and the pack mentality can destablise as we have seen
QUOTE]
....

Not saying it was the cause
QUOTE]

you confused?

cya.

 

[Marwan2010]

poor chap, you're like a lost puppy

since no one will tell you, the answer is fiat money

sorry mate! you baffle me more!
what do you mean by FIAT money???

 

[counter_violent]

Yes and i'm still waiting for an answer on unskilled migratory workers vs funding our own home grown layabouts. Seems nobody wants to debate this. Not surprized though, govt doesn't either.

 

[robster970]

I'll go for migratory workers every time - at least they have a work ethic based upon work

 

[Atilla]

Bit of a joker aren't you - give it to women with big breasts... 😆

QUOTE]

yawn i have risen to the bait, i asked a question, you ignored it & deflected attention away from your wildly innaccurate statements by then asking me a few.......therefore i am in the wrong, i feel sorry for whoever has to deal with your poor reasoning on a daily basis.

i thought you were joking (lol) re your questions, they were so poor, anyway.....

"How would it stop global economy from functioning?" banning derivs? do you seriosly not know the answer to this, crikes. one example.....most large flows of fx (so this includes any business, bank, investment vehicle and the like which operates in >1 country (its a globalised economy we live in btw) with diff ccy's wld be hedging their ccy expsure in derivs mkts, & if they didnt exist this wld severely restrict their scope to foreign mkts etc (not saying we shld be so globalised, but we are). thats just ccy risk, there is interest rate risk, mkt risk (another example?....farmers have been hedging against global price fluctuations for hundreds of years in futures mkt), blah blah blah etc which can and are hedged in derivs mkts. read a book.

"Why are derivatives so highly leveraged?" dunno - perhaps a question for the regulators / gov'ts, doesnt mean they shld be banned though. you mentioned mortgage backed securities example which is interesting, cos these are as per the name suggests, underpinned by mortgages.....lent to households who were leveraged far too high i.e. incomes cldnt afford the repayments. these are not derivs, its securitised debt, bundled into derivs. stop the loose credit facilities (govts / regulators etc) and the MBAs wldnt have been around. we live in a consumer economy, we are encouraged to spend more than we earn, get into highly leveraged debt (mortgages), and buy the latest stuff - only way to continue this is to continue lines of credit, as soon as they freeze up (blackrock) we are ****ed. uk labour govt reduced unemployment by creating uselss middle m'ment jobs in public services to increase not only tax receipts, but the number of ppl who can spend more than they earn. the only feasible way out of this is to raise interest rates and admit this model doesnt work and take a huge hit, but will the big businesses let the gov'ts do this? no way. this has sweet fa to do with derivs, or employment contracts, or whatever mumbo jumbo pops into your head and you decide to regurgitate for the detriment of everyone reading this thread. in fact it cldnt be further from it. though in other posts you seem quite measured, weird.

"How does this help the global economy? What useful function does it serve?" see first answer.

Not sure if you actually make money trading derivs, but if you do perhaps you shld show the industry some respect and learn a little about its history instead of spouting twaddle about short selling being the root of all evil. god, have you seen, theres been a lot of short selling in the global stock mkts recently, all those dastardly hedge funds & big greedy institutions playing silly buggers again. darn them. if only we cld stop them the world wld be a rosy place again.

you left a lol emoticon after repeating my 'joke', these are to represent your emotions at the time of writing (there is no sarcastic emoticon), so i am glad you appreciated it.

short selling and the pack mentality can destablise as we have seen
QUOTE]
....

Not saying it was the cause
QUOTE]

you confused?

cya.

Fair points re: futures market for FX and commodities as these help remove uncertainty.

However, point still remains hedge funds can destabilise rather than assist in recovery. Highly leveraged derivatives further sub-packaged basically hide all risk. Is this deliberate or purely byproduct of the derivatives. There is no transparency so virtually impossible to calculate risk or exposure.

Because it is virtually impossible to quantify risk - how can this stuff be sold on as safe assets backed by what? The mind boggles.

There are pros and cons. These markets need to be tightly controlled and regulated.


Good post and I have read it and good contributions this time. May I also ask how you explain the targeting of countries? It seems we are on a course - Portugal, Ireland, Greece. Spain had it's wobbles and now the bigger fish Italy.

Perhaps I'm being cynical - the pack hunts down the weakest member of the group as easy prey. Leaves big beasts to the end.

Is this purely a random behaviour by the hedge funds or something akin to a pack of hyenias?


As for raising interest rates right now would be absolute suicide. You are obviously loaded and have no consideration for rest of your fellow men. Total wrong macro-economic policy. The UK is doing the right thing by keeping rates low (stimulate investment and keep sterling low) and taking the heat off aggregate demand by a combination of price increases and taxation.

However, inflation is about the only cure for debt at the mo.

 

[new_trader]

As for raising interest rates right now would be absolute suicide. You are obviously loaded and have no consideration for rest of your fellow men. Total wrong macro-economic policy. The UK is doing the right thing by keeping rates low (stimulate investment and keep sterling low) and taking the heat off aggregate demand by a combination of price increases and taxation.

However, inflation is about the only cure for debt at the mo.

Atilla, you really need to read about the broken window fallacy.

http://en.wikipedia.org/wiki/Parable_of_the_broken_window

 

[counter_violent]

I'll go for migratory workers every time - at least they have a work ethic based upon work

😆 Not saying I don't agree Rob. The point though is more about why successive govts ...oh never mind, i've got better things to do !

 

[Pazienza]

😆 Not saying I don't agree Rob. The point though is more about why successive govts ...oh never mind, i've got better things to do !

LOL

If it's any consolation, I understand what you're driving at, don't think you hate immigrants, and I agree with you. 🙂

 

[robster970]

😆 Not saying I don't agree Rob. The point though is more about why successive govts ...oh never mind, i've got better things to do !

I know man, I know.............

 

[JRP2891]

sorry mate! you baffle me more!
what do you mean by FIAT money???

 

[cr6196]

poor chap, you're like a lost puppy

since no one will tell you, the answer is fiat money

nice one, apart from ECB purchases are sterilized, to quote Trichet "we don't do QE". also, Italy doesn't import most of its capital. if you want to know about the other countries you can work it out from the BoP capital account. basically tho, if its not German banks its usually domestically funded (as a quick and imprecise rule).

 

[Martinghoul]

Simple questions >
italy, Greece, Spain, portugal and Ireland are all in a **** hole! they have borrowed

They borrowed mostly from Germany, France and UK.

Germany, France and UK. are also in a **** hole by lending money to these stupid countries
USA is in a Bigger **** hole

so the big question is FROM WHERE is all the MONEY coming from????????
In balance sheet - there is always a DEBIT and CREDIT and the books are balanced

but here everyone is in a **** hole

I am baffled! - can someone help me?

It's been spent, consumed, eaten, drunk, gambled, prostituted (is that the right word?).

 

[scose-no-doubt]

It's been spent, consumed, eaten, drunk, gambled, prostituted (is that the right word?).

He's not asking what you did with your share, mate.

 

[barryb]

One of the problems the EC has right now is that they have different countries at different levels of economic activity and key instrument is not available for them to manage inflationary effects.

If the BoE has inflation target of 2% and if that target is exceeded the only instrument it has to tweak is interest rates. Should be raised. However, raising it will directly impact the sterling as well as making probably good few million homeless in the current climate.


I've said this many times before - the remaining adjustment then becomes a demand side action - raising taxes to stave off demand. Or as some may suggest cut back on all services which are to some the real cause of our problems.


Of course neither of this has happened in the US. Instead they dropped rates carrying a loose monetary policy to finance war debt and cut taxes to the rich and oil companies. Hey presto twin defecits.


I'm not sir and don't patronise me, but you certainly come across as a dim wit.


So what do you suggest is the solution smarty pants? I bet you'll come out with two half baked sentences.

Well Atilla, Mr Smarty Pants here...as we're past the point of no return there's no easy solution, due to any increase in rates of the debtors of the west resulting in a proportional increase in servicing the unpayable debt. However, my argument is that meddling with the interest rate only leads to high capital goods' industries expanding operations which are only made profitable due to an intervened low rate of interest. Consequently, these operations become malinvestments after inflation heats up and rates HAVE to go up, ceasing these projects before they even get to market in most cases, making the severity of the recession/depression much, much worse. If you let the market decide rates, these malinvestments would not be so widespread.

Try not to get personal this time please.

 

[Atilla]

Well Atilla, Mr Smarty Pants here...as we're past the point of no return there's no easy solution, due to any increase in rates of the debtors of the west resulting in a proportional increase in servicing the unpayable debt. However, my argument is that meddling with the interest rate only leads to high capital goods' industries expanding operations which are only made profitable due to an intervened low rate of interest. Consequently, these operations become malinvestments after inflation heats up and rates HAVE to go up, ceasing these projects before they even get to market in most cases, making the severity of the recession/depression much, much worse. If you let the market decide rates, these malinvestments would not be so widespread.

Try not to get personal this time please.

In normal market conditions what you describe - return on investment would be true.

But we are not in normal market conditions.

To raise interest rates would be absolute madness. The consequences of high interest rates would just about make everything much worse.

Moreover - why should interest rates rise. With all the money slush in the economy there is no need.

Issue once again is to do with distribution of wealth. Think about it. Lots of money in the hands of people who already have it.

Raise rates to reward savers hoarding untold millions and billions. Who is going to invest these savings to reap the returns on capital investment in the time frame to service those rates at these difficult trading period. Not to mention raising exchange rates making exports dearer.


Have you thought and played out the consequences out what you are suggesting before saying I'm talking crap???

 

[Atilla]

Just to reiterate - one of our key problems right now is the skewed distribution of wealth. I'm dissapointed many people here do not know or understand this is precisely what has happened in the way we have dealt with the banks. It will impact our societies for decades to come.

Moreover, this massive redistribution of wealth in our economies has occurred in a very short period of time and its consequences will continue for many years to come unless addressed.

Giving tax cuts will not stimulate spending.
Most people already have what they need. They may want but it's not the same. Tax cuts will probably go to paying off personal debt if any.

Giving money to banks and corporates will not stimulate investment without demand and sound reasons for investment.

Authorities and the public find this key fact difficult to grasp. Gross inequitable redistrubion of wealth is not good for either party.

Equitable redistribution of wealth and repayment of the debt burden is essential part of the solution to our recovery.

I am not a socialist. I am not a capitalist. Nor fascist or communist.

I call things out as I see them with no vested interest based on social-economic considerations to the benefit of all imho.


Yours trully,

 

[barryb]

In normal market conditions what you describe - return on investment would be true.

But we are not in normal market conditions.

To raise interest rates would be absolute madness. The consequences of high interest rates would just about make everything much worse.

Moreover - why should interest rates rise. With all the money slush in the economy there is no need.

Issue once again is to do with distribution of wealth. Think about it. Lots of money in the hands of people who already have it.

Raise rates to reward savers hoarding untold millions and billions. Who is going to invest these savings to reap the returns on capital investment in the time frame to service those rates at these difficult trading period. Not to mention raising exchange rates making exports dearer.


Have you thought and played out the consequences out what you are suggesting before saying I'm talking crap???

Unfortunately the powers that be are between a rock and a hard place. However it's my view, with particular reference to the last decade, government intervention on rates has only compounded our problems which we find ourselves in today.

 

[Pazienza]

Just to reiterate - one of our key problems right now is the skewed distribution of wealth. I'm dissapointed many people here do not know or understand this is precisely what has happened in the way we have dealt with the banks. It will impact our societies for decades to come.

Moreover, this massive redistribution of wealth in our economies has occurred in a very short period of time and its consequences will continue for many years to come unless addressed.

Giving tax cuts will not stimulate spending.
Most people already have what they need. They may want but it's not the same. Tax cuts will probably go to paying off personal debt if any.

Giving money to banks and corporates will not stimulate investment without demand and sound reasons for investment.

Authorities and the public find this key fact difficult to grasp. Gross inequitable redistrubion of wealth is not good for either party.

Equitable redistribution of wealth and repayment of the debt burden is essential part of the solution to our recovery.

I am not a socialist. I am not a capitalist. Nor fascist or communist.

I call things out as I see them with no vested interest based on social-economic considerations to the benefit of all imho.


Yours trully,

What exactly is "equitable redistribution of wealth"?

 

[counter_violent]

What exactly is "equitable redistribution of wealth"?

Well, sounds to me like a conservative "equitable" word used very cleverly so as not to show a left bias. It reminds me of the time Gordon was appointed chancellor and moved straight in on good ole conservative John Major type words like "prudent". 😆😆 socialists/prudent 😆😆 can't stop laughing.

But basically cos atilla is saying it. It means " just hand out cash to anyone who wants it but isn't capable of earning it themselves" no work required🙂

Just for good measure US has had a slap by Standard and Poor's.
http://www.bbc.co.uk/news/world-us-canada-14428930

Also I don't think we all now need to worry about this bit of inflation we saw this year.
It will be interesting to see how all these govt's now deal with the very real threat of another recession / depression and the deflation that will surely come with it.

 

[enragedcow]

So let me get this clear. You are stating the cause and continuing issues we have are due to social services?


To answer your question; on both sides of the pond the US and the UK are trying to get

1. demand in the economy moving &
2. get banks lending to business again as before

Based on all the trillions of billions pumped in either via bailout or QE this hasn't materialised in the last 3-4 years. Has it?


Why do you think that is the case?

Because as per the BoE QE explanation outlined (as per link posted by NT) the transmission mechanism isn't taking a year or two. Not even three.

Reason is based on common sense.

A. Economic activity leads to increased frequency of transactions exchanged and thus increase in money supply.

my fix: increased money demand actually, and at a fixed level of money supply nominal interest rate should increase

B. Any freaking twit who thinks by increasing the supply of money via loose monetary policy one can get economic activity ie frequency of economic transactions going is well deluded to say the best. You can pull a string but pushing it is a whole different kettle of fish. You capiche?

my fix: increase money supply which puts downward pressure on interest rates which should lead to an increase in consumption and in an open economy should lead to a currency depreciation thus improve the trade balance (assuming the marshall lerner condition holds)

I've been trying to figure out the transmission mechanism and other than a few wishy washy statements about replacing paper assets with liquid cash - will get big corporates to spend more money is a load of ********.

If there is no demand and stagnating economic activity why should business invest in expanding output capacity or produce more? You get the picture? Why should banks lend if the books don't add up?

The whole economics is screwed up and makes no freaking sense. All you so called experts and well reasoned and seasoned clever cloggs can obviously see what's right and what's wrong but I don't?


So when you give money to people who already have it they squander it on holidays and expensive purchase items like cars and boats more often than not made abroad so the Balance of Payments deteriates.

When you give money to nurses and dustmen and the low end of the society they spend it on essential items and what they need.

On balance if you want more demand you distribute money to those who don't have it so they can spend.

my fix: no no and no, "distributions" such as welfare payments do not affect demand, government spending does. govt spending is the govt buying goods and services not handing out cash

You give it to well endowed people in the hope they'll do something clever and invest - is just hoping on an ideal outcome which will not happen any time soon. When it does it will be because rest of global economy will finally pull out and we will follow.


Reason why Europe doing better than UK is because their labour and social policies prevent the mass unemployment and firing of staff for short term corporate gain. This is precisely why Germany, France and Italy are doing better than the UK.


Don't forget after Greece, UK is 2nd debtor nation in terms of GDP.

Now there is no socialism here just pure common sense. Cameron said he will keep front line services and better manage civil service without labours quangos.

What we are seeing is the reduction in front line services and having not renewed quangos contracts and after some redundancies news is out the Tory party have hired 3 times the number released.

So go figure the sums.

I'm getting tired of all you bright monkies - I've made my point. Time will tell and show the outcome of these short sighted, biased and skewed policies.


Life is a beach and then one drowns.

Enjoy the swim whilst it lasts. 👍

well that's my fix to a few of your strange comments

please read a few textbooks on macroeconomics before arguing it on the interwebs

btw this isn't a personal attack; i'm not a troll/flamer and realised i've replied to quite an old post lol sorry d00ds