The XYY Man Posted September 19, 2008 Share Posted September 19, 2008 Why Has An Hpc Senior Veteran Not Explained, What is going on in Sept 2008 in simple Laymans terms Because they can't? Far be it from a mere junior like me to speak for them, but I think they already have. Very many times... (Since about 2004 in some cases.) Quote Link to comment Share on other sites More sharing options...
Moo Posted September 19, 2008 Share Posted September 19, 2008 Because they can't?I post on several boards where somebody might have been expected to provide such an explanation, but nobody has. Nor has any link appeared in blogs or counter-culture news sources. I am not convinced that anybody knows what is going to happen. Nothing like this has ever happened before, nobody knows who is telling the truth and who is lying or who understands what and who doesn't. Bang on the money there. So far, as a result of this week, we "know" the following... Investment banking is buggered beyond belief, even the good bits - highly deflationary. If you're in trouble, and you don't buddy up, you're buggered - a bit deflationary. HBOS and Lloyds have merged - highly dubious Paulson wants the US taxpayer to underwrite every dumb choice since 'The Charge of the Light Brigade' - Somewhere between hyperinflationary, and altering the historic ownership of the ****-end of the Crimea. Brown's a cockwad - No change. Half of HPC thinks because Paulson wants to do what Paulson wants to will happen, Brown will write off all mortgages and string renters up by the sex oxgans - totally bloody Emo. Net result = ??? Meh, sit and wait. Quote Link to comment Share on other sites More sharing options...
The XYY Man Posted September 19, 2008 Share Posted September 19, 2008 Kiwi High Gloss Black.I'm sorry, I appear to have had an evening on the sauce. Gerrrawaaaayyy man - no way that New Zealand rubbish beats a genuine 1973 Cherry Blossom... Quote Link to comment Share on other sites More sharing options...
Guest mattsta1964 Posted September 19, 2008 Share Posted September 19, 2008 DStars was a top poster. He was indeed! Shame we don't hear from him these days Quote Link to comment Share on other sites More sharing options...
'Bart' Posted September 20, 2008 Share Posted September 20, 2008 Agreed. I don't miss Bart of Darkness though. He was a wrong'un. Too true. I hear he went "rogue" as a mod and was ceremonially stripped of his rank by Webmaster. No, wait, that was Chuck Conners in .Must be that same rugged jawline that confused me. Quote Link to comment Share on other sites More sharing options...
Moo Posted September 20, 2008 Share Posted September 20, 2008 Gerrrawaaaayyy man - no way that New Zealand rubbish beats a genuine 1973 Cherry Blossom... Can it, you dubiously chromosomed chap, you. Whilst that's a good year, your polish is merely a Shinto cheap-ass poetic device for persuading those from 10 timezones down from here to fly into US carriers. Pah! Me, I can get a high gloss from both shit AND Shinola! Quote Link to comment Share on other sites More sharing options...
Moo Posted September 20, 2008 Share Posted September 20, 2008 Too true. I hear he went "rogue" as a mod and was ceremonially stripped of his rank by Webmaster. Bart Pilereneedown Jennygrade, or whatever it is, if you can get Johnathon Ross to read out this quote live on air, I'll give you my entire Commodities Stash*. * Note : This does not apply if the coalman has actually turned up beforehand, otherwise I'll get really quite miffed. Quote Link to comment Share on other sites More sharing options...
'Bart' Posted September 20, 2008 Share Posted September 20, 2008 Bart Pilereneedown Jennygrade, or whatever it is, if you can get Johnathon Ross to read out this quote live on air, I'll give you my entire Commodities Stash*.* Note : This does not apply if the coalman has actually turned up beforehand, otherwise I'll get really quite miffed. I think your stash is safe old chap. Anyone remember "Branded"? I was only a kid when it was on and used to call it "Brendan", thinking that was the name of the Chuck Connors character (hey, I was only 4 y'know). Quote Link to comment Share on other sites More sharing options...
Guest Steve Cook Posted September 20, 2008 Share Posted September 20, 2008 (edited) Thank you for the compliment of including me on your list. However, in doing so, you credit me with an inteligence and insight I do not posess any more than anyone else on here. I'm just a nerdy little git who posts too much..... I'll give it a go.... we are at the bursting phase of a speculative bubble. This is nothing new and occurs throughout human history. The frequency has increased somewhat over the last few hundred years as our economies have grown and increased in speed themselves. This comes down the large influx of energy into our economies on the back of hydrocarbons. When an economy contracts, there are less legitimate economic places for money to reside. In a fiat based system, this is self regulated by the money supply dropping in order to re-align itself to the economic demand for such money. How does this happen? It happens by the destruction of money via debt default. This is because much of the money supply in a fiat system is actually credit, or "promises to pay". When debts are defaulted on, these promises to pay are defaulted on. They literally wink out of existence. This causes as deflation of supply of the money supply. This brings them money supply back into equilibrium with the economic need for it. When the above happens we all get poorer. By the above, i mean contraction of an economy. The decrease of supply of money is a symptom. not a cause. This includes the bankers as they go bust. Sure depositors lose their deposits. But the bankers also lose their shirts. Then it all starts again. However, there is another outcome that can be manufactured. Again, this is particularly pertinent to fiat based systems. In this, the bankers increase the money supply to cover their losses. The depositors do not lose their deposits. However, their deposits become worth f*ck all. Why? Because if you increase the supply of something in the absence of an increase in the demand for it, then it's exchange value will drop. Money is no exception to this iron economic principle. As there is more money in the system, the exchange value of everything that is exchanged for money will go up to compensate for the fact of a debased currency. In the above manufacture doutcome, the economy still contracts, the same dropping of living standars occurs. however, the bankers avoid their share of it by socialising their losses onto joe public by causing a devaluation of their savings. In the ordinary run of things, as this money enters the economy, everyone gets access to it. So, to some extent, the rising of the price of goods and services is offset by increase in wages. In other words, there is no real difference in the relative spending power of earnings. However, there is a decrease in the spending power of savings. This is offset to some extent by the rise of interest rates in times of monetary inflation. The banks are not doing this to benefit depositors. They are doing this so as to charge borrowers more in order to offset the debased currency they are being paid back on the loans. However, the crisis this time around is so huge, so monumental; that I suspect this money will not filter quickly back into the wider economy. Or at least into yours and my pocket. It will, though, feed back into the worlds markets as the banks seek to invest it in commodities. This will cause a rise in the price of goods and services. However, our wages will not rise in equilibrium. Its called stagflation, at least for the average punter in the street there is also a much bigger picture in the background and it is to do with resource depletion. It is the reason why this bust is going to be so much worse than all that have gone before in human history. But that, and how all I have written so far fits into the current crisis, will have to wait till tomorrow. I'm off to bed... Edited September 20, 2008 by Steve Cook Quote Link to comment Share on other sites More sharing options...
Guest Steve Cook Posted September 20, 2008 Share Posted September 20, 2008 Too true. I hear he went "rogue" as a mod and was ceremonially stripped of his rank by Webmaster.No, wait, that was Chuck Conners in .Must be that same rugged jawline that confused me. Its a good job Dr Who can regenerate... Quote Link to comment Share on other sites More sharing options...
The XYY Man Posted September 20, 2008 Share Posted September 20, 2008 Pah! Me, I can get a high gloss from both shit AND Shinola! Any chance you could provide that service and include a VAT receipt...??? Quote Link to comment Share on other sites More sharing options...
wren Posted September 20, 2008 Share Posted September 20, 2008 Seriously, it would be nice for new visitors and non-finance souls such as myself to have a clear, concise explanation of what is going on in the money markets and what this will cause in say the next 6-12 months in the UK. Crack up Boom. According to von Mises. Quote Link to comment Share on other sites More sharing options...
The XYY Man Posted September 20, 2008 Share Posted September 20, 2008 By seniors I mean the Bloo Loos, Injins and Steve Cooks. Pretty scary public school that is, what with them three as prefects...? Bit like Gary Glitter running Mothercare if you ask me. (Which of course you didn't...) Is Mr Parry the headmaster per chance...? XYY Quote Link to comment Share on other sites More sharing options...
Injin Posted September 20, 2008 Share Posted September 20, 2008 Pretty scary public school that is, what with them three as prefects...?Bit like Gary Glitter running Mothercare if you ask me. (Which of course you didn't...) Is Mr Parry the headmaster per chance...? XYY Bugger off, you! Quote Link to comment Share on other sites More sharing options...
Guest Steve Cook Posted September 20, 2008 Share Posted September 20, 2008 Pretty scary public school that is, what with them three as prefects...?Bit like Gary Glitter running Mothercare if you ask me. (Which of course you didn't...) Is Mr Parry the headmaster per chance...? XYY Quote Link to comment Share on other sites More sharing options...
Minderbinder Posted September 20, 2008 Share Posted September 20, 2008 Getting back to the OP .. its a good question. I'm no HPC vet or ecconomist, but I'll have a crack (since no-one else will) ... - There are various sources of pressure on the financial system. First there's the continued falls in US house prices and escalating mortgage defaults. - That is putting pressure on holders of MBSs. Its forcing them to write-down their asset values (or increase their lies about their asset values). - That is forcing them to raise more capital and preventing them from issuing new loans. - Most of the financials are in this position. - Many banks are now only able to stay out of bankruptcy thanks to loans from the Fed, which they exchanged for their bad loans. - So far, just the process that's been ongoing for months now. But its getting worse. - There is a US election in November. All parties in power there want to keep things together until after the election. Because financial disaster before the election will effectively decide it. - The state of Fannie and Freddie deteriorated so badly that the treasury decided to step in. Paulson fired his bazooka and effectively nationalised the GSEs. - Paulson took steps to protect the government and taxpayer. The nationalization effectively wiped out all GSE shareholders (common and preferred). - Lots of financials hold GSE stock. Its now worthless, so they took another hit. - In wiping out preferred stock, Paulson made it very difficult for financials to raise more capital themselves. They had raised capital by issuing stock. But now it seems, if you are a distressed financial and you require a bailout from the government, then your stockholders are going to lose all their investment. So who is now going to buy new stock issued to raise capital? No-one. - So the banks look shakier still and have had a major fund raising option eliminated. - Lehman (already weak, holding huge amounts of bad paper) is now in trouble. No-one wants to help. Surely the government will bail them (as they've always stepped in so far). The government says no. Lehman files bankruptcy. Every other financial sh*ts bricks. - Financial stocks nose dive, causing even more pressure especially on the weakest. - Merril Lynch agrees to a buy-out by Bank of America. Its suggested this is a shotgun marriage forced by the Fed, before Merrill does a Lehman. - Some large banks share prices (e.g. WaMu) are heading for $0. people are wondering what about depositors? How is the FDIC going to cope? - AIG, one of the world's largest insurance companies, nose dives towards a $0 share price. They cannot find a way to stave off bankruptcy. At pretty much the last minute the Fed (who has no authority to help insurance companies) agrees to provide an $85 billion loan to buy AIG enough time to sell assets and reduce its balance sheet. - The Fed is now pretty much out of money. Notice the Fed bailed AIG, but not Lehman and Merril, because it couldn't afford all. The treasury has to sell bonds to recapitalise the Fed. - Financials share prices still plunging. MS and GS now look to be in deep sh*t. MS is shopping itself around, even talking to a Chinese bank about a buy out. It looks like there will be no investment banks left on wall street. - Paulson, Bernanke get together with various congressional leaders to put together a plan. It seems if something big isn't done immediately, then the entire US financial system will collapse. How's that? Busy couple of weeks. Can't wait to hear the plan. Quote Link to comment Share on other sites More sharing options...
The XYY Man Posted September 20, 2008 Share Posted September 20, 2008 (edited) Hey fair's fair lads - Steve and Injun - with you two as prefects, I can't wait to hear who's on the Board of Governers... Edited September 20, 2008 by The XYY Man Quote Link to comment Share on other sites More sharing options...
Injin Posted September 20, 2008 Share Posted September 20, 2008 Hey fair's fair lads - Steve and Injun - with you two as prefects, I can't wait to hear who's on the Board of Governers... Penfold from the UK and that Chipmuk looking **** from the fed. Quote Link to comment Share on other sites More sharing options...
lordofcolchester Posted September 20, 2008 Share Posted September 20, 2008 (edited) Here goes, as simple as I can make it...... Until the details of the FED rescue plan are known, and more importantly do enough people believe it will work, no one knows what will happen for certain in the next six months. This mess all started way back.. Way back in the 1970's it was very difficult to get a mortgage. Basically, funds were rationed by building societies and people first had to save a meaningful deposit and then get in the queue. Now most people of an Anglo Saxon background have a strange urge to own their own property and this put pressure on financial institutions come up with solutions i.e. find ways to lend more money. Over the years they have done this and basically over the last few years this has been achieved in the following ways: 1. Originate and distribute model (sell mortgages package them up and sell them on via SIVs) 2. Increase the leverage (i.e. give out more mortgages for each portion of capital / funding). Number 1 has lead to a number of problems as banks basically did not care about the quality of the lender and lent money to anyone (sub prime, liar loans etc) as the debt would be passed to someone else. The problem was mad worse by other banks / investment banks buying the CDOs as they were searching for yield in a low interest rate environment. Number 2 has also lead to problems as banks have had to rely on the short term funding market to support their mortgage books and this is generally known as 'professional deposit' money. All these problems did not really matter when house prices were rising as the collateral was good and people struggling to pay their mortgage could always refinance. Now when house prices started to fall and defaults started to occur the losses started. The value of the CDOs etc plummeted. The knock on effect is a loss of capital and the scramble for funds. At the same time the professional depositors (pension funds etc) saw the banks as very risky and decided to stop funding them. All of this meant for the banks they had large losses, either from the fall in value of their CDO portfolio or from their own mortgage book. For banks losses are a killer as they eat in to a bank's capital thus restricting the business they can do in the future (hence all the banks looking for capital via sovereign funds / rights issues). With there also being no funds available to the banks in the money market (from the pension funds etc) banks had a real liquidity problem and became desperate for cash, hence the jumps in LIBOR and the need for governments to issue bonds to banks in exchange for illiquid securities. As I see it, the banks that survive will struggle for the next couple of years at least. They will need to rebuild their balance sheets and generally contract. Companies wanting money to invest are going to have to fight to get it and this will severely restrict the economy in the next couple of years. If the FED plan works as it should and protects the tax payer as much as possible (buy the assets at market value) then some banks will go bust as they will have to record massive losses due to the fact that they have been over valuing all the CDOs etc in order to protect their balance sheets. This has been done by marking-to-model, basically valuing assets at what they want. This should then leave the stronger banks standing but with a restricted lending capacity. Of course the FED and the BoE could end up buying all the crap at face value, bailing out all the banks to start the whole thing again and scr*wing the taxpayer. Edited September 20, 2008 by lordofcolchester Quote Link to comment Share on other sites More sharing options...
UndercoverElephant Posted September 20, 2008 Share Posted September 20, 2008 Far be it from a mere junior like me to speak for them, but I think they already have.Very many times... (Since about 2004 in some cases.) Hey man, until about 48 hours ago I thought I understood it myself. Then the financial system imploded and Hank waved his magic wand... This doesn't make any sense. If Hank's magic wand could have fixed it like this last week, why did he wait until now to wave it? Quote Link to comment Share on other sites More sharing options...
Liquid Goldfish Posted September 20, 2008 Share Posted September 20, 2008 Hey man, until about 48 hours ago I thought I understood it myself. Then the financial system imploded and Hank waved his magic wand...This doesn't make any sense. If Hank's magic wand could have fixed it like this last week, why did he wait until now to wave it? he needed voters to be scared enough to accept and pay for the bailout Quote Link to comment Share on other sites More sharing options...
UndercoverElephant Posted September 20, 2008 Share Posted September 20, 2008 he needed voters to be scared enough to accept and pay for the bailout He doesn't answer to the electorate. This can't have anything to do with the election, can it? I don't think this is political - in the sense that the decisions are not being driven by political considerations. They cannot possibly be, because this is an ideological crisis for the right and we have a right wing president. GWB hasn't got a clue what is going on. Hank Paulson is effectively the President. Quote Link to comment Share on other sites More sharing options...
Liquid Goldfish Posted September 20, 2008 Share Posted September 20, 2008 He doesn't answer to the electorate. This can't have anything to do with the election, can it? I don't think this is political - in the sense that the decisions are not being driven by political considerations. They cannot possibly be, because this is an ideological crisis for the right and we have a right wing president. GWB hasn't got a clue what is going on. Hank Paulson is effectively the President. No, I don't think it's political either I think I really meant that he needs the population to be scared enough to accept what is a truly extraordinary scheme Quote Link to comment Share on other sites More sharing options...
UndercoverElephant Posted September 20, 2008 Share Posted September 20, 2008 No, I don't think it's political eitherI think I really meant that he needs the population to be scared enough to accept what is a truly extraordinary scheme But the population don't have any choice. He only needed GWB to scared enough to be able to do it. One has to wonder what is going on in the mind of GWB. Quote Link to comment Share on other sites More sharing options...
Liquid Goldfish Posted September 20, 2008 Share Posted September 20, 2008 But the population don't have any choice. He only needed GWB to scared enough to be able to do it. One has to wonder what is going on in the mind of GWB. There are always some things the population would balk at - the governemnt has huge leeway to take the piss - but eventually there comes a point when people will riot Quote Link to comment Share on other sites More sharing options...
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