market stability and market trust, market regulations etc. the recent financial crisis was from abuse from last ten years of deregulation in the financial markets and etc. massive leverage
FUNNNNnnnny interview!!!!!!!! What would it be like if we had a TV station that was informative??? Or a place somewhere to "get it"????
Sorry about double posting. I always find it sort of funny when people say "markets are wrong". Market participants take into consideration information available at the time they are making decisions. When the information changes, market participants change their decisions. This doesn't mean the market is "wrong". The market is not wrong. The information changes. Let's see your list: 1.) Subprime loans were mispriced for a myriad of reasons including mistakes by the government sanctioned credit rating agencies, government guarantees on certain mortgages, lack of capital gains tax on houses vs. other assets, and an overly loose monetary policy by the Fed and other central banks around the world. The unintended consequences of these mostly government attempts to create an outcome it desired, is too many people were lent too much money that will never be paid back. 2.) the $147 oil price reflected demand and supply information at the time and the $42 price reflects supply and demand information now. 3.) Shipping rates. So, you're saying that the market is wrong because it's not clairvoyant? Future shipping rates, like future oil prices, are a best guess by the market based on information known at the time the contract was signed. How is "why was the market wrong about how things will be in the future?" even a valid question? 4.) There may be more defaults than the Great Depression. The GD did not result from an a popping of a bubble and certainly not one that was caused by government meddling in the economy and an overly loose money supply. An economic fact is that you can only consume as much as you produce. Credit changes the timing of consumption, but it doesn't change the fact that consumption must be paid for with production at some point. The bubble burst because we suddenly realized that even without a recession, we couldn't possibly produce enough to repay the loans we have already taken. Thus, you don't even need a recession for defaults to rise. Add a recession to the mix, and defaults could very well top the number during the GD. Or not. I'm not clairvoyant either, but that is market participants' best guess based on the information available to it now. The only way to reflate this entire mess is for government to step in and lend money in place of private lenders. But government will be borrowing from foreigners to do it and it will be borrowing against future production. Remember - the bubble burst because we suddenly realized we couldn't produce enough to pay for the consumption that has already occurred. While government doesn't actually create wealth, it is following the pattern of the Great Depression by directly competing with private industry as well as lending to mostly zombie businesses which clearly know how to do only one thing well - destroy wealth. Where do you suppose the money to repay lenders to the U.S. government will come from? As the borrows too much (the price of CDS on Treasuries is already rising) and more people become reliant on government instead of private industry, creditors will demand a higher interest rate - which the U.S. can't afford. Nervous creditors will pull their money out of Treasuries. That's when we will have a currency crisis characterized by hyper-inflation and asset confiscation by government to pay off creditors. Currency crises happen very fast and without warning. Except for the "sterilization" policies of the Fed in 1930, which decreased the money supply and precipitated the depression, all of Hoover's and FDR's policies were inflationary. Yet, we didn't recover from the GD in real terms until after WWII. Also, reflating is going to be harder now than then. In the GD, the problem was liquidity. Today, the problem is solvency. Thus, I'm not betting on reflation. I think we're going to be in a period of deflation and stagnation and the market will bounce around like a maniac - as it does in the bear markets of the 70s's and the 30's.
Thanks for the link!!! I like Taleb's views and the interview was good. So how many more Black Swan's in the next 12 to 24 months??? :eek: I say at least three more...........so HANG ON! :eek:
I believe you are looking at this from the wrong angle, It does not matter if government or the market is in control stuff needs to go where suff is needed to go to correct future imbalances. The supply of labor will decrease in the western world as more and more people retire, a lot of debt obligations have already been taken on by a lot of people during the debt bubble that no longer is, how convenient. A lot of people trapped, with deflation these same people are trapped harder, they have to work more and consume less than what they can be doing with no deflation or inflation, turns out this is exactly what the world needs when there are fewer and fewer people to work. I will not be surprised at all to see deflation lasting for a long time, and contary to what you seem to think it is in governments interest.
Angrycat The only way to reflate this entire mess is for government to step in and lend money in place of private lenders. But government will be borrowing from foreigners to do it and it will be borrowing against future production. Remember - the bubble burst because we suddenly realized we couldn't produce enough to pay for the consumption that has already occurred. While government doesn't actually create wealth, it is following the pattern of the Great Depression by directly competing with private industry as well as lending to mostly zombie businesses which clearly know how to do only one thing well - destroy wealth. Where do you suppose the money to repay lenders to the U.S. government will come from? As the borrows too much (the price of CDS on Treasuries is already rising) and more people become reliant on government instead of private industry, creditors will demand a higher interest rate - which the U.S. can't afford. Nervous creditors will pull their money out of Treasuries. That's when we will have a currency crisis characterized by hyper-inflation and asset confiscation by government to pay off creditors. Currency crises happen very fast and without warning. Except for the "sterilization" policies of the Fed in 1930, which decreased the money supply and precipitated the depression, all of Hoover's and FDR's policies were inflationary. Yet, we didn't recover from the GD in real terms until after WWII. Also, reflating is going to be harder now than then. In the GD, the problem was liquidity. Today, the problem is solvency. Thus, I'm not betting on reflation. I think we're going to be in a period of deflation and stagnation and the market will bounce around like a maniac - as it does in the bear markets of the 70s's and the 30's. ..................................................................................................... Good post..... Has anyone been privy to studies regarding ¨what if¨ failures by the majority of the US financials ? It seems to me that the bigger financials have blown the majority of the deposits entrusted to them.... The government is just trying to create a long term payback plan.... The deposit holders are just basically replacing their own money lost by others....via government means....
This the MAJOR problem that is going to confront us this time around compared to previous periods. We have to get handle on where the base line of solvency is and the quickest way is to unwind the financial institutions' assets/portfolios and establish a core value. Until that can be achieved , I believe we will wandering around for a couple years in the dark. I am personally against any government interference in the market place, but, unfortunately , it is needed this time. We simply have to nationalize the banking system, redesign the financial structure and gradually mould it into private enterprise over the ensuing years. While this is going on, it will be an ideal time to revamp the tax code..
The bears are staying too late like always. Do they never learn? If this wasn't enough of a disaster that all the bears were expecting, what do they want? I mean, come on, the market priced in armageddon already, they need to cover their shorts. For the market to keep falling at this point, everyone needs to get fired, move out of the city, and stop driving, using electricity, buying food, and live in a cave.