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Thread: Black Monday 2: Economic Boogaloo

  1. #1651
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    Quote Originally Posted by HenrikOlsen View Post
    They do it by paying politicians to adjust laws to the richest don't have to pay if their accountants know the loopholes.
    Nothing to do with technology.
    I may have been guilty of a cynicism, you may be a fellow cynic, I could not possible say.
    sicut vis videre esto
    When we realize that patterns don't exist in the universe, they are a template that we hold to the universe to make sense of it, it all makes a lot more sense.
    Originally Posted by Ken G

  2. #1652
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    Dunno if Publius will ever come back, but I saw this article and chuckled to myself.
    There's A Huge Party Happening In The Market — And Everyone On Wall Street Is Miserable
    Wall Street workers make money on either volatility (traders) or volume (brokers). At the moment both are shrinking and a graph on the page shows the number of employees on Wall Street is in decline.

    Not sure if this is good or bad. Maybe it will allow common sense to come back. Or maybe it's a symptom of a worsening disease.
    Et tu BAUT? Quantum mutatus ab illo.

  3. #1653
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    Volatility and volume track one another you say? They always have, otherwise why sell. If you have bought at a price and will only make money when that price changes then you don't sell until it does. Fewer traders may be a good thing if there were too many to begin with and they were churning to look busy.

  4. #1654
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    I was just about to dig this thread back up again myself today. I saw links at another forum to articles saying the housing market is "recovering", with house construction or sales at a 6-year high. But nothing was said about any of the systemic debt & borrowing problems that caused the "slump" actually being solved. Last I heard (months to maybe over a year ago), all that was being done was efforts to prop up the same old system while the forces driving the problems in it continue to pile on more weight on top of it. So what's going on

  5. #1655
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    I think we have two fundamental problems; excess capital in search of returns, and a now fully unmasked long-term structural unemployment / low quality employment problem. The first is what creates the pressure against any meaningful reforms of the financial system (which has only had band-aids and is more concentrated than ever, and continues to mix productive and speculative banking.) The second has been trending since the Reagan era, and was hidden by the increasing debt taken on to finance continued consumption.

    About the only suggestion I hear that sounds remotely capable of addressing both income inequality and insufficient investment in physical assets (and so low employment) is a renewed emphasis on infrastructure investment, from reforming buildings for energy use to rebuilding roads and bridges.
    For each man, according to the measure of his intelligence, must speak what he can speak, and do what he can do. - Alfred, King of Wessex
    Calm down, have some dip. -George Carlin

  6. #1656
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    Quote Originally Posted by Delvo View Post
    I was just about to dig this thread back up again myself today. I saw links at another forum to articles saying the housing market is "recovering", with house construction or sales at a 6-year high.
    Construction and sales are very different things with different drivers. In the UK house construction is booming due to government mortgage incentives but sales in some sectors of the market are at best static as people are buying new rather than second hand.

    But nothing was said about any of the systemic debt & borrowing problems that caused the "slump" actually being solved.
    Who says this? The end of self-certification mortgages and reductions in income multipliers greatly reduced new toxic borrowing.

    Last I heard (months to maybe over a year ago), all that was being done was efforts to prop up the same old system while the forces driving the problems in it continue to pile on more weight on top of it. So what's going on
    Where did you hear this?

  7. #1657
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    Quote Originally Posted by Hlafordlaes View Post
    I think we have two fundamental problems; excess capital in search of returns,
    Excess to what? and why is this a problem?

    The first is what creates the pressure against any meaningful reforms of the financial system (which has only had band-aids and is more concentrated than ever, and continues to mix productive and speculative banking.)
    How does it do this?

    About the only suggestion I hear that sounds remotely capable of addressing both income inequality and insufficient investment in physical assets (and so low employment) . . .
    I'm not following this, are you saying that low wages cause low employment, insufficient investment in infrastructure causes low employment or both do? In any case I'd like to know how.

  8. #1658
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    Quote Originally Posted by Heid the Ba' View Post
    Excess to what? and why is this a problem?
    I do not have a link, but in a fairly recent article (last couple of years) published by a friend of mine in El Pais, who is himself a member of the 0.1%, noted that total global financial assets reached something like a 40:1 ratio to tangible assets as of the 2000s.

    How does it do this?
    Excess capital can be pernicious by creating the need for trading instruments that never entail ownership of any real assets; a casino. Trading on the moves in the general market index, rather than in a given stock, is one example of a tradable asset untied to the productive economy, or the infamous CDSs. The separation between casinos (investment funds) and commercial banking that applied under Glass-Steagal was a remedy that helped avoid systemic risks to the productive economy from the "casino." That firewall has not been rebuilt; this time around concentration of assets into fewer institutions was undertaken as the main remedy, thereby increasing systemic risk from any one failure.

    I'm not following this, are you saying that low wages cause low employment, insufficient investment in infrastructure causes low employment or both do? In any case I'd like to know how.
    What I wish to express is that post-industrial economies do not offer the same level of employment that resulted from investments in industrial enterprises (Facebook vs Ford Motor Co.) There is a persistent structural lack of semi-skilled and skilled positions, with a similar erosion in "knowledge" jobs also coming increasingly into play. For the same level of financial capital, we get far fewer jobs. The insufficiencies in aggregate demand that this results in were masked to a degree by ever-increasing private debt over the last 3 decades, which finally became unsustainable.

    Investment in capital goods and infrastructure, since it is both an investment in higher overall long-term productivity as well as a large creator of jobs, is one approach to remedying some of the imbalances. This is achieved via taxation and public spending.
    For each man, according to the measure of his intelligence, must speak what he can speak, and do what he can do. - Alfred, King of Wessex
    Calm down, have some dip. -George Carlin

  9. #1659
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    Quote Originally Posted by Hlafordlaes View Post
    I do not have a link, but in a fairly recent article (last couple of years) published by a friend of mine in El Pais, who is himself a member of the 0.1%, noted that total global financial assets reached something like a 40:1 ratio to tangible assets as of the 2000s.
    Spain has seen a dramatic reduction in financial assets during the recession and is a basket case. I don't follow your (or your friend's) point.

    Excess capital can be pernicious by creating the need for trading instruments that never entail ownership of any real assets; a casino. Trading on the moves in the general market index, rather than in a given stock, is one example of a tradable asset untied to the productive economy, or the infamous CDSs. The separation between casinos (investment funds) and commercial banking that applied under Glass-Steagal was a remedy that helped avoid systemic risks to the productive economy from the "casino." That firewall has not been rebuilt; this time around concentration of assets into fewer institutions was undertaken as the main remedy, thereby increasing systemic risk from any one failure.
    Excess (whatever that means) capital can also be used to invest in infrastructure products, as happens in many countries, it is not intrinsically pernicious. If I have a spare 10 I can give it to charity or buy drugs.

    What I wish to express is that post-industrial economies do not offer the same level of employment that resulted from investments in industrial enterprises (Facebook vs Ford Motor Co.)
    In the first points you were talking about a global model, now you are talking locally. There are plenty of industrial economies in the world.

    There is a persistent structural lack of semi-skilled and skilled positions, with a similar erosion in "knowledge" jobs also coming increasingly into play.
    Only in places where the workforce is tied to an obsolete model. Bangalore has vast numbers of skilled and semi-skilled workers.

    Investment in capital goods and infrastructure, since it is both an investment in higher overall long-term productivity as well as a large creator of jobs, is one approach to remedying some of the imbalances. This is achieved via taxation and public spending.
    To go back to Spain, how many airports have been built that are now too large or completely redundant saddling the local authorities with a debt burden they can't live with? Spending on infrastructure has exacerbated their problems, not helped them.

  10. #1660
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    There are two ways governments get rid of debt and neither involves much repaying. One is inflation and the other is exchange rate devaluation. Unfortunately the latter can become a race to the bottom.

    The global capital chases low wages around the globe in ever faster cycles as the richer countries buy stuff from the low wage poorer countries. Growing economies feed their internal markets and then compete in exports.

    The recent crisis was managed by printing money and this just has to be inflationary, but the printed money was not "helicoptered" to consumers, it was basically fed to the banks to prevent bank collapses.

    The UK is doing quite well and this is partly due to an ironic twist, the banks had to repay billions due to mis-selling of insurance over the previous decade and this was a cash boost to small people who went out and spent their compensation. This while the UK is still a huge debtor internationally but trades on a good credit record. The currently stronger pound can be seen as losing the exchange rate battle with USA and Europe whose currencies are getting more competitive.

    The gap between rich and poor, or the disproportionate hoarding of wealth, in all countries is now at levels that in history promoted revolution and civil war. When food gets scarce or too expensive, that's when the fire sparks into flames.
    sicut vis videre esto
    When we realize that patterns don't exist in the universe, they are a template that we hold to the universe to make sense of it, it all makes a lot more sense.
    Originally Posted by Ken G

  11. #1661
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    Quote Originally Posted by Heid the Ba' View Post
    Spain has seen a dramatic reduction in financial assets during the recession and is a basket case. I don't follow your (or your friend's) point.
    You need to look at global figures, since capital is mobile. Plenty of capital that was invested in Spain has left, but that does not change aggregates.

    Excess (whatever that means) capital can also be used to invest in infrastructure products, as happens in many countries, it is not intrinsically pernicious. If I have a spare 10 I can give it to charity or buy drugs.
    I do not use the term "excess" as a value judgment; rather, as a way to indicate that the diminishing returns on capital limits what can be invested in tangible or productive assets. Excess in this sense is capital seeking returns through purely speculative instruments, or simply retained as cash equivalents.

    In the first points you were talking about a global model, now you are talking locally. There are plenty of industrial economies in the world.
    Yes, yet in aggregate they do not supply enough investment opportunities. The ratio of 40:1 was derived from global, not local, figures.

    Only in places where the workforce is tied to an obsolete model. Bangalore has vast numbers of skilled and semi-skilled workers.
    Very good example of an industrial or pre-industrial economy, where wage levels are low enough to compete with capital goods. Yet even in China, we are already seeing a wide-spread move toward mechanization/automation. Once production has shifted around to the remaining low-wage economies and these reach a working wage level, the pressure of automation arises. The post-industrial, highly automated economy is not a great generator of mass employment.

    To go back to Spain, how many airports have been built that are now too large or completely redundant saddling the local authorities with a debt burden they can't live with? Spending on infrastructure has exacerbated their problems, not helped them.
    The choice of infrastructure projects is vital. Without wishing to discuss politics, the investments you cite did not arise from planning, but from the pressure to dole out funds equitably among autonomies, which like states in the US, clamor for pork. A better example of good infrastructure is the Mediterranean corridor for rail transport, which has been consistently delayed by a central administration seeking to hobble a regional competitor (see widely rejected calls for a rail network coming through the center of the Pyrenees to Madrid as a boondoggle preference resulting from politics, not sound planning.)
    For each man, according to the measure of his intelligence, must speak what he can speak, and do what he can do. - Alfred, King of Wessex
    Calm down, have some dip. -George Carlin

  12. #1662
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    Quote Originally Posted by Heid the Ba' View Post
    Who says this? The end of self-certification mortgages and reductions in income multipliers greatly reduced new toxic borrowing.
    I read somewhere recently, and may have posted it here, that the new trend has been toward building smaller homes as opposed to McMansions. This might result in more new home sales but less economic activity in the sector. I don't know if that's the case, but it could be.
    Et tu BAUT? Quantum mutatus ab illo.

  13. #1663
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    According to this article, 40% of all Home Equity Line of Credit loans will soon enter their repayment phase.
    These loans were taken out during the housing bubble, and it should be interesting to see what the default rate turns out to be.

    But don't worry. According to the article, "Regulators also pledged to thoroughly check banks' programs to control the risk arising from the lines of credit."
    Isn't that like checking the barn door after the horse has wandered off?
    I may have many faults, but being wrong ain't one of them. - Jimmy Hoffa

  14. #1664
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    Yes, interesting to see what will happen now. In Spain, 2013 had the highest rate of mortgage defaults so far in the crisis; worst year ever.
    For each man, according to the measure of his intelligence, must speak what he can speak, and do what he can do. - Alfred, King of Wessex
    Calm down, have some dip. -George Carlin

  15. #1665
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    Quote Originally Posted by Extravoice View Post
    Isn't that like checking the barn door after the horse has wandered off?
    It's like closing the bank vault after the money has wandered off. On second thought, it's not like that, it is that.
    I'm a cynical optimist. I think the only way out is through, but once we get through it'll be better. Very different, but better. Howard Tayler

    It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change. Charles Darwin

    "It is the duty of the writers to seduce me into suspending my disbelief!" Paul Beardsley

    Power, Lord Acton says, corrupts. Not always. What power always does is reveal. Robert A. Caro

  16. #1666
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    New article, new observation: The Next Financial Crisis Is Brewing Right Now, and Regulators Are Missing It

    Regulators agree that newly issued corporate debt, a record amount of it below investment grade, has built up well beyond comfort levels. Investors bought as many so-called “leveraged loans” — junk bonds that offer a higher return because of the higher risk of default — in 2013 than they purchased from 1997 through 2012 combined.
    (emphasis in original was italicized)

    So, any guesses on how are they going to blame consumers for this one?
    Last edited by Ara Pacis; 2014-Jul-04 at 06:23 PM.
    Et tu BAUT? Quantum mutatus ab illo.

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