How the American bankers destroy the world


Status
Not open for further replies.

s598719

New Member
Oct 27, 2006
592
0
0
#1
This is written along the lines of my favorite TV show, Heroes.

It is boom time and the year is 2006. Citibank Financial, the most aggressive mortgage lenders ordered their sales team to sell, sell, sell loans to anyone they know as long as they look like humans. So their agents went to the ghettos to lend to people who has no income (called Ninjas). Why take such big risks (u may ask?)....well, according to these MBA whizzs there are no risk for Citi as they can transfer all risks to foreign investors via securities called CDO. These risky loans are called sub-prime now, and were packaged into paper investments (like bonds) & sold mainly to European banks, Asian banks, rich people (via Citi private bankers).

Fast forward to August 2007, when the first time bomb exploded. Bear Stearns (another American banker) closed two CDO funds as their values plunged. Fast forward to March 2008, Bear Stearns are running out of capital fast .... and they need more injection.

In all these sagas, the individual American bankers all raked in millions of dollars of bonus. CEOs were fired bt not before being paid >$100m. They have just destroyed the global economy and yet they were richly rewarded. They seem to have done more damage than a certain Saudi national now hiding in Afghan.

How have they damaged the world's economy:

1. The US Fed is trying to bail out all these bankers by lowering interest rates. With lower short term rates, banks can borrow cheap and lend out expensive and make a good margin. The problem is that nobody is borrowing except the US govt because everyone is trying to reduce debt.

2. As US rates is likely to dropped all the way to 0%, global interests rates are likely to plunged. Already, Singapore saving rates is less than 1%.

3. With such low rates, global investors are running scare as US$ crashed. As US$ are used global in transactions like commodities, these have risen in prices (every commodities have gone up because US$ crashed ...... oil, wheat, soya, gold).

4. Global inflations are now accelerating. Singapore CPI is expected to go up 6% in 2008 ... we now have severe negative interest rates. Our savings are eroding in value.

5. The world as we know before 2008 has changed forever. We are now entering a period of great uncertainties. From history books, Germany started World War 2 because their economy was in tatters due to high inflation.

6. My view is that US has entered a period of 1930s type depression where unemployment rates were 30%; a heavily armed nation in such depressed state may easily engage in armed conflict. Even when they were booming, they were already in conflict.

7. European nations like Spain & Italy were already in recession as their housing industry plunged. Now they are relying on funding from Germany, who is not too happy I suppose. What will happen to the Euro currency ...... disintegrated?

8. UK & Australia are now heading towards recession ... again, housing is a major contributor.

9. What are the prospects of the housing market in Singapore? Can anyone like to comment ...........
 

night86mare

Deregistered
Aug 25, 2006
25,541
0
0
www.pbase.com
#2
...i won't actually point the finger at individuals just yet; economics is an extremely complex subject that no one has really managed to work out yet, because in reality human behaviour is effectively so erratic that to be honest, there is no solid way of predicting how individuals react, let alone huge groups of mixed individuals with different priorities, different ways of thinking, etc.

that said, definitely there is no excuse for the slipshod attitude in making risky loans with low likelihoods of returns - there is probably no form of logic which would make anything like that sound rational. perhaps someone could come up with one though, but well, given the current state of affairs i don't think any explanation which places it in a positive light is going to sound credible.

nonetheless, the milk has been spilt in many places, at least there is an effort to wipe it up and prevent massive panic and hysteria, which seems to be holding together but could fall apart any moment.

would like to comment that your terminology extremely warped, no offense meant but it just seems like you have mashed together a whole wave of financial times/wall street journal genre and turned it into a hysterical rant. interest rates given by banks are NOT equivalent to savings rate. the savings rate, by definition is basically what is not consumed.. i am pretty sure singaporeans do not consume 99% of their income. you are probably talking about bank interest rates.

on 3, if the us dollar value drops, what one should be concerned about is the real exchange rate, not the nominal exchange rate. while prices might have gone up - unless we are given exact figures for comparison there is no basis to say that commodities have increased in "price", since the price we pay in terms of monetary values are not exactly the price which we pay.. rather we should be thinking of what we are forgoing.

do not rely too much on the consumer price index - it is a silly form of calculation which places emphasis of comparison on past values. simply put, cpi =

price of base year bundles (selection of goods) today / price of base year bundles in the past

if one thinks more than just simply at taking values at face value, just because wanton mee cost $3 now and $0.50 in the past doesn't mean anything at all. if anything, the cpi consistently overstates price inflation and therefore one should not read too much into it and take it as the sole measurement of inflation.

if one examines the history of germany before world war 2, and post world war 1 period, you'd easily see why there is a very very thin fine line where one could compare germany to modern day america. it is so thin that an ant could walk on it and break it - hyperinflation in germany occured because of extreme greed - one could view this as literally, due to the overprinting of money in some spastic german bid to gain more seignorage (or what is known as the inflation tax). a similar situation is seen in the japanese occupation where so many banana notes were printed and used liberally until the value of the banana currency was almost worthless. similarly, the price of a german newspaper went from 0.30 marks to 70 million marks in the span of less than a year. are you seeing that in the us economy? i would think not.. perhaps a better understanding of hyperinflation might help. :)

europe is one nest of.. flies.. that's all i will say, i guess. :dunno:
 

ricohflex

Senior Member
Feb 24, 2005
3,353
8
38
sing
#3
?
don't understand your text. too chim for me.

why do US CEOs earn >US$100M a year?
Because the people there let them do so.

Some grandstanding lady got US$71M to leave the company.
Now I know what they mean when they say...

the Price of failure.

I think US is in a hole in Iraq and they are spending a lot but not getting much results. This is a drain on their wealth.

Sub prime woes?
Don't blame others when we went in with our eyes closed.
 

Silence Sky

Deregistered
Sep 5, 2006
130
0
0
#4
In short, the whole world saved for the Americans to spend! :)

This is written along the lines of my favorite TV show, Heroes.

It is boom time and the year is 2006. Citibank Financial, the most aggressive mortgage lenders ordered their sales team to sell, sell, sell loans to anyone they know as long as they look like humans. So their agents went to the ghettos to lend to people who has no income (called Ninjas). Why take such big risks (u may ask?)....well, according to these MBA whizzs there are no risk for Citi as they can transfer all risks to foreign investors via securities called CDO. These risky loans are called sub-prime now, and were packaged into paper investments (like bonds) & sold mainly to European banks, Asian banks, rich people (via Citi private bankers).

Fast forward to August 2007, when the first time bomb exploded. Bear Stearns (another American banker) closed two CDO funds as their values plunged. Fast forward to March 2008, Bear Stearns are running out of capital fast .... and they need more injection.

In all these sagas, the individual American bankers all raked in millions of dollars of bonus. CEOs were fired bt not before being paid >$100m. They have just destroyed the global economy and yet they were richly rewarded. They seem to have done more damage than a certain Saudi national now hiding in Afghan.

How have they damaged the world's economy:

1. The US Fed is trying to bail out all these bankers by lowering interest rates. With lower short term rates, banks can borrow cheap and lend out expensive and make a good margin. The problem is that nobody is borrowing except the US govt because everyone is trying to reduce debt.

2. As US rates is likely to dropped all the way to 0%, global interests rates are likely to plunged. Already, Singapore saving rates is less than 1%.

3. With such low rates, global investors are running scare as US$ crashed. As US$ are used global in transactions like commodities, these have risen in prices (every commodities have gone up because US$ crashed ...... oil, wheat, soya, gold).

4. Global inflations are now accelerating. Singapore CPI is expected to go up 6% in 2008 ... we now have severe negative interest rates. Our savings are eroding in value.

5. The world as we know before 2008 has changed forever. We are now entering a period of great uncertainties. From history books, Germany started World War 2 because their economy was in tatters due to high inflation.

6. My view is that US has entered a period of 1930s type depression where unemployment rates were 30%; a heavily armed nation in such depressed state may easily engage in armed conflict. Even when they were booming, they were already in conflict.

7. European nations like Spain & Italy were already in recession as their housing industry plunged. Now they are relying on funding from Germany, who is not too happy I suppose. What will happen to the Euro currency ...... disintegrated?

8. UK & Australia are now heading towards recession ... again, housing is a major contributor.

9. What are the prospects of the housing market in Singapore? Can anyone like to comment ...........
 

Silence Sky

Deregistered
Sep 5, 2006
130
0
0
#5
?
don't understand your text. too chim for me.

why do US CEOs earn >US$100M a year?
Because the people there let them do so.

Some grandstanding lady got US$71M to leave the company.
Now I know what they mean when they say...

the Price of failure.

I think US is in a hole in Iraq and they are spending a lot but not getting much results. This is a drain on their wealth.

Sub prime woes?
Don't blame others when we went in with our eyes closed.

I have done the calculation, is it worth while for the American to make war in Iraq.
Oil Price shot up. Guess who benefitted most from the surge in oil price.
The Seven Sisters: Shell, BP, Mobil, chevron ect...
We all know who owned the Seven Sisters.

Lets say, the world produces 5 million barrel a day. An increase of $10 = $50 million additional profit per day.:think:
 

night86mare

Deregistered
Aug 25, 2006
25,541
0
0
www.pbase.com
#6
I have done the calculation, is it worth while for the American to make war in Iraq.
Oil Price shot up. Guess who benefitted most from the surge in oil price.
The Seven Sisters: Shell, BP, Mobil, chevron ect...
We all know who owned the Seven Sisters.

Lets say, the world produces 5 million barrel a day. An increase of $10 = $50 million additional profit per day.:think:
as much as we would like to second guess at american reasons and logic to enter iraq

i think most of us are more than happy that that festering ground has been given something else to play with than the world :dunno:
 

garou12

Deregistered
May 15, 2007
1,644
0
0
#7
?
don't understand your text. too chim for me.

why do US CEOs earn >US$100M a year?
Because the people there let them do so.

Some grandstanding lady got US$71M to leave the company.
Now I know what they mean when they say...

the Price of failure.

I think US is in a hole in Iraq and they are spending a lot but not getting much results. This is a drain on their wealth.

Sub prime woes?
Don't blame others when we went in with our eyes closed.
ITs not a drain on their wealth. its a drain on their people, resources and future considering the american government isn't bankrolling the war. ITs BORROWING money from everyone else to pay for it. If u look at the facts carefully you'll realize this:public America owes everyone money. Think its bad now think how bad it'll be when the debt collectors come calling.
 

wind30

Deregistered
Mar 14, 2004
2,927
0
0
#8
ITs not a drain on their wealth. its a drain on their people, resources and future considering the american government isn't bankrolling the war. ITs BORROWING money from everyone else to pay for it. If u look at the facts carefully you'll realize this:public America owes everyone money. Think its bad now think how bad it'll be when the debt collectors come calling.
actually since they owe everybody money, isn't it brilliant for them to depreciate the currency before paying off?
 

garou12

Deregistered
May 15, 2007
1,644
0
0
#9
actually since they owe everybody money, isn't it brilliant for them to depreciate the currency before paying off?
no because that would put them in a bigger hole. you think people are stupid enuff to lend them in a depreciating currency is it? Only america is smart enuff to give people aid money on the condition that the people receiving the aid money buy american goods only.
 

Jun 1, 2007
71
0
0
Bukit Timah
#10
Moral of story: Hedge in Euro, Aussie or Kiwi over the next couple of months. Let the US go sort itself out first.
 

Silence Sky

Deregistered
Sep 5, 2006
130
0
0
#11
would like to comment that your terminology extremely warped, no offense meant but it just seems like you have mashed together a whole wave of financial times/wall street journal genre and turned it into a hysterical rant. interest rates given by banks are NOT equivalent to savings rate. the savings rate, by definition is basically what is not consumed.. i am pretty sure singaporeans do not consume 99% of their income. you are probably talking about bank interest rates.
Wah... No need to explain until so complicated wah...
Anyone reading this can make out TS is talking about interest rate for saving account lah.:)

on 3, if the us dollar value drops, what one should be concerned about is the real exchange rate, not the nominal exchange rate. while prices might have gone up - unless we are given exact figures for comparison there is no basis to say that commodities have increased in "price", since the price we pay in terms of monetary values are not exactly the price which we pay.. rather we should be thinking of what we are forgoing.
This one also made complicated.
Take the price of commodities as a constant. As an importer or producer, which rate is more important to you?
Next, the increase in price of commodities in the recent years is not due to the weak dallars. All purchaser will point to you it is due to Supply and demand. :)



do not rely too much on the consumer price index - it is a silly form of calculation which places emphasis of comparison on past values. simply put, cpi =

price of base year bundles (selection of goods) today / price of base year bundles in the past

if one thinks more than just simply at taking values at face value, just because wanton mee cost $3 now and $0.50 in the past doesn't mean anything at all. if anything, the cpi consistently overstates price inflation and therefore one should not read too much into it and take it as the sole measurement of inflation.
Ok... CPI is silly, then what is the best model to measure the cost of living? :think:
Last year, wanton mee cost $0.50 and today it costs $3.00. You sure there is no concern?:think:
 

seewhy

New Member
Jan 20, 2005
297
0
0
Singapore
#12
Sub prime woes?
Don't blame others when we went in with our eyes closed.
They did not exactly went in with eyes closed. In fact went in with eyes wide open and did their research, unfortunately, they believed in the wrong advice, namely S&P (the definitive authority in CDO rating). Before Jul07, S&P rated 73 out of 93 CDO subprime with better than A- grade (15/93 = 16% obtaining AAA, the highest grade). So if you would want to put your money some where, you would put it there.

Although S&P is not a bank, they are american, so the thread title is partially right. ;)
 

#13
I have done the calculation, is it worth while for the American to make war in Iraq.
Oil Price shot up. Guess who benefitted most from the surge in oil price.
The Seven Sisters: Shell, BP, Mobil, chevron ect...
We all know who owned the Seven Sisters.
We've always thought that Edison owns the seven sisters. :bsmilie: :bsmilie:
 

night86mare

Deregistered
Aug 25, 2006
25,541
0
0
www.pbase.com
#14
Ok... CPI is silly, then what is the best model to measure the cost of living? :think:
Last year, wanton mee cost $0.50 and today it costs $3.00. You sure there is no concern?:think:
there is no solid model,

since prices expand at different rates, hence the cpi is really silly, it is so silly until it cannot be silly, since certain commodity's prices remain constant, certain commodity's prices drop like hell, certain commodity's prices rise beyond belief.

even if you want to act cool and do a bundle calculation, using BASE YEAR weights is just going to damn your calculations into hell.

think of it this way;

unless the consumer is a mindless jellyfish (though this may be true for some) who repeats his habits from 1950 to 2050 and beyond, and eats wanton mee everyday, how is basing your calculations of inflation going to prove anything? sure, wanton mee may be costing 0.50 last year, and today it costs 3.00. so? are you telling me if the wanton mee sellers jack up their prices you are going to suck your thumb and pay? or are you going to go to the chicken rice seller who only jacked up his price to 1.00? consumers can ADJUST their preferences in response to varying increment in prices. things are also different. saying that buying a car in 1960 is the same as buying a car in 2008 is wrong in so many sense of the word, technologies, research and a lot more has gone into the new car of today to make it a much more valuable asset compared to what it would have cost in 1960, so even IF it costs more in real terms, IT COULD BE JUSTIFIED.

...wasn't it you who claimed that he had studied economics before? i had thought that this would have been covered in first year, frankly. the cpi overstates inflation, the gdp deflator understates inflation, because it uses final year weights. usually researchers try to find a middle ground in between the two.. which would be about right, but it is not necessarily the mean of the two.
 

s598719

New Member
Oct 27, 2006
592
0
0
#15
...i won't actually point the finger at individuals just yet.......
would like to comment that your terminology extremely warped, no offense meant but it just seems like you have mashed together a whole wave of financial times/wall street journal genre and turned it into a hysterical rant........:dunno:
Do note my first line: "This is written along the lines of my favorite TV show, Heroes."

The current saga is worth making into a movie. Like 'Heroes 2', the show began by showing viewers how the world look like in future (humans wiped out by virus) and then the heroes moved back in time to try to prevent this from happening....

What I did was paint a possible bleak future but it may not happen. Think there are enough smart people in this world who could step up and prevent this from happening. However, currently things are getting 'out-of-hand' ---- US$ still dropping, oil still going higher, news on the banks still not getting better. People said US now in recession. News in Singapore that a big foreign buyer of a property project has let their option lapsed .... foreigners bot 6000+ homes in Singapore last year but if their home country property dropped, will they let go here?
 

s598719

New Member
Oct 27, 2006
592
0
0
#16
Today, news reported 3 hedge funds suspend clients from withdrawing their monies. One of them is a giant $12b fund.

Also, last week, one mortgage bond fund default on $16b worth of investments.

A lot of problems on the bonds side, so it is no wonder they are also selling shares to raise $.
 

Silence Sky

Deregistered
Sep 5, 2006
130
0
0
#18
there is no solid model,

since prices expand at different rates, hence the cpi is really silly, it is so silly until it cannot be silly, since certain commodity's prices remain constant, certain commodity's prices drop like hell, certain commodity's prices rise beyond belief.

even if you want to act cool and do a bundle calculation, using BASE YEAR weights is just going to damn your calculations into hell.


In the same tune, would you also say statistical data; Stock Index; GPA; are all silly things?
Since none of the above is a definite representation of the entire population.
 

ricohflex

Senior Member
Feb 24, 2005
3,353
8
38
sing
#19
unfortunately, they believed in the wrong advice, namely S&P (the definitive authority in CDO rating). Before Jul07, S&P rated 73 out of 93 CDO subprime with better than A- grade (15/93 = 16% obtaining AAA, the highest grade). So if you would want to put your money some where, you would put it there.

That is why I never believe in financial advisers/consultants/planners/etc..... who recite these AAA blah, blah,..... and then ask you to BELIEVE them and put your entire life savings in their hands so they can "invest" on your behalf....

By the way life insurance companies before the 2000's called their people insurance agents. Now got name game....they call themselves Financial Planner.

Big deal.

Please ask them to explain in great detail derivatives, CDOs...
maybe some never even heard of Paul Volcker and Alan Greenspan.

And some empire idiot claims he is greater than Warren Buffet.
 

night86mare

Deregistered
Aug 25, 2006
25,541
0
0
www.pbase.com
#20
In the same tune, would you also say statistical data; Stock Index; GPA; are all silly things?
Since none of the above is a definite representation of the entire population.
no, but neither should any smart pants present these as an accurate representation

my point was that cpi =/= inflation, and would tend to overinflate values

i like how you selectively reply, why should i waste my time making wholesome, meaningful replies to one who needs to sustain his own virtual ego? even the threadstarter has not defended his own words as much as you have, it is ironic, and i do not think i really need to take this further, it only proves many things which i shall not say here. cheers.
 

Status
Not open for further replies.
Top Bottom