Jump to content


Photo
- - - - -

Getting Closer To My Masterwork


This topic has been archived. This means that you cannot reply to this topic.
75 replies to this topic

#31 StrawDaddy

StrawDaddy

    Stock Proctology Intern

  • Members
  • Pip
  • 103 posts

Posted 19 March 2003 - 12:43 AM

War is not productive, there is no ROI (Return on Investment), ok maybe you can steal some Oil but it's doubtful since along the way you make sooo many enemies that the cost of guarding the oil wipes out most of the "theft bonus".


I would tend to disagree with this statement. I'll have to dig up my uncles journal for an exact qoute of his debunking, from memory, it's the fact that wars goal is the destruction of excesses and unfairness and sets the stage for rebuilding. (not that the reconstruction gets things right).

Also, after reading an article linked from here I'm now appreciating the fact that the war may be about the support of the U.S. dollar and oil is just a side line. Talked to an American Oil Man and he says that the U.S. reserves are basically untapped.

Given HT's scenario recent U.S. efforts may simply be about the dominance of the U.S. dollar.

#32 tpark

tpark

    Bachelor of Stock Proctology

  • Members
  • PipPip
  • 584 posts

Posted 19 March 2003 - 01:22 AM

"My suspicion is that issuers of credit cards will take a beating."

Not, They'll end up holding most houses and real estate and virtually ALL vacation property. They'll sell them later or rent and get their dough back. Plus by the time most people actually file for bankruptcy they've paid most or all of the principal back. And with interest rates at 1.5% the bonkers aren't losing much.

Well, credit card issuers won't get much because such debt is unsecured debt.
If the debtors go down, and da house goes to da bank, unsecured creditors will get very little.
As far as the mortgage holders go, well, in a depression it might be hard to unload those
houses at a good price - look at what happened in Texas, or to the banks in Japan that are
holding all that property. Also, the "cash out refinancing" craze has certainly increased
the exposure of banks to failing debtors. If you can show me a crash cycle where property
prices didn't take a huge hit, I'd be interested in looking at it. After getting
the property, banks will take a big hit, especially if they can't sell it. I'd be interested
in seeing where "by the time most people actually file for bankruptcy they've paid most or all
of the principal back". Most of the information that I've read seems to indicate otherwise, but
its quite possible I've missed something.

"I also question whether the FDIC will cover "
It's just worthless paper. They'll print whatever they need. The days of bank runs ended when Gold backing was removed.

The government sure likes to print money, but I'm sure the raised interest and resulting
devaluation of the currency wouldn't sit too well with bond holders. Todays question is
"Why does the US government borrow rather than print more money?"

Its possible the government could try and inflate their troubles away. I don't know how
probable that is though. Such a deed by the feed would cause trouble indeed.

#33

  • Guests
  • 0 posts

Posted 19 March 2003 - 07:07 AM

Hyper - I assume you've read Billions for the Bankers, Debts for the People.  I For those who haven't, highly recommened this as a start to understanding how the system is rigged and why it will ultimately collapse as surely as an octogenarian chubby at a polar bear swim meet.

Waaaaaahahahahaha. What a load of rubbish.

There is so much nonsense contained in that diatribe it is impossible to tackle everything comprehensively. Nor is there much point because clearly a significant number of people have convinced themselves of the merits of this protest clap-trap. At least I’d like to think it is nothing more sinister than that.

It takes only a little imagination to see that if Congress had been "creating," and spending or issuing into circulation the necessary increase in the money supply, THERE WOULD BE NO NATIONAL DEBT, and the over $4 Trillion of other debts would be practically non-existent. Since there would be no ORIGINAL cost of money except printing, and no CONTINUING costs such as interest, Federal taxes would be almost nil. Money, once in circulation, would remain their and go on serving its purpose as a medium of exchange for generation after generation and century after century, just as coins do now, with NO payments to the Bankers whatever!


The childlike naivety of this supposedly important critique is simply staggering.

Yes, remove the role of banks in the money supply creation process and merely let the Federal government print as much money as they wish and no longer will the populace be beholden to evil bankers. Never mind that this creation of money backed by NOTHING leads to the sort of hyper inflation that would make Germany in the early 1920s look like a model of monetary stability. It would wipe out all savings in a flash and in the same stroke remove any incentive to work and save. How good is that?

But NO is the anguished cry, this was not intended by the founding fathers. Judging by the reverence with which their each and every utterance is held by some they must have been infallible - nay divine - and as fine upstanding eighteenth century gentlemen no doubt had a unique grasp of finance and economics.

However, as it were proof of the pudding is supposedly provided in the article by the startling revelation that banks are solely to blame for the depression because though they had lots of money they refused to lend it out. It is no small wonder that the author has not won the Nobel prize in economics for this stunningly simple analysis which has so eluded the greatest economists of our time. That is unless you take into account the fact that it is a load of bollocks.

In large part thanks to the historically highly fragmented and therefore weak US financial system, in the last half of the 1920s banks were failing at the rate of approximately two a day prior to the 1929 crash. After that things began to get worse. By 1933 bank runs and failures had reached fever pitch to the extent that when Roosevelt came to power one of his first acts was to declare a nationwide bank holiday to stem the emergency. The sign of rich, greedy fat-cat bankers refusing to lend in order to persecute the people? Hardly.

Germany issued debt-free and interest-free money from 1935 and on, accounting for its startling rise from the depression to a world power in 5 years. Germany financed its entire government and war operation from 1935 to 1945 without debt, and it took the whole Capitalist and Communist world to destroy the German power over Europe and bring Europe back under the heel of the Bankers. Such history of money does not even appear in the textbooks of public (government) schools today.


Hmmmm. Well the substance of the claim that the Nazis financed their economic initiatives without debt is an outright lie. Indeed it was this departure from prior policy that allowed for the initiatives to kick start recovery.

But more troubling is the implication of the lie; the Nazis had all the answers?

Hyper, I believe you are misguided but well-meaning. I urge you to exercise extreme caution in who you align yourself with and to act responsibly in thoroughly researching your claims.

In particular I would ask that you consider the role of capital adequacy regulations as imposed by national central banks and the various BIS Basel Accords in placing severe constraints on the potential for monetary expansion through the fractional reserve system, since you are so preoccupied with this.

#34 Sphinxter

Sphinxter

    Doctor of Stock Proctology

  • Members
  • PipPipPipPip
  • 2,083 posts

Posted 19 March 2003 - 08:18 AM

Yes, remove the role of banks in the money supply creation process and merely let the Federal government print as much money as they wish and no longer will the populace be beholden to evil bankers.  Never mind that this creation of money backed by NOTHING leads to the sort of hyper inflation that would make Germany in the early 1920s look like a model of monetary stability.  It would wipe out all savings in a flash and in the same stroke remove any incentive to work and save.  How good is that?

Alrighty then. Major, for us ignoramuses out here, care to explain the fundamental difference between money that is created out of thin air and backed by debt and money that is created out of thin air? Your implication is that the former is good because it is at least backed by something, whereas the second is bad because it will lead to hyperinflation. I simply don't follow your reasoning. At all.

But NO is the anguished cry, this was not intended by the founding fathers. Judging by the reverence with which their each and every utterance is held by some they must have been infallible - nay divine - and as fine upstanding eighteenth century gentlemen no doubt had a unique grasp of finance and economics.


What you've missed here is that the founding fathers were extraordinarily well versed in history and economics. Enough to have seen the countless examples of what happens when monetary policy is ceded to extra-governmental forces. They created the constitutional language they did because they knew full well the dangers of simple paper backed currencies (the 'Continentals' of the times) and the dangers of bankers through their dealings with the predatory BoE. You might want to spend some time checking the history out because it's a great read, you'll learn something, and you'll understand that this isn't 'anguished' whining. It's a belief that finance and economics are simple reflections of human nature/behavior and these characteristics haven't evolved much over the last 250 years. I fully believe that our founding fathers lived in a more reflective and simple time that allowed them to understand human behavior to a far finer degree than our complicated and busy world allows today. So, yeah, compared to Easy Al and Bu$h - I'll take the founding father by a country mile.

However, as it were proof of the pudding is supposedly provided in the article by the startling revelation that banks are solely to blame for the depression because though they had lots of money they refused to lend it out. It is no small wonder that the author has not won the Nobel prize in economics for this stunningly simple analysis which has so eluded the greatest economists of our time. That is unless you take into account the fact that it is a load of bollocks


Nobel prize winning economists have come to the conclusion that the great depression was caused by poor banking policy (see Milton Friedman). This guy isn't one of them...is that a problem? Further, since Nobel Laureate economists have proven to be serious boneheads from time to time (LTCM), we should also consider the works of Professor Murray Rothbard of the Austrian school who meticulously catalogued the reckless monetary expansion and then credit squeeze over the timeframe from 1921 through 1934. Rothbard's are the best and most compelling explanation of the causes of the depression I've seen because they make sense. All the other economists desperately try to find any other cause besides the banking system and they come off looking foolish. Natural business cycles my a**. What a load of rubbish. Here's a great link.

By 1933 bank runs and failures had reached fever pitch to the extent that when Roosevelt came to power one of his first acts was to declare a nationwide bank holiday to stem the emergency. The sign of rich, greedy fat-cat bankers refusing to lend in order to persecute the people? Hardly.


It's true that a bunch of banks failed. It's also true that the great depression saw the one of the greatest transfers of real wealth (property) from private hands to banks in history. Bank of America went from being a cheezy regional job to national prominance on the basis of foreclosing on so much farmland and commercial real-estate. When one considers the fact that bankers 'worked' so hard to create the capital they lent by simply borrowing from the people and then simply making a fractional reserve book entry to create the rest, one can easily conclude that 'greedy' and fat cat' are appropriate terms. At least I can.

In particular I would ask that you consider the role of capital adequacy regulations as imposed by national central banks and the various BIS Basel Accords in placing severe constraints on the potential for monetary expansion through the fractional reserve system


Best. Line. Ever.
:P :P :P :D :D :D

Hyper, I believe you are misguided but well-meaning. I urge you to exercise extreme caution in who you align yourself with and to act responsibly in thoroughly researching your claims.


Truer words were never spoken.

Cheers.

#35 threadbare

threadbare

    Master of Stock Proctology

  • Members
  • PipPipPip
  • 1,232 posts

Posted 19 March 2003 - 01:11 PM

Strawdaddy, War sometimes knocks out excesses. I wouldn't count on it doing so this time. This war will enable large corporations, in bed with the govt, to survive, at the taxpayers expence and do very little for smaller more independant businesses. It's just another example of a transfer of wealth from truly private industry to the military industrial complex. If anything the effect of this war will be to suck the vitality right out of the system. We'll end up with bloated, unregulated virtual monopolies, or cartels, virtually indistinguishable from the govt, in size and competance.

#36 threadbare

threadbare

    Master of Stock Proctology

  • Members
  • PipPipPip
  • 1,232 posts

Posted 19 March 2003 - 01:28 PM

Major Crapper, I like the story about the checks and balances in the banking system. I look forward to your next story, you know the one where the white wizard, Al Greenspan waves his magic wand, makes everyone solvent, and we all live happily ever after. --Wait, I have to get my teddy and cozy slippers for this one.

#37

  • Guests
  • 0 posts

Posted 19 March 2003 - 04:17 PM

Alrighty then.  Major, for us ignoramuses out here, care to explain the fundamental difference between money that is created out of thin air and backed by debt and money that is created out of thin air?  

Since you ask so nicely. Leaving aside some technical and philosophical difficulties let us for a moment assume that Hyper’s mantra that debt is money is created out of thin air holds true. What happens is a borrowing from future earnings with the debt backed by the explicit promise that it will be repaid from this. In other words the bringing forward of money or value-added that does not exist today but will in future.

However, there is an important proviso here; the lender is running a credit risk and if the hoped for materialisation of wealth disappoints and the borrower is unable to repay the debt it will result in a reduction of the lenders net wealth (prior to netting from any security pledges). This means that in the event of debt default the money in simplistic terms initially created will be cancelled out by the money lost by the lender.

In the simpletons utopia described in your party piece, government simply prints money as required and does need to trouble itself with the tiresome burden of having to balance its books through such public inconveniences as collecting future tax receipts. It just prints and spends ad infinitum, literally.

What you've missed here is that the founding fathers were extraordinarily well versed in history and economics


Yah right, not only were they all-knowing and infallible they were also blessed with perfect foresight. And I am expecting a visit from the tooth fairy any day now.

Nobel prize winning economists have come to the conclusion that the great depression was caused by poor banking policy (see Milton Friedman). This guy isn't one of them...is that a problem?


Not in itself, the problem is that his premise is false.

we should also consider the works of Professor Murray Rothbard of the Austrian school who meticulously catalogued the reckless monetary expansion and then credit squeeze over the timeframe from 1921 through 1934.


By all means. There are many varied and subtle causes of the depression but as single issue theories go that is eminently more plausible. However, you are creating a straw man here.

It's true that a bunch of banks failed. It's also true that the great depression saw the one of the greatest transfers of real wealth (property) from private hands to banks in history. Bank of America went from being a cheezy regional job to national prominance on the basis of foreclosing on so much farmland and commercial real-estate.


Well the depression involved very specific problems in the agricultural sector that I won’t go into now but you like many others appear to be suffering from a serious misconception. Assume my net worth is zero; I go to the bank for a 100% mortgage and buy a house. I have a house and I owe a debt for the corresponding value. But my net worth is still zero.

I work hard and gradually repay the mortgage naturally with interest and over time build equity in the home. This gives me net worth. I have benefited from the system in that I have been spared the inconvenience of living in a cardboard box while I saved money to buy a house. You think that is unfair? You think society should be run solely on the basis of charity?

When one considers the fact that bankers 'worked' so hard to create the capital they lent by simply borrowing from the people and then simply making a fractional reserve book entry to create the rest, one can easily conclude that 'greedy' and fat cat' are appropriate terms.


Again a misconception that I mentioned earlier. Banks are running a credit risk every time they make a loan. That means that if the loan turns sour their equity is reduced commensurately. It is the banks shareholder’s net worth that is on the line. Got it?

Debt and equity financing are the basis of a risk taking economy. This is what has enabled a much higher standard of living over the years.

Unfortunately the bubble has clearly allowed the situation to get out of hand and this has been aggravated by lack of political vigilance. Furthermore innovation in financial engineering has allowed banks and debt providers to repackage many credit risks and spread them elsewhere throughout the financial system were regulation is much more lax or non-existent.

But the answer is not to tear down these institutions that despite the prophesies of inevitable doom have evolved successfully over many, many years. The answer is improved regulation; evolution not revolution is the key to successful reform.

#38 Sphinxter

Sphinxter

    Doctor of Stock Proctology

  • Members
  • PipPipPipPip
  • 2,083 posts

Posted 19 March 2003 - 05:02 PM

I work hard and gradually repay the mortgage naturally with interest and over time build equity in the home. This gives me net worth. I have benefited from the system in that I have been spared the inconvenience of living in a cardboard box while I saved money to buy a house. You think that is unfair? You think society should be run solely on the basis of charity?


Well, considering that everytime I make a bad business decision I lose money and/or go out of business and every time the banking industry does the same they get bailed out by me the taxpayer, I would say that, yes, banking is run like a charity. For the rich and well connected.

LTCM, S&L, blah, blah, blah. Some hardship for the boys in pinstripes, I'd say. I could sure use some of that hardship.

In the simpletons utopia described in your party piece, government simply prints money as required and does need to trouble itself with the tiresome burden of having to balance its books through such public inconveniences as collecting future tax receipts. It just prints and spends ad infinitum, literally


No, that wasn't the point. The point was, as long as the government is in the business of running a deficit, why pay interest on the balance? There's still the same impact on money supply only with debt creation there's also the associated interest. Risk? On T-bills? And who said anything about not collecting taxes? The truth is that in 2002, if we didn't have to pay interest, we'd need to collect about $400B less. That's some real change in my world.

The issue of government reckless spending is a true strawman but since you bring it up, I don't see how the gubbmint would necessarily be any more or less reckless under either system.

For a great read on the appropriate role of government and capital markets, I direct you to a piece by Lew Rockwell. He makes the point that the 'central planning' of our monetary supply is no different than the central economic planning of Stalin's socialist dream - and will end about as well.

I'm ready to admit that the current institutions are beyond reform as they are predicated upon a bankrupt set of principles. As soon as market forces are allowed to run their natural courses I'll reconsider. As long as rampant money creation and bailouts are occuring, I won't. Corporate welfare and governmental intrusion on business sucesses/failures simply creates more problems than it solves and inhibits economic advancement.

Of course, I could be wrong.

#39 megabear

megabear

    Stock Proctology Intern

  • Members
  • Pip
  • 318 posts

Posted 19 March 2003 - 09:57 PM

What's it take to get another one of those little blue boxes under HyperTiger's name? That was an awesome thread. Can you imagine we almost lost him a while back; yikes, that would have been a supreme bummer.

Great input from all of you; the greatest group of smart asses on the web!

#40 StrawDaddy

StrawDaddy

    Stock Proctology Intern

  • Members
  • Pip
  • 103 posts

Posted 19 March 2003 - 11:01 PM

If the new money/debt/credit created out of thin air is not greater than or equal to the compound interest due on the previously created money/debt/credit created out of thin air then the debt that is backing up the debt begins to vaporize through default and bankruptcy slow at first and then it gains speed and leads to the final or terminal stage which is…

While some may call HT extreme, I enjoy his insights because it makes me think. (I found a new toy, my brain!)

Is the Finance Chage greater than the Debt?

From federalbudget.com : While the current public deficit is around 6.4 Trillion dollars, according to the linked website, last years Finance Charge on the debt was 333 Billion dollars. The website mentions that interest going to the holders of the national debt. So who holds the notes on national debt and who is it exactly that gets those interest payments?

There is no way to project the interest payments on the national debt because we don't know how long it will take to pay it down. As mentioned recently in this thread it's up to the checks and balances of the banking industry and the FED to keep the whole thing afloat.

If you go to the first page of this thread you'll see that HT lists something called M3 and I've been assuming that's money supply and that since 1960 the M3 has created, per HT "Red boxes represent 1 trillion dollar increments" around 7 new red boxes, or 7 trillion dollars created. So, my next question is this, of the 6.4 Trillion dollars of the federal deficit how much of this amount is contained within the little red boxes printed on HT's chart? I'm guessing none?

If/when the federal deficit is paid down does that add little red boxes to the chart that HT provided?

While those are some data bytes that cause me confusion what I do feel that I have a handle on is consumer debt.

In Japan, consumers became a nation of savers. They paid down their debt and became the worlds greatest cash on hand consumers. Where did it get them?

The feeling I get is that America is about to emulate Japan. American consumers are all about paying debt and they are extremely cautious with taking on new debt. Students, new home buyers, automobile buyers and home improvements are the main reasons for taking on debt for the solvent consumers. Cash flow negative consumers are taking on new debt simply to survive current debt obligations such as those listed in the previous sentence.

Regardless of HT's worst case scenario, after looking at channel drawn out in the inflation adjusted DJIA chart that was linked from this web site and combining it with other information gathered from various sources I am confident that the defining trend in the stock market for the next 20 years is downward. It's a slow motion train wreck.

#41 EasyAl

EasyAl

    Doctor of Stock Proctology

  • Members
  • PipPipPipPip
  • 2,228 posts

Posted 19 March 2003 - 11:01 PM

I'm in the Credit Card industry. In the past few weeks I've noticed an increase of credit tightening among major banks. I've talked to people who've had their lines of credit cut with no notice other than a letter advising them of the cut and the reason. These cuts are appearing from the major banks and it is appears to be a growing trend. The major banks are still offering the ZERO percent balance transfer offers but many of the small players seem to have backed out. Local banks are winning customers with loans based on variable prime (4.25). While the FED has warned banks to cut back on what is esentially interest bearing loans, those loans where 0 principal is payed, one bank in particular seems to be laughing in the face of the FED warning. This particular bank is (imo) notorious for extending huge credit lines, taking on all of a consumers debt, and then raising the rates :-> I expect those practices to bite that particular bank the hardest. These are just my impressions and I'm sure they are slanted because of my closeness to the industry and the fact that it provides my livelyhood.

It seems to me that bank regulators are taking a slow and different method to deal with the loose credit problem. In early 1990s, regulators were blamed to cause credit crunch by going after banks and S&Ls (particularly in CA and New Englad) and hitting them hard in their real estate exposures. This time around, they are hitting them one at a time. For instance, they first went after Providian. Then after Next Card and Capital One. To less extent, they also went after PNC and JPM. What the regulators are doing is to make sure they do not rock the boat so hard so that Wall Street can always say that the problem is unique to one company.

#42 StrawDaddy

StrawDaddy

    Stock Proctology Intern

  • Members
  • Pip
  • 103 posts

Posted 20 March 2003 - 12:18 AM

This time around, they are hitting them one at a time. For instance, they first went after Providian.

I don't name the bank I think most deserving of a whack because as a salesman, I try to avoid spreading bad publicity about the competition. So, I'm inclined to carry that salesmanship over to this message board too.

#43

  • Guests
  • 0 posts

Posted 20 March 2003 - 04:57 AM

Every time the system reached it's maximum potential there was someone like yourself that came out of the shadows to say it's the regulations that are hampering the "free market" and you convince the simpletons that once the regulations are removed everything will be better and sure enough everything works out and a serious study of the mechanics of fractional reserve banking is averted...  

You see this is precisely why I have a problem discussing these issues with you, Hyper. You don’t listen and your mind is closed and hears only what it wants to hear.

If you go back and read what I actually said you will see I am in favour of much more regulation not less.

As far as I am concerned there is no point in continuing this discussion.

#44 Lethal Dose

Lethal Dose

    Stock Proctology Intern

  • Members
  • Pip
  • 98 posts

Posted 20 March 2003 - 06:04 AM

Wowza. And to think i dropped by just to see about a take on tomorrow's market. Hyper, i've enjoyed your posts in intraday stool....never thought I'd get such a comprehensive primer in economics in one place. Thanks for your hard work. I've a lot to digest still, but my gut tells me you should be lionized someday for sounding the alarm. Loved the "herding people into burning pits of diesel oil" line as well! :P

#45 The brown one

The brown one

    Associate Professor of Stock Proctology

  • Members
  • PipPipPipPipPipPip
  • 4,509 posts

Posted 20 March 2003 - 07:49 AM

A magnificent piece of work Hypertiger!

Major Crapper: You mentioned the risk that a bank takes by lending money-well that's in the old days.Now the banks just bundle those risks as Asset Backed Securities and sell it on to some other schmuk-risk gone and if you're still worried about default they'll sell you credit insurance backed by a non-existent Cayman island's company!





Stock market portfolio giving you the runs? See Dr. Stool.

Take a subscribatory!
Download 
The Anals of Stock Proctology now!



The Daily Stool - Stock Market Message Board
Stool's Gold- Gold and Precious Metals Forum
Look Out Below Message Board

Support your local Stool Board.


The Al E. Greenspeuman designer line at Stoolmart. Get yours today! Click here now!
Get Mugged!


Dr. Stool's
Book Search

Enter title, author, or keyword
Just books
All Products





Old Stool Depository

Live Steaming Pile Chart