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On January 23 2012 07:37 Gaga wrote:Show nested quote +On January 23 2012 05:51 DoubleReed wrote:The OP is blatantly anti-semetic. The focus on the Rothchilds and his Jewishness, and the whole conspiratorial tone of the post is exactly how these sorts of stories work. Anyone who knows anything about the history of anti-semetism can see this from a mile away. I request that this be closed on those grounds. It should be noted that the American Politicans and presidents fought, and died, to keep this banking system out of America. Andrew Jackson, one of the bravest presidents of all time, managed to abolish the (rothschild controlled) first bank of America. Here are a few Quotes by him: This made me want to puke. You do know Andrew Jackson is wholly responsible for the hideous massacre of the Native Americans, right? The whole "Trail of Tears" thing was him. History does not look upon him fondly. At all. Quoting him (several times mind you) only makes my contempt and disgust of the OP ever clearer. The focus on the rothshilds has nothing with them being jewish ... wtf he barely even mentiones it ... sometimes the anti conspiracy guys are just as paranoid as who they fight, i guess.
Don't you know?
By mentioning the word "jew" and something someone has done wrong you basically become a holocaust supporter.
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On January 23 2012 08:09 Talin wrote:
The OP could have been presented in a much more useful manner. But some of the unnecessary flavor text aside, it is fundamentally correct.
There is a difference between conspiracy theories, and something which is very public, well documented and fairly obvious to anyone that takes an interest in the topic.
Talking about the Freemasons, which are well-known public organization, is different from talking about how they secretly control the world.
The latter is a conspriacy theory, even if it sits on a partly true foundation.
Do you see why this OP is like the latter and not the former?
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On January 23 2012 08:38 Velr wrote:Show nested quote +On January 23 2012 07:37 Gaga wrote:On January 23 2012 05:51 DoubleReed wrote:The OP is blatantly anti-semetic. The focus on the Rothchilds and his Jewishness, and the whole conspiratorial tone of the post is exactly how these sorts of stories work. Anyone who knows anything about the history of anti-semetism can see this from a mile away. I request that this be closed on those grounds. It should be noted that the American Politicans and presidents fought, and died, to keep this banking system out of America. Andrew Jackson, one of the bravest presidents of all time, managed to abolish the (rothschild controlled) first bank of America. Here are a few Quotes by him: This made me want to puke. You do know Andrew Jackson is wholly responsible for the hideous massacre of the Native Americans, right? The whole "Trail of Tears" thing was him. History does not look upon him fondly. At all. Quoting him (several times mind you) only makes my contempt and disgust of the OP ever clearer. The focus on the rothshilds has nothing with them being jewish ... wtf he barely even mentiones it ... sometimes the anti conspiracy guys are just as paranoid as who they fight, i guess. Don't you know? By mentioning the word "jew" and something someone has done wrong you basically become a holocaust supporter.
When someone feels the need to point out someone is jewish, it gets rather obvious, rather fast.
"Obama, a black president, wants to give the US socialist healthcare"
He could have made his entire conspiracy rant without ever mentioning the jews, but for some reason he went out of his way to make sure that people knew they were jews.
Add that to the fact that he is buying into the whole myth that jewish bankers run the world, and you can make a decent guess from which angle he is coming.
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On January 22 2012 23:30 Dark Templar wrote:
Why is this reprehensible anti-semitic, communistic nonsense still up?
User was warned for this post
People like you make me ashamed Im human. GTFO
Guys, calm down. All op is doing is providing us with the facts, nothing wrong with that.
Personally, I find this very interesting
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On January 23 2012 08:45 The_PhaCe wrote:Show nested quote +On January 22 2012 23:30 Dark Templar wrote:
Why is this reprehensible anti-semitic, communistic nonsense still up?
User was warned for this post People like you make me ashamed Im human. GTFO Guys, calm down. All op is doing is providing us with the facts, nothing wrong with that. Personally, I find this very interesting
There are no facts in the OP. It's certainly an interesting read and something to think about, but I don't think that his compiled list of quotes and family anecdotes should be considered facts, at all. Parts might be true, parts might be false, it's impossible to tell - AKA not facts.
Personally, I think it sounds kind of like the plot of Sherlock Holmes 2.
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On January 23 2012 07:36 Nqsty wrote:
Wow another Rothschild thread ?
I really don't get the need to speculate on the whole situation, seriously no one has a CLUE about what's going on.
I have an uncle who is a General Manager at Banque Privee Edmont de Rothschild in Geneva and who has been involved in the firm for over two decades.
I've had a countless amount of conversations on the subject with him, and I'd like to believe he's well informed.
Well guess what, he isn't, no one is, because the secrecy is unbelievable.
There are over 2000 Rothschilds today, and the only thing he was able to say for sure is that the Rothschilds themselves don't fully know how large the extent of their fortune is.
This whole myth is getting on my nerves, drop it, and please don't say retarded stuff like the Rothschilds helped Hitler in his quest for Europe, that's just taking it way too far.
Scholar or no scholar, go back to textbooks and don't try to assess things that aren't assessable.
Edit: I also want to add that the system we have in western countries today isn't capitalism, it's flawed capitalism, draw your conclusions accordingly.
This guy's got a point. If the Rothschilds are as powerful as they seem to be and malevolent to boot, then there is no point discussing it. They are too powerful to defy, we might as well be fighting a God. And merely discussing it might not be the best idea either if it ever does get major attention.
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I agree, we should keep our head down. You dont want to be on the Rotchilds shitlist.
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On January 23 2012 08:34 perser84 wrote:
even if everything the op says is true
there is nothing that we can do about
Born into a world we didnt choose, and a system with the same rules as monopoly,
However we can do something about it. we can do whatever we like.
fuck there rules and norms, and fuck there laws. you where born free and as
long as you respect your fellow humans, the earth and the animals you will be ok.
For to long it has been said that we are small and have no power to change our destiny on this planet.
But dont listen to the demons trying to conform you into a helpless passanger.
Go out and be the change you wanna see in the world, you have one life and one experiance here on
this wonderful planet, dont waste it by letting others controll your thoughts and your destiny.
Your awakening and your actions is of virtue, our children and our species future depends on it.
We CAN and we WILL stop the devilspiders and there controll-web.
May the truth that you seek, shine bright in the path that you follows
and please stand tall everyone and stand up for what you feel is right.
Dont rationalize to much and dont listen to others, inside your soul you have
all the awnsers that you need, let your inner glow take fire and let the fire
guide you as we retake the human spirit and move towards a future that is worth living.
Love and Grace!
Peace from Gaia.
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people just don't understand how banks work ... just a brief thing to notice.
When a bank lends someoney money the borrower offers securities for that loan. Securities that are worth as much as the loan.
Are you serious?
No off course not, the bank lends out tons of loans without anny sufficient collateral at all.
Not every loan is a mortgage and even with mortgages people are often allowed to loan more then the collateral (the house) if their income is good enough
This income isnt a real asset either, since its future income wich has still yet to be earned.
Will try explain the isue, and i will try to keep things simple.
Our society is based on a system of monney creation,
Monney is constantly added into circulation by various means
This system in itself is a good system imo (though manny people wil disagree) since it forces people and monney to be active instead of passive
Also because amount of trade and goods are always on the rise, more monney is needed in the system to prevent deflation (m*v=p*t)
But this is not a discussion about the system, this is a discussion about the banks and why they indeed thieves (lol)
You would think that the creation of monney is something a state should regulate and control, and make profit from,since it influences everything and everyone.
but this is not the case.
what we do now, to simplify it a bit is as follows:
The central bank decides that there needs to be 1 trillion dollar extra in the system for whatever reason
The central bank then lends 1 trillion dollars to commercial banks for 1% interest, the commercial banks then distribute this 1 trillion dollar into loans and bonds, for 3-4% interest.
The central bank (wich is owned by the governments in europe, and by commercial banks in the usa..) profits 1%
The commercial banks, who are basicly nothing more then an intermediate get 3% free (if they lend it out against 4%)
The differerence is pure profit for the bank and an onvoluntary gift from the public
Why are the commercial banks needed to create this monney and reap the huge rewards from it?
Why is this not a state operation and why is the profit of this not going into the treasury?
A few banks have gotten the privilige to create monney long ago and they still have this privilage, draining the economy for a few% a year
Btw i am not a socialist, i love capitalism, but monney creation and the control of it should belong to national states, not private commercial companys.
Look what a mess they made past 10 years,
And last year, GS had 16 BILLION in bonus payments lol, imagine it.
16 billion only in bonusses, not even salarys.
you can give 16.000 people a 1 million dollar bonus,the bank maybe only has like 30k people working for them so you get an idea of how much monney they are pulling.
This is the reason why all smart kids now go study finance.
Years ago, in the "good old times" lol the smart kids went go study engineering .
Engineering realy adds value to the economy, all true wealth increases come from technological progress
Its pretty easy to see that shuffling monney around does not add annything to the real economy.
Capitalism is digging its own grave if they continue like this
sry for long post but this particular isue annoyes me alot.
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On January 23 2012 09:31 Rassy wrote:
what we do now, to simplify it a bit is as follows:
The central bank decides that there needs to be 1 trillion dollar extra in the system for whatever reason
The central bank then lends 1 trillion dollars to commercial banks for 1% interest, the commercial banks then distribute this 1 trillion dollar into loans and bonds, for 3-4% interest.
The central bank (wich is owned by the governments in europe, and by commercial banks in the usa..) profits 1%
The commercial banks, who are basicly nothing more then an intermediate get 3% free (if they lend it out against 4%)
The differerence is pure profit for the bank and an onvoluntary gift from the public
This is not how it works. At least not in the US (EU too if I'm not mistaken). And no the central bank is not owned by commercial banks in the USA. It's owned by the government... ALL profits flow to the US Treasury (over $70 billion in 2010/2011). http://crfb.org/chart/federal-reserve-remittances-treasury
Central banks create money by buying bonds with money that did not exist before. The new money then gets deposited at banks by the seller of the bonds. This money then gets lent out, as needed, into the economy. The process is reversed when central banks tighten.
It's not "free" money to the banks either any more than normal deposits are "free" money to the banks. You are correct that banks earn money on the spread between the interest rate they pay on deposits and they make on loans BUT you need to realize that the spread is not always positive - if a bank today lends money at 3.5% for a 30 year mortgage they earn a nice spread but if interest rates rise that spread can disappear or even go negative as the interest rate on the mortgage is fixed while the interest rate on deposits is not. Also, the bank has expenses that go along with the loans (including defaults) that further eat away at profits.
This is the reason why all smart kids now go study finance. Years ago, in the "good old times" lol the smart kids went go study engineering . Engineering realy adds value to the economy, all true wealth increases come from technological progress Its pretty easy to see that shuffling monney around does not add annything to the real economy. Capitalism is digging its own grave if they continue like this sry for long post but this particular isue annoyes me alot.
Finance does add to the real economy.
Macro:
Good financial markets like we have in the US lower the cost of capital for all businesses which allows them to expand as they are saddled with lower interest payments and investors demand smaller returns on their investments. It also allows for more efficient allocation of capital so US businesses expand to where it will have the biggest positive impact on the economy.
Ex. Apple invests in design, engineering and retail while leaving the near worthless job of final assembly to Chinese firms (Foxconn).
Micro:
Finance also allows for the formation of businesses that would otherwise not exist. In countries with less sophisticated financial systems startup companies are often financed by family money, large existing corporations or just not at all. In the US, Venture Capital firms have allowed for the creation of countless startup firms that simply could not exist otherwise due to the conflicts of interest that arise from simpler forms of financing. This includes large numbers of small companies in biotechnology and other high-tech sciences that are formed by scientists and engineers that are in the top of their field and able to bring valuable new technologies to the economy.
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I worked writing software in a number of banks in the UK, particularly over the recent financial crisis and the things that they would regularly get up to were so abusive it was ridiculous. One particular bank was taking large loans (Hundreds of millions of pounds) from the UK government which was supposed to be to stimulate the business sector, keeping small businesses afloat with lines of credit etc. However, what they did with the money instead was buy up UK government bonds instead, which effectively was lending the money back to the government at a decent rate of interest. They decided this was the best investment because it was essentially risk free.
So, they borrowed from us the people at 0%, lent the back at approximately 4%, and all took fat bonuses off the top, while helping no small businesses. The whole exercise was simply privatizing public wealth.
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On January 23 2012 10:27 DR.Ham wrote:
I worked writing software in a number of banks in the UK, particularly over the recent financial crisis and the things that they would regularly get up to were so abusive it was ridiculous. One particular bank was taking large loans (Hundreds of millions of pounds) from the UK government which was supposed to be to stimulate the business sector, keeping small businesses afloat with lines of credit etc. However, what they did with the money instead was buy up UK government bonds instead, which effectively was lending the money back to the government at a decent rate of interest. They decided this was the best investment because it was essentially risk free.
So, they borrowed from us the people at 0%, lent the back at approximately 4%, and all took fat bonuses off the top, while helping no small businesses. The whole exercise was simply privatizing public wealth.
Was the money lent to the banks by the government or the Bank of England?
If it's from the BOE than no money was take from the people and given to the banks. If this is the case then the government benefited from lower borrowing costs and society pays for it trough higher inflation - which primarily affects the wealthy.
There's really nothing the bank could have done that would have made people happy. If they lent the money to small businesses that went bankrupt (presumably why they didn't make the loans) then people would have complained that they took on excessive risk at the public's expense. By doing the opposite people complain the other way - took too little risk at the public's expense.
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I made it to page 2 before finding something so ridiculous I couldn't not respond. My faith in humanity is dwindling.
On January 22 2012 23:55 Rassy wrote:
Thoose who say an internattional banking conspiracy is retarded realy dont know whats going on.
I cant agree with everything the op writes, i have no clue about the rothshields or rockefellers and their influence.
I do know though,by simply looking at facts wich are made public , that the banking industry somehow manages to get huge amounts of monney for free from the governments.
Like the last action, the 1% loan the central european bank gave to the banks in europe to combat the crisis.
The banks wrote into this loan for a totall of ~ 600 trillion euro giving weak assets as collateral.
The bank then immediatly lends all that monney out again for 3-4% by buying bonds and isueing mortgages.
This is just a free 3% gift to the banks, and with a sum of 600 trillion this amounts to 18 trillion a year income the banks basicly get for free.
There is NO risk, they are even allowed to use verry weak assests (wich have a value lower then then loan) as collateral.
The deal with greece, 60% haircut on the bonds voluntarely, does that not hurt the banks then?
No that does not hurt the banks at all, since the banks get compensated for this (see the 600 trillion loan for 1% amongst other measures), it only hurts the private investors who are forced to go along with the banks and who dont get compensation.
If by "trillion" you mean "billion", then at least the loan commitment was correct ($630Bn to be exact). I'd rather not spend a half our writing an essay that everyone just tl;dr's, so let's just focus on your answer to your own rhetorical question.
(1) Since this is a loan to banks, the value to the bank of getting a loan at 1% isn't $630Bn. Assuming projected rates for Aaa rated corporate bonds between 3.8% and 4.7% (Moody's 2012 projections, the "gift" you're talking about is worth ~$22Bn annually given a 4.5% yield compared to the actual 1% the banks are receiving. These are 36 month facilities. Bank gain: $22Bn per annum, or $66Bn net.
(2) According to BBC in Nov 2011, Greece has about $340Bn of debt outstanding. A 60% haircut is ~$204Bn. The actual haircut is likely to be a real loss of around 65-70%, but we'll give you the 60% for now. Bank loss: $204Bn
I'll let you do the quick arithmetic. Stop making absurd, unsubstantiated claims.
Sincerely,
Your Friendly Neighborhood Banker
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Dude. Wtf. I mean seriously, wtf.
The world of finance is considerably more than the quantity of capital. Like my ex use to say "it's not what you have, it's how you use it". Sure, you can have shit tons of money, but if you don't use it productivly then that shit tons of money will soon be very close to 'no money'. I'm seriously sick of this Rockefeller, Rothschilds and Morgans shit. You conspiricy theorists just can't get enough of them...
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On January 23 2012 10:18 JonnyBNoHo wrote:Show nested quote +On January 23 2012 09:31 Rassy wrote:
what we do now, to simplify it a bit is as follows:
The central bank decides that there needs to be 1 trillion dollar extra in the system for whatever reason
The central bank then lends 1 trillion dollars to commercial banks for 1% interest, the commercial banks then distribute this 1 trillion dollar into loans and bonds, for 3-4% interest.
The central bank (wich is owned by the governments in europe, and by commercial banks in the usa..) profits 1%
The commercial banks, who are basicly nothing more then an intermediate get 3% free (if they lend it out against 4%)
The differerence is pure profit for the bank and an onvoluntary gift from the public This is not how it works. At least not in the US (EU too if I'm not mistaken). And no the central bank is not owned by commercial banks in the USA. It's owned by the government... ALL profits flow to the US Treasury (over $70 billion in 2010/2011). http://crfb.org/chart/federal-reserve-remittances-treasuryCentral banks create money by buying bonds with money that did not exist before. The new money then gets deposited at banks by the seller of the bonds. This money then gets lent out, as needed, into the economy. The process is reversed when central banks tighten. It's not "free" money to the banks either any more than normal deposits are "free" money to the banks. You are correct that banks earn money on the spread between the interest rate they pay on deposits and they make on loans BUT you need to realize that the spread is not always positive - if a bank today lends money at 3.5% for a 30 year mortgage they earn a nice spread but if interest rates rise that spread can disappear or even go negative as the interest rate on the mortgage is fixed while the interest rate on deposits is not. Also, the bank has expenses that go along with the loans (including defaults) that further eat away at profits. Show nested quote +This is the reason why all smart kids now go study finance. Years ago, in the "good old times" lol the smart kids went go study engineering . Engineering realy adds value to the economy, all true wealth increases come from technological progress Its pretty easy to see that shuffling monney around does not add annything to the real economy. Capitalism is digging its own grave if they continue like this sry for long post but this particular isue annoyes me alot. Finance does add to the real economy. Macro: Good financial markets like we have in the US lower the cost of capital for all businesses which allows them to expand as they are saddled with lower interest payments and investors demand smaller returns on their investments. It also allows for more efficient allocation of capital so US businesses expand to where it will have the biggest positive impact on the economy. Ex. Apple invests in design, engineering and retail while leaving the near worthless job of final assembly to Chinese firms (Foxconn). Micro: Finance also allows for the formation of businesses that would otherwise not exist. In countries with less sophisticated financial systems startup companies are often financed by family money, large existing corporations or just not at all. In the US, Venture Capital firms have allowed for the creation of countless startup firms that simply could not exist otherwise due to the conflicts of interest that arise from simpler forms of financing. This includes large numbers of small companies in biotechnology and other high-tech sciences that are formed by scientists and engineers that are in the top of their field and able to bring valuable new technologies to the economy. This deserves a quote.
A job well done, sir! :D
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On January 23 2012 22:43 Yorbon wrote:Show nested quote +On January 23 2012 10:18 JonnyBNoHo wrote:On January 23 2012 09:31 Rassy wrote:
what we do now, to simplify it a bit is as follows:
The central bank decides that there needs to be 1 trillion dollar extra in the system for whatever reason
The central bank then lends 1 trillion dollars to commercial banks for 1% interest, the commercial banks then distribute this 1 trillion dollar into loans and bonds, for 3-4% interest.
The central bank (wich is owned by the governments in europe, and by commercial banks in the usa..) profits 1%
The commercial banks, who are basicly nothing more then an intermediate get 3% free (if they lend it out against 4%)
The differerence is pure profit for the bank and an onvoluntary gift from the public This is not how it works. At least not in the US (EU too if I'm not mistaken). And no the central bank is not owned by commercial banks in the USA. It's owned by the government... ALL profits flow to the US Treasury (over $70 billion in 2010/2011). http://crfb.org/chart/federal-reserve-remittances-treasuryCentral banks create money by buying bonds with money that did not exist before. The new money then gets deposited at banks by the seller of the bonds. This money then gets lent out, as needed, into the economy. The process is reversed when central banks tighten. It's not "free" money to the banks either any more than normal deposits are "free" money to the banks. You are correct that banks earn money on the spread between the interest rate they pay on deposits and they make on loans BUT you need to realize that the spread is not always positive - if a bank today lends money at 3.5% for a 30 year mortgage they earn a nice spread but if interest rates rise that spread can disappear or even go negative as the interest rate on the mortgage is fixed while the interest rate on deposits is not. Also, the bank has expenses that go along with the loans (including defaults) that further eat away at profits. This is the reason why all smart kids now go study finance. Years ago, in the "good old times" lol the smart kids went go study engineering . Engineering realy adds value to the economy, all true wealth increases come from technological progress Its pretty easy to see that shuffling monney around does not add annything to the real economy. Capitalism is digging its own grave if they continue like this sry for long post but this particular isue annoyes me alot. Finance does add to the real economy. Macro: Good financial markets like we have in the US lower the cost of capital for all businesses which allows them to expand as they are saddled with lower interest payments and investors demand smaller returns on their investments. It also allows for more efficient allocation of capital so US businesses expand to where it will have the biggest positive impact on the economy. Ex. Apple invests in design, engineering and retail while leaving the near worthless job of final assembly to Chinese firms (Foxconn). Micro: Finance also allows for the formation of businesses that would otherwise not exist. In countries with less sophisticated financial systems startup companies are often financed by family money, large existing corporations or just not at all. In the US, Venture Capital firms have allowed for the creation of countless startup firms that simply could not exist otherwise due to the conflicts of interest that arise from simpler forms of financing. This includes large numbers of small companies in biotechnology and other high-tech sciences that are formed by scientists and engineers that are in the top of their field and able to bring valuable new technologies to the economy. This deserves a quote. A job well done, sir! :D
Efficient allocation of capital? Sure, if you invest in the conventional sense. But significant trading firms like DE Shaw and Jane Street will trade much more algorithmically/mathematically with astronomical hedging and unbelievably high amounts of day trading to maximize yearly returns (the roster of stocks such a company invests in changes significantly day by day, with no stock holding over 1% of the firm's money). This sounds a good deal less like efficient allocation than it is making sure the stockmarket is pricing things properly to the fraction of a cent (which of course, is also a value added service, but doesn't have quite the same ring to it).
And sure finance is necessary for the modern economy. But when big finance pulls shit like this, finance in its current incarnation seems to detract a lot of the value that it otherwise would have added to the system.
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On January 23 2012 10:18 JonnyBNoHo wrote:Show nested quote +On January 23 2012 09:31 Rassy wrote:
what we do now, to simplify it a bit is as follows:
The central bank decides that there needs to be 1 trillion dollar extra in the system for whatever reason
The central bank then lends 1 trillion dollars to commercial banks for 1% interest, the commercial banks then distribute this 1 trillion dollar into loans and bonds, for 3-4% interest.
The central bank (wich is owned by the governments in europe, and by commercial banks in the usa..) profits 1%
The commercial banks, who are basicly nothing more then an intermediate get 3% free (if they lend it out against 4%)
The differerence is pure profit for the bank and an onvoluntary gift from the public This is not how it works. At least not in the US (EU too if I'm not mistaken). And no the central bank is not owned by commercial banks in the USA. It's owned by the government... ALL profits flow to the US Treasury (over $70 billion in 2010/2011). http://crfb.org/chart/federal-reserve-remittances-treasuryCentral banks create money by buying bonds with money that did not exist before. The new money then gets deposited at banks by the seller of the bonds. This money then gets lent out, as needed, into the economy. The process is reversed when central banks tighten. It's not "free" money to the banks either any more than normal deposits are "free" money to the banks. You are correct that banks earn money on the spread between the interest rate they pay on deposits and they make on loans BUT you need to realize that the spread is not always positive - if a bank today lends money at 3.5% for a 30 year mortgage they earn a nice spread but if interest rates rise that spread can disappear or even go negative as the interest rate on the mortgage is fixed while the interest rate on deposits is not. Also, the bank has expenses that go along with the loans (including defaults) that further eat away at profits. Show nested quote +This is the reason why all smart kids now go study finance. Years ago, in the "good old times" lol the smart kids went go study engineering . Engineering realy adds value to the economy, all true wealth increases come from technological progress Its pretty easy to see that shuffling monney around does not add annything to the real economy. Capitalism is digging its own grave if they continue like this sry for long post but this particular isue annoyes me alot. Finance does add to the real economy. Macro: Good financial markets like we have in the US lower the cost of capital for all businesses which allows them to expand as they are saddled with lower interest payments and investors demand smaller returns on their investments. It also allows for more efficient allocation of capital so US businesses expand to where it will have the biggest positive impact on the economy. Ex. Apple invests in design, engineering and retail while leaving the near worthless job of final assembly to Chinese firms (Foxconn). Micro: Finance also allows for the formation of businesses that would otherwise not exist. In countries with less sophisticated financial systems startup companies are often financed by family money, large existing corporations or just not at all. In the US, Venture Capital firms have allowed for the creation of countless startup firms that simply could not exist otherwise due to the conflicts of interest that arise from simpler forms of financing. This includes large numbers of small companies in biotechnology and other high-tech sciences that are formed by scientists and engineers that are in the top of their field and able to bring valuable new technologies to the economy.
Your first part is mostly true, though i would like to add that the fact that banks can lend from the FED is free money. Its an option they would not have in a free market. Of course if the FED lend rate became too high and they could borrow cheaper elsewhere, thye would probably do it.
However, low cost of capital has little to with sound financial markets. Cost of capital = the return the capital lenders demand. Their decision is obv. based on risk and risk free interest rate. However interest rate can be low, even when there is no savings behind the interest rates. Also remember that bad expections to the future market index decreases cost of capital.
So while you may agree on the above you probably still think low cost of capital = sound financial markets as companies can get moeny easily. However thats actually the opposite way. When companies can get money easily, there is a risk of malinvestments going to happen. I mean if the company can borrow a shitton of money at no interest rates, and then makes a lot of investments, thinking future consumers are going to buy this, then they could very wlel be making a huge mistake. Because the future consumers didn't lend them the money. FED did. Not future consumers, and they do not have any money to buy future products becasue there weren't any savings.
So actually a sound economy is based on high production and high savings rate. Artifically low interest rate = Unsound eco.
And no, all these guys studying keynesian and monetaist theories in school has not added vlaue, but destroyed a shitton of value when trying to manipulate the free market, and hence created financial crises.
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On January 23 2012 23:00 SerpentFlame wrote:Show nested quote +On January 23 2012 22:43 Yorbon wrote:On January 23 2012 10:18 JonnyBNoHo wrote:On January 23 2012 09:31 Rassy wrote:
what we do now, to simplify it a bit is as follows:
The central bank decides that there needs to be 1 trillion dollar extra in the system for whatever reason
The central bank then lends 1 trillion dollars to commercial banks for 1% interest, the commercial banks then distribute this 1 trillion dollar into loans and bonds, for 3-4% interest.
The central bank (wich is owned by the governments in europe, and by commercial banks in the usa..) profits 1%
The commercial banks, who are basicly nothing more then an intermediate get 3% free (if they lend it out against 4%)
The differerence is pure profit for the bank and an onvoluntary gift from the public This is not how it works. At least not in the US (EU too if I'm not mistaken). And no the central bank is not owned by commercial banks in the USA. It's owned by the government... ALL profits flow to the US Treasury (over $70 billion in 2010/2011). http://crfb.org/chart/federal-reserve-remittances-treasuryCentral banks create money by buying bonds with money that did not exist before. The new money then gets deposited at banks by the seller of the bonds. This money then gets lent out, as needed, into the economy. The process is reversed when central banks tighten. It's not "free" money to the banks either any more than normal deposits are "free" money to the banks. You are correct that banks earn money on the spread between the interest rate they pay on deposits and they make on loans BUT you need to realize that the spread is not always positive - if a bank today lends money at 3.5% for a 30 year mortgage they earn a nice spread but if interest rates rise that spread can disappear or even go negative as the interest rate on the mortgage is fixed while the interest rate on deposits is not. Also, the bank has expenses that go along with the loans (including defaults) that further eat away at profits. This is the reason why all smart kids now go study finance. Years ago, in the "good old times" lol the smart kids went go study engineering . Engineering realy adds value to the economy, all true wealth increases come from technological progress Its pretty easy to see that shuffling monney around does not add annything to the real economy. Capitalism is digging its own grave if they continue like this sry for long post but this particular isue annoyes me alot. Finance does add to the real economy. Macro: Good financial markets like we have in the US lower the cost of capital for all businesses which allows them to expand as they are saddled with lower interest payments and investors demand smaller returns on their investments. It also allows for more efficient allocation of capital so US businesses expand to where it will have the biggest positive impact on the economy. Ex. Apple invests in design, engineering and retail while leaving the near worthless job of final assembly to Chinese firms (Foxconn). Micro: Finance also allows for the formation of businesses that would otherwise not exist. In countries with less sophisticated financial systems startup companies are often financed by family money, large existing corporations or just not at all. In the US, Venture Capital firms have allowed for the creation of countless startup firms that simply could not exist otherwise due to the conflicts of interest that arise from simpler forms of financing. This includes large numbers of small companies in biotechnology and other high-tech sciences that are formed by scientists and engineers that are in the top of their field and able to bring valuable new technologies to the economy. This deserves a quote. A job well done, sir! :D Efficient allocation of capital? Sure, if you invest in the conventional sense. But significant trading firms like DE Shaw and Jane Street will trade much more algorithmically/mathematically with astronomical hedging and unbelievably high amounts of day trading to maximize yearly returns (the roster of stocks such a company invests in changes significantly day by day, with no stock holding over 1% of the firm's money). This sounds a good deal less like efficient allocation than it is making sure the stockmarket is pricing things properly to the fraction of a cent (which of course, is also a value added service, but doesn't have quite the same ring to it). And sure finance is necessary for the modern economy. But when big finance pulls shit like this, finance in its current incarnation seems to detract a lot of the value that it otherwise would have added to the system. Sorry, you're quite wrong. Just reread the introduction of the article posted by you, and ask yourself the question why GS wanted to (partly) get rid of the mortgage portfolio.
What GS did is very sensible. I'm too lazy to explain, just figure it out youself.
EDIT: this is about the last part
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On January 23 2012 23:00 SerpentFlame wrote:Show nested quote +On January 23 2012 22:43 Yorbon wrote:On January 23 2012 10:18 JonnyBNoHo wrote:On January 23 2012 09:31 Rassy wrote:
what we do now, to simplify it a bit is as follows:
The central bank decides that there needs to be 1 trillion dollar extra in the system for whatever reason
The central bank then lends 1 trillion dollars to commercial banks for 1% interest, the commercial banks then distribute this 1 trillion dollar into loans and bonds, for 3-4% interest.
The central bank (wich is owned by the governments in europe, and by commercial banks in the usa..) profits 1%
The commercial banks, who are basicly nothing more then an intermediate get 3% free (if they lend it out against 4%)
The differerence is pure profit for the bank and an onvoluntary gift from the public This is not how it works. At least not in the US (EU too if I'm not mistaken). And no the central bank is not owned by commercial banks in the USA. It's owned by the government... ALL profits flow to the US Treasury (over $70 billion in 2010/2011). http://crfb.org/chart/federal-reserve-remittances-treasuryCentral banks create money by buying bonds with money that did not exist before. The new money then gets deposited at banks by the seller of the bonds. This money then gets lent out, as needed, into the economy. The process is reversed when central banks tighten. It's not "free" money to the banks either any more than normal deposits are "free" money to the banks. You are correct that banks earn money on the spread between the interest rate they pay on deposits and they make on loans BUT you need to realize that the spread is not always positive - if a bank today lends money at 3.5% for a 30 year mortgage they earn a nice spread but if interest rates rise that spread can disappear or even go negative as the interest rate on the mortgage is fixed while the interest rate on deposits is not. Also, the bank has expenses that go along with the loans (including defaults) that further eat away at profits. This is the reason why all smart kids now go study finance. Years ago, in the "good old times" lol the smart kids went go study engineering . Engineering realy adds value to the economy, all true wealth increases come from technological progress Its pretty easy to see that shuffling monney around does not add annything to the real economy. Capitalism is digging its own grave if they continue like this sry for long post but this particular isue annoyes me alot. Finance does add to the real economy. Macro: Good financial markets like we have in the US lower the cost of capital for all businesses which allows them to expand as they are saddled with lower interest payments and investors demand smaller returns on their investments. It also allows for more efficient allocation of capital so US businesses expand to where it will have the biggest positive impact on the economy. Ex. Apple invests in design, engineering and retail while leaving the near worthless job of final assembly to Chinese firms (Foxconn). Micro: Finance also allows for the formation of businesses that would otherwise not exist. In countries with less sophisticated financial systems startup companies are often financed by family money, large existing corporations or just not at all. In the US, Venture Capital firms have allowed for the creation of countless startup firms that simply could not exist otherwise due to the conflicts of interest that arise from simpler forms of financing. This includes large numbers of small companies in biotechnology and other high-tech sciences that are formed by scientists and engineers that are in the top of their field and able to bring valuable new technologies to the economy. This deserves a quote. A job well done, sir! :D Efficient allocation of capital? Sure, if you invest in the conventional sense. But significant trading firms like DE Shaw and Jane Street will trade much more algorithmically/mathematically with astronomical hedging and unbelievably high amounts of day trading to maximize yearly returns (the roster of stocks such a company invests in changes significantly day by day, with no stock holding over 1% of the firm's money). This sounds a good deal less like efficient allocation than it is making sure the stockmarket is pricing things properly to the fraction of a cent (which of course, is also a value added service, but doesn't have quite the same ring to it). And sure finance is necessary for the modern economy. But when big finance pulls shit like this, finance in its current incarnation seems to detract a lot of the value that it otherwise would have added to the system.
By and large the people buying those products from GS knew that GS thought mortgages were a bad investment and knew that GS was betting against them.
One person's trash is another person's treasure (depends on the price).
If more investors did the same analysis GS did we wouldn't have had as much excess in the housing market and the subsequent recession would have been less severe.
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On January 23 2012 23:06 Hider wrote:Show nested quote +On January 23 2012 10:18 JonnyBNoHo wrote:On January 23 2012 09:31 Rassy wrote:
what we do now, to simplify it a bit is as follows:
The central bank decides that there needs to be 1 trillion dollar extra in the system for whatever reason
The central bank then lends 1 trillion dollars to commercial banks for 1% interest, the commercial banks then distribute this 1 trillion dollar into loans and bonds, for 3-4% interest.
The central bank (wich is owned by the governments in europe, and by commercial banks in the usa..) profits 1%
The commercial banks, who are basicly nothing more then an intermediate get 3% free (if they lend it out against 4%)
The differerence is pure profit for the bank and an onvoluntary gift from the public This is not how it works. At least not in the US (EU too if I'm not mistaken). And no the central bank is not owned by commercial banks in the USA. It's owned by the government... ALL profits flow to the US Treasury (over $70 billion in 2010/2011). http://crfb.org/chart/federal-reserve-remittances-treasuryCentral banks create money by buying bonds with money that did not exist before. The new money then gets deposited at banks by the seller of the bonds. This money then gets lent out, as needed, into the economy. The process is reversed when central banks tighten. It's not "free" money to the banks either any more than normal deposits are "free" money to the banks. You are correct that banks earn money on the spread between the interest rate they pay on deposits and they make on loans BUT you need to realize that the spread is not always positive - if a bank today lends money at 3.5% for a 30 year mortgage they earn a nice spread but if interest rates rise that spread can disappear or even go negative as the interest rate on the mortgage is fixed while the interest rate on deposits is not. Also, the bank has expenses that go along with the loans (including defaults) that further eat away at profits. This is the reason why all smart kids now go study finance. Years ago, in the "good old times" lol the smart kids went go study engineering . Engineering realy adds value to the economy, all true wealth increases come from technological progress Its pretty easy to see that shuffling monney around does not add annything to the real economy. Capitalism is digging its own grave if they continue like this sry for long post but this particular isue annoyes me alot. Finance does add to the real economy. Macro: Good financial markets like we have in the US lower the cost of capital for all businesses which allows them to expand as they are saddled with lower interest payments and investors demand smaller returns on their investments. It also allows for more efficient allocation of capital so US businesses expand to where it will have the biggest positive impact on the economy. Ex. Apple invests in design, engineering and retail while leaving the near worthless job of final assembly to Chinese firms (Foxconn). Micro: Finance also allows for the formation of businesses that would otherwise not exist. In countries with less sophisticated financial systems startup companies are often financed by family money, large existing corporations or just not at all. In the US, Venture Capital firms have allowed for the creation of countless startup firms that simply could not exist otherwise due to the conflicts of interest that arise from simpler forms of financing. This includes large numbers of small companies in biotechnology and other high-tech sciences that are formed by scientists and engineers that are in the top of their field and able to bring valuable new technologies to the economy. Your first part is mostly true, though i would like to add that the fact that banks can lend from the FED is free money. Its an option they would not have in a free market. Of course if the FED lend rate became too high and they could borrow cheaper elsewhere, thye would probably do it. However, low cost of capital has little to with sound financial markets. Cost of capital = the return the capital lenders demand. Their decision is obv. based on risk and risk free interest rate. However interest rate can be low, even when there is no savings behind the interest rates. Also remember that bad expections to the future market index decreases cost of capital. So while you may agree on the above you probably still think low cost of capital = sound financial markets as companies can get moeny easily. However thats actually the opposite way. When companies can get money easily, there is a risk of malinvestments going to happen. I mean if the company can borrow a shitton of money at no interest rates, and then makes a lot of investments, thinking future consumers are going to buy this, then they could very wlel be making a huge mistake. Because the future consumers didn't lend them the money. FED did. Not future consumers, and they do not have any money to buy future products becasue there weren't any savings. So actually a sound economy is based on high production and high savings rate. Artifically low interest rate = Unsound eco. And no, all these guys studying keynesian and monetaist theories in school has not added vlaue, but destroyed a shitton of value when trying to manipulate the free market, and hence created financial crises.
Typically Fed policy runs in cycles. Currently the yield curve is positive so, yes, the banks can make money lending. This is done to stimulate the economy towards growth. Later in the cycle the Fed will tighten and the yield curve will invert - at which time it will be very bad to be a bank.
http://en.wikipedia.org/wiki/Yield_curve
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EPT
