EPT5 Trillion Dollars - Page 3
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Ecael
United States6703 Posts
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ScarFace
United States1175 Posts
I mean, it seems hard to believe that 5 trillion dollars can just be brushed off casually, that it will only cause a recession in america, and a slow down else where- I think the effects will be BIGGER. Hopefully not great depression big, but still...scary thought. | ||
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dybydx
Canada1764 Posts
On September 18 2008 11:01 CTStalker wrote: a poorly drawn comic that explains the bullshit in a dumbed down way http://docs.google.com/TeamPresent?docid=ddp4zq7n_0cdjsr4fn&skipauth=true&pli=1 its somewhat inaccurate near the end. typically institutional investors are insulated and have indeed purchased an AAA quality mortgage. the original lender is usually the first to get arse raped. | ||
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bdams19
United States1316 Posts
On September 18 2008 11:46 dybydx wrote: its somewhat inaccurate near the end. typically institutional investors are insulated and have indeed purchased an AAA quality mortgage. the original lender is usually the first to get arse raped. lol that shit was so good though quit being a nit | ||
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gchan
United States654 Posts
On September 18 2008 10:24 dybydx wrote: you CAN regulate it. in the early days, the gov prevented banks from overlending by keeping a reserve ratio. the Fed also has a regulation that automatically loan banks money and guarantee deposits up to 100k. all these are regulations aimed that protecting the public and prevent bank failures. likewise, you CAN regulate mortgages by forcing banks to keep a reserve if need be. (ie if u have 100B mortgage outstanding, u need a minimum cash balance of 100M. Well, in theory you can regulate it, but in practicality you can't. The problem with regulating the financial industry is that it changes quicker than the government can keep an eye on it. The government can only do so much because they rely strictly on auditing to see what is going on inside these companies; by the time all the forms are looked and and processed, the data is half a year old and 500 billion dollars undervalued. When you're not working with physical capital, it's very difficult to keep track of everything and thats where the government is limited in it's ability to regulate it. | ||
Smurg
Australia3818 Posts
40% of the government's spending money goes to the military/war effort per year? | ||
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gchan
United States654 Posts
On September 18 2008 09:08 dybydx wrote: gold and silver are the universally accepted currency. the US dollar is backed by the US econ, when the US econ fails, US dollar is just paper money. gold and silver is different. the price of gold relative to US dollar changes each year due to strenght of US econ, but if you compare gold to bread and butter, you will see that the value of gold always raises consistently or stay about the same. 1 once of gold can buy u 100 loaf of bread in 1900, it can still buy you 100 loaf of bread today. in contrast, 1 us dollar buy you 10 loaf of bread in 1900, it buy you 1/2 of a loaf of bread today. thus, when in doubt, covert you cash to gold. thus, unlike paper money (ie US dollar), gold is a hard asset. gold also has alot of industrial and commercial use, so the value of gold never plumets in real term. This is the psychological belief people have behind purchasing gold and silver, but for all intents and purposes, the USD is not just a piece of paper. If the US econ fails and the USD becomes worthless, you will have a lot more to be worried about than just the little hoard of gold you have...which leads to my next point. When you buy gold, you're not actually buying physical gold but a contract that says you own a portion of gold--on the market. If the US economy fails, you can pretty much kiss your contract goodbye as the whole financial system would go down with it. In the larger picture, "buying" gold and silver doesn't really hedge against stock (or other assets). The US, EU, and other players have been pumping so much liquidity into the market the last couple decades that even physical assets and commodities have become as easy to buy and sell as cash. That's kind of what happened with the housing market--because mortgages (which are traditionally long term assets) were so liquid, people swapped and over speculated their actual value. | ||
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dybydx
Canada1764 Posts
On September 18 2008 12:37 gchan wrote: This is the psychological belief people have behind purchasing gold and silver, but for all intents and purposes, the USD is not just a piece of paper. If the US econ fails and the USD becomes worthless, you will have a lot more to be worried about than just the little hoard of gold you have...which leads to my next point. When you buy gold, you're not actually buying physical gold but a contract that says you own a portion of gold--on the market. If the US economy fails, you can pretty much kiss your contract goodbye as the whole financial system would go down with it. In the larger picture, "buying" gold and silver doesn't really hedge against stock (or other assets). The US, EU, and other players have been pumping so much liquidity into the market the last couple decades that even physical assets and commodities have become as easy to buy and sell as cash. That's kind of what happened with the housing market--because mortgages (which are traditionally long term assets) were so liquid, people swapped and over speculated their actual value. my friend, ever been to viet nam? when they say "buy gold" they literally have that bright yellowish dense metal that you can bite into. other nations that had war and inflation troubles often turn back to the gold standard. trust me, it works. just make sure u remember where u buried it and pay ur property tax. ^^ | ||
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dybydx
Canada1764 Posts
On September 18 2008 12:12 gchan wrote: Well, in theory you can regulate it, but in practicality you can't. The problem with regulating the financial industry is that it changes quicker than the government can keep an eye on it. The government can only do so much because they rely strictly on auditing to see what is going on inside these companies; by the time all the forms are looked and and processed, the data is half a year old and 500 billion dollars undervalued. When you're not working with physical capital, it's very difficult to keep track of everything and thats where the government is limited in it's ability to regulate it. 1. in practice, canada regulated it and so did the brits. 2. investors rely on the latest info, often that isnt the audited financial statement. 3. the issue on hand is that these investments are not a direct investment itself. its a derivitive and that translates to higher risk. anyone who isnt willing to bear the risk shouldnt buy it. for this purpose, some investment firms require an acid test before accepting clients. their clients know well what kind of shit they put themselves up against. | ||
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ahrara_
Afghanistan1715 Posts
On September 18 2008 12:37 gchan wrote: This is the psychological belief people have behind purchasing gold and silver, but for all intents and purposes, the USD is not just a piece of paper. If the US econ fails and the USD becomes worthless, you will have a lot more to be worried about than just the little hoard of gold you have...which leads to my next point. When you buy gold, you're not actually buying physical gold but a contract that says you own a portion of gold--on the market. If the US economy fails, you can pretty much kiss your contract goodbye as the whole financial system would go down with it. In the larger picture, "buying" gold and silver doesn't really hedge against stock (or other assets). The US, EU, and other players have been pumping so much liquidity into the market the last couple decades that even physical assets and commodities have become as easy to buy and sell as cash. That's kind of what happened with the housing market--because mortgages (which are traditionally long term assets) were so liquid, people swapped and over speculated their actual value. hey so I have a couple of questions. Monetary theory confuses the shit out of me. Can you explain exactly how the performance of the economy and the value of currency is linked? Why was the dollar on the decline for so long? Why is it going up again? What do you mean by pumping liquidity into the market? is that the same as having lots of very liquid assets? How are mortgages liquid? How does that liquidity lead to overspeculation? | ||
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Not_Computer
Canada2277 Posts
say, "buy crude oil barrels and hide em in your basement" or "buy plutonium and don't tell your neighbours why their lawn is glowing" | ||
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SweeTLemonS[TPR]
11739 Posts
On September 18 2008 11:23 Archaic wrote: Probably doesn't factor in the actual direness of the situation, but it is hilarious. Who cares about the United States economy; China can take over anyways. Far East Asia shall take over the world! It is already starting. World Economy: China Inventions & Innovation: Japan Technology: S. Korea That "political issue" country: N. Korea Cyber Gaming: S. Korea To explain more about the Cyber Gaming community, and how it is taking over... think about Spirit Tournament. They are taking the best from the rest of the world, and containing them in S. Korea training houses. They hire thousands of Dark Archons (As seen in OSL commercials) to maelstrom the pro-gamer material foreigners while the rest of the world deteriorates. They take over, and Far East Asia owns everything, the best of the best of every thing possible on Earth. GG Wow.. didn't I drift off topic.... Yeah.. losing money 'n stuff, US in debt. Bad. You do realize that if the US economy fails, no one will be buying goods anymore, right? We consume 75% of everything, and are China's biggest customer. If we fail, the whole world is fucked. | ||
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dybydx
Canada1764 Posts
On September 18 2008 13:39 Not_Computer wrote: just curious, is there anything you can buy other than gold and silver? i know gold is probably the most "reliable global currency" but i was also thinking about the usefulness of it. say, "buy crude oil barrels and hide em in your basement" or "buy plutonium and don't tell your neighbours why their lawn is glowing" platinum is also good, but its price tend to vary a bit more than gold. platinum itself has industrial use, so its value is justified. like gold, platinum do not "rust" and is much rarer than gold. btw diamond on the otherhand is NOT a good purchase because it can be produced and has little industrial value (other than diamond drills). alternatively, if u got the balls, buy urself a few nuclear weapons. they sell for high prices on the black market. =) and if u cant find a buyer, u can always blackmail someone for money. | ||
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SweeTLemonS[TPR]
11739 Posts
On September 18 2008 13:39 Not_Computer wrote: just curious, is there anything you can buy other than gold and silver? i know gold is probably the most "reliable global currency" but i was also thinking about the usefulness of it. say, "buy crude oil barrels and hide em in your basement" or "buy plutonium and don't tell your neighbours why their lawn is glowing" Here are some other uses, I didn't read all of them. http://en.wikipedia.org/wiki/Gold#Other On September 18 2008 12:19 Smurg wrote: Going to war all the time is expensive. 40% of the government's spending money goes to the military/war effort per year? Uhh, that really has nothing to do with this at all. | ||
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dybydx
Canada1764 Posts
On September 18 2008 13:26 ahrara_ wrote: hey so I have a couple of questions. Monetary theory confuses the shit out of me. Can you explain exactly how the performance of the economy and the value of currency is linked? Why was the dollar on the decline for so long? Why is it going up again? What do you mean by pumping liquidity into the market? is that the same as having lots of very liquid assets? How are mortgages liquid? How does that liquidity lead to overspeculation? economy and us dollar 1. suppose the only thing the US econ can produce is bread, and the US produce 100 bread this year. if there is only $100 USD out there, then 1 USD = 1 bread. next year, the economy becomes "stronger" and US produced 200 bread. this will allow the US gov to print another $100 USD, for a total of $200 USD, and we still have $1 = 1 bread. but if the econ goes shit.... and no bread is produced. then $100 USD is just paper with no value. also if ppl have strong belief that the USD is backed by bread (ie $1 USD = 1 bread), they are sometimes willing to overpay for the USD for the security. this is why the US dollar was going up alot in the 90's 2. lately, the US econ has largely stopped growing, but because of debt, the US gov needs to pay interest. but since the US econ didnt generate more bread, the US gov essentially "printed more money". so now theres $200 USD buy only 100 bread. bread now cost $2 each. so the dollar has declined. 3. in the last few months the USD went up because Feds raised the interest rate. this cause other banks to lend out less money. with less money in the market, the value of each USD goes up. liquidity 1. liquidity means how much cash u got. pumping liquidity means the US gov is loaning money out to the banks, since the banks now have more money, they can lend more money out to borrowers like home buyers, thus more money is available to everyone. mortgages are not liquid because a $1M mortgage takes like 20 years to pay off. so it takes a long time to collect all that cash. having high liquidity is good financial health. low liquidity is bad health. however, having low liquidity allow you to make more money, at the risk of going bankrupt. =) | ||
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Ecael
United States6703 Posts
ahrara, forex is rather weird like that. Currency theoretically reflect the strength of the economy backing, but really it points closer to the relative strength of the particular economy in comparison to another. The decline earlier in the year, particularly from the period after Bear Stearns rescue was due to the relative strength of Europe in comparison to America, and that showed in Q1 growth as well. The recent boom of the dollar was much due to the slowing of growth in Europe as people switched to greenbacks for better security, and as we see now people are switching to the Japanese Yen in favor of the dollar. I am not quite sure as to why gchan worded that part about liquidity like that though, so I'll leave it to him to explain that part better. Not_Computer, crude oil is in many ways more reliant on the industry than gold and silver. EDIT - dybydx...when was the last time we raised rates. And I wouldn't define liquidity like that either. That kind of generalization about liquidity is also particularly misleading. | ||
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gchan
United States654 Posts
On September 18 2008 13:19 dybydx wrote: my friend, ever been to viet nam? when they say "buy gold" they literally have that bright yellowish dense metal that you can bite into. other nations that had war and inflation troubles often turn back to the gold standard. trust me, it works. just make sure u remember where u buried it and pay ur property tax. ^^ Well, some people may actually keep physical gold around as security, but the vast majority of people do not. I think most physical gold is actually held by governments or large organizations (like the IMF, World Bank). But thats besides the point; my point was that dumping a bunch of USD for gold (or other commodities) really does nothing because if the USD defaults/goes bankrupt (which is next to impossible), the rest of the world is pretty much fucked as well. It'll be the equivalent of an economic nuclear holocaust. Case in point, this image indexes the ratio of Dow Jones/ounce of gold. They pretty much, in the long run, go hand in hand | ||
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dybydx
Canada1764 Posts
On September 18 2008 14:02 Ecael wrote: dybydx, if we are going to point at physical objects, it is by far more practical to have life necessities than gold in the case of a financial failure. Should the US financial system crash, even gold in physical form won't be particularly useful. I for one would much rather have stores of food and other necessities to barter with. Caller when he brought up the gold/silver point was much more likely to be pointing at it as a kind of security against inflation rather than the kind of medium of exchange you are suggesting. ahrara, forex is rather weird like that. Currency theoretically reflect the strength of the economy backing, but really it points closer to the relative strength of the particular economy in comparison to another. The decline earlier in the year, particularly from the period after Bear Stearns rescue was due to the relative strength of Europe in comparison to America, and that showed in Q1 growth as well. The recent boom of the dollar was much due to the slowing of growth in Europe as people switched to greenbacks for better security, and as we see now people are switching to the Japanese Yen in favor of the dollar. I am not quite sure as to why gchan worded that part about liquidity like that though, so I'll leave it to him to explain that part better. Not_Computer, crude oil is in many ways more reliant on the industry than gold and silver. EDIT - dybydx...when was the last time we raised rates. 1. food doesnt last very long. it is not a good store of value. gold does not rust, so it stores for a long time. 2. the recent raise in USD isnt just against euro. the USD also raised against gold. i think it has to do with fed raising the rate as well. | ||
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Ecael
United States6703 Posts
The recent raise in USD is indeed not just against the Euro, but Europe as one of the largest economic entities has been lagging, which attributes to the dollar's rise there. I am simply contrasting that with the Yen's latest growths to demonstrate the point of relative security vs actual economic strength. As for rates, we last raised them in 2006. | ||
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dybydx
Canada1764 Posts
On September 18 2008 14:08 gchan wrote: Well, some people may actually keep physical gold around as security, but the vast majority of people do not. I think most physical gold is actually held by governments or large organizations (like the IMF, World Bank). But thats besides the point; my point was that dumping a bunch of USD for gold (or other commodities) really does nothing because if the USD defaults/goes bankrupt (which is next to impossible), the rest of the world is pretty much fucked as well. It'll be the equivalent of an economic nuclear holocaust. Case in point, this image indexes the ratio of Dow Jones/ounce of gold. They pretty much, in the long run, go hand in hand u'd be suprised how many ppl buy bullions. in addition, u have to understand the goal of buying gold is not to make a gazillion dollar, its for protection. (hence u only do it when ur scared, ie in viet nam) in general, even very large investors (ie gov't of USA, China, etc) has a practice of holding gold. | ||
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