Financial topics

[Higgenbotham]

I like the part where it says in so many words that the Bardi was thought to be "too big to fail" so the Florentine government "kicked the can down the road" at taxpayer expense. I know of no other situation in world history this similar to the financial events of 2008-2011.

I think this pattern has been repeated over and over, at least that was my take from reading "This Time is Different". To me the pattern seems to be:

1) Banks take in demand deposits and loan most of them out long term like 10 or 20 years
This is called "fractional reserve banking" but should be called "not matching terms on
deposits and loans" or "fraudulently telling depositors they can take their money at
any time when really the bank is not always able to handle it".
2) At some point banks are sure to get in trouble because there is always some amount
of withdrawls from the demand deposit accounts that they can not handle.
= "Banking Crisis"
3) Government bails out the banks.
4) Government get too much debt and get in trouble = "sovereign debt crisis"
5) Central bank bail out the government = monetizing debt = printing money
6) Currency Crisis

To me it looks like this happens over and over and over again in any place where banks do not match the terms on deposits and loans, which seems to be all Western banking.

http://www.amazon.com/This-Time-Differe ... =pd_cp_b_1

The first difference is the unique conditions existed for the advent and large scale proliferation of derivatives in the financial system. The second difference is this led to tremendous consolidation in the banking system leading up the the crisis so that only a few international scale banks and trading houses remained, who then essentially seized control of the political system. The third difference is that the government (or Central Bank) attempted to backstop the derivatives to keep the key international scale banks and trading houses from unravelling. The fourth difference is that both the 14th Century and current crisis are on a global scale where there are linkages between countries and domino effects. The last difference is that the citizens have not demanded accountability or change until things were in a later stage of decay. So this time really is different in that nothing this similar has been seen for 7 centuries.

The glibness and lack of rigor of these authors, academics in general, leaders, and the citizenry is the reason we're in this very large scale mess. They would prefer to think it's normal folly; it's anything but.

[vincecate]

I like the part where it says in so many words that the Bardi was thought to be "too big to fail" so the Florentine government "kicked the can down the road" at taxpayer expense. I know of no other situation in world history this similar to the financial events of 2008-2011.

I think this pattern has been repeated over and over, at least that was my take from reading "This Time is Different". To me the pattern seems to be:

1) Banks take in demand deposits and loan most of them out long term like 10 or 20 years
This is called "fractional reserve banking" but should be called "not matching terms on
deposits and loans" or "fraudulently telling depositors they can take their money at
any time when really the bank is not always able to handle it".
2) At some point banks are sure to get in trouble because there is always some amount
of withdrawls from the demand deposit accounts that they can not handle.
= "Banking Crisis"
3) Government bails out the banks.
4) Government get too much debt and get in trouble = "sovereign debt crisis"
5) Central bank bail out the government = monetizing debt = printing money
6) Currency Crisis

To me it looks like this happens over and over and over again in any place where banks do not match the terms on deposits and loans, which seems to be all Western banking.

http://www.amazon.com/This-Time-Differe ... =pd_cp_b_1

The first difference is the unique conditions existed for the advent and large scale proliferation of derivatives in the financial system. The second difference is this led to tremendous consolidation in the banking system leading up the the crisis so that only a few international scale banks and trading houses remained, who then essentially seized control of the political system. The third difference is that the government (or Central Bank) attempted to backstop the derivatives to keep the key international scale banks and trading houses from unravelling. The fourth difference is that both the 14th Century and current crisis are on a global scale where there are linkages between countries and domino effects. The last difference is that the citizens have not demanded accountability or change until things were in a later stage of decay. So this time really is different in that nothing this similar has been seen for 7 centuries.

The glibness and lack of rigor of these authors, academics in general, leaders, and the citizenry is the reason we're in this very large scale mess. They would prefer to think it's normal folly; it's anything but.

The scale is far larger than any previous case but the pattern is the same. I think very few people really understand this pattern. The end is always "currency crisis" and that is not the prediction on this board. The funny thing is each time this pattern repeats the people involved think, "this time is different", but it never really is. Because I think I get it, I am betting that the value of the dollar will tank in the next couple years and the price of gold and silver will shoot up. John and many others think gold is a bubble. But John's logic of "regression toward the mean" works with the long term price of gold at $20/oz and silver at $1/oz (really hundreds of years), which I think is silly. We will see who is right.

http://pair.offshore.ai/38yearcycle/#banksgobust

[richard5za]

I just discovered this.

Factually correct (mostly) but presented in very a lop-sided way.

Productivity increases from 1980 were due to technology not employees being down-trodden. Employee compensation over time is a matter of supply and demand (or powerful labour legislation, which America does not have) not greedy employers. More women went to work for the 'good material life' and not because their families had insufficient nutrition. And massive household debt is plain dumb.

Personal debt is a bit like gambling: which is "a tax on people who know not mathematics" (Unless you are the owner of the gambling operation). You need to acquire some debt such as getting a professional qualification, or a mortgage to buy a house when you are in the first half of your life. After that if you have significant levels of debt then 'you either know not mathematics or are in need some personal discipline, or both'. Albert Einstein stated that the eighth wonder of the world was compound interest: With debt its against you, and with saving its for you.

[aedens]

No bigotry. No racialist BS. We are the 99. We don’t tolerate scapegoat blame. My grandparents did what they could. To generalise is tinder to a fire that is sparked by weak people.

http://www.youtube.com/watch?v=VH_DkBI9Qsk

Turnings are as may you live in interesting times.

[richard5za]

I am betting that the value of the dollar will tank in the next couple years and the price of gold and silver will shoot up. John and many others think gold is a bubble.

Expressing a personal view: I don't think that gold is in a bubble yet; its not yet exhibiting typical bubble characteristics. Its anticipating a devalued dollar which is where we are heading now. I don't want to put a $ figure on where gold gets to bubble characteristics because thats too hard to predict; just watch the charts on a daily basis.

If for whatever reason deflation takes a grip then the increasing gold trend will reverse, and John may be right in his prediction which I seem to recall was $ 500. But I think on the balance of probability that you will be right, Vince, that the outcome will be dollar devaluation and very significant inflation.

I am keeping my options open, and believe that quick and high investment flexibility is very important.

Deflation will result either from bad monetary decisons (which is possible if you look at the abysmal decision making thus far in this monetary crisis, especially in Europe) or if a set of circumstances arises that completely overwhelms the monetary authorities.

[OLD1953]

How do you have inflation sans massive borrowing? If it doesn't circulate, it doesn't inflate. Printing money now is done via the banks making loans, and that isn't happening.

[Higgenbotham]

The end is always "currency crisis" and that is not the prediction on this board. The funny thing is each time this pattern repeats the people involved think, "this time is different", but it never really is. Because I think I get it, I am betting that the value of the dollar will tank in the next couple years and the price of gold and silver will shoot up.

Throughout the entire Fourteenth Century, both pre-collapse and post-collapse, the Venetian bond market was relatively stable. Throughout the entire early 20th Century crisis, until the end of World War II, the British pound was relatively stable. The interesting thing at this point to me is that the dollar has been relatively stable these past 2 years despite predictions to the contrary in both directions.

This year has been an interesting case in point too. Earlier in the year, many informed investors, including the "Bond KIng" Bill Gross, expected that the US bond market would weaken. Instead, it has strengthened immensely. And many were looking for stocks to crash further in October, but they didn't.

You said that a "currency crisis" is not the prediction on this board. Speaking only for myself, generally that has not been my prediction within your earlier mentioned time frame of 2012, but there was a period in April where I mentioned that the door looked to be open to hyperinflation and then it quickly shut, which was when I sold all my metals. But I have said that the ultimate outcome will be hyperinflation. I may be dead before it happens though.

[vincecate]

The end is always "currency crisis" and that is not the prediction on this board. The funny thing is each time this pattern repeats the people involved think, "this time is different", but it never really is. Because I think I get it, I am betting that the value of the dollar will tank in the next couple years and the price of gold and silver will shoot up.

You said that a "currency crisis" is not the prediction on this board. Speaking only for myself, generally that has not been my prediction within your earlier mentioned time frame of 2012, but there was a period in April where I mentioned that the door looked to be open to hyperinflation and then it quickly shut, which was when I sold all my metals. But I have said that the ultimate outcome will be hyperinflation. I may be dead before it happens though.

The banking crisis, sovereign debt crisis, and currency crisis seem to follow each other with only a couple years lag. Do you know of a major banking crisis, followed by sovereign debt crisis, where there was a long time before a currency crisis, other than Japan?

[Higgenbotham]

The banking crisis, sovereign debt crisis, and currency crisis seem to follow each other with only a couple years lag. Do you know of a major banking crisis, followed by sovereign debt crisis, where there was a long time before a currency crisis, other than Japan?

Are you saying a banking crisis happened in 2008? I'm saying it still hasn't happened yet. Yesterday I said the generational panic didn't happen in 2008.

[jdcpapa]

I just discovered this.

Factually correct (mostly) but presented in very a lop-sided way.

There is much to be said about the graph, I agree. However, I find it very interesting that the top "1%" of today are now reaching the pre-depression era (1928)peak level. So here are examples of history repeating itself. In the pre-depression era, we had a credit/housing crisis. It is a revelation to me that the top "1%" peaked pre-depression. The present mood of the generations is swinging against the top "1%". This is a clear indicator of things to come, in my view.