Give the super rich austerity

Now by that, I am not talking about taxing millionaires more, instead I am takking about we the people refusing to pay the credit default swaps anymore.

Banks magic the money up, it's been illustrated that they are basically insolvent anyways, most are running on life support machines. So burn the bonds, it's simple, it's either them or us.

 

Who has issued the CDS and who is paying - do you have a clue what you are talking about??!!

Quite frankly, you clearly don't have a clue...Burn which bonds, issued by who? Who loses in that scenario?


Sidicks

 

Let me rephrase that, we are paying for the debts in a system where the wealth is being plundered through this scam. So when I said refusing to pay for the credit default swaps, what I meant was a result of this scam, we are paying for increasingly high "risk' through higher bonds.

Against an ever increasing interest rate payment, it's just simple a way of looting and what's more, with so many of the banking system now on a life support machine, they need to be buried. The credit defaults are just a scam!, everything is so highly leveraged, that the credit default isn't worth the notional amount of paper it's printed on. So in reality it really does not provide any insurance.

As for not knowing what I am talking about, you are the one who couldn't see the problematic feature of having thousands of derivative products where in essence the same debt is wrapped up over and over again and is then highly leveraged. The banks are insolvent, let me just refer you to this again....

Josef Ackermann, chief executive of Deutsche Bank, Germany's biggest bank, has warned that "numerous" European lenders would collapse if they were forced to book their losses on stricken sovereign bonds.

Mr Ackermann said that the value of billions of euros of loans has plunged to a level that could overwhelm smaller banks. "Numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels."

Now the fraud is out the way, all of Europe must default on the bonds.

 

When I think of the "super rich" the person that swims into mind is this [-]gnome[/-] man.



Please could you explain the impact of your plan on him as I don't know if he has anything invested in credit default swaps.

 

Who is 'we'?

Who is gaining from the CDS?

What 'ever increasing interest rate' are you talking about??

Makes no sense.

Well, one of us has derivative qualifications and works with derivatives on a daily basis. The other doesn't....

So basically all banks would be insolvent, all pension funds, all insurance companies and many other investors that have invested in 'safe' assets, driven by regulations that required them to invest in these assets.

And you think this is a good thing??

Sidicks

 

The ones "insuring" are sucking money out of the system.

That's great, you work with derivatives, what's your point? they are just a vehicle to package debts, the same debts over and over again.

The ever increasing interest rates which are now being seen across Europe and will soon hit here too.

The leverage is so great, that if a country should default, the cd's will mean nothing. Hence they are a parasitical scam as far as sovereign debt is concerned.

I think it's a great thing when this wretched stinking fraudulent system goes POP.

No one has a right to expect a return from a bond.

However sure, ordinary investors, should be protected

At that point, we have to ensure that sovereign debt becomes a thing of the past by issuing money without debt.

 

No they aren't. There are a huge range of derivatives, most of which don't relate to debt!

HTH

You mean bond yields?

 

Yes, the ever increasing interest which parties are seeking to purchase bonds which is meant to be representative of the risk.

 

So no-one will ever lend to anyone ever??

What is an 'ordinary investor'?
How can they be protected?

So you think we should just print money and you don't see any problems with that ?!

 

Sidicks youre been a bit simplistic.

The derivatives market was created in the US by & for the farmers to protect themselves against the vagaries of weather and drops in the prices of their commodities.

This idea got seized upon by the banks. The lady in charge of regulation of the market, a certain Brooksley Born, was head of the CTFC. The way she was ousted is worthy of any persons research into the bubble of the derivatives market.

CDS's are in themselves toxic assets. a mortgage cannot become a part of any CDS (Credit Default Swap) until the payee has missed at least 2 mortgage payments. Only investment houses were able to buy and trade in them, due to the risks attatched. How on earth they managed to end up with AAA ratings is anyones guess, but worthy of massive judicial inquiries.

Money is created out of thin air. I can reference the BOE 2008 quarterly bulletin to prove it. Money is created simply by increasing the amount (digits) in a persons current account. As soon as the money is created (by loan of course, money is only ever created by debt) the bank is then free to leverage 9 x or more of the value in the new debtors account by way of fractional reserve banking.

Now you know why when you default on credit, you get offered reductions to pay it back. Defaults are sold for pennies in the pound.

Because they are chasing money that didnt exist til you put your signature on the form. Ever noticed that youve never signed a contract with your bank for a loan or mortgage? Only agreements... Because they are not contracts! Contracts mean that both parties have 'consideration', which is something of value. Your labour to pay it off is your consideration. The bank is not risking anything so it cant enter a contract.

Thats why you sign a mortgage 'agreement' or a loan 'agreement'
'
Banks are forbidden by law to use deposit (savers) accounts to fund loans.

So they have to create the money out of thin air and hope you pay it back.

I'm sure it will all work out well.... just be sure to stock up on guns, water and tinned food lol

Paul

 

Sidicks, you know very well that your last statement was designed to convolute. Firstly that is exactly how money comes into existence at the moment courtesy of just that, created money out of thin air. Only in this system it's created with debt, so in order to sustain and grow, more debt must be taken on. All money through the banking system is debt. It's not an opinion, money is debt.

However you are right to say that you can't simply keep printing money because this would then lead to the same set of circumstances once again. So instead the money needs to be used in high value projects as I mentioned in a previous thread. Rebuilding the infrastructure in this country is key, essential in fact to the rebuilding of the economy.

We get all sorts of utterly fallacious remarks on television describing how too much is being spent but that's nonsense when you consider that debt is being taken out to service debt, to service debt. Which is why the bank bailouts are suicidal, they are perverse and they are the tipping point and as I said, we can either allow the western world to be dragged to the bottom to the very bottom in which we will see the re-emergence of feudalism, or the bonds get burned.

 

Given the complexity of the derivative market and the variety of derivatives available means that a simplistic approach is necessary, I'm afraid, particular given the level of expertise of most on the forum in this area.

I thought that, but I was recently informed that it started earlier in Japan as a means of guaranteeing rice farmers a price for their crop. The sentiment is the same though.

And this is where is goes wrong - CDS are NOT 'toxic' assets - you are referring to a particular subset of CDS - CDS on mortgages (well in fact CDS on pools of mortgages).

The vast liquid CDS market on corporate bonds and Sovereign bonds is very different to that which you describe above.

Regardless, for a CDS contract to exist, two parties have to agree a price, so assuming that both parties understand the undelrying risks (if they do not they should not be investing!) then the price will reflect the risk.

This is a fundamentla misunderstanding of the approach taken to rate stuctured securities, something I've commented on before.

With appropriate tranching, it would be perfectly possible (and perfectly sensible) to structure a AAA security which pays out depending on the results of numerous coin tosses.

The problem with some of the MBS assets was that the assumed correlation between mortgage pools was much lower than the true correlation figure, meaning that the diversification beenfits were exaggerated and hence the risks underpriced.

I am full aware of what QE is - the point is that this is intended as a temporary boost and is planned to be unwound in the near future.

'Leedswillprevail' appeared to be suggesting ongoing QE forever more!!

Again you are confusing private loans - typical recovery rates on CDS contracts (on bonds) are 40%. Recovery rates on standard mortgages are much higher as the collateral (property) is normally a failry high proportion of the amount outstanding.

Sidicks

 

I would take what this man says with a pinch of salt. After all, its rumoured that Deutsche Bank faced a call similar to RBS as recent as last Monday. By stricken bonds he is referring to all debt futures not yet due for repayment, including sovereign Euro Zone. It would be all of them facing ruin.

Which is why RBS and Deutsche Bank, as well as all other major players took on massive purchases of Credit Clearing Houses and Investment Banks, all of it underwritten by governments, in order to leverage more cash which the governments could then call on to fund their ever growing and ambitious statist plans.

This is a great idea. But if you want a welfare state, and free healthcare with all the trimmings, unless you are prepared to work harder for less its simply not going to happen. Debt is being taken out to service Debt to pay for the services you were promised so you keep voting for (insert party here).

Being 'promised' services and benefits by a politician does not automatically mean its now your 'right' to receive said services or benefits.

Learn to love thy banker I'm afraid.

 

Dale, I refuse to believe that we have to abide by a system in which almost everyone will get screwed. As you seem to understand this, then you know that all so called austerity does is to reduce the money supply, therefore not only does it not provide stability, but it also causes a worsening situation as lo and behold growth falls.

There is leverage on top of leverage, the warning that deutsche made is of no great revelation. Without intervention many of these banks would now be six feet under. Where they need to be, as for entitlements, a pool of funds could be created from a new system to safeguard. However the way in which I define entitlements is you have paid into something for years, you are entitled to believe that it's still going to be there.

That is a far cry from an individual or group buying what are effectively shares (bonds) the higher the return, the higher the perceived risk.

 

But we have not had any Austerity yet, all we are seeing is less growth in public sector spending. When the whole economy is based on what the government spends, its inevitable growth will fall. Governments have no money except for what is stolen from the electorate under threat of prison in the form of taxation.

Nobody says we have to abide by it, but what you propose is anarchy (the exact opposite of fascism to those readers who are uneducated) of which I am all for. So long as you understand exactly what it is you are espousing, and what would happen if that policy would be followed.

 

We are already seeing austerity in cuts being made, real cuts to jobs. So I would disagree with you there. We are seeing the products of money printing through rapidly soaring prices, no matter how much the private central bank figureheads insist it's just transitory.

I am not suggesting anarchy, on the contrary, the only way that we could have zero debt backed currency is to ensure that government gives themselves this power. Maybe this isn't the best way. but we are sitting in an infested river which is only rising and we are indulging in corporatism through PFI's through the collusive action of government and banks.

So we need alternatives, not more individuals playing havoc with these constant fluctuations in money supply.

 

I have to cut in here after watching tonight's Storyville-inside Job.

Seriously it has made my blood run cold. Of course I have read and seen all this before but never put it all together.
It appears to me that we are on the edge of the end of civilisation. It's not possible to separate any part from any other, each part is both complicit and reliant on the current monetary system.

We have been sold a dream, it worked as long as no one got too greedy. The trouble is we all did. You cannot blame it on anyone, it was inevitable that a system based on a free market with an ever demanding population would eventually implode. It's not rational to exploit the worlds resources and continue to want more and more, it's exactly the same as a nuclear chain reaction and the results will be just as devastating.

I can clearly see that the only way out of this situation for any ruling party is just more of the same. The reactor is in melt down, we push the rods in to slow it down, we try and reduce expectations by cutting and slashing expenditure, reducing expectations and aspirations, but eventually we are forced to turn the reactor back on. When we do it goes into melt down even faster. It leaves two options, either leave the reactor to go completely critical (leave the banking system unregulated) in which case the monetary system collapses and everything comes to a grinding halt, or we leave the reactor shut down ( stiff banking regulation)and everything comes to a grinding halt. It's no wonder so many weapons research scientists went into banking after the end of the cold war, working for a blinkered, despotic, civilisation, we have eventually managed to create the perfect weapon. It causes no destruction, no pollution, kills no animals, kills and maims no one, but destroys the very thing we have fought to maintain, our present western civilisation.

Yes, there are those at the top we can point the finger at but it does no good. For the moment they have simply dodged their own bomb, sitting behind a wall of money like some paper nuclear shelter. They are both architect and wrecking crew depending where we are in the cycle. At present they are the evil wrecking crew, tomorrow, supermen saviours of the free world. Needed and despised at the same time just like all the best Super Heroes half the time worshipped like religious idols and then condemned as the ultimate evil.

You can see the start of this breakdown around the western world with riots, looting and tented homeless, looking exactly like refugees from war. This is why the banks were bailed out, this is why we are enduring the beginning of austerity measures, spiralling cost of living, crumbling social support, health service and education. Governments are powerless, they realise that we all have to go back to a time before the times of milk and honey, when you paid for health, worked or starved. They are just hoping that some miracle will reverse it and the only ones they can look towards are the very people who we now see as the culprits.

Is there an answer?

I don't think there is. Like all civilisations it's hard to spot when exactly things started to go really wrong. Look at all the great civilisations of the past, eventually it was greed and corruption that felled them, made them easy pray for whatever hostile conditions prevailed. It certainly won't be the end of all civilisations, but it will be an end to our present one. It wont happen over night, it may be measured in years or even decades, but I think it is a logical outcome.

Tonight, for the first time I realised just how fragile this whole system is and how incredibly dependent I am on civilisations trappings. One thing is for certain, I'm not taking it for granted anymore.

 

It's "particularly" - not "particular".


MikeTV.

 

Oh dear - cheer up!

This is not the first time western civilisation has looked into the abyss and it won't be the last. We haven't reached the stage of hundreds of children begging on the streets or people dying overnight of starvation, the bodies being dumped into early morning trucks and taken away for cremation.

I've seen those conditions in other countries and we have a long way to go before we see it here and I very much doubt we ever will.

The "system" is not as fragile as you think. All that is required is to face the belt-tightening changes that will take place in the future and be flexible and ready...

... Mean and lean.

 

Yes, I agree. It probably won't get to the bodies on the street stage but the sliding scale of wealth means the pain will progressively work it's way higher. The end result is those who feel themselves lucky to have a good job (>100k) and have been prudent will see a massive reduction in their disposable income, I suspect they won't have any. Anyone underneath that line will not be able to afford their own house and it really will be subsistence living. This is probably why there is a turn around for the building program and a clamour to put dilapidated housing stock back into use.

Pulling the belts in like this means the monetary slope has tilted into the negative. That can be weathered if commodities remain stable, but we have a perfect storm due to escalating energy prices. Unless we find an answer that will ultimately back feed into all areas of life meaning all essentials will rocket in value increasing the number all ready in poverty.

It will result in a seismic shift in circumstances. Requiring the energy situation to be resolved and a rolling back of prosperity not too far from the situation in the second world war. Pensions will vanish or become so devalued as to be worth practically nothing. I can see many different ways it will go, none of them look like the situation we have enjoyed for the past 60 years. Some scenarios are worse than others, as long as people form an orderly q and accept the pain, but unlike the war, it will be clear who isn't suffering in the short term and that will require violent suppression....any wonder why the Police are now requesting water canon and plastic bullets!

It's a shame we let it get to this stage that's all. Greed begets greed, we want more and more, the system gives us more and more, it strips the future to pay the present. The problem is that the future isn't real, it doesn't perform like an orderly equation, it's chock full of unknowns and history shows us that increasing challenges are the norm.

I have always been an optimist, that it will sort itself out and get better. Well I just became a realist. It will sort itself out, but there is a lot more pain to come and it starts here and now and not some time in the future.

 

I tend to agree with this, but my take is slightly different to yours on the causes. 25 years ago, banking was arguably the dullest profession in the world. They lent money, paid interest on savings, manipulated their margin rates, and earned a decent enough living on the interest from their loan books.

But then something changed - they were deregulated. Slowly but surely they all went into a lending frenzy. House prices went through the roof. They all got very rich. Instead of small mortgages on large homes, they were issuing ever larger mortgages, on ever smaller homes - the property bubble.

With more deregulation, they were selling their loan books to each other. Every asset sale created more profits. So why wouldn't they? And every sale meant more money to use for lending. More profits.

But now they didn't know who owned what, or more importantly, how much they were risking. But they didn't care. They were making too much money. And anyway, if it all went wrong, the government would bail them out...

And so here we are. But this is all entirely curable. We simply need to stop them doing it. There will be winners and losers. The property market has to return to more sustainable levels. Governments will need to stop borrowing more than they can afford, which means cuts. But above all else, banks need to return to the business models of 25 years ago, and become trusted institutions again, accountable for their own mistakes. They don't like that idea, at all! They are going to fight tooth and nail to prevent that happening. That's why we are still fighting a financial crisis, 3 years on from 2008. Nothing has changed. But it will - when governments finally come to their senses.

 

I think the situation is somewhat different for the first time since western civilization came to dominate the world. Every crisis that has happened in the past - financial crises, wars et al - was between western powers and resolved with western money. This, for the very first time, no longer rings true. The American economy is being effectively managed by China, western businesses are being bought up - factory, patents and all and shipped accross the sea to China, emerging economies are getting rich producing and exporting their resouces to China. A new order is rapidly evolving and its irresistable gravity is centred around China. OK at the moment Chinas continued rate of growth depends on us in the decreasingly rich west buying their goods - but there will soon come a time when China 25+ % of the worlds population will have sufficient wealth to buy enough of its own goods that its economy will become self sufficient, self reliant and we in the west will become irrelevant. This massive population also has an ingrained tendency to save making their banks amongst the most powerful on the planet. For the last 400 yrs the world has danced to a western tune, for the first time ever that tune is at serious risk of being drowned out, not because of war but because of a seriously flawed financial system that chose to ignore the events last crisis and reject the safeguards put in place to ensure it never happened again. It is about greed and it is probably too late to reform and rebuild what has been broken. I doubt it will ever be the same again and TBH the West has made a mess of things - the environment is a mess, the third world has been exploited and the wealth gap is bigger than ever. As brilliant as our civilization has been, without a serious re think it does not deserve to persist - it certainly cannot persist in the form it has become in the last 20+ years.

 

But they haven't yet - the ECB has just announced a cut in interest rates. They are simply throwing petrol on a fire. In order to solve a financial crisis caused by excessive lending, they are making lending cheaper. Marvellous!

 

I'm afraid it isn't as simple as that, if it had been we would have cured it. As I watched the film I had exactly the same thoughts as you, regulate the system, go back to the old system. Then I had one of those aha moments that turned into oh no. Think back to the state of affairs just in the UK before the banks got deregulated. I remember it well, the country was going to the dogs, mass unemployment back in the early 80s. Deregulation kicked of an unprecedented rise in GDP, from a slump of under 2% to 8% which was far more than any other European country. We had a small dip in the 1990s but the recovery wis almost instant and meteoric, output up, unemployment down.

Of course we now can grasp what happened, but while Harry Enfield was trumpeting his "loads a money" tag line everyone was enjoying incredible prosperity. It's really hard to grasp the difference, back in the 70s and 80s people rented TVs, you couldn't get credit unless the Bank Manager saw you personally and it had to be for something which had a value should you default, new clothes were a yearly thing and people shopped when they needed to, not as a leisure activity. A bottle of wine was an expense at Christmas and I doubt many people could even find a bottle of champagne never mind buy one. By the mid 80s we were beginning to buy more TVs, cars, wine, new kitchens, bigger houses etc.

What you haven't realised is that our consumption is paid for by the banking sectors success. If it just stopped there and we could return to the Austerity of the early 80s it would be manageable. Thing is, unfortunately our pensions, health, education and transport are now tied to the same tattered flag. In the 80s we lived with that system and though meagre, the system was under control more or less. This is no longer the case, the locusts have eaten everything and that included the store marked emergencies. The safety net has gone for those who are wage earners or small business owners and god help the pensioners. If you watched the Italian minister give the speech about reduced pensions you will have seen her break down in floods of tears. That's not normal for any politician but it is for a person when things have gone beyond what they feel is fair and are asked to perform a coup de grace.

What you are suggesting is turning the banking generator off. That will cause exactly the same situation as letting it run. If it was possible they would have already done it. All they are trying to achieve at the moment is financial stability so that the whole of Europe is not plunged into financial ruin and anarchy. Collateral damage is assumed to be acceptable in the face of total collapse. We all ate very well without asking where the food was coming from, we over consumed and that's not just an empty description, you can see it directly in the obesity problem across the West. We pigged out big time. Even China has been begging us to control our spending, they rely on exports, it's still a very low paid, manual economy. If we can't spend, they cant make, if we can't pay our countries loans China suffers a financial hit.

All the politicians say is that it can't possibly happen here. Well that's the one thing that history has proven time and time again to be incorrect.

 

I think we agree that recovery from our borrowing frenzy will be a very painful process indeed, especially for those that relied on borrowing the most (consumers, governments, and countries like Greece). And I agree that everything that we own is going to be hit hard by the process - our houses, our pensions, our taxes, our services.

But the solution is still going to have to be a gradual turning down of the "generator". But governments seem to me to be in denial, most notably Merkozy, Cameron, and Mervyn King, and are failing to even do that.

We also have to remember that some people have done very nicely out of the frenzy of the last 25 years - and we wont be getting any of that back. Sure, they will "suffer" some inconvenience too (the "trickle-up" effect), but it's going to be a hell of a lot easier for them, on Fred Goodwin style pensions of £700K per annum.

 

On this point, agreed - we saw a rise in "growth". But it wasn't real. Our output hadn't increased by 8%, it just looked like it had, because of the property boom. But we started spending as though it had, and borrowing when the money ran out. And now we've done so much borrowing, there's nothing more we can borrow. It's payback time.

We could have just consumed using money we earned during the good times. But no, we decided to pay banks to lend us money before we earned it. Expensive! And it made them all super rich. And it simply made the hole all the bigger.

It's not just the scam of the century, it's the biggest financial scam in human history.

 

And their motives are obvious. Merkozy and Cameron all all right-wingers. Cameron's best buddies are all super rich property owners and city folk. It's in their best interests that the scam continues for as long as possible. And that the taxpayers keeps bailing them at every sign of a hiccup. Merkozy are less convinced, because they know the super rich in the UK are making the most money from the scam, compared to any other european nation. Mervyn King sees his role as defending the bankers interests at all costs. His advisory comittees are all bank executives.

And that's why we should never have elected Cameron. And actually, we didn't.

 

I think it's more likely that Cameron is like the majority of today's politicians and in it for the glory, duty is a dirty word. Having said that, I have no doubt he is wanting the best for the UK and thereby being seen as the great saviour. No one wants to be Governing a disaster when it comes down to it. Everyone in the financial sector is going to be claiming they have a plan and I'm sure he listens to his friends first.

It needs a complete change of attitude from everyone. A second coming if you like to put us back helping our neighbour and acting less selfishly, realising what is necessary and what is just trappings. In a way that's Cameron's Big Society, trouble with that is it is aimed predominantly at the poor and middle income earners. Once upon a time the rich were far less visible, these days there is no escape. Everyone is looking to the leaders to do so by example. Telling everyone to go over the top while they stay in the club house is no longer acceptable.

There is no way that they can afford not to use Taxpayers money, without it the banking system comes crashing down and so does everyone's way of life. No cushion, just one big crash. We accepted them when times were good and they grew exponentially with our blessing, it was only when things went wrong that we looked to blame and accuse. Don't get me wrong, these top earners are scum bags of the worst kind, prostitutes, cocaine, legalised bribery and who knows what other dirty tricks. Seriously though, they are what we made them, they are just like us, except more aggressive with it, far fewer scruples and an almost religious belief in their own righteousness. I dare anyone to look at themselves and say that there isn't a bit of that in all of us, it's only degrees.

If we move away from bankers for the moment. Look at the whole football phenomenon, no fan was particularly bothered about the cost of going to see matches. Sure, they grumbled, but still paid for the tickets, sky subscriptions and merchandise. No one said, look at them, it's not right, we are paying a fortune while they rent out corporate seats and boxes which are paid by the taxpayer through expense write offs.

You cannot condemn if you are part of it, you can only decide that you are not going to follow the herd. It's self improvement that is needed. Don't Gazump buyers in the housing market, stop buying stuff we don't need in the belief it's making us happier, be ruthlessly honest, look after other people, stop networking just to get your kids into better schools etc lead by example and the world can change.

 

Stop holding on to the bankers as if they were god like. While I hear your concerns, if we don't go do something radical like change the damn monetary system then we will be forced to live in squalor.

Solutions so far have revolved around gold standard and zero interest and with it burning the bond holders.

If you are really so concerned and have already said the banking elite are SCUM, then it's simple, take your money out of the bank as I am about to do.

 

You miss the point, if you needed an operation would you go to a surgeon or a tree surgeon? They see themselves that way and we worship the results......they are the high priests of money.

You are not going to take your money out of the bank, you are going to take bits of paper with numbers printed on it. See what it says along the top "I promise to pay the bearer on demand". Go and ask them to exchange that for money, they can't. What you take out is an object of faith that's all. Faith that the monetary system will work as advertised, it's called market confidence in business circles. See Faith and Gods is pretty damned close isn't it? Ten commandments got it right...don't worship false idols.