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Global financial system implosion begins

Marty1 said:
Bezos in particular is a blight on humanity. He’s a parasite wealth extractor that regards its host (customers) with contempt as lazy cunts who will always go for the path of least resistance (convenience).
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I hate Bezos and Amazon too. Its a viciously monopolist vampire that sucks every last drop of profit and blood out of everyone and everything in its process chain. No amount of billions of profit change its behaviour.
Even if BIll Gates is comparatively a better person tp Bezos, its not about the personalities or even the degree of profit extraction. Its the system thats obscene, so its no surprise there are obscene people who rise to the top within it. Bezos isn't a special case. There are thousands of Bezos around the world, often just middle management pricks.
 
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ska invita said:
I hate Bezos and Amazon too. Its a viciously monopolist vampire that sucks every last drop of profit and blood out of everyone and everything in its process chain. No amount of kabillions of profit change its behaviour.
Even if BIll Gates is comparatively a better person tp Bezos, its not about the personalities or even the degree of profit extraction. Its the system thats obscene, so its no surprise there are obscene people who rise to the top within it. Bezos isn't a special case. There are thousands of Bezos around the world, often just middle management pricks.
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These people like Bezos, Gates and Musk are the human face of it. They are deliberately chosen because they are eccentric and weird and sort of relatable. The idea of billionaire kings is palatable for us, the idea of living in a failed system isn't
 
ska invita said:
Who is deliberately chosing them?
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it's not a who, it a system. they all want to be famous, the majority of rich people don't

Donald Trump is the extreme example, no sane rich people want to be him, he's barely even a rich person making such an exhibition of himself to live in a castle. He must be poor to think that is what a rich person is. Even at the top level they work for people, it doesn't end, nobody actually owns anything maaaaaan
 
Macro N Cheese – Debt Deflation and the Neofeudal Empire with Michael Hudson
Nakedcapitalism October 5, 2020

Michael Hudson (11:08): There are good ways and there are bad ways of doing it through MMT. To me, the bad way would be the way that Donald Trump just did it over the summer. He gave grants to… the $1,200 grant that he gave to all the Americans. The pretense was that this $1,200 was going to be used to buy goods and services and to help keep them afloat and to revive the economy. But most families used it to pay down the debt.

In fact, the credits were put into their bank account. And if they had an overdraft, whether for a credit card where the rates go up to 29% or whether they were just overdrawn in the bank account with overdraft fees, the money that was given – created by the government, simply by printing it electronically – it all ended up with the bank. So the wage earners that received this money simply were intermediaries to give the money ultimately to the banks, the same effect you could have done simply by wiping out $1,200 from everybody’s debt who owns the debt.
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Of course, that would have penalized the banks and the government basically is run by the banks. So what you’ve seen under Donald Trump is nightmare MMT. You have MMT being created, not to spend into the economy, not to create new infrastructure, creating jobs, not to support labor, but to buy stocks and bonds to support the 1%. This is a perversion of MMT, the assumption and advocacy of Randy Wray and Stephanie and her whole gang has been, “Well, the government can run a budget deficit to spend money into the economy.”

But finance is not the economy, the stock market, the bond market, and the wealth market. Basically you can think of it as the finance insurance and real estate sector. The FIRE sector is external to the economy. It’s something else. It’s the economy of the 1%. And most of the MMTers come from a background where we’re for the 99%. But Donald Trump is probably the leading MMTer in the country, in a far more powerful position than Stephanie Kelton or myself, and he said: “I’m all for MMT. You’ve convinced me. We can create all the money we want. I’m going to give it to my campaign contributors, the 1%.” That’s nightmare MMT.
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The question is what is the right strategy for the average punter? Presumably to borrow? If course, like all other economic interventions, this will benefit the wealthier far more. Middle income people would probably be able to take out an extra mortgage (and ideally on as long a term as possible). So will this just generate another wave of middle class small scale landlords? The wealth gap is surely only going to get worse. Free money if you have enough stake to join the party.
 
the average punter has a few hundred quid in the bank to a cut from 0.1% to 0.00 wont directly make much difference. indirectly, they will most likely be shafted at every opportunity/ outcome
 
Idaho said:
The question is what is the right strategy for the average punter? Presumably to borrow? If course, like all other economic interventions, this will benefit the wealthier far more. Middle income people would probably be able to take out an extra mortgage (and ideally on as long a term as possible). So will this just generate another wave of middle class small scale landlords? The wealth gap is surely only going to get worse. Free money if you have enough stake to join the party.
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Mortgage and savings rates won't go much lower regardless what BoE rates do. Negative savings rates would only apply to large balances and commercial accounts.
 
I'm less interested in the effect of saving rates on bank accounts - because they are already negligible. The change from getting a few quid a year on savings to getting a few pence won't make much difference to anyone. If you have enough money in a bank account for the interest rate drop to make a significant difference, then you clearly have your money in the wrong place.

What is significant is how this will affect borrowing. The policy is aiming to push banks to lend and people to borrow. It's the composition of that borrowing and what it will be used to buy that's interesting. The BoE are hoping that it will lead to new business set ups. But in the current climate people are less likely to risk starting a business, and banks are less likely to lend to them. Therefore the easy bet is buy to let. Easy money, a defence against inflation, banks happy to lend against a hard asset. But really it's an economic dead end. It generates no new economic value - just transfers wealth from renters to landlords.
 
I’m not so sure about low rates inflating buy-to-let in particular. There are things that have definitely made that less attractive to investors in recent years — an extra 3% stamp duty, mortgage relief capped at basic rate, banks having tougher lending practices and a highly shaky housing market all spring to mind. We’ll see, I guess.
 
ska invita said:
Is this correct? Can anyone expand on relation of debt and profit?

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For many American multinationals, it's all a bit of a tax wheeze e.g.:

www.fool.com

16 Years After Freeing Itself From Debt, Apple Now Owes Over $100 Billion | The Motley Fool

"Today is a historic day of sorts for our company," Steve Jobs wrote to employees at the time.
www.fool.com www.fool.com

"the year that Apple became debt-free (2004) was the same year that Congress approved the first repatriation tax holiday, which allowed companies to bring cash home at a reduced tax rate of 5.25%. That created an inadvertent precedent, incentivizing companies to wait around for the next tax holiday, and collective international cash holdings continued to climb for another 13 years. Apple initiated its current capital return program, which consists of dividend and share repurchases, in 2012. By then, total cash had grown to nearly $140 billion and Apple had more money than it knew what to do with, so it wanted to give some of that cash back to shareholders. Instead of repatriating cash at the then-statutory rate of 35% to return to investors, it began issuing debt as an alternative way to bolster its domestic cash position without touching international reserves. Operating cash flow was more than sufficient to service that debt, and the debt strategy helped the company reduce its weighted average cost of capital, thanks in part to the associated tax shield."

Likewise Netflix needs to make content upfront, and if it pays for that by debt it pays less tax:

"in optimizing our balance sheet, we strive for the capital structure that results in the lowest weighted average cost of capital. Given low interest rates, the tax deductibility of debt and our low debt to enterprise value, financing growth through the debt market is currently more efficient than issuing equity."
 
Sorry ska what exactly do you want to know?

That it is cheaper to issue debt than to repatriate profits from a tax haven?
 
platinumsage said:
Mortgage and savings rates won't go much lower regardless what BoE rates do. Negative savings rates would only apply to large balances and commercial accounts.
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Just checked my mortgage agreement and it doesn’t seem to have a floor. I pay 0.69% over BoE base rate. If it drops to -0.7% do they need to start paying me?
 
Winot said:
Just checked my mortgage agreement and it doesn’t seem to have a floor. I pay 0.69% over BoE base rate. If it drops to -0.7% do they need to start paying me?
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Most lenders put a floor in during the financial crisis. For mortgages taken out before then borrowers might be lucky and see their rate fall to zero. I doubt your mortgage agreements mentions anything about you receiving interest though, it's probably all about the amount payable by you being determined by the interest rate.
 
I believe negative mortgages still have the same monthly payments, but the capital is down valued at the end of each year.
 
Markets all collapsing this week and the BBC is soft rolling it. FTSE 100 is down over 5% and most of the European markets are down more. Those central banks better start printing again.
 
Interestingly or maybe not, the BoE had extended the deadline for UK clearing bank implosion scenario submissions . Not something widely publicised but all banks should now have plans for and orderly collapse in place

yes, orderly collapse
 
He’s got a point though that within the context of this year’s volatility, +\- 5% from one week to the next is just kind of business as usual.
 
Yeah, it's currently within the kind of volatility parameters we've come accustomed to. However with the FTSE 100, it's looking a bit bleak. See crashed from 7000 to 5200 this year and have been bouncing around a few percent most months - but generally in a positive direction. Earlier in the month we got back over 6000. However the picture since has been less rosy. We now appear to be bouncing around in a generally downward direction.
 
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