Global financial system implosion begins
- Thread starter Falcon
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hipipol
Peckham Wry
The funds are up to their arses in analysts and never just believe what the agencies tell them, however they are under pressure, they have pensons to pay out, ins cos have to payout, any asset manager has to achieve targets or the funds get pulled. The smooth talking ALM solutions guy appeares for Goldmans or where ever and show them how to 're-balance' their portfolios to achieve greater returns with proclaimed reduced risk. They will run the scenarios, even stress test for themselves these new products. This actually went on for years, but the funds saw other people making huge returns (ie Hedgies, who by very definition make their wedge out of risk), plus other funds look like they'll do it, we're benchmarked against them, oh shit, better get some. It took years for the long only guys to get into CDOs, even then only the goodies, but they moved cos even their in-house quants didn't spot the fault.
Its worth looking at how much toxic crap was held by funds and how much by banks, who were after all the originators of these idiot instruments - guess who got fucked? The Banks, believed their own hype and held huge positions in unpricable illiquid sub-junk trash.
The banks and the regulators have tried to blame the ratings agencies and though they were at fault it is wrong to assume that any sensible market participant relies on their say so alone
hipipol
Peckham Wry
Fuck knows mate, sure I read it somewhere in this huge thread, but then that was probably a year or so ago so is prob no longer part of the zeitgeist
Cant be arsed to go look for it either tbh
ymu
Niall Ferguson's deep-cover sock-puppet
Getting shareholders, of which the pension funds are the largest, to take more responsibility is, indeed, one of the proposals for sorting out this mess.
ymu
Niall Ferguson's deep-cover sock-puppet
ymu
Niall Ferguson's deep-cover sock-puppet
Prezactly.
The running is being made by the stateless super-rich. None of them care very much what happens to any individual economy, as long as they're not paying for any of it.
camouflage
gaslit at scale.
Kanda
Diving wanker
This has been documented in quite a few books over the last few years.
It wasn't just Goldmans. Morgan Stanley, Deutche, Bear Sterns, loads of them. Especially near the end when the lower tranches of the CDO's started to default. Trying to cover their arses/losses.
E2A: Just realised the article is from Jan 2010
It wasn't just Goldmans. Morgan Stanley, Deutche, Bear Sterns, loads of them. Especially near the end when the lower tranches of the CDO's started to default. Trying to cover their arses/losses.
E2A: Just realised the article is from Jan 2010
ymu
Niall Ferguson's deep-cover sock-puppet
It's an entirely separate argument from the flounce threat.
The flounce threat is about hundreds/thousands of (very well paid but not super-rich) employees being willing to move to another country, and/or the ability to replace them with local labour if they don't want to move. It's an empty, meaningless threat - the employees don't usually want to move and even if they did, the company would still have to pay tax on profits made in the market they moved out of (or leave the field clear for others to make that money and pay tax on it).
The stateless super-rich argument is about them not caring about the name of the economy that is making them rich.
ymu
Niall Ferguson's deep-cover sock-puppet
This has been documented in quite a few books over the last few years.
It wasn't just Goldmans. Morgan Stanley, Deutche, Bear Sterns, loads of them. Especially near the end when the lower tranches of the CDO's started to default. Trying to cover their arses/losses.
E2A: Just realised the article is from Jan 2010
Aye. The article is about them admitting it. It's not new, for sure.
camouflage
gaslit at scale.
Ok, I see your point. But even here, economies are very particular beasts, each has it's own unique characteristics etc. Some Blofeld-type that doesn't care about the name of the economy that is making them rich isn't going to stay super-rich for long in my opinion.
Of course once you're a billionaire you can lose hundreds of millions all day long for a year and still be a billionaire I hear... they don't call mere millionaires that can barely afford a palace, some jets and half fleet of yachts the super-rich do they... so I've just argued out my own point.
Carry on.
Not content with having unleashed financial destruction on the UK, I've just seen that Gurning Gonad wants to head the IMF.
Unbe-fucking-lievable.
Unbe-fucking-lievable.
A Dashing Blade
Takes horses to water but can't make donkeys drink
I know there are a lot of zero's involved but . . .
1bn = 1,000m
1,000 / 200 = 5 days
ymu
Niall Ferguson's deep-cover sock-puppet
Depends who you're shifting the losses onto, doesn't it?
roryer
道可道非常道，名可名非常名
Simply that the number of reactors and amount of plutonium present would indicate that the potential catastrophe from this event is greater than that in Chernobyl, there seem to be several estimates of the level of radiation leaking at present, reporting from Japan seems to focus on limiting panic, so difficult to know exactly what to believe. What is clear is that it is not over yet, and will have a significant impact.
My only point is that with a clean-up of epic proportions, and a leaking nuclear reactor to deal with Japan isn't going to be buying many US bonds or supporting the Euro in the near future.
Nuclear power was meant to be the stop-gap to bridge us to renewable energy, but it doesn't look so attractive either. Conventional oil peaked in 2006, and Saudi production is dropping sharply at a period when we are close to all time high prices.
I feel we might have some massive structural issues to solve, with the whole financial edifice. Soaring unemployment, food riots in parts of the emerging world, and governments close to bankrupt while the Goldman Sachs banksters take home average compensation of US$0.5m bonuses.
I am usually wrong, but this all looks like it's going to end badly. I asked an economist friend who works for the ECB what he thought, he noted, "as for the world falling apart it always is. but as we are simply animated sections of the earth's crust it really doesnt matter in the long run unless we destroy the planet- o hang on....................."
ymu
Niall Ferguson's deep-cover sock-puppet
Japan hasn't been bankrolling the US for a while now - they screwed their economy by going for austerity measures in the 1990s, got downgraded by the ratings agencies in 2000 and have been stagnating ever since.
Rebuilding might be the boost they need to get out of the doldrums. In much the same way that WWII did far more than the half-hearted Keynesian policies being tried out in the 1930s.
Rebuilding might be the boost they need to get out of the doldrums. In much the same way that WWII did far more than the half-hearted Keynesian policies being tried out in the 1930s.
roryer
道可道非常道，名可名非常名
Good point, rebuild they will, of that I have no doubt. Although the area around Fukushima will be off limits for a decade or three.
If it was the Tsunami's destruction of life, communities and property, then the Keynesian argument might have been right about this, but the nuclear issue is the Joker in the pack.
Even without that, it's still questionable, whether reconstruction is this going to contribute to a Japanese economic recovery.
The simple weight of other issues, just makes that seem unlikely.
It is an energy issue of course, which is of global significance in itself with the nuclear issue so topical, but that is another thread.
Do you know whether Japan needs to go to global markets to fund reconstruction? Will interest rates for a stagnant nation with a leaking nuclear plant 200 miles from the capital, be low enough to spur economic recovery or bankrupt the nation?
If it was the Tsunami's destruction of life, communities and property, then the Keynesian argument might have been right about this, but the nuclear issue is the Joker in the pack.
Even without that, it's still questionable, whether reconstruction is this going to contribute to a Japanese economic recovery.
The simple weight of other issues, just makes that seem unlikely.
It is an energy issue of course, which is of global significance in itself with the nuclear issue so topical, but that is another thread.
Do you know whether Japan needs to go to global markets to fund reconstruction? Will interest rates for a stagnant nation with a leaking nuclear plant 200 miles from the capital, be low enough to spur economic recovery or bankrupt the nation?
ymu
Niall Ferguson's deep-cover sock-puppet
I honestly don't know. But I'm not convinced by arguments based on the cost of servicing debt. UK debt repayments this year will be lower than UK debt repayments for all but 4 years of the last 60 and they're going fucking nuts about that for no reason. 
Japan is in ASEAN, not Europe. I think the money will be fairly easy to find if the political will is there to find it. Which I think there will be. ASEAN are nowhere near so keen on austerity as we are - they learnt that lesson from the crash of the 1990s.
Japan is in ASEAN, not Europe. I think the money will be fairly easy to find if the political will is there to find it. Which I think there will be. ASEAN are nowhere near so keen on austerity as we are - they learnt that lesson from the crash of the 1990s.
ymu
Niall Ferguson's deep-cover sock-puppet
Paul Krugman's take on S&P's warning:
ie Big Fat Lie
I continue to be amazed by how much attention and credence is being given to the S&P “warning” on US debt. I mean, this was supposedly a warning about the safety of US debt. So if it mattered, we should have seen a jump in interest rates on April 18, the day of the announcement. Um, here’s the 10-year bond rate:
People, this was a non-event.
ie Big Fat Lie
love detective
there's no love too small
hipipol
Peckham Wry
I honestly don't know. But I'm not convinced by arguments based on the cost of servicing debt. UK debt repayments this year will be lower than UK debt repayments for all but 4 years of the last 60 and they're going fucking nuts about that for no reason.
Japan is in ASEAN, not Europe. I think the money will be fairly easy to find if the political will is there to find it. Which I think there will be. ASEAN are nowhere near so keen on austerity as we are - they learnt that lesson from the crash of the 1990s.
Japan is NOT a member of Asean - Assoc of South East Asian Nations - unlikely to welcome the builder of the Great Asian Co-Properity Sphere into the fold when they founded, even less likley now for different reasons
Japan will not need top go to global markets less thay get another quake - which according to peeps I have talked to in Tokyo they ex[ect in a few weeks????? - still rolling power cuts and everything shaking every other day. Confidence will be the key - I expect hefty outflows of non Japanese people.
On another fron, Hitachi Building Machinery, Kawasaki and Mitsubishi Heavy industries all up on the Nikkie today, looks like every expects a pick up starting with the rebuilding
ymu
Niall Ferguson's deep-cover sock-puppet
I stand corrected! knew they held a lot of US debt, but I didn't know they were still lending so much compared to China. They're not running a surplus, are they? Or is this Japanese pension funds, not the state itself?
hipipol
Peckham Wry
Ref the T-Bills yeild slide
Ths US may be in trouble but if you have $500 Mil and you need to park it for a bit, there are few maekets that are any safer that offer the liquidity - and it was liquidity (well plus the unpriceable nature of some of the assets held) that fucked N Rock, Halifax and to a degree bear - also the main cause for Merrills rushing into the arms of BoA
Ths US may be in trouble but if you have $500 Mil and you need to park it for a bit, there are few maekets that are any safer that offer the liquidity - and it was liquidity (well plus the unpriceable nature of some of the assets held) that fucked N Rock, Halifax and to a degree bear - also the main cause for Merrills rushing into the arms of BoA
ymu
Niall Ferguson's deep-cover sock-puppet
love detective
there's no love too small
state, not pension funds - and yes, still a huge surplus (in absolute terms anyway)
gosub
~#
Their debt is something like 200%GDP and they are "thinking" about a disaster bond coz is estimated at 25 trillion yen spend over the next 3 years to get back to where they were, am not sure included the cash they threw at the markets to stablise them after the disaster. Either way isn't cheap, and a lot of reasons not to be bullish.
Wish them well though.
ymu
Niall Ferguson's deep-cover sock-puppet
I'm quoting several Nobel prize-winning economists on that one, so I think it's at least arguable.
love detective
there's no love too small
And yet yields/interest costs on japan government debt are pretty much lower than anywhere else in the world - proof that there is nothing inherently unsustainable about debt at those levels.
Regardless of the various structural differences between Japan and Europe/US in terms of who buys most of that issued debt, huge amounts of QE (and also the fact that Japan has huge reserves which brings the net debt down well below 200%) - it does somewhat make a mockery of the market orthodoxy that debt at anything like those levels is unsustainable
gosub
~#
renewed wasn't in your sentence. That article was 22/10/10, just checked Greece& Ireland got there own thread 20/09/10, bit odd that.
Still didn't grasp what he was talking about from just that sentence, (there were tax rises in Japan in 97 turns out), a quick google of Japan Krugman gives you a page linking to articles he wrote in tail end of the 90's which are interesting.
Still didn't grasp what he was talking about from just that sentence, (there were tax rises in Japan in 97 turns out), a quick google of Japan Krugman gives you a page linking to articles he wrote in tail end of the 90's which are interesting.
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