Mon 14 Sep 2009
THE WORLD IN FINANCIAL CRISIS ?
Posted by Unclewoodsy under Balkers
[9] Comments
The World in Financial Crisis :
The CAUSE and ROOT CAUSE with an absolutely necessary FIX !!
No one can now deny that the whole world is suffering a financial meltdown . Even DUBAI , in the rich UAE , has been deeply affected by this economic disaster .
THE CAUSE :
It is no coincidence that the timing of this meltdown is at the same time the cost of OIL reached unsustainable heights.
Unsustainable , in a sense , that products and services ( that had been previously assigned calculated values ) now suddenly doubled and triplet in cost . As a result , jobs were lost ,companies folded , and the avalanche effect soon made semi luxury products ” off limit ” for most , including REAL ESTATE values.
The banks folded not ” because of BAD LOANS ! but because the average Joe ” lost his job and was not able to make is mortgage payments.
THE ROOT CAUSE :
The OIL cost was artificially escalated at a very rapid rate , simply a RESULT of trendy and greedy TRADING , BETTING and HEDGING in the OIL marked. Worth mentioning is that now a days , the trading , buying and selling is almost instant compared to a few years back when there was a “slow curve ” that allowed a ” smoothing out time” for the market to assimilate the new $ changes. The present computer abilities have removed this ” slow buffer effect and resulted in an instant ” assault at the same time ” making a drastic
$ increase more treacherous in the market .
One can not double and triple the cost of OIL at such a rapid rate without it causing a ” TSUNAMI of ECONOMIC DISASTER ” especially if it was initiated by a trendy and frenzied trading onslaught .
THE ONLY FIX !!!!
We MUST get our governments to STOP ! the TRADING / BETTING / HEDGING of ” LIFE ESSENTIAL GOODS ” such as ( OIL, WATER , POWER , FOOD ) !!!!
Playing with the daily values of these ESSENTIAL to LIFE goods through reckless TRADING ect… for the sheer purpose of personal profit , will prevent these goods from achieving a ” FREE FLOATING TRUE REAL LIFE VALUE ” that our personal income was related to .
The daily fluctuating artificial market value , caused by reckless trading , creates too much uncertain turmoil , and will trigger an other disastrous ” TSUNAMI of ECONOMIC MELTDOWN ” for our world.
OBAMA ! MAKE THE TRADING / BETTING / HEDGING OF ” ESSENTIAL TO LIFE ” GOODS ( OIL , WATER , POWER . FOOD ) OFF LIMIT AND ILLEGAL !!!!!!
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Welcome to B/P Unclewoodsy – nice Balk!
I completely agree about both the unchecked speculators, and the need to single out critical-need industries for special regulation.
When oil ran up to $(U.S.)147 per barrel last year, I think most consumers believed it was due to price manipulations and not an accurate reflection
of demand. But indeed as you said, the fallout to regular people happened anyway. They enjoyed no protections, from the crazy futures bets of commodity speculators.
There were similar events with electric power in California a few years back, and also with natural gas which doubled right after the Katrina disaster in New Orleans. Yet there was no actual shortage of natural gas in America, nobody ran out or was put on rations. They just got hit with twice the cost to heat their homes, overnight…
As I’ve spoken against a failed laissez-faire economic policy in America
for decades now since Reagan, in more recent years I too have begun to believe, that certain industries are particularly important to impose safeguards and restrictions on. Just the same ones you indicate, because they deal with the life needs of individual consumers – whom have no lobbying offices and few politicians in their corner.
I add health care to the list also. As a Canadian you’re already beyond that one at least; but for Americans it’s still on the “to do” list… ;^)
In USA the biggest culprits have been all energy types, (which are gasoline, natural gas, electricity, heating oil), and also private health insurance and the financial industry. The average Joe has probably lost half his earnings to pirates in these 3 alone.
No doubt that oil price hikes by themselves can cause inflation which leads to the recessions and job losses. But we’ve also had no regulations on small mortgage companies who put people into homes with bad credit, no money down, and ballooning loan terms. Then they are allowed to sell those loans to big bank corps who repackaged them as investment products to be sold along side of mutual funds, bonds and the like. Everyone was making money on the sale and reselling of the underlying loans, until real estate values stopped going up and then crashed. Which was partly out of panic about the size and lack of transparency that the mortgage industry had grown in to. It was a total fiasco with the big banks so in it up to their necks, that the anti-government Republican Bush had to give them a bailout from tax dollars larger than any in history for any industry.
Good points all. I’m not sure of any regulatory agency in place that could remedy the hedging of markets on a world scale. Possibly the world bank and the g8 might have input on this though I’m not confident the first would attempt it, and I have no faith in the former. They seem more intent on protecting the status quo as it is.
That said I believe it to be in our own best interests to do all we can to isolate ourselves from their effects. In a global economy, this may sound unrealistic, but still the best bet may be to take simple steps to reduce our dependency in all areas we can. Simply put, save as much as you possibly can, and reduce your bills on all fronts. I was fortunate enough to see an impending collapse in real estate, sold my highly overvalued home in a high tax state and moved to a more rural and tax friendly state in the nick of time (literally). I now heat about 60% of my home with cheap easily obtained wood and enjoy more time with my family than I thought possible in N.E.
While this has nothing to do with controlling global gambling with life sustaining commodities, it certainly can’t hurt. As far as Jeff’s post, I think the best approach to some of that, in the financial industry in particular, would be for demanding performance based pay for the big exec’s. They can afford to gamble at all costs with company money. If their gamble pays off they’re corporate darlings, if not and their company fails, they have the proverbial golden parachute, leaving us in the wake to fend for ourselves. Which I hope slightly explains my last train of thought. If they earned their money rather than walking into a position with guaranteed bonuses in the tens of millions, they might be more responsive to company and customer needs.
Obama seems to have a full agenda at the moment, but it may be a goal for his second term. Just today I was reading news that stated he was starting to push for more economic regulations for the banking industry, hopefully we’ll see some actual laws passed in the near future. Other than minimizing the effects of the financial meltdown, those bailouts still leave a real bad taste in my mouth. If it happens again, let them fail, we’re still left to fend for ourselves.
I would agree that real global coordination on regulating industries like banking, is years or decades off. Yet Europe and especially Iceland saw the perils of under-regulation of banks, just as the U.S. did, in the financial meltdown last year. I think world leaders now understand it as a necessity, for stability of the world economy. In the U.S., along with restricting banks to sound lending principles, we need to limit their overall size so that we don’t get into this bailout trap of “too big to fail”, ever again.
Limiting the size of banks was something instituted in the Great Depression, that we got away from during the laissez-faire Reagan/Bush era. Didn’t work out so well…
Interfering with executive salaries would send NeoCons screaming round the bend once again, just like Public Option did. But in many cases those have lost all relation, to whether they grew the firm or let it stagnate or wrecked it. America has minimum wage laws and a 40-hour work week regulation – both borne out of the ravages of previous laissez-faire capitalist eras – so we probably could go to a maximum wage also.
Say no more than 30-fold of your lowest paid worker, but with deferred stock awards from there – indexed to measurable long-term growth which you presided over as an upper officer of the corp. That would be a way to retain appropriate incentives, but also remove incentives to be reckless with company assets for gains in the shorter term.
Might motivate your worker a little more also… ;^)
Thoreau; with you on the conservation.
On the news tonight they said Obama’s admin is considering new rules for bankers pay. I agree the wingers will go ballistic again on that!
Of course they will, seems everyone has to scream bloody murder to get news coverage nowadays. It matters not if they have a valid point, as a matter of fact, the more outrageous the claims, the more airtime is devoted. Whatever happened to the lessons learned in “The Little Boy Who Cried Wolf” ? Apparently, “The Little Boy Who Cries Socialist” gets his own tv show in this day and age.
I made a comment on NPR about an issue involving religious extremists that the only thing extremists of all religions have in common is that they are extremists. That applies to political extremists as well. We need to get their point of view out of the conversation, and find the middle ground that represents the views of the majority of those affected by these issues. Only then can we get back to common sense and thoughtful, constructive debates that might actually produce coherent results.
Maybe Glenn Beck could devote an hour to this, LOL !
Regarding Roy’s Balk of Sept 18, yes world leaders are waking up to the global ramifications. To get them to work in a manner benefiting global stability for all sounds doubtful. Players such as China and India are relatively new to the world stage as economic powers, I’m worried they’ll most likely act in a manner geared more to protecting their new found wealth and keeping the populace complacent and docile.
As far as a maximum wage, sounds interesting, good luck pushing the agenda. Minimum wage was instituted as a way of protecting the little guy, you’d have to prove way beyond a shadow of a doubt that a maximum wage also protects the little guy, and everyone else. It would only be possible in areas with almost instant global ramifications such as banking. Though opponents could easily argue where does it end, as almost all large corporations have reach and power beyond their own self interests in a global economy. You might be able to make a more palatable case for it with the performance based line of reasoning. This would most likely have to come from a consensus of the stockholders rather than the government.
Limiting the size is most likely a much more obtainable goal.
I like the fact that the G20 seems to be meeting 2-3 times per year now, even if it is mostly for targets and resolutions rather than firm policy. There seems to be more desire for coordination, if only to respond to the worldwide recession. Trade generates growth, rules generate stability, and interdependence generates peace IMO. Maybe some bickering, but fewer bullets…
The G20 website
Many oil rich countries, have requested to have their oil paid in Euros, rather than U.S. Dollars.
I believe that this could be one of the basic reason that the U.S Dollar has lost ground to the Euro.
But all of this could be blamed to the past bush administration which was dormant to protect the U.S
fallen Dollar, against the indiscriminate rising Euro.
Because the Bush administration also speculated
with the fallen U.S Dollar. It increased U.S products to be competitive in foreign markets, at
that time, and bringing foreign investments into the U.S, but in the long run, this type of policy was
destructive for the U.S economy, as well as the world economy in general.
But specifically with a very strong Euro, those in the Euro zone were priced out of their markets,
which helped to bring this world economic crises, and people are suffering the consequences now.
Things could get worse, if many countries who still hold U.S. Dollars as part of their reserve
would suddenly convert their U.S. Dollars into Euros.
All of this scenario has to do with American foreign policies towards those friendly countries that
still have faith in our U.S Dollars, and many foreign national banks have lost billions to bail out
our fallen U.S. Dollar to protect their Dollar holdings, against the indiscriminately rising Euro, and
at the same time trying to keep an equilibrium between Euro, and U:S. Dollar to try to keep an
economic stability between the U.S and Europe
Infact, many foreign banks charge handling fees on all U.S checks that they cash, or place into
checking accounts.
And if a person does not have a checking account, they will not cash an American check.
infact I receive a $61.00 monthly check from my local Union’s Pension Tust Fund, and at today’s
conversion rate, of U.S Dollar into Euros, I will receive 40 Euros and 90 cents, where the service fees
amount to 10 Euros and 50 cents, which leaves me 30 Euros and 40 cents net.
This example is to illustrate how things really are on the international scene to the value of our precious
U.S Dollar, and how it is being speculated, by the money changers, as well as the unscroupulus bankers,
that in some way are the main frofiteers. The same thing applies to the cashing of U.S Dollars.
Infact due to this lost of value of the U.S Dollar, very few American tourists visit countries that are
in the Euro zone, and choose instead the Asian countries, where till this day the U.S. Dollar
has more purchasing power. But who knows; how much this will last, if they decide to accept Euros
instead of U.S. Dollars.
I believe that if the U.S would raise its interest rates, much foreign capital would return to the U.S and the
American economy as well as the U.S. Dollar would have more value against the super Euro, which is
over valued in regards to the U.S Dollar. and at the sametime would stop the speculation upon the U.S Dollar
by those unscroupulus money speculators.
Sammy from Sicily