tag:blogger.com,1999:blog-4900303239154048192.post960083726070069302..comments2024-03-06T06:34:42.881-05:00Comments on EconoSpeak: Did Bernanke (And Crew) Save The World? Unknownnoreply@blogger.comBlogger8125tag:blogger.com,1999:blog-4900303239154048192.post-10223648801853376642015-11-07T19:26:55.704-05:002015-11-07T19:26:55.704-05:00Barkley, the leveraged forms of derivatives would ...Barkley, the leveraged forms of derivatives would likely be a response to a lack of collateral behind the debt being issued. By 'collateral' I refer to 'real' wealth. This problem arose also in the 1920s, prior to the Great Depression. After the Great War, when vast (incalculable) areas of the globe were destroyed along with many millions of young people who had so much potential....as you and most readers are aware.<br /><br />Again we see even the financiers also are vulnerable to the contingencies of life.<br /><br />It seems that many holding power are acting inappropriately by leaving people without resources and opportunities to address our shortages of sustainable forms of infrastructure, social services and so on. Perhaps it's because the effective tapping of our human resources challenges the profit structures.<br /><br /><br /><br />Myrtle Blackwoodhttps://www.blogger.com/profile/07427043367624101075noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-78114125383113488562015-11-07T18:46:10.270-05:002015-11-07T18:46:10.270-05:00Myrtle,
I do not disagree with the statement by V...Myrtle,<br /><br />I do not disagree with the statement by Varoufakis that you quote above. The main missing element in your account (and not mentioned by me either) was the rise of the wide variety of ever more leveraged forms of derivatives based on the sub-prime mortgages, with AIG in particular a main supplier of some of the most leveraged to various European banks and other financial institutions, with some of these reported to have had leverage ratios as high as 35 to 1. The upper end of that market has since all but disappeared since the crash.<br /><br />In any case, it was the collapse of these "shadow bank" securities that was the real nub of the crisis, particularly in Europe, with the banks running to the ECB (and the Bank of England and the Swiss Ntional Bank and the Swedish Riksbank) to save them, but these were unable to. That is when the Fed stepped in quietly with the swaps, but keeping it quiety at Trichet's request so as not to trigger a worse panic and run than was already going on.rosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-71732727665797151112015-11-07T02:47:07.090-05:002015-11-07T02:47:07.090-05:00Once the printing presses go into play, the next f...Once the printing presses go into play, the next fix is to lower personal incomes-- dramatically to avert inflation.<br /><br />"....Ponzi austerity is the inverse of Ponzi growth. Whereas in standard Ponzi (growth) schemes the lure is the promise of a growing fund, in the case of Ponzi austerity the attraction to bankrupted participants is the promise of reducing their debt, so as to liberate them from insolvency, through a combination of ‘belt tightening’, austerity measures and new loans that provide the bankrupt with necessary funds for repaying maturing debts (e.g. bonds). As it is impossible to escape insolvency in this manner, Ponzi austerity schemes, just like Ponzi growth schemes, necessitate a constant influx of new capital to support the illusion that bankruptcy has been averted. But to attract this capital, the Ponzi austerity’s operators must do their utmost to maintain the façade of genuine debt reduction." Yanis Varoufakis (former Greek fincance minister, November 2013)Myrtle Blackwoodhttps://www.blogger.com/profile/07427043367624101075noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-52833124394295452362015-11-07T02:40:58.168-05:002015-11-07T02:40:58.168-05:00As global debt deflation kicked in global interest...As global debt deflation kicked in global interest rates were lowered. But, since financial wealth was already very concentrated at the top, this fix didn't do much beyond raising asset prices leading to the need for yet higher mortgages. To keep the system afloat official assent was given to subprime lending. After all (they thought) it's not bad debt that creates a financial crisis only a lack of liquidity.<br /><br />In September 2008 interbank lending closed down. The liquidity crisis finally arrived. After that, the next fix is to print money and lots of it.Myrtle Blackwoodhttps://www.blogger.com/profile/07427043367624101075noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-57859161861016720212015-11-07T02:34:38.324-05:002015-11-07T02:34:38.324-05:00Re: "In 2008, the crisis was emanating from t...Re: "In 2008, the crisis was emanating from the US and its subrime lending crisis. The Fed effectively kept this from leading to a 1931 outcome in Europe and other nations as well..."<br /><br />I have been trying to unravel exactly what happened and still can't understand what went on. But I'll pose a possible (partial) explanation:<br /><br />The world's financial system has always been incredibly fragile. No system has evolved to ensure equitable access to money or a credible link between the quantity of money versus real wealth on the planet. And this situation has worsened as the world's key energy resource - oil - became concentrated in its supply in a smaller number of places around the globe. This prompted fixes like the creation of the 'petro-dollar' (to maintaiin US economic hegemony). Another fixe was the rationing of oil supplies so that it favoured the most powerful nations (such as the US). As a result economic growth trended much lower post 1970s in Europe versus in the US.<br /><br />Another fix to sustain economic growth in an unbalanced world economy was to create more and more debt around the world. This provided a mechanism to recycle the abundance (surplus?) of 'petrodollars' but the system was unsustainable as debt repayments in themselves create deflation and recession.... Myrtle Blackwoodhttps://www.blogger.com/profile/07427043367624101075noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-2473848987079421172015-11-06T01:29:31.181-05:002015-11-06T01:29:31.181-05:00Now corrected.Now corrected.rosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-77838987027328975362015-11-06T01:27:37.363-05:002015-11-06T01:27:37.363-05:00Thanks, you are right, john.Thanks, you are right, john.rosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-91633413956983950232015-11-05T23:07:37.694-05:002015-11-05T23:07:37.694-05:00Small correction. Creditanstalt failed in May 1931...Small correction. Creditanstalt failed in May 1931, and in Sept. 1931 the Brits went off gold. I'm not sure of how quickly the bank-run hit the U.S. but likely before Sept. 1932.john c. halaszhttps://www.blogger.com/profile/17176419625607679150noreply@blogger.com