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WHY THE FED SHOULD IGNORE THE STOCK MARKET AND RAISE RATES. [Copy link] 中文

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Post time 2015-9-13 02:07:27 |Display all floors
This post was edited by abramicus at 2015-9-13 02:15

The needs of Wall Street should never have influenced the decision of the Fed in the past, to begin with, whose first priority should have been to ensure maximum employment, and a rising standard of living for the majority.  The Fed had been suckered into bailing out big time gamblers and ended up with a pile of shit that is as high as the moon.  All the debts that Wall Street made the Fed pay for, equivalent to 4 trillion dollars were bets that they owed to each other, worth 30 times the value of the underlying asset they held or borrowed, such that when the assets bottomed out, they owed each other 30 times the value all all their assets.  This is what the public was made to pay for, in order to save them.

A 200 blllion dollars of failed mortgages ended up costing the Fed 4,000 billion dollars, a 20:1 ratio.  Thus, their bail out was mostly profit money.

And if the Fed is willing to be a perpetual sucker, Wall Street will never be short of "crisis" it would need to be bailed out from.  So, Janet should end this scam of the big boys, and tell them, pay up or fold up.  If the stocks are not worth what they are selling for at a higher interest rate that would make the retirees able to retire decently on their savings, too bad.  Sell them cheaper, and the public will certainly buy them up at a lower price.  Hey, this is a free market, and the public that lends its savings to the country have a right to the profits of the financial market, which the Fed will defend and enforce.  Hike!!!





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Post time 2015-9-13 07:31:28 |Display all floors
This post was edited by abramicus at 2015-9-13 08:13

WHY CHINA SHOULD NOT BLINDLY ADOPT THE "BEST ECONOMIC THEORIES" FROM THE WEST -- NO MATTER HOW MANY NOBEL LAUREATES SUPPORT THEM -- JUST LOOK AT THE SUBPRIME MORTGAGE DEBACLE THAT NEARLY BANKRUPTED THE ENTIRE BANKING SYSTEM, AND LOOK AT LTCM THAT BLEW UP DESPITE HAVING TWO NOBEL LAUREATES ON BOARD.  WHITE CAT, YELLOW CAT, WHAT MATTERS IS THE CAT THAT CATCHES THE MICE, AND DOES NOT CRASH THE HEIRLOOM VASE.  "CONSUMPTION" ECONOMICS, TIED TO "SERVICE ECONOMY" (CLEANING CARS) AND "INCREASING CAPITAL ACCOUNTS" (BORROWING TO LIVE BEYOND ONE'S PRODUCTION OUPUT) IS A DEAD-END, SO-CALLED "POST-INDUSTRIAL ECONOMICS" NONSENSE.  CHINA IS NOT POST-INDUSTRIAL, AND SHOULD NEVER BE POST-INDUSTRIAL, BECAUSE IN CHINA, WHILE ENVIRONMENTAL PROTECTION WILL ALWAYS BE A PRIORITY, IT WILL HAVE TO BE FUNDED BY THE PROFITS OF ITS OWN DOMESTIC PRODUCTION, AND WILL NOT BE FUNDED BY ANY OTHER COUNTRY.  SELF-RELIANCE IS THE FOUNDATION OF ECONOMICS WITH CHINESE CHARACTERISTICS, ALL THE REST IS SHIBBOLETH.

Lesson from the "Best" of Wall Street Big Wigs - Credit Event 2008.


Twelve banks have agreed to pay 1.87 billion dollars to settle an antitrust lawsuit stemming from their collusion to prevent market transparency in the lead-up to the 2008 financial breakdown, and beyond, to as recently as 2013.  What it showed is not the existence of this race horse operation, but rather that only certain banks are allowed to deal in its bets, and whose customers are the public, or in many cases, each other.

To make the story simple and understandable, let us suppose Bank A issued a mortgage to a fellow for a house worth 10 times his salary, and Bank B issued a similar mortgage to another fellow with the same risk profile, for the same amount.  Next, Bank B contracts to buy a Credit Default Swap from Bank A, to insure it against the risk of the borrower defaulting, and Bank A contracts to buy a Credit Default Swap from Bank B to insure against the default of its borrower.  

But wait, Bank C wants to sell a CDS on the house bought by the customer of Bank A also, and Bank D, knowing that the borrower is unlikely to pay back his loan, agrees to buy that CDS.  

Then, Bank D turns around and sells a CDS on the house bought by the customre of Bank B, which Bank C buys, both of them, to hedge against their earlier positions.

Then, imagine more banks piling on, much like in horseracing, anybody can bet on the horse any way he wants for a certain price.  Anyone can buy a CDS as long as there is a seller, even if the buyer has no home to insure against.  He can bet on any tranche of mortgages defaulting, and bank on collecting the face value of the mortgage if it does happen, all for the fee paid to the seller of the CDS.  Thus, these new homeowners have become the race horses in a financial racetrack they never knew existed.  And when they miss their mortgage payment, a "credit event" is registered that forces one bank to owe another bank the full value of their mortgage.  After all the "credit events" have been triggered, you can have 20 to 30 banks owing each other the full value of their mortgage, which if isolated in occurrence, can be sorted out between the banks, but if the entire housing market were affected, causes the banks to lack the liquidity to pay off all their maturing obligations based on the CDS that they have sold to each other.  But, you know what?  The value of the mortgage is only 1/30th of the amounts they bet against each other.  And why should the public give them 30 times the value of the mortgage, so that they can be solvent?  Would it not have been simpler for the government to just pay off the 200 billion dollars of mortgages, which would have released every one of them from their obligations to each other, put these mortgages under the debt portfolio of the Fed, which can then be liquidated through the form of a REIT, costing the public 1/30th of the bailout money, and actually helping the home owners to be able to stay in their homes, paying rents that they can afford, which can be done restructuring their loans to fixed rate mortgages with longer duration, such as 30, 40 or 50 years?

If the CDS dealers made a mountain out of a mole hill, the government turned that mountain into an entire continent, forcing the public to shoulder a debt that is still hanging over their heads, now worth some 14 trillion dollars, and which they can never pay off, not in 30, 40 or 50 years, or ever.  

Clearly, not only did the "white cats" fail to catch any mice, they nearly caused all the priceless heirlooms and costly appliances to crash down by their frantic attempts to save themselves, and the spreadsheet of the Fed is the best proof of what happens when China, now with a surplus of 3.2 trillion dollars, tries to imitate them.  China had many good "yellow cats" who were retired who created the China Miracle - they don't need any "white cat theory".  They only had common sense, like Deng Xiaoping, like Zhu Rongzhi.  China should put those who have common sense at the very top, and those who have the burden of too much conflicted and contradictory learning, should serve as advisers, not decision makers, if there is to be peace and lasting, sustainable, prosperity for China.  That is why Deng used the "white cat, black cat" paradigm -it is the best paradigm in economics, and now, it is time to apply it appropriately.  White cat or yellow cat, what matters is that it can revive China's productivity that is the source of every project it has on its modernization agenda.  

Growth by consumption is possible only if you consume what others produce or what you have previously produced - the former requires military conquest (establishing the Yuan as an international reserve currency by fiat) or debt servitude (opening capital accounts), the latter (cleaning cars instead of producing cars, and eating grain instead of producing grain) is the surest road to universal poverty and social upheaval.  

Growth by consumption is simply put, IMPOSSIBLE - forget that crazy idea.  





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Post time 2015-9-14 13:09:03 |Display all floors
Deng is a fake communist and opportunist like Zhou En Lai.  It was not Zhou who initiated the ping pong diplomacy. In fact when someone suggested to Mao to start talking to US officials, Zhou opposed strongly  to the suggestion.

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Post time 2015-9-14 13:16:01 |Display all floors
China is grossly over invested already........


Makes no difference whether Fed raise rates or not.



I've made my living, Mr. Thompson, in large part as a gambler. Some days I make twenty bets, some days I make none. There are weeks, sometimes months, in fact, when I don't make any bet at all because ...

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Post time 2015-9-17 22:55:48 |Display all floors
China is still under invested in INFRASTRUCTURE development.  China need to build many many power plants, networked roads, world class telecommunication system, mass rapid transit for cities, affordable housing, etc.                   Singapore is the best economy model China should copy.  Currently the economy model copy from the HK and Taiwan which is exploitative and promote barbaric economy growth.  

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Post time 2015-9-18 00:26:43 |Display all floors
This post was edited by sfphoto at 2015-9-18 00:28

The past economic model is based on low-cost manufacturing of consumer goods for export, property development and infrastructure spending. The future economic model will be based on highly-automated manufacturing of high-value goods in the consumer, corporate, industrial, information technology, robotics, clean energy, transportation, nanomaterials, life sciences, environmental and defense sectors, and on high-value knowledge-based services industries in the healthcare, education, professional, financial, retail/ecommerce, logistics, business, travel/tourism, sports/recreation, technical and social welfare sectors.

How the State deal with Society, Capital and Market and what roles the State will assign to each one of them in the economy will be the greatest challenge that lies ahead.

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Post time 2015-9-18 09:37:22 |Display all floors

Japan Militarists to Enact "Enabling Act" - A De Facto Coup d'Etat

This post was edited by abramicus at 2015-9-18 09:44

Capitalism - with Chinese Characteristics - Can Only Be Made in China.

As we analyze the economic models of the West that have been so successful abroad, but so disastrous in China, we cannot escape the conclusion that you cannot wear someone's else's clothes without eventually losing your pants.

The False Model of Consumption Economics, of accumulating Capital Accounts Surplus (Capital Accounts are basically debts owed to foreign countries, euphemistically called "Capital Accounts"), of espousing a Service Economy (doing things that produce nothing, and whose efforts are consumed without any product to show for it) makes sense ONLY for a country that can issue unlimited debts (Capital Accounts issuer), that can use such debts to borrow everything it needs to consume, and thus consumes everything that others have toiled to produce.

Such a country, friends, is the sole issuer of the international reserve currency - its own currency.

China is not such a country, has no need to be such a country, and rejects being such a country.

Capitalism in China is not a model of consumption by borrowing, enforced by a global military power.  

Capitalism in China is a model of production always exceeding consumption, the surplus of which is used to lend to other countries not so well endowed or managed, supported by the fact that other countries need China more than China needs them - a self-reliant, self-supported Civilization, rather than a self-appointed, self-promoted Colonial power.  If China were to adopt the growth-by-consumption model of the economy, owing others everything one consumes without limit, then China must be prepared to enforce it by sanctions, seige, subversion, and regime change, on all the countries that refuse to keep giving her their products and natural resources for her to consume, under the myth of exporting them to China and earning Chinese yuans, that China can continue to print without limit,   Failure to ruthlessly enforce such a form of Capitalism with Western Characteristics by using overwhelming force will, however, bankrupt China for more quickly and permanently than any foreign invasion.


On the other hand, by adopting Capitalism with Chinese Characteristics, as founded by Deng Xiaoping and successors, China will achieve self-sufficiency, security, and social equality, with lasting peace and prosperity, because her survival has become necessary condition for the survival of the rest of civilized humanity.







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