Peak Oil
Donate Bitcoin

Donate Paypal


PeakOil is You

PeakOil is You

Economics/Math (split from OPEC thread)

Discussions about the economic and financial ramifications of PEAK OIL
Post a reply

Re: September OPEC Production Falls - Petrologistics

Unread postby dr_doom » Wed 27 Sep 2006, 05:17:37

$this->bbcode_second_pass_quote('', '
')No, I'm claiming that the vast majority of trades are backed by something ...


Re-read my response, I said you're probably right.

The wording of your statement implies you do believe there
is some derivatives based on non-existent underlying assets.


$this->bbcode_second_pass_quote('', '
')There isn't enough gold in existence to run the economy these days.


This is total BS. If we had an honest gold or silver backed currency
prices would adjust to how much money there was in circulation. And
assuming the standard was adhered to, prices would stabilise,
and what you would see over time would be dis-inflation as the economy
became more productive.

Instead what we see, even in the tremendous period of economic
growth that has been experienced in recent times, is that the best
result has been low inflation.

The whole idea of a gold-standard is that it stops governments and banks
creating too much money, and transferring wealth to themselves.

There isn't enough gold in existence to "run the economy" these days
because too much paper money has been created.




I'm not saying there necessarily is a derivatives bubble, I'm saying
that derivatives are being used as yet another tool for market
manipulation and wealth transfer, which I think is a bad thing.

Have you actually read about the LTCM disaster? There was an article
in the economist a few months back saying how great derivatives were,
and how clever (people like yourself) are for creating them.

There was even a bit where it was saying how clever Goldman Sachs was
to have profited from LTCM, while it was being bailed out with public money.
All of which I'm sure you'll wholeheartedly agree with.

The most shocking thing about this article was it pretty much stated
at the end, that another derivatives disaster like LTCM, but probably worse,
was inevitable. And if/when it happens again the lender of last resort,
the fed, will step in and bail them out again.

And this is what makes the whole system so robust and fantastic,
I'm sure you'll agree with that too.
User avatar
dr_doom
Wood
Wood
 
Posts: 34
Joined: Sun 26 Mar 2006, 04:00:00
Top

Re: September OPEC Production Falls - Petrologistics

Unread postby Dezakin » Wed 27 Sep 2006, 10:09:54

$this->bbcode_second_pass_quote('Doly', 'W')hoa! I never expected to see a discussion about advanced math here! Can I chime in? Number theory has always been a favorite with me.

$this->bbcode_second_pass_quote('Dezakin', '
')$this->bbcode_second_pass_quote('', 'T')here is a mystery there. I think some philosphers of the past have suggested that our ability to apprehend real numbers but never actually master them suggests there is a spiritual component to the universe. We say they exist because our reason implies them, but we can never mechanically verify their existence in the natural world.

We don't have to assume they exist at all.


Well, Dezakin, no, unless you want numerical analysis to work. And numerical analysis is the basis of physics since Newton. If you don't assume that every converging limit converges to a number, where does that leave you?


They're just tools. When you throw out the axiom of infinity you throw out the gateway to larger infinite cardinals, but you can still work with 'real' numbers. See Bishops work 'Foundations of Constructive Analysis'
User avatar
Dezakin
Heavy Crude
Heavy Crude
 
Posts: 1569
Joined: Wed 09 Feb 2005, 04:00:00
Top

Re: September OPEC Production Falls - Petrologistics

Unread postby GoIllini » Wed 27 Sep 2006, 15:50:37

$this->bbcode_second_pass_quote('dr_doom', '
')Re-read my response, I said you're probably right.

The wording of your statement implies you do believe there
is some derivatives based on non-existent underlying assets.

Of course, there is. This isn't fraudulent; it just makes sense. Say I'm a millionaire with no liabilities. You think P.O. is coming. I take out a futures contract to sell you 500 barrels of oil that you think *may* hit $200/barrel in a few years. I'm still creditworthy, because it's likely I'll be able to shell out $201/barrel to buy oil from someone else who'd normally take delivery to make the delivery to you. So the short interest covering to make delivery will only drive up prices a little. Additionally, futures exchanges have been around for at least a hundred years, so they know when the short interest has gotten too high, and they can stop people from selling futures unless they're backed by real assets.

I'm not saying the system's perfectly safe (although no clearing house- or exchange has defaulted in U.S. history, and they survived the great depression pretty easily), but I'd be more worried about getting hit by lightning than the derivatives market hitting things out of whack.

$this->bbcode_second_pass_quote('', 'T')his is total BS. If we had an honest gold or silver backed currency
prices would adjust to how much money there was in circulation. And
assuming the standard was adhered to, prices would stabilise,
and what you would see over time would be dis-inflation as the economy
became more productive.

Pros of Gold:
1.) Inflation happens more slowly.
2.) Currency can't be manipulated by government.

Cons of Gold:
1.) $1 gold coins would require a magnifying glass to count; the economy would get less efficient with everyone doing that.
2.) It's a useless metal. Why not use tin foil as a currency? You can at least do something with that.
3.) The federal reserve doesn't have the power to stop a recession.
4.) Lower inflation is good news for people who have money; bad news for people who owe money.

$this->bbcode_second_pass_quote('', 'I')nstead what we see, even in the tremendous period of economic
growth that has been experienced in recent times, is that the best
result has been low inflation.

The whole idea of a gold-standard is that it stops governments and banks
creating too much money, and transferring wealth to themselves.


That's the federal reserve's job. They're pretty much independant of politics. Meanwhile, banks are allowed to "create" money, but they also have to pay interest on it. Banking is a great industry to get into, but when you take a close look at it, banks aren't doing anything necessarily "unfair" with money. If you've ever subleased an apartment, you "created" apartment space much the same way that banks create money.


$this->bbcode_second_pass_quote('', 'T')here isn't enough gold in existence to "run the economy" these days
because too much paper money has been created.

It all depends on whether gold's inherent value is dependant on the amount of liquid value needed to run the economy, or whether gold has a somewhat fixed inherent value between an infation-adjusted $300/oz and $1000/oz. IMHO, gold has a somewhat fixed intrinsic value.

$this->bbcode_second_pass_quote('', 'I')'m not saying there necessarily is a derivatives bubble, I'm saying that derivatives are being used as yet another tool for market manipulation and wealth transfer, which I think is a bad thing.
You call it market manipulation and wealth transfer (you can't manipulate the market long-term); I call it giving investors the risk profiles they're looking for. What if we could take a stock, and pay one person for taking the risk for it going between $55 and $60, and pay someone else for taking the rest of the risk? Derivatives let you do that.

$this->bbcode_second_pass_quote('', 'H')ave you actually read about the LTCM disaster? There was an article in the economist a few months back saying how great derivatives were, and how clever (people like yourself) are for creating them.
Actually, I don't read the economist, so I'm not sure how sarcastic you're being (it's so easy to pick out sarcasm in text online </sarcasm>). Seriously, though, I have heard of the Long-Term Capital Management Hedge Fund. IIRC, the Fed did convene meetings with various investment banks and exchanges to work things out, but it didn't cost a dime of public money- besides the time and energy of regulators.

$this->bbcode_second_pass_quote('', 'T')he most shocking thing about this article was it pretty much stated at the end, that another derivatives disaster like LTCM, but probably worse, was inevitable. And if/when it happens again the lender of last resort, the fed, will step in and bail them out again.
This is because stupid creditors, acting on behalf of other stupid creditors, lend money to stupid debtors. Sound familiar, eh? We had this same issue, before most derivatives (other than futures and maybe a little OTC call option trading) and before we went off the gold standard in 1929. The difference is that, today, the Fed's there to step in with solutions, rather than exacerbating problems.

$this->bbcode_second_pass_quote('', 'A')nd this is what makes the whole system so robust and fantastic, I'm sure you'll agree with that too.
It does make it exciting, I'll tell you that.
User avatar
GoIllini
Tar Sands
Tar Sands
 
Posts: 765
Joined: Sat 05 Mar 2005, 04:00:00
Top

Re: September OPEC Production Falls - Petrologistics

Unread postby Dezakin » Thu 28 Sep 2006, 16:37:31

$this->bbcode_second_pass_quote('ElijahJones', 'I') appreciate your long reply Dezakin, but I would suggest that there is still more to be known about how and why mathematics serves as a model for the real world. You sort of glossed over most of what I said as though it was meaningless.

Not meaningless, just irrelevant. It doesnt matter if theres a cardinality between the integers and the reals, and it doesn't matter if there are no infinite sets at all.
$this->bbcode_second_pass_quote('', 'I') was not looking for you to solve an existential crisis for me, the post was for GoIllini mostly.

Cantor's Paradise? The ideas of Cantor led directly to Godel's Incompleteness Theorem, which is a very profound and far reaching result.

People often read more into it than it really implies....

In any case, you don't need uncountable cardinals to prove the incompleteness theorem. Infinity is unnecissary.
$this->bbcode_second_pass_quote('', ' ') Chaitin has outdone Cantor and Godel, but we mortal's have little respect for the gods.

Oh come on. We don't need to start worshiping mathematicians now, especially ones that start infering bizzare metaphysics into their arguments. Godel even believed the continuum hypothisis had a real truth value! You might as well have opinions on God's warts!

$this->bbcode_second_pass_quote('', 'O')h and factorization base two can certainly be done in exponential time...


I don't remember saying it cant. Its trivially obvious...

$this->bbcode_second_pass_quote('', 'W')hat is interesting is that a polynomial time algorithm for primality exists and that it is non-deterministic.
Theres the deterministic primality test...
$this->bbcode_second_pass_quote('', 'T')he idea of actually using the algorithm is just busy work. Why do the natural numbers allow a polynomial time primality test?
I'm not sure thats a very useful question.
$this->bbcode_second_pass_quote('', 'O')n the other issues of embedding and which is more foundational and which is most useful, I am inclined toward agreement with Gauss on this one. Number Theory is the queen of mathematics and quadratic reciprocity is the jewel in her crown.
Gauss was brilliant sure, but hes several centuries out of date. Russels paradox, the birth of set theory, and much of mathematical logic itself isn't embedded within number theory.
$this->bbcode_second_pass_quote('', 'T')hree hundred years on and most of elementary number theory remains a mystery. Whereas ZFS is pretty much laid bare, Computability Theory is a subset of other broader theories, number theory alone stand with the highest number of unsolved problems. Problems I might add that we are so perplexed by that rather than vaunt them (and so admit our own shortcomings) we avoid them and instruct others to do the same.

Cheers!

Number theory is not the end of mathematics, and there are statements within number theory that you have to go outside to prove... Goodsteins theorem for instance requires stepping outside peano arithmetic in order to find a proof. If you want a broader base, go to ZF or category theory, and more existential problems are dealt with there anyways.
User avatar
Dezakin
Heavy Crude
Heavy Crude
 
Posts: 1569
Joined: Wed 09 Feb 2005, 04:00:00
Top

Re: Economics/Math (split from OPEC thread)

Unread postby EnergyHog » Thu 28 Sep 2006, 22:30:35

Wow, all I can say to those of you that think this is a good economy and that Ford laying off 14,000 white collar employees is a "normal" part of switching to a service economy (it's not normal to switch to a service economy) is that you may want to seriously consider joining an economics forum. Your knowledge of oil/energy far outweighs your economics knowledge.
User avatar
EnergyHog
Lignite
Lignite
 
Posts: 215
Joined: Mon 27 Mar 2006, 04:00:00
Top

Re: Economics/Math (split from OPEC thread)

Unread postby GoIllini » Fri 29 Sep 2006, 00:18:21

$this->bbcode_second_pass_quote('EnergyHog', 'W')ow, all I can say to those of you that think this is a good economy and that Ford laying off 14,000 white collar employees is a "normal" part of switching to a service economy (it's not normal to switch to a service economy) is that you may want to seriously consider joining an economics forum. Your knowledge of oil/energy far outweighs your economics knowledge.


I think it's a great economy, at least relative to three years ago.

Some of this is based on my experience, but I think that if you look at the broader picture, this seems to make sense. We're seeing lots of jobs get created. At the same time, corporate profits are setting new records, meaning they can create more jobs.

I won't say there's economic prosperity or a boom, but I will say that the economy's at least much closer to "normal" than it's been in five years.
User avatar
GoIllini
Tar Sands
Tar Sands
 
Posts: 765
Joined: Sat 05 Mar 2005, 04:00:00
Top

Re: Economics/Math (split from OPEC thread)

Unread postby dr_doom » Fri 29 Sep 2006, 11:50:52

$this->bbcode_second_pass_quote('', '
')Pros of Gold:
1.) Inflation happens more slowly.
2.) Currency can't be manipulated by government.


If we had a gold-standard resources would actually be allocated
by the free-market, and greater prosperity would likely be enjoyed by all.
The monetary system we have at the moment
is essentially central-planning by stealth.


$this->bbcode_second_pass_quote('', '
')Cons of Gold:
1.) $1 gold coins would require a magnifying glass to count; the economy would get less efficient with everyone doing that.
2.) It's a useless metal. Why not use tin foil as a currency? You can at least do something with that.
3.) The federal reserve doesn't have the power to stop a recession.
4.) Lower inflation is good news for people who have money; bad news for people who owe money.


1) We could have a gold-backed paper/electronic currencies,
ideally less centralised, seeing as that is what has lead us to the mess we're in now.
2) The fact that gold isn't "consumed" is part of what makes it such a great monetary base
3) Don't tell me you actually believe Helicopter Ben's rhetoric about printing the US
economy out of a recession
4) This idea that inflation is good for some people and not for others is at best
misguided. In the US/UK the vast majority of people are in loads of debt, I somehow don't
think this puts them in a good position to deal with serious inflation.
Especially if it is accompanied by a global credit-crunch, which we are beginning to see.




$this->bbcode_second_pass_quote('', '
')That's the federal reserve's job. They're pretty much independant of politics. Meanwhile, banks are allowed to "create" money, but they also have to pay interest on it. Banking is a great industry to get into, but when you take a close look at it, banks aren't doing anything necessarily "unfair" with money. If you've ever subleased an apartment, you "created" apartment space much the same way that banks create money.


Central banks are allowed to create money, and we pay interest on it, via the government.
Retail/commercial banks are then allowed to create even more money, by the magic of
fractional-reserve lending, and we pay interest on that too.
And then we pay again through inflation, the invisible tax.

Your statement is patently false.

Banking a great industry to get into, yes indeed, you will make an absolute fortune.
Don't you wonder though why there are so many jobs in banking, and why bankers
are the highest paid people in the world by a mile. Is it because they are
so incredibly productive that they get paid so highly. No, it is because they are
working for a sector which has the ability to create fiat currency out of thin air.

Your example about subleasing an apartment is totally incomparable, as apartment
space cannot be created out of thin air with the flick of a pen.



$this->bbcode_second_pass_quote('', '
')It all depends on whether gold's inherent value is dependant on the amount of liquid value needed to run the economy, or whether gold has a somewhat fixed inherent value between an infation-adjusted $300/oz and $1000/oz. IMHO, gold has a somewhat fixed intrinsic value.


I would agree with the last sentence.
Didn't really get what you were saying in the first sentence.




$this->bbcode_second_pass_quote('', '
')You call it market manipulation and wealth transfer (you can't manipulate the market long-term); I call it giving investors the risk profiles they're looking for. What if we could take a stock, and pay one person for taking the risk for it going between $55 and $60, and pay someone else for taking the rest of the risk? Derivatives let you do that.


I agree, you can't manipulate the market or markets long-term.
This is part of the reason why a hedge fund/derivatives
disaster of unprecedented scale is quite likely to happen in the
near future.



$this->bbcode_second_pass_quote('', '
')Actually, I don't read the economist, so I'm not sure how sarcastic you're being (it's so easy to pick out sarcasm in text online </sarcasm>). Seriously, though, I have heard of the Long-Term Capital Management Hedge Fund. IIRC, the Fed did convene meetings with various investment banks and exchanges to work things out, but it didn't cost a dime of public money- besides the time and energy of regulators.


The problem with LTCM was that it lost a shed-load of borrowed money,
and the argument put-forward was that if LTCM defaulted on its loans
it would cause a cascade of banking failures which would
'threaten the stability of the financial system'.

Please explain to me where the money came from to keep LTCM in business
if it wasn't 'public' money.

LTCM is just the latest in a long-line of banking failures / bailouts of ever
increasing size which have taken place since the Fed has
been available as a lender-of-last-resort. It effectively removes any
risk of loss for banks that wish to lend fiat money irresponsibly.



$this->bbcode_second_pass_quote('', '
')The most shocking thing about this article was it pretty much stated at the end, that another derivatives disaster like LTCM, but probably worse, was inevitable. And if/when it happens again the lender of last resort, the fed, will step in and bail them out again.

This is because stupid creditors, acting on behalf of other stupid creditors, lend money to stupid debtors. Sound familiar, eh? We had this same issue, before most derivatives (other than futures and maybe a little OTC call option trading) and before we went off the gold standard in 1929. The difference is that, today, the Fed's there to step in with solutions, rather than exacerbating problems.


The Fed is the problem as I see it.

My core-argument here isn't against derivatives per-se, but what derivatives
are being used for, which you seem to be in denial about.

I dug out that article from the economist, and I've actually misquoted it.

"Any Crisis would affect Goldman, because it is so intertwined with the system.
The bank says it keeps plenty of liquid reserves against the dread day. It might
well profit from any crisis (it did from LTCM). But the chances are that some
banks, somewhere, will get into serious trouble.

If that happens, the losses of any bank will be for its shareholders; they should
not expect any bail-out. THe wider question has to do with systemic risk. If the
much vaunted systems do not work, then the central banks will have to step in
(as the Federal Reserve did with LTCM)."

The article is very careful not to explictly say anything about the central banks
bailing-out failed banks with newly-created money. But you have to wonder why they
would even mention the word bail-out if it wasn't something that has been known
to happen.

If you are in fact correct and LTCM wasn't bailed out by the Fed, Jim Kunstler
has also got this wrong in his book The Long Emergency, in the chapter running
on Fumes. In there he quite clearly claims, that they had a series of meetings
which ended with the Fed agreeing to cover LTCM losses.
User avatar
dr_doom
Wood
Wood
 
Posts: 34
Joined: Sun 26 Mar 2006, 04:00:00
Top

Re: Economics/Math (split from OPEC thread)

Unread postby GoIllini » Sat 30 Sep 2006, 04:04:02

$this->bbcode_second_pass_quote('', 'I')f we had a gold-standard resources would actually be allocated
by the free-market, and greater prosperity would likely be enjoyed by all.
The monetary system we have at the moment
is essentially central-planning by stealth.

That's an interesting argument. I will agree that the supply of capital to the economy is centrally planned, but everything else isn't.

The problem with soviet-style communism was that a bunch of political bigwigs weren't just managing the currency, they were managing factories, supply lines, and everything. The Fed finds the very smartest people in the country to take care of the currency, and leaves the rest to the economy. The Fed's also relatively independant of Capitol Hill (If only it were spelled with two "a"s; I'd love to make a bad joke or two.) This may cause some people to be concerned that our money supply is privately controlled (It isn't; the FOMC is mostly appointed by the White House, and while banks can "create" money, the whole process is regulated/controlled by the FOMC.), but it also keeps the Fed out of politics. This is also something the Soviets didn't have going for them.

$this->bbcode_second_pass_quote('', '
')1) We could have a gold-backed paper/electronic currencies,
ideally less centralised, seeing as that is what has lead us to the mess we're in now.

Personally, I trust paper ballots more than electronic ones. I'd trust paper currency more than electronic currency.

$this->bbcode_second_pass_quote('', '2')) The fact that gold isn't "consumed" is part of what makes it such a great monetary base

True. OK; let's go with steel, or copper. Just something useful that automatically gets more expensive when the economy is using lots of it. This mechanism would automatically cut the money supply if the economy's growing too fast, and loosen it if it needs to grow.

$this->bbcode_second_pass_quote('', '3')) Don't tell me you actually believe Helicopter Ben's rhetoric about printing the US
economy out of a recession

Actually, Ben's a "react to market indicators" kinda guy. If core inflation's high, he raises rates. If it's low, and the economy's not doing so hot, he lowers them. You can't always print your way out of a recession, but you can turn a bad depression into a recession by making sure the money supply isn't too bad.

$this->bbcode_second_pass_quote('', '4')) This idea that inflation is good for some people and not for others is at best
misguided. In the US/UK the vast majority of people are in loads of debt, I somehow don't
think this puts them in a good position to deal with serious inflation.
Especially if it is accompanied by a global credit-crunch, which we are beginning to see.
The 10-year's gone from 5+% down to 4.6% over the past few months. The more time we have to give people a taste of 7%, 8%, 9%, and 10% mortgage rates, the better we can be at avoiding recession.




$this->bbcode_second_pass_quote('', 'C')entral banks are allowed to create money, and we pay interest on it, via the government.
Retail/commercial banks are then allowed to create even more money, by the magic of
fractional-reserve lending, and we pay interest on that too.
And then we pay again through inflation, the invisible tax.$this->bbcode_second_pass_quote('', '
')See this website to take a look at what a well-known econ professor has to say about this claim:
http://www.publiceye.org/conspire/flahe ... erty7.html

The truth is that:

1). Banks can create money into existence by having the federal reserve create it and lend it to them (even then, this story isn't completely true, because there are more restrictions on that.) They then have to pay interest on that money to the fed.
2). The fed refunds nearly all interest paid by the federal government on bonds the federal reserve owns every year. This actually helps save taxpayers money. Last year, something like 8% of the federal government's debt was interest-free because we have the federal reserve.

$this->bbcode_second_pass_quote('', 'Y')our statement is patently false.
It's patently false if you ascribe to certain conspiracy theories.

$this->bbcode_second_pass_quote('', 'B')anking a great industry to get into, yes indeed, you will make an absolute fortune.
Anybody can make an absolute fortune by setting up the next Google. Bankers make money because they work with money. But still, it's more like owning a casino than like owning a printing press. If people do business with you, you make money. If they don't do business with you, you lose money. Some of the money that gets made in finance is made by putting hard-working blue-collar employees out of business (That would be M&A. I have relatives who work factory jobs, so that's not how I'd like to make money.) The other area is in trading. Most of the money gets made off of foolish rich people who have more money than wisdom. So if you're making money off of rich people doing financial transactions, chances are that you'll get rich pretty quickly, too.

$this->bbcode_second_pass_quote('', 'D')on't you wonder though why there are so many jobs in banking, and why bankers
are the highest paid people in the world by a mile. Is it because they are
so incredibly productive that they get paid so highly. No, it is because they are
working for a sector which has the ability to create fiat currency out of thin air.
If banks can create money out of thin air, why not just turn the printing press on 24/7? Why didn't, say, Morgan Stanley, post a $1 Trillion profit this quarter?

The truth is that it's more complicated than banks just having the right to create a fiat currency.

$this->bbcode_second_pass_quote('', 'Y')our example about subleasing an apartment is totally incomparable, as apartment
space cannot be created out of thin air with the flick of a pen.
True, but it's not without cost. The only difference between a bank and me is that they can instantaneously get their raw materials. They still have to pay for it, though. That's the point. And to be honest, it makes sense for that industry. If I had to wait 12 months to get a loan to buy a car, I wouldn't be very happy. (Never borrow to buy anything except real-estate, BTW.)



$this->bbcode_second_pass_quote('', '
')I would agree with the last sentence.
Didn't really get what you were saying in the first sentence.
My point is this:

-Imagine that an ounce of gold is worth 200 hours of minimum-wage work.
-Currently, the U.S. GDP is ~2.4 Trillion hours of minimum-wage work per year.
-We probably need an inventory of at least 400 Billion hours of minimum wage work as currency, in the U.S. alone.
-This is 2 Billion ounces of gold. Maybe we have that much, but there is a finite amount of gold in the earth's crust, and if the economy keeps growing (it will if we go from oil to nuclear), we eventually won't have enough. Why not at least use a commodity that's tied to the economy?


$this->bbcode_second_pass_quote('', '
')I agree, you can't manipulate the market or markets long-term.
This is part of the reason why a hedge fund/derivatives
disaster of unprecedented scale is quite likely to happen in the
near future.
Market manipulation isn't like terms thrown around on here like "overshoot". By short-term, I mean that an investor might be able to do it for a few months with a lot of money (like the Amaranthe natural gas trader with $6 Billion), but a year, let alone eight? You're asking too much.

Derivatives prices probably hit their long-term market value sometime during the last year (intrinsic value, plus or minus investor sentiment. Right now, investor sentiment is probably a slight minus). Maybe two. Since they're linked to underlying assets and an easy arbitrage opportunity exists if they get out of whack, they vary with the equities, commodities, and fixed-income markets at worst.



$this->bbcode_second_pass_quote('', '
')The problem with LTCM was that it lost a shed-load of borrowed money,
and the argument put-forward was that if LTCM defaulted on its loans
it would cause a cascade of banking failures which would
'threaten the stability of the financial system'.

Please explain to me where the money came from to keep LTCM in business
if it wasn't 'public' money.

http://en.wikipedia.org/wiki/Long-Term_ ... Management
It says here that the Fed of NY got a bunch of banks together (perhaps their creditors) to bail them out. I may have been wrong about it not costing a dime of federal money, but it looks like it just cost a bunch of private banks money, according to wikipedia.

$this->bbcode_second_pass_quote('', 'L')TCM is just the latest in a long-line of banking failures / bailouts of ever
increasing size which have taken place since the Fed has
been available as a lender-of-last-resort. It effectively removes any
risk of loss for banks that wish to lend fiat money irresponsibly.
Bankruptcy removes any risk of loss, too. The only difference is that the federal reserve keeps disasters like LTCM from also causing a market crash.

$this->bbcode_second_pass_quote('', 'I') dug out that article from the economist, and I've actually misquoted it.

"Any Crisis would affect Goldman, because it is so intertwined with the system.
The bank says it keeps plenty of liquid reserves against the dread day. It might
well profit from any crisis (it did from LTCM). But the chances are that some
banks, somewhere, will get into serious trouble.

If that happens, the losses of any bank will be for its shareholders; they should
not expect any bail-out. THe wider question has to do with systemic risk. If the
much vaunted systems do not work, then the central banks will have to step in
(as the Federal Reserve did with LTCM)."

The article is very careful not to explictly say anything about the central banks
bailing-out failed banks with newly-created money. But you have to wonder why they
would even mention the word bail-out if it wasn't something that has been known
to happen.
Was the Economist a huge fan of Chrysler in 1980/81? The federal government's bailed out plenty of companies over the past 25 years, but I'm not sure if the fed's explicitly allowed to just give a company money without some sort of authorization from congress. My thinking is that the Economist is just comparing this to other federal bailouts.

$this->bbcode_second_pass_quote('', 'I')f you are in fact correct and LTCM wasn't bailed out by the Fed, Jim Kunstler
has also got this wrong in his book The Long Emergency, in the chapter running
on Fumes. In there he quite clearly claims, that they had a series of meetings
which ended with the Fed agreeing to cover LTCM losses.
Kunstler, IMHO, has at least a small amount of an agenda. I'm not saying that affects his veracity, but I do think that it may cause him to change his words around a little. How does he define the word "cover". Does it mean that the fed agreed to just give LTCM $4.6 Billion to pay to its creditors, or does it mean that the fed agreed to talk to its creditors to get some of the liabilities forgiven and prevent a market meltdown?

I *might* be wrong, but what I've heard, as well as what wikipedia seems to say, is that
User avatar
GoIllini
Tar Sands
Tar Sands
 
Posts: 765
Joined: Sat 05 Mar 2005, 04:00:00
Top

Re: Economics/Math (split from OPEC thread)

Unread postby dr_doom » Sat 30 Sep 2006, 11:12:02

$this->bbcode_second_pass_quote('', '
')That's an interesting argument. I will agree that the supply of capital to the economy is centrally planned, but everything else isn't.

...


The economic systems had subtle differences but are really the same.

Economics that is taught in schools tells us that in the west we're "better"
because we've embraced a free-market economy. Whereas communism failed because
it was a centrally planned economy.



$this->bbcode_second_pass_quote('', '
')3) Don't tell me you actually believe Helicopter Ben's rhetoric about printing the US
economy out of a recession

Actually, Ben's a "react to market indicators" kinda guy. If core inflation's high, he raises rates. If it's low, and the economy's not doing so hot, he lowers them. You can't always print your way out of a recession, but you can turn a bad depression into a recession by making sure the money supply isn't too bad.


I'd be interested to hear what you define as a "bad money supply",
and it would also be nice if you could pass comments on Bernanke's comments
that deflation could be avoided with a "helicopter drop" of newly-created
money into the economy.

My interpretation of this is that The Fed's secondary reaction to any asset-deflation
(house price crash), would be to step-up the rate at which the money supply
is increased. Not that it will make any difference to the scores of home-owners
who will be facing fore-closure caused by increasing interest-rates.

The ludicrousness of this whole stage-managed scam:

energy-driven inflation -> rising interest rates -> house price crash ->
increase money supply so house prices stop crashing, but causes even more
inflation (probably hyper-inflation)

And these are the smartest people that have been picked to manage
the economy this way? They are either stupid or doing this knowingly
with an un-disclosed objective.



$this->bbcode_second_pass_quote('', '
')The 10-year's gone from 5+% down to 4.6% over the past few months. The more time we have to give people a taste of 7%, 8%, 9%, and 10% mortgage rates, the better we can be at avoiding recession.


If we boil a frog slowly enough we may avoid killing it?



$this->bbcode_second_pass_quote('', '
')The truth is that: ...

It's patently false if you ascribe to certain conspiracy theories.


We've been here before, you're reaction is not atypical amongst
people who work in the banking system and enjoy great rewards for
doing so. On some subconscious level you really do not wish to
believe that what you a part of is evil/wrong/unfair.

This timeless Rothschild quote really captures why it is virtually
impossible to convince someone in the system to admit to the true
nature of it.


It (Central Bank) gives the National Bank almost complete control of national finance. The few who understand the system will either be so interested in its profits, or so dependent on its favours, that there will be no opposition from that class... The great body of the people, mentally incapable of comprehending, will bear its burden without complaint, and perhaps without even suspecting that the system is inimical (contrary) to their interests.





$this->bbcode_second_pass_quote('', '
')If banks can create money out of thin air, why not just turn the printing press on 24/7? Why didn't, say, Morgan Stanley, post a $1 Trillion profit this quarter?

The truth is that it's more complicated than banks just having the right to create a fiat currency.


Any complexity is by design, to obfuscate where money is created
and who controls it.

The banks and their cheer-leaders don't advertise the fact that they are
involved in creating money out of thin air. Posting a 1 trillion profit
could bring unwanted attention to the fact that they are.

Even more unwanted attention than they already get from people claiming
that bankers being paid multi-millions, in some cases billions, for doing
seemingly very little is obscene.

The fact is, the government can borrow as much money as it needs for public
spending from the federal reserve, and the public would bear this cost through
the resulting inflation from this policy. In fact this already happens,
the war in Iraq is mainly funded this way.

Income taxes could be done away with completely and the full taxation burden
could be inflicted through inflation. The reason it isn't, people would
start asking awkward questions, like where does the money come from to
pay for these things.


$this->bbcode_second_pass_quote('', '
')-This is 2 Billion ounces of gold. Maybe we have that much, but there is a finite amount of gold in the earth's crust, and if the economy keeps growing (it will if we go from oil to nuclear), we eventually won't have enough. Why not at least use a commodity that's tied to the economy?


Are you actually a peakoiler?
A peakoiler would never say we could continue growing the
economy by simply switching to nuclear.

I've said it already but having a money supply fixed to something
like gold, is about keeping the money supply, and hence the economy stable.
Maybe even avoiding booms and busts which some say are caused by throwing
the economy between easy and tight money.

The idea that a growing economy requires more money is a total myth, imho.
The value of money would adjust to the volume of goods in circulation.



$this->bbcode_second_pass_quote('', '
')...but a year, let alone eight? You're asking too much.


I'm not asking for anything, except that you use your head.

When you look at the volume of gold that existed in 1980 vs today,
the increase isn't significant. I don't think I need to point out
that the volume of paper in circulation has increased by many times
what gold has.

Personally I think the evidence for long-term manipulation
of the gold market by central banks, and the rest of the banking
system is an overwhelming one.




$this->bbcode_second_pass_quote('', 'K')unstler, IMHO, has at least a small amount of an agenda

I will admit I got my facts a bit wrong with LTCM.
Kunstler also says that it was ultimately the banks that
lent money who were forced to pony up the money to
recapitalise LTCM.

I'm not a huge fan of Kunstler by any means;
I suppose mainly because of his total rejection of any
alternative (conspiracy) theories. And then he has the
audacity to call the rest of the american people ignorant.
User avatar
dr_doom
Wood
Wood
 
Posts: 34
Joined: Sun 26 Mar 2006, 04:00:00
Top

Re: Economics/Math (split from OPEC thread)

Unread postby GoIllini » Sat 30 Sep 2006, 14:10:49

$this->bbcode_second_pass_quote('dr_doom', 'T')he economic systems had subtle differences but are really the same.

Economics that is taught in schools tells us that in the west we're "better"
because we've embraced a free-market economy. Whereas communism failed because
it was a centrally planned economy.

There's more than a few differences. In Russia, you had the bureaucrats doing the work of ten million managers. In the U.S, you have eight bureaucrats doing the work of maybe fifty thousand managers, and these bureaucrats are probably a lot smarter than those fifty-thousand managers would be.

I'm not saying it's perfect, but I am saying that after 30 years of it, the U.S. economy is still plugging along well. You couldn't say that about Soviet Russia by 1950.



$this->bbcode_second_pass_quote('', '
')I'd be interested to hear what you define as a "bad money supply",
and it would also be nice if you could pass comments on Bernanke's comments
that deflation could be avoided with a "helicopter drop" of newly-created
money into the economy.

My point is that the fed needs to be there to make sure there isn't a sudden unnecessary drop in the money supply. We had this problem between 1929 and maybe 1935 with thousands of bank closures, and it turned a bad recession into a really bad depression.

Had the fed stepped in to loan more money to banks, the Great Depression could have been alleviated a great deal.

Unfortunately, I can't comment on Bernanke, too much. My employers probably wouldn't want me sharing the exact details of what they think, along with their analysis of his comments, but the overarching "respond to market conditions" is public knowledge that I can share. I am convinced, however, that he likes to respond to market indicators, and that he's the next best thing to going back to a gold-backed currency.

$this->bbcode_second_pass_quote('', 'M')y interpretation of this is that The Fed's secondary reaction to any asset-deflation
(house price crash), would be to step-up the rate at which the money supply
is increased. Not that it will make any difference to the scores of home-owners
who will be facing fore-closure caused by increasing interest-rates.

It won't make any difference in the number of foreclosures, but if the fed can slow the process of increasing rates down a little bit, it won't just delay a market crash, it'll prevent one. You asked me a question on that, so I'll get to that after my next quote.

$this->bbcode_second_pass_quote('', 'T')he ludicrousness of this whole stage-managed scam:

energy-driven inflation -> rising interest rates -> house price crash ->
increase money supply so house prices stop crashing, but causes even more
inflation (probably hyper-inflation)

And these are the smartest people that have been picked to manage
the economy this way? They are either stupid or doing this knowingly
with an un-disclosed objective.

If we boil a frog slowly enough we may avoid killing it?

True, but if we have millions of frogs in the soup and remove frogs as they die, we can avoid having millions of frogs float to the surface at the same time and ruin our soup if we raise the temperature very slowly.

Homeowners with Option ARMs who can't make more than the minimum payments are screwed unless they sell now. Having said that, if these guys default slowly, the S&D fundamentals on housing don't look all that horrible. A lot of the kids of the baby boomers are in college or have just graduated college, and might start looking for houses over the next five-seven years. If the foreclosures happen slowly (Ala, people who can't afford the fed. target rate at 5% default; after eight months or so, people who can't afford the fed target rate at 6% default, etc.), demand from Generation Y will be able to keep up.



$this->bbcode_second_pass_quote('', 'W')e've been here before, you're reaction is not atypical amongst
people who work in the banking system and enjoy great rewards for
doing so. On some subconscious level you really do not wish to
believe that what you a part of is evil/wrong/unfair.

This timeless Rothschild quote really captures why it is virtually
impossible to convince someone in the system to admit to the true
nature of it.


It (Central Bank) gives the National Bank almost complete control of national finance. The few who understand the system will either be so interested in its profits, or so dependent on its favours, that there will be no opposition from that class... The great body of the people, mentally incapable of comprehending, will bear its burden without complaint, and perhaps without even suspecting that the system is inimical (contrary) to their interests.

I worked in the finance industry for a summer, and I'm a programmer by education. IMHO, I learned just enough about banking to have some idea of what's really going on, but I didn't work their long enough to become too corrupted.

The London/France branch of the Rothschilds have $1 Billion in assets. Some people think they have several trillion because of some person's incorrect observation in 1865 that they somehow managed to have 1/2 the world's wealth in gold (this is impossible; there wasn't enough gold in the world even back in 1865 to make up more than a small fraction of the world's wealth.) The truth is that with so many descendants, it's impossible to keep such a conspiracy secret. Besides that, the Rothschilds would need to have everybody and their uncle managing their money to get a decent return on it. Nobody where I worked ever mentioned doing business with them.

$this->bbcode_second_pass_quote('', '
')Any complexity is by design, to obfuscate where money is created
and who controls it.

The banks and their cheer-leaders don't advertise the fact that they are
involved in creating money out of thin air. Posting a 1 trillion profit
could bring unwanted attention to the fact that they are.

The thing is that the banks created gold "out of thin air" before we had a fiat currency. They'd borrow money from depositors, lend it out to borrowers, and cross their fingers that there wouldn't be a run on the bank.

The difference is that these days, the fed is a lender of last resort. If everybody wants their money out at the same time, the fed is able to lend the bank money, temporarily, to cover the withdrawals.

$this->bbcode_second_pass_quote('', 'E')ven more unwanted attention than they already get from people claiming
that bankers being paid multi-millions, in some cases billions, for doing
seemingly very little is obscene.
The fact is that some people who work outside of banking, but do the same thing (like trading) generally make more. For example, it's possible to make $30 million by the time you're 24 if you work for a proprietary trading firm or hedge fund. You simply can't do that at a bank. They don't have the power to create money "out of thin air", but they make more.

$this->bbcode_second_pass_quote('', 'T')he fact is, the government can borrow as much money as it needs for public
spending from the federal reserve, and the public would bear this cost through
the resulting inflation from this policy. In fact this already happens,
the war in Iraq is mainly funded this way.
This is one claim I'll agree to. Increased borrowing by the federal government increases inflation.

$this->bbcode_second_pass_quote('', 'I')ncome taxes could be done away with completely and the full taxation burden
could be inflicted through inflation. The reason it isn't, people would
start asking awkward questions, like where does the money come from to
pay for these things.
Well, this would also likely bring about hyperinflation.


$this->bbcode_second_pass_quote('', '
')Are you actually a peakoiler?
A peakoiler would never say we could continue growing the
economy by simply switching to nuclear.
See some of my other posts. I'm a peakoiler in that I agree with M. King Hubbert, as well as some of the more reasonable experts on the subject- like Deffeyes- that oil production will look like the normal (that is, bell) curve, and oil production will start to peak sometime in the next 20 years. I don't ascribe to peak energy, in the next 10,000 years, however. Beyond oil, we have fission, beyond fission, we have fusion. Beyond fusion, it might be one day possible to reverse entropy.

$this->bbcode_second_pass_quote('', 'I')'ve said it already but having a money supply fixed to something
like gold, is about keeping the money supply, and hence the economy stable.
Maybe even avoiding booms and busts which some say are caused by throwing
the economy between easy and tight money.
The problem is that market crashes are often driven by tight money. IMHO, market crashes are generally unnatural, and can often be alleviated a little by loosening the money supply temporarily. Since the market's conservative, you shouldn't take any long-term stability out of it if you put $X into the economy when it's tanking, and then take $X out once it's recovered.

$this->bbcode_second_pass_quote('', 'T')he idea that a growing economy requires more money is a total myth, imho.
The value of money would adjust to the volume of goods in circulation.
It seems like you're suggesting that gold doesn't have a fixed value, now. Inflation isn't the only thing that makes economic figures bigger. Stuff like increased efficiency, the availability of new resources, and the supply of labor also factor to create real economic growth. Many POers point out that we're using more energy today than we did in 1920, and the reason is that the economy has grown.

$this->bbcode_second_pass_quote('', '
')I'm not asking for anything, except that you use your head.

When you look at the volume of gold that existed in 1980 vs today,
the increase isn't significant. I don't think I need to point out
that the volume of paper in circulation has increased by many times
what gold has.

Personally I think the evidence for long-term manipulation
of the gold market by central banks, and the rest of the banking
system is an overwhelming one.
If the open interest on gold isn't any higher than it was in 1980, how can you claim that the central banks are massively short-selling gold? For those that don't know, open interest gets created when someone sells futures in something that they don't currently have.




$this->bbcode_second_pass_quote('', 'I') will admit I got my facts a bit wrong with LTCM.
Kunstler also says that it was ultimately the banks that
lent money who were forced to pony up the money to
recapitalise LTCM.

I'm not a huge fan of Kunstler by any means;
I suppose mainly because of his total rejection of any
alternative (conspiracy) theories. And then he has the
audacity to call the rest of the american people ignorant.
Hey, join the club. I probably mess up on my facts on this forum much more than you. (I've just been working on getting better at it, since I need to have my facts *perfect* if I want to work on the trading floor of a large bank.)

The fed *could* have done a secret bail-out. I can't disprove that beyond a shadow of a doubt. However, the official story is that the fed didn't, and after eight years, nobody with a great deal of credibility has come out to claim otherwise. This leads me to believe there wasn't a bailout.
User avatar
GoIllini
Tar Sands
Tar Sands
 
Posts: 765
Joined: Sat 05 Mar 2005, 04:00:00
Top

Re: Economics/Math (split from OPEC thread)

Unread postby dr_doom » Sat 30 Sep 2006, 17:27:12

$this->bbcode_second_pass_quote('', '
')...
I'm not saying it's perfect, but I am saying that after 30 years of it, the U.S. economy is still plugging along well. You couldn't say that about Soviet Russia by 1950.


I thought that the Soviet system did reasonably well in terms of keeping
up an arms race with the West until the collapse in the 80s/90s.

I seem to remember from my education centrally determined price-controls
were a large part of the problem they had.


$this->bbcode_second_pass_quote('', '
')My point is that the fed needs to be there to make sure there isn't a sudden unnecessary drop in the money supply. We had this problem between 1929 and maybe 1935 with thousands of bank closures, and it turned a bad recession into a really bad depression.

Had the fed stepped in to loan more money to banks, the Great Depression could have been alleviated a great deal.


Hello, it was the Fed that decided to make money easy to borrow in the 20s,
leading to the huge stock-market boom / bubble, and the Fed which decided to
stop the loans causing the 1929 stock-market slump / depression.

What exactly was stopping the Fed from stepping in and improving the situation?
I know famous economists such as Milton Friedman have criticised The Fed
for their inaction during this period, and even called it a bad system,
which I would agree with.

A lot of mainstream history blames the great depression on a gold-standard,
this is such a sick joke it's not even funny.

Are you aware that early in the great-depression private-ownership of gold was
outlawed, and people were instructed to turn in their gold? This was such an
unpopular move that no elected official would even take responsibility for it,
and the only comment anyone would make was "it's what the experts want".

The justification for this confiscation of private-property, over and above
what had been effectively confiscated by the stock-market collapse which
saw a lot of peoples' notional wealth disappear, was that they needed the
gold to deposit in the central bank.

Which sort of brings me full-circle to why claims blaming this situation
on a gold-standard are such a joke. The bankers confiscated everybody's gold,
as a touted solution to a problem which they had created,
and then didn't even bother to adopt a gold-standard.



$this->bbcode_second_pass_quote('', '
')Homeowners with Option ARMs who can't make more than the minimum payments are
screwed unless they sell now. Having said that...


Sorry, I thought it was a given that we are in the early stages of the biggest
housing crash the world has ever seen. I find it difficult to share your optimism
for the near future, especially when you hear statistics like 1 trillion
in fixed-rate mortgages rolling over to the new-rate in 2007.

I don't expect interest-rates to stop here, in fact I expect them to continue
rising throughout 2007. Also there is a great potential for a forex collapse
requiring 'emergency-interest-rates', Yuan/USD, Yuan/GBP, Yuan/vs-anything pretty
much. The only small point of doubt in my mind, is when it does eventually
happen, will any paper currency survive.



$this->bbcode_second_pass_quote('', '
')I worked in the finance industry for a summer, and I'm a programmer by education.
IMHO, I learned just enough about banking to have some idea of what's really going on,
but I didn't work their long enough to become too corrupted.


Your background is not dissimilar to my own. I'm 23, also a programmer by education,
I've spent my career mainly in medical engineering, and lately business
consulting, developing computer simulations based on systems dynamics.

I'm not saying you're corrupt, but you do seem to have taken it upon
yourself to defend the banking/monetary status-quo. Which I've also found with
anyone who has ever worked in banking, and associates themselves with this system.



$this->bbcode_second_pass_quote('', '
')The London/France branch of the Rothschilds have $1 Billion in assets. Some people think they have several trillion because of some person's incorrect observation in 1865 that they somehow managed to have 1/2 the world's wealth in gold (this is impossible; there wasn't enough gold in the world even back in 1865 to make up more than a small fraction of the world's wealth.) The truth is that with so many descendants, it's impossible to keep such a conspiracy secret. Besides that, the Rothschilds would need to have everybody and their uncle managing their money to get a decent return on it. Nobody where I worked ever mentioned doing business with them.


Funnily enough there was a slew of stories in the London tabloid press last week
about Zac Goldsmith having an affair with this girl called Alice Rothschild.
Not very relevant although it does kind of support the notion that there
is a lot inter-marrying, if not in-breeding that goes on amongst these elite
families.

In Thursday's Evening Standard there is a 2-page story, Could Nat become the Richest
Rothschild Ever? This is very strange because the Rothschilds are virtually
never mentioned in the media anywhere.

I've met people before who've tried to tell me that the Rothschilds weren't the
richest family in the world in the 19th century, I'm not sure if this is what you
are claiming. But it makes this claim here in the Evening Standard.


According to legend, Nathan was with Wellington when Napolean was crushed and he raced
back to London to buy British government stock before news of victory spread. He founded
NM Rothschild, the family bank, and by the mid-19th century the Rothschilds were the richest
family of the age, building stately homes, amassing priceless art collections and patronising
artists including Rossini and Balzac.


This is the story that the Rothschilds went to court to try and suppress some time ago. But what's
been printed here in the evening standard is a distortion, whether this is sloppy research,
or deliberate spin I do not know.

It says nothing about the market manipulation that Nathan allegedly carried out when he
received the news of napoleans defeat from his courier, or the war-profiteering that the
Rothschilds were involved in with Napoleans wars, in some cases allegedly financing both
sides of a conflict.

It then makes the claim that Rothschilds wealth has been over-taken by global corporations
in the 20th century.

It values Jacob Rothschilds fortune at £500 million ~ $900million.

It reports that Jacob actually fell out with NM Rothschild's head Evelyn.
Which I understand from you is worth $1billion in its own right.

So you have $1.9billion right there. It then speculates as to what
Nat might be worth in his own right. Having spent most of his 20s boozing
it up as a socialite he then decided to turn his hand to international business.

He set up hedge fund Amicus, which now manages £7billion of funds for some
of america's wealthiest families. He also shares many of his father's connections
with russian oligarchs such as Roman Abramovich, people that bought up russian
assets in rigged auctions as the economy collapsed in 1998.

They don't just know him, they made it possible for these people to profit from the
russian collapse. It also goes on to say that they both jointly own various holding
companies which "invest in russia".

It says: "It is not known precisely how much [Nat] he is worth,
but few doubt he is probably headed for billionaire status".

So you've got about $3billion you can talk about there. Before you even
move onto French branches of the family. Obviously there is no publicly available
evidence to support the $100-400trillion estimate. That is more a case of how much
wealth do they control rather than what they own.

If you believe the conspiracies, David Rockefeller and all the other Magnates
which they've financed are really just lieutenants in the Rothschild Empire,
and fortunes such as his would be included in such a 'crazy' figure.



$this->bbcode_second_pass_quote('', '
')The thing is that the banks created gold "out of thin air" before we had a fiat currency. They'd borrow money from depositors, lend it out to borrowers, and cross their fingers that there wouldn't be a run on the bank.


The point is, in the "bad old days", you might put your money in a bank
and the bank might start lending out money it didn't have, and then there
might be a run on a bank, and you could lose your money.

But at least it was a free-market, anyone was free to setup a bank,
and the good banks became popular and people trusted them to look
after their hard earned wealth. It also meant the banks had an
incentive not to lend to people or businesses that were likely
to default on their debts. So you didn't have the type of debt
culture that we have today, more people were actually compelled
to work for a living.

Now we have a government assisted monopoly of banks, which are constantly
merging with each other to become even bigger banks.

They still lend out more money than they have, but instead of being
"fraudulent trading activity", it is now "standard operating procedure".

Now when a bank fails instead of the free-market dealing with the situation
and it being a situation between the depositor, debtor, and bank;
now the old excuse of "it will threaten the system's stability" is rolled
out and the tax-payer is effectively roped in to cover the bank's losses,
through the hidden-tax of inflation.



$this->bbcode_second_pass_quote('', '
')It seems like you're suggesting that gold doesn't have a fixed value, now. Inflation isn't the only thing that makes economic figures bigger. Stuff like increased efficiency, the availability of new resources, and the supply of labor also factor to create real economic growth. Many POers point out that we're using more energy today than we did in 1920, and the reason is that the economy has grown.


What I'm saying is, with a stable currency, as the economy grows prices would actually decrease.
This is a good thing as it then allows the market to allocate resources elsewhere,
like cancer research, energy research, or whatever, stuff that people would actually pay for
and value.

There are very few examples as to when a gold-standard was used, but as I understand it
America in the 19th century managed to have a gold-standard for quite a while and they
were the envy of the world. Price of bread remained stable for many years.

Anyway it's been great arguing with you,
but I think I've spent far too much time writing this post.
Future posts will be more to the point.
User avatar
dr_doom
Wood
Wood
 
Posts: 34
Joined: Sun 26 Mar 2006, 04:00:00
Top

Re: Economics/Math (split from OPEC thread)

Unread postby dr_doom » Sat 30 Sep 2006, 18:00:02

$this->bbcode_second_pass_quote('ElijahJones', 'T')he gold standard limited the money supply. If .005 ounce of gold was to be equal to one dollar then for every dollar you print you have to have .005 ounces of gold in reserve to ensure payment on demand. Everyone realized this would limit the size of the economy even of you keep revaluing your currency relative to gold.


I don't agree with this at all.

You wouldn't need to keep revaluing gold, the value of goods and services would revalue relative to the gold available.

If you measure the size of the economy in terms of how much oil you are consuming. Say for example there is 100 barrels available to be consumed and 5 oz of gold (please bear with me, very simple example where the only thing consumed is oil).

.005 oz = 1$.

Therefore $1000 is the money, there fore 1 barrel = $10.

Next year thanks to fantastic efficiency improvements in the oil industry there is 200 barrels of oil to be consumed. Therefore price drops to $5 / barrel.

Next year there is more oil so price drops further, etc.

It just seems ludicrous to me that anyone can think that having the value of your currency fixed to something, somehow limits the amount of goods and services produced. The only thing it limits is how much wealth can be confiscated through deficit spending.


$this->bbcode_second_pass_quote('', '
')With one global currency...


Ah yes, a micro-chipped world population under a one world currency. Fantastic, I can't wait until the new world order succeeds in their plan to set this up. I'm sure you will be thrilled too.

Even if it does have dire warnings about this in the bible, hmm.
User avatar
dr_doom
Wood
Wood
 
Posts: 34
Joined: Sun 26 Mar 2006, 04:00:00
Top

Re: Economics/Math (split from OPEC thread)

Unread postby GoIllini » Sun 01 Oct 2006, 01:43:06

$this->bbcode_second_pass_quote('dr_doom', 'I') thought that the Soviet system did reasonably well in terms of keeping
up an arms race with the West until the collapse in the 80s/90s.

I seem to remember from my education centrally determined price-controls
were a large part of the problem they had.

Were they saying "Uhoh. Inflation's too high; we need to cut the money supply and let consumers figure out what they need less of", or were they saying, "Hey! Bread's too expensive for the proletariat! Let's introduce price controls."

IMHO, one system is much closer to the free market than the other.


$this->bbcode_second_pass_quote('', '
')Hello, it was the Fed that decided to make money easy to borrow in the 20s,
leading to the huge stock-market boom / bubble, and the Fed which decided to
stop the loans causing the 1929 stock-market slump / depression.

The fed's 80 years wiser, now.

$this->bbcode_second_pass_quote('', 'W')hat exactly was stopping the Fed from stepping in and improving the situation?
I know famous economists such as Milton Friedman have criticised The Fed
for their inaction during this period, and even called it a bad system,
which I would agree with.

Absolutely. The fed was stupid. (Keyword: was). FDR made it smarter.

$this->bbcode_second_pass_quote('', 'A') lot of mainstream history blames the great depression on a gold-standard,
this is such a sick joke it's not even funny.

Huh. I was about to pick up my mainstream history book and actually make that claim, but I'm interested in hearing your argument:

$this->bbcode_second_pass_quote('', 'A')re you aware that early in the great-depression private-ownership of gold was
outlawed, and people were instructed to turn in their gold? This was such an
unpopular move that no elected official would even take responsibility for it,
and the only comment anyone would make was "it's what the experts want".
Gold coins were printed until 1935, until FDR reorganized the federal reserve. I still think the whole call-in of gold was pretty stupid, though.

$this->bbcode_second_pass_quote('', 'T')he justification for this confiscation of private-property, over and above
what had been effectively confiscated by the stock-market collapse which
saw a lot of peoples' notional wealth disappear, was that they needed the
gold to deposit in the central bank.
People received dollars that corresponded to $1 worth of gold. I'll admit that somewhere between 1935 and the reorganization of the Fed in the '70s, people got tricked by the federal government.

$this->bbcode_second_pass_quote('', 'W')hich sort of brings me full-circle to why claims blaming this situation
on a gold-standard are such a joke. The bankers confiscated everybody's gold,
as a touted solution to a problem which they had created,
and then didn't even bother to adopt a gold-standard.
They did for almost 40 years. At the very least, fiat currency wasn't official until the 70's.



$this->bbcode_second_pass_quote('', '
')Sorry, I thought it was a given that we are in the early stages of the biggest
housing crash the world has ever seen. I find it difficult to share your optimism
for the near future, especially when you hear statistics like 1 trillion
in fixed-rate mortgages rolling over to the new-rate in 2007.
First off, fixed rate mortgages don't roll over. I'm guessing you mean ARMs.

Second off, for comparison, the NYSE has a market cap of roughly $18 Trillion (Nasdaq maybe adds on another $12-15 Billion), and the collective value of houses in this country might be $25 Trillion.

Assume that 1/4 of those loans defaults (we're being extremely pessimistic here, but I wanted to use a number you'd be OK with). Of those defaults, there's a loss severity of, say, 30% (This would be a realistic number for homes on the coasts, but slightly pessimistic when you factor in the heartland). That works out to $75 Billion in losses. For comparison, that's less than 1/3 of Citigroup's market cap.

$this->bbcode_second_pass_quote('', 'I') don't expect interest-rates to stop here, in fact I expect them to continue
rising throughout 2007. Also there is a great potential for a forex collapse
requiring 'emergency-interest-rates', Yuan/USD, Yuan/GBP, Yuan/vs-anything pretty
much. The only small point of doubt in my mind, is when it does eventually
happen, will any paper currency survive.
A forex collapse would be a financial disaster for China. Even if it were possible, I doubt they'd let it happen.

$this->bbcode_second_pass_quote('', 'I')'m not saying you're corrupt, but you do seem to have taken it upon
yourself to defend the banking/monetary status-quo. Which I've also found with
anyone who has ever worked in banking, and associates themselves with this system.
I'm a bit of a skeptic. It's difficult to argue against a commonly held paradigm, because you're essentially calling the rest of the country nitwits. If you believe free-market capitalism works, that's extremely hard to do.

$this->bbcode_second_pass_quote('', '
')In Thursday's Evening Standard there is a 2-page story, Could Nat become the Richest
Rothschild Ever? This is very strange because the Rothschilds are virtually
never mentioned in the media anywhere.
Probably because they're like any other rich extended family that controls maybe $2-5 Billion in assets that didn't come from the media or anything else high-profile. (IE: Do you see the Fords in the media a great deal?) The fact that they made it into the Evening Standard suggests the "Rothschilds own the media" conspiracy theory is wrong.

$this->bbcode_second_pass_quote('', 'I')'ve met people before who've tried to tell me that the Rothschilds weren't the
richest family in the world in the 19th century, I'm not sure if this is what you
are claiming. But it makes this claim here in the Evening Standard.
They may have been. I don't know. I do know they're probably not richer than Bill Gates.

$this->bbcode_second_pass_quote('', 'I')t says nothing about the market manipulation that Nathan allegedly carried out when he
received the news of napoleans defeat from his courier, or the war-profiteering that the
Rothschilds were involved in with Napoleans wars, in some cases allegedly financing both
sides of a conflict.
How do you make money from market manipulation that hurts the market? This is another [s]conspiracy[/s] interesting theory.

$this->bbcode_second_pass_quote('', 'S')o you've got about $3billion you can talk about there. Before you even
move onto French branches of the family. Obviously there is no publicly available
evidence to support the $100-400trillion estimate. That is more a case of how much
wealth do they control rather than what they own.
This is a slightly more reasonable conspiracy theory than some of the ones I've seen on these boards. Keep in mind, however, that the entire U.S. GDP is roughly $10 Trillion.

Meanwhile, it's impossible for a single family to manage $400 Trillion in assets. It *might* be possible to have $400 Trillion under custody.

$this->bbcode_second_pass_quote('', 'I')f you believe the conspiracies, David Rockefeller and all the other Magnates
which they've financed are really just lieutenants in the Rothschild Empire,
and fortunes such as his would be included in such a 'crazy' figure.
Did they also finance Dale Carnegie? Why did they let him give away all of his money to charity?

$this->bbcode_second_pass_quote('', 'T')he point is, in the "bad old days", you might put your money in a bank
and the bank might start lending out money it didn't have, and then there
might be a run on a bank, and you could lose your money.

But at least it was a free-market, anyone was free to setup a bank,
and the good banks became popular and people trusted them to look
after their hard earned wealth. It also meant the banks had an
incentive not to lend to people or businesses that were likely
to default on their debts. So you didn't have the type of debt
culture that we have today, more people were actually compelled
to work for a living.
True. When the fed loosened credit requirements in the '80s, it created a lending bonanza. Still, most of this debt gets sold immediately and is securitized into mortgage and consumer-debt bonds. In other words, your interest rate is determined by the bond market, not by the fed or even the credit card company.

$this->bbcode_second_pass_quote('', 'N')ow we have a government assisted monopoly of banks, which are constantly
merging with each other to become even bigger banks.

They still lend out more money than they have, but instead of being
"fraudulent trading activity", it is now "standard operating procedure".
I don't know where you're going with this one. There is nothing fraudulent with having $100K in deposits and lending something like $90K to someone else.

$this->bbcode_second_pass_quote('', 'N')ow when a bank fails instead of the free-market dealing with the situation
and it being a situation between the depositor, debtor, and bank;
now the old excuse of "it will threaten the system's stability" is rolled
out and the tax-payer is effectively roped in to cover the bank's losses,
through the hidden-tax of inflation.
And who suffers the most? When inflation hits, incomes generally also follow increases in the costs of goods. It's people with their money in bonds. If you want to be specific, when stuff like this happens, the biggest monetary loser would be the Peoples' Bank of China.
User avatar
GoIllini
Tar Sands
Tar Sands
 
Posts: 765
Joined: Sat 05 Mar 2005, 04:00:00
Top

Re: Economics/Math (split from OPEC thread)

Unread postby CrudeAwakening » Sun 01 Oct 2006, 03:10:26

$this->bbcode_second_pass_quote('GoIllini', '')$this->bbcode_second_pass_quote('', '
')They still lend out more money than they have, but instead of being
"fraudulent trading activity", it is now "standard operating procedure".

I don't know where you're going with this one. There is nothing fraudulent with having $100K in deposits and lending something like $90K to someone else.


I can't really speak for dr_doom, but I suspect what he is getting at is that this situation involves the bank promising to pay $190K, when it only began with a $100K deposit. Lending $90K would seem reasonable if the original deposit was then reduced to $10K, but this isn't what happens, and some people are perturbed by this.
User avatar
CrudeAwakening
Tar Sands
Tar Sands
 
Posts: 834
Joined: Tue 28 Jun 2005, 03:00:00
Top

Re: Economics/Math (split from OPEC thread)

Unread postby dr_doom » Sun 01 Oct 2006, 09:34:31

$this->bbcode_second_pass_quote('', '
')The fed's 80 years wiser, now.


Yet they're still running the economy the same way
fundamentally. We've had a huge boom in the past 10 years
or so, driven by cheap money. I would say as the cheap
money stops the boom will turn to bust, as has happened
so many times before throughout history.

Don't tell me, it's different this time.



$this->bbcode_second_pass_quote('', '
')They did for almost 40 years. At the very least,
fiat currency wasn't official until the 70's.


After they confiscated peoples' gold, FDR actually
took america off the gold-standard, i.e. reduced the
amount of gold that a dollar was worth.

After WW2 had finished the Bretton Woods agreement
said that the US Dollar would be the world's reserve
currency, and it would be backed up by gold, again.

That agreement was broken in the early 70s, at the
same time as another deal was made that the US dollar
would become the world monopoly currency for oil sales.

Soon after this the price of gold started to sky-rocket,
until market-forces, or manipulation brought it back
down again.



$this->bbcode_second_pass_quote('', '
')First off, fixed rate mortgages don't roll over. I'm guessing you mean ARMs.


I'm using UK terminology, I suppose "roll over" was the wrong term,
expire/adjust would be a better word. But semantics aside,
all these people stretched to the limit as it is, with their 2%
mortgage rates are going to be going bust in droves when it suddenly
jumps to 6% or whatever.

A glut of forced sellers will drive the price of real-estate down,
it's basic economics.



$this->bbcode_second_pass_quote('', '
')The fact that they made it into the Evening Standard suggests the "Rothschilds own the media" conspiracy theory is wrong.


If it had been a balanced article I might agree, however it was full of inaccuracies,
and spin to make them appear in a positive light.


$this->bbcode_second_pass_quote('', '
')How do you make money from market manipulation that hurts the market?


I may as well tell you the story. In the 18th century the Rothschilds had apparently
set up an incredibly efficient network of couriers. Which meant when Napolean was
defeated Nathan Rothschild was the first to know. He stood at the london bourse and
started selling all of his government bonds as if they were going to be worthless
because he knew Napolean had won.

Other people in the market seeing this also started selling their government bonds
until very soon the prices were at rock-bottom. It was at this point Nathan started
buying back the government debt, through agents at the new depressed price.
It was at this point some speculate that Nathan in fact gained control of the
Bank of England.


$this->bbcode_second_pass_quote('', '
')Did they also finance Dale Carnegie? Why did they let him give away all of his money to charity?


Yes that is claimed. I haven't read that much about Carnegie, but it isn't
uncharacteristic of these elites to 'disown' assets, or put them into
'charitable' trusts, which they control usually.
User avatar
dr_doom
Wood
Wood
 
Posts: 34
Joined: Sun 26 Mar 2006, 04:00:00
Top

Re: Economics/Math (split from OPEC thread)

Unread postby MrBill » Wed 04 Oct 2006, 04:18:40

Dr Doom wrote:
$this->bbcode_second_pass_quote('', 'Y')our background is not dissimilar to my own. I'm 23, also a programmer by education, I've spent my career mainly in medical engineering, and lately business consulting, developing computer simulations based on systems dynamics.

I'm not saying you're corrupt, but you do seem to have taken it upon yourself to defend the banking/monetary status-quo. Which I've also found with anyone who has ever worked in banking, and associates themselves with this system.


I have been reading through some of the posts and although some points are interesting they mostly fall well wide of the mark. Blame me. I am tainted. I have been in banking, trading and finance for over twenty years now. You say you 'spent your careeer mainly in medical engineering'? You're only 23. You're not old enough to have had a career in anything. Your first job out of university perhaps. So although there is nothing wrong with that it is your understanding of banking and finance that is incomplete nevermind that you do not work directly in it, so you cannot understand its inner mechanisms, so instead you rely on others who have written shabby books to do your thinking for you. And then you quote their ideas back verbatum.

LTCM was not bailed out by the FED. The FED got a lot of investment banks around the table and used moral suasion to get them to lend money to LTCM. Central banks and governments do that. They use their power of diplomacy to make private parties see it is in their best interest to solve a problem rather than make it worse. This recent fund collapse is no different. A bunch of banks get around the table over the weekend to hammer out who buys what at what price. Most near bankruptcies are also solved by the banks involved in the same way. I can imagine a lot of interested parties have also been meeting behind closed doors to talk about taking Ford private as well as entertaining other scenarios. This is not a conspiracy.

Rothchilds are indeed an old, established wealthy family. And? Through 4-5 generations and countless marriages it would not be unreasonable to expect many offspring, and of course given their prestigious name, like the Kennedy's for example, many of the children might prefer to keep their maiden names as well. Your references to them proves nothing other than perhaps you are jealous of their success. I guess I am as well. I still have to work for my money.

That bankers work very hard does not seem to impress you very much? If you have worked on Wall Street or in The City for ten or twenty years of 12-hour days, entertaining customers in the evening, endless business travel, sometimes working or traveling at weekends as well, under constant pressure to perform, as there are always younger, bright colleagues snapping at your heels and zero job security other than what you know, then you might have a better appreciation for how stressful that really is. To be 35 and an investment banker is to be old. And the headline grabbing pay packets disguise the vast majority who are well paid, but do not earn millions every year. Mostly that is being in the right place at the right time. It ain't like on television my friend.

Whatever the faults of the current system and how it is run your solutions, for example a return to the gold standard, just show how unimaginative you are (at least the Mogambo Guru does his own research, analysis and is entertaining to read). For one, gold mining is probably one of the most energy intensive, environmentally damaging activities that I can think of? The expense and pollution alone hardly justifies the end result. a bit of shiny metal! Nevermind that in order to support 6.5 billion or 9 billion people, and not 1 billion people like before one hundred years ago, implores productivity advances including making land, labor, intangible assets and capital work harder and more efficiently. Yes, capital as well.

Perhaps as you are such a good student you may wish to do your homework and tell me for example about capital markets 100 years ago? Who had access to capital? How much did capital cost to borrow? Under what conditions? Who financed the ships of commerce? What were their conditions? How many people owned their own homes? How many could afford to borrow to start a business? I think you may find that innovations in capital markets have been very democratic and opened up opportunities for far more people than you think. I think you will find that the concentration in wealth, by the Rothschilds for example, was a lot more than today where any dumbass with a 4-year general arts degree who is willing to work 40-hours a week can afford their own detached house and an auto.

Remove these innovations and many could not afford real interest rates of 10%, plus a 25% down payment on their home, and pay cash up front to buy an automobile. Nevermind that the average worker in the rich world is no more productive than in the developing world, so their jobs to a certain degree would also not be any safer under a gold standard. I am not sure where you think their higher standard of living is going to come from? I only know about secondary and tertiary industries that are dependent on primary industry to generate wealth and trade that helps balance supply and demand as well as surpluses and deficits. Are we all expected to become gold miners or farmers?

To be honest, I would have thought that someone involved in such a dynamic industry such as medical engineering and IT would see the miracle of the modern economy and the power of innovation driving it instead of falling for conspiracy theories from dubious sources as the gospel? You must be a really lousy business consultant if you do not even understand how the economy works and finances role in making it more efficient. But that is just my opinion. As you say, I may be too blind and stupid to question anything anymore now that I have been corrupted by working in banking? ; - )
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
User avatar
MrBill
Expert
Expert
 
Posts: 5630
Joined: Thu 15 Sep 2005, 03:00:00
Location: Eurasia
Top
PreviousNext
Post a reply

Return to Economics & Finance

Who is online

Users browsing this forum: No registered users and 0 guests



cron