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Biggest commodities bust in 52 years

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Re: Biggest commodities bust in 52 years

Unread postby patience » Sun 23 Mar 2008, 20:48:05

I dunno whether a gold standard would fix it or not. I'm sure that the root of the problem we have now is fractional reserve banking, that is, allowing banks to "create money" out of thin air. Wars have been fought, and heads of state assassinated over allowing them to do this, or not.
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Re: Biggest commodities bust in 52 years

Unread postby Homesteader » Sun 23 Mar 2008, 20:57:05

I agree that fractional banking is a root cause.

Great thread by the way. Thanks to all the posters for their thoughts.
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Re: Biggest commodities bust in 52 years

Unread postby mkwin » Sun 23 Mar 2008, 21:17:28

$this->bbcode_second_pass_quote('', 'A') derivative is an insurance claim for a term to pay if something happens. It gives you an income stream.


A derivative is a contract for difference there are no income streams for contracts for differences. For example, the main derivative is a futures contract. There are 2 parties to the contract the person who bets on the price of the underlying commodity going down (takes the PUT) and the person who bets on the commodity going up (the CALL). When the contract expires the loser simply pays the winner depending on the closing price of the underlying asset.


$this->bbcode_second_pass_quote('', 'I')f the counterparty, the agent that bought it from you, goes broke and can no longer make his monthly payments it becomes worthless. You have to write that off your books, which should go against your capital, since you put it there to begin with as an asset.


I am not an accountant but I doubt you can book derivative gains until the contract expires and the contract is settled because the value is changing every second the market is open and there are certainly no monthly payments made just a lump sum to the winner at the end of the contract.

$this->bbcode_second_pass_quote('', 'T')rillions$ have been created this way,The bank then turned around, sterilizes it, and goes to the FED and borrows against the loan it gave the originator. Now many, many trillions goes poof.


How have trillions been created? A derivative is essentially a private bet between two parties.

Are you getting mixed up with mortgage-backed securities? If so, a mortgage backed security is an asset-backed bond not a derivate. Maybe we are getting mixed up with terms.

I agree derivative pose significant risk in terms of the potential for financial instability but they have no affect on the amount of money in circulation because the winner pays the loser capital already in existence. If the loser goes insolvent, the winner does not get all or some of his paper gain depending on how much the insolvent loser can afford to pay.
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Re: Biggest commodities bust in 52 years

Unread postby mkwin » Sun 23 Mar 2008, 21:23:21

$this->bbcode_second_pass_quote('Homesteader', 'I') agree that fractional banking is a root cause.




The root cause of these crises was greenspan flooding the world with cheap dollars and the advent of mortgage backed bonds, which meant banks no longer cared if the borrowers repaid their debt because it was no longer their money. It was a complete failure on behalf of the regulators and greenspan.

Without the fractional banking system credit would be far more expensive which would mean most normal people would not be able to afford mortgages and business would not be able to borrow money to expand operations. Hence our standard of living would be far lower than it is now.
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Re: Biggest commodities bust in 52 years

Unread postby Homesteader » Sun 23 Mar 2008, 21:29:22

$this->bbcode_second_pass_quote('mkwin', '')$this->bbcode_second_pass_quote('Homesteader', 'I') agree that fractional banking is a root cause.




The root cause of these crises was greenspan flooding the world with cheap dollars and the advent of mortgage backed bonds, which meant banks no longer cared if the borrowers repaid their debt because it was no longer their money. It was a complete failure on behalf of the regulators and greenspan.

Without the fractional banking system credit would be far more expensive which would mean most normal people would not be able to afford mortgages and business would not be able to borrow money to expand operations. Hence our standard of living would be far lower than it is now.


So what mechanism allowed Greenspan to flood the world with dollars?

Certainly the standard of living for the wealthiest 1% or so would be considerably less.
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Re: Biggest commodities bust in 52 years

Unread postby sjn » Sun 23 Mar 2008, 21:43:22

$this->bbcode_second_pass_quote('mkwin', '')$this->bbcode_second_pass_quote('Homesteader', 'I') agree that fractional banking is a root cause.




The root cause of these crises was greenspan flooding the world with cheap dollars and the advent of mortgage backed bonds, which meant banks no longer cared if the borrowers repaid their debt because it was no longer their money. It was a complete failure on behalf of the regulators and greenspan.

Without the fractional banking system credit would be far more expensive which would mean most normal people would not be able to afford mortgages and business would not be able to borrow money to expand operations. Hence our standard of living would be far lower than it is now.

We may have not ran off the edge of the overshoot cliff. The system we employed inherently discounted the future, it allowed us to leverage our fossil fuel bonanza to undermine the ecological structure we all depend upon. The interaction of fossil fuels and fractional reserve banking made it "profitable" to engage in activities which were in fact mal-investments but were subsidized by cheap oil and cheap credit. That includes the "Green Revolution" which made the population explosion inevitable.
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Re: Biggest commodities bust in 52 years

Unread postby mmasters » Sun 23 Mar 2008, 22:15:43

Great time to buy commodities. I personally found the article saying how the collapse of bear was a sign of the bottom entertaining.

Anyhow I think the real question here is how long will the fed continue to prop up the US economy and or how long will the world's central banks continue to prop up the fed. Any break in this daisy chain support structure will lead to a global meltdown with the US at the epicenter.
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Re: Biggest commodities bust in 52 years

Unread postby mmasters » Sun 23 Mar 2008, 22:17:17

I know it sounds dramatic but people should use their brains on this more and better understand the fallout potential of this thing. It's very easy to fall a victim to a global meltdown.
Last edited by mmasters on Sun 23 Mar 2008, 22:45:09, edited 1 time in total.
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Re: Biggest commodities bust in 52 years

Unread postby shortonoil » Sun 23 Mar 2008, 22:31:05

smallpoxgirl said:
$this->bbcode_second_pass_quote('', '
')Yeah, except that if that happened, the money men would have no-one left to fleece. If it got bad enough, the butchers might even riot and burn down some of the money men's mansions. They won't let that happen. They will engineer some massively expensive government bailout so they get billions and we the taxpayers get to pay it off. That's what always happens.


If you believe the PTB are capable of doing what you say, apparently you have much more respect for their abilities than I do. If you are right, they must therefore be more intelligent than we are; perhaps they are a superior segment of the species? Maybe we should be bowing down to them, and be grateful they haven’t had us all zapped into oblivion!

Perhaps Kings were of divine lineage.

I knew I should have been a Pharaoh, you know, like God directed King George.

mekrob said:

$this->bbcode_second_pass_quote('', 'T')his is another probably dumb question: would any of this even be possible without fiat money? If we had the gold standard or whatever type of standard besides debt, are massive bubbles and implosions possible?


The simple answer is: NO and yes. It is not just fiat that is causing the problem, it is fiat used with Reserve Banking that is causing the problem. Either one by themselves is not intrinsically bad, together - they are hemlock!
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Re: Biggest commodities bust in 52 years

Unread postby shortonoil » Sun 23 Mar 2008, 22:40:50

mkwin said:

$this->bbcode_second_pass_quote('', 'A') derivative is a contract for difference there are no income streams for contracts for differences.


Dam, now you tell me --- after I paid for all those oil futures contracts!

Now convince me and the financial world that a futures contract is not a derivative!
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Re: Biggest commodities bust in 52 years

Unread postby DantesPeak » Sun 23 Mar 2008, 22:50:13

$this->bbcode_second_pass_quote('mmasters', 'G')reat time to buy commodities. I personally found the article saying how the collapse of bear was a sign of the bottom entertaining.

Anyhow I think the real question here is how long will the fed continue to prop up the US economy and or how long will the world's central banks continue to prop up the fed. Any break in this daisy chain support structure will lead to a global meltdown with the US at the epicenter.


That sums it up.

Still the Gulf Cooperation Council recently decided, among others, that they are more or less still supporting the dollar and preventing the dollar from losing its value too rapidly.

That will change one day.
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Re: Biggest commodities bust in 52 years

Unread postby smallpoxgirl » Sun 23 Mar 2008, 23:09:45

$this->bbcode_second_pass_quote('shortonoil', 'I')f you believe the PTB are capable of doing what you say, apparently you have much more respect for their abilities than I do. If you are right, they must therefore be more intelligent than we are; perhaps they are a superior segment of the species? Maybe we should be bowing down to them, and be grateful they haven’t had us all zapped into oblivion!
It's not so much that I think that the elites are powerful, as much as that most of the goings on in Wall Street bear about as little relation to reality as the goings on in Congress. We're living in a fiction: fictional political system, fictional economy, heck for most of us the evening sit coms are more real than our own lives. The nature of fiction is that the authors can write the plot however it suits them. One of the other properties of fiction is that the plots are often repetitive and predictable. Like I said, this one will end with Congress bailing out the hurting business using your and my money, and the billionaires that created this mess will end up lounging on the beach on Maui sipping Mai Tai's. That's how every issue of this particular comic book ends.
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Re: Biggest commodities bust in 52 years

Unread postby shortonoil » Sun 23 Mar 2008, 23:17:12

DantesPeak said:

$this->bbcode_second_pass_quote('', 'S')till the Gulf Cooperation Council recently decided, among others, that they are more or less still supporting the dollar and preventing the dollar from losing its value too rapidly.


If they didn’t take our dollars, we couldn’t buy their oil. If we don’t buy their oil the world price plunges back to $20 a barrel. In that case they go bankrupt and after the revolution their hides are found hanging from a telephone pole!

Sort of a sticky wicket, wouldn’t you say!
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Re: Biggest commodities bust in 52 years

Unread postby newman1979 » Mon 24 Mar 2008, 05:15:06

The Middle East oil goes to many countries besides the US. As those countries that have already shifted from the dollar prosper, it will put pressure on the others to go to a basket approach to protect their economies from inflation. Many Middle East countries do not have as many options to fight inflation due, in part, to religious principles. Many countries blame the US for increasing their domestic inflation, so the US has lost some of its influence in their decision matrix. As China has increased its Middle East purchases, its influence grows.
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Re: Biggest commodities bust in 52 years

Unread postby mkwin » Mon 24 Mar 2008, 08:07:37

$this->bbcode_second_pass_quote('shortonoil', '[')b]mkwin said:

$this->bbcode_second_pass_quote('', 'A') derivative is a contract for difference there are no income streams for contracts for differences.


Dam, now you tell me --- after I paid for all those oil futures contracts!

Now convince me and the financial world that a futures contract is not a derivative!


I used the futures contract as an example of a derivative. It is the most common. You don't get a monthly income stream from it and you exchange no money until you exit your position. Were you talking about mortage-backed securities?
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Re: Biggest commodities bust in 52 years

Unread postby mkwin » Mon 24 Mar 2008, 08:17:09

$this->bbcode_second_pass_quote('Homesteader', '
')
So what mechanism allowed Greenspan to flood the world with dollars?

Certainly the standard of living for the wealthiest 1% or so would be considerably less.


It was bad policy simple as that. If Greenspan had not kept interest rates for so low so long and regulators had controlled the use of mortgage backed bonds there would be no housing bubble.

It is possible without the mortgage system, as we now know it, the common man would still be living on the land of the ruling elite or in urban slums. Instead I think 40% of Americans own their own homes completely and it is a similar level in other OECD countries.

People need to be careful what they wish for. The fractional banking system may well fail due to peak oil and the mortgage market will fail with it. The days of home ownership for your children and their children may be over. Rich children will still be buying and owning property because they will be able to afford the 20% mortgage rates.
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Re: Biggest commodities bust in 52 years

Unread postby Homesteader » Mon 24 Mar 2008, 08:45:33

$this->bbcode_second_pass_quote('mkwin', '')$this->bbcode_second_pass_quote('Homesteader', '
')
So what mechanism allowed Greenspan to flood the world with dollars?

Certainly the standard of living for the wealthiest 1% or so would be considerably less.


It is possible without the mortgage system, as we now know it, the common man would still be living on the land of the ruling elite or in urban slums. Instead I think 40% of Americans own their own homes completely and it is a similar level in other OECD countries.

People need to be careful what they wish for. The fractional banking system may well fail due to peak oil and the mortgage market will fail with it. The days of home ownership for your children and their children may be over. Rich children will still be buying and owning property because they will be able to afford the 20% mortgage rates.


It is also quite probable that humans would have developed a completely different society without fractional banking. Likely we would still have discovered and exploited fossil fuels and developed technology but in a much slower more deliberate fashion.

Fractional banking has pushed us to the brink. Shit, I doubt my children's children will own a home due to global warming, due largely to the excesses supported to a large degree by fractional banking. Fractional banking financed the population explosion.

To say we would all still be dirt-grubbing peasants without fractional banking is errant nonsense.

Seems like your view is a bit short sighted and self-centered.
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Re: Biggest commodities bust in 52 years

Unread postby mkwin » Mon 24 Mar 2008, 10:13:33

$this->bbcode_second_pass_quote('', 'F')ractional banking has pushed us to the brink. Shit, I doubt my children's children will own a home due to global warming, due largely to the excesses supported to a large degree by fractional banking. Fractional banking financed the population explosion.


Fractional banking has been around for over 150 years in some countries. It has nothing to do with population growth explosion which is more correlated with the 'green revolution'.

Everyone needs a bogey man to blame, the truth is no one is to blame this is just how life has developed for better or for worse. Maybe things could have developed differently but it is a pointless waste of time to speculate.
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Re: Biggest commodities bust in 52 years

Unread postby mmasters » Mon 24 Mar 2008, 10:47:39

$this->bbcode_second_pass_quote('mkwin', '')$this->bbcode_second_pass_quote('', 'F')ractional banking has pushed us to the brink. Shit, I doubt my children's children will own a home due to global warming, due largely to the excesses supported to a large degree by fractional banking. Fractional banking financed the population explosion.


Fractional banking has been around for over 150 years in some countries. It has nothing to do with population growth explosion which is more correlated with the 'green revolution'.

Everyone needs a bogey man to blame, the truth is no one is to blame this is just how life has developed for better or for worse. Maybe things could have developed differently but it is a pointless waste of time to speculate.

I disagree. Fractional banking has influenced an incredible pyramid scheme of growth and boom times, particularly through wars. Not that it's completely responsible for the population explosion but it is a huge catalyst as is oil. We would have never used as much of the planet's resources with a demurrage system that influences long term thinking for maximum wealth.
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Re: Biggest commodities bust in 52 years

Unread postby mkwin » Mon 24 Mar 2008, 11:12:03

$this->bbcode_second_pass_quote('', 'I') disagree. Fractional banking has influenced an incredible pyramid scheme of growth and boom times, particularly through wars. Not that it's completely responsible for the population explosion but it is a huge catalyst as is oil. We would have never used as much of the planet's resources with a demurrage system that influences long term thinking for maximum wealth.



I would not call 100+ years of economic growth a pyramid scheme. But I take your point. The system we have does not, however, have to be unsustainable. Limits to growth found if the right policy decisions are taken, all 9 billion people projected in 2050 could have a standard of living equal to that of Hungry or Poland, which is not bad. I also do not see the problem with using resources as long as it is done sustainably. I find it pretty hypocritical of Americans deriding the very system that has given them an unprecedented level of wealth in both relative and historical terms. Some people will argue that only the rich have benefited but that is just bull s***. Anyone with any degree of determination can make a good life for himself or herself in the US. If you cannot make a reasonable standard of living for yourself in the US, you would not make it anywhere in fact you would be dead in many parts of the world.
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