Some Good News Financially?
 

Odd that I read that we only overspent by $680B and actually thought this was a good thing.
But in reality. It is. It's a lot better than $1.4T and the article says the trade deficit is also declining. And that is a really good thing.

Maybe there is hope.

http://money.cnn.com/2013/10/30/news...ury/index.html

Sequester baby!

It seems that stimulating the economy briefly, then cutting spending, ending unnecessary wars, raising revenue by eliminating unfunded tax cuts and plenty of pork reduction is actually a good way to spur economic recovery. Who woulda thunk it?!

Now if they would put capitalization requirements for banks in place, stop threatening that we won't pay our debts, and regulate new paper bubbles like the student loan market to prevent the next crash, I'd be optimistic for a change. :2 cents:

Where did you see anyone do that? I saw a paralyzed govt let some bad ideas run out and some good ideas go into effect. But it was not really a plan by any stretch of the imagination.

Blame obama

The stimulus happened, the sequester happened, the war in Iraq effectively ended, the unfunded bush tax cuts expired, the top bracket increased. Whether it was by plan or by accident doesn't change whether or not those things happened.

Don't know what to think until the Fed stops buying bonds.

the sad part is that congress made small changes to taxes & spending & the deficit got cut in half. If they could make decisions that are not that much tougher (like means testing SS or increasing the eligibility age of medicare) they could balance the budget. But look at all the fighting it took just to get to a 700 billion deficit. :(

And that was just Minte's lunch money:winkwink:...

Longish post, but I've studied the shit out of this. Please read.

Too Big To Fail (TBTF) banks and the massive derivative bubble are by far the biggest threat to not only US, but global economic stability.

As long as the TBTF banks are allowed to take insane risks with depositor's (and with bailouts, ALL of our) money, the question isn't IF there will be another major catastrophe, but WHEN. This is exactly what caused the 2008-9 financial crisis.

The only solution that makes sense is to re-instate the Glass-Steagall act (repealed in 1998), which separated retail banking from investment banking. It kept us safe from major financial catastrophes for 65 years.



The student loan bomb is very important as it's getting close to $1 Trillion. But that's nothing compared to the derivatives market, which currently stands at $1.2 Quadrillion. $1.2 Quadrillion = 20x global GDP!!!!!!!

What are derivatives? (Longer Version) Short version, it's a giant casino where you can bet on virtually anything, like the amount of rain Brazil will get in February 2014. No joke. And it only costs 1% of buying the underlying security. That is leverage on ultra-mega steroids.

Derivatives called synthetic CDO's (collateralized debt obligations) and CDS's (credit default swaps) were the core of the financial crisis. The size of the derivatives market has doubled(!) since then.

And you know what? The Commodities Futures Moderization Act of 2000 made it illegal to regulate these financial weapons of mass destruction.


This is what happens when you let banksters highjack your government. This is non-partisan. It's been going on through a succession of administrations/congresses for 30+ years.

There are several very simple fixes that should be put in place which would stabilize our economy for decades.

1 Add a nominal ten cent per share fee on all stock trades of shares resold less than six months after they were purchased. It would have zero impact on investors and would immediately eliminate high frequency trading speculators.

2 Require significant minimum capitalization of all banks. If banks want to take big risks with their profits, good for them... Risks with deposits should never exceed capital on hand.

3 The entire student loan 'industry' needs to be regulated. Schools should be required to spend a high percentage of revenue on present students, the same way insurance premiums are limited by cost of the insured pool and utilities are limited by pricing constraints. The great majority of student money goes to projects that have nothing to do with the cost of education per student.

4 A single payer baseline health system that covers catastrophic care and basic medicine, with supplemental private insurance or cash payments layered over it.

5 reinstate the Gephardt rule, that a vote for the budget counts as a vote to raise the debt ceiling by the necessary corresponding amount. The present method of voting to spend and later voting on whether or not to pay the bill is disastrous and unnecessary.

6 Implement the Buffet rule which would eliminate carried interest and other loopholes used by generational wealth to pay a 12% tax rate...

These fixes won't make us prosper because they don't address the root problem (we have more people than we need and that curve is accelerating), but they would stabilize things and give us a sane environment to live in while sorting out the larger issue.

sounds good to me

at least on those 2 things the EU is working right now - but the Brits once again get their panties in a bunch cause they think it will shut down London

Relentless, those are all good points, but they don't solve the problem of the Too Big To Fail (TBTF) banks. Until Glass-Steagall is re-enacted (separating retail banks from investment banks, as they had been for 65 years) the TBTF banks will continue to make insane, massively leveraged bets with depositor's, and ultimately OUR money.

TBTF banks have pretty much doubled down on this shit since 2009. There's simply waaay too much short-term profit (and bonuses). Also, they know if it goes bad, they'll get bailed out and nobody will go to jail. It's all upside for them.

This is a good Forbes article recapping the causes of the Financial Crisis and why another major crisis is inevitable.

There have been no meaningful changes to these because the big banks have lobbied hard (aka bribed politicians) for that. One big example: In 2008, Obama's largest campaign contributor were the TBTF banks. Is it any surprise no banksters went to jail AND there's been no meaningful reform? It's not just him, they buy off fuckloads of congressmen and senators too. This is how our alleged "democracy" works now.

actually history is unlikely to repeat. the feds have banned most of the abusive loans at the grassroots level. so despite the continuing lack of derivatives regs, its no longer possible for a regional banks to create the fraud loans that were at the core of the 08 calamity. also the rating agencies like moodys are in no position to repeat mistakes of the past like attaching triple A ratings to junk bonds.

The sad thing is your understanding of them is better then 95% of the people highly involved with them. True story. Not that is is sad that you get it. :2 cents::2 cents:

That's the problem. They've moved on to other insane bets. The size of the derivatives market has DOUBLED since 2008 to $1.2 Quadrillion. I take no pleasure in saying it, but under current conditions, the shit will hit the fan again. And we the people will be on the hook for it yet again.

Thanks. Even worse, your average person has NO concept of what's going on at all. If they did, there'd be a load of banksters with their heads on pikes. Of course unsurprisingly, mainstream "news" virtually never talks about this.

I have np with banks making risky bets (their argument for having glass steagall repealed), the problem is with the size of those bets. If you invest in anything there is risk, so take the riskiest example... Gambling. If you go to a casino and bet a million dollars, it doesn't matter if that million is money from your checking account, savings account, college fund or under your mattress...

What matters is how much money you have overall. Did you bet a million by using your entire nestegg of 800K and borrow 200K? Did you bet a million out of a 300 million dollar bankroll? Capitalization requirements is the solution. Limiting what a bank can gamble on allows crafty bankers to find loopholes, requiring a large amount to be held in reserve eliminates those restrictions and the loopholes. It doesn't just solve derivivitive trades, it solves any and all trading risk from the depositor point of view. The only question is what percent should be required as capital reserve.

Derivatives are a big problem, they aren't the only banking problem. Glass steagall solves some of it, high capital reserves solves pretty much all of it.

How can you be okay with them making super-high/risk, massively leveraged (like 100:1) bets with their depositor's (and ultimately the American people's) money? This is exactly what caused the worst recession since the Great Depression. The Financial Crisis is estimated to have cost the US $13 Trillion, not only from the bailouts, but the massive wealth destruction that affected virtually everyone in the country.

DTK we agree much more than we disagree.

I'm ok with them doing that with a very small percentage of their capital if they think they can profit from it. I'm not at all ok with the size of the bets they make. If they were doing it with one percent of their capital, it wouldn't be a risk to the economy. If they do it with 99% its a major problem. The question is what percent should be allowed, and I'm not sure 0% is the only acceptable answer. Banks with a high percentage of capital in reserve can absorb their losses, just like any other entity that takes risks. If the regulation relies on making sure they have enough capital in reserve (and putting law breaking executives in jail) it's a better and more durable solution than glass steagall was.

:thumbsup:thumbsup

http://tinyurl.com/cdkhxm3

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We totally do:thumbsup

I'd agree on them only being allowed to make crazy bets with only a tiny portion of their bankroll, if those banks were required to account for the full notional value of their positions. That is literally at least 100 times more than they're required to do now.

I'll just say that almost every economist I check out (aside from the obvious TBTF shills) agree that reinstating Glass-Steagall is vital. It makes sense because that was the thing that kept us safe from banking catastrophe for 65 years.

The problem now is that TBTFs (in their role as "investment bankers", aka gamblers) have access to virtually free money from the Federal Reserve. As separate investment banks, they would not. Then, they'd have to go back to having their own "skin in the game". That would lead to sane investment decisions, like Investment Bankers used to make.

Have you ever seen Inside Job? It won the Best Documentary Academy Award. It's a chronicle of Financial Crisis and the history of what led up to it. If you haven't, I can't recommend it enough. :thumbsup