Stalins Organ Posted July 16, 2009 Share Posted July 16, 2009 Goldman Sachs manages to pay back it's $10 billion and make a profit, meanwhile CIT, lender to small businesses, is on the brink of collapse even with fed "bailout". I know nothing about these aother than what is reported - I certainly haven't done any in depth research, but it strikes me that the respective fates (or apparently/likely fate of CIT) are symptomatic of what is wrong with the financial system - GS made their money "trading" - they have no "toxic assets", and as long as they keep "guessing" correctly which way the markets are going to go they keep making money........without, as I see it, actually creating/adding any value at all. CIT have aparently lent to industry....they have actually invested in that part of the economy that creates wealth/adds value.....and that is their problem - that part of the economy is in trouble because of...well I don't really know but it possibly 'cos way too much money was going to another part that didn't create or add value to anything. Does anyone else see this as a fundamental flaw, or am I jsut being old fashioned to think that the basic creation of wealth/value should be more important than shuffling it around? 0 Quote Link to comment Share on other sites More sharing options...
Guest Guest Posted July 16, 2009 Share Posted July 16, 2009 deleted per user request 0 Quote Link to comment Share on other sites More sharing options...
costard Posted July 16, 2009 Share Posted July 16, 2009 SO, I don't think you're old fashioned, just expecting more of people than they're willing to give. One of the telling sound bites I heard a couple of months ago was the description of investors (by a banker) as "punters". Whilst the market ignores it's fundament as a means of bringing investment capital to ideas and works in need of that capital, it will continue to be seen as a get rich quick scam by those on the inside and a get poor quick scam by the suckers silly enough to believe that trustworthiness is something you can ascribe to anyone who works in that industry. It's worth doing a little research into "reserve capital lending" - where a loan of, say $100 can be turned into ~$400 by counting that loan as an asset and, in turn, lending on it. It's pretty much what GS set up back in the late eighties, and the paper wealth created thereby is mostly what has disappeared in the last couple of years. The ex-rich who swapped their understanding of the fundamentals of capitalism for a chance to splash around in the new pool of dollars deserve no sympathy, but those who have quite cynically engineered circumstances so that the taxpayers are left with the mess deserve little more than a wall to stand up against and a hole to go into. For the rest of us, we find the cost of living soaring as the value of excess number of dollars in the world catches up with the relative lack of energy and food. I know my wage hasn't risen in real terms for the last eighteen years, and it it looks like I'll be going significantly backward this year (if I manage to remain employed). As to the "profits" being made at the moment by investment banks - I suspect that the markets are being played, bounced by planned, strategic buying and selling (with a little help from well placed press articles and some funded rebellions, notably Nigeria). Certainly there is no investment in anything other than speculative stocks. It's probably been going on for half a decade now, and the legislature is still a ways off catching up with the perpetrators. History would suggest that it never will - oh, except for Mao and Lenin and Robespierre: they got a few. 0 Quote Link to comment Share on other sites More sharing options...
gunnergoz Posted July 16, 2009 Share Posted July 16, 2009 All I know is that they are using the money that taxpayers gave them to put back into the lending market, to make more profits for themselves. And so we will pay them interest on the money that we payed taxes to give them in the first place. Assuming they lend any out to ordinary businesses and individuals...which seems unlikely. The banking system is a bit like religion, with priests, secret mantras and formulas and holy places. If you are not a priest or acolyte, you don't get much but promises. While they get fat and own all the property in the country. We should have let them go bankrupt... 0 Quote Link to comment Share on other sites More sharing options...
Stalins Organ Posted July 17, 2009 Author Share Posted July 17, 2009 Gunner yes that's my understanding of how GS were abel to pay back their 10 billion and turn a profit so quickly - they used the liquidity it gave them to play hte market - but since hte market direction was fairly obvious it wasn't too much of a gamble...so they bade the 10 billion back with profit on top. costard I don't think that reserve capital lending is a great problem - it is a practical applicatio of banking - the system probably couldn't work without it. It certaily wasn't invented by GS & the limited liquidity it allowed was a problem befoer the emergence of cental banks as lenders of last resort, plus other regulations. It may be that the current situation is a logical development of RCL as it has been implemented.....but I don't see returning to the days of a gold standard as being a great improvement. Rather it is the immense amount of money that can be made without actually lending anything - essentially gambling on futures - I guess it is pure capitalism - literally making money by moving capital, whereas the making of money by investing capital into production seems much less profitable. 0 Quote Link to comment Share on other sites More sharing options...
costard Posted July 17, 2009 Share Posted July 17, 2009 Reserve Capital Lending has been around for ages, true, but it was Lehmann Bros (not GS, my error) who took the accounting of it to a new level with the bundling of loans and selling them as assets in the late eighties/early nineties. The authorities (the gummint, god bless it, which was following the line of the voting members of the legislature, true capitalists to a pig) were convinced that these new instruments were kosher, and it followed that the derivatives of these were kosher too. Being *new*, there was no data for insurance companies to calculate risk with - unsurprisingly, they followed the line that everyone else was taking and decided they were a good thing, low risk. Unsurprisingly because 1. they were collecting premiums for the policies, a new and expanding market in its own right and 2. because the insurance companies were either owned outright by the banks using the instruments or were comfortable with the normal practice of insurers caught with large policies to pay out on: discovering they were based overseas and declaring bankruptcy. When time came to pay out on the insurance policies (see AIG), lo and behold, the state had to step in and refinance the loans, else the whole kit and kaboodle would have gone into shutdown. Sure, the banks with their post-modern philosophic interpretation of wealth ("Its there because I say it is.") would have gone down, but the rest of us would have gone with them. The way it has been engineered, the next ten to fifteen years of corporate profits have been taken out of the market over the last five years and pissed up against the wall, and the successful businesses will be those that can operate at zero profit for that time. Or screw their labour into paying their profit for them by negotiating deteriorating conditions of employment - static wages and rising prices. Given that most management has become used to getting easy money and murky accounting practices to cover for their inefficiencies over the last decade, I'm thinking that it will be a combination of the two for most corporations. Welcome to the world of the wage slave. SO, you're right when you say that returning to the gold standard won't work, but you can see Russia's and China's point about not being too confident in the US dollar standard either. This is why they're asking for something to replace the $US as the global, and this is the price the ruling capitalists in the US and Europe were prepared to pay (actually, they're still confident it won't happen). In the meantime, I expect the old staple, food, to bring currency valuation back into line (that's Adam Smith's reasoning, anyway), with energy as a significant modifier. With increased interest payments on state loans leading to higher unemployment and further reduced tax revenues, labour will be a glut on the market. Unless we can keep the illusion of market growth alive: that's where we're at. 0 Quote Link to comment Share on other sites More sharing options...
dieseltaylor Posted July 18, 2009 Share Posted July 18, 2009 Yep, cheery thought. The only way out as I see it is a massive program of switching to green power. Actually it need not be green power simply something that employs a lot of people and has a ongoing benefit. 0 Quote Link to comment Share on other sites More sharing options...
costard Posted July 19, 2009 Share Posted July 19, 2009 I know I have little credibility for analysis of this set of circumstances, and a penchant for exaggeration and drama in my writing (I should have gone for a job writing scurrilous pamphlets) - but here's an example of what gets me ranting: from the New York Times, a "liberal" rag as far as I can tell: http://www.nytimes.com/2009/07/19/business/19dimon.html?partner=rss&emc=rss “It’s got to be a regular thing. You’ve got to have a few relations where people know and trust you; you can be an honest broker,” Mr. Dimon said in an interview. followed by Yet Mr. Dimon helped persuade Mr. Frank and Congress to ease the terms for banks, allowing JPMorgan to repay $25 billion in bailout money from the Troubled Asset Relief Program, known as TARP. He did so by complaining publicly and privately that JPMorgan only reluctantly took the money last year from the Bush administration to avoid stigmatizing more needy banks, And I'm the ****ing tooth fairy. He either asks us to believe that he's stupid, in which case why would we show any interest in what he says, or he honestly believes we're stupid - which is probably the case, but hardly likely to be better received for being so carefully pointed out. It could be that the NYT editors are cleverer than I give them credit for, and that this is just the American version of irony, extremely deep and quite, quite black, but somehow I doubt it. 0 Quote Link to comment Share on other sites More sharing options...
Stalins Organ Posted July 19, 2009 Author Share Posted July 19, 2009 Costard those "instruments" they packaged up the various mortgages into then onsold them are certainly a symptom - making them adds no value, and yet they got sold on for profit - a paper shuffling exercise that reaped vast amounts of money for some sectors at a cost we all recognise now. So yep - that's exactly the kind of thing that seems "wrong" to me - making money, but not making value or wealth. the US$ has to be the reserve currency for a long time as far as I can see - china would not be happy if it's trillion $'s was no longer up for it.....and that reserve is a pretty big stick to have clearly hiding in the background not being waved in any dealings with the USA! 0 Quote Link to comment Share on other sites More sharing options...
costard Posted July 24, 2009 Share Posted July 24, 2009 Here's a good example of what you're up against in the market. Note the use of early glimpses of trading prices and volumes given out for a "small" fee, and the payment of further fees for the largest volume of trades. The game is rigged. Forget about the fundamentals of investment and capital, this is a casino, pure and simple. http://www.nytimes.com/2009/07/24/business/24trading.html?_r=1&partner=rss&emc=rss 0 Quote Link to comment Share on other sites More sharing options...
Michael Emrys Posted July 24, 2009 Share Posted July 24, 2009 The game is rigged. Forget about the fundamentals of investment and capital, this is a casino, pure and simple. Anyone who hadn't figured that out several decades ago is slooooooooowww. Actually, I used to compare it to off-track betting on horse racing, but casino fits just as well. Any way you slice it, it is a racket and has been for ages. Michael 0 Quote Link to comment Share on other sites More sharing options...
dieseltaylor Posted July 24, 2009 Share Posted July 24, 2009 I do invest but not in the US, adn I go for small technology plays so I am probably not suffering. However this rigging of the market with previewing is blatantly corruption of the system, NASDAQ - *******s. Capitalism is going to be getting an even worse rap as Joe Public gets educated on this. 0 Quote Link to comment Share on other sites More sharing options...
Michael Emrys Posted July 24, 2009 Share Posted July 24, 2009 Capitalism would probably be okay if the government regulators would just do their jobs. Unfortunately, for the last 30 years they've either been in bed with the people they are supposed to be regulating, or at least sympathetic towards them. Too many foxes guarding too many henhouses. Michael 0 Quote Link to comment Share on other sites More sharing options...
dieseltaylor Posted July 26, 2009 Share Posted July 26, 2009 http://www.rollingstone.com/politics/story/28816321/the_great_american_bubble_machine May be a little over the top but on GS stacking the Govt http://www.huffingtonpost.com/2009/06/02/government-sachs-goldmans_n_210561.html 0 Quote Link to comment Share on other sites More sharing options...
gunnergoz Posted July 26, 2009 Share Posted July 26, 2009 I was just reading that the executives and top management of US banks and corporations are now believed to collect one third of the total of all the salaries in the whole of the USA. Must be nice! http://www.alternet.org/blogs/peek/141481/executives_receive_one-third_of_all_pay_in_the_u.s./ 0 Quote Link to comment Share on other sites More sharing options...
costard Posted July 26, 2009 Share Posted July 26, 2009 Sadly, nothing they're doing is illegal - yet - though it is generally recognised as outright theft. The dangers of the worship of Mammon haven't done more than show a fin. The general populace of the west does have to shoulder some of the responsibility for this mess: a recreational drug can be a society destroyer if not properly managed and debt is much the same. Things are getting pretty shaky around the world - and the title of the thread has been shown to be a true statement. It might be a case of the war arriving just in the nick of time, though in this case the cause of the devastation will be ultimately shrouded from popular perception, lost in the foreground noise of the pundits calling for sides to be taken. Whatever you choose to do, remember that it is the little guy that gets it in the neck: this is the way of any political system. 0 Quote Link to comment Share on other sites More sharing options...
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