Tick everything that you think applies to the World Financial System over the past 10 years

It gave us all important necessities like SUVs, big screen TVs and tropical holidays
10
28%
It was a gigantic Ponzi scheme, and you all fell for it - suckers!
13
36%
It was partially a cunning plan from China to buy up American
10
28%
It revolved around a lot of people believing in wealth that never actually existed
23
64%
It has conclusively proved the "free market" doesn't work
6
17%
It alleviated poverty in the third world, somehow
1
3%
It allowed smart people to sell debt to stupid people and reap their just rewards
22
61%
It was a modern version of Sodom and Gomorrah
4
11%
Consumers spent money they didn't have on stuff they didn't need
30
83%
Politicians safeguarded the wealth of our society for future generations
1
3%
Financial wizards made us all wealthier and happier with their innovative investment schemes
1
3%
Fund managers looted the public purse happy in the knowledge the governments would bail them out
16
44%
Governments constructed a system that rewarded greed and deceit with wealth and power
15
42%
Thieves! Thieves and liars! Murderers, hypocrites and bastards and lechers!
13
36%
It was fun while it lasted but we'll soon be back to eating boiled spuds every night
18
50%
 
Total voters : 36

Your Take On The World Financial System Over The Past Decade

Postby Tama on Tue 17/Mar/09 8:56am

Every morning I do my stretching exercises when the business news is on the National Radio so while I'm contorting on the carpet I get to listen to yet more predictions, dissections, autopsies and really crappy news involving yet more redundancies, bail outs and legal proceedings.

So while riding to work I decided to make this lovely poll to see what the general feel is for what's been going on for the past decade in the world financial system. Tick all options you think are applicable :)
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Re: Your Take On The World Financial System Over The Past Decade

Postby Oli on Tue 17/Mar/09 9:10am

DOOOOOOOM! :paranoid:
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Re: Your Take On The World Financial System Over The Past Decade

Postby Colin on Tue 17/Mar/09 9:16am

Financial markets are exactly like the stonefruit industry. All about making a dollar now by selling an illusion that you will have something in the future, all the while turning leaving any downstream problems to be thought about and solved tomorrow.

Stonefruit industry have delveloped their product to be appealing and easy to sell today, ignoring the fact that after the 14th time of biting into year another dry bitter skinned flavourless ball of disappointment, the customer will finally learn not to buy thee pretty imiitation of their childhood memories.

Fund managers have sold schemes to investors where the fund managers are rewarded with upfront fees for making the placement rather than a share of the real returns to the investor, ignoring the fact that when the gulliable investor lost their life savings there would be no further funds invested to clip the ticket on.

Marketing of the thrills provided by instant gratification.

It aint much Im asking if you want the truth
Heres to the future
Hear the cry of youth (hear the cry hear the cry of youth)
I want it all I want it all I want it all and I want it now
I want it all (yeah yeah yeah) I want it all I want it all and i
Want it now
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Re: Your Take On The World Financial System Over The Past Decade

Postby Trail on Tue 17/Mar/09 9:28am

That article on Looting explained it all pretty well. Financial businesses making money by taking fees while playing with other peoples money... and then when it all falls over the governments bail the businesses out with tax payers money.

http://www.nytimes.com/2009/03/11/busin ... hardt.html

Rich bastards getting richer off the taxpayer. The goverment has bailed the buisiness out to the order of billions of dollars (of taxpayers money) and yet the managers are still getting paid multimillion dollar bonuses... :crazy:
http://business.timesonline.co.uk/tol/b ... 795072.ece
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Re: Your Take On The World Financial System Over The Past Decade

Postby happybaboon on Tue 17/Mar/09 6:12pm

There's a case for many of those options.

The world got greedy, and now the world is getting reamed out.
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Re: Your Take On The World Financial System Over The Past Decade

Postby Tama on Wed 18/Mar/09 8:32am

happybaboon wrote:There's a case for many of those options.

That's why you can pick as many as you like :)
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Re: Your Take On The World Financial System Over The Past Decade

Postby Tama on Wed 18/Mar/09 8:47am

Trail wrote:Rich bastards getting richer off the taxpayer. The goverment has bailed the buisiness out to the order of billions of dollars (of taxpayers money) and yet the managers are still getting paid multimillion dollar bonuses... :crazy:
http://business.timesonline.co.uk/tol/b ... 795072.ece

And then they leave the company :)

http://business.timesonline.co.uk/tol/b ... 926545.ece wrote:The stricken insurance giant AIG was hit by fresh controversy today when it was revealed that eleven executives being paid bonuses of a million dollars or more to stay have quit the company.

...

The news undermined the argument of government-appointed AIG boss Edward Liddy that the bonuses were necessary to retain “the best and brightest talent".

Mr Cuomo demanded to be told who had received $165 million worth of bonuses yesterday, but AIG refused to disclose the information despite accepting a multi-billion dollar bailout package from the government.

...

In the letter to Congress, Mr Cuomo also revealed that the ten AIG employees who received the largest bonuses were paid a total of $42 million dollars.

“These payments were all made to individuals . . . whose performance led to crushing losses and the near failure of AIG,” he wrote.

A total of 73 employees received a million dollars or more, Mr Cuomo said. “Thus, last week, AIG made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing a taxpayer bailout. Something is deeply wrong with this outcome,” he said.
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Re: Your Take On The World Financial System Over The Past Decade

Postby Joel on Wed 18/Mar/09 8:50am

Economic crisis explained in simple terms

Heidi is the proprietor of a bar in Berlin . In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).
Word gets around and as a result increasing numbers of customers flood into Heidi's bar. Taking advantage of her customers' freedom from immediate payment constraints, Heidi increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively. A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi's borrowing limit. He sees no reason for undue concern since he has the debts of the alcoholics as collateral.

At the bank's corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items.
One day, although the prices are still climbing, a risk manager (subsequently of course fired by the bank due his negativity) finally decides the time has come to demand payment of the debts incurred by the drinkers at Heidi's bar. However they cannot pay back the debts.

Heidi cannot fulfil her loan obligations and claims bankruptcy. DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND performs better, stabilizing in price after dropping by 80%. The suppliers of Heidi's bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor. The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties. The funds required for this purpose are obtained by a tax levied on the non-drinkers.

Finally an explanation we can all understand .. .
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Re: Your Take On The World Financial System Over The Past Decade

Postby Trail on Wed 18/Mar/09 8:51am

Tama wrote:And then they leave the company :)


I am not surprised they have left. They have sucked all the money they can possibly get out of the company for now... not much point in staying.

I think AIG should name and shame...
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Re: Your Take On The World Financial System Over The Past Decade

Postby Tama on Wed 18/Mar/09 8:53am

Another very good explanation:
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Re: Your Take On The World Financial System Over The Past Decade

Postby Trail on Wed 18/Mar/09 8:57am

Joel wrote:Economic crisis explained in simple terms

Finally an explanation we can all understand .. .


I liked Joe Bennett explanation better
So you want to get into high finance. Good on you. Here's a four-step guide.

Step 1 Find a hobo. He should be homeless, hopeless and with a hole in his pocket through which money tumbles straight to the liquor store.

Offer him a loan. The loan is to buy him a modest house in which he can entertain friends to methylated cocktails around the heated swimming pool. But don't forget to put an inflated valuation on the house first.

When the hobo accepts, assume the role of mortgage broker. In other words, sell the loan to someone else. It may seem like a bad loan to you, but lending institutions will jump at it. Add a cut for yourself, and hey presto, you've started making money. But there's a lot more cash to be made further up the ladder.

Step 2 Become a lender. As a lending institution, you must always remember that one bad debt is a bad thing, but a lot of bad debt is a good thing. So buy as many hobo-loans as you can. Sweep them up like confetti after a wedding.

You'll soon have loans by the fistful. A few will be sound but most will be lousy. Just bundle them together and slice the bundle into sellable units, each of which has a bit of each loan in it. The process is simple, but you must make it seem complicated so that commentators will refer to it as sophisticated financial engineering. Everyone's impressed by sophisticated financial engineering, especially when you give it an impenetrable name like Collateralised Debt Obligations. To obfuscate matters even more you can then reduce this to CDO. Initials lend status. And anyone who doesn't understand them is reluctant to admit their ignorance.

Now sell your CDOs to venerable financial institutions such as investment banks. They'll snap them up and you'll have made a nice fat profit. Once again you can stop there, but step three beckons the brave.

Step 3 Become boss of an investment bank that buys CDOs. This has the immediate advantage of paying a simply hilarious salary. But it comes with a hitch. Remember the hobo? Having held a couple of poolside parties he felt the call of the open road and simply walked off the property. But he did remember to drop the keys in an envelope. So you now have the keys to a house that is worth less than the loan you advanced on it. This is known in financial circles as negative equity and in less financial circles as a problem. But in the world of high finance every problem is an opportunity in disguise. Just file for bankruptcy. Almost immediately the US cavalry will arrive in the form of the US Treasury. They'll buy your bad loans and you'll get a fat golden handshake that is more than enough to retire on. But you may find you've enjoyed the ride so much that you want to go on to step 4.

Step 4 Become President of the United States of America, a position that comes with enormous prestige. But it also comes with a trillion dollars worth of CDOs which have now been stripped of their verbal finery and have reverted to what they always were which is plain bad loans.

You've bought them in the name of the people who originally took them out. And you've used their taxes to pay for them. So effectively the American people now own a trillion dollars worth of bad loans to themselves. And most of the money has just plain disappeared. House prices have shrunk and the rest of the cash has gone to China in exchange for goods that the American people are too sophisticated to make for themselves.

To prop up the American people you need money fast. But your only reliable source of money is taxes levied on the American people, and in order to achieve the presidency you promised to lower taxes on the American people rather than raise them.

To compound your problems you're running a colossal trade deficit and you've got some expensive wars to fight in the name of the American people. So your only choice is to borrow from the people who've now got the money that used to be American. So off you trot to Beijing selling Treasury bonds. These are effectively mortgages on the United States.

Then all you have to do is to cross your fingers and hope that the Chinese don't ask for their money back before your term in office ends. You really don't want to be the first US president to take step 5.

Step 5 pop the keys to your country into an envelope and take to the open road, homeless, hopeless and with a hole in your pocket through which money tumbles straight to the liquor store.

Good luck in your financial careers ...
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Re: Your Take On The World Financial System Over The Past Decade

Postby sooby on Wed 18/Mar/09 1:24pm

Trail wrote:
Joel wrote:Economic crisis explained in simple terms

Finally an explanation we can all understand .. .


I liked Joe Bennett explanation better
So you want to get into high finance. Good on you. Here's a four-step guide.


awesome, Joe Bennett is very witty
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Re: Your Take On The World Financial System Over The Past Decade

Postby Tama on Sat 18/Apr/09 7:38am

I recently tweaked the code so multi-option polls like this make more sense. If you look at the results it shows the percentage of people who've selected each option (in the old system the percentages were nonsensical.)

So of course I had to have a look at some old multi-option polls to see what they were looking like...

...which brings me to...

Holy shit! 90%+ on "Consumers spent money they didn't have on stuff they didn't need" - that has to be a new record!
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Re: Your Take On The World Financial System Over The Past Decade

Postby Tama on Tue 21/Apr/09 11:12am

Good opinion piece...

http://www.theatlantic.com/doc/200905/goldberg-economy wrote:FOR MOST OF our adult lives, my wife and I have behaved in the way responsible cogs of capitalism are supposed to behave—we invested in a carefully calibrated mix of equities and bonds; we bought and held; we didn’t overextend on real estate; we put the maximum in our 401(k) accounts; we gave to charity; and we saved, but we also spent: mainly on gasoline, food, and magazines. In retrospect, we didn’t have the proper appreciation for risk, but who did? We were children of the bull market. Even at its top, my investment portfolio was never anything to write home about. Its saving grace was that it was mine. And I imagined that when we did cash out, at 60 or 65, I would pass my time buying my wife semisubstantial pieces of jewelry and going bass fishing like the men in Flomax commercials.

Well, goodbye to all that. I took a random walk down Wall Street and got hit by a bus.

How am I sure it’s goodbye? The signs are rampant, but one has become stuck in my mind: a video of Richard Bernstein, the chief investment strategist for Merrill Lynch (sorry, I mean the Merrill Lynch division of Bank of America, which, by the time you read this, may be the Bank of America division of the United States Government), advising Merrill clients such as myself that one of the best financial strategies to adopt now would be to extend my “investment time horizon.”

“If one were to trade the S&P 500 for one day, the probability of losing money is about 46 percent,” Bernstein states. “However, as one extends that time horizon from one day to one month to one quarter to one year to 10 years, the probability of losing money decreases as the time horizon lengthens.”

To which I would add this observation from Keynes: “In the long run, we are all dead.”

This is what I heard Bernstein say: give up. You’re not going to make money on your investments in the next 10 years, or 15, or 20, so you should stop worrying about your portfolio and go to the movies like everyone else.

I called Bernstein and asked him if he was, in fact, advocating a form of Stoicism. He said I was misinterpreting his views. “This is not some sort of psychological compensation device. What I’m saying is that in looking for investment ideas, we should be looking over a five-, six-, seven-year time period. You have to give an investment strategy time to reach gestation.”

But my investment strategy gestated for 15 years. And then it died.

As I write this, the markets are back down to 1997 levels. In Japan, they’ve sunk to 1983 levels. I pointed out to Bernstein that 1983 was 26 years ago. The investor who bought Japanese equities in 1983 and held on to them has stayed absolutely flat. “That’s not correct,” Bernstein said. “That doesn’t take into account dividend payments.”

Even with all those munificent dividend payments, my net worth has dropped by a third, and new vistas of worry open up for me each day.

I’m not complaining, by the way, and not only because I have no right to complain. I make more money than most Americans. I will ungrudgingly pay more taxes if it means keeping people in their homes—even the schmucks in overleveraged McMansions. My wife and I are lucky. We have substantial equity in a small but perfectly nice house in Washington, D.C., a city that is now, among other things, America’s financial-services capital, which should help keep real-estate prices steady. I have a late-model minivan. Most important, I have a job (and in the thriving magazine industry, no less!). If I lose my job, then I’ll complain (at which point, of course, I’ll no longer have a public venue for my complaints). But for now, no whining: just confusion and bemusement and fear, along with an uncharacteristic sense of paralysis. In the past six months, I’ve bought and sold virtually no equities. And I rarely take the pulse of my 401(k).

I called a psychologist to find out what could explain this weird passivity. Daniel Kahneman is a Nobel Prize–winning innovator in the field of behavioral economics. He explained that my feelings of paralysis were to be expected.

“You no longer know the world you live in,” he said. “You played by the rules, the rules benefited you. The world functioned according to some regularities. Right now, it’s unclear what rules apply. There is a new regime. What seemed prudent earlier has disappeared. I’m surprised Americans aren’t more panicked. Americans seem to accept a level of insecurity in their lives that Europeans wouldn’t tolerate. Paralysis is one response to this level of insecurity.”

More: http://www.theatlantic.com/doc/200905/goldberg-economy
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