So Nick Clegg is talking rubbish again.

[kwerk]

It's a normal economic function - those holding assets like gold, silver, oil, copper, infrastructure etc before the crash occurs will see their assets rise in value (and thus their wealth increase) after the crash as those not holding those assets flock to them for their perceived safety.

I've got some great data on it at work as we use it to show our clients why they should diversify their investments across asset classes. Sadly, not being in work today means I haven't got it to hand - but I can grab it when I am back.

Basically leveraged assets go down, necessities go up. Biflation.

 

[estebanrey]

They are hoarding money because they know lending it out would end in more failure. It's painfully obvious the loans can not be paid back with anything. There is no more illusionary "growth" to exploit anywhere.

Why should they lend you money to start a dog grooming business, with public sector workers as your customers, who are paid by a government which is partially funded literally by dreams. And the part that is funded by actually tax revenue is based on dreams too, in the private sector. Like the tax from your dog grooming business.

Then they are supposed to lend you money for a house leveraged on that dog grooming business "asset" you now own?

It's completely detached from reality.

What can you actually pay them back with? Dog haircuts and dreams. And maybe profits from your APPL stock fueled by Asian slave labour.

I'm all for this "let people fail" rule but this rule should also apply to the banks.

Why should the banks be lending people money? Well because we partially own them because when they were in trouble we bailed them out.

 

[robgmun]

do you really think that? if so you need to look back at some history.

the world economic crisis was mainly caused by US banks giving out stupid low % mortgages.....

I stopped reading there, as this fact is so wrong it leads me to believe you don't actually know what happened, the sunprime mortgages offered by Fannie Mae and Freddie Mac and the others were anything but low, in fact they were cripplingly high. The T&C and situation of the mortgages would trigger red warning lights and red flags to anyone that had half a brain.

Ultimate responsibility lies solely on the person signing on the dotted line. No if's, no buts, I know how some of you like to "blame the bankers" but there's a word that can be used so that you don't screw yourself over, it's NO, try it sometime when someone offers you a store card with 35% APR instead of scrambling for a pen.

 

[LordSplodge]

Ultimate responsibility lies solely on the person signing on the dotted line. No if's, no buts, I know how some of you like to "blame the bankers" but there's a word that can be used so that you don't screw yourself over it's NO, try it sometime when someone offers you a store card with 35% APR instead of scrambling for a pen.

Much as I am an advocate of personal responsibility are you saying the banks have no culpability in this? I mean they traded these obvious toxic assets to attempt to make a quick buck.

 

[kwerk]

I'm all for this "let people fail" rule but this rule should also apply to the banks.

Why should the banks be lending people money? Well because we partially own them because when they were in trouble we bailed them out.

That pays back the money they already given out to create the subprime crisis. And if you own them now that's all the more reason NOT to make more bad loans.

I have a feeling the banks knew this would happen from the start. Like I showed above they put up a legal fight against the idea because they knew it wouldn't work, and the government threatened them with all sorts of sanctions. So they basically shrugged their shoulders and said OK, it's you're problem when it blows up. They then milked as much money as they could out of it because they knew the government would have to bail them out. So you had these banks on what is basically government mandated steroids... so then all the other banks around the world now had to take steroids too in order to compete, or else they would die. The loans spread everywhere and got leveraged up like crazy.

If anything is to blame it's government ineptitude and their "fairness" dogma.

 

[kwerk]

Then everyone else went along for the ride thinking it was all well and good. "They're bankers they must know what they're doing.".

Nope, they were basically government pawns running what amounted to a huge train wreck of a social engineering experiment! If everyone has equal access to credit, they can all own a house, we'll all be equal and everything will be fair and there will be no poverty.

You can't blame them if they skimmed off the top, anyone with an ounce of sense would have done the same.

 

[Theophany]

I'm all for this "let people fail" rule but this rule should also apply to the banks.

Why should the banks be lending people money? Well because we partially own them because when they were in trouble we bailed them out.

That's circular logic though, banks shouldn't just loan because they're taxpayer owned. It's that kind of equality of credit rule that started the entire mess in the first place.

I'm not saying that the institutions were blameless or powerless, because they were neither. What they did was tantamount to loan sharking. However, the above is just forcing them to do what they have finally realised is wrong. They should not be lending so freely - indeed they should not have been doing it in the first place.

 

[Mercenary Keyboard Warrior]

It's a normal economic function - those holding assets like gold, silver, oil, copper, infrastructure etc before the crash occurs will see their assets rise in value (and thus their wealth increase) after the crash as those not holding those assets flock to them for their perceived safety.

I've got some great data on it at work as we use it to show our clients why they should diversify their investments across asset classes. Sadly, not being in work today means I haven't got it to hand - but I can grab it when I am back.

I'm just interested in how seeing some backup to the for every loser there is a winner statement. I can't see how it can be true thats my point. Its possible but its unlikely. Massive stockmarket crashes happen and i am referring to say black monday http://en.wikipedia.org/wiki/Black_Monday_(1987) where such massive amounts get wiped in a super short period its impossible to win.
As soon as you look longer term then yes its easier to beat the market but thats not the same thing.
Holding a diverse portfolio helps to spread the risk (its why pension schemes etc do it) but its not specific cover against one part falling in value.
Its basically impossible to cover all angles in all investments, if it was that easy inventment wrappers would always contain said balance and would hence never lose value, they lose money regularly)

Simplify it, say I own an icecream van, I may make £1000 if the weather is hot, however if its cold I will make £0. I could buy a soup van which would make £1000 if its cold but £0 if its hot. If I bought 50% of each I would expect one to make £500 which is spreading my risk. I won't get £1000 from either, but I won't get £0 either. Investment spreading is trying to achieve this by ensuring that within a portfolio you have a balance of items that will likely show opposite results in a bad time (or extreme in a certain way) and hopefully all do ok in the good times.

I am trying to vastly simplify here just to make a point. When the global stock exchanges lose massive values there is not necessarily a significant nor immediate impact to make say precious metals leap in value, there is not that perfect a correlation hence me objecting to the statement there is a winner for every loser.

 

[Theophany]

I'm just interested in how seeing some backup to the for every loser there is a winner statement. I can't see how it can be true thats my point. Its possible but its unlikely. Massive stockmarket crashes happen and i am referring to say black monday http://en.wikipedia.org/wiki/Black_Monday_(1987) where such massive amounts get wiped in a super short period its impossible to win.
As soon as you look longer term then yes its easier to beat the market but thats not the same thing.
Holding a diverse portfolio helps to spread the risk (its why pension schemes etc do it) but its not specific cover against one part falling in value.
Its basically impossible to cover all angles in all investments, if it was that easy inventment wrappers would always contain said balance and would hence never lose value, they lose money regularly)

Simplify it, say I own an icecream van, I may make £1000 if the weather is hot, however if its cold I will make £0. I could buy a soup van which would make £1000 if its cold but £0 if its hot. If I bought 50% of each I would expect one to make £500 which is spreading my risk. I won't get £1000 from either, but I won't get £0 either. Investment spreading is trying to achieve this by ensuring that within a portfolio you have a balance of items that will likely show opposite results in a bad time (or extreme in a certain way) and hopefully all do ok in the good times.

I am trying to vastly simplify here just to make a point. When the global stock exchanges lose massive values there is not necessarily a significant nor immediate impact to make say precious metals leap in value, there is not that perfect a correlation hence me objecting to the statement there is a winner for every loser.

George Soros made millions from Black Wednesday by shorting Sterling.

One of the basic market mechanisms is taking a short or long stance, which creates the simple zero sum game of the markets. One party wins, another loses. It's why hedge funds traditionally make money regardless of the direction of markets - they go long on certain assets and short on others.

This also works in a situation where both investors take long positions. The reason commodities raise in value during a market crash is because investors pile into it after seeing value wiped off their traditional assets. Savvy investors already in that asset simply ride the wave as prices are driven up by the sudden influx of investors looking to protect capital they have already taken a hit on.

E.g. I have £1000 in gold in 2005. By 2009 this is worth £3000. Comparatively, somebody holding shares in XYZ Plc has £1000 in shares in 2005. By 2009 these shares are worth £250. The market for risky assets has tanked, the market for 'safer' assets has taken off. I've made a win, somebody else has taken a spanking.

Last year's market for Gilts and Index-Linked Gilts was testament to this, anybody invested in equities took a pasting from August, whilst those invested in Gilts took home a tidy profit of 20% on average.

 

[kwerk]

"ponzi scheme"

"stealing from future generations"

nice to begin hearing this stuff from mainstream TV.

 

[Mercenary Keyboard Warrior]

George Soros made millions from Black Wednesday by shorting Sterling.

One of the basic market mechanisms is taking a short or long stance, which creates the simple zero sum game of the markets. One party wins, another loses. It's why hedge funds traditionally make money regardless of the direction of markets - they go long on certain assets and short on others.

This also works in a situation where both investors take long positions. The reason commodities raise in value during a market crash is because investors pile into it after seeing value wiped off their traditional assets. Savvy investors already in that asset simply ride the wave as prices are driven up by the sudden influx of investors looking to protect capital they have already taken a hit on.

E.g. I have £1000 in gold in 2005. By 2009 this is worth £3000. Comparatively, somebody holding shares in XYZ Plc has £1000 in shares in 2005. By 2009 these shares are worth £250. The market for risky assets has tanked, the market for 'safer' assets has taken off. I've made a win, somebody else has taken a spanking.

Last year's market for Gilts and Index-Linked Gilts was testament to this, anybody invested in equities took a pasting from August, whilst those invested in Gilts took home a tidy profit of 20% on average.

Your still not proving your statement, I cant argue against what your typing but its not proving what your saying about the winner and the loser.

When market crashes etc happen the whole market is valued lower, so by default there is less wealth. For your statement to be correct there cannot be a reduction in the total value but at times it clearly happens. It does happen where the total markets are valued lower there is not a direct opposite increase at exactly the same time in other wealth it just doesn't happen. If there was zero sum the markets would be worth the same as they were 100 years ago, they aren't because the perceived value changes over time. Hence there is no zero sum.

 

[Theophany]

Your still not proving your statement, I cant argue against what your typing but its not proving what your saying about the winner and the loser.

When market crashes etc happen the whole market is valued lower, so by default there is less wealth. For your statement to be correct there cannot be a reduction in the total value but at times it clearly happens. It does happen where the total markets are valued lower there is not a direct opposite increase at exactly the same time in other wealth it just doesn't happen. If there was zero sum the markets would be worth the same as they were 100 years ago, they aren't because the perceived value changes over time. Hence there is no zero sum.

I get you. On a macro level, sure, the entire market is worth less. But that doesn't stop there from being winners amongst the losers.

The zero-sum only applies in long vs short positions, it's not a top down view of markets.

I guess I didn't make it clear in my original post, but I don't disagree that the entire pool of wealth is devalued. That being said, billionaires have been made by market crashes.

 

[Mercenary Keyboard Warrior]

I get you. On a macro level, sure, the entire market is worth less. But that doesn't stop there from being winners amongst the losers.

The zero-sum only applies in long vs short positions, it's not a top down view of markets.

I guess I didn't make it clear in my original post, but I don't disagree that the entire pool of wealth is devalued. That being said, billionaires have been made by market crashes.

But thats the main point surely at the macro level not at individual trade level.

Say ABC PLC issues a statement "we have just found our unique blahblah item is in fact flawed and will not create free energy" their shares crash to nothing as their whole wealth was the super product. Every investor loses that wealth, there is the possibility some other companies who would have been competitors may go up a bit in value but not necessarily.

On individual trades there will be a winner and a loser but that was not my original point anyway way beack when I first mentioned the possibility that wealth in TOTAL may go down and hence have less to tax. My point all along was the total wealth can be impacted.

 

[Theophany]

But thats the main point surely at the macro level not at individual trade level.

Say ABC PLC issues a statement "we have just found our unique blahblah item is in fact flawed and will not create free energy" their shares crash to nothing as their whole wealth was the super product. Every investor loses that wealth, there is the possibility some other companies who would have been competitors may go up a bit in value but not necessarily.

On individual trades there will be a winner and a loser but that was not my original point anyway way beack when I first mentioned the possibility that wealth in TOTAL may go down and hence have less to tax. My point all along was the total wealth can be impacted.

But the flipside of that argument is that only a small percentage of investors would have lost out. If you're not invested in ABC Plc, you don't lose.

More to the point, in a real-world application of what you described, the likely outcome is that investors would, in a knee-jerk reaction, flock to another stock thus driving other share prices up to effectively negate the loss in ABC Plc's shares. After all, share prices are not driven by a company's successes or failures, they are driven by the supply and demand of irrational, emotional investors.

Given that the losses suffered by ABC Plc are then counterbalanced by the gains made by other shares available on the market, is there really a loss in overall wealth? Whilst those who moved from holdings in ABC Plc have likely lost out, existing investors in DEF Plc and XYZ Plc have seen their share prices rise from the sudden growth in demand for shares, so their increased wealth has effectively offset the losses realised by ABC Plc's investors.

 

[Mercenary Keyboard Warrior]

But the flipside of that argument is that only a small percentage of investors would have lost out. If you're not invested in ABC Plc, you don't lose.

More to the point, in a real-world application of what you described, the likely outcome is that investors would, in a knee-jerk reaction, flock to another stock thus driving other share prices up to effectively negate the loss in ABC Plc's shares. After all, share prices are not driven by a company's successes or failures, they are driven by the supply and demand of irrational, emotional investors.

Given that the losses suffered by ABC Plc are then counterbalanced by the gains made by other shares available on the market, is there really a loss in overall wealth? Whilst those who moved from holdings in ABC Plc have likely lost out, existing investors in DEF Plc and XYZ Plc have seen their share prices rise from the sudden growth in demand for shares, so their increased wealth has effectively offset the losses realised by ABC Plc's investors.

Argh I give up.

I think your far far far far far too insistent on trying to find a way to prove the whole system is zero balancing as you mentioned earlier. Its just not working that way.

Those same investors lost it all they cannot flock elsewhere their on paper wealth went to zero overnight with no warning.

It was an extreme example but every day individual companies results are published which affect their value (andthat of every investor)
The whoel stock market can move by 2% in a day quite regularly, if your winners matching losers statement was correct suddenly loads of wealth would appear in other assets equal to and opposite the stock market movements that same day. It just doesnt happen.

Its a while since I studied it but the stock markets have been shown to follow a close to perfect information model not as you suggest a blind outcome by knee jerk investors. Ie they prove that over a long period the movements in a companies share price predict fairly well the underlying performance without that being public knowledge.

 

[kwerk]

it's only zero sum while there is a buyer for every seller (in the whole market). Once there is too many sellers and not enough buyers it quickly stops being zero sum game and the leveraged wealth starts disappearing in to thin air, from whence it came, until you're left with just the bare real world assets. Like the auctioneers carrying the servers out of bankrupt dotcom offices in 2000.

Sort of like a ponzi scheme. While the ponzi is functioning it's zero sum

 

[hurfdurf]

Theophany is on the right track with the Clinton stuff. That's what caused it. It actually started before Clinton but he put it on steroids, in the name of "fairness" and "equality".

"Let's make sure everyone has equal access to credit so they can all own homes and start business and be equal."

Result: epic train wreck.

Those loans would never had been made if the banks had done their normal due diligence. But of course due dilligence = racism and classism.

And then when it blows up the banks become "predatory lenders".

Damned if they do, damned if they don't.

This is Republican nonsense spoon fed to libertarians Ron Paul type idiots.

 

[kwerk]

How is it republican nonsense when the republicans where in on it too?

there are pages and pages of government PDF files specifically out lining these "best practices", how to make loans to "protected classes" and what happens if you get caught NOT making those loans.

Want me to post the quotes, straight from the government's own files?

 

[hurfdurf]

How is it republican nonsense when the republicans where in on it too?

there are pages and pages of government PDF files specifically out lining these "best practices", how to make loans to "protected classes" and what happens if you get caught NOT making those loans.

Want me to post the quotes, straight from the government's own files?

That doesn't mean that's what led to the banks over extending, it is simply their excuse after they had to be bailed out when all their dodgy practices went wrong, and its very very Republican to blame the disastrous failings of the Bush administration on Clinton. They inherited a massive surplus and managed to turn it into a giant deficit.

Clinton wanted banks to stop being racist/classist, this in no way mean he was forcing their hand to lend to people who couldn't pay it back, that was short sighted bankers trying to make a buck, getting their bonuses, and then getting away with it completely free without having to pay anything back when it all went wrong.

 

[kwerk]

What Clinton order (and Bush doubled up on)