The Credit Crunch

INT21

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Cavynaut,

Sub Prime is indeed starting to creep back in. And the removal of regulations set up by the previous administration, who had to sweep up the last mess, is underway.

As for the workers. The number of manufacturing jobs in the US appears to still be many less than it was in 2000, post crash.

INT21
 

EnolaGaia

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So, ten years on from the crash and it seems we've learnt nothing. I was reading today about a relatively new financial "product", Exchange Trading Funds. I've tried teaching myself a bit about economics, but I can't understand ETF at all. Sounds about as much fun as sub prime mortgages though...if one country defaults it will be time to wheel out the old lies again so we all believe that a country can go bust...and more austerity will be the price we pay.
There's nothing shady about ETF's. I've been using them for years.

Basically, an ETF is a defined 'basket' of stocks, bonds, etc., that can be purchased and sold instantaneously like individual stocks. In effect, they're pre-defined and relatively fixed portfolios that don't have the intermediate active-management infrastructure, higher fee structures, and transaction processing delays associated with actively managed mutual funds.

ETF's are configured to provide a convenient and relatively inexpensive way to invest with respect to (e.g.) a particular sector, theme, region, or indexing strategy. If anything, an ETF provides the investor more transparency than a mutual fund, because the criteria for and content of the 'basket' are clearly specified up front and remain reliably stable.

Otherwise, ETF's are subject to the same sort of regulatory requirements and consumer safeguards as mutual funds.

https://www.investopedia.com/terms/e/etf.asp
https://www.etf.com
 

INT21

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...Basically, an ETF is a defined 'basket' of stocks, bonds, etc., that can be purchased and sold instantaneously like individual stocks...

Wasn't this what brought about the 2008 crash ?

Junk bonds (mostly from housing sales) were mixed in with good ones and sold as packages.

INT21
 

EnolaGaia

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...Wasn't this what brought about the 2008 crash ?

Junk bonds (mostly from housing sales) were mixed in with good ones and sold as packages. ...
No - these are entirely different things.

The junk bond 'packages' were being sold on the secondary market among banks and other financial pirates. They represented a grab bag or 'pig in a poke' marketed in the shadows, outside the scope of regulatory oversight.

ETF's are defined sets of securities offered out in the open at market prices and under the same range of regulatory safeguards that pertain to individual stocks or mutual funds.
 

INT21

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I think i see your point.

In the original crash the problem was that someone would be left 'holding the baby' of junk that no one would buy.

Rather like the Bitcoin scam. Nobody wants to be the one holding them when it all falls through.

INT21.
 

Mythopoeika

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Mytho,

...
It's because this country's corporations have simply not invested enough in automation.
They're all too ready to take the business away to the Far East...

Isn't that a bit of an oxymoron.
If the jobs are farmed out to the East (as they are) to cut down on labour costs, surely investing in automation will have the same effect.

INT21
Not really.
If companies automate and then successfully compete, they can stay here. In spite of the automation, they will still provide jobs. Also, they will pay taxes.
A company that shifts everything to another country will not benefit its country of origin.
 

INT21

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..A company that shifts everything to another country will not benefit its country of origin...

Not something the shareholders worry about too much. They are only interested in the bottom line.

If a CEO were to push for keeping his company within, say, the UK, he would likely be replaced by one who was more amenable to moving it to somewhere where they could get greater dividends.

This is why the current situation in America is so farcical. Most of the multi millionaires etc get their wealth from producing overseas. Trump's 'let's make it all in America' just won't work.

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EnolaGaia

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I think i see your point.

In the original crash the problem was that someone would be left 'holding the baby' of junk that no one would buy.

Rather like the Bitcoin scam. Nobody wants to be the one holding them when it all falls through.
Yep - that's a fair characterization ...

An ETF is essentially a mutual fund from which the middlemen (active managers) and issues of confidence therein have been stripped out, with the added advantage that shares in an ETF can be bought and sold in realtime. You don't have to wait throughout the daily trading cycle to find the mutual fund you dumped yesterday morning after it sank 10% was down even further by the time trading closed and everything was settled.

It depends on your investment style and preferences. If you'd like more discretionary choice than large mutual funds can provide, but don't want to get down in the weeds chasing individual stocks, ETF's can provide a reasonable 'sweet spot' between those alternatives.
 

Quake42

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..A company that shifts everything to another country will not benefit its country of origin...

Not something the shareholders worry about too much. They are only interested in the bottom line.

If a CEO were to push for keeping his company within, say, the UK, he would likely be replaced by one who was more amenable to moving it to somewhere where they could get greater dividends.

This is why the current situation in America is so farcical. Most of the multi millionaires etc get their wealth from producing overseas. Trump's 'let's make it all in America' just won't work.

INT21.
Multinationals do want to keep farming out production to cheaper jurisdictions, and their global set up means the current administration’s corporate tax cuts don’t help them alll that much. Companies that are largely domestic however are indeed assisted by these tax changes and focus on making / buying American and many are very enthusiastic about them. So, it’s not a straightforward “business wants X” situation by any means.
 

Cavynaut

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Cavynaut,

Sub Prime is indeed starting to creep back in. And the removal of regulations set up by the previous administration, who had to sweep up the last mess, is underway.

INT21
Not to mention the huge increase in unsecured/ household debt.

Buy gold!

No, buy soup, bread etc....you can't eat gold.
 

cycleboy2

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Not to mention the huge increase in unsecured/ household debt.

Buy gold!

No, buy soup, bread etc....you can't eat gold.
I paid for my honeymoon using gold - I starting buying sovereigns when they were £53 each, selling a handful seven years ago at £240 each; I'd owned them about 10 years. Most of my savings are in my pension, a small amount in savings and a similar amount in gold.

I don't do shares after those in my company plummeted from around £9 or so to about 25p; I actually broke even or made a small profit overall as I sold some shares for £8.50 that we'd been bought at £4.20 when it went public.

Me and the wife have been sensible with our finances, no kids, no debt, paid off the mortgage last year (huzzahhh!!!), but I'm worried we're going to be royally screwed by an(other) economic breakdown in the next few years.
 

uair01

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Bookshops threatened with legal action over book about Malaysian 'playboy banker'
https://www.theguardian.com/world/2...ith-legal-action-jho-low-billion-dollar-whale

The book – Billion Dollar Whale by the Wall Street Journal reporters Bradley Hope and Tom Wright – describes how the Malaysian financier Jho Low is accused by the US government of masterminding the theft of billions of dollars from the Malaysian state-owned investment fund 1MDB, which was sent to bank accounts in Switzerland, Singapore and the Virgin Islands. It has been widely reported that Low, 36, is facing money-laundering charges in absentia in Malaysia and is the subject of an Interpol red notice.

Low insists he has not broken any laws, is not guilty of any fraud and is not being investigated. His lawyers say that the allegations in the book are defamatory and wholly untrue.
 
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I think this fits in here.



The report of the third joint ETUI-ETUC conference, held on 27-29 June 2018, summarises the three days of discussion that took place when over 500 delegates gathered in Brussels to debate the future of work. The ambition of the 2018 event was to analyse the impact of the four key ‘megatrends’ – globalization, climate change, digitalization and the demographic transition disrupting societies and economies.

Click on link to download.

http://clicks.aweber.com/y/ct/?l=HQrSCs&m=3gmzm3kLyhe3Fj_&b=VCKtJ1Fa5.pazcz00oSFLg
 

INT21

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No need.

Zagar and Evens already did it.

In the year 5555
Your arms hangin' limp at your sides
Your legs got nothin' to do
Some machine's doin' that for you

INT21
 
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Interesting review/essay, especially on the contradictions of how the Obama acted as distinct from the rhetoric.

The Crash That Failed
Robert Kuttner
NOVEMBER 22, 2018 ISSUE

Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze
Viking, 706 pp., $35.00

The historian G.M. Trevelyan said that the democratic revolutions of 1848, all of which were quickly crushed, represented “a turning point at which modern history failed to turn.” The same can be said of the financial collapse of 2008. The crash demonstrated the emptiness of the claim that markets could regulate themselves. It should have led to the disgrace of neoliberalism—the belief that unregulated markets produce and distribute goods and services more efficiently than regulated ones. Instead, the old order reasserted itself, and with calamitous consequences. Gross economic imbalances of power and wealth persisted. We are still experiencing the reverberations.

In the United States, the bipartisan financial elite escaped largely unscathed. Barack Obama, whose campaign benefited from the timing of the collapse, hired the architects of the Clinton-era deregulation who had created the conditions that led to the crisis. Far from breaking up the big banks or removing their executives, Obama’s team bailed them out. None of the leading bankers whose fraudulent products caused the economy to crash went to jail; criminal prosecution took a back seat to the stability of the system. Obama’s tepid program provided just enough stimulus, via a modest public-spending program and cheap unlimited credit for bankers, for a slow recovery. But the economic security of most Americans dwindled, and the legitimacy of the system was called into question. One consequence has been the rise of the far right; another is Donald Trump.

In Europe the aftermath was worse. Fragmented into twenty-eight member states, the EU could not pursue even the minimal policies of Obama. Germany had already spent some E1.3 trillion on the economic integration of the former DDR and was in no mood to underwrite the recovery of the entire continent. Germany insisted that the struggling countries had to practice austerity in order to restore the confidence of private financial markets. In a deep recession, even orthodox economists at the International Monetary Fund soon recognized that austerity was a perverse recipe for economic recovery. ...

https://www.nybooks.com/articles/20...tter&utm_term=the old order reasserted itself
 

XBergMann

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Interesting review/essay, especially on the contradictions of how the Obama acted as distinct from the rhetoric.

The Crash That Failed
Robert Kuttner
NOVEMBER 22, 2018 ISSUE

Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze
Viking, 706 pp., $35.00

The historian G.M. Trevelyan said that the democratic revolutions of 1848, all of which were quickly crushed, represented “a turning point at which modern history failed to turn.” The same can be said of the financial collapse of 2008. The crash demonstrated the emptiness of the claim that markets could regulate themselves. It should have led to the disgrace of neoliberalism—the belief that unregulated markets produce and distribute goods and services more efficiently than regulated ones. Instead, the old order reasserted itself, and with calamitous consequences. Gross economic imbalances of power and wealth persisted. We are still experiencing the reverberations.

In the United States, the bipartisan financial elite escaped largely unscathed. Barack Obama, whose campaign benefited from the timing of the collapse, hired the architects of the Clinton-era deregulation who had created the conditions that led to the crisis. Far from breaking up the big banks or removing their executives, Obama’s team bailed them out. None of the leading bankers whose fraudulent products caused the economy to crash went to jail; criminal prosecution took a back seat to the stability of the system. Obama’s tepid program provided just enough stimulus, via a modest public-spending program and cheap unlimited credit for bankers, for a slow recovery. But the economic security of most Americans dwindled, and the legitimacy of the system was called into question. One consequence has been the rise of the far right; another is Donald Trump.

In Europe the aftermath was worse. Fragmented into twenty-eight member states, the EU could not pursue even the minimal policies of Obama. Germany had already spent some E1.3 trillion on the economic integration of the former DDR and was in no mood to underwrite the recovery of the entire continent. Germany insisted that the struggling countries had to practice austerity in order to restore the confidence of private financial markets. In a deep recession, even orthodox economists at the International Monetary Fund soon recognized that austerity was a perverse recipe for economic recovery. ...

https://www.nybooks.com/articles/2018/11/22/financial-crash-that-failed/?utm_medium=email&utm_campaign=NYR Delacroix the crash Turkey&utm_content=NYR Delacroix the crash Turkey CID_254ea5a42892e52dce32f755e8bf4fe7&utm_source=Newsletter&utm_term=the old order reasserted itself

It was Dubya who deregulated everything not Obama.

Obama was dealt the mess that Dubya left behind.

As to Clinton he left Dubya a budget in surplus on the handover.

I suspect the author is a Republican
 

XBergMann

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I paid for my honeymoon using gold - I starting buying sovereigns when they were £53 each, selling a handful seven years ago at £240 each; I'd owned them about 10 years. Most of my savings are in my pension, a small amount in savings and a similar amount in gold.

I don't do shares after those in my company plummeted from around £9 or so to about 25p; I actually broke even or made a small profit overall as I sold some shares for £8.50 that we'd been bought at £4.20 when it went public.

Me and the wife have been sensible with our finances, no kids, no debt, paid off the mortgage last year (huzzahhh!!!), but I'm worried we're going to be royally screwed by an(other) economic breakdown in the next few years.

Where I live the economy contracted by 17% in 2008 that's minus 17% GDP growth. The currency collapsed, inflation went up to 40% the base rate was 30% and all the banks became insolvent.

Then once things got better Russia invaded in 2014.

Yet now in 2018, at least economically, things are fine again, inflation is under control, the bad banks have all been closed, interest rates are down to approx 10% and the currency has been stable for years.

So any economic breakdown you experience is unlikely to be as bad as where I am and we all got through it OK so my advice to you is don't worry it's not worth it as things always bounce quicker than you realise.
 
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It was Dubya who deregulated everything not Obama.

Obama was dealt the mess that Dubya left behind.

As to Clinton he left Dubya a budget in surplus on the handover.

I suspect the author is a Republican
I don't think he is a Republican. Dubya deregulated but Obama hired guys who thought in the old manner and they didn't act in the interests of the many. This is just an analysis of the Treasury and macro-economic issues. Not the broader Obama agenda on Labour, Environment, Women's issues.
 

INT21

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...Yet now in 2018, at least economically, things are fine again, inflation is under control, the bad banks have all been closed, interest rates are down to approx 10% and the currency has been stable for years...

And the present regime are deregulating things that will lead to a 2008 style crash in just the same sub-prime market that brought about the last one.
Anything to get people spending money they haven't got.
The Man loves debt; he said so. 'I'm the king of debt'.

INT21
 

INT21

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Looks like I have already pointed this out.

But it's worth saying again.

INT21
 

AlchoPwn

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In the United States, the bipartisan financial elite escaped largely unscathed. Barack Obama, whose campaign benefited from the timing of the collapse, hired the architects of the Clinton-era deregulation who had created the conditions that led to the crisis.
I actually disagree with this premise. Clinton was left with the appalling situation of the now largely forgotten "Savings and Loans Crisis". What you will not hear about that crisis is that it was started under Reagan/Bush, when loads of drug money from the "war on drugs" ,and more specifically the Iran-Contra-Drug Dealer triangle started sloshing around in the system trying to get laundered. That was the cause of all the inflation. Now this meant that Clinton and Congress had to loosen some screws and tighten others in order to avoid a leveraged collapse (being a situation where an institution has used borrowed money as collateral to borrow money over and over again, it has an almost exponential multiplier effect for each layer of leverage that is economically devastating). So having eased up on monetary policy to a responsible level Clinton saved the US economy. Good work.

When things went bad was in 2001, under W when the Saudis pulled off 9/11. The situation started innocently enough. The plane strikes had shut down Wall Street, and so in order to stop an economic downturn, W's admin eased monetary policy down to 0% interest. They were giving money away to keep things chugging along uninterrupted. The consequence was that the free money encouraged a lot of borrowing (strange that), and people who had never before ever considered getting a loan were able to get credit. W saw a deregulated economy picking up steam and said "I like this, lets leave interest rates low". And that was great, up until the Battle for Fallujah, which jacked up the petrol price enormously, and suddenly people with low document loans had to choose between paying for their house or paying for their car, and they voted with their wheels. Then the market tanked.

So really the deregulation that whacked the system was W's not Bill's. There was also substantial interference in the market by W to further deregulate institutions and laws that Bill's crew had put in place as safeguards, and suddenly the USA was on the trapeze without a net.
 
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XBergMann

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...Yet now in 2018, at least economically, things are fine again, inflation is under control, the bad banks have all been closed, interest rates are down to approx 10% and the currency has been stable for years...

And the present regime are deregulating things that will lead to a 2008 style crash in just the same sub-prime market that brought about the last one.
Anything to get people spending money they haven't got.
The Man loves debt; he said so. 'I'm the king of debt'.

INT21
I should point out that my comment related to Ukraine - where I live - and not the USA
 
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You may download this report at the link below.

The Crisis of Globalisation

  • Publisher: Social Europe (in cooperation with Friedrich-Ebert-Stiftung and Hans Böckler Stiftung)
  • Published: 28th January 2019
FREE PDF DOWNLOAD

In cooperation with our partners from the Friedrich-Ebert-Stiftung and the Hans Böckler Stiftung, Social Europe examined the different dimensions of the crisis of globalisation and what kind of policy mix could help addressing it. We bring together some of the best analyses and leading voices in the field and try to highlight some of the most innovative solutions to the major political and economic problems associated with the crisis of globalisation.
with contributions by Mark Blyth, Eunice Goes, Javier Lopez, Guillaume Duval, Anke Hassel, Colin Crouch, Jürgen Habermas, Sheri Berman, Paul Collier, Ngaire Woods, Catherine de Vries, David Held, Heikki Patomäki, Gustav Horn, Robert Kuttner and Dani Rodrik.

https://www.socialeurope.eu/book/the-crisis-of-globalisation
 
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I think this fits here, even if the collapse wasn't directly caused by tax evasion, much of the additional taxes paid by ordinary people was due to that non-payment. The story also relates how a relatively junior bank official was badly treated both by the bank and the government.

In May 2011, a scared employee from Swiss bank UBS was summoned without warning or explanation to meet French government officials outside the Louis Vuitton store on the Champs-Elysées in Paris.

From there she was shuttled to the back of a large department store and given her mission: to help the French government try to catch Swiss bankers illegally soliciting French clients at the French Open tennis tournament.

“They said we are going to follow you for two weeks at Roland-Garros... they said they would follow me for the two weeks with a camera,” said Stéphanie Gibaud in an interview with the Financial Times days after UBS was hit with a €3.7 billion penalty for recruiting clients in France and helping them evade taxes.

Ms Gibaud, a relatively junior marketing manager who organised client events during her more than 10 years at the bank, spent the following days at Roland-Garros in fear, trying to behave normally in front of her colleagues before being interrogated for hours by the French officials.

“I just thought that my life is like a thriller,” she said, remembering how she felt standing in front of the customs agents. “I found out at the ground floor of Fnac [the department store] that I had no choice. They could have taken me into custody.”

Ms Gibaud (53) was a vital part of a case that featured encrypted hard drives, shadow accounting systems, bankers chasing clients through French high society and, once the charges had been brought, a huge gamble for UBS over whether or not to settle.

The court judgment in Paris last week came at the end of a multiyear investigation and trial that saw a witness describe the tactics of the Swiss bankers in France – some of whom were labelled “hunters” – as “worthy of James Bond”.

https://www.irishtimes.com/business...wiss-bank-undone-by-a-whistleblower-1.3810950
 
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