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The BillyB, Aster & JR8 roundtable!

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Postby aster » Wed, 10 Aug 2011 4:35 pm

Yeah, lots of countries in debt and in trouble, nothing new here. US is in no better shape, and the same for Japan. Doesn't mean the Euro will disappear, even though the shylocks are doing everything in their power to bring it down and get rid of it, so that they can continue to milk all of Europe on every cross-border transaction like they have been doing previously.

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Postby JR8 » Wed, 10 Aug 2011 7:37 pm

You must personally really not like paying cross-border transaction fees. To the extent you don't mind if Europe financially implodes as an alternative.

Time for dinner I think!
TTFN

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Postby aster » Thu, 11 Aug 2011 3:24 am

I don't like banks. :) Look who got the entire world into this mess and needed gov't bailouts worldwide to stay afloat...

Of course then there's countries like Greece who have been living at the Eurozone's expense like leeches...

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Postby JR8 » Wed, 24 Aug 2011 5:45 am

Sometimes you read something that is such a given, you have to pinch yourself out of your through-the-looking-glass torpor.
The EU and it's democratic deficit. I wonder how the German courts will deal with that?
It is rather as if the recent matter of Obama and the US debt-ceiling had been decided in back-room dealing by unelected people, and then foisted onto Congress as a done deal. Sometimes I read about what the EU politicos are doing and just shrug 'who are these people, and who do they think they are?'

------------------------------------------------------
'Bundesbank questions legality of EU bail-outs
Germany's Bundesbank has issued a blistering critique of EU bail-out policies, warning that the eurozone is drifting towards a debt union without "democratic legitimacy" or treaty backing.
http://www.telegraph.co.uk/finance/fina ... -outs.html

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Postby nakatago » Wed, 24 Aug 2011 8:57 am

Oh, hi. Just dropping by to leave this....


http://imgur.com/ZGmZc

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Postby BillyB » Wed, 24 Aug 2011 10:46 am

aster wrote:I don't like banks. :) Look who got the entire world into this mess and needed gov't bailouts worldwide to stay afloat...

Of course then there's countries like Greece who have been living at the Eurozone's expense like leeches...


ASTER!!!!

It wasn't the banks who solely caused the GFC and most of the other sh*t that has happened in the markets over recent times. The main problem is the regulators - in most cases its out of there hands as they cannot keep up with the complexity of some of the banking products being devised - it's untested waters and mistakes are bound to be made despite the best risk management in the world. The problem is that its peoples money that usually ends up getting affected and all the negative publicity about the banking sector doesn't help - the bonuses, corruption etc. - hence the levels of resentment.

The GFC was caused by the Fed, rating agencies and the housing loan companies. The banks jumped on the bandwagon by buying and repackaging the toxic debt into securities. They didn't help things, but they certainly aren't solely to blame. They saw an opportunity and piled in.....but the debt was really crap in the first place and was always going to go tit's up in the majority of cases

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Postby BillyB » Wed, 24 Aug 2011 10:48 am

nakatago wrote:Oh, hi. Just dropping by to leave this....


http://imgur.com/ZGmZc


Very droll!!

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Postby JR8 » Wed, 24 Aug 2011 8:53 pm

------------- Quote Bunter:
It wasn't the banks who solely caused the GFC and most of the other sh*t that has happened in the markets over recent times. The main problem is the regulators - in most cases its out of there hands as they cannot keep up with the complexity of some of the banking products being devised - it's untested waters and mistakes are bound to be made despite the best risk management in the world. The problem is that its peoples money that usually ends up getting affected and all the negative publicity about the banking sector doesn't help - the bonuses, corruption etc. - hence the levels of resentment.
---------------


Bankers are just a part of the chain or responsibility that failed. You had politicians like Clinton mandating that banks lend to poor people. Where was that only ever going to end? Did anyone at the time question whether that was a good idea or did politics (in this case political correctness) disallow it? I see a parallel with Libya, one year we’re cosying up to them, the next year they’re pariah state #1 and must be exterminated – despite nothing much happening in the interim, it lacks even basic coherence.

There is a perpetual internal conflict within banking. On the one hand you have often educated and driven young people who want to make a good living and will do so via what ever means they legitimately can (and naturally some will probe or break the rules). There is a temptation to sell what ever you can to who ever is willing to buy it. If you and your colleagues are all rated in published monthly commission listings, with various awards given to top performers it’s like night following day. Then you have a banks internal controls (and external ones from regulators which are enforced internally). They are to put a break on inappropriate practises, sometimes known as ‘mis-selling’. So on one hand you want the staff to be turning over as much product as possible, whilst not breaking the rules. IME banks do put a lot of effort into this internal control, because one rogue trader is very expensive to a bank’s reputation.

There is another facet to it (as Bunter mentioned), that the regulators and controllers often don’t understand what they are trying to control. Banking is so competitive that you won’t get many controllers volunteering that ‘er in fact I don’t understand how this out-of-the-money long/short puts straddle hedged by a 5 year inverted curve swap [or wha ever! ] is. The guys selling these things are perhaps earning 10-20-100 times what the guys trying to control them do. In other words you don’t get a whole bunch of bright people queuing up to be regulators. A recipe for trouble, but how you right that situation I don’t know.

Then you have greed. If JoBloggs is offered a 110% self-certifying home loan he is entirely capable of lying to get one. No one forces him to, plenty of people do and it is his decision. Banks then need to get that off their balance sheet so they have fresh capital to lend again. That’s one way that you get toxic debt.

Then you have ratings agencies that have historically been in the pockets of the banks and politicians. That was in part why there was such drama when S&P downgraded US debt, ratings agencies are not meant to demonstrate this kind of independence Refer also to the EU politicians, when EU sovereigns were being cut to junk status what was their response, ‘We’ll set up our own ratings agency!’. Hilarious.

Do you remember the embarrassingly fawning terms Gordon Brown used in his Mansion House speech a mere two months before Northern Rock nearly went kaput? Bear in mind that he was the top UK regulator at the time, (despite not having any education of background in economics):

-----------
‘“Over the ten years that I have had the privilege of addressing you as Chancellor, I have been able year by year to record how the City of London has risen by your efforts, ingenuity and creativity to become a new world leader.

I congratulate you Lord Mayor and the City of London on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London.

And I believe the lesson we learn from the success of the City has ramifications far beyond the City itself - that we are leading because we are first in putting to work exactly that set of qualities that is needed for global success:
And I believe it will be said of this age, the first decades of the 21st century, that out of the greatest restructuring of the global economy, perhaps even greater than the industrial revolution, a new world order was created.”

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Postby JR8 » Wed, 24 Aug 2011 10:29 pm

The Bundesbank speaks. Lest you be in any doubt that the Fourth Reich is already on maneuvers:

-----------
“Overall, there is a risk that the originally agreed institutional framework of the monetary union will increasingly become eroded… Unless and until a fundamental change of regime occurs involving an extensive surrender of national fiscal sovereignty, it is imperative that the no bail-out rule that is still enshrined in the treaties and the associated disciplining function of the capital markets be strengthened, and not fatally weakened.”

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Postby BillyB » Thu, 25 Aug 2011 11:30 am

[quote="JR8"]------------- Quote Bunter:
It wasn't the banks who solely caused the GFC and most of the other sh*t that has happened in the markets over recent times. The main problem is the regulators - in most cases its out of there hands as they cannot keep up with the complexity of some of the banking products being devised - it's untested waters and mistakes are bound to be made despite the best risk management in the world. The problem is that its peoples money that usually ends up getting affected and all the negative publicity about the banking sector doesn't help - the bonuses, corruption etc. - hence the levels of resentment.
---------------


Bankers are just a part of the chain or responsibility that failed. You had politicians like Clinton mandating that banks lend to poor people. Where was that only ever going to end? Did anyone at the time question whether that was a good idea or did politics (in this case political correctness) disallow it? I see a parallel with Libya, one year we’re cosying up to them, the next year they’re pariah state #1 and must be exterminated – despite nothing much happening in the interim, it lacks even basic coherence.

There is a perpetual internal conflict within banking. On the one hand you have often educated and driven young people who want to make a good living and will do so via what ever means they legitimately can (and naturally some will probe or break the rules). There is a temptation to sell what ever you can to who ever is willing to buy it. If you and your colleagues are all rated in published monthly commission listings, with various awards given to top performers it’s like night following day. Then you have a banks internal controls (and external ones from regulators which are enforced internally). They are to put a break on inappropriate practises, sometimes known as ‘mis-selling’. So on one hand you want the staff to be turning over as much product as possible, whilst not breaking the rules. IME banks do put a lot of effort into this internal control, because one rogue trader is very expensive to a bank’s reputation.

There is another facet to it (as Bunter mentioned), that the regulators and controllers often don’t understand what they are trying to control. Banking is so competitive that you won’t get many controllers volunteering that ‘er in fact I don’t understand how this out-of-the-money long/short puts straddle hedged by a 5 year inverted curve swap [or wha ever! ] is. The guys selling these things are perhaps earning 10-20-100 times what the guys trying to control them do. In other words you don’t get a whole bunch of bright people queuing up to be regulators. A recipe for trouble, but how you right that situation I don’t know.

Then you have greed. If JoBloggs is offered a 110% self-certifying home loan he is entirely capable of lying to get one. No one forces him to, plenty of people do and it is his decision. Banks then need to get that off their balance sheet so they have fresh capital to lend again. That’s one way that you get toxic debt.

Then you have ratings agencies that have historically been in the pockets of the banks and politicians. That was in part why there was such drama when S&P downgraded US debt, ratings agencies are not meant to demonstrate this kind of independence Refer also to the EU politicians, when EU sovereigns were being cut to junk status what was their response, ‘We’ll set up our own ratings agency!’. Hilarious.

Do you remember the embarrassingly fawning terms Gordon Brown used in his Mansion House speech a mere two months before Northern Rock nearly went kaput? Bear in mind that he was the top UK regulator at the time, (despite not having any education of background in economics):

-----------
‘“Over the ten years that I have had the privilege of addressing you as Chancellor, I have been able year by year to record how the City of London has risen by your efforts, ingenuity and creativity to become a new world leader.

I congratulate you Lord Mayor and the City of London on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London.

And I believe the lesson we learn from the success of the City has ramifications far beyond the City itself - that we are leading because we are first in putting to work exactly that set of qualities that is needed for global success:
And I believe it will be said of this age, the first decades of the 21st century, that out of the greatest restructuring of the global economy, perhaps even greater than the industrial revolution, a new world order was created.”

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Postby JR8 » Thu, 25 Aug 2011 4:14 pm

Hehe.. thanks, just random musing over my cornflakes yesterday.

I recall the 125% LTV loans. Weren't they aimed at young professionals (people who could evidence a career path that would bring in rapidly increasing earnings?). I suppose in a world where boom and bust had been eradicated (copyright, Gordon Brown) it made perfect sense. Less so in retrospect!

Stress testing? I don't think politicians honestly want to know, they'd rather wing-it and hang on to power for as long as possible. If house prices are going up citizens feel richer. Such people tend to go along with the status quo and not rock the boat. The ideal world for politicians. (Blimey an extreme extension of that would be a country where the government owns almost all the land, so that situation can be perpetually engineered!).

Wasn't there round #2 of stress testing on all EU banks just recently? The markets received it with cynicism and suggested it was tantamount to a whitewash. The head of the audit agency then turned around and said 'Don't blame us, we know the remit was very narrow but that is what the politicians told us to audit'.

Meanwhile more debt is being shoveled on the US, the PIGS, the UK (where the reported cuts are a cut in the rate of increase in spending, not a cut in spending itself (most of the population are too financially illiterate to understand the difference. So perversely they think they're living in brutally hard times, despite the fact that spending is still rising and at record levels no less. Weird lol!)).

I don't see that the economic fundamentals are being corrected. I just see politicians scurrying around with sticking plasters in order to perpetuate for this week or month the lie that the west has been and continues to live within it's means.

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Postby sundaymorningstaple » Thu, 25 Aug 2011 5:24 pm

JR8 wrote:(Blimey an extreme extension of that would be a country where the government owns almost all the land, so that situation can be perpetually engineered!).


Bloody 'ell, I think you've just described Singapore! :o :lol:

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Postby JR8 » Thu, 25 Aug 2011 5:40 pm

sundaymorningstaple wrote:
JR8 wrote:(Blimey an extreme extension of that would be a country where the government owns almost all the land, so that situation can be perpetually engineered!).


Bloody 'ell, I think you've just described Singapore! :o :lol:


Hey, you broke the code!
8-)

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Postby BillyB » Fri, 26 Aug 2011 11:59 am

JR8 wrote:Hehe.. thanks, just random musing over my cornflakes yesterday.

I recall the 125% LTV loans. Weren't they aimed at young professionals (people who could evidence a career path that would bring in rapidly increasing earnings?). I suppose in a world where boom and bust had been eradicated (copyright, Gordon Brown) it made perfect sense. Less so in retrospect!

Stress testing? I don't think politicians honestly want to know, they'd rather wing-it and hang on to power for as long as possible. If house prices are going up citizens feel richer. Such people tend to go along with the status quo and not rock the boat. The ideal world for politicians. (Blimey an extreme extension of that would be a country where the government owns almost all the land, so that situation can be perpetually engineered!).

Wasn't there round #2 of stress testing on all EU banks just recently? The markets received it with cynicism and suggested it was tantamount to a whitewash. The head of the audit agency then turned around and said 'Don't blame us, we know the remit was very narrow but that is what the politicians told us to audit'.

Meanwhile more debt is being shoveled on the US, the PIGS, the UK (where the reported cuts are a cut in the rate of increase in spending, not a cut in spending itself (most of the population are too financially illiterate to understand the difference. So perversely they think they're living in brutally hard times, despite the fact that spending is still rising and at record levels no less. Weird lol!)).

I don't see that the economic fundamentals are being corrected. I just see politicians scurrying around with sticking plasters in order to perpetuate for this week or month the lie that the west has been and continues to live within it's means.


I believe the loans were based on greed, complacency and thinking that the housing industry was insulated from all economic factors, downright stupidity, and likely some of Gordon's figure fudging. Who the F*ck lends 125% against an asset - oh wait, the banks! Who lends against 100-1000% of something - oh wait, the banks in the form of margin!!

Stress testing needs to be implemented independently by regulators and should be able to be carried out randomly at any time - not in cohesion with the banks as it gives them a chance to 'adjust' their positions and data in order to comply with standards they already have details on. Its like giving someone the answers to an exam question.

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Postby JR8 » Fri, 26 Aug 2011 3:11 pm

Quite!

And another thing! I understand that a lot of this worthless junk (PIGS debt) is sitting on certain banks' balance sheets, not least the ECB itself which I understand is probably technically insolvent, and hasn't been marked-to- market.

What kind of denial-of-reality accounting convention allows that? Any idea?

p.s. re: stress-testing, the SG-MOF used to have a right to walk in on any day and carry out a complete audit, unannounced. Screw it up and they could close you down. I expect they still do these. Believe me that was always in our minds. I bet the FSA never do similar... probably have to give the target a years notice under Human Rights law or something.... lol


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