BREAK IN CASE OF EMERGENCY: How to overthrow the government and break the banks
- Thread starter The Coup
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- #103
- Oct 30, 2010
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Freo2012
Premiership Player
I knew my time frames would draw some interestBut you all do understand probabilities, don't you and what I said - In my opinion highest likelihood in the next 3 years will see serious currency collapse - obviously not all as currencies are relative, but the asset bubble bursts and losses from some significant currency corrections will be felt by all. My problem is not the printing of money (debt laden) modern economics, it is that it must be in balance with real growth in the economies and that markets must be allowed to self-correct under efficient market theory. If you manipulate the markets and prop it up via monetary policy, you are not learning the lessons and the poor risk management practices that created the problem will actually get far worse - there has not been the prudential controls established to solve the underlying problems, and thus eventual outcome far worse for all. IMO we are in a far worse position in a lot of markets than we were back in the GFC, they are continually pumping extreme levels of monetary policy (including QE and others asset props), and they are running out of options and ability to get growth going across economies (not just in some overinflated asset bubbles) - our markets are consumer driven and the vast majority need to drive it through ability to do so - ie we have major structural problems that are not being addressed) - that faith in the system and ability to do so by the majority is being severely tested right now. Most of the extremely massive QE has been ending up in the wrong places (certain asset bubbles) and not assisting economy wide growth.
There is significant,well "publicly stated" anyway, dialogues and movement in prudential control of the "too big to fail" banks occurring. I was hoping to get some significant outcomes made public after the latest G20 meetings. Mandates have been made and effectively the G20 rubber stamped the steps of the FSB in finalising the "loss absorbing capacity" of the TBTF banks. Obviously we are all aware of the failure of Lehman's several years ago, the GFC, and the Cyprus banking crisis which resulted in ECB forced Cyprus bail-in capitalisation of % of bank deposits. The global framework is close to final and requires significant quantitative impact work which is scheduled for next year as well as actual legislative implementation in all the separate jurisdictions, which in some countries is being implemented now (UK and USA).
Anyway here is the FSB policy framework:
http://www.financialstabilityboard....bing-capacity-tlac-for-global-systemic-banks/
and the current "public" working document:
https://www.g20.org/sites/default/f...pacty_global_systemically_important_banks.pdf
I have only glanced over so far but a few points come out.
-basically following the Cyprus type model - when banks in distress creditors of banks will be converted to capital - hence "bail-in" rather than "bail-out" as occurred during GFC - protecting the "TBTF" but different people copping the responsibility for their excesses, lack of correct risk management control.
- long term deposits will be first "bail-in" liabilities converted, and interesting to see investigate full makeup of the Pillar 1 liability capital.
-re-structure of traditional liquidation process and order of payouts, especially in relation to bank depositors, ranking behind derivative counter-parties, which they argue is to keep the overall inter-related financial economy functioning - ie. "too big to fail" are still "TBTF" and protected
- public message is that it will remove taxpayers and govt from footing the bill, but public via companies and direct depositors will be footing the bill, and that includes public/super funds held in those banks when trouble arises.
- will be interesting to see their explanations after "full" quantitative analysis next year, particularly about the cost to banks of the "new" liability capital Pillar 1 requirements and even the additional cost on general depositors - they will be incurring part of the shareholder downside risk but not enjoying any upside (profits) - risk rating return estimates will be interesting (factoring cost to banks).
- will be interesting to see how they handle the "shadow banking" entities, which the banks use to move much higher risk and derivative positioning off balance sheet; as well as the cross border relationships and of course controls on bank manipulations prior to subsidiary banking entity exposure/collapse to limit their losses.
Certainly I have to read this more thoroughly and other support documentation and read up on the commentary and reactions to reach my own conclusions about these to be legislated outcomes.
At the end of the day the main message coming out of the G20 was their need to create world growth, including financial monetary growth (credit growth and money velocity, not just QE supply) - going to be interesting as to how they do that whilst also pushing greater prudential controls as stated (opposite in effect). My view of these prudential controls, bail-ins etc, is that the banks are too powerful to have any real meaningful limiting prudential controls placed on them and will fight against some of them and win that fight as they always have, much of the bail-in aspects they will certainly welcome (which they promoted in the first place). Unfortunately the TBTF banks are getting methods to enable them to not suffer the consequences of their own actions (already enjoyed under the GFC bail-outs that occurred and expectations since) and if you don't understand human nature then that means they effectively have less downside responsibility for their actions. Banks are the original creators of gearing, it is their domain and profitmaking is their bread and butter - with these "bail-ins" they are IMO being let off the leash and thus expect the massive asset, derivative bubbles and risk mismanagement to go unabated to a certain outcome.
Obviously there are many other "pressures" as some of you like to call them occurring right now, geopolitical (which IMO is purely the side effect/public face of the power mongering over resources given the global economic climate), real limits of growth globally and in mature economies (all resources including labour and public consumption), and continued "log scale" disparity in wealth and real wages across economies (hence further exacerbating the consumer markets which is what economies are all about), and the social issues that are also "log scale" rising from all of this. And of course the currency wars (mostly taking in turn co-ordinated attempts to promote economic activity) and the significantly increasing de-coupling of the USD from global trade which has very significant issues to the "reserve" currency and its economy.
A little hint for all you aspiring economists - global resource economics (base materials supply and demand, scope and pricing), real production levels and capacity, money supply and velocity, credit use profiles and the real underlying contributors to GDP's (areas and govt v public), as well as consumer spending profiles are fundamental and most crucial to what is happening in the global economies. Then view the levels of monetary policies (including QE and direct market interventions) being used to promote the economies and how effective (or not). Basic "dashboard" govt numbers are the factors most financial product "salesmen" (financial planners and stockbrokers) and the general public consider the be all and end all of "economic reality" and thus the majority of them are the sheep caught unawares when trouble arises (which is quite clear to see beforehand if you look deep enough, just the timing that is the trick).
Any of you wondering why there is simultaneous deflation in global commodities and inflation in many necessities, significant monetary easing and massively growing population wealth and ability to spend disparity as well as the asset bubbles?
Paints a very interesting picture going forward - yet many just see it as a few "pressures".
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Freo2012
Premiership Player
This economic situation reminds me of the real estate industry. Ask most in the industry anytime when it is a good time to buy - and their response is "now and always" (though to be honest many in the finance industry are far more prudent and honest with trusted clients/contacts). In the real estate industry whilst it might be true for the majority of time (particularly in Oz over its history) there are times it is the worst decision. Also like asking the used car salesman if the car they are wanting to sell you is a good buy - LOL. Australia will not be insulated in the years ahead like we were in the GFC.
and it's the off season!
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- #108
So we should all just hoard our money and delay buying any assets and wait for the potential crash to occur?
I'm in two minds I agree with you that a crash is likely to happen, however I'll hate to wait and in a few years time the housing prices will increase further.
must resist skiing joke.
Freo2012
Premiership Player
I think it is more a matter of determining what are "safe" assets to have money in to protect your relative wealth - if you do it right you will actually gain significantly on relative terms compared to everyone else. There are reasons many very rich have moved significantly into base level infrastructure (water, monopoly transport etc as well as prime undeveloped real estate. One of the safest is probably prime undeveloped land (rural or urban, but must be absolutely prime) - developments go down in value (land goes up, buildings go down) and in severe economic circumstances can be built for far far less.
What I am really saying is be very careful with any debt levels. Property has and always will be a great protector of "relative" wealth, particularly if it is your own home. So even if real estate corrects massively you are still protecting your relative wealth compared to everyone else (as long as you can retain it with cashflow in a rising interest rate environment), and everyone needs a home to live in. If however you have very high debt levels, it is a gamble given the economic conditions and far more so if you have negative geared property.
Most mainstream economic institutions are already calling Australian real estate an overinflated bubble (including all major world banks, World Bank and UN). Oz govt is looking to change the negative gearing laws (which are contrary to all tax principles - ie should only get deduction up to the amount of the rental income and excess (negative gearing interest cost) then factored into cost when ultimately sell) - RBA doing numbers now on its abolishment. However there will no doubt be a "grandfathering" of all existing - so there is an expected little "rush" to get in now before the changes.
I am expecting large deflation on capital and financial assets, corrections of asset bubbles (particularly property here in OZ - just look at what happened elsewhere with the GFC and those full downside effects have to a very large extent been deferred to be "enjoyed" at a later date), whilst non-durable goods (everyday needed to survive) will have significant inflation - this is what happens in major downturns and there is much economic history and fact to this, not just theory. So I expect real estate to drop a LOT here and then later comes the wonderful economic condition of significantly rising rates - so debt over real estate in those circumstances will wipe out very many.
- Banned
- #112
In layman terms what would you suggestion be? I have zero debts but am unwilling to take on a large mortgage where I see that this real estate bubble will burst possibily in the next 5 years.
And as you say hoarding money won't necessary help?
And as you say hoarding money won't necessary help?
Freo2012
Premiership Player
Not suggesting "hoarding money" - just safe guarding its value, at least on a relative basis better than the majority - that is what its all about. In many respects I am a layman myself in many markets and what is the best to do with what I believe is coming, but I do have some significant knowledge and experience in resources economics, international trade and banking. I'm not giving advice, only the scenarios that I think will happen, and which there is very much historic and theory to support. Everyone is responsible for their own financial futures, and should weigh up what their exposures are and should be and what they can "hang onto" or lose in difficult economic environment.
In my own case I have been severely limiting debt (and thus limited financial growth somewhat at the moment with the current asset bubbles and near zero interest rates - money for jam if you get off at the right time), have generally moved into what I consider safer "comparatively to everyone else" assets that will hold value and be attractive to realize no matter the outcome. It is worth remembering that there are significant opportunities in ALL market and economic conditions to improve ones own financial position, even in very bad economic times, if you have prepared yourself. One thing to remember - don't stop living today either - so probably a safe balanced approach is best for most.
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- #114
Having a very limited understanding of investing and finances in general how would you suggest a beginner can educate themselves on the matter?
Should of done it years ago but I guess it's never too late to start.
Should of done it years ago but I guess it's never too late to start.
Freo2012
Premiership Player
As I said I'm not going to give any specific advice, I spend enough time working out what I am and should be getting into, and the missed opportunities as a result. If you are only really starting to look at investing and economics get into some solid financial publications on various markets and economics. Look at some "reputable" mainstream business sites for starters - ones that have a reasonably varied "impartial" economic outlook and that publish many differing market and financial articles.
If you are worried as I am about the short term economic future read through these pages, you will get an idea of what areas to look at, and look more closely at what actually happened in currency and asset bubble collapses. There is very much about the economics, asset and societal effects of the GFC on USA and europe (a good starter), Greece today, perhaps some currency collapses in south america in recent times. Further there is substantial information on limits of growth theories, mature economy limits and of course the effects when "reserve" currencies change. Do some web searching for starters, but beware there is an awful lot of very extreme literature and websites out there, and many you should be able to see through as to what "agenda" or industry they are really just trying to promote.
Economics is definitely NOT an "exact science" - all the powers that be admit to applying theory and looking for outcomes based on probability and historical data/results. Economics is the study of a very complex system and the more information and data you have about the entire system the better you can be at determining accurate probabilities of what will happen. Economics is all about risk and probabilities and the truth is in the detail, not the headline dashboard numbers.
Personally, I get most of my data and information from mainstream and regulatory sources. I do look at some of the "extreme" sources, they often uncover and expose supporting data anomalies and some of them are/have very experienced and knowledgeable analysts, albeit their intentions may be to "pick and choose" what they report on to support a position and or specific industry. I also look at "economic cyclists" - there are some very VERY good cyclists around that do very regularly get their predictions right (including major turning points), some have even been used by companies I have worked for, not on a stand alone basis but in support or contrary risk assessment. There is also obviously the "herd mentality" which in reality is the faith in the system - the technical market analysts - obviously the more that believe and follow a system, the more self-fulfilling it becomes, up until crisis point and most then cry "I didn't see that coming" - I think this aspect is very much the "bubble extremists", these systems and mentality extend bubbles far beyond where efficient markets would, and of course the current economic climate where the powers that be think they can "control" economic nature, manipulating and propping up markets which in reality just delays the inevitable and makes the downsides far worse. The number 1 question I always ask when looking at anything is "what is in it for them presenting this report, what is their underlying angle" - applies to advice from anyone, particularly the "basic dashboard economic wallstreet heroes" - lol.
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The Coup
Premiership Player
- Sep 4, 2014
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- #116
Worked in finance for a decade.
No campaigner knows what they're doing, its a con game. That's why they talk about confidence all the time. Half the higher ups are ex insurance salesman who couldn't tell you even how to reduce the fees on your savings account.
invest in a gun and some canned food.
