Korean Job Discussion Forums

[bacasper]

[mises]

It is a really wacky situation and I know of only two individuals who thought this possible. The first is Taleb and the second a relative nobody who runs a site called Mish's Global Economic Trend Analysis.

http://globaleconomicanalysis.blogspot.com/

There are several things going on, leading with massive bank losses. Much of the money they borrow from the Fed is quickly lost in huge write downs on their level 3 assets. The banks don't have money to lend, and aggregate credit contacts as a result. In addition, the Fed has been using different mechanisms to introduce credit and some analysis believe that these aren't inflationary to the same extent. Some estimates put total bank losses at around 1.5 trillion and I suppose credit will contract until that cycle is past.

The financial system is a total mess right now and we won't know for 100% sure what exactly is happening until it is in the past. What we do know is that America et al went on an epic borrowing spree and that this is unwinding.

Here are some links that explain, or try to, what is happening. There is a rather animated and interesting debate in the financial blogosphere re: inflation vs deflation.

http://www.nakedcapitalism.com/2008/08/inflation-versus-deflation-debate.html
http://www.thestreet.com/video/index.html#1741168883
http://globaleconomicanalysis.blogspot.com/2008/06/deflationary-hurricanes-to-hit-us-and.html
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/11/cnmoney111.xml

My opinion is that the deflation or credit/monetary contraction will pass and the medicine used to fight it -massive credit/monetary expansion, will restart the commodity/equity bubble. The boom/bust cycle is speeding up. But Bernake may know what he is doing. I don't know.

[luvnpeas]

[mises]

Ho hum. Evidence?

By the way, I only wrote one of the two quotes you provided. Ho hum.

[huffdaddy]

[sojourner1]

Every time I see this thread come up, I'm expecting breaking news of the stock markets crashing and the world shocked in horror over what is to come next.

I hope not, but things don't look good. They can only manipulate the markets and economies for so long before the big bubble bursts due to imbalances, deficits, and white collar corruptions.

[huffdaddy]

[ontheway]

[mises]

http://2.bp.blogspot.com/_ym8Q9yxUg34/SMrDlFy5EPI/AAAAAAAAE2U/c1e8YS7BN6c/s1600-h/ffreq12008.jpg

[arjuna]

Finance, as opposed to real economy based on labor, will more or less come to an end by the beginning of 2009. This is the beginning of the end of the tyranny of money over people. Bailout or no bailout, the end is nigh.

It is then up to you humans to rise to the occasion and institute an honest monetary system through which you can share the fruits of your labor equitably. Free trade, with honest labor and respect for others, will pave the way for wealth beyond your wildest imaginations.

There is much to change in the way of your seeing and thinking.

[arjuna]

Will the Crisis Bring Down the Global Financial System? Go Get Your Dollars Out Now! FAST!!!

by Adrian Salbuchi

Global Research, October 3, 2008

http://www.globalresearch.ca/index.php?context=va&aid=10430

The events of the last two weeks have clearly revealed that the global financial, monetary and banking system imposed on the world by the power structures promoting "globalization" is fundamentally flawed, unviable and immoral in its effects upon the most all of Mankind. After allowing a small cabal of shady characters to illegitimately accumulate vast amounts of wealth and power over markets, corporations, industries, media, armed forces and entire nations, like the World Trade Center towers on 9/11, this entire System is now in free-fall, collapsing into itself in one massive implosion.

This loathsome and unjust Global Power System was designed and implemented over the past seven decades by the geopolitical and geoeconomic strategic planners serving the New World Order power structures, most notably its network of discrete, low-profile but highly powerful private think tanks, such as the Council on Foreign Relations (CFR, founded in New York in 1919), The Trilateral Commission (founded in 1973), The Bilderberg Conference (formed in Holland in 1954), and others like the Cato Institute, American Enterprise Institute (AEI), and the notorious Neo-con Project for a New American Century (PNAC) (1).

Considering the enormous complexity of the process that is taking place right now; the vast amounts of information we are bombarded with every minute of the day, and the apparent difficulty in foreseeing just how this global crisis will finally be resolved, we would summarize certain important aspects and key data which we believe will help us put together this veritable jig-saw puzzle, so that we may begin to fathom what the true face of this horrendous creature euphemistically called "globalization", is really like. As Argentine citizens, we have a huge advantage over other peoples including US citizens when it comes to understanding and coping with this kind of crisis. I say this because in our own lifetimes we have suffered in Argentina all of what is now happening globally - albeit on a much smaller scale in our case. We've seen this movie... We've been there, and done that... We've been pushed and dragged through the entire hysterical hocus-pocus of inflation, hyperinflation, systemic banking collapses, currency changes, Debt Bond Swaps, Mega-Debt Bond Swaps, financial "armouring", banking holidays, freezing of bank accounts, etc., etc... And we have also suffered the end-results: bank bail-outs paid for by taxpayers (or through inflation, or through the confiscation of savings), disappearance of pension funds, destruction of job posts and overall impoverishment of the population.

So, take a clue from our thirty years' experience in "financial meltdowns": GO GET YOUR DOLLARS OUT FROM YOUR BANK NOW, AND DO IT FAST!!!!

A Flawed Model

Finance versus Economics -

The financial system (i.e., the basically virtual, unreal and parasitic wonderworld of banking), was designed to function in a way increasingly contrary to the interests of the Economy (i.e., the real world of concrete work, labour and production/services). In recent decades, Finance and the Economy have increasingly parted paths, ceasing to maintain the essential balance and equilibrium that is necessary for ensuring healthy economic activity centered on the Common Good of the People. In fact, Finance and Economy have today become all but total enemies. This can be seen, for example, by the fact that the present Global Economic and Financial System rests almost completely on the concept of DEBT, which is another way of saying that the Real Economy is always controlled by, and subservient to, the interests, whims and crises of Virtual Finance.

The Debt System -

The Doctrine (or, should I say, Dogma) of Extreme Capitalism has imposed the concept of DEBT as the preferred way to move the economy. In most countries (Argentina, for example) this means that there is no proper use of the local National Currency by the State to generate credit in a controlled and non-Interest bearing manner. This is the best way of fueling economic expansion for specific social, defense, infrastructure, and technological developments, always focusing on the Common Good and prioritizing the National Interest. One of Extreme Capitalism's key dogmas says that central banks controlling the national currency must be totally "independent" of Government. However, since all such institutions must finally respond to somebody somewhere, we thus discover that nowadays central banks are subordinated and subservient not to the State (i.e., the People), but rather to the private banking superstructure, both local and global, which naturally leaves the whole concept of the Common Good and National Interest almost totally aside.

This is so in Argentina as in other countries, however in the case of the United States this is particularly extreme because its central bank - the Federal Reserve Bank (FED) - is a private institution, with almost 97% of its unique shareholding structure in the hands of the private banking infrastructure itself, both domestic (in a first instance) as well as global (if we look further afield). Once the private banking superstructure achieves control of the local central bank, it is then in a position to impose chronic and often drastic under-monetization of the Economy.

This means that there is never enough money to satisfy the true needs of the Real Economy. That's when the private banks come on stage offering to close that artificially generated "gap", becoming the prime credit generators of the economy, for which they charge interest - often at usury rates - for loans made to individuals, companies and even the State itself. We should also understand that the key source of inflation in all economies lies not so much in monetary expansion by the State (if this is kept in sync with true economic growth), but rather most inflation in any economy is fueled by interest bearing loans made by the private banking sector.

At a Geoeconomic level (2), this has also served to generate massive public debt in Third World countries like Argentina,. fueled by rampant corruption amongst the individuals involved in the lending and borrowing process, and supported by Governments that never seem to understand how to use the sovereign functions inherent in their power to issue money to fund and promote balanced economic growth. Instead, these countries adopt IMF-designed neoliberal policies on key matters spanning from central banking functions, fiscal policies, debt, rates of interest and exchange, to banking regulations and other key factors, that have all been twisted out of shape so that they run counter to the country's National Interest.

Fractional Reserve Banking System -

This is a universaly applicable banking concept in today's global marketplace, that allows the private banking infrastructure to generate "Virtual Money" literally out of thin air (i.e., electronic credit lines, loans and the like) in a proportion of 6, 10, 30 or 50 times more than the actual Real Money they hold in their bank vaults.

To add insult to injury, the banks then charge you hefty interest rates for the "money" they created out of nothing and "lent" to you, whilst they require collateral consisting of real stuff like your home, your car, or your company. The proportion between the number of Dollars or pesos in their vaults and the amount of credit they can generate, is determined by the local central bank (remember: controlled by the private banks themselves), is called minimum monetary reserves under the Fractional Reserve Banking System and reflects a statistical estimate of what portion of deposit holders will normally visit the bank to withdraw their money in cash. The problem is that the concept of "normal" is basically a group or collective psychological factor, intimately linked to the perception that deposit-holders have regarding the financial system in general, and individual banks in particular. When "abnormal" times come - and boy have they come today!! - then people panic and run to their banks all at the same time, demanding to withdraw their money, not as electronic blips on the ATM machine, but as hard cash.

That was when we all discovered that the amount of Real Money in each bank's vaults was not suffient to pay all depositors, except for a handful (normally privileged insiders who "saw it all coming"). For the rest: of us, there was nothing left and the banking system collapsed. That's when in the US for example, and barring any taxpayer funded bail-outs, the Federal Deposit Insurance Corporation (FDIC) indemnifies up to 100.000 dollars in the US or, in Argentina, that's when we all realized that we had all been totally robbed, and took to the streets to uselessly bang our pots and pans on the banks' monumental iron-clad gates, conveniently shuttered the night before... All thanks to the inherently fraudulent Fractional Reserve Banking System. This is what happened in Argentina in 2001 and this is what is unfolding right now in the US.

Investment Banking -

In the US, Commercial or Main Street banks like Bank of America, JPMorganChase or CitiGroup are allowed to generate 8 to 10 "Virtual" - i.e., fake - Dollars for every Real Buck they have in their vaults. This scheme is controlled by the authorities, i.e., the FED and the Comptroller of the Currency. However, so called "investment banks" in the US and elsewhere, do not need to comply with any such requirements; they are the ones making Mega-Loans to Corporations, the US Government and foreign Governments like Argentina's, which is why they are far less controlled and regulated This means that for every Real Dollar they hold, these investment bankers can create 26 "virtual" Dollars (Goldman Sachs), 30 "virtual" Dollars (Morgan Stanley), more than 60 (Merrill Lynch, just before they went bust), or more than 100 in the cases of Bear Stearns and Lehman Brothers. (3)

Channeling and Transference System -

Another key factor lies in the way that the global financial system has structured automatic channels to bring in profits and transfer away all losses throughout the entire system. This has the effect that in times of great growth and gigantic profits (i.e., when the whole system grows), it is stable and allows creating many trillions of dollars out of thin air). That's when profits are conveniently privatized, i.e., they naturally flow into the pockets of shareholders, speculators, directors, CEO's, top management, "investors" and other key stakeholders in financial institutions and Corporate infrastructure. But when the system suddenly contracts, and tail-spins out of control as is happening now, then mechanisms are conveniently activated to socialize all losses through State-funded bailouts, special loans, FED-funded acquisitions via specific "vehicles" like JPMorgan, Citicorp and Bank of America, so that it is the domestic and foreign populations as a whole who end up paying the bill, through such phenomenae as inflation, hyperinflation (oh, we know a lot about that in Argentina!!), banking collapses, tax hikes, debt defaults, nationalizations, etc). The 4 Pillars of the Extreme Capitalist Model - In short the key factors described above, in the long-term all function together in a coordinated, consistent and synchronized manner, which means that, even if in the short- and medium-terms there are spates of high profits where money is sloshed around big time, in the long-term the whole system just doesn't add up. That's when you have periodic meltdowns like today's. Usually, they are explained away by well-paid economic gurus writing brainy explanations in The Wall Street Journal, Financial Times or New York Times, who tell us that this is all just part of "the economic cycle". For the most part, they can isolate sections of those downturns and localize them, so that they only affect a couple of emerging markets...

Like Argentina in 2001, or Brasil in 1999, or Mexico in 1997. In short, these four pillars are:

1. Programmed Monetary Insufficiency - Artificially generated by an "independent" central bank, controlled by the local and global private banking institutions superstructure;

2. Private banking based on Fractional Reserves - As a system, this allows banks to create money out of thin air, charging interest for it - often at usury rates -, and generating huge profits for "investors" and creditors;

3. Debt - This is the key concept that "fuels" private and public economies replacing the far more economically sound concept of reinvesting company profits and promoting a savings culture. Those who benefit from the unnecessary creation of debt need to promote and instigate among the public at large in all countries, fericiously undisciplined consumerism and greed, which goes hand in hand with total rejection of the very concept of saving and preparing for a rainy day. (4)

4. Privatize Profits /Socialize Losses - As a channelling and transference scheme for the various stages of the recurrent "cycles", so that when they reach the inexorable stage where collapse is nunavoidable, there is always a way of making the population at large pay the bill.

Key Data and Concepts

[...]

Plausible Scenarios

The crisis affecting the global financial system based on parasitic speculation and usury is a terminal crisis. It can no longer be solved through purely financial and monetary mechanisms and measures. If US authorities only concentrate on this type of measure, then a truly serious collapse is imminent and unavoidable.

A more pragmatic view of the global and US power structures, however, indicates that the US will not just stand by whilst this occurs, allowing the demise of the US as a global superpower. The US will not just turn-off the lights, and go home as the Soviet Nomenklatura did in the early nineties. No sir. They're gonna put up a hell of fight!! And that is a problem for all the peoples of the world, as well as for the people of the United States themselves. In this sense, we envision several scenarios out of which we have singled out three clearly defined scenarios which must no doubt have their respective alternative action plans to address this growing crises:

Plan A (i.e., addressing a relatively low intensity crisis through basically financial measures) -

[...]

Plan B (i.e., addressing a medium intensity crisis through financial and monetary measures) -

[...]

Plan C (i.e., addressing a high intensity crisis through geopolitical and miitary measures) -

[...]

This summary merely sets out some information, patterns and conclusions which help stress the extremely grave times all Mankind is presently living under. Its result will deeply affect the whole world. We offer these ideas as a sort of initial exercise in Global Risk Management, hoping that it will serve as a starting point to promote better and greater strategic planning exercises amongst public and private organizations in Argentina and elsewhere.

[...]

[some waygug-in]

Ameros anyone?

What do you economist types make of this?

Should we all rush out and start trading in any North American Currency for Swiss Francs or something else?

http://halturnershow.blogspot.com/2008/10/i-have-obtained-actual-amero-from.html

Seems like there's no end to the madness.

[bacasper]

[some waygug-in]

Yes, I was wondering that myself.

[bacasper]

Iceland's banks falter

By JANE WARDELL, AP Business Writer


REYKJAVIK, Iceland - Iceland's banks face a battle for survival Tuesday after government introduced emergency legislation to give itself sweeping new powers over its collapsing financial sector.

Prime Minister Geir H. Haarde warned late Monday that the heavy exposure of the tiny country's banking sector to the global financial turmoil was raising the specter of "national bankruptcy."

The government's attempt to gain control of the increasingly dire situation and restore some confidence in the country's hard-hit banking sector followed a day of panic Monday that saw trading in shares of major banks suspended and the Icelandic krona shrink in value against the euro.

Iceland is paying the price for an economic boom of recent years that saw its newly affluent companies go on an acquisition spree across Europe and its banking sector grow to dwarf the rest of the economy. Bank assets are nine times annual gross domestic product of 14 billion euros ($19 billion).

Investors are now punishing the whole country for the banking sector's heavy exposure to the global credit squeeze � its currency has gone through the floor, imports have fallen and inflation is soaring.

A major fear is that the government will struggle to rescue any other failing banks after last week coming to the rescue of the country's third largest bank, Glitnir.

"In the perilous situation which exists now on the world's financial markets, providing the banks with a secure life line poses a great risk for the Icelandic nation," Haarde said in a televised address to the nation. "There is a very real danger, fellow citizens, that the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool and the result could be national bankruptcy."

Just hours earlier, Haarde had said that no special measures were necessary � but credit lines to banks then seized up as speculation about the solvency of the country's major banks reached fever pitch.

"The position has today altered completely and for the worse," Haarde said.

The new laws will give the Central Bank of Iceland and the Icelandic Financial Supervisory Authority detailed and vast authority to intervene in the control and operation of Icelandic financial institutions, including the ability to take over or create new institutions, call shareholder meetings and limit the authority of boards.

Haarde told reporters that the government would not be closing banks, but foreshadowed the government taking control of more banks.

"We will not be closing banks but it is conceivable that some of them will not be able to function without our authorities intervening," he told reporters, declining to name any potential candidates.

Earlier Monday, the Icelandic Financial Supervisory Authority suspended trading in financial instruments issued by Kaupthing, Landsbanki, Glitnir, Straumur-Burdaras, Exista and Spron, saying that "uncertainties regarding the issuers are likely to disrupt normal price formation, and as such, any trading could be detrimental for investors."

The government also put 100 percent guarantees on savers' deposits, following in the footsteps of Ireland, Germany, Austria, Greece and Denmark.

A collapse of the Icelandic financial system could also have ramifications across Europe given the heavy investment by Icelandic banks and companies across the continent.

One of the country's biggest companies, retailing investment group Baugur, now owns or has stakes in dozens of major European retailers � including enough to make it the largest private company in Britain, where it owns a handful of well-known stores such as the famous toy store Hamley's.

Kaupthing, Iceland's largest bank and one of those whose share trading was suspended on Monday, has also invested in European retail groups.

Part of problem is that Iceland's tiny size has led to a high level of cross ownership of assets between banks and companies, which creates a house of cards scenario.

In that eventuality, the central bank with its liquid foreign assets of just 4 billion euros ($5.5 billion) will be hard pressed to make any more bailouts � the big four banks have combined foreign liabilities in excess of 100 billion euros ($137 billion).

Those concerns led all the major credit ratings agencies to downgrade Iceland's sovereign, or government, credit rating last week.