tag:blogger.com,1999:blog-11719208.post3502610139033022014..comments2023-11-05T04:36:14.223-08:00Comments on The Mess That Greenspan Made: Confidence games and Ponzi schemesTimhttp://www.blogger.com/profile/16530974968126497397noreply@blogger.comBlogger15125tag:blogger.com,1999:blog-11719208.post-30392085228969166992009-08-07T12:12:05.153-07:002009-08-07T12:12:05.153-07:00Anon1031,
I don't know the exact circumstance...Anon1031,<br /><br />I don't know the exact circumstances that led to the $100M bonus in question. My point is if someone risks their own property and fairly nets a gain, I believe they should have the right to keep it no matter how obscene the amount. Further regulation by a government body is not the answer. Effectively, you would be still be empowering a collective, or worse an elite, to distribute rights to individual property. <br /><br />The answer is not a further concentration of power. I like Ron Paul too and do not find him extreme at all. The 'system' will regulate itself if you return enough property rights back to individuals. This would be as simple as repealing legal tender laws; which would have the effect of greatly weakening the central bank and government.<br /><br />I am a good saver and the money is not going to banks. But they don't need me anyway. The Fed exists to support their activities and is now asking for more power while trying to avoid letting us know what they are doing with our money. <br /><br />People, take the time to try understanding what those like Ron Paul are trying to do. He is an advocate of weakening government and taking back control of our lives.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-32207507657194196632009-08-07T10:31:36.287-07:002009-08-07T10:31:36.287-07:00Anon901pm said if someone makes a risky bet, and n...Anon901pm said if someone makes a risky bet, and nets $100M, they should get it. But, if they lose it, then the public should not have to bail them out.<br /><br />I would agree in general, but, I several problems with the approach. <br /><br />1.Just think for a moment- the reason why we should not allow this kind of speculation and regulate it - is because it brings down the whole company, and is a systemic risk. <br />2. The argument by democrats (to save this) has been that it would bring down the economy, and they never then try to rein in executive compensation - even though they make too much noise about it. Even Geithner made the same argument to a NYT reporters that we did it for us (overall health of the economy), and not for wall street bankers. And, that is the excuse they throw at us. On the other hands republicans are willing to let the companies go down (creative destruction), but, then we don't know how the broader economy suffers in the process. <br />3. and remember that the guys who made boatloads of money don't have to worry if the economy goes down. This guy who is asking for $100M - it is not like he owns Citibank, and has great attachment. Most of the time problem with executive compensation is. Even at the risk of oversimplication on exec compensation, most of these guys make so much short money in millions that their generations do not have to work. So, at that point it is just their reputation we are talking about. In 1789 Paris, they would have been lynched by a mob.<br />4. Do not forget that now onwards the speculation will be using monopoly money from the Fed, and we just have to believe that Fed is monitoring them closely and regulating them:-)as if they did a marvelous job in last 20 years that we want to entrust them with even more reponsibility. That is the reason I like Ron Paul, but, he sometimes seems too extreme.<br />5. I suspect the tactics he used to make that money is suspicious of holding back Oil supplies on the high seas until prices shoot, and dumping it later. that is classic price gouging no matter how you look at it. And, what I am afraid is that it was similar behavior that was displayed by Enron energy traders. And, just like other banks got on the party that GS started, and then everyone started taking outsized risks. It could happen again with other banks copying the same behavior. <br /><br />well, if you are a saver, good luck, you are not going to make any money, you are giving your money interest free to banks for their speculation.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-19276048082391905372009-08-07T09:01:14.931-07:002009-08-07T09:01:14.931-07:00GS and the big investment banks make most of their...GS and the big investment banks make most of their gains by offloading their losses onto the public. The CDS contracts they held with AIG should have been wiped out. Instead AIG was bailed out so they could get paid.<br /><br />Anon820pm, If someone makes a risky bet and nets $100M, they should get it. But, if they lose it, then the public should not have to bail them out.<br /><br />This is the true essence of central banking and fractional reserve lending. It allows favored banks to lever up on big bets risk-free. Well not quite, there is the risk that the public figures it out and refuses to absorb the losses.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-65742766244349529442009-08-07T06:49:34.496-07:002009-08-07T06:49:34.496-07:00Tim:
Nice piece summarizing where we stand and ev...Tim: <br />Nice piece summarizing where we stand and even better analogy to the Sting by Pool Shark. The thing that disappoints and infuriates me in equal portions is our government---the one formed by a Constitution that I swore to uphold---is blatantly and criminally (IMHO) hosing its citizens by first, urging people to continue going into debt and second, enslaving the nation with even more spending for questionable programs, entitlements and pork. <br /><br />While people have bought into the Bezzle for more than 30 years, they appear to have now awakened and are becoming more and more aware of the damage done to themselves and the nation. Our so called political elites, however, have decided that they 'know best' and are trying their best to maintain power by sacrificing the citizens at the alter of Debt. <br /><br />Disgraceful & disgusting does not begin to cover what the pols, the media and Wall Street Banksters are doing and I am sick of the BS. If we don't rise up and put and end to this soon, IT will end US.Tailwindnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-685533565328669412009-08-06T20:20:15.837-07:002009-08-06T20:20:15.837-07:00I like Pool Shark's observation. I did not qui...I like Pool Shark's observation. I did not quite remember the "wire" gimmick from "The Sting". But, GS's flash trades are nothing but that gimmick. <br /><br />I was thinking of only a few ways they can make so much money on trading<br /><br />(1) insider information<br />(2) really great algorithms (software) that they claim.<br />(3) heavy leverage with significant risk<br />(4) getting monopoly money from fed reserve and using it for trading (gambling)<br /><br />and combination of all.<br /><br />But, no matter how sophisticated the algorithms are, they cannot beat the market every single time. Also, that means they are taking too much risk (leverage) - which is the kind of behavior that fed reserve & treasury should not be encouraging in the first place in this environment. The chances that they go would go wrong would be very high, and the whole system would implode again.<br /><br />When I think about this citibank guy making billion dollar profits to claim $100m bonus, I smell a rat there too. what they are doing should be illegal. Oil cartel is called cartel because they are trying to influence the market which is against free trade principles. Unfortunately, you cannot discipline them easily because we are talking about countries. But, in the old days (and even now), the traders make obscene windfall profits by price gouging or restricting or holding back supply intentionally. I remember hearing about this during last year's oil spike, and people complaining about gas station operators doing this. I don't understand why commodity traders actions are not illegal just like any other trader if they amount to profiteering like this.<br /><br />When slowly people start realizing this, they do not participate in the confidence game. I agree with the sentiment - the whole damned casion is rigged.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-82683359013248006792009-08-06T18:28:10.842-07:002009-08-06T18:28:10.842-07:00This may be the best "putting it all together...This may be the best "putting it all together" article I have read ever. I have featured it tonight and I hope it finds a big audience.EconomicDisconnecthttps://www.blogger.com/profile/02802078645713106743noreply@blogger.comtag:blogger.com,1999:blog-11719208.post-17391485097897294942009-08-06T16:35:31.250-07:002009-08-06T16:35:31.250-07:00It's even worse than you think Tim.
Remember ...It's even worse than you think Tim.<br /><br />Remember the device used in the <i>denouement</i> of "The Sting" to relieve Lonnigan of his money? It was called "The Wire." Results of horse races were held up just long enough to tip the gambler so that he could bet on a sure 'winner.'<br /><br />GS is currently running "The Wire" on our equities markets with so-called "Flash Trades." In essence, they get to see who the winner is <i>before</i> they place their own HFT bets.<br /><br />Government finance, commodities speculation, equities markets... <b>the whole damned casino is rigged!</b>Pool Sharknoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-33645858567407132712009-08-06T15:19:07.440-07:002009-08-06T15:19:07.440-07:00@anon208,
Is there such a thing as too much savin...@anon208,<br /><br />Is there such a thing as too much savings? Savings is the difference between what you produce and what you consume. I suppose socialists would argue that those without surplus production are entitled to be supported by those with. This of course eventually leads to very little or no surplus at all anywhere.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-37060743803658531292009-08-06T14:25:25.156-07:002009-08-06T14:25:25.156-07:00^^Harry has never read an AARP bulletin. The Elde...^^Harry has never read an AARP bulletin. The Elder lobby, along with their Congressional enablers, firmly assert that SS payments are a return on the recipients' contributions. The last thing the AARP will ever admit is that the SS is just another form of welfare. The continuation of the SS con requires that current payers, particularly 20-somethings, never learn that it is highly unlikely that they'll ever see the money they're paying in now ever paid out to them in the form of benefits.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-13326243149191769872009-08-06T14:16:25.262-07:002009-08-06T14:16:25.262-07:00Tim,
Your analysis is spot on but for one big er...Tim, <br /><br />Your analysis is spot on but for one big error: your likening Social Security to a Ponzi scheme.<br /><br />What Ponzi and Madoff did was to take in money on the pretense they were going to invest it. The deal with SocSec is that today's workers pay for yesterday's workers (now retirees) on the firm understanding they will receive the same in their turn on retirement (no scam). If you posit there may not be enough budgetary funds in future to finance this you have to accept the same is true of any other component of the US current budget, including (e.g.) judges' and congressmen's salaries. Is that a Ponzi scheme?<br /><br />Harry Shuttharry shutthttps://www.blogger.com/profile/02806463289443335523noreply@blogger.comtag:blogger.com,1999:blog-11719208.post-28592830410201900792009-08-06T14:08:56.835-07:002009-08-06T14:08:56.835-07:00The US savings rate went to zero mostly because th...The US savings rate went to zero mostly because the US central bank tried to compensate for too much overseas savings by forcing Americans to save nothing at all. This was a terrible policy that has put the US deeply into debt. Excessive private debt to GDP was a prime cause the Great Depression. Private debt did not go down until WWII forced Americans to save (pay down their debt). Low private debt to GDP after WWII allowed the economy to prosper once again.<br /><br />That is, until the central bank drove private debt to GDP to unstable levels once again with its misguided policy. The central bank should be abolished, as it is completely incompetent. Eliminate inflation, and let the free market set interest rates.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-47292844098760717112009-08-06T10:10:57.232-07:002009-08-06T10:10:57.232-07:00Tim, I think your analysis is right .... and wrong...Tim, I think your analysis is right .... and wrong. It's right in a pontificating sort of way and looking through a telescope into the future. It's wrong in terms of a current investment analysis. The opportunity cost lost by mixing up the two views is enormous. <br /><br />But who knows when the long view becomes current reality? That's the million dollar question isn't it? I don't think it's likely to be now or soon as long as American's retain the economic (and particularly) the military dominance in the world. And when the cataclysm comes, I suspect it will come in drips not torrents.Greyhairhttps://www.blogger.com/profile/05927522817378718823noreply@blogger.comtag:blogger.com,1999:blog-11719208.post-38214382285403759862009-08-06T10:06:56.740-07:002009-08-06T10:06:56.740-07:00@anon1,
That's great. $50M is like a paying ...@anon1,<br /><br />That's great. $50M is like a paying parking ticket for armed robbery. This is a criminal offense. And guess who pays it? The shareholders not the execs that benefitted.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-35805842896509314312009-08-06T09:54:08.330-07:002009-08-06T09:54:08.330-07:00The psychology of mass bubbles is fascinating. So...The psychology of mass bubbles is fascinating. Some argue (I am neutral) that the victims of mass cons are often willing and knowing participants in an elaborate escape episode. The uglier the reality, the greater the need for an alternative. There are strong parallels with drug-seeking behavior (including gambling).<br /><br />Nice synopsis, Tim. A while back, I think you still believed in the need for central banking. I'm wondering if that still holds. <br /><br />--<br /><br />In the Land of Mordor where the Shadows lie.<br />One Ring to rule them all, One Ring to find them,<br />One Ring to bring them all and in the darkness bind themAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-31591775941330867242009-08-06T09:36:34.956-07:002009-08-06T09:36:34.956-07:00Speaking of confidence games, what about this?
Wa...Speaking of confidence games, what about this?<br /><br />Washington, D.C., Aug. 4, 2009 — The Securities and Exchange Commission today filed civil fraud and other charges against General Electric Company (GE), alleging that it misled investors by reporting materially false and misleading results in its financial statements.<br />Additional Materials<br /><br /> * Litigation Release No. 21166<br /> * SEC Complaint<br /><br />The SEC alleges that GE used improper accounting methods to increase its reported earnings or revenues and avoid reporting negative financial results. GE has agreed to pay a $50 million penalty to settle the SEC's charges.<br /><br />"GE bent the accounting rules beyond the breaking point," said Robert Khuzami, Director of the SEC's Division of Enforcement. "Overly aggressive accounting can distort a company's true financial condition and mislead investors."<br /><br />David P. Bergers, Director of the SEC's Boston Regional Office, added, "Every accounting decision at a company should be driven by a desire to get it right, not to achieve a particular business objective. GE misapplied the accounting rules to cast its financial results in a better light."Anonymousnoreply@blogger.com