Comments on: Shout-out to the hard core greenies http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/ hopping along the corridors of power Thu, 20 Nov 2008 14:10:01 +0000 http://wordpress.org/?v=2.3.3 By: SleepyTreehugger http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-31150 SleepyTreehugger Sat, 08 Sep 2007 03:29:38 +0000 http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-31150 Your argument is sound Kevyn, but you seem to be unaware of the concept of fractional reserve banking. You're assuming a case of a bank being required to have 100% reserves, rather than the current less than 10% reserves requirment and also doesn't take into account moral hazard on the part of bank loan officers, investment fund managers, and asset speculators who want to get as much "performance bonuses", commission, and profits as possible in full awareness that the negative consequences of their actions are socialised and their interests are protected by government regulations. (Federal Deposit Insurance, bailouts etc) "In essence, it states that for every $100 of loans, a bank should have at least $8 of capital, of which at least $4 must be permanent equity. Because loans secured over residential property were seen to be less risky than other loans, they only had to have 50% as much capital. Loans to banks from OECD countries were seen to be less risky still, so they only had to have 20% as much capital, and loans to governments denominated in their local currency 0%. There were several other categories and treatment for off-balance-sheet exposures." http://www.rbnz.govt.nz/speeches/0104984.html Your argument is sound Kevyn, but you seem to be unaware of the concept of fractional reserve banking. You’re assuming a case of a bank being required to have 100% reserves, rather than the current less than 10% reserves requirment and also doesn’t take into account moral hazard on the part of bank loan officers, investment fund managers, and asset speculators who want to get as much “performance bonuses”, commission, and profits as possible in full awareness that the negative consequences of their actions are socialised and their interests are protected by government regulations. (Federal Deposit Insurance, bailouts etc)

“In essence, it states that for every $100 of loans, a bank should have at least $8 of capital, of which at least $4 must be permanent equity. Because loans secured over residential property were seen to be less risky than other loans, they only had to have 50% as much capital. Loans to banks from OECD countries were seen to be less risky still, so they only had to have 20% as much capital, and loans to governments denominated in their local currency 0%. There were several other categories and treatment for off-balance-sheet exposures.”

http://www.rbnz.govt.nz/speeches/0104984.html

]]> By: Kevyn http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-31144 Kevyn Fri, 07 Sep 2007 12:54:29 +0000 http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-31144 Sleepy, Here is a simple (and somewhat simplistic) theory of how banks amplify or create the boom and bust economic cycles. economy doing well => people get paid more people get paid more => people save more for a rainy day people save more for a rainy day => banks pay more interest on savings banks pay more interest on savings => banks have to lend more money banks have to lend more money => have to find more enitities to lend to have to find more enitities to lend to => have to lend to riskier entities have to lend to riskier entities => bad loans increase bad loans increase => have to increase interest rates all lending increase interest rates on all lending => businesses reduce investments businesses reduce investments => economy slows down economy slows down => people get paid less people get paid less => people withdraw rainy day savings people withdraw rainy day savings => banks begin repossessing instead of refinancing banks begin repossessing instead of refinancing => sharemarket collapses sharemarket collapses => economy collapses economy collapses => banks declare bankruptcy banks declare bankruptcy = > bad debts written off bad debts written off => economy revives Sleepy, Here is a simple (and somewhat simplistic) theory of how banks amplify or create the boom and bust economic cycles.
economy doing well => people get paid more
people get paid more => people save more for a rainy day
people save more for a rainy day => banks pay more interest on savings
banks pay more interest on savings => banks have to lend more money
banks have to lend more money => have to find more enitities to lend to
have to find more enitities to lend to => have to lend to riskier entities
have to lend to riskier entities => bad loans increase
bad loans increase => have to increase interest rates all lending
increase interest rates on all lending => businesses reduce investments
businesses reduce investments => economy slows down
economy slows down => people get paid less
people get paid less => people withdraw rainy day savings
people withdraw rainy day savings => banks begin repossessing instead of refinancing
banks begin repossessing instead of refinancing => sharemarket collapses
sharemarket collapses => economy collapses
economy collapses => banks declare bankruptcy
banks declare bankruptcy = > bad debts written off
bad debts written off => economy revives

]]> By: SleepyTreehugger http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30811 SleepyTreehugger Thu, 30 Aug 2007 08:29:45 +0000 http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30811 Yep the current financial crisis does have rather scary parallels with the market "correction" in the 1920-21 depression, which directly led to the Great Depression thanks to the Fed's attempts to stimulate the economy, alongside the Feds attempts to assist the British to return to the gold standard after World War I. http://en.wikipedia.org/wiki/Great_Depression#Debt Personally I think that it won't take 8 years for the next Great Depression to happen. Already people are distrustful the our financial institutions after the seventh collapse of a finacial compony in 15 months. Even banks don't trust each other enough to lend to each other without the government/reserve bank being the intermediary. http://www.stuff.co.nz/4174017a13.html Yep the current financial crisis does have rather scary parallels with the market “correction” in the 1920-21 depression, which directly led to the Great Depression thanks to the Fed’s attempts to stimulate the economy, alongside the Feds attempts to assist the British to return to the gold standard after World War I.

http://en.wikipedia.org/wiki/Great_Depression#Debt

Personally I think that it won’t take 8 years for the next Great Depression to happen. Already people are distrustful the our financial institutions after the seventh collapse of a finacial compony in 15 months.

Even banks don’t trust each other enough to lend to each other without the government/reserve bank being the intermediary.

http://www.stuff.co.nz/4174017a13.html

]]> By: bjchip http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30807 bjchip Thu, 30 Aug 2007 04:21:16 +0000 http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30807 Got a spooky one for you Sleepy http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=B03AAE1A-17A4-1130-F5A895FE45EDE2AA respectfully BJ Got a spooky one for you Sleepy

http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=B03AAE1A-17A4-11 30-F5A895FE45EDE2AA

respectfully
BJ

]]> By: SleepyTreehugger http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30806 SleepyTreehugger Thu, 30 Aug 2007 03:41:06 +0000 http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30806 Another article to demonstrate how fked the world economy is going to be in the not too distant future. http://www.kitco.com/ind/Daughty/jul202007.html Another article to demonstrate how fked the world economy is going to be in the not too distant future.
http://www.kitco.com/ind/Daughty/jul202007.html

]]> By: SleepyTreehugger http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30673 SleepyTreehugger Sun, 26 Aug 2007 06:49:12 +0000 http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30673 You know the financial markets are in deep doo doo when the New Zealand Herald incorporates an article from The Independent. http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10459208 You know the financial markets are in deep doo doo when the New Zealand Herald incorporates an article from The Independent.
http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10459208

]]> By: SleepyTreehugger http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30671 SleepyTreehugger Sun, 26 Aug 2007 03:18:53 +0000 http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30671 I meant Do you think the timing of the “revelations� regarding the dangers of Chinse goods alongside the recent high powered U.S. trade delegation to China protesting at the unfair trade advantage that the Chinese have is coincidental? I meant
Do you think the timing of the “revelations� regarding the dangers of Chinse goods alongside the recent high powered U.S. trade delegation to China protesting at the unfair trade advantage that the Chinese have is coincidental?

]]> By: SleepyTreehugger http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30670 SleepyTreehugger Sun, 26 Aug 2007 03:17:31 +0000 http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30670 Do you think the timing of the "revelations" regarding the dangers of Chinse goods alongside the recent high powered U.S. trade delegation to China protesting at the unfair trade advantage that the Chinese have? http://english.people.com.cn/200612/16/eng20061216_333220.html I think its priceless that the Yanks are protesting at the trade imbalance as the primary beneficiaries of that imbalance are a) U.S. enterprises who have outsourced their production there, and b) U.S. consumers who have benefited from the super low prices due to the lax or nonexistant labour and environmental laws. When the Chinese do actually propose labour protection, guess who is the first to complain? Yep the heads of U.S. corporations. Their perspective is best summed up by this quote. "And, according to their own English translation, they also gave the Darwinian advice, “that the fittest survives is the basic principle of all creatures.â€? http://www.inthesetimes.com/article/3017/fights_over_chinese_labor_reform/ Do you think the timing of the “revelations” regarding the dangers of Chinse goods alongside the recent high powered U.S. trade delegation to China protesting at the unfair trade advantage that the Chinese have?

http://english.people.com.cn/200612/16/eng20061216_333220.html

I think its priceless that the Yanks are protesting at the trade imbalance as the primary beneficiaries of that imbalance are a) U.S. enterprises who have outsourced their production there, and b) U.S. consumers who have benefited from the super low prices due to the lax or nonexistant labour and environmental laws. When the Chinese do actually propose labour protection, guess who is the first to complain? Yep the heads of U.S. corporations. Their perspective is best summed up by this quote.

“And, according to their own English translation, they also gave the Darwinian advice, “that the fittest survives is the basic principle of all creatures.â€?
http://www.inthesetimes.com/article/3017/fights_over_chinese_labor_ref orm/

]]> By: phil u http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30669 phil u Sun, 26 Aug 2007 03:16:06 +0000 http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30669 bj.. puremedianz@hotmail.com phil(whoar.co.nz) bj..

puremedianz@hotmail.com

phil(whoar.co.nz)

]]> By: Kevyn http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30667 Kevyn Sun, 26 Aug 2007 02:58:55 +0000 http://blog.greens.org.nz/2007/08/22/shout-out-to-the-hard-core-greenies/#comment-30667 Does the WTO have the kahones to stop the US from responding in the same way it did in 1930? A repeat of the Smoot-Hawley tariff act might not be as catastrophic now that we have the Euro. We might not see a deep recession plunged into a full blown depression as happened in 1930 but I wouldn't bank on it. Does the WTO have the kahones to stop the US from responding in the same way it did in 1930? A repeat of the Smoot-Hawley tariff act might not be as catastrophic now that we have the Euro. We might not see a deep recession plunged into a full blown depression as happened in 1930 but I wouldn’t bank on it.

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