Signs of another economic collapse coming?

[Mallette]

Just toss the lawyers (both sides) and everything will work itself out just fine

 

Wouldn't be enough left in Congress for a card game, much less a quorum.

 

Dave

[Travis In Austin]

 

 

Really?  Of course it is not easy.  But Congress has the power.  Time to elect new congressmen.  Start by eliminating democrats and republicans.

 

Yes. Throw them all out on their behinee's and demand the newly elected members dismantle special interest. It's a start.

 

 

 

Now, now. Just toss the lawyers (both sides) and everything will work itself out just fine. 

 

 

Hey now wait a minute, wouldn't that be like sticking your head in the sand?  

 

On second thought I'm all for it.  

 

Travis

[Gilbert]

Heheheheheh, I knew I'd get a bite.

 

 

Edited February 10, 2015 by Gilbert

[Travis In Austin]

Ouch

 

 

[Fjd]

 

LOL.  Everything he talked about only needs Congress to make happen.  Of which he was a  member at the time.  Instead of jawing a non legislator why didn't he get anything done where it needs to be done? Jaw at his fellow members, write up the legislation.  it was easy for him to pass the buck....I wonder also if he bought gold at 1800 an ounce and is enjoying his store of value at 1200.

We can't even get the federal reserve to tell us where 2.3 trillion dollars went. We can't exactly just make them change major policy that easily.

 

 

 

 

A very complex situation and difficult to describe; however, that’s an easy one as to where the bail-out money went and it may provide insight into the impact that the repeal of Glass–Steagall had on the late 2000s financial crisis.  I believe that all you need to do is just follow the trail of the Wall Street investment banks “legally” converting their corporate structures to “bank holding companies” in order to qualify for bail-out money. 

 

Originally, the bail-out money appeared to be earmarked to buy the “toxic assets” (portfolios of bad mortgage loans that had defaulted) from these companies and remove the bad mortgage loans from the balance sheets to help boost liquidity and encourage lending.   In addition, during the 2008 financial crisis, and to encourage businesses and high-net-worth individuals to keep their cash in the largest banks (rather than spreading it out), Congress temporarily increased the FDIC insurance limit to $250,000. Subsequently with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, this increase became permanent as of July 21, 2010.

 

However, as they lifted the big turd from the ground, they discovered that the Wall Street “now bank holding companies / investment banks” did not actually have any portfolios of actual "bad mortgage loans" on the balance sheets of the companies as they were "securitized" and tucked away "off-balance" sheet in some bankruptcy-remote trust.  Most of these investment banks only retained a few tranches of the very, very bad securitized bond offerings for which the losses were already covered by the management fees charged.

 

Therefore, these "new banks" essentially appeared to have a greater need for the money to pay off all of the “credit default swaps” (bets that they made and lost) that they sold to those “smart” hedge fund managers that understood the market and “shorted” it, plus the losses for 'reps and warranties' on the credit default obligations (CDOs) and synthetic credit default obligations that they created and packaged and sold in the form of "bond offerings." 

 

And take a guess on how many of the alumni of these investment banks were part of the decision making process in how to spend the bail-out money?

 

I believe that this may be more of the reason “too big to fail” was coined as there is still very huge risk attached to overall economy that still has not been addressed and increases daily.  Today, the markets are still very over-leveraged with an extreme lack of visibility related to trillions of dollars of derivatives and other “financial instruments” and whether or not the counterparties have enough liquidity to cover a crash-type of situation.  These derivatives create a level of risk that essentially dwarfs the past risks.

 

While the Federal Reserve has its issues, they are not necessarily the main problem here.  For example, it is interesting to note that where the Federal Reserve System traditionally controlled most of the “credit markets” in the United States by its regulation of depository institutions, since deregulation, by 2014 the traditional depository institutions only controlled about 20% of the credit market.   That means that 80% of the credit market is controlled by Wall Street investment banks, private equity, among other non-traditional types of financial institutions that were now allowed to play in the sand box.

 

In the “old days” we tended to know what a depository institution was and it usually consisted of savings banks, commercial banks, savings and loan associations, community banks, credit unions, etc.   While it no longer controls the credit markets, only a depository institution is legally allowed to accept cash deposits from consumers and the true federal depository institutions are regulated by the Federal Deposit Insurance Corporation.

 

The interesting aspect here is that not one trader at these investment banks really cared about getting bailed out and that aspect had no influence on their trading tendencies, especially the “proprietary” trading desks and the "dark pools" of these firms.  Essentially, there is no down side to them in relation to risk and everyone on Wall Street is chomping at the bit and willing to risk as much of other people’s money as they possible can in order to make these lucrative and grossly insane profits.

 

Actually, for anyone close to the industry the mortgage meltdown really happened in slow motion and provided enough fair warning for the smart ones to get out of the way or short it and those that didn’t were only blinded by greed and stayed too long.  In certain respects, it seems that every industry has a fair share innovators, imitators and idiots.

 

Since nothing was done to fix the underlying issues, the next crisis may come at them all exceedingly fast and may just be some type of liquidity crunch due to the derivatives / commodities markets.  These days you have people trading derivatives on indexes and if a counter party cannot come through and meet its obligation, you end up with a crash that will drag down much more than just the market in this "unquantifiable" derivatives market.

 

If a “derivatives-type” of crash happens, it will not necessarily be Federal Reserve causing it and sorry to say, but gold won’t be worth crap either because no one will be willing to trade their corn or rice or oil for that big gold bar you have tucked under the floor boards.

[artto]

There are a few problems with your analysis (or whoever you got the dire prediction from) of the Baltic Dry Index.

 

As one can see from the chart/link you posted, the time period of the previous low was actually the very bottom of the financial crisis, not the beginning of it.

 

Second, is your notion that this "indicator" somehow can't be fudged or fiddled with. It was created by the London-based Baltic Exchange, a financial exchange, just like any other "exchange". It's a business, not a government agency.

 

Third, it measures the COST to transport raw materials such as fuels, grains, metal, etc, by sea. There has been a sharp decline in the cost of fuel recently whereby supply has increased enough to surpass demand. Don't forget, many refineries were destroyed in a number of domestic and global disasters in recent years. These take many years to rebuild. And there are new sources/methods of retrieving fossil fuels as well which have increased supply such as fracking.

 

Fourth, the index is actually a composite of three sub-indexes that measure different sizes of dry bulk carriers - merchant ships. And there are multiple geographic routes evaluated for each sub-index to give more depth to the BDI.

 

Fifth, if you study the chart more closely you will see that the BDI never fully recovered from its previous high which actually occurred when we (the U.S.) were well into the Financial Crisis.

 

As they say, "timing is everything". And this case, the timing is way off. If anything, it's indicative of a high probability of global "easing" with the rest of the international community following in the U.S footsteps and throwing austerity aside. Indeed we are already starting to see that. Austerity does not create growth. And that is what the current BDI chart is reflecting, especially in light of its global measurement, the rest of world lagging the U.S. recovery.

Edited February 11, 2015 by artto

[artto]

Did a little more research into the Baltic Dry Index as a predictor of stock market direction. As it turns out there's very little correlation between the Baltic Dry Index and future prospects for stocks, U.S. in particular. It does however have a high correlation to Chinese stocks although this is the only time in history that the Baltic Index has collapsed so much while Chinese stocks have not. Don't know if that's a good or bad sign although it would "usually" be considered a positive. But with only one instance there isn't much of anything to correlate from that.

[Travis In Austin]

Did a little more research into the Baltic Dry Index as a predictor of stock market direction. As it turns out there's very little correlation between the Baltic Dry Index and future prospects for stocks, U.S. in particular. It does however have a high correlation to Chinese stocks although this is the only time in history that the Baltic Index has collapsed so much while Chinese stocks have not. Don't know if that's a good or bad sign although it would "usually" be considered a positive. But with only one instance there isn't much of anything to correlate from that.

You stated pretty much what I found. Although it can indicate future demand, there is no way to tell if dips are caused by over supply of shipping vessels. I also saw that China had a lot of impact, both on demand side, and supply side by ship building.

That index is for bulk goods only. There is another ondex for container ships which shows a slow steady climb.