subprime - it takes a cartoon to understand this stuff... | Page 2 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Absolutely new to this Stuff 9 replies

MQL 'stuff' 20 replies

subprime - it takes a cartoon to understand this stuff...

  • #21
  • Feb 20, 2008 12:46pm Feb 20, 2008 12:46pm
Quoting capitalist88
One of the things I always try to keep in mind is that economics is actually very simple. In order for people to live, we have to turn natural resources into useful stuff. But then we consume that stuff, or the stuff gets worn out or damaged by the environment from whence it came, so we have to make more stuff. The simplest economy is one dude on an island.

Money is just a convenient way to keep track of the goods and services we each produce, so it becomes easier to trade those things amongst each other. People who say that "nothing backs our money" don't quite get it. Look around. All the houses, cars, telephone poles, asphalt streets, Nintendo GameBoys, bottles of Orange Crush and my new hat is what actually backs the money. Money is backed by stuff. That stuff doesn't have to be shiny and heavy.

If you loan me $100, you're assuming that I will somehow create at least $100 worth of value somewhere in the world which will allow me to pay you back. When the creditors of the world loan a hundred billion dollars to a group of borrowers, the creditors SHOULD be basing that decision on the belief that those borrowers will be able to create at least a hundred billion dollars worth of new goods and services in the world during the loan period.

But they F'ed up.

Is it not about risk to reward? If I loaned you 100$ and thought you were high risk would I loan you the money? Sure and only make you pay 10$ per month for 13 months.. What a deal, after all your high risk. What should I do if you miss a payment?
Check Mate GAME OVER
  • #22
  • Feb 20, 2008 12:53pm Feb 20, 2008 12:53pm
that's where they missed the boat. They gave it away to people who could not pay them back. They did not apply a good risk//reward plan and it bit them in the ass..hehehe

Greed has a way of moving in a complete circle and karma is a bitch..
Check Mate GAME OVER
  • #23
  • Feb 20, 2008 12:58pm Feb 20, 2008 12:58pm
The big dogs are in pain and so da fed lowers da rate to save our ass. After all i think a new chief will be in the house soon. Well what does citigroup and friends do? They increase the interest for all credit card holders to help offset the fuk'ed mess they got... What a joke!!
Check Mate GAME OVER
  • #24
  • Feb 20, 2008 1:01pm Feb 20, 2008 1:01pm
if fact dis entire country has turned into one big joke.. The big dogs could care less about anything and big companies suck. They miss a qtr and fire 10,000.. my grandpa would turn in his grave if he seen the shit going on..
Check Mate GAME OVER
  • #25
  • Feb 20, 2008 1:02pm Feb 20, 2008 1:02pm
Quoting merlin
have you read greenspans book yet? unbeknownst to me, he was a good friends with ayn rand and he talks a lot about their relationship in the book. i personally think it was more than just friends, but i wont turn this thread into a gossip mag on you guys
Well her big affair was with Nathaniel Branden, but who knows? Alan could have been quite the sly dog back then.

I haven't read Greenspan's book, but I have read several short essays of his from back in the 60's when he was in the "inner circle." I was familiar with his work before he became the Fed chairman.

You know how he had a tendency to create those extremely complex sentences, and the press would always talk about "Greenspeak" or whatever they called it? His writing wasn't like that at all, and I have a suspicion that he talked that way in public as kind of a massive inside joke. I'm guessing he was actually making fun of the bureaucrats for years, but only the Objectivists got the joke.
  • #26
  • Feb 20, 2008 1:08pm Feb 20, 2008 1:08pm
GM the rock of America... Well lets buy your ass out and get rid of everyone and hire us a new batch and give them less money... Right good job guys. This is real American of you... SSecurity is like a 4 letter word if you work for the big boys..
Check Mate GAME OVER
  • #27
  • Feb 20, 2008 1:11pm Feb 20, 2008 1:11pm
Quoting bunton
Is it not about risk to reward? If I loaned you 100$ and thought you were high risk would I loan you the money? Sure and only make you pay 10$ per month for 13 months.. What a deal, after all your high risk. What should I do if you miss a payment?
The "risk" that you're talking about is simply the risk that the borrower won't be able to produce enough economic value (by going to work every day, inventing something cool, writing a bestseller, or whatever), which means that the borrower won't collect the vouchers for those activities (which we call "money"), which means that they can't pay back the loan.
  • #28
  • Feb 20, 2008 1:15pm Feb 20, 2008 1:15pm
Quoting bunton
GM the rock of America... Well lets buy your ass out and get rid of everyone and hire us a new batch and give them less money... Right good job guys. This is real American of you... SSecurity is like a 4 letter word if you work for the big boys..
Don't worry. If GM keeps going the way they are, they'll be out of business eventually and then you'll be rid of them. Won't that be GREAT?
  • #29
  • Feb 20, 2008 1:17pm Feb 20, 2008 1:17pm
Quoting capitalist88
Don't worry. If GM keeps going the way they are, they'll be out of business eventually and then you'll be rid of them. Won't that be GREAT?
Watch China in 10 years take over our streets with auto's... mark this post..
Check Mate GAME OVER
  • #30
  • Feb 20, 2008 1:42pm Feb 20, 2008 1:42pm
Quoting bunton
Watch China in 10 years take over our streets with auto's... mark this post..
Close, but go a bit more west until you reach Nepal, then take a hard left. These guys are way ahead of China:

http://www.nextbillion.net/blogs/200...ar-out-by-2008
  • #31
  • Feb 20, 2008 2:17pm Feb 20, 2008 2:17pm
Here is TATA's chart.. Watch it run to 100..heheh

http://img444.imageshack.us/img444/1949/tatabo4.png
Check Mate GAME OVER
  • #32
  • Feb 20, 2008 5:18pm Feb 20, 2008 5:18pm
Quoting capitalist88
... won't be able to produce enough economic value (by going to work every day, inventing something cool, writing a bestseller, or whatever),
...do well in the forex...
Carpe Divitiae
  • #33
  • Feb 21, 2008 1:46am Feb 21, 2008 1:46am
Trade what you see, not what you think.
  • #34
  • Feb 21, 2008 4:21am Feb 21, 2008 4:21am
Hilarious, and true
Patience + Humility + Study = Success
  • #35
  • Feb 26, 2008 10:08pm Feb 26, 2008 10:08pm
Quoting DutchTrader
Hilarious, and true
Pretty much the exact post I was about to throw in. LOL

That was good man!
Bundy's status today: "Waiting..."
  • #36
  • Feb 27, 2008 4:54am Feb 27, 2008 4:54am
The sub prime crisis has reached Japan as reported from the Land of the
Setting Sun

In the last 7 days Origami Bank has folded, Sumo Bank has gone belly up and
Bonsai Bank announced plans to cut some of its branches.

Yesterday, it was announced that Karaoke Bank is up for sale and will likely
go for a song while today shares in Kamikaze Bank were suspended after they
nose-dived.

While Samurai Bank is soldiering on following sharp cutbacks, Ninja Bank is
reported to have taken a hit but they remain in the black.

Furthermore, 500 staff at Karate Bank got the chop and analysts report that
there is something fishy going on at Sushi Bank where it is feared that
staff may get a raw deal.
GOD IS NOT SHORT OF CASH
  • #37
  • Mar 11, 2008 1:34pm Mar 11, 2008 1:34pm
Quoting capitalist88
One of the things I always try to keep in mind is that economics is actually very simple. In order for people to live, we have to turn natural resources into useful stuff. But then we consume that stuff, or the stuff gets worn out or damaged by the environment from whence it came, so we have to make more stuff. The simplest economy is one dude on an island.

Money is just a convenient way to keep track of the goods and services we each produce, so it becomes easier to trade those things amongst each other. People who say that "nothing backs our money" don't quite get it. Look around. All the houses, cars, telephone poles, asphalt streets, Nintendo GameBoys, bottles of Orange Crush and my new hat is what actually backs the money. Money is backed by stuff. That stuff doesn't have to be shiny and heavy.

If you loan me $100, you're assuming that I will somehow create at least $100 worth of value somewhere in the world which will allow me to pay you back. When the creditors of the world loan a hundred billion dollars to a group of borrowers, the creditors SHOULD be basing that decision on the belief that those borrowers will be able to create at least a hundred billion dollars worth of new goods and services in the world during the loan period.

But they F'ed up.

If it only were that simple... Unfortunately you get these magicians that move things around behind smoke and mirrors and play with numbers and trick others into thinking they've created something of value. They are called BANKS. For example, they can take $1,000 in deposits and turn it into $10,000 in loans. Since loaned money is the same as earned money, they just created wealth out of nothing! Imagine that! And they didn't even have to turn any natural resources into useful stuff to accomplish that, and that money doesn't have to be backed by anything except 10% of its own value.

I wonder what would happen if the $10,000 loan goes bad (the borrower does NOT manage to produce $10,000 + interest worth of stuff) AND the $1,000 depositor wants his money back??? Well then the Fed steps in and just prints the money and drops it out of a helicopter to anyone who wants to borrow it - that would be the troubled bank. Simple, elegant solution, except the amount of stuff backing all this money hasn't changed, so something has got to give: The value of the currency has to drop... And the anyone who gets paid in that currency will naturally get upset and want more of the stuff. etc. etc.

The economy you describe is the way it should be. The economy I describe is the one we have (unfortunately).
  • #38
  • Mar 11, 2008 2:12pm Mar 11, 2008 2:12pm
Quoting fierceman
Since loaned money is the same as earned money, they just created wealth out of nothing!
The economy you describe is the way it should be. The economy I describe is the one we have (unfortunately).
No they didn't. Loaned (newly created money) is NOT the same as earned money. There's a difference between GETTING money and EARNING it. Earning it always involves some form of wealth production.

I'm making a distinction between money and wealth. Wealth is stuff. It's clipboards, capacitors, roofing tile and popcorn.

Money is not wealth. Money is just a form of technology. It's an accounting tool we use to keep track of how much wealth we've each produced. Money just allows us to trade rivets for razors without having to actually carry bags of either around. It's also a way of keeping track of how many razors equals how many rivets without having to refer to a big chart with millions of exchange rates listed on it.

Anyone can create money out of nothing. It doesn't even take a bank to do it. Look at Second Life with it's "Linden Dollars" or whatever they're called. Or if I loan a buddy $100 and take his IOU in return, I've created new money in the system.

But no one can create wealth out of nothing. Wealth creation is the process of digging, planting, hunting, fishing, manufacturing, etc.
  • #39
  • Mar 11, 2008 2:38pm Mar 11, 2008 2:38pm
Quoting capitalist88
No they didn't. Loaned (newly created money) is NOT the same as earned money. There's a difference between GETTING money and EARNING it. Earning it always involves some form of wealth production.

I'm making a distinction between money and wealth. Wealth is stuff. It's clipboards, capacitors, roofing tile and popcorn.

Money is not wealth. Money is just a form of technology. It's an accounting tool we use to keep track of how much wealth we've each produced. Money just allows us to trade rivets for razors without having to actually carry bags of either around. It's also a way of keeping track of how many razors equals how many rivets without having to refer to a big chart with millions of exchange rates listed on it.

Anyone can create money out of nothing. It doesn't even take a bank to do it. Look at Second Life with it's "Linden Dollars" or whatever they're called. Or if I loan a buddy $100 and take his IOU in return, I've created new money in the system.

But no one can create wealth out of nothing. Wealth creation is the process of digging, planting, hunting, fishing, manufacturing, etc.
I think we're basically agreeing here actually . My tone towards the "creation" of wealth was meant to be sarcastic - I was actually trying to show exactly what you're saying: money can be created out of thin air, but wealth cannot. That's the trick banks play on average citizens. Banks create nothing, and yet they play such an important role in the economy.

The only thing I disagree with you on is that loaned money really is the same as earned money - to the extent that it can be spent on the same things and is accepted universally just the same. The only thing is that when money supply is increased, the value of each unit of the currency has to drop - whether that particular unit was earned or borrowed doesn't really matter, its value still drops. Hope that clarifies it a bit better.

Next time I'll make sure I use when being sarcastic. Oh, and sorry for changing the tone of this light-hearted thread into something so dry.
  • #40
  • Mar 11, 2008 3:12pm Mar 11, 2008 3:12pm
Quoting fierceman
I think we're basically agreeing here actually . My tone towards the "creation" of wealth was meant to be sarcastic - I was actually trying to show exactly what you're saying: money can be created out of thin air, but wealth cannot. That's the trick banks play on average citizens. Banks create nothing, and yet they play such an important role in the economy.

The only thing I disagree with you on is that loaned money really is the same as earned money - to the extent that it can be spent on the same things and is accepted universally just the same. The only thing is that when money supply is increased, the value of each unit of the currency has to drop - whether that particular unit was earned or borrowed doesn't really matter, its value still drops. Hope that clarifies it a bit better.

Next time I'll make sure I use when being sarcastic. Oh, and sorry for changing the tone of this light-hearted thread into something so dry.

True, I see what you mean on earned and loaned money being the same in terms of acceptance.

You got me on the "Wow! We created a bunch of new wealth!" thing. The exclamation points should have clued me in. Not to mention the fact that you and I had a discussion on a similar topic many moons ago in one of the news threads where we were both making the same kind of point. Err, so I knew you were kidding the whole time... yeah um, that's my story and I'm stickin' to it!

Light-hearted thread my frigid Norwegian ass!
0 traders viewing now