Originally Posted by g3abc (17Oct2012)
A giant conspiracy then developed, even fooling the conspirators, government regulators and the investors themselves:
As I understand, a toxic mix of factors what created the now defunct CDO monster:
- The Chairman of FED had apparently lowered interest rates to~ 1% after the dot com crisis of 2000 but had not raised rates despite a recovering economy- thus the desperation by USD70Trillion worth of wealth seeking higher returns. "CPM correspondents argued that a 'Giant Pool of Money' (represented by $70 trillion in worldwide fixed income investments)"[link].
- The competition between rating agencies to give good ratings to all CDO creators in order to enjoy continued patronage of their rubber stamping rating services- thus the stamping of practically all CDO as AAA+++ ultra safe investment vehicles- investors fooled by the ultra safe investment labels the CDO creators 'bought' from rating agencies were then sold like hotcakes to investors including the 'Singapore Government Staff Credit Cooperative Society' as was the case of the Pinnacle notes saga occurring between Aug2006 and Dec2008.
- The en masse rubber stamping by rating agencies, greed blinded investment bankers, lazy hedge fund managers and other fooled investors; low interest rates thanks to irresponsible FED printing $$$, the almost total blind eye by the SEC, all contributed individually to the massive housing bubble that built up in the USA up till 2008- which began bursting by October 2007 where "approximately 16% of subprime adjustable rate mortgages (ARM) were either 90-days delinquent or the lender had begun foreclosure proceedings, roughly triple the rate of 2005"[source]
- The tidal wave of foreclosures simply wiped out the value of CDOs, which premised upon homeowners regularly paying installments and guaranteed by the value of the property itself as collateral. With homeowners unable to pay and a glut of property now worth much less, CDOs were now considered toxic debt- worthless as a book asset- many banks which invested their depositors savings in these risky assets were thus on the verge of bankruptcy as the values of these convoluted assets plummeted overnight; nobody wanted to buy them and CDOs were shunned like plague.
- Facing the propensity of massive bank-runs and economic collapse, the US government had no choice but to bail out the banks by either taking over the toxic debt at inflated prices, or else replenishing the banks reserves with the purchase of preference shares or other preferred stock from the ailing bank (all this funded by taxpayer reserves, newly printed currency, or government debt, or all of the above).
According to PM Lee HL in the report as appended above [Regulating tightly 'not always feasible'] , he is unable to regulate banks as their complexity befuddles him. As a politician, PM Lee seems to think that he should let banks do what they want, the reserves of Singapore it seems, have by his admission, been earmarked for use as banker's golden parachutes.
Whether CIMB or Maybank is the safer/ stronger, according to the logic of PM Lee HL doesn't matter because as mentioned, the Singapore Deposit Insurance Cooperation (SDIC) to return at least S$50K of Singaporean's life savings saved in banks locally. Where either the retail arm or the investment arm of a bank fails in Singapore, better still if "if all the banks threaten to die at the same time, governments cannot help but go and rescue them', (as they did in 2008 and 2009)" says Prime Minister Lee Hsien Loong.
The US govt borrowed/ printed USD4.76Trillion (high water mark at USD13.87Trillion) to bail out banks and companies affected by the Lehman crisis of 2008-9 and the USD is still depreciating by the day; PM Lee HL plans to do the same, my take is that whether or not one places his money in a bank in Singapore, with PM Lee being so tarry with bankers, every Singaporean has much to worry.
Originally Posted by neddy
Because keeping cash in the bank is safer than keeping it under the pillow just in case you are burgled at home or in public?
But guess the benefit ends there because as the [Chart: comex gold vs USD index, 10yr end 2/2012] shows, the USD is a constantly depreciating investment whilst gold compared to the USD is an appreciating one.
Originally Posted by Television
Keep in mind that there is now no official value of gold in that its value is now dependent on sentiment: just like a Rolex watch, a Vincent van Gogh Painting, a residential property or even equity on the stock market.
The gold standard of currency exchange, on the wane since 1931, was totally dissolved by US President Richard Nixon in 1971. So like the painting, watch or or fine wine that you have, I do not have to by law accept it as payment in financial transactions; incidentally however, up till 1971, the US government promised to exchange just USD35 for one ounce of gold in its reserves (see: Bretton Woods System), but Present R Nixon broke the agreement so now the only way to obtain gold is on the world commodities market at which it is currently being traded at USD1748.50 for just one ounce of gold [kitco gold price]: almost 50X the price it was once worth in 1971.
About my take on gold kept in your home safe: it is about the only valuable item which would retain some value even in times of hyperinflation since for AFAIK, for up to 4500years: is has been a commodity of value: aka money.
Paintings, fine wine, jewellery and watches are all too bulky to carry in case U want to leave in a hurry and lesser appreciated by all: a pure gold bar on the other hand, as I understand, can in fact be cut with scissors and sold in parts by weight- you wouldn't be able to do the same with a painting or a bottle of wine.
Only gold can out run the CDO monster if I'd want my opinion to date.
Just my 2c,
Have fun living and God bless.
B.C.
PS: I'm no financial expert nor analyst, just a hobbyist economist from home.
No comments:
Post a Comment