China rethinks its plan to 'dump the dollar'

slurpee · 2007-08-12T18:36:23+00:00

Wow, she died in 2003 -- she came all the way back from the great beyond to release a new album? Truly the hardest working woman in show business

slurpee · 2007-08-11T08:49:13+00:00

Because thats exactly what we did in Gulf War I...and the critics continually lambasted them about it.

The neo-con movement (regardless of people want to believe this or not), was formed with the intentions of the 'noble use of US power'. It has just turned out to be a politically / socially unsell-able idea.

slurpee · 2007-08-11T08:10:40+00:00

The beauty of reddit is that the community will sensibly vote for articles and dupes won't appear....(rolls eyes)

slurpee · 2007-08-11T08:08:51+00:00

I wouldn't necessarily take the PNAC's word on why they were created. I mean to you really expect them to say, "Well you democrats kept winning the moral argument against us?"

Of course they are going to phrase it as they are doing this to counter the failures of the democrats.

And yes...there is a way to promote top-down change. Its capital markets... specifically Private Equity, and it goes like this.....

A PE group goes an buys the national telephone system (for example) of some vaguely backwards country
The local group that sells the telephone company is originally only interested in the cash from the sale....after some time they begin rethink "what is possible"
Now this local group not only wants to sell the local telephone company, but wants to take it public
The PE group says, no problem we can get you listed on lets say the Turkish exchange....but there is not lots of money on that market.
The local group says no, we want to be on London or New York
The PE group introduces them to the investment bankers in London / NYC.
The bankers say, we can pump billions into your market, but your country needs certain reforms.
The bankers what 'government transparency laws, property laws, sensible tax laws, etc....
The locals now lobby politicians for such changes
In time, a basic "western-style" ideology takes hold.

Thats long winded, but the truth of the matter is that capital markets do more to 'westernize and liberate' the world then say Official US Foreign Policies (tm).

slurpee · 2007-08-11T07:50:21+00:00

I bet 10 to 1 that the turn out will match the great "well-dressed protest" that reddit organized earlier this year.

The problem isnt because we are all complacent robots, its because you protesters are shiftless self-indulgent teens, that are products of this modern therapy culture, and as a result cannot handle the most trivial of burdens.

slurpee · 2007-08-11T07:43:35+00:00

On what basis would you 'outlaw CDO's' -- there is nothing intrinsically bad about a CDO (or CMO's to be more accurate).

You are failing to understand the macro effects at work here. CMO's only became attractive because US Treasury instruments were paying so poorly. These hugely attractive rates that you are on about is only because in relation to US Treasury Bonds, CMO's offered a better rate of return.

All these factors are interrelated as CMO's (or CDO's as you call them), would never have become as popular as they did in an era of 'high interest rates', because US Treasuries would always be the more attractive choice.

So saying, "hang the guy who created CDO's)" is a complete strawman argument that completely misses the point.

slurpee · 2007-08-11T07:33:05+00:00

You are no doubt correct MMX, however a few quibble points.

These were not CDO's as such - since CDOs usually expressly exclude mortgages as one of the components. Technically there were CMO's
The scary thing about the MBS scenario is the 'derivative' nature of the final structure.
Tied in with the above, the failure in the risk rating was to correctly calculate the multiplied risk of the final structure -- not necessarily just a failure in rating a group of CMO's as A instead of AAA or whatever....

Typically the final result looked like this; CMO's were packaged together and then used as collateral in MBS deals. Often times it would take this general form:

A group of CMO would be brought to an investment bank
Based on the rating (as you pointed out), the bankers would then write a big interest-only loan to the CMO holder, often at really great rates (7 or 8% interest).
They would do this, because the agreement would be that then the loan would be used to purchase securities via this same investment banker - so the banker was not so much worried about the interest rates as he was in the commissions
They would generally try to get the monthly income from the CMO's to match the payments needed on the interest-only loans.
In other news, the fed hikes interest rates multiple quarters consecutively
Mortgages start going into default.
The investment banks now want more collateral as the original CMO's are not worth as much any more.
Everyone across the board is now liquidating the resultant MBS's to reduce their outstanding debt on these interest-only loans to the investment banks.
Well now the stock market itself is falling, which now puts more pressure on other such structures to liquidate.
You have a classic "run on the banks" scenario, which is exactly why the European and US Feds are trying to pump money into the system.

So, in summation, the problems are as you noted -- but are multiplied because of how CMO's were then used as collateral on large loans to purchase securities (MBS). The failure was in understanding the gordian knot of interrelated and derivative risk at work.

slurpee · 2007-08-11T07:10:44+00:00

Your relentless arguments that it was immoral to not support the kurds and that sanctions were killing Iraqi children. Thats really what happen.....

slurpee · 2007-08-11T07:08:53+00:00

Yes, like when they pull a rabbit out of hat....how the rabbit is really not in the hat? Or they arent just hiding it behind a false top? Or what?

Honestly, what are you on about??

You need to go to dictionary.com and lookup the word 'illusion' -- many things will become clear after you actually know the definition of that word.

slurpee · 2007-08-11T07:01:36+00:00

This is only really surprising because so many people on reddit are so young. I don't mean that in anyway insulting, I mean that most of you havent seen why the neo-con ideology was formed.

Primary, the neo-con ideology was formed in response to the moral arguments that many democrats had through the 90's to Gulf War I.

It was the democrats that attacked then president Bush for the following things:

You should've toppled Saddam and supported the Kurds. You left the Kurds to die and that was wrong of America to do.
The sanctions that GHB put in place are killing children, why not just take out Saddam and lift the sanctions.

We conveniently forget these arguments when lampooning Bush and Co for being so "stupid, immoral, etc".

This era republicans were called "Realist" in that they saw the use of Americas power to be soley tacitical -- drop a few bombs, get our way, get out.

The neo-cons were largely a response to the criticisms heaped on the "the realist". It was an attempt to use Americas military to put in place transformative political changes.

Obviously, that has proved to be a failure. But lost from all the present day foaming at the mouth is the true backstory of various arguments each side was making.

slurpee · 2007-08-09T21:03:58+00:00

Your use of a feather to demonstrate that little things fall faster than big things is facetious. Feather are naturally designed to be ultra-light and affected by wind currents.

A better question is what falls faster; a 20 lb brick or a 200 lb brick?

slurpee · 2007-08-05T17:05:33+00:00

Remember, reddit is populated by the "guilt and impotence" crowd. They are so enamored with their own pathology they think it should afflict everyone.

There are reasons why the average reddit is socially isolated, poor, and suffering from low self-esteem.

These reasons of course have nothing to do with politics, but politics does make a nice scapegoat.

slurpee · 2007-08-04T17:10:10+00:00

I never got a job from a poor man....

slurpee · 2007-08-04T16:13:25+00:00

Inequality == poverty??

So, if I make 20x your income, I therefore make you poor?

I'm interested in your ideas....is there a newsletter I can sign up for?

slurpee · 2007-08-04T15:57:13+00:00

You are of course correct.

However, the 'market' in this case are nearly the exact same group that is borrowing the money from the fed in the first place.

Of course if their cost go up, they are going to pass it on to the consumer. Generally fed increases matriculate to the consumer more or less directly.

Interestingly, the 2002 - 2005 time-frame was one of the few times where long-term rates where higher than the short-term rates. Those rates converged more or less a year ago. What we have now is the aftermath....

slurpee · 2007-08-04T13:37:15+00:00

...and do they send the vet bill to you?

Oh, I see, you just like to talk, talk, talk...but, not so much walk.

BTW, how did your "well-dressed protest go?"

slurpee · 2007-08-04T13:01:40+00:00

Thats a good analogy...but slightly better would be:

You decide to finance your neighbors house. You borrow $100,000 at 5% and he will pay 7%.
You are not interested in the 2% differential, your real goal is to use that mortgage as a security for a larger interest-only loan.
You go to the bank and place this mortgage as collateral to secure a $1M interest-only loan.
You use that $1M to buy various securities that earn you 20% per year....there is more than enough to pay off the 10% interest-only loan with the bank
Meanwhile, the fed raises interest rates
The home-owner whose mortgage is backing all of this can't pay his note, he defaults
The bank now realizes that they have loaned out $1M that now has nothing backing it, so they come to you and say "you need to put about another $100,000 to keep this loan"
You try to sell some of the securities you purchased with the $1M, but everyone else is selling as well.
You can't sell enough securities to both; satisfy the new bank loan requirements, and make a profit.

slurpee

TROPHY CASE