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The anticipated collapse

by Open-Publishing - Sunday 21 September 2008
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Trade-Exchange Rates

The anticipated collapse
Lessons from the banking crisis

Banks are neither productive nor innovative. They lend money. Huge returns are available only with the development of chain letter schemes to achieve.

Heine FLASSBECK

Why always the financial markets? Why so rare burst a speculative bubble on the potato market? Why verkalkulieren machine builders are so rare that the state must help because otherwise the entire market economic system is at risk? What drives seemingly respectable crowds bankers and stock market to be risky business to make it all behind how stupid kids in the fountain, and after the state screaming for help?

The statements are relatively simple. First you need to take note that the financial system fundamentally works differently than the normal freight markets. The famous liberal Friedrich August von Hayek, the superiority of the market economy system is always on the grounds that millions of market participants to meet all the different information available on the market then in a uniform price for a good turn. No government of this world is to reach such an efficiency in the situation.

The capital markets work, but unlike the trade in potatoes and machinery. Here comes the "really big games" to interest rates, exchange rates, equities, commodities prices and house a handful of privileged actors who are no longer all know, as every well-informed department of a ministry or central bank can know. All are remotely controlled by a few information that accessible to everyone permanently on the hunt screens and all those involved in a similar way be interpreted. So if certain events occur, such as a commodity price boom, then jump almost all players simultaneously on this train and try a golden nose to earn. That is exactly good for so long, until the price far away from the value driven to the real world, so the right people to pay in a timely manner. But then collapsed the entire game system.

This game is even more absurd that the financial greedy gambler and their bankers every few years on the grandiose idea that one could own the profits it really rejoice in the height (on Mr Ackermann famous 25 percent return on equity for example) by the majority speculation financed with debt. It is therefore to borrow the money, which is already in the bag has a lot more money and investing it in plants with a slightly higher return than the interest rate provided that one to the other banks or investors will pay good. That is the big lever with which banks, hedge funds and so-called private-equity fund, the return on equity in unimagined heights can drive if they only get enough credit.

If all speculators with borrowed money just go into the casino, would spook quickly to an end. The extremely unimaginative method, which returns to levers, works for the entire global financial system only for a while, when all players will find certain objects in which they deal with a certain plausibility can persuade, they would be high returns with low risk offer. Thus an object was the American housing market in the last ten years. In the twenties of the last century over the role of new shares arose producer and consumer in the nineties shares of telecommunications. Very often there are currencies in which governments are based on the price or interest rates high. Even companies with high equity share to buy is popular because the return on this alone can hochjubeln that equity is replaced by debt. The latter do so-called private equity firms, so companies that exactly the opposite of what its name says, they decrease systematically namely equity, rather than such available. Once the markets such an object of desire have identified, is a kind of chain letter set in motion mechanism, in which each tries, not the last in the chain.
So primitive and yet is short so profitably. As long as you submissive "scientist" has nothing else to do, as the "undeniable efficiency of capital markets" to praise, as long as one politician has, before the high respect for the "Werteschaffern" in the banks in the knees go, as long as you have a public Who love to persuade it that it would no longer able to work and with a quick business in the financial markets virtually without risk rich, as long as you have a public discussion in the media hinbekommt the people weismacht their retirement could only with the big game in the financial markets are made secure so long as it is always great crises.

What we should finally understand that banks produce nothing. The People’s Verdummung begins so that one, what banks offer their customers as "products". That sounds good and serious and especially as banks were equally innovative as production companies and would be every few weeks, a "new product" to throw the market. Banks do but always the same: You borrow money over relatively short periods and give it over longer periods. It is to earn money because the interest rates for long periods often are higher than those for short. This is also a risk, because the timely repayment of loans to the banks for long periods never been as safe as the short-term obligation for banks to the depositors. Overall, it is a business, but surely not a bomb shop, where you systematically and in the longer term returns of 25 percent could achieve, as still the biggest German bank sought.

We went in the good old days at a bank counter, had been regularly wet hands. The man behind the counter, then the "official bank" was called, had no sense in us the joys of presenting financial life, but was only pointed out the dangers to conjure, which lurk everywhere. "This is nothing for you," We would have all facilities has been considered, in any way with the real financial markets had to do. Worse of course, connected with hochnotpeinlichen interviews, it was if you wanted money.

If an investor in recent years went to the bank, he met fashionable ladies and gentlemen, with all his charm in the world one of its latest products, "wanted to sell. Should it be 13 per cent yield with Argentine runners or long but perhaps equal 23 percent with an ordinary equity? Even the one who needed money, it had in the modern banks easily. Hochnotpeinlicher nothing to do with questioning and collateral. A customized financial plan, the bank young team ready for the young company - with fast motion on the stock exchange as a coronation. We had no business politicians for decades preached that this country the courage to take risks and thus the risk is missing?
That is now ended and this is a good thing. In large parts of the financial world was any sense of lost that the "game" with the money saved by people who do not understand what is happening on the financial markets happens, not only morally reprehensible, but also economically in a crisis must lead once betting on a large scale does not work. That is always the case if somewhere a shock triggered when the economy threatens to overheat and interest rates by the central banks will be raised - or if the real world simply no longer follow the financial roulette.

What to do? The rapid intervention of central banks, although appropriate, because otherwise far greater damage had threatened. But this should not mean that the state, after he once again banks and other speculators before the worst of us, goes on to the agenda. So it only provokes the next crisis, because the players in the casino then reckon that it is already not so bad will happen. Who, as Deutsche Bank, with 25 percent protzt yield, which must also demand that he accept 25 percent loss, according to the state without screaming. He screams and the State can not simply shut their eyes, because a significant risk of infection for healthy institutions threatens the state to the "Institute" long before knocking on the fingers, namely when it returns with his goal in public protzt.

On the other hand, the policy must begin to understand that the big games, because the around the world are played for the real economy are completely useless. That the mortgage of an American house builder still 23-times on the international financial markets in the form of any "Products" verscherbelt was indeed harmful to the American build houses. It seemed only a time to inspire the market, because the house builders in the dark about their interest burden and allowed investors to be achieved in terms of yield has systematically deceived. Games on foreign exchange markets are generally in a direct and massive way harmful to the real economy because they are the exchange rates as systematically in the wrong direction to drive.

Credit for the really investing companies can also create banks, which are of such activities fully contain the casino. One should not forget that there will be times of the German economic miracle was still obviously the Zinsgebahren banks strictly controlled. Even a country like China has its economic miracle even greater in strict control of the state on debit and credit interest managed. Competent to understand economic and financial linkages such politicians now again, it’s easy, the glaring regulatory gaps.
Even the gaps in the international financial supervision are obvious. The best rules on the deposit of banking activities with equity, such as those at the Bank for International Settlements will be formulated, using nothing if the assessment of risks alone a small group of rating agencies leave, which in turn is due to incompetence or ignorance the wildest derivative structures with high quality features. Again, the bodies themselves hands and ensure that such ratings are not interessengebundenen institutions such as a financial supervisor critically reviewed and corrected if necessary. Any medical or chemical product is approved by state regulators, only "financial weapons of mass destruction" (Warren Buffet) may each sell without the state einschreitet. Finally, the biggest casino, one in which international currencies are traded, simply closed. It is less than ever that the main price of an economy, the exchange rate, the short-term profit interests of international financial speculators and sharks left.

Overall, it is simple: financial markets you need, but we must be aware that they need to be heavily regulated. Because they produce dangerous toys by people in their greed for short-term profit on irresponsible manner with the money of other people speculate in the hope that it is enough to fool the world who do not realize how smart bankers from across the table should be considered.

In future, each Boasting with extreme returns of financial supervision, the finance ministries and central banks immediately be taken as an occasion to examine in whose bore the excessive profits of the concerned financial institution go. Also for the salaries of directors and supervisory boards must be limits to the government because it is obvious that these executive and supervisory boards of systematic involvement of the State of the losses expected. Would that not so, they would much more thoroughly examine where their profits come and what risks they are tainted.

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