Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: neolib who wrote (107139)	2/28/2008 10:35:38 AM
From: 10K a day	Respond to of 306849

write the book and i'll buy it.

To: neolib who wrote (107139)	2/28/2008 11:17:08 AM
From: Tommaso	Read Replies (1) \| Respond to of 306849

>>>A common currency does have advantages<<< Oh I don't know. You could sign a note with a picture of the house you were buying, and then it could be cut up into rooms that could be used to buy an automobile, etc., for example. Ha ha.

To: neolib who wrote (107139)	2/28/2008 11:31:10 AM
From: Hawkmoon	Read Replies (1) \| Respond to of 306849

All I was attempting to point out is that there are other ways to create money which don't involve Government debt at all. I hope I'm incorrect in construing that you took undue offense to my comments. None was intended. I think the history of financial panics, both before and after the creation of the Federal Reserve system, indicates that they can happen regardless of whether our currency is backed by hard (gold), or soft reserves. But understandably, having the Fed require lending institutions increase their reserves during heady economic times as a means of venting inflationary pressures seems sound practice. Now, maybe I'm incorrect, but it seems that during the past 10 years (housing bubble), banks were able to circumvent needing to increase reserves by selling off their mortgages to the securities markets rather than holding those loans on their own books. As Barry Ritzholtz mentions, the proliferation of derivatives has created an unregulated "insurance" market that has exploded from a couple of billion dollars to nearly $46 Trillion: "Further, as was the political fashion, deregulation and a lack of interest in the oversight role of the banking system allowed an unprecedented expansion of credit, including to the least credit worthy consumers. Additionally, derivative selling -- at is heart, an unregulated form of insurance -- expanded from a few billion dollars to $46 trillion dollars." bigpicture.typepad.com Some people have opined that the Fed (all central bankers?) no longer has the ability to control monetary supply. They assert that derivatives, traded in public/private markets, are the new tool of creating money supply.. They have created proprietary liquidity instruments that were backed by the willingness of investors to purchase them. But the minute that demand subsides (or in the case of CMOs, vanishes), those instruments become valueless. The same could be said for credit card and the securities that are sold backed by the "integrity" of the card user. Should markets suddenly decide to avoid purchasing those high yield securitized bonds, interest rates for credit cards would naturally skyrocket and credit card holders would likely be required to demand immediate payment and halt further credit availability. I don't know the answers.. (that why I'm seeking a bit of enlightenment out here as I bounce my ideas around).. This is a tough one to get a grasp on. But I can recall that the panic of 1907 occurred when there was no Federal Reserve, and the US was on a gold standard. Banks called loans.. halted further credit, and there were numerous runs by depositors that forced many banks to close.. So, the point I would like to convey is that financial panics occur because of overspeculation and excessive expansion occur without appropriate regulation and oversight. But who is to decide what constitutes a bubble? That's hard to determine, and it places enormous power in the hands of a relatively few people. Few people recognize a bubble until after it's burst. And maybe that's because they're too busy trying to make money as they whistle past the economic graveyard, hoping the animal spirits don't attack them before they can get a chance to make a bundle. Hawk