Warning: you might learn something. K. Denninger lecture

Started Sep 17, 2012 | Discussions thread
GregGory
Veteran MemberPosts: 4,249
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Re: free capital is devastating
In reply to Chato, Sep 22, 2012

Chato wrote:

GregGory wrote:

I wish it were that simple... The problem is capital and the term 'free markets' which doesn't mean what it suggests.

Spewing trillions in QEs and allocating free capital to the cronies result in devastation in regions with less or higher cost of capital. The corporations simply buyout the competitors, drain them for intangibles, then shut them down, or run them to the ground then shut them down... Simply because the expense doesn't really cost them money (capital cost) and it's much much cheaper to wipe them off the map than to compete with them.

Of course, the world economy will/ would survive without the US economy (after some bumpy years) but in it's current state, the mega-corporations (non-US as well) with access to the free capital are like stampeding buffalo.

In fact the European economy tanked to a large extent because you bought up our Triple AAA rated Bonds, bonds based on home mortgages, which turned out to be wall paper.

And Europe is demanding that it's lazy useless population sacrifice everything they own in order to pay off the loses these banks suffered. Why should the banks suffer because they bought into a ponzi scheme? Heck no. Turn your countries into Third World ghettoes, and spend the next three generations paying off the debt.

Makes sense? Why should the banks suffer?

Dave

The owner structure of the megabanks is so complex, that it doesn't really make too much sense talking about 'American' vs. 'German', 'British', or 'Swiss' banks. Moreover, with derivatives in the background, the fate of companies and financial institutions sometimes act as a cock-fight in a dark Bangkok alley. Some institutions are bailed out, some are not... Pension funds are a different matter, this is where Average Joe takes a direct hit. With all these QEs, it's getting even worse for savers/ pension funds. Virtually free capital for the fellas and the FED removing safe, albeit negative real rent bonds from the market, pushes the risk averse into the risky markets. Mr. Ponzi probably has tears in his eyes looking down on us, either of pride or sarcastic laughter...

It beyond me, how those rating agencies haven't been purged to the ground. Since selling bad bonds is perfectly legal, but the risk would be reflected in the return. When the EU Parliament aired the idea of a European rating agency, WS almost gave 'orders' to refurbish the Kitty Hawk... Interestingly, Japan also has rating agencies, and the ratings are quite distinct from the Trio...

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It's easier to fool people than to convince them they have been fooled. - M.T.

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