Wednesday, May 4, 2011

Financial Crisis More than Finance, Staggering Lack of Knowledge by Investors

Tags: Financial Crisis Crucial Facts Hidden from Investors Deregulation Greenspan Ideology 20 Years of Dismantling Safeguards for Investors

Financial Crisis More than Finance, Staggering Lack of Knowledge by Investors

Lies and deceptions by Wall Street Bankers and everyone else in the Financial chain has led to the phenomena of no one trusting anyone else which has essentially stunted long term investments and any loans by many banks. As David Brooks explained why all the brains including himself could not save Russia form its financial crisis and may have actually caused it was due to a lack of trust and information which led to oligarchs to stealing Russia blind of perhaps trillions of dollars sent overseas. In any top down dictatorial system as in the Soviet Union, no independent financial system and its safeguards were developed. Such is the case in China now.

European stocks may be a safer place to bet on the Emerging Markets because they are heavily involved there in a more balanced manner than here.

In the last 20-30 years, these safeguard systems were systematically dismantled in the USA and Europe, especially when President Clinton in the mist of the sex scandals, signed the Republican bills in 1999 and 2000 and specific policies instituted by Bush and lobbying by Paulson of Goldman Sachs and a friendly SEC run by people who hated regulations. The same Paulson as Secretary of Treasury under Bush decided to ignore congress and use to $700 Billion to enrich the banks instead of getting rid of the derivatives which the banks still hold secretly. No one really knows how much each bank has.

So the Federal Reserve printing machine provided unlimited amounts of money for the top banks and wealthy patrons. Yes, they made up all their loses and more!

How about the rest of us? We all have uncertain futures and have no idea whether another financial collapse will occur and when it will occur.

Even a wide majority American bankers did not know the extent these derivatives on derivatives were spread throughout the world financial system without accountability. Only Goldman Sachs and J.P. Morgan Chase Banks knew!

Both the Clinton administration and especially the Bush Administration with considerable leadership or lack thereof of Alan Greenspan whose Ayn Rand Ideology was so deeply ingrained that given the facts as early as 2001 showed his ideology was wrong and the financial markets must have strong rules to keep it on an even keel. Especially allowing financial institutions and corporations to hide what they were actually doing led to the Enron, and other collapses. Even with that Greenspan's ideology prevented him from acting.

It takes someone with credentials to say something that most investors with common sense figured out a long time ago. Keeping secrets whether by governments or corporations or Wall Street bankers is not the way to go to maintain stability in society or the financial markets.

Sure most of us knew something will go wrong, but i had no idea that these unreported secret derivatives where spread all over the world, but especially in America and Europe. We are still seeing the ramifications in Iceland, Ireland, Greece, Portugal, Spain, and who knows where else.

Hernando de Soto argues for much stronger regulation that cannot be easily changed from administration to administration.

So far not much has said about President Obama very risky move to kill Bin Laden and getting computer information about Al Qaeda operation, and verifying that Bin Laden was indeed dead. Terrorists often have explosives on their body so when Bin Laden ran toward them although apparently unarmed, he had to be killed to prevent him from activating a possible bomb.

The media does not talk about the whole implications of this brave decision by Obama on his public perception by more conservative voters based on what happened to President Carter and Clinton when helicopter raids became disastrous in rescuing hostages and the Black Hawk Down incident respectively.

The White men who invariably favor Republicans in every election were concerned whether Obama had the cajones to do to brave things. Obama's political compromises made him look weak. If he continues to do bold things, he will perhaps allow the Democrats to take back the House and gain in the Senate in spite of the Republican unlimited corporate and billionaire secret donations in 2012 to saturate the political ads on television.

Obama will not be able raise close to what the Republicans can raise, but it has to be enough so he is not shut out of the television necessary market. Remember both the House and Senate are needed for Obama to be effective, but even a majority does not guarantee success because of rules of the Senate force compromise because even one senator can stop or delay legislation.

Jim Kawakami, May 4, 2011,

Financial Crisis Wall Street Crucial Facts Hidden to Investors Needed To Access Risk, Bloomberg Business Week, April 28, 2011, Renounced Economist Hernando de Soto, What was Missing,

During the second half of the 19th century, the world's biggest economies endured a series of brutal recessions. At the time, most forms of reliable economic knowledge were organized within feudal, patrimonial, and tribal relationships. If you wanted to know who owned land or owed a debt, it was a fact recorded locally—and most likely shielded from outsiders. At the same time, the world was expanding. Travel between cities and countries became more common and global trade increased. The result was a huge rift between the old, fragmented social order and the needs of a rising, globalizing market economy.

To prevent the breakdown of industrial and commercial progress, hundreds of creative reformers concluded that the world needed a shared set of facts. Knowledge had to be gathered, organized, standardized, recorded, continually updated, and easily accessible—so that all players in the world's widening markets could, in the words of France's free-banking champion Charles Coquelin, "pick up the thousands of filaments that businesses are creating between themselves."

The result was the invention of the first massive "public memory systems" to record and classify—in rule-bound, certified, and publicly accessible registries, titles, balance sheets, and statements of account—all the relevant knowledge available, whether intangible (stocks, commercial paper, deeds, ledgers, contracts, patents, companies, and promissory notes), or tangible (land, buildings, boats, machines, etc.). Knowing who owned and owed, and fixing that information in public records, made it possible for investors to infer value, take risks, and track results. The final product was a revolutionary form of knowledge: "economic facts."

Over the past 20 years, Americans and Europeans have quietly gone about destroying these facts. The very systems that could have provided markets and governments with the means to understand the global financial crisis—and to prevent another one—are being eroded. Governments have allowed shadow markets to develop and reach a size beyond comprehension. Mortgages have been granted and recorded with such inattention that homeowners and banks often don't know and can't prove who owns their homes. In a few short decades the West undercut 150 years of legal reforms that made the global economy possible.

The results are hardly surprising. In the U.S., trust has broken down between banks and subprime mortgage holders; between foreclosing agents and courts; between banks and their investors—even between banks and other banks. Overall, credit (from the Latin for "trust") continues to flow steadily, but closer examination shows that nongovernment credit has contracted. Private lending has dropped 21 percent since 2007. Outstanding loans to small businesses dropped more than 6 percent over the past year, while lending to large businesses, measured in commercial loans of more than $1 million, fell nearly 9 percent. ... For 8 page article, link at top of article.

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