A moment of silence, please
Published:
September 15, 2008 at 8:31pm
There are matters of far greater importance than Joseph Muscat, though they do serve to remind us that in a crisis, somebody like him would be totally irrelevant.
Eighty years after the Wall Street Crash that brought on the Great Depression, great efforts are being made to stop history repeating itself.
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Welcome to the real world….
FYI this all kicked off in July 2007
we’ve seen a bailout of Bear Stearns (March)
the nationalisation of Freddie Mac & Fannie Mae (last wkend)
Lehman go bust & Merrill Lynch get bought (this weekend)
not to mention Northern Rock last year!!
(Daphne – There was a brilliant piece in one of the London newspapers a week ago, I think. I’m going to look for the link.)
what exactly is your point Daphne?
After all with loads of supposedly competent fat cats lining their pockets will tens of millions of dollars a year in bonuses, Lehmann Brothers top brass actually steered the bank to its destruction. So it didn’t take a Joseph Muscat to bring them down……
On a local note, it looks that BOV has some investments in Lehmann which will probably go out of the window. Now thats a worrying thought….
Just for those who forgot, Lehmann were the privatistion advisors for Maltacom plc when it was sold to Tecom. Enough said.
(Daphne – Gerald, you are quite beyond belief.)
@Gerald
The only thing Joseph Muscat is capable of bringing down is anything he controls – God forbid it ever be the country!
Forget that little man – we are talking about the big picture here!
Gerald, no one could have predicted this crisis, and it wasn’t the bank’s executive that created it. The subprime mortgage crisis started back in 1938, when Roosevelt set up agencies like Fannie Mae to open up the credit market to poor people, as part of the New Deal.
And it’s not just BOV that has an investment in Lehman, it’s all of BOV’s clients which do. If BOV’s profits fall, then so will the interest rate on your savings. Meanwhile, it will become more difficult to borrow money. If you don’t bank with BOV, but the company you work for does, then you won’t be getting a raise because your employer is borrowing at a higher interest rate. At some point everyone will be hit by the fallout, in some way or another.
Good to see you here, Daphne. Pity your critical switch is off when it’s not about Lejber and Katliks.
I don’t want to sound apocalyptic, but this is more than the usual market slump.
It’s Catch 22 now. The Federal Reserve (which is not a federal entity but governed by the banking cartels with no congressional oversight) cannot print more dollars to bail out the ailing financial institutions (who create the financial bubbles in the first place). Printing more dollars at a time when the dollar is no longer in demand worlwide would bring its total collapse.
On the other hand they can hardly afford a domino effect and a financial collapse. Following the nationalisation and federal bailout of Freddie and Fanny, this time the banking certels themselves are trying to bail out eachother (that is, without asking their cronies at the Federal Reserve to print more money and create more inflation).
This is not the only thing that is occuring in the US. There is more than meets the eye. But at last the people are waking up to an accumulation of indescribable deceit, tyranny and greed for power. Some of the younger revolutionaries are even planning to rise…
(Daphne – Kevin, just because I don’t subscribe to your US conspiracy theories, it doesn’t mean my ‘critical switch is off’. Also, I don’t need your mini lecture, thanks.)
Gerald: What exactly is your point?
I propose another moment of silence – in remebrance of the great Richard Wright.
Kev, the Fed won’t have to print any more dollars, because these past few years the country has received more foreign direct investment than ever before. The US now has the magical combination of a weak currency and a stable economy.
The financial bubbles were created by socialist policies not by corporations. US banks were always very conservative, it’s the government which opened them up by agreeing to subsidise the banks’ losses, year after year, so that they could provide credit to people who couldn’t afford it. The investment banks got caught up in the mess because they bought up these debts as bonds.
Seems Gerald has one of those instincts so common, sadly, in Lil’Elfdom – glee when something bad might be happening to the country, so they can blame it on the Government. I don’t if he’s a Lil’Elve himself, but he does a good imitation of one.
Stand up and salute Mr Wright, all of you.
(Daphne – Gerald is a reporter with the business press, no less.)
You know what is frightening – seemingly oblivious to the news, two Maltese stockbrokers were trying to sell Lehman equities as double As.
(Daphne – You’re joking, right? Gerald, here’s a story for you.)
Here Daphne, have some soft Carlin
http://www.youtube.com/watch?v=WmJ-dMIb1cE
Who knows, it might stir your slumber.
@ Matthew – The world has stopped buying dollars – some dumping occured too.
The bubbles were created by the bankers’ quest to make more profits by lending money they did not possess. Meanwhile, taxpayers’ money is squandered in unncessary wars for the benefit of the military industrial complex and the oil oligarchy, while the US is gradually turned into a police state… These are exciting times. You’ll soon find out.
(Daphne – I have to hand it to you, Kev – you’re always in the know when it comes to exciting times that lie ahead….)
Black Sunday!!
Merill and Lehman, down in one day. Fannie Mae was bailed out by the US Government earlier this month. Bear Sterns, another old institution, was bailed out earlier this year.
Wall Street got involved in complex financial instruments, that ran out of control. These bonds (MBS and ABS) became so creative, that nobody could understand them any longer.
@Gerald
BTW the underwriting business, investment banking and the advisory divisions of Lehman are quite distinct from each other. So please try to look at the big picture rather than your insular and petty mentality. No wonder that JM thrives in Malta.
@Kev
This is not the only thing that is occuring in the US. There is more than meets the eye……… Some of the younger revolutionaries are even planning to rise…!!!!!!!!
I guess you read a lot of left wing, anti-US blogs.
You and your wife are an item. BTW, where is Lorna (Vassallo). that’s an interesting trio.
I read these stories with a heavy heart. I salute first of all the gentle, wonderful Richard Wright, who thrilled us with his complex overlays on the keyboards during the heydey of the only rock group that matters, the unique, wonderful Pink Floyd. Richard, who I had the intense pleasure to meet and discuss his and the Floyd’s music several times through a mutual friend, wss the quiet unassuming backbone of the Floyd. The world, and not just the musical world, is that much poorer with his passing. Richard, you are now in that Great Gig in the Sky…..you are gone, but we who grew up listening to your music, will never forget you…… my 5 year old son is already a fan, thank God.
I am also worried about the collapse of Lehman Brothers. The failure of the Fed to bail them out was no surprise in a an election year. The FEd cannot contnue raiding the US Tsxpayer’s money. But this collapse will sound the death knell for easy money and cheap borrowings everywhere. Malta will be affected . No doubt
P Shaw, what you mean to say is that while it’s very easy to track the movement of bonds, it’s very difficult to predict it.
We know for certain that a financial crisis will cause a hedge fund or two to fail. What we don’t know is when or why this will happen, because the world is full of unstable economies led by unpredictable people. Lehman had bailed out Long-Term Capital Management in the late nineties, which had failed because of the knock-on effects of the Thai government driving the country into bankruptcy.
Kev, how do you lend money which you don’t possess?
Sorry Mario, but I glaze over when people my age (the men, usually) bang on about Pink Floyd. It’s like the older generation with their Beatles. I have lots of their music but quite frankly, when I listen to it now it means about as much to me as a waist-length jumper with batwing sleeves and leg-warmers. I can remember liking all that, but I can’t exactly remember why.
This banking cartel was created by the American Federal Reserve Bank (a private international corporation) that loans money to public and banks, money they just print.
The more money they print the more the dollar goes down in value and inflation occurs. Eventually this will lead banks to collapse and corporations to bankruptcy. Keep in mind that the only thing that gives the money value is how much there is in circulation. When this occurs the Fed will end up buying their rival Banks at a discounted price consolidating the monopoly to this small group of bankers.
This is just a mathematically equation method that gives power to the Fed, this super state (the US) is controlled by international bankers. In five years between 1914 and 1919 the Feds increased money supply by 100% resulting in extensive loans to small banks and ended up to bank-runs and eventually bankruptcies. Happened again in 1930 where 18,000 small banks ended up bankrupt, the largest depression in history.
The power to regulate a currency such as the dollar means that you have the power to regulate the world’s economy. And who are these bankers? The queen of England is one of them, the others? Is this conspiracy?
(Daphne – You must be related to our friend Kevin.)
Daphne, you are entitled to all that glazing over you like. I do remember why i liked all that. I still get goosebumps and all the related phenomena when i listen to the Floyd. We were younger and sometimes it was the only good thing that there was in the horrible reality of the Mintoff KMB years. At least, music wasnt censored. I remember my first live Floyd concert at Hyde Park. I was 15. But women dont understand us men’s love for good music. Sorry. I say the same thing to my wife, she is ans unimpressed as you are with all this, god bless her. When Roger Waters was here, she didnt see me for 3 days. Roger performed nightly in Philip’s Kantina after the concert. Can i have some support here, Bocca?. Enough on the Floyd.
As for the Lehman Brothers crash, it’s serious and disquieting. It’s going to take down a lot of smaller financial institutions, not just in the US but in the UK as well. AIG is another concern. If that fails, we can be looking at double digit explosions in insurance premiums. I think it’s time the top gun at MFSA stopped eating their bank-sponsored dinners and get their act together to get some contingencies in place. After the failure to protect consumers from being unnecessarily scammed by the banks in the credit card issue in Malta, I have very little faith in the Stair Rail and his band of merry men. They are, as we say in Malta, Laham Minjuh. And the buyers are the banks.Where are they when the going gets tough?
(Daphne – As we say in Malta? Or as they say in Zurrieq? I’ve never heard that expression. Please explain.)
I think M. Debono meant laham mibjuh the “n” is close to the “b” on the keyboard.
(Daphne – I still don’t understand it.)
@ Matthew, you ask “how do you lend money which you don’t possess?”
This does not even form part of the “conspiracy theory” domain. This is standard practice. Banks today simply create credit out of debit – so they make profits through interests over loaned money that does not really exist. Every newly created debit becomes a new credit in the bank’s accounts on which they can provide yet more loans, thereby creating more debit-based credit. You don’t have to be a financial guru to realise that this inflates prices and creates financial bubbles. The banks are essentially saying ‘there is a lot of credit, borrow more at low interest rates.’ It’s like an elaborate pyramid scheme: as long as debtors pay up the wheel continues to revolve.
@ P Shaw – you wrote: “I guess you read a lot of left wing, anti-US blogs.”
You’re very wrong. In fact I find myself more on the side of the so-called Ron Paul Revolution. These people are better equiped to understand what is really going on. Many on the Left in America still think that this is the result of unregulated capitalism – when the truth is that this is the result of REGULATED capitalism. The large corporations rule the US not through capitalism per se, but through Big Government serving their needs by regulating in their favour and by creating a corrupt playing field (while spending billions on wars for the sole benefit of those who profit of American imperialism).
But this popular revolutionary spirit – especially the anti-war stance and that against police-state tyranny – transcends the bipartisan duopoly. The new American revolutionaries call themselves “patriots” (a reaction to the fact that in fascist America those who are against the war are called ‘unpatriotic’). They know that there are no differences between McCain and Obama because none of them is addressing the main problems: 1. Interventionist foreign
policy on the basis of lies and deceit (preemptive wars of aggression); 2. financial problems caused by the unaccountable Federal reserve – which is triggering the demise of the dollar; 3. the advent of the police state with astonishingly eroding civil liberties; 4. Huge budget deficits.
There is a lot more to this, but you would call it “conspiracy theory”. I guess if you keep watching the mainstream news you will remain in the sheeple’s rut. A lot is happening without as much as a whisper from the mainstream media – although the advent of martial law did make it to the MSM a few times (this one is from 2007: http://www.youtube.com/watch?v=DK2g0TGaAZA )
Martial law in America? Unbelievable, right? Do some research about Fema camps and about what’s going on right now and double-check whatever you don’t believe.
But remember that ‘conspiracy’ is all that governments and powerful people do. It is obvious that these people meet. And when they meet they discuss issues that concern them and their power – and since their power overwhelms the stooges that play politics, they are the true rulers. CNN is not going to tell you about this power pyramid, less so SuperFun or NetNooze.
(Daphne – “Conspiracy is all that governments and powerful people do. It is obvious that these people meet.” What – haven’t they asked Joseph Muscat to join them, yet?)
Before dismissing this development at Lehman Brothers as being of little consequence to our daily lives, do have a look at the news which has been revealed today that Bank of Valletta has been ‘moderately’ effected and do think about the fact that there are many small Maltese investors who shall somehow suffer because of this.
The financial services sector – in general – relies on a complex fabric of supporting instruments which basically means that a kink in the network effects many players and the larger the incident, the more likely that this effects more and more institutions.
I believe we are today paying the price of the bullish bubbles created by the yuppie generation in the eighties and the subsequent dotcom and S&L (savings and loans) booms of the nineties. We may yet see more Lehman Brothers (see the buyout of Merrill Lynch) and we should be ready to see developments on a micro-level even locally with the issues surrounding the various bond issues and the various property developments (which remain unsold even years after these are completed).
Fortunately, if one examines how the Central Bank of Malta first and now the MFSA regulates the matter of non-performing loans, we are more lucky than the US and many EU states since banks have to impose a certain level of security from their clients.
What should be done now is for local institutions to actually reassess the securitisation of private sector / commercial financing and the actual value of guarantees lodged and eliminate that gross practice of accepting second and even third hypothecation as this can be a source of abuse.
The immediate impact, however, remains on the effect on exchange rates and the weak dollar / strong Euro ratio is not necessarily a good thing… even though the price of oil is dropping towards US$90!
Kev, you make it seem as though banks are printing notes with an HP DeskJet.
Once upon a time banks were very, very conservative. When a wage-earner approached a bank for a loan to finance the construction of a house, the bank would deny that request. And they would deny it because they knew that if they didn’t then they would end up carrying the loss incurred by that loan when the borrower failed to pay up. So the poor person would go and build a house out of mud and sticks, and his children would grow up among mud and sticks, just like many Maltese people did not so long ago.
But then something happened: banks realised that they could lend money to poor people, package all those debts into bonds which could be bought by people like you and me, and register an instant income, without having to wait decades for the loan repayments to come through. That’s how credit became democratised, and that’s how a lot of us live in conditions that would have been considered luxurious by the previous generation.
Kev: Most of the profits of banks, today, result from non-interest income. Just browse the published accounts of the leading banks (even those based in Malta) and you’ll see for yourself.
What I meant by “Laham Mibjuh” is simply that. Our financial regulatory setup is influenced too much by the big banks and financial institutions.Just as long as they foot the bill for the endless lunches and dinners. Daphne, we dont just say it in Zurrieq. Its a Rabat expression actually. It means simply “bought”.
Daphne, whist not agreeing too much with KEV, he has a bit of a point. When Governments, and by that I also mean the EU, mix too much with us business people, we tend to try and influence the hell out of them. But then that’s our job, to further our business interests. Nothing wrong with that, as long as no undue influence is used. We business people always have a point, and frequently it’s the right point.
” As we say in Malta? Or as they say in Zurrieq? I’ve never heard that expression. Please explain”
Daphne it is “laham mibjugh” meaning that they aren’t really independent , they are puppets on a string sort of.
(Daphne – Where I come from, we just say ‘mixtri’.)
Jesus, I seem to have stirred up quite a hornet’s nest here. As for the BOV situation, no I don’t bank with BOV but I’ve no doubt everyone will be affected.
What i was trying to say was that even if JM was in power, his relevance (and Malta’s) to such a large crisis is really minimal – although there will be undoubted effects on our already disastrous MSE which has been stuck in the doldrums for the past two years.
ABC – i am not an elf as you will see when we meet on Thursday :)
And thanks for the tip on Lehmann selling as triple A. I have an idea who the stockbroker is though.
(Daphne – My remark wasn’t about Muscat’s relevance to the crisis in America, but to his dubious ability at handling an economic crisis here when he becomes prime minister.)
Some food for thought:
http://www.nytimes.com/2008/09/16/business/worldbusiness/16oil.html?_r=1&oref=slogin
(Daphne – It was bound to happen. The high price of oil was fuelled – sorry – by demand for goods and services that used oil. Now, with demand for those goods and services crashing through the floor….I’ve just had a thought: maybe all those Prayers at the Pump organised by that American pastor actually worked. I’ll bet he’s claiming they did. There is a God, and he’s listening….)
Well, it looks like our government has got the market wrong and it will be months before we see a corresponding decrease in fuel prices at the pump and our utility bills.
“Mixtri” means that someone received money. “Laham mibjugh” is sort of there is a blind loyalty ,for which one cannot do much about it.The meat is already destined for the customer , there is no way one can buy it.
We also refer “laham mibjugh” to someone who does not have full control on his life due to his job conditions like for example a soldier or a policeman. Hope that I am more clear now . {;-)
(Daphne – Yes, it’s more clear now. I’m trying to think of the equivalent English expression, if there is one, but can’t yet.)
and now AIG is going down…..
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4767140.ece
@gerald , you must be obsessed with this government. You must hold a grudge. Poor gerald, were you passed over for an interview?
ANyway, the hedge worked for a very long time when oil prices were close to $140 a barrell. now they have gone down, and hopefully will go down further, BUT you need to know there is a time lapse and various factors in the formulae between actual price of oil and the current price per barrel. OPEC is already talking of cutting production.
In the US retail price is still above $3.50 a gallon, in Italy still above EUR 1.52 in the north.
I hope that the oil prices keep decreasing for our common good,especially to cut off the wind for countries like russia which use oil revenue to threaten their neighbours. So gerald do not fret. the market has not adjusted yet (god forbid you and JM were running this country)
@ Mario Debono : I like pink Floyd’s ” On the turning away” http://www.youtube.com/watch?v=2v240bYbbrM&feature=related
Their music and lyrics are great.
@ All : How can we ask that US pastor for some REAL rain here in Malta , all the wells are dry , I need to start planting some tomatoes . The land is bone dry , it hasn’t rained since March. Robins are already here and the countryside (what’s left of it) looks like the Sahara desert. Weather forecasts are predicting a storm for next Friday , I hope it will be a perfect storm with enough water (40mm please).
Economists are worried about AIG and Lehmann Brothers and country folk about the much needed rain.
Of course there is a time lapse – but government is already preparing everyone that at best, the surcharge will remain as it is.
Kevin Ellul Bonici: “loaned money that does not exist?” What sort of money – loaned or otherwise – *does* exist?
Good commentary on Glenn Beck (CNN, 15/09): http://www.youtube.com/watch?v=UMstcGRezhw
This was before the $85-billion Federal bail out of AIG. So far, the pattern is thus: the Fed is bailing out the mortgage industry (Freddie Mac and Fannie Mae) and the insurance industry (AIG). Lehman Brothers is a commercial bank – it was left to die. But Meryll Lynch, another commercial bank, was purchased by Bank of America, itself a faltering giant – perhaps hoping to be bailed out by their cronies in the Fed when its time comes. Some months ago, attempts to bail out Bear Stearns, an investment company, failed miserably and it was eventually bought by JP Morgan Chase.
Meanwhile the taxpaying citizens, already footing the bill for pre-emptive wars and over 750 military bases across the world, also pick up the bailout tab. And if the Fed runs out of money, as was the case time and time again, hey presto, it’s FIAT money, ‘printable’ by the tons (it’s digital money in fact). In this case the taxpayer suffers the ‘inflation tax’.
All is fine in the land of the free.
For anyone interested in a clean description of what’s going on, here’s Joseph Stiglitz saying it as it is (former chief economist, World Bank):
http://www.prisonplanet.com/nobel-prize-winning-economist-crisis-as-bad-as-great-depression-or-worse.html
(The interview is also on youtube/audio below the article – it starts at 02:03)
John, yes the song is really good. I have left strict instructions for it to be played as my coffin is going down into the depths of Mother Earth. Hope the wife / offspring oblige me.
Mario , are you sure you have a place to go” down into the depths of mother earth”. By the time people our age start to die there wouldn’t be a place for us for a burial into a grave.So it will be burial at sea or incineration ;-)