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How To Lose $7.2B With Just a Few Basic Skills
Cityslacker recommends a Register piece speculating on how a lowly trader at the French bank SocGen was able to lose billions using only Excel VB. The author freely admits that his story is not based on hard sources, but his experience in the banking industry lends plausibility.
The solution is clearly to blame microsoft for it.
As someone who has spent too many years in financial services... while some traders are famous for thier bubble-gum and duct-tape approaches to things, this article is this biggest pile of BS I've ever read.
Give me $7.2B and I'll conveniently "lose" it for you. And I have no skills!
This guy's the limit!
I wouldn't put any money based on what the Register says. Not a very reliable source!
XML is like violence. If it doesn't solve the problem, use more.
I may be stupid, but I read the entire article and still don't know what the guy is accused of doing. He traded stocks without permission? Can anyone clue me in?
He should have read some training material from the internets first.
Buy high, sell low!
and he also has no skilz.
Cost of Iraq war
See here...
PHEM - party like it's 1997-2003!
I read TFA and I have only a vague idea what the author is talking about.
Proverbs 21:19
Isn't that how Red Hat started?
In other words, it's like poker in Vegas:
If you are good you can win. If you aren't you will lose. Either way, the house/broker always wins and it's a net loss for the players.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
10 STEAL Money
20 GOTO 10
If you haven't made a developer cry, you've wasted a day.
The SocGen "scandal" scares me mostly because it seems, with consistency, the people calling foul in the media tend to be the very people who also want more regulation of banks in investment schemes. As the media calls for tighter controls over investments, I find more people willing to nod their heads in agreement, even though we need to see that it is CURRENT regulations that lead to these fiascos.
Why do we have ANY bailout protections for investments, including savings accounts? When you give someone your money and hope to make money in return, there is risk. Part of the chance for reward (profit) should be loss of your money. That's what investing is. Yet when we get MORE regulatory control, it gives people less fear in losing everything.
The FDIC (and the SEC) are both such organizations that increase regulations so people feel safe, even though they should NEVER feel safe about investments. That's risk, people! The FDIC has to "insure" deposits because of the fraudulent fractional reserve banking system. What we need is full reserve banking, with private regulatory audits, and greater knowledge that the money you put in isn't loaned 8X more than the bank has on your deposit record.
What SocGen did is not uncommon. First, the bank has the ability to create money out of thin air (see the money multiplier effect). Second, most investments today do not generate any profit or income (see dividends), they just grow in value because other sucks have more money in the future than the current sucker had to buy (see monetary inflation), so the price seems to go up even though the value stays on par or goes down.
For me, there is one investment: put money into my own business, which pays me dividends (profits) instead of just showing an inflationary-based stock value increase. If I need to "save" money, I put it into hard assets such as gold, land (not mortgaging it but for cash), or hoarding in a variety of currencies (physical hoarding, not sticking it into a bank to have it cause inflationary-effects via the money multiplier effect) like the Euro, the Rupee, the Yen and even the US Dollar.
It sickens me that people are going to call for more bank regulations, when it is obvious that regulations of any kind on investments only do one thing: make people feel safe when they should think twice about anything risky.
He pulled this off using insider knowledge. He worked previously in the back office, which oversaw all trading. The bank then moved him into trading, which according to statements I've read from other bankers, was practically a violation of policy.
Since he knew the flow of information through all parts of the bank, he was able to cover his tracks and employ creative accounting. He knew what types of accounts and trades would not raise flags, so he would flow money though those routes.
This type of security risk can exist in practically any business. If you're a developer or IT person, and suddenly find yourself working within the infrastructure you design and maintain, then guess what? You can most likely bend the system around some rules. The same type of rule applies for relatives and spouses. Most businesses will not let an employer be managed or supervised by a relative or spouse for the same reason. They can cover each other's tracks, and have more complete knowledge of the system.
Dan East
Better known as 318230.
In a place (bank) I worked a branch had a new trainee employee start and forgot to notify the IT department. When they phoned up and let us know we said we would do it as soon as possible. The answer we got was "That's OK, the branch manager has let him use his password for now".
While this really was a clueless trainee someone with the manager's password could authorise over-limit cash withdrawals, reverse transactions, see all sorts of files and make queries on customers that ordinary staff cannot do.
http://blog.kryptiva.com/2008/01/why-strong-em-1.html
Whenever there's Visual Basic, bad things are sure to happen, but apparently, he was
"armed only with VBA, Walkenbach and the right passwords"
so I would say both VBA stupidity and human stupidity were factors.
This - very entertaining book - explains the process better. The characterisation of traders who blow up is particularly damning.
Curiously, Nick Leeson (the man who sank Barings Bank) supplied a soundbite saying how he didn't believe that the losses in this instance could have reached such a size. And that's the problem: he hasn't learned anything from his experience.
The difference between "trader" and "rogue trader" is simply one of the amount of luck the lucky idiot has.
What he did
Basically the guy was "gambling" on stocks and losing - then making bigger bets trying to catch up. He claimed that he was simply trying to get a big bonus and didn't have any malicious intent.
how he did it
He went largely "unsupervised" because he was considered unimportant (and hadn't taken a vacation in a long time - so he covered his own tracks until the whole thing collapsed).
Most financial institutions require mandatory "vacations" so they can check up on people (this guy would have been caught much sooner if someone else had a chance to look at his "trading desk")
the funny part
what I love is that they haven't fired him yet, he has been told to not come to work and they aren't paying him, but France's labor laws require a "sit down" before they kick him out the door.
In the short term he is being looked at as a "Robin Hood" type figure by some people (who think he just ripped off the greedy bankers, not that he committed fraud and stole) - so mark this up as an unintended consequence of ridiculously strong labor unions
It ain't what they call you. It's what you answer to. http://mylyceum.us/
And this guy is lauded as a "computer genius" with insider knowledge!!!
So now Slashdot is carrying articles that are mere speculation. I realize that "serious programmers" love to trash VB everywhere, but can't we at least have facts on our side first?
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
"The author freely admits that his story is not based on hard sources, but his experience in the banking industry lends plausibility." Read: "This guy has no proof, evidence, or accounts of what happened, but this sounds good, so lets blame MS" I'm on board with that. This is /.!
I worked a contract gig a few years back for a non-consumer bank. Their average transactions were on the order of tens of thousands to millions of dollars. The IT director was a lady who loathed Microsoft. Not that she ever really explained her hatred of MS, but she stuck to it. As a result, they were using Netware 3.0 for all of their networking needs. Now, that in and of itself isn't a major problem, Netware was a solid system in it's time. The problem though was that while I was working that contract the latest version of Netware had just been released, v6.0. Yup, they were using a 10 year old networking system. Not only that, but it was version 3.0, not the fully patched 3.3. The IT direct railed against MS for their security shortcomings while touting a network that was so archaic that her only security was the obscurity of her software.
-Rick
"Most people in the U.S. wouldn't know they live in a tyrannical state if it walked up and grabbed their junk." - MyFirs
The sollution is to sell GOOG like crazy now. The overvaluated stock will plumet in the next month or two... More if Yahoo accepts MS offer.
Ubuntu is an African word meaning 'I can't configure Debian'
is that anybody with some VBA knowledge will sooner or later get access to other peoples Excel sheets in order to fix problems. This is just a form of social engineering. Once you sit in front of the PC, logged in as another user and telling that gratefull person you get nervous when other people look you on the fingers while you try to solve a complex problem...
Another interesting point is "Rights-creep". Often people are given acces rights as they move between functions, but these rights are never revoked when moving on to the next...
10 ?"Hello World" life was simple then
Hundreds of billions of losses, because Wall Street figured out how to "package" "insured" mortgages on "inherently safe" homes, where the under-girding asset is solid ground that is "always" appreciating on average.
If nothing else, the article on the $7B loss in France ought to serve as another wake up call to "managed risk systems".
The PHDs, the MBAs, the CFOs & the Risk Analysis people with their algorithms all pronounced it a sound "system".
What they didn't look at was what happens when mortgage companies and individual salesmen and appraiser's collude to scam property values and borrower's financial condition (along with pressure from Jesse Jackson & Villagarosa types to not discriminate "against race").
The top level control system was probably figured out tightly.
Monitoring the entry level data risk was and is a disaster. Hundreds of billions at the very least are lost (transferred if you will) as a result.
How come I don't hear of any call for heads to be lopped off in the mortgage bundling business? Maybe money, power & influence in Washington anyone?
You can bet there are some very highly placed traders in these securities whose customers would like to do that.
One objective of terrorists is to force people to make a choice:
Tyranny or death.
Or, to put it another way, death now at the hands of the terrorists or death in a generation when people forget why they let the dictators in power and start the revolution.
Me? In a country with more than 300,000,000 people, I'd rather live in a free society and lose a few thousand people in a big event [9/11] every decade, a hundred people in a medium-sized event [Oklahoma City, London, Madrid, Virginia Tech, Columbine] every year or two, and a few dozen more people a year one or two at a time [smaller bombings, abortion-clinic or other non-government-target attacks, lone nut with a gun] to terrorism than live in an ultra-safe cocooned police state.
If government doesn't make it a habit of pissing people off the supply of suicide-bombers is self-limiting and we'll be left with the abortion-clinic bombers, disaffected/depressed students, and nut jobs.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
I interviewed for a senior IT management position at a fairly decent size bank several years ago. Maybe this bank is within the top 25 in the USA.
I met with the CIO, and we had a great discussion in terms of where they were in terms of their systems. The CIO seemed to be an honest, straight-shooting guy. He was new to the bank - he started perhaps 8-12 months earlier.
He stated that the systems of the bank were in danger of total catastrophe. There were internally-built programs without source code. The divide between production, QA, and development environments broke down. Production runtime was manipulated by developers in real time. Some hardware was so old that it was running obsolete operating system software. If the machines failed, recovery would be extremely difficult, at best.
Coming from another class of institution, I found these statements shocking and disheartening. I liked the CIO - he was certainly fighting a huge, dangerous battle... and it was clear that he knew how much trouble he was in.
I ended up turning down the position offered, as their financial compensation wasn't nearly commensurate with the career risks I'd be taking stepping into such a huge minefield.
The CIO said he understood, but his budget was constrained - the bank was in severe cost-cutting mode, looking for a merger.
Nice.
is obviously a Layer 8 problem.
My backup chemistry thesis stored on Data Storing Bacteria mutated; granting me a degree in forensic anthropology. v4sw7
According to Richard Branson, the best way to become a millionaire is to start as a billionaire and found an airline.
Q: Want to know how to make a small fortune in the stock market?
A: Start with a large fortune.
thankyouverymuch. Don't forget to tip the waiter. No stock tips, please.
I have seen several instances where someone that did a little digging on the back end could easily make the system do what ever they wanted. They become more valuable because they can fix the system when it hiccups. "Customer Joe has a weird charge on it. The system won't let us fix it. What are we going to do?" The guy that knows the backend then goes in and changes it right on the database and is a hero. But if he can fix things then he can also break things and cover it up. It goes back to managements desire to wear blinders. They want to put super locks on the physical doors but give the keys to kingdom on the system to anyone that is willing to help.
Is he strong? Listen bud, He's got radioactive blood.
Here in France someone is not guilty until it has been proven.
;)
Just let the justice do its work, we can then speak about it using some hopefully serious investigation to base our comments on.
Several things are unclear:
- Why and How can this man be responsible for a such thing ?
- What gives its employer the right to judge him ? (nothing according to French laws)
- Is it really a fraud or is it a professional mistake ? This point is still unclear according to the justice.
- How are the amount accounted ? According to the latest news the bank itself is responsible for the loss and it was determined by the bank strategy not the trader's.
I think this is a very complicated situation involving various interests (financial places, politics, justice...).
It is not obvious how things will be sorted out, speculating about it will not help.
I am giving up my karma on this one
Generally, the economy works better when money circulates...When it has "velocity", which is another one of those words like "multiplier" which I'm going to assume you understand. By dumping surplus money into commodities rather than banks, you're effectively hiding your money under your bed, and dampening the flow of money through the economy. People did this for a long time until a smart guy named Adam Smith pointed out that hoarding gold didn't make anyone especially wealthy; it was trade that built wealth, and that meant the movement of money and goods.
So that's why banks exist, and why we allow things like the multiplier effect to run our economy. The granddaddy of all multipliers (the Fed) has been active for the past few weeks, trying to pump some money into the economy. Bush is hedging his bets, and backing Keynes at the same time with a stimulus package. Historically, these actions have added velocity to currency, and fast currency tends to stimulate the economy.
The reason for the FDIC, and SEC, and Social Security and Welfare, and every other similar system is to basically keep the money in people's pockets. This is important for the reasons above; cash circulating through the economy creates jobs and stimulates the economy. A bunch of people losing all their money (for example, when a bank fails) means you have a bunch of people who suddenly can't buy groceries. Grocery stores start laying people off, because they have to cut costs, which means MORE people can't afford groceries, and so forth. People like you pull their money in and convert it to commodities, instead of putting it into banks, which means banks can't make loans to support people who are trying to start businesses or buy houses, which, again, slows the economy and costs people their jobs.
Basically your thoughts on this stuff fly in the face of all mainstream economic thought for the last several hundred years. I'm assuming you're a Ron Paul guy, because echoing his "economic" beliefs, and Gosh, we'd sure like to move back to the gold standard. I'd almost like to see him get elected, just out of academic interest in the economic chaos that would ensue.
Anyway.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
This is a dupe. Oh wait, I thought it read "How To Lose $44.6 Billion .." that would be this post http://slashdot.org/article.pl?sid=08/02/01/1353211&from=rss/
:)
My bad!
...
"The FDIC has to "insure" deposits because of the fraudulent fractional reserve banking system. What we need is full reserve banking, with private regulatory audits, and greater knowledge that the money you put in isn't loaned 8X more than the bank has on your deposit record."
The tallysheet bankers' Ponzi scheme is so fragile they have to send in covert assistance -- Plunge Protection Teams-- to prop up the securities markets by purchasing depressed stocks, bonds and derivatives to avert a free-fall, using money created from nothing to make the buys. Goldseek.com has a piece on the PPTs, and Ellen Brown discusses fractional reserve banking in her book, "Web of Debt", and in the associated blog.
I wondered what might happen if the whole scheme fell apart, so I've started a series of short stories exploring the world after the collapse of the banking system. The first one, "As Is", starts like this...
* * *
Ryan Svorlin stood in front of the big house, gaping. The keys hung loosely in his shaking hand, clattering against one another in rhythmic reflection of the waves of shock coursing through his troubled mind. "It... it's... mine," he stammered, unable to comprehend what had just happened.
"Well, sure," the real estate lady told him. "You did sign the papers, didn't you?"
He slowly turned to look at her. Paper-thin skin stretched across unnaturally prominent cheekbones. Overdone make-up. Probably over seventy, he guessed. "Of course. But I never expected to --."
"To be selected? Well, someone had to be. They couldn't afford to let these places go vacant, after all."
Less than a year had passed since the first cannonade in the financial meltdown destroyed the façade of normalcy masquerading as prosperity in the United States. Some faceless blogger had instigated a mortgage strike, an incautious response to the revelation that the reason the government was so determined to protect the masses from being dispossessed in their forced insolvency was the dirtiest little secret at the heart of the country's high-flying economy - that nobody really owned all those high-risk loans, and therefore the houses could not be foreclosed. No one could have predicted what happened next.
* * *
You can read the whole story at http://klurgsheld.wordpress.com/2007/12/18/short-story-as-is/ then click on to read "Full Value" and "LA Scrip".
P. Orin Zack
The quick and easy way is to become a politician. Get voted in and promptly lose $7.2B of taxpayers money. Heck, you don't even need basic skills for that, and with some basic skills, you can lose a whole lot more than $7.2B.
There is a large difference between financial services regulation, and FDIC-style promises from governments. The two seem somewhat entwined in your mind.
Also, AIUI, individual banks do not have the ability to create money from thin air. The FR/BoE/etc. can, but individual banks cannot.
Your summary of "The Creature from Jekyll Island" is somewhat flawed. I suggest readers go to the source.
Generally, the economy works better when money circulates...When it has "velocity", which is another one of those words like "multiplier" which I'm going to assume you understand. By dumping surplus money into commodities rather than banks, you're effectively hiding your money under your bed, and dampening the flow of money through the economy. People did this for a long time until a smart guy named Adam Smith pointed out that hoarding gold didn't make anyone especially wealthy; it was trade that built wealth, and that meant the movement of money and goods.
Yes, Adam Smith was correct, that wealth is built on trade. The problem with what you said is that there is a hidden effect from almost every transaction in said trade -- the profit made by the cartelized banks from each and every dollar that they create through the money multiplier effect. They don't actively "give" money out that they've created through the fraudulent fractional reserve banking standard, they loan it out. In fact, they loan out money based on previously loaned out and deposited money, so they're making money on nearly every loan transaction, even though the money doesn't physically exist. This hidden tax that only occurs with fiat money in a fractional reserve banking and monetary system is a form of wealth transfer from the economy as a whole to the cartelized banking institutions, and it actually causes a lag on the economy?
Don't believe me? Look at the GDP figures for the past, oh, 20 years. Subtract TRUE price increases over that time (don't use the ignorant and embarassingly fake CPI figures) from that GDP. We've been in a recession for 20 years, maybe 30 years, even though we may seem to have been strong for a few segments in that time. At almost no time in 30 years have we truly had GDP growth after subtracting the loss of the value of the dollar from the previous time-frame of GDP analysis. This means we're in a permanent recession, and the recession comes from the loss in value of the dollar, which is multiplied many times over due to the hidden tax the banking cartels have created from their money multiplier profit drain.
So that's why banks exist, and why we allow things like the multiplier effect to run our economy. The granddaddy of all multipliers (the Fed) has been active for the past few weeks, trying to pump some money into the economy. Bush is hedging his bets, and backing Keynes at the same time with a stimulus package. Historically, these actions have added velocity to currency, and fast currency tends to stimulate the economy.
No, it doesn't. That's a false statement, and one that a Keynesian spews regularly. Just because the economy may show growth in pure dollar totals, the value of the dollar is decreasing over that time, over and beyond any economic growth shown by more dollars spinning around. If the GDP grows from $10.00 to $10.75 in a year, but the dollar has lost 10% of its value, the actual growth in the economy in dollar terms is 7.5%, but the actual growth in value terms is -3.25%. This is a fact that is readily ignored by Keynesians and other pseudo-economists since these United States have withdrawn from backing the monetary notes with anything of current value. We are in a recession, and we've likely been in a permanent recession since Nixon's time.
The reason for the FDIC, and SEC, and Social Security and Welfare, and every other similar system is to basically keep the money in people's pockets. This is important for the reasons above; cash circulating through the economy creates jobs and stimulates the economy. A bunch of people losing all their money (for example, when a bank fails) means you have a bunch of people who suddenly can't buy groceries. Grocery stores start laying people off, because they have to cut costs, which means MORE people can't afford groceries, and so forth. People like you pull their money in and convert it to commodities, instead of putting it into banks, which means banks can't make loans to support people who are trying t
How to lose this kind of money is SIMPLE! Get married.
This is important for the reasons above; cash circulating through the economy creates jobs and stimulates the economy.
That isn't really true. Wealth is generated when assets move from a lower value to a higher value. Money isn't really an asset. (Well, "money" in the strictest sense.) Wealth is created when you take your herd of goats and slaughter a few of them for meat and milk a few of them to make cheese. A herd of goats is valuable; a herd of goats being used for food is more valuable. Money is simply a convenient way to carry your herd of goats around when you want to buy a Nintendo Wii.
When you turn money into an asset in and of itself jobs and economic stimulation does occur. But the inflationary nature of this process leads to a boom-and-bust business cycle. You can't have economic growth through money without monetary inflation. You can't turn money into better money. You can only take money out of GoatCo and put it in CowCo, which gives better dividends or whatever. You're not the only guy doing this, though, so the profits have to come from somewhere. Thus the Fed "prints" more money, and soon milk is selling for $5/gallon.
Potato chips are a by-yourself food.
I hate to say it, but the Reg might be right. Assuming the linked CV is the real thing, he only claims to have experience with Excel macros and a smattering of VB.
The real part of his hack is probably social engineering and stumbling upon oversights in the trading system. How many IT folks, even the dumb ones, can say "I could take this whole system down if I wanted!" - this guy actually did.
Goes to show that there's a difference between checking off boxes for auditors and actual security. Auditors can make sure the proper safeguards are in place; auditors can't tell if everyone in the department uses the same password.
While I appreciate "The Creature from Jekyll Island," I also think the book has numerous misthoughts. Yes, the SEC is "regulatory" and the FDIC is "insurance" but neither of them are correctly defined by either of these two words. The FDIC does not keep reserves like an insurance company should. If a bank fails, the FIRST step is the FDIC forcing member banks to attempt a bailout, using the member bank's funds. A very close friend of mine is the GM of a large bank in the Midwest, and he always talks about the fears that he'll have to bail out another national bank should they come up short on funds. Yes, this bailout is more of a loan, but fairly unsecured. The FDIC's only weapon against bankruptcy (bank runs) is monetary creation. Not much of a bailout when it destroys everyone's money to save a few.
The SEC's regulation is usually post-trauma, meaning it creates new regulations to try to fix previous errors that were likely caused by either their own previous regulation, or by the Federal Reserve's manipulations of the money supply, interest rates, or whatever else they believe they can control.
I do like Griffin's book, but I don't adhere to the conspiracy theories that most anti-Fed people have. The banks are not conspiring to destroy the middle class together in secret, they're just a legal cartel (monopoly) who are all independently trying to make a lot of money using the fraud allowed by government. The fact they they seem in lockstep is just a mirage, and the truth profiteers are not those who own the banks, but those who run the economic trading systems. It is far better to make 1/10% on trillions than try to make 5% on billions.
First, you start with a large fortune...
try { do() || do_not(); } catch (JediException err) { yoda(err); }
"...bleeding edge programming in F#, to cruel and unusual C++..."
All credibility of the author lost in one absurd statement.
The granddaddy of all multipliers (the Fed) has been active for the past few weeks, trying to pump some money into the economy.
Of course, as the banks have already so oversaturated the market with loan-generated fantasy money that not even the Fed can input the liquidity needed. It just disappears down the drain as fast as they can pump it in; eaten by accelerating writeoffs.
Put your money in the bank? Have you seen the latest data on the NFORBRES? The US banks have gone into _negative reserve_ territory. They have no reserves left that arent borrowed. The multiplicatory spiral is rapidly unwinding. Apart from treasuries it's hard to find a place where you can put your money and be certain it isnt simply wiped out in the ensuing... adjustments. I can certainly understand the desire to put ones money in gold.
Heck, I'm definitely not a Ron Paul guy, nor a gold standard supporter, but the current idea of debt based money secured against the value of objects valued at a price depending on how easy it is to get a loan is idiotic. That shortcircuits the systems so you can print more money when asset values go up and asset values go up as you print more money. Until they dont. And you suddenly find yourself in an unwind where you cant print money fast enough to replace the fictional numbers lost.
banks can't make loans to support people who are trying to start businesses or buy houses
Banks made loans secured against fantasy values. Now they cant get those imaginary values out of the defaulting loans. This is depleting their capital and killing their ability to make new loans. Just as in the inflationary spiral raised the imaginary value of their security, the deflationary contraction spiral decreases the values of their security and the money they made up disappears. Dont blame the few trying to protect what assets they have; their flight to gold is a fart in a hurricane compared to the credit unwind and destruction of credit-based multiplier money.
Of course, this is a natural artifact of a fractional reserve system and any such system is doomed to repeat the bubble phenomena time and time again. Moving to a full reserve system would perhaps solve it, but there are easier ways to (at least partially) deal with it.
Personally I'd favour enforcing mandatory long-term valuations for any collateral; for example, a bank would only be able to use the (inflation adjusted) 10-30 year average value for a house as collateral; want to pay more than that and you'll have to pay for it yourself. You might still end up with bubbles, but at least they'd be much more long-term and easier for the rest of the economy to adjust to. And valuations would not be as susceptible to the ease of borrowing.
I don't disagree with you, what I personally have a problem with is how 'the circulation of money' tends to be towards a limited number of people. Sometimes, as in a case like this one, the money seems to circulate into oblivion. Unfortunately, I doubt that anyone knows of a way to structure economies so that more of the money that leaves your pocket into circulation ends up back in your pocket.
Fittingly, the captcha is 'cynical'
Personally I'd favour enforcing mandatory long-term valuations for any collateral; for example, a bank would only be able to use the (inflation adjusted) 10-30 year average value for a house as collateral; want to pay more than that and you'll have to pay for it yourself. You might still end up with bubbles, but at least they'd be much more long-term and easier for the rest of the economy to adjust to. And valuations would not be as susceptible to the ease of borrowing.
The problem with this is that housing values are very comparative to what is going on in the neighborhood/local economy. What is Google moved their base of operations to a small hamlet 60 miles out of Omaha, NE? Housing prices SHOULD go up if Google brings more money into the economy, increasing demand for housing.
My solution is a simple one, and yes, Ron Paul and Dennis Kucinich happen to like it, too: DUMP THE FED. If the banks need money, this is what they can do: increase the interest rates that CDs and savings accounts pay, and then guarantee the depositor that they will only loan out 100% of the money and lock the account for the fixed time-frame of the loan.
You have $100. A bank needs your 100% to stay in business. The bank offers you 12% on your deposit, and promises to loan the money out to only one person, for a period of 3 years, so you can't touch the money for 3 years without significant penalty. Now, the bank takes your $100, and loans it out at 15% or 18% for 3 years to John, who is happy to pay the interest rate because there is no easy way to get money cheap. John has your $100, you don't, the bank makes 3-5% a year, you make 12% a year.
Problem solved.
Now, let's say that I offered you this opportunity at the Full Reserve Bank of Dada. You'd probably LOVE the idea that you could earn 12% on your money, and that I wasn't creating price inflation in your economy by taking advantage of the money multiplier effect. Sounds good, right? Wrong, because as long as fraudulent fractional reserve banks exist, NO ONE would borrow from me at 18% if they could borrow at 4% from a bank that uses fake money created from low or negative reserves.
It is the Fed, and it's control of fake interest rates, that destroy YOUR chance to save money, and save the banks. The banks should never be loaning out money at 5% a year for 30 years fixed! What a ridiculous profit margin on money for 30 years, don't you think? Would you loan the man with an 850 FICO score $300,000 of your money for 5% a year for 30 years fixed? No freaking way. Neither do the banks, by the way, because they know that the loan will come back in part as a deposit (from the home seller, let's say), so they can now re-loan the same money back to another sucker. And over and over and over again.
It's fraud.
Actually, no.
.25 euros, the demand for american cars would increase overseas. Conversely, if the dollar was worth 25 euros, then no one in their right mind would buy an american car...Once you add the tariffs, the price would make it unthinkable.
Currency inflation isn't directly related to economic growth; they can run together, but it's not required. Currency inflates when the money supply outstrips the supply of goods, so consumers bid up the prices of goods. Obviiously things like the multiplier effect, which is how the banks "create" money (you give them money, and they give the same money to someone else, but you still have access to it so there is effectively twice as much money, etc) can increase the money supply, and thus cause inflation.
But it can also work in reverse, when the money supply shrinks and causes currency deflation...And this is absolutely possible, like when the gp poster and his ilk pull all their money out of banks to hide it under their beds. The reason nations don't usually seek this is because when the value of your currency increases, it pretty much ends your foreign trade because no one can afford to buy your goods. If an american made car cost 20,000 dollars, and a dollar was worth
Also, if the supply of goods increase, the amount of money needed to buy them will decrease (assuming constant demand, which is probably a bad assumption, but what the hell), leading to deflation.
The problem with "Wealth as a Herd of Goats" is when no one wants to eat goat. The "other" multiplier, which is a driver of cash velocity, is when you're building up your goat herd, you're buying goat chow, and goat supply, and then you're paying a butcher, and you're paying people to market your goat, and the supermarket is paying people to put it on shelves and take money from goat consumers, etc.
That is where wealth comes from. Not from a thing; that thing is worthless without demand.
I once heard an environmentalist say, "What do you think the last barrel of oil will cost?" and I thought the answer was obvious: "Nothing." It's not like the demand for oil will remain constant as the supply dwindles and the price skyrockets; chances are we'll never see the last barrel, because we'll have long since passed the point where it makes economic sense to use oil at all.
Likewise with most resources; in the long run resource prices rise and fall, because the demand doesn't remain constant. If the price goes too high, alternatives become economical, and the demand drops off. If we had a massive outbreak of bird flu and mad cow, then your goats would see a market surge because of the scarcity of other meats.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
Well, can't argue with a zealot, so I won't try.
I suggest however, that increases in our relative standard of living and the fact that our purchasing power has remained reasonably constant over the past three decades would suggest that we're not actually all secretly bankrupt, or, if we are, then the whole world is secretly bankrupt with us.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
The key in the large $7.2B U.S. loss at the French bank is horrible management of their "IT Systems".
That 7.2B loss is merely the latest in a long string of losses at both public firms and governments, because of the failures in management systems &/or flawed risk analysis at the very beginning in understanding whether the system can survive fast market changes or "bubbles".
That is the lesson to be learned from all of this.
In addition then, one has to ask if a large sophisticated bank CAN NOT control its risks, and governments can't control theirs (has any major government program figured out how to significantly decrease costs of inefficiency and fraud?), and particularly that the Fed, OBM, FASB, SEC and others all passed on the newer bundled mortgage securities, can the government be relied on to oversee what is right and wrong for business risks? This is a big question.
These "big business risks" like at the French Bank, were NOT the norm that many years ago, but now they are allowed by governments.
If "Big Banks" shareholders and lenders and customers are allowed "government insurance" and then the government allows high risk or bad governance, government has failed us.
It may be that technology has become so complex that companies and governments do not yet have the technology systems to properly monitor and track what is really going on.
To that end, that means they need to create more sophisticated systems, and both private and government systems need to be able to be curtailed when it is found that the systems are going wrong.
Yeah, in a way it is not glib-speak, but it is important to the French bank and every other bank and brokerage out there.
What could possibly go wrong?
...or does this guy look suspiciously like Tom Cruise? Maybe he syphoned off the money to fund the building of a spaceship to find Xenu?
Of course I'm passionate about my hatred of fraudulent policies. A man steals from you, he's a thief. I don't care what anyone calls it, taking from someone against their will is theft.
That being said, we are all bankrupt. What is the average person's net value in the United States? No, don't just count your property and 401Ks, also add in the government's debt (local, state, and federal). Now you're bankrupt, unless you're worth at least $800,000 or so above and beyond your debt.
Our buying power might be more, but that's merely a figment of the imagination, as the quality of what we can buy is surely less. Plus, we're indentured to that debt for many more years than previous generations, and it is hard to say if we are living better because such a subjective comparison is impossible to make without having lived in previous times. Medical opportunity is better, and the chance to eat a healthier diet is also better, so I think we've gained something, but that's notwithstanding the corruption of those who try to prevent such gains in living ability.
Welcome back! The quality of trolls has been really poor lately, and we need more people like you to help make slashdot back into the laugh-a-minute absurd fun factory it's supposed to be.
That's actually not so much what "velocity" means. In economic terms the "Velocity of money" is basically the gdp / the amount of money.
It's a measure of spending; a stagnant economy would be one with a very low velocity, which is to say that the amount of money in the money supply is pretty much equal to all the transactions. An extremely fast economy is one where the velocity is very high, where basically all money is burning a hole in your pocket at all times. Obviously this isn't a great state to be in either, because a tiny hiccup could send the whole thing into ruin.
I'm not terribly in favor of our current concentration of wealth either, but to a degree its a symptom of the volatile tech economy.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
Not to get into the rest of your debate, but yes, most people are secretly bankrupt. The current housing crash is a ready sign. If most people sold everything they owned, and tried to pay their debts, they would come out in the negatives. Now, given that the government and media are not going to start reporting that the country is bankrupt, the only reliable data I can use is what I personally have observed.
Coming from a perspective of someone just entering the upper middle class, a good 90% of the people I have talked to about money are worth less than $0. This includes the people "wealthier" and "poorer" than me whom I have had discussions with. I have a very hard time believing that any significant portion of the economically lower class have greater financial worth than the middle class. So, while I cannot speak of the very wealthy, the middle class and poor are as a group bankrupt. That does not include, as your advisory points out, the debt that is held in trust by our government.
Then again, Americans have their share of anti-business, pro-Robin Hood prejudice. One reason everything we do is so bound up in liability concerns ("Do not iron clothes while wearing them!") is that American juries love to sock it to defendants with deep pockets. That attitude is also reflected in a lot of pop culture.
It's true that French labor-laws are a little too worker-friendly. (Just as, IMHO, U.S. labor laws are a little too employer-friendly.) But I have to point out that in this particular case the rules aren't that different. In the U.S., an employer can't just walk into an employee's office and tell them "You're fired" without jumping through a few hoops first. Failure to counsel the employee on what they're doing wrong can have various consequences, ranging from a termination-for-cause being converted to a layoff (meaning the employer has to cover unemployment benefits, something they can avoid with a little effort), to getting sued on a civil rights violation, to a hefty fine. And yes, that's even happened when somebody's accused of costing their employer big bucks, either through malfeasance or incompetence. Especially then, because then you have the libel laws and the "innocent until proven guilty" principle come into play.
In this respect, the French are actually a lot less RH-friendly than we are, since suing people is a lot less profitable there.
Anecdotal evidence is always faulty, but yea, savings rates are in the toilet right now. People are overspending. People ask me why I drive the same crappy car I've been driving for 12 years, and I just smile, because tax, title, tags and insurance costs me less for a year than most of them pay on their cars in a month. That culture of consumption will bite you in the ass, especially in recession times.
Another thing that always makes me laugh, is people who equate wealth with big spenders...It's like the people who win 100 million in the lottery, then manage to go broke. Most of the richest people I've known were terrible cheapskates.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
Your point seems to be that the system is more complex than my goat herd example takes into account. Well, good job, I guess.
Currency inflation is a result of monetary policy. If you have dollars backed by assets it's harder to handwave away the fact that your goat-money doesn't have enough goats behind it to justify the amount of currency you have in circulation. But if you have dollars that are simply markers, which is what we have with fiat money, and if those dollars are ultimately controlled by a single institution, inflation inevitably occurs. The money supply outstripping the supply of goods is more like an effect than a cause. Talking about "the money supply" isn't complete until you account for the fact that the money supply has a distinct source. The Fed inflates because it really can't do anything else. It can't remove money from circulation. It can inflate a little, or it can inflate a lot. This is tied to the fractional reserve banking system, but all of it stems from monetary policy as set by the Fed.
(I suppose theoretically perfect control of the monetary supply is possible so that fiat money is as stable as money backed by assets. In practice it has never occurred. Just have a look at Fed policy today--rate changes at the window is fiddled with to keep the mortgage crisis from exploding. This isn't anything like a free market, it's a reaction to placate the loudest voices. Bankers, investment houses, politicians and the like. It is subsidizing an inefficient allocation of resources. Which is what the Fed's purpose is, when you get down to it. As a "lender of last resort" it helps prevent bad investments from going away and being reallocated more appropriately.)
Potato chips are a by-yourself food.
Better summary: he was a financial derivatives trader at a big French investment bank. Derivatives traders don't buy and sell stocks, but rather, more exotic financial instruments, whose value is tied to stocks. His job was to find mispriced trades when they momentarily occurred, and jump in quickly to make the bank a small profit of them. In general, the way this works is that you have two investments, A and B, whose prices are supposed to stay in the same relation regardless of whether they go up or down; if the prices of A and B are spread too far apart from each other, for example, his job was to spot this, and to simultaneously short sell the overpriced one and buy the underpriced one. This is a form of what's called "arbitrage," because it's supposed to be riskless; if the market goes down, the buy loses money, but the short sale makes you money, and vice-versa. The amounts of the transactions in the pair are set up so that if A and B move the same amount, the losses and gains cancel each other out exactly; you only make money in that example when the prices move relatively closer to each other.
So now, essentially, what he's accused of doing is two things:
One further thing is needed to understand this: derivatives allow one to take huge positions with very little money down, because when you buy, say, a 3-month futures contract to buy on GOOG for $600 (more or less randomly picked number), you don't have to put in $600 for that contract; you only need to put in a fraction of it, as decided by the broker (this is called a "margin requirement"). For the sake of argument, let's say 10%; then with $600, you could buy one share of GOOG, or you could use that as a margin to buy 10 futures contracts on GOOG, that give you, over 3 months, the return of $6,000 worth of GOOG stock. If GOOG goes up, you make 10x as much with the futures contracts; if it goes down, you lost 10x as much.
This is relevant to this case because Kerviel's job was a futures trader. To take positions worth $50 billion USD, he didn't need to procure that much money from the bank; he only needed to obtain much less.
Maybe this is just a cultural difference between the UK and the USA, but I can't stand the Reg house writing style. Most pieces consist of a meandering, rambling narrative with tedious in-joke acronyms and what I can only describe as linguistic cruft splayed out over three ugly pages. I used to enjoy the Reg (a while ago, when I was more heavily invested in "IT" as a career) but I can't say I've made it to the end of an article in years.
I was thinking of joining a fantasy stock exchange game, but this looks a lot more fun.
Sign me up!
The problem with a gold standard, or any other commodity based currency, is that it is absolutely limited to your supply of the commodity, so you're essentially doomed to DEflation, and your goods and services are always going to be "cheaper" in actual dollars, but much more expensive in a relative sense. It's also dependent on the value of the commodity you choose to base your economy on, so if someone discovers a goldmine the entire currency loses value as the commodity price drops.
Basically, it's all fiat money. Just some people feel better when they attach that money to something they can touch.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
I don't think the precise numbers around all of this are understood yet, but the numbers out there are a 5 billion Euro loss from unwinding futures positions with a nominal value of 33 billion Euro; in USD, roughly, 7 billion and 50 billion. So if the market is worth 1,000 billion USD (yeah, I know it's not), it's as if somebody sold off 5% of the market.
You're certainly not the only one who thinks the losses on that Monday could've been caused by SocGen unwinding, there are stories of that in the news. I remember that one of them said that SocGen's positions didn't amount to more than 8% of any of the markets they were in.
Take into account the following things:
Are you adequate?
No, people like me put our money into our businesses, which earn us a REAL profit (dividend) versus a FAKE profit (stock value increase without dividend) like in the stock market. My money really grows, and as it grows, I hire more people. I spend more on infrastructure, while still maintaining a true profit over the loss of value via monetary inflation. You put your money in the stock market by buying used stocks, not new ones. Those used stocks have gone up in value usually because the dollar has plummeted in value over the time since the previous used stock buyer purchased the very stocks they're selling. The stock market goes up not because the companies are paying bigger profits, but because the dollar has lost value, so you need more dollars to buy the same amount of company. Yes, some companies actually have expanded their infrastructure, acquiring more assets, etc, but in reality none of those things matter unless the company is sold. Stock values going up have nothing to do with company values going up -- they're purely a mirage caused by the fiat money system.
I'm sorry, but the last time I checked, owning a stock is owning a business. I know many publicly held companies that have gone up in price because their value has gone up. Berkshire Hathaway has increased in value far outpacing inflation, without ever paying a dividend. And while its true, it doesn't result in cash in your pocket until you sell the stock, you can never realize the full value of your self-run business until you sell it either. You might get what its intrinsic value is worth when you sell, you might not, all affected by many of the same things that affect the price of a stock. Something is only worth what someone else is willing to pay you for it.
So. apart from a better standard of living, better health, longer life, better nutrition, more leisure time and the ability to experience more of the world than previous generations, we are all worse off. Got it.
"I don't know what happened, I must have missed a decimal point or something..."
This is a sig. It is like every other sig in the world, except that it is mine, and it is different.
Housing prices SHOULD go up if Google brings more money into the economy, increasing demand for housing.
Ah, but why should _money creation_ go up if Google brings more money? Money creation should have a fundamental value backing it; the vagaries of corporate locations isn't a reliable value to base currency creation on. (And note it works both ways; long-term valuations would slow descents as well).
Denying the use of short-term price fluctuations as collateral for credit derived money creation doesn't change the fact that prices will rise. But they will rise according to market demand and available income (want to bid more than the bank can loan you with the house as collateral? Then you have to save for it and risk your own actual money), not as a function of the former my-bank-is-less-responsible-than-yours theory of setting prices.
It's fraud.
Without a doubt. There are, however, easier and harder ways to move towards full-reserve banking. Demanding long-term valuations of collateral is one step that will slow the rampant excesses and partially negate the feedback loop (and one that, considering the recent excessive credit-derived bubbles might actually have a reasonable chance of passing, while at the same time making people more aware of the actual mechanics of money creation). From there you can move on to other more stringent demands.
Simply demanding the abolition of the Fed is simply not a prospect with much chance of success.
The Romans haven't done anything for us!
I don't post much on Slashdot (ever), but I read the site a lot. I work in the financial industry and got some feedback from senior Risk Management ppl at SocGen regarding this little fiasco.
This is what they said happened:
As is now well-publicized, JK was able to use his knowledge of SocGen's back office procedures and controls to subvert them. Somehow (SocGen still seems unsure how) he obtained the access passwords of 3 or 4 other middle/back office individuals; but not only that, because these are changed regularly, he obviously managed to keep "updated" with the changes; (*my theory is that he figured out that people use easy to remember passwords like MonthYear and change it every month).
JK was able to hide what would have been massive swings (because of the size of real gross positions he was taking, primarily on Eurex) in his P&L from SocGen's P&L and Risk Management systems;
An alternating pattern of 5 basic types of transactions was used. (I believe these were described in a press release last weekend);
One thing that JK was apparently doing (which gave us an instant "flashback" to Barings and the infamous 88888 account!), was that JK would fail to put the required broker reference on at least some of his transactions, which would cause them to go into an error or suspense account for subsequent reconciliation (i.e., not as part of the overnight routine), allowing JK the opportunity (presumably) to reverse out or cancel the trade before it was spotted and questioned;
JK was hiding a few fictitious transactions in the midst of a slew of real ones. When some of these were picked up by controllers, he was able to find excuses to allay suspicion- e.g., by saying that the size of transaction entered must be an error and he would rectify it
He would cancel forward starting transactions before SocGen's system generated the relevant Confirm; [If I understood JPM correctly, SocGen has stopped the practice of deferring sending these out];
SocGen has combed its books and it believes that it has found all the fictitious transactions; and does not believe there was anyone else acting with JK. JPM stated that the bank was "99% certain" that it knows the full extent of its losses;
There were clear weaknesses in trader management. The Delta One Desk was supposed to have small risk sensitivities and hence a modest net daily P&L movement. JK's superior "reconciled" the daily P&L on a net basis, but never appears to have looked at the gross positions- the clear inference from JPM was that, if he/she had the fact that something didn't add would/should have been spotted;
With regards to margin calls, most of these would have related to positions on Eurex. For administrative convenience, SocGen received a single consolidated account for the whole bank- i.e., no granularity. Given how big a player SocGen is on Eurex, this made it easy to miss individual movements {Altho' this begs the question about control over actual movement of cash/margin];
As JPM pointedly said, SocGen's Market Risk Management never failed, but its Operating Risk Management certainly did;
Boston Consulting Group is now helping SocGen with making changes to its controls and the bank has a number of immediate and short term fixes underway- including reviewing the use of biometric identity checks for at least key controls; looking at gross and not just net positions in reconciling daily P reconciling positions between internal counterparts daily (not monthly as before); tougher and more granular controls on deposit and margin calls and reporting; better enforcement of the holiday policy (e.g., JK was able to find an excuse not to take holiday last November);
As is public knowledge, when JK was found out, SocGen discovered that it had open positions on Eurex (EUR 30BN); DAX (18BN); and FTSE (EUR 2BN), aggregating EUR 50BN. JPM was adamant that SocGen had no choice but to close out those positions, while trying to avoid moving the market. In mitigation of the
You realize, of course, that if you have a full reserve system, your savings account will no longer earn interest from the bank, but rather will pay interest to the bank (in order to have your money kept safely). The reason you get paid interest on a bank account is because the bank can take part of your money and invest it/loan it out, earning more money.
That newbie trader you call smart is still claiming credit for a $1.2Bn loss.
Thus demonstrating that he is, in fact, still a newbie.
It takes a special kind of sick mind and irrational hate toward people organizing to protect their livelihood to convert this financial fraud story into retarded anti-union rant.
Amazing.
You claim to be making yourself wealthy through investing in your own company. That's all well and good, but not for everyone. What method for creating real wealth do you suggest for those who aren't entrepreneurs?
"[Regarding the 'cloud,'] ownership was what made America different than Russia." -- Woz
Well, it is true, owning a stock is owning a business.
But the real problem is that higher stock prices don't necessarily translate into higher investments into that company, because you buy the stock from someone else not from the company.
This results in companies having to borrow money, resulting in a nice income for the financial system. Splitting stock and handing out options is another way out, but results in the dilution of the investment of the original shareholders.
Hey don't blame me, IANAB
All right, but apart from the sanitation, the medicine, education, wine, public order, irrigation, roads, a fresh water system, and public health, what have the Romans ever done for us?
...and the wine! Don't forget the wine!
i agree with you wholeheartedly!
i would just like to add a few points of my own.
First there is no middle class. There is only owning class, and wage class. period.
now by wealthy i am refering to those who do not toil for there income, they might
have a "job" but they certainly do not need one. They increase their wealth not by
working but through their investment, capital. The wage class is everyone that works
for the owning class, including highly paid wage earners such as executives of corporations.
Wage earner have the only thing of value that the owning class does not, and that is
their labor. The owning class needs labor in order to put their capital to use.
The owning class' only purpose is to build more wealth. It does not matter how much
wealth they already have they always want more, and the only way for that to happen
is for the wage earners to have less. The accomplish this in several ways. First, they
do shift wealth by paying less for labor that it is worth, the excess becoming their
profit. Second, shift wealth through inflation, decreasing buying power and requiring
more labor just to maintain the same.(in the fifties the single income family was common,
nowadays the multiple income family is more common)
oops, gotta get back to work... *sound of whips cracking*
>>Sig under construction
The Fed inflates because it really can't do anything else. It can't remove money from circulation.
That's not true at all.
I'm no expert, but two of the ways that the Fed creates money are to loan it out and to tell banks how much they can loan based on their assets. To reduce the money supply, they just lend less or tell the banks to tighten up. Because loans are continuously coming due, lending less reduces the money supply.
Nearly every other post in this thread has it wrong. They're all talking about how the guy who did the fraud put the money in "stocks," which is completely wrong; I think it was all in European index futures.
intuitively I think you're correct; the CPI is way understated. Offhand, do you have a link to a price index (or something in that vein) that would fit the bill for "TRUE price increases"? I'm not at all being skeptical, I'm just hoping for a shortcut.
Thanks in advance!
no, thank our nation's great grand children for that... they are bankrupt BEFORE they are even born. they are literally financial slaves to support our greed and selfishness.
you'll *never* hear a politician say, "we need to pay as we go..."
NEVER.
the people want to rob other people for the selfish gain. let's be honest, we are a nation of thieves... we just figured out how to steal from people who aren't alive to complain about it yet.
the harm will be done, though, and it is as *REAL* as it gets.
i believe it will eventually lead to all out war.
ps - about 1/3 of every dollar you pay for gas is due to the collapse of the dollar to 10% below the value of the "looney" (canadian dollar).
I think your point is valid if we accept the statement that CPI and Price Level figures are fundamentally off by huge margins. However, you say Subtract TRUE price increases over that time (don't use the ignorant and embarassingly fake CPI figures) from that GDP. So where are you getting your figures for inflation from? I really would like an answer, this is not a rhetorical question. How do your generate your figures for inflation, and what makes your figures better than the CPI?
Would love to read Dominic Connor's thoughts by exploring possibility Kerviel's skills were, although not disclosed on resume', possibly more extensive than VBA. After all, have they accounted for who (exactly) collected losses?
The problem with a gold standard, or any other commodity based currency, is that it is absolutely limited to your supply of the commodity, so you're essentially doomed to DEflation, and your goods and services are always going to be "cheaper" in actual dollars, but much more expensive in a relative sense.
That's not true at all. As you say, if a new gold mine is discovered, there is more gold to be had. The Spanish ran into this problem when they brought gold home from the New World. To put it in today's terms, the Aztecs were the Federal Reserve. You're not doomed to deflation because we become more efficient to produce goods and services. One of the primary values of a commodity-backed currency is the fact that is stable. Poaching the value of the dollar de-incentivizes people to save. Instead they invest, but investment on a massive scale means a lot of poor investments. If the dollar you saved when you were 20 was worth about the same when you're 60, then you're likely to keep the dollar rather than speculate.
Gold is a convenient commodity on which to base a currency. It worked pretty well in the past. I've seen comparisons where a buck in 1800 was worth a buck-twenty or thereabouts in 1900. But between 1900 and 2000, that buck turned into $20 or so. Our standard of living has increased, too, but the difference in quality of life between 1800 and 1900 was equally staggering.
Potato chips are a by-yourself food.
So where are you getting your figures for inflation from? I really would like an answer, this is not a rhetorical question. How do your generate your figures for inflation, and what makes your figures better than the CPI?
I run a private microsite where about 8 dozen people for the past year have been helping me keep track of money inflation's attack on prices. The site may never go public, but it might. We were originally hoping to create a database site where registered users can submit prices of things they've bought (including sales taxes), and then allowing people to enter what they normally buy to see how prices have changed.
6 months into the deal, we noticed a problem: cereal prices had not gone up as they should have. After poking around various grocery stores, a store manager let me in on WHY prices didn't go up -- some cereal boxes were getting smaller. Instead of 32 oz for $2.99, the boxes were 28.9 ounces for $2.99. Oops. We missed that. So now we're plotting prices based on the standard box size, PER unit of measurement. Of course a 64oz box of Cheerios will be cheaper per ounce than the 32oz size, but if we call "32oz Box" standard, and it becomes "28.9oz Box" eventually, we call that standard, and continue to price it based on ounces per dollar.
It's VERY confusing, because it's only a few of us who are working together to get prices together. Yet just based on my own measurements, based on nearly 8 years of entering receipts into Quicken (now we scan the receipts in), my yearly dollar loss is equal to nearly 17%. That's right, over 8 years, my dollar has lost on average 17% of value based on what I use daily. I include gasoline, insurance, highway tolls, utilities (water, electricity, gas, garbage), landscaping, etc.
About a year ago I started actively hoarding money rather than spending it, saving it in the bank, or investing it. I am much happier for it. Of course, I hoard in a basket of currencies (USD, EUR, YEN, gold), but it has kept up better with price increases here in the States, yet still lost some value over that time. Thankfully, my gold has generally kept value, although in the past year it has appreciated more than what I would call inflationary price pressures.
Some day, maybe soon, I'll register a site dedicated to letting people enter prices of items and services they use, and make it public.
I believe there is a site called ShadowStats that has SOME inflation figures that are more realistic, but I haven't really spent time there.
Wrong. Real GDP has had average annual growth of 4% in the last 20 years. Real GDP is measured by nominal GDP - inflation. Since 1984 there were only two periods that the Real GDP has had 0% or negative growth (1990, 2000). So, if inflation was eating away at the US economy then real GDP growth would be 0 or negative and that is not the case in the last 20 years. Another thing, the US currency historically has been relatively strong. I don't know where you got the weak US currency concept from. Either case, if the US currency was relatively weak in the last 20 years then we would have seen more inflation and weak to no Real GDP growth. That's hasn't happen except during the recession period 1990-1992 and 2000-2002.
But the 17% figure you give for the past 8 years actually DOES roughly agree with CPI. In fact, if anything its a bit low. According to the inflation calculator, 1 dollar in 2000 buys the same amount as 1.17 dollars in 2006, thus 17% in less than 8 years according to official figures. Source: http://www.westegg.com/inflation/ Anyway, what this mean is the government's figures are pretty close to accurate, and so the government's conversions from nominal GDP to real GDP and their estimations of growth are actually correct! This means probably we haven't likely been in a recession since the 70's like you claim in your previous post. Unless I'm missing something. Still, it was probably a good call to invest in gold and the euro in the past few years.
Too soon... too soon. [shakes head]
Instead of working directly to the customers, work for a provider... How do we call those? Yeah, jobs.
My worst enemy gave me a copy of Windows for Christmas.
Surely banks would offer that service for free, in order to attract depositors, just like they offer some other services now. In any case, the interests from your savings account would pay for your current account. In my country, in the time of my grandmother, I guess this is how it worked, because I remember she telling me once how the bank used to pay decent interests. Now, interests on savings account barely reach inflation (highest interests I shopped for were 2.5%, while government reports inflation at 3%).
My worst enemy gave me a copy of Windows for Christmas.
It has occured. The British Empire had a period of 250 years without any notable inflation with their gold-backed pound.
That's a result of easy access to unaffordable credit which the middle class enjoys, the rationale is that the earning power of people in this group increases with time and therefore the credit risk is small even if the repayments are only just affordable (or unaffordable) in the short term.
Whereas the poor don't have such ready access to credit, often don't own porperty (with the associated mortgage), perhaps even living in state provided housing. If these people were to seel up they could well have a positive net worth.
Of course most people accept credit as a risk in order to improve their standard of living, and/or finance luxury items.
I have discovered a truly remarkable sig which this post is too small to contain.
It's often faulty, but not always. Hence your statement is false. I won't make the logical mistake of therefore assuming that the rest of your post is also false, but it forces me to view it with more scrutiny than otherwise. Actually, I agree with most of it. Please don't start with obviously wrong statements in the future. Thank you.
I would agree with this 15 or 20 years ago, but over the last decade or two, the credit providers have been offering larger and larger lines of credit to people with lower and lower incomes. It has even gotten to the point that credit lines are being offered to people who are unemployed. I would hazard a guess that the number of poor over the age of about 21 or 22 would come up in the negatives.
If he was limited to a few millions, how it happened that he managed to bet billions?
IANAL but write like a drunk one.
This individual was gambling with other people's money without authorization.
That is one of the most hideous white collar crimes I can think of: betraying the trust of the people that give you their hard earned cash.
IANAL but write like a drunk one.
If you're going to count per capita government debt, then you better also count per capita government capital. If you add up the land (~33% of total US acreage), natural resources, buildings, dams, etc, etc that the government controls (which, as far as I can tell from google, has never been done), we're all sitting prettily in the black, and will be doing so for a very long time.