True Size of the Shadow Banking System Revealed (Spoiler: Humongous) 387
KentuckyFC writes "The banking system is closely regulated and monitored by central banks and other government agencies. But it has become common practice for banks to get around this by doing business in ways that don't show up on conventional balance sheets. This so-called shadow banking system is thought to be huge, but nobody knows exactly how big. Now three econophysicists have discovered that the size distribution of the world's largest financial firms significantly differs from the size distribution of smaller ones or indeed non-financial firms. And they hypothesize that the difference is the result of the hidden transactions that make up the shadow banking system. By this new measure, the shadow banking system has grown dramatically since the financial crisis and was worth over $100 trillion in 2012, significantly more than had been thought and more even than the GDP of the entire planet. Nothing to worry about, then."
BWAHAHAHAHAHAHA (Score:5, Funny)
AHAHAHAHA Stop it! Yer killing me!
Re:BWAHAHAHAHAHAHA (Score:5, Insightful)
In the United States, the central banks are regulating the Government.
They love the government as long as it sets rules that let them win.
Re:BWAHAHAHAHAHAHA (Score:4, Interesting)
In the United States, the central banks are regulating the Government.
They love the government as long as it sets rules that let them win.
How is this Flamebait? Come on, mods. Inside Job [wikipedia.org], watch it.
Re: (Score:3)
"Inside Job is a 2010 documentary film about the late-2000s financial crisis directed by Charles H. Ferguson."
Thanks for the link; do you think I'll be safe if I cash-out my investments by 2990? ;)
Re:BWAHAHAHAHAHAHA (Score:5, Informative)
One thing it does is to block lenders of record (banks) from considering certain data like race
Sorry... if you're actually advocating loan decisions based on race, you belong in a different era. Going on to say "what it actually does" :
As a result banks cant price the risk for tons of very poor people that need loans
Most very poor people all loans are very very bad for. It is very, very rare that any loans are ever good for poor people. Banks gouge the poor more than their better off customers, and payday loans at 300% often end up cheaper than bank overdraft and late payment fees. Claiming banks would be the saviour of the poor, except for those darn regulations is not just disingenuous, it's close to trolling.
Re:BWAHAHAHAHAHAHA (Score:5, Insightful)
Sorry? I completely fail to see any humor in the fact that the banks of the world explicitly and openly collude to fuck us as hard as they can - And with the outright support of government, at that.
Re: (Score:3)
You're right there is no humor in it.
There is a lot of DARK humor in the fact that a large percentage of our population would disagree with your statement, though.
Re: (Score:3)
"Econophysicists" - That's the REAL punchline.
Re:BWAHAHAHAHAHAHA (Score:5, Funny)
"Econophysicists" - That's the REAL punchline.
We Slashlinguists understand the term perfectly, you insensitive clod!
Re:BWAHAHAHAHAHAHA (Score:4, Insightful)
Re:BWAHAHAHAHAHAHA (Score:4, Interesting)
Re:BWAHAHAHAHAHAHA (Score:5, Insightful)
Currency and banks need not go hand in hand. Even if we drive the money changers from the temple, there will still be money.,/p.
Re:BWAHAHAHAHAHAHA (Score:5, Informative)
Re: (Score:3)
"Since money ceased to be backed by gold in any meaningful way, the sum total of "all money" is only limited by what a fool thinks it might be."
Yes, but that doesn't go without effects. Once you measure the effects, you can know what the money amount is.
Re:BWAHAHAHAHAHAHA (Score:4, Insightful)
Whereas I make that judgment based on what they say. But whatever floats your boat.
Re:BWAHAHAHAHAHAHA (Score:5, Insightful)
That's funny, when I see someone dismiss something because wikipedia was the citation I always figure they're just rejecting things on the basis that Wikipedia got mentioned because they think that makes them sound clever.
Re:BWAHAHAHAHAHAHA (Score:5, Funny)
Re: (Score:3)
Re:BWAHAHAHAHAHAHA (Score:5, Insightful)
Re:BWAHAHAHAHAHAHA (Score:5, Informative)
Then the feds decided this was bad and that they should fine them an extra $800 million.
WTF? Your own article says they were fined for hiding the loses. There are even criminal charges. It's legal to lose money, but it isn't legal to lie about it to regulators.
Re: (Score:3)
For those who wonder what exactly Tokolosh is getting at, here are the US corn prices 2001-2012:
for the 2001 - 2013 Calendar Year(s)
Year Corn ( $/bushel )
2001 1.89
2002 2.13
2003 2.27
2004 2.47
2005 1.96
2006 2.28
2007 3.39
2008 4.78
2009 3.
Econophysicists. WTF? (Score:5, Funny)
I did my masters in non-Newtonian budget surpluses.
Re:Econophysicists. WTF? (Score:5, Funny)
Re: (Score:2, Offtopic)
This is not to be confused with Ecto-physicists. That's what the famous documentary "Ghostbusters" was about.
Re: (Score:3)
Spoken like a true taurofaecologist.
Re:Econophysicists. WTF? (Score:4, Funny)
botanopsychologists
laugh all you want, but when the triffids start taking over who's going to talk them down, huh?
Sentient Econometrics (SMAC/X) (Score:2)
I immediately thought of Sid Maier's Alpha Centauri and it's wonderful tech tree and prescient ideas [1]
Note: while in SMAC, computing resources are used to solve big problems, mainly we're using them to run HFT schemes aiding the super-wealthy get even more wealthy.
[1] http://alphacentauri2.info/wiki/Sentient_Econometrics [alphacentauri2.info]
Re: (Score:3)
You thought of that, but not of Psychohistory?
Hari Seldon would be very disappointed in /. today.
Re: (Score:3, Funny)
Re:Econophysicists. WTF? (Score:5, Funny)
No... Econophysicists. Dark money
Re: (Score:2)
We all know that Bistronomics is at the forefront of the science.
Re:Econophysicists. WTF? (Score:5, Insightful)
"I have a very special service for rich people..." "Oh yes," said Ford, intrigued but careful, "and what's that?" "I tell them it's ok to be rich."
Actually, our planet has a whole industry telling poor people it's their fault for being poor and misdirecting their justifiable anger.
Re: (Score:3)
You did a good job of strawmanning the Libertarians there. They do not believe that that never happens, nor that such people should receive no assistance. Libertarians simply believe that government is not the best outfit to handle charity. If you want proof of government incompetence, overreach, and deception...well, hey, you are reading Slashdot--turn the page.
You might argue that private charities could not or would not be equal to the task. Neither of us can prove nor disprove that. But think about
Re:Econophysicists. WTF? (Score:5, Funny)
Nono.
It's the non-neutonian version of fluid capital.
It really isn't that difficult; just imagine cornstarch and water.
Ok, now imagine that as money, aka, liquid assets.
This non-neutonian liquid asset appears firm and to have substance as long as it is traded quickly, or placed under high trade pressures, but for anyone attempting to hold onto it, it melts into a sticky mess, and they are left with little to show for it.
There is a considerable degree of interest and research into such non-neutonian liquidities, as everyone seems hell bent on finding ways to make ever more of the stuff. This means that the rate of exchange and the overall economic force behind the trading have to continue to rise to accommodate the inclusion.
We non-neutonian econophysicists deal almost exclusively with these kinds of liquidities, and often work very closely with non-euclidian geometric market analysists to see new angles to the market that others failed to see or exploit before.
It's really quite technical deep down, so don't feel bad if you can't quite comprehend it all.
Re: (Score:3)
Not sure if serious or trolling.
Who was Neuton?
"Quantitative easing" my ass (Score:5, Interesting)
You wouldn't expect "the 1%" to take the hit, that's what the "middle class" is for. The trickle economy is still operating, except that now it's no longer the "value" that trickles, it is the "value depreciation".
Re:"Quantitative easing" my ass (Score:4, Funny)
To so much as imply otherwise means you must be a communist.
Re: (Score:3)
Quite. He's obviously in favour of socialised medicine, euthanasia committees, and gay marriage. Compulsory gay marriage.
It wouldn't surprise me if he's been to Yoorp and likes to watch movies where nothing happens for hours, the people talk nonsense and there's all writtins along the bottom.
Re: (Score:3)
Govt can index everything to inflation and print money. Have computers take care of the indexing so it's seamless. Then inflation is revealed to be the psychological game of control that it really is; not a necessary consequence of increasing the money supply.
You reckon? You didn't create enough value for the new money you printed, so inflation does really exists (with the yesterday dollar, you are now able to buy less things than before). The only "psychological game" (computerized or not): because the buying power is erroded, "consumers" scramble to buy now rather than tomorrow, creating an "artificial demand" and thus the oh-so-needed-illusion the economy started to work. In reality:
* the "99%" of the people will start trying to "invest" in something that wo
Re: (Score:3)
Here's [reuters.com] an example: price rises but the buying power's erroded (a low sales situation should drive the price lower - aka deflation. It happens in the reverse, so what do you think this is a symptom for?).
...
(if you are tempted to lecture me on "what actually inflation means", how the index is computed or anything on that line, don't. Let me stay a crackpot, I'll let you keep your head deeply stuck into your own ass and we can both agree to disagree).
Re: (Score:3)
Because of how banks are raising reserve ratios across the board, both due to more stict regulations and by choice,the money supply would decrease significantly if new currency wasn't issued to make up for the shortfall.
TFA/S mentions shadow banking system [wikipedia.org]. Now the definition that pops up if you follow the link is (with my emphasis):
The shadow banking system is a pejorative term for the collection of non-bank financial intermediaries that provide services similar to traditional commercial banks.
...
The core activities of investment banks are subject to regulation and monitoring by central banks and other government institutions - but it has been common practice for investment banks to conduct many of their transactions in ways that don't show up on their conventional balance sheet accounting and so are not visible to regulators or unsophisticated investors.
Now, a shadow banking system not subject to any outside scrutiny and with an estimated value of $100 trillion... do you sleep well at night on the account of banks raising reserve values? I mean, how can you tell of the fractional reserve they are using inside the $100 trillion value shadow banking provide enough cover?
Inflation is, if anything, too low right now, at least in the US.
A matter of trust, isn't it? Do you trust the same (type of) people that
Because of FED (Score:2)
No surprise here. What FED was doing for the last couple decades?
Printing the money and printing and printing and printing and printing and printing and printing and printing and printing and printing and printing and printing
All these cries about savings and cuts are pathetic.
There is enormous amount of money in circulation, so much that economic bubbles just put little dent in it.
Re:Because of FED (Score:5, Interesting)
Re:Because of FED (Score:5, Insightful)
The Fed can and has printed a ton of money. There's no question about that.
But because the banks aren't lending that money out to consumers, the overall money supply hasn't gone up, and inflation rates have been historically low, not high. If you believe, like almost all economists, that inflation and employment are inversely related, then you want to be doing exactly what the Fed is doing, because that will create jobs that people desperately need, and will have no negative effects on savings (because inflation has been almost 0% for years). This is the Fed doing exactly what they should do in a deep recession.
And if you want to see what not to do in a financial crisis, look at the central bank that steadfastly refused to print money like crazy during the recession: the European Central Bank. The result is Spain with a 26.9% unemployment rate, compared to the 7.4% just reported in the US.
Re:Because of FED (Score:4, Insightful)
One of the key words in what you said was in the last paragraph: "reported". I quote:
And if you want to see what not to do in a financial crisis, look at the central bank that steadfastly refused to print money like crazy during the recession: the European Central Bank. The result is Spain with a 26.9% unemployment rate, compared to the 7.4% just reported in the US.
Consider the significance of the word "reported". I believe the report to be quite an erroneous. And also consider that 45% of currently existing jobs are expecte to be automated by around 2020. (I, personally, think that this is an overestimation of the rate of automation, but I haven't studied it recently.) Note the article today that says robots-join-final-assembly-line-at-us-auto-plant. It could be that I'm underestimating the rate of automation.
Unemployment needs to become acceptable, and employment needs to become unnecessary for survival. But this will be difficult as there are still boring and unpleasant jobs that can't be automated. Also because many people believe that one's worth is determined by their job. Also because the tax structure is such that jobs need to be as efficient, meaning employ as few people, and coerce as much work out of them at possible. It doesn't really mean that jobs need to be made as unpleasant as possible, but many managers seem to think that it does, and while a job is necessary for (reasonable) survival, they are free to exercise power.
OTOH, one needs to realize that this is going to mean that an increasing number of people are dependent on the government for survival. With the implications that those psychotically driven by a need to control will flock from their current positions to roles in government that provide equivalent opportunities. (Not that there isn't a significant tendency in that direction already, but the current system provides them with a diffuse network of niches, and most of those would disappear.)
I don't really see a good answer, but I sure see a lot of bad ones. And the current situation isn't even meta-stable.
Re:Because of FED (Score:4, Informative)
Well, since they're not lending it, small businesses can't get loans to expand and thereby hire more people to reduce unemployment and prospective home buyers can't get financed and thereby can't help the housing recovery.
Instead, the banks get loans from the Fed at .25%, then buy treasury notes. Right now a 2 year treasury note is only like .5%, but in recent years they've been upwards of 1%. Inflation doesn't matter when it's all risk-free interest profits off somebody else's money.
Since the taxes to pay off those notes come from income earning Americans, it's basically a perpetual motion slavery machine.
1) Fed loans to banks.
2) Banks ignore individuals and loan to government.
3) Government taxes labor to repay banks.
4) Banks repay Fed.
5) Profit!
6) Goto 1
It's just a straight-up evil system to enrich the banking cartel off the backs of workers.
Re:Because of FED (Score:4, Interesting)
And if you want to see what not to do in a financial crisis, look at the central bank that steadfastly refused to print money like crazy during the recession: the European Central Bank. The result is Spain with a 26.9% unemployment rate, compared to the 7.4% just reported in the US.
Well, no - the result is the EU with an 11% unemployment rate. If you want to take numbers out of context, you might as well quote Germany with 5% unemployment, and claim that that is the result of not printing money.
Greece and Spain are outliers - their economies have been poorly managed for a while, and it's nothing to do with the recent recession. Greece propped up its employment for years by just employing everyone in the civil service, going into debt, and concealing it. Spain has had massive unemployment for decades, on and off - 20 years ago, it was as high as it is now.
Re: (Score:3)
Keep in mind the real interest rate. Currently, the U.S. 10-year T-bill yields 2.8%, while inflation is 1.5%; that means the current real interest rate is a paltry 1.3%. Agreed, feeding money out to the banks via the Fed just feeds the banks. If, instead, the government actually used that same money to pay people to do stuff, a lot of stuff could get done, people could be put to useful work (repairing infrastructure, teaching kids, researching non-petroleum energy), increasing GDP, increasing tax receipts,
Re: (Score:3)
I've considered moving to Iceland, since they're the only country who put their bankers in jail after the crash.
And if I recall, Iceland only has something like 130 people in prison, total.
The economy is faith based (Score:3)
All contributions should be tax deductible.
Re:The economy is faith based (Score:4, Informative)
I think saying fiat based currency is faith-based economy in literally true. It relies on everyone agreeing that its worth something.
Not really, when a government issues it and makes it the legal tender.
The value of the USD is based on the USG's willingness to bash peoples' heads in to collect taxes. FRN's have been threat-promises since 1971.
That and its legacy function as the petrodollar under the long-obsolete Bretton Woods terms. Syria and Iran are the last remaining threats to its dominance there, though Russia and China are doing what they can to level the playing field.
Good (Score:2)
Shadow banking system (Score:4, Funny)
Let's give the government a lot of power to regulate cash flow so they can protect us.
Re:Shadow banking system (Score:5, Insightful)
Nothing scarier than having your entire life savings become worthless.
Comment removed (Score:4, Informative)
Re:Shadow banking system (Score:4, Insightful)
Said by someone with life savings.
Re:Shadow banking system (Score:5, Insightful)
And, remember. The same people who run the shadow banking system are the ones who want you to put all your money into it rather than pay down your mortgage.
If you own your home free and clear, you don't need anywhere near as much savings (or income!) to be comfortable. But if you have a hundred grand outstanding on your mortgage and a hundred grand in the market and the market goes tits-up, that hundred grand is gone and you still have to pay the mortgage and the lender can still kick you on the street if you don't. And, ohbytheway, all that equity you've put into the home goes *poof* when the bank evicts you as well.
Debt may be what's driving the economy, but it's pure evil for the little people.
If you want a stress-free life, pay cash for everything. If you want something and you can't afford it, set aside whatever you'd spend on the monthly payments and then buy it outright when you've saved up enough. It won't take anywhere near as many monthly payments to save up for it as it would to buy it on credit. You're pretty much always going to spend a bare minimum of half the purchase price on finance charges, and often more than the purchase price.
That's really all you have to do to double your purchasing power: don't buy on credit.
(The only types of exceptions are for capital investments, such as big equipment for a business. If a company will make significantly more money from the equipment than it'll pay in finance charges, the loan makes sense. But that's almost never the case for individuals, and certainly not the case for living room furniture and kitchen doodads and exercise equipment that rusts from disuse. And rarely the case for vehicles. Homes you might have no choice but to finance, but buy something you can pay off in five to ten years, even if it means living on rice and beans in the mean time; if you can't afford to pay it off that fast, you can't afford the house.)
Cheers,
b&
Re: (Score:3)
Your math skills need work.
By financing your car, even at 2%, you cut the effective rate of return on your mutual funds in half. Instead of your mutual fund doubling (through interest, not additional investment) in eighteen years, it'll now take 35 years to double. (Presumably, it won't take that long to pay off the car...but, if you're typical, by the time the loan period is up, you'll just go out and finance yet another car.) And, again, if you fail to make your payments on time, the bank can and will tak
Re:Shadow banking system (Score:4, Insightful)
Not at all -- and quite the contrary!
Might you spend more per year in repairs on an old clunker than an under-warranty new car? Perhaps.
But even the most expensive things that might ever go horridly worng with that old clunker will still cost you less than a couple months of typical new car payments. And that's including you paying for a rental out-of-pocket while the car's at the mechanic.
That's another point -- there's no need to take car to the dealer for service and repairs. My own mechanic is a righteously grizzled shade-tree mechanic who works out of his back yard. He does awesome work; hardly surprising, since in a past life he was on the team of a top fuel racer. And every time I go there he's got some new Tin Lizzie or some such that he's restoring for somebody else; it's like an automobile museum. As a nice bonus, he doesn't charge anywhere near what he should, mainly because he has almost none of the overhead of a garage.
The short version is that it's always cheaper to fix up an old-and-busted car than it is to buy a new one. Always.
Will you have the latest and greatest array of gadgets, like three climate-controlled cupholders per passenger? No. But you'll have safe and affordable transportation.
Of course, if you do have lots of money and you can afford to buy (with cash!) a new luxury car every year and you enjoy spending your money on that sort of thing, go for it! The problem is that far too many people are spending money they don't have on things they can't afford, or they're giving half or more of their money to banks for no good reason.
That line above where I mentioned that you could double your purchasing power by not buying on credit? Imagine if everybody did that -- we'd double the size of our economy, just at the expense of the parasitic aspects of the banking industry. I daresay that just might do a wee bit of good for our economy...but only if we turned around and invested the windfall in solar power...and that's a rant for another time....
Cheers,
b&
Re: (Score:3)
What you're talking about really varies. Here's an example that illustrates how we can both be right. If you get a 1993 Ford 7.3 IDI with the upgraded turbine housing, you'll get the same power as a stock 1995 Ford 7.3 DI. Either one is cheaper to deal with than a Ford with a 6.0, which is a more powerful truck than either one... but which needs a whole mess of the same stuff the 7.3 needs to be reliable, plus some other magical stuff related to the fact that the 6.0 has a true head-up-ass design. However,
Re: (Score:2)
The government enables these kinds of transactions. What, you thought your elected representatives were in it for the sake of their voters and their countries? This is it folks, the real picture. It's all about the money.
Re: (Score:2)
size (Score:5, Insightful)
and more even than the GDP of the entire planet.
The size of the shadow banking system may be worrisome (I guess), but banks hold assets, whereas GDP measures income. It would be extremely surprising if the GDP of the world were more than its income.
Incidentally, if you are upset about the 'shadow banking system' or the name 'shadow' scares you, money market funds are part of the shadow banking system. So are ETFs. So it is very possible that you are part of the SBS, since normal people invest in these kinds of things.
In general the SBS only matters because tax payers are committed to bailing banks out if they lose too much money there. If we followed Paul Volcker's advise and made a rule that, "any bank that is too large to fail is too large to exist. Any bank that receives money from the federal government will be broken up in pieces and sold," then it would solve a large portion of these problems. Make a rule that you can clawback salaries and bonuses from execs who made very very bad decisions, and that will solve another large portion of the problem.
As it is now, all the incentives are aligned to ensure another financial crisis, whether we have a shadow market or not. Focus on fixing the incentives, focus on smaller details. But we won't focus on changing the incentives as long as the administration continues to keep stooges from the financial industry in his cabinet.
What is an "econophysicist" (Score:2)
... and do they have any expertise in economics? Or is it kind of like an econobiologist or econocabdriver -- someone interested in economics but doesn't know any more than I do about it.
Re: (Score:3, Informative)
It's a term that attempts to distinguish between economists who study monetary fictions and those who study reality based on measurement of resources.
Traditional economists of all schools practice "econo-fantasy" and almost universally support the making of money out of money. This is why current-day monetarism bears no relationship to the physical resources of the planet, and why financial institutions continue to profit despite the planet being in a death spiral.
Lacking even
From a post apocalyptic future... (Score:2)
The key phrase here is: (Score:4, Interesting)
And they hypothesize
In other words they are making this shit up for some unknown reason.
In his Principia, 2nd ed (published 300 years ago in 1713) Isaac Newton made some pithy comments about this sort of baloney.
"I have not as yet been able to discover the reason for these properties of gravity from phenomena, and I do not feign hypotheses. For whatever is not deduced from the phenomena must be called a hypothesis; and hypotheses, whether metaphysical or physical, or based on occult qualities, or mechanical, have no place in experimental philosophy. In this philosophy particular propositions are inferred from the phenomena, and afterwards rendered general by induction."
So really there is nothing to see here. Just move along now.
I am not amused (Score:5, Funny)
At what point can we end the delusion that fiat currencies are worth anything at all?
Let's just go back to bartering. How many chickens do I need to give my Cox Cable for my internet access?
Re:I am not amused (Score:5, Funny)
Re:I am not amused (Score:4, Insightful)
At what point can we end the delusion that fiat currencies are worth anything at all?
Probably when I can't buy a sandwich for a dollar.
Until then, it seems to work pretty well.
Re:I am not amused (Score:4, Insightful)
Bartering doesn't work for transactions with large disparities in value. If I build you a house I'm not going to accept 200,000 chickens as payment. Even if the deal was to give me one chicken per day for the rest of my life it doesn't work because:
1) I can't eat more than one chicken per day
2) I'm not in the business of re-selling excess chickens - I'm a home builder
3) That would be 548 years of daily chickens and neither of us will live nearly long enough to fully satisfy your debt to me
Even if the trade imbalance was smaller, say 10,000 chickens worth, I can't (or rather, YOU can't) guarantee that you'll even still be around with chickens in 5,10,20,30 years when I'll still have the need to eat every day.
If you want me to build you a house you're going to need to pay me in currency that I can easily and readily exchange for a chicken from ANY chicken supplier at the time I'm ready for the chicken, even if that chicken supplier won't exist in the marketplace for another 20 years from now.
Re: (Score:3)
That's a great answer to a ridiculous question asked in jest.
No, the little people don't have all the money (Score:4, Insightful)
That article is weird. But then, so is the site. In the middle of the article, there are ads for other articles:
New Healing Mechanism Closes Wounds By Up to 50 Percent in 30 Seconds -- And Leaves No Scar
Universe May Contain "Tardis-like: Regions of Spacetime, say Cosmologists
Reliable source problem here.
Anyway, their claim is that, based on Zipf's law, there must be some "long tail" of unknown small financial institutions which have vast but uncounted assets. No way. There's halawa, Indian gold merchants, and Bitcoin, but together they don't add up to one of the big banks.
"It is in the nature of markets to move money from the many to the few."
Silly, stupid me (Score:3)
The page is down, so hopefully someone can explain: how can the GDP of a system which is itself only a fraction of the planet, exceed the value of the planet?
If, as I suspect, this is calculated by totaling transactions alone - ie if I sell you an apple for $1, and then buy it back for $1, we've just added $2 to the total GDP of the system...well then my next question is why we even pay attention to such a worthless number in the first place?
Peanuts (Score:4, Informative)
Re:Peanuts (Score:4, Interesting)
FTFY. Also, it doesn't require "absolutely everything" to go tits up. Everything in our economy is so tightly coupled to each other that big waves in one sector are guaranteed to have some effect in most other sectors. And if the waves grow big enough, the whole thing could come down.
In addition to that, your assertion that the number means nothing assumes that the number of bets that it will go tits up are relatively balanced with the number of bets that it will not go tits up. The greater the disparity, the greater the economic effect. And the lack of regulation means that banks don't have to act in a manner that guarantees that they can cover even a majority of their bets, hence the 2008 bailouts. And nothing has been done to change that, so be prepared for it to happen again.
Re: (Score:2)
You really think that every single American is making ~800k under the table per year?
Re:Shadow economies (Score:4, Insightful)
There are surprisingly people in other parts of the world than American (IKR!!), but even if you take the global working population that still comes to around $40,000 for every worker per year. So, still calling bullshit.
Re: (Score:2)
My presumption of Americas was driven by the pricing in USD, not from nowhere.
Re:Shadow economies (Score:4, Funny)
There is a guy in a corner office somewhere that is apparently making my $40k share of the underground banking economy.
I would guess to say he's also making the $40k share of many most of the people in my 5 square miles as well.
Re: (Score:2)
How do I get in on this?
Re: (Score:2)
Surgically remove your conscience, you'll get a letter of invitation a week later.
Re:Shadow economies (Score:5, Funny)
The banker initiation involves kicking a puppy and stealing a little old lady's pension check.
Re: (Score:3)
The banker initiation involves kicking the old lady's puppy and stealing the little old lady's pension check. (ftfy)
Re: (Score:2)
You really think that every single American is making ~800k under the table per year?
Either that or he's implying that those jobs that only illegals are 'willing' to do actually pay 8-9 figures a year.
Re: (Score:2, Insightful)
And is anyone actually being harmed by this "shadow banking"? If so, I'd be interested in a concrete example.
Re:Shadow economies (Score:5, Insightful)
If you knew that your bank was involved in large, unregulated transactions worth more than the bank's holdings, would you continue to do business with them?
Re:Shadow economies (Score:5, Interesting)
An investor in a bank, or a purchaser of A-rated securities offered by that bank, may not be aware that there are unregulated, undocumented liabilities held by that bank, which, were they to go sour (see "Credit Default Swap"), could cause the bank to collapse.
I thought everyone knew these ratings were bullshit.
If you knew that your bank was involved in large, unregulated transactions worth more than the bank's holdings, would you continue to do business with them?
Well, this presumes that I am doing business with them in the first place, but I would say that this information wouldn't change my mind, because I just assumed nearly everything the banks did was not actually regulated anyway. Yes there are bank regulators, but they don't really understand how anything works, nor do the banks for that matter. This might be pretty scary for the banks if they weren't able to get taxpayers to pay their losses. It also might cause regulators to start shutting all these banks down if their bosses weren't completely in the pockets of the banks.
Hell even I have my money in a bank. I basically dumped almost all my money into a house because I don't trust banks, but the money I have left over is in a bank. The Federal reserve has made it so that the only thing dumber than putting your money in a bank is not putting your money in a bank. They basically force everyone to become irresponsible investors or they confiscate your money through inflation. It's really quite an ingenious system, but it sucks for people who want to play it safe. Then again life sucks for people who want to play it safe.
Re:Shadow economies (Score:4, Insightful)
From their site
1.18% through October 31, 2013
So you still have roughly a -8% ROI through these bonds if you are going by real inflation figures. So how exactly are these protected from inflation?
Hear hear, another scam from your federal treasury and your not-so-federal central bank.
Re: (Score:3)
Your understanding of shadow banking is wrong. That is precisely the reason a bank called "Wachovia" doesn't exist anymore.
Re:Shadow economies (Score:5, Insightful)
You are completely right – it is the other people who are confusing you. “Shadow Banking” is when non-banks, such a pension funds and money markets provide funding for lending instead of the banks.
Credit Default swap is a bad example. If it is held by the bank then it is on the books. It might be mispriced but that is another issue.
Commercial paper is the classic example. Companies go out into the market and borrow money for less than 270 days. The normally sell to money market funds and the like. Banks help in issues and selling the paper. It is off the books but it is lending. A lot of firms were borrowing lots of money like this because it was cheap. And at the end of the 270 days you just rolled it over. When the financial crisis hit nobody wanted to buy anything so you could not roll over your paper. A lot of good companies had to scramble.
Asset Backed Securities might be better. A bank (or GE, Target, or anybody selling almost anything) has 100m in loans. They then package those loans into a bond and sell 90m of that bond. They sell mainly to pension funds. Now the bank only has 10m on the books. This keeps leverage low and regulators happy. However now they are dependent on the market to buy their bonds. If they can’t sell their bonds then they can’t lend.
Re:Shadow economies (Score:5, Insightful)
* [urbandictionary.com]
Re: (Score:3)
Credit default swaps were a major cause of the domino like collapse of financial institutions in 2008 that required a government intervention of unprecedented size and scope. CDS's are a large part of the shadow banking system, they are black boxes to regulators who have no ability to regulate the market or ability to model the effects of problems in the market.
Re:Shadow economies (Score:5, Interesting)
Re:Shadow economies (Score:4, Insightful)
Re: (Score:3)
You ever play the tabletop game Jenga? You know, the one where you pull blocks from the bottom and stack them on top?
Well, try to think of the economy as a big ass game of Jenga, with the banksters and their Smaug-esque cash hoards at the top, and all us regular folk making up the bottom; just like the game, unless you leave yourself a strong, solid foundation, only so many blocks can be pulled from the bottom before the whole thing comes crashing down.
There's no logical reason any individual person should
Re: (Score:3)
Meanwhile, back in real reality, those of us who understand statistics have figured out that you can't just take a couple of data points, draw a liner regression, and assume your claims hold true in all cases, particularly when there are other well-known data points that contradict them. In English: Just because making a communist dictatorship somewhat less communist is good for their economy, it doesn't follow that eliminating all regulation in an already capitalist economy will be beneficial.
The countrie
Making shit up (Score:2)
The under-the-table business-to-employee market is nothing compared to the $8.3 Quadrillion in unfunded pension liabilities. We'll need 221 Earths to pay that off.
Re: (Score:3)
The under-the-table business-to-employee market is nothing compared to the $8.3 Quadrillion in unfunded pension liabilities. We'll need 221 Earths to pay that off.
Once some alien civilization discovers the disk on the Voyager probe the RIAA will be able to sue the entire Galactic Federation for copyright infringement, so that should be covered.
Power (Score:3)
Agreed, we want:
About your assertion that "These people are only in power because _we_ allow them to be" ... your heart is in the right place, but my head says otherwise. I wouldn't say that the powerful are powerful because we *allowed* them to be -- that overstates ho