Over the past few years I’ve learned the US does not have soup kitchens. We have food stamps - er, Supplemental Nutritional Assistance Program.
(Yes, we actually do have soup kitchens, too - but folks don’t depend on them quite like in the 1930’s. They might, though…)
There is zero regulation of derivatives in America, even two years after it was mainly losses in derivatives markets that almost melted the financial system down. There is zero effective regulation of bank capital requirements or leverage two years later too, the SEC in 2005 allowing firms like Goldman and Lehman to lever up their debt:assets ratio from 10:1 to 30 and 40:1, a major cause of the meltdown. Instead banks have been given effectively unlimited leverage by the Fed. And capital requirements were changed or scrapped because the banks had mountains of exotic AAA-rated mortgage paper that they could use as their capital base instead of holding actual capital assets and hedge their risk to almost zero, allowing them to lever up… And the bs mortgage paper managed to get AAA ratings because the ratings agencies had been allowed to self-regulate and were now quintupling their profits by acting as consultants to the investment banks to advise them how to create securities out of subprime crap that could be AAA rated.
I could go on all night but those are some of the crucial things that zero/ending of/lax/regulatory arbitrage allowed to happen and that brought us the meltdown. Like I said before even Alan motherfunking Greenspan now agrees that the system needs more and effective regulation.
Back to Greece, it looks like proposed austerity measures are not going over well at all with the population, what with widespread riots.
One thing I haven’t seen addressed anywhere – maybe because it’s more than two steps ahead, and maybe because those involved don’t want to think about it – is whether this is a threat to Greek democracy. I know next to nothing about Greek political history, but going by [del]Cliff’s Notes[/del] Wikipedia, it looks like their current democratic form of government has been in place only 35 years or so, before which there were coups, civil wars and dictators.
If there were a coup and a strongman, military or otherwise, took the reins in Greece, what would that do to Greece’s EU membership? What would be the repercussions in Spain, especially if the latter gets hit by the financial crisis as well?
The exchange traded derivatives markets in America are highly regulated.
They played practically no part in the market meltdown. Profits and losses on oil futures, S&P index futures, or stock options, for example, are marked to market daily. If an entity is underwater on a position they are required to post collateral immediately or potentially lose their status as an exchange member. The problem is with over-the-counter derivatives that are traded without any sort of central clearing mechanism. If a centralized exchange and/or clearinghouse were established to provide transparency and enforce margin requirements on all derivative contracts, companies like AIG could never bury themselves in CDS contracts that they couldn’t ever hope to pay out.
I have fallen behind on the details of the financial reform bill, but I know something resembling a centralized exchange was included. Warren Buffett came out against it (since it would require him to set aside capital for Berkshire Hathaway’s large derivatives portfolio), but the Democrats rejected his requests.
(I don’t mean to hijack this thread, but it’s worth pointing out that not all derivatives are equal and when used rationally can be good for the marketplace and overall economy.)
Isn’t that just exchange rules and regs rather than any actual government oversight though?
In this thread, the American navel gazin’ is just amazin’. The connected condo next door is on fire, and the main importance here is that it gives us yet another opportunity to sit around and bitch about the contractor who installed our sprinkler system upside down two years ago.
I have no idea where you’re getting any of this from.
Yes, I suppose the Greeks seem so very distant.
PLEASE, US WANKERY ABOUT YOUR FINANCIAL SYSTEM IN SOME THREAD … ABOUT THE BLOODY US.
I suppose the Germans should tell the Greeks to maintain the security forces salaries. Can’t have them getting too upset.
Indeed. I suppose that in reality a coup is not likely due to the pressure of being in the EU.
But then the Brussels pin-heads thought that magically, by joining the EU, corrupt lying governments would somehow start playing nice.
I doubt there are repercussions in Spain, Spain’s a rather better run country. Troubled by the debt load, but nothing like the problems the Greeks made for themselves. But a coup, I’d guess Greece gets suspended.
Let me take a stab at the original question: Nobody worried about the Greece/Portugal/Spain and Euro-zone meltdown?
Yes, I actually am concerned. Not just because I feel sympathy for fellow human beings caught up in violence and riots (and I do feel bad for them) but because in this global economy what screws up one country can have repercussions for all.
That said - I’m not even sure I can pay my rent next month. My immediate survival needs tend to take precedence day-to-day over what’s happening a world away. It’s partly because that’s how human beings are put together, but it’s also because I can’t do jack to solve Greece’s problems, but I’d better do something to solve my own. So most of my time and energy goes to looking for work, as I am already under “austerity” measure have have been for a couple years.
If they get booted from the EU, presumably they get booted from the euro as well? How would that work?
There would still be a legitimately elected greek government (in exile, in jail, whatever…). I would expect strong pressures from the EU for the “strongman” to give up power and would hope for a military intervention if needed.
It’s a combination of private sector self-regulation (CBOT, CME, NYSE rules) and governmental oversight (CFTC, SEC margin requirements).
Sorry for the hijack, back to Greece…
Various things I’ve read over the past couple of years. One article amazingly in the WSJ ripped the head of the OTS, James Gilleran to bits. Gilleran was the former bank lobbyist that Bush put in charge of the OTS and who allowed AIGFP to blow his own regulators off when they wanted to check AIG’s books. Here’s a photograph of him:
“Dow freefalls 1,000, partially recovers” http://www.msnbc.msn.com/id/36983596/ns/business-stocks_and_economy/
"Stocks plunged Thursday as investors succumbed to fears that Greece’s debt problems would halt the global economic recovery. In about a half-hour Thursday, the Dow Jones industrials slid almost 1,000 points before recovering to end the day off about 350 points. "
Yes, this can definitely affect the U.S. too
Here’s an interesting graphic showing how the PIIGS are interconnected with each other and Germany/France/Britain in terms of their obligations.
God knows. The EU never planned for any of this. The Eurocrats operated on the EU Magic Principal. Join EU, problems go away. Like magic.
This idiocy already was demonstrate with the Cyprus ascension.
My comment looking in from the outside: it seems to me that when sophisticated men of the world get together at Brussels cocktail parties and chat about world events, and of course all of us here are reasonable fellows and these “problems” really boil down to something quite simple, really . . . they talk themselves into believing that the wider world really is quite that simple, really.
That is indeed a very interesting graphic; thanks for that. Greece looks like a relatively small fish in that debt pond. I hadn’t realized Italy owed so much to France.
DickD: I understand where the OTS went wrong, but the FSA can’t regulate what it doesn’t regulate. That particular part of AIG snuck into the UK via France, which theoretically had responsibility for it. This incident does raise some of the major issues relating to regulation of multinationals falling under multiple jurisdictions and how to do so effectively (especially since one would have to include the US regulatory muddle). If you want to talk about a spattering of regulatory approaches, looking at international regulation is definitely the way to go.
And the eurotechnocrats cream their pants wanting fucking Turkey to be integrated…
May this feta-fiasco serves them as a lesson.
Humility is good in that it teaches you that you are never, ever safe. Plan for the worst.
Stats might look good on paper, your country might look like its on top of the world, but look what happened in my country, where the government was the last one to find out what was going on with the bank that collapsed (they stuck bananas in their ears). Look at Greece where the government knew they were nose-deep in crap but deceived everybody not wanting to be the ones left to clean this mess. The lesson I learned is not to trust my politicians too much. And live like tomorrow is doomsday again.
Ironically when the local crisis hit we (my husband and I) did pretty well, since neither my husband nor I were employed locally. Our “solid” currency was gold. We profited from the crisis and still hoped that it had never happened.
And back to Greece: the regular Greek schmo had no idea what was going on. Their own government was telling them lies. How can you plan for a catastrophe that you have been reassured will not happen? These were not excesses if they (regular Kostases) thought they could afford it (Not that I don’t believe we all live in excess, because it is hard not to reach that conclusion when you look at how the majority of the world lives).
I hope that somebody in Greece do some real hard time in prison. Let it serve as a warning to others.