The Big Short

[SilverDJ]

Water is a key component to energy production, both electrical and bio-chemical. Beyond our need for it to quench thirst and grow food, very few (if any) sources of electrical energy don't need water to manufacture, maintain cooling or transport.

http://www.nei.org/Master-Document-...act-Sheets/Water-Use-and-Nuclear-Power-Plants

According to the U.S. Geological Survey, electric generation accounts for 3.3 percent of freshwater consumption, about the same percentage as the industrial sector (3.4 percent) and raising livestock (3.2 percent). The residential sector consumes 6.7 percent of freshwater, while the commercial and mining sectors consume the least, at 1.3 percent and 0.8 percent, respectively. The largest consumption of freshwater is for irrigation, at 81.3 percent.

To put residential and electric power water consumption in perspective, a typical nuclear power plant supplies 740,000 homes with all of the electricity they use while consuming 13 gallons of water per day per household in a once-through cooling system and 23 gallons per day per household in a wet cooling tower system. By comparison, the average U.S. household of three people consumes about 94 gallons of water per day.

 

[mmm....shiney!]

The real villains behing The Big Short weren't wall street traders:

The theme of "The House that Uncle Sam Built: The Untold Story of the Great Recession of 2008" is that government policy, not a failure of free markets, caused the economic trauma we have been experiencing. We do not live in a free market. We live in a mixed economy. The mixture varies by industry. Technology is primarily free. Financial Services is primarily government. It isnot surprising that the most government regulated and controlled segment of the economy, financial services, experienced the biggest problems. These problems were created by actions by the Federal Reserve combined with government housing policy (especially the government sponsored enterprises - Freddie Mac and Fannie Mae). Misguided government interference in the market is the real culprit in laying the foundation for the Great Recession.

http://fee.org/files/doclib/houseunclesambuiltbooklet.pdf

 

[JulieW]

I thought the fault came in on the tail of the failure to regulate the illegal trading and fraud.

No doubt HFT has a part to play as well. As numerous pundits posit, the concept of 'market' no longer exists.

 

[mmm....shiney!]

I thought the fault came in on the tail of the failure to regulate the illegal trading and fraud.

No doubt HFT has a part to play as well. As numerous pundits posit, the concept of 'market' no longer exists.

I'm not sure what illegal trading and fraud you are referring to and what regulations you were suggesting.

At it's heart the fault lay with the government's housing policy, based upon the false premise that housing should be affordable for everyone and that it would secure loans in the event of any defaults, coupled with The Fed's easy money policy that injected excess credit into the market. It made it both popular and profitable to loan anyone money, regardless of their financial capacity to repay the loan.

President Bush, 2002: "I set an ambitious goal. It's one that I believe we can achieve. It's a clear goal, that by the end of this decade we'll increase the number of minority homeowners by at least 5.5 million families. Some may think that's a stretch. I don't think it is. I think it is realistic. I know we're going to have to work together to achieve it. But when we do, our communities will be stronger and so will our economy. Achieving the goal is going to require some good policies out of Washington. And it's going to require a strong commitment from those of you involved in the housing industry."

 

[JulieW]

The fraud by the mortgage writers - the NINJA loans etc. The illegality of creating the CDOs etc.

Tracing it back before then, it was the drug cartels withdrawing funds from Wachovia because Wachovia turned over for the Feds on a laundering matter, and so they were hit by the drug cartels emptying their accounts, which in turn became the first of the dominos that toppled Lehman.

But in essence, the corruption of Wall Street.

 

[mmm....shiney!]

The fraud by the mortgage writers - the NINJA loans etc. The illegality of creating the CDOs etc.

You are referring to the mortgage backed securities that were rated AAA by the ratings agency? I'd accept that as fraud, and the banks that sold those mortgage-backed securities were complicit so it could be argued they were behaving fraudulently, but remember who was behind the two banks that issued these securities - the government.

I don't really inderstand how they work but I don't see the CDOs as being illegal, just another investment strategy where you sell or buy insurance.

Tracing it back before then, it was the drug cartels withdrawing funds from Wachovia because Wachovia turned over for the Feds on a laundering matter, and so they were hit by the drug cartels emptying their accounts, which in turn became the first of the dominos that toppled Lehman.

But in essence, the corruption of Wall Street.

You've lost me there about the drugs bit but you're suggesting the corruption of Wall Street played a bigger role than the policy of the Federal government and the reserve bank? You're a kind judge to let the government off the hook so easily. :lol:

 

[JulieW]

The government was blind and ignorant and was taken for mugs by the Wall Street banks that told them the world as they knew it was over and they needed 700 billion to fix things (pretty paltry considering US debt just hit a trillion).

Lay it at the feet of a corrupt Clinton if you wish, although he was just the final nail in the coffin. Wall Street had been lobbying for years for the 'banking reform' that allowed the Wall Street banks to no longer abide by the provisions of the Glass-Steagall Act - instituted after the Great Depression to protect the people from exactly what happened in the GFC - in essence, bad investments taking down the whole institution, and not just its investment arm. The repeal of G-SA really opened the floodgates to the corruption of the CDO scams and the legendary greed and conflicts of interest by Wall Street banks such as Goldman Sachs.

Have a read of Matt Taibbi's article in Rolling Stone on the vampire squid which touches on all this and explains the mechanisms.

http://www.rollingstone.com/politic...the-mega-banks-most-devious-scam-yet-20140212

and

http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405

Incidentally, that repeal also allowed things such as the Goldman Sachs manipulation of aluminium prices by moving containers around storage yards and claiming costs and price increases on every forklift trip.

The CDOs were illegal in that it was misrepresentation of what was offered. Supposedly AAA investments which were in fact nowhere near - thank the rating agencies for that collusion.

 

[JulieW]

p.s. from the article quoted above:

And last summer, The New York Times described how Goldman Sachs was caught systematically delaying the delivery of metals out of a network of warehouses it owned in order to jack up rents and artificially boost prices.

You might not have been surprised that Goldman got caught scamming the world again, but it was certainly news to a lot of people that an investment bank with no industrial expertise, just five years removed from a federal bailout, stores and controls enough of America's aluminum supply to affect world prices.

 

[mmm....shiney!]

Not greed, it was the policy of government to make housing affordable for all and The Feds manipulation of the cash rate that provided the environment for this mass of speculation that led to the GFC. Greed is natural, it will always be a part of any market, it's not good, but don't blame greed for the crisis, otherwise you're going to have to blame everyone of being greedy, from the investment banks down to those who took out mortgages without any downpayment speculating that capital gain would mean they could flip that house off to someone else 6 months later for a tidy profit:

Any number of factors led to the recent financial crisis. At the top of the list and rarely mentioned is the willingness of our trading partners to finance our trade deficit with an artificially low interest rate and an artificially high exchange rate. And right behind it was the growth of a vast new shadow banking system largely outside the reach of regulators. Shoddy lenders, foolish borrowers and investors, greedy investment bankers, compromised appraisers and ratings analysts, clueless regulators all of these were also part of the story along with excessive consolidation.

https://www.washingtonpost.com/lets...ass-steagall/2012/07/27/gJQASaOAGX_story.html

Edit to add: the CDOs weren't illegal.

Edit to add: it was from the Washington Post so it's not entirely accuarate but it's useful

Edit to add again: and you may as well quote from Marxist Weekly if you're going to cite any Rolling Stone economic commentary. :lol:

 

[Porcello]

I think I like you, shiney. We kind of share the same love for governments.

 

[JulieW]

Not greed, it was the policy of government to make housing affordable for all and The Feds manipulation of the cash rate that provided the environment for this mass of speculation that led to the GFC. Greed is natural, it will always be a part of any market, it's not good, but don't blame greed for the crisis, otherwise you're going to have to blame everyone of being greedy, from the investment banks down to those who took out mortgages without any downpayment speculating that capital gain would mean they could flip that house off to someone else 6 months later for a tidy profit:

Any number of factors led to the recent financial crisis. At the top of the list and rarely mentioned is the willingness of our trading partners to finance our trade deficit with an artificially low interest rate and an artificially high exchange rate. And right behind it was the growth of a vast new shadow banking system largely outside the reach of regulators. Shoddy lenders, foolish borrowers and investors, greedy investment bankers, compromised appraisers and ratings analysts, clueless regulators all of these were also part of the story along with excessive consolidation.

https://www.washingtonpost.com/lets...ass-steagall/2012/07/27/gJQASaOAGX_story.html

Edit to add: the CDOs weren't illegal.

Edit to add: it was from the Washington Post so it's not entirely accuarate but it's useful

Edit to add again: and you may as well quote from Marxist Weekly if you're going to cite any Rolling Stone economic commentary. :lol:

Thank you Gordon Gecko, Goldman Sachs is doing god's work, and yes Virginia, there is a Santa Claus.

In other news....

 

[mmm....shiney!]

When argument fails, appeal to authority :lol:

The Big Shortbased on Michael Lewis's best-selling book on the 2008 financial crisisis both great and terrible. It's wonderful as a narrative of a financial mania. It's terrible if seen as a complete treatment of that mania's underlying causes or a path to future solutions.

There's no question that the movie is significant and is being pushed as the go-to film for the key economic event of our times. Two New York Times film critics think the film ought to be considered for a best picture Oscar. Paul Krugman agrees, writing: "I think it does a terrific job of making Wall Street skulduggery entertaining.... The movie gets the essentials of the financial crisis right."

Why Market Haters Cheer

Krugman and friends like the film because it leaves out any discussion of the main culprit behind the financial crisis, which was not Wall Street "greed" but bad monetary and credit policies from the Federal Reserve and the federal government. The movie barely hints at any exogenous factors behind the boom or bust. (This Foundation for Economic Education report by Peter Boettke and Steven Horwitz fills in the missing information.)

So the pro-regulation crowd is cheering. Viewers are given no understanding of the real causal factors and hence fill in the missing data with a feeling that banks just love ripping people off.

To be sure, if you approach this movie with some knowledge of economics and monetary policy, the rest of the narrative makes sense. Of course Wall Street got it wrong, given Washington's policies on mortgage lending!

However, if this is your one and only exposure to the history of the crisis, knowing nothing beyond it, it is easy to see how you could walk away thinking, Wow, Wall Street and the capitalist system are rackets that desperately need controlling by a powerful government.

Read more here:

http://europe.newsweek.com/big-short-margin-call-steve-carell-brad-pitt-ryan-gosling-410603?rm=eu

 

[Caput Lupinum]

The government and Fed under Greenspan provided the cesspool environment for the mal-investment in real estate and MBS to grow after the dot com bubble burst through extended low interest rates. The big banks, The SEC, credit agencies and the sheeple all played their role in the collapse. You can still buy CDS today as insurance/hedge against a bond or on their own.

Commonwealth Bank CDS which is a proxy CDS for the Australian economy is trading around the 100 mark and is slowly moving upwards. e.g if I was holding either Australian government bonds or CBA corporate bonds and I thought the Australian economy and real estate market was going to tank, I could buy CDS as a hedge against my positions to mitigate possible losses on the bonds. The CBA CDS was trading around the 200 level when the GFC hit in 2008. Also The Markit iTraxx Australia Index measures the top Australian corporate CDS yields to get an overall picture of how close Australia is to defaulting on corporate debt but it covers all sectors.

I don't have anything to do with CDS, but I use it as one of many indicators of financial stress in an economy for other more conventional trading

 

[JulieW]

When argument fails, appeal to authority :lol:

The Big Shortbased on Michael Lewis's best-selling book on the 2008 financial crisisis both great and terrible. It's wonderful as a narrative of a financial mania. It's terrible if seen as a complete treatment of that mania's underlying causes or a path to future solutions.

There's no question that the movie is significant and is being pushed as the go-to film for the key economic event of our times. Two New York Times film critics think the film ought to be considered for a best picture Oscar. Paul Krugman agrees, writing: "I think it does a terrific job of making Wall Street skulduggery entertaining.... The movie gets the essentials of the financial crisis right."

Why Market Haters Cheer

Krugman and friends like the film because it leaves out any discussion of the main culprit behind the financial crisis, which was not Wall Street "greed" but bad monetary and credit policies from the Federal Reserve and the federal government. The movie barely hints at any exogenous factors behind the boom or bust. (This Foundation for Economic Education report by Peter Boettke and Steven Horwitz fills in the missing information.)

So the pro-regulation crowd is cheering. Viewers are given no understanding of the real causal factors and hence fill in the missing data with a feeling that banks just love ripping people off.

To be sure, if you approach this movie with some knowledge of economics and monetary policy, the rest of the narrative makes sense. Of course Wall Street got it wrong, given Washington's policies on mortgage lending!

However, if this is your one and only exposure to the history of the crisis, knowing nothing beyond it, it is easy to see how you could walk away thinking, Wow, Wall Street and the capitalist system are rackets that desperately need controlling by a powerful government.

Read more here:

http://europe.newsweek.com/big-short-margin-call-steve-carell-brad-pitt-ryan-gosling-410603?rm=eu

Newsweek!

And Rolling Stone is biased!!

 

[mmm....shiney!]

Julie you wouldn't recognise bias if it was served up to you as the main course in your Annual Socialist Front AGM and dinner.

Edit to add: did you actually understand caput's post?

 

[JulieW]

I learned in debating if all else fails - character assassination!

 

[mmm....shiney!]

I learned in debating if all else fails - character assassination!

So you didn't understand what he wrote?

 

[mmm....shiney!]

I learned in debating if all else fails - character assassination!

 

[JulieW]

Yes I did but in my opinion it doesn't support the contention that government caused the GFC and not Wall Street corruption and fraud.

 

[mmm....shiney!]

Yes I did but in my opinion it doesn't support the contention that government caused the GFC and not Wall Street corruption and fraud.

That's because you are clutching at straws.