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A new financial system?


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2008 Nov 9, 12:17am   13,377 views  88 comments

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New World Order

Saw this on my rss feed from Yahoo/Reuters just now:
Glimpse into a new financial system

LONDON (Reuters) – Investors get a first glimpse of the likely shape of the new global financial system this week as finance chiefs prepare for a summit of world leaders fighting the worst world financial crisis in 80 years.

The rest of the article does not actually say what this "new financial system" is - just a vague statement about fiscal stimulus from the G20. Does not quite match the more ambitious tone of the title. Is this a case where the original article was whitewashed to remove the details, but they forgot to change the title?

In any case, what will the new financial system look like? I have heard all the rumors, and have no idea what to expect when the crooks get together behind closed doors.

SP

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1   Peter P   2008 Nov 9, 1:22am  

Remember, the design of any new financial system is to preserve the wealth of those in power and to transfer wealth from weak hands to strong hands.

Be very skeptical about any attempt to "tax the rich" or "redistribute wealth". These are the only two reasons behind such policies:

1. Populism
2. Barrier against new economic power

Any genuine attempt to fairly distribute wealth will include measures to tax the wealth directly, NOT income. Progressive taxation is an attack on becoming rich. Entrepreneurial people in the Silicon Valley, take note!

2   PermaRenter   2008 Nov 9, 2:09am  

China announces $586 billion stimulus plan
Sunday November 9, 9:42 am ET

China announces $586 billion spending package to boost domestic demand

BEIJING (AP) -- China announced a $586 billion stimulus package Sunday in its biggest move to stop the global financial crisis from hitting the world's fourth-largest economy.

A statement on the government's Web site said China's Cabinet had approved a plan to invest the amount in infrastructure and social welfare by the end of 2010.

Some of the money will come from the private sector. The statement did not say how much of the spending is on new projects and how much is for ventures already in the pipeline that will be speeded up.

China's export-driven economy is starting to feel the impact of the economic slowdown in the United States and Europe, and the government has already cut key interest rates three times in less than two months in a bid to spur economic expansion.

Economic growth slowed to 9 percent in the third quarter, the lowest level in five years and a sharp decline from last year's 11.9 percent. That is considered dangerously slow for a government that needs to create jobs for millions of new workers who enter the economy every year and to satisfy a public that has come to expect steadily rising incomes.

3   PermaRenter   2008 Nov 9, 2:10am  

AP
Latvian government takes over major bank
Latvian government takes control over No. 2 bank to save it from bankruptcy

RIGA, Latvia (AP) -- Latvia's government has decided to take over the nation's No. 2 financial institution after the bank ran into a liquidity crisis, an official said Sunday.

The government decided late Saturday to take a 51 percent stake in Parex Bank, the Baltic state's second largest bank by total assets, based on data that indicated the bank was headed toward insolvency, said Krists Leiskalns, press adviser to Prime Minister Ivars Godmanis.

On Saturday, Godmanis explained that Parex was functional but in need of liquidity. He also said the government had faced a choice of either taking control of the bank or allowing it to enter bankruptcy.

4   PermaRenter   2008 Nov 9, 2:17am  

Brazil's president demands global financial overhaul with strong input from emerging economies

SAO PAULO, Brazil (AP) -- Brazil's president on Saturday demanded that major reforms of the international financial system include strong input from large emerging nations and said the collapse of modern banking structures is victimizing the world's poor.

Those who have the least stand to lose the most from a credit crunch that has slammed businesses from Brazil to China, President Luiz Inacio Lula da Silva said at a meeting of finance ministers and central bank presidents from 20 of the world's wealthy and emerging economies ahead of a Nov. 15 summit in Washington.

The Group of 20 nations must "formulate proposals for a substantial change of the world's financial architecture," Silva said. "This system collapsed like a house of cards that dragged down with it the dogmatic faith in the principles of nonintervention by the state in the economy."

In closed-door talks, leaders also discussed ways for nations to boost government spending to counter a global slowdown that could lead trade to contract next year for the first time since 1982, said World Bank President Robert Zoellick.

5   PermaRenter   2008 Nov 9, 2:23am  

E.U. Wants Financial Reforms Soon
Leaders Look to Nov. 15 Summit for Concrete Measures to Prevent Further Crises

BRUSSELS, Nov. 7 -- The 27 nations of the European Union demanded Friday that the Bush administration join them in devising and putting into practice "strong, ambitious and operational" measures within 100 days to regulate international bankers more tightly and prevent repetition of the world financial crisis.

The appeal, at a summit of European leaders in Brussels, seemed designed to discourage the Bush administration in its waning days from trying to hand off difficult decisions on new international banking rules and other financial reforms to the administration of President-elect Barack Obama.

Rather, European leaders said, specific decisions should be made at a summit scheduled for next Saturday in Washington, in which Obama's financial advisers should be involved even though the president-elect himself is unlikely to be present. These decisions should be followed up with a second summit 100 days later -- when Obama is in office -- to review how the measures are working and decide on broader reforms aimed at changing the way the entire world financial system works, they added.

Running through the leaders' declaration was a desire that Europe's voice be heard more clearly in Washington as President Bush and his economic team prepare for the summit. The leaders emphasized that delay or soft-pedaling the need to act are unacceptable responses to the banking and market turmoil that rippled from Wall Street into Europe's most trusted financial institutions this fall and contributed to what is expected to be a severe and long-running economic recession across the continent.

"We demand to be heard, and quickly," said French President Nicolas Sarkozy, who holds the rotating E.U. presidency through Dec. 31 and who persuaded Bush to hold the upcoming gathering. He added: "I am not going to be participating in a summit of polite conversation."

Sarkozy said he had explained Europe's position Thursday in telephone conversations with Bush and Obama.

Without detailing his conversation with Bush, he suggested that some U.S. officials are trying to play down the need for immediate and drastic reforms. That would be a tragic mistake, he said, and pointedly noted that a Bush administration decision to allow the Lehman Brothers investment bank to collapse in mid-September triggered a crisis that has brought distress around the world.

"The crisis is worldwide, but we know where it started," he said.

Since the turmoil hit at the end of September, Sarkozy has pushed hard for a common European response and forceful government intervention to prevent bank failures on this side of the Atlantic. At the risk of irritating fellow European leaders, he has used his six-month presidency of the bloc as a bully pulpit to push them toward decisive measures and, beyond Europe, to call for an end to the "folly" of unregulated international banking and investment.

The financial crisis calls out for such decisive leadership, he has told associates, and decisiveness has been a trait of his political career -- to a degree that some qualify as pushy and rash. The satirical French newspaper Le Canard Enchaine, which mercilessly mocks the country's leaders, this week portrayed his wife, former model Carla Bruni, as calling him "my husband the master of the world."

In explaining the strongly worded European appeal, Sarkozy said Chancellor Angela Merkel of Germany and Prime Minister Gordon Brown of Britain -- both of whom have called for caution -- enthusiastically supported the call to Washington for swift and concrete action next Saturday.

"We do not want to go from no regulation to too much regulation," he said, "but we need to change the rules of the game in the financial domain."

Chief among the demands agreed on by the E.U. heads of state and government was tighter regulation of banking and investment markets. "No financial institution, no market segment and no jurisdiction must escape proportionate and adequate regulation or at least oversight," they said in a statement. The regulations must also cover rating agencies and speculative hedge funds, they added.

In addition, the leaders said international financial exchanges must be more transparent, thus more subject to government controls, and pay systems that encourage excessive risk-taking by traders must be changed. Colleges of supervisors should be set up to monitor international financial groups and the way they are regulated by national authorities, and the International Monetary Fund should get more authority to establish an early warning system, they said.

The declaration also called for attention to long-term economic concerns, such as ending hunger, fighting poverty and slowing climate change. But Sarkozy and the European Commission president, José Manuel Barroso, said the ultimate goal of a series of summits beginning next Saturday is to build a new financial system to replace the dollar-based pattern of exchanges inherited from the Bretton Woods conference of 1944.

At that time, as World War II was coming to a close, the U.S. dollar was the world's only currency of reference, Sarkozy said. But times have changed, he said, and now the euro and other currencies have a place in world financial exchanges, a new reality that he said should be reflected in the rules.

Unsaid but clearly present in his remarks was a touch of long-standing European resentment at the United States' ability to run large budget deficits on the strength of the dollar's role as an international investment standard, a privilege European governments do not enjoy even though their currency, the euro, has become one of the world's strongest.

6   bb   2008 Nov 9, 2:57am  

Any genuine attempt to fairly distribute wealth will include measures to tax the wealth directly, NOT income.

While you may be right that this is the only way possible, it doesn't sound practical. How do you determine what is "fair?" There would be a tremendous danger that you would unfairly penalize savers and those who made their wealth while bettering society.

The exception would be the estate tax. Dead people should be taxed up the wazoo - there is no danger in being unfair to them as they are dead and should cease to control assets (after accounting for what their surviving dependents need to subsist).

7   Brand165   2008 Nov 9, 3:53am  

U.S. Patent 102,344,569: Methods and Apparatus for Efficiently Separating Money from Suckers

Abstract: A method is described whereby mass financial panic is induced, followed by a "Trojan Horse" method of implementing legislation that appears to benefit the taxable populace while actually efficiently transferring wealth from this populace to more wealthy individuals.

8   Brand165   2008 Nov 9, 3:59am  

WALL STREET, Nov.8 (CashNews) — A new financial system was unveiled today at a meeting of the world’s financial superpowers. Said Mr. Warbucks, head of the committee, “We plan to fight the erosion of the middle class via a combination of policies called Keep You Right Where You Are, with an underlying strategy of Lowered Expectations.” Skeptics, bloggers and protesters vehemently objected to the new plan, calling it a way to lock in the status quo and prevent class advancement within developed nations. The German Chancellor was quoted as saying, “Ja, socia1ism’s not so bat, you big American beh-bies! Zhis is fer der best, mine proletariat!”

9   Brand165   2008 Nov 9, 4:02am  

TOB says: Perma, check out ‘hyperlink’ technology, its the next big thing.

Whoa, crazy. You fringe bloggers will try anything, won't ya! :o

Seriously Permarenter, it would be nice if you posted just the first few sentences and then a link to the rest. I come here to read the discussion threads, not entire C&P articles lifted from other sites.

10   Peter P   2008 Nov 9, 4:15am  

I don't like Sarkozy any more. He is nothing but a populist.

11   Peter P   2008 Nov 9, 4:19am  

But times have changed, he said, and now the euro and other currencies have a place in world financial exchanges, a new reality that he said should be reflected in the rules.

Yes, times have changed and Europe will go down the drains.

Mr Sarkozy, where is the Kärcher you promised?

12   Patrick   2008 Nov 9, 4:51am  

I like the idea of taxing the dead. They never complain.

Still interested in Henry George's idea of a single tax on land too. It's obviously very fair, public, inescapable, and has the nice benefit of driving down land prices too.

If you keep all your wealth in cash rather than land, fine. You pay no tax. But try to use it -- everyone in society will have to charge you because they themselves had to pay the land tax.

Though then there is the problem of cheap food imports putting farmers out of business.

13   GammaRaze   2008 Nov 9, 5:12am  

The only real new financial system will one where the central banks/bank cartels are dismantled and the markets become free again.

That will not happen. If anything, most of the Western world will become more socialized, thereby leading to the ruin of their economies.

Any emerging country that has the brains to take advantage of this and make their system more free will become more prosperous. I don't know that any of them will though.

14   Peter P   2008 Nov 9, 5:13am  

I do not mind if land tax is charged according to the rental equivalent value. It is a type of consumption tax.

Though then there is the problem of cheap food imports putting farmers out of business.

We better conquer that foreign land so that everybody in the world pays tax to Uncle Sam. LOL! :lol:

15   Peter P   2008 Nov 9, 5:15am  

The only real new financial system will one where the central banks/bank cartels are dismantled and the markets become free again.

Amen, brother!

That will not happen. If anything, most of the Western world will become more socialized, thereby leading to the ruin of their economies.

Yep.

Any emerging country that has the brains to take advantage of this and make their system more free will become more prosperous. I don’t know that any of them will though.

We may have to wait 200 years for that to happen. For now, we have a new dictator. It is called the tyranny of the majority!

16   Peter P   2008 Nov 9, 5:16am  

Even Switzerland and Hong Kong are slowly being poisoned by socia!ism.

17   Peter P   2008 Nov 9, 5:37am  

but the majority of Americans are White, free market, WASPs.

... and Boomers. "Hmm, let's tax those Gen-X slackers for our retirements."

Result: high income tax rate + socialized male potency drugs

18   Brand165   2008 Nov 9, 5:39am  

Peter, when has Switzerland ever not been socia1ist in the modern age?

Half of their economy is based on a great scam. You put money in Swiss banks, out of the reach of your own oppressive government tax policies, and in exchange their government skims off a small percent of your wealth each year. In exchange, the Swiss bankers get discounted access to massive amounts of capital.

Their game will be slowly busted by Singapore. Lichtenstein and the Cayman Islands perform the same legal money laundering function, but I don't think anybody really believes that their governments could restore your capital in the event of a banking meltdown. People can reasonably have faith in recovery in Zurich (barring a massive meltdown even bigger than this one), and now in Singapore because they have stockpiled so many U.S. Treasuries and Euro-denominated assets.

19   Peter P   2008 Nov 9, 5:42am  

Money laundering is a symptom of excessive government regulations.

20   Brand165   2008 Nov 9, 5:44am  

TOB: Americans might predominantly be WASPs, but most of them couldn't define "free market" without Wikipedia. J6P is a capitalist during a bull market; J6P is a socia1ist in a bear market. It's a corollary to "There are no athiests in foxholes."

21   Peter P   2008 Nov 9, 5:45am  

Switzerland is still safer until all warring dictators move their money away. ;)

22   Peter P   2008 Nov 9, 5:46am  

J6P is a capitalist during a bull market; J6P is a socia1ist in a bear market.

Hence socialized Put options. (e.g. The Greenspan Put)

23   Brand165   2008 Nov 9, 5:46am  

Money laundering is a symptom of people acting in their own best interests, which is not always to the ultimate gain of society. It's also a result of imbalances between various countries, and the method of smaller countries who try to exploit their relative size by becoming parasites.

24   Brand165   2008 Nov 9, 5:59am  

The Greenspan Put... and where exactly has that gotten us? Just another get rich quick scheme.

America needs to return to its fundamental roots. This is a nation where anyone can become rich with ingenuity and hard work. Our new idols seem to be hedge fund managers who made easy money. It appeals to people a lot more than the experiences of guys like Steve Jobs, who lived like a bum on somebody's dorm room floor until he spent the rest of his life building a company. The hedge fund sort of fast wealth contributes absolutely nothing to society.

Maybe we should tax the living hell out of stock gains and then massively cut corporate taxes. We want our smartest citizens to build productive businesses that bring employment and an improved standard of living to the nation. That's why capitalism benefits a republic. It would also point J6P away from trying to "double down" on risky stocks. Once the "little guy" starts playing in games beyond his control, the masses will eventually start lobbying the government for all sorts of "guarantees" about the stock market. Look at the way the Fed cut interest rates---how many times was it to boost the stock market and reverse losses? Is that sort of manipulation really capitalist? It's just a sign that J6P is trying to manipulate a game that he doesn't even remotely understand, and probably should not be playing in. Heck, most people don't even vote their proxies! Is J6P really trying to buy a slice of ownership in a company that's been carefully researched, one in which he wishes to participate, or is J6P just trying to accidentally strike gold by throwing $1000 darts at a ticker tape?

25   PermaRenter   2008 Nov 9, 7:37am  

>> Maybe we should tax the living hell out of stock gains and then massively cut corporate taxes.

I support this policy as well as taxing dead people 80%.

26   OO   2008 Nov 9, 8:08am  

The Chinese $600B stimulus plan is only the first stage.

There is a much bigger one coming earlier next year, which they are working on. It is rumored to be over $1T. Reminder, they have a total of $2T USD reserve. Just a side note, they won't be adding that much USD reserve this year because unfortunately we cannot afford to send too much USD that way because our consumers just went on strike.

Now the question is, who is going to buy our $500T new T offerings to plug the deficit hole of next year? Either our Fed just need to go straight to raw printing, or we will have to default...

27   OO   2008 Nov 9, 8:17am  

Oops, I meant $500B, maybe very soon we will be talking about $500T deficits if Ben gets his way

28   DennisN   2008 Nov 9, 8:30am  

“Hmm, let’s tax those Gen-X slackers for our retirements.”

Hear, hear! :)

Now all you slackers get back to work.

29   DennisN   2008 Nov 9, 10:15am  

It's not the boomers that are causing the problems: it's members of the so-called "greatest generation" (the boomers' parents) who are the leaches draining this country's reserves.

http://www.nytimes.com/2008/11/10/business/10gm.html?hp

The so-called "greatest generation" raped their own children - the boomers - to fund an unwarranted lavish retirement via high taxes all through the boomers lives.

30   FuzzyMath   2008 Nov 9, 11:07am  

boo hoo. We have to trade one free health plan with another free health plan. waaaaahhhh.

Try paying $500/month like me.

31   Peter P   2008 Nov 9, 1:28pm  

The so-called “greatest generation” raped their own children - the boomers - to fund an unwarranted lavish retirement via high taxes all through the boomers lives.

See... FDR's fault!

32   Brand165   2008 Nov 9, 1:43pm  

A social safety net is a huge moral hazard. Once people realize that they can't fall below a certain point, they have every incentive to attempt a super-dangerous stunt like betting their entire 401(k) in company stock. America has acquired a lotto mindset---success is attributed more to luck than to hard work.

The problem, of course, is that the safety net is designed to catch a small percentage of the trapeeze artists. If they all bail into the net at the same time, the whole structure will collapse.

How about a law that says if you drew any Social Security, the difference between what you paid in and what got paid out will be deducted from your estate prior to passing it on to your heirs? The system would thus guarantee that the penniless cannot die in the street, but it forces people to use their savings, pensions and retirement accounts to fund their retirement (or else pay it all back anyway).

33   Unalloyed   2008 Nov 9, 1:56pm  

How's this proposal as part of our new financial system... Confiscate individual retirement funds, 401K, 403B, 457, IRA etc. and put them under the benevolent care of the Social Security Administration.

http://www.carolinajournal.com/articles/display_story.html

This larger issue is freedom. Property rights are critical to the basic freedoms we enjoy in the English-speaking world. We're sliding into a bog called socialism, or enslavement by its real name. The end game is to enslave the population. Property rights and freedom cannot be separated.

34   Unalloyed   2008 Nov 9, 2:00pm  

I'm in moderation. Was it the word socialism? Not an epithet or offensive sobriquet in my modest comment.

35   Brand165   2008 Nov 9, 2:14pm  

I just saw this note on a HUD foreclosure listing:

HUD WILL PAY UP TO 5% COMMISSION ON ACCEPTED & CLOSED BID. NEW $100 Down payment Incentive is available for Owner Occupants who submit FULL Price Offers on FHA Eligible Properties (utilizing FHA financing). Visit URL above for additional information.

Can I possibly be reading that right? A $100 downpayment?

36   Brand165   2008 Nov 9, 2:15pm  

Or are they just offering an extra $100 if you supply a downpayment? Please be that.

37   Malcolm   2008 Nov 9, 2:34pm  

Brand, could you post the link, I'd like to look at it. Maybe I can make some sense of it.

38   Malcolm   2008 Nov 9, 2:41pm  

Actually I just found that on Atlanta homes. It seems pretty clear that it is a $100 downpayment. Remember that the FHA loans have closing costs but you may be reading it correctly. It seems on the site I found it has to be a HUD listed home, my link doesn't say anything about it being a full price offer. Evidently different areas may have different guidelines.

http://www.hmbireo.com/view.php?id=140

39   Malcolm   2008 Nov 9, 2:46pm  

Just type HUD $100 down payment into a search engine. It seems like it is definitely a real program. In MN, they are offering $500 to agents who get a full-price offer and again the $100 doesn't seem contingent on a full-price offer.

40   Malcolm   2008 Nov 9, 2:52pm  

It seems like a conflict of interest to offer a $500 bonus to an agent to get a full price offer. Why would a buyer do that? What would the agent say? "Dude, you need to pay full price so that I can get an extra $500." Or "Hurry, this house is going to go quick, I suggest you write a full price offer."

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