Comments on: Prepare for a different financial landscape http://blogs.reuters.com/mohamed-el-erian/2011/12/05/prepare-for-a-different-financial-landscape/ Mohamed Mondays Mon, 30 Mar 2015 23:53:19 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: robertoheckers http://blogs.reuters.com/mohamed-el-erian/2011/12/05/prepare-for-a-different-financial-landscape/#comment-376 Thu, 08 Dec 2011 01:08:47 +0000 http://blogs.reuters.com/mohamed-el-erian/?p=142#comment-376 People are make a mess of the economie. The have a lot of words but don’t come with a good solution for things. They just hold everything in the middle untill things realy fall a part and there is nothing to do anymore. A smart thing to do is to get yourself a backup and build on your own power.

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By: Kyung http://blogs.reuters.com/mohamed-el-erian/2011/12/05/prepare-for-a-different-financial-landscape/#comment-375 Tue, 06 Dec 2011 20:30:37 +0000 http://blogs.reuters.com/mohamed-el-erian/?p=142#comment-375 “Look for western banks to be less complex, less global, somewhat less inter-connected and, therefore, less systemic.”

And global trade must go the same way. No more so called free trade blocks. Every nation must produce as much in agriculture and industry as it can, tying producer to consumer, and only the excess trade in FAIR markets.

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By: Acetracy http://blogs.reuters.com/mohamed-el-erian/2011/12/05/prepare-for-a-different-financial-landscape/#comment-374 Tue, 06 Dec 2011 16:15:19 +0000 http://blogs.reuters.com/mohamed-el-erian/?p=142#comment-374 El-Erian only hints at the root cause of the whole collapse of US financial markets, and subsequent fallout in the Eurozone: leverage and derivatives.

Despite Frank-Dodd, despite central banks, and despite rhetoric from the financial gurus, the world financial markets still allow hedge funds and traders to leverage enormous trades, esp. in the FX and Bond market. Couple that leverage (sometime 100 to 1) with derivatives you have the perfect recipe for volatility and crashes.

Anyone who has traded naked options (writing a derivative without holding the underlying) knows how a 5% movement can become a complete wipe-out. That goes on every day in the commodity and FX markets where leverage and derivatives continue to rule those markets.

To bring back stability to banks and the financial markets the central banks along with the various governments need to slap on 1) strict margin levels, such as 80% collateral for all trades including bonds,2) impose 80% tax rates worldwide on all short term trading gains, and 3) levy a 80% tax rate on all derivative income/gains.

Unless the leverage and short term trading is diminished, we will continue on this roller coaster.

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By: ThinkEcon http://blogs.reuters.com/mohamed-el-erian/2011/12/05/prepare-for-a-different-financial-landscape/#comment-373 Tue, 06 Dec 2011 13:46:26 +0000 http://blogs.reuters.com/mohamed-el-erian/?p=142#comment-373 The changes may be even greater than Mohamed suggests. When printed money becomes the source of government funding, where is the end game? Why have taxes at all?

The need for private capital is the result of individual or collective desire act independently to achieve some task. When “capital” is borrowed from a bank, the true source should be the deferred spending collected by savers, not money printed by government and given to banks.

Yesterday, I visited with a young man who was saving for a dental degree. Our utility just raised rates by 8 percent. I pointed out that his savings just lost 8 percent in value so far as the savings were intend for future utility bills. Very sad. Why save at all when a new government program using printed money could solve the future funding problem?

ThinkEcon

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By: neversaynever http://blogs.reuters.com/mohamed-el-erian/2011/12/05/prepare-for-a-different-financial-landscape/#comment-372 Tue, 06 Dec 2011 13:30:00 +0000 http://blogs.reuters.com/mohamed-el-erian/?p=142#comment-372 Good article. But there are many smaller banks in America that did not participate in the free-for-all that eventually and predictably led to the mess were in. I’m a small business owner and I refinanced my commercial mortgage in Nov. 2010, I received favorable terms and a low interest rate. I had to switch small banks because my old bank over-levered themselves with questionable loans and had to ask for bailout funds, which meant they had to de-lever, meaning, no refi’s – even for solid business with good models. So I shopped around and found an ‘A’ rated bank locally, this new bank, around since 1909, was looking to originate new commercial loans! The reason my new bank was lending when almost all other banks were de-levering, is because they didn’t originate any ‘Liar loans, or undocumented loans, like many others were doing. My new bank has always only lent their own money, which meant they were more selective and diligent in loaning money. They didn’t owe the fed any money when the ‘greed caused crisis’ hit, and they didn’t have to go to the window when things tanked, soooo, they didn’t have to abide by the fed and didn’t need to de-lever their loan portfolio. They gained lots of new business because of their diligence and others failings. Not all banks are created equal. Shop around. Be diligent.

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By: OmarMinyawi http://blogs.reuters.com/mohamed-el-erian/2011/12/05/prepare-for-a-different-financial-landscape/#comment-370 Tue, 06 Dec 2011 06:09:01 +0000 http://blogs.reuters.com/mohamed-el-erian/?p=142#comment-370 Banks and financial system went too far in one direction and caused collapse and harm to all of us. As expected from human nature and system correction, government regulations and public pressure are pushing the financial system in the other direction and putting the banks into their ‘real’ size or smaller. With the shrinkage expected, many groups who ride the financial system to power may suffer. How long the shrinkage would be be until we forget/forgive the collapse and allow the system to go back to its hyper situation. In the mean time the financial system will find ways to squeeze profits directly from the common people instead of making them pay hefty at a collapse. The dilemma of extreme capitalism exposed by expanding China and other forces.

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By: Custerluck http://blogs.reuters.com/mohamed-el-erian/2011/12/05/prepare-for-a-different-financial-landscape/#comment-369 Tue, 06 Dec 2011 04:47:01 +0000 http://blogs.reuters.com/mohamed-el-erian/?p=142#comment-369 The bank’s behavior is simply a reflection of our own behavior. Just as a politician will vote for whatever first benefits himself, then his party, then his district, then his state, our banks behavior represents our own motives that result in self destruction.

Like wars that are fought until both sides tremble with exhaustion, our economic destiny will always be based on how each of us abuse the system. The only law that really prevails is the law of “survival of the fittest”.

As some wise old man once said, “The difference between an optimist and a pessimist is experience”.

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By: robb1 http://blogs.reuters.com/mohamed-el-erian/2011/12/05/prepare-for-a-different-financial-landscape/#comment-368 Tue, 06 Dec 2011 02:11:13 +0000 http://blogs.reuters.com/mohamed-el-erian/?p=142#comment-368 sure, just less rich… but also, less greedy?

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By: txgadfly http://blogs.reuters.com/mohamed-el-erian/2011/12/05/prepare-for-a-different-financial-landscape/#comment-367 Tue, 06 Dec 2011 01:10:36 +0000 http://blogs.reuters.com/mohamed-el-erian/?p=142#comment-367 Perhaps another way to summarize the point of the article is that governments are trying to recreate financial institutions that common people can have faith in, and to isolate “cowboy” bankers and swindlers from the public pool of tax money.

In the USA, if there are any honest banks, it is not apparent. They mainly seek “bailouts” from financial disasters they themselves, sometimes deliberately, create. Until these people are stripped of their ability to raid the Treasury, the USA will be in perpetual crisis.

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By: TheUSofA http://blogs.reuters.com/mohamed-el-erian/2011/12/05/prepare-for-a-different-financial-landscape/#comment-366 Mon, 05 Dec 2011 21:09:08 +0000 http://blogs.reuters.com/mohamed-el-erian/?p=142#comment-366 “The ultimate destination is a smaller and safer financial services sector. When we get there, a better balance will be struck between private gains and the common good. Banks will be in a better position to serve the real economy without exposing it to catastrophic risk and harmful abuses.”

Here in America the bankers, Wall Street, their lobbyists and their cronies in office will fight this tooth and nail.

“The cause is the twin problem of way too little economic growth and way too much debt.”

The West particularly needs to change the meme away from a model of debt and consumption. Sustainability should be the mantra of the future if we are to have one.

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