U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Economics
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 08-14-2018, 04:50 AM
 
64,577 posts, read 66,100,109 times
Reputation: 43003

Advertisements

it wasn't the loans in 2008 that did the real damage initially . it was betting for or against the loans in the credit default swap markets that crushed the speculators like lehman ,aig , the banks , etc .

the loans in question were small compared to the speculative bets in the default swap betting parlors . just imagine betting 10 million bucks on whether that 100k loan would be repaid or not ,hypothetically that is what goes on .
Reply With Quote Quick reply to this message

 
Old 08-14-2018, 06:38 AM
 
3,720 posts, read 1,667,677 times
Reputation: 5094
Quote:
Originally Posted by Merkin View Post
eh, Turkey has 1% of the world's GDP
Thailand's was smaller yet it almost caused a worldwide financial crisis. There was a big American (I think) company that had to be bailed out because of it's exposure to 3rd World debt, which tanked. If the company failed it would have led to a banking crisis.

The bailout saved it and Western Civilization survived.

The situation is similar with Turkey. US banks aren't that exposed directly but European banks are and they have a lot of dealings with US banks. If they have to call in contracts from US banks, ours might get dragged in.

Greenspan was raising interest rates in 1998, similar to the Fed's actions now. Only now they're doing it much slower. Maybe that will make the difference? But money left Thailand, etc., for higher US rates and at some point that could repeat itself here.
Reply With Quote Quick reply to this message
 
Old 08-14-2018, 01:00 PM
 
Location: 5,400 feet
2,199 posts, read 2,271,121 times
Reputation: 2840
Quote:
Originally Posted by Troyfan View Post
Thailand's was smaller yet it almost caused a worldwide financial crisis. There was a big American (I think) company that had to be bailed out because of it's exposure to 3rd World debt, which tanked. If the company failed it would have led to a banking crisis.

The bailout saved it and Western Civilization survived.

The situation is similar with Turkey. US banks aren't that exposed directly but European banks are and they have a lot of dealings with US banks. If they have to call in contracts from US banks, ours might get dragged in.

Greenspan was raising interest rates in 1998, similar to the Fed's actions now. Only now they're doing it much slower. Maybe that will make the difference? But money left Thailand, etc., for higher US rates and at some point that could repeat itself here.

The 1997 East Asian crisis was far more than Thailand. It involved Thailand, Indonesia, Japan and South Korea and many other smaller economies. South Korea and Indonesia were major players (Indonesian currency dropped 80% against the dollar, the others 30-40%). It was mostly a credit and lending crisis brought on by mostly by the rapid spending and accumulation of debt by the involved countries and refusals by usual lenders to loan more money to the countries. The IMF finally stepped in and loaned funds and the countries enacted more sound financial policies. The US market dropped for awhile, but the global impact of those affected economies were far greater than Turkey.
Reply With Quote Quick reply to this message
 
Old 08-14-2018, 01:03 PM
 
8,519 posts, read 2,389,571 times
Reputation: 8127
Quote:
Originally Posted by mathjak107 View Post
it wasn't the loans in 2008 that did the real damage initially . it was betting for or against the loans in the credit default swap markets that crushed the speculators like lehman ,aig , the banks , etc .

the loans in question were small compared to the speculative bets in the default swap betting parlors . just imagine betting 10 million bucks on whether that 100k loan would be repaid or not ,hypothetically that is what goes on .
Unregulated Capitalism works well until you run out of other peoples money.....I guess!



That's what happened. Let the Foxes watch the chickens and at first they eat just a few. Then, once they get the taste, they eat more. Eventually there are no chickens left so the Foxes are left to starve...and to eat each other. Those sly Foxes then go to the Farmer and Merchants, who have been more conservatives, and beg them to give them plenty of food so they can survive and keep the eco-system strong.
Reply With Quote Quick reply to this message
 
Old 08-14-2018, 06:19 PM
 
6,819 posts, read 4,410,206 times
Reputation: 11941
Quote:
Originally Posted by nybbler View Post
If Greece couldn't do it, Turkey can't do it.
The Greek crisis was the proximate cause of instability and market declines from 2011 through 2016. I mean, it is specious and unfair to blame Greece exclusively, but Greek this-and-that was a symptom. American investors might not have noticed as much, because the "contagion" was so much starker in Europe.

Turkey is potentially a bigger geopolitical problem, but because it is not part of the EU and does not use the Euro, the "contagion" ought not to be as pervasive or devastating. So at least one hopes.

As for the defaults and currency-collapses of 1998, I remember those well... in modern parlance, it was a "nothingburger". Stocks fell and promptly recovered, marching to new highs within a matter of months. It was the quintessential buying opportunity. If we face another such "crisis", it is tempting to quite the eminent modern philosopher G.W. Bush: "Bring it on"!
Reply With Quote Quick reply to this message
 
Old 08-14-2018, 08:07 PM
 
24,721 posts, read 26,785,278 times
Reputation: 22714
Quote:
Originally Posted by mathjak107 View Post
Things today are so interconnected it is hard to say the effects anymore. The credit default swap markets have turned into huge gambling casinos . More is bet on whether loans are paid back than the loans themselves
I suspect the above is totally true.
Reply With Quote Quick reply to this message
 
Old 08-14-2018, 08:12 PM
 
24,721 posts, read 26,785,278 times
Reputation: 22714
Quote:
Originally Posted by craigiri View Post
Unregulated Capitalism works well until you run out of other peoples money.....I guess!
Except we're far from that. Finally, today a mainstream journalist said what I've been saying forever. Headline reads: Both Political Parties are Rejecting Capitalism

https://finance.yahoo.com/news/polit...145632855.html
Reply With Quote Quick reply to this message
 
Old 08-15-2018, 08:51 AM
 
Location: Silicon Valley
2,751 posts, read 1,209,866 times
Reputation: 5055
Quote:
Originally Posted by Hoonose View Post
Nah. Turkey is too small and our exposure minimal. It surely will cause more local turmoil, and some short term uncertainty, but that will only create more flight to the safety and security of USD's and USD denominated debt.
That is exactly the problem. More people flee to treasuries, at first perhaps locally, but this pushes up the dollar, putting pressure on all other emerging economies. In anticipation of this downgraded outlook, you'll see money move sharply away from emerging markets and putting otherwise ok economies at risk of not being able to get enough dollars for their profits in order to service USD denominated debts.

Add to it the tariffs and the receding of peak globalization, we do have contagion risk here.

However, it's going to whip around like crazy. The banking system itself still looks pretty healthy, so this could be contained. If it's contained and outlook normalizes, expect a leap in EM markets as money comes back out of hiding.

So in regards to it being 1998...possibly in terms of EMs...not sure on affect to Asia. To Hoonose's comment, the US is unlikely to be affected, but you two are looking at different angles.
Reply With Quote Quick reply to this message
 
Old 08-15-2018, 01:32 PM
 
6,819 posts, read 4,410,206 times
Reputation: 11941
Dumb question: why are these various emerging market countries taking out debt in US dollars? If I were a central-banker of XYZ country, I would stipulate that if Chase or UBS or Deutsche Bank want to lend to me, they must do so in my native currency. But then again, I am not a central banker.
Reply With Quote Quick reply to this message
 
Old 08-15-2018, 04:10 PM
 
Location: Silicon Valley
2,751 posts, read 1,209,866 times
Reputation: 5055
Quote:
Originally Posted by ohio_peasant View Post
Dumb question: why are these various emerging market countries taking out debt in US dollars? If I were a central-banker of XYZ country, I would stipulate that if Chase or UBS or Deutsche Bank want to lend to me, they must do so in my native currency. But then again, I am not a central banker.
If you loan me, Artillerystan, 500C or Casings at 10% for the year, I will then pay you 550 Casings at the end of the year....you now have 550 casings....and a wildly upset investor that gave you USD currency to invest that has little interest in my pretend currency that can't be converted back into USD. Plus if I use the money to pay my workers and sell goods worth 800 Casings to another country....but they don't carry Casings....they have no way to pay me. So everyone trades in US Dollars.

Hence, when the world gets in trouble, people get as close to a strong currency as they can. That currency can always buy something. It's the most convertible. Up until the very scary present, the USD has always been the most convertible currency. All countries could trade here aside from a few pariahs so selection is great. The government on the whole, caused the least market interference. Even those pariahs could use USD for oil or other items that could be traded by the non-pariah supplier.

It's such a great advantage our country has over all others, that its obvious we wouldn't risk it....unless we forgot why we got it in the first place. Of course there were others. We were a historically neutral country through the 19th century in the European intrigues. It made for a safe place to store Gold. Our banking system was made free of the government's meddling.

So it was set. Gold to USD. USD to all major currencies via Bretton Woods. USD for petrol and international trades. Of course, we went economy of confidence in 1971. Our fiscal discipline has waned a bit as of late and we're no longer the top of the food chain in all industries.

I guess you could say, the underlying reasons why we were chosen have waned, but for now we're still the de facto beneficiary of our "Economy of Confidence". If that breaks, we're going to see a sharp decline in demand for USD, and buying power will evaporate as that demand does. Still, until it does, when trouble strikes, people run to the USD, the most convertible of currencies in the world.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2018, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top