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.
If only it were that simple. State and local governments need and use a wide array of financial services. Big banks on Wall Street are more than happy to help and market their products similar to how defense contracts work using bidding systems that are often completely shrouded in secrecy and with services that aren't even standardized. Political connections--in other words corruption--often determines many times who wins a contract. States and governments thus hire big banks to manage pension funds, finance long term investments such as schools and roads, and even manage how tax money is spent. Transaction costs levied by banks for these services is often 1-2 percent, and every year the banking industry pulls in roughly $25-50 billion a year off of states. If pension officials simply took all the money for their state workers and invested it into a friendly investment firm like Vanguard, with only a 0.15% fee for their index fund, the difference in cost would range from $20-45 billion a year.
The banking industry has now also devised schemes to fleece tax payers even more for their money. Instead of financing project with locked in interest rates on 10-30 year bonds like what used to be typical (so states could gradually accumulate money to pay off debt), banks now sell "auction rate securities" to states, investments completely inappropriate for public investors. Instead of locked in rates, these auction rate securities breaks up debt into short 30 to 90 day intervals. At the end of the interval, the loan must basically be refinanced. Banks argue that short term interest rates are usually lower than longer term fixed interest rates, so less should be paid. This is the same argument JP Morgan used when they sold Jefferson County Alabama auction rate securities. When the interest rate changed for the worse, raising the cost of borrowing for Jefferson County, JP Morgan tried to get $647 million dollars in fees from the country to excuse Jefferson County from its contract. However, later it was revealed that JP Morgan paid $235,000 to Larry Langford, the president of the County Commission at the time.
How about Eerie, Pa? JP Morgan sold Eerie, Pa complex derivative packages called "swaptions" along with $750k upfront that could be used "for school repairs". All a swaption is in the end is a high risk bet on interest rates, with the seller taking the risk. When the interest rates ended up increasing, Eerie had to pay $2.7 million to JP Morgan to get out of its commitments. In total 107 schools in PA were involved with swaptions.
Deals like this are way more common than you think. Major banks, the ones too big to fail that we bailed out with our tax dollars, make billions of dollars every year selling states and local governments extremely complex financial packages that almost no one understands except for those within the banks. The banks then make billions of dollars in profits while bankrupting local and state governments once their financial packages don't go as planned or go belly up. It's nothing more than preying on small government and tax payers bymassive banks looking to reap tons in fee money.
Last edited by fibonacci; 03-17-2012 at 09:18 PM..
LordBalfor, WWII debt was for survival, not IPODS. We also did not have state legacy obligations that are underfunded by years, and sometimes decades, of their entire GDP. We also were running surpluses again right after the war, and paying down the debt.
Perhaps you should spend more time reading The Economist than theexaminer.com
you have to be kidding. The economist. Tell that to all who went through the depression.
Now if the banks fail, who picks up the cost? The government. The FDIC.. now where is that money coming from? printing it out of thin air and selling the debt of which we the tax payers have to at least pay the interest. Now if that interest has to go up because no one wants to buy our debt , we get more in debt.
The dollar is so weak we have to spend more dollars for energy and food. Inflation eats away the dollar value.
The rate of inflation is going up while the paycheck stays flat.
If the dollar gets really weak interest rates will have to go up to keep inflation at bay. So it is a no win situation for this country and for the people especially the working poor and middleclass.
If you look at the Baltic Shipping Index you will see where the cost per container is dropping. This is at it's lowest point, the cost of goods depends on the shipping rates, and the whole world has to pay for it's goods to be moved. GOODS are not moving --- as the rates are dropping by the charts, this means the whole world is in an economic slump.
Also the ISDA reveals how much the banks will have to write off due to the Greece default on Monday, 3-19-2012. The CDS are insurance policy's written on the bonds by our banks and now the ISDA will tell how much each bank has to pony up.. hint trillions.
It comes down to this….
If 82.20% of the Dollar Index has lost on average 19.10%, 125.36%, and 281.20% the last 1,5 and 10 years versus gold, how can anyone call this stable? And the dollar itself has lost 25.98%, 158.59% and 446.10% to gold the last 1,5 and 10 years. Whether this kind of a reaction is because of inflation, perceived inflation, or even deflation, the purchasing power of gold is increasing. That’s because illusions of wealth are chasing the real wealth found in gold and silver.
So WHAT?
Gold is a commodity - that's it. It goes up and it goes DOWN - as was the case in 1980 when gold CRASHED - and stayed at the same price for 25 years. When it FINALLY sinks in to you folks that the dollar is NOT going to collapse gold will PLUMMIT. The only thing bolstering gold up now is the EXPECTION (and a WRONG expectation at that) that the dollar will collapse. Instead, the dollar is stronger now than it was 3 years ago.
The whole "priced in gold" nonsense is just that - NONSENSE.
I don't "get it" because there's nothing to be "got".
It's all a bunch of ignorant fear-mongering BS.
You folks have been saying for 3 years now that the stock martket was going to collapse and the dollar was going to collapse and that there'd been looting and choas and NONE of that has happened.
There's a REASON for that - your basic premise is WRONG.
If you were going thru some of your aunts old books after she had died and you found a $ 20 dollar bill or a 20 dollar gold piece, which would be more vaulable today.
LordBalfor, WWII debt was for survival, not IPODS. We also did not have state legacy obligations that are underfunded by years, and sometimes decades, of their entire GDP. We also were running surpluses again right after the war, and paying down the debt.
And we can run surplusses again. We were in fact doing that just a decade ago - and we can and will do it again.
If you were going thru some of your aunts old books after she had died and you found a $ 20 dollar bill or a 20 dollar gold piece, which would be more vaulable today.
If was going thru some of my aunts old books after she died and found an original copy of Superman it would be worth more than the 5 cents it originally cost too.
So what?
Like anything else, gold ONLY has the value people agree it does. There is NOTHING special about gold - NOTHING.
There is nothing fueling the rise in the value gold except the EXPECTATION that the dollar will collapse - and THAT is NOT going to happen.
What does THAT tell you about the future of the value of gold?
Gold is in a speculative bubble - and sooner or later that bubble will pop.
Ken
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.
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.
