The black box economy

[antigop]

http://www.boston.com/bostonglobe/ideas/articles/2008/01/27/the_black_box_economy/

Behind the recent bad news lurks a much deeper concern: The world economy is now being driven by a vast, secretive web of investments that might be out of anyone's control

Despite the anxiety, nobody is stockpiling canned goods just yet. The prevailing assumption in today's economy is that recessions and bear markets come and go, and that things will work out in the end, much as they have since the Great Depression. That's because there's a collective confidence that the market is strong enough to correct itself, and that experts in charge of the financial system will understand how to mount a vigorous defense.

Should we be so confident this time? A handful of financial theorists and thinkers are now saying we shouldn't. The drumbeat of bad news over the past year, they say, is only a symptom of something new and unsettling - a deeper change in the financial system that may leave regulators, and even Congress, powerless when they try to wield their usual tools.

That something is the immense shadow economy of novel and poorly understood financial instruments created by hedge funds and investment banks over the past decade - a web of extraordinarily complex securities and wagers that has made the world's financial system so opaque and entangled that even many experts confess that they no longer understand how it works.

Unlike the building blocks of the conventional economy - factories and firms, widgets and workers, stocks and bonds - these new financial arrangements are difficult to value, much less analyze. The money caught up in this web is now many times larger than the world's gross domestic product, and much of it exists outside the purview of regulators.

[Mojorabbit]

1. Scary stuff. eom

[AdHocSolver]

2. It is easy to understand. It is called a Ponzi scheme. Read how the Enron scam worked.

The current world economy works the same way. (It is also the financial situation that caused the "crash" of 1929 and the depression of the 1930's.)

The Enron scam worked essentially in this way. The insiders at Enron got a lot of stock options as part of their benefits package. They then worked a bunch of deals to make Enron look like it was making a lot of profit. Investors then bought lots of stock causing its price to zoom skyward.

As the price of the stock rose, the insiders started selling their stock making large capital gains profits. As long as investors kept pouring money at the stock, it would continue to rise ("price inflation").

To keep investors buying the stock, the executives of the company kept cooking the books to make it look like they were making huge, and ever increasing, profits. One popular method was that the insiders set up dummy corporations. Then Enron executives had Enron "loan" these dummy corporations money to buy an Enron product (say, electricity) which then showed up on Enrons books as sales and profits. It was a complete fraud, but it worked to get investors to pour buckets of cash at Enron. The insiders bailed out just BEFORE the scheme was exposed and the stock price collapsed.

Enron was not the only company pulling this scam. That is why, after Enron imploded, many other companies' stock prices collapsed, and a lot of them came out with "revised" income statements and balance sheets.

Many of these financial corporations have been using similar fraudulent schemes today. They are all going to lose huge amounts of money and many will fail completely. The problem for the insiders (they don't care about the "small" investors) is which ones are going to collapse early.

The collapse won't start until the first set of insiders pulls their money out. No one wants to be the "bad" guy. Yet no one wants to wait until the avalanche begins, as they might lose everything if they wait too long. This is the "mystery" and the dilemma.

The fact these "house of cards" financial schemes will eventually cause a recession or depression for the rest of the economy, and people will suffer, is not the elite's concern. The wealthy insiders who bail out at the correct time will do very well, thank you.

[mac2]

8. Ponzi Schemes are rampant

Enron was a Swiss bank baby. Hidden behind all the other robbery going in in the US. the Brits are ripping us off too.

While people complained about the bad business of Enron in California another swindle was going on in New York State. The British were stealing Niagara Mohawk Power for their own profit and Toronto, CA use. The federal government and the governor of NY sold out the people of Buffalo.

http://www.answers.com/topic/Niagara-Mohawk-holdings-inc?cat=biz-fin That buyout of Niagara Mohawk power was completed in 2001 with shareholders and regulators permission.

Why would nuclear power be put under Niagara Mohawk from the other part of the state or NE region except to steal Niagara Mohawk Power later on?

Britain's National Grid Group PLC agreed though acquire Niagara Mohawk Holdings, Inc. in a plot to consolidate US Power companies.

National Power grid two earlier US acquisitions of New England Electric Systems and Eastern Utilities Associates happened earlier.

British electric company's strategy has been adding to its holdings in the Northeast corner of the US. Niagara would be a "bridge" in that region. They promised to run the US power plants and bring about a profit (for themselves not the power customers). A bridge to stealing power for Canada they mean. It was also a set up to control prices for profit for themselves off the Northeastern US.

How dare any US regulatory agency allow such a merger and sale to a foreign country. Toronto, CN uses a lot of Niagara power for themselves leaving higher prices and less power for industry in Buffalo. Cheap safe power is gone.

Mohawk power was built at great expense by the citizens of Buffalo, NY to increase their ability to bring industry to the region. How dare they "privitize" it by breaking it up and bringing it together as something else to be purchased on the open market.

You have heard of the Republican governor of Indiana selling a highway to Spain, etc. didn't you? The Democratic governor before him just happened to have a heart attack when he was visiting Chicago.

Republicans has stolen and sold off our most precious resources to foreign countries without citizen permission. This is happening all over our country without media attention or outrage.

I have no problem with British business people grabbing what they can. It is the fault of our government who has not protected our best interests and property. The British do what they've always done...try to steal our wealth and our assets. They have little of their own. This all started with Reagan selling them our gold and mining.

To top it off...drugs invented in this country (with our tax dollars) are manufactured in Ireland, etc. They profit off us. Many of our manufacturing companies are now British (such as Ford).

Tony Blair helped Bush lie us into war. Their banks profit on off-shore islands. London is full of international banks fat on our wealth. Like the Spanish they are out to rob everything we have for themselves. Was that discussed by any candidate except to say...NAFTA is bad for us? It's a lot more than that is at stake. Our democracy is being stolen (and in debt) by their corporations and wars for oil. We are no more to them then the Scottish and Irish they sent off to their wars of Empire.

Am I angry at the British people? No. It's their elite few along with our own who are robbing us blind everyday. Make no mistake a bunch of European elites are out to destroy us and Republicans (along with some Democrats) turn a blind eye.

The X-Governor of New York State Pataki who did the deal with Britain for Niagara Mohawk power should be put in jail for treason and fraud. He was put out of office between that and 911. 911 hid all the dealing going on for the grab I'm sure. Give us back our power and energy companies now. They belong to the citizens who paid for them.

http://en.wikipedia.org/wiki/George_Pataki#Bilderberg_conference_2006 Pataki attended the 2006 Bilderberg Group. In 2007 Bush gave him a UN appointment. DA!

The Statue of Liberty was "privitized". What an outrage. When I called Senator Clinton about it she said, she tried to stop it but couldn't. How about getting it back. That was an insult to our democracy. The people paid for it (French gave it as a gift) and paid to repair it.

Governor Patacki did a lot of damage before he was gone. Not only that but he failed to protect NY City from attack on 911.

I wasn't in NY State when this happened so I didn't see anything local about it. I know my friends in Buffalo were uncomfortable talking about it.

A book to read about the sale\theft\robbery of our Common resources and wealth is a book called: Silent Theft by David Bollier.
http://www.amazon.com/s/ref=nb_ss_b/104-7611448-5773515?url=search-alias%3Dstripbooks&field-keywords=Silent+Theft

[liberalla]

3. This really puts into words the uneasy, nebulous, submerged,

strangled feeling I've had for four or five years.

Recommended.

[mac2]

9. They use the word "hope" and "change" but in reality it's the same thing

as before. And they promised us the same before.

[flashl]

4. 'We' had warnings ...

Sell-out: Why hedge funds will destroy the world
Janet Bush | 31 July 2006 | The Statesman

If hedge funds were a country, it would be the eighth-biggest on the planet. They can sink whole economies, and have the potential to crash the entire global financial system. Yet they are beyond regulation. We should be very afraid

[CabalPowered]

5. The derivative numbers are scary..

Pg. 4 of the article..

"As the derivatives business has grown more complex, it has also ballooned in scale. Broadly speaking, Das - author of a leading textbook on derivatives and complex securities - estimates that investors worldwide hold more than $500 trillion worth of derivatives. This number now dwarfs the global GDP, which tops out around $60 trillion."

[eridani]

6. I'm stocking up on canned goods and other from scratch foodstuffs myself

The real economy--if you can't eat it, drink it, wear it, use it to build shelter, or burn it to keep warm or get from point A to point B, then to hell with it.

[sendero]

7. "Despite the anxiety...

... nobody is stockpiling canned goods just yet".

Well, almost nobody but I've had a rotating food store going for 2 years now :)