The "coalition cuts" megathread

[truconstruct]

Donkey isn't the only one in the dark about this. I'd like to know how the banking crisis was entirely the fault of Governments in the West.

 

I appreciate that you are concerned that it might take a long time, but, I have all night, so don't worry about that.

 

Off you go. Do explain.

 

I don't have all night but since you ask nicely and probably will be able to understand here goes.

[truconstruct]

Every country has a credit rating based upon the weath of that country.

 

This takes into account the countries industrial, mineral, and fiscal productivity.

 

The fiscal productivity is mostly invisible earning and is hard to quantify though.

 

Afer productivity then there are assets, assets can be mineral weath, industrial capacity, and buildings that are mortgagable.

 

If housing is worth say 10T that number is part of the calculation made to assertain a countries index figure, the index figure is the limit to which a country can borrow and thus still maintain the AAA rating.

 

But if the government lets the banks and by that I mean 'encourages' them shall we say to make lax valuations on proporty and let go the controls on mortgages then the net effect is massive increases in house prices which in tern means the countries over all index figure goes up.

 

Then the government can issue more and more bonds for its own borrowing purposes.

 

There is also another reason to do this that's a little more cynical. It goes like this;

 

When mortgages are issued they are gathered into larger groups of say 100m dollars, normaly 92 to 96 million, but an instument or note is issued for the value of 100m. This note is then sold to the secondry market who sell it for face value to investors with what's call interest coupons. Once this is all put together the instrument is now called a note, not unlike a bank note, its a pice of paper where the issuing banks agree to pay the face price at the end of the term of the note.

 

In order for the system to work they need to produce more and more notes, but each and every note is really less stable than the last because its based upon mortgages for property that's over valued. So if the mortgages are defaulted on then the issuing bank can't pay the end investor back what they invested. But it gets better than that because the issueing banks actualy didn't sell the note directly to the investor, it was sold by a secondry party who has no assets at all other than the trade in notes.

 

So if you can keep the system in balance for quite a while you can sell billions of dollars worth of notes to say the Agricultural Bank of China and in one fell swoop leave them will billion upon billions of worthless notes which is really a sneaky way of getting back all the money you gave them for the goods they've been producing for the last 20 years.

[Guest sibon]

Every country has a credit rating based upon the weath of that country.

 

This takes into account the countries industrial, mineral, and fiscal productivity.

 

The fiscal productivity is mostly invisible earning and is hard to quantify though.

 

Afer productivity then there are assets, assets can be mineral weath, industrial capacity, and buildings that are mortgagable.

 

If housing is worth say 10T that number is part of the calculation made to assertain a countries index figure, the index figure is the limit to which a country can borrow and thus still maintain the AAA rating.

 

But if the government lets the banks and by that I mean 'encourages' them shall we say to make lax valuations on proporty and let go the controls on mortgages then the net effect is massive increases in house prices which in tern means the countries over all index figure goes up.

 

Then the government can issue more and more bonds for its own borrowing purposes.

 

There is also another reason to do this that's a little more cynical. It goes like this;

 

When mortgages are issued they are gathered into larger groups of say 100m dollars, normaly 92 to 96 million, but an instument or note is issued for the value of 100m. This note is then sold to the secondry market who sell it for face value to investors with what's call interest coupons. Once this is all put together the instrument is now called a note, not unlike a bank note, its a pice of paper where the issuing banks agree to pay the face price at the end of the term of the note.

 

In order for the system to work they need to produce more and more notes, but each and every note is really less stable than the last because its based upon mortgages for property that's over valued. So if the mortgages are defaulted on then the issuing bank can't pay the end investor back what they invested. But it gets better than that because the issueing banks actualy didn't sell the note directly to the investor, it was sold by a secondry party who has no assets at all other than the trade in notes.

 

So if you can keep the system in balance for quite a while you can sell billions of dollars worth of notes to say the Agricultural Bank of China and in one fell swoop leave them will billion upon billions of worthless notes which is really a sneaky way of getting back all the money you gave them for the goods they've been producing for the last 20 years.

 

 

Or, a more simple explanation. The bank executives invented ever more complex ways of recycling toxic debt, whilst picking up performance bonuses. This was ok for a while, but eventually it went tits up, as it inevitably would. No problem really, the bonuses were banked and, as we all know, even dead cats bounce. So, more bonuses in the offing. World Governments stood idly by and let this happen, without ensuring proper regulation. The Governments then shat their pants and spent all of our money on propping up insovent banks.

 

The whole house of cards turfed Government after Government out of power*

 

*This last bit is yet to happen, but is an integral part of the argument against your rather thought provoking post.

[truconstruct]

Or, a more simple explanation. The bank executives invented ever more complex ways of recycling toxic debt, whilst picking up performance bonuses. This was ok for a while, but eventually it went tits up, as it inevitably would. No problem really, the bonuses were banked and, as we all know, even dead cats bounce. So, more bonuses in the offing. World Governments stood idly by and let this happen, without ensuring proper regulation.

 

The whole house of cards turfed Government after government out of power*

 

*This last bit is yet to happen, but is an integral part of the argument against your rather thought provoking post.

 

Its got nothing to do with the banks Joel as well you know.

 

You might not be an ecconomist but you understand what I've posted is how things work. There has to be a correction in trade inbalance or we'd have to go to war again, its the underlying fabric that binds nations together and sets them appart at the same time.

 

Those who do not grasp this are peons not worthy of a second glance let alone thought.

[truconstruct]

You problem is the facts don't suit you class struggle ideology, its time you stopped listening to the brainwashing they gave you in the militan tendancy and embraced reality.

 

I always liked you Joel but you never could see the wood for the trees.

[donkey]

Every country has a credit rating based upon the weath of that country.

 

This takes into account the countries industrial, mineral, and fiscal productivity.

 

The fiscal productivity is mostly invisible earning and is hard to quantify though.

 

Afer productivity then there are assets, assets can be mineral weath, industrial capacity, and buildings that are mortgagable.

 

If housing is worth say 10T that number is part of the calculation made to assertain a countries index figure, the index figure is the limit to which a country can borrow and thus still maintain the AAA rating.

 

But if the government lets the banks and by that I mean 'encourages' them shall we say to make lax valuations on proporty and let go the controls on mortgages then the net effect is massive increases in house prices which in tern means the countries over all index figure goes up.

 

.

 

The the holes in your theory are instantly obvious.

Namely

1. You assume that 'Western governments' and the financial sectors are two completely seperate and unconnected entities. This is despite the clear evidence that this is not the case, as demonstrated by the large numbers of politicians with connections to the financial sector and the activities of lobbyists working on behalf of bankers.

2. Based on this erronious assumption, you further assume that governments in the west are united in their aims and co-ordinated in their actions (ie. secretly conspiring to push up their credit ratings.) The reality is they are made up of competing factions with a variety aims and ideologies.

3. You are basically saying that the top bosses of global financial institutions have a much poorer grasp of economics and can be easily manipulated by the average government? Given the fact that they are one and the same class of people, this is obviously a ridiculous assumption to make.

 

 

 

There is also another reason to do this that's a little more cynical. It goes like this;

 

When mortgages are issued they are gathered into larger groups of say 100m dollars, normaly 92 to 96 million, but an instument or note is issued for the value of 100m. This note is then sold to the secondry market who sell it for face value to investors with what's call interest coupons. Once this is all put together the instrument is now called a note, not unlike a bank note, its a pice of paper where the issuing banks agree to pay the face price at the end of the term of the note.

 

In order for the system to work they need to produce more and more notes, but each and every note is really less stable than the last because its based upon mortgages for property that's over valued. So if the mortgages are defaulted on then the issuing bank can't pay the end investor back what they invested. But it gets better than that because the issueing banks actualy didn't sell the note directly to the investor, it was sold by a secondry party who has no assets at all other than the trade in notes.

 

So if you can keep the system in balance for quite a while you can sell billions of dollars worth of notes to say the Agricultural Bank of China and in one fell swoop leave them will billion upon billions of worthless notes which is really a sneaky way of getting back all the money you gave them for the goods they've been producing for the last 20 years.

 

 

 

Right, so the reason China is the only country with a rapily expanding economy in the world, is because our genius politicians have completely duped them with their secret plan, while at the same time deviously collapsing the economies of their own countries and causeing themselves to be voted out of office? The pure devilish cunning of it all.

 

Sorry, but I'm just not convinced by your self professed understanding of global politics and economics.

[redrobbo]

SureStart Protected

 

Any comment from those Labour supporters on here who've been spouting off for the past few months that the Tories would axe SureStart?

 

When Cameron accepted Clegg's proposal for a premium for poor performing kids in school, it would have looked completely nonsensical for the coalition government to have axed SureStart. Had the Tories been in government alone, I feel sure the axe would haven fallen on SureStart, just as it is about to fall in any case on the Child Trust Funds.

[Longcol]

In order to raise capital governments created a situation that the banks had to deal with, that of over inflated house prices.

 

It would take me an age to try to explain how the system works, and age that I fear would be futile in that you still wouldn't be able to comprehend how government actualy raise their appareant net worth to investors by creating things like house price inflation.

 

Governments raise capital by borrowing. People will buy government debt (bonds) if they think the government will be able to repay them - with interest. Obviously the more a government borrows the more people are concerned about the governments ability to meet its debts.

 

You make it sound as if a nation is a "PLC"and the value of the assets (ie houses) appear on a balance sheet - and so if they can inflate the value of those assets they can borrow more.

[Tony]

That is a shameful post, Tony.

 

<snip well constructed but inaccurate diatribe>

It might be if you'd have understood it, but first you should understand the enormous gulf between evasion and avoidance and maybe then we can move the discussion on.

[Tony]

I'd like to know how the banking crisis was entirely the fault of Governments in the West.

 

Because they failed to legislate against loans exceeding the value of the security.

 

That is all that they had to do, no more. They knew what was going on yet they failed to act with the common sense that you learn at your mothers knee.