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Author Topic:   The Giant Pool Of Money. Implications
Phat
Member
Posts: 9284
From: Denver,Colorado USA
Joined: 12-30-2003
Member Rating: 1.7


Message 1 of 263 (585058)
10-05-2010 9:48 AM


Among the websites that I have neatly tucked away in "My Bookmarks", This American Life ranks as one of my favorites.

Recently on this website, I listened to a show called The Giant Pool Of Money which is self described as A special program about the housing crisis produced in a special collaboration with NPR News. We explain it all to you. What does the housing crisis have to do with the turmoil on Wall Street? Why did banks make half-million dollar loans to people without jobs or income? And why is everyone talking so much about the 1930s? In the show, they talk about a giant pool of money.

transcript writes:

BLUMBERG: What that is - most people don't think about it - it's the world investments - pension funds, investing for people's retirements, insurance companies investing your premiums, government central banks investing the wealth of nations.

Ms. CEYLA PAZARBASIOGLU (International Monetary Fund): A lot of money; it's about 70 trillion.

BLUMBERG: That's Ceyla Pazarbasioglu of the International Monetary Fund, and let's try to figure out how much is $70 trillion. Think of all the money everyone spends on Earth every year. Everything you bought in the last year, add everything the U.S. government and the U.S. military spent money on, add all the corn in Mexico and all the money folks spent on lawyers and all the rice sold in China, all the money spent everywhere on Earth in a year; that is less than $70 trillion, less than this global pool of money.

DAVIDSON: So it's a lot of money, and there's this army of people, investment managers, whose job it is to watch over that money. And they're pretty nervous because they have two sort of contradictory concerns. They don't want to lose any of it, and they also want to make it grow.

So for a long time, they made it grow by investing in very safe, pretty boring investments, things like U.S. treasuries and municipal bonds.

BLUMBERG: But right before our story starts, something happened to that global pool of money; it got a lot bigger. In fact, it doubled between 2000 and 2006. In other words, several centuries to get to about 35 trillion, and then over the course of six years, it got another 35 trillion.

And there are a lot of reasons for this growth, but the main one was that a lot of countries that used to be poor, that used to have no real savings, suddenly became rich. Brazil, India, of course China started making things that the rich countries wanted. And those countries banked their profits and looked around the world for ways to invest them.

So suddenly there's twice as much money scouring the world for investments, but the world wasn't ready. There weren't twice as many good investments. And so this global money looked around and found one investment that it liked in particular - the U.S. housing market, and a special bond created by Wall Street.

This one fact alone was mind boggling to me, and more than a bit scary. If this did in fact happen, a critical milestone had been reached in U.S.History, and the implications for people like me and you readers out there was quite scary. The thing is, I am not bright enough to understand these implications, and need your help, EvC Forum! Just what are the implications?


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Rahvin
Member (Idle past 567 days)
Posts: 3964
Joined: 07-01-2005


Message 2 of 263 (585068)
10-05-2010 4:42 PM
Reply to: Message 1 by Phat
10-05-2010 9:48 AM


This one fact alone was mind boggling to me, and more than a bit scary. If this did in fact happen, a critical milestone had been reached in U.S.History, and the implications for people like me and you readers out there was quite scary. The thing is, I am not bright enough to understand these implications, and need your help, EvC Forum! Just what are the implications?

I'm confused, Phat. You say that "the implications...was quite scary," and then you say that you're "...not bright enough to understand these implications" and ask what the implications are.

How can you know that the implications are scary without understanding them or even knowing what they are? Do you know some of the implications of a growing pool of global money, and you find those to be scary and want to know any other implications? Or are you actually just frightened by your own ignorance - you don't understand what it means for you and me, and your lack of comprehension frightens you?


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Jon
Inactive Member


Message 3 of 263 (585069)
10-05-2010 4:53 PM
Reply to: Message 1 by Phat
10-05-2010 9:48 AM


Magic behind the Curtain
When you increase the amount of money while failing to increase the amount of goods/services which back that money, you create inflation.

Such an increase has nothing to do with people making more shit; it is fat-cats in suits using fancy accounting tricks to make it look like there's more money than there actually is, and in so doing they decrease the value of the money that everyone holds.

There weren't twice as many good investments.

There are enough things in which to invest to suck up the world's money supply many times over. To say there were no places for investment other than stupid, con-artist, get-rich-quick schemes is just a lie.

And there are a lot of reasons for this growth, but the main one was that a lot of countries that used to be poor, that used to have no real savings, suddenly became rich.

I suppose these people can sleep better at night believing that poor countries have become rich and lost their money of their own foul doings, but this is simply not true. Poor countries building their manufacturing centers are certainly not to blame.

Jon

Edited by Jon, : Tenses: up-tight, let-loose, present


"Can we say the chair on the cat, for example? Or the basket in the person? No, we can't..." - Harriet J. Ottenheimer

"Dim bulbs save on energy..." - jar


This message is a reply to:
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Replies to this message:
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frako
Member
Posts: 2682
From: slovenija
Joined: 09-04-2010
Member Rating: 2.1


Message 4 of 263 (585144)
10-06-2010 4:15 AM
Reply to: Message 1 by Phat
10-05-2010 9:48 AM


well basicly the us is responsible for the whole pile of shit, the other countries are only partly responsible.

first off the us manualy increased inflation this can be a good thing for countries that have problems like the ware effort...., and reduced the % of income from bonds probably cause the us needed cash and did not want to go too fahr in debt the second one led to some bad investments but the first one was a real dosie.

because the inflation if an european sold to the us something worth say 1000 000 EUR 1700 000$ by the time the us byer hadt to pay the 1700 000$ the money was worth only 800 000EUR so they lost 200 000EUR worth do to inflation. that caused companies in europe and the rest of the world to go WTF we are loosing shit loads of money let us raise the prices, the same it happend on export so they did the next best thing lets fire some assholes to to cut our losses from there and whit the new increased prices and people out of work they screwed up their own economy cause people did not have enough to buy their shit and if they did not buy their shit they did not make any money and if they did not make money they hadto fire some more..... and this circular event braught us to where we are today


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Phat
Member
Posts: 9284
From: Denver,Colorado USA
Joined: 12-30-2003
Member Rating: 1.7


Message 5 of 263 (585187)
10-06-2010 12:48 PM
Reply to: Message 2 by Rahvin
10-05-2010 4:42 PM


Scary Implications
Rahvin writes:

How can you know that the implications are scary without understanding them or even knowing what they are? Do you know some of the implications of a growing pool of global money, and you find those to be scary and want to know any other implications? Or are you actually just frightened by your own ignorance - you don't understand what it means for you and me, and your lack of comprehension frightens you?

First of all, how can some people "get rich" while others remain the same? How did 35 trillion turn into 70? Where did the extra money come from?

Second, what are the implications for us here in the U.S.? Are our pensions safe? Is having twice as much money in the pool equivalent to the value of each unit being half as much? If it becomes harder and harder for our investments to make a profit, will the competition diminish our standard of living?

I fear that what this means is that the way of life as we knew it is gone...forever. America is now becoming just another country that has to work harder and harder to even remain at the same standard of living that once came easy to us. That scares me...because I am getting old.


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Phat
Member
Posts: 9284
From: Denver,Colorado USA
Joined: 12-30-2003
Member Rating: 1.7


Message 6 of 263 (585190)
10-06-2010 12:58 PM
Reply to: Message 3 by Jon
10-05-2010 4:53 PM


Re: Magic behind the Curtain
Jon writes:

There are enough things in which to invest to suck up the world's money supply many times over. To say there were no places for investment other than stupid, con-artist, get-rich-quick schemes is just a lie.

Interesting. So you are saying that these people in this article are lying? I would examine closely the statement that you made. Name just a few of these abundant investments that have not been covered previously. How will they provide a return? How can my Moms nest egg be invested to give her a livable 6-8% return so that she doesn't have to rely on her deadbeat son to support her?
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jar
Member
Posts: 28667
From: Texas!!
Joined: 04-20-2004
Member Rating: 2.6


Message 7 of 263 (585195)
10-06-2010 1:16 PM
Reply to: Message 5 by Phat
10-06-2010 12:48 PM


Re: Scary Implications
Phat writes:

First of all, how can some people "get rich" while others remain the same? How did 35 trillion turn into 70? Where did the extra money come from?

Some people do get rich, others stay the same, others get poorer. The very thing you quoted shows where the extra money came from, the new productivity of India, Brazil, China and other countries.

Phat writes:

Second, what are the implications for us here in the U.S.? Are our pensions safe? Is having twice as much money in the pool equivalent to the value of each unit being half as much? If it becomes harder and harder for our investments to make a profit, will the competition diminish our standard of living?

It means that competition has already increased. Having twice as much money simply means that there is twice as much money. In the past we mainly made money by exploiting others. There will be fewer and fewer people or things to exploit.

Phat writes:

I fear that what this means is that the way of life as we knew it is gone...forever. America is now becoming just another country that has to work harder and harder to even remain at the same standard of living that once came easy to us. That scares me...because I am getting old.

Except for the very short Aberration period, that has always been true.


Anyone so limited that they can only spell a word one way is severely handicapped!
This message is a reply to:
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Phat
Member
Posts: 9284
From: Denver,Colorado USA
Joined: 12-30-2003
Member Rating: 1.7


Message 8 of 263 (585196)
10-06-2010 1:25 PM
Reply to: Message 7 by jar
10-06-2010 1:16 PM


Aberration Period
jar writes:

Except for the very short Aberration period, that has always been true.

For those of us who do not understand, what exactly was the aberration period? When did it start, what caused it, and has it now ended entirely?
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jar
Member
Posts: 28667
From: Texas!!
Joined: 04-20-2004
Member Rating: 2.6


Message 9 of 263 (585228)
10-06-2010 6:11 PM
Reply to: Message 8 by Phat
10-06-2010 1:25 PM


Re: Aberration Period
The Aberration was that period after WWII when the productivity of almost ever developed nation except the US had been destroyed.

For a period of almost fifty years the US had a significant advantage; even the very materials to rebuild the infrastructure of Japan, Korea and western Europe came from the US. In addition, the political regimes in the Soviet Union and its satellites and in China held those peoples back.

The one real industrial power in the world was the US and no other nation really competed.

But that had not always been the case. Japan, Germany, Italy, France and in particular the British Empire had been equal competitors before WWII, and in many ways maybe even more advanced then the US.

The Aberration was a result of the ramped up capacity of the US as well as the destruction of the economic and industrial capabilities of much of the other industrial nations.

A big problem for the US though is that kids were taught that the Aberration was the norm, that the US was the Top Dog and so they had an inviolable right to their prosperity without competition.


Anyone so limited that they can only spell a word one way is severely handicapped!
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Phat
Member
Posts: 9284
From: Denver,Colorado USA
Joined: 12-30-2003
Member Rating: 1.7


Message 10 of 263 (585284)
10-07-2010 6:25 AM
Reply to: Message 9 by jar
10-06-2010 6:11 PM


The American Mindset
jar writes:

The Aberration was a result of the ramped up capacity of the US as well as the destruction of the economic and industrial capabilities of much of the other industrial nations.

A big problem for the US though is that kids were taught that the Aberration was the norm, that the US was the Top Dog and so they had an inviolable right to their prosperity without competition.

You and I have previously discussed the long term solution and best strategy for the U.S. Namely....

Educate a generation of people...Fathers, Mothers, Sons, and Daughters. Teach them how to think critically, examine all sides of an issure from as unbiased of a perspective as possible, and learn to apply what they learn so as to increase their value as workers, teachers, and voters.

What does the evidence show us about the reality of the American mindset, however?

Jon Jost has a web blog that has some interesting pictures and commentary based on his experience living in many places around the globe, both in and outside of America. I recommend reading his entire blog and looking at the pictures which accompany the commentary. In one installment, American Pastoral Jost comments on his perception of the current status of the American mindset, in regards to the global changes that we see.

Jon Jost writes:

It is autumn on an even numbered year, and in turn it is time for America to crank up its bi-annual electoral machinery to its maximum pitch. As customary and traditional the word high and low is that the newly installed Presidents party is headed for a come-down, in this case perhaps a loss of its majority in the House and Senate. Not that the closing two year cycle suggests it would make much difference: with a commanding, though blue dog tainted, majority in both chambers, the Democrats could barely limp a step without kow-towing to the vociferous shouts of right-wing commentators and politicians, who endlessly suggested Obama was in any event not legitimate by nature of his birthplace, his religion, and, sent only by transparent code words, his color. For some in America a (half) black man cannot be resident in the White House. These same people generally take their words literally, whether in this case, or in the Bible.

(...)

Thusly are our politics reduced to a pathetic cartoon in which the utterance of any truthful analysis of our national circumstance is political suicide. No, our temperamental children will not face any reality that deprives them of their instant gratification. Being woefully ill-educated, trained for decades to be selfish first and social last, and to run in horror at any word that begins with c-o-m our voting public is now bent on social destruction, deluded that they can have everything, pay no taxes, war for fun while utterly ignoring it, trash their neighbors, and somehow the grand American Exceptionalism will exempt them from all costs. Naturally it will not, and as the cost is being applied, our electorate appears to be running full-tilt into the arms of exactly those who sold them the sweet story that you could have it all and not pay for it. Were Reagan alive in two years, hed probably win in a landslide of historic proportions, never mind it was his philosophy and economic policies which induced our current situation. Ah, but he was, despite being a rather bad actor, a very good politician in that he could pull the wool over almost any sentimentalists eyes.

Thirty years on we are paying a very steep price for this shared delusion, and given the mind-set of the public, the price will likely get a lot steeper as our lemming herd runs as fast as it can to all the wrong people and policies a sure-fire formula for even worse problems in the coming years. Doubling down on our misguided practices is going to require the miracle which our Glenn Becks pray for, but the real world doesnt work on miracles or snake oil. Americans, accustomed to thinking of themselves as different and always being Number One, are likely to show their meanest and nastiest side as their delusions crumble about them. The current season is merely a prelude.

Does this veteran filmmaker see something in our national character that is deeper than foolishness with money?

Edited by Phat, : shortened article a bit


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Nij
Member (Idle past 2270 days)
Posts: 239
From: New Zealand
Joined: 08-20-2010


Message 11 of 263 (585287)
10-07-2010 7:06 AM
Reply to: Message 10 by Phat
10-07-2010 6:25 AM


Re: The American Mindset
I'm sure that was a rhetorical question.
He sees something that everybody else in the world sees and has seen for decades: "why do these people walk around thinking they're better than everybody else simply for living there instead of here?"

The people who do stupid things like fancy accounting to "create" more money from nothing and investing in people who clearly are not worth the risk, are the same ones promoting the ideas that somehow one country is inherently better than others (incidentally, they don't do it only in the USA) because that keeps them in power; build up the dream until it's so nice that waking up seems like a nightmare, and then you can walk around emptying their wallets while they're asleep.

The people who could stop them, don't. Why? Because they want to believe it's true. The people at large want to think they're impervious to reality, bulletproof against consequences, able to do and say anything now without regard to t* = t + 1. Feeding the positive confirmation and hiding away the negation is that everybody else is doing the same. And they do this because they don't know how else to act, because it is what everybody else is doing...

And the result is that a growing number of the poulace everywhere simply don't care about anybody else, because they've been taught it's okay to do so.
It's not only the US, but the US has a much more noticeable effect simply because of the aberration period's aftermath (mass media, substantial economy, global influence, etc.). And similarly, a much greater obliviousness to the fact that being an asshole now has short-term payoffs, but long-term losses: everybody being not-an-asshole leads to payoffs for everybody at all terms.

Educating people to become critical and independent thinkers is by far the best solution to fix that, but the problem is that first you need people educated in critical and independent thinking. Breaking the cycle of stupidity will take a substantial effort by multiple different groups, and the problem is that those groups simply aren't taking the chance; many can't risk extending themselves and many simply prefer the status quo. Until they can be convinced of the greater danger -- one that threatens eerybody equally regardless of race, religion, nationality -- then it won't happen.


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frako
Member
Posts: 2682
From: slovenija
Joined: 09-04-2010
Member Rating: 2.1


Message 12 of 263 (585288)
10-07-2010 7:25 AM
Reply to: Message 11 by Nij
10-07-2010 7:06 AM


Re: The American Mindset
do not worry Nij the US and us the EU will soon get screwed over by China the sleeping giant has almost awakend. china is alredy the second economic power in some things china tops the us i think. and it is stil the fastest growing major economy
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Percy
Member
Posts: 15561
From: New Hampshire
Joined: 12-23-2000
Member Rating: 4.3


Message 13 of 263 (585292)
10-07-2010 7:55 AM
Reply to: Message 1 by Phat
10-05-2010 9:48 AM


Hi Phat,

The This American Life episode you're talking about, The Giant Pool Of Money, was originally broadcast in 2008. Much of it was rebroadcast in the first half of a follow-up episode in September of 2009, and in the second half they interviewed many of the same people from the original episode to see how the collapse of the mortgage backed securities market and the associated CMO market had affected their views and attitudes.

There are other This American Life episodes focused on the financial crisis, usually with Alex Bloomberg as the primary reporter, and I'm sure there have been others since September, 2009, but I'm a bit behind in my podcasts.

By the way, in the September, 2009, episode they discovered that the IMF had underestimated the original size of the giant pool of money at the start of the crisis, that it had actually been around $80 trillion, and that as of that episode it had grown to around $83 trillion. Got that? Despite world wide economic collapse, the giant pool of money had grown by around $3 trillion. The big difference is that this money is now seeking safe havens instead of high returns. Investors are now very tight with their money, and until they loosen up world economic growth will continue to be anemic.

--Percy


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Phat
Member
Posts: 9284
From: Denver,Colorado USA
Joined: 12-30-2003
Member Rating: 1.7


Message 14 of 263 (585293)
10-07-2010 8:02 AM
Reply to: Message 12 by frako
10-07-2010 7:25 AM


Re: The American Mindset
Is not China one of the principal buyers of the U.S. Debts? This is also interesting. Foreign ownership of debt

I dont want to see my country disintegrate. I want to be able to have a decent retirement. I dont ask for much. All I want is a place to live, modest material goods, and a life free from worry about wars or depressions. Why cant people agree on this? Why is our defense budget as large as the rest of the world put together? Why do some of us want to screw other people over?


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Buzsaw
Inactive Member


(1)
Message 15 of 263 (585301)
10-07-2010 9:03 AM
Reply to: Message 14 by Phat
10-07-2010 8:02 AM


Re: The American Mindset
Phat writes:

I dont want to see my country disintegrate. I want to be able to have a decent retirement. I dont ask for much. All I want is a place to live, modest material goods, and a life free from worry about wars or depressions. Why cant people agree on this? Why is our defense budget as large as the rest of the world put together? Why do some of us want to screw other people over?

You have good reason to be concerned, Phat. All you need do is know your history. Any monetary system not backed by real value like gold or silver, etc eventually inflates away the wealth of the sheeple. I've been trying to get this into the heads of the sheeple since the 1960s, the last decade you could take a $1 bill to the bank and trade it for $1 in silver.

1964 was the last coinage of the 90$ silver coins. The half dollars contained 40% silver through 1969. After that the inflation index curved to the upside higher and higher.

The following link is the most concise and clear page I know of for you to see how all of the monetary graphs tell the story of inflation over the decades.

So Phat, get used to it. The American dream is over as the Biblically prophesied global beast government emerges. The bigger any human organization gets the more corrupt it gets. This beast, the last Gentile global kingdom, i.e. the ten horned beast of Daniel in the OT and Revelation in the NT, is fast emerging. It cannot happen until all nations are subjected into it. In order to subject the sheeple, the sheeple must become impoverished.

The Obama regime now in power is deliberately impoverishing the US so he can fulfill his campaign promises of changing it progressively into subjection.

Bottom line: The only hope is salvation through messiah/savior Jesus an the resurrection into the real good life. The present age is a sinking ship. Jesus, savior and lord is the lifeboat to hope.

The charts and comments answer your why and wherefore questions.

The US money supply is today twice as large as it was just a few years ago.
The Obama administration is without a clear economic policy three out of four members of the economic team have just resigned - and the fourth, Tim Geithner, has never held a position in the business world aside from being involved in the banking business at Goldman Sachs. The man cant even keep correct personal income records.
Worldwide money supply is expanding at an average rate of 10%.
The US dollar is in a long-term decline against gold (see chart below).
The Euro is in a long-term decline when measured in gold (see chart below).
Gold is rising not only in US dollar terms but also as expressed in a number of currencies this reflects a flight to safety from fiat currencies.
Gold production is declining, despite higher prices.
It takes longer (due to regulations) to build a gold mine than ever before, and the rising cost of materials and fuel makes it very expensive to build a mine.
The period between US Labor Day and Christmas is usually the most gold-bullish period of the year. In seven of the last eight years gold rose during this period.
The expiration of options on August 26th did not have a negative effect on the gold price, compared to options expiration days in June and July. This proves strong underlying physical demand.
China is buying up local gold production, thus withholding it from the market.
Russia is buying up local gold production, thus withholding it from the market.
Gold ETFs are more popular than ever before, drawing bullion away from the market.
The US gold supply that is stored at Fort Knox has not been audited since 1953 and is most likely all or partly gone. It has either been sold or leased.
Central banks have stopped selling gold and some have become buyers.
Gold thrives when real interest rates (US T-bill rate less CPI) is negative - as now. (People who are earning less than 7% per year on an investment are actually going backwards because of the inflationary effect which is currently 7% and rising!) Gold on the other hand has been rising at an average +20% per year for the past five years. Since 2001 gold has risen 400%!
Gold thrives during periods of price inflation and we are witnessing the beginning of increased price inflation: Wheat, corn, oats, barley, oranges, cattle, hogs, salmon, copper, iron ore, cotton, sugar, coffee, palm oil, health care, education are just some of the categories that are rising in price.

This chart courtesy Federal Reserve Bank of St. Louis shows price inflation is rising again after a short respite in 2009 following the credit crisis. Price deflation only lasted for about a year! (This chart is based on official figures. Mr. John Williams at Shadowstats.com has calculated price inflation to be rising at 7% per year). Statements made by government officials need to be taken with a grain of salt. Mr. Victor Zarnowitz, a professor at the University of Chicago is an expert on business cycles. He studied the predictions made by US government officials including the Federal Reserve bankers. He discovered that 92 out of 100 predictions turned out wrong.

Edited by Buzsaw, : change word


BUZSAW B 4 U 2 C Y BUZ SAW.
The immeasurable present eternally extends the infinite past and infinitely consumes the eternal future.
This message is a reply to:
 Message 14 by Phat, posted 10-07-2010 8:02 AM Phat has acknowledged this reply

Replies to this message:
 Message 16 by crashfrog, posted 10-07-2010 11:51 AM Buzsaw has responded

  
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