Economics 101--How Is Your Piggy Bank?

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Lightning Rod
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Economics 101--How Is Your Piggy Bank?

Post by Lightning Rod » October 10th, 2008, 12:25 pm

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Economics 101--How Is Your Piggy Bank?
for release 10-10-08
Dallas, Texas
by Lightning Rod


I don't pretend to understand economics. Economists don't even understand economics. As a science, economics rates right up there with astrology and parapsychology.

Most of us grasp the rudimentary principles of micro-economics. We know how to balance a checkbook; we know that our salary needs to exceed our mortgage; we vaguely understand supply and demand and know how to swipe a credit card.

But few of us understand complex mortgage based securities or how world money markets operate. I certainly don't. So in the area of macro-economics, we leave the magic to the witch doctors. But often witch doctors are charlatans dedicated to their own greedy purposes.

The Poet's Eye sees that stockbrokers and securities traders are simply glorified bookies. Bookies are the only players who have a guaranteed outcome in gambling. They just broker the bets and don't care who wins the game because no matter who wins, they get their vigorish.

You don't need to understand pari-mutuel betting in order to buy a two dollar ticket. Pari-mutuel betting resembles our securities markets and our stock market mutual funds. The risks and profits are distributed and the only assured winners are the house and the government (in taxes.)

When a bookie takes more bets than he can cover or when he needs to balance his odds, he will 'lay off' part of his bets to other bookies. In essence he sells the bet. This is also what happens when a bank repackages mortgages into securities and sells those securities to another bank or a broker.

This system works quite well until someone can't cover their bet. The foreclosure process in the gambling business is a little more lively than in the banking business and usually involves pain in the fingers or knees, but the outcome is the same. Someone gets hurt.

The Poet's Eye watches as the stock market sheds trillions of dollars worth of imaginary wealth. All the bookies are trying to lay off their bets. Some of them are going south because they know that someone's knees are about to be broken. My guess is that those knees will belong to you and me.


Mother Jones put Dow Jones to bed
With a sleepy bedtime story
A song of the twentieth century
Hackin' out a road to glory.
---Barry Gremillion
---
.... THIS MUCH I'VE LEARNED
In these five years in what I've spent and earned:
Time does not finish a poem.
Upon the old amusement pier I watch
The creeping darkness gather in the west.
Above the giant funhouse and the ghosts
I hear the seagulls call. They're going west
Toward some great Catalina of a dream
Out where the poem ends.
But does it end?
The birds are still in flight. Believe the birds.

-- Jack Spicer, Imaginary Elegies, 1950-55
"These words don't make me a poet, these Eyes make me a poet."

The Poet's Eye

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Dave The Dov
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Post by Dave The Dov » October 10th, 2008, 2:30 pm

Gambling and investing which is the more riskier???? Old Ben Franklin said it best when he said, "A penny save is a penny earned". So save those pennies!!!! :D
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Last edited by Dave The Dov on March 25th, 2009, 11:05 am, edited 1 time in total.

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mnaz
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Post by mnaz » October 10th, 2008, 3:47 pm

I used to get funny looks and condescending remarks when I said our economy is starting to resemble the old house-o'-cards. I don't get them any more.

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stilltrucking
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Post by stilltrucking » October 15th, 2008, 9:42 am

I think it would be a good idea to castrate the CEO's of the Commercial Banks?Brokerages. Seriously, there is a link somewhere that talks about the relaionship between testosterone and risk taking.
I will see if I can find it meanwhile there is this bit.

A decade ago, long before the financial calamity now sweeping the world, the federal government's economic brain trust heard a clarion warning and declared in unison: You're wrong.



The meeting of the President's Working Group on Financial Markets on an April day in 1998 brought together Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert E. Rubin and Securities and Exchange Commission Chairman Arthur Levitt Jr. -- all Wall Street legends, all opponents to varying degrees of tighter regulation of the financial system that had earned them wealth and power.

Their adversary, although also a member of the Working Group, did not belong to their club. Brooksley E. Born[/b], the 57-year-old head of the Commodity Futures Trading Commission, had earned a reputation as a steely, formidable litigator at a high-powered Washington law firm. She had grown used to being the only woman in a room full of men. She didn't like to be pushed around.
Now, in the Treasury Department's stately, wood-paneled conference room, she was being pushed hard.

Greenspan, Rubin and Levitt had reacted with alarm at Born's persistent interest in a fast-growing corner of the financial markets known as derivatives, so called because they derive their value from something else, such as bonds or currency rates. Setting the jargon aside, derivatives are both a cushion and a gamble -- deals that investment companies and banks arrange to manage the risk of their holdings, while trying to turn a profit at the same time.

Unlike the commodity futures regulated by Born's agency, many newer derivatives weren't traded on an exchange, constituting what some traders call the "dark markets." There were now millions of such private contracts, involving many of Wall Street's top firms. But there was no clearinghouse holding collateral to settle a deal gone bad, no transparent records of who was trading what.

http://www.washingtonpost.com/wp-dyn/co ... id=topnews


Good "eye"
thanks

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stilltrucking
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Post by stilltrucking » October 15th, 2008, 12:53 pm

Testosterone Fuels Stock Market Success...

Each trader's testosterone levels were higher on days when profits exceeded his one-month daily average than on other days. With elevated testosterone, traders may experience more confidence and risk-taking appetite — qualities that could bolster trading performance, the researchers suggest.

But there's also a down-side. Too much testosterone or prolonged elevation could lead to impulsive decisions and extreme risk-taking, the researchers say, turning a trader's profits into losses.

http://www.livescience.com/health/08041 ... aders.html

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