[JerryLove]

Originally Posted by nolidad

If it is your own- hey go crazy if you want- but if it belongs to others- conservative fiduciary prinicples should govern.

Shy of regulation, there's no way to even hope to ensure that happens.

[Chrysostom]

Originally Posted by nolidad

This is the part of the American system that really sucks. It is not leveraging that is bad per se, but the over leveraging that has caused so much trouble. I suppose that is a subjective statement and determined by each individual, but being a conservative person- principles of leveraging should be scaled way back. After all it is risking others money. If it is your own- hey go crazy if you want- but if it belongs to others- conservative fiduciary prinicples should govern.

The real question is, What does it means to be over-leveraged? That's an incredibly complicated matter of judgment -- different institutions with different risk profiles in different macro-economic circumstances with different total capitalizations will interact with leverage very differently. And, of course, more leverage means more innovation and less leverage means less risk, so this is an issue of trade-offs that can't be solved simply in principle. For this reason leverage management has to be fluid.

This is what makes it so hard to regulate. Of course it's easy for regulators to allow some leverage and ban massively excessive leverage. But even leverage between those two extremes can be very dangerous. Further, investment bankers are very good at coming up with new financial products and systems that allow them to increase their leverage surreptitiously. For this reason, I think the solution is a combination of limited but very tough-minded regulation (like, for instance, relentless anti-fraud and anti-trust enforcement, with increasingly strict regulation on very high leverage) alongside a solution from within the market. The market is better-equipped to handle rapid contextual changes than regulators.

One suggestion on the table is convertible debt, i.e. bonds that can be converted into equities and thereby allow the market both to recapitalize and hold accountable these leveraged institutions. I can't tell you that I know enough to say whether this is a good idea, but I certainly think that only a solution with a substantial component internal to the market will be able to handle all the complex particularities of leverage.

[Ridley's Own]

All of which still tempts me to buy gold from G Gordon Liddy and bury it in Mason jars in my back yard

[nolidad]

Originally Posted by Ridley's Own

All of which still tempts me to buy gold from G Gordon Liddy and bury it in Mason jars in my back yard

Which isn't a half bad idea given the insanity in the global fiscal markets.

The real question is, What does it means to be over-leveraged? That's an incredibly complicated matter of judgment -- different institutions with different risk profiles in different macro-economic circumstances with different total capitalizations will interact with leverage very differently. And, of course, more leverage means more innovation and less leverage means less risk, so this is an issue of trade-offs that can't be solved simply in principle. For this reason leverage management has to be fluid.

Once again if you are playing with your money or have permission from those whose money you are managing- fine.

But the currency and credit derivative markets currently stands at $654 trillion dollar in exposure!!! Many economists can only kind of shrug when asked to explain this market- but yet it has leveraged every person on the planet to the tune of millions each. This is the kind of overleveraging that should be stopped. The markets should roll back to what they were for- investment into companies- not the new las vegas that so many use the markets for.

[JerryLove]

Originally Posted by nolidad

But the currency and credit derivative markets currently stands at $654 trillion dollar in exposure!!! Many economists can only kind of shrug when asked to explain this market- but yet it has leveraged every person on the planet to the tune of millions each. This is the kind of overleveraging that should be stopped. The markets should roll back to what they were for- investment into companies- not the new las vegas that so many use the markets for.

Whose money is being used without consent?

[Chrysostom]

Originally Posted by Ridley's Own

All of which still tempts me to buy gold from G Gordon Liddy and bury it in Mason jars in my back yard

I'd say, if you want to go black-helicopter, a better way to do it is to invest your time and money into learning skills and owning land.

Originally Posted by nolidad

Once again if you are playing with your money or have permission from those whose money you are managing- fine.

I've got to go with Jerry here. Investors are culpable for their own decisions. If you don't want to put your money into equities or commodities or whatever you don't have to. If you'd like to invest in business but don't like the markets then start your own business. In America this is possible because we have relatively lax, entrepeneur-friendly regulation on small businesses.

Originally Posted by nolidad

But the currency and credit derivative markets currently stands at $654 trillion dollar in exposure!!! Many economists can only kind of shrug when asked to explain this market- but yet it has leveraged every person on the planet to the tune of millions each. This is the kind of overleveraging that should be stopped. The markets should roll back to what they were for- investment into companies- not the new las vegas that so many use the markets for.

I'm not sure we're talking about the same thing. The markets you're talking about are designed to hedge companies against risk, not to place bets at a million-to-one leverage. Their purpose is to reduce risk. The multiplication of money in commercial and retail banks, as well as the kind of leverage used among investment bankers and traders, is a different thing, and that's what I've been talking about.

[nolidad]

I've got to go with Jerry here. Investors are culpable for their own decisions. If you don't want to put your money into equities or commodities or whatever you don't have to. If you'd like to invest in business but don't like the markets then start your own business. In America this is possible because we have relatively lax, entrepeneur-friendly regulation on small businesses.

Direct investors- yes. But what about teh hundreds of billions in pension funds that are being tossed about in the markets? Many times for hundreds of thousandsa (if not millions) their company run pension funds are being gambled on.

I forgetr when but there was that big scandal when the market collapsed about tens of thousandsa losing their pensions because they did not know their money was being placed at such risk by the brokers companies hired or in the case of private funds- their money being bundled with thousand sof others and placed at risk.

[Bryan]

Originally Posted by nolidad

Direct investors- yes. But what about teh hundreds of billions in pension funds that are being tossed about in the markets? Many times for hundreds of thousandsa (if not millions) their company run pension funds are being gambled on.

aint got no pension... ain't gonna care

I forgetr when but there was that big scandal when the market collapsed about tens of thousandsa losing their pensions because they did not know their money was being placed at such risk by the brokers companies hired or in the case of private funds- their money being bundled with thousand sof others and placed at risk.

losing their pension is a bit of an extreme. having a smaller payout, possibly, but total loss... not unless the entire market goes to 0

[Ax]

Originally Posted by Ridley's Own

This answers the question rather clearly, I think. Look at the connections between all five countries and the larger economies in Europe.

What doesn't make sense here is this: all 5 countries owe each other. For example Greece owes Ireland 8.5 but Ireland owes Greece .8. Where I come from that just means Greece owes Ireland 7.7 (8.5 - 0.8). Or simply, if I owe my friend 10 dollars, then I let him borrow 6 bucks from me, I take that 6 bucks out of what I owe him. Unless of course the debt isn't government debt but rather private debt, but that's a whole other monster.

[Chrysostom]

Originally Posted by nolidad

Direct investors- yes. But what about teh hundreds of billions in pension funds that are being tossed about in the markets? Many times for hundreds of thousandsa (if not millions) their company run pension funds are being gambled on.

I forgetr when but there was that big scandal when the market collapsed about tens of thousandsa losing their pensions because they did not know their money was being placed at such risk by the brokers companies hired or in the case of private funds- their money being bundled with thousand sof others and placed at risk.

This is all pretty anecdotal. Only about half of retirees rely on a pension for a significant portion of their income, and for that half the pension accounts for about 1/5 of their total income. For that matter, the majority of those with pensions have them through the government, which has deeper pockets than any individual company. And, of course, pensions are becoming increasingly uncommon as defined-contribution plans succeed defined-benefit plans. Here is the link:

http://benefitslink.com/articles/gue...7_Oct_2009.pdf

Even beyond the relative unimportance of pensions there is the fact that they are run with conservative goals and don't leverage themselves to the hilt in order to hit billion-dollar home runs or anything. (Also, like I said in the last post, we seem to be veering a bit apart on topic here.)

On another level -- when you put your trust in your company to provide you with your retirement you're trusting its stewardship of its pension fund.

[JerryLove]

Originally Posted by nolidad

Direct investors- yes. But what about teh hundreds of billions in pension funds that are being tossed about in the markets? Many times for hundreds of thousandsa (if not millions) their company run pension funds are being gambled on.

That's the company with the pension's money: and they are a direct investor.

I forgetr when but there was that big scandal when the market collapsed about tens of thousandsa losing their pensions because they did not know their money was being placed at such risk by the brokers companies hired or in the case of private funds- their money being bundled with thousand sof others and placed at risk.

If they could not control it, then it was not their money. If it was money promised to them by some company that will now not deliver on that promise: the issue is one of a failed contract.

Let me take it to an extreme, and you tell me where the illegal / immoral part.

As part of your employment contract: I'm gonna put $100 per month into a fund. When you leave the company I'm going to flip a coin. Heads you get all the money, tails you don't.

Certainly that's clearly "gambling with money"... but where's the need for regulation (anti-gambling laws not withstanding).

If you didn't take personal responsability for understanding what you were promised and what might happen to it: why should the government pay for your mistake?