Re: [OPE] RE: [money_banks_crisis] Some new stats/spins on thefinancial crisis

Another link worth reading through is

http://www.revolutionarycommunist.org/frfipages/205/FRFI_205_usa2.html

with a series on CDS and all that has followed over the last couple of
years.

Ver good stuff

Paul Bullock

----- Original Message -----
From: "Gerry Gold" <gerrygold@onetel.com>
To: <pbond@mail.ngo.za>; "'debate@parrot.riseup.net:SA discussion list'"
<debate@debate.kabissa.org>; "'money crisis list'"
<money_banks_crisis@lists.riseup.net>; "'Outline on Political Economy
mailing list'" <ope@lists.csuchico.edu>; "'Progressive Economics'"
<pen-l@lists.csuchico.edu>; "'Activists and scholars in Marxist tradition'"
<marxism@lists.econ.utah.edu>
Sent: Tuesday, October 14, 2008 7:45 PM
Subject: [OPE] RE: [money_banks_crisis] Some new stats/spins on thefinancial
crisis

> Patrick,
>
> Thanks for that release notification and useful extract. I'll certainly
> use it in my attempts to render an understanding of the developing crisis
> for the rapidly increasing numbers entering politics for the first time.
>
> Here's what I wrote earlier today.....I hope it helps with your search for
> synthesis and conclusion...
>
> Gerry
> ------------------------------------------------
> The storm is just starting to blow
>
> Gordon Brown is being feted as the “master of the universe”. Stock markets
> yesterday were delirious with joy, making record-breaking, stratospheric
> leaps as governments around the world bailed out the banks. Right-wing
> Tory newspapers joined in unalloyed praise for the bankers’ government.
>
> Is the financial storm over then? Er, no actually.
>
> So far, sums approaching £2,000 billion (= £2 trillion) of taxpayers’
> money have been committed by the governments of America, the UK and Europe
> to the bankers’ bail-out. Central banks are pouring “unlimited” amounts of
> US dollars into the global financial system in what will prove yet another
> failed attempt to prevent the mother of all meltdowns.
>
> How can we be so sure?
>
> Yes, £2 trillion sounds a lot, but the collecting bucket is effectively
> bottomless. This unimaginably large sum of money is dwarfed by a series of
> other giant hot-air balloons of fantasy finance queuing to burst in the
> background whilst Brown’s Punch to the bankers’ Judy struts temporarily in
> the foreground.
>
> Among the balloons is the market in credit default swaps (CDS), a way of
> trading in risk. It began life in the mid-1990s and, largely because it
> has always been unregulated, and appeared to offer the possibility of
> reducing, or at least sharing risk, it attracted a great deal of interest.
>
> The simple version of the story goes that a swap enables an organisation
> making a loan to a customer to insure against the customer defaulting on
> payments by establishing a private contract with a third party, paying a
> kind of insurance premium. It can’t be called “insurance” because that
> would make it liable to regulation. You wouldn’t want to call it
> “protection” either. People might think you’re a gangster.
>
> The market grew very fast. Most major organisations are now caught up with
> each other in a lacework of interconnected contracts. Ok, so how much are
> we talking about? It’s difficult to be precise, because all the trading is
> in unregulated contracts hidden from public view. Nobody really knows.
> Data from the International Swaps and Derivatives Association (!) show
> that at the end of June, the CDS market had a notional value of $54
> trillion. That's the same as the planet's 2007 GDP and nearly four times
> the value of all shares traded on the New York Stock Exchange. Other
> estimates puts the figure nearer $65 trillion. So what is the chance of
> this particular balloon bursting? It already did. On Friday, Moneyweek put
> it like this:
>
> When one side of a trade defaults, it starts a chain reaction that raises
> the risk of others losing money. That's called 'counterparty risk', and is
> partly what has spooked investors into selling off assets and lenders into
> curbing credit. The collapse of Lehman Brothers has had a particularly big
> impact. Lehman wrote more than $700bn-worth of CDS. Now it's gone bust,
> investors who had taken out these CDS have been left without the
> insurance, so they're having to buy more, even though prices are now
> rising because of the general turmoil.
>
> Initial results of the auction to determine the value of CDS on Lehman
> Brothers showed banks, hedge funds and other sellers of protection facing
> losses in the area of 90.25% of the insurance they sold.
>
> The CDS market is only 10% of the global derivatives market, which covers
> all contracts taken out to minimise risk. This is the mysterious,
> unregulated world of futures, forwards, options and swaps. According to
> the Bank for International Settlements, the notional amounts outstanding
> at the end of 2007 totalled about $550 trillion on contracts privately
> traded between parties. As the global recession deepens, the number of
> parties unable to fulfil contracts will grow rapidly.
>
> Is the storm over? It’s only just beginning to blow!
>
>
>
>
>
> 
>
> -----Original Message-----
> From: Patrick Bond [mailto:patricksouthafrica@gmail.com] On Behalf Of
> Patrick Bond
> Sent: 14 October 2008 18:13
> To: debate@parrot.riseup.net:SA discussion list; money crisis list;
> Outline on Political Economy mailing list; Progressive Economics;
> Activists and scholars in Marxist tradition
> Subject: [money_banks_crisis] Some new stats/spins on the financial crisis
>
> http://www.nu.ac.za/ccs/default.asp?2,68,3,1605
>
> These are the stats I've found most compelling in reviewing the two IMF
> reports on global finance, just released.
>
> Note that we're grappling with getting a synthesis and conclusion, not
> just here in Caracas with the World Forum of Alternatives comrades
> (where Samir Amin is leading a three-day seminar), but more generally.
>
> Your inputs are very welcome.
>
> Patrick
>
> PS, as this material is mainly at the epiphenomenal level, a couple of
> other riffs on how the deeper economic crisis developed, and how it
> affects Africa, are here:
> http://www.nu.ac.za/ccs/default.asp?11,61,3,1624
> http://www.ukzn.ac.za/ccs/files/Microsoft%20PowerPoint%20-%20Bond%20IFG%207%20October.pdf
>
>
>
>
>
>
>
>
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Received on Wed Oct 15 19:21:31 2008