Rubenerd Blog

Ouch

2008.10.07 – 06.03 UTC+08 (Singapore Time)

Taken from the Bloomberg application on my iPhone 3G at 05:31am Australian Central Daylight Savings Time… what a mouthful.

Dow Jones at 9636.99

Categories: economics
Tags: bloomberg, iphone, subprime mortgage crisis, united states

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My view on the role of capitalism, via Twitter

2008.10.07 – 02.30 UTC+08 (Singapore Time)

Given the current financial situation in the United States and resulting global uncertainty, I could be penning thousands of posts here about economics… however given I’m studying economics as one of my degrees, for some reason I feel I’m writing enough about this issue as it is!

That said, I did have quite an involved (and unintended!) conversation with a couple of people about the current situation which evolved into the role of capitalism in general. For those of you not following me on Twitter, here is is. I’d love to hear your feedback if you have any opinion on the issue(s).

My proudly held Keynesian, regulated, sustainable growth over exponential growth, free market skeptic side seems to show a bit ;-).

Rubenerd

Retweet @cburell: As Reagan was to USSR decline, so Bin Laden was to US decline. 10 trillion debt, makes sense. http://tinyurl.com/53mrs4

skydaddy

@Rubenerd utter foolishness. The USSR was paying its soldiers in cabbages and brassieres at the end. The US economy is hardly decimated.

Rubenerd

@skydaddy Was just retweeting. Current US economic conditions are certainly no glowing endorsement of unregulated capitalism FWIW.

skydaddy

@Rubenerd found Clay’s post and replied w/ link. Neither is current condition an indictment of capitalism, nor endorsement of socialism.

Rubenerd

@skydaddy I do think capitalism is the way to go, but it must, MUST be fully regulated to work. Nobody wins unless we all win.

skydaddy

@Rubenerd actually, current market woes an indictment of liberal experiment to use govmt to encourage people to borrow beyond their means

Rubenerd

@skydaddy I agree with you partly. People borrowed beyond their means, but it’s the fault of greedy, unregulated, predatory finance companies.

skydaddy

@Rubenerd agree it’s not a zero-sum game, but some people do in fact lose. bad luck, bad decisions, bad timing take their toll.

Rubenerd

@skydaddy True. And in the end the people who really suffer are people, and that’s a travesty.

skydaddy

@Rubenerd if you’re saying that government should regulate business to prevent all suffering, we disagree. Can’t be done. Capitalism = risks

Rubenerd

@skydaddy That’s true, capitalism = risks, just as communism = bust. Regulated capitalism with sound monetary policy = less risk.

Cburrel

@skydaddy patriotism is no argument against economic realities, is it? we’re mid-avalanche right now, & you cite current snapshots.

skydaddy

@cburell Call me when US Navy puts into port & USAF suspends training flights b/c they can’t buy gas or pay troops. That was USSR in ’80s

@Rubenerd what is the goal of regulation - that’s key. s/b prevent excesses and abuses, not encourage them. hence current troubles

Rubenerd

@skydaddy True that regulation automatically doesn’t = good.

@skydaddy In this case I’d argue a result of insufficient regulations on financial institutions issuing credit.

@skydaddy Provided China and Japan keep buying US bonds the short term ramifications won’t be as bad, but long term not so sure.

skydaddy

@Rubenerd other countries buy our bonds b/c they think we will repay in future. Totally puts the lie to the “binLaden=Reagan” thesis.

Rubenerd

@skydaddy No, China and Japan are buying US bonds to artificially lower their currency values, to allow their exports to be cheaper.

@skydaddy But I do agree that poor people being lied too is just an abhorant situation.

skydaddy

@Rubenerd of course, we have to pay back the loans, which means create real value, not just paper wealth.

Rubenerd

@skydaddy True, that is the point of credit. I guess it bothers me that not enough productive use is being generated from said funds.

Alas I didn’t even get into the real core issues of the subprime mortgage crisis though which are: Greed. Arrogance. Fabrication. Lies. Lack of accountability.

I doubt that this is a signal that the United States Empire is on the decline if only because some of the brightest and sharpest inventors, ethical businesspeople (yes, they do exist), artists, doctors, you name them, live there and continue to do amazing and beautiful things that the world benefits from. I just hope the ship my American friends are sailing on doesn’t sink and drown them.

Of course the other side of this whole issue is that it’s being blown way out of proportion to allow corporate executives and financial institutions to get away with criminal ineptitude. I will restrain myself!

Categories: economics
Tags: subprime mortgage crisis

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At least Australian banks are weathering crisis just fine

2008.09.25 – 16.34 UTC+08 (Singapore Time)

Prime Minister Kevin Rudd in New York, 25th Septemter 2008
Photo from The Australian

With all the gloom and doom reports coming from across the Pacific in the United States with regards to the Subprime Mortgage Crisis and the string of unavoidable but nonetheless nauseating bailouts we’ve all heard about by now, it’s good to know that our own banking system and financial institutions in Australia are weathering the storm just fine. According to the Business section of The Australian paper and a recent report from the Reserve Bank, we’re actually in a relatively sound position:

“[Australia's] banking system is soundly capitalised, it has only limited exposure to sub-prime related assets, and it continues to record strong profitability and has low levels of problem loans,” it said.

The mostly upbeat report came a day after the International Monetary Fund issued a similar glowing assessment of Australia’s economy, fiscal settings and the resilience of its banks.

The RBA indicated that it, like many others, has been surprised by the extent of the financial crisis now sweeping global markets, but Australia’s banks were set to ride out the worst of it thanks to strong loan books and limited offshore exposures.

Unfortunately as I had suspected the global distrust and fear of banks is having an impact on Australian banks despite solid domestic performance. It’s another example of panic eclipsing common sense and actually doing research into companies you’re sinking money into.

For all the talk of lax regulations in the United States causing problems, I can’t help but think it has to do more with greed and general slackness. Again from the article:

[...] the central bank highlighted a few areas of the financial system hurt by the global turmoil.

“Australian Bank share prices are down considerably and banks’ funding costs have increased significantly,” the RBA said.

Bank bad debt provisioning has risen, but the ratio of banks’ problem loans to total assets remains below the average since the mid-1990s, “a period of unusually low credit losses”, it said.

In line with its recent comments on the economy, the central bank said that household balance sheets were entering a period of consolidation due to tighter financial conditions, but households were still drawing benefits from low unemployment rates and solid incomes growth.

Some stress signals are emerging for the mortgage belt, although these are minor compared to those in the United States.

This of course prompted the relaxing of interest rates from 7.25% to 7.00% earlier this month.

And to end this post, as if I needed an excuse to show something cool from my iPhone, here’s a screenshot of the Stocks application showing common indexes:

iPhone Stocks application