Jim Rogers is right and I agree with him BUT it is too late for the U.S. Government to stop bailing this insurer out halfway. Remember that they have injected over $100,000,000,000 into that company so far. Giving up on AIG means that $100,000,000,000 will be immediately wiped out. What could Obama explain to the American people? A more severe crisis of confidence will follow and chaos will spread even further.
A government's action cannot be half-hearted!
Tis is my hypothesis
If AIG goes bankrupt, it do not have to pay any of its liability because it can't.
If government does not save AIG, it goes bankrupt, then a lot of cars in USA cannot be used because it is driving without insurance. In fact I heard tat a lot of airline paid AIG money to insured their flights from accidents. If AIG collapse, perhaps US airline also become grounded because it is flying without insurance. Now a lot of people in USA, like america, bought life savings plan for their retirement. They give a few hundred for their whole lives for their retirement. If suddenly AIG goes, they will become like the Lehman brother bond buyers in singapore. They lost everything.
Insurance had become too embedded into our daily lives. No one ever thought tat insurance company need to be insured themselves. No one really know wat to do if such a big insurance company fail
So if AIG is left to die, perhaps the whole USA is already in another great depression
double
Originally posted by stupidissmart:Tis is my hypothesis
If AIG goes bankrupt, it do not have to pay any of its liability because it can't.
If government does not save AIG, it goes bankrupt, then a lot of cars in USA cannot be used because it is driving without insurance. In fact I heard tat a lot of airline paid AIG money to insured their flights from accidents. If AIG collapse, perhaps US airline also become grounded because it is flying without insurance. Now a lot of people in USA, like america, bought life savings plan for their retirement. They give a few hundred for their whole lives for their retirement. If suddenly AIG goes, they will become like the Lehman brother bond buyers in singapore. They lost everything.
Insurance had become too embedded into our daily lives. No one ever thought tat insurance company need to be insured themselves. No one really know wat to do if such a big insurance company fail
So if AIG is left to die, perhaps the whole USA is already in another great depression
So duh and dumb
AIG collapse means US citizens or the airline cannot change insurance company meh?
Can change. The prices may increase due to lesser competitior, a lot of people who pay insurance for the whole year canot get back the remainder amount, they need a few days for administration to register for a new company etc. The scale of the changes is very big on society. Furthermore, u r sure there r always some companies tat provide all the services from the biggest insurer of the world ? U sure for airlines there r many companies to choose from ?
Originally posted by stupidissmart:Can change. The prices may increase due to lesser competitior, a lot of people who pay insurance for the whole year canot get back the remainder amount, they need a few days for administration to register for a new company etc. The scale of the changes is very big on society. Furthermore, u r sure there r always some companies tat provide all the services from the biggest insurer of the world ? U sure for airlines there r many companies to choose from ?
So you think the scale on society by bailing out AIG smaller ah?
For airlines, don't need many companies to choose from. Just one other will do. Duh.
It is considered to be too big to fail. Imagine the millions of people who had put the money into the insurance and get nothing out. Imagine if u crash your car today and realise no insurance is paying your repair. Imagine some hit a person with a car and no one pay tis poor victim. Or imagine someone who discover he had cancer and his insurance comapny bankrupt at the same time. There r many cases of insurance in everybody's life. The effect can be felt by the common people
It is not tat simple. I must be frank to u I know little about airline insurance. If the airplane flies and crashed tat day, wat is gonna happen ? And do u think insurance for a company airline with many flights and liability and various payout be discussed within a day ?
Originally posted by stupidissmart:It is considered to be too big to fail. Imagine the millions of people who had put the money into the insurance and get nothing out. Imagine if u crash your car today and realise no insurance is paying your repair. Imagine some hit a person with a car and no one pay tis poor victim. Or imagine someone who discover he had cancer and his insurance comapny bankrupt at the same time. There r many cases of insurance in everybody's life. The effect can be felt by the common people
It is not tat simple. I must be frank to u I know little about airline insurance. If the airplane flies and crashed tat day, wat is gonna happen ? And do u think insurance for a company airline with many flights and liability and various payout be discussed within a day ?
yawns
no wonder you can only call it hypothesis. All imaginary scenarios only.
Lehmann Brothers was allowed to go bankrupt, causing millions (or probably billions) lost. You can also go imagine up a lot of scenarios on how many will get affected as well.
Originally posted by likedatosocan:time to invest more in this blue chip?
I mean how much lower can it go?
if i assume its wise to buy it for the LONG TERM, then, should buy even more now.
u r right, Citi's stock price cannot go any lower. but u also have to remember that the equity u invest is subject to dilution, plus the fact that there is no guarantee the stock price will recover in the near time future, so u also have to factor in the opportunity cost of your funds during this period of time.
also, if in the event citi is nationalised ( = US govt take over), u will also lose all the money you have invested.
that, together with the company's debts and liabilities, is the reason why citi's price is so low right now.
Originally posted by maxtor:u r right, Citi's stock price cannot go any lower. but u also have to remember that the equity u invest is subject to dilution, plus the fact that there is no guarantee the stock price will recover in the near time future, so u also have to factor in the opportunity cost of your funds during this period of time.
also, if in the event citi is nationalised ( = US govt take over), u will also lose all the money you have invested.
that, together with the company's debts and liabilities, is the reason why citi's price is so low right now.
Any reason why it cannot go to 5 cents?
Originally posted by Ice Dive:Sir ....... For your information , both China and Jap bought a lot of the US T-bills ... (when I say a lot ... its in billions )
This is one of the reasons why china will want to keep their currency low ......
If the T Bills matures or even sold before maturity, even when they are initially bought at a discount, it will be translated to losses when china currency inflates ....... Pure maths and calculation.
*Selling T bills before maturity means giving a lower discount .
* ( Even though I am half sick now , I think my logic should be correct. But do correct me if I am wrong .) I did a study on T bills long ago and cannot rem totally.
i don't quite agree.
one of the factors governing the price of a T-bill or any plain vanilla fixed income instrument is the promised yield attached to the bond. assuming that china purchased their bonds over the past few years, they could very well offload their bonds now at a premium rather than at a discount, simply because of current interest rates.
and i'm under the impression that china keeps its currency low because of its export status, especially to the US.
Originally posted by AndrewPKYap:
Any reason why it cannot go to 5 cents?
i think you have taken my statement out of context. i meant that there isn't much lower to go from $1.20 when i said, '' Citi's stock price cannot go any lower.''
Originally posted by tai gok nang:Jim Rogers is right and I agree with him BUT it is too late for the U.S. Government to stop bailing this insurer out halfway. Remember that they have injected over $100,000,000,000 into that company so far. Giving up on AIG means that $100,000,000,000 will be immediately wiped out. What could Obama explain to the American people? A more severe crisis of confidence will follow and chaos will spread even further.
A government's action cannot be half-hearted!
Does it make sense to throw good money after bad into an entity who is technically bankrupt?
Why not just do the easier thing and nationalise AIG?
Originally posted by maxtor:i don't quite agree.
one of the factors governing the price of a T-bill or any plain vanilla fixed income instrument is the promised yield attached to the bond. assuming that china purchased their bonds over the past few years, they could very well offload their bonds now at a premium rather than at a discount, simply because of current interest rates.
and i'm under the impression that china keeps its currency low because of its export status, especially to the US.
It is generally accepted that, like you said "china keeps its currency low because of its export status, especially to the US."
Originally posted by AndrewPKYap:
It is generally accepted that, like you said "china keeps its currency low because of its export status, especially to the US."
might there be other reasons ?
Originally posted by maxtor:Does it make sense to throw good money after bad into an entity who is technically bankrupt?
Why not just do the easier thing and nationalise AIG?
It does not make any sense to throw good money after bad, especially the technically bankrupt AIG, of course.
I believe both Bush and now Obama might have wanted to nationalize AIG so bad but he is facing political challenges:
1. America's standpoint is always free market and liberalization. Nationalization would badly harm its stature as the world centre of capitalism. But I don't think they can avoid it in the end.
2. Taxpayers' money are at stake here.
3. The stock markets will be badly battered, affecting the wealth of the American people in turn.
Originally posted by maxtor:Does it make sense to throw good money after bad into an entity who is technically bankrupt?
Why not just do the easier thing and nationalise AIG?
I think this was discussed about during an interview regarding why England isn't nationalizing all its banks despite the stituation.
The problem is the government are fully aware of how badly the insitutions are doing, if they chose to nationalize them the government would have to assume responsibility for the bad debts and toxic assets as well.
The blackhole is so immense it would effectively bankrupt the country to pay it.
Originally posted by Gensis:
yawns
no wonder you can only call it hypothesis. All imaginary scenarios only.
Lehmann Brothers was allowed to go bankrupt, causing millions (or probably billions) lost. You can also go imagine up a lot of scenarios on how many will get affected as well.
I think the main problem is AIG is holding on to a lot of people's pension funds. If it is allowed to fail, these people effectively lose all their pension funds. Simply imagine the scenario where the CPF fails and all of us lose every cent in our CPF. Atobe's correct when he says that the CPF is no different from a Ponzi's scheme.
Lehman Brothers is only responsible for the pensions and 401ks for their employees, while AIG as an insurance company handles the pension funds of other companies and institutions.
If AIG is allowed to fail in my opinion, it is going to be far more destructive than Lehman Brother's collapse. Potentially thousands of retirees or soon to be retirees would be reduced to paupers, a scenario that's far worse than Lehman Brothers' collapse.
Correct me if i'm wrong, though. I'm just going by what i've read up on.
Banks can be nationalized, simply because no sane person will want to withdraw their entire deposits. Where will they keep it where it can be safe?
With a democratic govt's guarantee on deposits, there is no fear that the govt cant pay depositors even if every wants back their money, simply because govt owns real resources - minerals and agriculture, which are necessary for humanity to survive and must pay for it, therefore as long as a country has resources,
( or a non-resource country has collateral in the resource rich country ), money will always grow. $1 today to $100 tomorrow when more resources are dug out or produced for survival.
AIG or insurance companies MUST NOT be nationalized. They are nothing more than ponzi schemes where the bottom pays for the top with a pool of money, which is 'invested' (gambled) in the stock market (high class casino), to generate money to pay off depositors, as well as insurance claims.
Think - buy a policy at $100 a month, but if an accident occurs the next month, your next of kin gets $1,000,000 in insurance claims. Where did the $999,900 came from?
Ans: Policy holders pool of funds, new entrants who buy policy, and invested ( gambled) money.
Banks do not payout $1,000,000 or hold any insurance claims, but insurance companies do. If nationalized, it may mean taxpayers will be paying for the claims. The AIG directors are probably laffing away after pocketing the policy holder's money, as well as other companies who benefited from AIG losses.
Money do not disappear. It ALWAYS ends up in someone else's pocket. US taxpayers will be the suckers if AIG is nationalized.
John Keynes did not say prop up failed companies, rather instead, govt spending to assist in the circulation of money to create further money. Giving to AIG is no keynesian theory, perhaps an Obama or Wall street theory.
Originally posted by Stevenson101:
I think the main problem is AIG is holding on to a lot of people's pension funds. If it is allowed to fail, these people effectively lose all their pension funds. Simply imagine the scenario where the CPF fails and all of us lose every cent in our CPF. Atobe's correct when he says that the CPF is no different from a Ponzi's scheme.Lehman Brothers is only responsible for the pensions and 401ks for their employees, while AIG as an insurance company handles the pension funds of other companies and institutions.
If AIG is allowed to fail in my opinion, it is going to be far more destructive than Lehman Brother's collapse. Potentially thousands of retirees or soon to be retirees would be reduced to paupers, a scenario that's far worse than Lehman Brothers' collapse.
Correct me if i'm wrong, though. I'm just going by what i've read up on.
I understand what you are saying and share the same sentiment with you. BUT it will be a moral dilemma.....
Shall we use bail out funds to save the few retirees....and let the majority mostly young and saddled with families die .....or,
...save the majority....and let the retirees......?
One thing for sure, when the dust settles, someone or somegroup WILL have to be hung for this!
Originally posted by Stevenson101:
I think the main problem is AIG is holding on to a lot of people's pension funds. If it is allowed to fail, these people effectively lose all their pension funds. Simply imagine the scenario where the CPF fails and all of us lose every cent in our CPF. Atobe's correct when he says that the CPF is no different from a Ponzi's scheme.Lehman Brothers is only responsible for the pensions and 401ks for their employees, while AIG as an insurance company handles the pension funds of other companies and institutions.
If AIG is allowed to fail in my opinion, it is going to be far more destructive than Lehman Brother's collapse. Potentially thousands of retirees or soon to be retirees would be reduced to paupers, a scenario that's far worse than Lehman Brothers' collapse.
Correct me if i'm wrong, though. I'm just going by what i've read up on.
Is RICH DAD's PROPHECY becoming true?
"Money do not disappear. It ALWAYS ends up in someone else's pocket."
You're absolutely right. We are seeing it happen right before our eyes: billions of Singapore taxpayers' money has landed in the pockets of companies/investors across the globe. And if Temasek goes ahead with its $30-billion plans to buy AIG's Asia operations, AIG directors will be laughing...but not at US taxpayers.
I wish the people running Temasek and GIC would take your advice and stay away from the "high-class casino" that stock market is, where "ponzi schemes" like insurance companies "gamble" away money.
Money can disappear. Most of it were virtual anyway.
With huge funds, a fund manager can move the price of stocks by doing a right hand sell to left hand tactic. Your "assets" can then increase or decrease just like that... They faced off with other fund managers only...
Originally posted by F-22A Raptor:Is RICH DAD's PROPHECY becoming true?
Sadly i think that it is.
Financial stores of wealth do not correspond to physical caches of wealth in the same sense as a squirrel's cache of nuts. If I retire when I am sixty-five years old and expect to live for another twenty years off of my 'savings', there are no warehouses under lock and key filled with food, clothing, and fuel dedicated to my exclusive future use. If I go on eating, wearing clothes, and staying warm at night, it is because men and women get out their beds every morning and go to work and produce economic output, part of which they give to me.
One person's savings is another person's consumption. While I am working I am effectively supporting the people who are not working, and when I retire (should such a day ever come) the people who are still working will, in turn, support me. Mutual support in complex economies is an objective physical reality which can be understood independent of any particular political ideology. Apart from some necessary amount of inventory real physical savings are in the built up infrastructure of society (in which I include the knowledge and skill of the men and women who are that societies brains and hands) and the resource base which supports that infrastructure. Since we build infrastructure in order to use it, the desire to store up value is really a desire to produce and sell as much stuff as we can in the present. When people are in the stores buying home theater systems, laptop computers, MP3 players, etc. then our 401K funds and pension funds are happy.
This fundamental structural contradiction of our economic system, in which greater current resource consumption is made to appear as if it will result in greater future security, needs to be fixed. Financial/monetary reform alone is not an adequate solution to this problem. We need to make the objective fact of mutual support manifest in the daily operation of our economic system. Your suggestion of a plan to provide basic goods and services in the event of an economic crisis is a step in this direction but does not really address the long term functioning of a steady state economy. In a world in which constant productivity increases are no longer possible we can no longer count on Adam Smith's cooperation of greed.
I wished that i could claim credit for this post, but i got this off a poster in www.theoildrum.com
I believe it explains the problem more accurately then i ever could. Our current economic growth and supposedly prosperity is actually quite paper thin if 2 factors are affected - high population growth and cheap energy.
AIG or insurance companies MUST NOT be nationalized. They are nothing more than ponzi schemes where the bottom pays for the top with a pool of money, which is 'invested' (gambled) in the stock market (high class casino), to generate money to pay off depositors, as well as insurance claims.
Think - buy a policy at $100 a month, but if an accident occurs the next month, your next of kin gets $1,000,000 in insurance claims. Where did the $999,900 came from?
To me insurance is like 4D. U can ask someone buy 4D for a few dollars but if they win they end up with thousands. How it works is the probability of u getting an accident unintentionally is lower than the odds u r getting. The 999900 comes from the other people who pay insurance and never get into any accident. In fact they even get an additional 1,000,000 in profit from people who never get into any accidents for adjusting the funding of the people.
yawns
no wonder you can only call it hypothesis. All imaginary scenarios only.
Lehmann Brothers was allowed to go bankrupt, causing millions (or probably billions) lost. You can also go imagine up a lot of scenarios on how many will get affected as well.
The world largest insurance, AIG is more embedded into our lives than a bank known more for investing. Everybody here is giving their hypothesis because we r predicting the future which no one really knows
"Money do not disappear. It ALWAYS ends up in someone else's pocket."
The value of an object, however can fluctuate greatly in time. These "values" is equivalent to money. A person with a million dollars buy a million dollar house. His total assets is still a million dollar. If the house value drops to 30,000. His assets is only 30,000.
The problem is a lot of objects, such as companies shares and houses suddenly have their value reduced tremendously in tis period of time. Tis reduction in value corresponding to a real loss in wealth.
Of course someone will say tat the builder of the houses still has the money of 1 million dollars. However before he sell the house, there is a total value of a 1 million house and 1 million dollar. After the crisis it becomes 1 million dollars and 30,000 house. There is still a loss in total "value" of the combined items.