Simplier explanation of money and value:-
Example A
---------------
I bought a house with cash worth $5million.
Today i sold it at $3million.
I lost $2million. A fact.
So where did my $2million went?
Ans:- It went to the original owner of my house, smiling and enjoying life in the Bahamas that he sold his house to me a a high of $5million
Example 2:-
------------
I bought Noble shares in cash $5million at a $1 per share market price today.
The share price drop to $0.50cts per share now
I lost $2.5million IF i sell it now.
So who had won my other $2.5million?
Ans: Those 'investors' (gamblers ) who bought Noble shares long before i did at $0.50cts and sold to the sucker that was me at $1 per share. My money is in their pockets warmly.
So, money did not disappear. Only time money disappear is when devaluation occurs, such as happened to Thai, Indonesia and african states. Fixed assets supposed to devalue as well, but it seldom do. It will still cost one billions of zambawi dollars to buy a loaf of bread.
We r not really contradicting each other here. If u look at just the physical money, it is always there. The money doesn't dissappear.
However I am talking about "value" of objects. They r equivalent to money (houses, shares, bonds) because they can be interchangeable (selling houses, shares, bonds). These values can dissappear. If these values dissappear, the total amount of asset of a person literally dissappear.
The money basically disappears with the bubble. The bubble was created due to unbelievably high prices, and basically those artificially inflated values disappeared when the bubble burst.
Banks who had those "lucrative" CDOs that included those houses, suddenly had very toxic debts that they could not liquidate since there are no buyers.
i feel obliged to correct a mis-conception here.
lets say the outstanding shares for a stock is 100 million shares. 10 million shares changed hands each day. For example, let's say the stock's highest price is $1.00, about 10% of the investors managed to sell at $1.00 and the rest hold. If the stock goes down to $0.10 right away, only 10% of the shareholders managed to sell at $1.00, the rest have it at $0.10.
Originally posted by Daddy!!:i feel obliged to correct a mis-conception here.
lets say the outstanding shares for a stock is 100 million shares. 10 million shares changed hands each day. For example, let's say the stock's highest price is $1.00, about 10% of the investors managed to sell at $1.00 and the rest hold. If the stock goes down to $0.10 right away, only 10% of the shareholders managed to sell at $1.00, the rest have it at $0.10.
And not to mention that there is such thing as credit creation ratio of comm banks....
The money disappeared is also partly because of the tightening of credit which is again due to the diminishing credit creation ratio of comm banks.....
I dun mean this to you but there are ppl who have never studied banking, come here to tell us where and how the money goes.
These ppl don't understand that banks have the ability to create virtual money which is treated as real money in the real world. As the credit gets tighten, these virtual money disappears....
"David Walker, former US Comptroller General and chief of the GAO, warned before the 2004 election that if large economic changes were not made, by 2009 the United States and its taxpayers would not be able to afford the interest payments on the national debt [12]. A study authorized by the US Treasury in 2001 found that in order to keep servicing the debt at its current rate of growth, by 2013 income taxes would need to be raised to 65% [13]. If the United States cannot afford to pay the interest on its debts, that would be the final stage of economic collapse and hence result in a total textbook bankruptcy. The systematic crisis would in turn likely spread to the rest of the world, due to the financial/commercial interconnections inherent.
How did this happen? Why is the US national debt $12,250,000,000,000 as of Jan 2009? Of the 203 countries in the world today, only four (!) do not owe others money. The collective external debt of all the governments in the world is now about 52 trillion dollars14 and this number doesn’t include the massive about of household debt in each country The whole world is basically bankrupt. But how? How can the world as a whole owe money to itself? Obviously, it’s all nonsense. There is no such thing as ‘money’. There are only planetary resources, human labor and human ingenuity . The monetary system is nothing more than a game… and an outdated and dysfunctional one at that.
Those in positions of social power alter the rules of the game, at will. The nature of those rules is guided by the same competitive, distorted mentalities that are used in everyday “monetary” life, only
this time the game is rigged at its root to favor those who run the show.
For example, if you have 1 million dollars and put it into a CD at 5% interest, you are going to generate $50,000 a year simply for that deposit. You are making money off of money itself… paper being made from other paper … nothing more - no invention - no contribution to society – no nothing.
That being denoted, if you are a lower to middle class person, who is limited in funds, and must get interest based loans to buy your home or use credit cards, then you are paying interest to the bank,
which the bank is then using, in theory, to pay the person’s return with the 5% CD! Not only is this equation outrageously offensive due to the use of usury (interest) to ‘steal from the poor and give to
the rich’, but it also perpetuates class stratification by its very design, keeping the lower classes poor, under the constant burden of debt, while keeping the upper classes rich, with the means to turn excess money into more money, with no labor.
That reality aside, there are other games in the system which have worked for decades, but are just now starting to bloom into the inevitable mathematic disasters that should have been anticipated 100 years ago.
..."
- http://www.thezeitgeistmovement.com/The%20Zeitgeist%20Movement.pdf
The collective external debt of all the governments in the world is now about 52 trillion dollars14 and this number doesn’t include the massive about of household debt in each country The whole world is basically bankrupt. But how? How can the world as a whole owe money to itself? Obviously, it’s all nonsense. There is no such thing as ‘money’. There are only planetary resources, human labor and human ingenuity . The monetary system is nothing more than a game… and an outdated and dysfunctional one at that.
Those in positions of social power alter the rules of the game, at will.
aye....well researched, well said.....
Originally posted by 4sg:aye....well researched, well said.....
Please go read about The Zeitgeist Movement, or rather, that .pdf file.Or better still, watch the documentary Zeitgeist Addendum.
For millenia we have counted on pieces of paper to deal with our scarcity, which was only natural. But right now, with our technological prowess, scarcity can be eradicated, removing the need for money. Without it, the social stratification which causes much of our social neurosis would have no place to exist. In addition, while it is not acknowledged, this monetary system is actually the root of most of society's ills. In order to survive, people have to complete and exploit one another. While we also pay lip service to compassion, humility and other virtues, how can they last if the system is designed to perpetuate opposite values?
Should money disappear in a world of abundance, there wouldnt be the basis for the sick, polluted and distorted world that we see today, where 25,000 children die everyday and half the world lives in abject poverty.
After so much being said about the human potential and our development as a species, isn't it time to progress? The real reason for all the bullshit talk about 'revitalising' the international system is simply to ensure that the elites' position of power isn't threatened. For in a money-less, and human-oriented world, the distorted pyramidal system of power would not exist, hence ending their monopoly of wealth and power.
No matter how you see it, they're just selfish bastards that want to consolidate their own power even if it causes billions of people to suffer in vain.
Originally posted by Daddy!!:i feel obliged to correct a mis-conception here.
lets say the outstanding shares for a stock is 100 million shares. 10 million shares changed hands each day. For example, let's say the stock's highest price is $1.00, about 10% of the investors managed to sell at $1.00 and the rest hold. If the stock goes down to $0.10 right away, only 10% of the shareholders managed to sell at $1.00, the rest have it at $0.10.
Good explanation ... I was trying to explain this this afternoon ... but my colleague cant seem to understand ... Your explanation is much better ...
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.
Care to give a numeric example for me to understand what you have said better ?
T-bills work by buying at a lower face value .
eg. $100 USD T bill is bought at a discount say 90 USD . They can choose to sell at a lower discount from the face value eg . 95 USD . That is what I mean at lower discount .
Anyone care to share and verify else I am going to buy T bills to try out ... haha ... Actually I have a colleague ( pretty smart ) ... swap from shares to T bills last year ..
America, the truth hurts ain't it?
Stop preaching about stuff like "creative destruction" when you know its bad for you.
Originally posted by Ice Dive:
Good explanation ... I was trying to explain this this afternoon ... but my colleague cant seem to understand ... Your explanation is much better ...
Can I put it this way.
Money is just a representative of value.....
and value greatly fluactuates, esp in times of uncertainty?
Originally posted by 4sg:Can I put it this way.
Money is just a representative of value.....
and value greatly fluactuates, esp in times of uncertainty?
Interestingly, are markets too sensitive in representing our wants and needs? Or are they grossly insensitive?
If we can answer this, then bubbles would not exist.
So, are we coming to an end of the financial system? A system of "virtual" money as some would put it.
If so, what is gonna replace it?
How else is the powerful going to dominate the others if there is no such thing as money?
Well, they still got 11 carrier groups...
Originally posted by Ice Dive:Care to give a numeric example for me to understand what you have said better ?
T-bills work by buying at a lower face value .
eg. $100 USD T bill is bought at a discount say 90 USD . They can choose to sell at a lower discount from the face value eg . 95 USD . That is what I mean at lower discount .
Anyone care to share and verify else I am going to buy T bills to try out ... haha ... Actually I have a colleague ( pretty smart ) ... swap from shares to T bills last year ..
let me try.
firstly i want to clarify that i am talking about fixed income instruments with coupons, ie treasury notes and bonds. treasury bills have tenures less than 1 year and therefore usually do not pay a coupon. it is this coupon payments that will affect the value of the bond.
a bond is valued by 1) the present value of the future maturity amount + 2) the present value of the coupons.
lets take a 10 year $1000000 bond yielding 5% when interest rates are 5% ( this means the bond is selling at par). this bond pays interest annually.
the present value of the bond when interest rates are 5% is =
5000 (1- (1.05)^ -10) 100000
________________ + ________ (divided by)
.05 (1.05)^10
= 38608.675 ( present value of future coupons) + 61391.325 (present value of maturity amount)
= $100000
Now lets take this same 10 year $100000 bond yielding 5% when interest rates are 1%. this bond also pays interest annually.
the present value of the bond when interest rates are 1% is =
5000 ( 1 - ( 1.01)^-10) 100000
________________ + ______ (divided by)
.01 (1.01)^10
= 47356.523 (present value of future coupons) + 90528.695 (present value of maturity amount)
= $137885.219
So we can see from this simple exercise that when interest rates are lower, bonds that have a higher interest rate than that of the current interest rates would sell at a premium, rather than a discount.
of course there are other issues that come into the pricing, including but not limited to, the duration, convexity, effect of time on a bond's price, as well as market supply and demand. what i am trying to show you is purely the academic way of calculation.
Originally posted by Ice Dive:Anyone care to share and verify else I am going to buy T bills to try out ... haha ... Actually I have a colleague ( pretty smart ) ... swap from shares to T bills last year ..
One more thing, on a personal basis i would not recommend that you purchase T-bills or any fixed income instruments for now. Reason being if interest rise in the near future, your investment would probably lose money.
Keep your money in cash and when you feel the time is right, invest in the stock market or in property.
Originally posted by tai gok nang: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.
Yes. They have talked about nationalisation affecting capitalism. But on the same hand they have also nationalised so many other entities, Bear Stearns, Freddie Mac, Fannie Mae .... the list goes on. So why not AIG? My question is, by extending a loan/bailout/whatever you call it to AIG at astronomical interest rates, you are not helping it either, so why not just nationalise it? It doesnt have to be forever, they could take over AIG, guarantee all its debt for now and when this crisis blows over sell it away again.
Also, the market takes a favourable view of nationalisation. It gives them confidence and reassurance. On the past few occasions that the government announced nationalisation of an entity, markets rallied. Look at past charts and you will see what i mean.
maybe im missing out on something. someone educate me.
Originally posted by xtreyier: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?
In a milo tin, under their pillow, or just maybe ... in another bank? Bank runs happen for a reason bro.
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.
The United States government is currently running a $10 trillion dollar deficit. The real reason why a govt guarantee on deposits is safe is because the government owns the printing press for their dollar bills.
Maybe the money wasn't there in the first place..
Check out these videos on the US Money system
Originally posted by Daddy!!:i feel obliged to correct a mis-conception here.
lets say the outstanding shares for a stock is 100 million shares. 10 million shares changed hands each day. For example, let's say the stock's highest price is $1.00, about 10% of the investors managed to sell at $1.00 and the rest hold. If the stock goes down to $0.10 right away, only 10% of the shareholders managed to sell at $1.00, the rest have it at $0.10.
An explanation, but not enough clarity.
100 million shares exists.
Only 10 million shares changed hand, at 10cts per share. The highest price rose to was $1.00.
The owners, eg ABC, of these 10 million shares quickly sold it at $1 per share.
Immediately the new owners, eg DEF, of these 10million shares saw the price drop to 10cts. They lost 90cts to a share IF THEY SELL now.
Q: Where did the 90cts per share went?
Ans: It went to ABC when they BOUGHT from ABC. Money 'dont disappear'. It goes into someone else pocket WHEN a transaction occurs. Is this so hard to understand?
Q2: What about the other 90 million share?
Ans: It was'nt sold. There was NO transaction. It's value is 10cts now. It's in the 'asset value' range now and use for record purpose, such as balance sheets or collateral for loans.
Q3. How can a share that rose to $1 from 10cts drop down back to 10cts?
Ans: TRANSACTIONS. BUY & SELLING of stocks. Heavy buying or selling cause the VALUE to rise or fall. Stocks prices DON'T JUST rise or fall on their own MAGICALLY OR AT THE SNAP OF FINGERS.
I dont mean you. This following passage is for someone else:- There are people who dont study banking. It is not a crime. It is only a crime when those who DO study banking assumed that they know it all and deride others who seek clearer explanations or misunderstand.
Originally posted by 4sg:And not to mention that there is such thing as credit creation ratio of comm banks....
The money disappeared is also partly because of the tightening of credit which is again due to the diminishing credit creation ratio of comm banks.....
I dun mean this to you but there are ppl who have never studied banking, come here to tell us where and how the money goes.These ppl don't understand that banks have the ability to create virtual money which is treated as real money in the real world. As the credit gets tighten, these virtual money disappears....
Which was what I said earlier
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...
With huge funds, you can create value out of nothing slowly. Value is based on demand and supply mah... so with the funds, you can sort of control the demand and supply...
And we have so many transactions that are done virtually in this world... Money is not really there at all...
Originally posted by xtreyier:Simplier explanation of money and value:-
Example A
---------------
I bought a house with cash worth $5million.
Today i sold it at $3million.
I lost $2million. A fact.
So where did my $2million went?
Ans:- It went to the original owner of my house, smiling and enjoying life in the Bahamas that he sold his house to me a a high of $5million
Example 2:-
------------
I bought Noble shares in cash $5million at a $1 per share market price today.
The share price drop to $0.50cts per share now
I lost $2.5million IF i sell it now.
So who had won my other $2.5million?
Ans: Those 'investors' (gamblers ) who bought Noble shares long before i did at $0.50cts and sold to the sucker that was me at $1 per share. My money is in their pockets warmly.
So, money did not disappear. Only time money disappear is when devaluation occurs, such as happened to Thai, Indonesia and african states. Fixed assets supposed to devalue as well, but it seldom do. It will still cost one billions of zambawi dollars to buy a loaf of bread.
What an idiot...
Of course money disappeared. Previously people could pledge the shares to the bank for say 70% of the shares value which is $3.5 million.
In it drops to $2.5million, then they can borrow from the bank using their shares as collateral for only $1.7million
That is why when share prices plunge, central banks will pump in liquidity to counter the effect of the money lost (or disappeared) from the system.
Originally posted by AndrewPKYap:
What an idiot...
Of course money disappeared. Previously people could pledge the shares to the bank for say 70% of the shares value which is $3.5 million.
In it drops to $2.5million, then they can borrow from the bank using their shares as collateral for only $1.7million
That is why when share prices plunge, central banks will pump in liquidity to counter the effect of the money lost (or disappeared) from the system.
SIGH....................
Question 1:
When one pledges the shares as collateral for loan, eg $1.7million, and the share drops to $0 per share, WHO HAS THE $1.7MILLION ?
Ans: Hirer has it.
Question 2:
When shares are pledges as COLLATERAL, and hirer defaults, WHO OWNS the COLLATERAL and is responsible for it?
Ans: The sucker - BANK.
Question 3:
Did money 'disappeared'?
Ans: It sure disappeared! From the bank, but only to the defaulting hirer.
Question 4:
Why does the central bank needs to pump 'liquidity' into the bank for the 'presumed loss'?
Ans: Because the sucker bank had not SOLD the worthless share, it still has a 'book value' of $1.7M to it. And at the end of the day, when the accounts must be balance as per 'mark to market' value, it shows $1.7M 'loss', so Central. Bank injects $$ to make up for the short fall.
The bank shouid sell the damn share and accept the loss, which they don't, and thus bankers go on their knees and beg for bailout funds, hoping the stock market will shot up again. Who pays for the bailout funds? Dumb taxpayers, caused banks dont wanna accept their losses and stop funding stockmarket operations(casino)
Told yer stock market is a casino dump, and dumber folks still accepts stock market 'value' in this current day and age. They better raise capital thru other means. Go for long term true investments and live on dividends by all means. But if you are the kind that watches the stock movement day by day, hell, you are a gambler.
Spare the goobletalk and cut straight to the clarified point please. The only 'virtual' money there is are hell notes and linden notes from 2nd life.com ( but even that has a value - make an internet transfer of $1000 real money to buy eg a virtual property there, and when you go to the bank in the real world to draw money, your bank account is lighter by $1000 'rea;' money - the money went into the pockets of 2nd life site owners and did not 'disappear')
Originally posted by eagle:Which was what I said earlier
With huge funds, you can create value out of nothing slowly. Value is based on demand and supply mah... so with the funds, you can sort of control the demand and supply...
And we have so many transactions that are done virtually in this world... Money is not really there at all...
I agree with you on the virtual money. Let’s say we have $10,000 and deposit it in a commercial bank. The bank will be required to set aside, say 10% (fraction reserve ratio) and allow to loan out the rest, ie $9,000.
But modern banks are not designed to loan out merely $9,000 but x times this amount. For simple computation, say 10 times (credit creation ratio). The bank will loan out not $9,000 but $90,000.
But this is not all, the money loaned out has a multiplier effect. The economic rational is that the borrower of $90,000 will not immediately spend all. Let’s say the borrower spends $10,000 and deposits the remaining $80,000 back into the banking system.
The bank will again be setting aside $8,000 (say 10%) and loan out $720,000 (say 10 times). And this cycle will goes on and on. This is what the economist called the multiplier effect. A real but classic, textbook case here.
The reason why bank, merely requires to set aside a small fraction of the deposit, is that in normal circumstances, all people are rational and there will be no run against the bank.
All modern economist and govt allow banks to pump these virtual money into the economy. The rational is that to stimulate economic growth, a larger than normal circular flow of money and a higher velocity money circulation are needed. The injected stock of money capital creates inflation, thus driving the economic resources of capital, resource and technology to move so that they are maximised.
The above situation is perfect when there is stability and economic growth with the system working clog-in-the-wheel.
But imagine the reverse which is happening now. A perfect storm where credit ratings are down, shaky consumer and producer confidence, choke on the flow of money, global recession with economic system exploited to benefit the minority. The reverse multiplier effect is kicking in.
Higher credit rating is nothing more than a signal for the bank to create more virtual money. Lower credit rating is nothing more than a signal of a higher risk of a run against the bank.
As it is now, all banks credit rating are down and their ability to project this virtual fund or money is curbed. This is one big flaw of modern economy.