Dear Xi Some very interesting points and news you brought us. Although I understood 50% of the game, but it is enough for me..
My regards ======= S1000+ ======= --- On Mon, 2/23/09, xi <[email protected]> wrote: From: xi <[email protected]> Subject: Re: Understanding The Financial Crisis and system To: "World-thread" <[email protected]> Date: Monday, February 23, 2009, 11:02 AM It is great ! Thank you very much ! (((((Sumerian))))) But, unfortunately, a crisis that started like described in those clips became much deeper, larger and bigger in further steps. Once that imbalance happened, the next step was Federal budget deficits. In fact, US government is the bigger borrower and, unfortunately, the safer one (at least, it was). Banks have to follow some regulations, they cannot lend above certain limits according to capital, to deposits/investments that it has received, etc. As house prices declined, risk associated to mortgage loans rose and their remaining capacity of banks to lend money declined. Therefore, once credit became scarce at the end of 2007 and begining of 2008, banks had to choose between either lend to regular citizens and corporations or to US government, obviously they choose US government that due to budget deficits required more and more loans. As US authorities were unable to to break that cycle rising taxes or cutting expenses, and therefore Federal deficits grew higher, US economy crossed to next step. In July 2008, US authorities, coordinated with Saudia, decided that they would cut prices from foreign imports to USA. US authorities decided to cut the amount of US dollar available in international markets (except for a few countries with whom they created a swap mechanism). In this way, as commodities are denominated in US dollars, American economists believed that USA (and those few other countries) would be the only countries that could take advantage of lower prices. As it happened ten, twenty, ... years ago. But this time something happened that American economists did not expect. During a few days in July everything worked as expected, but American economists did not foresee the international reaction. As credit and liquid US dollars was scarce, inmediately, investors and corporations around the world required American banks their US dollars back to face their current operations. Thus, those funds that banks receive from abroad declined sharply. The rate loan/deposit that banks must comply made that credit had to decline even more.Suddenly, American economists realised that USA is not alone in the universe and actions of foreign investors and corporations have dramatic consequences in US economy economy. In few days it became an evil cycle, less credit-less operations-less investments-less credit, that made international trade to collapse. What started as a financial crisis, suddenly became an economic crisis in few weeks. All countries suffered that collapse. But Americans even more because of two reasons. First because US economy was weaker, its foreign account deficit requires US dollars to survive. Second because as the US dollar was scarce, banks decided to lend not to US citizens and business, but to foreign business with huge US dollars because they were safer than American ones (as told in a funny way, banks always lend to those who do not need loans). Therefore we entered into the third phase. Astonishingly, US dollar became even more scarce in US economy. And we got an evil never-ending negative cycle, that supersedes the previous evil negative cycle, that US economy cannot break alone (although many American economists do not see it yet). And here we are. :) Peace and best wishes. Xi On Feb 23, 1:46 pm, "Sumerian.." <[email protected]> wrote: > 1-Understanding The Financial Crisis- > Current Crises: ( Simplified, and I don't understand why he says for Kids) > > http://www.youtube.com/watch?v=h4Ns4ltUvfw > > The whole Financial system story: > 2-Corrupt Banking System - How Money is Created: (This documentary was made 1996). S1000+ referred to it in 2007. > > http://www.youtube.com/watch?v=cy-fD78zyvI > > ======= > S1000+ > ======= --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "World-thread" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/world-thread?hl=en -~----------~----~----~----~------~----~------~--~---
