Paper on Global Financial Crisis (2007–present)
SYSTEM ERROR
global economical and financial crisis
understanding | analysis | true meaning
Civilizationism
PROJECT
PART 1
Those two maps shows how world has changed. According to that data, in just two years. Is it possible? No. World hasn’t changed in two years that much. Process started long time ago. We were just living in illusion that we are doing better then we really are. Time has came to face the unpleasant facts.
Before the crisis – GDP 2007*
After the crisis – GDP 2009 (real)*
*Gross domestic product (GDP) refers to the market value of all goods and services produced within a country in a given period.
It is often considered an indicator of a country’s standard of living.
Those diffrences around the globe are perfect visualisation how badly and how many people were affected. Despite obivius western economies you can notice colour green (GPD >10%) just disapeared from the map. Instead most of the world is covered in brown (GPD from – 2% up to – 10%). We can see impact all over the world.
This is direct efect of misjudgment of global economy.
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“Power, money and sex – globalisation, capitalism, stock exchange assets flow, corporate strategy”
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Market mechanisms working in such huge scales it is first time in history mankind reached that level.
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“Why “corporate capitalism” kills its own creations? ”
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Moving manufacturing to whenever is cheaper to make. Mainly very poor countries where people are “modern world slaves” not employees. Those areas we can see are market as “greenest” (highest GPD) in thw world. That is where statement: “DPD … is often considered an indicator of a country’s standard of living” is proven wrong. Clearly not becouse higher country’s standard of living we have GPD >4-10% in China, Africa and India! But becouse each day we living on huge loan to those people. They are working for us. They making products we buy. Western countires are not manufacturing pretty much anything anymore. And that is very worrying fact to me. As we writing this ashamed pages of contemporary, or rather “present-history” we finding that we reached times where laws of economy failed us. Where financial processes we have build to serve us are out of our control. Where abuse of financial and banking system are legal. Times where we moved from dealing with touchable real exchange of good to fictional paper goods called assets.
“In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent ownership of value that can be converted into cash (although cash itself is also considered an asset).”
In financial accounting assets can be described by following algorithm.
Assets = Liabilities +Stockholder’s Equity (Owner’s Equity)
And there is very important word here. We all are aware briefly of stockholders equity. But interesting and misleading word here is liabilities.
“A liability is defined by the following characteristics:
* Any type of borrowing from persons or banks;
* A duty or responsibility to others that entails settlement by future transfer or use of assets;
* A duty or responsibility that obligates the entity to another, leaving it little or no discretion to avoid settlement;
http://en.wikipedia.org/wiki/Asset
So what it is, basicaly you saying that your assets are what you have, cash, house, car, but also that 5 euro you’ve borrowed to Mr X, and that he will return 5 euro in 5 years with 10% extra.
In addition to that insurance you paied for your house, money you will never see, but if your house will burn down you will get lets say 1 milion euro. So as different forms of insurance may also be treated as long term investments. You could use some minor tricks to bring it as assets.
Complete fiction build on manipulating facts. Money you don’t have, and you will never have are your assets. How misleading and different meaning that word “assets” have in everyday life and in financial accounting. This is one of the “tools” that brought financial and banking system down. Well to be honest it didn’t bring the sector down, it just brought working-class people down by sucking real assets from us to fed the system’s monster hunger for “people’s dependancy” and cash.
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“Where the money are….. big brands 2011″
(http://gargasz.info/index.php/where-the-money-are-big-brands-2011/)
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Going through those definitions, graphs etc it becomes to clerify that all the theories and models are just simply proven wrong by facts. So what is that real couse the global economic crisis?
Well strarting from human nature (the biggest reason), up to inresponsibity and incompetence of few we put our trust in.
We could also put organizations like respectfull universities and governing bodies on that list. In no particular order, just to name few.
- London Business School
- Columbia University
- Harvard University
- Johns Hopkins University
- University of California, Berkeley
- US Treasury
- White House National Economic Council
- Federal Reserve Bank
- Barclays Bank
- AIG
- Goldman Sachs
- Citigroup
“Brains” of our economies, governments, financial and bank controlers. Long chain of names to put the blame stamp on.
Few proffesors, US presidents, politicians, advisors, CEO’s – other worlds, people responsible for making and executing laws of economy.
They simply failed to do their jobs. Or did they? Maybe we looking from wrong angle here. Maybe they were very succesfull. What were their principles? Their targets?
If they are not willingly admiting failures, how is it happening that we all in working-class paying with our jobs and higher taxes for that mistakes? The rich get richer and the poor get poorer. Intrestingly when I lookup that phrase on wiki, it says :
Something called Matthew effect (or accumulated advantage) in sociology. “Those who possess power and economic or social capital can leverage those resources to gain more power or capital. The term was first coined by sociologist Robert K. Merton in 1968 and takes its name from a line in the biblical Gospel of Matthew:
For to all those who have, more will be given, and they will have an abundance; but from those who have nothing, even what they have will be taken away.
—Matthew 25:29, New Revised Standard Version.”
http://en.wikipedia.org/wiki/Matthew_effect_(sociology)
So was it really a mistake?
Lets try to go deeper into the source of the issue. It all started with the birth of stock exchange. It took destructional path when political movement toward deregulation in financial sector won. Expecialy stock market exchange operations. That allow few “hungry” sharks to develop complex trading. They’ve started playing around with huge money. Money they didn’t have, but which were on the table. How come? Loans, depts, insurance sector. For large increases in risk taking that circumvented older regulations that were intended to control systemic risk. They cheated some, and created another “financial products”.
To name few which failed in its core:
-Collateralized Debt Obligation (CDO) and Synthetic CDO
-Commercial mortgage-backed security (CMBS)
-Asset Backed Security (ABS)
-Credit Rating Agency (CRA)
-Mortgage Backed Securities (MBS)
Manipulating facts, and criteria. As you see it is pretty smart. Silly but that reminds me words from “Leggaly Blond 2″ movie: “ You can not fight with the system, you have to change the system“. That is exactly what they did.
One person responsible for deregulation of this area. An American economist first appointed as Federal Reserve chairman by President Ronald Reagan in August 1987, he was reappointed at successive four-year intervals until retiring on January 31, 2006. His free-market ideology leaded US to creation of unreviewed deregulation laws. His name is Alan Greenspan. As many argues (citing from John Robbins) that “Greenspan may be more responsible than any other single human being for the disastrous developments in our nation’s economy,”. The question we should ask is: What were his intentions?
I would have to say a word in his defence. Error is in allowing idealogists to execute their ideas without reviewing them. Same way as idea of comunism wasn’t evil itself, its execution was proven tragic for masses. We talking about similiar situation with Mr Greenspan ideas. We simply CAN NOT trust each others. Our simple prime insticts are always leading us to self destruction. Same as comumism, giving too much power it too few hands, same Greenspan’s idea allowed too few hands to gain too much power. Was he aware of it? Who knows. As he refuses to participate in any interviews, we could only “read-him” through his work and books.
As he says himself:
“Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country … With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. … Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s”
Greenspan, Alan (April 8, 2005). “Consumer Finance”. Federal Reserve System’s Fourth Annual Community Affairs Research Conference. Federal Reserve Board.
http://www.federalreserve.gov/BoardDocs/speeches/2005/20050408/default.htm. Retrieved June 22, 2009.
Despite this, Greenspan still claims to be a firm believer in free markets, although in the 2007 publication of his biography, he writes, “History has not dealt kindly with the aftermath of protracted periods of low risk premiums” as seen before the credit crisis of 2008.
In Congressional testimony on October 23, 2008, Greenspan finally conceded error on regulation. The New York Times wrote, “a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending. … Mr. Greenspan refused to accept blame for the crisis but acknowledged that his belief in deregulation had been shaken.”
Same way as Mr Greenspan believed in main principle of capitalism and “free” market :
“Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces. Deregulation does not mean elimination of laws against fraud or property rights but eliminating or reducing government control of how business is done, thereby moving toward a more laissez-faire, free market. It is different from liberalization, where more players enter in the market, but continues the regulation and guarantee of consumer rights and maximum and minimum prices.
The stated rationale for deregulation is often that fewer and simpler regulations will lead to a raised level of competitiveness, therefore higher productivity, more efficiency and lower prices overall.”
more: http://en.wikipedia.org/wiki/Deregulation
We believed in those in power. Profesors, presidents, and those making laws. And I am terribly sorry to say that history has proven them wrong so far.
Bulding imperiums build on borrowed money. Financial products designed not only to suck money from the people now, but future incomes as well.
1% of people versus 90% of people
99% of power versus 1% of power
Through the chain of processes in un-regulated market, constant “hunger” for more lead this sector to tricking whole nations.
This is awazing how few people manipulated regulatory standarts, rating standarts to such huge level.
Again, we can see in Hollywood productions, who has money has power. “Sponsored” US government campaigns,big players simply buying their vote in Congress. What that means, if you are reach enought you standing the law.
But even that was not enough to cover their huge hunger for more. They manipulated law and economical/financial market in general to take money from people now, in the future. But also they found a way to get money from people they wouldn’t get otherwise.
Higher taxes, bailouts etc are simply money that government has to pay to them. Becouse they were so large and uncontrollable (unregulated) they could do pretty much everything. They were big enough to make the rules, to influance the governments and global economies. Each of those involved, creating the 1% of world population of the reachest. What they’ve managed to do is to make poor poorer, and reach reacher.
And everything build on irrational, “fake” financial processes. It is game of illusion they played very well. In such huge scale it went un-noticable for the 99% of word population.
It is pretty fair to say that 99% of the people in the world were played by 1%. And this is how 1% can enslave 99%. This is modern-slavery, dependancy. With all agro-cultural laws, manufaturing outsources, we became societies of very dependant people. We simply can not exist without what in-derectly represents this 1% group. And what just happened during this word crisis, we were shown where our place is, and how “weak” we are.
It is fatal global “system error”. System we’ve trusted too much. System we crutialy depend on now.
And what is going to happen now?
Nothing, we will pay with higher taxes for artificialy designed world crisis. It is time of reversions, and also that is our future, going step back in some areas, just to improve in others. Its is good lesson, not only in economic terms. Lesson we should pay attention too.
Showing us how self-destructive man kind is and how self-destructive I, you, all of us are to ourselfes. Our desires to have more, to achieve something we don’t really need. It is quite shiny example with this 1%, buying 6 houses, 5 planes….what for?
We ALL should be allow to have as much as we need, NOTHING MORE, NOTHING LESS.
That means selling you second car so person manufacturing parts for this car can be paid reasonable wages. So they human-rights can be equaly executed around the globe.
Did you know average income/salary in Manufacturing or Construction in china is 100USD?
Talking about resons of world crisis, just to provide an idea of who is we could put our blames on (just a start of the list):
- financial economist who was awared the Nobel Memorial Prize in Economic Sciences for a new method to determine the value of derivatives in 1997.
- chairperson of the U.S. Securities and Exchange Commission (SEC)
- an American macroeconomist. The chairman of US President Council of Economic Advisors.
- former Chairman and Chief Executive Officer of Lehman Brothers.
- President and CEO of Fannie Mae, CEO of Fortress Investment Group in New York City.
- Professor, Dean of the London Business School. He is also non-executive Chairman of the National Audit Office and a non-executive Director of Barclays Bank plc.
- president of Columbia University. Chair of the Federal Reserve Bank of New York board of directors for 2011.
- Director of the White House National Economic Council for US President. University Professor at Harvard University’s Kennedy School of Government. Secretary of the Treasury for the last year.
- professor of Economics at London Business School. President of the Centre for Economic Policy Research which he founded in 1983.
- Chairman of the Federal Reserve of the United States 1987-2006.
- American insurance executive who was an officer at AIG Financial Products
-Chairman and Chief Executive Officer of Goldman Sachs Group, Inc.
- former CEO and chairman of Citigroup.
- United States Secretary of the Treasury . Temporarily Chairman of Citigroup.
- current Chairman of the United States Federal Reserve. US President Council of Economic Advisers.
- United States Treasury Secretary. Chairman and Chief Executive Officer of Goldman Sachs. Fellow at Johns Hopkins University’s School of Advanced International Studies (SAIS).
- former Chair of the US President’s Council of Economic Advisers. Director of the National Economic Council. Professor at the Haas School of Business of the University of California, Berkeley.
- current United States Secretary of the Treasury. President of the Federal Reserve Bank of New York.
source: http://www.sonyclassics.com/insidejob/site/#/declined
Did we learned from that lesson?
No. There is still no regulations, no right law, nothing beside bailouts has been done. So we still feeding the monster, but not fixing our economies. We still flushing money down to toiler, payching for someone’s yacht, for 4th new 20 mln USD house, but we are not paying back to people doing acctual work.
It will continue to fall down, it already did, we just still hoping it will wake up. It will not. Worse is just to come. I see maybe not dark, but diffrent future ahead us then we always thought.
Whole situation so reminds me of history books about Stalin, Hitler, Fidel Castro, Hu Jintao. But what bathers me, those people were living under such preseure for centuries, they were born in that evironment. It is easier to adopt psychologicaly speaking to such terms. But for western world, where we were living in illusion of “freedom”, Freedom understood as right to go and BUY. Limiting that previlage might rise waves of societies in shock of reality. People feeling cheatet and mislead. Furius and lost. And we all know from history where such emotions area leading in such huge scale….
….The French Revolution (French: Révolution française; 1789–99) was a period of radical social and political upheaval in French and European history. The absolute monarchy that had ruled France for centuries collapsed in three years. French society underwent an epic transformation as feudal, aristocratic and religious privileges evaporated under a sustained assault from liberal political groups and the masses on the streets. Old ideas about hierarchy and tradition succumbed to new Enlightenment principles of citizenship and inalienable rights.
source: http://en.wikipedia.org/wiki/French_Revolution
We already had a scent of it in Greece. Hope those “lions” behind
- JP Morgan
- Goldman Sachs
- Morgan Stanley
- AIG
- Barclay’s
- Enron
- many others…..
source:http://www.sonyclassics.com/insidejob/site/#/crimeandpunishment
can hear rising voices from cornered sheps …how important our involvement is to the well-being of our democracy: “I forgot to use my voice… Now I know better. I learned that one honest voice can be louder than a crowd’s… So speak up… Speak up for the home of the brave…”
from http://en.wikipedia.org/wiki/Legally_Blonde_2:_Red,_White_%26_Blonde
I want to unite with those people included in this 1%. We all do unsersdant resons why they doing what they do. If you or me will be in their shoes, we probably would do the same. So I would say
John 8:7
“He who is without sin among you, let him be the first to throw a stone at her.”
Matthew 7:3
“Why do you see the speck in your brother’s eye but fail to notice the beam in your own eye?.
Don’t be too quick to judge, becouse we all are sinners of this sin. And whatever it is, socialism, capitalism, democracy, totalitarizm – it will all be the same, becouse people are the same. So what you can do? You can do a lot.
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“Only wisdom, dedication and sacrifice can safe mankind.”
http://gargasz.info/sociology/index.php/only-wisdom-dedication-and-sacrifice-can-safe-mankind/
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I am discussed and ashamed of this 1% spending money of unnecessary houses, planes 1000USD/hour prostitutes, drugs. That only tells us those are people without any compunction or conscience.
Essence that what drives us, people, destroys us as well.
It simply cannot be out of control, same way as wild animals. Power, money and sex. What else motivates you what doesn’t relates to those 3 keywords?
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