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Edited by Mrph1 on Nov 30th 2023 at 11:03:59 AM
Corporations aren't people, my friend. When a firm goes bankrupt, that's debt that is held by the firm that never gets paid off. Theoretically, if a firm is able to operate in the red through some mechanism, then the debt can be paid off eventually.
It's kind of like not letting a person burdened by debt commit suicide, because if they do, they can't work to pay off their debt. A bank or other institution going belly up isn't just bad because of major shocks to the economy, it's actually a built in inefficiency. Although I guess that presumes that the resources being used by the firm won't be able to be used elsewhere, but that's a bit more complicated.
The problem with the collapse of AIG isn't that the firm itself is somehow vital to the economic structure of the country, but that its insolvency creates a chain reaction of defaults because of the interconnected web of leverage among financial institutions.
Let's say that Firm X has 100 billion in liabilities, 90 of which is short term debt that it owes to Firm A and Firm B, 1 billion in cash, and 100 billion in assets, 90 of which is short term debt it holds from Firm Y and Firm Z.
Firm X suffers a cash crisis and can't pay its short term debt to Firms A and B. It asks Y and Z for money but they are worried about the solvency of X and won't pony up any more. X goes bankrupt. Firms A and B are now not going to recover most of their short-term debt, which they were depending on to pay their own short-term debt to Y and Z. Thus, A and B go insolvent. Y and Z now have a crisis and they fold, too. Now the whole system has died because of one firm.
Now, you can realistically blame the failure on excessive leverage on the part of all of the firms involved, but what you've actually done here is taken 500 billion of theoretical assets (the money each firm owed to each other) and transformed it to zero assets. Once this happens, lenders start being afraid to lend, worried that they won't get their money back as they look for the next default. This, ironically, causes companies that are dependent on short-term loans to collapse. The whole system freezes. This is 2008.
This is why the insolvency of a major firm is so problematic in a time of higher leveraging. If the other firms didn't have such a high debt-to-cash ratio, they wouldn't have been as severely affected. Clearly, one solution is to require that financial institutions hold stronger cash positions, but that's a case of locking the door after all your shit has been stolen.
edited 8th Jan '13 11:20:19 AM by Fighteer
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"Say, going back to the debt ceiling mentioned a while back, who actually owns the debts that the US government would have to pay up if it hits said ceiling? The banks?
And I didn't say that the mistake is justifiable or excusable, just understandable.
edited 8th Jan '13 11:50:33 AM by MarqFJA
Fiat iustitia, et pereat mundus.A quick Google search turned up this article
from CNBC on May, 2012. The infographic format is frustrating as hell, but I'll rewrite it here.
Top 15 U.S. bondholders as of May, 2012:
- Social Security trust funds: 2.67t
- U.S. Federal Reserve: 1.659t
- China: 1.169t
- Savings bonds and other investors: 1.102t
- Japan: 1.083t
- Pension funds: 903.4b
- Mutual funds: 797.9b
- State and local governments: 444.6b
- Medicare trust funds: 324.6b
- Depository institutions (banks, etc.): 286.3b
- Oil exporters: 254.5b
- Insurance companies: 253.7b
- Brazil: 237.4b
- Caribbean banks: 224.8b
- Taiwan: 184.4b
This adds up to 11.6 trillion of the 15.7 trillion outstanding at the time of the article's writing, or 74% of the total. Doing some math gives us 20% foreign ownership and 54% domestic. Bear in mind that we also hold a significant amount of foreign debt as well, very nearly making that portion a wash.
It also reveals that 28% of the debt is owned by the government itself, 32% if you add in Medicare and states. It's literally money we owe to ourselves.
edited 8th Jan '13 12:21:38 PM by Fighteer
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"... Wait, the US borrowed money from other countries?! I thought it was them who were lending others money!
Fiat iustitia, et pereat mundus.Currency exchange happens all the time. It's a give-and-take process.
The first Google result I found was a Treasury press release from 2011
stating our holdings as worth approximately $6.8 trillion.
![]()
Happens all the time - the British were borrowing from India in the The '90s, the same decade the Indian reserve bank had to airlift 40 tonnes of gold to London as collateral for a loan the British were giving them. The whole thing is bizarre.
Schild und Schwert der ParteiMadness. Just utter madness.
Onto happier news. Gabrielle Giffords is still alive and well enough to take on the the gun lobby
.
Part of me wants to say, "Oh great, more centrists," but in this case, it can only be an acknowledgement that what passes for a Republican Party these days is utterly gone from anything resembling moderation.
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"Can someone explain why the Republican Party is being so divided these days? Yes, it's actually a loose coalition of disparate political factions from virtually all over the political spectrum — moderates, liberals, conservatives, the works — but why is it now that they seem to be breaking at the seams more than any time within recent years (and seem to have been undergoing such dis-cohesion for a while, actually)?
edited 8th Jan '13 2:40:47 PM by MarqFJA
Fiat iustitia, et pereat mundus.
Because the tea Party and its base absolutely control the primaries (because nobody else shows up to vote in primaries), forcing you to either at least /appear/ to drink the ultraconservative slash hyper-religious koolaid or never get elected.
it also constrains you post-election because you'll get voted out if you piss them off.
edited 8th Jan '13 2:51:35 PM by Midgetsnowman
The reason why can be traced back to the Tea Party and its ideological forebears.
Like all political parties, the Republican Party is responsive to money — specifically, its big donors. Roughly since the New Deal, there has been a powerful bloc of politically active, wealthy individuals who look at the Robber Baron era with nostalgia. They view it as the mandate of wealth to hold political power, to make themselves wealthier. In technical vocabulary, the rentier class.
With the focus of the Democrats in the mid to late 20th century on social justice and equality, those arguing for the status quo have gravitated to the Republicans. By direct consequence, the big money moved there as well, because status quo is good for the wealthy.
Now, to win a general election, you have to appeal to 50% or more of the total voters. But to win a primary, you only need win 50% of the people from your own party who are interested enough to vote. In some cases that can be a mere couple of thousand voters. In any constituency, the people with the strongest opinions on a subject are the most likely to come out and vote in a primary.
So, what we have is a party in which, to get nominated, you have to espouse values that attract the most ardent of your voter base — which in the current climate is the Tea Party and the evangelical voters. You need funding, and that means you have to please the Kochs and Norquist and company. Once elected, you can't stray too far from these principles or the same process that got you nominated will get you replaced with someone else.
Thus, gradually but inexorably, the Republican Party has been coopted by its craziest elements, backed by big money interests who care only about their own wealth and influence.
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
...and Thus, the Republican Party will cease to exist. Mind you, the opposite situation is hardly much better — a Party going Bankrupt, especially in a two-party system, isn't much fun.
Not that Britain is much better — both Labour and the Conservatives are kept afloat by wealthy donors, including the Unions in Labour's case. There's even been talk to State Funding of Parties, which is not popular amongst the Public.
edited 8th Jan '13 3:08:18 PM by Greenmantle
Keep Rolling OnA party can't go bankrupt. Well, unless it's horribly mismanaged, but that's kind of a digression. A party can fail to attract enough donations to field viable candidates. The most likely course of action is that the Republicans continue to lose elections because they field candidates that can't win the popular vote. Thus, their donors start to abandon them and support more moderate candidates, and we end up with center-right and center-left parties again.
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"![]()
Whilst the British political system has many, many flaws, the ideological divide between left and right is not so bitter and entrenched as it is in the USA. Similarly, the British parties have an overarching unity of ideology - there are individual sticking points, like our relationships with Europe (Labour: To join the Euro or not? Tories: Grassroots advocate withdrawal, businesses advocate commitment), gay marriage (at least in the Tory party), and so forth. This is in contrast to the Republican party, which has to tie two groups, religious social conservatives and economic libertarian conservatives, into a single GOP despite the almost total diametric opposition of their ideological viewpoints.
edited 8th Jan '13 3:12:51 PM by Achaemenid
Schild und Schwert der ParteiThere was a not dissimilar era in UK politics, back in the 1980's, where the method of selecting Labour councillors and MP's meant that the people being selected in certain areas were being voted in by the most left wing members of the Labour Party. The eventual decision of the Labour Party leadership was that they either had to expel that particular faction or have their party torn apart.
What the Republicans are going to do, I don't know. But they've got the same problem - a 'broad church' party who have a group on one end of the spectrum seeing themselves as the 'ideologically pure'. And since they are 'ideologically pure', compromise with the rest of the 'broad church' is bad. Good is converting everyone to their way of thinking (and getting their own candidates into positions of power). Because they have the Truth.
edited 8th Jan '13 3:18:20 PM by Bluesqueak
It ain't over 'till the ring hits the lava.I'd say it's a rather recent change. Since Ronnie republicans have had a pretty solid idea of what they stand for. It wasn't until their war-hero and beauty pageant ticket lost to some foreign dude and everyone's-creepy-uncle that they really decided to look inward. Are we the problem? Have we abandoned our principles? The answer was a resounding yes!
String these incumbents up by their golden bootstraps! We'll drive these corporate whores out and bring in some liberty loving, classic republicans. And thus the tea party was formed. A faction of the republican party that sought a return to classic republican thought. Enough of them got elected to be a true political power (for now, anyway) and like every philosophy, once it hit reality problems became apparent.
You can't encourage small business growth without spending money as they kind of don't have anything. You can't run a government without money, which requires taxes. No compromise ever is a great slogan but a terrible idea when that means nothing you want is going to get through the house, either. Faced with these problems tea party backed candidates decided their principles were wrong and- oh who am I kidding?
Most refused to compromise and were then kicked out of office during this election cycle. Others stayed in office specifically because they refused to compromise with the government.
A second defeat sparked more navel gazing. We went back to basics. We doubled-down and we lost. What went wrong? Now the smart republicans are realizing that America has changed. You can't win in a nation as diverse as the US if you're appealing only to old white men (It's not stereotyping if it's true.) You can't win in the US when you make abortion a key issue and half the population is female. You need to re-evaluate, prioritize. Then there's the idiots.
Those republicans who are still voting no to anything Obama wants even if the rest of the party sees it's the right thing to do. Those who value their ideals more then their country. Who would have seen the country fall off the cliff before ever compromising. This is the new divide. Those who realize they must change or be made obsolete and those who think they can obstruct the country back to the fifties.
Is using "Julian Assange is a Hillary butt plug" an acceptable signature quote?@ Achaemenid:
True. Mostly because the Party Leaderships share the same background
. The British system is not perfect, and the unity does lead to areas that UKIP, the Green Party and other mid-sized to minor parties can exploit. But then again, this is sort of thing where there isn't a "right answer" and you've just got to live with it.
True. In almost every other liberal Democracy*, they'd be two different parties.
@ Bluesqueak:
Looking at it like that, the situation does look similar, doesn't it? The Republicans need their own Neil Kinnock — someone to tell the Party that they're driving themselves to irrelevance, and need to change, even if they fall on their sword. And then of course, to win they'll a Tony Blair — someone charismatic and willing to use Obama's (or his successor's) ideas to get into power*.
Anyway, time for Bed.
edited 8th Jan '13 3:25:19 PM by Greenmantle
Keep Rolling On
@Greenmantle
Only half-true, at least in Labour's case:
- Clement Attlee: Oxbridge, private-school.
- Gaitskell: Oxbridge, private-school.
- George Brown: Working-class, trade-union organizer.
- Harold Wilson: Grammar school, Oxbridge.
- James Callaghan: Local comp, straight into civil service (couldn't afford Oxbridge)
- Michael Foot: Oxbridge, private-school.
- Kinnock: Welsh miner's son, local comp, Uni of South Wales.
- John Smith: Dunoon Grammar School, Glasgow Uni
- The Wanker: Oxbridge, private-school.
- Pa Broon: Local comp, Edinburgh Uni
- Red Miliband: Local comp, LSE, academia
In Labour at least, there is enough variety between the "traditional Oxbridge private school" background and non-trad to guarantee some flexibility, especially amongst those who actually served as PM. The less Humpty-Dumptyish nature of UK politics has more to do with the Postwar consensus and the more recent secular consensus than it does similarity of background.
edited 8th Jan '13 3:34:56 PM by Achaemenid
Schild und Schwert der ParteiMore than a bit off-topic, but Actually, the private school-Oxbridge label is a bit of a mirage - it's just that the current Tory leader fits the stereotype.
Before Mr Cameron we have:
- Michael Howard, Grammar School, Oxbridge
- Iain Duncan Smith, Local comp, Merchant Navy training college, Sandhurst
- William Hague, Grammar School, Oxbridge
- John Major, Grammar School, left at 16, vocational banking qualifications
- Margaret Thatcher, Grammar School, Oxbridge
- Edward Heath, Grammar School, Oxbridge
- Alec Douglas-Home Eton and Oxford
- Harold Mac Millan, Eton and Oxford
- and before that you are generally either Eton-and-Oxford or public-school-and-Sandhurst.
So basically, from the 1970's onwards the Tories were generally Grammar School boys (and girl).
Trying desperately to get this back on topic; you could probably argue that the US political class is in a sense less diverse? Because the different electoral funding methods mean that politicians at a national level need to be pretty wealthy.
British politicians at the national level, otoh, seem to only need to be pretty well educated (which fits with the advantage given by quick wits in a parliamentary system). Even Major had the equivalent of a degree - it was just he'd done vocational qualifications.
edited 8th Jan '13 4:03:49 PM by Bluesqueak
It ain't over 'till the ring hits the lava.

The real question there is whether the sudden shock from them falling is worse than the long-teerm damage they can do if allowed to keep going. This varies from company to company, of course, which is why I'm suspicious of 'too big to fail' as a general, blanket principle.
What's precedent ever done for us?