Chinese Financial Crisis; small similarities to Mumbai 1992 stock market scam; USA Financial Crisis 2007-08; TARP repaid
This post is based on contents and comments of my Facebook post, https://www.facebook.com/ravi.s.iyer.7/posts/1636760126540558, dated July 9th 2015
My comment on the article, The really worrying financial crisis is happening in China, not Greece, http://www.telegraph.co.uk/finance/china-business/11725236/The-really-worrying-financial-crisis-is-happening-in-China-not-Greece.html, dated July 9th 2015, was as follows:
Worrying! If it does go the wrong way, the impact on the world can be significant. Hope this does not distress readers. But, sometimes, it is good to be aware of such matters.
[Small extract from the above Telegraph article:]
"Then, as now in China, rural workers had emigrated to the cities in vast numbers in the hope of finding a more prosperous life in fast-growing industrial sectors. In 1920s America, virtually all these sectors – from steel to automobiles and the new technologies of radio and consumer durables – grew like Topsy, inspiring households to invest in them and chase the apparently bountiful profits they were generating.
A similar explosion in industrial activity has taken place in China, only more so. China has packed more development into a few short decades than any country in recorded history before, creating a worldwide glut in industrial capacity that even global demand, let alone domestic Chinese demand, is struggling to accommodate."
Selected comments of the Facebook post are given below:
[Name-snipped] passed on an article, China Now Risks "Financial Crisis"; Loses Could Be "In The Trillions" BofA Says, http://www.zerohedge.com/news/2015-07-07/china-now-risks-financial-crisis-loses-could-be-trillions-bofa-says.
---
Ravi S. Iyer wrote:
After reading a Washington Post article on it, https://www.washingtonpost.com/world/asia_pacific/china-stock-market-crash-punches-a-hole-in-xis-china-dream/2015/07/08/13d22e66-2579-11e5-b621-b55e495e9b78_story.html, I was reminded of India's 1992 Harshad Mehta stock market scam, http://forbesindia.com/article/independence-day-special/economic-milestone-stock-market-scam-(1992)/38457/1. I think in the early 90s many Indians started moving into this stock market game as a supposedly quick means to riches. As I lived in Mumbai then (where the main stock market is based) I experienced both the feverishness of ordinary people (taxi drivers, housewives etc. let alone office going folks and small business folks) to jump in and make the quick buck that everybody else were supposedly making, and then the trauma of the stock market crash when reality kicked in. The tragedy was that the "insiders" in the stock market game played the game very well and made huge money, with the losers being the ordinary people who had blindly bought stocks at artificially inflated prices whose prices crashed drastically (mind you, this was prior to online stock exchanges and so stock market brokers had a big influence in the deals and market sentiment). There were a lot of heart-breaking stories then in Mumbai and in some other parts of India.
One sentence from the article [mentioned in previous comment,] really strikes a chord with what I mentioned above: "The net result of this volatile market is a transfer of wealth from the people on the street to the wealthy, including many major shareholders, who cashed out." I don't think there will be many differences between the Mumbai and India stock market speculators who made a 'killing' in the 1992 Mumbai stock market scam, and the Chinese stock market speculators now. Insatiable Greed seems to be free of any bias about race, ethnicity, developed world or developing world etc. :-) .
China now is an awesome economic giant. What got played out in the Bombay Stock market in 1992 was small-time, compared to what is happening in the Chinese stock markets now. And the worst thing is that the world has become so interdependent that a big-time Chinese stock market crash followed by a deep recession/depression, can shake up the whole world economy! Scary stuff!
---
Ravi S. Iyer [name-snipped]: About the Financial crisis 2007-08 and USA TARP, I wonder whether you have read Tim Geithner's Stress Test. I found it to be a gripping read almost like a Fredrick Forsyth or John Le Carre thriller. That was TERROR, man, TERROR. I have not experienced anything that scary in its world impact in my lifetime (which includes the horrific and grotesquely spectacular New York City, Twin Towers terror attack). I mean, Lehman Bros., AIG, Merill Lynch ... these were the financial pillars of the world powers dominated by USA. How they came crashing down! Geithner is startlingly frank in his book (though surely he would not have revealed all). Even if one does not agree with Geither's view, like Paul Krugman did not as seen in his critical review here: http://www.nybooks.com/articles/archives/2014/jul/10/geithner-does-he-pass-test/, Geithner's book is worth a read for those who want to know more about what happened then. .... And, yes, we would never know how bad, or perhaps how not-so-bad, it would have been if the Too Big To Fail USA Banks and Financial institutions were allowed to fail. ... But to also mention one seeming FACT as per official records and Geithner's claim, the four hundred odd billion dollars that were used from the $ 700 billion TARP, was recovered fully (and some more). So the USA taxpayer did not lose out. How well the 400+ billion dollars were used/abused (more help to Wall Street with Main Street being ignored is one charge) is a different matter about which I don't know enough to comment.
---
[One comment provided the following link] Austerity Has Failed: An Open Letter From Thomas Piketty to Angela Merkel, http://www.thenation.com/article/austerity-has-failed-an-open-letter-from-thomas-piketty-to-angela-merkel/
---
Ravi S. Iyer wrote:
Serious food for thought from eminent and knowledgeable people. Thanks for sharing.
---
Ravi S. Iyer wrote:
Paul Krugman wrote, "America did indeed manage to avoid a full replay of the Great Depression—an achievement for which Geithner implicitly claims much of the credit, and with some justification. We did not, however, avoid economic disaster. By any plausible accounting, we’ve lost trillions of dollars’ worth of goods and services that we could and should have produced; millions of Americans have lost their jobs, their homes, and their dreams. Call it the Lesser Depression—not as bad as the 1930s, but still a terrible thing. Not to mention the disastrous consequences abroad."
So I would go with the view that Geithner resolved the TERROR that had gripped the USA financial top bosses, and so the financial system. But Krugman's view is that Geithner could have done much better than just that. I simply don't know enough about this financial and economic stuff to know who is right about this part - Krugman or Geithner (who, in his book, claims significant improvement in economy, jobs & financial system stability in face of very, very difficult challenges, if I recall correctly). Perhaps the truth is somewhere in the middle. But somehow, I don't buy the view that Geithner alone could have done much, much better and achieved what Krugman says should have been achieved. Maybe I am naive, but I felt Geithner was a civil servant, and not a billionaire club man or agent, who was doing his very best to serve his country. Some people had to become the target of all the fury for the hard times, and naturally one of the key persons in this target list, had to be the Treasury secretary of the USA. The real guys who made the (money) 'killings' would have been smart enough to do it largely behind the curtains.
Of course, this is not to say that the USA is out of the economic crisis woods. One look at USA's debt (18 trillion dollars in 2015 with debt to gdp ratio of 102%, http://www.forbes.com/sites/mikepatton/2015/04/24/national-debt-tops-18-trillion-guess-how-much-you-owe/) and the way it keeps on growing and growing, is enough to know that it does face some very big challenges even if, as per some pundits, its economy may be large enough to handle such debt.
Don't know much about UK economy but the general impression is that it too is facing tough challenges.
The reward for bad behaviour of top bankers and financial system guys is the worst thing that simply defies principles of natural justice.
---
Ravi S. Iyer wrote:
My humble view, I repeat humble view (I mean, I don't live in USA or UK and so don't feel that particular economic pain directly, though India too has lots of economic pains of its own which in absolute terms are far worse, but in terms relative to the past decades in India, is not so bad), is that Geithner as treasury secretary could play only a limited role. Resolving the very serious wealth inequality problem that the USA has today (perhaps is similar in UK) requires political will at President of USA and USA Congress level. I mean, big-ticket changes in economy have to be pushed by the top political leaders - Geithner was, all said and done, a civil servant with expertise in handling financial crises, and just not a political guy..... Maybe that was part of the problem; perhaps the USA treasury secretary at that time should have been a political leader with a finger on the pulse of the people, having his panel of financial experts... I must also say that Geithner and USA got lucky with the shale oil & gas boom that helped the USA economy significantly (though the fracking environmental concerns that some report are scary in its own right).
My comment on the article, The really worrying financial crisis is happening in China, not Greece, http://www.telegraph.co.uk/finance/china-business/11725236/The-really-worrying-financial-crisis-is-happening-in-China-not-Greece.html, dated July 9th 2015, was as follows:
Worrying! If it does go the wrong way, the impact on the world can be significant. Hope this does not distress readers. But, sometimes, it is good to be aware of such matters.
[Small extract from the above Telegraph article:]
"Then, as now in China, rural workers had emigrated to the cities in vast numbers in the hope of finding a more prosperous life in fast-growing industrial sectors. In 1920s America, virtually all these sectors – from steel to automobiles and the new technologies of radio and consumer durables – grew like Topsy, inspiring households to invest in them and chase the apparently bountiful profits they were generating.
A similar explosion in industrial activity has taken place in China, only more so. China has packed more development into a few short decades than any country in recorded history before, creating a worldwide glut in industrial capacity that even global demand, let alone domestic Chinese demand, is struggling to accommodate."
Selected comments of the Facebook post are given below:
[Name-snipped] passed on an article, China Now Risks "Financial Crisis"; Loses Could Be "In The Trillions" BofA Says, http://www.zerohedge.com/news/2015-07-07/china-now-risks-financial-crisis-loses-could-be-trillions-bofa-says.
---
Ravi S. Iyer wrote:
After reading a Washington Post article on it, https://www.washingtonpost.com/world/asia_pacific/china-stock-market-crash-punches-a-hole-in-xis-china-dream/2015/07/08/13d22e66-2579-11e5-b621-b55e495e9b78_story.html, I was reminded of India's 1992 Harshad Mehta stock market scam, http://forbesindia.com/article/independence-day-special/economic-milestone-stock-market-scam-(1992)/38457/1. I think in the early 90s many Indians started moving into this stock market game as a supposedly quick means to riches. As I lived in Mumbai then (where the main stock market is based) I experienced both the feverishness of ordinary people (taxi drivers, housewives etc. let alone office going folks and small business folks) to jump in and make the quick buck that everybody else were supposedly making, and then the trauma of the stock market crash when reality kicked in. The tragedy was that the "insiders" in the stock market game played the game very well and made huge money, with the losers being the ordinary people who had blindly bought stocks at artificially inflated prices whose prices crashed drastically (mind you, this was prior to online stock exchanges and so stock market brokers had a big influence in the deals and market sentiment). There were a lot of heart-breaking stories then in Mumbai and in some other parts of India.
One sentence from the article [mentioned in previous comment,] really strikes a chord with what I mentioned above: "The net result of this volatile market is a transfer of wealth from the people on the street to the wealthy, including many major shareholders, who cashed out." I don't think there will be many differences between the Mumbai and India stock market speculators who made a 'killing' in the 1992 Mumbai stock market scam, and the Chinese stock market speculators now. Insatiable Greed seems to be free of any bias about race, ethnicity, developed world or developing world etc. :-) .
China now is an awesome economic giant. What got played out in the Bombay Stock market in 1992 was small-time, compared to what is happening in the Chinese stock markets now. And the worst thing is that the world has become so interdependent that a big-time Chinese stock market crash followed by a deep recession/depression, can shake up the whole world economy! Scary stuff!
---
Ravi S. Iyer [name-snipped]: About the Financial crisis 2007-08 and USA TARP, I wonder whether you have read Tim Geithner's Stress Test. I found it to be a gripping read almost like a Fredrick Forsyth or John Le Carre thriller. That was TERROR, man, TERROR. I have not experienced anything that scary in its world impact in my lifetime (which includes the horrific and grotesquely spectacular New York City, Twin Towers terror attack). I mean, Lehman Bros., AIG, Merill Lynch ... these were the financial pillars of the world powers dominated by USA. How they came crashing down! Geithner is startlingly frank in his book (though surely he would not have revealed all). Even if one does not agree with Geither's view, like Paul Krugman did not as seen in his critical review here: http://www.nybooks.com/articles/archives/2014/jul/10/geithner-does-he-pass-test/, Geithner's book is worth a read for those who want to know more about what happened then. .... And, yes, we would never know how bad, or perhaps how not-so-bad, it would have been if the Too Big To Fail USA Banks and Financial institutions were allowed to fail. ... But to also mention one seeming FACT as per official records and Geithner's claim, the four hundred odd billion dollars that were used from the $ 700 billion TARP, was recovered fully (and some more). So the USA taxpayer did not lose out. How well the 400+ billion dollars were used/abused (more help to Wall Street with Main Street being ignored is one charge) is a different matter about which I don't know enough to comment.
---
[One comment provided the following link] Austerity Has Failed: An Open Letter From Thomas Piketty to Angela Merkel, http://www.thenation.com/article/austerity-has-failed-an-open-letter-from-thomas-piketty-to-angela-merkel/
---
Ravi S. Iyer wrote:
Serious food for thought from eminent and knowledgeable people. Thanks for sharing.
---
Ravi S. Iyer wrote:
Paul Krugman wrote, "America did indeed manage to avoid a full replay of the Great Depression—an achievement for which Geithner implicitly claims much of the credit, and with some justification. We did not, however, avoid economic disaster. By any plausible accounting, we’ve lost trillions of dollars’ worth of goods and services that we could and should have produced; millions of Americans have lost their jobs, their homes, and their dreams. Call it the Lesser Depression—not as bad as the 1930s, but still a terrible thing. Not to mention the disastrous consequences abroad."
So I would go with the view that Geithner resolved the TERROR that had gripped the USA financial top bosses, and so the financial system. But Krugman's view is that Geithner could have done much better than just that. I simply don't know enough about this financial and economic stuff to know who is right about this part - Krugman or Geithner (who, in his book, claims significant improvement in economy, jobs & financial system stability in face of very, very difficult challenges, if I recall correctly). Perhaps the truth is somewhere in the middle. But somehow, I don't buy the view that Geithner alone could have done much, much better and achieved what Krugman says should have been achieved. Maybe I am naive, but I felt Geithner was a civil servant, and not a billionaire club man or agent, who was doing his very best to serve his country. Some people had to become the target of all the fury for the hard times, and naturally one of the key persons in this target list, had to be the Treasury secretary of the USA. The real guys who made the (money) 'killings' would have been smart enough to do it largely behind the curtains.
Of course, this is not to say that the USA is out of the economic crisis woods. One look at USA's debt (18 trillion dollars in 2015 with debt to gdp ratio of 102%, http://www.forbes.com/sites/mikepatton/2015/04/24/national-debt-tops-18-trillion-guess-how-much-you-owe/) and the way it keeps on growing and growing, is enough to know that it does face some very big challenges even if, as per some pundits, its economy may be large enough to handle such debt.
Don't know much about UK economy but the general impression is that it too is facing tough challenges.
The reward for bad behaviour of top bankers and financial system guys is the worst thing that simply defies principles of natural justice.
---
Ravi S. Iyer wrote:
My humble view, I repeat humble view (I mean, I don't live in USA or UK and so don't feel that particular economic pain directly, though India too has lots of economic pains of its own which in absolute terms are far worse, but in terms relative to the past decades in India, is not so bad), is that Geithner as treasury secretary could play only a limited role. Resolving the very serious wealth inequality problem that the USA has today (perhaps is similar in UK) requires political will at President of USA and USA Congress level. I mean, big-ticket changes in economy have to be pushed by the top political leaders - Geithner was, all said and done, a civil servant with expertise in handling financial crises, and just not a political guy..... Maybe that was part of the problem; perhaps the USA treasury secretary at that time should have been a political leader with a finger on the pulse of the people, having his panel of financial experts... I must also say that Geithner and USA got lucky with the shale oil & gas boom that helped the USA economy significantly (though the fracking environmental concerns that some report are scary in its own right).
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