US engaging in gunboat diplomacy: China

[CardSharp]

I have news for you: the subprime borrowers didn't borrow directly from the Fed. In fact banks would not touch people with sub 500 FICO score. They borrowed from corrupt lenders who went into churches and community centers and found anyone who wanted a house, even helping them forge fake documents.

Somehow I don't think all the people who defaulted on their debits were lured while playing bingo at their local community center. The fed doesn't lend direct but they set the interest rate which in turn affects daily interbank rates. These rates were so cheap, the banks were literally paid to take risks (what else are you going to do with it, earn terrible interest?). What better risk than high risk loan that paid great returns if they held up.

Again with your terrible understanding of economics and finance.

 

[CAPTAIN AMERICA]

Chinese Fleet Closes In On Okinawa
by James Dunnigan
May 11, 2010
Japan reports that, for the third time in the past 18 months, Chinese warships have been spotted south of the Japanese Island of Okinawa. This time, it was two Chinese submarines, running on the surface. That had never been seen before, in the area near the Senkaku islands (which are claimed by China, Taiwan and Japan). The Senkakus are eight uninhabited islands, which in the past were only used occasionally by fishermen. The Senkakus are 220 kilometers from Taiwan, 360 kilometers from China and 360 kilometers from Okinawa (which is part of Japan). Japan's claim is the strongest, having first been formally made in 1895. The United States took control of the islands after World War II, and used some of them for bombing practice. Japan continued to claim ownership when, in the 1970s, the possibility of oil deposits in the area caused China and Taiwan to make claims as well. The new Japanese radar facility on nearby Miyako island makes it easier for Japan to assert control over the Senkakus if there is ever a military confrontation with China.
There have been confrontations. Last year, two Chinese J-10A chased away three Japanese F-2 fighters that were near the Senkakus. Two years ago, Chinese coast guard ships began patrolling in the Senkakus, along with Chinese J-10A fighters.

Five years ago, a Chinese oil drilling platform, in disputed waters halfway between China and the Japanese island of Okinawa, began producing natural gas, despite ongoing negotiations over who owns what in that patch of ocean. The Chinese spent two years building that platform, in waters claimed by Japan. A second platform was later built, as well as an underwater oil pipeline for both platforms. China regularly sends groups of warships to patrol the area, to underline their belief that this bit of water is under Chinese control. Japan would probably win any naval war with China, but since China has nuclear weapons, and Japan does not (at least not right now), such a war could go seriously against Japan. This has been brought up in Japan before, and it is feared that the issue may lead to Japan secretly, or openly, building nuclear weapons (which it could certainly do, and quite quickly.)
Chinese Fleet Closes In On Okinawa

 

[Chinaownseverything]

Chinese Fleet Closes In On Okinawa
by James Dunnigan
May 11, 2010
Japan reports that, for the third time in the past 18 months, Chinese warships have been spotted south of the Japanese Island of Okinawa. This time, it was two Chinese submarines, running on the surface. That had never been seen before, in the area near the Senkaku islands (which are claimed by China, Taiwan and Japan). The Senkakus are eight uninhabited islands, which in the past were only used occasionally by fishermen. The Senkakus are 220 kilometers from Taiwan, 360 kilometers from China and 360 kilometers from Okinawa (which is part of Japan). Japan's claim is the strongest, having first been formally made in 1895. The United States took control of the islands after World War II, and used some of them for bombing practice. Japan continued to claim ownership when, in the 1970s, the possibility of oil deposits in the area caused China and Taiwan to make claims as well. The new Japanese radar facility on nearby Miyako island makes it easier for Japan to assert control over the Senkakus if there is ever a military confrontation with China.
There have been confrontations. Last year, two Chinese J-10A chased away three Japanese F-2 fighters that were near the Senkakus. Two years ago, Chinese coast guard ships began patrolling in the Senkakus, along with Chinese J-10A fighters.

Five years ago, a Chinese oil drilling platform, in disputed waters halfway between China and the Japanese island of Okinawa, began producing natural gas, despite ongoing negotiations over who owns what in that patch of ocean. The Chinese spent two years building that platform, in waters claimed by Japan. A second platform was later built, as well as an underwater oil pipeline for both platforms. China regularly sends groups of warships to patrol the area, to underline their belief that this bit of water is under Chinese control. Japan would probably win any naval war with China, but since China has nuclear weapons, and Japan does not (at least not right now), such a war could go seriously against Japan. This has been brought up in Japan before, and it is feared that the issue may lead to Japan secretly, or openly, building nuclear weapons (which it could certainly do, and quite quickly.)
Chinese Fleet Closes In On Okinawa

Japan's claim is the strongest, having first been formally made in 1895.

First Sino-Japanese War - Wikipedia, the free encyclopedia

1 August 1894 – 17 April 1895

Strategy page is an ANTI-CHINA website, Taiwan originally owned these islands, Taiwan was signed over to Japan after the first Sino Japanese war along with the Senkaku islands.

After Taiwan gained its independence after WW2 Japan refused to return these islands.

Its like the USA claiming Afghanistan as part of the USA. The entire world especially most Japanese know who is in the right.

China is not trying to take these islands, China is fighting for these islands to be returned to Taiwan.

 

[TorontoNoctis]

Somehow I don't think all the people who defaulted on their debits were lured while playing bingo at their local community center. The fed doesn't lend direct but they set the interest rate which in turn affects daily interbank rates. These rates were so cheap, the banks were literally paid to take risks (what else are you going to do with it, earn terrible interest?). What better risk than high risk loan that paid great returns if they held up.

Again with your terrible understanding of economics and finance.

Ok let's make this simple. Explain to me why Canadian banks didn't follow the same lending despite our rate moving in near lockstep to the Fed. Since you seem to think that overnight lending rate below inflation alone is enough to encourage risky behaviour.

 

[TorontoNoctis]

I believe that had the fed raised its rates in pace with the inflation, many people would not have been able to get away with vast amount of unsustainable debt, and the banks would have not been able to create so many CDOs no matter how hard it tried.

Many people are getting away with vast amounts of unsustainable debt right now, and the Fed rose rates starting in 2004. Are you saying it's the government's fault for not raising rates earlier even though the dot com bubble didn't fully burst until 2001? I think you underestimate the power of fraud. Individuals lied about their income regardless of the interest rate, and in 2004 Bush fully deregulated the subprime market growing it from around 10 percent to 30 percent and it just kept growing.

For someone who works in the field it is strange you do not separate the Fed from the government. Do you think that Greenspan and Bernanke were in Bush's pocket? Anyway the Fed and especially the government doesn't have a crystal ball, and if you want the nominal interest rate to be at inflation or higher always you have to define when you think the Fed should lower interest rates. If the answer is what I think it is (never to avoid moral hazard) then justify your opinion, since despite what you say about regulation not working it did in the past before the deregulation first in 1998 then again in 2004.

 

[lcloo]

to ptrotype

You have not answer my question.

Also no body is looking to the world's largest democracy for financial help, even though it is doing well.

 

[anon45]

I was going to try to get this thread back on track by going through the original article and discussing it, but it was so ignorant of what it spoke of (particularly referring to its ideas of manifest destiny), so full of charged words, and so biased in its views that I left it in disgust.

I was then going to post a flaying of the article, but then I looked at the source and saw it was opinion!

I then thought it was comparatively neutral and logical for an opinion piece.

 

[topjumper]

Ok let's make this simple. Explain to me why Canadian banks didn't follow the same lending despite our rate moving in near lockstep to the Fed.

lol... the canadian housing market and inflation never sky rocketed as hard as the US west coast did, had it been in the exact same situation as California and the canadian central bank did nothing to tighten the credits you guys would have been blown high out of water too.

Since you seem to think that overnight lending rate below inflation alone is enough to encourage risky behaviour.

Oh yes, not only below but also consistently below lol... look people are not as naive as you think, if you create an imbalance between cost of borrowing and inflation either way, people will take actions to play the difference. That's why relatively higher cost of borrowing encourages people to save and vice versa.

The difference between inflation and cost of borrowing is NOT the ONLY motivation behind people's risk taking, but it is an integral part of it in almost every business.

 

[topjumper]

Many people are getting away with vast amounts of unsustainable debt right now

Look, I'm tired of arguing with you over the same circle over and over again, you have a look around your society or speak to the delinquent borrowers and you honestly ask yourself that question again.

Are you saying it's the government's fault for not raising rates earlier even though the dot com bubble didn't fully burst until 2001? I think you underestimate the power of fraud. Individuals lied about their income regardless of the interest rate, and in 2004 Bush fully deregulated the subprime market growing it from around 10 percent to 30 percent and it just kept growing.

Actually the deregulation of subprime market began in the clinton administration back in the late 90s. Refer to my previous post if you are kind enough, I did place responsibility on the loose lending policy encouraged by the government, so let's not argue with each other just for argument's sake. What we differ is that I believed that even if the regulations and policies from time to time get out of touch with reality as they always do and always will, had the fed did its job properly by setting responsible rate of borrowing, there wouldn't have been so much profit for the ordinary citizens to play the housing market, and the entrance barrier into this business (yes, buying a house was like a business) would have been higher, and things wouldn't have gone so out of control.

For someone who works in the field it is strange you do not separate the Fed from the government. Do you think that Greenspan and Bernanke were in Bush's pocket?

Yes I didn't bother to separate the central bank from the government here just for simplicity of arguments, the point is it is out of private sector's control.

Anyway the Fed and especially the government doesn't have a crystal ball, and if you want the nominal interest rate to be at inflation or higher always you have to define when you think the Fed should lower interest rates. If the answer is what I think it is (never to avoid moral hazard) then justify your opinion, since despite what you say about regulation not working it did in the past before the deregulation first in 1998 then again in 2004.

The highlighted part didn't quite make sense to me, but let me just clarify something about the fed any way -- its core responsibility is to maintain price stability, in another word -- control inflation, the biggest gun it has by controlling inflation is setting the interest rate, some people have long argued that people at FED doesn't really set the interest rates, they merely observe what the "real" rate is (dictated by inflation) and the set their "official" rates around that. But when the fed created a sustained mis-match between the real rate and its official rate, the market came in to arbitrage the difference manifested in many ways, housing market was one of them. You may introduce regulations to limit the growth of one market or one type of security, but there will be other ways for this arbitrage opportunity to present itself, and the market regulators are almost always one step behind the market innovators/practitioners, enron, sub prime, madoff and you name it are the examples. The bottom line is I think the policy makers are only busy fixing the symptoms of a sickness, but not acknowledging for various political reasons the root cause of it.

Any ways, I'm not here to convince you to have a different view of debt or some economic theories, you are free to believe what you want and do what you want with your personal finances, I've disputed my points on your view of the government debts and I'll stop at here, and other people can objectively make up their own minds on this issue too.

 

[TorontoNoctis]

Even if I accept everything you said, the Fed would have had to raise the rate a full percentage point or higher a few times to have any effect. Instead of shocking the market one way you would have shocked it the other. The Fed clearly prefers inflation to deflation and so do all mainstream economists, so the job is not to control inflation but to prevent a deflationary spiral and that's a big difference.

Housing isn't like other commodities. A person can't sell his house without going homeless. Everyone also desperately wants a house. With any other product, skyrocketing prices should have stopped the boom. It's not the Fed's fault that Americans don't believe in apartments anymore or that the boomers parked most of their retirement money in their homes spreading the lie that equity was as good as money.