Monday, September 19, 2011

Note Books 3

March 21, 2011

The world itself is a single economic system. Everywhere the profits of a few major corporations are the most important concern of government.

Profits from investments around the world and control at the center are the indispensable political concern.

Over accumulation remains the single most important issue for careful economic planning.

Imperialism becomes only one option for overproduction. But it is the best option. Imperialism offers new investment opportunities, new markets and sources of cheap labor and resources.

Imperialism only adds to the problem, because it is so profitable it soon leads to capital looking for new profitable outlets for reinvestments.

With increasing debts the financial sector is always growing larger than ever. This is happening while production stagnates. This increases the tendency of financial institutions to barrow from other financial institutions further increasing the credit crunch.

Rapidly increasing consumer debt only adds to the problem. Individuals try harder to pay back debts while maintaining their living standards. Debts become away of life.

March 25, 2011

In the old days Production and Reinvestment lead to overproduction. As markets become saturated firms move into new markets expanding out from the center to fill the globe.

Rapid increases in production and sells lead to over investments and declining profits and stagnation.

When consumers buy products that stimulate the economy. This encourages the companies producing consumer goods to expand production. These firms are barrowing money for new equipment and raw materials for future investments. The barrowed money is then spent, leading capital goods production to expand. 

The economy seems to be in trouble at least once a decade, from the 1930’s till today. Before then the economy went from serious crisis to boom to serious crisis. From the Civil war till the depression of the 1930’s, not only was there the Great Depression 1973 but the economy collapsed now less than once a decade followed by a boom that could not be sustained.

Because production has stagnated for about forty years, profit-seeking capital has sought investment opportunities in the financial sector. Massive hoards of unused capital now have a home. Now finance is the dominant form of investments.

Banks aggressively offer loans and then sell the debts to others. These others in turn sell the debts to still others. Collateralized Loan Obligations.

Stock market and currency opportunities for speculation are moving large amounts of money from one set of holdings to another. It is no longer families indentified with certain industries or the people who worked their way up from the bottom to the top and finally become owners. Now it is pure gambling in which because the size of the operations the government cannot allow failure.

Hedge Funds are the use of advanced investment strategies in derivatives, leveraged investments. This is unregulated and unprotected selling securities from a third party, buying the assists and selling them back to this or another third party. In order to borrow heavily then to buy still more shares to sell them at a profit.  A firm with more debt than equity is leveraged. Buying up bad mortgages in the hopes some one will buy you out, or the government will bail you out. Use of junk bonds that sells below investment grade because of failure in hopes you can sell them at a profit or be bailed out.

Credit derivatives are privately held negotiable bilateral contracts that are used in managing exposures to credit risks by transferring a credit risk to some one else. This a bet that one can make money before the investment fails.

Collateral Debt Obligation (CDO) this credit protection allows selling of bad credit. Failure leads to super profits if you buy debts at a fraction of their original worth sell them still below their original value put at profit. The last guy standing will be bailed out buy the government. Either giving you loans at such low interest rates that when things turn around you own assets now worth more than what you paid or government insures your losses.

The leverage barrowing of large amounts of money to buy up large amounts of stocks to be able to resale them at a profit before loans are paid back. Instead of paying back the loans, this becomes collateral for new loans adding to the over all world debt. This becomes a search for quick profits without thinking about long-term consequences.

Structured Investment Vehicle (SIV) are used to buy up CDO’s in which money is barrowed to make payments in installments, where the lender with Government backing will make up any payments the barrower cannot make.

On top of all this Banks pooled mortgage loans to generate mortgage backed securities.

Large investors place investments in a wide diversity of holdings through hedge funds and when all else fails there will be government bailouts.

The need for profits on investment means there is a continual search new source for this surplus generating investments.

Expansion of production is replaced by capital accumulation through expanded investments independent of production.

Politics of government intervention is the only thing keeping this mess going.

Financial institutions expand rapidly growing ever larger as they loan out more money. As expansion continues as financial investments grows rapidly. These financial institutions themselves will barrow money from other financial institutions. Debts of all kinds become very profitable. Soon investments in financial institutions become it’s own ends. Financial institutions continue to expand even when production stagnates. Profits from debt-financed transaction do not put people back to work. Profits lead to still more investments in non-productive speculation. Until a collapse or a crisis the economy is not tied to anything that benefits people. Schemes like leveraged buy-outs, hedge funds and credit derivatives. This leads to quick increase in worth of stocks and dividends production continues stagnate. Production becomes less important than profits. Financial sector debt is the largest debt sector of the economy and is also the fastest growing part of the economy.

Currency becomes a most wanted speculative investment. Traders leverage large amounts of money taking risks in order to win big. Again having nothing to do with creating firms that make things that put people to work.

March 28, 2011

Because banks aggressively offer loans and then sell the debts to others there are profits to be made from failure. People who buy up debts in turn sell these debts until the bank of last resort the government get involved.

March 29, 2011

Mergers and acquisitions of companies by other companies are lead by private investment firms.

No comments:

Post a Comment