How to invest and help no one but your self:
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.
An informal agreement between two or more parties under which payments, or payoffs, are to be made between the parties often on future investments that have not been secured yet. The promise of repayment on ensuing values of the fundamental variables of the agreement estimated amount of repayments and the nominal or face amount that is used to calculate payments are also informal and left open. Many investors will set up a derivative contract with another investor on debts outstanding to speculate on the value of the underlying asset, betting that the party seeking insurance will be wrong about the future value of the underlying asset. Speculators look to buy an asset in the future at a low price when the future market will be price is higher, or to sell an asset in the future at a high price according to a derivative contract when the future market price maybe lower. It is hoped to be able to take advantage of differences between two or markets
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.
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.
Speculating on high-risk investment with a strong probability of default, thus investors demand higher returns on investments.
Money Market Accounts
An investment that is set to offers a higher rate of interest in exchange for larger-than-normal deposits.
Currency speculation involves buying, selling and holding currencies in order to make a profit from favorable fluctuations in exchange rates.
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 but 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 borrowing 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 borrowed 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.