much they can earn on their investments, simply explaining it, let’s take the example of
America, America has about 5 trillion dollars of investment money, that means that
5 Trillion dollar has to be invested somewhere, in order to generate return, meaning about 500
billion dollars a year. is the world capable of generating that much value in a single year? And
taking compounding growth into consideration, 550 billion dollars second year?
So in order to generate that type of return the so called intelligent fund managers and the likes
have to take unnecessary risks in order to generate that money. Have you ever wondered come
there are no recessions, ever till 1821?
There was a commodity shock in the that year that lasted 30 years, after that duration of
recession and depressions have been getting smaller and frequency has started increasing.
Can you recall major problems of over capital in the current economy, 1997, no matter what
the govt or the intelligent TV commentators tell you, it was a case of growth vs., risk,
corporations and funds invested huge amount of money in south Asian economies like
Thailand, Malaysia and likes, and when the returns generated was not good enough, they
pulled that money, resulting in super shocks to their economy, that was one of the first warning
sign to the world which no one paid any attention to. Then it was the dotcom bubble to 2000,.
Too much money being thrown by venture capitalists and likes in unsustainable business ideas,
then 9/11 happened, and us govt in order to boost the economy, did something that should not
have been done, it lowered the interest rates to dirt cheap, which resulted in unleashing to
tremendous liquidity in world markets as well as huge amount of capital available to the
American public. Which had to be invested somewhere, which they found in local property
market, because it was shown to the public that historically, real estate prices rarely come
down, what was not shown to the public that historically people did not had 5 trillion dollars to
invest which they don’t know where to invest. So greedy financial institutions in order to show
growth did something very similar to what they have been doing, boost prices of something
that is in limited supply by buying at whatever price they can get, only in this case the buyers
were the sub prime people who couldn’t afford huge villas and apartments, but bought it
anyway, and why shouldn’t they are not the ones who is buying because to buy you need to put
in your money which they never did, it was the money of the financial institutions which was
buying the properties for them and they never really cared about credit worthiness or credit
scores or anything like that because all they wanted was a promise of the bearer that they
would pay interest, and when they couldn’t even pay the interest they took it back, sure they
can “foreclose” and what do the sub prime people have to lose, nothing, they simply enjoyed
their stay in huge villas and bungalows just by paying the interest. It was never their money to
begin with. It was your money, the people’s money that crashed the market. Who lost the
money eventually; remember likes of Lehman brothers or JP Morgan or Wachovia or
freddiemae or xyz.
0 comments:
Post a Comment