As the FT notes this morning:
Investors' “relentless” appetite for juicy returns has triggered the biggest boom on Wall Street in complex financial products since the lead-up to the global financial crisis in 2007.
They added:
The boom in complex — and often riskier — deals highlights how buoyant markets and persistent US economic strength are allowing bankers to sell more esoteric products to investors keen to lock in high fixed returns.
The reference to 2007 appears to be entirely appropriate. Back then mortgages provided the supposed security for such bonds. Now the underpinnings are, if anything, even more esoteric. As the FT, again, notes:
Transactions this year have forged bonds that are backed by income tied to the revenues generated by spicy chicken wings, data centres and music catalogues.
The feeling that we are heading for another financial meltdown as a consequence of fools once again parting with their money to buy products that are almost incomprehensible is growing by the day.
How long is it before a quantitative easing programme has to be rolled out again, not to tackle the world's needs, but to save the wealthy from the folly of their greed? I don't know. But it is beginning to feel imminent.
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I’m feeling rather cynical this morning – but cynicism, like anger – is a form of energy I believe so the only problem I have with your post is:
1. It lacks the word ‘another’.
2. Aren’t bailouts always to enable the rich to get their money back anyway?
I cannot honestly think of how any bail out has ever benefited the man in the street. All we get is austerity and high interest rates.
Hi Richard, as always, your predictions are likely to unfortunately come true. Ironic isn’t it, that the ‘free market’ exists for making profit yet it’s socialism that always saves these bust businesses. Seems like socialism is acceptable for the elite but not the working class. If the free market really existed, there would be no QE/bail outs. One word describes this – corruption.
Thank you.
The wealthy love socialism for the rich / corporate welfare. Socialism for me, not for thee.
and many wealthy allow their greed to overtake moral principles.
I seem to remember tales of a medieval monarch who went into ‘The City’ and applied a procedure to the money men more usually associated with Tom Cats.
But Ye Gods why on earth are these ‘derivatives’ allowed, at least if I place a bet on Laughing Boy on the 3.30 at Catford as suggested by Steve Bell I have some idea of the transaction and what it involves but these ‘derivatives’ are barely understood by their creators let alone purchasers.
Masters of the Universe? The ‘Markets’ are more like a back street bookies.
Rachel Reeves thinks the City is our economic Jewel in the Crown. Marinate that folly in your mind for a while.
But of course that is only because in Britain there is nothing else left. We have asset stripped and sold off everything else over the last forty years.
Thank you and well said, John.
As I type my reply, I’m looking at an 8 storey building, between the Barbican and St Paul’s, that has been vacant for 5 years. The foreign banks and money managers that used to lease floors left years ago. One down the road, above London Wall, has been vacant for as many years and has a dozen floors. Not even Big Finance, post Brexit and as multipolarity grows, is working.
They know that if they screw up again and cause enough chaos they will get every penny back plus a nice chunk on top.
Why should they care joe public will be bank of last resort as always.
The Government never ever has any money when it comes to Public Services. But if you need £830bn for Covid, £720bn to bailout the banks, £7.3bn for Banker Bonuses, £12bn for untaxed pensions….
£37 billion for track and trace There is always money.
Don’t mention Trident, HS2, Hinkley C, Sizewell C, Carbon capture…………….
Thank you, Richard.
Funnily enough, I was thinking about that over the week-end and recalled two instruments “touted” to investors, one linked the appearances by Nessie and the other a correlation between the Swedish and Thai football leagues. Neither was from my employer(s). If that’s not casino / socially useless banking, what is?
I recently saw an observation (I forget where) that greed is a mental illness, akin to the hoarding obsession that some people suffer from. I tend to agree – the wealthy appear to be obsessed with hoarding money, regardless of need, or whether it actually improves their lives.
I think at some level it may be
Matched with paranoia about losing what has been collected
Perhaps then we should show them that they aren’t paranoid – and get Govt to tax them even harder, after restricting their means to move the money out of the Country!
I recall the end credits in the movie The Big Short that showed these esoteric financial instruments were already being devised again, the very same that caused the crash in 2007! They and we’ve learnt nothing.
Add to this the Trump regime proposal to bail out the big bitcoin investors – I suspect that, if that transpires, it will have knock-ons that will impact us in a not good way.
https://youtu.be/qWANiC28M8o