John » Sat Sep 20, 2008 1:01 pm
After several years of warnings on the Generational Dynamics web
site, it's now evident to everyone that we're in the midst of
worldwide financial crisis, and that this slide is occurring exactly
With the market for municipal bonds tumbling, cities, hospitals, schools and other public borrowers are scrambling to refinance tens of billions of dollars of debt this year, another sign that the once-safe market is under duress. The muni bond market was hit with the latest wave of bad news Thursday, prompting a selloff that sent the market to its lowest level since the financial crisis.
Yields on 30-year triple-A rated general obligation bonds shot higher to 5.01% on Thursday, reflecting a spike in perceived risk, according to Thomson Reuters Municipal Market Data. The last time those bonds yielded 5% was Jan. 30, 2009, during the financial crisis.
Many municipalities scrambled to convert the debt into other instruments, including variable-rate demand obligations, which are long-term bonds with interest rates that reset periodically. For a fee, big banks guaranteed many of these deals.
"Think of having a 30-year mortgage, and then someone suddenly says you have to pay your house off in five years," said Janis Schmees, executive director of the Harris County Houston Sports Authority,
The market has fallen every day this week, and investors have been net sellers of their holdings in municipal-bond mutual funds for nine straight weeks, according to fund tracker Lipper FMI.
weak stream wrote:I think there are two distinct groups in our society. Those that understand the financial system and those that don't.
Those that do (and are bullish about the markets) are disregarding the degree to which we have surrendered the fundamental concept of private property.
weak stream wrote:And the degree to which economic growth hinges necessarily upon it.
The debts that the government are racking up will cripple future investment and therefore economic growth through both direct taxation and inflation.
Both government debt and inflation violate the concept of private property. Fraudulent accounting practices at banks continue to rip off the investing public as they are lured into further bad investment in these corrupt entities.
"A Critique of Interventionism" by Ludwig Von Mises offers a very detailed explanation as to what the eventual fate of this system will be. This system will be with us until the government collapses.
weak stream wrote:When I say "understand" the financial system I'm referring to specific knowledge of how the transactions are made. For example, how bond auctions are conducted, how the Federal Reserve conducts interest rate controls, how IPO's are instituted as well as how currency swaps between central banks are made and many others. This knowledge and understanding, however, is not necessarily a knowledge of economics. Likewise, a bank robber doesn't so much understand banking but understands guns, time locks, employee schedules and so forth. Much advantage of these various mechanisms is taken by financial intermediaries to secure profits. Thus from an analytical point of view, learning how to "work the system" rather than genuine economic analysis takes precedence. The fact that the rest of society is being effectively "skimmed" is obscured by the accumulation of government debt and inflation. It is an economic ignorant that somehow believes we will not have to pay these debts. From a Generational Dynamics perspective ( and really, at this point, we have only Boomers and GenXers in control) I think Boomers are inclined to fantasy/denial while the GenXers simply don't care how bad this gets as long as they "get theirs". "I'll be gone, you'll be gone" is the mantra of GenX.
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