Most Excellent Stock Market Analysisgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
for a very insightful analysis about the extremes present in the stock market. The charts sum it up well.
Does anyone know of any sites covering the few bank runs which took place after the 1987 stock market crash? I seem to remember some lines formed at privately insured banks in Rhode Island? and one other state.
The crucical diffference between today and 1987 is the growth of derivitives, to an inconceivable level of $175 TRILLIONS. Back in 1987, the FED was able to flood the financial system with credit and stave off any further crisis. But if they try that tack again, it would lead to instant hyperinflation.
Because of these differences, I am thinking more and more that the reaction times will be much swifter than in the 1929 crash. Any bank run televised on the evening news will trigger a mass flight to cash. The goverment will have no choice but close the banks, and quick. With the financial markets paralyzed, can the printing press be far behind?
-- Sure M. Hopeful (Hopeful@future.com), February 10, 2000
-- (firstname.lastname@example.org), February 10, 2000.
TEXT-Greenspan's testimony on derivatives
WASHINGTON, Feb 10 (Reuters) - The following is the full text of Federal Reserve Bank Chairman Alan Greenspan's testimony on Thursday before the U.S. Senate Agriculture Committee on over-the-counter derivatives markets and the Commodity Exchange Act:
"I am pleased to be here today to underscore the importance of this committee's efforts to modernize the Commodity Exchange Act (CEA) and to express my support for the recommendations for amending the act that were contained in the report by the President's Working Group on Financial Markets entitled Over-the-Counter Derivatives Markets and the Commodity Exchange Act.
The Need for Legislation Over-the-counter (OTC) derivatives have come to play an exceptionally important role in our financial system and in our economy. These instruments allow users to unbundle risks and allocate them to the investors most willing and able to assume them. A growing number of financial and nonfinancial institutions have embraced derivatives as an integral part of their risk capital allocation and profit maximization. In particular, the profitability of derivative products has been a major factor in the significant gain in the finance industry's share of American corporate output during the past decade--a reflection of their value to nonfinancial industry. Indeed, this value added from derivatives itself derives from their ability to enhance the process of wealth creation throughout our economy. In light of the importance of OTC derivatives, it is essential that we address the legal uncertainties created by the possibility that courts could construe OTC derivatives to be futures contracts subject to the CEA. The legal uncertainties create risks to counterparties in OTC contracts and, indeed, to our financial system that simply are unacceptable. They have also impeded initiatives to centralize the trading and clearing of OTC contracts, developments that have the potential to increase efficiency and reduce risks in OTC transactions. As I shall discuss more fully later in my remarks, rapid changes in mmunications technology portend that time is running out for us to modernize our regulation of financial markets before we lose them and the associated profits and employment opportunities to foreign jurisdictions that impose no such impediments.
To be sure, the Congress and the Commodity Futures Trading Commission (CFTC) have taken steps to address these concerns about the CEA. The Futures Trading Practices Act of 1992 gave the CFTC uthority to exempt OTC derivatives from most provisions of the act. In early 1993 the CFTC used that authority to create an exemption for OTC derivatives that reduced legal uncertainty for a wide range of transactions and counterparties. Unfortunately, some subsequent actions by the Commission called into question market participants' understanding of the terms of the 1993 exemption. Now, under the leadership of Chairman Rainer, the Commission is considering reaffirming and expanding the terms of the 1993 exemption. Nonetheless, even with such an important and constructive step by the Commission, legislation amending the CEA would remain critically important. The greatest legal uncertainty affecting existing OTC transactions is in the area of securities-based contracts, where the CFTC's exemptive authority is constrained. Furthermore, as events during the past few years have clearly demonstrated, regulatory exemptions, unlike statutory exclusions, carry the risk of amendment by future Commissions.
-- Ray (email@example.com), February 10, 2000.
With the financial markets paralyzed, can the printing press be far behind?
This is the big reason that money coming out of the stock market will likely go into GOLD and other tangibles! There is no way to avoid both hyperinflation and a market crash in my opinion. When you see stocks and gold clearly moving in opposite directions...the end is near.
-- Slobby Don (firstname.lastname@example.org), February 10, 2000.
Don, I see gold moving up and stocks moving down. Hmmm.
-- Mara (MaraWayne@aol.com), February 10, 2000.
Well....this ol' hen don't see nuthin'!! Will sumbuddy please 'splain what that feller above is sayin'?? I still have made no moves to go out of cash position. Chubby Hubby and I both said, we have got to get our money out and working again. Yeah, right! Then another week goes by, and another week, and we drag our feet still further. But I don't have a clue as to this dirivative thangie. I watch the market like a hawk and bubble.com just cannot stay up there forever. But I guess its like a hot air ballown. As long as you turn on the gas/heat it will rise. And the $ coming in from the 401s and other payroll deductions and the euphoria of the mkts just keeps people investing. The market itself is a good definition of inflation....too much money chasing too few stocks. One thing you can bet on, when it falls it will be heard around the world! Taz
-- Taz (Tassi123@aol.com), February 10, 2000.