reply to post by mybigunit
MBU, the markets WILL NOT hold.. the surge on the DOW and other world markets was led by financials, which surged to much to fast. There will
obviously be retreating as people jumped in "for a deal" and it does not reflect the health of the industry. Small surge, for the time being, but
all in all will make little difference.
reply to post by Maxmars
Democracy was an expirement on Enlightenment ideologies. Once we forget what those ideologies where, then there is no longer a need for Democracy, as
Democracies purpose and function was to represent and protect those ideas. Essentially time destroyed this expirement, greed, corruption, and the
natural process of Humanity to consolidate wealth and power, all led to it's downfall.
"Who gets to lead and why?" .. Who ever has the power, as that is the only course Nature approves of.
Now as for layman's terms..
I would say your close, enough anyways, for the topic at hand is incredibly complex.
Essentially when an investor buys a share in a company they are "owning" part of this company. They are not loaning money to the institution to
"make their money grow", the entire purpose of stocks is to collect Dividends while the stock increases, but it only increases in respect to how
much equity the companies, through profits, accumulate.
The Companies use Capital and Profit, minus whats given in Dividend, to invest in other companies, via portfolios, and to advance their own method of
generating wealth. For banks this means loaning money out for interest via loans, credit cards and Mutual Funds, 401(k) etc.
The Companies produce profit, and give money to share holders.
The companies don't produce profit the share holders get nothing, and most likely the stock "drops".
That is the case with the two big F's here.
Bond holders have all their debts secured, and when a company liquidates bond holders are the first to be paid off. This is because Bonds are "low
risk investment" with a structured interest rate over a certain period of time.
Countries use bonds as investments to insure their funds meet expected inflation, maintaining wealth status as compared to other countries, this is
why China invest so heavily in American markets. This is also why America is doing every thing it can to secure our own Bond markets, because not
only do companies rely on them to survive and operate, ironically so does our Government, which other countries buy.
When you hear "national debt" and how we spend "more then what we have" .. we as a Government sell Federal Bonds mostly to corporations and other
countries to pay for the remaining balance on our balance sheets. When we say taxes pay interest, Federal Bonds have interest that MUST be paid, and
the reason we CANNOT default on our interest payments is security in the bond markets would plummet, and no one would invest in our government meaning
we could ONLY spend what money we have. Essentially destroying us..
Most bonds sold by the Federal Government are 1yr - 10yr notes.
Which is why the Fed is so willing to hand a blank check over to Fannie and Freddie because the potential losses in a unsecured bond market at the
federal level would destroy this country.
This is also why the Soviet Union collapsed, and America did not, we had a much, much larger base of investors who would purchase American Debt..
mainly Britain, Germany, and Japan. Now China is our biggest purchaser.
And all this with fiat money that is little more than 'make believe'?
A Fiat is a command, order or explicit instruction. A Fiat Currency is a currency that has a demanded value, that is to say, "You will except this
in exchange for goods and services". So long as you can actually trade for goods and services, with your money, it has value. It's value is
measured by "How much can I get with $1" .. If one year $3 buys you a gallon of gas, and the next it takes $5 it means your currency's value drops.
Still worth something, still valuable.
Gold works the same way, the misconception that currencies MUST be backed by "something" is .. odd. People still have to accept the Gold for goods
and services, just like a typical Dollar. And with a Dollar you can still purchase it's value in Gold.. the weaker the dollar, the less Gold. In a
Gold Standard, the more Gold one nation has, the less the ounce can buy, supply and demand, if everyone has it, you must acquire greater and greater
quantities.
So essentially, in our markets, 1% of the population would have all the Gold, and we would scrounge around for silver and copper.
Hope that's Layman's enough for you..
kosmicjack:
Some people who purchased the Bonds want them re-paid for fear the Gov or the companies won't pay them back... Of course, that cannot happen as ..
well the two companies wouldn't be worth anything..
