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Why shouldn't the government openly purchase securities such as equities or derivatives ?

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posted on Feb, 6 2010 @ 01:30 AM
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God I just had the best idea ever.

This should have some interesting responses.

Here is what we do.

The government just starts openly purchasing futures contracts and securities. Just like taking all of TARP, TALF, whatever and just blowing straight through the market.

Before you start to curse my name, this is the same thing that happens with banking interventions in FX Markets. If you have ever seen witness to price action like you see in currency markets you know what I am talking about when I say intervention. Although FX is unregulated, just bare with me.

Now govt. says they plan on this intervention. Everything gets immediately bought up. Not really so much immediately from the government, but from everyone, retail to big money players on this news. We are probably talking big time volatility here at the beginning then things begins to settle down - then comes the period where people are doubting the intervention etc.. price will stabilize at some point is what I am trying to say. But think, everyone's wealth has basically just skyrocketed because of this news. Short sellers are ****'ed, but you have to remember you maximum theoretical loss is unlimited when you are a short seller, but that is the market, deal with it.

Now the govt. has all these TARPS and TALFS money etc. like over 5 Trillion I am guessing and just injects the hell out of the markets over the period of many years (at our own discretion). Now here's how we (the taxpayer) make an assload of money.

Knowing all of this, we just issue super high yielding bonds in long maturities in anticipation and we continually keep the mill spinning. Everyone will buy these up instead of making 8.5% average with crazy up and downs of the boom/bust economy, but we still benefit because we are making compound interest on our original odd amount of trillion dollar investment in the market at a steady pace as we see fit because we control trends with all the money.

So is there anything really wrong with this? I think this would also increase competition because there would be plenty of free money around for venture capitalists etc.

This would totally turn the equity markets into something fierce for a while, but after time I really believe it would shake out and new valuations would take place and there is always a seller for a buyer on most all levels etc.

But if we (tax payers) were REALLY RUNNING THE SHOW and we could GET PAID like Uncle Ben wouldn't you want to just hatch this scheme tonight?

Makes sense to me





[edit on 6-2-2010 by GreenBicMan]

[edit on 6-2-2010 by GreenBicMan]

[edit on 6-2-2010 by GreenBicMan]




posted on Feb, 6 2010 @ 02:52 AM
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Yup, the government should buy all bad investments made by fools that go bad.

The government should pay off all the gambling debts of ordinary people.

But what will they pay for it all with ?



posted on Feb, 6 2010 @ 02:52 AM
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The bonds we issue at long maturities man



posted on Feb, 6 2010 @ 01:17 PM
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reply to post by GreenBicMan
 


There were a lot of Constitutional questions regarding "bailouts" back in 08.. naturally, eventually ignored.. but there being nothing stated specifically that the Government can or cannot own a corporation then technically, there is nothing to stop the Government.

It would naturally be a huge conflict of interest.. and, it would naturally unbalance the economy in general.. when a revolving piggy bank can buy anything under the sun, it can hostile take over corporations simply by reducing the value of the currency.

It also keeps dead corporations alive.

But anyways, the only entity NOT allowed to purchase .. anything.. except bonds, is the Federal Reserve. The Reserve being a panel, cannot legally own anything, because technically it isn't an entity capable of ownership. The only exception would be Tbills.

You will notice that the Fed produces small LLC corporations (because LLC's prevent corporate income disclosure.... aren't these guys crafty?) such as the Mary Lane I-III etc (all LLC's) to purchase massive amounts of equities, bonds, debts, CDO's etc.. Because they are LLC's the bankruptcy laws allow it to go under, while keeping the handler safe. Everyone dumps the garbage in the bin, they toss the bin out the window and no one is effected by it.

That being said, the Treasury (who has to do the actual bailing out because the Fed cannot) openly admits to supporting the economy, the markets, etc .. although they claim to reserve these rights for emergency uses only.. anyone watching the DOW on Friday will see what an "emergency" is to the Treasury.




It's also Fascist. If that bothers anyone.



posted on Feb, 6 2010 @ 01:23 PM
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reply to post by GreenBicMan
 


Why shouldn't the government purchase futures and derivatives? Because they are completely fabricated betting tools with nothing to back them up.

Derivatives are are not even backed up by the brokers that sell them.. They don't have the money to cover them all. There are 4 QUADRILLION dollars worth of derivatives in the world.

The whole thing is the definition of a ponzi scheme... The brokers sell the derivatives without having the money to back them up, then use the money from the sale to leverage it 10 to 1 or more in order to gamble on other high risk crap... which they also buy credit default swaps for to back them up.

Derivatives were outlawed until about 20 years ago for a good reason. Don't feed the Gremlin, it's already after midnight and its too late to save ourselves.

Even paying credit default swaps 100 cents on the dollar in the bailout was the biggest swindle in history. The credit default swaps were made up out of thin air, and the firms never even had the money to back them up. That's why it was going to cause the whole domino effect to begin with.

Like I said, don't feed the monster. It's all a scam. Literally.

[edit on 6-2-2010 by seattletruth]



posted on Feb, 6 2010 @ 01:26 PM
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reply to post by Rockpuck
 


Friday IMO was a case of people covering right when Dan Hoenig was speaking about interest rates - I made a post in the market thread, but it did not involve the PPT so of course it was overlooked.

I dont think there was anything wrong with Friday's action - thats just me though, and going into the weekend no one wanted to be short when PIIGS struck that deal with Eurozone, if that does indeed happen - We have seen that price action many many many times before on Friday

Regarding this topic I really do not see the downside to intervention in markets if all news is disclosed before it happens - unlike banking interventions - and I am not worried about being labeled anything in particular to accomplish it - it's prob. what is happening in some form anyways without our knowledge - might as well be open about it IMO



posted on Feb, 6 2010 @ 01:28 PM
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reply to post by seattletruth
 


You are using these terms too loosely.

Derivatives = options, futures contracts, etc - not just Credit Default Swaps (which I know nothing about)

They are backed by the underlying security



posted on Feb, 6 2010 @ 02:11 PM
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If you took 100% of everyone's salary and 100% of all company profits, so no one even had enough to buy one loaf of bread each year THROUGHOUT THE ENTIRE WORLD FOR EVER, you would ALMOST (within a a percentage point or two) but not quite have enough to service the derivative debt without even touching the actual debt itself.



posted on Feb, 6 2010 @ 02:17 PM
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reply to post by aristocrat2
 

That debt number you hear is make believe.

Its like me controlling 1,000,000 EUR/ USD with 1,000 in my trading account.

They are just taking the bigger number and then the media displays this number and people gawk, but it's just for headlines.



posted on Feb, 6 2010 @ 02:23 PM
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reply to post by GreenBicMan
 


Yes, they're backed by the underlying security.. But the derivative itself does NOTHING to contribute to a growing economy. It does NOTHING but give speculators another way to make money. That does NOT help the economy at all.

Buying shares of a company that is publicly traded actually gives that company money to expand with, which creates more jobs, etc. Derivatives do nothing that benefits anybody except for those speculators who need more and more ways to make high risk bets... That's all they are.

The derivatives bubble was the SOLE REASON that Wall street was able to hold the country hostage for the bailout after the suicide bankers committed financial terrorism.

If it wasn't for the credit default swaps (not to mention the mortgage backed securities), the brokers would have simply just failed... No big deal.

Watch this video to understand credit default swaps better, and you will understand how the public was defrauded and swindled. This video was posted Oct. 18 2008, right during the crash.







[edit on 6-2-2010 by seattletruth]



posted on Feb, 6 2010 @ 02:24 PM
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Originally posted by GreenBicMan
reply to post by aristocrat2
 

That debt number you hear is make believe.

Its like me controlling 1,000,000 EUR/ USD with 1,000 in my trading account.

They are just taking the bigger number and then the media displays this number and people gawk, but it's just for headlines.


Wow, you live in an amazing world, filled with prancing pink ponies and happy people. I wonder, is there space ni there for a few more of us?

(Maybe you should ring the bell for your nurse, your medication is clearly not working and you obviously need a higher dosage.)



posted on Feb, 6 2010 @ 02:24 PM
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The question is why the government is taking our money for anything other than paving roads and military defense.

The rest should be left with us to do as we please in a free market economy.
Anybody disagree with that?



posted on Feb, 6 2010 @ 02:25 PM
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reply to post by seattletruth
 


No, you are not entirely correct.

Derivatives give people a way to manage risk, this also brings in speculators as well.

Why do you think countries hedge against their oil etc in crude contracts? (CL - Light Sweet Crude) traded on the CME (edit : NYMEX)? We are talking the most liquid market in the world, how else would suggest countries handle this situation?

[edit on 6-2-2010 by GreenBicMan]



posted on Feb, 6 2010 @ 02:26 PM
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reply to post by ATS4dummies
 


No, I want that to happen, in fact I want us to profit on it and receive money every month.



posted on Feb, 6 2010 @ 02:26 PM
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reply to post by aristocrat2
 


Yeah it is, and I have plenty of pills, thanks



posted on Feb, 6 2010 @ 02:29 PM
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reply to post by seattletruth
 


You are not understanding me. I think things should fail as well - I don't care about CDS's and MBS. I am talking about straight government intervention into US securities markets that public also have a share in.



posted on Feb, 6 2010 @ 02:37 PM
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Well for starters the government is bankrupt and couldn't buy equities unless they borrowed the money from China first, and how long do you think the gov could keep bidding up the market? You're imagining an infinite supply of money in a finite economy and that's pretty much the ponzi scheme that just collapsed last year.

Looks good to you when you're already positioned to take advantage of a market rally, but the market is a zero sum game and whatever you take as profit is booked as a loss to whoever was on the other side of your trade. And while (some) traders are getting rich off the market manipulation, mr and mrs America will never see any of that wealth. For that reason I fully expect the government to love the idea. Give Ben and Timmy a call.



posted on Feb, 6 2010 @ 02:40 PM
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reply to post by mythatsabigprobe
 


I've tried to get picked up by GS and the likes already and it never happened. You need a PhD in mathematics or something like that.

What I am talking about is us the citizens getting paid like Big Ben does. I want us to earn income from the cycles of the stock market.



posted on Feb, 6 2010 @ 02:46 PM
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reply to post by GreenBicMan
 


You haven't explained how that would happen. The gov can't bid up prices indefinitely and by the time the average person tried to get on board, they'd get screwed in the huge market crash that's sure to happen.



posted on Feb, 6 2010 @ 02:48 PM
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reply to post by mythatsabigprobe
 


If Big Ben came out and said this was going to happen the market would rally big big time without the intervention in the first place.

That takes care of making everyone rich on the short term.

Then government starts selling long maturity high yielding bonds in anticipation of this - everyone buys in because why sit through the turmoil of financial markets when you can get 6-7% yielding 30 yr bonds?



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