Greenspan’s Stunt Show!
Quid si nunc cœlum ruat?
– #shorts upon request –
When you hire a nanny, the question you ask yourself is, 'What's best for my precious child?' And do you really want someone who feels that your motive in life is to minimize the amount you spend on your child? (Janet Yellen)
Obviously, this edition is running a bit late on echoing the most recent negotiations on a revised US Debt Ceiling[1]. However, anticipating future talks of such kind, this brief writing is certainly coming in much too early or at least right in time.
At any rate, such events and the like might rather serve as a Camouflage, for nobody actually seems to care about surging National Debt Levels[2] around the World. In terms of Life Achievement, Politicians tend to accumulate Debt as easily as CEOs seem to favour Massive Layoffs.
What’s so special about the United States of America? Well, which country on Earth has been trying to master Atlas'[3] or if you will, Sisyphus'[4] eternal Burden, having eventually run up a higher Bill than anyone else?
Back to Mammon[5]: The basic idea spurring this short essay in view of such a comprehensive subject matter, claims no inclined need to be tapping into Classic Economic Models, for historically, homo economicus has experienced them all. Atlas shrugged[6].
What else?
Neither a Synopsis[7] of Virtuous versus Vicious Cycles of Economic Growth and Taxation is among the points being made.
Nor the utility of Cash Advances[8] and Municipal Loans[9] for Governmental Purposes of Debt Easing, or Measurements[10] of Income (In)Equality in terms of Income Distribution[11] on Taxation is being of interest in this context.
Nonetheless, one might be discovering various incentives rendering an approximation to investigating the Causes and Effects of Government Debt exerting pressure on one’s Personal Standard of Subsistence.
There is a lower-middle class joke about the schoolboy at Eton who was told to write a composition on poverty. He wrote: "The father was poor. The mother was poor. The butler was poor. The cook was poor. The chauffeur was poor. ..." People have a tendency to mock enviously at the money difficulties of those in financial brackets above their own. But the insurance underwriter at Lloyds (admission price £ 75,000) who has to pay out on a bad run of claims, and so has to trade in his Rolls Royce for a Jaguar and holiday in Marbella instead of Montego Bay, feels the strain of his deprivations as keenly as the next men. We are all fellow sufferers. (Martin Page, The Company Savage)
Despite the Polarity and Variety of Political Regimes, Econo-Political Practices have never sufficiently or successfully approved of Econo-Theoretical Prescriptions having mostly featured e.g. Keynes‘[12], Friedman‘s[13] or Laffer‘s[14] incentives ... ideas ... ideologies.
Instead, how about asking Paul[15] for californication ... sorry ... clarification on how to interpret the curses and blessings of Money as Debt?
For one thing, how should more than 300 million US People forming different kinds of sub-economies perform like a Creditor's Mathematical Clockwork on interest rates?
First and foremost, Economic Growth Hikes[16] can't possibly ever outperform Debt Interest Rates or Interest Rates on Savings and Equity.
Those distinguished Folks capable of conducting Large-Scale and Long-Term Investments in US Government Bonds[17] at attractive Interest Rate Levels, may couple exponential Asset Growth with surging US Government Debt. This correlation has significantly accounted for the Rich-Poor-Gap‘s[18] continuous spread in the United States.
Against this backdrop, e.g. $ 1,000,000 being invested in US Government Bonds at a fixed annual interest rate at 4 percent over a 10 year term, yield $ 1,480,244 – i.e. a surplus of $ 480,244 or annual revenues of $ 48,024 over a decadic period – Snap[19] ... just like that!
An increase in the debt ceiling should be accompanied by fundamental policy reforms, substantial budget savings, and a strong enforcement mechanism to tie the hands of any future Congress. (Jerome Powell)
Mounting International Government Debt certainly also exerts escalating impetus and momentum on Global Economic Growth, inevitably imposing tremendous pressure on Mankind to continue exploiting Fossil Fuels, Natural Resources and other Commodities, synchronously aiming at meeting the Global Industry‘s (Real Economy), Financial Sector‘s (Stock Markets) and Digital Economy’s and Virtual Currency Sector’s objectives.
Would that’ve suggested a partially different view on the Origins of Surging Climate Change[20]?
Mother Earth would(‘ve) surely welcome(d) a Global Debt Relief Programme[21], don’t you think?!
Now, how about the Federal Reserve’s Chair(wo)men?
Since Greenbaum’s[22] ... sorry ... Greenspan's[23] retirement, his successors' Information Policies, Dialectics, Rhetorics and Semantics have obviously varied in dealing with this uneasy issue. Otherwise, some of them would've neither made it an issue nor let it be turning into a precarious one.
How should a Government heading the International Reserve Currency and a Federal Reserve[24] possessing the Money Printing Press be possibly be exposed to bankruptcy?
Moreover, ain‘t the World Economy quite dependent on the United States[25]?!
What would happen, if the United States went bankrupt?[26] – definitely misses the point by far.
How about recalling what happened after the Great Depression[27] or Black Monday[28]. Recollecting the long-standing Global Aftermath to Greece's, i.e. an Economic Gnome's Government Debt Crisis can neither suggest asking such a silly question, nor attempting to phrase Self-Fulfilling Prophecies wrapped in Half-Truthed Queries.
Ready for an Excursus?
By the way, do you know, what the Subprime Mortgage issue[29] (2007-2010), European Debt[30] (2009-2010) and Global Financial crisis[31] (2009) as much as the Great Recession[32] (2007-2009) have in common with Algorithms, Butterflies, Goldbugs, S & P, Moody's and Fitch?!
An algorithm is a mathematically formulated procedure, used to perform a digitally enhanced computation on delivering outcome in a specific context.
Put simple, according to chaos theory the Butterfly Effect[33] signifies something nondescript or small at best, bearing potential of exerting colossal impact on everything and everyone else.
In a nutshell, Gold Bugs[34] are investors believing in a steadily inclining price of Gold.
S & P[35], Moody's[36] and Fitch[37] issue Credit Ratings of Corporate and Governmental Entities to their clients' and their own advantage.
In the wake of the US Housing Bubble[38], many communities of Global Investors believed in High Yield Junk Bonds[39] on the US Real Estate Market. Whereas other packs of International Speculators cherished faith in Greek Federal Bonds[40].
The ultimate purpose of economics, of course, is to understand and promote the enhancement of well-being. (Ben Bernanke)
Rating Agencies played a key role in both cases, i.e. in terms of awarding junk bonds on the US Real Estate Market promising assessments, in lockstep with literally appreciating Goldman Sachs'[41] job of cooking the Greek government's books as a stepping stone for meeting the EU‘s Austerity Measures – granting Greece membership to the EU Monetary Union – supporting worldwide investor interest in Greek Federal Bonds as well.
Back in the day, Greece was also considered among the most intriguing global tax havens[42].
Coincidentally, General Motors'[43] gradual decline had already led to massive lay-offs, marking one of the unexpected tipping points of casualties contributing to the subprime mortgage crisis' escalation.
Eventually truth emerged, Greece's government had built an Eiffel Tower on quicksand, i.e. leaks finally unmasked the scope of corruption[44] and financial window dressing having supported the Great Greek Gig.
In retrospect, both past events fortuitously signify the European Debt and Global Financial crisis' as well as the Great Recession's points of origin.
Hype and collapse have always proven two sides of the same coin, bearing wishful thinking coupled with self-fulfilling prophecy and inevitable disillusionment.
Last not least, at that time financial analyses, trading and rating had already introduced a significant reliance on systemically pivotal, algorithmic[45] patterns, having conditioned market participants to prevent themselves from understanding their digital tools and employing their Common Sense more scrutinously.
The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default. (Alan Greenspan)
Originally starting out as a staged self-referential concept of prolifically self-replicating[46], algorithmitised cycles of advertised offer and primed demand, these self-fulfilling prophecies face the earthly, i.e. natural limits of manpower, fossil fuels, raw materials and other commodities. Autocatalysis[47] of such kind, inevitably yields such a Bubble‘s implosion[48] having fed on the Real Economy, the latter also being destined to collapse.
Drucker’s presumption, The New Realities[49] had already introduced a Raw Materials[50] and Industrial Economy[52] having become uncoupled, lacked lexical precision[53], for both have always embodied the Real Economy. More specifically, manufacturing semi-finished goods and end products bear on manpower, fossil fuels and raw materials.
At the time of Drucker’s aforementioned publication, the Finance Sector seemed to have detached itself from the Real Economy insofar as the Bretton Woods Agreement[54] had already been repealed having no longer required an exchange of Gold for U.S. currency.
Assuming the Real Economy and Financial Sector having gained autonomy from one another recommends, reflecting on the extent to which the digitisation[55] of businesses, governmental, public and social services has brought about a third entity having gained self-propelling momentum, i.e. the Virtual Economy, particularly the algorithmically biased Financial Sector and Virtual Currency Market[56].
What's the subject of life - to get rich? All of those fellows out there getting rich could be dancing around the real subject of life. (Paul A. Volcker)
The Virtual Economy and Financial Sector undoubtedly depend on the Industry as much as the latter bears on the Raw Materials Economy, itself relying on Earth’s natural resources. Wag the dog! Over the past three decades – especially reviewing the internet’s emergence taking effect in the mid 1990s – this bottom-up cause-effect relation has (virtually) been turned upside down.
How about investigating the Systemic Origins of Global Financial and Economic Crises (2007 – 2010) against the following abstract’s backdrop of Financial Instruments, Vehicles and Practices:
AI in Financial Trading[57] – Financial Stability[58] – Systemic Risk[59] – Rating Agencies[60] – Money as Debt[61] – Debt Equity Swap[62] – Global (Mutual) Indebtment[63] – Shadow Banking[64] ––– Ethically Disputed Business Practices[65] of Creative Finance: Off-Balance-Sheet Financing[66] – Off-Balance-Sheet Entities[67] – Single Purpose Vehicle[68] – Third-Party Technique[69] – Private Public Partnerships[70] – Articles Of Incorporation[71] – Asset-Backed-Securities[72] – Bearer Security[73] – Collateral[74] – Defeasance[75] (related: Off-Balance[76]) – Equipment Certificate Trust[77] – Exchange Of Assets[78] (related: Nine Men's Morris[79]) – Financial Leverage[80] (related: Gearing[81]) – Golden Parachute[82] – Interval Measures[83] – Leveraged Buy-Out[84] – Leveraged Lease[85] – Macrs (Modified Accelerated Cost Recovery System)[86] – Monte Carlo Simulation[87] – Novation[88] (related: Legal Defeasance[89], Off-Balance[90]) – Prepack[91] (Prepackaged Bankruptcy) – Registrar[92] (related: Freddie Mac[93], Fannie Mae[94], Subprime Mortgage Crisis[95], European Debt Crisis[96], Global Financial Crisis[97], Global Economic Crisis[98]) – Securitization[99] (related: Multiple Credit Formation[100]) [related: Asset-Backed-Securities, Collateral, Defeasance, Exchange Of Assets, Financial Leverage (Gearing), Leveraged Buy-Out, Leveraged Lease, Novation (Legal Defeasance), Prepack (Prepackaged Bankruptcy)] – Workout[101] (Workout Agreement)
Back to the US Debt Ceiling: US Government Politicians and Business Leaders have always feathered their Country’s (own) Nest[102], having endured a long-standing History of Financial Crises[103].
Other studies of new suburbias have disclosed that the residents are ripe for any goods sold to them as keys to social acceptance. And studies of people who have achieved a toehold in the white-collar group reveal that these people like to be told that they now "deserve" the finer, more solid material things in life, and that for them buying the "right" thing has become a "birthright." When people borrow money to achieve all this birthright, they should be assured that by going into debt they are "on their way up." (Vance Packard, The Status Seekers)
Instead, one ought to be gaining sufficient insight into and understanding of America's Internal[104] and External[105] Creditors – especially Chinese and Japanese Lenders[106] – Stealthy Shadow Bankers[107], Hedgy Black Rockers[108], Enigmatic Cryptonomists[109] and last not least, Rating Agencies such as S & P[110], Moody's[111] and Fitch[112].
That’s pretty much it – A Penny for your Thoughts!
Frame of Reference
[1] Debt ceiling: Senate passes debt limit deal to avert default | CNN Politics ––– Here's what's in the debt ceiling package | CNN Politics ––– Republicans intensify their assault on city governments (economist.com) ––– What's in US debt ceiling deal and who won? - BBC News
[2] List of countries by government debt (Wikiped) ––– List of countries by external debt (Wikiped) ––– Countries Compared by Economy > Debt > Government debt. International Statistics at NationMaster.com ––– Countries Compared by Economy > Debt > External > Per $ GDP. International Statistics at NationMaster.com
[3] Atlas (mythology) (Wikiped)
[6] Atlas Shrugged : Free Download, Borrow, and Streaming : Internet Archive
[7] What Is the Evidence on Taxes and Growth? | Tax Foundation ––– Economic Theory: Virtuous Economic Cycle and Vicious Economic Cycle Theory - Working Paper, Med Jones - International Institute of Management (iim-edu.org) ––– Catherine Mann, Going for Growth - Breaking the Vicious Cycle (oecd.org) ––– Effects of Income Tax Changes on Economic Growth (brookings.edu)
[8] Cash Advance: Definition, Types, and Impact on Credit Score (investopedia.com) ––– related: Cash Basis Loan Definition (investopedia.com) ––– related: Overdraft Explained: Fees, Protection, and Types (investopedia.com) ––– related: Line of credit (Wikiped)
[9] The “Privatization” of Municipal Debt (brookings.edu) ––– related: MRSC - Types of Municipal ––– related: Debt Risky Business: Bank Loans to Local Governments | Stanford Institute for Economic Policy Research (SIEPR)
[10] Gini coefficient (Wikiped) ––– Gini index | Data (worldbank.org)
[11] Household income in the United States (Wikiped) ––– Personal income in the United States (Wikiped) ––– Measuring Distribution and Mobility of Income and Wealth | NBER
[12] What Is Keynesian Economics? - Back to Basics - Finance & Development, September 2014 (imf.org)
[13] Friedman Doctrine - Overview, What It Says, Influence (corporatefinanceinstitute.com)
[14] Laffer Curve: History and Critique (investopedia.com)
[15] Money as Debt - Full Documentary - YouTube ––– Full Transcript: Money As Debt - Full Length Documentary – The Singju Post
[16] Gross Domestic Product | U.S. Bureau of Economic Analysis (BEA) ––– United States Gross National Product - 2023 Data - 2024 Forecast (tradingeconomics.com)
[17] United States Government Bonds - Yields Curve (worldgovernmentbonds.com)
[18] Wealth inequality in the United States (Wikiped)
[19] The Fonzarelli Snap - YouTube
[20] Soothe the Lion‘s Tooth: - Cal Caleido’s Substack
[21] Multilateral Debt Relief Initiative - Questions and Answers (imf.org)
[22] Norman Greenbaum - Spirit In The Sky (1970) - YouTube
[23] FRB: Speech, Greenspan -- Central banking in a democratic society -- December 5, 1996 (federalreserve.gov) ––– related: Reflections on Greenspan’s “Irrational Exuberance” Speech after 25 Years | Cato at Liberty Blog ––– related: The power of leading subtly: Alan Greenspan, rhetorical leadership, and monetary policy (isiarticles.com)
[24] Federal Reserve Board - Home
[25] Is the World Economy Dependent on America? (managementstudyguide.com) ––– related: More Americans See U.S. as Leading Economic Power (gallup.com)
[26] What Would Happen if the US Treasury Goes Bankrupt? (thelawdictionary.org)
[27] Great Depression (Wikiped)
[28] Black Monday (1987) (Wikiped)
[29] Subprime mortgage crisis (2007-2010) (Wikiped)
[30] European debt crisis (Wikiped)
[31] Global financial crisis in 2009 (Wikiped)
[32] Great Recession (2007-2009) (Wikiped)
[33] Butterfly effect (Wikiped) ––– related: Chaos theory (Wikiped) ––– listen! Crazy Town - Butterfly (Official Video) - YouTube
[34] Gold Bug Defined (investopedia.com)
[35] Home | S&P Global Ratings (spglobal.com)
[36] Fitch Ratings: Credit Ratings & Analysis For Financial Markets
[37] Fitch Ratings: Credit Ratings & Analysis For Financial Markets
[38] 2000s United States housing bubble (Wikiped)
[39] Related: Junk bonds’ crunch is nothing like the 2008 housing meltdown - MarketWatch
[40] German, French banks held $38 bln in Greek bonds - News | Khaleej Times
[41] Goldman helped Greece cook books - VoxEurop ––– Greek Debt Crisis: How Goldman Sachs Helped Greece to Mask its True Debt - DER SPIEGEL
[42] Estimation of the size of tax evasion in Greece (researchgate.net): The purpose of this paper is to estimate the extent of tax evasion in Greece for the period 1980-2018. For this estimation we have chosen to apply an indirect method of approach to the issue, as developed by Tanzi, based on the assumption that estimating the size of the shadow economy can lead us to a safe measurement of the extent of tax evasion. More precisely, through the Currency Demand approach which is based on the basic assumption that activities under the shadow economy constitute a direct response of taxpayers to the increased tax burden and also that cash is mainly used to conduct such transactions and of the wealth derived from them, the size of the shadow economy was determined using the method of the University of Leicester research team and then the level of tax evasion was assessed by imposing an annual tax rate on it as a ratio of total tax revenue to Gross Domestic Product. The results showed a significant increase of the size of tax evasion during the period considered, while the model estimation showed that most of the tax evasion came from direct taxation. ––– Tax shortfalls in Greece. Country Focus 5/2008 (europa.eu)
[43] General Motors and the Subprime Crisis (managementstudyguide.com) ––– GMAC Made Risky Subprime Mortgage Loans : NPR ––– Rejected by Courts, Retirees Take Last Shot to Save Pensions (usnews.com): When General Motors went through the biggest industrial bankruptcy proceedings in history, 20,000 retirees from GM's Delphi Corp. subsidiary saw their retirement savings slashed. Dave Muffley poses outside one of the Delphi Corporation plants in Kokomo, Ind., Monday, July 11, 2022. As General Motors Corp. underwent the biggest industrial bankruptcy proceedings in history, and the federal government negotiated a company restructuring, Muffley's healthy retirement savings would be slashed by 70 percent, and his life's trajectory would take a dramatic spiral downward.
[44] Corruption in Greece (Wikiped) ––– FACTBOX-Scandals plaguing Greece's conservative government | Reuters ––– Bribery scandal puts strain on Greek leader - Europe - International Herald Tribune - The New York Times (nytimes.com) ––– Greece-OECD project: Technical support on anti-corruption - OECD
[45] Was software responsible for the financial crisis? | Technology | The Guardian ––– The Algorithm for the Development of Global Financial Crises (internationalscholarsjournals.com) ––– Algorithms and Rhetorical Inquiry: The Case of the 2008 Financial Collapse | Mitch Reyes - Academia.edu
[46] John von Neumann, Theory of Self-Reproducing Automata (mit.edu) ––– John von Neumann, First Draft of a Report on the EDVAC ––– John von Neumann, The General and Logical Theory of Automata ––– related: Fibonacci sequence (Wikiped) ––– related: Self-reference effect (Wikiped) – Eternal return (Wikiped) – Ouroboros (Wikiped)
[47] By analogy: Autocatalysis (Wikiped): A set of chemical reactions can be said to be "collectively autocatalytic" if a number of those reactions produce, as reaction products, catalysts for enough of the other reactions that the entire set of chemical reactions is self-sustaining given an input of energy and food molecules (see autocatalytic set). – The second law of thermodynamics states that the disorder (entropy) of a physical or chemical system and its surroundings (a closed system) must increase with time. Systems left to themselves become increasingly random, and orderly energy of a system like uniform motion degrades eventually to the random motion of particles in a heat bath. ––– related: When is order disorder? (uu.edu) The Butterfly Effect (ens-lyon.fr) ––– related: John Nash, Non-Cooperative Games (upc.edu) – John Nash, Equilibrium Theory (uchicago.edu) – The Work of John Nash in Game Theory (nobelprize.org) ––– related: Steven Strogatz, Nonlinear Dynamics and Chaos (biodyn.ro) – Steven Strogatz, Oscillators that sync and swarm (squarespace.com) – Sync: The Emerging Science of Spontaneous Order — Steven Strogatz – Steven Strogatz: The science of sync | TED Talk ––– listen! the police synchronicity 1 - YouTube – the police synchronicity 2 - YouTube
[48] Predicting collapse of adaptive networked systems without knowing the network | Scientific Reports (nature.com) ––– Ricardo Hausmann - The Collapse of Economies - YouTube ––– related: Gödel's incompleteness theorems (Wikiped) ––– related: Poincaré recurrence theorem (Wikiped)
[49] The New Realities : Drucker, Peter F : Free Download, Borrow, and Streaming : Internet Archive: The American experience and its lessons: The first lesson of the American experience is that the raw material economy and the industrial economy have become uncoupled. For the developed non-communist countries the raw material economy has become marginal. (..) By 1989 the raw material economy world-wide had been in its most serious and most prolonged depression ever for almost a decade. Yet the industrial economies were booming. Equally important: the economy is steadily becoming less material-intensive. … The newest energy’ of all – information – has no raw material or energy content a all. It is totally knowledge-intensive’. Manufacturing is increasingly becoming uncoupled from labour. (..) Where none of the traditional factors of production’ – land, labour and money – determines competitiveness or competitve advantage any longer, trade is increasingly being replaced by investment as the world economy’ s economic driver. Investment used to follow trade. Now trade follows investment.
[50] Global Map of Material Flows in Total (viewsoftheworld.net) ––– Worldmapper | rediscover the world as you've never seen it before ––– Global Map of Fossil Fuel Flows (viewsoftheworld.net) ––– Worldmapper | rediscover the world as you've never seen it before
[52] GDP per person World map | SIMCenter (wrsc.org)
[53] Related: Grammar (Wikiped) – Sentence (linguistics) (Wikiped) – Syntactic Structures (Wikiped) – Vocabulary (Wikiped) – Ambiguity (Wikiped) – Vagueness (Wikiped) – Semantics (Wikiped) – Supervaluationism (Wikiped) ––– Information theory (Wikiped) – Fuzzy logic (Wikiped) ––– Linguistics (Wikiped) – Neurolinguistics (Wikiped) – Psycholinguistics (Wikiped) ––– Noam Chomsky - Syntactic Structures (tallinzen.net) ––– Peter Chen, Entity Relationhip Model (dragon1.com) – Peter Chen, Entity-Relationship Modeling: Historical Events, Future Trends, and Lessons Learned (lsu.edu) ––– Parsing (tohoku.ac.jp) ––– Sentence Patterns (towson.edu)
[54] Bretton Woods Agreement and the Institutions It Created Explained (investopedia.com) ––– About the IMF: History: The end of the Bretton Woods System (1972–81)
[55] Noam Chomsky - Syntactic Structures (tallinzen.net) ––– Peter Chen, Entity Relationhip Model (dragon1.com) – Peter Chen, Entity-Relationship Modeling: Historical Events, Future Trends, and Lessons Learned (lsu.edu) ––– Parsing (tohoku.ac.jp) ––– Sentence Patterns (towson.edu)
[56] Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System ––– related: Fed warns of 'economic ruin' when governments print money to pay off debt (cnbc.com) – How ‘Spoofing’ Traders Dupe Markets - WSJ – 10 Tips To Avoid Common Financial Scams (investopedia.com) – Money creation, bank profits, and central bank digital currency | VOX, CEPR Policy Portal (voxeu.org) – Money Creation in Fiat and Digital Currency Systems (imf.org) – Money Creation in Fiat and Digital Currency Systems (researchgate.net) – Digital Cash: Why central banks should issue digital currency (positivemoney.org) – Banks do not create money out of thin air | VOX, CEPR Policy Portal (voxeu.org) ––– listen! Dee D. Jackson - Automatic Lover (1978) - YouTube
[57] Electronic trading platform (Wikiped) ––– Was software responsible for the financial crisis? | Technology | The Guardian ––– Can Algorithms Help Predict the Next Financial Crisis? (upenn.edu) ––– Spoofing (finance) (Wikiped) ––– Mirror trading (Wikiped) ––– Social trading (Wikiped) ––– Copy trading (Wikiped)
[58] Ken Rogoff - Debts, Deficits and Global Financial Stability - YouTube
[59] Systemic Risk Contributions: A Credit Portfolio Approach (bis.org) ––– McKinsey Global Institute, Debt and Deleveraging. The global credit bubble and its economic consequences (mckinsey.com) ––– The Economist, Financial risk got ahead of the world’s ability to manage it. (economist.com) ––– Number-crunchers crunched | The Economist
[60] EU Commisson, Frequently asked questions: legislative proposal on credit rating agencies (CRAs) ––– Debasement of Ratings (columbia.edu): What is the evidence that rating agencies have been performing badly in measuring credit risk on the debts that they rate? The evidence relates to two separate phenomena: inflated ratings and low-quality ratings. The inflation of ratings is defined as the purposeful over-rating (under-estimation of default risk) on rated debts. Low-quality ratings, defined as ratings based on flawed measures of underlying risk, are a related but logically distinct phenomenon. The recent collapse of subprime-related securitizations revealed both problems in the extreme, but these problems have been present in securitized debt instruments for decades. ––– The Failures of Credit Rating Agencies during the Global Financial Crisis - Causes and Possible Solutions (researchgate.net): The adequacy of credit ratings is crucial for normal functioning of debt markets. Failures of credit rating agencies have strengthened the negative effects of global financial crisis, generating additional systemic risk. The errors of the agencies can be explained by many reasons as business models, conflicts of interest and absent or ineffective regulation of their activities. To overcome these major problems, we can apply different approaches. The best solution is to improve regulatory practices, combining it with limiting the regulatory status of rating agencies. ––– The Credit Ratings Game - BOLTON - 2012 - The Journal of Finance - Wiley Online Library: The collapse of AAA-rated structured finance products in 2007 to 2008 has brought renewed attention to conflicts of interest in credit rating agencies (CRAs). We model competition among CRAs with three sources of conflicts: (1) CRAs conflict of understating risk to attract business, (2) issuers' ability to purchase only the most favorable ratings, and (3) the trusting nature of some investor clienteles. These conflicts create two distortions. First, competition can reduce efficiency, as it facilitates ratings shopping. Second, ratings are more likely to be inflated during booms and when investors are more trusting. We also discuss efficiency-enhancing regulatory interventions. ––– Credit Rating Agencies: How to Restore Credibility (tavakolistructuredfinance.com): Ostensibly the U.S. Securities and Exchange Commission (SEC) qualifies the NRSRO designation. The SEC’s series of failures to check the creation and sale of hundreds of billions of dollars of blatantly misrated securitizations leading up to the financial crisis are beyond the scope of this report. It’s worth noting, however, that if the Food and Drug Administration failed to check the sale of tainted meat that repeatedly sickened a large segment of the population, we would demand a top to bottom overhaul of the organization and its methods. ––– FT, More Wrongdoing At Banks, More Swingeing Fines, No Prosecutions, May 23, 2015: THE scene was familiar: regulators meting out vast penalties to banks, scathing statements about gross misconduct, yet no individuals charged with any crimes and some confusion as to what exactly the banks were admitting to and what effect that would have. On May 20th a consortium of American and British government agencies announced settlements with six international banks regarding claims that they had manipulated currency markets. The six—Bank of America, Barclays, Citigroup, JPMorgan Chase, Royal Bank of Scotland (RBS) and UBS—agreed to pay $5.6 billion in penalties. All but Bank of America also admitted to crimes, although the significance of that is unclear. (Note: Original weblink no longer available) ––– FT, The Credit Rating Controversy, June 29, 2015: The "Big Three" global credit rating agencies—U.S.-based Standard and Poor's (S&P), Moody's, and Fitch Ratings—have come under intense scrutiny in the wake of the global financial crisis. (..) In Europe, the Big Three garnered further controversy over their sovereign debt ratings. While the public debt of crisis-hit countries like Greece, Portugal, and Ireland was relegated to “junk” status, the agencies also downgraded the creditworthiness of France, Austria, and other major eurozone economies. (Note: Original weblink no longer available) ––– FT, Rating Agencies: Badly Overrated – Regulators And Investors Rely Too Heavily On Credit Ratings, May 16, 2002: PITY the poor rating agencies. They work their socks off trying to give sensible credit ratings to every financial instrument they are asked to assess. Now they are under attack: from countries that claim to have been unfairly downgraded (such as Japan, see article); from companies struggling to cope with adverse markets; and from investors alarmed at the speed with which triple-A names can sink to single-B. America's regulators are also, post-Enron, reviewing the top three agencies' quasi-official status, for anti-competitiveness and potential conflicts of interest. (Note: Original weblink no longer available) ––– FT, Sec Pledges Overhaul Of Rating Agencies, January 25, 2003: The Securities and Exchange Commission on Friday pledged a sweeping overhaul of the regulation of credit rating agencies following criticism of their role in the collapse of Enron and the crisis in the telecommunications industry. The chief US financial regulator said a review of the credit rating business had "identified a wide range of issues that deserve further examination". (Note: Original weblink no longer available) ––– FT, Rating Agencies – Exclusion Zone, February 6, 2003: Regulators promise a belated review of the ratings oligopoly. THE domination of any industry by three firms ought to set regulators thinking. Does their power distort markets? Is lack of competition damaging? So it is in the world of credit ratings, where two big agencies, Moody's and Standard & Poor's (S&P), and one smaller one, Fitch, hold sway. The Securities and Exchange Commission (SEC) was asked by Congress last year to review their role. (Note: Original weblink no longer available) ––– FT, Paris To Target Credit Rating Agencies At G7, May 1, 2003: France plans to raise the issue of regulating the international credit ratings agencies with its partners in the Group of Seven industrial countries. The aim is to agree a set of principles with the ratings agencies to make them more transparent and accountable. The French finance ministry has already sounded out Moody's Investors Service, one of three big agencies that dominate the business. (Note: Original weblink no longer available) ––– FT, Pressure On Cdo Ratings, January 12, 2006: The European structured finance market is set to see benign or improving credit ratings cross most market segments this year after the best ever year for upgrades in 2005, according to analysts at Standard & Poor's, the ratings agency. The one area of continuing relative weakness in structured finance - which covers all kinds of asset-backed securitisations - would probably be in collateralised debt obligations, which in 2005 were hit by troubles in the US car industry and were likely to see ratings downgrades again this year. (Note: Original weblink no longer available) ––– FT, CREDIT RATINGS INDUSTRY COMES UNDER ATTACK, March 7, 2006: The dominance of the credit ratings industry by a handful of companies was attacked on Tuesday before the powerful Senate Banking Committee hearing in Washington. The hearing followed calls for legislative action that began intensifying after the failures of the main ratings agencies to flag up problems at Enron, WorldCom and Parmalat. More recent examples include Delphi, the car-parts maker that went from an investment grade rating in December 2004 to bankruptcy in less than a year. The Securities and Exchange Commission currently designates Nationally Recognised Statistical Rating Organisations using unspecified criteria. Only ratings supplied by an NRSRO are valid in the context of laws and regulations involving credit ratings, giving NRSROs huge influence.
[61] Money as Debt - Full Documentary - YouTube
[62] What is Debt/Equity Swap? | Examples | How Does it Work? (wallstreetmojo.com) ––– Corporate Debt Restructuring - ppt video online download (slideplayer.com)
[63] Countries Compared by Economy > Debt > External. International Statistics at NationMaster.com ––– World Debt Clocks (usdebtclock.org) ––– Creditor Country vs Debtor Country (sas.com) ––– America's Foreign Creditors - NYTimes.com ––– Whoops! Why Everyone Owes Everyone and No One Can Pay by John Lanchester | Business and finance books | The Guardian ––– Trends and major holders of U.S. federal debt in charts | Economic Commission for Latin America and the Caribbean (cepal.org) ––– Which Countries Hold the Most U.S. Debt? (visualcapitalist.com) ––– The Resistible Fall of Europe: An Interview with George Soros by George Soros - Project Syndicate (project-syndicate.org) ––– European Debt Crisis - Economic Collapse In 3 Minutes - Clarke & Dawe MUST SEE Video - YouTube ––– The European Debt Crisis Visualized - YouTube
[64] Shadow banking: still big, still dangerous - YouTube
[65] Ethically disputed business practices (Wikiped)
[66] Off-Balance Sheet Financing (OBSF): Definition and Purpose (investopedia.com) ––– Off-balance-sheet (Wikiped) ––– The Rise and Fall of WorldCom: Story of a Scandal (investopedia.com) ––– Enron Scandal: The Fall of a Wall Street Darling (investopedia.com) ––– The Accounting Trick Behind Thirty Years of Scandal | TIME.com
[67] Off-Balance-Sheet Entities: An Introduction (investopedia.com)
[68] The next chapter: creating an understanding of Special Purpose Vehicles (pwc.com) ––– Report on Special Purpose Entities (bis.org) ––– Special Purpose Entities and their role in Megaprojects: a new focus for understanding megaproject behaviour - CORE Reader
[69] Third-party technique (Wikiped)
[70] U.S. Department of Transportation, Risk Assessment for Public-Private Partnerships: A Primer (dot.gov) ––– David Hall, Why Private-Public Partnerships don't work - The many advantages of the public alternative (world-psi.org)
[71] What Are Articles of Incorporation? What's Included (investopedia.com)
[72] Asset-Backed Security (ABS): What It Is, How Different Types Work (investopedia.com)
[73] Bearer security financial definition of Bearer security (thefreedictionary.com)
[74] Collateral Definition, Types, & Examples (investopedia.com)
[75] What Is Defeasance? How It Works on the Balance Sheet and Example (investopedia.com) ––– Novation: Definition in Contract Law, Types, Uses, and Example (investopedia.com)
[76] Off-Balance Sheet Financing (OBSF): Definition and Purpose (investopedia.com)
[77] Equipment Trust Certificate (ETC) Definition (investopedia.com)
[78] Exchange of assets financial definition of Exchange of assets (thefreedictionary.com)
[79] Nine men's morris (Wikiped)
[80] What Is Financial Leverage, and Why Is It Important? (investopedia.com)
[81] What Is Gearing? Definition, How's It's Measured, and Example (investopedia.com)
[82] Golden Parachute: Definition, Examples, Controversy (investopedia.com)
[83] Interval Measure – Meaning, Importance, How to Calculate, Burn Rate | eFM (efinancemanagement.com)
[84] Leveraged Buyout (LBO) Definition: How It Works, with Example (investopedia.com)
[85] Leveraged Lease Definition (investopedia.com)
[86] Modified Accelerated Cost Recovery System (MACRS) Definition (investopedia.com)
[87] Monte Carlo method (Wikiped) ––– IN THE LAND OF THE MAGIC ASTERISK - The New York Times (nytimes.com) ––– Four Magic Tricks for Fiscal Conservatives by Jeffrey Frankel - Project Syndicate (project-syndicate.org)
[88] Novation: Definition in Contract Law, Types, Uses, and Example (investopedia.com)
[89] What Is Defeasance? How It Works on the Balance Sheet and Example (investopedia.com)
[90] Off-Balance Sheet Financing (OBSF): Definition and Purpose (investopedia.com)
[91] Prepackaged Bankruptcy Definition (investopedia.com)
[92] Registrar: Overview and Examples in Corporate Finance (investopedia.com)
[95] Subprime mortgage crisis (2007-2010) (Wikiped)
[96] European debt crisis (Wikiped)
[97] Global financial crisis in 2009 (Wikiped)
[98] Great Recession (2007-2009) (Wikiped)
[99] Securitization: Definition, Meaning, Types, and Example (investopedia.com) ––– Secured Debt Definition (investopedia.com)
[100] Management of Corporate Greatness: Blending Goodness with Greed - Pradip N. Khandwalla - Google Books
[101] Workout Agreement Definition (investopedia.com)
[102] Trilateral Commission (Wikiped) ––– International Emergency Economic Powers Act (Wikiped) 50 U.S. ––– Code Chapter 35 - INTERNATIONAL EMERGENCY ECONOMIC POWERS | U.S. Code | US Law | LII / Legal Information Institute (cornell.edu) ––– related: C. Fred Bergsten (Wikiped) ––– related: James E. Akins (Wikiped) ––– related: International Currency Review (JournalSeek) ––– related: Christopher Story: Bibliography, and a List of Books by Author Christopher Story (paperbackswap.com) ––– related: Comprehensive Economic and Trade Agreement (Wikiped) ––– related: Transatlantic Trade and Investment Partnership (Wikiped)
[103] Carmen M. Reinhart and Kenneth S. Rogoff, This Time is Different – A Panoramic View of Eight Centuries of Financial Crises (nber.org) ––– Ken Rogoff - Debts, Deficits and Global Financial Stability - YouTube ––– Carmen Reinhart & Kenneth Rogoff: Coming Out of the Crisis - YouTube
[104] How the U.S. national debt reached $31.4 trillion | PBS NewsHour
[105] US External Debt, 2003 – 2023 | CEIC Data
[106] Why China and Japan are praying the US won't default | CNN Business
[107] Shadow Banking (newyorkfed.org) ––– Shadow banking: still big, still dangerous - YouTube
[108] BlackRock US Government Mortgage Impact Fund | A2
[109] 6 billion USD in Bitcoin held by the US - The Cryptonomist
[110] Home | S&P Global Ratings (spglobal.com)
[111] Moody's - credit ratings, research, and data for global capital markets (moodys.com)
[112] Fitch Ratings: Credit Ratings & Analysis For Financial Markets
