So, it looks like we're golden. No financial crisis for a long time says the FEDERAL RESERVE

Discussion in 'Politics, Religion, Social Issues' started by darksithpro, Jul 2, 2017.

  1. darksithpro, Jul 2, 2017
    Last edited: Jul 2, 2017

    darksithpro macrumors regular

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    #1
    Looks like under President Trump we're good to go. Business as usual, and no financial problems, or collapse predicted ahead.

    https://www.reuters.com/article/us-usa-fed-yellen-idUSKBN19I2I5

    "Fed's Yellen expects no new financial crisis in 'our lifetimes'

    U.S. Federal Reserve Chair Janet Yellen said on Tuesday that she does not believe that there will be another financial crisis for at least as long as she lives, thanks largely to reforms of the banking system since the 2007-09 crash.

    "Would I say there will never, ever be another financial crisis?" Yellen said at a question-and-answer event in London.

    "You know probably that would be going too far but I do think we're much safer and I hope that it will not be in our lifetimes and I don't believe it will be," she said.

    Yellen said it would "not be a good thing" if reforms of the financial services industry since the crisis were unwound, and urged those who had helped manage the fallout at the time to be vocal in preventing such a dilution.

    U.S. President Donald Trump has said during his election campaign that he would cut banking regulation. The U.S. Treasury Department earlier this month proposed easing up on restrictions big banks now face in their trading operations.

    Yellen declined to comment when asked about her relationship with Trump but said she had a good working relationship with U.S. Treasury Secretary Steve Mnuchin.

    She also reiterated her view that the U.S. central bank would continue to raise interest rates only gradually.

    "We think it will be appropriate for the attainment of our goals to raise interest rates very gradually to levels that are likely to remain quite low, although there is uncertainty about this, to remain low by historical standards for a long time," she said.

    She said the stockpile of bonds the Fed amassed to help the U.S. economy through the crisis would be shrunk "gradually and predictably."

    Asked about share price valuations by a member of the audience, Yellen said "by standard metrics, some asset valuations look high but there's no certainty about that."
     
  2. samcraig macrumors P6

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    #2
    "thanks largely to reforms of the banking system since the 2007-09 crash"

    And if Trump reverses those? Then what?
     
  3. Gutwrench macrumors 65816

    Gutwrench

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    #3
    Thanks to Billdo.

    BLAMEWORTHY
    Bill Clinton
    [​IMG]
    Photo Illustration; Clinton: Saul Loeb / AFP / Getty; Jupiter

    President Clinton's tenure was characterized by economic prosperity and financial deregulation, which in many ways set the stage for the excesses of recent years. Among his biggest strokes of free-wheeling capitalism was the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act, a cornerstone of Depression-era regulation. He also signed the Commodity Futures Modernization Act, which exempted credit-default swaps from regulation. In 1995 Clinton loosened housing rules by rewriting the Community Reinvestment Act, which put added pressure on banks to lend in low-income neighborhoods. It is the subject of heated political and scholarly debate whether any of these moves are to blame for our troubles, but they certainly played a role in creating a permissive lending environment.

    http://content.time.com/time/specials/packages/article/0,28804,1877351_1877350_1877322,00.html
     
  4. jerwin macrumors 65816

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    #4
    hmm. Janet Yellen is 70.
    and, of course, Congress is working on repealing those pesky reforms.
     
  5. DanielDD macrumors 6502

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    #5
    That statement assumes that:
    - The US is not dependent on other countries' financial systems (which is does)
    - There will be no major wars
    - There will be no major incidents that will set off alarming markets (hacking exploits, terrorist attacks, Trump's tweet)
    - People will not find a way to circumvent current rules
     
  6. Technarchy macrumors 604

    Technarchy

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    #6
    She is not qualified to make this assessment. The global economy has more moving parts than ever before in history. A lot is going to go wrong and it won't take much to drag it all down.
     
  7. DearthnVader macrumors 6502

    DearthnVader

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    #7
    We got at least three financial bubbles right now, any of which popping will pop the other two.
     
  8. VulchR macrumors 68020

    VulchR

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    #8
    Clearly the people who control the economy have no clue that we're still in a financial crisis. It's like they live on another planet.

    [​IMG]
     
  9. samcraig macrumors P6

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    #9
    Thanks. But that has nothing to do with the question I asked
     
  10. vrDrew macrumors 65816

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    #10
    The OP seems characterized by an almost deliberate misreading (and misunderstanding) of both what Yellen was talking about and (most notably) Trump's level of responsibility for the current state of the banking system.

    For those who are confused: Yellen was discussing a crisis affecting the worldwide banking and credit system. Since the 2008 crisis, financial institutions both here in the US and across much of the world have come under much stronger scrutiny and regulation. Capital requirements (i.e. the ratio of reserves to loans) have markedly increased at the world largest banks. Lending standards have increased to reduce the probability of the systemic failure of an entire class of borrowers (as happened to subprime mortgages in the US and large parts of Europe..)

    On that last item, I think we need to look closely at both what Donald Trump has said, and has done:

    Short takeaway: We're in good shape now, thanks to financial regulations such as Dodd-Frank, enacted by Democrats and signed by President Obama. But should Donald Trump and the Republican Congress undo much of that regulation, we may very well be setting ourself up for a similar crisis in the future.
     
  11. samcraig macrumors P6

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    #11
    This was my assumption as well. The statement being cautionary.
     
  12. samiwas Suspended

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    #12
    Yeah, all because of President Trump.

    Seriously?
     
  13. yaxomoxay macrumors 68000

    yaxomoxay

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    #13
    Totally agreed, and I think that Dodd-Frank should remain intact for the time being.
    On the other hand, pretty soon Dodd-Frank is going to be obsolete as banks create new products that will be able to collapse the system.
    One thing that should remain is the mandatory capital.
     
  14. samcraig macrumors P6

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    #14
    Agreed. Throwing the baby out with the bathwater is not the answer most of the time. However - it appears Trump prefers a hatchet vs a scalpel.
     
  15. vrDrew macrumors 65816

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    #15
    Scientists and engineers did not throw out Newtonian Physics once Einstein published his paper on General Relativity.

    And I think the same principles should apply to our treatment of increasingly complex financial instruments. In other words, we ought to develop new regulations to deal with previously unforeseen financial products and relationships, but we need to keep in place the same regulatory frameworks that has protected people's checking and savings accounts since the 1930s, and has protected the global financial industry from systemic collapse since 2010. Maybe we do need new rules to handle things such as Crowdfunding and Bitcoin. But trashing Dodd-Frank is not the way to accomplish that.
     
  16. Huntn macrumors G5

    Huntn

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    #16
    Banking reform is like telling the gambling addict they can't use credit, while the GOP is like the gambling house saying here's a $million in credit, go have a lot of fun.
     
  17. yaxomoxay macrumors 68000

    yaxomoxay

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    #17
    You're kinda comparing apples to... horses here!
     
  18. VulchR macrumors 68020

    VulchR

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    #18
    Honestly it depends on how one defines 'we'.
     
  19. vrDrew macrumors 65816

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    #19
    It's an analogy. A perfectly valid rhetorical device, when handled appropriately, I believe.

    Rocket scientists still use Newton's law of motion when calculating the amount of fuel and burn time necessary to lift a GPS satellite into orbit. However, the designers of the navigation system then use the laws of General Relativity to calibrate the atomic clocks aboard those satellites to take into account both their relative velocity and altitude. The rocket scientists are working on the scale of kilograms, seconds, and meters - where Newton's laws make the necessary calculations (and the engineering tolerances) practical. You literally could not fill a solid-rocket booster tank, or design a pump solenoid valve, to the sort of tolerances implied by General Relativity. Newton launched the satellite constellation that is the backbone of the GPS system. It's just that engineers then need to look to Einstein for help in making it accurate enough to tell you where your car is parked.

    And I think that is analagous to what is happening in the financial industry. Yes: Highly complex new financial products and services are being created. But the existence of increasingly complex financial instruments should not be used as a rationale or justification for trashing the rules governing things like reserve ratios.
     
  20. alex2792 macrumors 6502a

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    #20
    Actually, an economic and societal collapse is inevitable once automation destroys enough jobs. Imagine, 50% unemployment in a couple of decades. Once millions of desperate people take to the streets the 1% will suffer the same fate as the Romanovs in 1917.
     
  21. zin macrumors 6502

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    #21
    Janet Yellen needs to be fired by Trump. She held interest rates artificially low under Obama, which has created many problems. The rates should've been raised years ago.
     
  22. throAU macrumors 601

    throAU

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    #22
    1. What reforms?
    2. They would say that. Given they're responsible for the previous economic catastrophies.

    "we have reviewed our own performance, and find it exemplary! pats on the back all round, good job lads!"

    I'd say that with the rise of decentralised crypto-currency, all of the major central banks are at major risk of becoming irrelevant, and that is going to shake up the global financial system in a massive way.

    There will be blood, and it will be within the next 5-10 years, I suspect.
     
  23. samcraig macrumors P6

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    #23
    What problems?
     
  24. zin macrumors 6502

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    #24
    Low interest rates and pumping money into the economy create bubbles. This "recovery" (or the slowest since after World War II) has been fuelled by the expansionary monetary policy ('easy money') of the Fed and other central banks, such as the Bank of England and the European Central Bank.

    The monetary cheating used to create the recovery will turn into a bust sooner or later. The Fed tried the same thing during the Dot Com bubble, in which they incrementally normalised rates up to 2004/05. Look what happened just a few years later.
     
  25. LizKat macrumors 68040

    LizKat

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    #25
    Not if hundreds of thousands of STEM graduates are willing to apply their botanical research or bionic medical skills on the nearest habitable planet we've decided is ready for a visit from a bunch of smart cookies. Think positively or or go home! (Or: start thinking about how to prepare earth's taxpayers to understand the need for UBI in the future, not as some welfare-for-freeloaders gig but as a floor under our own planet).

    But yeah, at the rate we have the right calling people like Clinton pinko commies, and at the rate we have the Democrats-in-bubbles still tolerating the banks and insurance companies calling the shots on health care and anything else the banks like to dabble in, including defense, offense, lol... you could very well be right. I hope not.

    btw we're probably already at 50% underemployment with 50% unemployment not out of the question considering "voluntary" dropouts from the potential labor market.

    We call unemployment and underemployment by a lot of other names, including but not lmited to: early retirements, buyouts, flextime, job sharing, internship, gap year, alternative lifestyle, community service, comptime, mandatory unpaid vacations, 4 to 12 for attempted robbery in aid of a drug fix...

    One could argue some of those aren't really related even to underemployment. And, one could argue that getting paid for half a career over the span of a full one is... what, exactly?


    Why, so private lenders could jack up their rates and take a couple quarters' quick profits off the underlying derivatives before the AAAness of the better tranches dived, and in so doing, triggered payoffs from their own hedges? Sure, that would have worked well. For somebody. For quite a few somebodies, actually.

    All snark aside (and some of that was a little snarky, yeah) you have a point. But everyone seems to realize the economic recovery in the USA is not as robust as we'd like it to be by now. It's sort of like a rope hammock where some of the knots or lengths have frayed, leaving holes not quite big enough to drop a beach read through. There are other places where you could rest a laptop and it would be fine.

    No one wants to trigger a recession for the sake of tamping down the possibility of a bubble in, say, subprime auto loans. Better to start talking more about those bubbles, which is another and more specific way of starting to make the bubbler promoters think about the exit... slowly, one may hope. My two cents, and I'm not following the markets much lately, it's more fun watching the zucchini grow.
     

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