FRED
07-31-08, 10:10 AM
http://www.itulip.com/images/wallstreetgpr.jpgRecorded at Wall Street
US-Flaggen wehen am Dienstagmorgen auf der Wall Street in New York. (Bild: AP)
Aufzeichnungen zur US-Blasen-Ökonomie
Von Barbara Eisenmann
Und wieder einmal ist eine Blase geplatzt, Kredite können nicht zurückgezahlt werden, Banken gehen pleite. An der Börse gibt man sich optimistisch, solange es eben geht. Aber die Gefahrenzonen multiplizieren sich, und die Immobilienblase und Bankenkrise, die Dollarabwertung und Ölpreisexplosion sind nicht mehr so einfach wegzuspekulieren. Es sei denn, man kreierte eine neue Blase.
Inzwischen haben allerdings auch in den USA die Schwarzseher unter den Wirtschaftsexperten das Wort übernommen. Ihre Kritik an den Exzessen einer blasenproduzierenden Finanzwirtschaft, die in keiner Beziehung mehr zur güterproduzierenden realen Wirtschaft steht, wird immer lauter. Vor Ort, an der Wall Street, die lange das geografische und imaginäre Zentrum des Kapitalismus war, hat sich die Autorin umgehört und dabei mit chinesischen Touristen, Geschäftsleuten, großen und kleinen Spielern und Wirtschaftswissenschaftlern gesprochen.
Manuskript zur Sendung als pdf (http://www.dradio.de/download/88726/) oder im barrierefreien Textformat (http://www.dradio.de/download/88727/).
Audio formats. (http://www.dradio.de/dlf/sendungen/dasfeature/774418/vorschau/)
English excerpts from transcript.
O-Ton 15 (Janszen)
I am not actually a big fan of the term bubble because I don´t think that is really what, that sort of
describes a finality, it is really more a system of believes that builds up over time, it is a system
of false believes that are developed in an atmosphere of delusion around the real source of gains
and asset prices that builds up, that become a self-reinforcing systems. So I prefer to call them
asset hyperinflations because that is ultimatley what they are.
O-TON 16 (Janszen)
So we have this asset bubble, asset inflation in tecnology stocks, when that ended so what the US
did to reflate the fire economy was to take what was already a growing part of the economy
which is housing and inflate it. Right. So this was policy. Of course they don´t talk about it as
policy, but as Chico Marx would say who are you going to believe me or your own eyes, you
know. In 1999 we got rid of all the regulations that were built after the last big crash like the
Glass Steagall act of 1933. That regulation was put in place because it was decided that the real
cause of the asset inflation in the 20ies was this non-transparent pools, these investment trusts
and pools of money that were manipulated ,and nobody really understood who is leveraged and
where the risks were. That was dismanteled in 1999, all based on the theory that markets will
work it out.
SPRECHERIN 1
Eric Janszen geht davon aus, dass eine produktionsschwache Wirtschaft wie die us-
amerikanische auf Spekulationsblasen angewiesen sei, und dass deshalb eine neue Blase immer
schon in die Wege geleitet werde, bevor aus der alten die Luft überhaupt vollständig entwichen
sei.
O-TON 17 (Janszen)
All our asset inflations have a certain structure to them, a certain way of evolution and
development. They usually / certainly involve some government legislation, it is very important
to get them kicked off. So for the internet bubble it was passage of right/of legislation that
allowed legal to do comercial transactions over the internet which it was passed in 1994 and that
is when that process started. And in housing, the real root of the housing inflation goes all back to
1986 with the tax relief act under Reagan, we got to write off the interest expense on your home
mortgage.
O-TON 18 (Roubini)
Certainly Greenspan was supportive of the market and didn´t worry about the irrational
exuberance in the 90ies and did nothing about it, and when the tec bust occurred he aggressively
eased the fed fund rates and created another bubble, the housing bubble, and now the housing
bubble is going to bust, so I don´t know if there is another bubble to create, but certainly Wall
Street hopes that the Fed easing is going to stimulate asset markets and equity markets.
O-TON 19 (Roubini)
Like in 2001 the Fed very aggressively cut interest rates and we still had a recession. And this
time the recession is going to be more severe than 2001. Plus the Fed has to worry about the fact
that cuting rates very fast might cause a very sharp fall of the dollar and that will become
dangerous, so the possibility of the Fed this time to cut rates as aggressive as it did in 2001 from
6 and a half Prozent all the way down to 1 Prozent is more limited this time around, so it is going
to be less Fed easing. So I think people yeah believe that there is a Bernanke put the way there
was a Greenspan put and Bernanke is going to rescue them. I don´t believe, this is not going to be
the case, it is not going to happen.
O-TON 20 (Parrott)
So may be it is a naive hope that people will look around and see what happened and ask
themselves why it happened, and particularily with the housing bubble, the subprime mortgage
where it was clear to so many people for so long and yet Alan Greenspan, chairman of the federal
reserve board was saying no there is not a housing bubble, it is just housing prices catching up
with income and nonesense like that that people will demand that the Fed and Washington
effectively regulate the financial sector and make the financial sector supportive and enabling of
activity in the real sector rather than the opposite.
SZENISCHE ATMO 27 (Schülerführung Wall Street)
Okay. Come on over guys. Come on over, so we can all stay close together ... this building right
here is probably the single most famous building on Wall Street, it is called the New York Stock
Exchange. There are 3000 stocks listed here, and they have a value today of somewhere around
22 or 23, anyone knows the number that comes after that - billion, billion, million - billion, no
keep going - trillion - trillion dollars, 23 trillion dollars, that is a lot of money. But you can´t
actually get all that money out.
SZENISCHE ATMO 28 (Schülerführung)
So what happens on a really bad day do you think? What makes the market really go down here?
- if no one buys - if no one buys right, and what might cause people to wanna think they
shouldn´t buy - it is expensive - stock suddenly seem expensive , but what kind of things make
them think that? Yeah - no one is buying the product - may be if no one is buying the product, so
may be if Coke announces they are not selling Coke classic anymore, only Coke black, did
anyone ever have a Coke black? - yeah - it was disgusting, I don´t even know if they are selling
it. So may be that news come out and then people say oh oh we don´t want Coke, so they start
selling Coke. May be people that own Pepsi what are they going to think yeah? - Buy more - But
would they buy more Pepsi if Coke is going down - because it is comeptitive - exactly right,
exactly right, may be they are going to think people are going to drink Pepsi instead, so let´s buy
more Pepsi. But there is another possibility, may be Coke goes down because there is a new
announcement that all you kids are drinking too much Coke and getting diabetes, so now what is
going to happen to the Pepsi buyers - they don´t sell - they are not going to sell too. Exactly right.
So this whole market moves on this kind of information. The whole Wall Street here just runs on
this kind of news. - ? - pardon - ? - that is when they go to grape juice exactly or may be water,
would be a better deal or diet soda or something. But you know what your comment there right,
that is whatcould make you a great Wall Street trader - oh - because you have to think about these
kinds of things instead, what are the subsitutes, what are other options, so you may have a future
here on Wall Street.
O-TON 21 (Roubini)
Certainly the US Federal Reserve cuts rates too much and kept them low for too long. But more
importantly I think that the interaction of essentially financial innovation, this process of
securitization where you take mortgages, you convert them in mortgage backed securitities, but
not only that you can create tranches of CDOs and then CDOs of CDOs and CDOs of CDOs of
CDOs, those things eventually become dangerous and useless and actually you can not price
these things. That creates a lot of lack of transparency, and at every step of the way each one of
the people in this process are earning fees, so they are not holding anything of the risks.That was
part of the problem. But then the other part of the problem was that while this was happening the
regulators were asleep at the wheel, they were actually saying all these market innovations are
fine. The US Fed and other regulators they were not only not doing their job in terms of
regulations and supervisions, but were cheerleaders of these financial innovations, so we led
these dangerous innovations and this opacity and lack of transparency to faster and grow into a
credit bubble without control. So it was a deadly combination.
SZENISCHE ATMO 31
The problem is there are no garantees, and one of the issues, excuse me I got to work while I am
talking to you, one of the issues that we have to deal with is the human emotion when it comes to
buying and selling stocks. Because at the end of the day it is human emotion that drives stock
crisis and so much of stock trading is driven by human emotion, and there are 2 emotions: fear
and greed. The greed, the greed I think we would attach to the bull, and the fear clearly we would
attach to the bear. And it is interesting because when human emotion takes over usually logic
goes out the window, and that is what creates all the volatility in the stock market.
O-TON 23 (Janszen)
Part of the thesis that we are developing is that the US will generate another asset inflation
subsequent to the housing deflation. And my current theory is that this will be in alternative
energy and infrastructure. In 2005 there was a new legislation passed in this country, the energy
security act I believe it was called, and this to me was the launch of the alternative energy bubble
because they are always launched by some sort of legislation. The reason is that you want
investors to be protected from losses, and the way you do that is either you open up a new market
as by deregulation or you do direct government subsidies to the industrie which is what is
happening with that act.
O-TON 25 (Janszen)
The problem of the US´ decline is that the rest of the world is really doing very well. Unless the
US economy adjusts to that new role in a thoughtful kind of way, how we put together an
industrial policy that allows us to be more/ to contribute more to the economy in ways other than
finance, you know it takes time, and frankly I think it is going to take a crisis to motivate, to
create the political motivation to do this.
US-Flaggen wehen am Dienstagmorgen auf der Wall Street in New York. (Bild: AP)
Aufzeichnungen zur US-Blasen-Ökonomie
Von Barbara Eisenmann
Und wieder einmal ist eine Blase geplatzt, Kredite können nicht zurückgezahlt werden, Banken gehen pleite. An der Börse gibt man sich optimistisch, solange es eben geht. Aber die Gefahrenzonen multiplizieren sich, und die Immobilienblase und Bankenkrise, die Dollarabwertung und Ölpreisexplosion sind nicht mehr so einfach wegzuspekulieren. Es sei denn, man kreierte eine neue Blase.
Inzwischen haben allerdings auch in den USA die Schwarzseher unter den Wirtschaftsexperten das Wort übernommen. Ihre Kritik an den Exzessen einer blasenproduzierenden Finanzwirtschaft, die in keiner Beziehung mehr zur güterproduzierenden realen Wirtschaft steht, wird immer lauter. Vor Ort, an der Wall Street, die lange das geografische und imaginäre Zentrum des Kapitalismus war, hat sich die Autorin umgehört und dabei mit chinesischen Touristen, Geschäftsleuten, großen und kleinen Spielern und Wirtschaftswissenschaftlern gesprochen.
Manuskript zur Sendung als pdf (http://www.dradio.de/download/88726/) oder im barrierefreien Textformat (http://www.dradio.de/download/88727/).
Audio formats. (http://www.dradio.de/dlf/sendungen/dasfeature/774418/vorschau/)
English excerpts from transcript.
O-Ton 15 (Janszen)
I am not actually a big fan of the term bubble because I don´t think that is really what, that sort of
describes a finality, it is really more a system of believes that builds up over time, it is a system
of false believes that are developed in an atmosphere of delusion around the real source of gains
and asset prices that builds up, that become a self-reinforcing systems. So I prefer to call them
asset hyperinflations because that is ultimatley what they are.
O-TON 16 (Janszen)
So we have this asset bubble, asset inflation in tecnology stocks, when that ended so what the US
did to reflate the fire economy was to take what was already a growing part of the economy
which is housing and inflate it. Right. So this was policy. Of course they don´t talk about it as
policy, but as Chico Marx would say who are you going to believe me or your own eyes, you
know. In 1999 we got rid of all the regulations that were built after the last big crash like the
Glass Steagall act of 1933. That regulation was put in place because it was decided that the real
cause of the asset inflation in the 20ies was this non-transparent pools, these investment trusts
and pools of money that were manipulated ,and nobody really understood who is leveraged and
where the risks were. That was dismanteled in 1999, all based on the theory that markets will
work it out.
SPRECHERIN 1
Eric Janszen geht davon aus, dass eine produktionsschwache Wirtschaft wie die us-
amerikanische auf Spekulationsblasen angewiesen sei, und dass deshalb eine neue Blase immer
schon in die Wege geleitet werde, bevor aus der alten die Luft überhaupt vollständig entwichen
sei.
O-TON 17 (Janszen)
All our asset inflations have a certain structure to them, a certain way of evolution and
development. They usually / certainly involve some government legislation, it is very important
to get them kicked off. So for the internet bubble it was passage of right/of legislation that
allowed legal to do comercial transactions over the internet which it was passed in 1994 and that
is when that process started. And in housing, the real root of the housing inflation goes all back to
1986 with the tax relief act under Reagan, we got to write off the interest expense on your home
mortgage.
O-TON 18 (Roubini)
Certainly Greenspan was supportive of the market and didn´t worry about the irrational
exuberance in the 90ies and did nothing about it, and when the tec bust occurred he aggressively
eased the fed fund rates and created another bubble, the housing bubble, and now the housing
bubble is going to bust, so I don´t know if there is another bubble to create, but certainly Wall
Street hopes that the Fed easing is going to stimulate asset markets and equity markets.
O-TON 19 (Roubini)
Like in 2001 the Fed very aggressively cut interest rates and we still had a recession. And this
time the recession is going to be more severe than 2001. Plus the Fed has to worry about the fact
that cuting rates very fast might cause a very sharp fall of the dollar and that will become
dangerous, so the possibility of the Fed this time to cut rates as aggressive as it did in 2001 from
6 and a half Prozent all the way down to 1 Prozent is more limited this time around, so it is going
to be less Fed easing. So I think people yeah believe that there is a Bernanke put the way there
was a Greenspan put and Bernanke is going to rescue them. I don´t believe, this is not going to be
the case, it is not going to happen.
O-TON 20 (Parrott)
So may be it is a naive hope that people will look around and see what happened and ask
themselves why it happened, and particularily with the housing bubble, the subprime mortgage
where it was clear to so many people for so long and yet Alan Greenspan, chairman of the federal
reserve board was saying no there is not a housing bubble, it is just housing prices catching up
with income and nonesense like that that people will demand that the Fed and Washington
effectively regulate the financial sector and make the financial sector supportive and enabling of
activity in the real sector rather than the opposite.
SZENISCHE ATMO 27 (Schülerführung Wall Street)
Okay. Come on over guys. Come on over, so we can all stay close together ... this building right
here is probably the single most famous building on Wall Street, it is called the New York Stock
Exchange. There are 3000 stocks listed here, and they have a value today of somewhere around
22 or 23, anyone knows the number that comes after that - billion, billion, million - billion, no
keep going - trillion - trillion dollars, 23 trillion dollars, that is a lot of money. But you can´t
actually get all that money out.
SZENISCHE ATMO 28 (Schülerführung)
So what happens on a really bad day do you think? What makes the market really go down here?
- if no one buys - if no one buys right, and what might cause people to wanna think they
shouldn´t buy - it is expensive - stock suddenly seem expensive , but what kind of things make
them think that? Yeah - no one is buying the product - may be if no one is buying the product, so
may be if Coke announces they are not selling Coke classic anymore, only Coke black, did
anyone ever have a Coke black? - yeah - it was disgusting, I don´t even know if they are selling
it. So may be that news come out and then people say oh oh we don´t want Coke, so they start
selling Coke. May be people that own Pepsi what are they going to think yeah? - Buy more - But
would they buy more Pepsi if Coke is going down - because it is comeptitive - exactly right,
exactly right, may be they are going to think people are going to drink Pepsi instead, so let´s buy
more Pepsi. But there is another possibility, may be Coke goes down because there is a new
announcement that all you kids are drinking too much Coke and getting diabetes, so now what is
going to happen to the Pepsi buyers - they don´t sell - they are not going to sell too. Exactly right.
So this whole market moves on this kind of information. The whole Wall Street here just runs on
this kind of news. - ? - pardon - ? - that is when they go to grape juice exactly or may be water,
would be a better deal or diet soda or something. But you know what your comment there right,
that is whatcould make you a great Wall Street trader - oh - because you have to think about these
kinds of things instead, what are the subsitutes, what are other options, so you may have a future
here on Wall Street.
O-TON 21 (Roubini)
Certainly the US Federal Reserve cuts rates too much and kept them low for too long. But more
importantly I think that the interaction of essentially financial innovation, this process of
securitization where you take mortgages, you convert them in mortgage backed securitities, but
not only that you can create tranches of CDOs and then CDOs of CDOs and CDOs of CDOs of
CDOs, those things eventually become dangerous and useless and actually you can not price
these things. That creates a lot of lack of transparency, and at every step of the way each one of
the people in this process are earning fees, so they are not holding anything of the risks.That was
part of the problem. But then the other part of the problem was that while this was happening the
regulators were asleep at the wheel, they were actually saying all these market innovations are
fine. The US Fed and other regulators they were not only not doing their job in terms of
regulations and supervisions, but were cheerleaders of these financial innovations, so we led
these dangerous innovations and this opacity and lack of transparency to faster and grow into a
credit bubble without control. So it was a deadly combination.
SZENISCHE ATMO 31
The problem is there are no garantees, and one of the issues, excuse me I got to work while I am
talking to you, one of the issues that we have to deal with is the human emotion when it comes to
buying and selling stocks. Because at the end of the day it is human emotion that drives stock
crisis and so much of stock trading is driven by human emotion, and there are 2 emotions: fear
and greed. The greed, the greed I think we would attach to the bull, and the fear clearly we would
attach to the bear. And it is interesting because when human emotion takes over usually logic
goes out the window, and that is what creates all the volatility in the stock market.
O-TON 23 (Janszen)
Part of the thesis that we are developing is that the US will generate another asset inflation
subsequent to the housing deflation. And my current theory is that this will be in alternative
energy and infrastructure. In 2005 there was a new legislation passed in this country, the energy
security act I believe it was called, and this to me was the launch of the alternative energy bubble
because they are always launched by some sort of legislation. The reason is that you want
investors to be protected from losses, and the way you do that is either you open up a new market
as by deregulation or you do direct government subsidies to the industrie which is what is
happening with that act.
O-TON 25 (Janszen)
The problem of the US´ decline is that the rest of the world is really doing very well. Unless the
US economy adjusts to that new role in a thoughtful kind of way, how we put together an
industrial policy that allows us to be more/ to contribute more to the economy in ways other than
finance, you know it takes time, and frankly I think it is going to take a crisis to motivate, to
create the political motivation to do this.