Thursday, 29 January 2009

Understanding the financial jargons

Wokeh la meor..Aku kasi ko paham pasal Alan Greenspan ni...n sambil tu aku relate3 sikit dengan lagi 24 orang dalam list tuh.....before tuh..aku nak kasi warning yer Meor..baca sampai abis OK!!!!..tak kira, ko bosan ke..ko paham tak paham ker, ko pening3 ker....penat aku tulis ni...lebih sejam.....

1.Who is Alan Greenspan???-chairman of US Federal Reserve(ie,central bank) 1987- 2006
-kerje dia cam Zeti Abdul Aziz la..gabenor Bank Negara

2. From 1987 to 2006..Ramai orang yang duk sanjung3 la dia ni pasal..bukannya satu krisis economy yang orang tua ni dah kemudikan US ni...taun 1987 satu..hujung 90an satu...awal 2000 pun ade lagi satu....so memang hebat abis ler orang tua ni...cam smua orang duk punya la respect giler kat pakcik ni..

3.Pahtu..in early 2000..Aku pun dah luper dah..2001 or 2002...In order to rejuvinate the glooming american economy, Mr Greenspan had slashed interest rates enormously..So..right after that, loans has become so much cheaper to service (ie.. bunga nye kurang)..and people have more incentive to spend rather than save since they won't gain much interest in their savings, anyway....


4.Alan Greenspan (and actually many others) believe that free market is the answer to everything..Why bother with troublesome regulations..why not make it easier for everyone..Why not make everyone happy...well..some were happy, before....for a very,very short period before things start to get very very nasty.....and now everyone has to bear the consequences...

5.It's not just that, Mr Greenspan also promote the practice of the "beautifully phrased", subprime lending (i'm not sure if he's the pioneer,though..=) ....)...But first of all..What is subprime lending that everyone has been talking about ?????? In a simple language, subprime lending is the loans given to people who do not meet the requirement to service the loans..ie, it's like giving loans RM10,000 to someone who is unemployed, no job, no financial source whatsoever....Cam tak logik kalu nak dapek loan camni kat Malaysia kan????

6.In fact...that's what exactly were happening in the US and the UK prior to the crisis,..and believe it or not, it was happening in an extremely large scale...the term NINJA borrower which I've read somewhere in guardian.co.uk which stands for No Income, No Job, No Assets borrower, is a simple word used on how to explain about this subprime lending thing....As a result of this big scale,crazy loan program in the US, at that time..It's like, everyone can afford a house..Absolutely everyone...
..konon3 nya nak wat bakti mulia la ni..

"Some people look at sub-prime lending and see evil. I look at sub-prime lending and I see the American dream in action."..--Senator Phil Gramm


7.As everyone can "afford" to buy a house..Demand for housings in the US rose dramatically...This is what we called the housing bubbles......With the ever ballooning housing bubble,some genius (or should I say freaking stupid and crazy) investment bankers saw their chance of making money out of thin air from this..They created Collateralized Debt Obligation (CDO).

8.Now ,..What is CDO??? you can get a full definition from wikipedia here
but I'm gonna tell you what I understand about CDO's...Well it's flawed but even George Soros (the mighty currency speculator who bring the Tiger Economies of east asia to their knees in 1997/1998 financial crisis-including Malaysia) and Warren Buffet (the richest man in the world, owner of Berkshire Hathaway) have never invested their money in CDO's and have always criticized it because, they have never,ever really understand how it works..

9.In my own words...CDO's works like this..the STUPID investment banks mix up all the high-rated corporate bonds (If you don't know what bonds are, click here
) and the junk, subprime-mortgages, rewrapped them ( like Nasi Lemak..hehehhe) ....and sell them again to anyone who are willing to buy.......that's how the trading of CDO starts (I think la)..Buying, Selling and Speculating is the bread and butter of the CDO's..and filthy rich investment bankers make so much money from this..exactly out of thin air.......memang pelik nak mati...

10.And unbelievably, top rating agencies like
Fitch, Moody's, and Standard & Poor's gave these junks AAA (which is the highest) rating...and making fool of so many people out there to invest in these CDO and their excuses was that their rating are made based on the information that are available to them at that time (ooo..pandai ler plak eh..bila nak downgradekan Malaysia punyer credit rating tuh, sesuka ati je plak...biol betol) ....And year after year since that,..not everyone realize that the worst financial meltdown in human history is coming....very, very soon.....

11. Then on September 2008..everything had turned 360 degrees..The ballooning bubble has ended..it had grown extremely large that it had burst out by itself...( What I'm trying to say here is that, this is where the credit crunch started,...when so many people defaulted on their loans, the money stop moving around and the financial system crashed by itself)

12.Everyone had realized that nothing lasts forever..Lehman Brothers went bankrupt, now Merryl Lynch is no more an investment bank, after being taken over by Bank Of America..and, many other financial institutions were and are still suffering..the full timeline is here- >wiki

13.Conclusion...All of the people, contributing to this financial crisis (as mentioned in the guardian before) are the ones who promoted total free market..In a sense that government interventions and rules should be kept to a very, very minimum level,...and generally, this is happening because of those some greedy bankers and politicians tried to multiply their wealth overnight (which is a total impossibilities) by expanding and growing, so fast, so large that the risk is so enormous......that all of us are gonna have to bear for quite some times, I think....




4 comments:

  1. hehe... ok ok dah paham... thanks... x)

    ReplyDelete
  2. hehe... ok ok dah paham... thanks... x)

    ReplyDelete
  3. Tu lah kijer yahudi .. ALlah beri dorang otak yg bijak .. tapi digunakan utk nyusahkan orang .. bila orang susah dia senang .. world economic dia yg pegang .. dia ranap dan dia build balik as long as to their benefits.

    kat Malaysia pun senang2 bleh dapat gak pinjaman tanpa cagaran .. pinjam kat AhLong ... lebih dari 10K pun bleh.

    ReplyDelete
  4. Tu lah kijer yahudi .. ALlah beri dorang otak yg bijak .. tapi digunakan utk nyusahkan orang .. bila orang susah dia senang .. world economic dia yg pegang .. dia ranap dan dia build balik as long as to their benefits.

    kat Malaysia pun senang2 bleh dapat gak pinjaman tanpa cagaran .. pinjam kat AhLong ... lebih dari 10K pun bleh.

    ReplyDelete