The professor introduced the Global Financial Crisis in our Comm 101 class this week and asked us to post on pulse press who is it to blame for the crisis: the People, the bank or the government?

In class, I thought it was mainly the fault of the bank because in my opinion, they shouldn’t lend it to the people with high risks, or in other words, those with a high possibility of failing to return the money.

After going home and doing a deep research about this, I realized that it was complicated, and that neither the banks nor the Fed could evade the responsibility.

” You were right, we did it. We are very sorry. But thanks to you,we won’t do it again.” That is what Ben Bernanke, the chairman of the Federal Reserve, said on Milton Friedman’s 90th birthday. What he said was basically about the Great depression which Milton Friedman argue was caused not by stock market crash but by the poor monetary policies.

Ben Bernanke promised that he would not do this again, but in 2008, he did it again!

The transcript of the Fed’s meeting from June 24-25 2008 revealed that there was 468 mentions of inflation but nothing barely taking about the crash of the Money Multiplier. The Fed kept the interest rate constant which just increased bank’s Excess Reserves, instead the Fed should decrease the interest rate to increase liquidity.

 

Above showed the Crash in Money multiplier which lead to the Huge Financial Crisis in 2008.

Although the Fed has to pay for the wrong policy, the banks could not evade responsibilities as well. No matter how bad the policy was, the CDOs and CDS was the start of the crisis which led to a huge uncertainty and the loss of information in the market.

 

References

http://www.washingtonsblog.com/2010/03/the-fed-is-responsible-for-the-crash-in-the-money-multiplier-and-the-failure-of-the-economy-to-recover.html

Whether reject or accept the BC Hydro’s $8-billion Site C hydroelectric megaproject has been a hot argument recently.

BC Hydro wants to construct and operate a dam and 1,100-megawatt hydroelectric generating station on the Peace River in northeastern British Columbia.BC has been developing fast recent years,It has been Canada’s third-largest generator of hydro electricity, providing one of the lowest power costs in North America.It is Canada’s second-largest natural gas producer, and the oil and gas industry continues to see tremendous growth in the northeast.In order to develop or with the growing population we need the clean hydroelectricity.But the first nation representative argued that the dam will destroy nature wildlife and farmland which is basically a living for them.

In my point of view,I think we should still build the dam since the BC province industry relies on hydroelectric and using hydro is cheap and environmentally friendly but we could reduce the size therefore reduce the damage of ecosystem.There is always a lot of benefits of using hydroelectric,for example the Tennessee River project in America encouraged the whole economic development of that area and promoted Aqua farming.Also we could try alternative method such as using wind energy,Solar energy or geothermal energy.They could perhaps change a location since Vancouver is near the Rocky mountain which could generate the geothermal energy and near the ocean which could use tide energy to generate electricity.

There must be an optimal solution to develop the industry and protect the first nation,The government just need to think more carefully about the whole situation.

 

http://www.vancouversun.com/news/First+Nation+chiefs+stage+Site+showdown/10215965/story.html

By reading though Money and Banking books during this week I discovered a very intresting term—consumer or market expectation.In the 20 century,governments like to introduce a theory called Fine tunning which is trying to change the short term interest rate and hope an effect on the whole macro economy.Due to the expectation hypothesis,the change in interest rate will not effect the expected interest rate and lead to a very small percentage change of investment which hardly effect the aggregate demand.

 

So what we really need to do is to change people expectation of future.Thats what Monetary policy is about,Future guidance!Since different people have different thoughts,it is very hard to use one method to change their expectations.Some might judge the future based on the past which is called adaptive expectations and also we have specialized agents which include the risk inside but we cannot simple predict it 100% correct since there are Random errors which can not be eliminated,so people’s expectation is only a best guess to the future.I often feel very confused about how government can work on this to effect someones thoughts,If the interest rate was low,then people might assume it will rise as a common sense and how can government change this?Only by influencing the money supply?Doubt it!

Therefore sometimes the basic economic policies cannot work,As what Hyman Minsky’s model of financial instability states:Good times are boring and people starts to seek higher returns which lead to another uncertain behavior.

In my view,as what I once saw on a documentary,it states that stock market is absolutely random,we could hardly predict few percentage of it,So is expectation,They might change in a sight and influence the economy.

 

Matching sellers and buyers in the secondary market is the hallmark of a healthy, liquid bond market.But nowadays with the attraction of financial market making huge money or in other words a person without any financial background can make money with the help of a bond manger or simply following the trend.More and more people starts to buy bonds and enter the financial market.Actually this will led to huge influence of the financial market because a rumor might cause huge decline demand of a typical bond.The vice chairman of Loomis Sayles & Co Dan Fuss said that:“I think it is a very good time to be cautious… You have growing geopolitical risks and you have shrinking incentives to invest.”Due to wars and war rumors the credit is rising and therefore bond yields are falling which might not be able to provide people a stable income but since so many people are in the bond market now it is a real big issue.This also put up the liquid premium.

Since yield has drop so much,this led to 2 situations.One is the bond trade decreased,The second is it cause some investors starting to buying the junk Bonds.

In my view people are buying some risks that they aren’t familiar with which is a huge danger,Even thought the investors might be rich but there influence will harm the market.Once the yield curve starts to shift upwards this will led to a crisis.Therefore in order to increase the trade of bonds but lower the yield,Governments should keep on with QE 2 which pulls down the longer time risky bond and this might drive people back to buying the short term bonds with more liquidity.

 

http://stream.marketwatch.com/story/markets/SS-4-4/SS-4-72085/

A i.t specialist is more important that an analyst or even then the actuary
Cybersecurtity attack
How can me make it more safer?
Online shopping makes it much more convenient but consider the possible drawbacks?
JP Morgan states that said hackers were unable to gather detailed information on accounts, such as account numbers, passwords, Social Security numbers or dates of birth. Customer money is “safe,” the bank said in a statement to customers on Thursday.
But some bank specialist says that it is unlikely to attack customers but instead it will affect the bank instead.
Target Corp.’s cyberattack last holiday season affected 40 million payment cards and 70 million names, addresses, emails and phone numbers. After that,the company’s CEO resigned.Why is the CEO taking the responsibly?The company changed another CEO and hired a lot of i.t specialist.So the company fires employees which they say might forgot to logout there account and don’t blame on the I.t department which is actually in direct control to these stuff and hire more.Does that mean nowadays an I.t specialist in the company becomes more and more important?
Actually,HSBC in Vancouver takes this very carefully.They never let customers plug in the u-disk or access their manger’s email.

 

 

 

 

http://online.wsj.com/articles/j-p-morgan-says-about-76-million-households-affected-by-cyber-breach-1412283372