Ron Paul on Cavuto [video]

[regtoday]

http://www.youtube.com/watch?v=CcfaORVl0Zg

[tropicangela]

Woot woot

[Malakai]

Awaiting!

[regtoday]

bump

[SamuraisWisdom]

He tried to say too much in too little time lol but anyone who's familiar with his message would understand what he was talking about.

[Knightskye]

http://digg.com/business_finance/Ron_Paul_discusses_AIG_bailout_with_Cavuto

I tried submitting, but someone beat me to it.

[Drknows]

He tried to say too much in too little time lol but anyone who's familiar with his message would understand what he was talking about.

yep the average listener is like say what? i think he knows he is about to get cut off thats why he packs so much into sound bite.

[kathy88]

Giddup Ron. I wish more of the MSM would bring attention to the fact that a year ago they wree calling him nuts.

[tropicangela]

He tried to say too much in too little time lol but anyone who's familiar with his message would understand what he was talking about.

Yea I agree. Wondering how the Obama or McCain supporter translates his message.

[Knightskye]

Yea I agree. Wondering how the Obama or McCain supporter translates his message.

I don't think I could imagine how they translate it.

Let's just say we have different versions of Microsoft Word. :D

[constitutional]

That was good...

[jacmicwag]

Fox knows that only one person was calling this mess five years ago. It's a shame our economy has to go to hell for Paul to get his just due. But maybe there is a bright spot after all if McCain is pressured into appointing Paul Sec. of Treasury. I won't hold my breathe on that one.

[olehounddog]

Bump

[Bruno]

Why does Cavuto interrupt him just when he started to mention Gold prices?

[Mark]

Many thanks! Great interview! Blogged --> http://thefreedomrevolution.com/blog

[NoOutlet]

only one person was calling this mess five years ago

Ralph Nader predicted it eight years ago. Not to shit on the parade or anything. I'm just saying more than one guy has been paying attention.

I suppose conspiracy-minded Democrats might think he plotted to steal Gore's Florida votes in an effort to make his prediction a reality.. :rolleyes:


Not that I think Gore would have saved taxpayers from the current meltdown, but I imagine these conspiracy-minded Democrats think Gore would have.

[Knightskye]

Ralph Nader predicted it eight years ago. Not to shit on the parade or anything. I'm just saying more than one guy has been paying attention.

http://www.youtube.com/watch?v=6epCVUppjJM

Game set and match? :D

[rajibo]

What does Ron Paul mean when he says "derivatives"?

[Perry]

Bam!

[Perry]

What does Ron Paul mean when he says "derivatives"?

I think what he means is when a business includes something like a stock as a hard asset when in fact an issues value is completely subject to market forces.
I'd like a more comprehensive understanding of this as well.

[NoOutlet]

http://www.youtube.com/watch?v=6epCVUppjJM

Game set and match? :D

I wasn't trying to say Nader beat Paul on this prediction. Please don't immediately feel everything as competition.
I was saying Nader also predicted this and it happened to be in 2000. He compared the current situation with GSEs to the situation with savings and loans banks in the late 1980s.

This speech from Ron Paul is about having a gold standard. It's a related issue, but it's not a prediction that "GSEs like Fannie Mae and Freddie Mac are going to go under after a savings and loan scandal and in both situations taxpayers are going to get raped for it".
The problem with GSEs can be boiled down to these companies writing checks they can't cash because they know that the government will bail them out on the taxpayer's dollar. He wasn't talking about that specifically.
He was talking about a stable economy based on a gold standard.
That's great and something I'm completely for of course(my dad is a numismatist and spoke awhile ago to me about how the federal reserve is creating money by making false value out of materials worth much less).

Anyway, alls I'm saying is that both Ron Paul and Ralph Nader predicted this awhile ago and they were BOTH ignored by everyone who matters and might have cared and that's a shame. I suppose I'll predict now that it'll happen again in let's say another 15 years.

[Knightskye]

I wasn't trying to say Nader beat Paul on this prediction. Please don't immediately feel everything as competition.
I was saying Nader also predicted this and it happened to be in 2000.

I think I found the article. They want $2.95 for the whole thing, but here's a snippet:

25.) Nader rips Mae and Mac

Publication: Milwaukee Journal Sentinel (WI)
Publish Date: June 16, 2000
Word Count: 67
Document ID: 0EB82DD6B6803722

Ralph Nader, warning of a potential taxpayer bailout similar to the savings and loan crisis, urged lawmakers to cut government benefits to mortgage-market giants Fannie Mae and Freddie Mac -- which he called "poster children for corporate welfare." But some lawmakers said that acting hastily could raise the cost of buying a home by increasing borrowing costs for Fannie Mae and Freddie Mac, which are called government-sponsored enterprises.

Truce. :)

Nader doesn't like it because it's "corporate welfare" (which I think he coined). Ron Paul is against it because it's not in the Constitution.

What's Nader think about sound money, though?

[NoOutlet]

I haven't heard him speak about it specifically. I'm sure he's for a sound economy(after all, who would be for an unsound economy?), but he hasn't talked about how to get that sound economy. I don't think his campaign believes it's an issue that will grab the attention of voters like the issues of imperialism and invasions of privacy. It seems they believe direct violations of human dignity will get more play than indirect violations of human dignity via manipulations of a corrupt economical system.

"The arbitrary power to create money and credit out of thin air behind closed doors for the benefit of commercial interests must be ended." is from the four principles that the four 3rd party candidates agreed to. "There should be no taxpayer bailouts of corporations" is also in the same section of the four principles and that's the "corporate welfare" that Nader is against.

Here's a badly presented transcript of Ralph among others on a panel speaking about Fannie Mae and Freddie Mac. (http://commdocs.house.gov/committees/bank/hba65224.000/hba65224_0f.htm) Ralph was a bit late to the meeting it seems. I'd suggest searching the page for "Nader" if you want to skip to his comments.

[Mark]

What does Ron Paul mean when he says "derivatives"?

It's complicated. :D And a mess. :eek: The totality of them all even confuses the Pros.

This is a start: http://www.investopedia.com/terms/d/derivative.asp
(http://www.investopedia.com/terms/d/derivative.asp)
Here's an example story from Investopedia.

The Barnyard Basics Of Derivatives (http://www.investopedia.com/articles/basics/07/derivatives_basics.asp)

When people think of stocks, bonds or Treasury bills, they can usually come up with a clear picture in their minds, and probably some examples as well. When the word is "derivatives (http://www.investopedia.com/terms/d/derivative.asp)", most people are lucky if they can conjure up anything but an indistinct fog.

Derivatives are generally placed in the realm of advanced or technical investing, but there is no reason why they should remain a mystery to common investors. This article will use a simple story of a fictional farm to explore the mechanics of derivatives.

The Definition
Derivatives are financial products with value that stems from an underlying asset or set of assets. These can be stocks, debt issues, or almost anything. A derivative's value is based on an asset, but ownership of a derivative doesn't mean ownership of the asset.

We will look at some examples.

The Future of Healthy Hen Farms
Gail, the owner of Healthy Hen Farms, is worried about the volatility (http://www.investopedia.com/terms/v/volatility.asp) of the chicken market with all the sporadic reports of bird flu coming out of the east. Gail wants a way to protect her business against another spell of bad news. Gail meets with an investor who enters into a futures contract with her.

The investor agrees to pay $30 per bird when the birds are ready for slaughter, say, in six months time, regardless of the market price. If, at that time, the price is above $30, the investor will get the benefit as he or she will be able to buy the birds for less than market cost and sell them onto the market at a higher price for a gain.

If the price goes below $30, then Gail will be receiving the benefit because she will be able to sell her birds for more than the current market price, or what she would have gotten for the birds in the open market.

By entering into a futures contract (http://www.investopedia.com/terms/f/futurescontract.asp), Gail is protected from price changes in the market, as she has locked in a price of $30 per bird. She may lose out if the price flies up to $50 per bird on a mad cow scare, but she will be protected if the price falls to $10 on news of a bird flu outbreak.

By hedging (http://www.investopedia.com/terms/h/hedge.asp) with a futures contract, Gail is able to focus on her business and limit her worry about price fluctuations. (For related reading, see A Beginner's Guide To Hedging (http://www.investopedia.com/articles/basics/03/080103.asp).)

Swapping
Gail has decided that it's time to take Healthy Hen Farms to the next level. She has already acquired all the smaller farms near her and is looking at opening her own processing plant. She tries to get more financing, but the lender, Lenny, rejects her.

The reason is that Gail financed her takeovers of the other farms through a massive variable-rate (http://www.investopedia.com/terms/v/variableinterestrate.asp) loan and the lender is worried that, if interest rates rise, Gail won't be able to pay her debts. He tells Gail that he will only lend to her if she can convert the loan to a fixed-rate (http://www.investopedia.com/terms/f/fixedinterestrate.asp). Unfortunately, her other lenders refuse to change her current loan terms because they are hoping interest rates will increase too.

Gail gets a lucky break when she meets Sam, the owner of a chain of restaurants. Sam has a fixed-rate loan about the same size as Gail's and he wants to convert it to a variable-rate loan because he hopes interest rates will decline in the future.

For similar reasons, Sam's lenders won't change the terms of the loan. Gail and Sam decide to swap (http://www.investopedia.com/terms/s/swap.asp) loans. They work out a deal by which Gail's payments go toward Sam's loan and his go toward Gail's loan. Although the names on the loans haven't changed, their contract allows them both to get the type of loan they want. (To learn more, read An Introduction To Swaps (http://www.investopedia.com/articles/optioninvestor/07/swaps.asp).)

This is a bit risky for both of them because if one of them defaults (http://www.investopedia.com/terms/d/default2.asp) or goes bankrupt, the other will be snapped back into his or her old loan, which may require a payment for which either Gail of Sam may be unprepared. But it allows for them to modify their loans to meet their individual needs.

Buying Debt
Lenny, Gail's financier, ponies up the additional capital at a favorable interest rate and Gail goes away happy. Lenny is pleased as well because his money is out there getting a return, but he is also a little worried that Sam or Gail may fail in their business.

To make matters worse, Lenny's friend Dale comes to him asking for money to start his own film company. Lenny knows Dale has a lot of collateral (http://www.investopedia.com/terms/c/collateral.asp) and that the loan would be at a higher interest rate because of the more volatile nature of the movie industry, so he's kicking himself for loaning all his capital to Gail.

Fortunately for Lenny, derivatives offer another solution. Lenny spins Gail's loan into a credit derivative (http://www.investopedia.com/terms/c/creditderivative.asp) and sells it to a speculator (http://www.investopedia.com/terms/s/speculator.asp) at a discount to the true value. Although Lenny doesn't see the full return on the loan, he gets his capital back and can issue it out again to his friend Dale.

Lenny likes this system so much that he continues to spin out his loans as credit derivatives, taking modest returns in exchange for less risk of default and more liquidity (http://www.investopedia.com/terms/l/liquidity.asp).

Options
Years later, Healthy Hen Farms is a publicly traded corporation (http://www.investopedia.com/terms/p/publiccompany.asp) (the ticker symbol is (obviously) HEN) and is America's largest poultry producer. Gail and Sam are both looking forward to retirement.

Over the years, Sam bought quite a few shares of HEN. In fact, he has more than $100,000 invested in the company. Sam is getting nervous because he is worried that some shock, another case of bird flu for example, might wipe out a huge chunk of his retirement money. Sam starts looking for someone to take the risk off his shoulders. Lenny, financier extraordinaire and an active writer (http://www.investopedia.com/terms/w/writer.asp) of options, agrees to give him a hand.

Lenny outlines a deal in which Sam pays Lenny a fee to for the right (but not the obligation) to sell Lenny the HEN shares in a year's time at their current price of $25 per share. If the share prices plummet, Lenny protects Sam from the loss of his retirement savings.

Lenny is OK because he has been collecting the fees and can handle the risk. This is called a put option (http://www.investopedia.com/terms/p/putoption.asp), but it can be done in reverse by someone agreeing to buy a stock in the future at a fixed price (called a call option (http://www.investopedia.com/terms/c/calloption.asp)). (For more insight, read the Options Basics (http://www.investopedia.com/university/options/) tutorial.)

The Happy Ending
Healthy Hen Farms remains stable until Sam and Gail have both pulled their money out for retirement. Lenny profits from the fees and his booming trade as a financier.

In this ideal tale, you can see how derivatives can move risk (and the accompanying rewards) from the risk averse (http://www.investopedia.com/terms/r/riskaverse.asp) to the risk seekers (http://www.investopedia.com/terms/r/risklover.asp). Although Warren Buffett (http://www.investopedia.com/terms/w/warrenbuffet.asp) once called derivatives, "financial weapons of mass destruction", derivatives can be very useful tools, provided they are used properly. Like all other financial instruments, derivatives have their own set of pros and cons, but they also hold unique potential to enhance the functionality of the the overall financial system.

[rajibo]

Thanks Mark. I'm still :confused:, but I'll check out your link and try and absorb it.:)

The powers that be have sure done a wonderful job of making it difficult for even the most intelligent of us to understand how the economy works (or doesn't work).

We're all getting a crash course.

[Indy Vidual]

That was good...

Sure was :)

[Indy4Chng]

I think what he means is when a business includes something like a stock as a hard asset when in fact an issues value is completely subject to market forces.
I'd like a more comprehensive understanding of this as well.

Per GAAP they should be included on your balance sheet, there are numerious things on the balance sheet that are recorded at fair value... and Company's are encouraged to record more items at fair value as the standards move to a fair value basis, rather than a cost basis. So all you need to do is get a CPA firm to sign off and you can value most balance sheet items at whatever you want.

That's why it is so important to review the balance sheet and income statement in correlation with the cash flow statement, pay particular attention to Non-cash adjustment to net income. That is all "fake" numbers.

Of course... that's just how the accounting works... I don't know how that would make you bankrupt. They are really not related.

[Mark]

Thanks Mark. I'm still :confused:, but I'll check out your link and try and absorb it.:)

The powers that be have sure done a wonderful job of making it difficult for even the most intelligent of us to understand how the economy works (or doesn't work).

We're all getting a crash course.

It :confused: me too rajibo. A quote from the link below:
"few people understand credit derivatives, or the full risks to the United States and global markets and economies."

Here's a great article that expounds on the basic knowledge you gained from the previous links.

AIG’s Dangerous Collapse
& A Credit Derivatives Risk Primer
by Daniel R. Amerman, CFA | September 17, 2008

http://www.financialsense.com/fsu/editorials/amerman/2008/0917.html

"The $62 trillion dollar credit derivatives market is 50 times the size of the subprime mortgage derivatives market,
and is indeed larger than the entire global economy."

[newyearsrevolution08]

Expounds, it is a big word people use to feel larger than life BOOYAHH!

[hotbrownsauce]

thanks for the vid

[Mark]

Expounds, it is a big word people use to feel larger than life BOOYAHH!

:p NEVER have I thought of "expounds" as a "big" word. :p

Be that as it may, I hope you got more out of the post than that.