01 May 13
Originally posted by Metal BrainIf they lose their shirt then they will get bailout and give the executives huge bonuses. I want in on this!!!!! I am ready to be rich!!!!
Is it unethical for central banks to buy equities?
http://www.bloomberg.com/news/2013-04-24/central-banks-load-up-on-equities-as-low-rates-kill-bond-yields.html
Is this a sign of desperation to prop up economies?
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01 May 13
Originally posted by Metal BrainLooking at the wikipedia article on central banks and securities I see that central banks buy and sell securities, and equity stocks are a security. So while ethical breaches and breaches of fiduciary responsibility can occur in any transaction, I don't see how the open buying and selling of stocks is itself unethical.
Is it unethical for central banks to buy equities?
http://www.bloomberg.com/news/2013-04-24/central-banks-load-up-on-equities-as-low-rates-kill-bond-yields.html
Is this a sign of desperation to prop up economies?
01 May 13
Originally posted by JS357What if the buying of stocks by central banks is not open and kept secret?
Looking at the wikipedia article on central banks and securities I see that central banks buy and sell securities, and equity stocks are a security. So while ethical breaches and breaches of fiduciary responsibility can occur in any transaction, I don't see how the open buying and selling of stocks is itself unethical.
01 May 13
Originally posted by Metal BrainOf course they can't. Not that governments or central banks generally know any better, but still.
Why can't they just let stock prices be determined by common investors of the public? Do you think they cannot be trusted to determine if stocks are overvalued or undervalued?
01 May 13
Originally posted by KazetNagorraAaaah, there you go. Central banks could be driving stocks up so they are overvalued. That can make the landing much harder than otherwise. Not good.
Of course they can't. Not that governments or central banks generally know any better, but still.
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01 May 13
1 edit
Originally posted by Metal BrainWhat do you mean by "common investors of the public" -- do you just mean the private sector?
Why can't they just let stock prices be determined by common investors of the public? Do you think they cannot be trusted to determine if stocks are overvalued or undervalued?
I just think this isn't an ethical issue, it is a "role of government" issue and the central bank as an institution that controls the money supply should be discussed in general terms first. I would have to see (and understand) how it works for example is it how GM was propped up in the recession?
"When the Treasury Department sold its last remaining shares in insurance giant AIG recently, it announced that it had earned a profit on the controversial bailout that began in 2008. That will not be the case for General Motors.
Treasury has finalized a plan to sell its remaining stake in the nation's biggest automaker over the next 15 months, beginning with GM buying back 200 million shares from the Treasury by the end of this year. That will leave the government holding about 19 percent of GM's shares, which it plans to sell throughout 2013 and perhaps into 2014."
http://www.usnews.com/news/blogs/rick-newman/2012/12/19/its-official-taxpayers-will-lose-big-on-the-gm-bailout
Edit, in accordance with the open market concept, I assume that others will be able to buy or sell GM stock at the same price (at whatever valuation the market determines) during this time.
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01 May 13
Originally posted by Metal BrainBy open I mean by what is called an open market operation which basically means, buying and selling on the open market like anyone else, not from or to select sellers or buyers. But I don't think this is an ethical question, it is a role of government question.
What if the buying of stocks by central banks is not open and kept secret?
01 May 13
Originally posted by JS357The market is rigged. It has been for a long time.
By open I mean by what is called an open market operation which basically means, buying and selling on the open market like anyone else, not from or to select sellers or buyers. But I don't think this is an ethical question, it is a role of government question.
https://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets
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01 May 13
1 edit
Originally posted by Metal BrainIf that is your position "going in" to these discussions then what are they for? Venting therapy? That's fine by me, because once in a while you bring up something that leads me to do a little research. Rarely if ever am I persuaded that extreme rhetoric is a useful way to approach issues. I associate that rhetoric with crotchety old men in their rocking chairs. (Which is becoming more and more true about me.)
The market is rigged. It has been for a long time.
https://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets
I note that the Working Group was started by a Reagan Executive Order.
Government can't help but strongly influence the market, in direct proportion to the size of each. [Edit: Even laissez faire would be a strong influence.] All of the different forces that are influential on the market, form it into what it is, and it is what the strongest forces make it. The individual or even small institutional investor like my homeowner association has a negligible impact on the market, financially or politically, and can only try to navigate it.
As the sailing aphorism goes, you can't control the wind, but you can adjust the sails.
01 May 13
Originally posted by Metal BrainThe markets are very volatile and only work on one principle.
The market is rigged. It has been for a long time.
https://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets
Stability.
If there is stability ( especially political stability ) then the market
works fine and there are few surprises. Trade is regarded as normal
and prices don't fluctuate all that much.
It is the job of Central Banks to get involved.
Their role is two fold.
1. They set interest rate for lending to other banks.
2. They worry about inflation.
As such they are integral to the economy and so act accordingly.
01 May 13
Originally posted by johnnylongwoody"2. They worry about inflation."
The markets are very volatile and only work on one principle.
Stability.
If there is stability ( especially political stability ) then the market
works fine and there are few surprises. Trade is regarded as normal
and prices don't fluctuate all that much.
It is the job of Central Banks to get involved.
Their role is two fold.
1. Th ...[text shortened]... They worry about inflation.
As such they are integral to the economy and so act accordingly.
They create inflation. Inflation is a tax and central banks like to tax with inflation. You clearly have bought into the propaganda that they are there to protect the value of currency. They are there to erode it.