Comments on: The Elite’s economic system

By: Comment on The Elite’s economic system by c. patriawan at Sub Prime on The Finance World For News and Information Around The World On Finance

Wed, 23 Apr 2008 02:16:21 +0000

[...] Comment on The Elite’s economic system by c. patriawan …om harry, some of your reasoning is actually not quite right, but you conclusion is good. [...]

By: The Elite’s economic system at Sub Prime on The Finance World For News and Information Around The World On Finance

Tue, 22 Apr 2008 13:53:23 +0000

[...] The Elite’s economic system Then we have that interest-ing problem : sub-prime mortgage trouble. We’re talking about US$ 8 trillions market here. [...]

By: Hendro

Hendro — Mon, 21 Apr 2008 04:43:16 +0000

Afwan, boleh ana kenalan?

By: c. patriawan

c. patriawan — Sat, 22 Mar 2008 00:28:52 +0000

the real problem of bear stearn crash is actually the mortgage securities where it’s not regulated. the ’subprime’ mortgage is not allowed before (during clinton area).

this blog clearly explain it:
————
http://www.afterdowningstreet.org/node/31800?ref=patrick.net

Here’s how it worked: The Grinning Family, with US average household income, gets a $200,000 mortgage at 4% for two years. Their $955 a month payment is 25% of their income. No problem. Their banker promises them a new mortgage, again at the cheap rate, in two years. But in two years, the promise ain’t worth a can of spam and the Grinnings are told to scram - because their house is now worth less than the mortgage. Now, the mortgage hits 9% or $1,609 plus fees to recover the “discount” they had for two years. Suddenly, payments equal 42% to 50% of pre-tax income. Grinnings move into their Toyota.

Now, what kind of American is ‘sub-prime.’ Guess. No peeking. Here’s a hint: 73% of HIGH INCOME Black and Hispanic borrowers were given sub-prime loans versus 17% of similar-income Whites. Dark-skinned borrowers aren’t stupid – they had no choice. They were ‘steered’ as it’s called in the mortgage sharking business.

‘Steering,’ sub-prime loans with usurious kickers, fake inducements to over-borrow, called ‘fraudulent conveyance’ or ‘predatory lending’ under US law, were almost completely forbidden in the olden days (Clinton Administration and earlier) by federal regulators and state laws as nothing more than fancy loan-sharking.

But when the Bush regime took over, Countrywide and its banking brethren were told to party hardy – it was OK now to steer’m, fake’m, charge’m and take’m.

By: sufehmi

sufehmi — Wed, 19 Mar 2008 09:59:32 +0000

Wow, you covered a lot of ground here.
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A bit of behind-the-scene stuff — I was suffering from a bad headache, about to give up and went too sleep, but I got too many tasks left to do.
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So I thought, “let’s make a post !”
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By the time this post was published, I was pumped up with adrenaline (this bubble economy is a total sham and an outrage anyway)
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Thanks to that, I was able to resume my work

By: sufehmi

sufehmi — Wed, 19 Mar 2008 08:54:20 +0000

@yanuar - that would be safer for most of us indeed
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@colson - thanks pak. “Casino Capitalism”, I like that
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It’s all about PR again, isn’t it ? With their heavy media campaign, and lavish offices, people are blinded and believed them.
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Re: being THE solution, it still depends on the execution. A solid idea/concept may deliver totally wrong results when executed improperly.
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So far it looks good, various sharia financial institutions are able to pass Indonesia’s 1998 economy meltdown. Some, like Syariah Mandiri, perform very well, it surprises even themselves.
How it will fare in the long term, however, nobody knows. Hopefully everyone involved will be sane enough not to make any stupid mistake with this instrument.
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One thing for sure - sharia economic institution is the new rock star. There’s no question about it. You can read the link from patriawan for more details.
Yes, even Citibank is buying.
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With that settled, I have concerns too about how it’s going. Again, some of the minor concerns are already mentioned in the article on patriawan’s comment.
There is indeed a shortage of ulama with :
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1. finance-perspective
2. skilled enough in sharia to issue fatwa
3. able to focus on the essence of sharia economy - not getting bogged down in the technicalities and misses the blindingly obvious (eg: wise)
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I don’t mind at all Citibank/HSBC/etc jumping on sharia bandwagon. It’d good for all of us if they are providing us with an alternative that’s beneficial to **all** of us, not just to some.
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However :
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1. Must be careful so there won’t be financial products with sharia badge slapped on it - but actually nothing close to it at all (that PR problem again). This is the job of “Dewan Pengawas Syariah” (sharia compliance board), but again, there’s an acute shortage of people capable of this.
2. Same as point 1, but when it’s happening slowly over the time. This will make it far more difficult to detect and realize. Similar to the famous analogy of boiling the frog - boil them slowly, not fast, and they’ll be dead before they know it.
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Also, sharia economy is not just about (economic) institutions. It’s just part of the picture.
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The big picture is a wealth-sharing system. Driven by zakat (obligatory alms) or jizya (its equivalent for non-muslim), and shadaqah (alms). People are collecting wealth as usual through real economic activities, but it will be spread again to the needy. Not accumulated in a small circle.
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Focusing on the details of sharia economics may very well make us miss this most important picture.
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@patriawan - hi Oom, how do you do? Yes, I’ve read your explanation on that mailing list. Clear and easy to understand as usual.
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I don’t mind you pointing out my mistakes too if you feel like it.
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Thanks for the link, the article is short but full of very interesting details.

By: c. patriawan

c. patriawan — Wed, 19 Mar 2008 02:14:13 +0000

om harry, some of your reasoning is actually not quite right, but you conclusion is good. Almost coincendentally , i just explained about this mortgage issue in indosv mailing-list and also explained how the islamic finance is surviving this madness.

There’s good URL for you to take a look.
http://www.financeweek.co.uk/cgi-bin/item.cgi?id=5931

By: colson

colson — Tue, 18 Mar 2008 21:06:41 +0000

Wow, you covered a lot of ground here. And in the process you made several interesting points. Generally I just have to agree with your analysis. And your father seems to be a very wise man to me, by the way.

I may add that I too think this Casino Capitalism is unfair and risky. Beneficial to a few and harmful for most. They ( the financial and economical elite) use to say it’s all about trust and that they were rock solid and very trustworthy - and miraculously the lot of us did/does trust them. Miraculously, because it’s largely fairy tales. Like most of the Friedmaniac economic theories at large are fairy tales.

Whether or not sharia is the solution, remains to be seen. As a matter of fact I don’t know about the Citibanks etc running in that direction. I wonder If you’ve got some specific information on this issue.

(Note: As for Europe’s interbank lending it may develop into a problem indeed. Because these financial institutions are intertwined globally. But in Europe, as far as I know only the Swiss bank UBS -lost € 7.8 in the last quater of 07 alone- that’s in severe trouble)

By: hard loan

hard loan — Tue, 18 Mar 2008 20:57:20 +0000

[...] she said. …Lehman CFO stimulates stock with upbeat liquidity comments MarketWatchmoney.cnn.comThe Elite??s economic systemThe Elite??s economic system March 18th, 2008 Back at the dotcom era do you still remember that?, I [...]

By: solution watch

solution watch — Tue, 18 Mar 2008 19:07:08 +0000

[...] the name of profit, America has been sacrificed on the altar of the god ofmparent7777-2.blogspot.comThe Elite??s economic systemThe Elite??s economic system March 18th, 2008 Back at the dotcom era do you still remember that?, I [...]

By: yanuar

yanuar — Tue, 18 Mar 2008 17:17:05 +0000

Still wondering how can we trade our capital. Even now I am studying accounting, it is still confusing for me. Nah.. I think I will just stay in the “real” trading.