economy

New financial madness
by Luciano Lanza

The economy of Western countries has not yet been relieved from the crisis generated by subprime mortgages in the United States and already there are signs of another possible setback. And who will pay the highest price? As usual, "those who are low."

The financial market is preparing a new bubble. And when trouble breaks out will be also (rather especially) for those who work in the stock market. That is, the vast majority of the world's population. And perhaps few have noticed that our economic future (and not only) depends on (but to a large extent) by the ETF. The Exchange traded funds, funds replicating the so-called because they follow the trend of a particular financial index, have been accused, rightly, of "toxicity". The same accusation was made in 2008 to U.S. sub-prime mortgages. And that led, as chain reaction, to the economic crisis which has not yet emerged. But not all. Financial markets are working another. Are preparing to replicate the great crisis of 2001. Remember? That tied the new economy. Some examples. The LinkedIn professional social network for the first day of listing on the New York Stock Exchange has reached stratospheric figures: a market capitalization of $ 9 billion. It is so, it is not? A lot if you think that bills are just 90 million, while the price is equal to 1,113 times the net profit. And what about the growing success of credit default swaps (CDS). These are derivatives that, upon payment of an interest, provide a refund in the event of bankruptcy of the debtor: built on risky mortgage-covered bonds. In short, you pay a kind of insurance, hoping that the securities in question are not reimbursed.

Social Media Boom

Meanwhile on the secondary market, also in New York, Facebook and Twitter, that is, two popular social media, have achieved incredible prices: the total value of the two companies reached $ 50 billion for Facebook and Twitter 7 billion. In short, there are all the signs of another crisis caused by speculation. It is certainly not new. Indeed, it is a phenomenon that crosses the centuries. Just remember the speculation that went through the Netherlands in 1636-1637 known as tulip mania. What happened? In 1636 we are seeing a growing demand for tulip bulbs, especially of rare varieties. Open to trade places for the bulbs, the bulbs are traded in Amsterdam in the stock exchange. At first operators in tulip realize huge profits by selling and buying when the price goes up when prices fall. "People from all walks converted their property into cash to invest in flowers. Houses and lands were offered for sale at ruinously low prices or given in payment of contracts concluded in the tulip market. The foreigners were impressed by the same frenzy, and money flowed to the land from all directions "(Charles Mackay, Extraordinary Popular Delusion and the Madness of Crowds, in John Kenneth Galbraith in the financial euphoria Brief History).

And then? In 1637 someone started to sell, followed by others until the race to sell became a disastrous avalanche. In short, came the economic depression. That surge followed by a frozen financial economic tells us what? A very simple and dramatic at the same time: large and easy gains are an illusion for many of which will benefit very few. We make an easy bet: As we lose those who purchase securities of Facebook and Twitter when they land on the New York Stock Exchange? And so we wait for the next year which will most likely catastrophic second analysis of the gripping Aldo Giannoula. Analysis contained in his latest book entitled 2012 is no coincidence: the Great Depression with this ironic introduction ... and the Maya have nothing to do with it.