Reason and Consequences of the financial crisis from an ethical point of view

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Reason and Consequences of the financial crisis
from an ethical point of view

• Referent Fabian Grummes,
• M-Phil (LMU-Muinch), Founding Member of the
  German Precious Metals Society,
  CommoditiesPreciousmetalstrader

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Some Quotes

• This is the Mother of all crisis. - Paul
  Volcker, former Chairman of the FED
• US sub-prime is just the leading edge of a
  financial hurricane. - Bernard Connolly, AIG
• When you're in a pit, the first thing to do is to
  stop digging. - James Ellman, Seacliffe Capital

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I. What is Money?
We can define it by its functions as a

• means of payment
• store of purchasing power

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Characteristics of Money

• rare
• fungible
• divisible
• in demand
• easily transportable
• unforgeable

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The Goldstandard 1815-1914

• Papermoney was convertible to Gold
• free and global exchange of capital and goods
• no government intervention necessary
• system regulated itself

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Bretton Woods

• established 1944
• US - Dollar became reserve currency
• USA obliged themselves to exchange every Dollar
  back into Gold (35 1 ounce of gold)
• broke down 1971

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Since 1996 all currencies of the world are backed
by nothing but the trust of the citizens...
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Todays Money Fiat Money
one fatal Flaw (over the long run) the amount of
money is easily to increase
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Global Amount of Derivatives 684 Trillions
US-Dollar
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II. The Structure of the MarketsThe Prisoners
Dilemma

• The classic dilemma Structure

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The Normal Structure
Companies with a bad Riskmanagement will go
bankrupt
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A History of Bailouts

• Chrysler 1979
• Stockcrash 1987
• Asian Crisis 1997
• Russia Crisis 1997/98
• LTCM 1998
• New Economy 2000
• Financial Crisis 2007 - 20??

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The Bailout Structure
Now Companies with a bad riskmanagement will be
rewarded
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III. The only Reason
FIAT MONEY

• only a fiat-money system make such a bailout
  history possible
• only in a fiat money system you can run a credit
  based economy
• only in a fiat money system you can establish
  bubble after bubble

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IV. Consequences

• When the music stops in terms of liquidity,
  things will get complicated. But as long as the
  music is playing, you've got to get up and dance.
  We're still dancing. - Chuck Prince, former CEO
  of Citigroup

Central Banks will create as much money as
necessary to bring back the music
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• The Federal Reserve was not founded to bail out
  Bear Stearns or a few hedge funds. It was founded
  to keep a stable currency and maintain its value.
  - Jim Rogers, Rogers Commodity Fund

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• The US-Dollar will loose most of its purchasing
  power
• The USA will loose their Status as the one and
  only Superpower
• China, India and also Brasil will get much more
  influence to worlds Policy
• Maybe the Euro will not survive
• The FED and the Central bank System will not
  survive
• War was and is always a good way to distract from
  inner Problems

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• Hyperinflation may cause a new Currency system
  maybe currency which is backed by something -
  Gold?
• 9/11 was abused to abolish a lot of personal
  liberties, and the financial crisis will be
  abused in the same way.
• The World will face a new Protectionism

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Thanks a lot for your interest!
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V. Are there ways to profit from that crisis?

• Gold and Silber
• Commodities - especially agriculture
• China (Asia)
• some Stocks