Why Asset Bubbles Will Always Surprise Us

It would be nice if we could predict bubbles; even nicer if we could prevent them. Unfortunately, this would violate the laws of nature: asset bubbles occur because of the limits of our ability to process information and coordinate activity in a market setting, where no-one is in charge, and no-one has a complete view of the big picture.

Here's how it works. On occasion, the enthusiasm for some growth opportunity or new technology attracts interest from people in the capital markets. Financing is suddenly available. Sooner or later the flow of new money starts to have an impact on the value of the assets being financed. But it takes time for people in the market to become fully aware of that impact.

In the case of the US housing market, prices began to accelerate beyond their sustainable path sometime around, say, 2003 thanks to global capital flows from savings-rich economies, advances in securitization technology, and an insatiable appetite for housing on the part of American consumers and investors. But it took until 2007 for the securitization markets to shut down. It took the broader equity markets another year to understand the severity of the housing crash and the resulting damage to the banking system. The government finally took steps to stabilize the system with TARP in late 2008 and stress tests for the banks in early 2009.

Why did it take so long for us collectively to come to our senses? Because consumers, mortgage brokers, lenders, investment bankers, regulators, CDO managers, rating agencies, and investors in distant countries didn't understand individually what the totality of their actions would mean for US home prices, the financial system, or the global economy.

We may criticize individuals, firms, leaders, and regulatory policies. But it would be unrealistic to think we could expect immediate, collective self-consciousness on the part of any group of people operating in a market setting. Each individual faces a practically infinite quantity of information in our complicated world. And we all have extremely limited resources with which to process this information. No system can be perfectly self-conscious. The kind of immediate social awareness that would prevent bubbles from forming or bursting is a physical and mathematical impossibility.

The inevitability of surprise does not mean that our financial system cannot be made more resilient — the key is to prevent the build-up of leverage (which makes outcomes more severe) and react more quickly during the crisis so that we can speed on our way to recovery. Here are some steps we can take now:

• Make sure public leverage does not become excessive. In addition to bringing down US Treasury debt levels, we should put Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System into run-off, which would help pay off roughly $3 trillion in so-called "US Agency" debt (a close cousin to Treasuries).

• Identify sources of "hidden leverage," such as the reliance by many institutions on similar statistical models (like Value-at-Risk) or credit ratings. We should reform the rating agencies so as to break up the oligopolistic market position of Moody's and Standard & Poors.

• Impose shorter term limits on certain public officials, for example the chairman of the Federal Reserve, to prevent the build-up of excessive investor confidence in the power of personalities or institutions to forestall economic crisis.

• Develop systems to recapitalize the financial system more quickly, with less taxpayer exposure, such as so-called "contingent capital," which consists of debt that automatically converts to equity during a crisis, stabilizing an institution without requiring protracted negotiations among investors or enactment of emergency government programs.

• Develop better corporate governance protocols, so that boards of directors can react more quickly to crisis including, if necessary, replacing CEOs who are caught in the grips of "cognitive dissonance" and unable to react to crisis or change.

Careers in Insurance

Did you know that some of the hottest jobs in finance aren't on Wall Street at all? These are jobs in insurance. Insurance is a trillion dollar business that employs more than 3 million people in the United States alone. As the population ages and wealth grows, the demand for insurance professionals will increase dramatically. This is great news for you if you're thinking of going in to insurance. Jobs in insurance involve helping individuals and business manage risk to protect themselves from catastrophic losses and to anticipate potential problems. Work in this area is not only personally rewarding, but can be financially rewarding as well.

Insurance is a stable yet dynamic industry that provides a wealth of advancement and career opportunities. From administrative support to management programs, from sales to information technology, from accounting to customer service ... anything you want to do in business, you can do in the insurance industry!

You will help clients understand their insurance needs, explain their options to them and hopefully help them purchase appropriate insurance policies. You could work in a variety of areas in insurance including as an underwriter, a sales representative, an asset manager, a customer service rep or an actuary. A theme that is constantly emphasized by insurance professionals is that the industry is ultimately about helping people when they need it the most. The stereotype of a slick, sleazy, fast-talking insurance salesman is largely a thing of the past.

Major areas of opportunity include auto insurance, life insurance, P&C (property & casualty) insurance, and health insurance. It's worth noting that private health insurance companies are central to all versions of health care legislation now being proposed in the US. If anything, the health insurance industry is likely to grow in size due to efforts to achieve universal coverage.

Fnance Need Of Everyone

Finance means to provide funds for business or it is a branch of economics which deals with study of money and other assets. In a Business management, finance is a most important characteristic as business and finance are interrelated. One can achieve its goal through the use of suited financial instruments. Financial planning is essential to ensure a secure future, both for the individual and an organization.



Personal finance

Personal finance may be required for education, insurance policies, and income tax management, investing, savings accounts. Personal loan is an effective source of personal finance. To avoid burden and life become enjoyable personal finance may be used as if getting it from a right source at minimum cost.

Business finance

Financial planning is essential in business finance to achieve its profit making objectives. There are two main types of finance available to small business:

Debt Finance: lending money from banks, financial institutions etc. The borrower repays principal and interest.

Equity Finance: source of equity finance may be through a joint venture, private investors. It is a time consuming process.

State finances

Finance of states or public finance is finance of country, state, county or city. It is concerned with sources of revenue, budgeting process, expenditure spent for public works projects.

How to maintain your finance solutions

To maintain your finance then take up best finance solutions this will give you the advice to manage your finance in better way. In financial crises, applying for a loan is the best way to finance your needs. Nowadays E-finance is another option for finance as borrower gets wider option in choosing the best lender. Financial planning is important for your finance solutions.

UK Insurance Market Intelligence - Market Research Report on Aarkstore Enterprise

UK Insurance Market Intelligence "The UK insurance market has become the second largest market globally after the US, overtaking the previous number two Japan. The main segments of the insurance industry include Life and Pension; Health and Protection; General Insurance; and Wholesale Insurance market. The Health and Protection segment comprises private medical insurance, long term care, critical illness, income protection, accident and health, and payment protection insurance. Motor and property insurance are the two dominant sub-segments of the non-life or general insurance segment. The Wholesale Insurance covers large commercial risks like those of large corporations.

In 2008, the UK insurance market witnessed a sharp decline in revenues on account
of the global economic environment. Motor and property insurance are the two dominant sub-segments of the general insurance segment. The non-life insurance sector, however, declined due to declining car insurance and home insurance premiums in the year 2008. Moreover, unfavorable weather conditions, like the windstorms Johanna and Kirsten caused huge losses in terms of profitability of general insurers. The unfavorable economic conditions in the UK have thrown opportunities for the larger players of the market to acquire the smaller ones. Aviva Plc. is the largest insurance company to operate in the UK.

The present report gives an overview of the UK's insurance market along with the analysis of the country's political structure and economic growth. The report provides an insight into the market size and trends in insurance premiums of life and non-life insurance sectors. Insurance premiums are discussed in terms of life and non-life segments and the density and penetration levels. The various developments and drivers are also discussed and finally the projections regarding premium growth are given.

By combining SPSS Inc.'s data integration and analysis capabilities with our relevant findings, we have predicted the future growth of the industry. We employed various significant variables that have an impact on this industry and created regression models with SPSS Base to determine the future direction of the industry. Before deploying the regression model, the relationship between several independent or predictor variables and the dependent variable was analyzed using standard SPSS output, including charts, tables and tests.


Table of Contents :
1. Industry Snapshot

1.1 Industry Structure

1.1.1 Second Largest Global Market after the US
1.1.2 Authorization of 972 Companies by FSA to Carry Insurance Business
1.1.3 Life and Pension, Health, General Insurance and Wholesale Insurance as Main Sectors

1.2 Market Overview

1.2.1 Market Size & Growth

1.2.1.1 Decline in Premiums Due to Global Financial Crisis in 2008
1.2.1.2 Premium Growth Largely Due to Occupational Pension Premiums Growth

1.2.2 Market Segments

1.2.2.1 Decline in Profitability of Life Insurers in Q109
1.2.2.2 Motor and Property Insurance Driving Non-Life Premiums
1.2.2.3 Huge Losses Due to Catastrophic Events Eroded Profits of General Insurers

1.2.3 Market Density & Penetration

1.2.3.1 Highest Penetration and Density Rate among European Countries
1.2.3.2 Declining Savings Ratio Effecting Density in 2008

1.2.4 Market Share

1.2.4.1 Non-Life Segment More Concentrated than Life Insurance Segment
1.2.4.2 Aviva Plc Leads the Overall Insurance Market

2. Industry Analysis

2.1 Industry Developments

Solvency II
Agreement on Flood Insurance - Good News for Customers
Lloyds and Halifax Deal Creates Bancassurer Heavyweight
Scrapping Scheme

2.2 Market Drivers

Economic Growth
Growing Annuity Market
Housing Insurance
Increase in Car Insurance

3. Country Analysis: Risk Assessment

3.1 Political Environment
3.2 Macro-Economic Indicators: Current and Projections

4. Industry Outlook: Forecast and Projections

4.1 Annual Premiums Expected to Decline Primarily Due to the Slowdown in Euro Zone
4.2 Rise in Pension Funds and Individual Annuities Market Driving Growth in Life Insurance Sector

Read more: http://www.articlesbase.com/insurance-articles/uk-insurance-market-intelligence-market-research-report-on-aarkstore-enterprise-2474632.html#ixzz0p9GEYFXO
Under Creative Commons License: Attribution

Developments leading to the Icelandic financial crisis

The developments leading up to the Icelandic financial crisis makes for an interesting read, only because of the fact that a lot of factors actually contributed to it. The problem really was – No one was able to understand the magnitude of the problem at hand, resulting in the entire situation to spill over in a big way.

The Krona was depreciating

The national currency of Iceland, Krona, didn't do well in the lead-up to the final bust. Starting January 2008 until September 2008, the Krona had slipped 35% against the value of Euro. It was not that the Euro was strong in itself, but the Krona was way too weak compared to the Euro. This almost triggered a price rise, which resulted in inflation climbing up to 14%.

Eventually, banks in Iceland raised their interest rates to deal with the inflation, to 15.5%.

The Central Bank of Iceland tried to benchmark the value of Kroner at two instances. The first of these was on the 6th October, when they failed to do so. And the other came on the 8th October, when the bank decided to peg the value at 131 Kroner to a Euro.

This attempt failed too, and by the next day, the Krona was dealing at 340 to a Euro, which is when FME took over the last standing major Icelandic bank. In days coming by, the value of the Krona went on to be determined by a lot of factors, most of which don't play a role in the normal sense in determining the valuation of the national currency.

October 2008 was the signal that the worst for Icelandic banks had indeed come, as the exchange reserves of the Central Bank of Iceland dipped by 289 Million Dollars.

Lack of strong action spelt doomsday for the banks

The news that the Iceland Government was planning to nationalize Glitnir, a leading bank by purchasing 75% of its stake at 600 Million Euros, made some people sit up and take notice. One of the leading banks was apparently in trouble and surely, this was a sign of worse things to come by. Apparently, what had happened behind the scenes was The Financial Supervisory Authority didn't let the take-over of 75% stake go through.

Considering the fact that Glitnir had about $750m in debts meant one thing – This development sounded the death knell for banks.

Developments over the next some days meant that banks had completely stopped inter-bank credit lending facilities, leading to Prime Minister, Geir Haarde announcing a new set of regulatory measures. In the coming week post this announcement, two other banks, Landsbanki and Kaupthing, bit the dust, literally speaking.

No activity on the stock markets, either

All this frenetic activity resulted in investors moving out their money out of the stock market. The national indices of Iceland saw a freefall like never before, and finally, the FME drove the final nail in the coffin, by suspending the operations of the stock markets. The markets remain shut for 8 days, before resuming on October 14th.

On resumption itself, the markets nosedived 77%, as a result of the indices and the values of the three major banks being set to zero.

Broadly speaking, these were three major developments that resulted in the ballooning of the Icelandic financial crisis. As discussed before, all of these could have been prevented easily by some proactive measures by the Government. As it turned out, the measures were retro-active.

Read more: http://www.articlesbase.com/banking-articles/developments-leading-to-the-icelandic-financial-crisis-2472301.html#ixzz0p9EH9sNt
Under Creative Commons License: Attribution

Banking regulation ? mal function!

The few regulatory measures introduced since the financial collapse in 2008 are being supervised by the same banking sector that caused it in the first place, writes Financial Times journalist Lucas Zeise. Governments’ delegation of regulatory responsibilities has deeply negative implications for democracy.

Two years have passed since the outbreak of the property and financial crisis, yet there has been no progress in the regulation of the banking and financial sectors. Worse still, a serious start has not even been made. This diagnosis doesn’t only go for Germany. It applies equally to the US, the European Union, and at the level of international regulation.

Not that there has been a lack of fine words. Alongside US president Barack Obama, who last summer announced the biggest “overhaul of the financial regulatory system since the reforms that followed the Great Depression”, the German chancellor is now proving to be a master of empty promises. Her new year’s address of 2010 contained the beautiful sentence: “We must and will continue to work resolutely to introduce new rules into the financial markets, which will in the future prevent in good time the concentration of excess and irresponsibility.” Angela Merkel made very similar sounds in New Year 2009, when she was still head of the grand SPD-CDU coalition.
Cynics as realists
Cynics will say that exactly this was foreseeable following the bank bail-outs in autumn 2008, when practically all capitalist countries ensured the survival of “their” domestic banks with hundreds of billions of euros, dollars, yen and pounds. The cynics have turned out to be realists. They knew that the political establishment is always and everywhere closely associated with the most senior figures in the financial sector – or “high finance”, as one used to say. They do not even need to mention in detail that the investment bank Goldman Sachs has the best possible connections in all the upper echelons of US government, or that Germany’s leading commercial bank (Deutsche Bank) and leading insurance company (Allianz) have exercised a very strong influence on the legislative and executive since the beginning of the FRG (and of course before then, too). It is hardly surprising, then, that the only SPD politician to have kept a top government post after the change from the grand coalition to the CDU-Liberal coalition is one Jörg Asmussen, who as secretary of state in the Federal Ministry of Finance organized the billions of euros to rescue IKB, HRE, Commerzbank, Allianz, and ultimately the entire German financial sector. He is still needed.

In terms of results, it all seems clear enough. Apart from a few mini-corrections and proposals for raising minimum levels of private capital for investment banks, which will be implemented in who knows how many years, nothing, absolutely nothing has happened in terms of serious regulation. In view of the economic disaster caused by financial speculation, that surely is surprising.

After all, an economic crisis, particularly one of this scale, is no fun for capitalists either. Not all managed to remain in the profit zone. More than a few had to file for bankruptcy. In fact, it ought to be in the interests of industrial and commercial capital – let’s call it that rather than pure money capital or finance capital – to avoid similar occurrences in the future. In other words, there needs to be stricter state control of the financial sector. Otherwise financial crises will simply be unavoidable. Indeed, this conclusion seemed to have been reached by many people in many different places. However when it comes to concrete matters, the financial market becomes the judge of how regulation is carried out (which is what the neoliberal business model intends).
Banks’ obligations on private capital
Since banks are able to offer practically unlimited amounts of credit, and can thereby create money, capitalist states have tried to control and limit this credit creation in order to avoid precisely the kind of crisis like the current one. The most important means to do this are regulations on the amount of private capital a bank must have in reserve in relation to the volume of credit on offer. The total credit offered is thereby limited. The first internationally binding regulation on the private capital ratio, the so-called Basel Accord (Basel I), came into effect in 1988. In general, it stipulated an 8 per cent rule. In other words, 8 per cent of every loan offered by a bank had to be backed up by private capital, or, to put it another way, the banks were only allowed to loan out 12.5 times their own capital.

From the outset however, this agreement had holes in it. Worse, the rules were soon relaxed, supposedly in the interests of greater efficiency. After more than ten years of negotiations, the Basel II Accord came into effect in 2008, the year of the crisis. It ruled that a bank has to put aside a high amount of private capital for high-risk investments and low amount of private capital for low risk investments. Basel II, in other words, meant that the banking supervisory body has to assess banks’ increasingly complex risk-measurement systems, a task for which it is unequipped.

In December 2009, the Basel Committee on Banking Supervision – the body that Basel I and II had created – proposed raising the private capital requirements of banks. It also recommended that the concept of private capital be more narrowly defined. However Basel II itself was not questioned. The Committee wants to implement this gentle tightening of private capital regulations extremely cautiously, or at any rate not immediately. This considerateness follows the bidding of governments, who at the G20 meeting in April 2009 spoke out in favour of stricter regulations, however wanted them implanted only “after the crisis”.
Early warning system out of order
Still, it is possible to observe at least small signs of ideological progress in banking control. Governments recognize that they need an institution that takes care of financial stability. They are clearly not doing this job themselves, nor apparently do they see themselves in a position to start. For that reason, the “Forum for Financial Stability” was tasked with acting as an early-warning system at the international level. It is supposed to sound the alarm, to draw attention to flaws in the financial system, and to circulate suggestions for improvements if anything goes wrong. The Forum was set up in back in 1999, following the Asian crisis, which indicates its greatest shortcoming. Its first president was Hanz Tietmeyer, who had recently retired as president of the German Bundesbank. Under his leadership, the Forum omitted to condemn the international speculation that had led to the hyper-boom in the Southeast Asian tiger states, and then to the flight of capital from the region in 1997, which left in its wake a serious economic crisis. Instead, the Forum moaned about the poor statistics of the Asian national economies. Today, the Forum is equally “competently” staffed as before – with eminent bankers, central bankers and bank supervisors.

Until now, a macro-economy did not exist in Europe. There has also been no pan-European economic policy. The crisis has at least caused something to change in conceptual terms. A body has been installed equivalent to that at the global level in order to forecast instability and even to offer suggestions to governments. It is headed by none other than the president of the European Central Bank, currently the Frenchman Jean-Claude Trichet. Like the institution he leads, Trichet for a long time denied the existence of a financial crisis, and when denial was no longer possible, deemed its effect upon the rest of the economy negligible. This new arrangement is sure to prove extremely useful for the citizens of the EU.

There are some remarkable parallels between the US and Europe here. In both the world’s two largest national economies, the intention is that the chaos and incompetence should be reduced somewhat; in both regions, the central banks will take control. Compared to the “diversity” of competence that currently dominates the field, that might be a marginal improvement. It is consistent, at any rate. As the creator of the dollar, the Fed can indeed rescue banks. It has recently been doing just this, with élan. However it is also consistent that control over private banks has been handed over to a state institution that nevertheless belongs to these banks.

In Europe, governments want to centralize the supervisory bodies that have until now been operating at the national level. A committee made up of representatives of the many national banking supervisory bodies will be formed to this end. Presiding over it will in turn be the president of the ECB. However what authority will the committee have when it comes to closing or bailing out a bank? Can it really order the national supervisory body of a country, against its own (government’s) will, to do such a thing? One is almost grateful to the governments in London and Berlin that, at the instigation of their domestic banks, they refused to give this new body such a far-reaching mandate.

In Germany, too, the Bundesbank is in the process of extending its supervisory role. However neither it nor the CDU-led government can argue with the economic crisis. In its analysis of the crisis, as well as in its bail-out measures, the Bundesbank has proved itself to be extraordinarily incompetent. That such an important area of state activity should be handed over to an institution that is beyond parliamentary control is a further step towards the de-democratization of the country.
The same procedure?
In derivatives trading, too, the finance lobby is in the process of asserting itself across a broad front. In order to avoid similar accusations that followed the Lehman collapse, so-called “central counterparties” have now been installed. They act as a general market central. If a bank collapses, they take over its contracts. The credit-worthiness of these institutions must be beyond all doubt. A state-protected institution is the only option. The result: the state acts as guarantor of the speculation business. In terms of the limitation of speculation itself, on the other hand, there is nothing to speak of.

While the ratings agencies were indeed given a sharp ticking off shortly after the outbreak of the crisis, there is still no sign of a reform. They are neither controlled, nor has their power been reduced. On the contrary: the ratings agencies bear some of the responsibility for the disastrous way Greece’s debt crisis has been handled. Not only banks, but also governments have referred to their judgements as if they were law. This scandal is continuing completely unchecked.

True, there could soon be a register for all hedge funds. However, control of this currently rather unsuccessful sector is non-existent.

Moreover, the free circulation of capital is not even seen as a problem. As decoration, one might also mention that the German Social Democrats as well as the Britain’s Labour prime minister Gordon Brown are currently backing the old call for a financial transactions tax – probably because they know that it will never happen. Governments appear not to be bothered by the fact that mass Carry-Trade (acquiring debt in currencies with low interest rates while investing in highly profitable currencies) not only distorts the market, but also runs contrary to the intended effect of the financial policies.
The Icelandic example
Symptomatic of the failure of state actors is the conflict over the repayment of the money that, using high interest rates as a lure, Icelandic banks amassed from British, Dutch and German savers prior to 2008. Back then, the guest countries, in accordance with EU law, decided not to impose their national investment security systems on the Icelandic banks. The deregulatory principle of freedom of establishment, disastrous in every relationship, ruled. In other words, the EU member states quite consciously opted not to protect their citizens from the unserious financial deals offered by these banks. In 2008, the three Icelandic banks finally collapsed, and the remains were nationalized.

The UK, Dutch and German governments have compensated their conned citizens and want the Icelandic state to foot this bill (3.8 billion euros) according to a contract drawn up with Iceland. However, after the Icelanders staged massive protests, the president Olafur Grimsson refused to ratify it. A popular referendum will now take place that is very likely to reject this law.

One can only applaud the Icelanders and their president. By refusing to take responsibility for the losses incurred by the banks and the speculators, the Icelandic people have probably found the sole effective lever for halting deregulation – and ultimately even reversing it.

Totally Permanent Disability Insurance - Things to Remember

Present lifestyle for everyone around the world in these days has become unpredictable.At this situation, every one of us needs all kinds of insurances,which are available today.Most of the people around the world are having much knowledge about these policies.However,still there are so many people are not having much knowledge about totally permanent disability policies.When it comes, it is a well known to the whole world. Life insurance, vehicle insurance,home insurance is some of the example of the insurance policies available today.Some of the people are also interested to take policies for body parts like voice, eyes and many more.When it comes to totally permanent disability insurance is one of the best among all others.The name insurance means it will help the policy holder from all types of necessitates when the person fails to attend work due to illness or disability.According to one medical survey report that most of the people around the people are becoming disabling at the age of thirty five, and they are unable to work for themselves.And also according to the World Health Organization reports that one in ten is experiencing these disability issues.With this type of policies,definitely,you will resolve some of your financial issues like medical and rehabilitation expenses.

When it comes to options available in this policies, there are two types of insurance available.First one is short term disability insurance and second one is long term disability insurance.The short term disability insurance covers sixty to seventy percent of your actual income and most of the insurance companies are offering this type of insurance for everyone in the time period up to your retirement.The long term disability insurance offers almost actual income up to your retirement.And the time period of this insurance policy is around six months to your retirement.And most of the insurance companies are not offering this insurance policy.However, selecting the best one is a really hectic task,but selecting the long term policy would be a wise idea to get as much coverage as possible, and also it will offers on tax free basis.This type insurance is available from the government insurance companies or some of the esteemed employers are offering to their employees.Most of the organizations are offering these insurance benefits to their employees at the end their termination from services.You need to consider so many things before selecting this type of insurance policy.

The first and main point to consider is the policy must provide the clause that the insurance company cannot cancel or raise the premium amount.For this instance,please make sure that you need to select the not canceled policy depending upon your requirement.However,there are some well established and experienced insurance companies in Australia are offering best totally permanent disability insurance for their valued customers.For more information and details,please visit their web site.

There are four types of Total and permanently disable insurance policies are available in the Australia.There are so many insurances like Total Permanent Disability insurance,Critical Illness insurance,Trauma Crisis insurance,Trauma insuranceare offering these insurances at affordable rates to their valuable clients.

There are four types of Total and permanently disable insurance policies are available in the Australia.There are so many insurances like Total Permanent Disability insurance,Critical Illness insurance,Trauma Crisis insurance,Trauma insurance are offering these insurances at affordable rates to their valuable clients.For more information on these insurances, Please visit our web site http://www.kevinhobbs.com.au/total-permanent-disability.php