In consequence the interest rates of the bonds drop deeper and
deeper in relation to the inflation rate. Hence more and more
speculants will sell their bonds and buy stocks. The reactions of
more and more expensive stocks are cheaper and cheaper bonds. In
such a time all investors will be enthusiastic because they
"earn" without working. It is an era in which the
investors are prowd about their own cleverness and foreknowledge.
On the other side the debtors are also satisfied. Because they can call in, that mean terminate their debts and make new contracts with lower interest rates. When the rates of the stocks rise the amounts of the debts must fall, because of their decreasing interest rates.
The hausse will strengthen the hausse. And not only the boom is strengthening the boom. There is an additional power which can strengthen the booms.
The governments can strenghten the rights of the speculants and the creditors and weaken the rights of the debtors in many kinds. They can strenghten the rights of the stockowners and the managements and weaken the rights of the workers. Especially with deregulation and privatization of monopolized services the government is able to promote the upper class. In this case the management must invest more money for advertising of the monopolized services. The growing number of stockowners and their income is only a small part of the advantages of the upper class of proprietors. In those times the managements will allow themself to take higher salary and add their income with stocks and stockoptions of their own company. On the other side the class of working poor will increase. What the upper class takes to much, for the lower class remains to less. The differential of economical earning is increasing faster in relation to the differential of the economical performance of the people. Both differentials look like the parts of a scissor. If the differential of the rich and poors is growing, it looks like an on opening scissor. The inequity of wealth and income is a constant partner of unemployment in capitalistic economies.
The governments have another possibility to strengthen the
rights of the speculants and to weaken the rights of their
contract partners. They can legalize socalled new financial
instruments. These are a special forms of debts. The amount of the
debt depends not only of the interest rate or the exchange rate.
The derivative debt is more than a contract between two contract
partners, because the worth of a derivative contract depends from
the value of strange property. It is like a guarantee for a
specific value of traded things. Such traded things may be
stocks, bonds, interest rates, exchange rates, indices of a
speficific selection of securities or risks. Sometimes the prices
of material things like the metal gold or mineral oil can be the base
values of derivative guarantees too.
It seems to be a very serious business, because everybody wishes security. Even the speculants of bonds and stocks and of foreign currencies should have security at their business. Therefore it is usual that the the creditors of the derivative contract make their contracts with other partners in order to minimize their own risk. They do this like assurance companies who make additional insurance contracts with a reinsurances in order to minimize their risks. But all this claims give the speculants more solvency for additional speculative contracts and the calculation of the true risk of insolvency from the creditor is more difficult. Everybody wishes more ability to pay of course. But this method is a kind without work. Nearly nobody does notice this kind of business, because it is a growing business for the satisfaction of the speculants.
The sum total of derivative debt was growing approximately constant in the western economies at the last years of the 20th century. Therefore it seems to stabilize all financial transactions, financial savings and financial activities. The international statistics of this mysterious forms of debt will be published regularly from the Bank for International Settlement (BIS) in Basel, Switzerland. The traders of derivative securities learned to calculate the risks of such business in the era of growth. A big crash, that means the implosion of a big speculative bubble, is not possibible without an implosion of the sum total of values from derivative debts.