Global Financial Crisis - Securities Exchange Simulation

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FINANCIAL CRISIS: Securities Exchange Simulation Sebastian Alex Dharmawangsa, MOS (cert.) 15/376878/SP/25627

img: Ravand Institute


What is Money?

The Securities Market


BONDS What is Money?

STOCKS


The Republic of Dummy People a i p Uto

Government: Republic Stability: Stable Population: 5,837,678 2 Size: 108,453 km 99% Literacy Rate Low Poverty Rate
 Low Unemployment Level (Services Based Industry) Low Domestic Tourism


DMEX

Dummy Exchange

img: Ravand Institute


Sanora-Tevi Detergent Company (Fast Moving Consumer Goods)

Fills Mega Land Corporation (Land & Housing Developer)

Started from a detergent company, now Sanora-Tevi produces most of D u m m y C o u n t r y ’s h o u s e h o l d cleaning products. The company constantly wins the ‘Top Brands’ awards.

Top land developer company in the nation, deals with projects ranging from shopping malls to govt. subsidised housing. The owner of this corporation is listed as the nation’s richest man.

Transit International Airline (Transportation - Airline)

Securities Exchange Cooperation (Finance - Insurance)

The company is the flag carrier of the nation. The company also is the holder of ‘DumEx Air’, the low-cost subsidiary of the airline. They also own part of the Airport Management company’s share.

Top land developer company in the nation, deals with projects ranging from shopping malls to govt. subsidised housing. The owner of this corporation is listed as the nation’s richest man.


STD

Sanora-Tevi Detergent Company

Fills Mega Land Corporation

TIT

SEX

Transit International Airline

FML

Securities Exchange Cooperation


! N I G E DMEX B S ’ T E L Dummy Exchange


Month ONE

Airlines Prepare Extra Flights and Airports Anticipate as Summer Holiday Nears

Sanora-Tevi to Take a Huge Leap Into Personal Hygiene Products Line

… airlines’ demand for tickets rises up to 500% and airports foreseen to see an increase up to 3,000,000 passengers in the period.

… the products produced would include soap, shampoo, facial wash, and 2-in-1 products. This will be another huge leap post the ‘detergent’ leap.


What Happened? Stock Price

Demand2 Demand1

P2

Supply

ę?Œ

1) Demand for the particular stocks increase as there is a positive speculation on longterm profit. 2) Both markets find itself a new equilibrium between supply and demand; with higher price level.

ę??

P1

How about the quantity? Story for another month (slide). Quantity


Month TWO Govt. Signed Reclamation Deal with Fills Mega Land Corp. *proposed reclamation site

The President To Visit Japan: Talks About Investing In Stronger Domestic Transportation

The Government has approved Fills Mega Land as the vendor for the long debated reclamation plan. This reclamation plan will begin mid this month, just a few days as the bid is passed. The reclaimed land, spanning an enormous three provinces, will first begin on the north most, Quabra region; shutting down the coastal activities. All coastal infrastructures are going to be replaced accordingly. However, the main focus of the project still lies in the coastal housing projects.


Month THREE

Sanora-Tevi New Personal Hygiene Products Instantly Tops the Toiletries Market Sanora-Tevi products, yet again, top the market; this time with their new personal hygiene products just introduced last month.

Transit International to Expand Services to International Rail Services ‌ as agreement on creating International Rail Services signed by the Dummy Government and the neighboring countries. The president director of TI has refused to confirm involvement in the project.


What Happened?

Speculation. “As time goes on, I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes.� - John Maynard Keynes


Month FOUR Prices of Coastal Apartments and Houses Released Last Week

SUDDEN BOOM: THE HOUSING MARKET Fills Mega Land released the new prices of the houses to be built on the reclaimed land Sector 1, Quabra last week in a Progress Press Conference. The market has reacted positively towards these prices as the demand skyrocketed. This even made the FML Website crashed for 3 consecutive days. The Phase I Project itself has been slanted to finish on early 2020.

Transit International to Purchase 10 new Airbus A380 To Suit International Demand The order includes: - Ten A380 Purchase - Five XWB Purchase

-

Five A380 Option Five XWB Option


What Happened? Price

P1

P2

Demand

Supply1

Supply2 ę?Œ

Vertical Supply: Naturally limited supply; where the a fixed number can only be supplied. 1) Expansion of land results in more area to build houses; especially in saturated areas. Thus, fixed supply can increase.

2) New equilibrium is formed ę?? between fixed supply and demand; with lower price level. Quantity


Month FIVE Chillax: Housing Instalments Lax Out To Push Sales of Sector Two

SOLD OUT: Current Phase I of Fills Mega Land’s Reclamation Project

With a high demand of the reclamation housing market, and the soon opening of sales on the Sector II of Phase 1, investment securities and banks lax their loan requirements (especially on the housing market). This easing of loan policy is done in the hope to increase the market demand and saturation, for a more positive future long-term investments prospects. The Financial Services Authority has given a green light for this loan policy, to be formally passed tomorrow in Utopia. This could double the market’s portfolio.

*proposed finished reclamation site plan

Sector Two of Phase One to be opened for purchase by end of the month.


What Happened? Sub-Prime Mortgages / Loans

Predatory Lending Practice

Mortgages approved in riskier individuals than normal; this might happen due to the high demand of loans and high prospects of returns in defaults.

Usually happens in a competitive based banking activities; where the banker would use long-term tricks in agreements that debtors wouldn't be able to keep up in the end.

Collaterised Debt Obligations

Debt Ratings

When a group of loans are then sold by banks towards finance firms and investors, to reduce the risks taken by banks. The payment, and interest, then becomes a profit towards these debt investors.

AAA

BB+

- Prime - Non-Investment Grade - In Default

D


Month SIX Saturating Signs? Slight Decline of Purchase Fills Mega Land released the new prices of the houses to be built on the reclaimed land Sector 1, Quabra last week in a Progress Press Conference. The market has reacted positively towards these prices as the demand skyrocketed. This even made the FML Website crashed for 3 consecutive days. The Phase I Project itself has been slanted to finish on early 2020.

DMEX Reached New Record Heights as Housing & Securities Markets Skyrocket


What Happened?

MARKET FLOODING

MARKET SATURATION


Month SEVEN Banks & Insurances: “Prepared for Worst” Still Easing Loans DMEX Shows Growth; Sluggish. When asked, the President Director of the nation’s largest bank DSB requoted that his consumers should never worry as they are too big to (be permitted to) fail.

Some economic advisors have warned the government about incoming recession if the housing bubble bursts. However, banking institutions and insurances companies have deemed themselves “Ready for the worst, IF it does happen.” When asked, the President Director of the nation’s largest bank DSB requoted that his consumers should never worry as they are too big to fail, the government will always take necessary actions to reduce any potential failures.


“TOO BIG, to fail”? The "too big to fail" theory asserts that certain corporations, and particularly financial institutions, are so large and so interconnected that their failure would be disastrous to the greater economic system, and that they therefore must be supported by government when they face potential failure. Professor Tom C. W. Lin “Too Big to Fail, Too Blind to See” (2012)


Month EIGHT

THE HOUSING BUBBLE HAS COLLAPSED THE ECONOMY SEES A MAJOR RECESSION LOOMING Major Defaults of the Housing Loans as the Driving Force of Collapse


Month NINE Black Christmas:

Recession - Low Holiday Turn Out

Failing Company: INVESTORS BAILS SECURITIES EXCHANGE Lorem ipsum dolor sit amet, consectetur adipiscing elit. Etiam tincidunt euismod mauris, a pharetra arcu viverra vitae. Integer id luctus tellus, a auctor ante. Phasellus nec ultricies dui. Nulla quis cursus mi. Mauris dolor ipsum, porttitor condimentum iaculis vitae, elementum ac elit. Etiam quis sem eget ex suscipit vestibulum sed eu nisi. Ut volutpat metus et neque aliquet malesuada. Etiam feugiat arcu turpis, sit amet egestas mauris dapibus eu. Suspendisse porttitor velit sapien, sit amet faucibus elit tincidunt molestie.


Month TEN As Demands Shrinks - Companies Cuts Variables Huge Layoffs Everywhere Across The Nation As the nation falls under recession, customers have cut spending in all sectors, creating a more protectionist companies due to the low demand. To save their variable costs and cut spendings, companies has started to lay off its workers. This created a huge unemployment bubble in the nation, especially for low skilled labours. Some companies have also opt to sell out their assets to dampen the fixed cost.


What Happened? LRAS

Aggregate Price P1 P2 P3

D2

D1 ꍌ

1) Aggregate Demand Falls, S1 ꍎ

S2

2) Short-Run Changes in Equilibrium, 3) Overtime, Supply Curve follows natural LRAS,

ꍍ ꍏ

4) Thus, Output returns to natural state, with new price level. Aggregate Quantity


Month ELEVEN

DMEX To Suspend Trading For A Week Due To The Recession


Month TWELVE The Sun Shines With Pain: New Fiscal Year Approaches

Bleak GMSs Across Nation As the new Fiscal Year looms in most companies, Shareholders across nations are called into what might be the bleakest General Meeting of Shareholders in the half century.

The Government To Take Actions In The Recession The President to speak to the public early tomorrow after a rigorous meeting with the house to decide the future of the financial market.

With most companies actually losing much in the recession, shareholders are not expecting any great turnouts. However, the government said that they are ready to intervene, giving a last minute hope to the economy.


What’s Next?


The Bright Future BANK BAILOUT GOVT. SPENDING

GOVT. TAX CUTS Dummy Government

BANK POLICING


How & Why Did Indonesia Survive?

GDP growth (annual %)

16 12 8 4

-4

2006

2007

2008

Indonesia

2009

2010

Singapore

2011

2012

United States

2013

2014 World

data.worldbank.org

0

2015


How & Why Did Indonesia Survive?

data.worldbank.org

>50% of Indonesian GDP Made Up By MSMEs + Positive Government

Intervention Using Available Reserves

(Cadangan Devisa)

2008


The Looming Danger: 2017 Global Financial Crisis

Brexit

The United Kingdom, is a country focused on the financial services sector. The City of London is also a major financial hub for the European Union, even the world. The withdraw of the United Kingdom from the European Union, creates hardship for financial services to continue their business in the UK.

Deutsche Bank Crisis

Remnants of the 2008 Financial Crisis: The United States Department of Justice is seeking a $14 billion civil settlement with Deutsche Bank over its alleged role in artificially propping up the U. S. housing market in the lead-up to the financial crisis of 2007–08 and the Great Recession. (USA Today)


The Looming Danger: 2017 Global Financial Crisis

Brexit

The United Kingdom, is a country focused on the financial services sector. The City of London is also a major financial hub for the European Union, even the world. The withdraw of the United Kingdom from the European Union, creates hardship for financial services to continue their business in the UK.

Deutsche Bank Crisis


DMEX

Dummy Exchange

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