Global financial system implosion begins

[kabbes]

Biggest sell off in 30 years - looks like long term holders are redeeming rather than rolling their holdings - in itself could just be a reaction to uncertainty and diversification of risk but it’s all interesting stuff.

This fear seems to be building

OTOH, US indices are more or less at record highs.

 

[Idaho]

OTOH, US indices are more or less at record highs.

Because of the huge capital flight from EMs?

 

[kabbes]

Because of the huge capital flight from EMs?

Quite possibly. It's not like investors are keen on just holding cash.

 

[Falcon]

So, no Global financial system implosion in the last ten years. Strange, I was expecting it sooner.... I will have to wait again, just like the uprising.

The Global Financial System - in the sense of a system operating on a sustainable basis, with some broad correspondence with the matter/energy system - has imploded. We are now living - temporarily - under a different arrangement that operates on the basis of mimicking "normality" by creating vast and growing quantities of synthetic debt (i.e. debt, e.g. Dandred's pension fund, that can never be serviced). The net energy system is contracting, breaking the economy/finance relationship (this is what renders this synthetic debt unserviceable); physicial and institutional infrastructure is observably collapsing - roads and bridges are collapsing for lack of resources to maintain them, and pension funds, local authorities, health and welfare systems etc. are insolvent; the pollution generated under the strain of maintaining continuity has caused earth's climate to breach its thermal runaway tipping point, with no surplus energy resources available to do anything about it; a Fascist occupies the office of the President of the United States, propelled by populist tension created by stagnating wages, economic/conflict migrancy, etc. The project to militarise societies to maintain continuity of government post-collapse is well underway.

Etc.

To confuse this arrangement with a functioning global financial system is confuse a corpse on life-support with a living person.

A significant feature of non-linear systems (of which this is a conspicuous example) is that they appear to work until they don't, then they stop. Which is to say that the transition to the next phase is likely to be abrupt.

 

[gosub]

The Global Financial System - in the sense of a system operating on a sustainable basis, with some broad correspondence with the matter/energy system - has imploded. We are now living - temporarily - under a different arrangement that operates on the basis of mimicking "normality" by creating vast and growing quantities of synthetic debt (i.e. debt, e.g. your pension fund, that can never be serviced). The net energy system is contracting, breaking the economy/finance relationship (this is what renders this synthetic debt unserviceable); physicial and institutional infrastructure is observably collapsing - roads and bridges are collapsing for lack of money to maintain them, and pension funds, local authorities, health systems etc. are insolvent; earth's climate has breached its thermal runaway tipping point, with no marginal energy resources available to do anything about it; a Fascist occupies the office of the President of the United States, propelled by populist tension created by stagnating wagesa and migrancy. Etc. Etc.

To confuse this arrangement with a functioning global financial system is confuse a corpse on life-support with a living person.

Maybe metaphorically. But in reality the sun has anther 5 billion years on the clock, theire's been some impressive breakthroughs on tidal turbines and we've started prototyping cars that can run on effectively concentrated piss.....But yep, without a c - change in thinking you may as well be right.

 

[kabbes]

It’s quite government-centric as an analysis, I have to say. It ignores the fact that companies worldwide continue to make record-breaking profits off the back of sales of actual goods. So who is the financial system imploding for? Not the rich.

 

[Falcon]

It’s quite government-centric as an analysis, I have to say. It ignores the fact that companies worldwide continue to make record-breaking profits off the back of sales of actual goods. So who is the financial system imploding for? Not the rich.

Sales of actual goods dependent on the drawdown of shrinking stocks of pre-discovered hydrocarbons, made "affordable" by cost reductions secured through the elimination of humans from manufacturing systems unable to accommodate such "inefficiency", "funded" by astronomic levels of unserviceable national and consumer debt enlargement, and bought by an increasingly aging population. These are neither sustainable nor substitutable operations and, to that extent, the financial system may reasonably be said to have ceased to function. There are very few collapses in the history of these things that have not resulted in the heads of the rich ending up on spikes, so you are really only talking about timing.

 

[ringo]

These are neither sustainable nor substitutable operations and, to that extent, the financial system may reasonably be said to have ceased to function. There are very few collapses in the history of these things that have not resulted in the heads of the rich ending up on spikes, so you are really only talking about timing.

Bit dramatic. Not historically accurate either. And the global financial system appears to be very much alive (and at a record high), as are the people getting enormously rich by it.

What's more interesting is the growth and economic influence of companies like Apple and Amazon. Much more likely to change the current models of boom/bust, bull/bear economics.

 

[Falcon]

Bit dramatic.

Ah. In that case, it can't possibly be accurate.

And the global financial system appears to be very much alive (and at a record high), as are the people getting enormously rich by it.

See "debt".

What's more interesting is the growth and economic influence of companies like Apple and Amazon. Much more likely to change the current models of boom/bust, bull/bear economics.

Neither pay tax, so of course if that were to become some sort of generalised model, we would run out of skilled workers, infrastructure, sanitary living arrangements, and enforcement of law and order in a few decades. Seems a rather unpromising place to look for solutions.

 

[ringo]

Ah. In that case, it can't possibly be accurate.

But by coincidence, it's not accurate. Most of the world do not consider the economy to be dead or that revolution and the execution of the financial and political elite as the most likely next step. It hardly ever gets mentioned on the news. Rarely does it seem to be predicted by economics experts, academics or journalists. Or anyone in fact. Wishful thinking at best.

See "debt".

I don't think you're being as clever as you think you are.

Neither pay tax, so of course if that were to become some sort of generalised model, we would run out of skilled workers, infrastructure, sanitary living arrangements, and enforcement of law and order in a few decades. Seems a rather unpromising place to look for solutions.

I didn't suggest anything was a solution or likely to become a generalised model. I'm not looking for a solution. I don't have an agenda or a specific problem I'm trying to solve. I'm saying the economy is changing and there will be new patterns and rules.

 

[Falcon]

But by coincidence, it's not accurate. Most of the world do not consider the economy to be dead or that revolution and the execution of the financial and political elite as the most likely next step. It hardly ever gets mentioned on the news. Rarely does it seem to be predicted by economics experts, academics or journalists. Or anyone in fact. Wishful thinking at best.

If the structure of contemporary civilization was the cause of the problem, isn't that precisely the outcome you would expect? Under what circumstances would you expect governments, corporate media firms, neoclassical economists (who's ideology fundamentally rejects this possibility), or academics and journalists (who's careers and livelihoods depend on there being a functioning economy) to announce that the industrial civilisation model was, in fact, dead, prompting widespread panic and the loss of continuity of government?

However, the number of quality, academic-quality publications that deal with this issue has risen exponentially since the 1970's, and the marekt place is, in fact, crowded. Just don't expect to be directed to them on Facebook ads. Nafeez Mosaddeq Ahmed's (Executive Director of the Institute for Policy Research and Development in London) "A User's Guide to the Crisis of Civilization: And How to Save It" (2010) remains, in my view, the best example of an integrated analysis of the unfolding ecological, energy, and economic crises, and is well worth reading irrespective of your view.

 

[ringo]

If the structure of contemporary civilization was the cause of the problem, isn't that precisely the outcome you would expect? Under what circumstances would you expect governments, corporate media firms, neoclassical economists (who's ideology fundamentally rejects this possibility), or academics and journalists (who's careers and livelihoods depend on there being a functioning economy) to announce that the industrial civilisation model was, in fact, dead, prompting widespread panic and the loss of continuity of government?

However, the number of quality, academic-quality publications that deal with this issue has risen exponentially since the 1970's, and the marekt place is, in fact, crowded. Just don't expect to be directed to them on Facebook ads. Nafeez Mosaddeq Ahmed's (Executive Director of the Institute for Policy Research and Development in London) "A User's Guide to the Crisis of Civilization: And How to Save It" (2010) remains, in my view, the best example of an integrated analysis of the unfolding ecological, energy, and economic crises, and is well worth reading irrespective of your view.

I might even have a look
I'll need some convincing though. When you started this thread in March 2008 we were a few months into a recession. Since then then rather than the system collapse, the financial markets have turned round and enjoyed their longest bull market of all time.

 

[Idaho]

I might even have a look
I'll need some convincing though. When you started this thread in March 2008 we were a few months into a recession. Since then then rather than the system collapse, the financial markets have turned round and enjoyed their longest bull market of all time.

Mainly because governments flooded the investment markets with free credit based on printing money. The fact that this money has really only gone to the already wealthy to make them even wealthier, rather than the majority of people, is probably the only reason we haven't had rampant inflation.

 

[Falcon]

I might even have a look
I'll need some convincing though. When you started this thread in March 2008 we were a few months into a recession. Since then then rather than the system collapse, the financial markets have turned round and enjoyed their longest bull market of all time.

With respect, until you recognise the difference beween a "bull market" and a Ponzi scheme, it's not really possible to hold a meaningful debate. I would encourage you to read the book, or indeed, any book that is based on an undertanding of this elementary distinction - John Michael Greer's "The Long Descent" and Tim Jackson's "Prosperity without growth" are accessible alternatives, although you'll need Ahmed's to understand the state-security response and militarisation of soceties.

 

[Mrs D]

If the structure of contemporary civilization was the cause of the problem, isn't that precisely the outcome you would expect? Under what circumstances would you expect governments, corporate media firms, neoclassical economists (who's ideology fundamentally rejects this possibility), or academics and journalists (who's careers and livelihoods depend on there being a functioning economy) to announce that the industrial civilisation model was, in fact, dead, prompting widespread panic and the loss of continuity of government?

However, the number of quality, academic-quality publications that deal with this issue has risen exponentially since the 1970's, and the marekt place is, in fact, crowded. Just don't expect to be directed to them on Facebook ads. Nafeez Mosaddeq Ahmed's (Executive Director of the Institute for Policy Research and Development in London) "A User's Guide to the Crisis of Civilization: And How to Save It" (2010) remains, in my view, the best example of an integrated analysis of the unfolding ecological, energy, and economic crises, and is well worth reading irrespective of your view.

I am totally judging that book by its cover

 

[ringo]

With respect, until you recognise the difference beween a "bull market" and a Ponzi scheme, it's not really possible to hold a meaningful debate.

With respect LOL.
Top marks for being really patronising. And now I've lost interest in your conspiraloon nonsense

 

[Falcon]

With respect LOL.
Top marks for being really patronising. And now I've lost interest in your conspiraloon nonsense

No problem, and good luck

 

[ringo]

ignorance

Ah, adding insult to injury, nice.

 

[Falcon]

Ah, adding insult to injury, nice.

I removed it. However, the full post was to the effect that "ignorance is bliss, enjoy it while you can" is an entirely rational strategy if there are no options. You were not being accused of being ignorant in general, or even wrong for choosing to remain ignorant of the writings of people who may be significantly more informed in this matter than you.

I've no interest in converting you beyond the usual concern for the welfare of another, and am happy to move on. Take care.

 

[gosub]

The real Goldfinger: the London banker who broke the world

 

[hipipol]

A couple of points:-
1 The "Global Financial System" is a misnomer, it implies adherence to a set of agreed rules and equally the imbedded craving for stasis - note Breton Woods and Gold Standard fantasies. This has NEVER been the case, trade and its attendant political implications have always been subject to Govt manipulation
2 The nature of world trade is a state of dynamic equilibrium, where major apparently rigid and safe structures can vanish
3 The closest humans get to global agreement is over the concept of money - is a promissory note with a fungible value based on FUD/Greed ratio expressed on major markets
4 No one is in charge

 

[hipipol]

Because of the huge capital flight from EMs?

The majority of the reason that the Dow/S&P/Nasdaq are at such towering levels is that major US corps have taken the cheap Fed money , using it for massive share buybacks instead of actually investing the cash for expansion purposes, but jacking up share value
The Russell 2000 index which looks at US small caps, mostly non exporters, thus not exposed so much to trade wars probs
These are cos who do not indulge in buybacks
The Russells value has spiked, best performance for years over the last few weeks - since Trumps trade wars sent money scampering for "Safe Havens" - ie the same event that fucked EMs
Suspect lots of repatriated EM cash went into the Russell

 

[Artaxerxes]

Hmm.

'The world is sleepwalking into a financial crisis' – Gordon Brown

 

[yield]

Hmm.

'The world is sleepwalking into a financial crisis' – Gordon Brown

Brown admitted that Labour should have been tougher on the City in the boom years leading up to the crisis. “Yes, we did not know what was going on in some of the institutions, some of it illegal, and which was being covered up.”

You were asleep at the wheel you prick. Chancellor of the Exchequer (1997–2007)

 

[paolo]

I’m a smidgen into...

https://www.amazon.co.uk/Crashed-De...1536823101&sr=8-1&keywords=adam+tooze+crashed

The Economist, where I found about the book, subsequently ran a cover piece - analysis of whether the system is really fixed.

Just yesterday they ran another.

I was going to say Brown is late to the party on this, but in Tooze’s book - London, and Brown with it - are right in the middle of the events leading up to 2008. Light touch regulation is a wonderful party, until it’s chucking out time.

 

[ringo]

It's all a swizz isn't it, constantly being manipulated and fixed. You could probably argue that's the point though, my memories of A level economics are a bit distant, but the whole idea of ecomonic policy is to manipulate and take advantage of economic processes and cycles to achieve the desired goals.

Trump has surely got to be breaking laws with his manipulation though. There has been a lot of journalism about the increased volatility of the markets since his election -
Here’s how things have changed for the stock market since Trump’s election
There’s been a historic amount of earthshaking stock-market volatility this year

Current trade threats against China have resulted in several fast and dramtic lows and record highs.
Year to date Nasdaq:


Seems pretty obvious that someone as greedy, corrupt and finance savvy as Trump is doing this intentionally, or at least as an intended side effect of his negototiation "style" so that he and his cronies can get enormously rich from knowing exactly when he was going to make announcements and threats to directly cause immediate and predictable volatility.

There must be some sort of investigation into him for dodgy insider practices going on. Hopefully.

 

[yield]

https://www. ft.com/content/a9baed9a-ce32-11e8-b276-b9069bde0956
paywalled use outline.om

How saving the liberal world order became harder
Wolfgang Münchau. October 14, 2018

You hear it all the time: we need to defend our liberal, multilateral economic order. If you want to get a roomful of people in places like Davos to keep nodding their heads to exhaustion, this is what you say.

I disagree vehemently with that statement. I believe that we are facing a fundamental choice between solving the problem and solving the crime — between addressing the issues or playing a blame game. The G20 Eminent Persons Group on Global Financial Governance argues that our multilateral institutions need repair. This is no doubt true but I would go further than proposed suggestions for greater efficiency and more inclusiveness.

Politicians like Donald Trump, Viktor Orban and Matteo Salvini have risen to power because of the deep malfunctioning of our systems of global capitalism. Brexit is not the result of Russian meddling or an alleged reporting bias of the BBC, but of a long series of unresolved political conflicts and the rentier business model the UK chose to pursue inside Europe’s single market. The global financial crisis and our policy responses exposed how the system had become unsustainable.

The eurozone is a perfect example of a liberal system that has become complacent and unstable: since it was plunged into crisis, European authorities have made persistent attempts to paper over the cracks. Contrary to the advice of the IMF, the EU keeps pretending that Greek debt is sustainable, and bases its judgment on growth forecasts that are plainly ludicrous. EU member states do not address the issue because they do not wish to recognise losses in their bilateral loans.

The political shocks in Italy stem from a dysfunctional monetary union and an unsustainable immigration regime. I fail to see how Italy and Germany can remain locked in the same monetary system unless we have reforms that both countries reject, whether it is a political union or a single safe asset, or reforms to align economic and judicial systems.

The EU’s legendary tendency to kick the can down the road has left us with a situation in which it makes no sense to talk about the eurozone crisis in the past tense. Greek and Italian debt are less sustainable today than they were in 2010 when the crisis began, and Germany is less willing to support the eurozone today.

Ideally we would fix the system. But instead we are procrastinating and hoping that something comes up. Emmanuel Macron, the French president, had ideas of how to reform the eurozone, but his proposals have deflated to almost nothing. The chance to reform came and went.

As in the early 1930s, libertarian economic systems were self-destructing because of their inbuilt tendency to produce financial and social instability. We are doing better than we did 90 years ago at stabilising gross domestic product. But the observation that many advanced countries have had more or less robust GDP growth and low unemployment misjudges the underlying political dynamic, which is much more influenced by variables such as income inequality, lack of housing and fears of job insecurity among the middle-classes.

Another parallel with the 1930s has been a tendency for the stalwarts of the liberal order to double down — through pro-cyclical austerity, bonus payments for bankers, a monetary policy that drives up asset prices or through free trade agreements that limit the independence of national courts — on harmful policies.

The tell-tale signs of the demise of liberal democracy have been visible long before the more recent electoral upsets. You know you are in trouble when you cannot impose a financial transaction tax because your banks threaten to shift their transactions to a tax haven. Or when countries cannot increase corporation tax for the same reason. Or when large car and chemical manufacturers can engage in persistent criminal behaviour and get away with it. What corrupts liberal systems is a breakdown of checks and balances in our economic life.

But political extremism is only one response to failing liberal systems. You may dismiss cryptocurrencies as just another bubble. But I would not bet my hard-earned bitcoins on our ability to preserve the money-issuing monopoly of the state indefinitely. As the aftermath of the financial crisis demonstrated, that monopoly is critical for liberal financial systems to secure basic macroeconomic stability. It is the one and only policy instrument we have that arguably still works. Saving the liberal world order will become progressively harder the weaker that instrument becomes.

If you really care about the liberal multilateral order, free trade and the EU, the least helpful thing you can do is to defend the status quo and hyperventilate about populists. Our problem is not the other team, but our team.

Panic!! Still says nothing about the incompatibilities between Liberalism and Democracy.

 

[Idaho]

It's a perfect storm. Bored A level economics students in a hundred years will have to write essays about what caused the 2018 crash. Top marks for those who can pick more than 5 causes.

 

[ringo]

It's a perfect storm. Bored A level economics students in a hundred years will have to write essays about what caused the 2018 crash. Top marks for those who can pick more than 5 causes.

It's not a crash "it's a correction" .
We appear to be on the see saw point between recovery and total collapse, place your bets...

NASDAQ year to date, bombs in October:

 

[kabbes]

But the NASDAQ is still 6% up on the year in that graph. At the point it was 18% up, that was a record high and was echoed by record highs in the Dow and S&P500 as well as FTSE 100 and FTSE 250 and ISTR in the CAC50 as well. The markets have been more volatile this year than I can remember for 10 years but they keep coming back to set new highs.

You're totally right to say "place your bets" because who the fuck knows where it goes next? Globally, all kinds of things look fucked. But industry earnings are still incredibly good, which I suppose is no surprise given how industry-friendly the US, UK and EU governments are.

To some degree I see equity prices as a reflection of who is winning out of society -- capital or labour. Betting against capital is quite brave as things stand.