Global financial system implosion begins

[gosub]

Not historically for urban China, but that's a whole other thread!!



I was blowing a raspberry at you

JD - the balance of power will change, it's inevitable. How it changes...well, China will be a superpower simply on the basis that it's 1/5-1/4 of the world's population but this assumes that environmental damage and economic disparity won't derail the economy.

Thank god for that. Fruit based disputes with China can last ages. Its only in the last ten years that they have deemed to mention the anti carcinogens in rhubarb.

 

[kyser_soze]

 

[darkfibre]

This probably isn't news to Kyser_soze, but the 'invisible hand' of the market keeps becoming ever more 'visible':

Credit Card Bond Sales at Zero, First Time Since 1993 (Update1)

By Sarah Mulholland

Nov. 5 (Bloomberg) -- Credit card companies were shut out of the market for bonds backed by customer payments in October for the first time in more than 15 years, as investors shunned the debt amid the global credit freeze.

A weakening job market and a looming recession are making it harder for consumers to make monthly payments, eroding confidence among investors about the safety of credit-card-backed bonds. It's the first month since April 1993 that there have been no sales, according to Wachovia Corp. data. Issuers sold $17.1 billion of the debt in October 2007, the data show.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aajOmDkW3xeE&refer=home

Ahhh... kill the thread. Start a new one - 'Global financial system implosion continues' or something. It's not like there's anything to do other than fight over who gets to be the last one to starve to death, anyway.

 

[goebfwai]

I came across a book recently that outlines exactly the financial implosion we are now seeing. It's called 'The Great Reckoning' by James Dale Davidson and William Rees-Mogg. Well worth a read. It was written in early 1993. The authors actually thought a new great global recession would start around 2001. I think the filip the barbarous wars against Afghanistan and Iraq gave to the US economy probably delayed it's onset until now. If US foreign policy is determined to stay as chained to the selfish, profiteering diktats of laissez-faire free-market capitalism as they used to be, more wars on other fronts seem inevitable. An end-game could then be played out causing a chain-reaction of fighting that could be widespread and very damaging to earth's garden and all those who inhabit it. For a time though it will seem as if all we are hearing about are world leaders talking about peace. Peace is great. I hate war. But mark my words, there is never a more dangerous time in history when nation states that have historically been anything but friendly start talking up their peace loving credentials and desires around the world. It's the calm before the storm, and a case of wait and see.

 

[kyser_soze]

It's called 'The Great Reckoning' by James Dale Davidson and William Rees-Mogg. Well worth a read. It was written in early 1993.

These 2 things do not compute. Mystic Mogg has a track record for appalling predictions.

 

[goebfwai]

any examples?

 

[kyser_soze]

Go read many back issues of Private Eye, they usually mention his predictions in Street of Shame...

 

[goebfwai]

Well he certainly got it right 15 years ago that the world economy was going to go down the tubes at some point.

By the way, anyone know what all this means?

"economic and financial mess...the risk that we will end in a deflationary liquidity trap as the Fed is fast approaching the zero-bound constraint for the Fed Funds rate; the risk of a severe debt deflation as the real value of nominal liabilities will rise given price deflation while the value of financial assets is still plunging." Nouriel Roubini

http://www.rgemonitor.com/roubini-m...nd_financial_disaster_that_obama_will_inherit

 

[kyser_soze]

Well he certainly got it right 15 years ago that the world economy was going to go down the tubes at some point.

Come on, that's about as good a prediction as the pope being replaced when the old one dies!! Capitalism is a cyclical - boom and bust are parts of that cycle. Every single thread on this board about economics has had people saying the economy will tank 'at some point' - it's not a validation of anyone's predictive powers...

 

[butchersapron]

If we're on about 'getting it right', then Hyman Minsky is your messiah.

 

[hipipol]

China's pretty much doomed

Just like the rest o us
Just a few years back nearly all the Chinese banks had their crap loans written off by their Govt
Wont happen now

Indai, on the other hand, is ablsouteloy awash with cash
Best get yer Kurtas out

 

[Dr Jon]

Indai, on the other hand, is ablsouteloy awash with cash

Well they are at the moment.

They blew $31 billion propping up the Rupee last month and I don't imagine they can carry on doing that for very long.

Best get yer Kurtas out

I'm sitting here under the fan in my lunghi, thank-you very much.

 

[gosub]

India's stockmarkets have been one of the worst hit:50% down
source

 

[Barking_Mad]

its interesting that relatively little coverage has been given to other countries suffering as a result.

 

[Kanda]

its interesting that relatively little coverage has been given to other countries suffering as a result.

Really?

There's tons of coverage!! You're relying on what as your news source???

 

[hipipol]

I'm sitting here under the fan in my lunghi, thank-you very much.

You always were a bohemian you lucky bugger!!!

 

[Barking_Mad]

Really?

There's tons of coverage!! You're relying on what as your news source???

i read several websites, obviously the wrong ones. I find out more on here than from the news in general.

 

[goebfwai]

its interesting that relatively little coverage has been given to other countries suffering as a result.

Yeah. Saw this article though about how Iceland is coping in the NYT the other day:

http://www.nytimes.com/2008/11/09/w...l?scp=1&sq=stunned icelanders struggle&st=cse

 

[boskysquelch]

The governor said that the objective should be to ensure that countries which had capital surpluses, such as China, also had an obligation to take action to correct financial imbalances.

http://news.bbc.co.uk/1/hi/business/7724215.stm

ha_fkkn_ha.

swap babies, make food

 

[david dissadent]

Federal Express now a bank

Link

The Federal Reserve on Monday evening granted a request by American Express to become a bank holding company, giving it access to low-cost financing from the Fed.

The Fed said it had approved the application for American Express and a related company, American Express Travel Related Services, to become bank holding companies. The approval represented the latest reshaping of the financial services industry, which is undergoing its worst credit crisis in decades.

In announcing the action, the Fed said “emergency conditions exist that justify expeditious action on this proposal.”

“Given the continued volatility in the financial markets,” said Kenneth I. Chenault, chief executive of American Express, “we want to be best-positioned to take advantage of the various programs the federal government has introduced or may introduce to support U.S. financial institutions.”

Um where are its depositors? This trough is getting mighty big. 75 billion for the car industry, now credit card companies are banks?

"The American Taxpayer -- don't leave home without them."

 

[david dissadent]

For the UK thre recession will really kick in just after christmas when all the retail jobs start going. This and the likely lower demand for overseas holidays will really hurt sales figures and we will move into the slump proper. I dont know how long it will last nor how deep it will get. Many argue it will be reasonably shallow and only last a year, others that we face several years worth of a depression. I doubt it will be that bad, but Id guess it will linger around Britain alot longer than other countries as our economy was so strongly focused on retail spending funded by debt and house price increases and the financial sector. For the UK our steadily dropping oil and gas production will see the pound fall, but lower wage costs and a weak currency will see exports gain in competativeness.

For the world, as soon as any recovery gets underway Id guess oil prices will rise put a roof on any runaway growth. We will have to use energy more efficiently to free up more of it to do more with it in the medium term.

 

[david dissadent]

Bank of England worried about deflation

Link


The UK is starting to have some resemblence to Japan in the 90s. Some not alot. Perhaps King should just go for a "big bang" cut in rates. Not too revive the economy but if inflation is going to hit 1% then he may as well go for it now. It will mean he is out of ammo in terms of rate cuts, like Bernanke is now but will mean more money for home owners. Offcourse it will anihalte the value of the pound and see a flight of capital from the UK. Upsides and downsides.

 

[darkfibre]

[cut in rates] will mean more money for home owners.

For people who actually own their home, it means nothing.

For people paying mortgages (who probably think they own their home) it will mean a reduction in repayments. (Just thought I'd point out the distinction).

By screaming 'DEFLATION!', they're encouraging the myth that keeping assets in 'cash' is a safe bet. This is like all the idiots watching the sea retreat and wandering down onto the beach to take a look. When the monstrous tsunami of inflation returns, they will be utterly wiped out.

In the 'Global Casino' - just like any Casino - 'The House' always wins.

 

[david dissadent]

By screaming 'DEFLATION!', they're encouraging the myth that keeping assets in 'cash' is a safe bet.

Only a very small portion of the worlds assets are in cash. Most assets are in bonds, equities, property and the like.

Ive not formed a very strong opinion on the matter yet as I think that as the pound weakens we will import inflation in terms of the cost of finished goods.

 

[elbows]

The UK is starting to have some resemblence to Japan in the 90s. Some not alot. Perhaps King should just go for a "big bang" cut in rates.

I thought we just had a quite large cut in rates? That may have been as big a cut we get in one go, and the rest will be achieved with smaller cuts in future?

I have no way of knowing whether it will be inflation or deflation that will be the big woe in future. A tug of war that I am not qualified to judge. Both problems seem possible. Can we have both, ie rampant deflation in some areas but high inflation in others? Some of the predictions for low inflation next year are based on the numbers where house prices are included, which could more than offset the potential inflation in other areas. Although the dramatic decline in commodity prices has rather spoilt my oversimplistic views about scary inflation in future.

Meanwhile at least the US seem to have abandoned using some of their bailout money to buy the bad debts of banks, rather than shares in the banks themselves:

http://news.bbc.co.uk/1/hi/business/7724325.stm

 

[Dr Jon]

Further to hipipol's comments, I see that the Rupee's in the shit too now:

India's rupee posted its biggest single-day fall in more than 12 years on Wednesday, hit by rising outflows from the local share market and heavy dollar demand from state-run banks to meet commercial operations

It'll be interesting to see whether the RBI blows even more of their dollar reserves when the markets open again tomorrow.

 

[kyser_soze]

So DD and darkfibre - do you think Swedish style hard dip, then recovery, a Japan Style decade of torpor or something else?

 

[darkfibre]

I'd say the clue's in the tread title.

The 'style' of a systemic, global collapse.

As I've said before, we're in uncharted territory, here. The global economy is more complex, interconnected, faster and bigger than ever before. We trust in increasing complexity to increase performance at the expense of resilience.

I have grave doubts as to the ability of the entities entrusted with 'fixing' this to react either quickly enough or in an appropriate manner/scale to do anything other than make the problem worse.

The problem we're seeing unfold is an inevitable result of attempting to run a system predicated on perpetually increasing 'growth' within a finite resource base.

How quickly we realise this will decide whether we survive with any semblance of 'civilisation', or die fighting each other over who gets to be the last person to starve to death.

To quote Einstein; "The significant problems we face cannot be solved at the same level of thinking we were at when we created them."

 

[gosub]

I'd say the clue's in the tread title.

The 'style' of a systemic, global collapse.

As I've said before, we're in uncharted territory, here. The global economy is more complex, interconnected, faster and bigger than ever before. We trust in increasing complexity to increase performance at the expense of resilience.

I have grave doubts as to the ability of the entities entrusted with 'fixing' this to react either quickly enough or in an appropriate manner/scale to do anything other than make the problem worse.

The problem we're seeing unfold is an inevitable result of attempting to run a system predicated on perpetually increasing 'growth' within a finite resource base.
How quickly we realise this will decide whether we survive with any semblance of 'civilisation', or die fighting each other over who gets to be the last person to starve to death.

To quote Einstein; "The significant problems we face cannot be solved at the same level of thinking we were at when we created them."

Am not disagreeing with you on that at all (obviously), but Radio 4 took a Minister to task about the energy tie in a couple of weeks back and the Minister(cant remember which one) explained it was only extremists with an agenda that were of that view. So perhaps if we knew what they knew they can turn things around (he didn't actually say that bit, Blair kind of ruined that line with Iraqi intelligence). If they do, it will make a bit of a mokery of Brown;s good freind Greenspan, who said this was a once in a century event ... A bit of relevant light relief for a Friday (not endorsing any ideas within the game; can't get past 2143 without the end of the world or being retired).

There is a post by VP in POCA thread in UKpol. Looks like Mandy thinks the economy is Japaning

 

[darkfibre]

Blimey.

When stating simple physical laws is heretical, you know you've got a problem.

perhaps if we knew what they knew they can turn things around

Doing stuff like concealing the beneficiaries of $2 Trillion in bailouts indicates that they're quite keen to prevent anyone knowing 'what they know'. It's either embarrassment or - more likely - guilt.

I'm fond of Bernie Gunther's mantra:

'Don't believe them, don't fear them, don't expect anything of them.'

Edit: Just realised it was Gulag survivor, Alexander Solzhenitsyn.