Global financial system implosion begins

[ymu]

Nah, China makes and exports loads of stuff

Its major customers are bankrupt. It has a tiny internal market because the growth strategy was based on low wages, cheap goods and a favourable exchange rate for export. Its GDP figures are based on , which is creating its own Chinese bubble, because the regional deputies dare not miss their 8% GDP growth targets.

We have yet to see what's going on with China.

 

[david dissadent]

Its major customers are bankrupt. It has a tiny internal market because the growth strategy was based on low wages, cheap goods and a favourable exchange rate for export. Its GDP figures are based on , which is creating its own Chinese bubble, because the regional deputies dare not miss their 8% GDP growth targets.

We have yet to see what's going on with China.

The growth figures in imports especialy oil strongly suggest that there has been significant increases in domestic consumption. On the flip side they are spedning stimulus waiting for there customers to emerge from recession. As the old saying goes when the tides goes out you see who does not have a bathing costume. I suspect Chinas tide of exports may be out for a while and it will be interesting to see who has no bathing costume. A great many analysts sugest very high rates of default and non payment on Chinese comercial loans, these have been easy to cover with 9% increases in economic activity year on year. The tide is still flowing out.

 

[goebfwai]

A very good interview below with Sir James Goldsmith from 1994 on the deficiencies and lack of foresight on the little talked about GATT treaty which explains rather neatly why the western world is in the state it is in today. There is little point of having rampant and unchecked global free trade that incentivises the import of goods and services from abroad, to the detriment of domestic manufacturing and jobs. Slowly but surely, you will enrich every other nation but your own, end up with crippling unemployment and trade imbalances and undermine your consumer and tax base for generations. In hollowing out and undermining the nation state it is a one way ticket to their replacement with the rising corporate state. Things may be too far gone in America, but I do believe there is hope for the UK and the European trading bloc.

http://video.google.com/videoplay?d...bS92RH5CM2AKi37HpBA&q=goldsmith+charlie+rose#

 

[david dissadent]

US house sales fall 17% in a month.

Purchases slumped 17 percent the month after a government tax credit was originally due to expire, the biggest decline since records began in 1968, to a 5.45 million annual rate, the National Association of Realtors said today in Washington. The median sales price increased for the first time in two years.

Is this what the economy looks like without stimulus? The figure is slightly artificial as first time buyers were trying to get a house before the governments aid was dropped.

Worth keeping in mind that the US housing market topped in 06 and that the financial quakes this caused started to take off in 07 so by 08 the housing market in the US was in deep trouble, 09 seen guargantuan stimulus so...

For all of 2009, existing home sales rose 4.9 percent to 5.16 million, the first gain in four years, from 4.91 million in 2008. The median price last year was $173,500, down 12 percent from 2008, the biggest annual drop on record and probably the largest since the Great Depression, NAR chief economist Lawrence Yun said in a news conference.

Increased home sales but huge drops in value.

The end of Federal Reserve purchases of mortgage-backed securities aimed at keeping borrowing costs low represents a challenge for the industry. The program is scheduled to expire by March 31.

The stimulus money cant flow forever.

Joblessness and foreclosures are other concerns. Unemployment is forecast to average 10 percent this year, the highest level in seven decades. A record 3 million U.S. homes will be repossessed by lenders this year

The real figure is repeatedly given at nearer 17% of Americans out of work.

Bloomberg

 

[kyser_soze]

The US housing market is diffilcult to judge at the best of times tho - I've always wondered how you can ever record price rises in a market where the primary resource - land - is so abundant, beyond artificial inflation caused by endlessly building new properties and pricing accordingly. Apparently the same thing happens in Australia (altho again there are some big differences between the two markets) - development 1 gets built in 2005, development 2 up the road in 2009, all the prices in dev 1 fall through the floor.

 

[david dissadent]

The US housing market is diffilcult to judge at the best of times tho - I've always wondered how you can ever record price rises in a market where the primary resource - land - is so abundant, beyond artificial inflation caused by endlessly building new properties and pricing accordingly. Apparently the same thing happens in Australia (altho again there are some big differences between the two markets) - development 1 gets built in 2005, development 2 up the road in 2009, all the prices in dev 1 fall through the floor.

Land may be abundant throughout the US, but it is also reasonably abundant in the UK. You can get houses for less than £40 000. But who is wanting land in a run down estate in Hull or a remote ex mining town in Ayrshire. It is the same in the US, the closer to the big centers of employment the more a house will cost. The huge size of many houses and sheer scale of urban sprawl means that new built housing estates can be 40-60 miles from the urban centers they serve. These are called the 'exburbs'. Imperial Valley in the quintisential location of the exburbs, but places like Maryland, West Virginia and so on are growing in such a way it may affect the composition of the senate in years to come.

People will pay a premium for a combination of the niceset area, the shortest comute and largest house they can afford. There may be alot more land but it is not limitless.

 

[Dr Jon]

Just spotted We Are So Screwed.
Will Greece be the first domino to fall?

The BoE are still uncertain about the "recovery"

 

[ymu]

Just spotted We Are So Screwed.

They have product placement in business articles now?

While I was in Europe, and flying back, I had the great pleasure of reading This Time is Different, by Carmen M. Reinhart and Kenneth Rogoff, on my new Kindle, courtesy of Fred Fern.
...
I highlighted more pages than in any book in recent memory (easy to do on the Kindle, and even easier to find the highlights).
...
If you are a serious student of economics, you should read this book. If you want to get a sense of the problems we face, the authors conveniently summarize the situation in chapters 13-16, purposefully allowing people to get the main points without drilling into the mountain of details they provide. Get the book at a 45% discount at Amazon.com.

Buy it with the excellent book I am now reading, Wall Street Revalued, and get free shipping.
...

 

[Dr Jon]

They have product placement in business articles now?

- and we might be totally screwed, but he's still taking subscriptions for his newsletter. Presumably offering advice on how to keep capitalism hobbling along for a bit longer...

 

[kyser_soze]

"Our immersion in the details of crises that have arisen over the past eight centuries and in data on them has led us to conclude that the most commonly repeated and most expensive investment advice ever given in the boom just before a financial crisis stems from the perception that 'this time is different.'

"That advice, that the old rules of valuation no longer apply, is usually followed up with vigor. Financial professionals and, all too often, government leaders explain that we are doing things better than before, we are smarter, and we have learned from past mistakes. Each time, society convinces itself that the current boom, unlike the many booms that preceded catastrophic collapses in the past, is built on sound fundamentals, structural reforms, technological innovation, and good policy."

Yes, because no one before has ever made this observation about financial markets in hindsight after a massive crash. No one. Ever.

 

[ymu]

Anecdote is not evidence kyser. They've looked at 250 crises in 66 countries and analysed the data in some detail. Their whole point is that people are always wise in hindsight, but always saying "this time it's different" the next time things get overheated.

 

[kyser_soze]

But that very obsvervation has been made countless times in the aftermath of a financial collapse - it's not a new thing to say. All of the things they mention there were all talked about, at length, after, for example, the junk-bond crisis and crash at the end of the 1990s (which was built on the same house of cards - highly leveraged debt).

 

[ymu]

There's 16 chapters. Pretty sure that quote does not encapsulate the entirety of the book. The first 12 are data crunching.

 

[Dr Jon]

I just spotted a link to this piece in Energy Bulletin whilst reading Endgame.

I guess an Anus HorribleArse is a year when we all end up in the shit?

 

[Barking_Mad]

I just spotted a link to this piece in Energy Bulletin whilst reading Endgame.

I guess an Anus HorribleArse is a year when we all end up in the shit?

I like the Endgame article, perhaps as it ascribes to my own point of view - that whilst people are waiting for a meltdown that is total and catostrophic, or claiming nothing has changed and people were just reactionary pessimists - that things are shifting out of view, and in ways most or many can perhaps only appreciate with hindsight.

His examples are interesting.

 

[Dr Jon]

20 reasons Global Debt Time Bomb explodes soon

20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover

Solids on course for the air-con and closing...

 

[goebfwai]

Was reading this interesting article on Market Oracle which talks about chaos theory, critical mass, social behaviour in trying to understand market meltdowns etc.

http://www.marketoracle.co.uk/Article17044.html

 

[A Dashing Blade]

Was reading this interesting article on Market Oracle which talks about chaos theory, critical mass, social behaviour in trying to understand market meltdowns etc.

http://www.marketoracle.co.uk/Article17044.html

Hmmmmm, citing Wiki for financial definitions really makes me want to waste 10 minutes of my life . . . Now compare Dr. Jacobs’s comments to those of Wikipedia regarding the term “liquidity risk.” . . .

 

[Barking_Mad]

20 reasons Global Debt Time Bomb explodes soon

20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover

Solids on course for the air-con and closing...

From the second link..

In December, there were also 929,000 "discouraged" workers who are not counted as part of the labor force because they have "given up" looking for work. That is the most since the U.S. government first started keeping track of discouraged workers in 1949. Many Americans have simply given up and are now chronically unemployed.

Now you see them, now you don't! You're only unemployed if you're not discouraged... lol

 

[kyser_soze]

That Paul Farrell bloke seems to blow with the wind. He seems to have about 8 basic articles:

Big debt is bad
Big debt is good
Reaganomics trumps Obamanomics/Vice versa
Lazy portfolios are great
Lazy portfolios allow Wall Street to steal you cash
10-30 reasons why we're about to go into a bull/bear/recession/boom/stagflationary period/gold will be pissing from the skies (the last one I made up)

And...I would point out, again, that these selfsame writers/seers/ pundits/tea leaf readers were, 3 years ago, almost universally saying that the world was going to get better, for ever and ever and ever. Now they're saying the world will get worse forever, and ever, and ever.

 

[hipipol]

Think the Tale of Two Cities has already been written eh?

The odds of total meltdown?

Very Low


The odds of total recovery?

Very low

Where will we end up?

Somewhere in the middle, with the US being less of a driver and China not a panacea for all ills.

Plus ca change.......

 

[Barking_Mad]

Secret summit of top bankers

THE world's top central bankers began arriving in Australia yesterday as renewed fears about the strength of the global economic recovery gripped world share markets.

Representatives from 24 central banks and monetary authorities including the US Federal Reserve and European Central Bank landed in Sydney to meet tomorrow at a secret location, the Herald Sun reports.

Organised by the Bank for International Settlements last year, the two-day talks are shrouded in secrecy with high-level security believed to have been invoked by law enforcement agencies.

Speculation that the chairman of the US Federal Reserve, Dr Ben Bernanke, would make an appearance could not be confirmed last night.

The event will be dominated by Asian delegations and is expected to include governors of the Peoples Bank of China, the Bank of Japan and the Reserve Bank of India.

The arrival of the high-powered gathering coincided with a fresh meltdown on world sharemarkets, sparked by renewed concerns about global growth and sovereign debt.

Fears countries including Greece, Portugal, Spain and Dubai could default on debt repayments combined with disappointing US jobs data to spook investors.

 

[kyser_soze]

Yeah, and the Chinese are going to turn up and say 'Hey! We've got no trousers either!'

 

[xes]

Are we boned yet or what?

 

[Sunray]

A very good interview below with Sir James Goldsmith from 1994 on the deficiencies and lack of foresight on the little talked about GATT treaty which explains rather neatly why the western world is in the state it is in today. There is little point of having rampant and unchecked global free trade that incentivises the import of goods and services from abroad, to the detriment of domestic manufacturing and jobs. Slowly but surely, you will enrich every other nation but your own, end up with crippling unemployment and trade imbalances and undermine your consumer and tax base for generations. In hollowing out and undermining the nation state it is a one way ticket to their replacement with the rising corporate state. Things may be too far gone in America, but I do believe there is hope for the UK and the European trading bloc.

http://video.google.com/videoplay?d...bS92RH5CM2AKi37HpBA&q=goldsmith+charlie+rose#

Listen to him and then read this

http://thisistheendoftheworldaswekn...-unemployment-is-now-at-45-percent-in-detroit

As much as I disagreed with him at the time and probably still do on a fundamental basis. Its hard to argue with the plain facts of what he was saying was going to happen has happened to some extent.

Detroit has underlined what Goldsmith was saying,in very grim detail, 50% unemployment, a truly shocking number in a country that has no real social security to speak of, means it will turn into a slum as the people who can move away.

The jobs went elsewhere and they are not coming back.

 

[Sunray]

If lots of wealth creation leaves a country and another country becomes totally geared to making stuff for that country, aren't they locked into some guaranteed mutual decline?

Unless one can start making stuff to make money it'll not be able to buy stuff from the other and the other will become undone as its got nobody to buy the stuff they make.

 

[goebfwai]

The whole globalisation thing becomes a race to the bottom, as well as undermining, and eventually even destroying national sovereignty. Then you end up with a cabal of extremely large monopolistic corporations slowly but surely end up securing control of vast swathes of critical infrastructure within the economy - housing, land, natural resources - in an insidious and Frankensteinian marriage with a patchwork of emasculated, but increasingly regionally unified, national governments.

What's more, destruction of national sovereignty has few happy outcomes:

- 1) you either end up with one country in hock to another;

- 2) one country entering into some semblance of war (trade, gunboat diplomacy, or actual) with the other following either a sovereign default or a strategically, diplomatically or economically ill-judged move intended to forestall it;

- 3) the population - beleagured by austerity measures, crippling taxation, increasing prices, wage freezes/reductions, perceived injustice/corruption, worker/minority discrimination or victimisation - end up over-throwing (peacefully [and ideally electorally] if their lucky, violently if not) the poor saps in govt trying their best to cope with (a) the end result of short-sighted decisions made by previous administrations; and (b) understand and out-fox the hydra-headed monster that is the global financial system - something of a Pandora's Box that, somewhat concerningly, even many of the brightest brains in high finance and economics have trouble understanding and containing!

Some interesting reading - and links - on hollow nation states here
http://globalguerrillas.typepad.com...1/journal-brands-and-hollow-nationstates.html

Re Detroit, aside from it looking like an (economic) war zone on mainland America some interesting moves are happening there right now, which I was reading about not long ago in one of their newspapers. It may be one of those cities that proves the saying "the darkest hour comes before the dawn".

Seems there are major plans to turn vast acres of urban Detroit sequentially back to agriculture, farmland communities, with lots of innovation, technology, renewable energy stuff going on. Kind of like a Central Park but for food instead of leisure. If I remember the article or can find it online I will post. It may well offer a solution that could be rolled out to other places.

Also, this is great viewing. Just shows you what can be done in a small space:
http://readynutrition.com/resources/proof-it-can-be-done-a-microfarm-in-the-subburbs_17112009/

 

[Falcon]

Good summary of where we are heading in the next 12 months

Very useful speech from Jeff Rubin (big Canadian Economist) putting a lot in perspective and quantifying it. Worth your time ( via youtube).

Basically:

1. Not running out of oil, just out of oil you can afford
- 5% per annum depletion is 20 million barrels a day shortage in 5 years
- no clear evidence it can be replaced
- all replacement is from expensive (i.e. >$200 per barrel) sources

2. Price won't ration demand
- oil is subsidised in the big producers
- 50c/gallon petrol, 7c/gallon electricity fuel irrespective of world price
- huge water desalination projects, new $2500 Tata car

3. So $200 per barrel oil in 10-15 months
- only two years of zero growth since 1983
- inevitable repeat of 2008 recession

4. 2008 recession wasn't subprime mortgage
- preceded by energy shock twice the size of the OPEC 1980's shocks
- recessions in Germany and Japan preceded US subprime
- can borrow to bail out home buyers, banks and motors, can't borrow energy

5. Solution: demand not supply
- Don't have 15 years for alternate technologies to address supply
- Need to reduce demand and insulate economy
- Globalisation is biggest energy demand

6. The end of globalisation
- transportation costs now >> wage arbitrage differentials
- relocalise everything (manufacturing, food, living arrangements)

7. CO2 emissions will be taxed
- good for domestic jobs in OECD: CO2 emissions lower so cheaper
- but needs import tariffs against countries that don't

8. Everything is going to get a lot more expensive.

 

[Dr Jon]

Euroland, the Horror Movie

Not to put too fine a point on it, Old Blighty is pretty well nigh fucked. It's on the express line back to the fifteenth century, and doesn't know it yet. Break out the leathern helmets and the wooden ploughshares. The UK is out of oil, out of banking cred (which is all it had the last forty years), and out of time. The one thing they have a lot of is bad paper hiding in their bank vaults -- enough to blow that black hole of capital even wider.

 

[hipipol]

Not only is that guy a complete KUNT, he also seems to have a very Yankee axe to grind


Shallow gut reaction posing as analysis