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Global financial system implosion begins

Nice inflamatory title from the Telegraph as per. The most interesting next step is what happens in the Eurozone - full blown meltdown seems to have been averted but the "next-best" scenario isn't too healthy either in that at some point it's likely Greece will leave the Euro.

In of itself that's bad but not horrific. The problem is that German banks are exposed to Greece more than any other country, likewise Spanish bank to Portuguese. So if Greece did withdraw all of a sudden there's big banks with a lot of exposure that they'll have bugger all chance of quantifying. Leading to more uncertainty.

Most likely outcome is the double dip and deflation and the recession dragging on for at least another 2 years.
 
All these statistical games about whether the economy is in recession or out of recession, is all just a bunch of nonsense and academic naval gazing anyway.

Economists and financiers playing with figures can sanitise and disguise a lot of social misery.

When Britain's economy wasn't in recession (as in a lot of other places in the world), and we were supposedly in the economic age of the "good times" things were still pretty tough, with permanent mass unemployment, and massive number of economically marginalised and disenfranchised people.

Post recession/depression we will still have permanent mass unemployment etc, but only at bigger levels.

For many people and many communities, life - from cradle to grave - is one of permanent recession.

The challenge in the 21st Century is to economically enfranchise people. The political enfranchisement of people that took root during the 19th and 20th century will only be valued and respected if they serve a function to economically enfranchise people. That means tackling inequality, poverty and unfairness, and levelling playing fields to promote a natural and organic redistribution of wealth.

Without this, political structures of all sorts will end up haemorraging legitimacy.

The trickle down effect simply doesn't work, and will work even less so during the global economic and political conditions of today.
 
An informative read from nakedcapitalism.com

58% of Real Income Growth since 1976 went to top 1% (and why that matters)
"I think of it as the end of “the deal”. What was that deal? It was the post-second-world-war settlement: in the US, the deal centred on full employment and high individual consumption. In Europe, it centred on state-provided welfare. Yves here. Now some readers may simply snort and say, “Well we can no longer afford that.” But that’s simplistic and misleading. We DID afford it. What led to the change in the deal was the staflationary 1970, which was driven both by a commodity prices (most notably the oil crisis) AND labor baragaining power (workers were able to demand that wages keep pace with inflation, which when inflation got beyond a modest level, meant it started to become self-reinforcing).
So the new program was to reduce workers’ bargaining power, both by combating unions, and by tolerating un and underemployment. Rising worker wages had been seen as crucial to greater prosperity; it was quietly abandoned as a policy goal. But this has profound implications. As rising income inequality demonstrates, the benefits of growth accrued substantially to those at the very top. But absent a few wastrels, people with that level of income are not going to spend as much of their income on consumption as those less well off. Thus (in very crude terms) Keynes’ problem of the paradox of thrift, that the understandable desire of households to save can result in insufficient demand, becomes even more acute when it it pretty much only the rich who are getting richer. http://www.nakedcapitalism.com/2010...-1976-went-to-top-1-and-why-that-matters.html
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Couple of interesting links:

Taleb: Government Deficits Could Be the Next 'Black Swan'
In a new edition of The Black Swan, author Nassim Nicholas Taleb warns "Citizens should not depend on financial assets as a repository of value and should not rely on fallible 'expert' advice for their retirement."http://www.businessweek.com/investor/content/jul2010/pi2010078_530571.htm
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Food inflation 'could go beyond 10pc before next year'
http://www.telegraph.co.uk/foodandd...on-could-go-beyond-10pc-before-next-year.html

£7billion a year skimmed off our savings
http://www.telegraph.co.uk/finance/.../7billion-a-year-skimmed-off-our-savings.html

Fed president: U.S. could face Japan-like crisis
http://www.msnbc.msn.com/id/38471746/ns/business-stocks_and_economy/

Double-dip feared as US economic growth loses pace
Fears that the world's biggest economy could be heading into a double-dip recession took hold on Friday after US growth was shown to have contracted sharply in the second quarter.http://www.telegraph.co.uk/finance/...-feared-as-US-economic-growth-loses-pace.html
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Only a small portion of the 14.6 million unemployed Americans likely found jobs in July, economists say, as businesses continue to be cautious about hiring in the face of forecasts of anemic growth for the rest of the year -- and as much high-tech production has moved overseas.
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Link


And all this with the trillion or so in debt largess from the government.

When a trillion dollar debt surge buys you a jobless recovery the fat lady is getting warmed up.

The easy to understand at even the most superficial level imballancies in the global economy are still there and ready to whack us in the face with a spade, figuring out where all this ends is easy. When is the challange.
 
Barking_Mad said:
I cant watch this as im at work, but linked via a comment further down..

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Thanks BM. Interesting counter-intuitive statistics. Didn't realise so many middle class people couldn't afford health insurance in the USA.

Shame Warren's colour blind though and she could've looked at the causes as well as the symptoms.

She fears America is moving from a three class society to a two class society.
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Barking_Mad said:
....

The £35,000 cocktail
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This is shocking, but when you read the article, and realise that you get an 11 carat diamond ring in the drink, which presumably you get to keep, it puts a somewhat different perspective on things.

It's still a stupid amount of money, but if this ring is worth most of it, then you are not really "paying £35,000 for a drink".

It would be like saying "I paid £200,000 for a packet of crisps" and forgetting to mention that the offer included not only the bag of crisps but also a 4 bedroom detached house.

Giles..
 
Giles said:
This is shocking, but when you read the article, and realise that you get an 11 carat diamond ring in the drink, which presumably you get to keep, it puts a somewhat different perspective on things.

It's still a stupid amount of money, but if this ring is worth most of it, then you are not really "paying £35,000 for a drink".

It would be like saying "I paid £200,000 for a packet of crisps" and forgetting to mention that the offer included not only the bag of crisps but also a 4 bedroom detached house.

Giles..
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Do you think you might be missing the point?
 
Barking_Mad said:
I cant watch this as im at work, but linked via a comment further down..

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It is a chill wind blowing through Americas middle classes.

Salon

Its not a new story though.....
In North America and Europe, the economic elite agreed to this bargain because they needed ordinary people as consumers and soldiers. Without mass consumption, the factories in which the rich invested would grind to a halt. Without universal conscription in the world wars, and selective conscription during the Cold War, the U.S. and its allies might have failed to defeat totalitarian empires that would have created a world order hostile to a market economy.

Globalization has eliminated the first reason for the rich to continue supporting this bargain at the nation-state level, while the privatization of the military threatens the other rationale.
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This marks a historic change in the relationship between capital and labor in the U.S. The robber barons of the late 19th century generally lived near the American working class and could be threatened by strikes and frightened by the prospect of revolution. But rioting Chinese workers are not going to burn down New York City or march on the Hamptons.

What about markets? Many U.S. multinationals that have transferred production to other countries continue to depend on an American mass market. But that, too, may be changing. American consumers are tapped out, and as long as they are paying down their debts from the bubble years, private household demand for goods and services will grow slowly at best in the United States. In the long run, the fastest-growing consumer markets, like the fastest-growing labor markets, may be found in China, India and other developing countries.
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In the medium term, over ten years I dont think the Americans have that much to worry about. The US housing market is still one of the largest asset classes in the world and the worlds elite needs US consumers to keep repaying their mortguages.

Also I very strongly doubt the Chinese are intending to allow the western elite to simply own them lock stock and barrel.

But clearly the great reconvergence has begun. But Chins itself may soon find Indonesia, India, Pakistan, Nigeria and others nipping at its heals with growing infrastructure and cheap labour.
New York Mayor Michael Bloomberg recently revealed the plutocratic perspective on immigration when he defended illegal immigration by asking, "Who takes care of the greens and the fairways in your golf course?"
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Not quite the Anarchist no borders approach to immigration.
however, America's professional army is being supplemented by contractors -- that is, mercenaries. And the elite press periodically publishes proposals to sell citizenship to foreigners who serve as soldiers in an American Foreign Legion. It is probably only a matter of time before some earnest pundit proposes to replace American police officers with foreign guest-worker mercenaries as well.
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There is the whiff of the fate of the Roman citizens in this. Replaced by slaves for work and foreign auxilaries for legionairs.
 
Employers in the US shed twice as many jobs as expected in July, fanning fears that the recovery in the world's largest economy will not see a revival in employment.

The US government said 131,000 jobs were lost overall, compared with forecasts for a 65,000 fall. The drop was mainly due to work finishing for temporary staff hired by the government to conduct its census. But private hiring was also weaker than expected.

Economists polled by Reuters ahead of the non-farm payrolls data forecast that private sector jobs would rise by 90,000, but in the event only 71,000 were added.

At the same time, June's overall drop was revised to a far steeper 221,000 from 125,000.

The data sparked a rally in government bonds, seen as safer investments when the economic picture darkens. Crude oil futures dropped on the prospect of weaker demand from the US market and stock indices also fell, including the FTSE 100 in the UK.

"This employment report only reinforces a sluggish recovery. Private sector job and income gains are not weak enough to point to a renewed downturn, nor are they strong enough to suggest the recovery is free of such risk," said Stephen Gallagher, economist at Société Générale.

Within July's drop, 143,000 jobs were census staff who were laid off, but there were also a further 59,000 public sector job losses as the US government mirrored its counterparts around the world in tightening budgets. Economists voiced concerns that the private sector outlook was also gloomy, suggesting that Americans will remain wary about their job prospects and do little to power the recovery.

"This is not good news for consumer confidence or spending and will intensify concerns about the pace of the recovery at the Federal Reserve," said James Knightley economist at ING Financial Markets.

"Given the recent data flow on activity we doubt we will see a surge in private sector employment over the next couple of months, which implies a further fall in total payrolls is probable next month."

The sharp drop in jobs, which follows news of slowing economic growth in the US, will likely prompt discussions at the Federal Reserve over implementing more quantitative easing - a way of pumping money into the financial system. The central bank's Federal Open Market Committee (FOMC) meets on Tuesday and Fed chairman Ben Bernanke has already hinted to markets that its programme of asset purchases could be resumed.

"The big picture is unfortunately that the downtrend in US economic growth is once again obvious, and these figures will probably do little to deter the FOMC from ultimately implementing fresh stimulus in the near future," said Nick Beecroft at Saxo Bank.

"I'd expect them to reinstate a quantitative easing programme - buying either US Treasuries or mortgage-backed securities - either at next week's meeting, or more likely at the following meeting on September 21."

Still, there was some comfort for president Barack Obama as he battles to ensure the economic recovery is accompanied by job creation. The unemployment rate held steady at 9.5% in July, defying expectations that it would rise to 9.6%.

But the steady rate reflected the fact that employment fell 159,000 while at the same time 181,000 people left the workforce.

"The fact that so many people are leaving the workforce is not positive in that it suggests people are giving up looking for work due to the lack of jobs," said Knightley.
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click
 
ferrelhadley said:
There is the whiff of the fate of the Roman citizens in this. Replaced by slaves for work and foreign auxilaries for legionairs.
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The main demise of the Romans was their use of lead to make their wine in. Made them infertile, go bonkers and slowly killed them
 
recent US economy statistics:

40.8 million on food stamps
10.5 million lost jobs (2007 base)
$13.6 trillion national debt, rising to $19.6 trillion by 2015
$700 billion debt interest repayment in 2010
$2 trillion debt interest repayment in 2015 (50% federal government budget)
tax receipts < social security expenditure
3.3 workers per retiree (16 in 1950; 2 by 2025)
10% of all mortgage owners have missed a payment in 1Q2010

So: debt interest is approaching 50% of the federal budget, social security payments exceed tax revenues while the number of workers continues to slide.

Rigged to implode.

[Source: 15 Economic Statistics That Just Keep Getting Worse, The Economic Collapse]
 
Just spotted this piece, which describes how the Republicans destroyed the US economy:

the road to the coming apocalypse began with a Republican president listening to a misguided Nobel economist's advice
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Self-interested Republican loyalists like Paulson, Bernanke and Geithner knew exactly what they were doing.

They wanted the economy, markets and the government to be under the absolute control of Wall Street's too-greedy-to-fail banks. They conned Congress and the Fed into bailing out an estimated $23.7 trillion debt. Worse, they have since destroyed meaningful financial reforms. So Wall Street is now back to business as usual blowing another bigger bubble/bust cycle that will culminate in the coming "American Apocalypse."
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Which resonates with what Jim Kunstler has been saying:

America has transformed itself from a nation of earnest, muscular, upright citizens to a land of overfed barbarous morons ruled by grifters. That what has been economics is about to turn dangerously political.
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I utterly reject the idea that the fed or congress were conned into doing the bank bailout, or that its all the Republicans fault. They may well be responsible for specific failings that make a real difference, but the direction the USA has been going in hasbeen set for many decades and when it comes to the basic details there is little difference between the Republican and Democrat position & strategy. Granted Bush & Cos crude approach towards ensuring this is another American Century may have ended up speeding their demise, but really most of the problerms are systemic and somewhat inevitable.

I get really tired of people who think the bank thing conned the fed. In some senses the bailout is a con, but its the usual con, that profit is privatised and liabilities are placed on the shoulders of the poorer masses. Those who focus on it being all the Feds fault etc are often the same people who are still mad that the USA went off the gold standard in the 70s. If the USA had gone the way these people wanted then they would have stood a fair chance of collapsing a lot sooner, for a lot of these chumps have no idea that the USA did a lot of what it did in order to preserve its empire. Sure in many ways it was dumb and unsustainable for the long-term, but it kept them going for decades longer than if drooly mcgoldnuts had been making the rules.
 
Sunray said:
The main demise of the Romans was their use of lead to make their wine in. Made them infertile, go bonkers and slowly killed them
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There was nothing unusual about the decline of the Roman Empire - too many wars fought overseas, neglect of education and social welfare at home, massive foreign debt. You don't need to make up special reasons why they went under. Interesting as the lead-in-wine theory is, it is extremely unlikely to have been the cause of their demise when most empires have followed much the same trajectory on their way out.
 
xes said:
Who can enlighten me on the "hindenburg omen"? On a scale of 1 to 10, how much bollocks is it?
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From your link . . .
"That said, there are plenty of Hindenburg false alarms, . . . "

xes said:
Is a stock market crash imminent?
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The one thing markets don't like is uncertainty and there's plenty of that around (Greece etc, US recovery fears, double-dip recession, etc). I get a feeining that most startagists are assigning a 20% chance to a very sharp fall / crash
 
Seems like there is still at least 3 bits of bad news for every bit of good news around at the moment, and most of the good news is that growth in certain countries or sectors has been quite good in recent quarters. But its not that hard to grow rapidly after you've had a big shrink, plenty of easy growth to be found for a while, and we've got more of a spare capacity buffer for a while too. For me its only a question of whether growth & recovery continues until we end up hitting the buffer again (eg oil price going massive again would be a sign of that), or whether the recovery peters out before we get to that point again. The latter seems a bit more likely at the moment, given the weakening of consumer confidence again, the house prices starting to drop back, and all the talk of public spending cuts, let alone when the cuts actually start to really bite.
 
If there is going to be another great shock int he not-too-distant future, I'll suggest that it could occur in September or October, once various 'important people' have come back from their holidays and attention turns to what lies ahead.
 
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