Financial Crisis

[12DrinkMore]

Here come the Chinese.

http://www.independent.co.uk/opinion/comme...sy-1931451.html

And then back to the Greeks

http://www.bloomberg.com/apps/news?pid=206...id=apLIYrttdcLc

Greece plans to sell a global bond in dollars in the next two months to help raise 11.6 billion euros ($15.6 billion) in funding requirements by the end of May after investors lost money on its most recent sale.

I suppose there must be some reason why they would want to take on a currency risk, heading down the path of the likes of Argentina.

And asking the impossible

“Greece needs to get through its current funding and start growing at a decent rate so this large amount of debt doesn’t snowball,” said Peter Chatwell, a fixed-income strategist at Credit Agricole in London.

Wonder where that growth is going to come from? The only growth in Greece is in debt, pension liabilities and unrest.

[Abrak]

Here come the Chinese.

http://www.independent.co.uk/opinion/comme...sy-1931451.html

And then back to the Greeks

http://www.bloomberg.com/apps/news?pid=206...id=apLIYrttdcLc

Greece plans to sell a global bond in dollars in the next two months to help raise 11.6 billion euros ($15.6 billion) in funding requirements by the end of May after investors lost maney on its most recent sale.

I suppose there must be some reason why they would want to take on a currency risk, heading down the path of the likes of Argentina.

And asking the impossible

“Greece needs to get through its current funding and start growing at a decent rate so this large amount of debt doesn’t snowball,” said Peter Chatwell, a fixed-income strategist at Credit Agricole in London.

Wonder where that growth is going to come from? The only growth in Greece is in debt, pension liabilities and unrest.

It is in my eyes it is pathetic. How the hel_l is Greece going to start growing when it wasnt competitive in the first place and then appreciated real incomes by 30%?

Greece clearly took advantage of the EU for low cost funding. It is complaining about paying 6% when they paid 12% before and simply have a back guarantee for additional lending. The Euro has by far the best fundamentals of the major countries disrupted by a banana republic.

And this is what pisses me off. There is some idiot telling them that they should grow at a decent rate so they can provide funding when he doesnt know that the only reason they grew at a decent rate was because they massively went into debt.

[Gambles]

agreed - we've been making the same point in presentations recently

just imagine the inflation neccessary to neutralise this debt burden - MS recently did an interesting study on this - Ben seems to need double digit inflation for at least a decade

but it ain't happening yet and I don't have faith in his ability to turn the taps on & off

I am generally in the all roads seem to lead to inflation argument.

US monetary policy seems to be a case of trying to get a cart moving forward by pushing on a piece of rope and fiscal policy another debt driven (not a real) growth strategy. (Personally I think Bernanke only claimed to be able to turn the tap on rather than his ability to switch it off.)

I think you highlight a particular problem though which is by the time he has actually created inflation he will need it (to reduce the debt profile) rather than have any desire to turn it off.

I also just get the 'feeling' there is quite a lot of inflation already about. I would have thought that velocity of money against broader money supply figures is actually increasing. It just seems to me that prices are rising.

I think that's very much a local take

in Asia there are inflationary forces BUT ironically these may be kept in check by western deflation - love your description and totally agree - have I mentioned Steve Keen and the circuit theory of money lately?

In America particularly it seems to me that velocity of money can't pick up whilever unemployment/artificially inflated real estate prey on people's minds......

[Gambles]

I doubt people are going to fall for the USD to the same extent that they did in 08. Anytime there is a default, anywhere in the world, Bernanke will just print money to paper over the problem. You gotta wonder why Portugal et al are now selling dollar denominated bonds and talking to the IMF. Its because the ECB is not going to bail anyone out but the FED will.

your theory is interesting and might be even valid in the long run. however, most €U-countries have been selling USD denominated debt -although a rather small percentage- since years.

you can't make too many solid inferences about the direction of currencies from government policy decisions

- use those a benchmark and you would have sold gold <$300

[Gambles]

And this is what pisses me off. There is some idiot telling them that they should grow at a decent rate so they can provide funding when he doesnt know that the only reason they grew at a decent rate was because they massively went into debt.

you'll never become a givernment economist, Ab.

Otherwise you'd instantly have concluded that the problem was that they didn't borrow more......

Edited March 31, 2010 by Gambles

[teletiger]

In America particularly it seems to me that velocity of money can't pick up whilever unemployment/artificially inflated real estate prey on people's minds......

$1.2 Trillion in unemployed bank reserves would be a dampner too.

The USA is clinically dead. Beyond resuscitation financially. No one is brave enough to pull the plug and call it.

America will go to war. The big dog never goes hungry.

Regards.

[sokal]

for the record and the dismay of the gloomdoomers™:

last weeks Greece government bond was three times oversubscribed. credit default swaps fell sharply. my dogs are getting too fat. Thai Baht is strong. Bernanke called and mentioned casually "who the eff cares what they say?" but did not elaborate who they are. Merkel contradicts herself. Sarkozy steps forward and makes promises to Papandreou. the overflow tank of my pool is leaking. Hu has no intentions to let CNY float. i still refuse to watch silly yewtoob clips. it's hot in Pattaya. my portfolio looks prettier than ever. anal-lusters predict GBP/EUR parity.

to be continued...

30 million dollars in last nights Australian lotto draw NOT claimed

to be continued

where do you get your news ?

Earlier yesterday Greece tried to do a quick drive by with a €1 billion in a reopening of a 12 Year auction. Instead, it barely managed to get €390 million off: a miss by 61%, which anywhere else would have caused the organizers to scrap the auction and never mention it again (but not here). The lack of demand for the remarkably stupid surprise auction, orchestrated by former Goldmanite Petros Christodoulou, achieved no incremental funding for Greece but merely spooked the entire curve, and forced buyers of yesterday's 7 Year auction to take immediate losses, as the bond traded down from 6% to 6.27% (not to mention a move wider in CDS).

[sokal]

In America particularly it seems to me that velocity of money can't pick up whilever unemployment/artificially inflated real estate prey on people's minds......

$1.2 Trillion in unemployed bank reserves would be a dampner too.

The USA is clinically dead. Beyond resuscitation financially. No one is brave enough to pull the plug and call it.

America will go to war. The big dog never goes hungry.

Regards.

You do not need money velocity and borrowing or a functioning economy to start inflation. Bannana republic style inflation is a currency event. When the economy cannot profitably absorb capital and when added debt leads to less productivity, rather then more.

[Abrak]

America will go to war. The big dog never goes hungry.

Regards.

America invades Greece scenario.

I like it.

[Gambles]

not a crisis per se but one more of the many, many baby steps towards tragic year II, the sequel....

for the record and the dismay of the gloomdoomers™:

last weeks Greece government bond was three times oversubscribed. credit default swaps fell sharply. my dogs are getting too fat. Thai Baht is strong. Bernanke called and mentioned casually "who the eff cares what they say?" but did not elaborate who they are. Merkel contradicts herself. Sarkozy steps forward and makes promises to Papandreou. the overflow tank of my pool is leaking. Hu has no intentions to let CNY float. i still refuse to watch silly yewtoob clips. it's hot in Pattaya. my portfolio looks prettier than ever. anal-lusters predict GBP/EUR parity.

to be continued...

30 million dollars in last nights Australian lotto draw NOT claimed

to be continued

where do you get your news ?

Earlier yesterday Greece tried to do a quick drive by with a €1 billion in a reopening of a 12 Year auction. Instead, it barely managed to get €390 million off: a miss by 61%, which anywhere else would have caused the organizers to scrap the auction and never mention it again (but not here). The lack of demand for the remarkably stupid surprise auction, orchestrated by former Goldmanite Petros Christodoulou, achieved no incremental funding for Greece but merely spooked the entire curve, and forced buyers of yesterday's 7 Year auction to take immediate losses, as the bond traded down from 6% to 6.27% (not to mention a move wider in CDS).

[Gambles]

In America particularly it seems to me that velocity of money can't pick up whilever unemployment/artificially inflated real estate prey on people's minds......

$1.2 Trillion in unemployed bank reserves would be a dampner too.

The USA is clinically dead. Beyond resuscitation financially. No one is brave enough to pull the plug and call it.

America will go to war. The big dog never goes hungry.

Regards.

You do not need money velocity and borrowing or a functioning economy to start inflation. Bannana republic style inflation is a currency event. When the economy cannot profitably absorb capital and when added debt leads to less productivity, rather then more.

Dollar's still a long way from that

at the moment T-Bills and USD remain bellwethers and are the place that people run in a crisis - CF USD behaviour during Greek crisis so far

Personally I think that difference now from 2008 is not that the Dollar won't rally - right now I believe that it would but 6-12 months is a long time in economics - but that having rallied to dizzy heights it will then have a Wile-E-Coyote moment, look down and plummet to the bottom of the canyon....

It's still the global reserve currency and therefore the flight to safety currency; people don't usually question that during a panic but maybe immediately afterwards?

[Gambles]

America will go to war. The big dog never goes hungry.

Regards.

America invades Greece scenario.

I like it.

and the Germans have already got their eyes on those islands as collateral.....

[Abrak]

It's still the global reserve currency and therefore the flight to safety currency; people don't usually question that during a panic but maybe immediately afterwards?

Yes its weird isnt it? Collapse your economy and your currency goes up.

But spare a thought for Bernanke. He must have had a recurring nightmare since the age of 6 (he was afterall an exceedingly bright child.) The nightmare was that he would be put in charge of the Fed and, however hard he tried, he couldnt devalue the US dollar.

I imagine he wakes up in the middle of the night screaming 'Zimbabwe, Zimbabwe....' but nobody listens.

Meanwhile all the Euro needs is a poxy third world country to go bankrupt on it and it nosedives.

[flying]

It's still the global reserve currency and therefore the flight to safety currency; people don't usually question that during a panic but maybe immediately afterwards?

Yes its weird isnt it? Collapse your economy and your currency goes up.

Yes but that hat trick does not work for any other

If the Middle East gets crazy enough it may not even work here anymore.

[sokal]

In America particularly it seems to me that velocity of money can't pick up whilever unemployment/artificially inflated real estate prey on people's minds......

$1.2 Trillion in unemployed bank reserves would be a dampner too.

The USA is clinically dead. Beyond resuscitation financially. No one is brave enough to pull the plug and call it.

America will go to war. The big dog never goes hungry.

Regards.

You do not need money velocity and borrowing or a functioning economy to start inflation. Bannana republic style inflation is a currency event. When the economy cannot profitably absorb capital and when added debt leads to less productivity, rather then more.

Dollar's still a long way from that

at the moment T-Bills and USD remain bellwethers and are the place that people run in a crisis - CF USD behaviour during Greek crisis so far

Personally I think that difference now from 2008 is not that the Dollar won't rally - right now I believe that it would but 6-12 months is a long time in economics - but that having rallied to dizzy heights it will then have a Wile-E-Coyote moment, look down and plummet to the bottom of the canyon....

It's still the global reserve currency and therefore the flight to safety currency; people don't usually question that during a panic but maybe immediately afterwards?

The dollar system is more fundamentally flawed and closer to the end of the road then many people realize so I would argue that the dollar is not a long way from banana republic problems.

This is a very simple chart. It takes the change in GDP and divides it by the change in Debt. What it shows is how much productivity is gained by infusing $1 of debt into our debt backed money system.

Back in the early 1960s a dollar of new debt added almost a dollar to the nation’s output of goods and services. As more debt enters the system the productivity gained by new debt diminishes. This produced a path that was following a diminishing line targeting ZERO in the year 2015. This meant that we could expect that each new dollar of debt added in the year 2015 would add NOTHING to our productivity.

Then a funny thing happened along the way. Macroeconomic DEBT SATURATION occurred causing a phase transition with our debt relationship. This is because total income can no longer support total debt. In the third quarter of 2009 each dollar of debt added produced NEGATIVE 15 cents of productivity, and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP!

[Abrak]

Nice and very beautiful chart. (I slightly disagree with your conclusion. I think it is theoretically impossible to add debt and reduce current GDP (by adding debt alone). Really what the chart says is that increasing amounts of debt is needed to create any growth rather than additional debt is now reducing GDP.)

When you cross the line it is known as 'zero hour'.

[Gambles]

It's still the global reserve currency and therefore the flight to safety currency; people don't usually question that during a panic but maybe immediately afterwards?

Yes its weird isnt it? Collapse your economy and your currency goes up.

But spare a thought for Bernanke. He must have had a recurring nightmare since the age of 6 (he was afterall an exceedingly bright child.) The nightmare was that he would be put in charge of the Fed and, however hard he tried, he couldnt devalue the US dollar.

I imagine he wakes up in the middle of the night screaming 'Zimbabwe, Zimbabwe....' but nobody listens.

Meanwhile all the Euro needs is a poxy third world country to go bankrupt on it and it nosedives.

Right now only one country can devalue the USD - Wen calls the shots today, not Ben

[Gambles]

Nice and very beautiful chart. (I slightly disagree with your conclusion. I think it is theoretically impossible to add debt and reduce current GDP (by adding debt alone). Really what the chart says is that increasing amounts of debt is needed to create any growth rather than additional debt is now reducing GDP.)

When you cross the line it is known as 'zero hour'.

quite

but GDP softening isn't going to drive the Dollar down at the moment. US GDP is still such an important determinant of global GDP that the immediate impact is felt everywhere.

From today's perspective, it's only in the aftermath that I see the significant weakening/collapse of the USD and while there'll be some big drops, the ride down to the very bottom is probably way longer than most of us expect/many of us will live to see the end of. However that could all change - especially if China doesn't manage to sell enough of its Dollars into strength (and remember so far it's managed to sell its Dollars into Dollar priced assets like commodities, effectively dumping the risk without anyone noticing)

[AlexLah]

We are fogged, I nut like itz.

It very clear liars uze numburs.

Zhe play iz simple, just watch for its unfolding.

[midas]

We are fogged, I nut like itz.

It very clear liars uze numburs.

Zhe play iz simple, just watch for its unfolding.

Figures don't lie but liars can figure.

[midas]

Could this re-ignite consumer spending ? I mean if they are not paying for the mortgage

and they are not paying any rent, what are people doing with all that extra disposable income ?

Living Rent Free: Homeowners become Squatters

http://www.calculatedriskblog.com/2010/02/...culated+Risk%29

That is an interesting thought - I could see the same happening in the UK if interest rates rise / what could anyone do ? throw thousands onto the streets - Big hit for the banks though /

yes indeed

How Obama's "Extend & Pretend" Mortgage Policy Explains The Apparent Disconnect Between Housing And The Consumer

Read more: http://www.businessinsider.com/mortgage-mo...4#ixzz0kQnOOFBz

7.4 million non-current loans in this country (a ton of folks living in a home but not paying at the moment for said home).

Most Americans behind on their mortgages have now gone a year without paying a single bill. If half the 7.4 million homeowners are skipping a $1,000 monthly mortgage payment, that provides a potential $3.7 billion boost to consumer spending.

It's not about, as the Santellis of the world might suggest, that it's some grave evil to be helping your neighbor who may or may not have gotten in over their head. It's more basic: the scheme is creating serious economic distortions, and are bound to unravel in ways that the market isn't properly anticipating.

Read more: http://www.businessinsider.com/mortgage-mo...4#ixzz0kQnlmsiS

http://www.businessinsider.com/mortgage-mo...spending-2010-4

[flying]

If half the 7.4 million homeowners are skipping a $1,000 monthly mortgage payment, that provides a potential $3.7 billion boost to consumer spending.

It's not about, as the Santellis of the world might suggest, that it's some grave evil to be helping your neighbor who may or may not have gotten in over their head. It's more basic: the scheme is creating serious economic distortions, and are bound to unravel in ways that the market isn't properly anticipating.

True isn't it? Strange & yet common too.

You know most folks who go for a default/bankruptcy like to run up everything they can on the way there. So yes I guess I could see a bounce based on that but......These same folks do not have actual MONEY !

They are buying the same way their govt is By the creation of debt

With that in mind I would have to conclude that if the markets are not properly anticipating this the same way many of us knew the housing bubble would burst...Well then they are all just as bad off in the lack of common sense department as these short sighted folks waisting the last of their credit on things such as that article showed...

* visits to the tanning salon

* visits to the nail spa

* some kind of gourmet produce market

* various liquor stores

* A DirecTV bill that involved some serious premium programming or pay-per-view events

* Over $1,700 in retail purchases, including: Best Buy, Baby Gap, Brookstone, Old Navy, Bed, Bath & Beyond, Home Depot, Macy’s, Pac Sun, Urban Behavior, Sears, Staples, and Footlocker

Not that I would condone it but dont they know they can actually buy money with that same credit?

Then again these folks are not the sharpest tools in the shed

Edited April 7, 2010 by flying

[midas]

You know most folks who go for a default/bankruptcy like to run up everything they can on the way there. So yes I guess I could see a bounce based on that but......These same folks do not have actual MONEY !

They are buying the same way their govt is By the creation of debt

It says this kind of thing has been going on for a year now.

OK so with all these imminent tax increases (and 16,000 new IRS agents to make sure they pay them ) , how long will it take for the envious neighbor who sees the lifestyle of the person living next door doesn’t seem to have suffered that much ( when they can still afford to go the tanning salon ) throw in the towel and say " stuff it I am not paying the mortgage any more either " ?

[Gambles]

Could this re-ignite consumer spending ? I mean if they are not paying for the mortgage

and they are not paying any rent, what are people doing with all that extra disposable income ?

Living Rent Free: Homeowners become Squatters

http://www.calculatedriskblog.com/2010/02/...culated+Risk%29

That is an interesting thought - I could see the same happening in the UK if interest rates rise / what could anyone do ? throw thousands onto the streets - Big hit for the banks though /

yes indeed

How Obama's "Extend & Pretend" Mortgage Policy Explains The Apparent Disconnect Between Housing And The Consumer

Read more: http://www.businessinsider.com/mortgage-mo...4#ixzz0kQnOOFBz

7.4 million non-current loans in this country (a ton of folks living in a home but not paying at the moment for said home).

Most Americans behind on their mortgages have now gone a year without paying a single bill. If half the 7.4 million homeowners are skipping a $1,000 monthly mortgage payment, that provides a potential $3.7 billion boost to consumer spending.

It's not about, as the Santellis of the world might suggest, that it's some grave evil to be helping your neighbor who may or may not have gotten in over their head. It's more basic: the scheme is creating serious economic distortions, and are bound to unravel in ways that the market isn't properly anticipating.

Read more: http://www.businessinsider.com/mortgage-mo...4#ixzz0kQnlmsiS

http://www.businessinsider.com/mortgage-mo...spending-2010-4

spot on Midas

totally agree with this theme.....

[Gambles]

and they are not paying any rent, what are people doing with all that extra disposable income ?

this is the conundrum - people aren't spending because they are worried about the present/future

I read somewhere that people are paying down credit card debt despite being in default on their mortgages because they see their card credit as being more useful to them than an up to date mortgage - the moral hazard of the messages that you don't have to pay your mortgage and that a floor has been put under house prices

[midas]

and they are not paying any rent, what are people doing with all that extra disposable income ?

this is the conundrum - people aren't spending because they are worried about the present/future

I read somewhere that people are paying down credit card debt despite being in default on their mortgages because they see their card credit as being more useful to them than an up to date mortgage - the moral hazard of the messages that you don't have to pay your mortgage and that a floor has been put under house prices

They put a floor under the banks and AIG's, they a putting a floor under the stockmarket and now they are trying

to prop up house prices...........what a joke.

Meanwhile depsite the ' non- believers ' like Abrak, USA is slowly sinking back to Wild West days..................

When asked what advice he would give to residents of Ashtabula County Ohio because of cutbacks in official law enforcement budgets, Judge Alfred Mackey said they should:

"arm themselves. Be very careful, be vigilant, get in touch with your neighbors, because we're going to have to look after each other."

Ashtabula County Judge Tells Ohio Residents to "Arm themselves"

http://www.wkyc.com/news/local/news_articl...951&catid=3

[teletiger]

Who are you going to shoot when you find them rifling (sic) your 401Ks and MM accounts?

Regards.

[midas]

Who are you going to shoot when you find them rifling (sic) your 401Ks and MM accounts?

Regards.

I was thinking it would be more like self defence against the army of 16,000 IRS agents

that might start " trespassing " on the land of a few farmers

[hawthorne]

and they are not paying any rent, what are people doing with all that extra disposable income ?

this is the conundrum - people aren't spending because they are worried about the present/future

I read somewhere that people are paying down credit card debt despite being in default on their mortgages because they see their card credit as being more useful to them than an up to date mortgage - the moral hazard of the messages that you don't have to pay your mortgage and that a floor has been put under house prices

They put a floor under the banks and AIG's, they a putting a floor under the stockmarket and now they are trying

to prop up house prices...........what a joke.

Meanwhile depsite the ' non- believers ' like Abrak, USA is slowly sinking back to Wild West days..................

When asked what advice he would give to residents of Ashtabula County Ohio because of cutbacks in official law enforcement budgets, Judge Alfred Mackey said they should:

"arm themselves. Be very careful, be vigilant, get in touch with your neighbors, because we're going to have to look after each other."

Ashtabula County Judge Tells Ohio Residents to "Arm themselves"

http://www.wkyc.com/news/local/news_articl...951&catid=3

It is a sad fate for the people of the US I am afraid. I have little faith in the US going back to the days of old. The gov't is coming for you and me. See who is the last one left to pay the tax bill.

[Gambles]

They put a floor under the banks and AIG's, they a putting a floor under the stockmarket and now they are trying

to prop up house prices...........what a joke.

Meanwhile depsite the ' non- believers ' like Abrak, USA is slowly sinking back to Wild West days..................

When asked what advice he would give to residents of Ashtabula County Ohio because of cutbacks in official law enforcement budgets, Judge Alfred Mackey said they should:

"arm themselves. Be very careful, be vigilant, get in touch with your neighbors, because we're going to have to look after each other."

Ashtabula County Judge Tells Ohio Residents to "Arm themselves"

http://www.wkyc.com/news/local/news_articl...951&catid=3

I think that most people underestimate the risk of social unrest and maybe even war