Financial Crisis

[churchill]

Really we are all getting screwed so dam_n hard!

I've got far too much at steak to contemplate doing anything about it. But those 20+ % youth unemployed in Spain obviously don't. Not sure they really know what the problem or solution is though; just "the indignant ones" is so dumb

the situation in Spain is much worse. overall unemployment 25%, of young people till age 25 it's 50%!

Sweet Jesus! And the austerity is only just beginning ; yet everyone for some reason thinks this crises is practically over?

it will take many years till the crisis in Spain is over. for more than a decade the country's economy expanded or rather exploded due to construction based on extremely low interest rates which accompanied the adoption of the EURo. except for tourism at the coast there is not enough viable industry which could absorb even a tiny percentage of the jobless, respectively offer young unemployed people the possibility to learn a trade.

the same applies more or less to Portugal and Greece but not to Italy.

.. so what about the current low interest rates ..

...what will happen when they rise .

Printing to keep rates low cannot go on forever ..

[Naam]

.. so what about the current low interest rates ..

...what will happen when they rise .

Printing to keep rates low cannot go on forever ..

most of the printing are hallucinations of gloom&doomers and the same applies to the lion share of quantitative easing. but we may have reached or soon reach a saturation point where actual money -fiat only of course - will flow into some economies, cause inflation and sooner or later interest rates to rise.

but not to worry! inflation is only in fiat money terms. those who hold precious metals will still be able to buy a roman tunic, a belt and a pair of boots for an ounce of gold

[12DrinkMore]

.. so what about the current low interest rates ..

...what will happen when they rise .

Printing to keep rates low cannot go on forever ..

Yes it can.

The central banks have no problem in buying massive amounts of government debt, effectively monetising all the deficits and more. This does not necessarily lead to inflation, but is implemented to prevent the rapid deflation of assets, which would further cripple the dam_n banking system.

Once the interest rates are zero bound, which is where we're at, it is difficult to see how the Bernank or the Merv can raise interest rates without massive falls in the value of treasuries, real estate, the stock market and hurt the economy.

I also cannot see how the immensely blown up balance sheets of the central banks can ever be reduced. I think that this is a means of injecting debt free capital into the economy so that parts the debts issued by the banks can be paid off. But maybe I'm wrong. However, with less than 3% of the "money" in circulation being issued as debt free bits of paper and coins, somehow the other 97% of credit/debt based money has to be paid off. Defaults/bankruptcies account for a part of it, but if the central banks buy up government debt then this money is essentially spent debt free by the government into the economy, allowing the dam_n bankers to be paid off.

The current system of money creation, where the governments have allowed the bankers to create most of the sovereign currency seems ridiculous to me, but I don't think the system will ever be changed. So maybe a compromise of constantly expanding central banks' balance sheets through open market operations in buying government bonds off the primary dealers is the future?

[churchill]

If they have to print ..

Fix income inequality with $10 million loans for everyone!

http://www.washingtonpost.com/opinions/fix-income-inequality-with-10-million-loans-for-everyone/2012/04/13/gIQATUQAFT_story.html

[gregb]

If they have to print ..

Fix income inequality with $10 million loans for everyone!

http://www.washingto...QAFT_story.html

Nothing new. People have been saying that for years. I remember when the whole thing started over 3 years ago an editorial saying that if the government wanted to print money, the correct solution was simply to give every family $500k. People underwater from the housing crisis could then pay off their home loans and be debt free, and savers would be rewarded with a fat bank account. It would fix all the economy's ills for a trifling $50 quadrillion or so. Given where the Fed and the US government will invariably take us as the collapse continues, it probably wasn't a bad idea.

[churchill]

Screw everyone else as long as we are OK ..Those at the top and in charge will never give up their privilages ---- beginning to sound like a movie .. Who and where is the 'hero' ... where is Europe's MT

'Neither the ECB nor the Fed should exist at all. Both present themselves as "inflation fighters" when they are the source of inflation.

Now these arrogant asswipes want to be protected from their own policies while demanding cuts in the pensions of Greece, Portugal, and Spain.'

ECB Wants Its Pensions Adjusted For Inflation; Reflections on the Politically Entitled Class

http://globaleconomi...justed-for.html

Suicides ‘by Economic Crisis’ Increase in Europe

Read more at http://www.inquisitr...pcDUXbLJqd5P.99

Edited April 16, 2012 by churchill

[Naam]

Neither the ECB nor the Fed should exist at all. Both present themselves as "inflation fighters" when they are the source of inflation.

where, pray tell, does one find this inflation caused by ECB and FED? did home prices and rents go through the roof in the U.S. of A. Europe and Thailand? talk is cheap, shit talk like yours to scare a bunch of poor chicken little is deplorably cheap.

get a life Mish... perhaps learn what your nickname means in Arabic!

[12DrinkMore]

If they have to print ..

Fix income inequality with $10 million loans for everyone!

http://www.washingto...QAFT_story.html

Nothing new. People have been saying that for years. I remember when the whole thing started over 3 years ago an editorial saying that if the government wanted to print money, the correct solution was simply to give every family $500k. People underwater from the housing crisis could then pay off their home loans and be debt free, and savers would be rewarded with a fat bank account. It would fix all the economy's ills for a trifling $50 quadrillion or so. Given where the Fed and the US government will invariably take us as the collapse continues, it probably wasn't a bad idea.

That process would lead to massive inflation, as people would bid up the price of assets with their newly found "wealth".

The current process of buying treasuries and other debt is preventing the house of cards from collapsing, it is not injecting the money directly into the economy, as the cash the banks receive for their 'assets' is not 'given out for free' for people to spend.

In order for any money to move from the banks first of all somebody has to ask for a loan, currently the banks are a little tight with giving loans. This loan is then created out of nothing with no regard to any money on deposit, or, indeed, at the time of the loan being issued, with no regard to the capital ratios. These ratios, which determine how much debt a bank can issue, are then sorted out later, if necessary by borrowing money from the interbank market or the Bernank.

With Fed funds on offer at zero interest, which also drives down the interbank rate, there is essentially no limit on how much the banks can lend out into the economy. The only limit being how strict they are with giving out loans. When they are too loose with the credit we have bubbles, when they are too strict we have recessions.

And on the other side the limit is set by how much people want to borrow.

The banks cannot push on a piece of string, although with all the cheap & easy deals they did up to 2007 they certainly made an excellent attempt.

[churchill]

Not sure about Mish but another one who speaks with forked tongue ..

Sarkozy Embraces Growth Role for ECB

http://online.wsj.com/article/SB10001424052702304818404577346111685995988.html?mod=wsj_share_tweet

[churchill]

If they have to print ..

Fix income inequality with $10 million loans for everyone!

http://www.washingto...QAFT_story.html

I should have put

[12DrinkMore]

Neither the ECB nor the Fed should exist at all. Both present themselves as "inflation fighters" when they are the source of inflation.

where, pray tell, does one find this inflation caused by ECB and FED? did home prices and rents go through the roof in the U.S. of A. Europe and Thailand? talk is cheap, shit talk like yours to scare a bunch of poor chicken little is deplorably cheap.

get a life Mish... perhaps learn what your nickname means in Arabic!

I think, but do not know for sure, that simply because the central banks have decided on an inflation target of 2%, then this feeds through into the expectations of the people and so sets the ball park figure for price/wage increases at 2%.

I don't think that they have any levers that can be pushed or pulled that would directly and immediately affect the inflation rate other than making statements designed to set the expectations of the people.

I would guess that the 2% was determined to be a number that seems credible, somehow 1% doesn't do the trick, and 3% would lead to 4 or 5% wage increase demands.

Edited April 16, 2012 by 12DrinkMore

[Naam]

I think, but do not know for sure, that simply because the central banks have decided on an inflation target of 2%, then this feeds through into the expectations of the people and so sets the ball park figure for price/wage increases at 2%.

I don't think that they have any levers that can be pushed or pulled that would directly and immediately affect the inflation rate other than making statements designed to set the expectations of the people.

I would guess that the 2% was determined to be a number that seems credible, somehow 1% doesn't do the trick, and 3% would lead to 4 or 5% wage increase demands.

please define inflation "12".

-if the price of rice, chillies, nam pla and Song Sam triples will you live like a pauper like the chap who works on a construction site for 250 Baht a day?

-will that same chap suffer if his staple food does not increase in price but the S-Class Mercedes you are planning to buy has now been priced at 13 million instead of 11.8 million Baht?

-will the driver of my wife benefit if the price of a 67" plasma flat screen drops from 97,000 Baht to only 69,000 Baht?

-does it bother your gardener if your first class ticket BKK-ANY is hiked by 25,000 Baht to 149,599 Baht plus taxes?

[12DrinkMore]

I think, but do not know for sure, that simply because the central banks have decided on an inflation target of 2%, then this feeds through into the expectations of the people and so sets the ball park figure for price/wage increases at 2%.

I don't think that they have any levers that can be pushed or pulled that would directly and immediately affect the inflation rate other than making statements designed to set the expectations of the people.

I would guess that the 2% was determined to be a number that seems credible, somehow 1% doesn't do the trick, and 3% would lead to 4 or 5% wage increase demands.

please define inflation "12".

-if the price of rice, chillies, nam pla and Song Sam triples will you live like a pauper like the chap who works on a construction site for 250 Baht a day?

-will that same chap suffer if his staple food does not increase in price but the S-Class Mercedes you are planning to buy has now been priced at 13 million instead of 11.8 million Baht?

-will the driver of my wife benefit if the price of a 67" plasma flat screen drops from 97,000 Baht to only 69,000 Baht?

-does it bother your gardener if your first class ticket BKK-ANY is hiked by 25,000 Baht to 149,599 Baht plus taxes?

Aah yes Naam, the economists cannot decide on a definition for inflation, so I will not even attempt to to it.

As you point out, there are many instances of inflation/deflation which will affect people in different ways.

You are making a few examples which demonstrate this.

I was referring to the specific case of the Central Bank targeted CPI, itself a fudged number, which is used by companies, unions and employees as a basis for price and wage increases. There will be clearly variations due to raw material costs, availability of skilled and unskilled labour and energy costs. But by setting the "CPI target" at 2% the Central Banks are attempting to provide a baseline of the "cost of living" inflation for the general economy, which is important for maintaining stability.

My point was that I think they attempt to reach this 2% figure by propaganda and not by monetary operations.

Edited April 16, 2012 by 12DrinkMore

[midas]

Suicides ‘by Economic Crisis’ Increase in Europe

Read more at http://www.inquisitr...pcDUXbLJqd5P.99

even The Lancet Medical Journal is now discussing this

http://www.lancet.com/journals/lancet/article/PIIS0140-6736%2811%2961079-9/fulltext

[gregb]

If they have to print ..

Fix income inequality with $10 million loans for everyone!

http://www.washingto...QAFT_story.html

Nothing new. People have been saying that for years. I remember when the whole thing started over 3 years ago an editorial saying that if the government wanted to print money, the correct solution was simply to give every family $500k. People underwater from the housing crisis could then pay off their home loans and be debt free, and savers would be rewarded with a fat bank account. It would fix all the economy's ills for a trifling $50 quadrillion or so. Given where the Fed and the US government will invariably take us as the collapse continues, it probably wasn't a bad idea.

That process would lead to massive inflation, as people would bid up the price of assets with their newly found "wealth".

The current process of buying treasuries and other debt is preventing the house of cards from collapsing, it is not injecting the money directly into the economy, as the cash the banks receive for their 'assets' is not 'given out for free' for people to spend.

In order for any money to move from the banks first of all somebody has to ask for a loan, currently the banks are a little tight with giving loans. This loan is then created out of nothing with no regard to any money on deposit, or, indeed, at the time of the loan being issued, with no regard to the capital ratios. These ratios, which determine how much debt a bank can issue, are then sorted out later, if necessary by borrowing money from the interbank market or the Bernank.

With Fed funds on offer at zero interest, which also drives down the interbank rate, there is essentially no limit on how much the banks can lend out into the economy. The only limit being how strict they are with giving out loans. When they are too loose with the credit we have bubbles, when they are too strict we have recessions.

And on the other side the limit is set by how much people want to borrow.

The banks cannot push on a piece of string, although with all the cheap & easy deals they did up to 2007 they certainly made an excellent attempt.

While I agree with you in theory, you are missing an important aspect that is pushing up the prices of necessities. By bailing out the banks and keeping them solvent from the real estate fiasco, the Fed and the US government are enabling the masses to default on their loans without fear of being evicted. The money saved from defaults on housing is giving people the cash they need to continue purchasing the necessities of life...namely food and fuel. That is why these areas are rising at 10+% while core inflation remains stagnant. So the money being given to the banks is filtering into the economy indirectly, and it will likely continue to do so as more and more people find themselves on the wrong side of the poverty line.

The alternative, which fits economic theory nicely, is that if the Fed wasn't so generous, millions more would prioritize shelter over food and fuel, and go hungry rather than being homeless. Eventually, they would die either from starvation or exposure, but they would die. Thus relieving the pressure on necessary resources and allowing commodity prices to find a lower equilibrium.

I am not saying that I wish the government would do that. In fact, I think the proper thing to do is not the limited categories of double digit inflation they are supporting today, but massive inflation all around. It is the end game anyway, as economic growth can not be revived given the realities of peak oil and energy depletion. The sooner we reset the entire system, the sooner we will be able to find a new equilibrium at a lower level of economic complexity.

[cmsally]

Crikey, reading this you really have to wonder what George and the boys are up to at No. 11!

http://www.bbc.co.uk/news/business-17356286

Some pretty brainless decisions going on regarding the inflation index.

[chiang mai]

Crikey, reading this you really have to wonder what George and the boys are up to at No. 11!

http://www.bbc.co.uk...siness-17356286

Some pretty brainless decisions going on regarding the inflation index.

I disagree, 700 different items bought locally, that seems to me to be a very real measure.

[flying]

Crikey, reading this you really have to wonder what George and the boys are up to at No. 11!

http://www.bbc.co.uk...siness-17356286

Some pretty brainless decisions going on regarding the inflation index.

I disagree, 700 different items bought locally, that seems to me to be a very real measure.

You would think so but.............Like the CPI the data is massage-able

Like the CPI they exchange *almost* like items at times of stress to massage the data to

give the appearance they seek.

Years ago it was shown how with the CPI which once held a good grade of steak...suddenly it was ok to exchange it with hamburger...

After all it was still beef right? Same with the quality of bread in their basket

Then from across the pond with their version of CPI the report linked above stated...

"They only buy them when they are cheap," she says, standing next to a punnet of pineapples

priced at £1.50 each. They will fall to 50p each later in the year.

All this ends up being is a shell game. If they want to use such a system it has to have controls.

Controls that dictate quality of product, seasonal pricing etc.

otherwise too much room is left to massage data

Edited April 17, 2012 by flying

[chiang mai]

Point taken, but what would be a more reliable and accurate measure?

[flying]

Point taken, but what would be a more reliable and accurate measure?

Not sure but it would have to be something whose quality remained static

Maybe fuel with a set octane rating etc.

[chiang mai]

I think I prefer the 700 item approach, a single item such as fuel suffers the same vagaries as the pineapple, except the pinapple has 699 other items to support an accurate assessment.

[flying]

I think I prefer the 700 item approach, a single item such as fuel suffers the same vagaries as the pineapple, except the pineapple has 699 other items to support an accurate assessment.

Yes for sure....I did not mean use a single item but use items that had a consistent/stable quality lock on them.

I do believe the CPI uses 200 categories grouped into 8 different groups. I am not sure how many individual items are in there

But I know gasoline is already in there too ....But is it always the same grade?

Edited April 17, 2012 by flying

[Naam]

Point taken, but what would be a more reliable and accurate measure?

the only reliable and accurate measure which applies individually is to do some accounting/data collection using a spreadsheet. i'm doing that in such a detailed way since 26 years that i can compare figures of different years in a few minutes

e.g. i have an answer for the question "what was your average electricity consumption in the month of march for the years 1990 till 2004 in Florida and how does that compare with Thailand for the years 2005 till 2012?"

my budget is broken down into 21 items (when moving to Thailand i collected more detailed data, around 40 items). by comparing the cost of these 21 items i can determine where inflation at what percentage happened and in most cases i can also determine 'why' it happened.

government published inflation rates are nothing but irrelevant bullshite. comparing "my" inflation rate with "yours" is bullshite too. actual (not perceived) inflation is extremely individual. it does not concern my gardener if Thai customs increase the import duties on Cuban cigars or Port wine and it is none of my concern if the landlord of my wife's driver increased his rent except that he might ask for a raise and my wife grants it.

inflation? an interesting fact is that i spend nowadays substantially less money then i spent 15 (fifteen) years ago. and no! it is not because i'm not paying any income tax. it's just that one does not spend money on things one already owns and which do not need to be replaced.

[flying]

That makes a lot of sense Herr Naam

[Naam]

I think I prefer the 700 item approach, a single item such as fuel suffers the same vagaries as the pineapple, except the pineapple has 699 other items to support an accurate assessment.

Yes for sure....I did not mean use a single item but use items that had a consistent/stable quality lock on them.

I do believe the CPI uses 200 categories grouped into 8 different groups. I am not sure how many individual items are in there

But I know gasoline is already in there too ....But is it always the same grade?

and has the quality of pineapples been consistent over a certain period of time? c'mon folks... get real and forget any "accurate assessments".

[flying]

and has the quality of pineapples been consistent over a certain period of time? c'mon folks... get real and forget any "accurate assessments".

Dont know about pineapples but if they choose those yucky Columbian Papayas as an example.... all is shot

Edited April 17, 2012 by flying

[waza]

I think I prefer the 700 item approach, a single item such as fuel suffers the same vagaries as the pineapple, except the pineapple has 699 other items to support an accurate assessment.

Yes for sure....I did not mean use a single item but use items that had a consistent/stable quality lock on them.

I do believe the CPI uses 200 categories grouped into 8 different groups. I am not sure how many individual items are in there

But I know gasoline is already in there too ....But is it always the same grade?

and has the quality of pineapples been consistent over a certain period of time? c'mon folks... get real and forget any "accurate assessments".

I know that my cost of living has deflated since I stopped going out for milk and got a cow.

[Naam]

That makes a lot of sense Herr Naam

does that mean you will support my nomination for "le Prix Noblaire en ce qui concerne combattre l'inflation en Thailande"?

you'd be the third supporter. the other two are my dogs... which i bribed with wild boar ham to get their vote.

[chiang mai]

Yes it does make sence but laborious to say the least, I find there's enough effort involved in keeping a higher level view of my finances without so much detail. The other factor to consider of course is location expense, we moved last year from Phuket back to Chiang Mai and our cost of living expense has decreased by about one third. I'm sure the cost of a chicken breast at the supermarkets in both locations is broadly similar but our savings have not resulted solely from groceries, our cost savings have come in the areas of clothing, restaurants, transportation, medicines and utilities. None of those cost reductions have much to do with inflation hence your approach Naam, whilst very sound, is only reliable provided you stay in the same location and all other factors remain equal.

[flying]

That makes a lot of sense Herr Naam

does that mean you will support my nomination for "le Prix Noblaire en ce qui concerne combattre l'inflation en Thailande"?

you'd be the third supporter. the other two are my dogs... which i bribed with wild boar ham to get their vote.

Why did I not get any ham?