Financial Crisis

[GuestHouse]

Naam, I like your long term view - but hey it hasn't got the immediacy of the short term view (especially when the latter is spiced with doom and despondency).

Let's remind ourselves this past year pundits here on TV where screaming time to get out of Dollars - All the usual Horse.....

Whenever I ask here on TV, and I do ask, give me a price and a date for any currency or any stock?, there is suddenly a deafening silence - Hindsight millionaires are however to be found with ease.

[12DrinkMore]

And just when you thought it was over, the Bank of England thinks otherwise....

http://www.guardian.co.uk/business/2009/ma...cession-economy

The Bank of England is concerned that the UK's banking system is heading for a third wave of crisis that could snuff out fragile signs of recovery in the economy.

On Thursday the Bank surprised the City by announcing that it would pump an extra £50bn of new money into the economy despite recent stockmarket rallies.

Now the Guardian has learned that this increase in quantitative easing was driven by fears in Threadneedle Street that the credit crunch is still sucking the life out of the British economy and the banking sector remains in deep trouble.

The new mood of caution chimes with comments from business leaders yesterday, who warned that apparent green shoots in the economy had shallow roots.

Richard Lambert, director general of the CBI, said: "The fact is that for all the injections of taxpayers' money, the credit markets are still not working properly."

But hang on, what does this "not working properly" mean? I want to know. Maybe this provides a clue?

Bank of England officials are concerned that big banks now supported by the taxpayer, such as Royal Bank of Scotland and Lloyds Banking Group, are struggling to increase lending volumes, as they had promised in return for help from the government.

Oh, so they can't increase lending volumes? But come on, surely there must be a demand before the supply? But hello! Here is a breath of reason in the midst of all the bullshit

In return for support from the government, both RBS and Lloyds had pledged to increase lending to homeowners and businesses to compensate for declining foreign lending. Instead Stephen Hester, chief executive of RBS, said yesterday that demands for loans had contracted as customers "quite properly" try to reduce their borrowings as the recession bites.

Well, yes, that sounds very reasonable. What is wrong with Darling, Brown and King? Deaf and blind to the needs and wants of the population as always.

So the question is, if the money is not being demanded by the population, why the fukc are they chucking out another 50,000,000,000 Quids that nobody seems to want? Maybe the UK population have more sense than the <deleted> at the Top.

We could be saved yet.

[AlexLah]

Hi di Hi, Hi di Hoooooooo!!!!!!

Who does remember the "Yellowcoats"

Anyway, I see you lady's are having sort of a tea party and I could not resist throwing in a few pictures and txt, enjoy!

I remember mentioning this would happen a long time ago, not only cannon fodder is hired......

I think I know why this guy seems to be so happy..

Be ready, "It" is about to come..........

More "news" as it breaks.

[Naam]

1. Naam, I like your long term view - but hey it hasn't got the immediacy of the short term view (especially when the latter is spiced with doom and despondency).

2. Let's remind ourselves this past year pundits here on TV where screaming time to get out of Dollars - All the usual Horse.....

GH,

1. i fail to recognise any relevance as far as doom is concerned. meaning "what the eff" is the impact of riots in Guadeloupe or the secession of Montana on an expat living in Chiang Mai, Phuket or Pattaya?

2. you see the usual horseshit in many aspects, negative as well as positive and almost always based and influenced by wishful thinking or to compensate inferiority complexes (i'm an expat, that's why i am holier than any Thai).

for quite some time i found it amusing and preferred "OZ-Dollar soon above par vs. US-Dollar" and "Baht to crash any time from now" to rubbish polls such as "why are Thais poking their noses publicly?" and complaints "being called a Farang is an insult!"

[midas]

1. i fail to recognise any relevance as far as doom is concerned. meaning "what the eff" is the impact of riots in Guadeloupe or the secession of Montana on an expat living in Chiang Mai, Phuket or Pattaya?

Reference to such events as " riots in Guadeloupe " or " secession of Montana "

have far more relevance in this thread than pictures of your swimming pool !

i.e. a trend of growing restlessness and violence

and an awakening of the empowerment of people prepared to challenge their Federal government

will have many unpredictable consequences on global trade.

Edited May 11, 2009 by midas

[midas]

In the UK property market ............the emperor isnt wearing any clothes.

Gordon Brown and his cronies can no longer try to prop up house prices in a rapidly

devaluing property market.

Homebuyers in lurch as state help exhausted

First-time buyers using a government scheme to get on the housing ladder have had to pull out of purchases at the eleventh hour after funding ran out.

The Government said that the sudden shortage of cash was a result of the huge demand for its

MyChoice Homebuy scheme, which enables buyers who do not have enough money for a deposit to obtain a mortgage with the Government stumping up the balance.

http://www.timesonline.co.uk/tol/money/pro...icle6261443.ece

[12DrinkMore]

In the UK property market ............the emperor isnt wearing any clothes.

Gordon Brown and his cronies can no longer try to prop up house prices in a rapidly

devaluing property market.

Homebuyers in lurch as state help exhausted

First-time buyers using a government scheme to get on the housing ladder have had to pull out of purchases at the eleventh hour after funding ran out.

Bugger me, I didn't even realise Brown was trying this to rescue his precious housing bubble.

Looking on the website

http://www.mychoice-homebuy.info/

The eligibility

MyChoiceHomeBuy is for people who would not normally be able to buy their own home on the open market.

Read that twice, "for people who would not normally be able to buy their own home".

Well done Brown, just what the world needs, another subprime debacle in the UK. If they can't manage to put a deposit together and afford to buy a house at the current interest rates, THE LOWEST SINCE THE BoE was founded, then how the fukc are they expected to pay the mortgage when interest rates start moving up, as they will surely do.

Is there no end to the rank stupidity of this government? These self-serving prats, to a man with their noses in the "MP expenses" trough of tax payers' money (a topic I do not want to even get started on, as it would send my blood pressure through the roof), will surely not stop until they have drained the economy of every penny, and then shovelled in a few Trillion of debts.

(At least Fred the Shred has been booted off the waiting list to join the St Andrews Golf Club, , up yours, you parasite)

(And finally all those jobsworthies may no longer be worthy of a job,

http://www.timesonline.co.uk/tol/news/uk/article6122296.ece

How on Earth can they justify a frigging "breastfeeding peer support co-ordinator”? Women have been feeding their brats at the breast for millions of years without a "peer support coordinator", what idiot thought up this job, and indeed all the rest?)

Edited May 11, 2009 by 12DrinkMore

[12DrinkMore]

well, just came across an interesting article from my good friend Darling.

http://www.timesonline.co.uk/tol/comment/c...icle6261262.ece

Although there is the usual political wind blowing,

We are proud to have more than 60,000 students from mainland China at UK institutions, more than from any other country.

Blimey, 60,000 Chinese studying in the UK, and most definitely NOT studying namby pamby "History of Art" or "Modern Political History" hoping for a job as a politician, but certainly studying science, computing, electronics and other subjects that will add to the future prosperity of China.

Then Darling rambles on about "working together" and "economic stimulus" and all that blather. Presumably he really wants China to buy a few UK bonds. :D

And then comes

So we must make progress in financial markets. We have been working with China for some years to help to develop its capital markets, in particular for corporate bonds. Now we must expand our programme of technical collaboration and exchange — so that those in the financial services industry, as well as regulators and central bankers — can learn from each other.

:D What a joke, it seems painfully obvious that Darling needs to learn a lot about account balancing. The Chinese already seem to have got that sorted out.

Darling lamely ends on

And we must trade across the whole of China — there are more than 250 cities there the size of Birmingham. The potential for both nations is enormous. We must seize the opportunities. Only by working together will we be able to build a stronger future.

Somehow I don't think the Chinese will be interested in working with the UK to "trade across China". They will suck as much as possible out of the UK education system and then continue technological advances back in China, with their own production lines delivering to their own people.

I wonder if the Chinese will have a word in Darling's ear about the devaluing of the GBP?

[ronz28]

Sleep safe America......NOT! There is an Inspector General staff paid to evaluate and report on activities at the Federal Reserve. They don't even know anything about the $2 trillion the Fed lent out or the probable $11+ trillion that includes off-book entries asserted by reporters. Inquiring Representatives want to know but the IG apparently prefers the mushroom approach....to be kept in the dark and fed a lot of BS.

[flying]

Sleep safe America......NOT! There is an Inspector General staff paid to evaluate and report on activities at the Federal Reserve. They don't even know anything about the $2 trillion the Fed lent out or the probable $11+ trillion that includes off-book entries asserted by reporters. Inquiring Representatives want to know but the IG apparently prefers the mushroom approach....to be kept in the dark and fed a lot of BS.

That is so classic isn't it? I mean the whole thing sums up the current state of affairs very well. There is no way that they have moved that amount 2T & not know.......There are times I wish that investigation scene could be overlapped with a game of Russian Roulette. They ask her a Question she hides the answer or feigns stupidity.....Spin....click.....Ok next question......what has the money been used on?.......

Well sir at this time we have not really....spin.....click.....Next question

kidding of course but how can a none answer be allowed? Are the pleading the 5th?

[Abrak]

There is a very obvious solution how they are going to resolve this simple equation but I think it is somewhat 'bad faith' not to admit to it.

Abrak, Cloudhopper;

we can discuss and speculate till doomsday whether or when China starts dumping USD or the demise of the Dollar (which i've been hearing since "Nixon/gold" in the early 70s). fact is and remains that the US-Dollar will for years to come play a dominant role in global finances.

a "stampede" out of the Dollar would in my [not so] humble view cause bigger havoc than what we have seen for the last 1½ years and still see now.

yes, i admit that the Chinese are talking using subtle threats and mentioning alternatives but so do the Americans and that goes on ad nauseam since years. but talk is cheap and the tool of politicians who talk 90% and act 10%. in the end a pragmatic approach will be the result.

Naam, I fully agree with your general sentiment. When I first started studying economics as a young kid 30 years ago, I did it because, I sort of believed it was some sort of science that if you understood would either cure economic ills or make me utterly rich. All I have really learnt is because it is essentially based non linnear equations essentially any prediction you make that you get correct must inherently be due as much to luck as judgment. There are some incredibly intelligent economists out there discussing issues and coming up with polar opposite views and while I respect anyone to hold any view for any reason, I fully admit that their infinitely better qualified and more intelligent people than me, who totally disagree and with whom I am not in a position to argue with.

In many respects I am far less confident in my views that I was when I first studied economics. There is mention of the the UKGB50bn 'new money' being inflationary in one post which you would have thought would be inherently true by definition but then if you consider the collapse in the 'shadow banking' system which must be included in a theoretical broad MS even that isnt obvious and would need quite a lot of explaining in terms of collapse in velocity.

One of the economists that I do have enormous respect for is Ben Bernanke - I think few would argue that he is probably the leading and most influential economist on the matters that are most effecting the US currently. If he hadnt joined the Fed, he would have probably beaten Krugman to a Nobel.

He has clearly set out his view on deflation - and its essential value destruction. He has also indicated that negative real rates and a devaluation of the dollar are an integral part of that strategy to cure it. Now you might not respect his view and methodology, that is up to you. But he clearly does not regard an extended period of US deflation as 'not an option'.

Now I am not arguing with your comments because I am not necessarily particularly confident that I am right (and I also know you can easily quote equally eminent economists that would agree with you) but (1) from the perspective you have been clearly warned by the player dealing the cards - please look up Bernanke Doctrine - you might feel slightly stupid if you get it wrong and (2) quoting the 70s to support your argument seems somewhat ridiculous because despite being only barely alive it is usually used as one of the most famous examples about the advantages of debasing a reserve currency - namely sterling - in the sole interests of the issuer.

[flying]

??? ??? This explains why a custard pie is 10 bucks now

Edited May 12, 2009 by flying

[Naam]

Naam, I fully agree with your general sentiment. When I first started studying economics as a young kid 30 years ago, I did it because, I sort of believed it was some sort of science that if you understood would either cure economic ills or make me utterly rich. All I have really learnt is because it is essentially based non linnear equations essentially any prediction you make that you get correct must inherently be due as much to luck as judgment.

welcome to the club Abrak i am not an economist but a physicist and for quite some years i looked at economists, especially those in finance, with quite some awe till i realised that the majority were just average run-of-the-mill chaps who eeked out a living the same way the normal mortals did. then i retired and had ample time to educate myself in economics/finance far beyond the knowledge i acquired during the years before. result: i stopped listening to any advice, even used most of the time economists and financial gurus as contra-indicators and was rather successful because i followed in most cases my own pragmatic approach.

[Naam]

??? ??? This explains why a custard pie is 10 bucks now

so what? compare loss of purchase power of other currencies/countries and you get more or less the same or an even worse result.

[flying]

so what? compare loss of purchase power of other currencies/countries and you get more or less the same or an even worse result.

Yes nothing special ...just as I said....good picture of why

I wish that was my program though as I would like to overlay a few currencies like you suggest...just to see

[Naam]

so what? compare loss of purchase power of other currencies/countries and you get more or less the same or an even worse result.

Yes nothing special ...just as I said....good picture of why. I wish that was my program though as I would like to overlay a few currencies like you suggest...just to see

it's Bloomie and you can have it for mere peanuts... the whole nine yards ~7,000 dollars a month

[churchill]

China buying up metals - Diversifying out of $

Will lead to inflation ? and a lower $

http://ftalphaville.ft.com/blog/2009/05/12...rab/?source=rss

[churchill]

TIPS for China on its dollar problem

http://ftalphaville.ft.com/blog/2009/05/12...lem/?source=rss

[midas]

These self-serving prats, to a man with their noses in the "MP expenses" trough of tax payers' money (a topic I do not want to even get started on, as it would send my blood pressure through the roof)

Sorry about blood pressure 12 but what about this then .................

MPs spend £100,000 to keep expenses secret

MPs have launched a £100,000 high court challenge to block the full disclosure of their expenses ordered under Freedom of Information laws.

Nigel Giffin QC, for the Commons, told the High Court in London that the decision meant there would be "a substantial intrusion'' into the lives of MPs and their families.

Hold on a minute ............if you submit yourself for election ...........dont you

realise you will be in the public eye....duh ! If you dont want intrusion

in your life then dont become an MP ................

Edited May 12, 2009 by midas

[stumonster]

it is not just the UK pollies

an Australian pollie just did a 27 day around the world junket - total 7 people - 290K AUD , over 10k per day.

and it was to hawk the state electricity company !

is there anywhere privatisation has led to cheaper products for the previous owners ?

[Abrak]

TIPS for China on its dollar problem

http://ftalphaville.ft.com/blog/2009/05/12...lem/?source=rss

This is one of the most fun articles I have read in a while - along with the comments.

China does not have the policy of option of switching from USTs to TIPs because (I believe their entire holdings of USTs is larger than the existing TIPs market).

Over and above any reason they chose to invest in USTs, China benefited by the fact that their peg to the dollar (at an under valued rate) and purchase of USTs helped keep US interest lows and increase their C/A surplus. So to the extent that their holdings of USTs now become a subsidy, China will probably still be a net beneficiary and they have no right to claim they are so unsophisticated that inflating away debts by the USA is an act of 'bad faith'. To the extent that other holders (or 99.9%) of them believe that the US will simply inflate their way out of their debts they can simply switch into TIPs.

If the US switched all its debts into TIPs it really would be an action of bad faith because the only logical reason for US accumulation of debt (say 108% MPC) could only be made on the basis that that accumulation of debt would never have to be paid back other than at below the same value in real terms (i.e lower value in inflation adjusted terms).

As Churchill points out in his previous post by selling USTs for metals, China is likely to lower the value of the dollar and create inflation - we should respect their decision to do that on the basis they are doing it despite the fact that it is probably causing a devaluation of their USTs and to that extent is acting in good faith by accepting the subsidy that will result by the wealth they have created for themselves at the US expense.

In general US consumers have correctly predicted that by acculumating large debts by taking advantage of their position as the global reserve currency will be to their benefit. If the US Government was to negotiate a deal that both recognized the ability of the Chinese to take advantage of that of a period of time while guaranteeing against the losses that are likely to be an inevitable consequence it would be both unfair and fraudulent.

[Chaimai]

12D - you may wish to add your name to this open letter to Mr Darling:-

Dear Mr. Darling,

Please find below my suggestion for fixing Britain's economy. Instead of giving billions of pounds to banks that will squander the money on lavish parties and unearned bonuses, use the following plan :

There are about 20 million people over 50 in the work force. - Pay them £1 million apiece severance for early retirement with the following stipulations:

1) They MUST retire. Twenty million job openings - Unemployment fixed.

2) They MUST buy a new British CAR. Twenty million cars ordered - Auto Industry fixed.

3) They MUST either buy a house or pay off their mortgage - Housing Crisis fixed.

4) They must send their kids to school / college /university - Crime rate fixed

5) Buy £50 of alcohol / tobacco a week there's your money back in duty / tax etc

It can't get any easier than that!

P.S. If more money is needed, have all members of parliament pay back there falsely claimed expenses and second home allowances.

[12DrinkMore]

12D - you may wish to add your name to this open letter to Mr Darling:-

Dear Mr. Darling,

Please find below my suggestion for fixing Britain's economy. Instead of giving billions of pounds to banks that will squander the money on lavish parties and unearned bonuses, use the following plan :

There are about 20 million people over 50 in the work force. - Pay them £1 million apiece severance for early retirement with the following stipulations:

1) They MUST retire. Twenty million job openings - Unemployment fixed.

2) They MUST buy a new British CAR. Twenty million cars ordered - Auto Industry fixed.

3) They MUST either buy a house or pay off their mortgage - Housing Crisis fixed.

4) They must send their kids to school / college /university - Crime rate fixed

5) Buy £50 of alcohol / tobacco a week there's your money back in duty / tax etc

It can't get any easier than that!

P.S. If more money is needed, have all members of parliament pay back there falsely claimed expenses and second home allowances.

On the face of it a good plan, but I suspect that even Brown and Darling would baulk at printing 20 Trillion Quids to fund this exercise, about 15 times the GDP. Maybe a better plan would be to print the same amount of money and give everybody in the UK around 300,000 Quid, taxable of course, except for the MPs

The GBP would take a bit of a hit, but Labour have already stated that they are not bothered about supporting the Squib anyway.

[churchill]

BoE sees inflation swinging both ways

Posted by Izabella Kaminska on May 13 11:07.

The Bank of England’s latest inflation is out and the top line is that the Bank sees inflation just above 1 per cent in 2 years time and the economy shrinking sharply in the coming months before recovering at a slower pace than previously thought.

However, the BoE also says it sees significant risks in both directions to its inflation forecast, which was based on market rates and its £125bn pounds asset purchase programme.

Here are the opening remarks by Governor Mervyn King.

http://ftalphaville.ft.com/blog/2009/05/13...ays/?source=rss

[churchill]

They know inflation is coming but don't want to admit it .

[MJP]

They know inflation is coming but don't want to admit it .

Awful ridiculousness from the ft.

http://www.ft.com/cms/s/0/03d19fd6-3e2d-11...;nclick_check=1

[midas]

They know inflation is coming but don't want to admit it .

Awful ridiculousness from the ft.

http://www.ft.com/cms/s/0/03d19fd6-3e2d-11...;nclick_check=1

Here we go again ..............

its fascinating that their yardstick only ever seems to be " global equity prices " and " business and consumer sentiment '

Even though as many skeptics keep saying why then are commodity prices not showing similar signs of recovery and

as the article says ..........

" the depth of the downturn already endured was still evident in official data released on Monday that showed

industrial production fell 4.6 per cent in March, leaving output almost 24 per cent below a year earlier "

The glass half full argument is wearing thin

[MJP]

They know inflation is coming but don't want to admit it .

Awful ridiculousness from the ft.

http://www.ft.com/cms/s/0/03d19fd6-3e2d-11...;nclick_check=1

Here we go again ..............

its fascinating that their yardstick only ever seems to be " global equity prices " and " business and consumer sentiment '

Even though as many skeptics keep saying why then are commodity prices not showing similar signs of recovery and

as the article says ..........

" the depth of the downturn already endured was still evident in official data released on Monday that showed

industrial production fell 4.6 per cent in March, leaving output almost 24 per cent below a year earlier "

The glass half full argument is wearing thin

There's a five to ten year unwind to go through, let's face it.

I used to be into the housepricecrash thing in the UK. They'll crash alright, but not much in GBP. The QE thing is new to that place and I think many are in for a shock.

[geriatrickid]

it is not just the UK pollies

an Australian pollie just did a 27 day around the world junket - total 7 people - 290K AUD , over 10k per day.

and it was to hawk the state electricity company !

is there anywhere privatisation has led to cheaper products for the previous owners ?

Yes. Transportation. Airlines, once state owned were privatised and the billions of euro/$ now being lost went from being the government's problem to that of the private sector. The transfers while painful have allowed unrealistic pay and pension schemes to slowly be adapted, something that government unions would never have allowed. Privatisation of Petro Canada has allowed Canada's oil reserves to be better developed. Privatisation of toll roads in some countries has also allowed new roads to be built when there was no public money available. Some privatisation of health services has reduced waiting lists and a financial burden from the public health care systems.

Aint black and white. Governments shouldn't be running commercial enterprises.

[mommysboy]

it is not just the UK pollies

an Australian pollie just did a 27 day around the world junket - total 7 people - 290K AUD , over 10k per day.

and it was to hawk the state electricity company !

is there anywhere privatisation has led to cheaper products for the previous owners ?

Yes. Transportation. Airlines, once state owned were privatised and the billions of euro/$ now being lost went from being the government's problem to that of the private sector. The transfers while painful have allowed unrealistic pay and pension schemes to slowly be adapted, something that government unions would never have allowed. Privatisation of Petro Canada has allowed Canada's oil reserves to be better developed. Privatisation of toll roads in some countries has also allowed new roads to be built when there was no public money available. Some privatisation of health services has reduced waiting lists and a financial burden from the public health care systems.

Aint black and white. Governments shouldn't be running commercial enterprises.

But these days a 'commercial enterprise' seems to be anything and everything from funding m.p expenses, to public utilities, or churning out endless health warnings. Surely much of this recent mess has been caused by deregulation.!