Thursday, Apr 26, 2007
It's all about money supply
The Independent: At 2.8 per cent, UK growth is still robust. So how come living standards are falling?
Money supply has exploded leaving massive profits for companies and masive debts for consumers.
Hence the economy doing well and consumers not.
Posted by sold 2 rent 1 @ 09:51 AM (337 views) Add Comment
21 Comments
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1. sold 2 rent 1 said...
When the history books are written about the crash of 2007 and the second great depression of 2010, the money supply growth will be the single biggest reason.
To allow money supply to grow at alarming rates just because inflation is low will prove to be the fatal blow to the world economy.
As mentioned in a previous post this leaves companies with record profits and consumers with record debts.
A policy of ever expanding debt is just not sustainable. The buck stops here.
2. Rickyb said...
The obvious answer to the question of why we don't feel richer, is that while the economy has been growing steadily since 2000, the UK's overall energy consumption has not risen accordingly. It is energy consumption that is the most useful indicator of living standards.
3. mrmickey said...
I think the money supply issue has kept the economy going over the last six years but the result is that it's eaten itself alive. Looking at the local newspaper job section in my area it's as thin as tissue paper and most of the jobs going are state funded. Let's face it without the financial services industry centred around London this country is screwed.
4. p. o. o. r said...
mrmickey said "Looking at the local newspaper job section in my area it's as thin as tissue paper and most of the jobs going are state funded."
The job market now is extremely bouyant, the difference being is that few companies now advertise through local rags. They take advantage of the Internet - Monster Jobs, Total jobs, Fish4Jobs, etc etc... As someone who is looking I have never know a better time and an easier time to find jobs. Already this week I have had 8 Interviews, with another 3 between today and tomorrow. Since I started looking 4 weeks ago, I have already tunred down 3 opportunities.
The reason I have turned these down, is that I believe there is going to be a turning point early next year, and I want to make sure that the position I take is going to see me through all the trouble ahead.
5. dohousescrashinthewoods said...
To be clear, every £1 of credit is basically £1 of extra money supply.
Why?
Because credit allows money to be created out of thin air.
The money supply only contracts again when it is paid back.
If there is a default, it never goes back.
If the amount outstanding continues to increase, (more borrowing) then the money supply continues to increase (example: public sector debt)
As Harold quoted the other day: "Inflation is not an act of God, it is a policy". The Gordster is basically creating his economic miracle the same way post World-War Germany did.
6. dohousescrashinthewoods said...
@sold 2 rent 1 - "The buck stops here" - I guess we've been saying it should have stopped a long way back and it really should stop now, but how much further will Brown go in trying to build the treehouse by sawing off the branch he is sitting on?
Interestingly, during Germany's hyperinflation, apparently there was a sense of "Goldilocks" before it all went parabolically pear-shaped.
7. sold 2 rent 1 said...
The wage-price spiral that is required for hyperinflation is not going to materialise.
All this money will be destoyed through deflation and bankrupties
8. sold 2 rent 1 said...
Whilst the world is still worried about inflation, deflation is set to rugby-tackle us from behind
9. confused76 said...
Add to all of the above that with $/£ = 2 the UK has become the largest global all-time-record exporter of just one commodity... employment! The rest of Europe, India, China, US, Japan are all thankful of the generosity and dedication of UK people... borrow money, spend hard, live in a fairy tale...
10. nearly30 said...
p.o.o.r - where do you live? Can only guess you live in South East or a major metropolitan area. Also what types of jobs are you 'turning down'?
From my heuristic experience - 11 months unemployment out of 19 months - getting/finding work is tough and getting tougher - general wages are getting lower, hours are being cut to part-time or shift-based over 7 week patterns. Perm work is rare - short-term and temp are the norm. And all those jobs that are advertised - press and on internet - THEY ARE FAKE - they are put up to 'hook' you in - get you to sign up to a recruitment firm or make yourself 'available' for other work.
As for public sector jobs - they are in abundance it seems.
Tell me i'm wrong or where this is not happening.
11. mrmickey said...
I think you've just got to look at the quality of jobs available anything over 20K is a rarity and the only jobs up around the 30K mark are usually some sort of ethnic awareness inspector or smoking compliance officer. If your looking for a well paid job in business outside of London then forget it's not going to happen it's charities or some sort of state employment. I live in Bath, the only people who can afford to live here are the one's commuting to London every day.
12. royston said...
Who needs jobs? Haven't you heard, BTL is the new employment. Just buy a house, get a renter to pay the mortgage for you and watch the value of your asset rise and rise. Couldn't be simpler, could it?
13. p. o. o. r said...
Nearly 30 - said "p.o.o.r - where do you live? Can only guess you live in South East or a major metropolitan area. Also what types of jobs are you 'turning down'?"
True I live in the South East - West of London. I'm nearly 40. My background is in Engineering, (Commercial Management) with salary >£40K for the last 5 years. Positions I have turned down are in light engineering (i.e. small component parts) as well as with companies who rely too much on maybe just 1 or 2 customers who represent a a high % of the business turnover.
I agree that there are some areas in the country where things are tough, I would also agree that salaries in the engineering sector have stayed static for much of the last 5 years. However most of the jobs that I have seen on line are genuine -- I have also found that a lot of agencies are really SH*T.
I have not signed on, as I know that should money become tight then I am prepared to work in pub, do gardening work, anything to earn a living instead of becoming a statistic. The way I think about finding a job, is treating it the same as if I was in employment - I.E. I start early and finish late, make lots of calls, document everything and most importantly ensure that I enjoy doing it.
14. rich said...
>> To be clear, every £1 of credit is basically £1 of extra money supply. Why? Because credit allows money to be created out of thin air.
dohousescrashinthewoods, sorry to ask you to explain but I don't understand your reasoning here.
Surely if I lend you £10, that's £10 I no longer have. How is money created out of thin air? (If lending creates money then I want some!)
15. Down Wave said...
Gordon Brown: Short extract from his personality profile. Being an introverted judging type, he is
intolerant and yet has strong idealistic concerns. Being a suppressed introvert (search Naked
Spirit), he is powerless to implement the necessary directives to attain the perfection in himself
that he demands of others. His current profession is contraindicated for his psychological type as
it enables him to unconsciously exercise the unsound parts of his personality by legally and
financially dominating and manipulating everyone towards his overt moralistic ambitions (and
those of Mr Blair). This results in him coming across as an obsessive hypocrite expounding
dictatorial behaviour supported with punitive avengement. All of this he naively believes is for
everyone’s good and he hopes that he will receive recognition. Appreciation will never be
forthcoming as Brown uses the hard-work, savings and estates of everyone else to pay for His and
Blair’s overt naive unrealistic pseudo moralistic and campaigns that he claims are to emancipate
our Kingdom. His financial schemes and self acclaimed economic success have been paid for by
using ‘spin’ to frog-march the public into dangerous unprecedented levels of person debt. His
acclaimed creation of his economic success is entirely based on massive personal and treasury
debt and is doomed to crash in the immediate future.
16. Sam said...
rich,
no it's 10 pounds that you have, but is tied up in a loan to Dohouses.
Dohouses owes you the money, so you have a debt you can sell to the heavies for day £14 even though Dohouses promised you he'd pay you back £15. you get £14 for your £10 because you don't want the hassle of chasing the payment.
The heavies pay Dohouses a 'visit' and get £15 and charge him a £50 collection fee. if he doesn't pay then they take his Ipod as payment or Dohouses goes without a few pints next week inorder to pay everyone back.
17. royston said...
Rich,
DHCW is talking about how banks create credit in order to meet demand. They place deposits with the central bank and then loan out multiples of these "reserves". If you want to know more about this process, look at:
http://video.google.com/videoplay?docid=-9050474362583451279
18. Randomkevlar said...
Rich, when a bank loans you any money, it is allowed by law to add that to its revenue stream. Couple this with the fact that banks can only loan out money which it has in its revenue stream and you can (hopefully) see how banks can create money out of thin air.
Example
A bank has £1000 in revenue, it then loans you that £1000 which you will pay back say twice.
As soon as the bank has made you the loan it can now legally claim to have £2000 revenue and can now loan someone else £2000 on the back of this revenue. So the bank only ever had £1000 but has loaned £3000 on the back of this. This now happen time and time again off the back of the new supposed revenue, creating lots of thin air money from a small amount of actual money.
arrr, the miracles of a capitalist society
19. sovietuk said...
One of the reasons 'good quality' work appears to becoming rare is that recent legislation has made it so expensive and so much hassle for employers to employ people as compared to say 5 or 10 years ago. A situation is fast developing where only the public sector, monopolistic companies or companies primarily funded by the state are only able to carry the burden imposed on them by 'Cloud Cuckoo Land' employment legislation. Add in high levels of corporation tax with increasing business rates and an employer will either not bother or if large enough just move to Eastern Europe or Asia. The net result of all this is that the majority of the population will end up comparitively poor. The Gordster and his colleagues in the Polit-Buro will not bring long term wealth to these shores in a month of sundays.
20. Shipbuilder said...
As much as many would like to heap this all on Gordo's doorstep, we all keep pointing out that HPI and it's associated 'miracle economy' is a worldwide phenomenon. Every government of every stripe has fallen for the real culprit here - big business, capitalism and the financial elite. We have seen, as this article points out, one of the biggest transfers in history of money from the poor to the rich. Not hysterics, fact. Was it engineered? Probably not, but it's been milked for all it's worth. Gordon's mismanagement was to tax the poor more and not the rich, thereby accelerating the wealth leaving the country. Lefty nonsense? Decent jobs were going East to the cheap labour, no matter what. More relaxed employment law would simply have made it easier. This type of amoral capitalism is harder to love when you're on the losing side (easier to blame it's faults on the left). Hence the far East are singing it's praises.
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