Thursday, Apr 24, 2008
Buy gold and silver as world economy implodes
The Telegraph: This bear growls on
"Far from being the shock absorber, Europe may prove to be the accelerator of this post-bubble denouement. Once you add Europe to the Anglo-Saxon and Japanese sick list, you reach 60pc of world GDP, and two thirds world demand. This leaves the global boom on tenuously narrow ground. Who is going to buy all those exports from China? Who is going to keep pushing commodity prices into the stratosphere? This bear growls on."
Posted by sold 2 rent 1 @ 10:46 AM (553 views) Add Comment
15 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. whiteknight said...
Ah. But in this perfect storm - my maps tell me - the consequences of moral hazard are delivered immediately. whoops.
2. uncle tom said...
I don't share his deflationary outlook - I think he's missing the inevitable re-alignment of the currencies of the developed and developing world. The commodity 'bubble' - as he calls it - may deflate a little for the developing world, but it could prove very persistant for us.
3. icarus said...
Ambrose - if you were a banker you'd be drinking '61 Chateau Palmer. You say that US banks are borrowing cheaply from the US govt and lending back to the same US govt in long-dated bonds. Yep, that or investing in higher-yielding euro-denominated bonds and making currency gains too while adding to capital flight & dollar inflation. Remember that the BoE's £50 - 100 bn support to the banks on Monday had to be complemented by Badger's "urging" those banks to use some of this support for mortgage lending. As for Prof Goodhart's comment that moral hazard concerns are for the good times - it's only in the bad times that it becomes an issue for chrissake. As in "Where are the cops/moral hazard when you need 'em"?
4. sold 2 rent 1 said...
UT,
"I don't share his deflationary outlook"
Your Inflationary outlook depends on expanding debt and money supply exponentially and indefinately
Now if lenders wont lend and borrowers wont borrow, the only way debt and money can be increased is if this process is taken over.
As we wont take on more debt ourselves (with the free market) the BoE has decided to kindly take over that role by taking on debt on our behalf.
But can this process of debt creation go on indefinitely?
Yes. But it does involve the destruction of money.
5. cornishman said...
S2R1 - your thinking could be accused of being too western-centric. The Chinese have the money to invest in infrastructure projects to keep them going thorough any recession in the west.
Even in the west, even with a recession, demand doesn't suddenly stop altogether. It only reduces a little. 60% of world demand isn't going to vanish overnight - only perhaps a few percent of that 60%. And China is growing at 10%...
I'm not pretending to know any more than you guys - just offer the above to think about.
6. uncle tom said...
S2R,
I see more inflationary pressures on the horizon than deflationary ones, with the balance putting huge pressure on the BOE target. I also see economic contraction. The money supply has already expanded excessively, and I don't see it shrinking in a hurry.
However, my main reason for expecting inflation is that when the chips are down, the pretences are over, and government has to navigate a way out of the slump, there will be a sound argument for raising the inflation target to 5% in order to burn off residual debts and negative equity.
However, that does assume that we have a government capable of governing. The present crowd are unwilling to admit they've screwed up, and will therefore be driven by events rather than managing them properly - that could easily lead to a loss of control over inflation..
7. paul said...
He says:
""When you’re in a crisis, you deal with the crisis. Moral hazard comes when times are easier." Quite."
Not quite. That's not the way moral hazard works. Moral hazard is about stomaching the consequences of bad decisions you made. Those consequences are only now coming to light.
8. cornishman said...
driven by events for sure and loss of control over most things probably.
I'm dying to see GB loose his temper in public. It can't be too far away now...
9. sold 2 rent 1 said...
UT
"The money supply has already expanded excessively, and I don't see it shrinking in a hurry."
But that's like saying "house prices have gone up excessively, and I don't see it shrinking in a hurry"
And we know this was VI rubbish.
Money supply in the UK will accelerate into a spike just like in the US and then collapse, unless the government starts giving away free money
10. sold 2 rent 1 said...
The US M3 graph looks like it is telling ua that inflation will break out like in the 1970s.
The US debt graph says it is nothing like the 1970s. It is like the 1930s - only worse.
Of course hyperinflation can be achieved by giving away "free money".
So it could still go either way in theory.
11. lvmreader said...
The Chinese can lend money to African nations, who have resources and manpower and need expertise and capital.
The Chinese can lend money to South American nations, who have resources and manpower and need expertise and capital.
The Chinese can lend money to Asian nations, who have resources and manpower and need expertise and capital.
The Chinese can lend money to China, to build infrastructure.
12. uncle tom said...
"unless the government starts giving away free money"
Massive public sector payroll, spiralling benefit claims, collapsing tax receipts, and no war chest.
- How do you think the govt will find the cash?
13. sold 2 rent 1 said...
"How do you think the govt will find the cash?"
Good question.
It will issue more debt onto the tax payer.
At some point the tax payer will clock what is going on and we might just get the CHANGE that we need.
14. also sold to rent said...
The Chinese can lend money to African nations, who have resources and manpower and need expertise and capital.
The Chinese can lend money to South American nations, who have resources and manpower and need expertise and capital.
The Chinese can lend money to Asian nations, who have resources and manpower and need expertise and capital.
The Chinese can lend money to China, to build infrastructure.
Yes, and the middle east. The resource exporting countries will then become rich and buy the junk that china makes (cars, flat screen TVs), effectively filling our role to support China as we dive bomb. Perhaps that'll last a decade or two while we get marginalised and then we can rebound with a economy based on renewable energy.
15. sold 2 rent 1 said...
If the banking system requires expanding debt to infinity to survive and the only people taking on new debt are the tax payers via bank bailouts; let's have a serious vote to see where our debt threshold level is.
At what point in the tax payer debt burden scheme would you march on Westminster and demand CHANGE?
How much debt would you be prepared to let the government create on your behalf?
a) £250 bn (10,000 per household)
b) £500 bn (20,000 per household)
c) £1 tr (40,000 per household)
d) £2 tr (80,000 per household)
e) £4 tr (160,000 per household)
f ) £8 tr (320,000 per household)
g) £16 tr (640,000 per household)
It would be nice to see what peoples' thresholds are?