Thursday, Apr 02, 2009
This is not good reading guys .....!!!
Guardian: The G20 communique in numbers
By the end of next year a "concerted fiscal expansion" of $5tn ... raising output by 4%
Posted by waitingfor hpc @ 05:22 PM (819 views) Add Comment
7 Comments
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1. alan said...
"$50bn from IMF gold sales in "concessional finance" for poorer countries"
Does this mean that gold prices will drop??
2. paul said...
There is still the pesky little issue of the transmission mechanism.
This is the age-old problem. If you print money, how do you get it into people's mitts without allowing them to merely spend it on what they would have bought anyway and saving the surplus.
I'm patiently sitting tight. I am yet to be convinced - and I've listened to all of the evidence - that the world is not heading down a Japanese-style deflationary slump. You see if it was as simple as printing money, Japan would never have had a slump.
The issue is the transmission mechanism. How do you get people to spend? It's a chicken and egg situation. Which is why it won't happen.
3. Tom101 said...
I thought Japan hadn't applied sufficient monetary controls and therefore the cash left the country and contributed to the World wide bubble.... Surely what is different now is that the cash has nowhere to flow and is on a far larger scale.
4. general congreve said...
We're going to get inflation, here in the UK anyway. Yes, there is the transmission problem, so perhaps the money will struggle to get into people's hands and cause inflation directly. However, as we have seen already, the weakening of the economy and the fact we are printing vast sums of money has hugely devalued the pound, 30% in the last year alone. This is already inflating the price of imports and will also inflate the price of domestically produced goods, because domestic producers will be able to get better prices overseas with the weak pound. If you want to buy domestic produce in the UK, you'll have to pay the same price as the domestic producer can get for it overseas or he'll sell overseas instead for more profit (unless the govt. goes down the protectionism and price fixing route in response).
Essentially, things will become more expensive full stop, because we are a heavily indebted country with a weakening economy that has been on life support from cheap credit for many years. There is a massive wealth transfer going on from west to east right now and we're going to end up permanently poorer for it, in the short to medium term at least.
As for house prices, inflation may well push them back up in nominal terms to above Aug. 07 peak levels, but I doubt we'll ever see real prices that high again. Banks haven't got the cash to lend, govt. legistlation is looking at reducing loans to 3 - 3.5x income and as a population the UK has the highest indebtedness of any country in the world. People will be paying down personal debt as well as paying back the huge amounts of tax necessary to clear the mounting national debt, thanks to Crash Gordon's hubris, for many decades to come. Money for property speculation and investment just won't be available to drive prices back up to '07 levels in real terms for decades IMO.
5. quiet guy said...
@alan
"Does this mean that gold prices will drop??"
Personally, I can't see how gold could not drop if that much was auctioned off. If you beleive that we are in a secular bull market for gold, then I don't think the fundamentals will change, however.
http://www.marketwatch.com/news/story/G20-supports-IMF-plan-raise/story.aspx?guid={5ABAE8F2-060D-44BC-9905-EB79665AEACE}
6. alan said...
@ Quiet Guy - Thanks for the link to "G20 supports IMF's plan to sell 403 tons of gold"
This may present a buying opportunity !
@ General Congreve - "Essentially, things will become more expensive full stop, because we are a heavily indebted country with a weakening economy that has been on life support from cheap credit for many years".
I think your comment summs up the UK. Anyone know a fairy with a magic wand?
7. mountain goat said...
Inflation not going to happen if people keep losing jobs. The economy is on its knees. People lose jobs, those with jobs are scared of losing them. Both groups don't spend, the first because they can't, the second because they are scared. How can inflation happen under these conditions? Only food maybe if the Pound falls off a cliff.
As for the gold article @4 "but do not believe that this presents a strong negative risk to gold prices - as it will be 'orderly' and maybe even off market." - might be a nice way for China to unload some of its dollar reserves in exchange for that gold...