Friday, Jun 19, 2009
Crucifixion laboratory
Telegraph: Rise of the right
The savings rate is rocketing in the deficit states of the US, UK, Spain, et al, as the "sinners" belatedly tighten their belts, but their fall in consumption is not being matched by an offsetting rise among the surplus "saints" states, China, Japan, Germany-Netherlands, which all points to an implosion in world demand. Yes, the West is printing money.
But that is a harder to trick to pull off than Friedman and Bernanke ever realized. And core Europe is not really printing anyway beyond its chump-change dallying in the covered bond market
Posted by bellwether @ 09:44 AM (1169 views) Add Comment
21 Comments
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1. mym said...
11 day old article, already looking like the usual frothy am-dram Mr A-P spills out:
"we may lose three or four governments in Europe in coming days"
2. stillthinking said...
Big rise in global deflation basically.
The flaw in the plan, as far as the rebalancing goes, that the surplus countries increase their consumption of UK goods, is simply that UK goods are too expensive. We can't force them to buy hugely overpriced stuff relative to their domestic prices.
If I work in MacUK selling burgers at £50 a pop, can I really say well, of course I am prepared to work off my debts, simply purchase as many of my fine £50 burgers as you have IOUs. When they know that burgers are less than £1 a pop in their own countries....
This is an insurmountable problem. The value of UK debt is fixed, maybe a bit of devaluation here, a bit of sneaky printing there, but our wages/cost of living/taxes/train fares are simply too too high.
This means there is not going to be some virtuous balancing of trade, until our wages fall and fall considerably. Our current plan seems to be to issue debt/print until there is a valid fear that £50 in the future will be worth only £1 of todays money, and reprice our burgers that way. AKA destroy confidence in our own currency.
3. icarus said...
Two of the responses to this article:
"We need to let (house?) prices fall to levels where savers are happy to buy them off the idiots who overpaid. The talk of reflation is keeping said idiots from selling at realistic prices and taking the losses they so richly deserve. If we inflate our way out of this it will teach everyone to buy into the next moronic bubble as soon as possible, and the very concept of doing work in exchange for gaining purchasing power will be destroyed. Instead the lesson will be "Fastest speculator wins and work is for mugs"".
"Keynes' recipe for recovery was only posited after debt destruction had taken place by widespread bankruptcy, and cannot work in our current crisis because the massive private debt overhang remains, ensuring that all fiscal and monetary stimulus will be saved to pay down debt, rather than spent".
And one reading of the Depression years goes as follows (my words): "After years of the New Deal and Keynesianism in the '30s the US economy fell back into the deep depression of 1937-8, and it took the whole of the '30s decade to shake out the high-cost, low-profit operators and thus lay the groundwork for recovery, but you still needed a jolt to aggregate demand, which was supplied by armaments spending for WWII"
4. uncle tom said...
"If this sorry saga goes on much longer, we may have to conjure up some sort of medieval impeachment process. (My colleague Phil Johnston says no such mechanism exists. Pity)"
Mr Johnston forgets that The Queen has the power to sack Mr Brown, although she may not have the power to order a general election.
Things would have to get worse before she used the power, but there is a precedent; in 1975 the Prime Minister of Australia, Gough Whitlam, was sacked. He had a minority administration, had fallen out with the majority, but refused to call an election.
5. japanese uncle said...
icarus
Actually, Pearl Harbour was the Saviour of the US economy, wholly justifying the wartime economic configuration. And as everyone who read John Toland's books knows, FDR did not inform (actually he expressly prohibited such information) Admiral Kimmerl in charge of the Pacific Fleet stationed in Honolulu, of the move of the Japanese task force whose movement was closely monitored right after its departure from Hokkaido.
6. icarus said...
People at the top doing things like that? Shirley Knott.
I bet you're one of the people who think they let Lehman go bust in order to drive up LIBOR so they could say to Congress "Give us the TARP money or we won't have an economy by Monday".
7. Sneaker said...
The swing to the right is very simple
First, the EU is basically a Socialist project: building a larger collective, destroying the nation state, family and society. This has demonstrably failed to deliver on the promise of the golden dawn of eternal prosperity.
Second, Socialism has been revealed as a good-times-only free-spending creed. When there's plenty of money to go around, Socialism is wonderful as the greater good intoxicates us all. When there's less money around, people want it spent on the people who earned it rather than those who didn't.
In good times, we favour expanding the collective. In bad times, we retrench into looking to ourselves and those close to home (more aggressive movements turn this into hating those who are "not like us").
When Socialism was new, this was not understood. Socialism was initially believed to be the "cure" to capitalism's ills. So we had a few anomalies in the early 20th century. Now we see that Socialism fails in bad times as all it knows how to do is spend more money we don't have. Instead of halting the business cycle, which Socialists blame on capitalism, free-spending Socialism ends up exaggerating the cycle.
Counter-cyclical Keynesian-ism become permanent over-spending, sold as "investment" but with no care for the return on investment nor its tenability in straitened times. The naive belief in the end of the business cycle leads to a vast spending edifice and nothing in the cupboard - an economy that is tighter than a drumskin and ready to tear at the first sign of trouble.
Great theory, shame about the practice basically.
Moreover, most people recognise that the credit crunch is NOT a failure of capitalism. It was because we do NOT have perfect, open and transparent markets that credit derivatives were mis-priced and then collapsed. The free market did not fail because we did not have one.
Finally people recognise that de-regulation does not mean NO regulation. Deregulation means just the right amount of good regulation to force the market to be clear, open and transparent. Curiously, free markets require force!
What we had was a failure of Socialism's big-hearted but botched attempt at free markets and this discredited the Socialist move to a European super-state.
Thus, the swing to the right.
8. sneaker said...
The swing to the right is very simple
First, the EU is basically a Socialist project: building a larger collective, destroying the nation state, family and society. This has demonstrably failed to deliver on the promise of the golden dawn of eternal prosperity.
Second, Socialism has been revealed as a good-times-only free-spending creed. When there's plenty of money to go around, Socialism is wonderful as the greater good intoxicates us all. When there's less money around, people want it spent on the people who earned it rather than those who didn't.
In good times, we favour expanding the collective. In bad times, we retrench into looking to ourselves and those close to home (more aggressive movements turn this into hating those who are "not like us").
When Socialism was new, this was not understood. Socialism was initially believed to be the "cure" to capitalism's ills. So we had a few anomalies in the early 20th century. Now we see that Socialism fails in bad times as all it knows how to do is spend more money we don't have. Instead of halting the business cycle, which Socialists blame on capitalism, free-spending Socialism ends up exaggerating the cycle.
Counter-cyclical Keynesian-ism become permanent over-spending, sold as "investment" but with no care for the return on investment nor its tenability in straitened times. The naive belief in the end of the business cycle leads to a vast spending edifice and nothing in the cupboard - an economy that is tighter than a drumskin and ready to tear at the first sign of trouble.
Great theory, shame about the practice basically.
Moreover, most people recognise that the credit crunch is NOT a failure of capitalism. It was because we do NOT have perfect, open and transparent markets that credit derivatives were mis-priced and then collapsed. The free market did not fail because we did not have one.
Finally people recognise that de-regulation does not mean NO regulation. Deregulation means just the right amount of good regulation to force the market to be clear, open and transparent. Curiously, free markets require force!
What we had was a failure of Socialism's big-hearted but botched attempt at free markets and this discredited the Socialist move to a European super-state.
Thus, the swing to the right.
9. icarus said...
Sorry, meant to say my comment @6 was in response to JU @5.
10. japanese uncle said...
icarus
Yes, indeed. People in panick without any valid information can be the easiest prey to be taken advantage of.
11. uncle tom said...
Sneaker,
- I couldn't agree more!
12. letthemfall said...
sneaker
What nonsense. You use a lot of old-fashioned terminology in an off-the-cuff Monday-Clubbish spiel to claim that the EU is destroying the family and society. I see neither happening. As for free markets, how much freer do you want it to be than that of America, the country along with the UK which has suffered most badly from the credit free-for-all bankers? Are you arguing for more or less regulation? And you can blame nothing on socialism because we haven't had any. The present govt, hardly socialist in the sense you mean, has failed largely in that it allowed, along with other countries' govts, the financial sector to wreak havoc. And now we pay the price.
13. matt_the_hat said...
7. sneaker - destroying the nation state
Don't you think we are all getting a bit old for tribes - segregation in any form only causes wars - I understand your position though being in one of the best tribes in the world at the moment, but I have the feeling that not so long ago you would be one of those questioning if we should enter the Euro now whilst we still can.
14. uncle tom said...
"Don't you think we are all getting a bit old for tribes"
The human race is instinctively tribal, and when different tribes vye for the same living space, there is always tension, and sometimes bloodshed.
This has always been the case, and there are still immense problems around the world that have their roots in ethnic conflict.
It is arrogant and stupid to pretend that this is yesterday's problem. It is here today, it will be here tomorrow.
The way forward is peaceful co-existence behind our respective borders; indeed the relationship of countries to one another should reflect neighbours in a street - everyone has their own land, their own living space. The less there is shared, the fewer the arguments.
15. letthemfall said...
As in Little England?
16. The Number Cruncher said...
Have you read the comments at the bottom of the article
It looks like there are lot of fascist apologists lining up to make capital out of the coming economic crisis.
I may be able to afford a house in six years time but I doubt I'll get a mortgage with a fascist bullet in my head.
17. bellwether said...
There can be no rational discussion of borders and immigration because western liberals automatically assume they are above the sort of basic instincts to which UT at 13 refers. The fact is however it is merely human to look to protect culture and identity to SOME extent hence the frequent growth of enclaves when immigrants live in foriegn lands. Funnily enough however liberals don't tend to assume enclaves are racist, because I suspect they don't think the immigrants should have the same standards of conduct applied to them as the liberals apply to themselves and their kin. This is of course in itself inherent racisit on the part of liberals. As you might guess I tend to think alot of liberals are w**kers
18. shipbuilder said...
There is so much utter cr*p written about 'the demise of British culture' - the reason why there can be no rational discussion about this is because the discussion can't get beyond the familiar and tedious immigration arguments. Preservation of culture requires support, engagement, nurturing by the people. Unfortunately more are concerned about swelling their bank accounts - the irony is that the individualism and bland homogeny that is at consumerist capitalism's very heart has done more damage to British culture than immigration can, or will EVER do. Rather than actively support our culture, the easy option is to blame someone else and what a familiar story THAT is.
19. letthemfall said...
And for rational discussion there has to be rationality before the prejudices that everyone, of course, has. Mostly it is the other way round, and we end up with the juvenile and inane remarks that characterise most of these exchanges.
20. sneaker said...
> You use a lot of old-fashioned terminology in an off-the-cuff Monday-Clubbish spiel
The Monday Club is a Tory group. I am not a Tory. Please illustrate which terminology you consider "old-fashioned" and also why "old-fashioned" is inherently bad. The majority words in the English language have a Norse or Latin origin. Are they also old-fashioned?
> to claim that the EU is destroying the family and society. I see neither happening.
Look harder. Brian Gerrish is your man here. See him on Google Videos. Note - I do not support his politics, but I like his information.
> As for free markets, how much freer do you want it to be than that of America,
> the country along with the UK which has suffered most badly from the credit free-for-all bankers?
> Are you arguing for more or less regulation?
Repeat from my post:
[...] we do NOT have perfect, open and transparent markets that credit derivatives were mis-priced and then collapsed. The free market did not fail because we did not have one.
Finally people recognise that de-regulation does not mean NO regulation. Deregulation means just the right amount of good regulation to force the market to be clear, open and transparent. Curiously, free markets require force! [...]
> And you can blame nothing on socialism because we haven't had any.
Interested you feel this. I see socialism everywhere. Big government, burdensome taxes, the most intrusive, prescriptive, onerous and frightening government this country has ever had. A generation dependent on the state. The spread of quangos and anti-democracy in private, whilst proclaiming democracy and openness in public. What am I missing?
> The present govt, hardly socialist in the sense you mean
I'm confused by your argument. I see socialism everywhere. It's a clever, nice-tie-wearing socialism with a lot of more classical socialism behind the scenes. It's Fabianism in a smart suit.
> has failed largely in that it allowed, along with other countries' govts, the financial sector to wreak havoc. And now we pay the price.
The pattern of history is a love-affair between the bankers and the socialists. The socialists love the bankers, because they allow them to spend freely and buy votes whilst re-engineering society. The bankers love the socialists because they get to lend against future taxes.
21. sneaker said...
@13
"Don't you think we are all getting a bit old for tribes"
What does "getting a bit old" mean? What is special about this present era?