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mattyfc

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Posts posted by mattyfc

  1. What’s probably happening in my view is just the follow on from the 2007-9 problems.

    The problems started building from the mid-1990s. Private debt levels soared out of control, and resulted in housing and stock bubbles in western countries. On the other side some countries like China and Germany have run huge current account surpluses. Together this resulted in the first financial crisis.

    Global imbalances are they key. Sir Mervyn got a lot wrong; he will be proved correct on this though, in the next 12-18 months.

    Nothing has actually been done to fix the global imbalances and bubbles which caused the financial crisis.

    Instead interest rates were cut to zero, housing and stock market bubbles reflated. The world carried on. Politicians don’t want to face the truth because it isn’t very popular.

    Osborne in 2010 should have stood up and said the unbalanced nature of the UK economy, house prices, housing equity withdrawal, the dodgy mortgage market and private debt levels were the problem. That was Gordon Browns legacy.

    Instead the side issue of the government’s finances were focused on along with maintaining and expanding the bubble at any cost.

    Zero interest rates and cutting government expenditure are pretty much the opposite of what should have been done.

    If a severe recession does develop monetary policy will be virtually impotent this time. The can kicking will come to an end. The only way of boosting the economy will be via the government. This is likely to cause some rather serious political problems in monetary sovereign countries and will probably be fatal for the Euro area.

     

     

  2. "Monetary trends, meanwhile, have weakened further in early 2018, with G7 plus E7 six-month real narrow money growth falling to a nine-year low in February. Real broad money has also continued to decelerate. The emerging economic slowdown, therefore, could extend into late 2018, allowing for the usual lead."

    http://moneymovesmarkets.com/journal/2018/4/10/a-monetarist-perspective-on-current-equity-markets.html

    Monetary trends looking similar to 2007/8 for the moment. There is a clear trend. It will be interesting to see if it continues or reverses in coming months.  

    It looks likely there will be a significant economic global economic deceleration over the next 12 months.

    Australia, Canada and the UK are lagging and coincidently? have the most advanced housing bubbles / private debt problems. The US, China and EU are also very weak. The Euro  aggregate conceals that France and Spain are lagging whilst Germany and Italy are holding up better.

     

     

     

  3. Figures out today.

    Down from 8.3% to 8.2%.

    UK unemployment fell by 45,000 to 2.63 million during the three months to March.

    Employment up 100k albeit part time jobs, hours worked rising solidly from Q4-Q1. Things look to have improved more significantly in April as well judging from the 15K fall in the claimant count. This data makes a mockery of the output figures and surely stretches the credibility of the ONS to breaking point.

  4. LINK

    This year's budget statement should be worth listening to.

    Relying on the private sector? That might be a tad wishful.

    Will the UK drown any growth in red tape?

    The guy is a genius really and full credit to him. Lots of talk about slashing spending whilst borrowing £120-140bn a year, printing and spending like Weimar is back in fashion. 33% of the entire debt stock will be owned by the BOE after the latest QE, the interest going in circles between the treasury and the Bank. Why not do the lot; he could probably pull it off.

    No one actually bothers to read the actual budget, Osborne does such a great job playing the Tory budget slasher. A miracle the UK has not already been downgraded by at least one agency (not that it would matter).

    With the Draghi put in place no need to worry about the EZ collapsing anytime soon. All coming up roses currently for Osborne currently.

  5. Nah, they'll just have another bailout, then another, and another etc.

    They wont be allowed to leave and mint their own currency. Its not what the globalist elite want. Theyve fought wars in Libya, and soon will fight a war in Iran to bring them into the global bankster family. The unarmed populace of Greece wont be much of a threat.

    This is the most likely scenario, Greek politicians seem particularly gutless and have chosen the worst possible option for the Greek people.

    Greece will be hollowed out economically, all the young intelligent graduates will leave. The ECB / Germany will drip feed enough cash to prevent default.

    The damage will be irreparable, Greece will be in recession for the foreseeable future. For the Germans and the rest of the world the best result. For anyone stuck in Greece things will be very grim indeed.

  6. A run seems to have started on sovereign debt all across the EZ, with the exception of Germany. Not surprisingly since giant depression seems to be heading towards southern Europe. Italy did not even release a preliminary Q3 GDP figure, which hardly inspires confidence.

    The politicians have no solutions, the EFSF is dead in the water and the only thing that will prevent the markets forcing default on Spain, Italy then France and the rest is the ECB buying debt on a gigantic scale. €1 trillion + would probably do the trick, or would prevent economic collapse in the short term.

    The problem of massive austerity, cutting in to the teeth of a recession will still remain. Southern Europe will enter a permanent state of economic contraction and misery. The only way out is going to be changing the structure of the EZ / a breakup of some kind that allows southern Europe to inflate and grow.

  7. The "rescue plan" for Greece is frankly insane, a decade of austerity and continual recession, unemployment likely to be 25%+, in the best case scenario debt / gdp will still be 120% in 2020. Although considering the ridiculously overoptimistic forecasts 200%+ is probably more likely ,utter, utter madness.

    The global lack of respect for democracy is rather troubling, financial markets are more important than allowing countries self determination? Weren't there two rather large wars fought to protect democracy from tyranny?

    Greece needs to default return to the Drachma and regain its self respect. Hopefully her creditors , who refuse to take any responsibility and are now trying to subjugate her to debt slavery get what is coming to them.

  8. well this is gonna get very awkward.

    wasint it about 96% that wanted to default?

    goodbye to the euro

    It does occur to me that this could be an attempt by Greece to force other countries out of the €. There is no way of forcing Greece to leave the € even if they default 100% as far as I can see. Leaving the € voluntarily would be suicidal, as would the proposed decade of misery in the EZ plan.

    It is clearly in the best economic interest of Greece, and other southern European countries to force Germany out of the monetary union, then to take over the ECB turn it in to a proper central bank lower interest rates to zero and kick start the presses.

    If the Germans don’t want any part of it they cam reissue the DM.

  9. http://www.rttnews.com/Content/AllEconomicNews.aspx?Id=1746706&SM=1

    (RTTNews) - Italian unemployment rate increased modestly in September, while employment declined, data from the statistical office Istat showed Monday.

    The jobless rate rose to 8.3 percent in September from 8 percent in August. Unemployment rate among youth increased 1.3 percentage point to 29.3 percent.

    It will be interesting to see how markets react once the recession really kicks off in Q4 and through 2012. No doubt the Italian deficit will start increasing and the proposed austerity plan will crush any chance of an economic revival in the short term.

  10. Wow, just wow it's at times like these I am very glad of the government we have. However, a double dip is pretty certain in 2012. Continental Europe is heading for a 1930's style depression and we will be dragged down as well. No avoiding it, things are going to get very very ugly.

    The ideas put forward in the article are completely ridiculous thiugh. None of them will create sustainable growth in the long run. Probably the worst ideas to solve the problem I have ever read.

    Investments in education, research science and technology along with building needed infastructure, e.g a new airport for London etc large capital projects would be the only sensible uses of public money.

    Solving the heart of the problem, global wage disparities between consuming / producing nations and rampant irresponsible private sector credit creation will be needed for a sustainable recovery.

  11. But are the Repos being put on the market.. or are the banks sitting on them (or selling them to themselves at inflated prices) to stop price discovery.?

    Problem in Spain is there is no escape from your mortgage, even if you default the property is auctioned if the amount does not cover the mortgage you still owe the bank and become a debt slave.

    Whilst in the short term this may provide support to the market it will also prevent any kind of recovery long term. Who would take out an inescapable debt in a plunging market, when friends and family are in debt servitude already?

    Banks may also be hiding non performing loans, the cajas that were taken over by the Bank of Spain have double the non performing construction loans of the cajas that have not had there books examined.

    With the economies of Northern Europe also in the toilet like us in the UK, the traditional foreign market for Spanish properties is also very depressed.

    Mortgage defaults in Spain have been very low so far 2.5%~, I think in the next 12 months this rate will begin to rise, the unofficial economy will grow to prevent wages from being garnished, emigration will rocket and Spain will turn in to a much larger version of Ireland without the predatory rate of corporation tax.

  12. http://www.telegraph.co.uk/finance/financialcrisis/8826163/SandP-downgrades-Spain.html

    Still at least the Spanish won't be bailing out the Greeks....

    I would not want to be the new Spanish government coming in to power in November. It is pretty amazing how effective the propaganda of the current administration has been. This really shows in the spread between Italian and Spanish debt recently.

    The reality seems to be somewhat different, new jobless claims doubling y/y in September (48k – 95k, +250k total y/y), the PMI surveys have been abysmal for the last couple of months with new orders plunging suggesting further downside. The manufacturing PMI is only 0.5 points above Greece.

    Mortgage approvals hitting a record low in July, Housing sales plunging 38% y/y and the Tinsa index showing prices plunging at an accelerating rate. Whilst industrial production rose slightly in August this may be because of a SA problem (an extra day in the figures?). Also in the FT today the deficit is looking to be at least 1% over target this year.

    A vicious recession seems to be on the way, the housing market is heading over a cliff and the effect this will have on the Spanish banking system and sovereign should not be underestimated. Spain increasingly looks like the next Greece to me, if the new government confesses the collapse could come hard and fast.

  13. What "cuts"?

    The telegraph is really going downhill and turning more in to a tabloid every day. You can smell the desperation to stop there ever declining circulation. They could at least get the borrowing figures right for the last two years.

    The borrowing figures for one month are also completely irrelevant, they are revised constantly for years after release. The figures for last year have been revised +/- £10bn 3 times in the last 6 months. Benign gilt rates? Last time I checked Gilts were touching 150 year lows and the ten year is trading a real rate of -2.5%~

    I think there is a big misunderstanding of public / private credit creation and the entire fiat monetary system. Private credit creation has done far more damage blowing up the housing bubble than a mere £75bn of QE, which will almost certainly do nothing.

    We place far too much emphasis on £ debt / credit values in sovereign terms. The whole fiat system is one of pretence. Sovereign nations with control of the medium of debt are nothing like a private household or business and should not be looked at in the same way.

  14. Merv has this one right, 2012 is going to a blood bath and at least trying to do something seems like a sensible course of action.

    The data coming out of Europe has been beyond awful this week, the EZ services PMI indicate a deep recession taking hold in the periphery. We are heading for a deflationary bust of epic proportion in Europe and with austerity taking hold there is no counter balance. The best case scenario for the UK is probably flat growth next year. on the continent a 1929 or worse style bust seems likely with the rest of the periphery heading for a Greek style meltdown.

    Frankly I don't think QE will work, the UK and global economy will crash hard, there are structural issues that run far deeper than a quick fiscal or monetary policy fix.

  15. From 0.2% to 0.1%

    GDP always seems to be revised for decades after its initial release. I am not really sure why anyone pays any attention to the initial figures. In the recessions from the 1970s,80s,90s GDP has been revised more than a decade afterwards once the tax records etc are available. By 2020 we should have a more accurate figure..

  16. http://www.ifaonline.co.uk/ifaonline/news/2113711/boe-mulls-rate-cut-025-odds-shorten-quant-easing

    The real reason if they do more cutting of rates and more QE... does it bear thinking about?

    Not really news, both options were widely discussed in the minutes from the last meeting. QE is inevitable, the only question is when, and also possible rates will be cut.

    Neither will help much though, UK / World economic problems can’t be fixed by tinkering with monetary policy.

  17. Black Monday, maybe not. Black 12 months coming up, virtually a certainty. The problem and its vast scale have not even been grasped. Politicians simply don't get it.

    The chancellor said Europe needed to show that it had enough firepower to convince the markets it was getting ahead of the curve, and made it clear that the €440bn European Financial Stability Facility needed to be beefed up. "I am not sure it is adequate," Osborne said.

    I like George, but can he use a calculator? ( Or Merkel and Sarko?). The EFSF is already obsolete, designed to take care the small countries only. What about Italy and Spain? Last time I checked the ECB are buying €10+ billion a week! of these bond alone. Even with this huge intervention Italian 10 year bonds are yielding 5.5%+, which is probably unsustainable. There is also the matter of Greece, Portugal and Ireland. Even if the EFSF was quadrupled it would not be enough. As it is, if it only has €440bn it will barely last 6 months.

    It gets worse though, a second recession is clearly coming. Italian and Spanish data has been pancaking. The PMI surveys indicate a significant economic contraction taking place over the last couple of months and accelerating downwards. Banking stress and unemployment will increase all over Europe over the next 12 months. Deficits and debts are certain to rocket as the European economy contracts.

    Even Germany and France are now on the border line of recession, new order levels indicate contraction in the whole EZ by the end of Q4.

    The European economy is entering a debt / deflation spiral which will be near impossible to escape. Where is growth meant to come from?

    Need I even mention the US...

    Truly a grim economic outlook, the closest modern equivalent would be the 1930's.

  18. The last 15 years has shown that economic growth in the west can only be achieved via reckless credit expansion and/or reckless deficit spending.

    My view is that the effects of globalisation were masked by the credit boom and have only recently started to reveal its true consequences to the west.

    So what next? The assumption is that growth will restart sooner or later... but will it?, and is growth that important anyway? (surely a stable economy that balances its books is better than a bankrupt one).

    Yes you are correct, the disastrous decisions made since the mid 1990’s have doomed the west to a depression worse than the 1930’s.

    We thought we could outsource our manufacturing base to Asia and live off ever expanding levels of credit. Have our cake and eat it. The massive imbalances in wages between west and east prevents any kind of sustained manufacturing led recovery. The “economic rebalancing” we are attempting is impossible.

    Compounded by the € crisis and huge debt levels build up over the last 10-20 years. The similarities with the 1920-1930’s period are striking, but we are in an even worse position. We had a more balanced economy in the 1920’s, less debt and breaking up the gold standard was relatively easy compared to the potential collapse of the euro.

    Any kind of sustained recovery to growth will require radical policies, protectionism against countries with massive wage disparity, hard mortgage limits fixed to income, reindustrialisation and probable massive levels of government involvement in the economy not seen since WW2.

  19. Some swinging cuts, those.

    40% cuts to pensions of under-55s

    20% cut to all pensions over €1200

    Tax threshold reduced from €8000 to €5000

    30,000 state workers having their salary cut to 60% for a year, and then dismissed if no alternative posts have been found for them

    What was Einsteins definition of insanity again? The economy is already shrinking 7% y/y, next year will no doubt be even worse, assuming the government actually survives that long. Debt to GDP heading for 200%.

    The chances of an explosive collapse, government overthrow or other unplanned event rises by the day.

  20. Its all locked in, nothing to fear, keep calm etc etc

    http://uk.news.yahoo.com/uk-services-pmi-suffers-biggest-drop-decade-083217062.html

    Depression here we come, this huge fall in services growth is not surprising. The rise the month before was the real surprise. We are going for an export lead recovery with the US heading for / in recession and the Euro about to implode. Who are we meant to export to?

    More QE will come in a few months but will not help growth; at least we can prevent the banks from collapsing.

    More creative policy going to be needed or we can look forward to no growth for a few decades.

  21. Trouble is most infrastructure spending is not efficient spending. Look at Japan and their bridges to nowhere. Will markets really lend over indebted nations more money to build unnecessary infrastructure?

    Whilst it will kick start the economy, it will not be sustainable and would lead to a greater collapse once people realise the money was wasted ie non income generating, and just leaves behind more debt.

    This is what should happen in a classical economic environment. However, this is not what happened after WW2 which would be the only other example of state control and spending at 60%+ of GDP for 4-5 years in a modern economy.

    Japan economy only consists of around 30%~ government spending, which would need to be doubled for a 4-5 year period to emulate WW2 levels of government spending.

    This is a rather good analysis of public debt in the US after WW2. Which fell rapidly:

    From 1945 to 1974, the debt to GDP ratio fell from 66.2 to 11.3. Of this 54.9 percentage

    drop,

    (a) 12.5 was due to negative real returns on debt via inflation. This largely (10.3 out 12.5)

    hit the long-term bond holders. The average maturity of the debt was around 7 years

    right after WWII.

    (B) 21.6 was due to growth in real GDP.

    © 20.8 was due to running primary surpluses

    https://files.nyu.edu/ts43/public/research/Hall_Sargent_2010_final.pdf

    The real problem of such huge stimulus programs would be international co-ordination, the possible inflationary effects and ensuring the money did not go straight out of the country on imports.

    Such a program could also not possibly be implemented for political reasons until the second level of the bust has already occurred.

  22. I would suggest looking at the unemployment chart on page 24 of this document, government spending as a % of GDP 1939-1945 on 22, and the real change in GDP on page 23. In the late 1930's GDP per capita was only very slightly above its level during the mid 1910's. You could probably argue we had a 20+ year depression here in the UK.

    http://www.parliament.uk/documents/commons/lib/research/rp99/rp99-111.pdf

    Unemployment in the UK plummeted from near 15% in the late 30's to nearly 0 after the outbreak of war. It then stayed under 5% for 40 years.

    Quite simply the only modern depression was in the early 20th century (pre industrialisation events can't be compared) , the way out of it was a massive government spending program. In the 30's this was because of war.

    If this is another depression and a second leg down is coming, we need to repeat the scale of the spending programs enacted in the 1939-45 period (without the war) the money needs to be kept in its country of origin and spend on technology research, infrastructure and anything else that will help long term development.

  23. ...are about to have their credit rating downgraded.

    There is clearly no risk to the nominal amount of money that is placed in a UK bank. 2008 should have taught us that in the event of any bank coming under threat there is implicit sovereign support including the printing press. The value of the money is a different story of course.

    This seems to be an old story related to the ring fencing of the retail arms of these banks. When this happens the non retail part of the bank will no longer have the printing press behind it and could fail. Therefore they are a higher credit risk and are downgraded.

    We should be delighted the non retail parts of banks will be allowed to fail and the banksters put on the street. This is what everyone has been calling for the last 3 years.

  24. This Is A Depression. Yes Or No?

    A couple of recent blogs in A Fistful Of Euros ponder this issue.

    Why aren't we calling this recession a depression? Alex Harrowell argues quite reasonably that 'it's been four years already . . . isn't that depressing enough?' :)

    More seriously, the point is that not calling it for what it is only fogs and fuzzes any way out.

    I think I can go along with this. The idea that there is a make-believe recovery stifles any attempt to get out of this mess.

    Well . . . look at the current objection to banking reform. 'It would hurt the fragile recovery'. Some truly bananas bankster lobbyist even talked about 'this moment of growth peril'. Well, no perilous danger of growth for a decade at this rate, chum.

    And there are similar excuses peddled for any number of other things, like tackling inflation. Oh, it might hurt the jobless, homeless, consumerless, you fill in, 'recovery'.

    So, it's a mindset, which Alex calls AirFrance 447 economics.

    A while back, the BBC pitched up with the phrase, ' the downturn' . And a logo to boot.

    So where's the 'upturn' logo? If anything changed, I must have missed it.

    Edit . . For the usual dyslexic typos

    Quite right, this is going to be a depression. All indicators are showing another global recession coming, the collapse of the Eurozone and a deflationary bust. This is not a recession that has been seen since the 1930's and traditional economic policy can't solve the problem.

    There has only been one depression on this scale in history 1929-1939, this was only solved by WW2, US GDP doubled in 5 years and unemployment went from 15% to 1% and the economy continued its recovery after central planning was removed the private sector took over again in 1946.

    It's time to accept that Krugman etc were correct and the only way out of this will be gigantic levels of stimulus on a par with WW2 levels of public investment.

    Not £25bn,£50bn etc here or a few hundred billion $ in the us. More like 30%+ of GDP stimulus programs $3-4trn in the US, £800bn in the UK, and 30% of GDP of whatever currencies exist in Europe once the collapse takes place, on a yearly basis.

    There is no point in investing this money through traditional fiscal policies as it will likely only end up in inflated public sector pay and waste. A separate authority similar to the War administration to use the funds in a way that benefits the economy in the long term (Infrastructure, research etc) will be needed.

    We have to accept that capitalism in its current form has failed and the only way to maintain our living standards is through a 4-5 year period of massively increased central planning.

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