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Money Figures Show There's Trouble Ahead

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Blimey.

Private credit is contracting on both sides of the Atlantic. The M3 money data is flashing early warning signals of a deflation crisis next year in nearly half the world economy. Emergency schemes that have propped up spending are being withdrawn, gently or otherwise.

Unemployment benefits have masked social hardship unto now but these are starting to expire with cliff-edge effects.The jobless army in Spain will be reduced to €100 a week; in Estonia to €15.

Whoever wins today's elections in Germany will face the reckoning so deftly dodged before. Kurzarbeit, that subsidises firms not to fire workers, is running out. The cash-for-clunkers scheme ended this month. It certainly "worked".

Car sales were up 28pc in August, but only by stealing from the future. The Center for Automotive Research says sales will fall by a million next year: "It will be the largest downturn ever suffered by the German car industry."

Fiat's Sergio Marchionne warns of "disaster" for Italy unless Rome renews its car scrappage subsidies. Chrysler too will see some "harsh reality" following the expiry of America's scheme this month. Some expect US car sales to slump 40pc in September.

Weaker US data is starting to trickle in. Shipments of capital goods fell by 1.9pc in August. New house sales are stuck near 430,000 – down 70pc from their peak – despite an $8,000 tax credit for first-time buyers. It expires in November.

We are moving into a phase when most OECD states must retrench to head off debt-compound traps.

Britain faces the broad sword; Spain has told ministries to slash 8pc of discretionary spending; the IMF says Japan risks a funding crisis.

If you look at the sheer scale of global stimulus this year, what shocks is how little has been achieved. China's exports were down 23pc in August; Japan's were down 36pc; industrial production has dropped by 23pc in Japan, 18pc in Italy, 17pc in Germany, 13pc in France and Russia and 11pc in the US.

Call this a "V-shaped" recovery if you want. Markets are pricing in economic growth that is not occurring.

http://www.telegraph.co.uk/finance/comment...uble-ahead.html

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is this why they are queasing, desp attempt to get inflation in the face of an unstoppable locomotive of deflation?

someone somewhere might have to rewrite his blue & red signatures if so

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is this why they are queasing, desp attempt to get inflation in the face of an unstoppable locomotive of deflation?

someone somewhere might have to rewrite his blue & red signatures if so

Indeed, this thing is a battleship, and Bernanke and King are a pair of dwarfs trying to stop it with plastic knives.

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"If you look at the sheer scale of global stimulus this year, what shocks is how little has been achieved. China's exports were down 23pc in August; Japan's were down 36pc; industrial production has dropped by 23pc in Japan, 18pc in Italy, 17pc in Germany, 13pc in France and Russia and 11pc in the US."

its almost as if our glorious leader has got the whole world up to their neck in debt for the sake of him winning an election in the uk which he's very likely to lose anyway, reminds me of having a childhood friend on drugs who gets you hooked on them too, then you both end up in the gutter together

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Guest The Relaxation Suite

Some other Deflationistas! Daddy Bear et al base their entire prediction of hyperinflation on the idea that governments will continually increase the printed money supply in the face of growing inflationary pressure until we have Weimar-style chaos. Ridiculous. QE measures have not been enough to reverse much of the deflationary pressure system blowing our way and all the politicos know it - look at the above post and the examples of demand destruction, etc. Look at oil falling 10% in a few days!

I expect a major and fairly imminent equities drawdown by the masses. Insider traders are already exiting the markets - look at the buyer/seller ratios in the Dow recently. Cash is King and Daddy Bear is Wrong (Sorry DB!)

Edited by D-503

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Some other Deflationistas! Daddy Bear et al base their entire prediction of hyperinflation on the idea that governments will continually increase the printed money supply in the face of growing inflationary pressure until we have Weimar-style chaos. Ridiculous. QE measures have not been enough to reverse much of the deflationary pressure system blowing our way and all the politicos know it - look at the above post and the examples of demand destruction, etc. Look at oil falling 10% in a few days!

I expect a major and fairly imminent equities drawdown by the masses. Insider traders are already exiting the markets - look at the buyer/seller ratios in the Dow recently. Cash is King and Daddy Bear is Wrong (Sorry DB!)

So what is to stop them increasing their QE efforts so that it does make a difference? A devaluation in the currency is the answer to that question. But Mervyn King has already said that he regards devaluation as a good thing.

Also I am interested in your view that there will be "equities drawdowns" soon. What reason please?

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Unemployment benefits have masked social hardship unto now but these are starting to expire with cliff-edge effects.The jobless army in Spain will be reduced to €100 a week; in Estonia to €15.

Strewth! Unemployment benefit reduced to £92 a week in Spain. No wonder they call it the Costa del Dole ! What's it here? £55.65 ?

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Strewth! Unemployment benefit reduced to £92 a week in Spain. No wonder they call it the Costa del Dole ! What's it here? £55.65 ?

In Ireland, it's 209 euros. That's about £190 at todays exchange rate. :o

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Guest The Relaxation Suite

Thread Killer

I don't think saying the FTSE will be well under 4000 before Christmas is particularly outrageous. QE cannot be continued. It is not working and it is nowhere near powerful enough to stop this deflationary juggernaut. Brown, Obama et al do not want their names in the same chapter as Robert Mugabe. Better for them to go down as being dragged down by global deflation than be remembered as that. You watch - they'll back away from these stimulus plans over the next few months.

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Guest The Relaxation Suite
In Ireland, it's 209 euros. That's about £190 at todays exchange rate. :o

Like I said elsewhere - I'm only half kidding when I say the unemployed will be given peanuts soon. The British Government is a bankrupt scandal. Deflationary forces are a coiled spring right now in Europe and the US. Welfare is already being cut in the UK - and by a Labour Government. This little holiday from reality everyone's been enjoying over th epast few months is over. The average house price IMHO will be closer to 50k than 150k by this time next year.

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He's a cheery sort Ambrose.

Anyone know how GB's exports compare?

Gordon Brown has exported quite a bit of bullsheet and a fair number of deaths

Edited by 51%deposit

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Some other Deflationistas! Daddy Bear et al base their entire prediction of hyperinflation on the idea that governments will continually increase the printed money supply in the face of growing inflationary pressure until we have Weimar-style chaos. Ridiculous. QE measures have not been enough to reverse much of the deflationary pressure system blowing our way and all the politicos know it - look at the above post and the examples of demand destruction, etc. Look at oil falling 10% in a few days!

I expect a major and fairly imminent equities drawdown by the masses. Insider traders are already exiting the markets - look at the buyer/seller ratios in the Dow recently. Cash is King and Daddy Bear is Wrong (Sorry DB!)

Perhaps.

But Ambrose is (again) calling for more printing. Read the rest of the article. Excerpts:

Yet hawks are already stamping feet at key central banks. Are they about to repeat the errors made in early 2007, and then again in the summer of 2008, when they tightened – or made hawkish noises – even as the underlying credit system fell apart?

I cited monetarists in July 2008 warning that the lifeblood of the Western credit was "draining away". For whatever reason (the lockhold of New Keynesian ideology?) the Fed missed the signal. So did the European Central Bank when it raised rates weeks before the Lehman collapse, blathering about a "1970s inflation spiral."

Whether you see a credit crunch in Euroland depends where you sit. It is already garrotting Spain. Germany's Mittelstand says it is "a reality", even if not for big companies that issue bonds. The Economy Ministry is drawing up plans for €250bn in state credit, knowing firms will be unable to roll over debts. Bundesbank chief Axel Weber sees no crunch now, yet fears a second pulse of the crisis this winter. "We are threatened by stress from our domestic credit industry through the rise in the insolvency of firms and households," he says.

Draw your own conclusion. Western central banks will have to "monetize" deficits on a huge scale to stave off debt deflation. The longer they think otherwise, the worse it will be.

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Guest The Relaxation Suite
Perhaps.

But Ambrose is (again) calling for more printing. Read the rest of the article. Excerpts:

Ambrose is caling for it because he knows what's coming. QE is like trying to repel a cyclone by farting in its general direction.

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Strewth! Unemployment benefit reduced to £92 a week in Spain. No wonder they call it the Costa del Dole ! What's it here? £55.65 ?

But do they get housing benefit or mortgage interest paid on top?

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the trouble with reducing lending is that banks will find it harder to trade through their problem.

deflation always has an end....inflation and return to growth. bankers, however, cant make their bonuses, politicians dont get their new jobs....

tricky call.

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the trouble with reducing lending is that banks will find it harder to trade through their problem.

deflation always has an end....inflation and return to growth. bankers, however, cant make their bonuses, politicians dont get their new jobs....

tricky call.

Well, yeah but the two curbs on this are the voters (who in the USA are generally armed) and more importantly the bond markets.

Ultimately whether you are an inflationista or deflationista depends upon who you think has most efficacy - the politicians or the market. Will the politicians bust the market, or will the market bust the politicians?

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Indeed, this thing is a battleship, and Bernanke and King are a pair of dwarfs trying to stop it with plastic knives.

Actually these two chaps have an ability to infinitely increase the money supply.

Thing is, you need to get that money into the economy. Open market operations wont do that on their own unless they overpay for assets, which they are probably doing.

In order to give the system a monetary blast of legendary proportions, what you need to do is run a fiscal deficit paid for with printed money rather than government debt.

Ironically, a lot of the UK debt is now owned by the Bank of England, and could therefore be cancelled. If I were Prime Minister, I would cancel the debt and finance my deficit with printing for a while, even if I didnt have an election coming up.

If you are reading this in the Eurozone by the way, be afraid, very afraid, cos you cant print.

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But do they get housing benefit or mortgage interest paid on top?

That's a very interesting question. I have no idea, but suspect that the difference between Britain and the rest of Europe is that Britain has a labyrinthine system of multiple benefits that all need to be claimed / administered separately, whereas other countries have simpler systems that pay out large amounts at the start and then taper off over time. In Britain the system probably works the other way, you start off with very little and as you get to know the system you can gradually extract more and more from it.

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Strewth! Unemployment benefit reduced to £92 a week in Spain. No wonder they call it the Costa del Dole ! What's it here? £55.65 ?

The spanish government rushed through a proposal so that the unemployed get 50 to 60% of salary for 18 months then 450 euros a month unlimited duration after that.

I was in Barcelona recently. Have to say I was very surprised at how busy and bustling the restaurants and bars were despite apparent 40% youth unemployment and 20% general unemployment.

Even taking the weak pound out of the equation food was expensive (and everything else).

However, the whole place just feels happy. The sun is shining. People are outside drinking coffees and chatting away etc etc.

I know this is meant to be the worst financial crisis since the great depression but really life seems to be going on as normal. Even if there is massive deflation I still think life will go on as normal and nothing should be feared.

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Actually these two chaps have an ability to infinitely increase the money supply.

Thing is, you need to get that money into the economy. Open market operations wont do that on their own unless they overpay for assets, which they are probably doing.

In order to give the system a monetary blast of legendary proportions, what you need to do is run a fiscal deficit paid for with printed money rather than government debt.

Ironically, a lot of the UK debt is now owned by the Bank of England, and could therefore be cancelled. If I were Prime Minister, I would cancel the debt and finance my deficit with printing for a while, even if I didnt have an election coming up.

If you are reading this in the Eurozone by the way, be afraid, very afraid, cos you cant print.

JUst print money, Each person gets enough to clear all their debts including mortgage. Then sit back and wait.

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Ambrose is caling for it because he knows what's coming. QE is like trying to repel a cyclone by farting in its general direction.

QE is all about propping up the banking system by plugging holes in their balance sheets caused by bad debts. The problems is that the politicians and their treasury advisers are under the delusion that the financial institutions and the economy are the same thing which they are not.

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That's a very interesting question. I have no idea, but suspect that the difference between Britain and the rest of Europe is that Britain has a labyrinthine system of multiple benefits that all need to be claimed / administered separately, whereas other countries have simpler systems that pay out large amounts at the start and then taper off over time. In Britain the system probably works the other way, you start off with very little and as you get to know the system you can gradually extract more and more from it.

Have a look at this for a snapshot of the great benefits bonanza in the UK:

http://ourdailydebt.wordpress.com/2009/09/...ernment-giveth/

My guess is that maybe a majority of UK women, whether through benefits or public sector employment, are hitched to the state.

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Actually these two chaps have an ability to infinitely increase the money supply.

And the bond markets have an ability to crash the system.

And that doesn't include the wilder shores of possibility, such as the Chinese making threatening military noises if this sort of thing is considered.

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