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indirectapproach

On The Basis It's Default Then, What Happens?

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I was wondering if anyone wanted to take a swim into the uncharted waters of default.

I suppose that one way it plays itself out might be,

The government can't pay it's debt and defaults.

No one lends it any more.

The government runs out of money.

Pensions and salaries are only paid to the police and military.

Being a genuine 72 hours from anarchy a State of Emergency is declared.

The riots start.

Martial law is imposed.

The government requisitions food stuffs and other essentials , which are rationed for coupons printed by the government, which replace cash.

A parallel (Black) market emerges, which is used to justify more repressive internal security measures.

The spam and margarine scenario.

Or do we all get our wellies out to find our way through to some self-help, community based, post capitalist, utopian, River Cottage ..... err ....... 'guild'?

At least spam and margarine would provide one way of dealing with benefits culture.

I could imagine IED's (shurely I mean IDS) mouth watering at the prospect.

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It would be bad, but not that bad I think. See Argentina crisis 2000 for ref, it got pretty hairy, people died in the subsequent riots, but the country survived and is recovering - one could argue that the Argentine population are much more accustomed to national crises so maybe we would not cope as well, but on the other hand I do think the British character, if such a thing exists, is more obedient and calmer than latin types which would help in a proper crisis.

On another note I think the UK will not default because it can monetise its debts. The BoE holds 25% of all gilts - the government would 'default' on those first, so real creditors would not take a haircut. In other words the government could default on a large chunk of its obligations simply by removing something from the BoE balance sheet. no worries. Any inflation associated with this move has already happened cos the money used to buy those guilts is already in circulation somewhere or other.

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It would be bad, but not that bad I think. See Argentina crisis 2000 for ref, it got pretty hairy, people died in the subsequent riots, but the country survived and is recovering - one could argue that the Argentine population are much more accustomed to national crises so maybe we would not cope as well, but on the other hand I do think the British character, if such a thing exists, is more obedient and calmer than latin types which would help in a proper crisis.

LMFAO!

You havent read anything about Argentina have you?

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It would be bad, but not that bad I think. See Argentina crisis 2000 for ref, it got pretty hairy, people died in the subsequent riots, but the country survived and is recovering - one could argue that the Argentine population are much more accustomed to national crises so maybe we would not cope as well, but on the other hand I do think the British character, if such a thing exists, is more obedient and calmer than latin types which would help in a proper crisis.

On another note I think the UK will not default because it can monetise its debts. The BoE holds 25% of all gilts - the government would 'default' on those first, so real creditors would not take a haircut. In other words the government could default on a large chunk of its obligations simply by removing something from the BoE balance sheet. no worries. Any inflation associated with this move has already happened cos the money used to buy those guilts is already in circulation somewhere or other.

Even if you were correct, we now have a perfect storm of crises which are bringing nations, global credit and fiat currency to it's knees. This is very different to the macro-economic situation in 2000. Argentina would have been a lot worse if the rest of the world had sunk into monetary failure as well.

Edited by JimDiGritz

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On another note I think the UK will not default because it can monetise its debts. The BoE holds 25% of all gilts - the government would 'default' on those first, so real creditors would not take a haircut. In other words the government could default on a large chunk of its obligations simply by removing something from the BoE balance sheet. no worries. Any inflation associated with this move has already happened cos the money used to buy those guilts is already in circulation somewhere or other.

Putting new cash into circulation doesn't create inflation straight away, I doubt very much that we have seen the full inflationary effects of QE yet. Doubling the central bank balance sheet resulting in 3-4% inflation for a couple of years? I don't believe it. Even Bernanke has admitted that the liquidity should be removed at some point to prevent some serious inflation in the future.

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I raised this point a few weeks ago and looked at Argentina where the Middle Classes were wiped out via default - the super rich had got their money out of the country but the Middle Classes ended up discovering their savings were worth 70% less.

It does concern me that this might be an outcome for all us savers here.

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For what it's worth, I don't think the UK will default either.

I think the UK has more room for maneuver and is in the process of reacting more like the Irish to this thing than the continentals.

Hopefully the austerity packages presage the end of the denial and delusion stages of the response but on the one hand I fear and I really do quite fear this, that their austerity stuff is more bluff than substance.

And on the other hand the austerity will stifle the economic activity that might allow the Mediterraneans to keep ahead of their debt obligations.

Edited by indirectapproach

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I raised this point a few weeks ago and looked at Argentina where the Middle Classes were wiped out via default - the super rich had got their money out of the country but the Middle Classes ended up discovering their savings were worth 70% less.

It does concern me that this might be an outcome for all us savers here.

Your savings are already worth 25% less and the wingnuts in the papers are telling you this is "A Good Thing". What worries me is if you get your money out the UK (easy enough these days) it will crash wherever you put it. Then people will start buying anything at any price and a certain departed member of this forum will be laughing rather too loudly...

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Your savings are already worth 25% less and the wingnuts in the papers are telling you this is "A Good Thing". What worries me is if you get your money out the UK (easy enough these days) it will crash wherever you put it. Then people will start buying anything at any price and a certain departed member of this forum will be laughing rather too loudly...

Good game this innit.

The trick is to move from domino to domino and just hope you can get the timing right. I'm 97% in Jpy so haven't lost 25% btw.

Only a very small number of people will be able to buy houses without bank loans (please refer to title, this is a massive financial crash we're talking about) but large numbers will need to sell. It just points to a massive crash to me.

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It would be bad, but not that bad I think. See Argentina crisis 2000 for ref, it got pretty hairy, people died in the subsequent riots, but the country survived and is recovering - one could argue that the Argentine population are much more accustomed to national crises so maybe we would not cope as well, but on the other hand I do think the British character, if such a thing exists, is more obedient and calmer than latin types which would help in a proper crisis.

On another note I think the UK will not default because it can monetise its debts. The BoE holds 25% of all gilts - the government would 'default' on those first, so real creditors would not take a haircut. In other words the government could default on a large chunk of its obligations simply by removing something from the BoE balance sheet. no worries. Any inflation associated with this move has already happened cos the money used to buy those guilts is already in circulation somewhere or other.

Yes. In our case they will print away our debts and inflate it all away rather than default. Our currency will crumble against any other that is not doing that itself anyway (like the USD) and it will be expensive to go abroad or buy foreign goods, or a lot of things because too much needs to be imported here for our vast population. There would be shortgages and it would truly feel austere. Lot's of reusing old items like in the War. The highest personal bankruptcy rate ever - a few bank failures and the Govt will just take them over as bankrupt this time, reopen them as govt owned and not pump billions in to stop them going under. People will lose money. There would be high unemployment like Spain at 20%. Parts of the economy will be in full scale deflation whilst other matters like food and fuel will become every expensive. Lots of allotments to be revitalised next spring? We are now in nothing less than a war on debt both sovereign and personal. It will get better afterwards!

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Martial law is imposed.

A parallel (Black) market emerges, which is used to justify more repressive internal security measures.

The spam and margarine scenario.

Pre-'revolution' Portugal. The good old days that the dictators henchmen/women miss. The infrastructure is still in place.

A licence required for everything -- You certainly would go to gaol if you didn't have one for your cigarette lighter & dared to light up on the street & were spotted by the ever present GNR.

Secret rooms to hide your produce to avoid confiscation, unless you were one of the chosen few.

A visit in the night (& your disappearance & torture) if you spoke out against the regime.

OMG what am I doing here?!!

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Isn't the normal model,

Default, devaluation, austerity, reconstruction?

I think the problem with the Med is the Jermans are phobic about the devaluation bit.

I think that's likely to make things yet more difficult.

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Isn't the normal model,

Default, devaluation, austerity, reconstruction?

I think the problem with the Med is the Jermans are phobic about the devaluation bit.

I think that's likely to make things yet more difficult.

yeah, but where does the Ipad, facebook and X factor come into play.

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I raised this point a few weeks ago and looked at Argentina where the Middle Classes were wiped out via default - the super rich had got their money out of the country but the Middle Classes ended up discovering their savings were worth 70% less.

It does concern me that this might be an outcome for all us savers here.

Argentina had a dollar peg, the default came from the removal of this peg. Overnight, people who thought they had "as good as dollar" savings, found that they didn't. The situation would be similar in an ex-EZ country that switched its depositors out of euros.

That situation doesn't apply here. In real terms there's already been a 30% (or whatever sterling's decline is at the moment) "default" on the international purchasing power of UK deposits. Nobody is banging saucepans because UK savers were never promised $2 for every £1, they were promised £1 for every £1 and that promise can always be kept.

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"yeah, but where does the Ipad, facebook and X factor come into play."

Well, even if the revolution will not be televised, the default will.

And it will be posted on youtube

Edited by indirectapproach

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... no. 93: British farmers buy up all the available amphetamines, hunting ammo and night vision gear they can lay their hands on.

After all, they no longer have the option of bringing all them sheepses and cowses indoors at night.

And they got shot of all their farm servants, preferring the internal combustion engine and electricity.

A guy I know, for example, has in the last ten years or so gone from one good-sized tenancy to taking over at least three of the neighbours' spreads (at the behest of the feudal overlord, naturally. The losers were simply "pitten oot" as too old, too scruffy, not squeezing the max. rents out of the place and being grassed up by the factor, whatever).

Whereas he could previously have fairly easily surveyed his (perfectly adequate) domain from the steading, he now is so lean, mean and huge an operation that if there's any interference it'll mean him, the wife and the son-in-law sleeping in shifts and patrolling by quad bike over the vast Ponderosa they are responsible for.

The local "scheme" and its roaming herd of indigents is only separated from his farmhouse by a couple of fields and a precipitous "dene". I suppose they'll start by thieving neeps and hoiking tatties up by the shaws at night. Till they figure out where the gintraps and ultrasonic radar are, and how to whack a cow without making a noise. :lol:

[ed: argh, transposed "i" and "e". Better sort it or people'll start thinking I work in IT ]

Edited by Wario

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  • 152 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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