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Buy that man a beer.

There is a definite shift in the views expressed by Niall who at long last has caught up with me. I was disgusted at his biased point of view last year when he larded blame on the EU who clearly are not the 800lb gorrilla. The PIGs R US is exactly right and those who are still delusional (you know who you are) should be watching this and changing their views. The USA and UK really are the syphlillic whores spreading disease to the rest of the world.

ph34r.gif

wink.gif

OK well I like the shock factor - but there is a reason I make my points so strongly - Brits and Americans need their greedy noses rubbed in failure to ensure they are ready to take the medicine. That means huge contraction of public spending, of the order of 20%, and a house price collapse for the UK so that weak banks with poisonous mortgages are forced into receivership and overleveraged home owners are forced into foreclosure and bankruptcy if needed.

THE GREEDY AND FOOLISH SHOULD NOT BE REWARDED LIKE THEY ARE IN THE USA - MORAL HAZARD MEANS IMMORAL GOVERNMENT

Cheers.

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Thanks for that, very interesting. The main thing that bothers me about Ferguson is that he seems to only care about businesses and investors, never workers. Watch the Q&A at the end, he is all for driving down wage costs so that business can 'improve productivity' and 'increase efficiency'. One of the biggest and yet rarely discussed stories of developed economies since 1970 has been the continued fall in wages as a share of GDP. When workers are poorly paid, they will not buy things in the shops, and the owners of capital will make no profits. We filled the gap with credit cards and MEW for a while, but the average Western worker is maxed out with credit now. Henry Ford understood that there was no point in manufacturing cars that the production line workers couldn't afford to buy. There is a huge need for the cost of living in the West to fall relative to wages. I would argue that is the biggest disequilibrium that needs to be resolved for this crisis to end.

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Very interesting videos - both of them!

Interesting points:

- International bond markets seem key to these big collapses. It's interesting that Italy and Japan are highlighted as being safer, despite their high levels of debt, as the vast majority of their debt is held by their citizens. I was interested to hear about this, as I've been pondering over this too recently. Niall points out that this makes them less likely to have problems of capital flight, but I would equally suggest that it makes them less light to capital floods too - if you haven't built up an addiction of foreign money, then you won't get withdrawal when it disappears.

- Discussed leverage and how it makes the economy very fragile, much like Teleb has been saying. He says as a result of extreme efficiencies in distributing capital, we have created something which can't stand shocks.

- Mentions Katlikoff, saying that we need to take radical action now to cut spending and leverage. He has, of course, been the one pushing for Limited Purpose Banking (see sig) as well. Niall also backs the idea of LPB as a way to reduce the excessive leverage and fragility within the system.

- We have to make unprecedented cuts to our deficits and debt and are unlikely to escape without radical action. Says that the Tories have one hell of a job to do.

- Says debt can't be inflated away, as the bond investors are now too savvy. I'd read into that, that communications are just too efficient to be able to trick the markets too; the Internet leaves few places to hide for long.

- He is long on low debtor countries, but is increasingly thinking commodities (he mentioned oil and gold) may be the safer option. He attributes this to more people holding a higher percentage of their wealth in gold, due to historic precedence of fiat currencies failing. He thinks this may be in the process of happening too. :ph34r:

Much of the discussion is about the history of the bond markets and how to get out of our current debt crisis. Interestingly, there seemed to be an undertone that we have been too much like the hare, rather than more like the tortoise too. In the rush to consume today, we have let tomorrow burn. Slow and steady may be the better way to win the race, which validates my reflections over the last few months.

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Thanks for that, very interesting. The main thing that bothers me about Ferguson is that he seems to only care about businesses and investors, never workers. Watch the Q&A at the end, he is all for driving down wage costs so that business can 'improve productivity' and 'increase efficiency'. One of the biggest and yet rarely discussed stories of developed economies since 1970 has been the continued fall in wages as a share of GDP. When workers are poorly paid, they will not buy things in the shops, and the owners of capital will make no profits. We filled the gap with credit cards and MEW for a while, but the average Western worker is maxed out with credit now. Henry Ford understood that there was no point in manufacturing cars that the production line workers couldn't afford to buy. There is a huge need for the cost of living in the West to fall relative to wages. I would argue that is the biggest disequilibrium that needs to be resolved for this crisis to end.

Maybe I was reading between the lines, but I thought he was making that point throughout. He suggested that the attitude of consume today, rather than save for tomorrow was very much part of the problem.

In a globalised economy, you can't just pull the draw bridge up and keep wages high - too many other people in other countries want the same thing. We can debate over whether China is achieving through oppression, but Niall suggested that India doesn't suffer from that same accusation and are relatively free. Of course they want a bigger piece of the pie and our gluttony to live off credit, funded by their savings is a big part of the problem - we have built a rod for our own backs.

He also talked about a fragile, too efficient financial system, which fits in with your above comments.

Basically, he is talking about things from a macro level, which have a profound affect on the micro level which you are concerned with (rightly) above. IMO, you can only fix the problems from the macro level, as otherwise you will be pissing in the wind.

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India isn't really a good place to invest long term.

The wealth and increased food supply from their green revolution a few decades ago will be short lived. In order to turn the Punjab into the bread basket of India they started sucking on the ground water. The water table collapsed and they simply drilled deeper and deeper. The drilling rigs and pumps are getting exponentially more expensive, the water they are pumping out of the ground to put on crops is also brackish and full of salt. They are literally salting their own fields and making them unusable because of the quantity of salt they are pouring on them.

The ability to grow food there is getting very, very close to collapse (probably less than a decade) and when it does India will find it self unable to feed about 200 million people.

The government has adopted the rabbit in the headlights approach and is doing absolutely nothing to prevent it or adapt.

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Maybe I was reading between the lines, but I thought he was making that point throughout. He suggested that the attitude of consume today, rather than save for tomorrow was very much part of the problem.

In a globalised economy, you can't just pull the draw bridge up and keep wages high - too many other people in other countries want the same thing. We can debate over whether China is achieving through oppression, but Niall suggested that India doesn't suffer from that same accusation and are relatively free. Of course they want a bigger piece of the pie and our gluttony to live off credit, funded by their savings is a big part of the problem - we have built a rod for our own backs.

He also talked about a fragile, too efficient financial system, which fits in with your above comments.

Basically, he is talking about things from a macro level, which have a profound affect on the micro level which you are concerned with (rightly) above. IMO, you can only fix the problems from the macro level, as otherwise you will be pissing in the wind.

Yes the solutions are certainly macro, and you can't legislate higher wages when UK workers are competing with those in other countries. What you can do though, is to lower the cost of living for UK workers. Although we import a lot, most of what we consume is right here, especially the biggest expense of all - land. The other major expense that applies to people in the UK is UK tax. The government should stop trying to fight deflation and defaults, this is the cure that market forces are trying to administer and not the disease. The cost of living is too high, it needs to fall relative to wages so that people can both spend in the shops and save for their retirement. Impossible and irresponsible debts in the public and private sectors need to be allowed to default, not be paid by future generations who had nothing to do with them. In an ideal world, what should Cameron be doing with his first 100 days? Raise interest rates, remove taxpayer protection for bank bondholders and shareholders, start slashing mercilessly at the public sector, and if necessary default on part of the government debt. Liquidate, liquidate, liquidate. It would hurt a great deal, but we would hit bottom within 3 years instead of 30.

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Thanks for that, very interesting. The main thing that bothers me about Ferguson is that he seems to only care about businesses and investors, never workers. Watch the Q&A at the end, he is all for driving down wage costs so that business can 'improve productivity' and 'increase efficiency'. One of the biggest and yet rarely discussed stories of developed economies since 1970 has been the continued fall in wages as a share of GDP. When workers are poorly paid, they will not buy things in the shops, and the owners of capital will make no profits. We filled the gap with credit cards and MEW for a while, but the average Western worker is maxed out with credit now. Henry Ford understood that there was no point in manufacturing cars that the production line workers couldn't afford to buy. There is a huge need for the cost of living in the West to fall relative to wages. I would argue that is the biggest disequilibrium that needs to be resolved for this crisis to end.

The point you make is the most difficult and challenging of our time, but barely discussed by some. The world changed when countries outside the 'west' hitherto unable to manufacture started to do so and at wages we cannot compete with. Look at India, China, vietnam. Once they produce things we want to buy, like clothes or even cars, then the imbalance in wages from here to there is so large, how would you compete on those products. About 50% or more of the clothes and household goods in my house are made in the above countries.

The process of countries with low wages exporting to us is not going to stop! Germany produces highly regarded technical/engineered products and does very well. But I would NOT bet against China or South Korea coming up with ever more enticing cars/other household goods at better prices?

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The point you make is the most difficult and challenging of our time, but barely discussed by some. The world changed when countries outside the 'west' hitherto unable to manufacture started to do so and at wages we cannot compete with. Look at India, China, vietnam. Once they produce things we want to buy, like clothes or even cars, then the imbalance in wages from here to there is so large, how would you compete on those products. About 50% or more of the clothes and household goods in my house are made in the above countries.

The process of countries with low wages exporting to us is not going to stop! Germany produces highly regarded technical/engineered products and does very well. But I would NOT bet against China or South Korea coming up with ever more enticing cars/other household goods at better prices?

When we imported cheap goods from Asia, market forces pushing for equilibrium would ordinarly have meant that we would import their lower cost base at the same time (and costs in Asia would slowly rise to meet ours). Forget low inflation since the early 80s, the West should have had deflation for the last 25 years as Asia arrived as a manufacturing power. Instead we had 25 years in which companies imported cheap goods from Asia while borrowing and asset prices were pushed ever higher by falling interest rates courtesy of central banks. If you were a Western capitalist, you couldn't lose! The profit margins on buying goods manufactured by cheap Chinese workers and selling them to 'rich' Westerners using their ever-expanding credit limits were great! The real loser was the Western worker, who thanks to global wage competition saw his wages fall relative to living costs and made up the gap with increased borrowing to fund consumption.

It's not China's fault that Western workers have become steadily poorer. Western central banks could have stopped this process at any time by raising interest rates, which would have increased the cost of borrowing, prevented Westerners from shopping on credit, and driven deflation in the West, thereby giving Western workers a chance to work for a competitive wage in the global labour market without a huge loss in living standards. They chose not to do this, and instead sided entirely with Western owners of capital. Trouble is, the game of ever-expanding central bank credit is pretty much a Ponzi scheme, and it stops working when Westerners can no longer afford to service their existing debts, let alone take on new ones. The total debt to GDP ratio in the UK is now something like 450% across all sectors. We are fast approaching game over for the credit Ponzi, just like Mises said, where we get to choose whether we voluntarily forego further credit expansion and start cutting back with repayments and default, or alternatively go all out on currency destruction. So far, we are choosing the credit destruction route, but the end result will be the same. All that Ponzi credit in the form of mortgages, credit card debt, government bonds etc will soon be worth a whole lot less in real terms. That means the owners of capital will be a lot poorer, and the payments owed to the owners of capital by Western workers will be a whole lot less in real terms. That means a lower cost base for Western workers, and a chance to work for a competitive wage with a decent standard of living again.

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At last, some people who have watched the recording of Niall's presentation.You all pass over what I think was the most important point at around 6m.25s into the follow on Q&A. The old chap sat to Niall's right posits another scenario and mentions the cute cartoon where the chinese 'pull the plug'. This guy suggesting the USA will be the ones to pull the plug - that means stack up debt and then default on it. Here is the quote:"it's the natives not the foreigners who get the word first, see what's coming, and pull the plug leaving the foreigners holding the bag" This translates as 'americans see the bond market start to demand higher yields at a time when the USA cannot service more debt' , as a result, the USA and likely the UK will default on China and the EU.If you have read my earlier posts you will realize that I think this IS the strategy. If so, then the USAs elite have set course on an evil path.

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At last, some people who have watched the recording of Niall's presentation.You all pass over what I think was the most important point at around 6m.25s into the follow on Q&A. The old chap sat to Niall's right posits another scenario and mentions the cute cartoon where the chinese 'pull the plug'. This guy suggesting the USA will be the ones to pull the plug - that means stack up debt and then default on it. Here is the quote:"it's the natives not the foreigners who get the word first, see what's coming, and pull the plug leaving the foreigners holding the bag" This translates as 'americans see the bond market start to demand higher yields at a time when the USA cannot service more debt' , as a result, the USA and likely the UK will default on China and the EU.If you have read my earlier posts you will realize that I think this IS the strategy. If so, then the USAs elite have set course on an evil path.

China's holdings of American treasuries are actually pretty small, less than $1tn. US GDP is around $14tn, and the national debt is $13tn of which about $3tn is held overseas (excluding Fannie Mae and Freddie Mac, which are huge). Defaulting on foreigners alone will not fix America's problems. I expect the maths is similar for the UK. Domestic bondholders will very likely have to take a significant haircut too, and say bye bye future bailouts for the financials. Don't think governments would do it to their own people? Argentina did.

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Something to liven up a slow-news day for HPC. In essence - the end of empire.

http://www.piie.com/events/event_detail.cfm?EventID=152&Media

Well having sat through that excruciating bit of peacockery, the first phrase that springs to mind is that a watched kettle never boils.

While I agree with the stats presented, what is most important is the vast array of other material factors that were missing from his analysis, and the very short reach (not priot to about 1800) of his historical window.

I wonder if niall knows about nyquists theorem.

http://en.wikipedia.org/wiki/Nyquist_rate

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Well having sat through that excruciating bit of peacockery, the first phrase that springs to mind is that a watched kettle never boils.

While I agree with the stats presented, what is most important is the vast array of other material factors that were missing from his analysis, and the very short reach (not priot to about 1800) of his historical window.

I wonder if niall knows about nyquists theorem.

http://en.wikipedia.org/wiki/Nyquist_rate

Good point fergusson is a twerp

Those who can do

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Well having sat through that excruciating bit of peacockery, the first phrase that springs to mind is that a watched kettle never boils.

While I agree with the stats presented, what is most important is the vast array of other material factors that were missing from his analysis, and the very short reach (not priot to about 1800) of his historical window.

I wonder if niall knows about nyquists theorem.

http://en.wikipedia.org/wiki/Nyquist_rate

Ferguson masquerades as a historian but in fact fancies himself as a soothsayer using the entrails of the past to predict the future

He is also a fan of counterfactual history which basically means making up different endings for things like the First World War because you did not like what actually happened.

A showboater not a serious scholar

Edited by realcrookswearsuits

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Ferguson masquerades as a historian but in fact fancies himself as a soothsayer using the entrails of the past to predict the future

He is also a fan of counterfactual history which basically means making up different endings for things like the First World War because you did not like what actually happened.

A showboater not a serious scholar

quite so. I shall be expanding on this point about predictions and credible data in a forthcoming post.

one for the chartists and k-cycle types.

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At last, some people who have watched the recording of Niall's presentation.You all pass over what I think was the most important point at around 6m.25s into the follow on Q&A. The old chap sat to Niall's right posits another scenario and mentions the cute cartoon where the chinese 'pull the plug'. This guy suggesting the USA will be the ones to pull the plug - that means stack up debt and then default on it. Here is the quote:"it's the natives not the foreigners who get the word first, see what's coming, and pull the plug leaving the foreigners holding the bag" This translates as 'americans see the bond market start to demand higher yields at a time when the USA cannot service more debt' , as a result, the USA and likely the UK will default on China and the EU.If you have read my earlier posts you will realize that I think this IS the strategy. If so, then the USAs elite have set course on an evil path.

I don't think going short the US will work out in the long run, because of one simple phrase.

'Yes bitch? We have more nukes.'

The US are not afraid of making up pack of lies to invade and slaughter a million people and dumping thousands of tons of highly radioactive depleted uranium in all of Iraq's major cities, they can easily stoke nationalism up a notch to paint China as the evil and justify nuking them.

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I don't think going short the US will work out in the long run, because of one simple phrase.

'Yes bitch? We have more nukes.'

The US are not afraid of making up pack of lies to invade and slaughter a million people and dumping thousands of tons of highly radioactive depleted uranium in all of Iraq's major cities, they can easily stoke nationalism up a notch to paint China as the evil and justify nuking them.

the fact is who has more nukes is not relevant - the UK alone is quite capable of wiping north america off the face of the earth.

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At last, some people who have watched the recording of Niall's presentation.You all pass over what I think was the most important point at around 6m.25s into the follow on Q&A. The old chap sat to Niall's right posits another scenario and mentions the cute cartoon where the chinese 'pull the plug'. This guy suggesting the USA will be the ones to pull the plug - that means stack up debt and then default on it. Here is the quote:"it's the natives not the foreigners who get the word first, see what's coming, and pull the plug leaving the foreigners holding the bag" This translates as 'americans see the bond market start to demand higher yields at a time when the USA cannot service more debt' , as a result, the USA and likely the UK will default on China and the EU.If you have read my earlier posts you will realize that I think this IS the strategy. If so, then the USAs elite have set course on an evil path.

But China have been benefitting by accumulating US debt in order to grow their export markets and develop their economy.

They are the ones operating a dollar peg and effectively selling their goods below market value, taking advantage of employment arbitrage to ensure production is shifted from the US.

Their dollar (and euro) reserves and thus the dollar and euro (and to an extent UK) debts are the counter balance to this policy.

At some point those imbalances must be restored - It does not appear an 'evil path' for the US to default any more than it would be an evil path for Greece to default on its creditors, the German and French banks, who have operated a similar policy. i.e. exporting their surplus credit booms to the piggies.

What goes around comes around. For every yin there's a yang, the Chinese know this full well.

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What goes around comes around. For every yin there's a yang, the Chinese know this full well.

exactly. The chinese know they'll lose on their investment in US debt. However they hope they come out winners overall by having created a domestic, stable industrial society that is independant of the vagaries of western demand. Then they can go on from there to become the worlds largest economy.

Shame that they will get too old before they complete this programme, which is largely due to their own mistakes vis-a-vis their one child rule.

Oops.

Hence the desperate bubble they are building. They might well be able to fix all that in the medium term though.

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There is a huge need for the cost of living in the West to fall relative to wages. I would argue that is the biggest disequilibrium that needs to be resolved for this crisis to end.

Not really. Only land/housing is expensive; everything else is cheaper than it's ever been, and cheaper vs incomes than at any time in history or in most of the rest of the world.

The way to get richer is through high-value productive businesses generating real wealth. They have to compete both locally and globally, so their costs are always an issue. We've just been through 13 years of Labour "feelgood", with our wealth overwhelmingly directed towards consumers (and of course property) at the expense of investment in productive. In other words, not merely spending more than we earn, but also allowing our earning capacity to run down. Reversing that implies a sharp belt-tightening for consumers.

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  • 142 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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