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Roger Bootle Forsees War

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http://www.telegraph.co.uk/finance/comment/rogerbootle/8040080/Ireland-the-latest-casualty-in-a-grim-new-game-of-beggar-thy-neighbour.html

A period when anything seems possible and politicians can indulge their wildest dreams morphs into a period when the future looks irredeemably bleak and governments are reduced to impotence.

This is when countries compete over market share. If you cannot grow on your own then the way out is to grow at someone else's expense. In the 1930s such an approach was referred to as "beggar thy neighbour". There are several ways in which this game can be played: competitive devaluation, deflation (ie internal devaluation), the imposition of trade barriers - and war. The 1930s saw all four, roughly in that order.

Forestalling the transition to phases two and three (never mind the unthinkable phase four) requires more spending. But those who spent freely in the boom years cannot now spend any more; indeed, many are engaged in attempts to cut spending.

Meanwhile, those who can spend more won't. Something has to give. I am still looking for the way out but cannot see it. Please, someone, tell me that I'm blind.

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War what is it good for? Absolutely noth.........weellll..........asset destruction and population reduction actually.

Even a world war wouldn't solve the problems unless it was largely land based and conscription was restricted to the over 50s.

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Andy Grove of Intel has called for trade barries against China. The call is gathering support in the US.

Trade barriers will become trade wars will become cold war IMPO.

I believe the Chinese appoint a new young inexperienced politburo in 2012

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Meanwhile, those who can spend more won't. Something has to give. I am still looking for the way out but cannot see it. Please, someone, tell me that I'm blind.

They must be 'forced' to.

The most obvious way is 'default'. i.e. 'Rich' give up the part of the value of their assets, the Germans lose part of their 'savings' and China loses part of its 'surpluses'. Like any other creditor they will realise eventually that this is the only way they can continue in the game. This doesn't even appear to be disputed - the only open question now is the 'how'.

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They must be 'forced' to.

The most obvious way is 'default'. i.e. 'Rich' give up the part of the value of their assets, the Germans lose part of their 'savings' and China loses part of its 'surpluses'. Like any other creditor they will realise eventually that this is the only way they can continue in the game. This doesn't even appear to be disputed - the only open question now is the 'how'.

Better still, those with a surplus just choose to spend them. If default is inevitable otherwise, they would be wise to consider this carefully.

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Better still, those with a surplus just choose to spend them. If default is inevitable otherwise, they would be wise to consider this carefully.

It's not a surplus if it can be defaulted on.

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Keynes solution was to do away with currency markets and that rates between two currencies would be set with regard to the trade balance between them.

Not that hard is it. Where there is a will.

So, uh, how do you plan to prevent people from selling currencies to each other at 'unapproved' exchange rates?

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I thought about inventing a board game like Monopoly. All the pieces like money, property, bank and currency rates etc. would be there but no rules. The aim of the game would be to devise the international trading rules that kept everybody in the game.

So you would have a room of perhaps 200 teams of 4 people from Cambridge, Harvard, Oxford etc. and the team that would win would be the team that kept all the players in the game.

It actually wouldn't be that difficult to devise.

They would quickly realise that TRADE REQUIRES BALANCE.

Keynes solution was to do away with currency markets and that rates between two currencies would be set with regard to the trade balance between them.

Not that hard is it. Where there is a will.

The hardest part is recognising there is aand deficits problem and what it is. The second hardest part is regulatory capture by vested interests and the power of the strong to maintain the status quo.

The issue is not a new one. My late father wrote an investment paper on this subject for his firm of stock brokers (also long gone) back in the 1970s . I believe one of the ideas discussed by Keynes was that all trade currency surpluses and deficits would be dealt with via an International Clearing Union that would attempt to maintain equilibrium. The key point is that surplus nations under the system would be held just as accountable as debtors for balance in international trade. One related idea was that this international institution rather than national governments would authorise tariffs to eliminate the surpluses ( a kind of reverse WTO). This is a bit of novel concept for most people who have been indoctrinated to believe that debtors are primarily responsible for the breakdown of financial systems . Ironically Keynes ideas were not adopted mainly due to opposition from the USA who were then the worlds largest creditor nation. It would be interesting to know whether the Yanks are now changing their mind. Of course, the problem to a solution now as it was in the 1940s is mainly political. Many countries particularly in Asia are wedded to the ideas that comparative currency advantage is essential to their prosperity so will not come on board voluntarily. This means instead of having agreed mechanisms for settling these issues we have to endure huge financial crisis when the old order blows up with every country first trying to out devalue its neighbours currency ,and when that fails, going for out and out protectionism of its domestic markets

Edited by realcrookswearsuits

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The issue is not a new one. My late father wrote an investment paper on this subject for his firm of stock brokers (also long gone) back in the 1970s . I believe one of the ideas discussed by Keynes was that all trade currency surpluses and deficits would be dealt with via an International Clearing Union that would attempt to maintain equilibrium. The key point is that surplus nations under the system would be held just as accountable as debtors for balance in international trade. One related idea was that this international institution rather than national governments would authorise tariffs to eliminate the surpluses ( a kind of reverse WTO).

I like this in principle, but I fear an unintended consequence. With the competitive edge of trade removed (i.e. no benefit in making things efficiently to create margin, or to make them better to charge premium) because your margin will be tariffed away from you any way, countries will become inefficient, and developments and improvements will cease. The next thing that will happen is that countries will realise they do not even need to make things badly or inefficiently - a country needs only to export one sachet of dry roast peanuts to a country from which they have imported 20,000t of items, and the trade deficit gets tariffed away. As productivity declines, progress gets stuck in a timewarp, and poor performance is rewarded equally with good performance, the whole system degenerates and decays. The USSR and Eastern Block degenerated down the same spiral for similar reasons until ultimate collapse - the system proposed above would be a sort of global version of the old Eastern Block. It would probably take longer, and instead of ending in revolution would end in war. [if I was being pointed, I would also claim that Benefits Britain and supporting capitalist banks with socialist style handouts will also send us down the same route.]

Back to the global model - what happens internally in each country could go a couple of ways. One is that the government is altruistic and divides this income from trade tariffs between the population as a citizens' wage (as UAE currently does). The other rather more likely scenario is that the politicians and bankers divvy it up between themselves as bonuses and junkets. The internal population can perform tertiary industry services for one another, moving a fiat currency between them to pay for cinema tickets and estate agent fees. This currency is essentially worthless internationally because anyone accepting it has to pay an enormous tariff, so no-one will accept it, so the general population have no more foreign holidays.

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I like this in principle, but I fear an unintended consequence. With the competitive edge of trade removed (i.e. no benefit in making things efficiently to create margin, or to make them better to charge premium) because your margin will be tariffed away from you any way, countries will become inefficient, and developments and improvements will cease. The next thing that will happen is that countries will realise they do not even need to make things badly or inefficiently - a country needs only to export one sachet of dry roast peanuts to a country from which they have imported 20,000t of items, and the trade deficit gets tariffed away. As productivity declines, progress gets stuck in a timewarp, and poor performance is rewarded equally with good performance, the whole system degenerates and decays. The USSR and Eastern Block degenerated down the same spiral for similar reasons until ultimate collapse - the system proposed above would be a sort of global version of the old Eastern Block. It would probably take longer, and instead of ending in revolution would end in war. [If I was being pointed, I would also claim that Benefits Britain and supporting capitalist banks with socialist style handouts will also send us down the same route.]

Back to the global model - what happens internally in each country could go a couple of ways. One is that the government is altruistic and divides this income from trade tariffs between the population as a citizens' wage (as UAE currently does). The other rather more likely scenario is that the politicians and bankers divvy it up between themselves as bonuses and junkets. The internal population can perform tertiary industry services for one another, moving a fiat currency between them to pay for cinema tickets and estate agent fees. This currency is essentially worthless internationally because anyone accepting it has to pay an enormous tariff, so no-one will accept it, so the general population have no more foreign holidays.

Well you can point elsewhere - newbie :rolleyes:

Some brainwashed bullsheet in there! Also Masonic B.B.= 22 symbology!

In less than 2 years banks have been supplied with 10x the annual expenditure on UK Benefits.

Benefits have risen to the fore, why would you think - if you REALLY 'thunk' about it?

Perhaps unemployment has risen by MILLIONS in the last couple of years due to people thrown out of their jobs!

Also due to short termist "Service Economy" Govts & feudalistic, bonus chasing, industry 'captain' destroyers in the UK - after more of the fast buck!

Edited by erranta

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I wasn't saying Keynes solution was right. I was referring to people sitting down and thinking through the issues and coming up with rules as though it were a board game.

As a matter of fact I agree with you wrt Keynes 'solution'. But how hard can it be to devise a process of exchange and trade if starting with a blank piece of paper....and importantly no vested interest except one that states the winner devises rules such that everyone stays in the game. It really can't be that hard can it?

What if demographics proved to be one of the main antagonists and suggested that some for of forced eugenics was the answer?

Good dinner party game!

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I wasn't saying Keynes solution was right. I was referring to people sitting down and thinking through the issues and coming up with rules as though it were a board game.

As a matter of fact I agree with you wrt Keynes 'solution'. But how hard can it be to devise a process of exchange and trade if starting with a blank piece of paper....and importantly no vested interest except one that states the winner devises rules such that everyone stays in the game. It really can't be that hard can it?

The problem is, the solution requires some wise men and/or a system to devise who is charged what and by whom. I can't imagine it remaining impartial and I would be very suspicious of such a 'world government' given the job of implementing it.

To be honest though, we already have a mechanism to rebalance trade deficits/surpluses - defaults. Caveat emptor and all that... if one country wants to lend another a whole pile of cash, they need to accept that they may not get it back. The same goes at the national level.

I know there are political reasons why debts may want to be honoured, but it is easier to legislate whether the taxpayer will be on the hook for this or not. If it isn't then the country with a growing surplus would need to think twice before extending ever more credit to deficit countries. The same goes at the national level.

As I have banged on about here, time and time again - risk needs to be better appropriated. You can't and shouldn't have risk free lending (or credit) as we will inevitably end up with huge imbalances. Maybe it would help to have tariffs to stop the pressure building up too high in the first place, but the buck has to stop somewhere.

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War what is it good for? Absolutely noth.........weellll..........asset destruction and population reduction actually.

Even a world war wouldn't solve the problems unless it was largely land based and conscription was restricted to the over 50s.

Over 50's, huh? Seems a bit unambitious, what's wrong with the over thirties? The world will need repopulating, so the young will be obliged to stay at home and make babies. Something to pass the time and boost morale in the bunker during those long nuclear winter nights...

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Andy Grove of Intel has called for trade barries against China. The call is gathering support in the US.

Don't intel make chips in china?

What a strange thing for him to say.

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I wasn't saying Keynes solution was right. I was referring to people sitting down and thinking through the issues and coming up with rules as though it were a board game.

As a matter of fact I agree with you wrt Keynes 'solution'. But how hard can it be to devise a process of exchange and trade if starting with a blank piece of paper....and importantly no vested interest except one that states the winner devises rules such that everyone stays in the game. It really can't be that hard can it?

It's very easy if you let leave everyone alone and let them do it for themselves.

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Don't intel make chips in china?

What a strange thing for him to say.

You could argue he was just forced to play the same game as everyone else i.e. if they don't do it, their competitors who do will gain. I agree it's pretty wobbly on the moral front though!

Edited by Traktion

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  • 145 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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