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2008 - Just A Baby - 2011 - The Mother - Not A Bank A Govt To Fail

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I think this is key:

2. The error of inflation targeting. "In a dynamic economy, with constant innovation, prices often decrease. Let's assume that the real underlying costs fall by 2 per cent, due to increased efficiency. But this development could be counteracted by an increase in the money supply so that price tags in stores indicate a price increase of 1 per cent. The central bank is likely to grab the wrong end of the stick, by concluding that there is no inflation worth mentioning. This will prompt it to cut rates."

Sometimes, the world just gets more efficient – and it should mean falling prices. Norberg quotes James Grant, editor of Grant's Interest Rate Observer (which was calling the asset bubble by its name from 2003 on) in noting that "the price of a basket of good exposed to international competition had fallen by 31 per cent in the years prior to 1886, before the United States had a central bank." As Grant says: "falling prices are a natural byproduct of human ingenuity. Print money to resist the decline, and the next thing you know there's a bubble."

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Surprised there are not more comments on this one - it was a good read. I especially liked No. 10.

10. We may have tried to fix the old Ponzi scheme with a new one. “In the original Superman film, the hero rescues Lois Lane as she falls from a skyscraper. ‘Don’t worry, ma’am, I got you,’ he says, midair. ‘You got me? Who’s got you?’ she replies. This is the question that no one is asking now. If China is lending to us, who is lending to China? If the governments are saving the banks, then who will save the governments? If the European Union is offering a safety net, who would be there to bail out the EU? There are other questions not being asked: which country, in recent economic history, has successfully borrowed its way out of a debt crisis?”
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6. The Irish bailout will not be the last of the sovereign debt crisis. “Greece and Ireland aren’t just illiquid, they are insolvent — and nothing is solved by taking new, bigger loans when they can’t pay the old ones. If Ireland or Greece default on their debt, forcing creditors to take steep losses, it might spook the markets and pull out a thread that unravels the garment.”

Clearly the author doesn't understand these are Ocean Finance roll up loans taken out over a longer term meaning they can afford them and keep on spending, they've taken out a little extra for a new holiday and new car. Lovely jubbly.

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