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Are We Overdue A 100 Year Recession?

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http://www.johncon.com/john/correspondence/010427005603.15373.html

Subject: Re: Recessions and Depressions are only a 20th century onwards

Date: 27 Apr 2001 07:46:39 GMT

The recession created by the South Sea fiasco was a biggie. Sir Isaac

Newton lost a fortune in it.

The collapse of the tulip market in the 17'th century almost destroyed

the Dutch economy, too-one of the largest financial institutions in

the world at the time-impacting the Dutch as an expansionist colonial

world power.

The world depression of the 4'th century, (which lasted almost the

entire century,) contributed significantly to the demise of the Roman

Empire, too.

Modern recessions seem to follow a Black/Scholes/Merton scenario:

http://www.johncon.com/john/correspondence/990215192020.29398.html

meaning that the likelihood of a recession lasting at least N many

years is about proportional to 1 / sqrt (N), and its magnitude will be

proportional to sqrt (N).

Although we do not have adequate data for more than a couple of

centuries, the duration of the economic depressions in the distant

past seem to follow a similar probabilistic distribution scenario-the

chances of a depression lasting at least a hundred years is about one

in ten, or we should one about once a millennia, and so on through the

depressions of recorded history. The durations, (from the historical

perspective,) fit the distribution fairly well-the magnitudes are

difficult, to quantify.

John

BTW, to put it in perspective, the Great Depression of the 1920's and

30's has about a chance of happening every several-to-many centuries,

and lasted about a decade, to a quarter of a century, (depending on

whether the GDP or DJIA data is used for the analysis.) The Roman

issue of the 4'th century was far worse, and derailed the world

economy. The bad news is that we are over due for such a scenario.

The good news is that there the chances of it happening in the

immediate future is the same as it has always been, (that's kind of

what B/S/M means-depending on who is telling the story, of course.)

> >From: Edward Flaherty

>

> >Not true. Documented recessions existed long before the 20th century

> >in the U.S. 1819, 1833, 1837, 1857, 1873, and 1893 were years of severe

> >recessions with a few smaller ones thrown in for good measure. In

> >addition, the 18th century saw numerous periods with depressed

> >business conditions (some which Ben Franklin described), but data

> >is too sparse from that era to be sure exactly when or how severe

> >they were.

> >

>

> I think, however, that the modern industrial cycle began around 1854 in the US.

> Prior cycles would have been more along the lines of the agricultural cycle,

> except maybe the 1837 depression that some consider as America's worst.

--

John Conover

Now here's a bearish premise could we be about to see a near 100 year recession?

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Now here's a bearish premise could we be about to see a near 100 year recession?

An interesting proposition. I guess that's about 3 generations of workers.

Well, this generation are screwed, and the next lot are via tuition fees taxes etc. So just one more generation to find to seal the deal!

Edited by cheeznbreed

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What recession?

Where I am (mainland europe, german speaking parts) the economy is booming, shops are full of people and stuff and the brief recession is already a distant memory.

It's the debt laden countries like the UK that still suffer, not the countries where people have managed their money sensibly.

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What recession?

Where I am (mainland europe, german speaking parts) the economy is booming, shops are full of people and stuff and the brief recession is already a distant memory.

It's the debt laden countries like the UK that still suffer, not the countries where people have managed their money sensibly.

You mean the Germans that have managed their money so well their banks lent it to the Greeks and Eastern Europeans?

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You mean the Germans that have managed their money so well their banks lent it to the Greeks and Eastern Europeans?

actually the germans havent lent much to E Europe relatively speaking, its the big swiss banks that are fcked if/when E Europe goes down the tubes

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What recession?

Where I am (mainland europe, german speaking parts) the economy is booming, shops are full of people and stuff and the brief recession is already a distant memory.

It's the debt laden countries like the UK that still suffer, not the countries where people have managed their money sensibly.

You mean lent it all to Spain, Ireland, Greece, Portugal etc etc and now refuse to see it wiped out?

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actually the germans havent lent much to E Europe relatively speaking, its the big swiss banks that are fcked if/when E Europe goes down the tubes

So, that rules out the Swiss Franc as a haven then.

With regards to Germany, they have got lots of that nice Spanish and Italian debt. If I was a German creditor and cast my mind back to the funny old Spanish and Italian bank notes with loads of zeros on them, I would be sweating.

Edited by Take Me Back To London!

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You mean the Germans that have managed their money so well their banks lent it to the Greeks and Eastern Europeans?

The banksters aren't the common people, banksters are banksters everywhere.

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actually the germans havent lent much to E Europe relatively speaking, its the big swiss banks that are fcked if/when E Europe goes down the tubes

http://www.economonitor.com/blog/2009/12/bank-collapse-in-austria-brings-debt-in-eastern-europe-center-stage/

This is what is commonly known as reckless lending and it happened in spades during the boom in Eastern Europe. Most of the actors are banks in Scandinavian and German-speaking countries. HGAA was most exposed to the former nations of Hapsburg empire, with the Balkans in first place on that list. The purchase of HGAA by BayernLB even after a global housing bubble had popped needs investigation and reminds me of the flyer taken by Hypo Real Estate in Ireland via its purchase of Depfa. And the fact that two large German institutions increased international exposure into Austria, the Balkans, and Ireland at the top of the market demonstrates the laxity in banking regulation globally.

http://www.telegraph.co.uk/finance/financialcrisis/4642259/Eastern-European-currencies-crumble-as-fears-of-debt-crisis-grow.html

“Investors are beginning to ask whether Germany is going to have to pay for the rescue of Eastern and Central Europe,” he said.

A report by Moody’s released on Tuesday said the region’s banks were coming under severe stress as the property bust combines with a rising debt burden. “Local currency depreciation is a major risk to East Europe banks,” it said.

There are contagion worries for Western banks that have lent $1.74 trillion (£1.22bn) to the ex-Soviet bloc -- split between $1 trillion in foreign loans and $700bn in local currency debt through subsidiaries.

Austria’s banks are the most exposed with the share of risk-weighted assets tied to the region reaching 54pc for Raffeisen and 38pc for Erste Bank. The exposure of Germany’s Bayern Bank is 48pc, Italy’s UniCredit is 45pc, and Swedbank is 29pc.

The region needs to roll over $400bn in foreign debts this year, equivalent to a third of total GDP, raising concerns that it may need a massive rescue programme from the International Monetary Fund and the European institutions.

I think there is enough exposure to cause a problem, although the Greeks are going to send the ship down.

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relative to the size of the economy it is not that much nlike Swiss/Austrian exposure relative to the size of the economies

Regarding the CHF query

ultimately, yes there is a risk in the CHF whilst risk remains in the big swiss bank themselves although at this moment in time the E European countries debt levels are paragons of virtue compared to the rest of Europe. Bankers have truly played their joker the world over, this depression is extraordinarily hard to retain wealth because financial conditions are so potentially changeable in practically every country, much more difficult than the 30s which was relatively straightforward and shortlived although that is in hindsight. Having said that whilst the big Swiss banks are deemed safe the CHF remains effectively a low beta play on gold.

If UBS particuarly and Credit Suisse fcked off tomorrow to the UK it would be a perfect hiding place here because Switzerland has a superbly balanced Economic, political, public sector and taxation system otherwise

Edited by georgia o'keeffe

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Now here's a bearish premise could we be about to see a near 100 year recession?

That's why I put a post up here a long time ago titled "demographics: rates to stay low for 100 years"!

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What recession?

Where I am (mainland europe, german speaking parts) the economy is booming, shops are full of people and stuff and the brief recession is already a distant memory.

It's the debt laden countries like the UK that still suffer, not the countries where people have managed their money sensibly.

German companies and brand names still doing relatively well does not necessarily mean it is uniformaly good for ALL Germans, don't fall into the trap of companies being the be all and end all. German wages remain stagnant and it will get worse with automation:

German Workers’ Wages Belie Country’s Rebound

BERLIN—Germany has surprised the world with a sharp acceleration in its economic recovery, but perhaps the least impressed by this feat are Germans themselves.

The German economy expanded a sharp 2.2% in the second quarter from the first—the fastest pace since reunification in 1990. But, despite the export-driven rebound, most German workers aren’t getting any richer.

One in five is working in the low-wage sector, defined as earning less than €9 (about $11.50) an hour. Nearly a third of the job openings are temporary and often badly paid.

Michael Wolff, a 45-year-old sound engineer from Berlin, earns €5 an hour producing radio plays when he has assignments, but he says he also needs social welfare to survive. „There is no economic upswing for me; there’s no work,“ he said. Working full time plus overtime could bring him about €1,000 a month, he said. „It’s an absolute disgrace that we can’t make a living with our work.“

Chancellor Angela Merkel’s government has hailed Germany’s „job miracle“ after whittling the jobless rate down to 7.6% of the work force, compared with unemployment levels of about 10% in the U.S. and France.

But the bulk of that reduction has come from the emergence of part-time jobs, often at low pay. That helps explain why German domestic demand has remained sluggish even as German exporters boast booming foreign orders. The disparity has drawn accusations from Germany’s neighbors, notably France, that it is exploiting the world recovery without contributing to global demand.

Average annual net income per employee has fallen steadily since 2004, reaching €15,815 in 2009, down from €16,471 in 2004. As part of the so-called Hartz IV labor-market overhaul program to support low-income groups, the government has spent €50 billion in welfare subsidies since 2005 for people who earn too little to make a living.

Lobby groups for low-paid and unemployed workers worry that an increasing number of jobs have to be subsidized. „Hartz IV has made it possible for companies to get their profit subsidies from the general public, with companies paying starvation wages while those affected need Hartz IV to survive,“ said Martin Behrsing, spokesman for the Unemployed Forum Germany.

Another measure for low-income workers is looking at people who earn two-thirds or less of the average income. By that measure, the number of low-paid workers increased by almost 2.3 million people to 6.55 million between 1998 and 2008, according to a recent study by the Institute for Employment and Qualification at the University Duisburg-Essen.

The Organization for Economic Cooperation and Development’s employment outlook report 2010 shows that 21.5% of Germans worked in the low-pay sector in 2008, up from 16% in 1998. In an international comparison, the share of low-paid workers remained unchanged at 24.5% in the U.S. and increased only slightly in the U.K. to 21.2% from 20.8%. The average among OECD countries is 16%.

„I think we have seen in Germany for quite a while now an expansion of the low-wage sector, since the mid, late 1990s,“ said Herwig Immervoll, an economist with the OECD, which is based in Paris. „There is an increase in the inequality in Germany. We see this in other countries too, but maybe not as much as in Germany.“

Duisburg-Essen University’s employment institute puts it even more starkly: „No other country has experienced a similar increase in the low-income sector over the past years and a differentiating of wages to the downside as Germany has,“ it says in its study.

Klaus-Dieter Friedrich, a 51-year-old master butcher from Wetzlar, in central Germany, ran his own business before he started working for a big company, which requires him sometimes to work as much as 70 hours a week without any extra pay or compensation time.

„The upswing hasn’t reached me. What I am witnessing is exploitation. There is more and more low-paid work. People don’t find work, and if so only as temporary work, which is a great mistake because it’s destroying the wage system,“ Mr. Friedrich said. „It might well be that the upswing has reached the big companies and that they are making more money, but it’s the opposite for the ordinary guy,“ he said.

Such sentiments are weighing on Ms. Merkel’s center-right government, whose popularity has been tumbling in opinion polls that increasingly favor the center-left opposition. One recent poll showed that four out of five Germans say they aren’t personally benefiting from the rebound.

Hubertus Heil, deputy parliamentary floor leader of the opposition Social Democrats, is angry about the increasing number of subsidized jobs and said a legally binding minimum wage is urgently needed. „It’s a shame that people who work full time have to put up with this,“ he said.

At present, Germany has no general minimum-wage level. Minimums do exist for specific sectors, such as for the construction, cleaning, waste and nursing sectors.

To match the minimum-wage levels in other European countries, Germany would have to introduce hourly minimum pay of between €5.93 and €9.18.

The DGB umbrella group of trade unions has called for an hourly minimum of €8.50. But others, such as the Ifo economic research institute, warn that this could result in the loss of 1.22 million jobs, largely among those earning low incomes.

Nelli Einstein, a 48-year-old from Berlin, has been selling clothes, bags, jewelry and tools for €1 apiece for the past two years. It sometimes takes her as long as a year to sell €10,000 of merchandise.

„People are doing badly and there is no money for luxury goods,“ Ms. Einstein said. „Things have gotten so bad that, where a year ago people in the flea market snapped up items costing €1, people are now bargaining and offer just 20 cents. Germans just don’t spend any money.“

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And I agree we could be still at the start of a 21st Century Crisis that mirrors the 3rd Century Crisis.

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  • 312 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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