The Brink

[Badlad1967]

LOL What a load of Drama Queens !!

At the end of the day it will hardly effect your man in the street one jot.

What they are talking about here is a load of banks losing a load of money, some of them will go to the wall, stock markets will fall by about 25%. We will have emergency meetings, the Chinese will get involved and for a week we will have "economic uncertainty" but Brian will still be selling his bread in the bakers and Susan will still work Saturdays down Sainsburys.

When the dust settles we will have some people losing billions in investments/pensions, a load of out of work bankers, credit will cease for a month, a few Woolworth type businesses will go to the wall.....nothing extraordinary, no armageddon type scenario.

I still hear people talk about the HUGE financial disaster of 2008 !!! What happened? It didn't effect me one bit, if anything I was begging for a little austerity, we needed to end our debt addiction. I havent noticed anything change, I still struggle to book a table at any of the restuarants in my town on a weekend, shops seem packed, new 4x4's still everywhere, every banker/city type I know still has a job or got a new one within a few weeks.

This Brink is only the Brink if you are in that financial industry and only really then if you are at the high end. Cameron, Cable, Peston, IMF etc are spending their days with these people and the panic is more to do with the party coming to an end rather than any doomsday scenario.

Gold star for that post....

It's getting boring all this "the end is nigh" and "life will end as we know it" being spouted out by our politicians.

Oh another one.... "time is running out..... "

Oh phuck off

[JimDiGritz]

Take World War two; the UK stood alone for a while, its supply links massively cut yet it carried on and people did not stave in fact I’ve read they were the healthy over that period than before the war.

People are incredibly resourceful and they will find a way, clear the financial departments out, let the engineers in, maybe we can return to barter for a while, if there’s a will there’s a way..

In the summer of 1939 the estimated population of Great Britain (ie. England, Wales and Scotland) was 46,467,000 (46 Million 467 Thousand).

Today it stands around 62 Million.

In 1939 we were a nation of make do and mend. Our food chain was local, with virtually zero food miles for the staples of wheat, milk and eggs.

Today we have a highly efficient food industry which operates on the basis of comparative advantage - it is more efficient to grow corn fed meat in Argentina and import it than to have beef cows grazing in Sussex. This system has taken decades to refine and can be modelled in an incredibly detailed way. It is baked into our financial system, our retail system and our middle class psyche.

If you believe that this highly complex and vulnerable system (which has NO inherent safeguards against a black swan event) can ride out a complete financial shutdown, or a massive oil supply shock, then you are drinking the kool aid.

[Riedquat]

Quite honestly if we all starve it'll serve us right for being so incredibly stupid as to manage to starve ourselves when there haven't been any crop failures and the people and machines required to grow and move the food about are still there and in working order. If we starve it'll be because people are sitting around not doing the work that needs doing for no sound practical reason whatsoever. That's Darwin Award territory.

Fortunately people aren't that stupid. They'll moan, grumble, and complain but do the essentials rather than starve no matter what some half-baked economic ideas say should be happening.

Today we have a highly efficient food industry which operates on the basis of comparative advantage - it is more efficient to grow corn fed meat in Argentina and import it than to have beef cows grazing in Sussex. This system has taken decades to refine and can be modelled in an incredibly detailed way. It is baked into our financial system, our retail system and our middle class psyche.

Yet we're still producing more from our farmland than ever. Fine, it might mean more gruel and less beef, and even though then we wouldn't be self-sufficient in food (not good, and something that we should aim for, but not a complete disaster either) it's not that far over the channel.

Edited September 23, 2011 by Riedquat

[Redcellar]

I’ve noticed terms like ‘We are on the brink’ and ‘we are staring down the barrel of a gun’ being used a lot recently by various Political leaders and bankers.

Anyone have an idea what this actually means? Are we looking at a mass extinction event or a lot of bankers missing out on their Christmas bonus?

The natural resources we need are all still there, the knowledge is there, things should more or less bump along in their normal way…

Didn't he say "we aren't staring down the barrel of a gun"?

[smiffy1967]

Quite honestly if we all starve it'll serve us right for being so incredibly stupid as to manage to starve ourselves when there haven't been any crop failures and the people and machines required to grow and move the food about are still there and in working order. If we starve it'll be because people are sitting around not doing the work that needs doing for no sound practical reason whatsoever. That's Darwin Award territory.

Fortunately people aren't that stupid. They'll moan, grumble, and complain but do the essentials rather than starve no matter what some half-baked economic ideas say should be happening.

Yet we're still producing more from our farmland than ever. Fine, it might mean more gruel and less beef, and even though then we wouldn't be self-sufficient in food (not good, and something that we should aim for, but not a complete disaster either) it's not that far over the channel.

Hmm

Imagine a massive oil supply shock

we would be phucked - our internal food miles are something like 18 billion miles a year

I think society would quickly fall into chaos and riots

[Biddyboy]

I can't see the markets crashing hard enough to alter the earth's orbit around its star, so no, not the end of the world.

[smiffy1967]

When I worked for Tesco, we calculated the lorries from one depot did the equivalent of driving to the moon and back in a year!

LOL

Do you think COBRA have thought about such a situation? (one for Kurt i think)

[Traktion]

Traktion,

I hope you are right, I fear you are not. The towering achievement of civilisation, the supply chains that bring us our wealth, rely on credit and need to be used in order to be sustained. If they collapse, and the people in them stop working because they are not paid for example, those chains might break and it could prove difficult if not impossible to get them back together again. The huge amount of specialisation in the world provides huge productivity, but it comes with a price, massive interdepence. If what you are dependent on ceases to be, then your node in the supply chain ceases to function, and so on.

There is more danger here than you think.

What we have currently is unsustainable, so it's going to have to change no matter what. There is only so much can kicking that can be done, when the underlying fabric is decaying for inevitable reasons.

I have no problem with credit being used, but it has got way out of control. The world needs to breath both in and out - you can't keep inflation without needing to exhale again at some point. Making bad promises good doesn't solve the problem that bad promises were made in the first place; individuals need to take responsibility for bad promises and they can't all be socialised, while the gamblers rake in the money.

Ofc, this isn't going to be painless, but once the poison has been purged, we can start over afresh. All of those bad, unsustainable policies, the bad banks, the malinvestment will be washed away. I'm sure there will be turmoil and I hope it doesn't lead to war (!), but I think our kids would thank us for it in the long run. I doubt they would thank us if we did nothing but saddle them with debt.

[Traktion]

LOL What a load of Drama Queens !!

At the end of the day it will hardly effect your man in the street one jot.

What they are talking about here is a load of banks losing a load of money, some of them will go to the wall, stock markets will fall by about 25%. We will have emergency meetings, the Chinese will get involved and for a week we will have "economic uncertainty" but Brian will still be selling his bread in the bakers and Susan will still work Saturdays down Sainsburys.

When the dust settles we will have some people losing billions in investments/pensions, a load of out of work bankers, credit will cease for a month, a few Woolworth type businesses will go to the wall.....nothing extraordinary, no armageddon type scenario.

I still hear people talk about the HUGE financial disaster of 2008 !!! What happened? It didn't effect me one bit, if anything I was begging for a little austerity, we needed to end our debt addiction. I havent noticed anything change, I still struggle to book a table at any of the restuarants in my town on a weekend, shops seem packed, new 4x4's still everywhere, every banker/city type I know still has a job or got a new one within a few weeks.

This Brink is only the Brink if you are in that financial industry and only really then if you are at the high end. Cameron, Cable, Peston, IMF etc are spending their days with these people and the panic is more to do with the party coming to an end rather than any doomsday scenario.

A true 2008 collapse was averted by sovereigns borrowing to bail out the insolvent banks. The sovereigns are now insolvent, so who is going to bail them out?

While I think life will continue and a new, better direction will come out of it, I think there will be more changes than you expect. The banks were 3 hours from closing last time (according to Darling), so what will happen this time now the bailout money has run out?

I doubt life will carry on as normal when the ATMs don't cough up any money and no transactions can be made electronically or in the banks either. The realisation that pensions are dust, that savings were just malinvestment and that houses are just a pile of cheap bricks would be pretty life changing for many, I suspect. Then you have all of the businesses, built on the back of loans against inflated property prices, who will be unable to borrow and expand.

However, the wind of time will resolve the above issues. Nature will still function as it always has and a clean slate will represent a fresh start. That is something to look forward to.

[Riedquat]

Hmm

Imagine a massive oil supply shock

we would be phucked - our internal food miles are something like 18 billion miles a year

I think society would quickly fall into chaos and riots

But does it have to travel that far, or is that simply the result of cheap transport enabling us to get whatever we want (rather than need)? How far does food move that's sold at a supermarket five miles from the farm it's grown in? Necessity will result in it moving not much more than 5 miles if it has to. If the supplies of anything get screwed for any reason other than real ones (i.e. natural disasters, running out etc.) I still expect necessity to triumph over finance. People won't be able to stuff themselves with any food they fancy from anywhere in the world, but it'll get grown and transported to where it needs to be.

[Traktion]

But does it have to travel that far, or is that simply the result of cheap transport enabling us to get whatever we want (rather than need)? How far does food move that's sold at a supermarket five miles from the farm it's grown in? Necessity will result in it moving not much more than 5 miles if it has to. If the supplies of anything get screwed for any reason other than real ones (i.e. natural disasters, running out etc.) I still expect necessity to triumph over finance. People won't be able to stuff themselves with any food they fancy from anywhere in the world, but it'll get grown and transported to where it needs to be.

Exactly. Bananas may go up in price, as may meat, but being vegetarian and not eating exotic fruit wouldn't kill us.

Likewise, many could work from home if the commute became too dear. Alternatively, people could move closer to their place of work. Maybe more will cycle/walk/bus/car share? Then again, there may be all sorts of inventions that come out of necessity - if oil becomes too expensive, it will simple be avoided, leading to other alternatives to be discovered.

If there are mass defaults, debt repayment and taxation could change drastically for the better too. In Greece, people are already on the streets burning tax request letters... no matter what the politicians ask them to do, they are powerless to enforce it, even if they bring out the tanks. The realisation of this could be as culture changing as the defaults themselves.

Change isn't necessarily bad, it's just different.

[PricedOutNative]

Good post!

We need to kick the parasites off, things could be much better for the average person if those con-men were not so influential.

LOL What a load of Drama Queens !!

At the end of the day it will hardly effect your man in the street one jot.

What they are talking about here is a load of banks losing a load of money, some of them will go to the wall, stock markets will fall by about 25%. We will have emergency meetings, the Chinese will get involved and for a week we will have "economic uncertainty" but Brian will still be selling his bread in the bakers and Susan will still work Saturdays down Sainsburys.

When the dust settles we will have some people losing billions in investments/pensions, a load of out of work bankers, credit will cease for a month, a few Woolworth type businesses will go to the wall.....nothing extraordinary, no armageddon type scenario.

I still hear people talk about the HUGE financial disaster of 2008 !!! What happened? It didn't effect me one bit, if anything I was begging for a little austerity, we needed to end our debt addiction. I havent noticed anything change, I still struggle to book a table at any of the restuarants in my town on a weekend, shops seem packed, new 4x4's still everywhere, every banker/city type I know still has a job or got a new one within a few weeks.

This Brink is only the Brink if you are in that financial industry and only really then if you are at the high end. Cameron, Cable, Peston, IMF etc are spending their days with these people and the panic is more to do with the party coming to an end rather than any doomsday scenario.

[plummet expert]

I’ve noticed terms like ‘We are on the brink’ and ‘we are staring down the barrel of a gun’ being used a lot recently by various Political leaders and bankers.

Anyone have an idea what this actually means? Are we looking at a mass extinction event or a lot of bankers missing out on their Christmas bonus?

The natural resources we need are all still there, the knowledge is there, things should more or less bump along in their normal way…

We all need debt forgiveness. We need to have the govts of the world call a 'stamp out debt conference' and all stamp on those pesky bits of paper which say they all owe soooooo much money it's unbelieveabubble. They can turn off the lecky to the central banks for a bit too so they can't keep on making up these electronic credits and all agree that instead of making it up they are borrowing actual money of worth, (when they are printing /desk top creating it/QE'ing), they all suddenly agree the pretence must stop and they forgive each others debts, strike them out and whatever sh** happens, happens. It won't be worse than carrying on pretending...promise

[aa3]

Yes when political orders fall apart as the western nations appear to be doing.. its only bad for the people with all the power and money in the current system. For the other 99% of the population life goes on as normal, or even gets better, after the purge and revolution happens.

One of the real fears is that banks go down, savings accounts wiped out. Sounds terrible until you realize most Brits have no savings.

Take a look at Argentina, they have gone under several times. But life seems pretty good there.

[mfp123]

an economy is the sum total of the amount of stuff that we do. wealth is the sum total of what other people will do for you.

if it collapses then it means everyone will be doing less, you can buy less for your money, you can get less things that you use to get.

your power and choices to do what you want gets reduced.

its like a social network, the more people participating the better, more convenient it is for everybody.

if youre friends werent on facebook (lets say lots of them got banned) it wouldnt have the same value (wealth) to you, even though youre still on it and not been affected.

you cut 20% of your closest friends off facebook and its more difficult for you to interact with them to do what you want.

the less people around that are doing stuff, the less they can do with/for you, so even if you earn the same, its still a reduction of your wealth if other people are affected.

Edited September 23, 2011 by mfp123

[leicestersq]

We all need debt forgiveness. We need to have the govts of the world call a 'stamp out debt conference' and all stamp on those pesky bits of paper which say they all owe soooooo much money it's unbelieveabubble. They can turn off the lecky to the central banks for a bit too so they can't keep on making up these electronic credits and all agree that instead of making it up they are borrowing actual money of worth, (when they are printing /desk top creating it/QE'ing), they all suddenly agree the pretence must stop and they forgive each others debts, strike them out and whatever sh** happens, happens. It won't be worse than carrying on pretending...promise

Does that mean we can ditch national insurance and cease paying state and civil service pensions?

[Fishbone Glover]

LOL What a load of Drama Queens !!

At the end of the day it will hardly effect your man in the street one jot.

What they are talking about here is a load of banks losing a load of money, some of them will go to the wall, stock markets will fall by about 25%. We will have emergency meetings, the Chinese will get involved and for a week we will have "economic uncertainty" but Brian will still be selling his bread in the bakers and Susan will still work Saturdays down Sainsburys.

When the dust settles we will have some people losing billions in investments/pensions, a load of out of work bankers, credit will cease for a month, a few Woolworth type businesses will go to the wall.....nothing extraordinary, no armageddon type scenario.

I still hear people talk about the HUGE financial disaster of 2008 !!! What happened? It didn't effect me one bit, if anything I was begging for a little austerity, we needed to end our debt addiction. I havent noticed anything change, I still struggle to book a table at any of the restuarants in my town on a weekend, shops seem packed, new 4x4's still everywhere, every banker/city type I know still has a job or got a new one within a few weeks.

This Brink is only the Brink if you are in that financial industry and only really then if you are at the high end. Cameron, Cable, Peston, IMF etc are spending their days with these people and the panic is more to do with the party coming to an end rather than any doomsday scenario.

+1

[Traktion]

Yes when political orders fall apart as the western nations appear to be doing.. its only bad for the people with all the power and money in the current system. For the other 99% of the population life goes on as normal, or even gets better, after the purge and revolution happens.

One of the real fears is that banks go down, savings accounts wiped out. Sounds terrible until you realize most Brits have no savings.

Take a look at Argentina, they have gone under several times. But life seems pretty good there.

Yup, this is very true.

However, some people think they have savings, when they are really just promises to repay. Pensioners who expected to live off the backs of the young, will find they will need to ask for help, rather than taking it.

TBH, the more disorderly the collapse the better for the average person too. If it's too organised, the rich get out before the exits collapse. This, ofc, we have seen plenty of since 2008 - this latest crisis has been thoroughly predictable, especially by those with money and brains (or advisers with brains).

People just need to let go. Let... it... go...

[Traktion]

an economy is the sum total of the amount of stuff that we do. wealth is the sum total of what other people will do for you.

if it collapses then it means everyone will be doing less, you can buy less for your money, you can get less things that you use to get.

your power and choices to do what you want gets reduced.

its like a social network, the more people participating the better, more convenient it is for everybody.

if youre friends werent on facebook (lets say lots of them got banned) it wouldnt have the same value (wealth) to you, even though youre still on it and not been affected.

you cut 20% of your closest friends off facebook and its more difficult for you to interact with them to do what you want.

the less people around that are doing stuff, the less they can do with/for you, so even if you earn the same, its still a reduction of your wealth if other people are affected.

You're forgetting about the rent seekers, here. The average guy works his **** off, to pay to keep the rich, wealthy. If you remove the rent seekers, you will lose little in the way of productivity - people will just have more money to spend.

To put it another way, GDP could perhaps half, but GDP per median capita could show little difference.

[A.steve]

I’ve noticed terms like ‘We are on the brink’ and ‘we are staring down the barrel of a gun’ being used a lot recently by various Political leaders and bankers.

Anyone have an idea what this actually means?

Forgive me if this is too pedantic...

The definition of "brink" in this context is "the upper edge of a steep or vertical slope" - and conveys the notion of fearful anticipation. I think it's relevant that Henry Paulson has written a book called "On the Brink: Inside the Race to Stop the Collapse of the Global Financial System".

"Staring down the barrel of a gun" conveys a similar notion of fear - though it is a more focused fear than merely being "On the brink" - as it suggests that the speaker feels they will be held personally accountable. It also conveys the idea that current reactions are all being made under duress.

I think those with a financial perspective will talk about economies being on the brink - whereas politicians whose reputations are at stake are more likely to feel that they are hostage to circumstances - and use the firearms metaphor.

The reality is that the financial system is 'holed below the waterline' (to use another cliché) and public figures are now recognising publicly that failure is inevitable in the context in which they made (implicit) promises. Banks are at a precipice because their business model failed to take into account their systemic importance to western capitalism - and, now, they are utterly dependent upon the largess of governments to support them. Politicians are at a precipice as they have one thing in common in western democracies - they are utterly dependent on capitalism appearing successful... and, if the banks collapse, this illusion vanishes - and if the banks are saved - this can only be done at the expense of abandoning free-market capitalism. There's a catch-22, and the political risks are growing all the time the politicians don't appear to be in control... making the outlook extremely bleak for them.

[winkie]

Forgive me if this is too pedantic...

The definition of "brink" in this context is "the upper edge of a steep or vertical slope" - and conveys the notion of fearful anticipation. I think it's relevant that Henry Paulson has written a book called "On the Brink: Inside the Race to Stop the Collapse of the Global Financial System".

"Staring down the barrel of a gun" conveys a similar notion of fear - though it is a more focused fear than merely being "On the brink" - as it suggests that the speaker feels they will be held personally accountable. It also conveys the idea that current reactions are all being made under duress.

I think those with a financial perspective will talk about economies being on the brink - whereas politicians whose reputations are at stake are more likely to feel that they are hostage to circumstances - and use the firearms metaphor.

The reality is that the financial system is 'holed below the waterline' (to use another cliché) and public figures are now recognising publicly that failure is inevitable in the context in which they made (implicit) promises. Banks are at a precipice because their business model failed to take into account their systemic importance to western capitalism - and, now, they are utterly dependent upon the largess of governments to support them. Politicians are at a precipice as they have one thing in common in western democracies - they are utterly dependent on capitalism appearing successful... and, if the banks collapse, this illusion vanishes - and if the banks are saved - this can only be done at the expense of abandoning free-market capitalism. There's a catch-22, and the political risks are growing all the time the politicians don't appear to be in control... making the outlook extremely bleak for them.

Sounds about right....interdependence on each other, leaning/relying on each other, who can save the day/world when neither can.

[Ungeared]

On the Brink? ....sods law, I have 2 tomatoes and half a dozen onions left from my gardens summer crop

[wonderpup]

Are we looking at a mass extinction event or a lot of bankers missing out on their Christmas bonus?

I'm not sure either the bankers or the politicians can distinguish between the two- To them saving the bankers is saving the world.

But in reality we all know the banks are backstopped by the state- so if they go down today and all creditors are wiped out they can then be brought back to life tomorrow as debt free institutions stuffed full of freshly created credit.

There is no reason the state can't issue it's own money- it only lent that power to the bankers anyway.

The notion that the banks are in any way autonomous is fiction and everybody knows it.

[Giordano Bruno]

I have a great idea for a Euro replacement....each country coiuld have their own "currency" and they could have an "exchange rate" between "countries".

That's a wonderful idea! They should have thought of that years ago!

[Meat Puppet]

Unless it comes via massive asteroid strike, super volcano or nuclear war collapse will be a long, make that very long, drawn out process. If it happens, say because of resource limitations, it will be so slow that you won't notice it and you will be just as happy or unhappy as you were 20 or 30 years ago when you had to live without ipods and ipads.

These financial shenanigans may make a difference to how many holidays you take in your retirement but they aren't much more important than that.