Jump to content
House Price Crash Forum
Sign in to follow this  
interestrateripoff

China Syndrome: How The Slowdown Could Spread To The Brics And Beyond

Recommended Posts

http://www.theguardian.com/business/2015/aug/22/could-china-crisis-spread-to-emerging-markets

Tumbling share prices. A sell-off in commodity markets. Capital flight from some of the world’s riskier countries. Hints of a looming currency war. Financial markets ended last week in panic mode as fears emerged that the world was about to enter the next phase of the crisis that began eight years ago in August 2007.

Back then, the problems began in the developed world – in American and European banks – and spread to the rest of the world. The bigger emerging markets – China and India most notably – recovered quickly and acted as the locomotive for global growth while the west was struggling.

There was talk of how the future would be dominated by the five Brics countries – Brazil, Russia, India, China and South Africa – and by 11 more emerging market economies, including Turkey, Indonesia, Mexico and Nigeria.

That has happened. Emerging market countries are dominating the news – but for all the wrong reasons. And because, after years of rapid growth, they now account for a bigger slice of the global economy, a crisis would have more serious ramifications than in the past.

Emerging markets have a habit of causing trouble. For a quarter of a century after the Latin American debt crisis erupted in Mexico in 1982, the story was of a storm moving from the periphery of the global economy towards its core, the advanced nations that make up the G7. Mexico ran into fresh problems in 1994, there was an Asian debt crisis in 1997, and a Russian default in 1998 before the dotcom bubble burst in 2001. That proved to be a dress rehearsal for the near meltdown of the global financial system in 2007-08.

Now the focus is back squarely on emerging markets. The problem is a relatively simple one. In the post-Great Recession world, the tendency has been for all countries to try to export their way out of trouble. But this model works only if the exports can find a home, as they did when China was growing at double-digit rates.

There are so many potential flashpoints now, its impossible to predict which the likely candidate will be. However it's inevitable something will be the tipping point causing a crisis.

Share this post


Link to post
Share on other sites

Good times. The long awaited crash and return to reality is happening.

Still waiting for the government to step in and spoil it all again though. They can't help themselves.

Share this post


Link to post
Share on other sites

Good times. The long awaited crash and return to reality is happening.

Still waiting for the government to step in and spoil it all again though. They can't help themselves.

...not sure if the Government can intervene successfully in such a widespread crash....where could they 'spoil' it...as you suggest ..?

Share this post


Link to post
Share on other sites

Maybe the UK government could force banks to issue negative interest rates on all savings "products" they offer - forcing a spending spree in the economy. Couple that with capital controls preventing you from cashing out, but allowing only credit/debit card transactions - forcing you to spend, not save/hoard cash in another way. Could put off the effects of a crash for a few months, and essentially cripple savers who were waiting for a crash to spend? It would shake out the last drops of cash from all the patient savers. Then when the crash happens, at least we'll all be skint, eh?

Share this post


Link to post
Share on other sites

Maybe the UK government could force banks to issue negative interest rates on all savings "products" they offer - forcing a spending spree in the economy. Couple that with capital controls preventing you from cashing out, but allowing only credit/debit card transactions - forcing you to spend, not save/hoard cash in another way. Could put off the effects of a crash for a few months, and essentially cripple savers who were waiting for a crash to spend? It would shake out the last drops of cash from all the patient savers. Then when the crash happens, at least we'll all be skint, eh?

A reset would be much more palatable if no one was saving in currency. To be honest I don't see a way out from under this global debt without either hyper inflation (thus destroying currency savings) or debt jubilee. I am not sure if debt jubilee is preferable to wiping out so many peoples savings via hyper inflation. The effect on peoples savings if a write off debt occurs on a global scale? No idea to be honest.

Share this post


Link to post
Share on other sites

I agree that a crash would probably end up wiping out savers in one way or another - just don't see a crash happening "cleanly", and then the saver escapes hyperinflation, bail-ins, negative interest rates or even QE - and yes, I'm a saver (most of my wealth in savings) - just think....sod it, when a crash happens, we're all screwed.

Share this post


Link to post
Share on other sites

I agree that a crash would probably end up wiping out savers in one way or another - just don't see a crash happening "cleanly", and then the saver escapes hyperinflation, bail-ins, negative interest rates or even QE - and yes, I'm a saver (most of my wealth in savings) - just think....sod it, when a crash happens, we're all screwed.

Just think what can you do about saving some of your wealth in a vehicle that isn't going to devalued in such situations. Currency is the wrong vehicle for long term savings IMO. There are plenty of ways to store wealth other than keeping it in currency form in a bank keeping up with inflation. Best to spread it around and hope for the best. That way if currency does go to zero in a reset, you still have some wealth in one form or another.

Or yeah just say sod it and go all in on currency and hope for the best. Like I said I don't have a clue what a debt jubilee would do to savings. You might come out the other side a wealthy man.

Share this post


Link to post
Share on other sites

Same here most of my wealth is in cash, although I have a fair bit in gold and shares. No idea what they will do to try and prop everything up next time but I wouldn't take bail-ins or huge QE off the table. As WideAsleep says, spread it around and hope for the best. I have several bank accounts and have been looking for an easy way to hold cash in different currencies, so I'm not all in on the pound, like I was in 2008!

Share this post


Link to post
Share on other sites

Maybe the UK government could force banks to issue negative interest rates on all savings "products" they offer - forcing a spending spree in the economy. Couple that with capital controls preventing you from cashing out, but allowing only credit/debit card transactions - forcing you to spend, not save/hoard cash in another way. Could put off the effects of a crash for a few months, and essentially cripple savers who were waiting for a crash to spend? It would shake out the last drops of cash from all the patient savers. Then when the crash happens, at least we'll all be skint, eh?

......they have done this already with those building private pensions ...making it more attractive and easy to cash them in whenever ....but who will look after the people who cash in and have no pension when they retire ....but of course the idea now is not to retire ...that will save paying people pensions the biggest element of benefits and the easiest to manipulate....as we can now foresee.....keep working ..the only solution.... :rolleyes:

Edited by South Lorne

Share this post


Link to post
Share on other sites
keep working ..the only solution....

....in a country with falling productivity / demand-per-capita and net rises in population (fuelled by economic migrants) of around 400,000 per year. UK also has average age of death at late 70s. Then you have automation and impending economic crash scenarios all queuing up. So....asking people to work til they die - where's all the jobs and economic stability coming from to actually achieve this (never mind that people would want to work til they die....).

Share this post


Link to post
Share on other sites

I agree that a crash would probably end up wiping out savers in one way or another - just don't see a crash happening "cleanly", and then the saver escapes hyperinflation, bail-ins, negative interest rates or even QE - and yes, I'm a saver (most of my wealth in savings) - just think....sod it, when a crash happens, we're all screwed.

Renter savers have already been through a horror HPI situation for so many years, followed on by QE, 0.5%, FLS, Global QE, massive reflation of double bubble house prices.

That's punishment after punishment, while HPI heads drool on about their homes bought for £30K worth £650K today, and rubbing their hands about prospect of more HPI, and last few years doubling down into BTL.

Carney has been very reassuring that savers are safe. There's nowhere to go other than savings for me.

We make our own market decisions, and I am positioned, liquid vs hyperinflated bonehead UK house prices.

Share this post


Link to post
Share on other sites

Maybe the UK government could force banks to issue negative interest rates on all savings "products" they offer - forcing a spending spree in the economy. Couple that with capital controls preventing you from cashing out, but allowing only credit/debit card transactions - forcing you to spend, not save/hoard cash in another way. Could put off the effects of a crash for a few months, and essentially cripple savers who were waiting for a crash to spend? It would shake out the last drops of cash from all the patient savers. Then when the crash happens, at least we'll all be skint, eh?

If you think so. I think massive HPC and rebalancing. Do you not see where the problem is?

Daily Mail

Average UK house price to hit £780,000 by 2040, says leading think tank

Kilo Charlie, My World, 9 hours ago

We purchased a property in 1983 for £72,000.........today it's worth £650,000 plus. It's certainly possible and quite likely.

Sam, Bucks, 3 hours ago

Bought house in ,74 for 16k added extention about £8k now valued at £480k you do the maths?

Share this post


Link to post
Share on other sites

A reset would be much more palatable if no one was saving in currency. To be honest I don't see a way out from under this global debt without either hyper inflation (thus destroying currency savings) or debt jubilee. I am not sure if debt jubilee is preferable to wiping out so many peoples savings via hyper inflation. The effect on peoples savings if a write off debt occurs on a global scale? No idea to be honest.

It is always going to be hyperinflation as it starts slowly and delayed from its causes, so the blame might be falling on the innocent. It is therefore not only preferred by politicians, but also socially more acceptable. Not to mention that the banks can survive it.

Share this post


Link to post
Share on other sites

And it is also good for your new 200k mortgage, if you fixed the rate...

The willing £200K mortgage example I had in mind was for a house currently valued at £850K down to £275K ish, which requires HPC.

As in the last crash (last real HPC) when banks wrote volume new mortgages against crashed house prices, to get debt velocity back up. And in real HPCs before that.

The boomer sat on their £850,000 homes seeing no incentive to downsize are the ones who need to worry, not those of us who have a pittance in savings vs these house prices. We've already had the hyperinflation, in house prices.

In 1976 I was offered a house by the boss of the business next door an E.A it was in Burton on the Wirral very expensive and exclusive area, five bed bungalow four car garage 3 are garden, paddock, and large 7 acre field, it had a massive sandstone wall frontage with double gates at each end, he showed me brochure £59K it had been empty and overgrown for a few years I knew the place and laughed it him, he persisted and offered the keys and told me to have a look inside and around the back.

I took the wife for a look, massive gravel drive and frontage was knee deep in grass and the garfens were overgrown and inpenatrable, the inside of the house was huge the lounge was 46ft, the kitchen was old and dated with a rayburn and the huge bsathroom was antique with black tyling and what like a ships boiler room showet it had two sets of french windows one from the lounge and one from the master bedroom/dressing room leading onto a massive raised patio with steps to the gardens, the view across the river dee to north Wales was stunning, all the windows and french windows were old steel framed.

The wife loved it but it wanted a lot spent, I went back and told the guy no way at £59K, he opened a foulder and slid a letter out just as far as the heading HM Customs & Excise VAT Recovery was all I could see, bid me at it? okay £15K it want;s a fortune spending and a years work, he told me to piss off I was not going to nick it, it had been subject of a Court charging order and a four Court battle with the Wirrakls biggest Audi/VW dealer who had gone bus. I eventually went £30 and got it, the wife spent a year and £35k (thirty years ago)

Totally gutted new kitchen etc new tramacked dribe sandstone wall rebuilt with two sets of 9ft Oack gates new tarmac deive to the paddock four stable block and tackroom and a new full size all weather riding menage. We had a housewarming garden party three knights of the realm and members of government members , Japanese company bosses from Handa Yamaha and Suzuki and government Minister of Transport who is now a peer.

Nice? live in Australian groom, top class hunters in the stables, gardener, Bentley T11 and the wifes Mercedes 450se in the garage, lovely jubbly. I had just a 9K mortgage on the place, it sold a year last may for £985K. I was also sponsoring a 10 time Isle of man T.T winner and and world champion motor cycle racer plus a couple of good blokes on a sidecar outfit.

£985K great stuff the trouble is it was NOT SOLD BY ME!!!,

I'll play you at your own game. Maybe I'll pick up some desperate seller's silver hoard at $1 an ounce after the deflationary crash too. It's only money that will matter in the crash/HPC, not asset values.

Share this post


Link to post
Share on other sites
We've already had the hyperinflation, in house prices.

...

It's only money that will matter in the crash/HPC, not asset values.

I do not dispute that house price have seen very strong inflation. But you seem to believe that they cannot push the money supply too much. I do not share this belief, since history seems to prove the opposite. I could see some deflation in debt-financed assets, i.e. assets that are used to secure the credit that financed their purchase, such as houses. For necessities that are bought cash, I cannot see it longer term (oil might be a little exception here, but rather medium term). Similarly, I cannot see it for highly liquid default- and counterparty-free financial assets. IMO, the long term charts support further relative appreciation of the precious metals too. The negative equity crowd won't buy gold & silver, sure. But there are a lot of people and funds that are debt free.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   35 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.