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Aep - I'll Eat My Hat If We Are Anywhere Near A Global Recession

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http://www.telegraph.co.uk/finance/economics/11973507/Ill-eat-my-hat-if-we-are-any-where-near-a-global-recession.html

The damp kindling wood of global economic recovery is poised to catch fire.

For the first time in half a decade of stagnation, government policy has turned expansionary in the US, China and the eurozone at the same time. Fiscal austerity is largely over. The combined money supply is surging.

Such optimistic claims are perhaps hazardous, given record debt ratios in most areas of the world and given that we are six-and-a-half years into an aging economic cycle that might normally be rolling over at this stage. It certainly feels lonely.

Citigroup's Willem Buiter has issued a global recession alert. Professor Nouriel Roubini from New York University joined him this week, warning that the odds of a fresh slump have doubled to 30pc.

Mr Roubini's gloom is unsettling for me. We saw the world in almost exactly the same way in the lead-up to the Lehman crisis, when it seemed obvious to both of us that sharply rising interest rates would ***** the US housing bubble and the EMU credit bubble.

This time I dissent. Years of fiscal retrenchment and balance sheet deleveraging have prevented the current global economic recovery from gathering speed, and have therefore stretched the potential lifespan of the cycle.

Years of fiscal retrenchment and balance sheet deleveraging????? Thank god we are going to avoid a recession!

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Lead article in today's Business Telegraph hard copy, beat me to posting it.

The narrative on deleveraging is correct as far as the business and household sector is concerned, in the West at least. Not only has debt been stuck at 2008 levels (an historic 25% inflation adjusted deleveraging) there has been a bit of cash hoarding not least by the doomsters on this board.

Often think that members on here are looking at the wrong target, it's not debt we should be worried about (well not personal, public sector absolutely) but the fact we don't pay our way in the world and have current account problems. There is only so much of London and our infrastructure we can keep giving away. I guess it's safe to assume that the Chinese will keep working for nothing and taking stuff off us or piling up IOUs for the next couple of years at any rate. May be we are in for a final couple of year's binge.

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Lead article in today's Business Telegraph hard copy, beat me to posting it.

The narrative on deleveraging is correct as far as the business and household sector is concerned, in the West at least. Not only has debt been stuck at 2008 levels (an historic 25% inflation adjusted deleveraging) there has been a bit of cash hoarding not least by the doomsters on this board.

Often think that members on here are looking at the wrong target, it's not debt we should be worried about (well not personal, public sector absolutely) but the fact we don't pay our way in the world and have current account problems. There is only so much of London and our infrastructure we can keep giving away. I guess it's safe to assume that the Chinese will keep working for nothing and taking stuff off us or piling up IOUs for the next couple of years at any rate. May be we are in for a final couple of year's binge.

We shouldn't worry about debt, yet we can't pay our way? I

suggest the latter is because of the former.

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We shouldn't worry about debt, yet we can't pay our way? I

suggest the latter is because of the former.

Every sector has been deleveraging big time since 2007 and the public sector has filled the gap. In the absence of people actually doing something productive like making steel we have switched to indulging middle class kids with Human geography degrees that will never be repaid and providing further enhanced retirement benefits. It's kept up consumption but we are indeed getting deeper into debt with the rest of the world and the public sector is steadily sinking.

But the narrative on here is that households are getting deeper into debt, personally we aren't but the public sector is on our behalf. I guess it's all the same in the end, but the thing which will hobble us is not our shrinking personal debts but the explosion of public sector debt and an increasing current account deficit.

http://ichef-1.bbci.co.uk/news/624/media/images/79773000/jpg/_79773584_937d25a2-705f-482b-8573-b7776001a026.jpg

Edited by crashmonitor

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Every sector has been deleveraging big time since 2007 and the public sector has filled the gap. So in the absence of people actually doing something productive like making steel we have switched to indulging middle class kids with Human geography degrees that will never be repaid and providing further enhanced retirement benefits. It's kept up consumption but we are indeed getting deeper into debt with the rest of the world and the public sector is steadily sinking.

But the narrative on here is that households are getting deeper into debt, personally we aren't but the public sector is on our behalf. I guess it's all the same in the end, but the thing which will hobble us is not our shrinking personal debts but the explosion of public sector debt and an increasing current account deficit.

http://ichef-1.bbci.co.uk/news/624/media/images/79773000/jpg/_79773584_937d25a2-705f-482b-8573-b7776001a026.jpg

There is no deleveraging of household debt according to this. Its getting worse.

http://touchstoneblog.org.uk/wp-content/uploads/2015/02/Untitled-660x430.png

http://touchstoneblog.org.uk/2015/02/uk-household-debt-still-amongst-the-highest-in-the-world/

Edited by evetsm

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Well I'm talking since the 2007 bust, if you look credit is almost flat 2008-2012 against inflation at up to 5% during those years. Sure it's picked up since. But 1.4 trillion to 1.5 trillion is some deleveraging in real terms over 7 years. Government, meanwhile, has took up the slack and some.

Going forward indeed we may have another household credit bubble forming. May be the Telegraph is right forming is not the same as being maxed out like seven years ago. He has given it another two years.

Edited by crashmonitor

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No of course private debt doesn't matter. As long as we ignore what happened last time.

We always make the same mistakes twice, it's the boom bust cycle. It will become unsustainable, not sure we have reached that point just yet.

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The damp kindling wood of global economic recovery is poised to catch fire.

For the first time in half a decade of stagnation, government policy has turned expansionary in the US, China and the eurozone at the same time. Fiscal austerity is largely over. The combined money supply is surging.

Such optimistic claims are perhaps hazardous, given record debt ratios in most areas of the world and given that we are six-and-a-half years into an aging economic cycle that might normally be rolling over at this stage. It certainly feels lonely.

Fiscal austerity was largely imaginary, govt policy has been wildly expansionary since 2008 almost everywhere.

The idea of the combined money supply as the key determinant of economic growth is monetarist claptrap.

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It sounds as if AEP has been told to bull up the economy in readiness for a possible rate hike by the Fed. Expect similar articles elsewhere as well.

Not that there'll be one but they're laying the groundwork just in case.

Edited by billybong

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Fiscal austerity was largely imaginary, govt policy has been wildly expansionary since 2008 almost everywhere.

The idea of the combined money supply as the key determinant of economic growth is monetarist claptrap.

Well it's worked so well over the last 7 years who could doubt them?

Yossarian lives.

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Can anyone tell me where that line has gone between public and private debt? I cannot find it anywhere.

The governbankment has taken a share in what used to be private debt, by taking shares in houses via Help to Buy Bail Banks.

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No of course private debt doesn't matter. As long as we ignore what happened last time.

From what I've read it appears that the majority of mainstream neoclassical economists don't include private debt in their fantasy models.

The BoE published a paper in May saying the ILF model is wrong and banks do create money out of thin air with loans.

gap anyone asked, how come interest rates and 0.

not near recession, we're IN THE MOTHER OF ALL DEPRESSIONS.

+1 :lol::lol::lol::lol:

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Well I'm talking since the 2007 bust, if you look credit is almost flat 2008-2012 against inflation at up to 5% during those years. Sure it's picked up since. But 1.4 trillion to 1.5 trillion is some deleveraging in real terms over 7 years. Government, meanwhile, has took up the slack and some.

Going forward indeed we may have another household credit bubble forming. May be the Telegraph is right forming is not the same as being maxed out like seven years ago. He has given it another two years.

Well I'm talking since the 2007 bust, if you look credit is almost flat 2008-2012 against inflation at up to 5% during those years. Sure it's picked up since. But 1.4 trillion to 1.5 trillion is some deleveraging in real terms over 7 years. Government, meanwhile, has took up the slack and some.

Going forward indeed we may have another household credit bubble forming. May be the Telegraph is right forming is not the same as being maxed out like seven years ago. He has given it another two years.

the only inflation that has a positive effect on debt is wage inflation and wage inflation has been well bellow CPI/RPI since 08 apart from the last year or so that debt burden to me looks even worse

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Would be interesting to pull out some old commentary pieces AEP wrote in 2006/2007 just before the "great recession", I genuinely don't know what they would contain, but suspect they would be just as far from the mark as the stuff many other journalists were writing.

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From what I've read it appears that the majority of mainstream neoclassical economists don't include private debt in their fantasy models.

That's true- apparently since all debt is offset by a corresponding credit elsewhere in the system they cancel each other out. Luckily no one ever defaults on their debt so this happy equilibrium can never be disturbed.

A very similar argument is proffered to explain why the trillions in derivative contracts also net out and so also pose no threat- it's not as if any large bank has ever defaulted after all.

I feel better just thinking about how safe everything is.

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That's true- apparently since all debt is offset by a corresponding credit elsewhere in the system they cancel each other out. Luckily no one ever defaults on their debt so this happy equilibrium can never be disturbed.

A very similar argument is proffered to explain why the trillions in derivative contracts also net out and so also pose no threat- it's not as if any large bank has ever defaulted after all.

I feel better just thinking about how safe everything is.

I got a warm fuzzy feeling then. Thank you :lol::lol::lol:

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I'm still waiting for ole whatsisname from the LibDems to eat his hat, after the election. :lol:

The trouble with casually tossing around these old figures of speech and NOT honouring them is that they become totally devalued. There was a time, admittedly likely way back in the dark ages, when making such a statement was akin to a solemn vow and ones personal honour was at stake - and failure to endure a humilation at least equivalent to eating ones own hat took you down several notches in public standing.

I don't think anyone today stopped at random in the high street could likely define the meaning of personal honour and integrity - even if they might 'know' what they mean. The irony being that those few who, by virtue of their education, might do a better job at explaining/articulating the term, such as AEP and elected politicians, are those who would never dream of acting on it.

That little rant aside.........agree with others here - he's clearly bonkers.

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