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IMF: 'Dangerous undercurrents' threaten global economy

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i saw this on the BBC this morning and this one statement jumped out :

Quote

The International Monetary Fund's Financial Stability Report says that although banks are far safer than they were in 2008 there are new risks.

Trade tensions are growing, the IMF says, and inequality has risen.

Further moves towards a trade war could "significantly harm global growth".

Other threats to trade, such as a disorderly Brexit, could also "adversely affect market sentiment", the IMF argues.

 

The US-based organisation says that a "no-deal" departure from the European Union could lead to fragmentation in European money markets, meaning that finance cannot flow around the system so efficiently.

The body urges the Bank of England to be ready to provide more quantitative easing - money printing - if it is required.

the world is addicted to QE

 

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1 hour ago, hurlerontheditch said:

i saw this on the BBC this morning and this one statement jumped out :

the world is addicted to QE

 

Link

Yes, but what else is there? Interest rates are at rock bottom and can't be cut meaningfully; governments wont expand fiscal policy because of future interest costs. The fact is that we are in a worse position than ten years ago and QE is virtually all that's left.

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1 hour ago, hurlerontheditch said:

meaning that finance cannot flow around the system so efficiently.

Perhaps this is part of the problem? ........ perhaps the ultimate 'efficiency' is high frequency trading......where buying & selling is executed in milliseconds ......which is not quite the same as a considered purchase of goods & services is it?

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4 minutes ago, crouch said:

Yes, but what else is there? Interest rates are at rock bottom and can't be cut meaningfully; governments wont expand fiscal policy because of future interest costs. The fact is that we are in a worse position than ten years ago and QE is virtually all that's left.

....and where will that QE go?

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9 minutes ago, cnick said:

....and where will that QE go?

If you're implying that it will all go into property I'm not sure that's true this time round. More and more people are seeing through these things and a reboost to property values will not be popular as affordability is already beyond many; I don't think the recent falls will be halted. Who knows?

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Inequality is growing because of past QE.....all flowing into same hands, the ones who have it first, after that it rapidly dilutes......more QE will have to be a different type of QE to balance out the growing inequalities.😉

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1 hour ago, hurlerontheditch said:

i saw this on the BBC this morning and this one statement jumped out :

the world is addicted to QE

 

Link

Lots of us here have been saying since day one of the money printing, that there's no going back.

Once you start printing, you can't stop.  Properly run, productive enterprises are penalised and  poorly run businesses that should go broke (with the assets sold cheaply to someone else who can make a better go of it) are propped up.   The economy becomes dependent on it, like a drug.

There is also no political will to take away the fix with any number of VIs lobbying to keep it going and no politician wanting to take the blame for the cold turkey afterwards.

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15 minutes ago, crouch said:

If you're implying that it will all go into property I'm not sure that's true this time round. More and more people are seeing through these things and a reboost to property values will not be popular as affordability is already beyond many; I don't think the recent falls will be halted. Who knows?

Property is the obvious place for it to go, but likely we'll see more corporate ownership as opposed to small scale private BTL.  If you are a decent sized business concern and can access cheap funds it's a no-brainer - as opposed to starting a productive but complex and difficult to run manufacturing enterprise which won't get any government support, will be subject to the intense competition of globalism and will be taxed to high heaven should it actually make money.

Stand by for a return to the days of average people having to rent whatever they can find from rich landlords as house prices go beyond what anyone can actually pay back on a mortgage.

 

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27 minutes ago, Sour Mash said:

Property is the obvious place for it to go, but likely we'll see more corporate ownership as opposed to small scale private BTL.  If you are a decent sized business concern and can access cheap funds it's a no-brainer - as opposed to starting a productive but complex and difficult to run manufacturing enterprise which won't get any government support, will be subject to the intense competition of globalism and will be taxed to high heaven should it actually make money.

Stand by for a return to the days of average people having to rent whatever they can find from rich landlords as house prices go beyond what anyone can actually pay back on a mortgage.

 

Yes, looks like this is the plan of direction......the disadvantaged being a good form of growth and income for the advantaged......growing wider apart.easier for some.😉

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46 minutes ago, Sour Mash said:

Property is the obvious place for it to go, but likely we'll see more corporate ownership as opposed to small scale private BTL.  If you are a decent sized business concern and can access cheap funds it's a no-brainer - as opposed to starting a productive but complex and difficult to run manufacturing enterprise which won't get any government support, will be subject to the intense competition of globalism and will be taxed to high heaven should it actually make money.

Stand by for a return to the days of average people having to rent whatever they can find from rich landlords as house prices go beyond what anyone can actually pay back on a mortgage.

 

IMV the main advantage of QE is that it's "invisible"; no one knows what it is or how it works but it may have some effect but the jury is out. To me it's little more than a gesture of despair; a doubling down of the idiocy. As for it going into property being a no brainer I'm really not sure; property cannot just keep going up like it's done in the last ten years; there's too much evidence of the downside of high prices and we have a totally artificial market that is devoid of reality.

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5 minutes ago, crouch said:

IMV the main advantage of QE is that it's "invisible"; no one knows what it is or how it works but it may have some effect but the jury is out. To me it's little more than a gesture of despair; a doubling down of the idiocy. As for it going into property being a no brainer I'm really not sure; property cannot just keep going up like it's done in the last ten years; there's too much evidence of the downside of high prices and we have a totally artificial market that is devoid of reality.

There would be no more sure fire way of getting Corbyn a healthy majority in the next ge.

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2 minutes ago, crouch said:

IMV the main advantage of QE is that it's "invisible"; no one knows what it is or how it works but it may have some effect but the jury is out. To me it's little more than a gesture of despair; a doubling down of the idiocy. As for it going into property being a no brainer I'm really not sure; property cannot just keep going up like it's done in the last ten years; there's too much evidence of the downside of high prices and we have a totally artificial market that is devoid of reality.

 

I would argue that QE has been extremely visible over the last decade  in terms of asset prices - Equities and property/land.

And the actual goal was to prop up asset prices, thus further enriching the already rich VIs whose wealth tends to be in assets.

Of course, a side effect has been a drop in productivity as there is no longer an incentive to invest in productive (but potentially risky) enterprises when you can access cheap funds to speculate on ever-rising asset classes with the bubble being blown ever bigger and an implicit guarantee from the central banks to keep the party going should things get tricky.

 

 

 

 

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Locally in Leeds, I know of medium sized commercial buildings specialist supplier/installer whose financial liabilities, if called in, would bankrupt the company overnight. I spoke to one of their accountants, he said the management haven't got a clue about it and, business having been so brisk these last ten years, are just happy riding the wave. Two independent restaurants in Leeds have gone suddenly bust in the last month. Patisserie Valerie looks on the brink, financial irregularities, shares stopped trading today.

QE is to stop these things happening. The problems never got fixed.

Edited by Si1

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59 minutes ago, crouch said:

If you're implying that it will all go into property I'm not sure that's true this time round. More and more people are seeing through these things and a reboost to property values will not be popular as affordability is already beyond many; I don't think the recent falls will be halted. Who knows?

Sorry, I was actually implying the 'money' would be 'borrowed' by the corporates to buy their back their own shares ..... not sure what else QE can be spent on ...... given the lack of mugs to pay it back ...... or does it have to be paid back?

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I've mentioned this before but history always repeats itself/ life reverts to mean. The establishment are not going to let house prices fall they will revert to QE to pump asset prices. The money went into assets last time and will again. I see the boomer and 60/70's generations have been the exception over the last 1000 years in being owners of land/houses. QE had a negative effect last time but they (governments bankers IMF and central banks) survived it and they will again.

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1 hour ago, winkie said:

Inequality is growing because of past QE.....all flowing into same hands, the ones who have it first, after that it rapidly dilutes......more QE will have to be a different type of QE to balance out the growing inequalities.😉

Yes, I wonder what true socialists have done to stimulate / 'kick start'(haha) the economy..... free 'money' for all?

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11 minutes ago, Sour Mash said:

 

I would argue that QE has been extremely visible over the last decade  in terms of asset prices - Equities and property/land.

And the actual goal was to prop up asset prices the bankers' system, thus further enriching the already rich VIs whose wealth tends to be in assets.

Of course, a side effect has been a drop in productivity as there is no longer an incentive to invest in productive (but potentially risky) enterprises when you can access cheap funds to speculate on ever-rising asset classes with the bubble being blown ever bigger and an implicit guarantee from the central banks to keep the party going should things get tricky.

 

 

 

 

Sorry .... edited for accuracy (?)

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3 hours ago, hurlerontheditch said:

i saw this on the BBC this morning and this one statement jumped out :

the world is addicted to QE

 

Link

Failure to issue QE may result in experiencing a different reality, so remember to take your proscribed dose.

Edited by Lord D'arcy Pew
Added Content

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8 minutes ago, Sour Mash said:

 

I would argue that QE has been extremely visible over the last decade  in terms of asset prices - Equities and property/land.

And the actual goal was to prop up asset prices, thus further enriching the already rich VIs whose wealth tends to be in assets.

Of course, a side effect has been a drop in productivity as there is no longer an incentive to invest in productive (but potentially risky) enterprises when you can access cheap funds to speculate on ever-rising asset classes with the bubble being blown ever bigger and an implicit guarantee from the central banks to keep the party going should things get tricky.

 

 

 

 

Its "invisibility" is more in the nature of it being a "technocratic" measure; interest rates aren't touched and neither are taxes; it's "under the radar".

There has to be a limit as to how far you can blow up asset prices; we're arguably well beyond that limit now. It may be used again because of its invisibility but, as you have said, it's already had a huge effect on asset prices whereas when it was started its effects were unknown. There would be an outcry if it were used again. 

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8 minutes ago, Si1 said:

Locally in Leeds, I know of medium sized commercial buildings specialist supplier/installer whose financial liabilities, if called in, would bankrupt the company overnight. I spoke to one of their accountants, he said the management haven't got a clue about it and, business having been so brisk these last ten years, are just happy riding the wave. Two independent restaurants in Leeds have gone suddenly bust in the last month. Patisserie Valerie looks on the brink, financial irregularities, shares stopped trading today.

QE is to stop these things happening. The problems never got fixed.

The IMF even wrote a report on this. Everyone knows it and admits it when it comes to talking about productivity:

"A lower bankruptcy rate has in part reflected a willingness of banks, supported by ultra-low interest rates, to cheapen or extend old customers’ credit—keeping alive inefficient, dying firms (“zombies”, in the jargon) to avoid taking a loss themselves."

https://www.economist.com/britain/2016/02/24/banks-may-be-to-blame-for-britains-measly-productivity-growth

In any case, Hammond & Carney are quite ready to print more pounds.

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4 hours ago, Freezer? Best place for it said:

QE is totally worthless.  We will continue to live with the undead until IR's return to normal, and unjustified firms and people are put out of our misery.  Only then can we cease “emergency” measures.

I think it could have been a good idea, if there had been lending controls to stop more people over extending themselves more and more.

Instead of giving people time to climb out of the hole they are in, it gave them a spade to dig deeper.

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7 hours ago, Sour Mash said:

 

I would argue that QE has been extremely visible over the last decade  in terms of asset prices - Equities and property/land.

And the actual goal was to prop up asset prices, thus further enriching the already rich VIs whose wealth tends to be in assets.

Of course, a side effect has been a drop in productivity as there is no longer an incentive to invest in productive (but potentially risky) enterprises when you can access cheap funds to speculate on ever-rising asset classes with the bubble being blown ever bigger and an implicit guarantee from the central banks to keep the party going should things get tricky.

 

 

 

 

It is difficult to know which was first, speculation in assets or a drop in productivity.

I think that a productivity decline (due to myriad reasons) meant speculation became more attractive and this resulted in further productive decline, a widening trade deficit and a need for foreigners to recycle sterling back into the economy and with few productive assets to purchase they also speculated and the cycle continued.

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And yet, just nine months ago at Davos the scientifically illiterate goons were squawking breathlessly about the accelerating pace of global recovery! 

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  • 140 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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