Saturday, October 25, 2008

A long article, but if you are having a slow Saturday – worth a read

A debt spiral we could have avoided

Who, five years ago, would have predicted the part-nationalisation of private banks, the UK Treasury considering abandoning its fetish of “inflation targeting”, and prudent Gordon Brown breaching the EU cap on government spending? ***Also from the NS back in ancient times of Sept 2003 title: Coming soon: the new poor

Posted by whostolemyendowment @ 12:51 PM (883 views)
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7 thoughts on “A long article, but if you are having a slow Saturday – worth a read

  • “A debt spiral we could have avoided” Some of us did.. let them pay with their souls! Merchant of Venice & Shylock comes to mind.

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  • “Those who still had time for the ideas of Karl Marx, John Maynard Keynes or J K Galbraith were denied professional posts, journal publication and media commentary. As a result, mainstream economists were not analytically equipped for near-systemic global economic failure and thus failed to alert their masters in the banks, central banks and finance ministries.”

    A lot of MSM rely upon advertising to survive (particularly property advertising) which I think has skewed the reporting somewhat. Ann Pettifor’s allegation obviously goes further; implying a Stasi-like solution to silence dissenting voices by blocking professional advancement.

    “Property prices have been falling in Britain for just one year now, but have fallen for three years in the US. More disturbingly, prices in Japan (as Graham Turner points out in his book The Credit Crunch) are still falling, fully 18 years after Japan’s credit bubble burst in 1990.”

    Oh dear. Is this why JU is so bearish?

    “Only by bailing out homeowners and companies can we arrest chronic property deflation, and restore confidence and solvency to the international capital markets.”

    Whenever I read something that contemplates bailing out homedebtors, my blood pressure rises a little. It’s jealousy and schadenfraude I know but the prospect of seeing reckless borrowers bailed out really hacks me off!

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  • But quiet guy, while they were being good citizens and spending with abandon thus supporting the consumer society, you were selfishly hoarding your money and earning interest. You are therefore a bad person and must be punished with rampant inflation.

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  • @renting2

    I see. We used to have prisons for debtors (still do in some parts of the world?) Perhaps we should introduce prisons for savers instead!

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  • @renting2…..there is never a mention of the malaise affecting the general fabric of our society, in your comments. Your main interest seems to be ‘getting your slice’ and blaming everyone else because you slice is disappointing……or am I wrong?

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  • braindeed, I think he was being ironic!

    The article is good where it focuses on poverty and the effects of debt. However I cannot agree with the conclusions:

    “Fortunately, there is a simple, cheap policy that would address property deflation.”
    Or we could just let house prices fall?

    “Abandon the cross of ‘inflation targeting'”
    The immediate result would be a complete collapse in confidence in Sterling, which would pummel our currency to the ground. Food and fuel prices would rocket. I can’t see that being a vote-winner.

    “Restore to the Bank of England the power to set all interest rates”
    Interest rates are about savers as well as borrowers. If the Bank of England drops interest rates, the savers will pull their money out of the banks and move it overseas to get more interest. That’s exactly what has been happening in Japan for the last decade – the Bank of Japan dropped rates to around 0%, so savers put all their cash in high-yielding countries like Australia and New Zealand (ironically, helping fuel their property bubble). Beware of unintended consequences to simplistic solutions!

    Incidentally, this so-called “carry-trade” is now unwinding as fearful Japanese savers pull their money back home, causing the Yen to rise against most other major currencies. The upshot is that Japan’s lost decade will end as the Japanese people invest and spend more at home. Japanese asset prices should rebound pretty sharply over the next few years as people invest their newly-repatriated money in the stockmarket and in property.

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  • drewster…Or we could just let house prices fall?

    agreed there – Not one major political heavyweight has questioned the wisdom of trying to reinflate this popped balloon. And not one has stepped up to say the bastards can’t have bonuses…clueless shits, alll of them

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