Tuesday, April 19, 2011

US is going bust

S&P: downgrade of US debt outlook

Short article but worth a read (especially the linked article there "A US way out?"; it's two years old but is spot on).

Posted by ant @ 09:09 AM (1732 views)
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21 thoughts on “US is going bust

  • “US is going bust”. Please define bust and give us a suggested time frame

    “It is simply a well result”. What does that mean?

    I’d also like to take this opportunity to ask you for a specific ‘bank multiplier’ number. The world has many banks, so an aggregate number will have to do. Please also give a ‘multiplier’ number for five largest banks. Your main theory is built on this ‘multiplier’ being unfeasibly large, so I’m sure you’ll have the numbers to hand

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  • By going bust I mean that the US will default on its financial obligations in the same way, or similar, to described in Pytel’s article “A US way out?” ()

    Read with care: “well predicted result” is self-explanatory.

    There is no such thing as bank multiplier that Pytel refers to. He talks about “money multiplier” a well know metrics of banks liquidity. Due to the fact that the banks were operating a pyramid scheme (i.e. lending with loan to deposit ratio greater than 100%) it is practically impossible to estimate the current level of the money multiplier (per currency). Traditionally – according to BoE – it should be between 5 – 10 (with 7.36(6) given as a guide standard) and as long as loan to deposit ratio was kept below 100% in the lending process it was trivially easy to calculate.

    Currently according to the most conservative estimates (as given by Will Hutton) the money multiplier is not less than 150, but can be 1,500 or 15,000 (the later figures are anyone’s guesses; the massive increase can happen overnight depending on the “markets” of certain financial instruments such as derivatives). The financial system is currently dysfunctional and bears no relationship to any rational behaviour in free market economy. It is simply communism for the rich where losses are nationalised (carried by the taxpayers) and profits are privatised (extracted by the bankers). Absolute travesty of free markets. The sooner this system goes bust the better for all of us (apart from the bankers). Like the communism in eastern Europe.

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  • So, someone else has estimated that it is somewhere between 150 and 15,000.

    Thanks

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  • References please, Mr Pytel. Otherwise it’s just meaningless opinion.

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  • @drewster: …indeed: FT, Telegraph, The Economist, Wall Street Journal and so on are full of information without references (i.e. meaningless opinions in your judgement). I am more than happy to join the club:-)

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  • ant, drewster was addressing Pytel and you answered: “I am more than happy to join the club” ???

    By the way, you forgot to give me a time frame on your suggestion that the US “is going bust”. Predictions without time frames aren’t particularly useful. Thanks in advance

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  • @flashman: I thought drewster was addressing my comment (above his :-). My view on timeframe of the US going bust is very wide. Someone can pull the plug on it even today (the system is insolvent already). However the whole thing can keep going for a year – or two – or three – or five. (I think five looks to me as maximum based on historical events, but this is. It is really a speculation. It is as if you were with CCJ, with your assets frozen, and were guessing when your creditor would send bailiffs around: he can do it next day or in a year time. But you can be pretty sure that it would happen.

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  • Newspapers do indicate their references, e.g. “According to IMF figures…”. In a printed newspaper there isn’t room for full links; but in your online blog there is absolutely no excuse. You can reference articles in newspapers (but not other unreferenced blogs), if you can find any that support your position. Good luck with that.

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  • OK, so you think that the US will go ‘bust’ in the next five years but that sometime in the next 1 to 3 years, is a more likely timeframe.

    Thanks

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  • Flashman said:

    “ant, drewster was addressing Pytel and you answered: “I am more than happy to join the club” ???”

    Well caught Flash!

    We’ve known for a long time that ‘ant’ and ‘Greg Pytel’ are one and the same..

    ..the way he talks about himself is more than a bit creepy…

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  • @uncle tom: this is as deep as you can get on the merits of the discussion. I am sure your contribution is widely appreciated.

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  • Ant/Greg, whatever your name is – are you taking bets on a US default by April 19th 2016?

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  • flash @6 – I noticed that; then ant @7 says ‘I thought drewster was addressing my comment’ even though drewster addressed his comment @ 4 to ‘Mr Pytel’. Also both Pytel and ant often leave out the definite or indefinite article as in “bank multiplier” and “loan to deposit ratio” @2 instead of “a” or “the” multiplier or loan to deposit ratio.

    Has anyone (other than ant or Pytel) seen ant and Pytel together? And why doesn’t ant ever post anything other than Pytel – after all there are others writing along these lines?

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  • @timmy t: I do not take bets at all (e.g. I am not taking bets that US will default in the next six months although it actually may).

    @icarus: …because I am Pytel’s blog fun, if it helps. Any problem with it? And if you refer to his first article “The largest heist in history” you will understand why. And if you take me as Pytel, that’s fine. I feel privileged:-)

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  • “because I am Pytel’s blog fun”

    That sounds perverted

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  • flash – nevertheless it’s perfectly legal as long as they’re both over 18

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  • ant, please don’t take any of this the wrong way. If you open your mind, I think I might even be of assistance to you. There is absolutely nothing wrong with you (possibly) using a pseudonym to post Pytel stuff. There is a guy who does the same thing with Money Week. There are also several others who use this blog to publicise their ventures using their own names (that guy who looks like Basil Faulty and titaniccaptain, for example).

    If the mods don’t object, then I we have no right to object. On the other hand, people are bound to get a bit creeped out by a poster using a pseudonym to consistently heap praise on themselves. If you made a small stylistic adjustment (after considering the above), then I’m sure more people would concentrate on what you have to say, rather than any perceived creepiness.

    Everyone else: For what it’s worth my theory is that they are, in fact, two different people but that they are closely related and from the same background (my best guess is that they are married). icarus has spotted that they both commit the same grammatical errors. I have also noticed this but I have a refinement to that observation: they make similar mistakes but Greg Pytel is far less literate than ant. When we consider that Greg Pytel must spend quite some time editing and checking his published blog efforts, we can only conclude that any spontaneous literary effort would be completely unintelligible. Ant, on the other hand, often responds very quickly to comments, without making half the mistakes made by Greg, in his edited efforts. Another best guess: English is not Greg Pytel’s first language. If that’s the case, then hats off to him for blogging in his second language. I have been bashing away at French for a lifetime but I still wouldn’t quite have the nerve to blog in it

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  • Decisions as to when people/organisations “go bust” are usually in the hands of the people who are owed money by the prospective defaulter.

    Before that happens, there are lots of signs like “can’t get a loan except at high interest rates” and so on. I don’t see this happening just yet to the USA.

    Maybe the early signs of a bust are smart people safeguarding their dollars by moving them away from the US or investing in a store of value like precious stones/metals. A soothsayer might look at the market right now and say “its ready to happen”, but personally I don’t think so.

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  • i’ve noticed that ant posts on the telegraph using his real name …… and its not pytel!
    do i win a prize

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  • “i’ve noticed that ant posts on the telegraph using his real name …… and its not pytel!
    do i win a prize”

    Only if you tell us what it is..

    ..time our narcissistic skulker smelt the coffee..

    ..but does he have another alias..??

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  • the above comments exchange shows that the world is full of envious cretins. One cannot even like something as if you do are accused of being disingenuous by those of a different opinion. (And for them the discussion on the merits becomes immaterial.)

    @20 It’s up to you uncle tom to prove that it is it is “another alias” not the other way round. Surely you are a deep rooted communist in your thinking: it was the system employing a philosophy whereby you had to prove you did not do something or you were not something (e.g. a famous camel), rather than for someone who made a supposition to prove it was correct. No wonder we are in such a mess if the world is full of uncle toms: instead of brains envious emotions.

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