The Great International Depression of 2008 & Beyond /

He says gold is a pure "fear play" - T-bonds going up in price because the interest rates going down on the 30-year bond and gold going up - a very interesting situation to watch he says.

He says it's not a good time to buy stocks.

Money is clearing out of stocks and bonds and heading towards gold but not flooding towards gold yet - is that what he's saying? If money isn't going to bonds and stocks anymore then that means more and more printing ... hyperinflation...

youngdan wrote:

What do you not understand about the bonds and I will explain before I leave

The claim is that the interest on bonds issued is too low, and that the value will fall.


Audi

He claims more fall on stocks generally and I think he is correct. It is not a place to be just now. Why should they rise? Why put money into stocks with the generally economy entering recession? Prospects for good dividends are low and there is the risk of businesses becoming insolvent. It is a bit early to buy stock, need to leave a bit more time to see who survives. Also you have all the government interference that is well and truely preventing the market from adjusting. In some sectors businesses could be nationalised and the values of assets are being under written which helps prevent adjustment down. This collective action is lengthening the period of decline and delaying recovery.

His view on gold seems similar to my own, it is high historically and I could see more reason if we were entering a period of inflation It is a hedge against inflation. However what we have is severe deflation, now I have no idea when all the financial easement will start to show up and inflation rise. The pit seems deep. He couldn't make his mind up on gold and believed that it could well fluctuate. Golds value is a flight out of fear, basically we have money slushing around with nowhere safe to go. So you have the possibility of bubbles. Is god one? Don't know. It could be a wise move or a bad mistake. I would also add that when people believe that stock prices have floored you will see a movement back into stock. THere is no where truely safe at the minute.

In an Irish context I wonder people see a share in a bank at 35 cents or whatever and think that's value, why the fascination in banks? Why not ready mix or the people who sell bananas?

Chicken and seed he said, Squire - I'm not as daft as you think I am

Quote :

Why would you want the money supply to grow or fall regardless of what shape the economy is in. Money is just a medium of exchange.

If the volume of dollars were set by an act of God then we would not need the gold standard. The price of say and automobile should be lower than it was years ago to reflect advances in productivity

Or the working week could be shorter. Same number of cars, better life.

Quote :

There is no where truely safe at the minute

Very true.

You're right - we should have watched the banana people: they gave us our first insight into how slack our regulation is.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4681167/Britains-credit-rating-threatened-by-scale-of-bank-bail-out-warns-SandP.html

Doesn't take the next door neighbours long to catch up, does it??

In the same issue; BoE voting unanimously to start printing money.... whoops, er, initiate quantitative easing to increase the money supply

And.... RBS having problems paying the Govt its cut.

Meanwhile, UK now pricing in over 3% contraction as opposed to 1%+ a few months ago.

Snafu, fubar.....everywhere

Squire wrote:

Audi

He claims more fall on stocks generally and I think he is correct. It is not a place to be just now. Why should they rise? Why put money into stocks with the generally economy entering recession? Prospects for good dividends are low and there is the risk of businesses becoming insolvent. It is a bit early to buy stock, need to leave a bit more time to see who survives. Also you have all the government interference that is well and truely preventing the market from adjusting. In some sectors businesses could be nationalised and the values of assets are being under written which helps prevent adjustment down. This collective action is lengthening the period of decline and delaying recovery.

His view on gold seems similar to my own, it is high historically and I could see more reason if we were entering a period of inflation It is a hedge against inflation. However what we have is severe deflation, now I have no idea when all the financial easement will start to show up and inflation rise. The pit seems deep. He couldn't make his mind up on gold and believed that it could well fluctuate. Golds value is a flight out of fear, basically we have money slushing around with nowhere safe to go. So you have the possibility of bubbles. Is god one? Don't know. It could be a wise move or a bad mistake. I would also add that when people believe that stock prices have floored you will see a movement back into stock. THere is no where truely safe at the minute.

In an Irish context I wonder people see a share in a bank at 35 cents or whatever and think that's value, why the fascination in banks? Why not ready mix or the people who sell bananas?

I'm not sure about these metals either - if I had spare 1000s to be throwing around I reckon it'd be into metals though - silver. Another lad here is talking about the metals markets but I think that a lot of these fellas are hedging their money against inflation. That guy is also talking about positive correlations, inverse and negative correlations beween the rise and fall of the dollar, stock market and metals. He also says that a big currency sell off happened in Asia and they went in for dollars.

On the Quantitative Easing .... some analysts on Bloomberg again were saying that they didn't think it would lead to hyperinflation in the UK .... that the "excess capacity" would soak up the Quantitative Easing* - does that mean they all get a rebate of a couple of hundred quid each in the UK to spend on stuff???? How will the Quantitative Easing be distributed? The Commerzbank analyst was pressed by the interviewer on whether or not he was sure it wouldn't lead to hyperinflation ... he said it wouldn't as long as the Chancellor knew when to turn the tap off ....

Has there been hyperinflation around here before on these isles ? Again I figure it will get down to energy and climate that will bottom hyperinflation out if it does start - unlike Zimbabwe we can't sit around on our arses as the price of a bag of coal goes through the roof.





*(kwont-ttv i:zŋ)

noun, plural -s,
–noun
1. money hot off the printing press

A good round up of the debt that ties western and eastern Europe together, from the Wall Street Journal.

It really looks as though no one is going to escape this.

http://online.wsj.com/article/SB123489966805902405.html

cactus flower wrote:

Chicken and seed he said, Squire - I'm not as daft as you think I am

I would be a fool to think you were.

Can't help thinking that we are over emphasising all the gloom and doom. If asset values fall we all get an opportunity to start again and move on. If panic sets in we are on the road to nowhere. In reality most people will retain their jobs and people will still have to eat, and live somewhere. With all the misspent time and money on Banks proper consideration is not given to the needs of people who do suffer difficulty. On so many aspects I find inconsistencies troubling. It is utter madness.


Audi

A lot of ordinary people are placing their faith in Gold and Silver and I hope they get a return, but it is not a safe bet. The whole Gold standard business has followers that have almost religious belief in the stuff. They are good people and they are genuine in their belief, but when I see a wealthy person on television who just happens to have a piece of gold in his pocket I start to worry. Come on that is too much of a coincidence. Oh I bought some in Switzerland and here it is in my pocket! Utter rubbish. You go and buy an ounce of gold, it is say 1000 dollars. Now the people that message is aimed at have a lot less money than the person conveying the message. If said investor goes and buys say 5 million dollars of the stuff it is going to weigh well over a ton. For larger investors this is the reality. The volume may not be that large but it isn't the sort of thing you put under your bed. Once you are into reasonable quantities taking physical possession, as recommended, has problems all of its own. My limited experience on such matters and what I hear doesn't tally and that worries me. Doubting Thomas?

Good man Squire you're keeping your head on this maelstrom. Were you expecting all this nuclear fallout during that otherwise quiet September last when we started to see it happening in real time with Lehman's etc. ?

What's your opinion on the Printing of Money - do you think it'll lead to massive inflation or will they turn the tap off in time ? This could have an effect on the value of the metals people are holding.

Can't you bury silver in your backyard in a plastic bag as regards storage ?

cactus flower wrote:

Chicken and seed he said, Squire - I'm not as daft as you think I am :

Anyone thinking that is a fool.



Audi

I wish I knew the answer to the inflation question. On that hinges many a financial decision. Best guess deflation right through this year. Change possible in 2010 but who knows a deflationary spiral may take hold? It could well be that the measures currently under way will stabilise the situation for a number of years and the west enters a period of more rapid decline. Western Economies like the USA and UK are living on debt. Their currencies are over valued, so perhaps what their politicians are doing is the correct economic measure? They are taking measures to ensure that the values of the currencies fall as the market seems incapable of arriving at sensible values?

Everyone is not in exactly the same boat. In China it is a reduction in growth. Germany and France have less debt, the Arabs are losing oil revenue, East Europe owes West Europe, If virtually everyone starts easement what will the consequences be? It has to be inflation which will devalue money and correct the over valuation of assets.

I think we are going to hit by inflation when the markets floor and we try to invest for the future. Then if there is an increase in demand we may well see the price of oil, copper, lead, pork bellies increasing. So on that guess deflation rules well into 2010.

It is anyone's guess, but you must be out of money and in assets before the change happens. However if you jump too soon deflation in the value of assets eats your working capital. I am working on the assumption of patchy recovery in 2011. It is either that or sit on one's hands and if you do that you never gain. You have to be ready to move and be doing the ground work now, If I am wrong what harm all I lose is the preparation.

I think a lot of this depends on how Joe and Josephine Soap react to the current crisis. I'd love to see some stats on what the 90% of NON-defaulting mortgage holders in the US are doing?? Are they saving more?? Paying down their debts?? Same goes for here and the UK (although the level of defaults is nowhere near 10% in either). The local picture I'm getting, talking to friends, is that those with steady incomes are cutting spending and overpaying debt. Those reliant on commission or who have had to take pay cuts of a significant nature are, however, moving their mortgages to interest only to stay afloat, while many with smaller mortgages (taken out 5+ years ago which are now a much smaller proportion of household income) seem to be carrying on without changing much.

Soo... what happens next?? The US mortgage plan may stabilize things there; asset prices might then level off in a year or so when this becomes apparent in the rearview mirror. There is still the significant oversupply problem, here, US, Canada, which needs to be worked off and should keep prices lower for a good while. The UK is different, they considered themselves undersupplied before the crash (3% vacancy), and Canada is still accepting lots of immigrants every year through official programmes, which may limit their issues. For us, it will be interesting to see what happens when the UK housing market levels.... because of demand, that market may be the first to see a significant recovery?? Here, the bad news on Eastern Europe may mean that the number of people leaving slows down or stops?? Would love to know how many airport exit polls are happening. Some journo reported snooping round Dublin airport on the weekend looking for sob emigrant stories and could only find people off on skiing holidays.

The resumption of inflation may also have different effects depending on cause. If it is simply a "whoops we printed too much money, where's the brake" issue, as you say, asset prices may sink towards historic norms without too many changes in nominal value. However, there are 2 issues, 1) with the current culture of wage cuts and deficits, I can't see huge eagerness to pay people more when things recover, they'll try and take profit first and will tackle pay a lot later. Which will work for employers until the labour supply gets back to being tight... could be a long while. The second problem is if inflation rises with increasing energy costs, which will result in huge pressure on living standards and the ability of companies to raise people's wages.

So if it is going to be difficult for people to gain increased pay in response to inflation, it will be very difficult for them to clear debt quickly. It will also result in lowered tax revenue for quite some time, and huge pressure on things like social welfare as those receiving it find it difficult to feed and clothe their families.

The best I think we can hope for is limited deflation followed by stability for a while as people clear debt and start to move on. How likely we are to get that, I really don't know. I suspect the monetary easers will overshoot, but perhaps they and I are "misunderestimating" the true scale of the mountains of toxic debt. A bad scenario would be if they are underestimating the cash pile some of the financial institutions and big business are sitting on. Because if that is the case, all that money could well flood the market in search of assets, all at once, as soon as the inflation figures start to uptick. However, here, I suppose that would mean an increase in Govt. revenue from stamp duty....... don't abolish it yet, boys!!

cactus flower wrote:

A good round up of the debt that ties western and eastern Europe together, from the Wall Street Journal.

It really looks as though no one is going to escape this.

[url=http://online.wsj.com/article/SB123489966805902405.html

http://online.wsj.com/article/SB123489966805902405.html[/quote[/url]]

Good article cactus!

The good news for our sovereign debt is that we are not listed in the top 10 EU countries whose banks lent money to Eastern Europe. Apparently the problem is that many of the loans are in foreign currency which has appreciated against local currency.

AIB has a Polish subsidiary, but presumably it banks in zlotys since it is a local subsidiary. Any idea if any of our other esteemed financial institutions have loans outstanding out there??

There may come the day, I kid you not, when we will be thanking our developers for sucking up so much bank moolah that no-one sent vast amounts of money abroad or spent it on sub-prime mortgage bonds.....at least reposessed building sites in Ireland can be of use to the owner... probably the State, at this rate.

Half these countries look as if they are going to be righteously hammered... Poland is about to spend a fortune in EU subsidies to defend the zloty as it has to enter a fixed exchange rate with the euro next year.

Doom is nigh... as usual

So both of you reckon it will deflate a bit more for a while ? So you think people are probably generally paying off their debts (if they have an income that is). This is deflationary ... but will it deflate down to a tempo that's a healthy pre-bubble rhythm or will it deflate beyone that into something less desirable ?

These economic movements have their own tipping points I suppose - it'll deflate so much towards some level but could either stop or go beyond that level depending on circumstances, events, sentiment. I mean, if unemployment grows to some figure then it could crystallize a whole other raft of new deflationary unemployment - I'm thinking the 20,000 civil servants in California for example or Intel recently announcing job losses becaues there is less and less demand and this in turn could lead to less demand in other stuff - thus spiralling downwards. You'd imagine energy and food won't go either way in this scenario.

Consumer prices are out this week in the U.S. I think I just heard on Bloomberg where they are exploring inflation/deflation. Jaysus I can't wait for those figures to come out ....

Not quite no-one. A good number of Irish people have invested in Eastern Europe with the idea that they would have a similar boom to our own. Notoriously, they often paid excessive "Irish prices" for land and property.

In the long run, provided they are not squeezed dry by the IMF, Poland at least is better positioned than we are by location, large population, education levels and costs/competitivity.

There is a problem of attitudes here that I think is to do with the colonial role model from which our ruling and business class absorbed the wrong lessons: the colonial approach is predatory, with the idea or ripping the place off as much as possible, rather than developing it.

I was involved a while back in port development policy but did not keep in touch over the last few years. I had hoped/assumed that Ireland's ports would have been developed and rationalised in the boom: shipping and port costs are amongst the things that adds on to costs and reduces competitivity. Just read a few things that made my hair stand on end: it took Waterford Port 5 years to get a broadband connection say.

The management of Irish Rail is an utter scandal that I can hardly bear to think about.

The plus side of this is there is so much room for improvement.

How can we get a different kind of management that meets normal standards of efficiency and honesty, and that has vision and drive in terms of the national interest, and sustainability ?

There is alot of private Irish money in Eastern Europe.

15-week impasse terminates in California producing a budget which will help to it to start putting itself back together financially.

Quote :

SACRAMENTO, Calif. -- California's legislature approved a plan Thursday to close the state's $42 billion budget deficit through steep cuts and new taxes, after state leaders corralled the last Republican vote needed to end a 15-week partisan impasse that has battered an already-crippled state economy.

State Sen. Abel Maldonado provided the required "aye" vote after senate leaders met his demands that certain state-government reforms be added to the budget proposal and that the plan be stripped of a gas-tax increase.
http://online.wsj.com/article/SB123503429614220905.html?mod=googlenews_wsj

Seems that both sides Republican and Democrat came together and married their differences on this occasion in the name of the ordinary californian against special interests.

Quote :

The Senate’s vote about 6 a.m. Sacramento time was followed less than hour later by the Assembly. Governor Arnold Schwarzenegger, whose signature is required, praised the measures and said they were a defeat for special interests.

“I am extremely proud of the members of the Legislature, both Republicans and Democrats, who had the courage to stand up and put the needs of Californians first,” Schwarzenegger said in a statement. “Rather than approaching this unprecedented crisis with gimmicks and temporary solutions, we took the difficult but responsible steps to address our entire $42 billion budget deficit and pass historic bipartisan reform measures.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=a_eSllHEhcSM&refer=home

Apparently the Senator whose vote swung it is committing a form of political suicide ... ?

Quote :

Electoral Consequences

“This might be the end for me,” Maldonado said on the Senate floor before the vote. “This vote assures that it’s not the end for the people of California.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=a_eSllHEhcSM&refer=home

They were all up all night working hard on this it seems ...

Quote :

The passage came amid nearly round-the-clock talks. More than a year of economic recession has hammered California’s tax collections, creating a gap in the budget that forced the state to shut down thousands of construction projects, delay payments of income tax refunds and left it with the lowest credit rating of any U.S. state. (Bloomberg)

Very interestingly, the political organs in California or those Governing it Federally (?) require a supermajority rather than just a bare majority in order to pass tax and budget proposals - that's two thirds supermajority, leaving a third behind ..

Quote :

While Democrats control both chambers of the Legislature, taxes and budgets must be approved by a two-thirds supermajority equal to 27 of 40 seats in the Senate and 54 of 80 in the Assembly. The tax increase passed 27-12 in the Senate; 54-26 in the Assembly. (Bloomberg)

However, one woman was up in arms about it

Quote :

The negotiations, conducted behind closed doors in late- night sessions with no public input, drew criticism from some who voted for Maldonado’s changes to break the impasse.

“This is a disgusting process,” said Senator Gloria Romero, a Democrat from East Los Angeles. “This is not good government. This is not political reform. This is old fashioned special interests.” (Bloomberg)

Quote :

Scaling Back Operations




The package requires voters approve eight measures during statewide elections. Seven of those measures, including the lottery bond, will appear on a March 19 ballot. The open primary measure will go to voters in June 2010.

California’s government had slowly began to shut down as politicians debated for four months on how to cut spending or raise revenue to replace lost tax collections.

This week, with no agreement forthcoming, the state told some 20,000 workers that they might lose their jobs and was poised to shut down more public works projects throughout the state today.

While the tax increases ended the crisis facing the state, they drew fire from many Republicans, who said they would hurt residents who are already reeling from the worst recession since the 1930s. (Bloomberg)

And don't forget ...

Excellent job!

What's the Guardian at telling us this bad news when Trichet says there are no weak links not even Ireland ???? There's potentially €18 TRILLION in toxic assets in Europe according to the paper, and there's a meeting of the 27 in the coming week.

€18 trilllion - that's a lot of packets of Mariettas.

Quote :

Is the EU falling apart? Can the euro survive? The coming week is scheduled to deliver some eagerly awaited policy responses to these suddenly urgent questions, but the prospects are that they will fall short of what is required and that the "worst depression for a century" will deepen.

Europe, as in tackling climate change, has preened itself on taking on a global leadership role in confronting, first, the financial crisis and, then, the economic recession. But there is every evidence that, amid the clarion and confusing calls for a co-ordinated response, the 27 EU governments are engaged in a turf war of beggar-thy-neighbour policies.

Economically, the perspectives are dire. The Dutch economy is officially forecast to shrink by 3.5% this year, the German economy by more than 3%, the British by as much as 4% and Latvia is "staring into the abyss" with a 10% shrinkage at least.

Social unrest is growing, notably in eastern Europe. Austrian banks alone face self-inflicted losses of €150bn on their exposures to bad loans and credit rating company Moody's said this week that "a widespread deterioration in the economic health of core markets" could hit other banks such as France's SocGen, Italy's UniCredit and Belgium's KBC.

Quote :

The European Central Bank, still imposing the highest interest rates in "mature" economies, is at sixes and sevens over "non-standard measures" such as quantitative easing.

There's worse news to come as governments grapple with the Everest of toxic and impaired assets still sitting on banks' balance sheets – perhaps as much as €18 trillion in Europe alone. Last week, the EU's 27 finance ministers were told by the European commission that go-it-alone policies and a subsidy race for ailing and sound banks could trigger "a drift towards financial protectionism and fragmentation of the internal market".

http://www.guardian.co.uk/business/2009/feb/18/european-union-recession-policy

Audi, that post up there with the pitchers is mighty.

EvotingMachine0197 wrote:

Audi, that post up there with the pitchers is mighty.

Thanks. Life imitating art isn't it.

The YouTuber Demcad with a roundup of the news. It's not all bad though - even though unemployment is killing men's sex appeal, it appears there is a sudden booming market in online 'dating' sites. 'Dating' = 'too expensive' so you can download it free on these sites I suppose.

He asks if the economic recession is affecting relationships for good or for bad ? For some, relationships affect their economics not the other way around.
https://www.youtube.com/watch?v=evQCQz6uxA4

Hugh Hendry talking in December about the whole thing. I think the likes of him are brought on these shows as the token bear to give the opposing soundbyte for the sake of balance. But he grabs the bulls attention in this to give a roundup of the history of the stock markets and an impression of what is coming and what Depression means.

Interestingly he talks about the erosion of civil liberties, the ascent of Fascism and the unwanted but probably necessary intrusion of Government in the everybody's life. He also mentions the gagging of the media on this subject.