This Is Not Good News...

More bad news I take it.

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US mortgage giants on the brink?
Friday, 11 July 2008 16:57
Fears are growing that two of the most important mortgage companies in the US may run short of funds, placing the US economy at even greater risk.
The companies, Fannie Mae and Freddie Mac, own or guarantee $5 trillion of debt, close to half of all US mortgages.
Their shares continued to plummet this afternoon after comments from the US government offered no hint of a bail-out. Treasury Secretary Henry Paulson, responding to reports a government takeover was under consideration, said 'our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission'.
Shares in both companies were more than 40% lower on Wall Street this afternoon. Both have lost close to 90% of their value since August.
The companies have been hit hard by the US housing crisis, seeing borrowing costs rise and suffering billions of dollars of losses as many investors lose confidence they can raise sufficient capital to stay afloat.
Were Fannie and Freddie unable to borrow, or find it too costly to borrow, they would not be able to buy mortgages from lenders. This would make it far more difficult and perhaps impossible for people to obtain home loans, which could cause the housing market to grind to a halt.
A White House spokesman said President Bush's economic advisers kept a 'close watch' on markets. But he said the best thing for Fannie and Freddie would be for Congress to pass new oversight legislation.
Investors view Fannie and Freddie as the last bastions of support for a US housing market in its worst downturn since the Great Depression. Putting Fannie and Freddie under government control, or conservatorship, could wipe out shareholders, and oblige taxpayers to cover losses on home loans Fannie and Freddie own or guarantee.
Since the housing crisis began, Fannie and Freddie have lost more than $11 billion, and raised some $20 billion of capital. The fate of the two companies has ramifications far beyond the US, as US agency debt and agency-issued mortgage bonds held by foreign central banks has grown 18% this year to a record $979 billion.
Meanwhile, the European Central Bank accepts Fannie and Freddie loans as collateral from commercial banks.
http://www.rte.ie/business/2008/0711/subprime.html

Capitalism is in its death agonies Lestat. We need to focus our attention on how to replace it.

Brian Lenihan said yesterday that the Irish GDP growth rate would return to 4% the year after next. He is either a liar, or very, very stupid (or possibly both).

What we need is capitalism as in free market economies. This is not a capitalist country and has not been for a long time. Freddy and Fannie are perfect examples. As is social security, medicare, medicade and thousands of others. As I have said before what we are seeing is the end of the welfare state.

We're not seeing eye to eye here at all. Everywhere I go I here and read the yowls of "please please intervene" from free market capitalists.

cactus flower wrote:

Capitalism is in its death agonies Lestat. We need to focus our attention on how to replace it.

Capitalism is not in its death agonies cactus. It's just going through one of the periods where it fecks up completely. The South Sea Bubble, the Tulip craze, the Wall Street Crsh/Great Depression, the Great Stagflation of the Seventies, the early 90s recession and the dotcom crash are other feck ups. The capitalist system survived through each of these manias and crises. It will survive through this as well.

On the subject of Freddie and Fannie, I would leave them out to dry since I'm a pragmatic non-interventionist capitalist. If a collapse of these institutions would cause too much secondary damage, then a solution must be arrived at. However, it's my first instinct to let things play out.

Ard-Taoiseach wrote:

cactus flower wrote:

Capitalism is in its death agonies Lestat. We need to focus our attention on how to replace it.

Capitalism is not in its death agonies cactus. It's just going through one of the periods where it fecks up completely. The South Sea Bubble, the Tulip craze, the Wall Street Crsh/Great Depression, the Great Stagflation of the Seventies, the early 90s recession and the dotcom crash are other feck ups. The capitalist system survived through each of these manias and crises. It will survive through this as well.

On the subject of Freddie and Fannie, I would leave them out to dry since I'm a pragmatic non-interventionist capitalist. If a collapse of these institutions would cause too much secondary damage, then a solution must be arrived at. However, it's my first instinct to let things play out.

I like your posts Ard Taoiseach even though I don't agree with your analysis because we need confidence and energy to deal with stuff and not to go around in a panic or black gloom. The human species has transformed its way of life and adapted in amazing ways to changing circumstances.

What we are seeing now I don't think that is separate from the 70s and the dot com bubble, but it is much bigger. What is different is the size of the inflationary boom, the end of oil and climate change. We can't deal with this just by printing more money, or tightening the belt a notch. There is not enough paper or belt. Fannie Mae and Freddie Mac back 60% of US mortgages at over 5 trillion dollars - one and a half Iraqi wars worth. No credit and soaring energy prices is a killer combination for industry. Hold onto your hats.

cactus flower wrote:

I like your posts Ard Taoiseach even though I don't agree with your analysis because we need confidence and energy to deal with stuff and not to go around in a panic or black gloom. The human species has transformed its way of life and adapted in amazing ways to changing circumstances.

Thanks very much, cactus. I'm an inveterate optimist and I see the best in situations rather than the worst. I like to look on the bright side and avoid the panicked, "It's all going to end!" mentality of others. We need to keep our wits about us, keep calm and enact the right policies. We can and will get out of this mire.

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What we are seeing now I don't think that is separate from the 70s and the dot com bubble, but it is much bigger. What is different is the size of the inflationary boom, the end of oil and climate change. We can't deal with this just by printing more money, or tightening the belt a notch. There is not enough paper or belt. Fannie Mae and Freddie Mac back 60% of US mortgages at over 5 trillion dollars - one and a half Iraqi wars worth. No credit and soaring energy prices is a killer combination for industry. Hold onto your hats.

Indeed. It is a very large bubble out there and it seems to be popping. That is very good. All the unproductive investment capital tied up can be re-assigned and the economy can be re-shaped. Banks have gone bankrupt before, financial systems have nearly collapsed before, hyper-inflation is the stuff of history, depressions have occurred before. We got through those episodes and we can get through this. I went to the Bank of England Museum when in London this year's April. There is a chart on one of the walls listing the about 12 major financial crises to occur in the lifetime of the Bank. All of them were dealt with and are now merely another chapter in an economics book. The credit crunch is the thirteenth in the list. In a few years time we will have dealt with it and be moving on. Capitalism has its faults but it is sufficiently adaptable to survive.

Ard-Taoiseach wrote:

cactus flower wrote:

Capitalism is in its death agonies Lestat. We need to focus our attention on how to replace it.

Capitalism is not in its death agonies cactus. It's just going through one of the periods where it fecks up completely. The South Sea Bubble, the Tulip craze, the Wall Street Crsh/Great Depression, the Great Stagflation of the Seventies, the early 90s recession and the dotcom crash are other feck ups. The capitalist system survived through each of these manias and crises. It will survive through this as well.

It seemed to survive the Seventies...

Ard-Taoiseach wrote:

On the subject of Freddie and Fannie, I would leave them out to dry since I'm a pragmatic non-interventionist capitalist. If a collapse of these institutions would cause too much secondary damage, then a solution must be arrived at. However, it's my first instinct to let things play out.

I seem to remember the Economist pointing out the inherent dangers of Freddie and Fannie a number of years ago.

I'm a bit weary after a day in the IAA parallel universe yesterday. Im off to bed and we'll solve it all in the morning. My aim is to find a way that avoids the classic capitalist adjustments of World War and mass destruction of productive resources. I had another look at Mr Douthwaites book and was unconvinced with his zero growth proposals. Naomi Klein suggests the nationalisation of everything I think. I am not sure how that would work. Ilm sure there are posters out there with answers. I seem to remember that the anarchists know how to run a factory without closing down in a recession. Perhaps they will have some suggestions.

And well have to get over our oil dependency while we do it.

Have one for me in the Sibin Ard Taoiseach.

cactus flower wrote:

IIlm sure there are posters out there with answers.

Christ - I'm not being blasphemous.

cactus flower wrote:

My aim is to find a way that avoids the classic capitalist adjustments of World War and mass destruction of productive resources. I had another look at Mr Douthwaites book and was unconvinced with his zero growth proposals. Naomi Klein suggests the nationalisation of everything I think. I am not sure how that would work.

Should have gone with Stiglitz, eh? Or Patten maybe, he's as passionate about capitalism as you are.

cactus flower wrote:

I'm a bit weary after a day in the IAA parallel universe yesterday. Im off to bed and we'll solve it all in the morning. My aim is to find a way that avoids the classic capitalist adjustments of World War and mass destruction of productive resources. I had another look at Mr Douthwaites book and was unconvinced with his zero growth proposals.

That doesn't sound good. How can we create the resources necessary for meeting our budgets and solving our problems if the national income fails to increase? Inflation occurs regardless of growth rates and it would eat into the stagnant level of economic wealth we would have to work with. We need constant growth of sufficient quality to provide the resources we need to tackle everything from unemployment to crime to poverty to environmental devastation.

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Naomi Klein suggests the nationalisation of everything I think. I am not sure how that would work.

It wouldn't. Look at Cuba, North Korea, China, the USSR, Vietnam, Romania, Albania and any other Communist country which tried, and failed, in that regard. Nationalisation stifles innovation, fails to eliminate uncompetitive firms, promotes excessive bureaucracy, gives the State too much to do and a problem with focus, reduces productivity, stagnates the labour market, reduces the vitality of the investment market and makes the quality of economic activity suffer.

It is much better for most companies to be left in private hands. Some companies should remain in public hands to ensure infrastructural investments, prevent undue duplication of services or are of vital national interest. Granted, a number of companies fulfil those conditions. However, the rest should be privatised since it boosts competition, boosts innovation, livens investment markets, opens the economy to better-quality activity and leads to less waste.

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Ilm sure there are posters out there with answers. I seem to remember that the anarchists know how to run a factory without closing down in a recession. Perhaps they will have some suggestions.

And well have to get over our oil dependency while we do it.

Indeed. I think it's a profound geo-political mistake to leave our economic livelihoods in the hands of such a fractious region. What were we thinking? Why do we let the internecine wranglings of the Arabs throw our economies out of kilter? It's utter lunacy and we should be looking to declare our energy independence as soon as possible.

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Have one for me in the Sibin Ard Taoiseach.

I will, cactus. I will toast all our healths there.

Ard-Taoiseach wrote:

Quote :

Naomi Klein suggests the nationalisation of everything I think. I am not sure how that would work.

It wouldn't. Look at Cuba, North Korea, China, the USSR, Vietnam, Romania, Albania and any other Communist country which tried, and failed, in that regard. Nationalisation stifles innovation, fails to eliminate uncompetitive firms, promotes excessive bureaucracy, gives the State too much to do and a problem with focus, reduces productivity, stagnates the labour market, reduces the vitality of the investment market and makes the quality of economic activity suffer.

It is much better for most companies to be left in private hands..

Is China not opening up now, Ard-Taoiseach? And are Western markets really that open as we would like them in theory to be? I'd imagine that some markets work very well when liberated but I'd imagine others should be entitled to a 'visible hand' if you want to bring ideas like sustainablility into the equations for instance (deliberately preferring alternatives to nuclear for instance though nuclear might turn out to be cheaper..) Is the international food production business or medicines for that matter operating in a true open market Ard Taoiseach? Not to mention Microsoft ..

No apologies for dragging Stiglitz book in again but he is talking about East Asia and the dearth of finance provoking a recession there in the late 90s and which was exacerbated, he claims, by IMF policies (which served to further restrict available credit). Isn't a lack of credit the issue here too with reference to the mortgages? Stiglitz recommended the banks reduce their debt interest for a period in order to allow non-performing loans to pay something back - a very basic idea but it wasn't tried in East Asia back then. A few countries - Malaysia, South Korea and China went for classic Keynsian economic solutions - spend their way out of a recession and provisionally keep tight control over money movements which was open to speculation. Malaysia's government did this by implementing an 'exit tax' he says - penalising profit-taking by speculators I guess. But that is possibly not the issue here, it's more to do with money being turned literally into stone, thus frozen and not permitted to move around the economy.

I'm not very clear on what economists mean exactly as 'growth' - isn't it indisputable that it's simply not sustainable in the long term? - depending on your definition of growth? Disregarding pollution of the environement and exhaustion of resources for a minute, isn't constant population growth unsustainable? Disputable I suppose but what about food production for them? And at some stage if the increase in world population plateaus won't we then reach a stage where we won't need to build new habitations but rather we'll be clearing out the old stock and rebuilding that? How much of Germany's growth is in housing? Our growth may have peaked with regard to housing but isn't that inevitable eventually everywhere with the likes of that type of market?

Unfortunately for the free market idea of the Economy it also has to be told about possible problems with the environment thus it may be seen as less of an automatic mechanism and more of an organism that relies on sensitivity to changing information over time for its continued existence..

And I'd like to ask anyone if they know anything about Muslim Economics as it seemed Malaysia used a Visible Hand technique back in the 90s when the East Asia crisis was at its worst. China as well it seemed stepped sideways from state control and used traditional Keynesian economics to deal with their recession. (I could be reading Stiglitz wrong though so am open to massive correction)

Auditor #9 wrote:

And are Western markets really that open as we would like them in theory to be? I'd imagine that some markets work very well when liberated but I'd imagine others should be entitled to a 'visible hand' if you want to bring ideas like sustainablility into the equations for instance ....

For an economy to work properly you need some sort of control from government. The removal of regulation in the US has contributed to the current global crisis.

Auditor #9 wrote:

Isn't a lack of credit the issue here too with reference to the mortgages?....

Isn't lack of credit for mortgages a good thing. House prices are over-inflated. If people can't get mortgages, demand will drop and price will follow suit. The knock on effect in the short term of course is that construction workers will lose their jobs and many construction businesses will go to the wall. In the long term people will start buying houses again at affordable prices.

Auditor #9 wrote:

Disregarding pollution of the environement and exhaustion of resources for a minute, isn't constant population growth unsustainable? Disputable I suppose but what about food production for them? ?....

Yes it is unsustainable. World population is calculated to hit 9 billion about 2050. 5 billion will be living in an extremely crowded Asia and 1.5 billion in an Africa that cannot come close to feeding that number of people.

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ibis wrote:

Ard-Taoiseach wrote:

cactus flower wrote:

Capitalism is in its death agonies Lestat. We need to focus our attention on how to replace it.

Capitalism is not in its death agonies cactus. It's just going through one of the periods where it fecks up completely. The South Sea Bubble, the Tulip craze, the Wall Street Crsh/Great Depression, the Great Stagflation of the Seventies, the early 90s recession and the dotcom crash are other feck ups. The capitalist system survived through each of these manias and crises. It will survive through this as well.

It seemed to survive the Seventies...

Ard-Taoiseach wrote:

On the subject of Freddie and Fannie, I would leave them out to dry since I'm a pragmatic non-interventionist capitalist. If a collapse of these institutions would cause too much secondary damage, then a solution must be arrived at. However, it's my first instinct to let things play out.

I seem to remember the Economist pointing out the inherent dangers of Freddie and Fannie a number of years ago.

The seventies were a little picnic in comparison with where we are today, with massive growth in personal debt, banks folding, global food shortage and oil supply peaking. This is only the beginning of it Ibis, and the longer people keep their heads in the sand the harder it will be to deal with. It should seriously worry us that Lenihan is telling us everything will be back to boom next year.

Did the Economist point out that there is nothing new about Freddie and Fannie and that this is an archetypal property crash after an archetypal inflationary property boom? It's only the scale that is unprecedented and is indicative of the seriousness of the economic contraction going on.

Ard Taoiseach said:

Quote :

Indeed. I think it's a profound geo-political mistake to leave our economic livelihoods in the hands of such a fractious region. What were we thinking? Why do we let the internecine wranglings of the Arabs throw our economies out of kilter? It's utter lunacy and we should be looking to declare our energy independence as soon as possible.

The need for Ireland to achieve clean energy self sufficiency is something it might be possible to reach and agreement on across all the lines. Can we drag the politicians up to the line? Sweden adopted an oil-free strategy last year.
We are very well placed - we should be looking at becoming exporters of wind and tidal energy - we should be getting stuck into research and testing on this.

Auditor #9 said

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I'm not very clear on what economists mean exactly as 'growth' - isn't it indisputable that it's simply not sustainable in the long term? - depending on your definition of growth? Disregarding pollution of the environement and exhaustion of resources for a minute, isn't constant population growth unsustainable

This part Douthwaite has got right I'm sure. The problem is how to run an economy that isn't dependent on growth to oil its wheels. It would be good to examine all the attempts that have been made so far at not-for-profit economies and see what the problems were, with a view to overcoming.

905 said

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Should have gone with Stiglitz, eh? Or Patten maybe, he's as passionate about capitalism as you are.

I read Naomi Klein's chapter on South Africa last night and I strongly recommend it to everyone as a warning of why we are right to give close attention to the Lisbon Treaty. Thanks to those who recommended the book, its growing on me. Stiglitz is waiting for me at the bookshop. He sounds a bit like a Keynesian from Audi's description. Patten is on the list too. Does he think capitalism is a dead duck?

cactus flower wrote:

The need for Ireland to achieve clean energy self sufficiency is something it might be possible to reach and agreement on across all the lines. Can we drag the politicians up to the line? Sweden adopted an oil-free strategy last year.
We are very well placed - we should be looking at becoming exporters of wind and tidal energy - we should be getting stuck into research and testing on this.

We aren't well placed to even provide for our own needs. Outside of what's generated by hydro power, Irish generating stations produce about 4,000 megawatts of electricity from oil, gas, coal and peat. There are about 60 windfarms in Ireland churning out approximately 590 megawatts. So to make up the power generated from fossil fuels we need to increase our renewable out put 7-fold. That's a big ask. On top of that you also need to be able to provide power at peak times. As a for instance everybody comes in from work at 5.30 pm and puts on the kettle. What do you do if the wind isn't blowing and the tides aren't flowing at 5.30 pm?

And the hits just keep on coming...

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IndyMac in third largest bank collapse in US history

Saturday July 12 2008



A major American mortgage lender is at the centre of the third largest banking failure in US history.
Federal banking regulators have stepped in to take over the California-based IndyMac - the fifth US bank this year to fail under strains of the housing bust and credit crunch.
US stock markets were hit yesterday due to surging oil price and renewed fears about the stability of the top two home financing providers, Fannie Mae and Freddie Mac.
http://www.independent.ie/breaking-news/world-news/north-america/indymac-in-third-largest-bank-collapse-in-us-history-1432007.html

Lestat wrote:

cactus flower wrote:

The need for Ireland to achieve clean energy self sufficiency is something it might be possible to reach and agreement on across all the lines. Can we drag the politicians up to the line? Sweden adopted an oil-free strategy last year.
We are very well placed - we should be looking at becoming exporters of wind and tidal energy - we should be getting stuck into research and testing on this.

We aren't well placed to even provide for our own needs. Outside of what's generated by hydro power, Irish generating stations produce about 4,000 megawatts of electricity from oil, gas, coal and peat. There are about 60 windfarms in Ireland churning out approximately 590 megawatts. So to make up the power generated from fossil fuels we need to increase our renewable out put 7-fold. That's a big ask. On top of that you also need to be able to provide power at peak times. As a for instance everybody comes in from work at 5.30 pm and puts on the kettle. What do you do if the wind isn't blowing and the tides aren't flowing at 5.30 pm?

I agree with you that we are not meeting our needs but we are well placed for meeting them. There are couple of good threads here that look at Ireland's excellent potential for development of renewables. If we leave it to the ESB geniuses and our present Government it won't happen, but it isn't rocket science. Capturing excess wind energy can be done by charging batteries - Denmark is constructing 50,000 charging points for wind generated electricity to run electric cars. The discussion should not at this stage be about whether we do it but how we do it.

If some of the money that was poured into the property bubble had been poured instead into energy production we would now be self sufficient in energy.

I was walking along some seaside cliffs yesterday. The amount of power in that ocean is colossal. The rise and drop in the waves must have been several metres and it wasn't a particularly bad day.

However if I suddenly decide to say, build a jetty out into the sea and use that displacement motion to generate electricity, I would have a hell of a hard time getting the necessary approvals. Or if anyone was to propose that say Strangford Lough becomes a tidal Hydro dam, you would have every conservationist imaginable screaming protest. North and South we are stuck in a noose of our own making. There are so many restrictions.

The question is how do you achieve truely sustainable growth and not how we manage zero growth or decline. The resources we have are the earth, fire (sun), water, wind and people. That is as it has always been. Your limit on growth is your ability to produce energy, grow food and manage available commodities like lead and copper. Produce and manage these efficiently and you have the surplus labour for the service sectors. You can have a society where our material wealth is limited but has a strong service sector, health care, education, etc. Less consumerism.

cactus flower wrote:

I agree with you that we are not meeting our needs but we are well placed for meeting them.

You obviously didn't read my post.

cactus flower wrote:

Capturing excess wind energy can be done by charging batteries .

You cannot run a house on batteries, let alone a factory, a school or a hospital. And if you tried to do so you would create an ecological time bomb of lead and acid filled batteries.

cactus flower wrote:

Denmark is constructing 50,000 charging points for wind generated electricity to run electric cars. The discussion should not at this stage be about whether we do it but how we do it.

Sounds good. All we need is 400 new wind farms.

Squire wrote:

....However if I suddenly decide to say, build a jetty out into the sea and use that displacement motion to generate electricity, I would have a hell of a hard time getting the necessary approvals. Or if anyone was to propose that say Strangford Lough becomes a tidal Hydro dam, you would have every conservationist imaginable screaming protest. North and South we are stuck in a noose of our own making. There are so many restrictions.

That's fair enough. Suppose you build a tidal station off the south coast and then discover that you've diverted the currents that flow through Cork harbour which is now silting up. You only have to look at Haulbowline to see the damage caused by the failure of the planning process.

Haulbowline was totally avoidable and is basically criminal negligence.

I think if we started on some of our costs with quite modest constructs we shouldn't go too far wrong. By the way with the jetties I wasn't thinking tidal more the wave motion moving columns of air.

Energy collection and land use could be deepened through use of technology and invention and with regards to land for recreation and reforestation - this is how I see sustainable growth occurring in the medium to long term as there is plenty of scope for economic windfalls, pardon the pun, in these two sectors that immediately come to mind.

Economic 'growth' can surely on be sustained through a deepening of the procedures that are there already - education must not be neglected nor food and leisure sectors either. Money doesn't really exist as it depends largely on availability of resources as in Squire's post above - if we had a stable supply of energy then we could establish some economic structure on top of that. That structure will need to grow in terms of quality moreso than quantity because as Lestat says, there will be 9 billion here by 2050 ..

I agree with cactus - we shouldn't be talking about why with alternatives but how. The nuclear debate is a fair issue but I'm convinced we don't need to bother with it. If we do fail in any green tech we should be researching and using then I'm sure there are off-the-shelf reactors (anyway there are handy gas-powered plants which could back up alternative sources)

I had a look at Ecogeek.org yesterday and it has some impressive articles about alternative energy. Britain for example wants to produce half its electricity from wind by 2020, they say. Apparently there are gigantic wind turbines of 7.5 MW (100 of those and you've doubled Ireland's current installed capacity) slated for installation out at sea where there is only half the oil left.
http://www.ecogeek.org/content/view/1850/86/

And taking some cues from nature, an interesting approach to tidal which could see 1 MW units like the yoke below within 5 years.
http://www.ecogeek.org/content/view/1852/84/



I'm also keeping an eye on algae oil which by all accounts sounds promising though we have yet to see (they say the yield can be up to 20,000 gallons of algae diesel per ACRE - worth looking at)

Many of these things will see explosions of investment money in the next few years.

Auditor #9 wrote:

Is China not opening up now, Ard-Taoiseach?

Yes it is since it ditched the un-sustainable and ridiculous economic policies of Mao Tse Tung. Deng Xiaoping led the way and it is continuing down the path towards free markets. This drives growth, reduces poverty, improves standards of living, increases freedom, promotes innovation and reduces waste in the economy.

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And are Western markets really that open as we would like them in theory to be?

No, they aren't. In many jurisdictions there are excessive regulations, heavy-handed governments and market distortions preventing the full power of the market to be realised and put to use as a driver of efficiency in the economy. Italy, France, Portugal, Greece, Spain amongst others would fall into this bracket. Even Ireland, the UK and the US have closed markets which do not work as well as they should. The legal profession in Ireland is an example of such an inefficient and protected market.

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I'd imagine that some markets work very well when liberated but I'd imagine others should be entitled to a 'visible hand' if you want to bring ideas like sustainablility into the equations for instance (deliberately preferring alternatives to nuclear for instance though nuclear might turn out to be cheaper..)

Well, that falls under the rest of the paragraph I posted in my post you quoted. I'm a pragmatic free marketeer. I understand that certain industries require a strong, "visible hand" as you say. Transport in Ireland is one such market. It doesn't justify having free market forces since that duplicates services un-necessarily. However, we need to free up more industries and we need to keep them free.

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Is the international food production business or medicines for that matter operating in a true open market Ard Taoiseach?

International food production is as far away from free markets as you can get. Subsidies, trade barriers and tarriffs, regulations and a lack of a truly global marketplace mean that international food production is an exceptionally imperfectly competitive market. This leads to waste like the food mountains and inefficient distribution of resources since many in the world are starving while many grow obese. Freer trade would be a benefit, but it would need to be phased and come under some form of WTO agreement.

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Not to mention Microsoft ..

Microsoft simply understood the market better than anybody else, took first dibs on the software industry and never let go. They are a particularly successful company in cementing market share. I would argue that Microsoft is so dominant because others have not been as strategically shrewd as they. In any case, Google is now challenging them with open-source, advertising-led and internet-based software and free play of market forces should ensue. That means we get better products, more efficient production of those products and a better software industry with higher productivity.

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No apologies for dragging Stiglitz book in again but he is talking about East Asia and the dearth of finance provoking a recession there in the late 90s and which was exacerbated, he claims, by IMF policies (which served to further restrict available credit). Isn't a lack of credit the issue here too with reference to the mortgages? Stiglitz recommended the banks reduce their debt interest for a period in order to allow non-performing loans to pay something back - a very basic idea but it wasn't tried in East Asia back then.

Well, I'd leave that to the banks concerned. If they do that, and capitalise, then well done them. If it's really the best thing to do then I'm sure our bankers will adopt it as a means of excavating them from the crisis we are in. I'd just leave the market to sort it out. IMF policies aren't the Mae West either and have the tendency to let ideology blind them to what really needs to be done. They're like doctors who swear by conventional treatment even though a bit of homeopathy might be better.

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A few countries - Malaysia, South Korea and China went for classic Keynsian economic solutions - spend their way out of a recession and provisionally keep tight control over money movements which was open to speculation. Malaysia's government did this by implementing an 'exit tax' he says - penalising profit-taking by speculators I guess. But that is possibly not the issue here, it's more to do with money being turned literally into stone, thus frozen and not permitted to move around the economy.

Which is wrong since it prevents the capitalist system to re-assign investment funds are re-balance the economy. I would let investment flows run freely so that losers can be exited and winners entered.

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I'm not very clear on what economists mean exactly as 'growth' - isn't it indisputable that it's simply not sustainable in the long term? - depending on your definition of growth?

Growth is the rise in the level of production of goods and services in an economy from one year to the next. Real growth rates account for the inflation effect while nominals do not. That is why the economy does indeed grow when it registers 1% growth in a year of 5% inflation.

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Disregarding pollution of the environement and exhaustion of resources for a minute, isn't constant population growth unsustainable? Disputable I suppose but what about food production for them? And at some stage if the increase in world population plateaus won't we then reach a stage where we won't need to build new habitations but rather we'll be clearing out the old stock and rebuilding that?

That's exactly it. However, rising incomes would mean that holiday homes, vanity projects and the like would continue to grow in construction.

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How much of Germany's growth is in housing?

Statistically, some. Realistically, none. Housing isn't an issue in the German economy. House prices and building haven't been a determinant of growth for about a decade.

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Our growth may have peaked with regard to housing but isn't that inevitable eventually everywhere with the likes of that type of market?

Yes, exactly because houses aren't perishable goods. You can buy muffins this week, eat them and want more next week, so you buy them again and again and again. There is a huge renewal in demand in the muffin market because we're dealing with a short-term, perishable good. When a house is built, it (hopefully) lasts for up to 100 years. That severely limits the renewal of demand. I remember freedomlover once estimated that the renewal of demand in housing amounted to about 7,000 units per annum.