I have a simple question for our economic leaders and experts – where is the growth you need to cover the debts you still have on your and now our books, going to come from? Bear in mind this profit had better be LARGE and SWIFT arriving, because we have very large debts and the payments started some while ago.
From manufacturing?
The Empire State Manufacturing Index is a measure of the manufacturing output of business in New York State. There are larger indexes but Empire posts earlier and so people look to it. What it said today is that everything is down and not by just a little. Actual orders being shipped are down by a third from what was expected. Future orders are down by a half from what was expected. So perhaps not from manufacturing.
From financials – ah yes that’s the ticket. Don’t know why I didn’t put them first. Except that banks have been consistent losers of recent times. Could have something to do with investigations of Goldman and Morgan. Could be because they all are still sitting on a putrid mound of bad debt as if it were an egg from which they might hatch a golden goose. All face large losses on Helocs. Of course they can still squeeze blood form sovereign default trades.
Maybe that’s it! The banks will save us, using all the money they are making trading on sovereign debt fears. Oh wait. Their profits are our loss. So how is that going to help?
Maybe Asia is going to save us. Except the Shanghai index dropped another 5% today. It’s been dropping steadily since mid April. IN part because of the knowledge and fear that China is going to have to raise rates sooner rather than later if it wants of stop a property and bank explosion. That will put a brake on the growth the markets dream of every night. It also helps explain why OZ was down 3% today.
Maybe the Arabs will save us. They’re rich right? Er, well no. Crude is down to $71 per barrel. At that level expect Dubai’s debts to go for another ‘restructuring’ and for a lot of Kuwaiti investment funds to look to liquidate holdings. I think this should hurt London properties later this year. Of they might sink more oil money into the holes in their finances and try to wait it out rather than sell into a crap market. But either way they won’t be saving debtor nations. And why should they?
So where is growth going to come from, now that the US stimulus is coming to and end, the Chinese are tightening and the Euro stimulus is still hovering like a desert mirage not sure if it is real or not?
In the UK we can expect cuts, which means lots of people to lose their jobs in the public sector who will then go straight onto the dole bleed, and taxes going up to make sure that there is NO spending to help retailers and manufacturers alike.
Have I missed something? Anyone feel left out? Japan, maybe? Your order of another lost decade should be with you soon. So sorry to have kept you waiting.
Seriously. We have stimulated this corpse till it has started to smoke and crisp. What now? Another round of government spending to buy up everything in sight?
Will the bond market go for that? Will the public?
We re running out of options and time as well as money.
I don't know how big a market it is, but one service Britain does that foreigners will pay a lot of foreign currency is for is education, both private schools and universities.
Also isn't Britain pretty good at making weapons?
Not that I'm particularly proud of either industry, mind…
At the end of the day, the debts will be written down. This is just simple mathematics. What we are seeing is just stalling to let the rich stay as rich as possible while they try and offload the debts to any mugs they can find (taxpayers, which doesn't include them anymore). I guess the powers that be are also trying to avoid a sudden collapse, and prefer a slow melt down.
Personally speaking, I think I would prefer a slow melt-down at this stage…
Hello Tam,
I much prefer that we help educate than help murder. Weapons research and manufacture is such a corrupt and corrupting business – at least what I have seen of it.
Rob,
I agree that at some point the debts will be written down. As you say those who would lose are trying to put off the day and lessen the amount by getting us to cover it for them.
I don't think the choice is between a sudden collapse versus a slow melt down. I would say it is traumatic surgery (think Napoleonic navy type – bite down on this son – kind of thing) but versus watching gangrene consume not just our economy but our democracy, our values and our culture.
The slow melt down will rot this nation and its people if we allow it.
I am NOT willing to let that happen. Not without a fight. I'd prefer a verbal, democratic fight. But if that option is not left open to us then I hope we will find the courage to stand together against those who shit on us.
Somebody, somewhere commented that the board of the IMF always voting in favour of aid packages brought before it, but maybe not this time around…. Now the news are in about the Congress in the USA instructing its board member not to go for bail-outs if the recipent is too heavily in debt or there is risque of default (strangely enough I find this reported only in Norwegian media http://www.e24.no)
And, as I understand it, the Euro
ministers of finance is still wrangling with the "details" of the 750 bill. prop-up fund. Seems they find themselves in difficulty trying to device austerity without austerity effects (savings in public spendings with no adverse effects on growth). Wildly differing comments have been made public today.
By the way, do you read Antony Hilton's columns? I think he's far and away the best of the mainstream financial commentators (and the only thing worth reading in the Standard), since he's older than most and has seen much of this before. He's also pretty good in the role psychology plays in economics which sometimes gets overlooked. Worth reading even if you don't agree with him. Here's today's column…
http://www.thisislondon.co.uk/markets/article-23835210-george-osborne-must-start-bigging-up-britain.do
From Bloomberg:
"Josef Ackermann, the chief executive officer of Germany’s largest bank, said in an interview on ZDF television last week that it’s imperative to avoid a restructuring of Greece’s debt for now, even as he expressed doubts about the country’s ability to pay back its borrowings in full. "
I guess the operative word here is "for now"…
I agree, Mr Eirik.
"for now" is indeed the key phrase. It will have to happen. Absolutely no question about it. It is a certainty. Just a question of when.
Golem,
The mischievous part of me would like the whole thing to fall apart as quickly as possible. Then I think of my family and friends and the pain that the collapse would cause. That is why I'm not so sure…
I'm angry too. This whole crisis is the biggest crime ever perpetrated. A group of people have actually managed to steal money from the future – the perfect crime. No one will ever go to prison over it either. That makes me angry.
Any elected politician, whether they are bought by the financial oligarchs or not, would prefer a slow melt down over a collapse – that is the problem. I don't think that they have any plan of how to deal with such a collapse. Civilisation (if we can call it that) is very fragile these days, much more so than we realise.
I work in the space industry (luckily it's not very financialised, nearly 100% of the development cost is labour, political reasons not to offshore, no economies of scale as most items are one offs, etc). I was discussing, just the other day, with some colleagues, what would happen if all the satellites in orbit stopped working. No Telecoms, No GPS (OK maybe a good thing), Weather forecasts. Everything would grind to a halt. Is it hard to imagine this happening, not really – one big solar flare could do it.
People in the developed world are more and more specialised, less able to look after themselves if it all falls apart. It is all very well to encourage collapse, but we need a plan for getting through the worst phase. I don't think our politicians are completely in the pockets of some financial overlords – they are just out manoeuvred, badly advised and slightly scared (mainly for their reputations perhaps).
As for a slow melt down – I think that is the best we can hope for. If you look at the total use of the worlds resources by the developed world, then it would take 3 Earth's (I think) to support the entire world population at the level of the developed world. I used to wonder how this would happen (in fact it will never happen). But what will happen is that the developed world's standard of living will fall to meet the developing world somewhere in the middle. Another trigger for the crisis are the large wage differences between the developed and developing worlds. The devaluation of the US and European currencies shows that we are headed down to meet the developing world.
You mention that the slow melt down will rot our nation. I think that that the last 20 years of comparative good times have not exactly seen a flourishing of anything to be proud of. But I take your point.
The figures are in, according to the Times :
"The European Central Bank said yesterday that it had spent €16.5 billion buying government bonds of Greece and other financially weakened eurozone states.
(….)
The ECB moved to offset the emergency injection of cash into the bond markets, seeking deposits from commercial banks to calm the potential inflationary effect of the new money created to purchase sovereign bonds."
"Seeking deposits" may be the extent of the "sterilization" of the intervention. The amounts deposited are not quantified however….
Rob,
I'm very happy that we have a space scientist on board – and a very eloquent one…
The hurt that your family and friends may feel at the melt-down, is the realization that they're not as rich as they once thought, in absolute terms of equity in value of homes and in relative terms of buying power in the 3rd world.
Most people can come to terms with this. Food will be produced and distributed, and God knows we have more than enough real estate to house everybody. Sharing will be the new greed!
I'm with you on the not so conspirational approach to politics. It's understandable how badly informed wishful thinking ends up as stupid political decisions. We need to get the honest ill-informed on board also – how can we communicate with them more efficiently in your opinion?
Lars,
Perhaps we can club together and buy a TV channel and a newspaper. Otherwise we could spend a fortune on lobbying…
Seriously though, it's much easier to identify problems than propose solutions.
I'm not really worried about losing a little wealth, most of which was only on paper anyway. I am worried about a complete breakdown of society. I hope that this is a little unjustified, but it is pretty hard to fix an airplane in flight
Rob and Lars,
Thank you for making this place what it could be – a place for thoughtful people to talk. I have greatly enjoyed reading your exchange.