They are trying to pump a new bubble to solve existing problems.
Before inflation appears, this strategy works.
As inflation expectation rises, its effectiveness is threatened.
When inflation appears in 2010, another crash will come.
If you are a speculator and confident you can get out before it crashes, this is your market. If you think this market is for real, you are making a mistake and should get out as soon as possible. If you lost money during your last three market entries, stay away from this one – as far as you can."
petey : sounds about right to me....
always read the full article an we don't give advice. we just suckers like you...
..."Paul Krugman: The "Nipponisation" of the world economy with a bunch of "Argentinafications" playing a role in the acute crisis. But even after those are over, we have the Nipponisation of the world economy. And that's really something.
Will Hutton: What was the heart of the Japanese problem? What was at the heart of their 17 years of going nowhere?
PK: Well, my guess is that it was that the balance-sheet problems took a very long time to resolve. And it is difficult to get enough demand in an economy where you have really very adverse demography ...
WH: So, which countries look closest to being Nipponised - combining balance-sheet problems and ageing populations?
PK: Well, the US doesn't have the same combination. But in Europe, Germany and Italy look comparable. France is better and Europe as a whole is considerably better.
WH: Germany matches Japan to an uncanny degree. You talk about the Nipponisation of the world economy: I'm not so sure. But I would talk about the Nipponisation of Europe via a German economy at its centre in the grip of the same problem - and that starts to be a global problem.
PK: Germany has huge inadequacy of domestic demand. Their economic recovery in the first seven years of this decade rested on the emergence of gigantic current account surplus.
How is it possible that Germany, which did not have a house price bubble, is having a steeper GDP fall than anyone else in the major economies?
The answer is that they depended upon exporting to the bubble regions of Europe, so they actually got side-swiped by the loss of those exports worse than the bubble regions themselves got hit.
It's Germany on a global scale that is the concern. We worry about the drag on world demand from the global savings coming out of east Asia and the Middle East, but within Europe there's a European savings glut which is coming out of Germany. And it's much bigger relative to the size of the economy.
WH: And on top there is an unique and unaddressed huge potential banking crisis. The Germans pride themselves on their three-legged banking system, but it is incredibly interlinked. The IMF warns that Germany could have to take at least $500bn of writedowns, which its banks have not begun to recognise. German banks hold a trillion dollars - maybe more - of maturing collateralised debt obligations that can only be refinanced by crystallising the losses. We've had RBS and you've had Citigroup. Germany's GDP will fall 6% this year - before the banking crisis has hit it....
...PK: That the cause is primarily financial. Certainly, Lehman and all of that alerted us all. And it did trigger an immediate drop in demand. But the housing bust was going to happen regardless.
The fall in business investment is at least to a large degree a response to excess capacity, which is the result of falling consumer demand and the housing bust. So we don't know.
WH: I think we know more than that. The links between bank capital, loan losses, credit availability and economic activity and asset prices have never been clearer. That was why there was a threat of Depression.
PK: Clearly, re-establishing stability in the financial markets is a necessary condition for recovery. But we're not sure it's sufficient.
WH: That's very scary.
PK: Well, that is part of the reason why I am so depressed.
WH: In one of your lecture charts you seemed to be suggesting that we're 12 months into what you think could be a 36-month period of downturn, albeit at a slower rate.
PK: Easily.
WH: It's quite shocking that you think it will be that severe.
petey : Im shocked that you're shocked...Will
PK: If we measure the 2001 US recession by when the labour market finally started to turn around, it was a 30-month recession. It was really 30 months in before you started to see the unemployment rate come down."
..."The March signs of revival turned out to be little more than a technical inventory correction, with no change in the underlying trend. The world economy is still contracting, though perhaps not quite as fast as at the start of the year.
As an analysis by economists Barry Eichengreen and Kevin O’Rourke* shows, global industrial output is still on the same trajectory as it was during 1930.
The only question is whether we can avoid 1931 and 1932.
The answer is yes, but on conditions that seem increasingly implausible if we extrapolate current policies. We can avoid calamity if monetary and fiscal policies remain supportive throughout the duration of this crisis, if we fix the banking system and if we impose regulations to constrain a resurgent financial sector. We also have to be lucky to avoid another round of market turbulence in the near future.
In other words ... the answer may well be no. Central banks and governments therefore risk moving too swiftly out of a recession-mode strategy. When Axel Weber, president of the Bundesbank, publicly talks at this time about how to communicate a rise in interest rates, it tells me that the danger of a premature exit, at least in Europe, is clear and present....
...So at this point, I see the chances as roughly even between a global slump and a return to quasi-stagnation. What is so galling about this scenario is that it is avoidable. The central banks took the right decisions. But the political reaction has been near-catastrophic almost everywhere.
Instead of solving the problems to generate a recovery, the political strategies have consisted of waiting for a recovery to solve the problem. The Europeans are relying on the Americans to generate growth. The Americans are relying on the Chinese, who in turn are waiting for the rest of the world.
Even if the US were to generate some growth, as is likely after this summer, it would not benefit global exporters; China may be one of the fastest growing economies in the world, but it is only about half as large as the eurozone in dollar terms. And as Brad Setser** has pointed out in his blog, there is absolutely no evidence that China contributes to a global recovery. While Chinese investments are up by more than 30 per cent from last year alone, imports are down 25 per cent. All this hype about decoupling and China pulling the world out of recession is baloney. The data tell us that China’s exports and imports are both falling, and that imports are falling faster.
As everybody expects the others to move first, nobody ends up moving. In the meantime, the problems grow worse. US house prices, which are down by a little over 30 per cent from their peak, still have some way to fall. Until the US housing market hits rock bottom, perhaps sometime in 2010, there is no chance of a recovery in the securitisation market, without which there may not be sufficient credit growth....
...The only potentially good news in the past three months has been the receding threat of a currency crisis in central and eastern Europe. But I am not even sure that this is for real. The persistent refusal by eurozone policymakers to concede fast-track euro accession for central and eastern member states could yet prove destabilising.
Last week, the ECB had to provide €3bn in euro liquidity to Sweden’s Riksbank, in the absence of which Sweden may have experienced its second banking meltdown in less than two decades. The inevitable collapse of Latvia will have ripple effects on the Baltic region and may cause panic among investors in other central and east European countries.
This is why last week’s news about the withering green shoots is so important.
It tells us that the non-strategy of waiting until things get better is not working.
The March signs of life reinforced complacency.
Optimism will get us out of this crisis only if it is founded in reality.
..."Neil Mackinnon, chief economist at ECU Group, said Washington believes European states are "free riding" on American stimulus, expecting the US to pull them out of crisis yet again.
Europe's industrial output continued to slide in April and was down 22pc from a year earlier, suggesting that talk of a "V-shaped" rebound is premature. At best, the pace of decline has slowed. Production fell 23pc in Germany and 24pc in Italy.
The ECB expects the eurozone economy to contract by 4.6pc this year and a further 0.3pc next year, with no recovery until mid-2010.
Structural rigidities of the region raise risks that it will remain trapped in slump well after the rest of the world has turned the corner, as it did after the dotcom bust.
This time Europe faces the extra head-winds of a strong euro, over-valued against the 45-odd countries such as China that are linked to the dollar. This currency effect is slowly "hollowing out" Europe's industrial core...."
..."It all depends upon unit labour costs and the state of demand in the economy. In fact, pay here seems to have responded more quickly to the economic downturn. Average earnings growth actually turned negative earlier this year. Although this was primarily due to the impact of sharply lower bonuses in the City, the figure was also boosted by continued strong pay growth in the public sector. And that can't last. In the private sector not a day goes by without another company announcing a freeze or even a cut in regular pay.
So the upshot is that the deflation danger is not yet old hat. People are watching the wrong thing. Don't look at the short term twitchings of the RPI or CPI but rather at the behaviour of wages and salaries.
Of course, if the Chancellor is right and by the end of this year the economy is bouncing back strongly, then the deflation danger, like all the others, will quickly melt away as the strengthening economy eventually boosts employment prospects, pay rates harden and firms are more able to push prices up. But if you want to back that particular horse, I would strongly advise you to put your money on each way."
..."What can't be paid back will be defaulted on. Consumers with no job have no chance of paying back those debts. Many others who could, won't (because it is in their best interest to walk away). The Alt-A and Option ARM defaults are going to be massive.
lex : ..."Anyway, what might trigger a rise in inflation? That is the biggest stumbling block for worry-worts. The unwinding of the credit boom of the past 10 years will require higher savings, weak consumption and low investment, probably well into the next decade. That ensures demand will remain weak, and with it inflation too...."FT
The announcement by the monetary authorities in the UK that a policy of quantatitive easing (QE) would be implemented was greeted with euphoria by the gilt market.
BUT ALSO
EXPORT IMANUFACTUREI MANUFACTURE IEXPORT
...here in palookaville we have always been told...
...our economy is f**ked bescause we have too small...
...a manufacturing base...
...we do not export enough...
...but look around the world and what do you see...
...if only people did not talk the economy down...
...if only we could stop the short sellers...
WELL
IF ONLY THE POLITIX WOULD STOP FIDDLING
...like taking power from the BOE and giving it to the FSA...
...like robbing the pension funds...
...like robbing the savers...
...scrapping PEPs...
...increasing tax complexity...
...creating a client state...
...busting the economy...
...increasing the national debt...
...busting final salary pension schemes...
...while MPs have voted themselves...
...bigger salaries and better pension entitlements...
NB chart is uk based and funds reflect the effect of currency movements
charts from equitable life are used as an illustration of sector performance comparisons only and not as a commentary on their investment performance. no opinionis offered here either for or against equitable life as a pension company...
...they just happen to have these charts... ...which i find very helpful... ...when comparing sector fund performance...
...here in palookaville all the talk is about the local outlaw...
...his band of merry men and women...
...with guaranteed, index linked pensions...
...who are stealing the pensions from the poor...
this robbin band
...STEALS FROM THE POOR...
...GIVES TO THE RICH BANKERS...
...AND THOSE WORKING FOR THE STATE...
...meanwhile...
...the serfs here in palookaville are all watching the football...
...or phoning in their votes for some reality tv idiot...
...they do not know about how they have been robbed...
...they have been told that...
...the boarded up stores are part of some american problem...
Retirement plans of millions of Britons at risk after Bank of England 'prints money'
The retirement plans of millions of Britons have been put at risk after the Bank of England's controversial plan to create money tore an unprecedented hole in pension schemes.
..."The Bank was accused of hammering the final nail into the coffin for Britain’s final salary pension schemes, which have seen their deficits climb in recent years, partly as a result of Gordon Brown’s decision as Chancellor to levy a £6 billion tax raid on pension funds’ dividends.
Some 2.5 million workers are currently signed up for these schemes which provide retirees with a guaranteed annual income when they reach the appropriate age.
Having enjoyed a small surplus only a year ago, these funds have also been hit by the fall in the stock market over the past year.
However, the effect of the Bank’s scheme has been to increase the deficit between what is in the funds and what is needed to pay out future pensioners by an almost instant £100 billion. Although some expect the deficits to fall in the years ahead as the economy improves, insiders warned that this could be the final straw that persuades companies to shut down these schemes altogether and turn instead to far less generous defined contribution plans.
However, experts warned that even these more parsimonious schemes, which 8 million workers are subscribed to, will suffer as a direct result of the Bank’s actions. The amount these people receive from their pension depends not only on the size of pot they amass over their working life but on the rate of the so-called annuity which provides them an annual income from the moment of retirement...."sunday telegraph
painty : now watch the companies with these pension deficits... ...see their share prices come under even more pressure...
There is a house in many a town They call the Rising Debt And it's been the ruin of many a poor boy And God I know I'm it
My mother was a tailor She sewed my new bluejeans My father was a gamblin' man Down in New Orleans
Now the only thing a gambler needs Is a mortgage and trunk And the only time he's satisfied Is when he's on a drunk
------ organ solo ------
Oh mother tell your children Not to do what I have done Spend your lives in sin and misery In the House of the Rising Debt
Well, I got one foot on the platform The other foot on the train I'm goin' back to Rentin a room To wear that ball and chain
Well, there is a house in New Orleans They call the Settin Sun And it's been the ruin of many a poor boy And God I know I'm one
EVERY PICTURE TELLS A STORY
NB chart is uk based and funds reflect the effect of currency movements
charts from equitable life are used as an illustration of sector performance comparisons only and not as a commentary on their investment performance. no opinionis offered here either for or against equitable life as a pension company...
...they just happen to have these charts... ...which i find very helpful... ...when comparing sector fund performance...
Fleet sales, which account for 60 per cent of the total market, fell by 35 per cent as the economic downturn forced companies to cut back on transport for staff.
It was the ninth successive month that sales have fallen compared to the previous year, the Society of Motor Manufacturers and Traders said.
The continuing slump in car sales comes after months of cutbacks within the industry with a wave of redundancies and extended factory closures...."telegraph
THE NOBEL PRIZE IS NOT WHAT IT WAS
...anatoleis predicting a nobel prize for brown...
...after all not many enelected prime ministers have a patsy chancellor...
...our nobel dictator has created a spectacular bust...
...and should get some sort of recognition for it...
DEPRESSIONISM : THE ART OF THE BUST
...when peter the paintpallet started a new art movement...
...he did not realise that he would get a show so soon...
...now all the world is joining in the fun...
...currencies are out doing each other to debase themselves at his feet...
...zombie banks are casting out the demon hearsts...
...and hanging the painted one's depressionist masterpieces...
...from their atrium roofs...
DOWN IN THE JUNGLE, GOT THE BELLYACHE...
...down in the vaults the canvases are stacking up...
...toxic and unpredictable art for the new, bust millenium...
...their value rises as the other toxic assets deflate...
...paint is the future...
...for the new bust...
FORCAST NEWS
...suckers are still bettin the bust is past it's sell by...
...they think itz all over...
...normal service will be resumed and the paintings of doom...
"The US Treasury on Wednesday opened the floodgates of government bond issuance, revealing plans for a record debt sale in February and more frequent auctions in the months to come.
The announcement came amid growing fears about US government deficits and sent the yield on the benchmark 10-year Treasury note rising to 2.95 per cent, up from just over 2 per cent at the end of December.
The rise in Treasury yields has been pushing mortgage rates higher, complicating efforts to revive the economy. The US Federal Reserve said last week it was “prepared to” buy Treasuries if that would be a “particularly effective” way of reducing private borrowing costs.
“The Fed has to be troubled by the fact that mortgage rates have been rising and the buying of Treasuries by the Fed may come sooner than the market expects,” said William O’Donnell, UBS strategist"...FT
THE TRUTH IS OUT THERE
iain martin..."When a great many lies have been told, the antidote is usually truth. This can hurt, but without it the possibility of recovery and future happiness is remote. And so it is with today's crisis of capitalism.
If an excess of debt built with cheap money was the cause of the crisis – and it was – then more debt is not the answer. Aligning their party with this most basic but vital of insights was, as the essential Tory website Conservative Home put it, "Cameron and Osborne's bravest and loneliest decision". When the Tory leadership decided to oppose Gordon Brown's plans to borrow and spend his way out of the "Depression", as the Prime Minister called it yesterday in a revealing slip of the tongue, they were virtually alone in the western world." times
