[zaph]

Quote

The World Bank says the global economy is on the edge of a new financial crisis, deeper and more damaging than the one that followed the collapse of Lehman Brothers in 2008.

Its latest six-monthly assessment of global economic prospects halves its forecast for growth among high-income countries, and pushes its forecast for countries using the euro into negative territory.

It has slashed its global growth forecast for 2012 from 3.6 per cent to 2.5 per cent. High-income nations are forecast to grow at 1.4 per cent rather than 2.7 per cent. The euro area's economy will shrink 0.3 per cent



Read more: http://www.brisbanet...l#ixzz1jn4CcPIC

fasten the seat belts.

[cobran20]

Do not panick, the printing presses are coming to your rescue!

IMF Seeks $500B Boost to Lending Resources

Quote

The International Monetary Fund is proposing to raise its lending capacity by as much as $500 billion to insulate the global economy against any worsening of Europe’s debt crisis.

The Washington-based lender is aiming to increase its resources after identifying a potential need for $1 trillion in financing in coming years, an IMF spokesman said in a statement. The IMF is studying options and will not comment further until it has consulted its members, the fund said. To incorporate a cash buffer, the lender is seeking a total $600 billion.

[staringclown]

I've been reading of Greshams Law. The idea that "bad money" chases "good money" out of circulation. ie. In greshams time "good money" had a face value closer to the commodity value of the make up of the coin. (gold/silver/copper) Henry VIII debased* the currency by mixing the silver with 40% base metal. The real silver coins got hoarded, melted down and sold. The "bad money" dominated the circulation. This answers in part my questions about why a standard backed currency (like gold) have advantages in maintaining your wealth.

It's funny that I start having the idea that sure gold has value in terms of it's usefulness in the same way oxygen does. Or rare earth metals. Or pork bellies**.

An article in the FT (I followed from cobrans link) asserts that there is a parallel with QE and ZIRP. Too much easy credit can cause deleveraging as opposed to it's intention of releveraging. I need to get my head around this but the basic theme seems to be if a bank is offering you nothing you might want to stash the cash under your mattress rather than have it onsold at unknown risk cheaply. Banks have less to lend and so it goes... If I'm reading it correctly.

Anyway turns out if you think something is going to be in demand in the future you should probably invest in that thing to maintain your wealth. Who'd have thunk it?

*This surely is where the word debased is derived

**The idea of a pork belly backed currency amuses me greatly

[boz]

staringclown, on 19 January 2012 - 11:13 AM, said:

Too much easy credit can cause deleveraging as opposed to it's intention of releveraging.

that is the reality of last 30 years. it is not easy credit the one we see now it has been for far longer that people realise.
easy credit brought the numbers up to a level unsustainable and destabilising and deleveraging is one way out towards stabilisation

[staringclown]

boz, on 20 January 2012 - 10:39 AM, said:

that is the reality of last 30 years. it is not easy credit the one we see now it has been for far longer that people realise.
easy credit brought the numbers up to a level unsustainable and destabilising and deleveraging is one way out towards stabilisation

What about the idea of a reset button?

Regardless of ideology it seems that any political system leads to a concentration of wealth. My understanding is that historically debt forgiveness was common when a system was approaching limits. Stability was ensured through the hegemony of power being maintained but debt obligations being removed allows the whole system to restart. Like the voluntary haircut greek bond holders are being asked to swallow. A deal ensuring some advantage in a newly reformed system might ease the concerns of hedge funds for example.

The world has constant supply-demand. It seems that systems approaching limits adversely affect the operation of the markets.

Edit: OK the world doesn't have constant supply but demand certainly. This is an abstract notion and I realise that those who are owed would be reluctant to forego the obligation of the debtors. Which is why europe may yet collapse.

[boz]

staringclown, on 21 January 2012 - 10:13 AM, said:

What about the idea of a reset button?

Regardless of ideology it seems that any political system leads to a concentration of wealth. My understanding is that historically debt forgiveness was common when a system was approaching limits. Stability was ensured through the hegemony of power being maintained but debt obligations being removed allows the whole system to restart. Like the voluntary haircut greek bond holders are being asked to swallow. A deal ensuring some advantage in a newly reformed system might ease the concerns of hedge funds for example.

The world has constant supply-demand. It seems that systems approaching limits adversely affect the operation of the markets.

Edit: OK the world doesn't have constant supply but demand certainly. This is an abstract notion and I realise that those who are owed would be reluctant to forego the obligation of the debtors. Which is why europe may yet collapse.

not sure I understand your point, in most countries debtor and creditors are within the same boundaries, specially in europe where things produced have similar value of things consumed, this is despite the commodity boom that penalise manufacturing countries and give an advantage to resource producers. If you push the reset button you give a prize to the one that have consumed beyond their mean and penalise the one that have been saving to provide for the future, it is not a stabilising situation for the country. also you don't improve economy and consuming as people that have been saving they are going to reduce consumption once they realise they haven't got their savings anymore, while the people that have been overspending they are going to reduce consumption too as they'll get none that will lend them money anymore. That is why is important to have a stable number of creditor and debtor, to avoid the inevitable deflation that and destabilisation of the country

[Solomon]

boz, on 22 January 2012 - 02:54 AM, said:

If you push the reset button you give a prize to the one that have consumed beyond their mean and penalise the one that have been saving to provide for the future.

boz makes a valid point.
He also describes the problem that got us into this mess.
Greed.
You see, there is another way to describe "saving to provide for the future".
It is the desire for power over their future.
That is what some people believe, money provides.
It doesn't.
Money can't buy you time, if your time's up.

I recognise that those who consumed beyond their means, are just as greedy, as though who want to accumulate massive amounts of wealth as a cushion against struggle and hardship.

The reason the world will hold off pressing the reset button (just as they have since the idea of a Jubilee, was first considered in scripture), is that those that have, just simply don't want to give it up, for those that don't.

While that mindset exists, we will continue to annihilate one another for the sake of getting what is owed to us. (Or at leat that is what creditors and debtors have always done.)
Forgiveness, was all about debts.
boz, reveals why it is so hard to actually do.
Forgiveness was all about money, and accounting practice.

We have now digressed so far from the basics of genuine forgiveness, we haven't got a hope in harry, of coming out of this unscathed.
While boz's mindset exists, people will kill one another, for the sake of a few bucks.
What a waste!!

And you wonder why religion exists!!

[cobran20]

Solomon, on 22 January 2012 - 12:44 PM, said:

boz makes a valid point.
He also describes the problem that got us into this mess.
Greed.
You see, there is another way to describe "saving to provide for the future".
It is the desire for power over their future.
That is what some people believe, money provides.
It doesn't.
Money can't buy you time, if your time's up.

I recognise that those who consumed beyond their means, are just as greedy, as though who want to accumulate massive amounts of wealth as a cushion against struggle and hardship.

The reason the world will hold off pressing the reset button (just as they have since the idea of a Jubilee, was first considered in scripture), is that those that have, just simply don't want to give it up, for those that don't.

While that mindset exists, we will continue to annihilate one another for the sake of getting what is owed to us. (Or at leat that is what creditors and debtors have always done.)
Forgiveness, was all about debts.
boz, reveals why it is so hard to actually do.
Forgiveness was all about money, and accounting practice.

We have now digressed so far from the basics of genuine forgiveness, we haven't got a hope in harry, of coming out of this unscathed.
While boz's mindset exists, people will kill one another, for the sake of a few bucks.
What a waste!!

And you wonder why religion exists!!

... let's not forget how many people have been killed in the name of religion over millenia!

[staringclown]

boz, on 22 January 2012 - 02:54 AM, said:

not sure I understand your point, in most countries debtor and creditors are within the same boundaries, specially in europe where things produced have similar value of things consumed, this is despite the commodity boom that penalise manufacturing countries and give an advantage to resource producers. If you push the reset button you give a prize to the one that have consumed beyond their mean and penalise the one that have been saving to provide for the future, it is not a stabilising situation for the country. also you don't improve economy and consuming as people that have been saving they are going to reduce consumption once they realise they haven't got their savings anymore, while the people that have been overspending they are going to reduce consumption too as they'll get none that will lend them money anymore. That is why is important to have a stable number of creditor and debtor, to avoid the inevitable deflation that and destabilisation of the country

On reading it again I'm not sure I see my own point. That's what malt scotch will do to you.

I was thinking of the situation where debt forgiveness would be better than the alternative of sovereign default which could spread to other countries and thus be a worse outcome for holders of the debt overall. For instance the german first world war reparations caused resentment and ultimately contributed to the second world war.

I agree that rewarding profligate countries is not a good thing as it rewards bad behaviour. In the same way as bailing out banks leads to increased risk as they don't suffer consequences and are more likely to repeat the behaviour.

You mentioned that deleveraging was one way out of the situation of excessive debt. Is the other way inflating your way out of debt?

[sydney3000]

staringclown, on 23 January 2012 - 09:40 AM, said:

I was thinking of the situation where debt forgiveness would be better than the alternative of sovereign default which could spread to other countries and thus be a worse outcome for holders of the debt overall.

'You will not have to pay me back' is the same as 'I won't pay you back'.