bubble bubble booom

[forker]

Since the 2008 crisis economies around the world have been struggling to return to inflation targets. Monetary policy is not working very well and debt has sky rocketed. to give you a feeling of the magnitute of it here are some stats

euro area
From 1996 its debt to gdp was 70% and gradually reduced to 65% before 2008. Today its 90%.

usa
World war 2 took debt to 120% of gdp where it gradually worked to 40% in 1980 and then worked up to a a range around 60% between 1995 and 2008.Today its sitting at 104%

japan
was 100% of gdp in about 1998 and increased by 150% in 2008.Today its 229%


Given that the usa government is bankrupt since its only liquid asset that isn't debt related is its gold reserves. the usa has 8133 tones of gold which roughly exchanges for approximately $238 billion . The usa's recent gdp number is $17947 billion. If debt is 104% of gdp then its bankrupt any way you look at it. I bring up the usa specifically because its still the world reserve currency even though things are changing.

Word is out that central banks are losing their ability to maintain stability and return growth. Lets face it they haven't been able to fix 5hit up and are really just adding wood to the fire. Interest rates are at historic lows and have been for a long time. The issue is the bond bubble that has been building as a result of low rates. The same goes for equity markets with many being at all time highs. Central banks have effectively caused a bubble environment and when the bubble bursts, governments will be left with no choice and will need to pump more money. The next burst is going to be particularly bad with nobody really in strong financial position to recover. Where this all leads is anyone's' guess but it sure is going to be worse than 2008 for a whole lot more people than 2008.When interest rates rise the bond market is going to be molten rock.

 

[counter_violent]

Since the 2008 crisis economies around the world have been struggling to return to inflation targets. Monetary policy is not working very well and debt has sky rocketed. to give you a feeling of the magnitute of it here are some stats

euro area
From 1996 its debt to gdp was 70% and gradually reduced to 65% before 2008. Today its 90%.

usa
World war 2 took debt to 120% of gdp where it gradually worked to 40% in 1980 and then worked up to a a range around 60% between 1995 and 2008.Today its sitting at 104%

japan
was 100% of gdp in about 1998 and increased by 150% in 2008.Today its 229%


Given that the usa government is bankrupt since its only liquid asset that isn't debt related is its gold reserves. the usa has 8133 tones of gold which roughly exchanges for approximately $238 billion . The usa's recent gdp number is $17947 billion. If debt is 104% of gdp then its bankrupt any way you look at it. I bring up the usa specifically because its still the world reserve currency even though things are changing.

Word is out that central banks are losing their ability to maintain stability and return growth. Lets face it they haven't been able to fix 5hit up and are really just adding wood to the fire. Interest rates are at historic lows and have been for a long time. The issue is the bond bubble that has been building as a result of low rates. The same foes for equity markets with many being at all time highs. Central banks have effectively caused a bubble environment and when the bubble bursts, governments will be left with no choice and need to pump more money. The next burst is going to be particularly bad with nobody really in strong financial position to recover. Where this all leads is anyone's' guess but it sure is going to be worse than 2008 for a whole lot more people than 2008.When interest rates rise the bond market is going to be molten rock.

People just have no idea just how bad things are going to get. They trust that govts will look after them, come what may.

Might be time to become a prepper !

 

[new_trader]

Austrian Economics triumphs...again!

Those who subscribe to the Austrian school of economics, which includes me, were warning about this YEARS ago. The majority in this forum argued against me, mostly because they have been brainwashed by the "keep interest rates low and print money" Keynesians and believe that Central Bankers and their fiat money are what a modern economy needs...

This is an interesting thread to read, 5 years later... http://www.trade2win.com/boards/economic-fundamental-analysis/133422-keynes-vs-hayek.html

 

[tomorton]

Those who subscribe to the Austrian school of economics, which includes me, were warning about this YEARS ago. The majority in this forum argued against me, mostly because they have been brainwashed by the "keep interest rates low and print money" Keynesians and believe that Central Bankers and their fiat money are what a modern economy needs...

This is an interesting thread to read, 5 years later... http://www.trade2win.com/boards/economic-fundamental-analysis/133422-keynes-vs-hayek.html

I don't recall what your opponents were saying at that time new_trader but I bet the majority of readers do not hold a negative opinion of the Austrian school of economics. But they have heard every year since they could follow the news that an economic crash was coming. If we're not actually in a crash, and even if we are, a new crash is always coming. But then another day goes by and we don't crash, then another year, then another. And we still don't crash.

You and forker might be right, the conditions to support a new crash might be in place. But it would be irrational to do something today in the expectation it will definitely arrive tomorrow. It might, it might not. I can't say it definitely won't. What you yourselves doing to prepare for this?

 

[forker]

Would it be irrational for governments to pay off their over inflated debt to be more equipped to deal with a crash? Ignoring the obvious because you have a licence to print money is just plain stupid

 

[new_trader]

Say it, don't say it.

I don't recall what your opponents were saying at that time new_trader but I bet the majority of readers do not hold a negative opinion of the Austrian school of economics. But they have heard every year since they could follow the news that an economic crash was coming. If we're not actually in a crash, and even if we are, a new crash is always coming. But then another day goes by and we don't crash, then another year, then another. And we still don't crash.

You and forker might be right, the conditions to support a new crash might be in place. But it would be irrational to do something today in the expectation it will definitely arrive tomorrow. It might, it might not. I can't say it definitely won't. What you yourselves doing to prepare for this?

The dilemma is this: If I wait for the economic crisis and then say “I knew this would happen”, nobody would believe me. If I warn in advance of a coming economic crisis then it becomes “You’ve been saying that for years”. It’s a bit like trying to warn someone who starts smoking that it will give them cancer, you have to warn them in advance and keep telling them for years.

I have never pinned an exact date for a crisis but I was 100% certain that lowering interest rates and printing money would not lead to the kind of economic growth promised by Central bankers and their apologists. I was 100% confident it would lead to a lengthy Japan style stagflation. Looking at the current situation I think I called it right.

The closest I came to predicting a date for a crisis is this entry in my journal:

Jun 9, 2014, 7:09am

The psychopathic Central Planners continue their financial repression while trying to brainwash you into believing that inflation is good for you. By my reckoning the next financial crisis isn’t too far away, probably around 2016-2017, but it might just be possible for the insane and psychotic Central Planners to INFLATE-REPRESS-DENY for longer than even I can imagine. But make no mistake; the Central Planners have every intention of inflating their way out this predicament. So even when (if) they start to raise interest rates it will only be a token effort to make it look as if their over leveraged economies are stronger. They will raise rates so impossibly slowly, in absurdly tiny increments to ensure they are always a long way behind the inflation curve. Don’t expect to see any Gerald Ford style “Whip Inflation Now” campaigns...that is from a bygone era when Central Planners kept inflation to a minimum as opposed to today where they are doing the very opposite. The poor and low income earners will suffer, but they are disregarded. All that matters is the deflation bogeyman is destroyed.

Now, the crisis might not happen until 2020, but one thing is certain, the seeds for it were planted just after the 2008 crash.

 

[timsk]

IMO, it's not a question of if it's going to happen, merely a question of when. Different commentators have different ideas about the catalyst that will trigger a crash; my money is on Europe this time around and, in particular, Deutsche Bank.

 

[sminicooper]

Nassim agrees

quote from Nassim Taleb http://finance.yahoo.com/news/nassi...vbG8DYmYxBHBvcwM1BHZ0aWQDQjE5MTBfMQRzZWMDc3I-

“The fact that the world, as a result of quantitative easing, has seen an asset inflation that benefited the uber-rich, and that nothing has been cured. One cannot cure debt with debt, by transferring from private to public sectors. The markets will ultimately crash again, although this time it will hurt a lot more people,”

 

[dbphoenix]

quote from Nassim Taleb http://finance.yahoo.com/news/nassi...vbG8DYmYxBHBvcwM1BHZ0aWQDQjE5MTBfMQRzZWMDc3I-

“The fact that the world, as a result of quantitative easing, has seen an asset inflation that benefited the uber-rich, and that nothing has been cured. One cannot cure debt with debt, by transferring from private to public sectors. The markets will ultimately crash again, although this time it will hurt a lot more people,”

What the govt should have done at the time, but didn't because of Wall Street and corporate ties, was to let the bondholders, shareholders, and officers hold the bag rather than force the public to suffer the damage, then inject stimuli into the economy to create jobs (not just minimum wage jobs) in order to generate revenue in addition to raising corporate taxes and taxes on the wealthy. We would then now be in a much healthier position.

The chief problem during most of the last century is that people want loads of services but they also want low taxes. Politicians remain in office by promising both, not only in the US but worldwide. But the only way to accomplish that is to borrow the money to pay for the services provided -- including defense spending -- without an accompanying rise in taxes. So here we are. There will at some point be a reckoning. As far as the market and market forecasts are concerned, the chief advantage of trading price is that none of this makes any difference with regard to the profits one earns from trading.

 

[barjon]

........................... But then another day goes by and we don't crash, then another year, then another. And we still don't crash.........

Money nowadays is backed by bugger all and is just a figure in a spread sheet. And we all know how you can play about with spreadsheets. I wouldn't put it past Governments to tinker away for ever and a day to postpone the evil day (and find a form of words that make it sound impressively valid - quantitative easing please stand up). Perhaps the crash will only come when some honest Government comes out from behind the smoke and mirrors

 

[counter_violent]

Money nowadays is backed by bugger all and is just a figure in a spread sheet. And we all know how you can play about with spreadsheets. I wouldn't put it past Governments to tinker away for ever and a day to postpone the evil day (and find a form of words that make it sound impressively valid - quantitative easing please stand up). Perhaps the crash will only come when some honest Government comes out from behind the smoke and mirrors

End of the day it all comes back to One thing. If you have a tenner to spend but you spend twelve, then your life will become miserable, cos the next time you have a tenner to spend, after interest paid on the money you didn't have, then you will only have 9. and so it goes on. The situation just goes from bad to worse until you end completely endebted and your ability to spend becomes non existent.

Govt's everywhere are pretending they are investing for future growth, when in reality they are just pumping more money in to stand still, or worse, still going backwards.
UK still hasn't bridged the deficit gap. There is no talk of paying down any debt.

A good start is by leaving the EU and all that non essential spending we have been doing.

 

[dbphoenix]

End of the day it all comes back to One thing. If you have a tenner to spend but you spend twelve, then your life will become miserable, cos the next time you have a tenner to spend, after interest paid on the money you didn't have, then you will only have 9. and so it goes on. The situation just goes from bad to worse until you end completely endebted and your ability to spend becomes non existant.

Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.

-- Wilkins Micawber

 

[barjon]

End of the day it all comes back to One thing. If you have a tenner to spend but you spend twelve, then your life will become miserable, cos the next time you have a tenner to spend, after interest paid on the money you didn't have, then you will only have 9. and so it goes on. The situation just goes from bad to worse until you end completely endebted and your ability to spend becomes non existent.

Govt's everywhere are pretending they are investing for future growth, when in reality they are just pumping more money in to stand still, or worse, still going backwards.
UK still hasn't bridged the deficit gap. There is no talk of paying down any debt.

A good start is by leaving the EU and all that non essential spending we have been doing.

Well you just print another two pounds (call it QE) and increase the spreadsheet total to twelve pounds. Problem solved.

 

[counter_violent]

Well you just print another two pounds (call it QE) and increase the spreadsheet total to twelve pounds. Problem solved.

Yeah that's right, pass it on to the grandkids, call it their inheritance

 

[forker]

Snippet from Eikon

"The latest monthly survey by Bank of America Merrill Lynch showed that fund managers reckon stocks are their most overvalued since 2000, and equities and bonds combined are near their most overvalued ever.

The poll of 208 fund managers managing $579 billion was carried out from Sept 2-8 against a backdrop of swirling expectations on when the Federal Reserve might raise U.S. interest rates."

 

[new_trader]

The terrifying truth!

Ron Paul: The Fed Plans For The Next Crisis – OpEd

http://www.eurasiareview.com/12092016-ron-paul-the-fed-plans-for-the-next-crisis-oped/

The failure of the Federal Reserve’s eight-year spree of money creation via quantitative easing and historically low interest rates to reflate the bubble economy suggests that the fiat currency system may soon be coming to an end. Yellen’s outside the box proposals will only hasten that collapse.

 

[Atilla]

What is the purpose of interest rates?

Government debt can not be paid back any time soon! What are the options?

1. Cut spending
2. Raise taxes
3. Allow inflation to erode debt

Pick what ever floats your boat!

Why raise rates? Considering so much money has been printed interest rates should fall to price the value of holding money!


Much ado about the usual suspect jumping up and down shouting from the roof tops.

Raising rates will hurt so many people in so many ways it's pure madness. It will also hurt governments trying finance their debt. As economy goes into nose dive it will be an absolute calamity of catastrophic proportions.


As for devaluation of currency and the rest of it. What's the big deal. Talk till the cows come home. Belarus and Romania wiped four zeros off their currency whilst Zimbabwe knocked 10. Cut spending and get back to fighting inflation again.

Countries have also been known to write off debt. Mr Trump has even mentioned it.

It's simply the economic cycle since the beginning of time. Birth rates, floods, wars and droughts can all kick it off. Alternatively, a new creation like the wheel, steam or more recently iphone and the apps world.

What is important is the circle and frequency that money changes hands.
Monetary policy and Milton Fieldman theory was full of rubbish. I think it has now been proven as being flash in a pan that does NOT work. Time to move on...


Low interest rates stays. Look for fiscal policy solutions to control what ever one chooses to; inflation, employment or balanced books.


:smart: