|
Korean Job Discussion Forums
"The Internet's Meeting Place for ESL/EFL Teachers from Around the World!"
|
| View previous topic :: View next topic |
| Author |
Message |
thepeel
Joined: 08 Aug 2004
|
 Posted: Mon Dec 10, 2007 11:32 pm Post subject: America faces day of reckoning with debt |
 |
|
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/10/ccview110.xml
| Quote: |
The rising economies of Asia are too small and deformed to save world growth as America, Britain, Australia and Club Med face their day of debt reckoning. China may make matters worse, not better.
The seven pillars of global demand over the last year - measured by current account deficits - have been the United States ($793bn), Spain ($126bn), UK ($87bn), Australia ($50bn), Italy ($48bn), Greece ($42bn), and Turkey ($34bn). Most are facing a housing bust. All are in trouble.
China cannot possibly step into the breach. Jahangir Aziz and Xiangming Li argue in a new IMF paper that China's economy is now so geared to the US and EU markets that a 1pc fall in external demand will lead to a 4.5pc slide in exports and 0.75pc fall in GDP. Assumptions that it will weather a global shock are "likely to be wrong, perhaps dramatically".
China is gobbling up iron ore, soy beans and crude oil, but it accounts for less than 4pc of global consumption and is no longer adding to total demand. Imports have been flat since April. China is boosting GDP at the world's expense, by snatching markets with a cheap yuan. It is beggar-thy-neighbour growth.
Thomas Mayer, Europe economist for Deutsche Bank, said the European Central Bank must cut rates immediately, regardless of the lingering inflation threat. "This could go beyond just a normal recession. It could turn into a real economy-wide crunch that we cannot stop," he said.
Four months after the global credit system suffered its August heart attack, nothing has been resolved. The US market for Asset Backed Commercial Paper shed another $23bn last week. The outstanding volume has fallen for 17 weeks in a row as lenders refuse to roll over loans, cutting off $393bn in funding since August.
For now, the consensus view is that sub-prime losses will total $500bn and crimp lending by $2 trillion as bank multiples kick into reverse.
This assumes there are no more shoes to drop. Yet shoes are dangling precariously across the global credit system. We may soon have to add the terms HELOCs and "monoline insurers" to our crunch lexicon.
HELOCs are home equity loans, the money extracted from houses. Many borrowers pushed their debt to as much as 110pc of house values.
Moody's says 16.5pc of these loans are in arrears beyond 60 days. The HELOC market is roughly $600bn, so add another $100bn to the funeral pyre. These niches add up.
Monoliners are specialist insurers who earn fees by lending their AAA ratings to US states, counties, and cities for bond issues - the safest corner of the credit industry. The nasty twist is that most have ventured into mortgage debt to spice returns. They now face enough losses to threaten their AAA standing.
A downgrade means that every bond bearing their guarantee must be downgraded pari passu. Pension funds and institutions will be forced to liquidate sub-AAA holdings. A fresh cascade of distress sales will ravage the $2,400bn "muni" market.
The unthinkable now looms. Moody's said it was "somewhat likely" that top insurer MBIA would fall below the AAA capital requirement: Fitch warns of a "high probability" that CIFG Guaranty and Financial Guaranty will be placed on negative watch. Both agencies are poised to issue verdicts. The insurers will then have a month to raise capital, no easy task after a 70pc crash in share prices.
Mr Paulson's New Deal may at least reduce systemic risk. Frozen rates concentrate losses in the lower tiers of mortgage debt but rescue the upper tiers, which is where the threat lies for the financial system. Would free marketeers rather see the whole edifice of capitalism burned to the ground to make their point?
The root cause of this debacle lies in errors made by the Federal Reserve and fellow sinners. They inflated the credit bubble by holding interest rates too low for too long and lulled nations into suicidal levels of debt.
The strategic failure of a whole generation of economists, bankers, and policy-makers has been so enormous that it may now take a strong draught of socialism to save the Western democracies. We start - but may not end - with the nationalisation of Northern Rock. |
|
|
| Back to top |
|
 |
Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
|
| Posted: Tue Dec 11, 2007 12:31 am Post subject: |
|
|
| Yes, sooner or later the bill for the last 40 years of Conservative dominance of the US government will come home to roost. |
|
| Back to top |
|
|
Tiger Beer
Joined: 07 Feb 2003
|
| Posted: Tue Dec 11, 2007 7:56 am Post subject: Re: America faces day of reckoning with debt |
|
|
| Quote: |
| The seven pillars of global demand over the last year - measured by current account deficits - have been the United States ($793bn), Spain ($126bn), UK ($87bn), Australia ($50bn), Italy ($48bn), Greece ($42bn), and Turkey ($34bn). Most are facing a housing bust. All are in trouble. |
I'm in shock that Spain is #2. They hardly do anything whatsoever internationally. In addition, they hardly do anything domestically either.
What a mystery that one is. |
|
| Back to top |
|
|
ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
|
| Posted: Tue Dec 11, 2007 9:22 am Post subject: |
|
|
| Ya-ta Boy wrote: |
| Yes, sooner or later the bill for the last 40 years of Conservative dominance of the US government will come home to roost. |
Completely Wrong.
Only the Gold Standard qualifies as either "conservative" or "libertarian."
With a gold standard, and fraud made illegal, there can be no recessions and no bubbles. These problems are avoidable by following known facts of economic science and the science of liberty.
These are soclialist policies come home to roost. Unfortunately, the public is generally too ignorant to know, and they will buy into lies and ignorance like Yata's and demand an increase in the policies that are the cause of the world's problems. |
|
| Back to top |
|
|
thepeel
Joined: 08 Aug 2004
|
| Posted: Tue Dec 11, 2007 9:28 am Post subject: |
|
|
ontheway:
I agree that a gold standard would eliminate monetary induced asset bubbles, but not all asset bubbles are monetary induced. Sometimes, people just hype something beyond what should be the normal value. Bubble economies, typically are created by inflationary monetary policy.
I do not agree with a gold standard. But a central bank with competing private currencies that are portfolio managed and the ability to exchange gold/silver for assets more easily would likely be enough to hold back the central bank. |
|
| Back to top |
|
|
ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
|
| Posted: Tue Dec 11, 2007 10:26 am Post subject: |
|
|
Money must be backed by something of value or it is worthless. Yes, it takes time to fall to zero, but fiat currency is always worthless, it's just that it takes time to recognize it.
The dollar has only lasted this long because:
1. Nixon's gold conversion freeze was orignially announced as being temporary.
2. Many people still think the dollar IS backed by gold.
3. Since there are NO hard money currencies available, there is no where to run quickly.
4. The world at the time of Nixon's treason was using dollars as backing for the other currencies. His announcement made all of them "fiat" money overnight. Had any of the other currencies been backed by gold, the dollar would have fallen quickly.
The dollar has already lost 97% of its value since the Federal Reserve was created. Gradually at first by printing unbacked dollars. It fell more quickly under FDR who made the changes permanent. Then Nixon finished it off.
If any country or private insitiution insitutes a commodity backed currency, the world's fiat currencies would quickly hit zero.
Other commodities are possible: silver or platinum maybe. But unbacked currencies are worth only the value of the paper they are printed on. It's only the proof of the "greater fool" theorum that allows fiat currencies to fall over long periods of time before going splat.
Private currencies would be fine, as long as fraud in the form of issuing unbacked currency is prohibited. The institution should be required to follow its own rules and not defraud the public. If $20 represents one ounce of gold, then the institution should not be legally able to issue one dollar more than 20 times the number of ounces of gold it holds on deposit. If another bank wants to issue money backed by some formula based on silver, soybeans or pig snouts, it doesn't matter, as long as they follow their formula. The public will be free to choose which of the competing curencies they each individually wish to hold.
3% is all the value that remains on the way to zero. The Federal Reserve is a total failure. |
|
| Back to top |
|
|
Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
|
| Posted: Wed Dec 12, 2007 12:53 am Post subject: |
|
|
Completely Correct. 
Have you ever read Eric Hoffer? You would not like him. He wrote about how Communists turned into Fascists without really stopping for time to blink. It's an interesting read. "The True Believer".
In a couple of years, after a Democrat takes office in Jan '09 and starts to save the country from the wretched mess your guys have made, you will be back on this forum singing a new tune. Just remember you heard it here first. |
|
| Back to top |
|
|
ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
|
| Posted: Wed Dec 12, 2007 8:43 am Post subject: |
|
|
| Ya-ta Boy wrote: |
Completely Correct.
Have you ever read Eric Hoffer? You would not like him. He wrote about how Communists turned into Fascists without really stopping for time to blink. It's an interesting read. "The True Believer".
In a couple of years, after a Democrat takes office in Jan '09 and starts to save the country from the wretched mess your guys have made, you will be back on this forum singing a new tune. Just remember you heard it here first. |
Communists and Fascists are two extreme forms of socialism. They are together in the bottom quadrant of the political map. This is no surprise. It fits. Why were you surprised? They have the same ideology, the same ideas about government, they just use different words with the same meanings to describe their already identical goals.
The left/right political line is as outmoded as alchemy. |
|
| Back to top |
|
|
Pluto
Joined: 19 Dec 2006
|
| Posted: Wed Dec 12, 2007 9:30 am Post subject: |
|
|
| ontheway wrote: |
The left/right political line is as outmoded as alchemy. |
Were you referring something similar to this.
http://www.politicalcompass.org/test
I'm more Libertarian Right than I thought:
Libertarian: -2.67(lower the score, more libertarian, higher score means more authoritarian.)
Economic Right: 4.75(higher score means more economic freedom)
This page made me laugh a bit to see that George Bush is slightly less authoritarian than Robert Mugabe 
Anyway, interesting test. Take it and see where you end up. |
|
| Back to top |
|
|
thepeel
Joined: 08 Aug 2004
|
| Posted: Wed Dec 12, 2007 9:39 am Post subject: |
|
|
| I think that there was a very long thread a few months back where many posters took that quiz. |
|
| Back to top |
|
|
ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
|
|
| Back to top |
|
|
Pluto
Joined: 19 Dec 2006
|
| Posted: Wed Dec 12, 2007 9:51 am Post subject: |
|
|
Whoa! LMAO! That put me way up in the Libertarian corner.
That said, as far as funding the troops goes though, I support the troops in the field. I will agree that one of the biggest mistakes by Bush/Cheney is not using the government power of monopsony. Why they just gave the right of monopoly to Hal/KBR, I'll never know. But yeah, that is corporate welfare, pure and simple. |
|
| Back to top |
|
|
thepeel
Joined: 08 Aug 2004
|
| Posted: Wed Dec 12, 2007 10:07 am Post subject: |
|
|
| ontheway wrote: |
| The dollar has only lasted this long because: |
I disagree with the points you provided. The dollar has maintained value to the extent that it has because the Bretton Woods 2 system imposes a Nash Equilibrium upon the United States and the export orientated developing states that have been gobbleing up US debt at the tune of about 800billion a year. This is a stable system in the short term because neither the exporting states nor the United States has the ability to unilaterally move away from BW2 and still be in a beneficial position.
However, when domestic demand in Asia is sufficient enough that they can decouple from the United States, the dollar will crash (unless the Fed dramatically increases interest rates). It could also crash if Asian states melt down due to a decrease in American demand for Asian exports, which I believe to be the biggest risk in the short term. |
|
| Back to top |
|
|
ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
|
| Posted: Wed Dec 12, 2007 10:31 am Post subject: |
|
|
| The dollar will crash when enough ordinary everyday people realize it's worthless and refuse to accept it. That is what usually brings down a currency. The reasons I stated are why the people haven't run away from the dollar yet. When the run on the dollar begins, all the banking systems in the world won't stop it. People will demand gold, silver or some other item in barter. The dollar will fall to zero. Most of the other currencies in the world will follow. |
|
| Back to top |
|
|
thepeel
Joined: 08 Aug 2004
|
| Posted: Wed Dec 12, 2007 10:46 am Post subject: |
|
|
I am not a fan of fiat currency. But, when you exchange a dollar for a good you are doing more than just giving a piece of paper.
Assuming you are a teacher for a moment.. You can't exchange teaching services for pork at the butcher and then coke at the 7/11 and a book from Amazon.com. The dollar doesn't necessarily have to be a store of value (ie gold) but can simply be a means of exchange. It is a way for you to exchange teaching services to someone in America that sells books and doesn't need your teaching services. It is just a means of exchange. There can be a market value, but the central banks of most nations have undermined that market value via fractional reserve banking and inflationary monetary policy. The dollar has no value but your labour does. And you can exchange your labour for a dollar and then exchange that dollar for the labour of another. I'd rather a different system, but I don't agree with your characterization.
If given the choice I would rather be paid in gold/silver than dollars. Of course. And because of this the money that I save every month is invested in a way that I hope will protect me from the central banks who seem hellbent on devaluing my labour. |
|
| Back to top |
|
|
|
|
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum
|
|
FAQ
Search
Memberlist
Usergroups
Register
Profile
Log in to check your private messages
Log in
