Barack Obama, the angel of change, man that through no one knows what mysterious super power should cure the ills of America and the world, has finally settled at the White House. The market has joyfully celebrated the event breaking apart.
While the herald of hope filled the rightful place behind the bench of the Oval Office was his hope to be cruelly slaughtered on the stock exchanges around the world.
A false hope mind you.
The illusion that the situation was resolved with half measures. Remedies that were not going to hit the problem at its root. The childish belief that it was possible to swim in a pool of manure and come out clean and fragrant.
Now, even this ridiculous hope seems to have broken. The bloodbath that has involved the titles of major British and U.S. banks has made it clear to everyone that the situation in the banking sector was not in any way improved. Attempts by states to save any body have only transferred the risk to them. Now in addition to banks, whole nations are to wobble, to flirt with an event called "default" that seems to reciprocate loving every demonstration of affection.
Standard & Poor 's recently cut the rating of Spain Port from AAA to AA +. France is planning an event. As I illustrated in the previous post, Spain is facing a worrying decline created by the combination of excessive borrowing, economic growth based on imitation of it and the gradual loss of competitiveness. Pritchard on Telegraph suggests Spain to abandon the European Union, to restore and devalued its currency in an attempt to compensate for the imbalances. I guess that would Pritchard delighted with such an event. It 's always been anti-European (or € skeptical if you like) and never bothered to hide it.
pity that the output for any member country of the euro (except maybe France and Germany) would be for it a one-way ticket to hell. It will not happen, how many threats in this regard some states might launch. Ireland has already started : "save us or leave Europe," said David McWilliams, a former member of the Central Bank of Ireland. The anger is directed McWilliams especially in France and Germany. The two big countries are accused of not wanting to support more members of the shabby € agreeing to pay its price.
Most economists seem to agree that Spain and Ireland would need a currency devaluation to boost the export sector, second only strategy McWilliams and Pritchard to mitigate the impact of economic crisis. A road is not viable in the context of the single currency. The alternative to a competitive devaluation would be a massive reduction in wages. A kind of politics that hardly would be accepted peacefully by the people. The risk of violent protests or riots would become too high.
No politician in their right mind would face similar risks, being able to avoid. Moreover, even taking limited action in this sense, Spain and Ireland would be met with similar measures taken by other major European countries. If Germany and France would reduce their earnings, any measure of this type undertaken by Spain and Ireland would be nullified.
weaker euro zone countries are literally between a rock and a hard place. If you leave the euro commit suicide. If they do not die little by little.
The strength of the single currency is also impacting on the tourism sector. Spain has lost in 2008 a million British tourists who have preferred destinations more affordable and the outlook for the current year are even worse. Tourism accounts for 10% of GDP in Spain, 11, 4% in Italy, 15% in Greece.
France and Germany will have to resign and accept a devaluation of the euro will come up or some form of direct support towards shaky countries.
we should not worry about the possible default of a state adopting the single currency, at least to hear Almunia :
With discipline by the states, I presume che Almunia intenda: calo della spesa pubblica, diminuzione delle retribuzioni ed eventualmente, ma non necessariamente, un aumento delle tasse. Quasi tutti gli economisti invece, invocano in coro la necessità di interventi di riduzione fiscale, l'incremento della spesa pubblica come misura anti ciclica ed un aumento dei consumi da parte della popolazione. Come molti avevano previsto ci troviamo in piena fase schizofrenica.
Se molti paesi dell'euro zona se la passano male l'Europa dell'est sta semplicemente esplodendo . Lettonia e Bulgaria sono state teatro, la scorsa settimana, di proteste sfociante in scontri violenti con le forze dell'ordine. Nei due piccoli paesi si sta creando una saldatura tra la classe media and youth population. Both feel cheated and deceived by their own government accused of abandoning him in the midst of economic crisis and left them with no prospects for the future. In both countries, the taxes were increased and reduced government spending. To this we must add to a growing unemployment rate and the refusal by the banking system to extend credit to the people. An explosive combination of factors.
Hungary and Lithuania are in similar conditions, while the edge of Europe Ukraine has become a living dead . The local currency has lost 38% against the dollar last year, the stock has fallen 85% and the bonds must promise the highest performance in the world apart from those good Ecuador (a country that declared default in December). The only thing that still has life in Ukraine is the $ 16.5 billion loan granted to it by ' IMF. The country is likely to erupt as has happened to Iceland. In the small island in the north, the population is now exasperated increasingly frequent recourse to forms of violent protest.
The news of the moment, however, remains the worsening situation of English as a direct result of the terrible condition in which its banking system. An article of Iain Martin on Telegraph not mince words: "Gordon Brown brought Britain to the brink of bankruptcy" is the title. Martin says:
Pritchard says that the path taken by Iceland, to park elsewhere supervised by committees, the loss of its banking system is precluded from England. If it tried to escape from the 4.4 trillion dollars in total exposure of its banks, would unleash the mayhem on the entire planet and permanently undermine the position of the City of London.
Jim Rogers old investor and former classmate of raids Soros told Bloomberg to Television: "I invite you to sell every pound you have. It 's over. I hate to say, but not invest any money in England. "
Soros on the other hand seems more agitated: "The economies of the world are falling off a cliff. This situation is comparable to that of 30 years. And once you recognize it, we must also recognize that the scale of the problem is even higher."
The recognition of spoken Soros is exactly what the world needs. That politicians and economists were well aware that fish take a long time it was clear to those who wanted to see the reality. The central problem of all the current economic crisis has never been particularly difficult to understand. The system has grown too much debt compared to the wealth that the system itself is capable of producing. To overcome this problem the system has begun to pay existing debt contracting of new debt. This did not make the situation worse by increasing the debt itself and led us into a dead end. We got to the point where the system is saturated with debt and is no longer able to accept again.
The time in which debts must be paid for real or where you have to declare default.
And given that the wealth we produce is not enough to pay that part of the debt needed to prop up the cabin, the alternative is one.
We want four degrees to come to understand this simple reality. The debt grows as an exponential function and When a function like this comes up against the limits of the real world sooner or later collapse. It 's always been unrealistic to pretend that the economic growth of the various states could stay for a long time behind a similar function. From this point of view the graph that I published several times and that shows the trend of the ratio of debt to total U.S. GDP and their Tutt 'nothing but ambiguous
While the herald of hope filled the rightful place behind the bench of the Oval Office was his hope to be cruelly slaughtered on the stock exchanges around the world.
A false hope mind you.
The illusion that the situation was resolved with half measures. Remedies that were not going to hit the problem at its root. The childish belief that it was possible to swim in a pool of manure and come out clean and fragrant.
Now, even this ridiculous hope seems to have broken. The bloodbath that has involved the titles of major British and U.S. banks has made it clear to everyone that the situation in the banking sector was not in any way improved. Attempts by states to save any body have only transferred the risk to them. Now in addition to banks, whole nations are to wobble, to flirt with an event called "default" that seems to reciprocate loving every demonstration of affection.
Standard & Poor 's recently cut the rating of Spain Port from AAA to AA +. France is planning an event. As I illustrated in the previous post, Spain is facing a worrying decline created by the combination of excessive borrowing, economic growth based on imitation of it and the gradual loss of competitiveness. Pritchard on Telegraph suggests Spain to abandon the European Union, to restore and devalued its currency in an attempt to compensate for the imbalances. I guess that would Pritchard delighted with such an event. It 's always been anti-European (or € skeptical if you like) and never bothered to hide it.
pity that the output for any member country of the euro (except maybe France and Germany) would be for it a one-way ticket to hell. It will not happen, how many threats in this regard some states might launch. Ireland has already started : "save us or leave Europe," said David McWilliams, a former member of the Central Bank of Ireland. The anger is directed McWilliams especially in France and Germany. The two big countries are accused of not wanting to support more members of the shabby € agreeing to pay its price.
Most economists seem to agree that Spain and Ireland would need a currency devaluation to boost the export sector, second only strategy McWilliams and Pritchard to mitigate the impact of economic crisis. A road is not viable in the context of the single currency. The alternative to a competitive devaluation would be a massive reduction in wages. A kind of politics that hardly would be accepted peacefully by the people. The risk of violent protests or riots would become too high.
No politician in their right mind would face similar risks, being able to avoid. Moreover, even taking limited action in this sense, Spain and Ireland would be met with similar measures taken by other major European countries. If Germany and France would reduce their earnings, any measure of this type undertaken by Spain and Ireland would be nullified.
weaker euro zone countries are literally between a rock and a hard place. If you leave the euro commit suicide. If they do not die little by little.
The strength of the single currency is also impacting on the tourism sector. Spain has lost in 2008 a million British tourists who have preferred destinations more affordable and the outlook for the current year are even worse. Tourism accounts for 10% of GDP in Spain, 11, 4% in Italy, 15% in Greece.
France and Germany will have to resign and accept a devaluation of the euro will come up or some form of direct support towards shaky countries.
we should not worry about the possible default of a state adopting the single currency, at least to hear Almunia :
"The default risk is always there, in private as in public, but I do not think in ' euro area risks are important and meaningful. " He said the European Commissioner Joaquin Almunia when asked by a journalist and explaining that "constitutes an element of market discipline, the spread now higher", ie the increase of the difference between interest rates States that are charged on new issues of their titles.
With discipline by the states, I presume che Almunia intenda: calo della spesa pubblica, diminuzione delle retribuzioni ed eventualmente, ma non necessariamente, un aumento delle tasse. Quasi tutti gli economisti invece, invocano in coro la necessità di interventi di riduzione fiscale, l'incremento della spesa pubblica come misura anti ciclica ed un aumento dei consumi da parte della popolazione. Come molti avevano previsto ci troviamo in piena fase schizofrenica.
Se molti paesi dell'euro zona se la passano male l'Europa dell'est sta semplicemente esplodendo . Lettonia e Bulgaria sono state teatro, la scorsa settimana, di proteste sfociante in scontri violenti con le forze dell'ordine. Nei due piccoli paesi si sta creando una saldatura tra la classe media and youth population. Both feel cheated and deceived by their own government accused of abandoning him in the midst of economic crisis and left them with no prospects for the future. In both countries, the taxes were increased and reduced government spending. To this we must add to a growing unemployment rate and the refusal by the banking system to extend credit to the people. An explosive combination of factors.
Hungary and Lithuania are in similar conditions, while the edge of Europe Ukraine has become a living dead . The local currency has lost 38% against the dollar last year, the stock has fallen 85% and the bonds must promise the highest performance in the world apart from those good Ecuador (a country that declared default in December). The only thing that still has life in Ukraine is the $ 16.5 billion loan granted to it by ' IMF. The country is likely to erupt as has happened to Iceland. In the small island in the north, the population is now exasperated increasingly frequent recourse to forms of violent protest.
The news of the moment, however, remains the worsening situation of English as a direct result of the terrible condition in which its banking system. An article of Iain Martin on Telegraph not mince words: "Gordon Brown brought Britain to the brink of bankruptcy" is the title. Martin says:
not know what they're doing, do not you think? Each new step taken by the government in the frantic attempt is supporting the British banking system, makes this truth more evident (...)Martin concludes:
The rescue of the banks by the Government in October through the use of 37 billion pounds a load taxpayers should have the second prime minister "to save the world", but it is now clear that was not even able to save the banks. Our money did continue the show for only three months.
As requested by the spokesman for the Liberal Democrats Vince Cable : where did the 37 billion? The answer, as Cable know, is that they disappeared in the exhaust pipe.
is finally flashing in the mind of the notion that government obligations of the British banks have grown so massive that during the boom years to come to overshadow the whole economy. Unfortunately, the Treasury has pledged to honor these obligations by ensuring that no bank will be allowed to fail. RBS has obligations to 1.8 trillion pounds, three times the annual cost of the British government, up from 1.9 trillion of assets . But after the events of last year, I bet that many taxpayers believe that reality is even worse.
Brown and Darling go around telling that it is not for the government own or manage banks, as if to reassure the stock against any prospect of nationalization. Judging by the collapse of the securities of the largest banks essersela British investors do not seem drunk. All escape in case of nationalization since the value of the shares would be reset. An analyst at Nomura (a major Japanese bank) said: "We believe that if the latest measures should prove insufficient, then the authorities would find themselves, probably with no alternative than to full nationalization."In this depressing situation, the Prime Minister is only a faint hope that somehow, by the force of his personality, the new president Obama will be able to strike up a quick recovery by restoring confidence in America global energizing markets and making them forget all this bad dream.
Obama is full of talent but not a magician. The nightmare of Gordon Brown , which we are all trapped in is destined to become much worse.
Pritchard says that the path taken by Iceland, to park elsewhere supervised by committees, the loss of its banking system is precluded from England. If it tried to escape from the 4.4 trillion dollars in total exposure of its banks, would unleash the mayhem on the entire planet and permanently undermine the position of the City of London.
Jim Rogers old investor and former classmate of raids Soros told Bloomberg to Television: "I invite you to sell every pound you have. It 's over. I hate to say, but not invest any money in England. "
Soros on the other hand seems more agitated: "The economies of the world are falling off a cliff. This situation is comparable to that of 30 years. And once you recognize it, we must also recognize that the scale of the problem is even higher."
The recognition of spoken Soros is exactly what the world needs. That politicians and economists were well aware that fish take a long time it was clear to those who wanted to see the reality. The central problem of all the current economic crisis has never been particularly difficult to understand. The system has grown too much debt compared to the wealth that the system itself is capable of producing. To overcome this problem the system has begun to pay existing debt contracting of new debt. This did not make the situation worse by increasing the debt itself and led us into a dead end. We got to the point where the system is saturated with debt and is no longer able to accept again.
The time in which debts must be paid for real or where you have to declare default.
And given that the wealth we produce is not enough to pay that part of the debt needed to prop up the cabin, the alternative is one.
We want four degrees to come to understand this simple reality. The debt grows as an exponential function and When a function like this comes up against the limits of the real world sooner or later collapse. It 's always been unrealistic to pretend that the economic growth of the various states could stay for a long time behind a similar function. From this point of view the graph that I published several times and that shows the trend of the ratio of debt to total U.S. GDP and their Tutt 'nothing but ambiguous
The dramatic increase in the ratio from the mid-90 forward was to trigger an alarm bell. Now it seems that little by little, the problem is becoming a matter of debate. Surprisingly an article Massimo Mucchetti on the courier's website addresses the question:
Barack Obama's response is based on an increase in spending , which adds to the cost of rigging last Bush. We're talking about $ 800 billion economic stimulus than the similar figure in the Federal Reserve is already committed to spend in support of the banks. Elected president inherits a country that has a total debt (companies, families, financial sector and foreign) of 51.849 billion dollars, compared to gross domestic product of 14,412. A debt equal to 359.7% of the wealth produced each year. In 2009, the public component of this debt is set to grow the aim, if nothing else, to hold that allowing private firms and households to survive. And today, depending on how you make the count, the U.S. public debt close to or even exceeds the gross domestic product. As reported Reinhart and Rogoff Moreover, within three years of past banking crises, public debt increased by '86%, because it is not even with their necessary operations on interest rates, by central banks, which exceed these crises so serious, but inevitably the public expenditure financed by debt. But if you look at the experience of the Great Depression in the United States will have to go beyond the readings dei due economisti. Perché quando, nel 1941, il prodotto interno lordo espresso in moneta corrente tornò finalmente ai livelli pre -crisi del 1929, il debito totale americano si era dimezzato. E tutti sanno che esistono solo quattro modi per tagliare drasticamente un debito: l’insolvenza, la bancarotta, l’inflazione e la cancellazione del debito mediante un Giubileo di biblica memoria come ironicamente ricorda Niall Ferguson sul Financial Times o attraverso la conversione dei debiti in azioni, come suggeriva Guido Carli all’Italia degli anni Settanta.L'utilità di interventi economici come quelli annunciati Obama is questionable, since they do not go to any influence on the heart of the problem. People and companies can no longer borrow money, thereby creating sufficient to ensure that the system is able to repay their debts? "What is undue status and whether to put money into circulation" is suggested by many.
not need to much. Meanwhile
intervention in the wrong direction, tending to settle the problem rather than solve it. Second, hardly a state will be able to borrow enough to compensate for the lack of private debt.
The only way to go is to let the debt decreases.
Seek inflation reduce the value of money and therefore the amount of debt actually downloading it on the shoulders of all people, on whom it was prudent and those who are indebted to the neck. If I have a debt of € 100 and suddenly someone print enough money to ensure that their purchasing power drop so much, not even enough to buy a box of candy, that someone has actually canceled my debt. This strategy worked very well in Germany during the 20s. Many paid off their debts. The entire German economy, however, came out destroyed. The people soon found themselves strangled by inflation to the store with the cart (used in place of the portfolio). In the chaos that followed Hitler came to power. The rest of the story we all know. A
article on 'Economics Times suggests the very approach inflationary. He says that it is politically and socially unacceptable to fail the people and that at most one may try to extend somehow pay the debt by increasing inflation in the meantime.
Karl Denninger Blog its raised what he always believed to be the only approach possible. An approach that closely resembles the solution put forward by Guido Carli : clarity on banks' balance sheets, reducing their exposure to the shareholders take losses, and those holding common shares of preferred stock and convert the bonds into shares. In this way the institutions' balance sheets are cleaned by allowing them to return to lend money at the same time would be made transparent to the actual conditions of the banking sector in order to restore investor confidence. As for private debt Denninger suggests simply letting people fail. Who should bear imprudently risked without discharging its responsibilities on the shoulders of all.
On a possible global Jubilee, many are ultimately a "joke" about. For the uninitiated, once took place during the remission of Jubilees debt. It was canceled, "who had had and who gave gave it." "Forgive us our trespasses as we forgive our debtors." The fact that such a concept is found in the sacred prayers, shows that in the past it was common knowledge that sooner or later the debt inevitably escapes and ends up in your face break out. In Leviticus (if not mistaken) the Bible prescribes debt relief every 50 years. The usual
Pritchard says :
Taken together, the rescue packages could make the difference between a global recession and a decline more pronounced that could cause mass unemployment and social unrest, perhaps destroying that order global openness that we take for granted. If this is so we can only suppose.
We have no guarantee that the measures will work. The large government debt under way, the reserves may run out of global capital. The markets are already beginning to question the solvency of sovereign states. The Fed may find more difficult than expected to withdraw its colossal market interventions obligazionario.
Ultimately, the only way out of this debt could be a global memory of the Biblical Jubilee.
the creditors will not like it.
the course of the Jubilee is not really a road viable. Can you imagine Obama going by the Chinese with a smile and says, "Surprise You worked 13 years for nothing. We should do it again one of these days."
Who reads this blog knows how I feel. A reduction of debt is inevitable and let it fail the people are the less painful way to do it. As far as the banks tend to share the solution Denninger and where not to apply for a Swedish approach . During the banking crisis of early 1990, triggered by the bursting of a housing bubble (the housing market fell by 50-60% in 18 months) that had generated a series of deregulation, Sweden and ineffective after several interventions had to resign nationalizing several banks. The Management of the institutions in question was fired and the value of the shares to zero. Losses on assets held by banks-written budget, making clear the conditions of the sector, and banks need recapitalized by the state. The Swedish government at some point came to own 20% of the entire banking system. Once the situation stabilized Sweden broke free of its shares on the market and selling them even managed to draw a profit.
The recent stock market carnage in the banking sector, reveals the confidence that investors have in the condition of the schools. They fear that losses will be far more substantial than suspected or reported and that a nationalization potrebbe essere prossima. Questo sta facendo crollare l'illusione che bastasse qualche assicurazione verbale o una semplice garanzia finanziaria da parte degli stati a calmare le acque e grazie al cielo sta portando alla ribalta uno dei fondamentali problemi: quella dell'effettiva condizione dei bilanci bancari. Finché non si fa chiarezza su questo punto non ci potrà essere una reale ripresa.
Quello sarebbe il primo passo da fare.
Seguito da una riduzione del debito, scaricando le perdite derivanti dai debiti non ripagabili sulle spalle di chi se lo merita. Un debito non ripagabile è una perdita. Per troppo tempo siamo andati avanti facendo finta che queste perdite non esistessero, forse nella speranza che se ci credevamo con tutte our forces, they would have magically disappeared. The losses, however, are still there and the market is once again clamoring to know how many you are and on the shoulders of those who imposed.
In this respect, Obama can not do anything. As long as he and his political equivalent of the other countries decide to act seriously addressing the roots of the problem does not emerge from this situation. Although the waters were calm down temporarily, in a few months we'll be back in the same situation as the last days.
I just hope that with the death of any illusions about the financial condition of banks and also the British and Americans die in a definitive way, hope you can solve this crisis and avoid directly addressing the cause.
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