Friday, April 23, 2010

The Greek Crisis (again)...

Yet again, I have an unfinished post, and again it is due to events that I have changed direction. The Greek crisis has now entered a new phase, with the bailout from the IMF and EU finally enacted:

Greece bowed to market pressure yesterday and formally requested a bailout from the European Union and the International Monetary Fund.

It is the first time a eurozone member has asked for a financial rescue and it is likely to test European political cohesion as well as the stability of the euro itself.

Greece asked for the €45 billion package after being downgraded by the Moody’s credit rating agency on Thursday.

The first problem is that it is just not going to be enough. The problem of the scale of Greek debt is worse than was feared:
Greece' deficit for last year is worse than the cash-strapped country originally reported and could still be revised higher, the European Union said Thursday, news that weighed on the common currency. A sharp upward revision to the 2009 figure, which sent Greek bonds into a tailspin, was surprising because Greek officials just two weeks ago denied reports of a big spike.
And the bailout will only take Greece so far.....
However, there are concerns that despite the unprecedented scale of the loan, it will not be sufficient to do little more than buy the country time, allowing it to finance its state only for another few months. The full details of the loan will not be laid out in the next few weeks, as IMF and euro area officials hammer out an economic plan for the country, which is likely to involve further severe cuts in public spending.
Then there is the problem of the potential challenge in Germany as to whether the Greek bailout is unconstitutional:
The German constitutional lawyer seeking to derail Berlin's contribution to a Greek rescue plan said he likes his chance better this time than in 1998, when he tried unsuccessfully to block Germany's adoption of the euro.

Karl Albrecht Schachtschneider, a retired University of Nuremberg law professor and expert on the constitutional court, said he believes that the Greek aid package is in clear violation of European treaties and the German constitution and sees a chance of convincing the court this time.

What may seem a contrarian quest has attracted attention in financial markets, where investors fret over any sign that Germany would withhold or even delay providing its share to the EUR30 billion rescue plan if Greece requests it.

Schachtschneider is drafting the legal complaint with three other established euro skeptics, all of whom are into retirement age.

Working with him are economics professors Wilhelm Hankel, Wilhelm Noelling and Joachim Starbatty. Noelling is a one-time governor of the Bundesbank, Germany's central bank. The same foursome were behind the ill-fated legal challenge 12 years ago.

I would like to give some perspective on whether the challenge might be realistic, but must confess that I have no particular insight on the issue. Some time ago, when first reading about this (sorry, no references), I did see some fairly persuasive cases for the challenge, but still remain on the fence with regards to whether the challenge might gain traction.

As I have posted before, the real issue of interest is the wider consequences of the Greek crisis. When first starting this blog, I contemplated the possibility that the Euro might not survive the crisis, and others are now seriously contemplating this possibility. This is Edmund Conway of the Telegraph writing from the G20:
Though they don’t admit it, they also privately suspect that this crisis will be the biggest challenge yet for the euro project. And for many it is no longer anathema to suggest that the euro may not survive this crisis – at least not in its current form.
I would agree that, at the very least, that there will be strong pressure to reform the structure, with Germany leading the way. Of course, the only kind of reform that might work is closer regulation of Euro-wide fiscal policy, which implies a significant loss of sovereignty of Euro member countries. Somehow, I suspect that, even for those who support the European project, this might just be too much.

Then there are the next contenders for debt crisis. Spain and Portugal are looking increasingly vulnerable:
Iberian stocks fell sharply Thursday amid concern the escalating Greek debt crisis could spread to other southern European countries with troubled finances.

Madrid's IBEX-35 index ended 2.19% lower at 10,821.9 points, while Portugal's PSI-20 index closed 2.57% down at 7,751.95 points.

"There's confusion and a great insecurity in the market," said Karsten Sommer, a trader at BCP in Lisbon, adding that rising government sovereign yields are bad news for stocks.

As Moody's Investor Service Inc. downgraded Greek sovereign debt, the cost of taking out insurance of Greek government bonds through credit default swaps surged about 10% to 620 basis points earlier Thursday. Spanish CDS spreads were also pushed higher to 171.5 basis points from 158.5 earlier in the day, while Portuguese CDS spreads moved to 260 basis points from 232.

Banking stocks were hit hard, with Banco Santander SA (STD) down 3.1% to EUR9.91, and Banco Bilbao Vizcaya Argentaria SA (BBVA) plunging 3.1% to EUR10.55. Portugal's Banco Espirito Santo SA (BES.LB) shed 4.1% to EUR3.569 after a Nomura downgrade.
....then there are the banks that hold Greek bonds, with the largest holders in France and Germany. A Greek default will put new stresses on an already stressed banking system. Unlike commercial loans going sour, it will be hard for the banks suffering such losses to have the news buried or obscured:
Private investors are already seeking ways to decrease their exposure to Greek debt although European banks appear to own some 58% of Greece’s 270 bln euro debt. Greece’s indebtedness to European banks appears to have been one of the key facts that convinced Brussels to take the lead and seek a mainly European solution.
It is worth reminding readers that the Basel rules gave OECD debt a zero risk rating in the calculation of capital adequacy ratios..... These are the same regulators who will now, apparently, be able to foresee future risk and prevent it. The new regulation will, of course, learn the lessons of the past, implement a new and more secure structure, and so forth. Just as they do after each crisis and problem.....and remember, this is not new obscure financial instruments, this is sovereign debt. This has been around for centuries.

With regards to the next phase of the crisis, it is tempting to use emotive expressions such as 'now that the markets have tasted blood...' and all of the cliches that we see in so many articles. However, it is not a question of 'tasting blood', but rather the facing up to the reality of the terrible fiscal position of so many 'rich world' nations. The markets, the holders of 'safe' sovereign debt, are just waking up to the fact that it is not, after all, safe.

The big questions, aside from the crisis in Greece is who is next, and where the bailout money might come from? Will the EU also be prepared to bailout the next country in line, or the next....? How about the IMF? Can it fund a series of EU country bailouts? As has been discussed in the case of Greece, this bailout is likely to just be the first tranche....Greece will need further finance later. Then there will be the steep fall in Greek GDP as the austerity bites, and the picture will be one of a GDP to debt ratio moving in the wrong direction....it will not be pretty. This will cause even more alarm, as the markets see what happens to an economy that is mired in debt and where GDP has been sustained/obscured with debt.

And then...if the crisis gathers pace, will the markets start to look at economies such as the US, the UK and Japan. For example, Japan has now had a rating downgrade:
Fitch Ratings said Thursday that Japan's credit ratings face downward pressure in the medium term due to the ballooning debt, increasing the urgency that the government come up with a plan to get it public finances under control.

"In the absence of sustained economic recovery and fiscal consolidation, government debt will continue to rise, placing downward pressure on sovereign credit and ratings over the medium term," the credit-rating agency said in a report.

"The Japanese government is one of the most indebted in the world," Fitch said in the report titled, "Just How Indebted Is The Japanese Government?"

Fitch estimates Japan's headline gross government debt reached 201% of gross domestic product at the end of the last year, the highest ratio of any country the agency rates.

Any downgrade would elevate market concerns about Japan's creditworthiness and could prompt investors to unload their government bond holdings.

"It's important to show that the government is managing fiscal policy in an appropriate manner," Cabinet Office Senior Vice Minister Motohisa Furukawa said at a press conference following the release of the report.

Just for the sake of interest, I undertook a Google new search for 'sovereign debt' and found an article that is illustrative of the growing concerns in the media:

So here’s a brief look at some aspects of the UK’s debt vulnerability compared with that of France, using a useful table in an IMF report issued this week. (The link is below).

It shows the rating agencies agree with the continental finger-pointers. France’s top triple-A rating is stable; while the UK’s has a negative outlook. That’s even though the UK’s deficit at the end of this year will be below France’s, at 78% of GDP compared with 84%.

By some measures, France is more vulnerable. Foreigners tend to be more skittish than domestic bond holders and foreigners hold only 22% of British debt, compared with 58% of France’s. On top of that, a fifth of France’s debt is maturing in the next year, compared with 8.4% of UK government debt.

The article is not of particular interest of itself, but for the way that it is framed. The article is about relative vulnerability. The framing of the article speaks volumes. The IMF now sees sovereign debt crisis as a real possibility, and they are a long way from the (sometimes) radical musings of a blogger - they are the embodiment of the mainstream:

Greece's upheaval could mark the starting point of a "new phase" in the global crisis if countries don't get their fiscal houses in order, despite the low risk of contagion, the International Monetary Fund said Tuesday.

While the IMF slashed its projections for bank losses from the crisis to an amount deemed manageable, the rapid buildup of sovereign debt among advanced countries to levels not seen since the end of World War II has emerged as the biggest threat to global financial stability.

"In spite of recent improvements in the outlook and the health of the global financial system, stability is not yet assured," said Jose Vinals, director of the IMF's monetary and capital markets department, at a press conference to discuss the semi-annual Global Financial Stability Report.

"If the legacy of the present crisis and emerging sovereign risks are not addressed, we run the real risk of undermining the recovery and extending the financial crisis to a new phase," he said.
All of this leads to a question. When, and under what circumstances are the policymakers, the politicians and economists cheerleading for fiscal profligacy going to wake up to what is taking place. When I first started writing this blog, the situation was different. Reality was obscured, theory was not being tested in the real world, and there was some kind of excuse (albeit a poor excuse) for the lunatic policy that was being enacted. As we now see the consequences, there is simply no excuse for the continuation of the madness, but still it continues.

Notes:

The UK election has taken some unusual twists and turns of late, with the Liberal Democrats making a big splash. However, I am not convinced that they, any more than the Conservatives or Labour, are serious about the dire fiscal crisis. Interestingly, some commentators and analysts seem to think a hung parliament is not a problem. I am agnostic on this, as it is always possible that the right leader, and the right coalition might work, but do recognise that this represents big uncertainty. What will finally matter is not who does it, but what they do.

Yet again, some very interesting comments on the last post, and it good to see some further challenges to Lord Keynes. Interestingly, his view of economics is now starting to face the real test. I would like him to be right, as I do not want what is coming, but alas I think this unlikely.

My original post was on housing / real estate, and I will try to finish in the week.

16 comments:

  1. The crisis faced by some EU member countries is real enough, and entirely predictable..

    No monetary union works without federal fiscal policy.

    The Japanese downgrade is a perfect example of how ridiculous the rating agencies are. Moody's Investors Service downgraded Japan’s local currency debt rating from Aa3 to A2 in 2002 (see http://search.japantimes.co.jp/cgi-bin/nb20020501a2.html).

    The result? Did Japan suddenly collapse?
    Nope. Utterly irrelevant.

    Moreover, the actual facts are about Japan are rarely reported:

    It's important first to define what "debt" figures really matter. Japan's gross government debt is projected to hit a record 200% of GDP in 2010. But gross debt involves double-counting the debt that various domestic government agencies owe each other, such as the Bank of Japan's holdings of government bonds. Net debt, absent the double counting, is about 100% of GDP .... Nor does Tokyo have any difficulty in paying its interest bills. Thanks to ultra low interest rates, the total net interest on government debt is projected to hit only 1.3% of GDP in 2010, barely more than the 1.1% ratio two decades ago in 1991 and only half of the 2.6% average ratio that has prevailed in the OECD over the past two decades.

    http://online.wsj.com/article/SB10001424052748704779704574555132306518464.html.

    Again:

    [Japan’s] gross debt levels are misleading. Japan’s debt, after netting off the state’s own holdings, is less than 100 per cent of GDP. Second, the cost of servicing its debt is low, at roughly 1.3 per cent of GDP …. Third, Japan has fiscal wiggle room: sales tax is just 5 per cent. Fourth, 95 per cent of Japan’s debt is domestically owned. Fickle foreigners have almost no sway. Indeed, Japan’s problem is still an excess of savings. Banks are awash with deposits that they need to place somewhere. For some time yet, the government will not find it hard to secure buyers for JGBs. Japan’s debt problem will be worked out in the family.

    http://www.ft.com/cms/s/0/cb125274-14e3-11df-8f1d-00144feab49a.html

    One could add that with its massive current account surplus, there won’t be a balance of payments crisis any time soon in Japan, even if foreigners stop buying government debt.

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  2. Cynicus,
    Please write an article on what you think is coming, how it will unfold and in what approx timescale, since I do not wish to be alone in my view that it soon will be the end of the world as we know it.

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  3. The critical point you make is that when governments try to dig themselves out of a fiscal hole, the situation will be made temporarily worse - the contribution of debt accumulation to GDP will go negative. This has led to a catch 22 situation, where no government wants to bite the bullet and resolve the situation.
    The labour goverment imply this with their policy of (temporarily) high deficits, but of course never admit that debt accumulation is critical to the appearance of growth throughout the cycle, and that they are merely replacing private debt accumulation which has stopped.

    The difficult analysis is whether the increasing debt to GDP ratio will spark a crisis of confidence causing a tipping point in funding costs. This is at the crux of everything recently discussed - a good topic to discuss would be the numbers involved - the tipping point values, timescales, and effects if the tipping point was breached.

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  4. CE and Anonymous at 4.18

    "...I do not wish to be alone in my view that it soon will be the end of the world as we know it."

    Personally, do you ever find your ideas about the economy something of a burden? I find that in most social situations - even when surrounded by the most intelligent people I know - the conversation often assumes implicitly that there is going to be a 'recovery'. I have learned not to open my mouth at this point.

    A few years ago the conversation always used to turn to house prices and how people were getting into buy-to-let; and how such-and-such was getting out of engineering and starting a boat business and how they would retire by the time they were 50. A teacher I know suddenly became a man with money, and loved Tony Blair for transforming his school, as though previous governments had been witholding cash out of nothing more than spite. I was always the party pooper who suggested that such ideas might be based on a fantasy.

    I am now so hardened to apocalyptic predictions concerning the economy that I have to be on my guard against severly traumatising 'normal' people by mentioning them. Online is possibly the only place that it is possible to discuss these ideas, I think.

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  5. Lemming: I am very sympathetic to the difficulty of discussing the problems. I am not sure people want to hear, and have not woken up to the fundamental nature of the change. On more gloomy days I find myself wondering at how normal everything seems; it is a bit like the scene before a car crash, everyone going about their normal business, oblivious to the drunk driver coming towards them....

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  6. I believe the British share of the IMF loan will be about £1bn.

    Given we are skint, we will be borrowing the money to then give to the IMF to then give to the Greeks.

    I wonder who we are borrowing the money from in the first place and what interest rate we will be paying in order to help put off the day of reckoning for the Greeks?!

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  7. Lemming and Cynicus,
    You both sum up exactly my situation both in social circles and in private thoughts, that I didn't even wish to use my normal posting name.

    Pessimist is how I am labelled even though I have unfortunately been proven correct on my discusions over the last 15 years, but I have to admit that since this crisis developed and my understanding of our financial systems has grown, things are even worse than I could have predicted.

    Seriously though Cynicus, I would like to read your thoughts of what you think is coming even if you risk losing your readership for being seen to be too negative. Something along the lines of: gilt strikes and high state debt interest repayments, leading to a fiat paper currency crisis and state defaults destroying all pensions and welfare, then to money printing and hyperinflation of food, energy and commodities (gold price explosion when physical supply does not match paper claims, and state confiscasion attempts) coupled with rapid deflation of levaraged housing assets and a second bigger terminal banking crisis, panic leading to food shortages and energy shortages, public sector strikes, civil unrest and uncotrollable crime, starvation, and ultimately to survival of rural communities that can remain self sufficient and able to defend themselves, that is if a major global conflict has not already occured to rapidly reduce the worlds unsustainable population. OK, perhaps that is a little too pessimistic and a miracle can occur to delay this result beyond my children's lifetime, but the Roman civilised empire did also collapse with a few hundred years of dark ages which followed.

    This website also reflects my views (not written by me) www.howitends.co.uk

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  8. Something along the lines of .... deflation of levaraged housing assets and a second bigger terminal banking crisis, panic leading to food shortages and energy shortages, public sector strikes, civil unrest and uncotrollable crime, starvation, and ultimately to survival of rural communities that can remain self sufficient and able to defend themselves

    It sounds like the plot of a bad diaster movie, frankly.

    Do you really think Germany a country with a huge trade surplus and manufacturing giant is heading for diaster? On what basis?

    Most north European states also have trade surpluses, Canada as well.

    On a more serious note, it sounds like you have been reading too much Austrian economics.

    To de-brainwash yourself, start here:

    http://socialdemocracy21stcentury.blogspot.com/

    People have been reading nonsense about hyperinflation over the last year or so and now they are shocked that Austrian predictions are ridiculously off base.

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  9. Josiah Stamp's GhostApril 26, 2010 at 6:05 AM

    Cynicus said, "The UK election has taken some unusual twists and turns of late, with the Liberal Democrats making a big splash. However, I am not convinced that they, any more than the Conservatives or Labour, are serious about the dire fiscal crisis."

    I don't agree, im sure they do know what they have to do (huge tax increases), they are just avoiding saying it at the moment. They are after all politicians and there are no votes in admitting that they are going to shaft you BEFORE they you have voted for them.

    of course im sure the rich will do very well out of this and the Tories (more than the other 2 parties at any rate) will be more than happy to assist them in making sure their wealth stays where it is.

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  10. It reminds me of that scene in alien when john hurt has his chest ripped open by the xenomorph, and it then runs off to develop into something much worse that wipes out the crew. If they had killed the alien when it first popped out, the crew would have lived.

    Transpose this to Greece. If Greece were immediately told: Start growing productive industries now AND cut your spending, there would be a chance to stop its implosion, but instead, the monster is sneaking away in the form of bailout. The monster is non productivity, consuming more than is produced and is being allowed to grow into something much, much worse.

    The bailout has to come from somewhere, who? the rest of europe, then if portugal and spain go under, who picks them up? and who pays? The IMF will end up owning most of europe if this continues.

    Everything seems to be aimed at slowing or masking collapse, nothing is being done to promote growth?

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  11. Lord Keynes states,
    'Do you really think Germany a country with a huge trade surplus and manufacturing giant is heading for disaster? On what basis?'

    Yes, because when its other European state customers go bust, so will they. Germany wanted the Euro to buck the market because it could trade competitively within Europe without having its Deutchmark appreciate in value, and now even trade surplus Germany which by the way also has huge public debt which needs to be rolled over with new debt issues will also suffer. Same with China which does not even have public debt but has its savings in fiat paper US dollars that will also soon be worthless, whilst it too was trying to prevent its currency from strenghtening to remain competitive by buying US treasury bonds.

    With regards to Austrian economics, they have been proven correct in that this crisis due to a credit over expansion is continuing, and just because the final outcome of hyper-inflation has not yet occurred, this is only because governments are postponing the correction such that when it happens it will be terminal for our society. Even Keynes's statement that ultimately we will all be dead shows that he knew his policies have a finite limit of borrowing and spending, and I doubt his beliefs would have been the same if he had fathered children to continue living after he was dead.

    The fact is that we now have debt created phony paper money, and not how it originated where they were receipts for gold held in banks. If you accept that during the gold standard there were periods of inflation when new gold discoveries were made, then why do you not accept that inflation will ultimately result with an increase in money supply? If creating money out of debt, based on fractional reserve banking quantitative easing created money so called bank reserves is so good for our economies, then why not do even more of this 'money printing' to a finite level and we can all live like kings? If you do have a limit as to how much can be printed, then please specify what it should be. In any event hyper-inflation is different to inflation of an overheating economy, but occurs suddenly when the whole debt based money system collapses and also when people are already too poor to afford goods.

    I would love it if your views prove correct for my children's sake, but alas I believe that whilst postponing the innevitable, it is these very same policies that have created the mess we are in.

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  12. Reply to James Bromfield

    Transpose this to Greece. If Greece were immediately told: Start growing productive industries now AND cut your spending, there would be a chance to stop its implosion, but instead, the monster is sneaking away in the form of bailout. The monster is non productivity, consuming more than is produced and is being allowed to grow into something much, much worse.

    You exaggerate.
    All this hysterical nonsense about Greece is put into perspective by this fact: Greece’s economy is a pathetic and tiny 2% of the European Union GDP.

    Portugal’s economy is 1.3% of EU GDP

    Spain is 8.9%

    So most of the PIGS account for 12% of EU GDP

    There is more than enough wealth in the wider EU to bail these small economies out.

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  13. The whole thing has an inexorablity to it - the Greeks number was up years ago, probably at the point it joined the euro by falsifying its economic data to qualify. The problems in the other Club Med countries will end up in similar outcomes too. We are in the same convoy of boats, just a bit further behind.

    But the trouble is, at almost every point, the medicine required to solve the problem (namely that of living within your means) is more painful that the do nothing option. Nothing is ever done until the actual disaster is upon you. So no politician will ever take the steps required because they can point to no immediate reason for doing so, and thus will not be electorally successfull.

    Thus we wait for the barbarians to be at the gate before any attempts are made to arrange our defence.

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  14. Reply to George

    Yes, because when its other European state customers go bust, so will they.

    Then they would substitute internal growth for external export led growth.

    They can produce a lot of what they consume and there is a big market for their capital goods in the US and China and Japan

    With regards to Austrian economics, they have been proven correct in that this crisis due to a credit over expansion is continuing,

    Austrians are wrong in the view that it was caused by “credit overexpansion”. It was caused by a severely faulty financial system subject to deregulated financial markets.

    Even Keynes's statement that ultimately we will all be dead shows that he knew his policies have a finite limit of borrowing and spending, and I doubt his beliefs would have been the same if he had fathered children to continue living after he was dead.

    You completely misunderstand Keynes’ remark.

    It was a flippant remark made to Austrian school and other neoclassical theologians in 1923. They asserted that capitalism tended to equilibrium in the long run, and that severe unemployment and recession were nothing to worry about.

    Keynes essentially meant that, even if capitalism tended towards equilibrium in the long run (which it doesn’t), what use is that??
    By the time the market goes back to full employment in the “long run” we will probably all be dead. Our societies will be destroyed by high unemployment and economic collapse. Communism or fascism might even result before the mythical “long run equilibrium” ever returns.


    The fact is that we now have debt created phony paper money, and not how it originated where they were receipts for gold held in banks.

    Fiduciary media accounted for more than 50% of the money in society even throughout most of the 19th century. The classical “gold standard” is a myth.

    If you accept that during the gold standard there were periods of inflation when new gold discoveries were made, then why do you not accept that inflation will ultimately result with an increase in money supply?

    The price level is caused by both real and monetary factors.

    The view that an increase in the money supply always results in inflation is ridiculous.

    We can take a real world example. In the late 19th century, the UK experienced sustained price deflation from 1873–1896. However, the actual broad money stock was rising in these years: between 1873–1896 the money stock grew by about 1.3% a year, or over the entire period by about 33%. Yet between 1873–1896 wholesale prices fell by 39%. What happened was that in this period the money supply was rising, but not as fast as demand for money, and also steep falls in the prices of agricultural commodities contributed to the fall in overall prices.

    Even after new gold discoveries were made in the late 1880s deflation continued down to 1897.

    http://socialdemocracy21stcentury.blogspot.com/2010/04/austrian-theory-of-inflation-myths-and.html.


    If creating money out of debt, based on fractional reserve banking quantitative easing created money so called bank reserves is so good for our economies, then why not do even more of this 'money printing' to a finite level and we can all live like kings?

    QE was useful in recapitalizing banks.

    You misunderstand Keynesian economics. Nobody ever said that QE creates wealth or goods and services. This is a straw man argument.

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  15. Interesting read on housing

    http://www.howitends.co.uk/2-the%20housing-market.php

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  16. Reply to Lord Keynes,

    You misunderstood my point that if Germany's export market customers such as the PIGS countries and UK go bust, then like any company who loses its customers, Germany will go bust also. The US and Japan are also about to go bust with record debts to roll over plus more to issue, and as for China they have maintained growth by building lots of redundant factories, unafordable empty housing, plus ghost cities, they compete with Germany on trade surplus, and they will also go bust when their export customers default.

    The only comment that I agree with you from all your postings is that this crisis was caused by a severely faulty financial system subject to deregulated financial markets, however this was done with the blessing of deficit spending polititians, and you still cannot bring yourself to accept what these deregulated financial markets actualy did was to create money out debt and the Austrian theory of collapse due to a period of credit expansion.

    Indeed, the only reason that governments bailed out the banks with QE money printing was as you state to recapitalise the banks so that via a fractional reserve banking system the governments could borrow back from these banks a multiple of what they QE printed.

    I do not expect you Keynesians to ever understand the perverse view that these borrowings called gilts and treasury bonds of bankrupt governments are classified as bank reserves and capital to enable bankrupt bailed out banks to lend a multiple of debt created money supply back to governments to create a fake economy distributed via the public sector payroll and public sector funding projects via private sector companies.

    There wouldn't be a need for equilibrium if governments did not consistently deficit spend, and if our monetary system was based on sound money of true value acting as bank reserves which retains its value as the means of exchange money (eg Gold as used over 1000's of years) which evolved from a barter economy. However a point that I would agree with you on is that these failing policies of Keynes and debt based created money for public spending, will lead to Communism and Fascism when all wealth is destroyed from the majority populace via inflation and a collapse of this pyramid scheme once people cannot afford to take on more debt (as we are seeing). This forms part of the plot from your so called bad disaster movie, with history repeating itself not just via a global conflict but also through internal civil unrest forced by desparation and along all class, regional, religious, and ethnic lines.

    Again, I would prefer to be proven wrong and your theories proven to be correct, but history together with logic tells us otherwise.

    ReplyDelete

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