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uences for emergent economies the politicisation of trade into alliance factions undermining of property rights driven by debasement of fiat currency systems re emergence and re entrenchment of more authoritarian systems of government armed conflict as a tool of government policy for managing dissent if history does repeat itself we may see the re emergence of widespread localised conflicts especially for natural resources in the absence of effective world trade i think it is unlikely to be a global war per se but a series of regional conflicts possible locations south china sea china japan vietnam the philippines and the us siberia china and russia mongolia china and russia the middle east is now far more unstable that it was before the disastrous arab spring which replaced totalitarian but stable secular governments with whatever may replace them which will be anything but democracies i suspect that as much as it may try to avoid it turkey will have a critical role as a focus point of conflict here well a lot of geo political speculation today i will go pack the crystal ball back up posted by peter at 2 27 pm 4 comments wednesday june 06 2012 1934 http www businessspectator com au bs nsf article panic has become all too rational pd20120606 uz2p6 opendocument src sph please find above a link to martin wolf s article covered in business spectator in this article martin makes the following statement before now i had never really understood how the 1930s could happen now i do this blog in heading towards its eigth year and i suppose i should comment on this statement martin seems at a loss to explain how poor decision making is leading inexorably towards disaster unfortunately as this blog has long maintained this disaster started in the 1990 s just as the previous one started in the 1920 s the irresponsible expansion of money supply led to this situation this increase in money supply led to an expansion in credit the expansion in credit led to inflation not in cpi s largely but in asset prices like spanish real estate or us shares as the asset values increased so did the apparent collateral to support the underlying debt in many cases this increase in asset values was realised as income and cashflow funded by the debt that was borrowed against the asset value this occured at many levels individuals borrowing against their houses and spending the surplus from thier refinanced mortgages and investment banks refinancing infrastructure and property and distributing the refinancing gain to equity investors now the magic roundabout has stopped now we all get off and now we begin to understand where we are unemployement in the teens and twenties wholesale collapse in asset values both governments and systems of government collapse the rise of totalitarian states to replace weak democracies as people seek to blame anyone but themselves greece may be the first the cycle is repeating itself welcome to 1934 posted by peter at 1 25 pm 1 comments thursday may 24 2012 antigone and the decline of the west if sophocles was alive today would he write of antigone s need to bury the euro i cannot be sure of that but indeed the euro does need to be buried the euro has been a stage curtain hiding the play beneath the play that had been going on beneath that curtain was a sad tale of nation after nation borrowing against the prosperity and competitiveness of other nations without a clear understanding on the consequences or at worst a reckless indifference to the inevitable reckoning full and fair disclose here i want this reckoning i want to see an accountable and well governed europe and this is far from what is unfolding greece is ungovernable the new french government seems set on agressively moving europe into third world status lets be abundantly clear there is no growth option there is austerity and there is hyperinflation these are your two choices i only hope that germany with its disasterous experiences in the 1920 s understands the least offensive option here in fact i would like to see nothing less that germany withdrawing from the euro as a clear message to those in europe living the dream that the hyperinflation and currency debasement party is not one that plan to attend it now begins to appear that the great recession is something more that just an economic crisis like the great depression it is far more dire because it is not just parts of europe but the united states as well living beyond their means without the political will for accountability therefore i must conclude that the both the economic moral and cultural strength of the west has likely commenced a process of protracted crisis and extended decline posted by peter at 10 02 am 0 comments thursday january 12 2012 sovereign sovereign is a word you can expect to hear mentioned a lot in 2012 usually followed immediately by risk or default we spent 2011 dodging and delaying what appeared to imminent defaults in europe rather than follow the legitimate approach of recognising government insolvencies and the unsustainability of the euro european leaders continued to pursue what they perceived as the more morally praise worthly approach of continued bailouts and the potential for greater european fiscal union this writer however believes and has always argued that the national solvency issues should be recognised accepted and resolved in order to move forward the club med nations of the euro that are hopelessly insolvent should be cut lose fo the euro and allowed to reorganise their debts and currencies on their own account the massive writedowns that need to occur in european banks should be allowed to proceed and if some disappear all the better those who have pursued prudent risk and lending policies if any will be rewarded the only proviso i have is that depositors should be guaranteed by the state pressure on government bond pricing has been significant over 2011 perhaps 2012 is the year when interest rates across the developed finally start to realistically factor in the significant price of sovereign risk whatever happens in europe will seem like sideshow compared to the economic consequences of the chinese economy finally discovering the theory of gravity that remains a dice roll posted by peter at 1 31 pm 1 comments friday october 21 2011 the dismal science it is an interesting thing to read about the great recession now that we are actually in the middle of it i cannot tell where the market will move tomorrow or whether spain will default on its sovereign debt in 2 years what i can tell you and what i think any decent economist should be able to tell you in where we are in the supercycle we can probably all agree on a few things there was a boom fuelled by cheap debt leading to irresponsible investments and risk taking there was a credit crisis induced by defaults on securitised mortgages read the first post irresponsible monetary policy with overally low interest rates added fuel to this fire accerating the boom and exascerbating the bust we are in the bust this is a severe prolonged global recession so if there is broad agreement on what caused the recession we are currently in it seems mind boggling that no one sees with equally clarity how this should be resolved debt caused the boom deleveraging will correct it by default or austerity irresponsible lending practices led to excessive risk taking reform and regulating the banking industry is required to see that this doesn t happen again at least until alan greenspan ii repeals the glass steagall act ii in the late 2060 s economic science a stretch of concept indeed all social sciences need to incorporate generational theory into their models as messrs howe and strauss have proven history does indeed repeat itself what we call the great recession history may well call the second great depression just as the great war became world war i let s just hope history doesn t repeat in every way posted by peter at 3 55 pm 4 comments tuesday july 19 2011 two waves collide one of the persistent features of the great recession is that we have not yet undertaken the necessary surgery to correct the underlying problem of how we reached here chronic over indebtedness amongst developed countries the deleveraging that should have occurred from 2008 has been continuously delayed in some countries such as greece the situation is so dire and the country so hopelessly insolvent that default is the only option it has now become blatantly clear that whilst monetary union was an idea that arose with the best intentions the euro has completely failed as an integrated currency for europe perhaps there is a future for the euro but amongst a smaller group of nations that can jointly sustain a relatively sound fiscal policy with broadly economic health not only is the default of a number of european countries inevitable it is necessary and desirable including all the concomitant ramifications of bank collapses for those that have not practiced risk adverse policies only when fictitious global capital has been erased can we start to rebuild the global economy on a sound basis so as europe continues its slow grind towards the end of the euro the united states is playing its own version of russian roulette with its debt ceiling again the issue is not as simple as it appears yes the us should not continue to raise its debt ceiling and yes and measures to this effect should have commenced a long time ago however that fantasy argument that you can cut spending alone without addressing taxation suggests the naivety of the political establishment in the united states read tea party if these two events occur simultaneously the impact on the global economy is likely to be extremely severe it won t look like a day at the beach and if it did i wouldn t go swimming in it no link to a specific article today as this post has been informed by several posted by peter at 12 17 pm 1 comments tuesday may 17 2011 interest rates headed north please explore the link above from karen maley s article in business spectator the article refers to dominque strauss khan adventures in a us hotel and its potential impact on greece in particular the arrest of dsk may impair any misguided support for further greek bailouts and precipitae a greek debt restructure of default the final line is the takeout and a heads up to any reader if investors ultimately lose confidence we could be in for a complete re rating of risk around the world which would spark a huge sell off in markets the huge sell off in equities would be accompanied by a rapid rise in global interest rates leading to further defaults and plummeting asset prices globally posted by peter at 12 25 pm 0 comments tuesday april 12 2011 us debt default enters mainstream media it seems that the unthinkable and yet inevitable is now finding its way into mainstream press see the link above if default by stealth through continued debt monitisation inflation and dollar depreciation fails the us may be forced into a de jure default on its debts the constant bailouts of the european defaulters have simply delayed the inevitable i greatly doubt for example greece s ability to reform its economy and service its debts post bailout the cleanest and less damaging approach would have been to let greece default withdraw from the euro and have economic restructuring forced upon it political debate in the united states to the extent it legitimately exists which i question alternates between two partisan extremes only the left are the quacks who apparently don t realise or care that there is a debt problem and would happily let the us spend itself into default on the right are another bunch of quacks who apparently realise the existence of a debt problem but in reality are just as predisposed to let the us default by cutting spending and taxes simultaneously with this level of puerile discourse in the united states void of any mainstream meaningful economic debate the us truly appears in a period of extended decline first economically and then shortly thereafter socially the political aspect of its decline commenced decades ago with the counter intellectualism of the conservative movement posted by peter at 6 03 pm 0 comments wednesday february 16 2011 checkmate please follow the link to karen maley s article in business spectator today this is the most articulate and focussed article on the global economy put to press for sometime particularly the conclusion that we have simply prolonged the hangover from the gfc rather than have begun to deleverage and rebuild by transferring private debt to public debt we have greatly exascerbated the problem and created the real possibility of a string of sovereign defaults over the next decade unfortunately it remains my firm view that we are far from recovery or any semblance of the pre gfc status quo there remains a severe economic reckoning still to unfold posted by peter at 2 43 pm 0 comments thursday february 10 2011 consequences of mis diagnosis ignoring how low rates created the crisis is like blaming the crash of the hindenburg on bad weather poor piloting lazy ground crews and overly emotional broadcast journalists while ignoring the 200 000 cubic meters of flammable hydrogen gas that the airship held in its structure please find the link above to peter schiff at his best clear evidence again that the decision makers in the u s remain oblivious to the courses of the great recession and will continue to exascerbate rather than treat the problem given the vast monetisation of the us dollar currently underway the tide has definitely gone out of that inflation tsunami posted by peter at 5 20 pm 0 comments wednesday december 01 2010 the fourteen speed economy in recent press over the last year australia was described as being a two speed economy the bouyant mining driven economies of western australia and queensland contrasted against the more subdued if not stagnant economies of the eastern seaboard states at the time is was speculated that the reserve bank s monetary policy was struggling to contain these two diverging economic zones what we are seeing in europe at the moment is in effect the fourteen speed economy and it may well tear the euro apart please find attached a link to business spectator with an article from martin wolf at the financial times here martin provides a pre emptory autopsy of the euro the euro was always an ambitous idea indeed it may have worked where it formed the common currency for a number of like economies operating in broad concert with each other however as martin outlines the euro has in effect contributed to if not facilitated many of the economic adjustments that are taking place in the piigs economies at the moment these weaker member economies of the euro need to devalue their currencies increase there competitiveness and restart their economies this clear is something they cannot do whilst they remain members of the euro stapling the struggling...
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