Ross Miller
- Location: London Road, Dover
- Registered: 17 Sep 2008
- Posts: 3,709
#1
As I mentioned on another thread the real crisis facing this country, in fact the whole global economy, is the current debt crisis.
The US Federal Authorities are oiling and cranking up the presses to print more dollars, yet have little or nothing to back it with, the Euro is crumbling as we watch and optimistically has less than 6 months to live in its current incarnation, even Sterling is under pressure. The resulting flight to physical commodities and those companies that mine, extract and sell them seeing huge appreciation in value with Gold hitting USD1600 per oz the highest it has been since the mid 1980s; mining stocks up (whilst banks are crashing) etc.
The US is in danger of default, along with Italy, Spain, Portugal again, Greece again, possibly Ireland. The UK, France and Germany are under significant pressure as in reality the ECB stress test of banks was a face saving exercise and if even 2 of the Euro countries mentioned default many banks will be in danger of collapse.
Of course one could print more money, but this is what in many ways started the problem, as printing money creates debt (there is nothing but government bonds to back it) or we could hope that there will be significant devaluation of floating currencies (USD, GBP in particular), but this has its own cost and damage to our economy. Without solid, real backing fiat currencies suddenly start to look like a busted flush in the face of a global debt mountain that is rapidly becoming unserviceable.
If fiat currencies fail, what happens to your wages, pension, your business?
The major corporations will survive as they have either built up commodity reserves, piled into Swiss Francs, or fobbed their debt off on the state, however nation states will be under serious risk of default and what then?
"Dream as if you'll live forever. Live as if you'll die today." - James Dean
"Being deeply loved by someone gives you strength,
While loving someone deeply gives you courage" - Laozi
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#2
There is indeed a very serious crisis but it would be easy to work it up into an even worse one. The points you make are valid and as I said on my blog a lot of economic mismanagement is coming home to roost. 'Printing money or QE as it is now known in its modern form is inflationary and is not by any means a free lunch.
This comes back to my point - governments have to cut their spending dramatically far more than is currently planned. The Euro region needs to be dismembered into two or maybe three smaller sub-currencies to allow the weaker economies to float and then they may be able to start a recovery, something that will not happen unless they are freed up from the Euro yoke.
This is very much the making of ill-considered public policy by politicians of many countries living for too long on a fantasy island of debt and excessive spending. The party is well and truly over. The sooner this whole mess comes to a head the better and the sooner recovery can commence because until it does the confidence will not be there.
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
#3
interesting stuff, gold has been mentioned this from the telegraph today.
Gold tipped above $1,600 an ounce in Europe on Monday as investors spooked by the eurozone debt crisis and the threat of a US default piled into the metal as a safe haven from risk.
Gold is traditionally seen as a safe haven in times of risk.
The spot price reached an all-time high of $1,603.40 at 12.50pm in London, as Italian and Spanish ten year bond yields also ticked-up back towards levels that forced Greece, Ireland and Portugal to ask for help.
Italian and Spanish 10-year bond yields climbed above 6pc, edging closer to the 7pc mark that prompted its smaller euro partners to seek bailouts.
"If we reach 7pc on Spain and Italy, we are probably approaching very quickly the point of no return," Nicola Marinelli, a London-based fund manager at Glendevon King Asset Management, told Bloomberg.
Scepticism over the latest round of bank 'stress tests' and uncertainty amid a deepening eurozone debt crisis also saw european markets fall, as banking heavyweight Royal Bank of Scotland shed more than 5pc.
City analysts and investors said on Friday that the criteria used in the latest report released by the European Banking Authority (EBA) on Friday were overly optimistic, and omitted the possible impact of a Greek default on the eurozone
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#4
All this underlines that Osborne is doing the right thing, we just need more of it... If Labour's 'go even slower' policy were adopted then we too would see soaring yields with confidence being under-mined in the markets.
Osborne has done just enough to hold up confidence in the UK but not enough to reduce the burden on business and to power a recovery.
Ross Miller- Location: London Road, Dover
- Registered: 17 Sep 2008
- Posts: 3,709
#5
Whilst I get where you are coming from Barry, with the ClubMed countries collapsing into default, Bernanke preparing to print more dollars whatever the "cost", the Senate majority prepared to raise the US debt cap, Germany and France making more and more protectionist noises, where are the opportunities for recovery?
"Dream as if you'll live forever. Live as if you'll die today." - James Dean
"Being deeply loved by someone gives you strength,
While loving someone deeply gives you courage" - Laozi
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#6
A sad state of affairs Ross, that is what. In the end we can only do what is needed to put right our own economy, avoid the Euro, make sure our credit rating stays firm and to reduce the burden on our businesses. The Far East offers many opportunities but to compete we really have to buck our ideas up.
Brian Dixon
- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
#7
so acording to every one here the world is going for broke,what a sad state of affaires we have.doom and gloom is forcast then.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#8
Not the world Brian - there are countries that are doing well unhindered by massive sovereign debt, huge deficits and are not locked into a mad currency project.
Guest 649- Registered: 12 Mar 2008
- Posts: 14,118
#9
So what are we left with,"What UKIP has been saying for years" The only save way is come out of the EU,and we are still the only party saying that,members of other partys even Barry say it to,but the main two partys do not agree with that even if alot of their members do.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#10
Vic - we will be out of the EU in due course, make no mistake.
But, getting out of the EU will not save us from this crisis. We are ourselves have a huge deficit that is still pilling up every day more and more sovereign debt. There will be repercussions from Greek and other potential defaults as well.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#11
Andrew Lilco has written a very interesting pieces about what may happen and he sees 5 possible outcomes.
We just have to be grateful that we are not part of the Eurozone (the one thing Brown did right, keeping us out, even if for the wrong reasons).
We can at least not get sucked into his option 4, the most likely outcome....
http://conservativehome.blogs.com/platform/2011/07/five-ways-forward-for-the-eurozone.htmlBrian Dixon- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
#12
barryw,i disagree slightly with wot you posted,most countrys i found use sterling/us doller as a guideline.and most trade in it along with the euro.thats my understanding of it anyway.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#13
Brian - the US Dollar is the reserve currency internationally and yes a lot of trading goes on in dollars and sterling. The point is that many countries are not struggling under a massive deficit and debt, though they may have exposure through lending to potential defaulting countries. The big problems at the moment are in the Eurozone and in the USA. I expect the Americans to resolve their problem but the EU track record instills no faith they will.
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
#14
just for you barry courtesy of the daily mail today.
While Westminster fiddled over the phone-hacking frenzy, the European economy was burning last night.
World financial watchdogs issued an extraordinary warning of a global economic 'earthquake' triggered by the failure of many countries to get to grips with massive debts.
To add insult to injury, it emerged yesterday that those largely responsible for bringing Britain's economy to its knees - bankers and finance workers - have scooped bonuses totalling £14billion this year.
Overshadowed: The attack on Rupert Murdoch and his and Rebekah Brooks's evidence to a Select Committee turned attention away from a warning that the European economy was on the brink of an 'earthquake'
Meltdown: Failure of eurozone countries to get control of their debts could lead to billions being wiped off the global economy, experts have warned
While the phone-hacking scandal will be investigated by a public inquiry led by a senior judge, there has been no equivalent investigation into the actions of bankers and the Government's failure to hold them to account for triggering the financial crisis.
There were growing calls for Westminster to lift its gaze from phone-hacking and focus on the threat to the livelihoods of millions.
As the Commons hearings into the scandal descended into farce when a protester tried to attack Rupert Murdoch with a foam pie, David Cameron, speaking in Lagos, Nigeria, pledged to focus on issues that 'really matter' to people amid fears the Government is beginning to look paralysed by the phone-hacking furore.
Cameron will be looking to find answers to the financial crisis as French President Nicolas Sarkozy jets into Berlin today for a summit with Angela Merkel aimed at forging a common stance on the Greek rescue package as the eurozone lurches closer to collapse.
The Prime Minister, who cut short a tour of Africa last night to return to address MPs, said: 'It is important for the British Prime Minister and Government to get on with those things that really matter to Britain, which is making sure there are jobs and exports.'
While there were 'serious questions' for parts of the media, police and politicians to answer over phone hacking, Mr Cameron insisted voters 'don't want us to lose our focus on an economy that provides good jobs, an immigration system that works for Britain and a welfare system that is fair'.
Office of National Statistics figures showed that between April 2010 and March 2011, a total of £13.6billion in bonuses was paid out to workers in the 'finance and insurance' sector.
They account for just 4 per cent of the workers in this country, but get about 40 per cent of the bonuses paid.
The size of the massive windfall will outrage millions of hard-working Britons who face a daily battle to stay financially afloat during the economic downturn.
Guest 714- Registered: 14 Apr 2011
- Posts: 2,594
#15
Its an indictment of the UK that we are in a total lather about hacking when the economies in Europe and US are so fragile, it will soon have implications for us far more serious than 99% of people realise.
Guest 649- Registered: 12 Mar 2008
- Posts: 14,118
#16
If only the reds had not sold off all our Gold next for nothing the UK would be alot better off now.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#17
I don't think the gold sale is a major issue in impacting here so much, but yes that was a disgrace Vic.
Ross Miller- Location: London Road, Dover
- Registered: 17 Sep 2008
- Posts: 3,709
#18
The real mistake Brown made was to announce his intention to sell of the gold, not the sale itself. By forewarning the markets he drove the price down thus reducing the funds the Treasury would get.
But on the serious point of now and the future, we are not in as bad a state as many of our peers, whilst we have unacceptable level of government debt the vast majority of it is fairly long term unlike the US in particular.
The big issue for the US is if China and the oil producing nations sovereign wealth funds, who hold vast quantities of US government bonds, refuse to take US Dollars or new debt what is the US to do?
"Dream as if you'll live forever. Live as if you'll die today." - James Dean
"Being deeply loved by someone gives you strength,
While loving someone deeply gives you courage" - Laozi
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#19
True about announcing the sale, plainly stupid, but gold was at a low price point anyway at the time and it has since been revealed that Brown was advised this and that he should not sell. He ignored the advice as he did over pensions (three times...) and other tax incentivised savings.
The USA have to get a grip of their public spending and given the importance of the US markets to the bond holders they will not want to undermine that. Interesting issue that one.
What you say about the long-term nature of our debt is correct but you should remember Ross that at one point just before the election the interest rates being demanded were at AA levels and not reflecting the AAA rating Britain had at the time. That was a forewarning of the troubles that would have followed if the deficit was not adequately addressed. Rates fell after the emergency budget.
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
#20
timing of any sale is all important, giving notice that you want to sell is almost criminal.
any football club chairman will tell you that their star player is not for sale knowing full well that they are hard up for money and playing a hand of poker.
moving on we keep hearing that important financial issues must be addressed by our government, they way it seems is that there is little they can really do being dependent what goes on in the states and the eurozone.