World Faces Greatest Economic Crisis Ever

Discussion in 'Economy' started by JimBowie1958, Oct 9, 2011.

  1. JimBowie1958
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    JimBowie1958 Old Fogey

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    An entire system of global trade is at risk - Telegraph

    This guy just doesnt get it. Recapitalization wont work because the root problem to this whole thing is the collapse of mortgage debt related securities and their amplified impact through the use of CDS. This is ine effect an exponentially growing problem that started with Greek banks being threatened with bankruptcy so the Greek government bailed them out. Then the Greek government was put in the red by the growing debt, and so they went to the EMU for a bailout. Now the EMU wants a bailout from the G7, then the G20 with the IMF as a backstop. These idiots dont understand what Einstein said was the most powerful force in the universe; exponential growth.

    So the choice is either to 1) bail out the banks over and over till every government on the planet is out of money. And then everything collapses, or 2) Let the banks fail, have the government step in and act in the void they leave until other banks can organize to step in in place of the big banks that failed.

    Europe and the US have been doing 1) with failing results, kicking the can down the road and stealing the wealth from everyone else by eroding the value of the US dollar. But eventually this will collapse through either hyper-inflation from the government running the monetary digital creation apps 24/7 or massive deflation if the government does not attempt to massively soak the world in fiat currency. The 'sweet spot' where it can hit a happy median with neither hyperinflation nor deflation does not exist except int he minds of Keynesians.

    Iceland took option 2), let the banks take their lumps and now their economy is growing strong all on its own.

    When will we wake up and choose door number 2?
     
  2. expat_panama
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    expat_panama Silver Member

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    Another choice in 2008 was to issue money for collateralized loans to be paid back with interest. That's what was done with TARP and any 'bail-out' was private business' paying back all the loans plus interest. Recapitalization isn't being done now because deflation is no longer a threat. What's being done now is tax'n'spending plus over regulation. It's a real bad idea.
     
  3. JimBowie1958
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    JimBowie1958 Old Fogey

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    Troubled Asset Relief Program - Wikipedia, the free encyclopedia

    While much of the loans have been paid back, it does not appear that all the 'invested' money has been paid back.

    And there is still a large threat from deflation.

    http://www.marketoracle.co.uk/Article30687.html



    Deflation Has Arrived - Forbes.com

    Can Global Stimulus Stop Deflation? | Clif Droke | FINANCIAL SENSE
     
  4. expat_panama
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    expat_panama Silver Member

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    It 'appears' that way to some and not to others. Some prefer reading Wikipedia's rehash of pundits take on what the Fed says, and others just read what the Fed says. Their timeline for TARP and other programs is at http://timeline.stlouisfed.org/pdf/CrisisTimeline.pdf and the argument over how much is still outstanding can depend on which accounting method's used and what's accepted as proof. Here's the NYT's take:
    [​IMG]
    True, and it's not a credible threat. The serious concern now is that inflation doesn't start again:


    U.S. Bureau of Labor Statistics
    Data extracted on: October 9, 2011 (2:52:42 PM)
    Consumer Price Index - All Urban Consumers

    1-Month Percent Change

    Series Id: CUUR0000SA0
    Not Seasonally Adjusted
    Area: U.S. city average
    Item: All items
    Base Period: 1982-84=100​
    [​IMG]
     
    Last edited: Oct 10, 2011

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