Why This Aint No Ordinary Recession Concern

Ross Gittins has done an excellent job of explaining why this global crisis is no ordinary crisis, and in terms that are relatively easy to understand.

And unfortunately the last time we faced a crisis of this magnitude was in way back in the 1930’s, as Gittin’s explains:

we haven’t seen anything so life-threatening since the Depression of the 1930s. That’s what’s so different this time.

Here’s a quick break down of recession types and causes  that usually underline economic downturns as Gittin’s explains them:

Type One – Wage Inflation

Your classic post-World War II recession is a wage-inflation recession. The economy booms and unemployment falls below the “non-accelerating-inflation rate of unemployment”.

In a situation of labour shortages, wages rise excessively thus feeding a wage-price spiral. The authorities become alarmed by the growing inflation pressure and start applying the brakes – raising taxes or, more likely, raising interest rates to discourage borrowing and spending.

Type Two – Asset Boom

The second type of recession is an asset-boom recession. You start with a boom in a market for assets such as shares, residential property or commercial property.

Asset prices go sky-high because the boom is being fed by borrowing. You end up with a bubble – prices that are far higher than is sensible, matched by ever-growing levels of debt owed by households or businesses.

The authorities worry that asset-price inflation will start translating into ordinary, goods-and-services price inflation, so they jack up interest rates.

Type Three – The Global Ponzi Financing Boom Led By The US

The crisis that arose from the failure of Lehman Brothers in mid-September last year was like a global heart attack. For a while the heart stopped beating, credit stopped flowing and we went perilously close to a global financial collapse that would have wreaked untold destruction on economies around the world.

Point is: that doesn’t happen in every recession. In fact, we haven’t seen anything so life-threatening since the Depression of the 1930s. That’s what’s so different this time.

You might have noticed that much of what is being reported around the globe, is in fact, an overlapping of types two and three.  That’s because that’s exactly what is happenning.

If I were to further elaborate on what we are seeing and experiencing I’d be tempted to go with Soros’ super-boom hypothesis and the credit expansion theory, which of course has been caused by  a global market system that be can best be described as a ‘rogue system‘ .  Soros  explains:

Globalisation allowed the US to su k up the savings of the rest of the world and consume more than it produced. The US current account deficit reached 6.2 per cent of gross national product in 2006. The financial markets encouraged consumers to borrow by introducing ever more  sophisticated instruments and more generous terms. The authorities aided and abetted the process by intervening whenever the global financial system was at risk. Since 1980, regulations have been progressively relaxed until they have practically disappeared.

The super-boom got out of hand when the new products became socomplicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility.

Everything that could go wrong did. What started with subprime mortgages spread to all collateralised debt obligations, endangered municipal and mortgage insurance and reinsurance companies and threatened to unravel the multi-trillion-dollar credit default swap market. Investment banks’ commitments to leveraged buyouts became liabilities. Market-neutral hedge funds turned out not to be market-neutral and had to be unwound. The asset backed  commercial paper market came to a standstill and the special investment vehicles set up by banks to get mortgages off their balance sheets could no longer get outside financing. The final blow came when interbank lending, which is at the heart of the financial system, was disrupted because banks had to husband their resources and could not trust their counterparties.

The central banks had to inject an unprecedented amount of money and extend credit on an unprecedented range of securities to a broader range of institutions than ever before. That made the crisis more severe than any since the second world war.

And what does Gittin’s article conclude?:

Punchline: as everyone from the International Monetary Fund to the US Federal Reserve chairman, Ben Bernanke, has warned, until the Americans fix their blocked banking system, no amount of fiscal stimulus or interest-rate cuts will make any difference.

Our economy will remain in trouble until they do.

Over to you

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47 Responses

  1. As a short time lurker of this blog and a long time one of others, I enjoy reading but don’t much like getting involved. I’m not very good at making a case for anything.

    When I saw this post from John I knew it was the time to participate and post this two part explanation of the crisis. I’ve seen no better.


  2. Mobius Echo

    Absolutely brilliant ! Thank you very much for sharing.

    What a great way to explain and simplify.

  3. Mobius Echo

    Here’s an extract from a recent article from Michael West that puts into context our predicament.

    Don’t mention the debt
    Michael West
    February 19, 2009
    http://business.smh.com.au/business/dont-mention-the-debt-20090219-8c6e.html
    Looking at the numbers, according to the Australian Bureau of Statistics we have about 21,374,000 or so people living in this country. Our combined national debt (taking all government, personal, private and business debt into account) is $2.32 trillion ($3.4 trillion including equity) as of September last year – and growing. A falling Aussie dollar makes it more expensive to repay, or roll over.

    Each and every Australian then, including babies, accounts for foreign borrowings of nearly $110,500 dollars. If we use the same method to calculate what the cost of Prime Minster Rudd’s “stimulus package” is to the nation, we end up with a cost of nearly $2,000 per head.

    To put it another way, says macroeconomic consultant Mark Beavan, Kevin’s rescue package is increasing the nation’s net debt by little more than 1%.

    ”Malcolm might happily forget that while his former government colleagues were steering the good ship Australia, the nation’s total debt soared from a mere $700 billion in 1997 up to $3.2 trillion by the close of their term. An increase of 387%”.

    Deregulation brought growth alright. But there is a yin for every yang. The Opposition may well brag that it left office with zero debt – zero government debt that is – as the upshot of policy was to lump it onto the consumer. That is something the nation has to live with for a long time. In the meantime, it will do the sovereign credit rating no favours.

    ”In the fluid deregulated markets, the government (past and present) didn’t think for a second about regulating the extent and rate at which the nation got itself into debt,” says Beavan. ”It is too hooked on the drug of national economic growth for economic growth’s own sake and refuses to allow the dream of many

    Australians (who still believe that housing prices can only go up) to be punctured along with our economy”.
    Inflating house prices

    Beavan believes that if all that debt were stripped away, irrespective of land shortages, property prices would be half to two-thirds of what they are today. ”If homebuyers don’t have money on loan from the banks, then they could not afford to pay the higher housing price – so the price would have to fall or the market would stagnate”.

    ”Why did we not index the rate of debt growth (15% per annum compounding for the last 12 years straight) to that of the country’s economic growth (less than 3% when the debt is stripped out)? Surely a lending system predicated on genuine national economic growth would be a far more practical solution?”

    If governments had constrained debt growth, bank profits could not have kept growing at 15% a year. Or executive salaries at 30% for that matter. (Not to mention state stamp duty revenues.)

  4. ”Malcolm might happily forget that while his former government colleagues were steering the good ship Australia, the nation’s total debt soared from a mere $700 billion in 1997 up to $3.2 trillion by the close of their term. An increase of 387%”.

    Better not tell Neil that, the last government was supposed to have had not debt whatsoever.

    Didn’t someone else here say that total government liabilities under the last government was 50 billion dollars or thereabouts? But I’m not going to pretend to understand even a fraction of what you post or this stuff, which is why I liked those videos so much.

    For instance, what is including “equity” you stated? I don’t understand all this stuff about equity or what it is.

    Just so people know, I sway conservative but have ventured to the dark side on occasion. I was mostly in favour of the last government but did become disillusioned with it and am very disillusioned with the current opposition.

    Anyway that’s as much as I’ve participated for a while so its back to lurking before the recriminations start.

  5. William Fleckenstein , author of Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve 2008, has been extremely damning of the role played by the former US Federal Reserve Chairman in this crisis.

    Fleckstein writes in his closing chapter ” During Greenspan’s tenure, the creative destruction component of capitalism was routinely suppressed. The main consequence of this suppression was a loss of fear. Thus, the normal risk reduction response to periodic financial pain never occurred, as Greenspan wouldn’t even allow small crises to run their course. Instead, as people lost respect for the idea that they might lose money, risk taking continually escalated until the situation reached a point where it is now: the United States, individually and collectively, is swimming in an ocean of debt that has been rapidly ratcheting higher. At the same time, the country is experiencing a declining real estate market that supports much of that debt, a sinking economy that has been dependent on an unsustainable real estate bubble, and a weak currency. Plus, there are over $500 trillion worth of derivatives that Warren Buffett has described as “financial instruments of mass destruction.” You couldn’t have created a more precarious environment if you had tried “

  6. Gittin’s article also states: The obvious answer, as demonstrated by the Swedes in the ’90s – temporary nationalisation of most big banks – is one the Americans’ hang-ups prevent them from adopting. But the longer they delay, the worse things get.

    What would you consider is the likelihood of this happening in Australia?

    Thank you Mobius for the youtube links..even I understood this.

  7. Min

    “What would you consider is the likelihood of this happening in Australia?”

    I think it all depends now on how severely our banks will get hit. As of yet they’re ratcheting up their bad debt provisions, however, they’re in much better shape than many banks around the world. Short answer Min: Not at all sure at this stage.

  8. All the signs coming out of the US are extremely bleak.

    Wall Street suffers worst February since 1933
    http://www.theaustralian.news.com.au/business/story/0,28124,25118054-20142,00.html

    US recession deepens as GDP slides
    http://www.theaustralian.news.com.au/business/story/0,28124,25118035-36375,00.html

    THE US recession deepened a lot more in late 2008 than first reported, according to government data showing a big revision down because businesses cut supplies to adjust for shriveling demand.

    Gross domestic product decreased at a seasonally adjusted 6.2 per cent annual rate October through December, the Commerce Department said in a new, revised estimate of fourth-quarter GDP.

    The 6.2 per cent decline meant the worst quarterly showing for GDP since a 6.4 per cent decrease in first-quarter 1982 GDP.

    In its original estimate, issued a month ago, the Government had reported fourth-quarter 2008 GDP fell 3.8 per cent. The sharply lower revision to a decline of 6.2 per cent reflected adjustments downward of inventory investment, exports and consumer spending.

    The report showed businesses inventories shrank $US19.9 billion ($31.12 billion) in the fourth quarter, instead of rising by $US6.2 billion as Commerce originally estimated. Third-quarter inventories fell by $US29.6 billion in the third quarter

  9. John I was thinking that our low doc loan problems would not be nearly as severe as in the US. From memory this started in Australia when people such as contractors could not provide proof of 2 years of continuous employment and later were added in the zero dollar deposit loans. It didn’t matter if one had little equity in the property because prices were continuously rising.

    But, we do not have the US’s problem of over-supply – that although housing prices have stagnated (low to middle income) that things are holding..at least for the moment.

    To me the situation is still precarious especially re how many will default due to unemployment.

  10. Informative Mobius Echo.

    Where do you think oil/war-related inflation affecting mortgage payers in 2nd Bush term…& tax cuts that provided more incentive for investors and house builders on top of low interest rates…& changes to bankruptcy laws comes into the scheme of things?

    N’

  11. John, I’d like to get your opinion on the Obama govts’ proposal to purchase more shares (common stock) in Citigroup?

    N’

  12. And what does Gittin’s article conclude?

    Really? The State Department’s IMF and Ben Bernanke of the for-profit banker cartel comprising the Federal Reserve say that all the investors who invested in products sold by American bankers (not) regulated by the Federal Reserve and by Congress, and throwing around money like confetti, and soaking up the world’s surplus to leverage and on-sell as credit, should just lose their stored value as that negative value is sequestered in a naughty bank and swept under the carpet by the very same people who were giving a regulatory green light for that behaviour, and the American finance system is off the hook by defaulting on its debts after taking the benefit of using those funds for years? I did see in the graphic that the investor’s phoned the home owner investors to tell them that their investments were now worth $%#&, but that bit of the story ain’t really adding up as a direct, unmediated line.

  13. Dang blast it!…if this does turn out to be a full-bore Recession then I won’t be easing my woes w/ the sounds of U2 like last time.

    Yep, they’re running for the tax-avoiders’ Dutch canals “with or without you”: The red light district will turn green w/ envy.

    February 27 – March 1, 2009

    Bono: “All the Corporate Entities Do It”
    Where the Cheats Have No Shame
    By HARRY BROWNE

    Entries have already been pouring in to the ‘rewrite a U2 song’ competition in honour of the group’s Irish tax-exile status, as described here on Counterpunch by Eamonn McCann. ‘Where the Streets Have No Name’ has been recast as ‘Where the Cheats Have No Shame’, ‘Angel of Harlem’ as ‘Arrangement in Holland’ — and those are just the entries from my house.

    But CounterPunchers are rarely less than fair, so we just had to read more when we saw this news intro on page-one of today’s Irish Times: “U2 singer Bono says he was ‘stung’ and ‘hurt’ by criticism of the band moving part of its business to the Netherlands to lessen its tax burden.”…

    But let’s allow Bono to speak for himself. Tax avoidance, he says, is how Ireland got rich:

    “I can understand how people outside the country wouldn’t understand how Ireland got to its prosperity, but everybody in Ireland knows that there are some very clever people in the Government and in the Revenue who created a financial architecture that prospered the entire nation — it was a way of attracting people to this country who wouldn’t normally do business here. And the financial services brought billions of dollars every year directly to the exchequer.”

    There’s at least half-truth in what he’s saying: helping rich foreign companies avoid taxes was indeed part of the story of the Celtic Tiger. But Bono is leaving out the moral of the story, something else that “everybody in Ireland knows”: now that this get-rich-quick scheme has collapsed, Ireland is getting poor as precipitously quickly as any country in the developed world. So Bono is justifying U2’s tax-avoidance by comparing it to the Irish “financial architecture” that is now justly regarded as a national scandal, part of what brought more than 100,000 people on to Dublin’s streets to protest last weekend. Oops.
    (Excerpts from Bono: “All the Corporate Entities Do It”
    Where the Cheats Have No Shame)

    More here:

    http://www.counterpunch.org/browne02272009.html

    My U2 cd covers are obviously going to get alot dustier.

    N’

  14. Well,from they way things appear to be shaping up, we have now sold, and bought a ‘quaint’ refuge, stuck some money aside and are winding up all business interests. Not that there was much involved, were hardly big time. Also age has a big factor.
    I feel so sad for the younger families that I feel will end up badly out of all of this, all the theory and all the discussion count’s for sweet FA when you hit poverty, and I may get taken to task on this,especially in a large city.My reason for saying that is observing from friends in cities, just what it costs in capital outlay to bring in an income.

  15. Min

    To me the situation is still precarious especially re how many will default due to unemployment.”

    Affordable housing has been a major issue for some time Min, of which wages is a major factor.

    Seriously ‘Unaffordable’ Housing
    Posted on January 27, 2009 by johnmcphilbin
    https://blogocrats.wordpress.com/2009/01/27/seriously-unaffordable-housing/
    Tuesday, 27 January 2009

    Australian house prices are severely and seriously unaffordable…

    –See. Markets work if you let prices function. Median house prices have fallen over 15% in the U.S. in the last year, according to the National Association of Realtors. The median price of US$175,400 is obviously starting to clear some of the inventory over-hang. If prices fall even more, you can expect more buyers to come in off the sidelines and back into the market.

    –The alternative is to keep those new buyers out of the market by propping up prices through various government-backed lending initiatives. If you want to make homes more affordable, you should let home prices adjust lower, to a level that reflects tighter credit. How hard is it to figure out that if you take away copious amounts of credit from the housing market (in Australia or America) prices are going to fall?

    –But is that such a bad thing? Well, it is if you own a house and have a large mortgage on it. But let’s consider a new study on global housing affordability by Performance Urban Planning. The report concluded that Australia has the most unaffordable housing of all the nations surveyed. Not only that, but according to the report, Australia doesn’t even have a single urban area in which housing is merely “moderately unaffordable.”

    –Now before you write in defending the honour of Australia’s housing market, let’s be clear what the survey’s designers consider unaffordable. They use a ratio of Median House Price to Median Household income. A house is “Affordable” if the ratio is 3.0 or less. It’s “Moderately unaffordable” if the ratio is 3.1 to 4.0. It’s “Seriously Unaffordable” if the ratio is 4.1 to 5.0. And it’s “Severely Unaffordable” if the ratio is 5.1 or more.

    –Australia sports a ratio of 6.3, which is both “Severely Unaffordable” and “Seriously Daloob.” New Zealand comes in next t 5.7, followed by Ireland at 5.4 and the U.K. at 5.3. Owing to its large number of metropolitan areas in which there is a wide variety of median prices and incomes, the U.S. nationwide ratio is just 3.2.

    –Part of the problem in the other countries is that national median incomes and house prices are derived from just a small number of densely populated urban areas. It’s a pretty common occurrence in America to pack up your car, change states, and change jobs. You trade lower wages for a lower cost of living. That may be harder to do in more homogenised labour and housing markets, like, say, Australia.

    –So is today’s ratio any higher than historically? You bet it is! According to the study, “In recent decades, the Median Multiple has been remarkably similar among the nations surveyed, with median house prices being generally 3.0 or less times median household incomes.”

    –”This historic affordability relationship continues in many housing markets of the United States and Canada. However, the Median Multiple has escalated sharply in Australia, Ireland, New Zealand and the United Kingdom and in some markets of Canada and the United States.”

    –There are other ways to measure affordability, of course. But it really comes down to the mortgage payment. Looking at house prices in terms of household earnings and income, then, is the method that makes the most sense to us. And by that measure, Australia has some of the most expensive housing in the world.

  16. N’

    From what I can gather the intention to buy more shares in Citigroup is an effort to neutralise the impact of toxic assets on its balance sheet. Another bailout essentially. It’s an attempt to unclog blocked arteries. Would you be eager to buy shares in Citigroup? I know I wouldn’t N’

    As Gittins conclusion?

    I think he’s saying that those who ignored or denied the problems for so long have now come to the conclusion that the banking and financial system has failed in a major way.

  17. “all the theory and all the discussion count’s for sweet FA when you hit poverty”

    LM, exactly why I’ve stored away bags of rice, tins of pulses and other essentials, containers of flour, bought plenty of candles & a couple of wind up torches & a wind-up radio…& prepared our budget for a 1/3rd reduction in income. Just in case.

    I love my PayTV but it will be the first to go if things get real bad. There’s always the ABC & other free to air channels…& the blogs for news, local papers and word of mouth…And the DVDs we own. And plenty of DVD shops offering good deals for movies…can wait for download system to eventually come along.

    And I can reduce my beer drinking…and change my present internet connection…to a basic, cheaper package. Not many people will be hearing from us by long distance either. And energy use will contract something chronic. And gifts will primarily be homemade.

    Probably best we don’t focus on the NEGATIVES too much & inadvertantly contribute to talking down the economy.

    Leave that to the media moguls, their editors & talking heads who obviously don’t give a stuff about undermining CONFIDENCE and keeping people in jobs to purchase their offerings. Or so it seems sometimes. Political GAMES perhaps?

    N’

  18. Legion, on February 28th, 2009 at 5:04 pm Said:

    And what does Gittin’s article conclude?

    Sorry N’ it was Legion’s question

    As Gittins conclusion?

    I think he’s saying that those who ignored or denied the problems for so long have now come to the conclusion that the banking and financial system has failed in a major way.

  19. Probably best we don’t focus on the NEGATIVES too much & inadvertantly contribute to talking down the economy.

    Leave that to the media moguls, their editors & talking heads who obviously don’t give a stuff about undermining CONFIDENCE and keeping people in jobs to purchase their offerings</blockquote?

    Don’t forget the politicians.

    Oh yeah, and John McPhilbin. 😉

  20. Thanks Tony

  21. Lol

    DUE TO TECHNICAL DIFFICULTIES THIS POST HAS BEEN CLOSED TO COMMENTS

    SORRY FOR THE INCONVENIENCE

  22. CORRECTION…CLOSED TO TONY…. ALL ELSE WELCOME (wink)

  23. Heh. No problem John. (I wouldn’t want your efforts going unrecognised.)

    😀

  24. Tony

    I really wish I had reason to talk the economy up, sadly I don’t, and to say otherwise wouldn’t be truthful.

    I do, however, have faith that in the long run (not short run like the next few months or even three years) our fortunes will turn upward.

    For around twelve months now I’ve stuck with my sanity saving approach which has led me to look at the whole problem in more general terms, simply because there is no avoiding the pain brought about by our addiction to debt:

    We will, in my opinion, continue getting snapshots that are aimed at providing greater hope and optimism about the economy and our wealth status. I’m just hoping people take a more realistic view of what is really happening. Nobody wants to see a major panic or excessive pessimism, however, we’ve had well over a decade where it seems nothing could stand in our way.I personally think that our average wealth will decrease (taking away previous gains through heated housing and stock markets), credit card spending will have to slow significantly and therefore consumer spending will decline, and housing prices will continue to fall. For how long? anywhere from between 18 months to 5 years – seriously (and the 5 years is a conservative guess). The problem that some people are not seeing clearly is that many of us are leveraged to the hilt with debt and we now need to start shedding much of the excess debt we’ve been carrying – this could be a lengthy process.

  25. …that’s not to say I don’t appreciate your kind recognition Tony (wink)

  26. “. I’m just hoping people take a more realistic view of what is really happening. Nobody wants to see a major panic or excessive pessimism,”

    No John, however there is also a time when home is where the hearth is, and as Naskin pointed out, better to be prepared than to wing it.
    Especially with the shortage of feathers.

  27. Slightly off topic, but I would like to hear peoples opinion on the predicament the government is finding itself in with its reaction to rising inflation early last year before the current crisis became apparent.

    They are currently being held accountable for people locking in mortgages at much higher rates than they are now because of the ‘inflation genie’ rhetoric.

    My main question then is, just what would our ability to react to the current crisis be if inflation had not been dealt with before the GFC hit, or would we have been better off letting inflation get out of control and allow ‘market forces’ to fix it.

    One upside I see is that our banks have had plenty of room to move in regards to interest rates as they were at a relatively high rate.

    Also, I had fixed mine, but this was more a practical thing I do so that I can budget more readily, I know exactly what is going out every two weeks. I do not feel that ripped off about the situation, a little miffed at times, but nothing to write home about. i generally fix mine without too much note of rising and falling rates, because I guess I am just a lazy/hopeless budgeter

  28. Mobius Echo, Adrian?
    Hello 🙂

  29. Hi Aquanut,

    Mobius Echo, Adrian?
    Hello

    Do you think so? Doesn’t sound like him to me.

  30. Tony,
    fair enough. i think it was the picture and how informative the guy was. Just a guess

  31. You got me thinking though, so I just googled ‘Mobius Echo’. That person left the same comment on another blog earlier today:

    http://economics.com.au/?p=2735#comments

  32. “They are currently being held accountable for people locking in mortgages at much higher rates than they are now because of the ‘inflation genie’ rhetoric.”

    Tom R, we hooked in during the end of the Howard govt era…all those interest rate increases in a row had us worried enuff to do so (we missed a few on the trot fortunately)…and even tho we could see the economic downturn coming, it was hard to predict how fast the Reserve Bank would decrease rates…or if they would at all.

    Particularly as we were worried about the Busheviks going for Iran or Syria & pushing the price of oil up even further…leading to more inflation. And a possible McCain win that could’ve ratcheted up problems w/ Russia & other oil & gas producing states. Because of that we hooked into 3 years fixed rate instead of 2 years. Being cautious and all.

    Still, only 10 mths to go. We’ll come out fairly even I imagine. And fortunately we didn’t add to our debt when we fixed in. Or sell & buy a more expensive house.

    cheers
    N’

  33. Acutally i think your correct Tony is not him.

  34. Sorry Mobius, but welcome to the site.
    Like John thanks for sharing you thoughts.

  35. “better to be prepared than to wing it.”

    Hey LM, I bet you’ve put a few beers in storage & have plenty of tucker tucked away. With some music, lovely partners, good chow & the odd homebrew or so we can do the odd labour job that comes along and ride thru the storm. Just like the old days eh?

    i’m putting more chives in the garden tomorrow & my zuchinnis are coming along a treat…as are my precious chillies. Drop one in a recipe, add Tabasco to my beer, and I’m in heaven.
    🙂

    BTW, excellent & stimulating discussions on this blog. Interesting characters too. Great sense of humour…including the Right-Wingers & others non-Rudd supporting like Tony & Tom of Melb. who I still find generally make a decent contribution. We even have a deep sea diver on here…that’s pretty amazing.

    And some of the brightest, common-sense women I’ve ever had the pleasure to chat to.

    Good to have you onboard too LM…I really missed your down-to-earth comments & music suggestions after RTS closed. And Ken & Evan are putting in an insightful contribution…as usual based on their wide experience.

    Great job John, Reb, joni, TB & renniek. Your blog is refreshing to wake up to….or read in the arvo onwards.

    Now I’m having a beer. This political economic stuff gets a fella thirsty.
    N’

  36. I think China will bounce back fairly quickly. Mining and resources will follow.

    I tend to think we are observing an economic realignment more than a serious recession.

    USA, Japan & Europe are likely to suffer more than the emerging economies, and I include us in the latter group.

    *sent via mobile – apologies for lack of lengthy quotes & over explained rationale.
    *insert happy face!

  37. add Tabasco to my beer! Good Grief, I thought that you were a vege thingo, isn’t that made out of Longhorn cactus eating bulls balls,from Eagle Pass, Texas. (great newspaper has Eagle Pass ).
    Have to add to N’s comment, this is a good site and mostly I’m glad to read that opinions are constructed,well apart from mine, in an educational and bitter free manner, it’s hard , I guess ,for some of us leftovers from RTS to want to contribute to other sites as we in a way had our own ‘family’ and agenda, however as a few of us pointed out that we were not rabid leftys or anti right, all we wanted was a fair go and justice for all Australians which rightly or wrongly (I suspect the former) we felt we were being denied.

    I sat back and watched for a while and was pleased with the articles that were put up and the quality of comments , and as N has pointed out, that lady’s were not ,through subtle or other means , being excluded ,mostly it’s the lady’s who drop some common sense in, as always, just when it’s needed.

    So to the folk who kicked it off, and the literate on here, well done, albiet a well rounded site such as this should have a shallow sea diver.
    I know you all want to know, yes, the dogs are doing well (bludgers:0 )

  38. “Good Grief, I thought that you were a vege thingo, isn’t that made out of Longhorn cactus eating bulls balls,from Eagle Pass, Texas.”

    lol…bollocks! I say…

    check out this LM:

    tabasco commercial

    lhttp://www.youtube.com/watch?v=fbminOZZcio

    N’

  39. Firefox put up a message that their protocol wont be associated with veges or bulls ball sauce, or oxy morons.
    Have a T Bone, with sauce…:)

  40. Egads, the Amerikan ikonomists are going all supernatural with their talk of ghouls and zombies!

    Nouriel Roubini: Time to nationalise insolvent banks

    Thus, paradoxically nationalisation may be a more market-friendly solution: it wipes out common and preferred shareholders of clearly insolvent institutions, and possibly unsecured creditors if the insolvency is too large, while providing a fair upside to the taxpayer. It can also resolve the problem of managing banks’ bad assets by reselling most of assets and deposits — with a government guarantee — to new private shareholders after a clean-up of the bad assets (as in the resolution of the Indy Mac bank failure).

    Nationalisation also resolves the too-big-too-fail problem of banks that are systemically important, and that thus need to be rescued by the government at a high cost to taxpayers. Indeed, the problem has now grown larger, because the current approach has led weak banks to take over even weaker banks.

    Merging zombie banks is like drunks trying to help each other stand up. JPMorgan’s takeover of Bear Stearns and WaMu; Bank of America’s takeover of Countrywide and Merrill Lynch; and Wells Fargo’s takeover of Wachovia underscore the problem. With nationalisation, the government can break up these financial monstrosities and sell them to private investors as smaller good banks.

    Whereas Sweden adopted this approach successfully during its banking crisis in the early 1990s, the current US and British approach may end up producing Japanese-style zombie banks — never properly restructured and perpetuating a credit freeze. Japan suffered a decade-long near-depression because of its failure to clean up the banks. The US, United Kingdom and other economies risk a similar outcome — multi-year recession and price deflation — if they fail to act appropriately.

    A ghoulish prospect

    In a classic horror film, “Night of the Living Dead”, a terrified group of people barricade themselves in a rural farmhouse to escape hordes of flesh-eating zombies. Today Americans are gripped by a similar fear, but this time the walking corpses in their nightmares are banks, tearing insatiably at the public purse. As the Obama administration struggles to get its poorly received bank-rescue plan up and running, it is being pressed to respond to suspicions that some large banks are on the edge of insolvency, if not already there.

    In a matter of weeks nationalisation has gone from taboo to talking point. Economists debate its pros and cons across the blogosphere.

    (Mental note to self: procure more zombie repellent for bug-out kit.)

  41. Legion, although that was others thoughts, once again I heard a tree fall in a forest.
    ABC Digg calls and the prunes need treeing. .
    .

  42. Interesting stuff Legion.

    SUEDE – The Living Dead (acoustic version)

  43. Helps if I put the link:

    N’

  44. There’s a sad denial by companies and many investors about what’s really happening. In my previous life as an analyst I knew this to be the case, exactly as I do now. Some things simply do not change, especially when a painful truth is involved.

    Elizabeth Knight’s spot on.

    Denial works – until the cracks break through
    http://business.smh.com.au/business/denial-works–until-the-cracks-break-through-20090227-8kap.html
    Elizabeth Knight
    February 28, 2009

    A smattering of shareholders regularly challenge their corporate governors but for the most part small and even large investors believe these men and women know what they are doing.

    The sad reality in these troubled times is that most of them don’t have a clue, and during the course of the current results season that has really started to show.

    I call it the credibility gap. The gap between what our corporate masters tell us and what we are inclined to believe. Needless to say it is growing by the day.

    This reporting season has been a mess. Large numbers of companies had to issue profit warnings a week or two before their official audited results to comply with continuous disclosure obligations. Then the news was usually worse than the market had expected and often accompanied by large write-downs in the value of assets.

    The trouble is not that investors didn’t see any of this coming, it’s that company boards and management didn’t see it coming. That’s called incompetence, lying or denial – and in most cases it’s denial.

  45. Instead of always propping up banks & other businesses the government should redirect billions and billions (the word, amount they throw around so easily today) into ensuring a decent percentage of mortgage payers & small business loans are paid off.

    Freeing up income for workers to do what the scammers have always done. The corporate aristocracy..

    But i guess they want us to be ever-indebted to the banks…whatever THE CON. And to keep the long, long payments to the financial institutions going so the corporates & risk-takers (my arse) & well-off SFR (not TB & such) can keep feeding off it.

    Feeding off US.

    Perhaps we should all become lawyers?…demand compensation from employers who ripped us off? Exploited our labour power? Sue the fckn real estate merchants & media who ensured that home/unit prices were so high…ensured SHELTER became a commodity.

    Who knows?

    Just sometimes you look around…

    everything slows down…to a crawl…time lengthens…perception of such…

    you…see…hear…WITNESS the injustice. The SCAMS.

    Your blood rushes…boils you think…as the ice they freeze us with…the uncertainty factor & propaganda messages melt…

    You see the CON-ARTISTS on TV…computer screen…on ripped billboards everyfreakin’day…their stankin’ actions being justified on & on & on again…by talking heads…sales people looking urgent…smiling inanely as politicians…as media gurus…as celebrity tossers…as big wig execs w/ glimmering watches…& shiny suits…

    scammers driving around like arrogant wolves. Life sucking vampires. And YOU begin to think…

    THERE’S GOT TO BE A BETTER WAY

    then you look in the mirror

    and see the teeth.

    Are YOU willing to SHINE THE LIGHT on yerself?
    Rip those teeth out?

    Start again.

    N’…pissed again.

  46. Continue to spend and support jobs or reduce spending and pay down debt. With so much consumer spending supported by credit they’ll be no easy way out. A recession we have to have perhaps, in order to our economy to a more stable footing?

    Job fears help to reduce debt
    http://www.theaustralian.news.com.au/business/story/0,28124,25122535-643,00.html
    A SLOWING economy and a fear of losing their job is motivating many Australians to slash their debt, economists say.

    In recent months, personal credit growth has slowed to rates last seen in the 1991-92 recession.
    Personal borrowing levels, which includes credit cards, margin loans and personal loans, fell by 0.2 per cent in January, the Reserve Bank of Australia said.

    Other personal credit shrank for the eight consecutive month in January, the longest run of contraction in personal credit, other than for housing, since the 1991-92 recession.

    Commsec economist Savanth Sebastian said clearing debt was attractive for Australians in the current economic climate.

    “At the moment, consumers are probably looking at the global economy, realising it is weak and they have big concerns about employment,” Mr Sebastian said.

    “They are really shunning away from debt in this environment.

    “They are trying to ensure their households budgets are in order.”

    The average debt on a credit card was $3,162 in December 2008, with plastic debt increasing at three per cent yearly, the slowest rate on record.

  47. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

    Which leads me to a supplementary question, John.

    Do our schools teach ‘credit’, ‘savings’, general household finance nowadays? I would hope so.

    I’m always telling my kids about credit, savings, cash, financing, assets, real and perceived.

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