Sunday, November 22, 2009
My hero!
Banks: "parasites... financial bastards... should never have lent the money in the first place... bankrupt them... nationalise them... cancel debt... or the economy will die... never-ending Depression."
Straight-talking Aussie economist Steve Keen, talking to teeth-clenched grinning, gonzo (but still on the money, in my opinion) "Wall Street are terrorists" Max Keiser.
Straight-talking Aussie economist Steve Keen, talking to teeth-clenched grinning, gonzo (but still on the money, in my opinion) "Wall Street are terrorists" Max Keiser.
Saturday, November 21, 2009
Steve Keen: we are facing a rerun of the 1930s
In a long and fairly technical presentation which, as an amateur I freely admit to not fully understanding, Steve Keen, one of the few professional economists to foresee the credit crunch, argues that there will NOT be a successful reflation this time, and instead we face a savage "deleveraging" as in the 1930s. Possibly worse, since the ratio of debt to GDP is worse this time.
Friday, November 20, 2009
India: the coming superpower
Like I've been saying for some time; and now someone else thinks so, too.
Thursday, November 19, 2009
Dilution
It is generally agreed that our current financial mess was precipitated by the sub-prime mortgage fiasco. The system was already burdened by too much debt to absorb those new losses. The commentators have moved on to the American hobby of assigning blame: to President Clinton and the Democrats for forcing the banks to offer high-risk loans to the poor, the bi-partisan officials for deregulation, and to the poor themselves, for accepting 'free' money.
To me, a finance ignoramus, the real questions are:
a) How did a few million bad loans bring down such a huge system?
and
b) How did the system get so much debt?
The answer to a) seems simple. While the government could have paid the $500 billion or so in bad loans, or Wall Street could have given up bonuses for a couple of years, the way that the debt was securitized meant that each bad dollar in investment was multiplied by factors in the hundreds. All on paper, of course.
As for b), I note that Robert Rubin states that 'this could not have been foreseen'. I can only attribute this to a quasi-religious belief in the magic of the market. Several people that I know were worried at the trends over 15 years ago. Nominal house prices were rising faster than inflation and incomes combined, and too many people were using their homes as cash machines by re-mortgaging.
This fiat money was magnified many times by the system through derivatives, until we reach the current state. With a world's annual production of goods and services at about $55 trillion, there is an estimated $1000 trillion in derivatives. That is, we have mortgaged everything on the Earth for the next 18-19 years. That's what I call a sub-prime loan!
Homeopathic 'medicines' are made by diluting active chemicals with distilled water until no molecule of the ingredient is left. We appear to be actively approaching homeopathic wealth, diluted by paper.
To me, a finance ignoramus, the real questions are:
a) How did a few million bad loans bring down such a huge system?
and
b) How did the system get so much debt?
The answer to a) seems simple. While the government could have paid the $500 billion or so in bad loans, or Wall Street could have given up bonuses for a couple of years, the way that the debt was securitized meant that each bad dollar in investment was multiplied by factors in the hundreds. All on paper, of course.
As for b), I note that Robert Rubin states that 'this could not have been foreseen'. I can only attribute this to a quasi-religious belief in the magic of the market. Several people that I know were worried at the trends over 15 years ago. Nominal house prices were rising faster than inflation and incomes combined, and too many people were using their homes as cash machines by re-mortgaging.
This fiat money was magnified many times by the system through derivatives, until we reach the current state. With a world's annual production of goods and services at about $55 trillion, there is an estimated $1000 trillion in derivatives. That is, we have mortgaged everything on the Earth for the next 18-19 years. That's what I call a sub-prime loan!
Homeopathic 'medicines' are made by diluting active chemicals with distilled water until no molecule of the ingredient is left. We appear to be actively approaching homeopathic wealth, diluted by paper.
Sunday, November 15, 2009
Strangling the goose
When the dust has settled on the Keydata case...
when Keydata and its directors no longer pay the taxman on profits, wages and dividends derived from a business that had, until the tax office got zealous and technical, apparently paid off all its debts, was showing a profit and had cash in hand;
.. will this really look like a win for the Shylock approach to revenue gathering, and to regulation?
when Keydata and its directors no longer pay the taxman on profits, wages and dividends derived from a business that had, until the tax office got zealous and technical, apparently paid off all its debts, was showing a profit and had cash in hand;
when the former employees are claiming a complex array of benefits instead of paying income tax and National Insurance;
when PriceWaterhouseCoopers have sent in their final massive bill for services rendered;
when the investors, many worried half to death for months, finally (most of them) get massive collective financial compensation from the Government..... will this really look like a win for the Shylock approach to revenue gathering, and to regulation?
The British taxman has become a laughing-stock
Following the ridiculous 2001 sale of the taxman's own offices to a property company that smartly transferred the ownership to the tax haven of Bermuda, the British Treasury has made itself into a charity case and is asking for tax-deductible donations to reduce the National Debt.
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