Dr Faber thinks the real cost will be seven times greater than the proposed bailout.
... and here are his thoughts on where to be invested - and the current advantages and future perils of holding cash:
Saturday, September 27, 2008
The revolution is personal
"Financial Crisis: The next decade could be our very own Great Depression" says the economics editor of the Daily Telegraph.
Towards the end of the 90s, I was expecting a major crash. Then, I was in a laughable and condescended-to minority, it seems. And I'm certainly not important enough for anyone in the City of London to give me a minute of their heavily-overremunerated time. Even last year, warning on Cafe Hayek that America could become dirt-poor financially, I was mocked for my ignorance of "purchasing power parity".
I was unfamiliar with the phrase at that time, but I still think my instincts were right. I don't know what ordinary people are going to live on, in the US and the UK, when everything we used to make can be made cheaper elsewhere and the world's average income (in Purchasing Power Parity terms) is $5,000 a year.
When the government runs nearly everything, as it seems determined to do, maybe "if you can't beat them, join them". Here in the UK, the next administration will have very limited freedom of action, as the present one expects (perhaps wrongly) to lose the coming General Election and so has adopted a "Götterdämmerung" strategy - selling our nuclear power firm to the French, undermining the Monarchy, and generally assaulting anything that will hold us together politically, culturally and financially. In a way, I hope Labour wins again; but then again, it would be no punishment - they'd continue to eat and drink well while perfecting our destruction.
In case you imagine I am politically biased, please note that I hold no brief for the pack of smoothies that is the current Tory Party, any more than for the Fifth Columnists who have spent 11 years destroying the country from the top. Both seem to see their future as part of the Euro-elite and think the common people depend on their bull****, as koalas depend on eucalyptus leaves.
Abandon all belief in these charlatans and concentrate on your personal life plan.
Towards the end of the 90s, I was expecting a major crash. Then, I was in a laughable and condescended-to minority, it seems. And I'm certainly not important enough for anyone in the City of London to give me a minute of their heavily-overremunerated time. Even last year, warning on Cafe Hayek that America could become dirt-poor financially, I was mocked for my ignorance of "purchasing power parity".
I was unfamiliar with the phrase at that time, but I still think my instincts were right. I don't know what ordinary people are going to live on, in the US and the UK, when everything we used to make can be made cheaper elsewhere and the world's average income (in Purchasing Power Parity terms) is $5,000 a year.
Being right is no use at all, except on a personal level: I re-entered the despised public sector at the end of 1999 so that I would have something to live on when the financial world unravelled. Now, you need to make your own survival plans - it shouldn't (I earnestly hope) be guns and dried food, but what line of work will you be doing and how much can you sell to get rid of debt?
It's not too late. The Equitable Life mess took a long time to reach its endpoint, and there was quite a window of opportunity to get out of their with-profits fund with a reasonable amount of your savings intact. Similarly, houses have dipped in price, but (in my view) nowhere near hit bottom; nor do I expect them to return to current levels for a generation (in real terms; if the government permits hyperinflation, they may return in nominal terms, but that'll be no comfort when a loaf of bread costs £10).
When the government runs nearly everything, as it seems determined to do, maybe "if you can't beat them, join them". Here in the UK, the next administration will have very limited freedom of action, as the present one expects (perhaps wrongly) to lose the coming General Election and so has adopted a "Götterdämmerung" strategy - selling our nuclear power firm to the French, undermining the Monarchy, and generally assaulting anything that will hold us together politically, culturally and financially. In a way, I hope Labour wins again; but then again, it would be no punishment - they'd continue to eat and drink well while perfecting our destruction.
My newsagent told me this morning that he works 90 hours a week. He referred to a Daily Express front page story from yesterday, which said that it was indeed better to live on benefits. I'm not surprised. In ancient times, it was understood that if you wanted a good job doing, you employed a freedman, since slaves were complacent and lazy. Democracy has become a process whereby slaves appoint masters who will feed, clothe and house them.
In case you imagine I am politically biased, please note that I hold no brief for the pack of smoothies that is the current Tory Party, any more than for the Fifth Columnists who have spent 11 years destroying the country from the top. Both seem to see their future as part of the Euro-elite and think the common people depend on their bull****, as koalas depend on eucalyptus leaves.
Abandon all belief in these charlatans and concentrate on your personal life plan.
$700 billion: cui bono?
Hunter in the Daily Kos (HTP: my brother) says that the $700 billion rescue plan has no relation to the (much smaller) likely amount of mortgage defaults; instead, it's designed to prop up the derivatives scam that banks have been running for years.
I've thought recently that the bankers and traders are, in effect, being offered absolution without confession (1), restitution (2), doing penance (3) or a "firm purpose of amendment" (4).
1. Full disclosure of all liabilities and "assets"; admission of each person's part in the debacle. This should be Watergate Plus: there's a lot more than four burglars and the damage to third parties is incalculable.
2. Preferably, repayment of past bonuses awarded at a time when the recipient knew, or ought to have known, that the game was destabilising his own firm and the national economy.
3. Ideally, jail time, for some; at least, loss of office for those responsible.
4. Adoption of regulations designed to maintain the value of the currency and prevent future speculative bubbles.
From time to time we hear the defence that the consumer was at fault, too. Perhaps, if you're thinking about home equity withdrawals; but even the boll weevil is "just looking for a home" as Leadbelly sang, and when banks opened the money sluices house prices doubled. The buyer had no option to purchase a home at 2002 prices in 2007 (and I'm not sure what happened to the cost of rent in that time). The lenders should have known what they were doing; the poorest borrowers were not their equals in expertise. There was a duty of care.
What would houses cost, if it had always been illegal to use them as collateral for debt? What would the US and UK economies look like, if the vast sums sunk into housing had gone into small business enterprises? How much wealthier would we be?
I've thought recently that the bankers and traders are, in effect, being offered absolution without confession (1), restitution (2), doing penance (3) or a "firm purpose of amendment" (4).
1. Full disclosure of all liabilities and "assets"; admission of each person's part in the debacle. This should be Watergate Plus: there's a lot more than four burglars and the damage to third parties is incalculable.
2. Preferably, repayment of past bonuses awarded at a time when the recipient knew, or ought to have known, that the game was destabilising his own firm and the national economy.
3. Ideally, jail time, for some; at least, loss of office for those responsible.
4. Adoption of regulations designed to maintain the value of the currency and prevent future speculative bubbles.
From time to time we hear the defence that the consumer was at fault, too. Perhaps, if you're thinking about home equity withdrawals; but even the boll weevil is "just looking for a home" as Leadbelly sang, and when banks opened the money sluices house prices doubled. The buyer had no option to purchase a home at 2002 prices in 2007 (and I'm not sure what happened to the cost of rent in that time). The lenders should have known what they were doing; the poorest borrowers were not their equals in expertise. There was a duty of care.
What would houses cost, if it had always been illegal to use them as collateral for debt? What would the US and UK economies look like, if the vast sums sunk into housing had gone into small business enterprises? How much wealthier would we be?
Friday, September 26, 2008
Have Britons become slaves?
Lilith's daughter has been charged for demonstrating back in June. I was disturbed about it then, and am again now.
As in the early nineteenth century, the people are effectively disenfranchised and have little other way to express their dissatisfaction than by demonstrations - in this case, holding up a placard. Do American police arrest placard-holders outside the White House, or is America still a democracy?
It's not as though we're putting the windows through in Whitehall, as in 1831 (Reform Bill), 1855 (against closing pubs on Sundays) and on other occasions.
When did the police turn from being a people's Watch to fight crime as normally understood, to a standing army whose purpose is to suppress the people?
As in the early nineteenth century, the people are effectively disenfranchised and have little other way to express their dissatisfaction than by demonstrations - in this case, holding up a placard. Do American police arrest placard-holders outside the White House, or is America still a democracy?
It's not as though we're putting the windows through in Whitehall, as in 1831 (Reform Bill), 1855 (against closing pubs on Sundays) and on other occasions.
When did the police turn from being a people's Watch to fight crime as normally understood, to a standing army whose purpose is to suppress the people?
Spectator letter is published
The Spectator magazine has published my recent letter; heavily edited, but at least it was the first in the list, so that's some sort of recognition:
"Storing up more trouble
Sir:
Your leading article (20 September) calls for a ‘kick up the backside’ to the banking industry. That kick should be aimed elsewhere. The British and American governments have not merely permitted this crisis to happen, but positively created it by a deliberate relaxation of monetary controls. Worse still, they have now decided that instead of destroying excess credit by asset deflation, bankruptcies and share collapses, the monetary inflation is to be consolidated by absorption of bad debt into the public finances.
I don’t see how this can end well. Some commentators are already saying that, if passed unaltered, the proposed American financial legislation could, once properly understood, trigger a major crash in US financial shares, possibly before this letter is published.
I think The Spectator and its economically savvy readers should put on fresh pairs of winkle-pickers, and gather in Whitehall and Washington for some kicking practice."
"Storing up more trouble
Sir:
Your leading article (20 September) calls for a ‘kick up the backside’ to the banking industry. That kick should be aimed elsewhere. The British and American governments have not merely permitted this crisis to happen, but positively created it by a deliberate relaxation of monetary controls. Worse still, they have now decided that instead of destroying excess credit by asset deflation, bankruptcies and share collapses, the monetary inflation is to be consolidated by absorption of bad debt into the public finances.
I don’t see how this can end well. Some commentators are already saying that, if passed unaltered, the proposed American financial legislation could, once properly understood, trigger a major crash in US financial shares, possibly before this letter is published.
I think The Spectator and its economically savvy readers should put on fresh pairs of winkle-pickers, and gather in Whitehall and Washington for some kicking practice."
A crisis of democracy, not of capitalism
One of the features of the present crisis is that it is not so much financial as political. Vast bailouts of greedy and destructive banks lead Americans to ask, who is running the country, and for whose benefit? Mish and others are turning from financial commentators to pro-democracy activists.
Shall "Government of the people, by the people and for the people" perish from the earth? The lazy, defeatist cynics of the UK fail to understand how Lincoln's words still burn brightly in many Americans' hearts. It's why they are so quick to attack their politicians as liars and shysters, wheras we merely expect them to be that anyway. Their idealism shames us.
Shall "Government of the people, by the people and for the people" perish from the earth? The lazy, defeatist cynics of the UK fail to understand how Lincoln's words still burn brightly in many Americans' hearts. It's why they are so quick to attack their politicians as liars and shysters, wheras we merely expect them to be that anyway. Their idealism shames us.
A Marmite Backwater
Dark Matter, Dark Energy, now Dark Flow... my brother directs me to a new discovery/theory.
It seems that a great cluster of galaxies that is halfway towards the edge of the observable universe, is moving in a different direction from the general stretching of space-time. It's like a little boat caught in an eddy.
Cosmologists theorise that there may be massive, unobservable structures hundreds of billions of light years away, pulling these galaxies in their direction. They imagine that the universe beyond what we can see (c. 17 billion light-years) may be very different from ours.
And some of us laugh at mediaeval theological speculation. How foolish those people were, building elaborate worlds of internally-consistent ideas, applying nothing but logic to extend their understanding beyond the few things they were certain that they did know, attempting to move from the seen to the unseen.
And now we lift our gaze from the CERN to the unCERN.
I wonder what Ben Jonson would have made of it all?
May I prevail on you all for charitable contributions to fund a new chair of Marmite Studies?
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