Thread: Is the world heading into recession?

What is 'wealth'?

Now the world economy is collapsing a lot of money is going into $USs as a safe haven because its a commodity and tradable for real goods and services. But thats a bit like buying up sub-prime mortgages in hard times because the $US is based on a spiral of never ending debt that cant be repaid unless its value falls substantially.

When the $US crashes it will be the end of stage one of this world economic crisis. Then the big investors will take what they have left and put it into gold because its seen as the next safe haven for wealth to be stored in hard times.
Naturally the price of gold will go through the roof when that happens. Keep an eye on gold prices because its trading value is basically inversely proportional to the $US in these turbulent financial times. That will be stage two of this economic readjustment.

Then when the bulk of the worlds wealth is tied up in gold that has topped out and not actually turning over to fund investment in actual production of stuff that can turn a profit, the big money people will start investing in the raw materials the world needs, but that have become stagnant. Mainly minerals and energy I reckon. That will be stage three when the recovery starts and the world gets moving again.

But somewhere in the interim the worlds financial leaders will figure out that its not such a good idea to base the worlds trading economy on the $US (or gold) and all the worlds governments will sit down and develop a new international trading medium (probably called something like the $W, or world $) that will be based on a basket of currency values and linked directly to production rather than the old debt based $US.

I am thinking this whole process is going to take maybe another 3 to 5 years to pan out unless USA can pull a rabbit out of the hat and get things going again long enough to stall the inevitable world financial readjustment for a couple or few more years. I hope it happens sooner rather than later as the longer it goes on the more painful it will be in the end.

Thanks for the excellent explanations...

Originally Posted by Butterfly

You are forgetting natural resources, workforce, and ability to produce which are "assets" that backs the "value" of a country, and also the USD. It's not worthless simply because of the debt.

This is old traditional evaluation of a currency's stability and value and is in my opinion the right way of evaluation.
Unfortunately, the market does not see it this way nowadays.
Some currencies are getting heavily over-appreciated by the market and some heavily under-appreciated without any resemblance to the actual value of the country.

Originally Posted by Butterfly

Originally Posted by Panda

Right now the worlds economy is based on $US paper money, which in turn is debt based in terms of actual tradable goods. The current tradable value of the $US paper money doesn't represent the countries ability to swap the equivalent value in actual goods. The USA cant pay its bills in real goods anymore, only in paper money. So in effect the paper money $US is overvalued.

a bit simplistic. You are forgetting natural resources, workforce, and ability to produce which are "assets" that backs the "value" of a country, and also the USD. It's not worthless simply because of the debt.

Not "worthless" simply worth less.

Originally Posted by lom

Unfortunately, the market does not see it this way nowadays.

Some currencies are getting heavily over-appreciated by the market and some heavily under-appreciated without any resemblance to the actual value of the country.

Asbolutely. That's because markets are usually dominated by silly market speculators who usually get it wrong on the short term. Markets however can be right on the long term, as part of their adjustment process. Why do we put up with silly speculators you ask ? because we need them to be "wrong" as they create liquidity and opportunities for risk averse and long term investors

where is BkkArse when we need him

so the banks claim they don't know what they are owed ...........wtf

^ Interesting video clip Spin. Amazing how he says the world financial system would have ended within 24hours of that run had it not been dealt with.

BTW the woman at the beginning shares the view of most Americans nowadays I would guess.



Another story...
Bailed-out Banks sought foreign workers
Bailed-out banks sought foreign workers - U.S. business- msnbc.com

"SANTA CLARA, Calif. - Major U.S. banks sought government permission to bring thousands of foreign workers into the country for high-paying jobs even as the system was melting down last year and Americans were getting laid off, according to an Associated Press review of visa applications."

Originally Posted by Spin

He talks of a silent run on the banks in the US that could have exceeded 11 trillion on the 15th September.
This is the first time I've heard such detailed info, its doesnt surprise me though, as I see that week as the time that this situation wernt really global and trade collapsed around the world as banks stopped lending in a hoarding panic.

He is talking out of his arse though, and concede he doesn't know much. Apparently he claims there was a silent run of 550 billions in a matter of hours, but that was from Money Market funds, it's not cash per se, the money is still in the bank or the financial institution. And I don't see how he can claim that the Fed stopped the Money Market run, it's impossible, at least by law, and they don't have control of the Money Market funds. Would be interesting to investigate what he meant by this, he probably got confused and meant something else, it doesn't add up.

Federal banking is quite a complex topic. I am sure it hasn't been easy to explain the causes and consequences to politicians and official representatives who probably can't even balance their own checkbooks.

Originally Posted by Butterfly

Originally Posted by Spin

He talks of a silent run on the banks in the US that could have exceeded 11 trillion on the 15th September.
This is the first time I've heard such detailed info, its doesnt surprise me though, as I see that week as the time that this situation wernt really global and trade collapsed around the world as banks stopped lending in a hoarding panic.

He is talking out of his arse though, and concede he doesn't know much. Apparently he claims there was a silent run of 550 billions in a matter of hours, but that was from Money Market funds, it's not cash per se, the money is still in the bank or the financial institution. And I don't see how he can claim that the Fed stopped the Money Market run, it's impossible, at least by law, and they don't have control of the Money Market funds. Would be interesting to investigate what he meant by this, he probably got confused and meant something else, it doesn't add up.

Federal banking is quite a complex topic. I am sure it hasn't been easy to explain the causes and consequences to politicians and official representatives who probably can't even balance their own checkbooks.

Do you think there was actually $550 billion transferred electronically out of $USs
to whatever unknown currency on Sept 15? All within the space of one hour. And if so, who would do such a thing knowing the consequences. Would have been interesting to know who was pulling the money out of $USs and where it was going.
And something that just didn't gel right was the statement that they stemmed the flow within a couple of hours by guaranteeing a maximum security of $250,OOO which would be chicken feed to anyone with $550 billion plus, to play with. Something just doesn't smell right in his story.

Originally Posted by Panda

Do you think there was actually $550 billion transferred electronically out of $USs

If that was the case, it would have impacted greatly the USD, and that wasn't the case. The money was still in the system. Who was withdrawing ? was it really the public ? or maybe banks using their client funds to recapitalizes in a fraudulent way ? more likely but still very wild speculation. Frankly, we will never know as the information is probably highly confidential.

Originally Posted by Panda

Something just doesn't smell right in his story.

From that guy on the videoclip or the whole meltdown episode ? the guy concede he doesn't understand much, he is a lawyer politician, they have no clue, their job is not to have a clue but to take decisions that will affect everybody

Aren't a lot of the transactions nowadays done through triggers. You can even set them on your own account at places like Ameritrade. If the markets fall or rise triggers go off and things happen. Money being pumped in could stop further selling instantly; it could also encourage buying. Not sure about banks and moneymarkets but a lot of things happen electronically nowadays. You could have an online account then die tomorrow and your account would trade into the future if you set buy-sell limits on your holdings

^ I think computer trading is shutdown automatically when certain level of volumes are reached,

as for online broker accounts, I don't think they trigger transactions automatically, just send you an alert for a buy or sell signal, which is definitely not the same

you still have to approve the trade with your login and password, or else possible huge security risk, and mistakes being made.

Read

The Hidden Connections, Capra F., Anchor Books, 2002.
Chapter 5 - The Networks of Global Capitalism

Nonlinear economic instability...

^Got any online links to that

China Exports Fall by Most in 13 Years, Imports Drop by Record

Feb. 11 (Bloomberg) -- China’s exports fell by the most in almost 13 years as demand dried up in the U.S. and Europe and imports plunged by a record, signaling a deepening slump in the world’s third-biggest economy.

Outbound shipments declined 17.5 percent in January from a year earlier and imports fell 43.1 percent, the customs bureau said on its Web site today. Both numbers were worse than economists’ forecasts.

The $39.11 billion trade surplus, the nation’s second biggest on record, may add to tensions as global leaders seek to avoid a trade war amid the worst financial crisis since World War II. China’s economic slowdown has already cost the jobs of 20 million migrant workers and growth may slide to 6.1 percent this quarter, the least since 1999, according to a Bloomberg News survey of 10 economists.

“It’s a very eye-catching trade surplus and people will ask how it can be so high at a time that everybody else’s economy is suffering,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd in Hong Kong. “What’s happening here is really dramatic, underscoring plunging global demand.”

The yuan traded at 6.8344 per dollar as of 2:13 p.m. in Shanghai today from 6.8342 before the data was released.

Falling commodity prices drove down import costs as China’s demand for raw materials also faltered because of the export slowdown and a property slump. The value of crude-oil imports fell 57 percent from a year earlier.

U.S., European Union

Exports to the European Union fell 17.4 percent. Those to the U.S. slid 9.8 percent. Shipments of electronics dropped 21 percent. Steel slid 32.5 percent and toys declined 14.7 percent.

The trade slump was likely exacerbated by a week-long Lunar New Year holiday, which occurred in January this year and February last year.

Government researchers have advocated weakening the yuan against the dollar to support exports. China should “actively guide” the yuan to about 6.93 against the dollar to aid growth and bolster employment, according to a report by the Ministry of Finance’s research institute published Feb. 7.

U.S. Treasury Secretary Timothy Geithner said yesterday that the new administration is yet to decide whether China is manipulating its currency. He added that China was an important force for global economic stability and “it is in the interests of the United States to work closely with them.”

‘Buy American’

Rising protectionism may make it “even more difficult for China to have an export recovery any time soon,” according to Isaac Meng, a senior economist at BNP Paribas SA in Beijing.

He cited “Buy American” provisions in a U.S. economic stimulus package, watered down after warnings from President Barack Obama and foreign leaders that they risked triggering a trade war.

British Prime Minister Gordon Brown last week described “a retreat into protectionism” as the biggest danger facing the world economy.

India imposed a six-month ban on imports of Chinese toys last month, citing health concerns. China said Feb. 9 that India’s trade barriers may have “a serious impact on bilateral trade relations.”

Mattel Inc., the world’s biggest toymaker, said this month that fourth-quarter profit plunged as consumers cut spending on Barbie dolls and Hot Wheels cars during the worst U.S. holiday- shopping season in 40 years.

Mattel imports from China, where more than 4,000 toy companies closed last year as demand fell and countries tightened safety standards, according to the official Xinhua News Agency.

Trade Collapse

The trade collapse and a slowdown to the weakest economic growth in seven years in the fourth quarter adds pressure on the government to boost consumption and expand a 4 trillion yuan ($585 billion) stimulus package.

“Policy makers should continue to ease monetary policy and to come out with policies to stimulate consumption and stimulate property transactions,” said Frank Gong, head of China research at JPMorgan Chase & Co. in Hong Kong.

The government should cut the key one-year lending rate by more than 100 basis points this year, cut taxes and distribute discount coupons to encourage spending, Gong said. The rate stands at 5.31 percent.

China’s economy grew 6.8 percent from a year earlier in the fourth quarter after gaining 9 percent in the previous three months. Industrial output grew 5.7 percent in December, down from 17.4 percent a year earlier.

‘Not as Severe’

“While the recent export slowdown has been alarming, China’s export slump has not been as severe as in some neighboring countries with a greater reliance on high-tech exports,” said Jing Ulrich, head of China equities with JPMorgan in Hong Kong. Taiwan’s exports fell a record 44 percent in January.

The government’s stimulus program is starting to gather momentum, indicating China can revive growth even as exports fall, said Lu Ting, an economist with Merrill Lynch & Co. in Hong Kong.

The economy will expand 8 percent this year, he estimates, as China, “with perhaps the deepest pockets in the world,” ramps up spending.

full story

Uk shedding job at a similar rate to the US.....

Feb. 11 (Bloomberg) -- U.K. unemployment rose for a 12th consecutive month in January as the deepening recession forced companies from automakers to airlines to cut jobs.

The number of people receiving jobless benefits rose 73,800 to 1.23 million, the highest level since July 1999, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 24 economists was 89,000.

Mounting job losses threaten to turn the recession into a political crisis for Prime Minister Gordon Brown, whose Labour Party lost more support after strikes broke out across the U.K. last month over the use of foreign workers. The Bank of England may cut the key interest rate from the current 1 percent to revive an economy facing its sharpest contraction for 63 years.

``This is only the beginning of the deterioration of the labor market,'' said Nick Kounis, an economist at Fortis Bank in Amsterdam and a former U.K. Treasury official. ``It looks increasingly likely that the bank is going to have to cut rates to zero.''

The jobless total based on International Labor Organization methods rose 146,000 in the quarter through December to 1.97 million, the highest since August 1997, the year Labour took office. The rate climbed to 6.3 percent, the most since March 1998, from 5.8 percent in the period through September.

It compares with 8 percent in the euro region in December, 3.9 percent in Japan in November and 7.6 percent in the U.S. in January. story

Japan’s economy shrank at an annual 12.7 percent pace last quarter

more
U.K. Economy to See Worst Slump Since 1980, CBI Says
story

^ Bleak. Been reading more on Japan today. They've been in recession since November 2007 and ther latest export plunges put them into near depression status. Well and truely fcuked they are, which in turn has giant implications for Thailand, not that you will see any of these fcuknuckles like marky-boy admiting.
The gf works in a employment office in Isaan, shes telling me there are LOADS of people returning to the North East after being laid off from jobs around Bangkok. She seemed suprised that one or two had come back from Dubai, saying that they also had been laid off. Dubai, is of course royally fcuked from every angle, foolish billion dollar residential projects unfinished and huge oceans of unwanted oil going cheap.

Originally Posted by robuzo

In Poland, 60pc of mortgages are in Swiss francs. The zloty has just halved against the franc. Hungary, the Balkans, the Baltics, and Ukraine are all suffering variants of this story. As an act of collective folly – by lenders and borrowers – it matches America's sub-prime debacle. There is a crucial difference, however. European banks are on the hook for both. US banks are not.

Almost all East bloc debts are owed to West Europe, especially Austrian, Swedish, Greek, Italian, and Belgian banks. En plus, Europeans account for an astonishing 74pc of the entire $4.9 trillion portfolio of loans to emerging markets.

sorry can't feel sorry for those eastern Europe fucks, they tried to play capitalism and they fucked up, and that was after they fucked up Communism too. I hope the EU will take action and kick those fuckers out, maybe they will have no choice eventually when they try to rescue everyone else, including the UK.

This meltdown is the end of Capitalism largess as we know it, hopefully we will see a new form of Socialism taking over soon,