Hypothetical - the economy goes bust

[cordelia]

I came across that video four days ago in another forum.....I am not one for conspiracy theories.....but the evidence was compelling.....

I will never forget the moment George Bush addressed the American public following 9/11..he looked like he was lying...as if he knew about it before it happened.....I have mentioned this on several occasions to people I know but they all say it's ridiculous......

So when I watched that video I knew it was the truth.....

Sometimes the truth is ridiculous....It's so ridiculous people find it hard to believe...

We think we have more freedom because of the ease of communication..mobile phones...internet etc etc but really it's just easier to track us down and monitor what we are doing...

To give you an example when I grew up it was much more difficult for my parents to find out where I was.....That knew who my friends were but didn't have access to our personal conversations....

Enter myspace......I have three teenagers.....all I have to do is google one of their buddies ..and they have hundreds...they are all linked and some of them are careless with access.....These kids put everything online for the world to see......all any savvy parent has to do is access their Myspace...

Do I do this no.....because information is passed around so easily that if anyone does anything they shouldn't do then it spreads like wildfire.....I am informed before I even have time to question...where's the fun gone...

I would hate to be a teenager today......there's no privacy

 

[Ageo]

Its funny when 9/11 happened 1 pakistani man explained to me why he believed the U.S government was behind it and after a long think i actually thought so myself. This just added to that belief

 

[cordelia]

I just watched this, thank you for the link.

Blown away. Most of it regarding current events just solidifies my position on things. Still, it leaves me at a loss at the end, somewhat powerless. What can you do? Keep spreading the word, getting everyone informed I guess?

baja: you are not powerless....that is the misconception we all have as individuals......Many individuals make a crowd......Our voices are important....All political movements have started with just one voice...Finding others who have the same beliefs is empowering...but if we don't have the courage to voice those beliefs then our lack of courage diminishes our power..

Currently we are a society of dispersed individuals...this is not a good thing.....like minded individuals need to group together and from a crowd....

 

[Ageo]

There are a tonne of similar videos to watch here ==> http://www.kokomotion.com/TWH/docs/expanded.html

I have watched a couple of video's on that site now, the money video's (monopoly men, money as debt etc...) are crazy but totally relevant. I could see alot of truth in it. Lets just say that if it were to be true then we are all dumb sheep hehe

 

[ozambersand]

A while ago, I posted the question here.......

So one could speculate given comments in posts above, that the answer/cause of the problem is once again a move to centralise banking. In the 1930's it was to create a central US bank. Now, is it to create a global bank? (Not the "World Bank") but some new entity?

World needs new Bretton Woods system, says UK PM
From correspondents in London
Agence France-Presse
October 14, 2008 08:18am
World leaders must meet to agree a new Bretton Woods system, Prime Minister Gordon Brown said, referring to the global financial architecture agreed at the end of World War II.
Speaking as Britain announced its latest move to try to stabilise the tottering banking system, he said the current crisis should be seen as an opportunity to push through delayed reforms.

"Sometimes it takes a crisis for people to agree that what is obvious and should have been done years ago can no longer be postponed," he said in a major speech on the fast-moving world financial crisis.

"We must create a new international financial architecture for the global age," adding: "We must have a new Bretton Woods - building a new international financial architecture for the years ahead".

Aaah, finally get an answer.....

 

[Green08]

Looks like a good reason to have the secret inside US government to be so angry to orchestrate and do 911, blame outside terrorists and hope for the best...with their impending 700 billion scam to the american taxpayers.

http://money.cnn.com/2008/07/11/news...ion=2008071120

http://abcnews.go.com/Business/story?id=5889501&page=1

http://www.nowpublic.com/world/histo...-bank-failures

Fact is stranger than Fiction

Why haven't caught Osama maybe GW knows where his is quietly.

Wouldn't surprise me. GW is an idiot but a clever nasty idiot

 

[Temjin]

A while ago, I posted the question here.......



Aaah, finally get an answer.....

Here we go, the next big scam.

While we are powerless to change all this, we can at least do something to protect ourselve and our families from this treachery.

 

[Punter44]

G'day all,

I am new to this forum and have found this particular thread very interesting indeed particularly the commentry from lakemac.

I read this article today which I thought was extreme but not entirely out of the question....




Why real estate spending could make Australia the new Iceland
Paul Sheehan | October 19, 2008

On July 30 Hans Redeker, head of foreign exchange strategy at BNP Paribas, Europe's biggest investment bank, predicted: "The Aussie is going down, big time."
Back then - it already seems like a long time ago - the Australian dollar was sitting majestically at 97 cents to the US dollar, which was taking a battering. But the Aussie did, indeed, go down, big time. Within three months it had crashed by 33 per cent to US65.5 cents. Now Redeker has issued another warning to Australia. We'll get to that. But first, let's look at his track record.
December 2006: Redeker predicted a sharp recession in the United States, saying the condition of its housing market was worse than the experts were stating and the flow-on effects would be much worse than predicted. That was almost two years ago. He was right.
January 2008: he predicted the Aussie dollar was facing two years of decline, and expected to see it fall to 66 cents. He was right. He also predicted a rise in financial market volatility, higher inflation worldwide, higher interest rates in Asia, weakening demand for Australia's minerals exports from China, and a weaker sharemarket in China, all of which would drive down the Australian dollar. Since then, the Shanghai sharemarket has crashed 50 per cent from its peak.
October 2008: two weeks ago Redeker repeated his claim that abundant foreign money had been available to Australia and too much of it had been spent on real estate, creating a speculative bubble: "The easy money went straight into real estate - Australia will now have to generate 4 per cent of GDP to meet payments to foreign holders of its assets. This is twice as high as the burden faced by the US."
After the Australian Reserve Bank slashed key interest rates by 1 per cent, Redeker also told London's Telegraph that he was concerned about what the Australian Government may do: "Yes, Australia has a fiscal surplus, but that does not offer as much protection as people think. If the Government boosts spending further, the current account deficit will spiral out of control."
And what has the Rudd Government just done? Boost spending.
There was certainly no discussion of the current account deficit spinning out of control, or Australia's excessive debt, when the Prime Minister, Kevin Rudd, launched his $10 billion economic stimulus package last week, nor any from the Opposition Leader, Malcolm Turnbull, who offered in-principle bipartisan support.
It gets worse. Redeker continued: "There is a risk, however remote, that Australia could face some of the foreign funding difficulties we have seen in Iceland."
Iceland! Iceland was the most leveraged economy in the developed world when it became the first economy to be bankrupted by the credit crisis. You do not want to be mentioned in the same sentence as Iceland unless the discussion is fishing or blondes.
After quoting Redeker, the Telegraph's global business columnist, Ambrose Evans-Pritchard, weighed in with his own commentary: "The immediate problem for Australia's banks is that they gorged on offshore US dollar markets to fund expansion because the interest costs were lower. They were playing on a huge scale with leverage. European banks face much the same problem as dollar liabilities come back to haunt, but Australian lenders have pushed their luck even further."
Gabriel Stein, of Lombard Street Research, weighed in with this, after noting that Australian household debt had reached 177 per cent of gross domestic product, almost a world record: "It is amazing that in the midst of the biggest commodity boom ever seen they have still been unable to get a current account surplus. They have been living beyond their means for 10 years. What worries me is that productivity growth has been very low: they have been coasting after their reforms in the 1990s."
The global financial world is watching the Australian dollar because it holds a key to the great unanswered question of this uncertain era: will the global market punish a currency for its declining interest yield? Or will it reward a currency because of the soundness of its economy? Central banks are acutely interested in the answer.
Evans-Pritchard thinks the early signs are hopeful that the answer is the good one, that nations will be rewarded for having sound economies. But he does not believe Australia can escape the consequences of excess: "Australia has allowed its net foreign liabilities to reach 60 per cent of GDP during a decade-long boom, twice the level of the US. The country will, in effect, have to pay 4 per cent of GDP in the form of rents to foreign asset-holders as the bill for such extravagance falls due."
The bill is falling due. Earlier in the year Australians travelling in Europe would have paid about $1.50 for every euro spent. Today they need $2.10. The Aussie dollar is weak again, despite all the luck of the China boom. This raises a number of awkward questions. Did the lucky country became the greedy country? Did it fail to sufficiently embark on a program of nation-building during the resources boom? Was most of the bonus redistributed as tax cuts, which were spent chasing bigger mortgages, bigger homes, new cars and general consumption, stimulating short-term economic growth but not enough on long-term productivity and higher savings?
During 17 years of unbroken economic expansion and a 10-year commodities boom, it took a lot of people, borrowing a lot of money, taking a lot of unproductive risk, to get to where we are today: a nation with excessive debt and excessive vulnerability to external circumstances barely within our control.

 

[Ageo]

Interesting article Punter thanks

got a link to where you got it from?

 

[lakemac]

Thank you for the praise Punter44.
It makes the effort worthwhile if I can at least open your eyes to other possibilities.

I have had some questions regarding the source of credit figures.
The best source for those figures is the websites of the central bank in the respective countries.

US - Federal Reserve - table H.8
http://www.federalreserve.gov/Releases/H8/default.htm

Aus - Reserve Bank Of Australia - table D2 and D3
http://www.rba.gov.au/Statistics/AlphaListing/index.html

UK - Bank of England

China - Peoples Bank of China

Japan - Bank of Japan

EU - European Central Bank

A quick google search and/or search on their respective web sites will pull up credit data - it sometimes is called lending aggregates or such like.
Search search search.

 

[Punter44]

Interesting article Punter thanks

got a link to where you got it from?

Read the article on smh.com.au


http://www.smh.com.au/news/opinion/...g-for-australia/2008/10/19/1224351052160.html

 

[lakemac]

Punter44, I want you (and others) to think about something independently of what a journalist is printing.

If I want to buy something in say, Australia from an Australian resident, what currency will I have to have in my hand (or bank account) in order to complete that transaction? Aussie dollars right?

So lets say I am a Canadian citizen that wants to buy your house here in Australia to use as an investment property. Are you going to accept Canadian dollars or Aussie dollars? Aussie probably as you can't spend Canadian dollars here in Australia to buy anything.

So as a Canadian (or any foreigner) I would have to first convert my foreign currency into local currency right. Where do I go to do that? A bank of course (those of you who know my posts can see where this is going can't you LOL). Now the local bank is happy enough to take the Canadian dollars and give you (minus their fat commission in the form of currency spread) Australian dollars. Where did those Aussie dollars come from? And secondly where did the Canadian ones go to?

There is one bank authorised to create Australian dollars - yes kiddies the RBA. Same as in Canada only their central bank can create Canadian dollars.

Now don't get confused by credit creation and currency. Non-central banks can create credit/goodwill/trust to be issued between other local banks but they are all basically dealing in local currency. If you have a foreign currency it is the central bank that you are ultimately dealing with (bet you didn't know that...). The source of the currency ie. Aussie dollars here rests with the RBA. You can only exchange foreign for local currency by ultimately going to the RBA (of course your local bank branch handles the front office transaction).

So if in a fictious land lets say the benign (LOL again) central bank did not create any more currency out of thin air we would have a fixed amount of currency units in circulation. Certainly a fixed amount of *exchangeable* currency. Remember this is not a loan. That happened in your foreign (in this example, Canadian bank). This is just a currency exchange.

With me so far? Good.

So here we have a fixed amount of currency but because investment properties are really good investments in this ficticious country everybody wants in. So the demand for a *fixed* amount of currency would go up. With a fixed supply and higher demand the "price" of that thing goes up. Correct? Indeed simple supply and demand - economics 101. The price in a currency situation is called an "exchange rate".

The higher the exchange rate the more demand for a currency right? Well only partially right. Why only partially? We don't live in a ficticious land. Our central banks keep creating more currency. And so does the other central bank. So exchange rates not only vary because of the supply and demand for a currency but more importantly because of the *RELATIVE* rates of currency creation (or destruction) by each central bank invovled in the exchange transaction.

You will have to think about what I just said - I know it gives me a headache every time I have to explain how exchange rates work and why non-government foreign debt is not an issue in all this credit mess.

The reason non-government foreign debt is not and issue is once the money is exchanged into your local currency the debt essentially has to stay here unless it can be exchanged back out. (That is a topic for a later discussion).

Back to central banks and exchange rates. We know that all currency has to pass thru a central bank on its way to be exchanged. We know that central banks create/destroy currency. Question is how much of an exchange rate movement is due to the central banks. Remember they can create an unlimited amount of currency out of thin air (think the Fed "finding" $700B to fund the bailout - that did not exist before a computer created it). So if the Aussie dollar has gone down so much there are two factors we need to consider:
1. how much Aussie dollar thin air has the RBA created?
2. how much Aussie dollar currency was exchanged for say $US by private means.

Both are required before you can properly work out what the drop in the $A really means (by the way I don't have these figures - anyone care to do the research I would love to get a copy of them).

What is worth considering is this. Just before the fall in the Dow the $US surged against all other currencies. Now we know the Fed was pumping thin air (ie. more US currency) into the baloon in order to keep it afloat. So here we have a central bank making enough new dollar bills with as much value as the leaves from several deciduous forests which should push down the exchange rate (more supply same demand) but even in spite of this massive increase in supply the exchange rate kept going *UP*... In other words the demand for $US was so high it even outstripped the massively increased supply of same from the Fed which was as we speak debasing the US currency even more.

What gives? Someone knew something. Remember this happened *before* the stock market correction. Why did all this money get converted into $US? Anyone have an idea? Lets see who has a handle on the concepts...

 

[ozambersand]

The whole currency issue confuses me I will admit.
I downloaded some figures on exchange rates between the Aussie dollar and the US, Euro, Great Britain pound and the Japanese yen from the Reserve Bank site. Then I used multipliers so that they could be compared better on the one chart.
Which gave me this:

As you can see we were going along pretty consistently all year until 30th September when we tanked against all of those currencies.
Why did we tank compared to the others while they seemed to hold up pretty consistently with each other?
Why was it so sudden?
In actual fact, the biggest drop was on the 7th October and the biggest after that was the 10th October. What happened on these two days to create that much movement?
Also, Lakemac said above that:

Just before the fall in the Dow the $US surged against all other currencies.

If this was the case, wouldn't the paths of the US and the others be very different. From what I can see the US and the Yen at least have tracked together vs the Australian dollar at least. Haven't got figures though on how they are trading in terms of each other though.
As you can see I am a tad confused.....

 

[lakemac]

great chart ozambersand.

part of our $A tumble was the China syndrome.
The $A got dumped because of the fear our resources boom was over.
But I don't buy into that totally. The reason I don't is that central banks have a much larger pot of currency to play with because they created the pot to start with... (remember they are the only ones that can create/destroy their respective currencies). So I am applying Pareto rules here. ie. 80:20 ratios. Thus who actually moved the market?

One thing I should point out here is I don't have an answer to this yet. All I know is that exchange rates are a combination of demand for a currency and the actions of central banks creating thin air.

As I said I get a headache too - currency is not my forte.

 

[frenzel]

The US$ went up and stays up because everyone was/is moving to US T-bills as a safe haven from whatever else it was they were invested in. These require US$ to buy.

So I've read anyway. Still getting my head around currencies and exchanges.

Have just gone through the entire thread and have definitely learnt a lot. Thanks to all for a very interesting read.

Suggest having a look at some of the videos on this link.

http://www.chrismartenson.com/crash-course/chapter-1-three-beliefs

Some very good visual explanations on money creation by banks, and the issues we have going forward re currency and inflation.

 

[Bat_Ears]

Thanks for all that LakeMac. Its a lot to think about. What are your thoughts at the moment?

Also, on the first page of this thread you said (two years ago) that the banks would want China to industrialise so they could consume more, so that they would rely more on credit.

Anyway, you said that the next recession would be when China reached the point of self sufficiency. Since we are now seeing a recession, were you right?

 

[kincella]

there were groups of people in the US who years ago planned a 'manufactured financial crisis'.....
anyone out there fealing a bit duped....now we have all the biggest banks saying they are ok now ???

an extract......

America waits with bated breath while Washington struggles to bring the U.S. economy back from the brink of disaster. But many of those same politicians caused the crisis, and if left to their own devices will do so again.

and this extract.....
Both the Living Wage and Voting Rights movements depend heavily on financial support from George Soros's Open Society Institute and his "Shadow Party," through whose support the Cloward-Piven strategy continues to provide a blueprint for some of the Left's most ambitious campaigns

http://www.americanthinker.com/2008/09/barack_obama_and_the_strategy.html

http://www.discoverthenetworks.org/groupProfile.asp?grpid=6967

 

[lakemac]

Thanks for all that LakeMac. Its a lot to think about. What are your thoughts at the moment?

Also, on the first page of this thread you said (two years ago) that the banks would want China to industrialise so they could consume more, so that they would rely more on credit.

Anyway, you said that the next recession would be when China reached the point of self sufficiency. Since we are now seeing a recession, were you right?

Given we are now offically in a recession according to the RBA and China is at the point of self sufficency, then I guess I must be right

China central bank chief says economy turning around
AFP
AFP Asian Edition
Mar 25, 2009 20:00 EDT
The head of China's central bank said Thursday data showed that a slowdown in economic growth has hit bottom
and a national recovery was imminent thanks to government stimulus measures.
An article by People's Bank of China Governor Zhou Xiaochuan posted on the bank's website also said plans to shift
from reliance on exports and toward domestic demand will make China a "stabilising force in the global economy.""The macroeconomic measures have produced preliminary results and some leading indicators are pointing to
recovery in economic growth, indicating that the rapid decline in growth has been curbed," the article said.
The report did not reveal to which data Zhou was referring.
China's economic growth slowed to 9.0 percent last year from 13.0 percent in 2007, as the global financial crisis has
shrunk demand for its exports.
The World Bank has forecast 6.5 percent growth this year, which would be the lowest level in almost two decades.
In November, China's government announced a nearly 600-billion-dollar stimulus plan aimed at stoking domestic
demand to make up for the export woes.
It also has since raised export tax rebates and announced sector-specific stimulus plans for a range of industries.
"Facts speak volumes and demonstrate that compared with other major economies the Chinese government has
taken prompt, decisive and effective policy measures, demonstrating its superior system advantage when it comes to
making vital policy decisions," Zhou wrote.
The measures will shift the economy toward more domestic demand, helping China to maintain stable growth and
thus serve as a stabilising global force, he said.
Source: AFP Asian Edition
http://www.blnz.com/news/2009/03/26/China_central_bank_chief_says_9112.html

 

[lakemac]

Kincella, I had a quick read through those links in your post.
My take on those: Yes the left has an influence on policy (cf ACOSS has the ear of Ken Henry doing the tax reform at the moment), however, the left lacks a crucial ingredient - money (or more correctly credit).

The unfortunate thing is that you get corporate welfare (terrorism, Fannie Mae, TARP etc) propping up big business. When such extreme forms of "capitalism" fail the left come in and start claiming capitalism doesn't work.

Personally my preference is to push "free enterprise" rather than capitalism or fascism dressed up as a totalitarian state pretending to be a softer version of communistic socialism (go all that - there will be a test later on LOL).

All of what we have, all the advances over centuries, all that is due to free enterprise - competition between business for you, the customer. When a government steps in because of some special interest group to redistribute wealth distortions in free enterprise start to appear and mutate to what we currently have - a cancerous version of capitalism.

The problem is politicians have only one driving force - winning the next popularity contest. There are more people who thru choice want the easy way out - more regulation, more personal welfare, more handouts which always results in more government and hence more taxes. Add to that the use of outdated, provenly wrong and downright dangerous ideas such as Keynesian stimulation and we have a receipe for disaster.

The movers and shakers of the world don't like to be taxed and regulated out of existence. Innovation gets stifled, the old order calcifies in (cf General Motors). Unfortunately the average under educated worker thinks simple fixes will work - and the politicians pander to that with things like the $900 stimulus handout. If the government had said well you can get $900 now but in 2 years time you are going to have to pay back $1500 do you still want it?

Personally (and this goes for a question Bat Ears asked) I am getting ready for a period of high, if not hyper inflation. Get out of cash get into hard assets - commodities, real estate, mining companies. China is doing this right now. The days are numbered for the US dollar. The only reason it is holding up is there is no ready alternative for a world currency. Change that and the US dollar becomes about as valuable as a peso.

We are heading into inflation - not if, when. I give it till the end of the year when we see the signs of inflation hitting.
And just for the astute:
http://www.theaustralian.news.com.au/business/story/0,28124,25361998-643,00.html

 

[Julia]

and the politicians pander to that with things like the $900 stimulus handout. If the government had said well you can get $900 now but in 2 years time you are going to have to pay back $1500 do you still want it?

Sadly, the response of much of the public probably would have reflected the short term view of the government, and they would have said 'yes' to the $900, essentially ignoring the rider about the $1500/

Given that many believe they will never have to pay the balance on their credit cards, they'd probably take the same view about the $900/$1500 question.
"A bird in the hand....." etc.

And now the government is indicating that there will be a third stimulus package. No worries that expectations are that most of the second package will be saved, just keep on borrowing and throwing the money out there.

Unless in Package Mark III they are going to fund necessary infrastructure like roads,health and water. No objections to that and it would be very welcome.