World economy talk

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either the EU breaks apart or move towards fiscal integration -- meaning countries give up sovereignty

"master plan"

News Headlines

Over the weekend, reports indicated that Germany is now willing to consider greater fiscal union if euro members agree to hand over power on government spending and structural reform of their economies. Officials in Brussels, Frankfurt, and Berlin are said to be working on a “master plan” that could see Germany agree to underwrite the euro if everyone falls into line on German demands for fiscal responsibility.

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friday's jobs report sign of US economic slowdown

another sign:

April factory orders down -0.6% expected +0.2%

previous month revised from -1.5% to -2.1%

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think positive... facebook is not myspace. facebook is not myspace. facebook is not myspace

hehehe

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"HELP!"

http://online.wsj.com/article/SB1000...082690142.html

Spain's Budget Minister:

"What this premium tells us is that the state, and Spain as a whole, has a problem when it comes to accessing markets, when we need to refinance our debt," Mr. Montoro said in a radio interview. "What that premium says is that Spain doesn't have the market's door open, as such, the challenge is to open that door and regain the confidence of those markets, our creditors."

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WSJ's Jon Hilsenrath (the guy known as Fedwire) said the Fed is considering taking further action... including QE3

Fed Debate Builds as Outlook Dims - WSJ.com

[wowiesy]

June 30, 2012: Look For It

By John Mangun

YOU are intelligent, educated, and keep up with current events. Yet all of your experience does not help in genuinely understanding what explains the global crisis. June 30, 2012, is another turning point as was June 1st.

You go to the bank and borrow money to buy a condominium. If you do not pay the loan, the bank takes the property and sells it to someone else to repay the loan. Simple.

A bank borrows money from depositors and loans the money to other people. If the other people do not pay the loans, the bank may not have enough cash, liquidity, to pay depositors’ withdrawals. Another bank must come in with cash, assume the loans and assume the responsibility of paying the depositors. Also simple.

There are constant “debt crises” of this type but they are always resolved. In extreme cases, government or private deposit insurance protects the depositors. The bank dies when its assets, the loans, become worthless and no one wants to buy them.

Historically, governments (mainly monarchies) borrowed money from banks to fund wars or economic exploration. Win the war, take the other king’s money and the loans were paid off. Find a new, rich country like the Philippines, set up trade, make money, and pay the loans back.

Financial crises, on the other hand, are always the result of governments devaluing the currency. Borrow a coin made of 100 percent gold and try to pay it back with a coin made of 50 percent gold, the lender now wants two of the less-valued coins. What used to cost one coin now costs two; it is called currency induced cost-push inflation.

On August 30, 2008, the US Federal Reserve had assets of $870 billion. On May 30, 2012, its assets were $2.870 trillion. The increase of $2 trillion came from just adding $2 trillion to the Fed’s Assets Column on its balance sheet, sort of like if there was a special button on your ATM machine that let you set your balance at whatever amount you desired.

Whenever a bank needed extra money because its loans were bad like in the housing sector, the Fed loaned them the money and, therefore, put all that $2 trillion into the economy. It was supposed to get economic activity going again. Except, because the US government has a huge budget deficit, the banks loaned the money they borrowed back the government.

June 1st was the wake-up call that the policy was a failure. By June 30th, the central banks will either walk away, letting dozens of major banks and a couple of countries go out of business, or they will put more money into the system.

Between now and June 30th, the government of Greece will run out of money. Spain’s banks and governments will by then need at least $500 billion to survive. Both the European Central Bank and the Federal Reserve will meet and decide what to do.

There is very little major global economic activity. This new round of money infusion will not create economic activity any more than it did between 2009 and 2012. June 30th will mark the day the global economy starts going into a recession with nations seeing economic activity shrinking. This is because of three years of population growth and three years of increasing government deficits. Governments have no monetary power nor can afford to “stimulate.”

That June 30th date will also mark the beginning of major price inflation although the inflation will not start becoming apparent for 12 to 18 months.

The reason there has been low inflation for three years was the belief that increased economic activity could soak up all the excess cheap money. In a year, that belief will be totally destroyed. Commodity prices will go up. Stock markets will rally and emerging-market currencies will go to levels not seen since 1997.

This will all become clear by June 30th. Mark your calendar.

Quite scary... anybody care to expand further?

May mga points na di ko gano ma gets...

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^^

the global financial system works like a ponzi scheme

to keep it working properly ever greater amounts of money has to be created to service the previous amounts created

by creating money meaning money has to be borrowed into existence

so as more and more money is created you need more and more money to pay back the amount previously created (coz there's interest attached to all that money)

the system works fine as long as there's an ever greater amount of money created (or borrowed into existence) to service the previous amount created

BUT when borrowing slows down (coz borrowers can no longer take on more debt) the system gets screwed

where will the money come from to service the previously created debt?

like what happened when the US housing boom collapsed (also happening in Spain)

so when that happens central banks lower interest rates to encourage borrowing

the US central bank has kept rates at ZERO for a number of years na but it isnt working

i'll be back may gagawin lang ako

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Whenever a bank needed extra money because its loans were bad like in the housing sector, the Fed loaned them the money and, therefore, put all that $2 trillion into the economy. It was supposed to get economic activity going again. Except, because the US government has a huge budget deficit, the banks loaned the money they borrowed back the government.

coz the USG is the only creditworthy borrower. after getting burned banks didnt wanna take risk lending to ordinary folks and businesses

[Monseratto]

Japan has been doing that for decades, and it got them nowhere. So how can the US succeed?

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Between now and June 30th, the government of Greece will run out of money. Spain’s banks and governments will by then need at least $500 billion to survive. Both the European Central Bank and the Federal Reserve will meet and decide what to do.

the Greece govt only has enough money to last the month

as we all know Greece has been surviving on money lent to it by the troika (installment not lump sum)

Greece has to meet certain conditions to get more money

but since those conditions are not being met Greece might not get more money

so Greece could fail and exit the euro

--

Spain naman is experiencing what the US experienced a few years ago

Spain had a housing bubble

the banks now have tons of bad loans

they have to be bailed out