Announcement

Collapse
No announcement yet.

Pop goes the Globaloney Economy - Eric Janszen

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Pop goes the Globaloney Economy - Eric Janszen

    Pop goes the Globaloney Economy

    The global economy is devolving with astonishing speed. Today the Institute of International Finance (IIF) issued the following alarm: worst global recession since the 1950s.
    Global economy to contract in 'severe' 2009 recession: banking group

    WASHINGTON (AFP) — The global economy likely will contract next year for the first time in decades in a "severe" recession as the credit crunch bites, an international banking group said.

    The Institute of International Finance (IIF), the Washington-based association representing more than 375 of the world's major banks and financial institutions, projected the world economy would shrink 0.4 percent in 2009, after 2.0 percent growth this year.

    Charles Dallara, the managing director of the IIF, called it "the most severe, globally synchronized recession in modern economic history."

    The global crisis requires a global coordinated response, he said at a news conference.

    Dallara said the economy was mired in a negative feedback loop of weakening economic activity and intense financial market strains.

    What the writer means is a positive feedback loop with negative results, not a negative feedback loop. As WikiPedia says:
    Positive feedback, sometimes referred to as "cumulative causation", is a feedback loop system in which the system responds to perturbation in the same direction as the perturbation. In contrast, a system that responds to the perturbation in the opposite direction is called a negative feedback system.
    Nit picking aside, the writer is correct: the US has within its borders suffers a number of positive feedback loops that are bringing down the US economy that kicked off international feedback loops:
    Consumer/Employment Loop
    1. Falling consumer demand
    2. Falling business revenues
    3. Layoffs
    4. Declining consumer purchasing power power from income
    5. Go to 1.

    Financial Crisis/Consumer Credit Loop
    1. Financial Crisis
    2. Credit Crunch
    3. Falling consumer access to credit
    4. Declining consumer purchasing power power from credit
    5. Go to 1.
    In the global economy, international positive feedback loops of trade and finance, with negative results, are in force.

    The World Trade Organization's latest repost says:
    Trade slowed down in 2007 due to weakening demand from developed economies. The slowdown of trade growth from 8.5 per cent in 2006 is due to a deceleration of import demand, mainly in the United States but also in Europe and Japan.


    WTO Global Trade Data
    "Mistakes were made"

    The report goes on to state that the global contraction will be the first since the 1950s and a coordinated response is required to halt it:
    "The weakening economy will increase credit losses, continuing to put pressure on bank capital. This underscores the point that capital injection alone will not be sufficient to strengthen the banking system until the economy and financial markets stabilize," Tran said.

    Dallara recommended measures including the purchase of troubled assets and relief of credit bottlenecks, and said an increasing number of financial institutions were making progress in reforming operations.
    Purchase of troubled assets have not resolved US, UK, or European credit market dysfunction, nor have liquidity injections, nor has debt restructuring. What is needed in the US is debt forgiveness but instead the FIRE Economy leadership is pushing measures through to lock US homeowners into paying down mortgage debt that was taken on when housing prices were inflated. This is a repeat of the Japanese policy error. US household cash flow will be dedicated to paying down existing debts, virtually guaranteeing that US consumers will remain moribund for an extended period; without domestic reforms the Consumer/Employment Loop and Financial Crisis/Consumer Credit Loop are here for the long haul, contributing the global feedback loops.

    Our forecast for global trade in 2008 and 2009 is as follows.


    iTulip 2008 and 2009 global growth forecast

    Shall we look for Thomas Friedman's new book titled "The World is Flattened" in 2009?

    iTulip Select: The Investment Thesis for the Next Cycle™
    __________________________________________________

    To receive the iTulip Newsletter or iTulip Alerts, Join our FREE Email Mailing List

    Copyright iTulip, Inc. 1998 - 2007 All Rights Reserved

    All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Nothing appearing on this website should be considered a recommendation to buy or to sell any security or related financial instrument. iTulip, Inc. is not liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. Full Disclaimer
    Last edited by FRED; 12-19-08, 05:45 PM.

  • #2
    Re: Pop goes the Globaloney Economy

    Nice article, Eric, and nothing wrong with nit-picking, clarity and brevity.

    Techical site question, when I clink the hyperlink above the last graph, I get a new window asking me to sign in and I am already signed in. Is that as it should be?
    Last edited by Jim Nickerson; 12-19-08, 02:35 PM.
    Jim 69 y/o

    "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

    Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

    Good judgement comes from experience; experience comes from bad judgement. Unknown.

    Comment


    • #3
      Re: Pop goes the Globaloney Economy

      ..."What is needed in the US is debt forgiveness"...

      So who then carries the cost?? Taxpayer again...:confused:

      In the words of Jim Rogers..."banks have been going bust for hundreds of years"... let them fall. GM, AIG, GS etc

      Let the competent people take over the assets.

      Just
      1) Insure the depositors
      2) Individual bankruptcy recovery allowed to be quicker
      3) Create a govt program to pull down the houses, remove supply.

      The cost to insure depositors and pull down houses will be less than the good money after bad thats going on now !

      Comment


      • #4
        Re: Pop goes the Globaloney Economy

        Purchase of troubled assets have not resolved US, UK, or European credit market dysfunction, nor have liquidity injections, nor has debt restructuring. What is needed in the US is debt forgiveness but instead the FIRE Economy leadership is pushing measures through to lock US homeowners into paying down mortgage debt that was taken on when housing prices were inflated. This is a repeat of the Japanese policy error.

        EJ,
        Then if this is a repeat of the Japanese error, does that mean we will end up with a "lost decade", or do you still see "Poom" taking place?

        Thanks for all your great posts!
        Jim

        Comment


        • #5
          Re: Pop goes the Globaloney Economy

          Originally posted by icm63 View Post
          ..."What is needed in the US is debt forgiveness"...

          So who then carries the cost?? Taxpayer again...:confused:

          In the words of Jim Rogers..."banks have been going bust for hundreds of years"... let them fall. GM, AIG, GS etc

          Let the competent people take over the assets.

          Just
          1) Insure the depositors
          2) Individual bankruptcy recovery allowed to be quicker
          3) Create a govt program to pull down the houses, remove supply.

          The cost to insure depositors and pull down houses will be less than the good money after bad thats going on now !
          Those are steps 2, 3, and 4.

          Step 1: Elect politicians who do not represent FIRE Economy interests.

          Maybe in 2010.
          Ed.

          Comment


          • #6
            Re: Pop goes the Globaloney Economy

            Originally posted by FRED View Post
            Those are steps 2, 3, and 4.

            Step 1: Elect politicians who do not represent FIRE Economy interests.

            Maybe in 2010.
            FRED, contact your psychiatrist immediately and get him to allow you to lessen your dose of Prozac, or was "2010" a typo and supposed to have been "2100?"
            Jim 69 y/o

            "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

            Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

            Good judgement comes from experience; experience comes from bad judgement. Unknown.

            Comment


            • #7
              Re: Pop goes the Globaloney Economy

              Originally posted by jiimbergin View Post
              Purchase of troubled assets have not resolved US, UK, or European credit market dysfunction, nor have liquidity injections, nor has debt restructuring. What is needed in the US is debt forgiveness but instead the FIRE Economy leadership is pushing measures through to lock US homeowners into paying down mortgage debt that was taken on when housing prices were inflated. This is a repeat of the Japanese policy error.

              EJ,
              Then if this is a repeat of the Japanese error, does that mean we will end up with a "lost decade", or do you still see "Poom" taking place?

              Thanks for all your great posts!
              Jim

              Well it seems to be "working", at least here in the D/FW area. A friend has an employee who's wife managed to dodge all of the axes while remaining employed at Countrywide all this time. Lately she has been putting in double time and they have called a lot of people back. Refi's are booming.

              Comment


              • #8
                Re: Pop goes the Globaloney Economy

                Originally posted by FRED View Post
                Those are steps 2, 3, and 4.

                Step 1: Elect politicians who do not represent FIRE Economy interests.

                Maybe in 2010.
                Fred, you have a lot of faith in elections. The struggle between the production/consumption 'old money' and the FIRE/military 'new money' wasn't settled in the voting booth.

                Comment


                • #9
                  Re: Pop goes the Globaloney Economy

                  It remains difficult to follow iTulip, or talk to Eric and then go talk ith friends and neighbors. There are none so blind as those who will not see.

                  I feel like that kid in the movies. "I see broke people. They don't even know they're broke."
                  "The test of our progress is not whether we add more to the abundance of those who have much it is whether we provide enough for those who have little." - Franklin D. Roosevelt

                  Comment


                  • #10
                    Re: Pop goes the Globaloney Economy

                    Originally posted by EJ View Post

                    Purchase of troubled assets have not resolved US, UK, or European credit market dysfunction, nor have liquidity injections, nor has debt restructuring. What is needed in the US is debt forgiveness but instead the FIRE Economy leadership is pushing measures through to lock US homeowners into paying down mortgage debt that was taken on when housing prices were inflated. This is a repeat of the Japanese policy error. US household cash flow will be dedicated to paying down existing debts, virtually guaranteeing that US consumers will remain moribund for an extended period; without domestic reforms the Consumer/Employment Loop and Financial Crisis/Consumer Credit Loop are here for the long haul, contributing the global feedback loops.
                    Well EJ, you've been right so far, but this broad statement makes me nervous enough to ask what do you mean or have in mind?
                    I realize the following will come off rather curmudgeonly but ...

                    If the banks loans were irresponsible, e.g., liar loans, no money down, questionable appraisal, then the banks should take the hit - not the public, e.g., if requiring them to forgive principle b/c of their own responsibility makes them insolvent or devastates their shareholders so be it (NOTE: this will never happen as we've already seen - can't have banks failing left and right).

                    If home buyers were irresponsible by getting caught up into bubble greed mania, then they, along with the bank should take the hit, not the public (Note: not going to happen) Joe6P says "i'm under water and won't pay", so bank says OK we'll right the principal to keep you in the house (b/c we don't really have any choice as default and foreclosure is worse for the bank (again homeowner gets a break and banks take a hit)

                    Or how about this, when that recent homebuyer bought an over inflated house, the seller undoubtedly received a windfall. Let's mark all those underwater homes to market, and get the difference back from those who profitted on the sale (seller, brokers, banks, appraisers etc). As absurd as this may sound, it is no less equitable, and I would submit more equitable than distributing these losses of fictitious wealth (which remember is cold hard cash in the pockets of those who participated on the way up) on the "public". And talk about future moral hazard.

                    I would very much appreciate understanding how you see a debt forgiveness working.

                    Comment


                    • #11
                      Re: Pop goes the Globaloney Economy

                      Originally posted by vinoveri View Post
                      Well EJ, you've been right so far, but this broad statement makes me nervous enough to ask what do you mean or have in mind?
                      I realize the following will come off rather curmudgeonly but ...

                      If the banks loans were irresponsible, e.g., liar loans, no money down, questionable appraisal, then the banks should take the hit - not the public, e.g., if requiring them to forgive principle b/c of their own responsibility makes them insolvent or devastates their shareholders so be it (NOTE: this will never happen as we've already seen - can't have banks failing left and right).

                      If home buyers were irresponsible by getting caught up into bubble greed mania, then they, along with the bank should take the hit, not the public (Note: not going to happen) Joe6P says "i'm under water and won't pay", so bank says OK we'll right the principal to keep you in the house (b/c we don't really have any choice as default and foreclosure is worse for the bank (again homeowner gets a break and banks take a hit)

                      Or how about this, when that recent homebuyer bought an over inflated house, the seller undoubtedly received a windfall. Let's mark all those underwater homes to market, and get the difference back from those who profitted on the sale (seller, brokers, banks, appraisers etc). As absurd as this may sound, it is no less equitable, and I would submit more equitable than distributing these losses on the "public".

                      I would very much appreciate understanding how you see a debt forgiveness working.
                      EJ wrote that what is needed is debt-forgiveness. I don't take his recommendation of what's needed as a forecast as to what will ultimately happen.
                      Jim 69 y/o

                      "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

                      Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

                      Good judgement comes from experience; experience comes from bad judgement. Unknown.

                      Comment


                      • #12
                        Re: Pop goes the Globaloney Economy

                        Originally posted by icm63 View Post
                        ..."What is needed in the US is debt forgiveness"...

                        So who then carries the cost?? Taxpayer again...:confused:

                        In the words of Jim Rogers..."banks have been going bust for hundreds of years"... let them fall. GM, AIG, GS etc

                        Let the competent people take over the assets.

                        Just
                        1) Insure the depositors
                        2) Individual bankruptcy recovery allowed to be quicker
                        3) Create a govt program to pull down the houses, remove supply.

                        The cost to insure depositors and pull down houses will be less than the good money after bad thats going on now !
                        Originally posted by FRED View Post
                        Those are steps 2, 3, and 4.

                        Step 1: Elect politicians who do not represent FIRE Economy interests.

                        Maybe in 2010.
                        I have heard that. it probably remains wishful thinking

                        In the period from August 1929 until he left office President Herbert Hoover oversaw a 43-month long contraction of the US economy of 33%. Barack Obama looks set to break that record, to preside over what historians could likely call the Very Great Depression of 2008-2014, unless he finds a new cast of financial advisers before Inauguration Day, January 20. Required are not recycled New York Fed presidents, Paul Volckers or Larry Summers types. Needed is a radically new strategy to put virtually the entire United States economy into some form of an emergency 'Chapter 11' bankruptcy reorganization where banks take write-offs of up to 90% on their toxic assets, that, in order to save the real economy for the American population and the rest of the world. Paper money can be shredded easily. Not human lives. In the process it might be time for Congress to consider retaking the Federal Reserve into the Federal Government as the Constitution originally specified, and make the entire process easier for all. If this sounds extreme, perhaps revisit this article in six months again.

                        http://www.globalresearch.ca/index.p...t=va&aid=11401

                        Comment


                        • #13
                          Re: Pop goes the Globaloney Economy

                          Every commentary the EJ writes always seems to get more and more depressing.

                          Ugh.

                          Comment


                          • #14
                            Re: Pop goes the Globaloney Economy

                            Originally posted by Jeff View Post
                            It remains difficult to follow iTulip, or talk to Eric and then go talk ith friends and neighbors. There are none so blind as those who will not see.
                            I was just ridiculed by two people at a party last night because I'm renting. I kept asking "have you read a newspaper recently?" Finally, I got them to shut up by asking "If your real estate is such a great investment, why aren't you buying more houses?" :-)

                            Comment


                            • #15
                              Re: Pop goes the Globaloney Economy

                              For the last three year my wife and I have been the freaks at the Barbecue who are renting.

                              How can you be married - have children and not be tied to a Mortgage. The common belief is that your child will have a sad and unfulfilled childhood without the family being tied to a Mortgage/House. When financial decisions are made with the Heart/emotion - disaster is likely to be the result.

                              Luckily, Renting means we spend every weekend together as a family - there is no lawn to mow, no hedges to trim, no contractors to call, no painting, and no snow shoveling.

                              I have wasted so much time in the last 4 years Begging friends and family to Not to Buy a Home or to sell and Rent!

                              Needless to say Not One Friend or Family member would listen to my crazy talk that Real Estate was bad investment . One friends Mom called me Insane!

                              Comment

                              Working...
                              X