Global Debt Time Bomb explodes soon

[Kommander]

I think that A) we may be getting a bit too deep into politics here and B) while theoretical "works on paper" stuff is interesting I am unsure how much to do with the current situation.

[derf26]

I think that A) we may be getting a bit too deep into politics here and B) while theoretical "works on paper" stuff is interesting I am unsure how much to do with the current situation.

The theoretical understanding of econ and politics I have has, I think, helped me understand and anticipate crisis situations much better than I could have before. In fact, it was exploring economics that got me into prepping in the first place (prepping for an economic collapse or just a fall in living standards is very high on my list). Plus, I'm not talking about elections or candidates; but I'm quite happy to tone it down anyway if you guys don't think it's helpful

[Blacksmith]

I think that A) we may be getting a bit too deep into politics here and B) while theoretical "works on paper" stuff is interesting I am unsure how much to do with the current situation.

The theoretical understanding of econ and politics I have has, I think, helped me understand and anticipate crisis situations much better than I could have before. In fact, it was exploring economics that got me into prepping in the first place (prepping for an economic collapse or just a fall in living standards is very high on my list). Plus, I'm not talking about elections or candidates; but I'm quite happy to tone it down anyway if you guys don't think it's helpful

You are talking about economic and political systems which is politics. The FED itself is a political issue and you have taken sides on these issues which is also political. That is why I am ignoring large parts of your posts. Statements like this are pure politics:

1. First of all, let's call things by what they are. Redistribution of wealth is a fancy socialist term for theft, and I would argue that all forms of theft are immoral.

....and add absolutely nothing to the discussion while cheapening your argument at the same time. You are also posting links to political treaties, using stigmatization terminology in your descriptors etc, etc, etc.

Anywho...:

I also don't see how you're seriously contending that a market is less suited to properly valuing currencies, when that is precisely what it does every day.

Somewhere you lost me. You say that there is no free market for currency and then in the same breath you say there is one? You can't have it both ways. So what is a "free market" according to you?

I actually change my opinions quite frequently, as I discover new information.

That is actually intellectually dishonest. It is not as though you just decided yesterday you were going to preach the Austrian School of thought yet are also open to new ideas about how the economy should run. Besides it is not my intent to get you to change your opinion about anything. Because........ wait for it....... that would politicking.....

I'm not sure I follow. You're saying that a coercive State can function properly, but that there is too much incentive for it not to. Doesn't that seem to you like cognitive dissonance?

No. But since your question is couched to equate the "coercive state" to the banking system there is no way for me to effectively answer your question without getting political. This is really disappointing all in all.

[dogbane]

Warren Buffet said that the odds of a renewed recession in the U.S. are low but that all bets could be off if the effects of Europe's financial crisis were to "spill over in a big way."

So what are the odds of a spillover?

[SlobberToofTigger]

Warren Buffet said that the odds of a renewed recession in the U.S. are low but that all bets could be off if the effects of Europe's financial crisis were to "spill over in a big way."

So what are the odds of a spillover?

Based on the amount of private EU debt owned by the US and the percentage of our output that they consume somewhere around 100% chance of spillover... Essentially he was lip flapping to keep the US economy running but did not want to look like a moron if the EU goes boom this year.

[Blacksmith]

The tools at Bloomberg believe that the already crappy economy in the US won't be able to get much worse.

http://www.bloomberg.com/news/2012-06-0 ... risis.html

Significant is that only 2% of US exports go there while the US is a huge market for some European Countries. To me that smells like potential trouble if the dollar rises a lot relative to European currency (whatever it is or will be).

What they are not looking at and may not know is the exposure US trading houses have to EU bond issues.

[SlobberToofTigger]

The tools at Bloomberg believe that the already crappy economy in the US won't be able to get much worse.

http://www.bloomberg.com/news/2012-06-0 ... risis.html

Significant is that only 2% of US exports go there while the US is a huge market for some European Countries. To me that smells like potential trouble if the dollar rises a lot relative to European currency (whatever it is or will be).

What they are not looking at and may not know is the exposure US trading houses have to EU bond issues.

The issue with those numbers is you can find the export number as high as 20% of US goods exported depending on where you look...

[deMaccusweil]

I don't know if this has been posted before, but the financial crisis is raising other concerns than just those listed above.
http://www.bbc.co.uk/news/world-europe-17898561
http://www.bbc.co.uk/news/world-europe-18352258

[Blacksmith]

I don't know if this has been posted before, but the financial crisis is raising other concerns than just those listed above.
http://www.bbc.co.uk/news/world-europe-17898561
http://www.bbc.co.uk/news/world-europe-18352258

Your links have to do with possible political fallout of the Greek election and not much to do with the issue under discussion.

[Blacksmith]

Curious events today. US and UK decided not to expand their money supply and China decided to cut interest rates at their banks. I don't see how it would be possible these events are unrelated and uncoordinated.

[raptor]

Curious events today. US and UK decided not to expand their money supply and China decided to cut interest rates at their banks. I don't see how it would be possible these events are unrelated and uncoordinated.

There are no coincidences. Random chance and events yes but coincidences...sorry I do not believe in them.

[TacAir]

Curious events today. US and UK decided not to expand their money supply and China decided to cut interest rates at their banks. I don't see how it would be possible these events are unrelated and uncoordinated.

There are no coincidences. Random chance and events yes but coincidences...sorry I do not believe in them.

OK, poor guess my part - EU and US signaling that no 'money' will be available for the EU - but China cutting interest rates means 'money' from China might go the EU based bonds or banks?

Or has the boat left without me - again?

[deMaccusweil]

China has been offering bailouts to europe for some time. I don't remember the details, but there were significant strings attached.

[DarkAxel]

Spain Downgraded by Fitch

Spain's sovereign debt rating was slashed three steps Thursday by credit rating agency Fitch, which warned that the nation is at risk of being downgraded into junk bond status.

The nation's debt rating was cut from "A" all the way to "BBB," the lowest rating that is considered investment grade. And the new rating was given a negative outlook, meaning it at risk for further downgrades..... (More at link)

[Blacksmith]

Actually BBB- is the lowest investment grade out there used by Fitch. If the SD gets rated below that by two out of three houses then the bonds will go into absolute free fall as everyone will be dumping them.

The issue is no one knows how much money it will take to bail out Spain. It could be $400B. Not everyone is sure that the EU is able to raise that much. Which brings us full circle to the Angela Merkel comment I posted near two years ago:

“There is a rumor going around that nations cannot go bankrupt. This rumor is not true.”

If that is the EU perspective does that mean that a country can be placed in receivership? Because I don't think that will play well in Greece, Spain or Ireland. All countries with long histories of violent resistance from outsiders.

If they go bankrupt will the bond issues be dissolved and state assets seized and sold off? That would be likely to go even worse.

This long slow crash could heat up quite quickly.

[SeerSavant]

“There is a rumor going around that nations cannot go bankrupt. This rumor is not true.”

If that is the EU perspective does that mean that a country can be placed in receivership? Because I don't think that will play well in Greece, Spain or Ireland. All countries with long histories of violent resistance from outsiders.

If they go bankrupt will the bond issues be dissolved and state assets seized and sold off? That would be likely to go even worse.

This long slow crash could heat up quite quickly.

Of this I am very curious, and it worries me to a point past internal conflict in the member states of the EU, but into issues between member states...

It looks to have the potential for a nasty boil over... So, I'll second Blacksmith's questions... What are the chances?

[Blacksmith]

That is a worry. Passions are running pretty high. Here is an altered photo run in Greek National Daily in FEB:



There clearly is some unhappiness here.

[phil_in_cs]

They had some of that before the previous vote, too. And yet an openly neo-Nazi party is getting 10% of the vote.

[Blacksmith]

They had some of that before the previous vote, too. And yet an openly neo-Nazi party is getting 10% of the vote.

I don't know about that. The other day one of the leaders of the neo-nazi party slapped a female communist party member in the face on live national TV.



He ran away and has not been captured yet despite a man hunt. I figure that will hurt their odds in the election but I could be wrong.

Oh, and they say they are NOT Neo-nazi despite having a Hitler salute and following nearly all of the same doctrine.

[phil_in_cs]

Oh, and they say they are NOT Neo-nazi despite having a Hitler salute and following nearly all of the same doctrine.

Well, they don't want to Godwin themselves.

They got 7% in the last election. http://en.wikipedia.org/wiki/Golden_Dawn_(Greece)
That's enough to matter as tight as things were.

[Blacksmith]

Here is a very good write up from Wells Fargo on what they see as the banking fall out of a Spain or Italy EU departure:

http://www.realclearmarkets.com/blog/Sp ... 5B1%5D.pdf

In sum, a sovereign default and exit from EMU by either Spain or Italy could be another “Lehman moment.”

They deem it less likely (as do I) but not without possibility.

[phil_in_cs]

http://www.reuters.com/article/2012/06/ ... JA20120608

Argentina loses a third of its dollar deposits
Fri Jun 8, 2012 4:46pm EDT
* Argentines reacting to foreign exchange restrictions

* About $100 mln in dollars withdrawn every day

* Rush toward greenback started in November

By Jorge Otaola

BUENOS AIRES, June 8 (Reuters) - Argentine banks have seen a third of their U.S. dollar deposits withdrawn since November as savers chase greenbacks in response to stiffening foreign exchange restrictions, local banking sources said on Friday.

Depositors withdrew a total of about $100 million per day over the last month in a safe-haven bid fueled by uncertainty over policies that might be adopted as pressure grows to keep U.S. currency in the country.

The chase for dollars is motivated by fear that the government may further toughen its clamp down on access to the U.S. currency as high inflation and lack of faith in government policy erode the local peso.

"Deposits keep going down," said one foreign exchange broker who asked not to be named. "There is a disparity among banks, but in total it's about $80 million to $120 million per day."

more at the link

[drunkensurvivor]

Argentina recently nationalized a foreign oil firm, which is pretty indicative of their overall domestic economic policies lately. I don't follow Argentina too closely, but I think its likely what is going on there is due almost entirely to domestic policies and has little to do with the European debt crisis.

[Blacksmith]

This downgrade expected next week effects nearly every major US bank.

http://online.wsj.com/article/SB1000142 ... _pageone_0

The secondary impacts are predicted to be large.