Crisis facing the global economy

[Lennon]

The World's Shifting Balance: Martin Wolf of the Financial Times analyses the crisis facing the global economy, now perceived to be unlike anything seen before.

http://www.bbc.co.uk/radio/aod/mainf...adio4/analysis

[Akrasia]

Thanks for that. i was looking for something stimulating before bedtime


I haven't listened to it yet, but one thing thats really really annoying me about this current crisis is that all the newspapers and analysts keep claiming that 'nobody foresaw the immensity of credit defaults' or 'Nobody predicted that the financial sector would face such serious shocks'

Bollox. There were lots of people predicting these things. Anyone with any expertise should have predicted these events if they hadn't been wilfully ignorant about the realities of the unsustainability of the financial system. The problem is that everyone who had a voice also had an incentive to keep quiet about the weakness and corruption. There were many who were ideologically blinkered by free market bunkum and refused to believe that the house of cards could come down. Its so obvious now what happened.

Its also obvious that the problems in the system won't be resolved by simply waiting for this to blow over and doing more of the same in the future

[seabhcan]

Bollox. There were lots of people predicting these things.

Exactly - there are even dozens of threads on p.ie predicting it.

[youngdan]

Well now that we are here maybe we can have some predictions on what will happen if there is a run out of the dollar.

[jcdf]

Thanks for that. i was looking for something stimulating before bedtime


I haven't listened to it yet, but one thing thats really really annoying me about this current crisis is that all the newspapers and analysts keep claiming that 'nobody foresaw the immensity of credit defaults' or 'Nobody predicted that the financial sector would face such serious shocks'

Bollox. There were lots of people predicting these things. Anyone with any expertise should have predicted these events if they hadn't been wilfully ignorant about the realities of the unsustainability of the financial system. The problem is that everyone who had a voice also had an incentive to keep quiet about the weakness and corruption. There were many who were ideologically blinkered by free market bunkum and refused to believe that the house of cards could come down. Its so obvious now what happened.

Its also obvious that the problems in the system won't be resolved by simply waiting for this to blow over and doing more of the same in the future

Alright then, what do you propose smart guy?

[seabhcan]

Well now that we are here maybe we can have some predictions on what will happen if there is a run out of the dollar.

Predictions?

In the medium to long term the dollar needs to decline to around 2.50 to the Euro, and sterling needs to fall to par with the euro. The sooner this happens the sooner we can start rebuilding the economy. i expect a gradual and orderly decline - simply because it takes time to move the vast volumes of money out of the dollar and there are few places to put it.

What we're seeing now - especially with oil - is a shift in the wealth of the planet to oil producing countries. This is permanent, and the west will never recover its dominant position.

[jcdf]

Predictions?

In the medium to long term the dollar needs to decline to around 2.50 to the Euro, and sterling needs to fall to par with the euro. The sooner this happens the sooner we can start rebuilding the economy. i expect a gradual and orderly decline - simply because it takes time to move the vast volumes of money out of the dollar and there are few places to put it.

What we're seeing now - especially with oil - is a shift in the wealth of the planet to oil producing countries. This is permanent, and the west will never recover its dominant position.

Oil producing countries are almost entirely backward kips, flush with money. The best of them use their money for mass building projects like the Gulf States. But most just see all the money siphoned off by corrupt government officials and ending up in their Swiss Bank accounts. Just look at places like Nigeria, it has gotten even worse since they started pumping the oil.

The increase in wealth in most of these countries is only temporary. Headbangers like Saddam will take control and will go on mass spending spree buying weapons from the permanent security council members. They will then perform all the usual ethnic cleansing, civil wars and maybe attack a few of their next door neighbours before ending up in a knotted rope like Saddam. I suspect most will head down the road of Iraq or other failed states.

[Electro]

Its also obvious that the problems in the system won't be resolved by simply waiting for this to blow over and doing more of the same in the future

Alright then, what do you propose smart guy?

Hint: it begins with a big 'C'.

[youngdan]

You are a genius Electro. Akrasia is indeed very Conservative.

Seabhcan. I do not expect a gradual decline. As a matter of fact the dollar index has held pretty well at 72 these last few weeks considering Stearns nearly brought the whole thing down and now we have Indy, Fannie etc. When the going gets tough maybe it will be the Euro that will fall apart. As chronic as things appear here at least this is a somewhat cohesive political unit. I saw a headline that Spain was facing a depression so I can not see calls for the return to the old currencies.

I fully expect to see a gold backed currency. Mexico is toying with the idea of a silver backed currency. All arguments will be out the window when faith is lost in the major currencies

Elsewhere I have seen suggestions of pegging one currency to another. What sort of talk is that. Just saying that a Euro is worth 1.6 dollars does not make it so. One would need a Currency Board. Of course you can't have a Currency Board without having the currency. As for the person who said the punt should be backed by gold there is just one problem.

[seabhcan]

Oil producing countries are almost entirely backward kips, flush with money. The best of them use their money for mass building projects like the Gulf States. But most just see all the money siphoned off by corrupt government officials and ending up in their Swiss Bank accounts. Just look at places like Nigeria, it has gotten even worse since they started pumping the oil.

The increase in wealth in most of these countries is only temporary. Headbangers like Saddam will take control and will go on mass spending spree buying weapons from the permanent security council members. They will then perform all the usual ethnic cleansing, civil wars and maybe attack a few of their next door neighbours before ending up in a knotted rope like Saddam. I suspect most will head down the road of Iraq or other failed states.

Some of the oil countries are using the oil money to buy up western industry, lock stock and barrel. Paradoxically, this is largely what is keeping the US economy going at the moment - as money is flowing back into the country. But this is a very serious development - the US economy is becoming foreign owned.

Then there are countries like Russia and Venezuela who are quite cleverly using the money to develop their own ecomonies. If you ever go to places like Novosibersk or Altai you would be amazed at the level of infrastructure being built. Russia is now pouring billions into a brand new, Russian owned, commercial electronics industry. Next year they are due to launch a Russian made GPS satellite system (almost totally unreported in the west). Medial services, schools and pensions are getting massive investment for the first time in years. It doesn't matter how corrupt the politics is, when oil is at 145$+, there is money for every project. If oil had been this high in the 1980's the Soviet Union would not have collapsed.