One of Global Finance's Biggest Doctors Warns: The World Economy Is About to Get Very Sick
Unless banks and governments switch gears from tax cuts to addressing inequality, we may be in for a lengthy economic downturn soon
When Claudio Borio speaks, the big bankers and investors, the economics profession, and senior policymakers listen quite carefully—even if his sentiments don’t reach the shores of the popular media. Borio, the chief economist for the Bank for International Settlements (BIS), the central bankers’ central bank, recently remarked on the fragility of the global economy, and suggested that we were on the verge of a significant relapse similar to the global crash experienced 10 years ago. Among the parallels he perceives: the proliferation of “collateralized loan obligations (CLOs), which are ‘close cousins’ of the infamous instruments known as collateralized debt obligations, or CDOs, and securities backed by residential mortgages,” the prevalence of which helped to crater the credit system in 2008.
Mindful as central bankers have been about the ready availability of liquidity, they have (as I have written before) omitted to “proactively... [charging] private market participants variable risk premiums commensurate with the risk of the underlying activity they are undertaking when providing credit.” Furthermore, Borio implies that the monetary and fiscal authorities expended excessive efforts toward restoring the status quo ante, instead of directing policy toward broader job creation and income generation, which would place the economy on sounder footing when the next downturn inevitably comes. Finally, the BIS’s chief economist also publicly mooted whether additional “medicine” of the kind that we used last time will be in sufficient supply to respond adequately when the next crisis emerges.
More: https://www.commondreams.org/views/2018 ... -very-sick
onlooker wrote:The assertion of the article Ghung posted above makes alot of sense to me. I read that roughly 70% of the US economy is via consumption. The lower classes spend their all their income for needs and some wants. It is money that is circulating in the Economy. As opposed to the rich who invest a sizable portion of their money in parked assets or keep it in bank accounts. other accounts or tax havens
Newfie wrote:Interesting ideas. I need to read that through a few times.
Gotta say I’m suspicious of that view point.
India's currency crashes to another record low
New Delhi (CNN Business)India's currency resumed its headlong plunge on Friday, stoking concerns that the world's fastest-growing major economy could be heading for a slowdown.
The rupee crossed 74 rupees to the US dollar for the first time ever, after the country's central bank surprised markets by holding off on raising interest rates. The currency recovered slightly later in the day.
The Reserve Bank of India (RBI) decided against hiking rates for the third time this year despite expectations that it would act to tame inflation caused by rising oil prices and the crashing currency, which makes imports more expensive.
The Indian rupee has fallen around 15% against the surging dollar this year, making it one of the world's worst performing currencies.
The Indian government has tried in vain to stop the slide. It recently made it easier for foreign investors to buy rupee bonds issued by Indian companies and raised tariffs on imported goods like washing machines and diamonds, measures designed to reduce the flow of money out of the country. ....
https://www.cnn.com/2018/10/05/economy/ ... index.html
In addition to the existing headwinds to its economy, India could soon face sanctions from the United States over a defense deal it signed with Russia on Friday.
Russian President Vladimir Putin signed the $5 billion missile deal in New Delhi, making India vulnerable to economic retaliation from Washington. The Trump administration imposed sanctions on China last month for a similar defense pact.
In the way the US economy is going and others, I do not see any of this happening. It is becoming a zero sum game.
onlooker wrote:Evil, do you propose the capital ie. money be given directly to the Indepedent Contractors or to the Businesses or Industries which transact with them?
In any case, it is a central contradiction that seems to now be most relevevant. In the chase for profit, companies wish to pare wages, but if you pare them too much, who will buy your products. Thomas Edison understood that when he referred to the need to pay his workers enough to buy his cars.
In the way the US economy is going and others, I do not see any of this happening. It is becoming a zero sum game. Meaning what benefits Big money does not benefit the little people. And as Big Govt is so inextricably tied to Big money, it is a foregone conclusion that the Government will side with Big Business. So, what is happening now is quite evident. The financial side of the Economy is cannibalizing the productive side. Via the Stock Market, via Tax breaks, via privatization and stock buybacks. Via bailouts to the "Too big too fail" . That is why when you look at statistics, you see a dramatic rise in income for the top 1% and stagnation and regression for the lower 99%. We live in a new Gilded Age on steroids.
marmico wrote:In the way the US economy is going and others, I do not see any of this happening. It is becoming a zero sum game.
Month after month the prior consecutive monthly record of US nonfarm payroll increases is broken.
In the beyond the doomtard circles, US households are near record sentiment from the 1966 tie dyed tee shirt era.
The 'mother of all credit bubbles' is brewing — and this time it isn’t household debt
Corporate America has transformed itself into one giant leveraged buyout
Nobel Prize in economics awarded to William Nordhaus and Paul Romer
London (CNN Business)American economists William Nordhaus and Paul Romer have been awarded the Nobel Prize for their work on understanding how economies can grow sustainably.
Nordhaus, a professor at Yale University, is best known for his work on climate economics. Romer, of NYU's Stern School of Business, is a proponent of a theory that examines how the world can achieve sustainable growth.
"This year's Laureates have designed methods for addressing some of our time's most basic and pressing questions about how we create long-term sustained and sustainable economic growth," the Royal Swedish Academy of Sciences said in a statement.
Nordhaus developed an influential model that examines the consequences of climate policy interventions, including carbon taxes, on the global economy. .....
.....Justin Wolfers, an economist at the University of Michigan, said on Twitter that the work of both winners showed "smart government policies" are "essential if the economy is to deliver good outcomes in the long run."
"It's all about market failure," he added. "Left alone, markets will generate too much pollution (Nordhaus) and too few ideas (Romer)."
https://www.cnn.com/2018/10/08/business ... index.html
onlooker wrote:https://www.newsweek.com/stock-market-1134867
" THERE COULD BE A FINANCIAL CRASH BEFORE END OF TRUMP'S FIRST TERM, EXPERTS SAY, CITING LOOMING DEBTS"
...... "We think the major economies are on the cusp of turning into the worst recessions we have seen in 10 years. Should the [U.S.] economy start to shrink, and our analysis suggests that it will, the high nominal levels of debt will instantly become a very big issue."
Experts cautioned that several economic markers had gotten much worse over the past decade, especially in regard to borrowed money. The U.S. household debt of $13.3 trillion is now far worse than it was during its 2008 peak, due primarily to mortgage lending.
Outstanding student loan debts have simultaneously increased from $611 billion of unpaid debt in 2008 to more than $1.5 trillion today. Automobile loans have far exceeded their 2008 peaks, sitting at about $1.25 trillion today, and unpaid credit card balances are just as high as the years leading up to the Great Recession.
Central bankers have also more than doubled global debt as they flooded national economies with cheap and easy money. In 2008, global debt sat at $177 trillion, in comparison to $247 trillion today.
“We won’t be able to call it a recession, it’s going to be worse than the Great Depression,” economic commentator Peter Schiff told the Post. “The U.S. economy is in so much worse shape than it was a decade ago.” .....
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