Rolling UK Economy Into The Shitbin Thread

also, another question: you know how UK and US economy are going into the shitbin, but economy must be some kind of zero sum thing, so someone's winning in all of this - who is it? China?

£3bn is small potatoes compared to RBS handing over the keys to darling and kicking out the CEO. Barclays also hope to get that £3bn from temasek, DIC or the Chinese although the government will underwrite if need be.

Economy is far from zero sum, the money didn't go anywhere the money just went, money is debt.

economy must be some kind of zero sum thing

i once asked pretty much the same question in an economics class, but in relation to national debt. i tihnk he failed me on principle 6 months later.

i think most of the 'missing' money has gone into the pockets of private individuals that are keeping very quiet now, if you can pinpoint anywhere. but probably it's just 'gone'. xposts.

but surely it's all relative. so countries/places where they didn't lose any/as much money must in a sense have earned loads of money, in the percentage of money in the whole world owned stakes? cos like, it's not like aliens just took loads of money?

ah i see so basically loads of greedy fuckers are what i said were the 'aliens' ?

i wish i was one of them greedy fuckers!

see david icke for more details.

Aren't institutions holding on to the money? Cos they don't trust anyone else to give it back. That's the whole problem: liquidity, not solvency, although that is now an issue too.

Anyway, no, the economy is not a zero-sum game, so this hurts everyone, so make it stop, please.

but surely it's all relative. so countries/places where they didn't lose any/as much money must in a sense have earned loads of money, in the percentage of money in the whole world owned stakes? cos like, it's not like aliens just took loads of money?

If this led to deflation, that would be true, I think (scratches head).

All that the producer countries have are promissory notes from consumer countries, China etc. have been lending the money they receive from America etc. back to US so we can buy more stuff. We've stopped buying stuff so all the chinese etc. have are promissory notes issued by economies that are in no position to repay them.

xpost

Everyone will get their pieces of paper back don't worry.

No one said the pieces of paper would be worth anything

i think most of the 'missing' money has gone into the pockets of private individuals that are keeping very quiet now, if you can pinpoint anywhere. but probably it's just 'gone'. xposts.

― darraghmac, Monday, 13 October 2008 13:36 (7 minutes ago) Bookmark Suggest Ban Permalink

A lot in human terms has leaked into these people's pockets but the inhuman sums have disappeared.

Everyone will get their pieces of paper back don't worry.

No one said the pieces of paper would be worth anything

― Kondratieff, Monday, 13 October 2008 13:45 (13 seconds ago) Bookmark Suggest Ban Permalink

I don't know, some of the curly writing is quite attractive.

We've stopped buying stuff so all the chinese etc. have are promissory notes issued by economies that are in no position to repay them.

This kind of implies a US sovereign default, which isn't going to happen, IS IT?

For now, it can repay the interest, mainly through the issuing of more paper, the US is still allowed way more debt than typical countries.

This question of "where is the money" kind of underlines how silly the whole thing is. These fucking genius morons have invented this towering edifice of confusion that has fallen down and sucked all the money out of the world.

The US could have had a nice little housing crash and a mild or even serious recession, and the rest of the world would have taken a couple of percentage points off GDP growth and got on with it, but instead we have this confusing and serious mess. Makes me cross.

Its not 'where is the money', it is 'what is money'

money and bank credit are not the same thing. the money that has disappeared was never there in the first place.

person A deposits £10 cash in bank A. this is no longer cash. bank A lends £8 to person B to buy a car from person C. Person A has £10 in the bank, person C has £8 in Bank B, which then lends £6 of it to person D. Person A has £10 in the bank, Person C has £8 in the bank, Person D has £6 in his pocket, Person B has a car. There is £24 pounds in the economy. Person A faces a margin call and goes to withdraw his £10. Where is it?

The disappearance of money from the economy isn't really a disappearance. It was never there

But no money is ever there.

bingo

just want to illustrate the point that that first £10 is faerie gold too.

Yes but there is still a difference between notes/coins and credit. Cash in your position belongs to you. Once deposited in a bank it is no longer cash and no longer belongs to you. You now have an asset. The disappearance of money is the unwinding of the example above, most os it disappears rather than ending up in someone elses pocket. Same way as the repaying of debt destroys money

One way to avoid bank runs in general rather than on one specific bank is to introduce 'temporary emergency measures' - limiting the amount one can withdraw from the system. An attempt to preserve the illusion that your money exists. Such a move would be a final roll of dice for that country as Argentina found out in 2001

xpost

Exactly, and what Kondratieff described is on the whole, a good thing, because all those people have the money or the car or whatever. It's also good for the person who made the car.

We're just talking about different sorts of money supply here, aren't we? M0 and so on.

And even M0 (notes and coins in circulation) is a confidence trick. A fiver isn't actually worth anything, it relies on the confidence of those using it.

And none of this has that much to do with the problems we're facing, although it is part of the mechanism in which things are falling apart.

ie Bank A didn't lend Person B £8 to buy a car. Bank A bought up trillions of dollars of weird complex financial instruments that since no-one can now decide the value of, are considered worthless.

and fractional reserve banking, capital adequacy ratios, basle ii etc

Actually I think it has a lot to do with the current problems. I see the rapid expansion of money supply as directly responsible for the current situation. This has gradually accelerated since the 1970s. I also see the diminishing amounts held in reserve as directly responsible, via offbalance sheet and other trickery. You devalue the currency and accelerate the money supply and you kick off a credit expansion, devalue savings and encourage debtor status, while creating the illusion of wealth

Didn't Basel II TIGHTEN reserve ratio requirements?

Or did it just try to make them more sensitive to a with hindsight spuriously defined set of risks?

The securitisation of debt was a response to Basel II, move the debt beyond the scope of the narrowly defined criteria.

Seeing more and more talk about a run on credit rather than savings (which nobody has in these modren times)

talking of which I won 50 quid on the premium bonds this month, my return is still pretty shite, but I'm glad I didn't put it in an ICESAVE ISA.

Crisis must be over the Today programme had 10 minutes for a piece on a woman in the Congo who had been raped by rebel soldiers and then helped by Radio 4 listeners. Everything is just dandy, KEEP CALM AND CARRY ON.

Oh, Wait, whoops

http://news.bbc.co.uk/1/hi/business/7668608.stm

how do you like those negative real interest rates?

i still haven't seen any sort of interview with or explanation from any of the people at the heart of this, the bankers and lenders who created or OKed these insane financial instruments.

It must be an interesting time to be a financial advisor: "Well, you could put your £1,000 under the mattress, but it will lose 5% of its value each year. Alternatively, you could put it in the bank and it will only lose 0.5% of its value each year, but the bank might well go bust. Property is looking like a sound investment: you could lose up to 15% a year that way. Or, for life in the fast lane, you could invest in the stockmarket, and you could lose up to 25% of your money in just one week. I suggest you buy lots of dairy products."

That sort of depends on what you think the heart actually is, but yes humility and apologies are in short supply (haha newsflash).

(xpost to Lex)

They should measure inflation in maple syrup - £4.40 a bottle in Sainsburys - first time I've ever put anything back on the shelve. Hard times indeed.

i'm not even really looking for humility and apologies, just a "wtf were you supposedly smart people thinking when you created this mental edifice out of matchsticks and dust? and how was it possible that no one saw this coming when the entire structure seems so obviously to be based on, like, thin air?"

after they've answered that the humility can come, and then the stringing-up-in-the-streets &c &c

There was no incentive to worry about what happened later, at pretty much every link in the chain from the mortgage lender up, that was the whole point/problem.

wtf were you supposedly smart people thinking when you created this mental edifice

http://www.fishandonions.com/randomFK/loadsamoney.jpg

how do you like those negative real interest rates?

It's a good job no one can borrow anything at the moment:

Oh, wait.

http://news.bbc.co.uk/1/hi/business/7667072.stm

So, Kondratieff, do you believe in wage inflation now?

lex i thought this was pretty good but it's telling that something like this can apparently only appear in a literary magazine:

http://www.nplusonemag.com/financial-meltdown

the first interview with this person is here - http://www.nplusonemag.com/?q=node/418

Haha I love the opening to that first interview.

Either I'm suffering deja-vu or I swear I've read that somewhere other than n+1. I hate it when that happens.

love that link

But it turned out the clock struck midnight and these assets turned into — pumpkins.

Best explanation yet.

It must be an interesting time to be a financial advisor: "Well, you could put your £1,000 under the mattress, but it will lose 5% of its value each year. Alternatively, you could put it in the bank and it will only lose 0.5% of its value each year, but the bank might well go bust. Property is looking like a sound investment: you could lose up to 15% a year that way. Or, for life in the fast lane, you could invest in the stockmarket, and you could lose up to 25% of your money in just one week. I suggest you buy lots of dairy products."

I imagine they are saying BUY SHARES now, no?

Also, the policy rate may be negative, but the savings rates offered by the banks aren't, cos they are desperate for cash (the flipside of them being unwilling to lend is that they are v keen to borrow). And no retail depositor has lost a penny as yet, and your savings are guaranteed up to £50,000, so not too diffcult to see that there's no problem with keeping it in the bank.