Rolling UK Economy Into The Shitbin Thread

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.

How about Iraq?

Baghdad’s property market has experienced a new breath of life in recent months after being stagnant for some time due to excessive violence. This was prompted by a dramatic fall in violence. While most real estate agents saw themselves jobless when sectarian killings raged in the city only last year, now they can’t seem to keep up with the new found demand.

Excessive violence.

Ironically (?) the photo accompanying that appears to be from 2003 and of the huge mosque started by Saddam.

Sorry still don't believe in forthcoming wage inflation (especially as public sector workers were cajoled into multiyear below inflation payrises). I see lots of job cuts though, if that helps

So can you have negative real interest rates in the absence of wage inflation?

Although devaluing the currency would certainly allow for wage inflation (albeit with consequences for commodity prices, esp fuel)

negative real interest rates

worked the last 6 years (unless you like official stats)

You can't have it both ways, you can't say there is no debt erosion without wage inflation and then say we have negative real interest rates without wage inflation.

we have had effective negative real interest rates without wage inflation.

Which sectors do you see the wage inflation occuring in?

we have had effective negative real interest rates without wage inflation.

how

real wages have fallen throughout the 2000s. interest rates may have been above official inflation stats, but looking at those statistics is rather like looking at unemployment figures to count the unemployed

But if wage inflation is to occur (via currency devaluation) it does rather suggest now is a good time to get out of the pound

So, has debt been eroded by inflation?

rather depends which currency you are paying it back in

But yes if wages go up I will be happy to agree that debt is being eroded by inflation

For those that still have wages anyway

Or personal circumstances, how did your basket of good rise in price, what pay settlement did you get.

Still doesn't why you think we have both negative real interest rates and no debt erosion.

pay went up less than the basket of goods. a larger proportion of pay went towards goods than it did pre-payrise, leaving less to go towards anything else

The Police have negotiated themselves 2.6% this year, 2.6% for 2009, and 2.6% for 2010