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The Financial System is Destroying the World Economy

Discussions about the economic and financial ramifications of PEAK OIL

Re: The Financial System is Destroying the World Economy

Unread postby radon1 » Thu 28 Jun 2018, 10:24:41

The financial system is the world economy. Meaningless heading.
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Re: The Financial System is Destroying the World Economy

Unread postby onlooker » Thu 28 Jun 2018, 10:39:13

radon1 wrote:The financial system is the world economy. Meaningless heading.

The financial system is NOT the world economy. It is a subset of it that encompasses, the markets, Banks and lending systems. Its main activity is the transference and return on money.
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Re: The Financial System is Destroying the World Economy

Unread postby KaiserJeep » Thu 28 Jun 2018, 11:19:55

I like that definition better. There were real economies in every village, run by barter before banks or money existed.
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Re: The Financial System is Destroying the World Economy

Unread postby Newfie » Thu 28 Jun 2018, 12:20:40

I like the world global economy. All our eggs in on basket. If Trump succeds in destroying international faith in the system it will collapse destroying trade causing a massive reduction in manufacturing and thus green house gasses thus saving the World. Of course the loss of aerosols will cause dimming to cease and temps will ramp up 1° before starting to come back down, but that is unavoidable.

I know, very pollyannish if me to have such fond hopes.
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Re: The Financial System is Destroying the World Economy

Unread postby Outcast_Searcher » Thu 28 Jun 2018, 12:58:28

Newfie wrote:I like the world global economy. All our eggs in on basket. If Trump succeds in destroying international faith in the system it will collapse destroying trade causing a massive reduction in manufacturing and thus green house gasses thus saving the World.

The system tends to be self correcting, re watching out for the financial interest of the majority.

The more Trump screws up on things like trade, the shorter his likely tenure. And even if he revokes every anti-AGW measure Obama passed, that can be undone by the next POTUS.

Trump can certainly hurt the global economy. Meaningfully. But that's not like he can "destroy" anything over time -- again, the system tends to be self correcting.

Already, now he's starting to mess with his base re farmers in Iowa, and potentially EVERY new car buyer. At some point, even the beltway clowns in his own party are going to start actively fighting him on that front if he goes too far.

Inconvenience, recession, etc. isn't destruction.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The Financial System is Destroying the World Economy

Unread postby Newfie » Thu 28 Jun 2018, 14:29:23

Ah, but I can dream. ;)
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Re: The Financial System is Destroying the World Economy

Unread postby evilgenius » Thu 05 Jul 2018, 10:11:13

I don't think the world economy is as self-correcting as one might wish. Things like nationalism have a huge impact upon trade. They have a much larger impact when entered into by larger countries. Nationalism is one of those things which, if it goes too far, has to run its course. A population has to encounter on its own the results of its reticence to participate and the truth of its sour grapes attitude.

The added danger here is that Trump may eventually be seeking the downsizing of the US Government. Partly he may be able to accomplish this by short circuiting the venerable status of both government and its institutions by putting freaks and irrational partisans in charge of sensitive positions. Partly by slowing down trade and destroying connections which took decades to build. Mostly by simply insisting on a world view that few but crackpots and charlatans accepted only a few years ago, but which everyone now has to figure out for themselves - so that it makes some sense at least. Points will be pulled from this as people seek to understand it which may compel us down this path, as we try to function according to some sort of logic.
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Re: The Financial System is Destroying the World Economy

Unread postby onlooker » Thu 05 Jul 2018, 10:31:44

I will put it more simply and concise. 8 Billion of us to a greater and lesser degree depend on the bountiful energy that FF provides both for the pure energy and in rich societies because entire infrastructure systems pivotal to us , utilize the abundant energy of FF to run. When that amount of energy is not there anymore unless a comparable system/energy source is in place, rich world citizens are ill eqipped to survive. They're will be no self correcting this.

Second, when the undergirding life support systems of this Earth fail because of depletion or degradation , no self correction will occur
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Re: The Financial System is Destroying the World Economy

Unread postby Outcast_Searcher » Thu 05 Jul 2018, 16:38:31

evilgenius wrote:I don't think the world economy is as self-correcting as one might wish.

...

The added danger here is that Trump may eventually be seeking the downsizing of the US Government. Partly he may be able to accomplish this by short circuiting the venerable status of both government and its institutions by putting freaks and irrational partisans in charge of sensitive positions. Partly by slowing down trade and destroying connections which took decades to build. Mostly by simply insisting on a world view that few but crackpots and charlatans accepted only a few years ago, but which everyone now has to figure out for themselves - so that it makes some sense at least. Points will be pulled from this as people seek to understand it which may compel us down this path, as we try to function according to some sort of logic.

Worst case, if he screws it up really bad, the voters throw him out in four years, and the next person, with a mandate from the voters, works to restore much of what was lost. (If he lasts two terms, then how bad could he really be (at least the first term) if the people who elected him last time, largely on economic issues, elect him again, IMO?

For good or bad, most rational people want economic "success" in the short to intermediate term, because they see it as in their self interest. Thus, while all the mess might not be moving toward being cleared up quickly (example: trade issues from Brexit), with long term trade partners, once a return to a leader with economic stability in mind is demonstrated, pure self-interest from trading partners will help clear up the issues.

No, the system certainly isn't always self correcting, and is most likely never completely self correcting. However, given the rather remarkable overall level of long term relative prosperity from major trading relationships, clearly (IMO) there is a significant amount of self-correction inherent in the system.

And this is a very good thing, else we would see much more economic chaos over time, even in "prosperous" economies.

...

Note: I'm NOT supporting Trump here, merely opining that I think the system is much stronger over time than the constant panicky calls of relative doom from one side for political points make it out to be -- and that principle applies regardless of who happens to be POTUS and/or the Beltway majority at the time.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The Financial System is Destroying the World Economy

Unread postby Newfie » Thu 05 Jul 2018, 18:22:27

Outcast,

While it’s possible that the global economy is more stable it’s also POSSIBLE ITS (edited to fix stupid spell check) less stable. The point is we don’t really know. We have never had anglobal economy like this before.

The global economy now rests on trust between partners and stability of the monetary supply. Transactions occurring between countries have at best tenuous guarantees and the whole financial system now consists of fiat currency at best with virtual crypto currencies perturbing that. IF you believe Georg Bush or Obama the 2008 crisis came within a few days of causing the world economy to “lock up.” It took extraordinary measures to assure liquidity. So there seems to be at least some evidence of instability along with identification of destabilizing elements. How long this can last is anyone’s guess.

But, on the bright side, let’s say Trump does manage to screw the pooch royally. Traders loose faith they can conduct business with any assurance of fair mnney transfers. International shipping gets gutted while financiers look for some reset. So off shore manufacturing shuts down, most manufacturing shuts down. The whole world economy goes into a depression. Then what?

Well that is really good news because it will cause a major reduction in smokestack emissions. Vehicular traffic, shipping, airplane travel all tank. Oil goes up so everyone starts to conserve. Our production of green house gasses goes down and we slow or perhaps even reverse AGW.

Of course there will be a short term bump in temperatures of about 1° because global dimming will cease to moderate the temperature rise. But, hey, overall it’s real progress towards saving the planet.

Ya see, not DOOMERISH at all, it’s all good.
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Re: The Financial System is Destroying the World Economy

Unread postby evilgenius » Fri 06 Jul 2018, 10:55:23

I think the trade war stuff is something like how after the Depression there were similar rumblings. Emotions rattled the idealogues. They didn't see their ideas put into practice while there was a chance to do so. Good thing for them that they had stacked the Supreme Court, or Roosevelt might have convinced the people of their folly by now. So they raised rates and instituted tariffs. They wound up putting the world back into trouble because their appetite for what they wanted was more important than the economic health of the world.
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Re: The Financial System is Destroying the World Economy

Unread postby evilgenius » Sat 07 Jul 2018, 11:10:40

Outcast_Searcher wrote:
evilgenius wrote:I don't think the world economy is as self-correcting as one might wish.

...

The added danger here is that Trump may eventually be seeking the downsizing of the US Government. Partly he may be able to accomplish this by short circuiting the venerable status of both government and its institutions by putting freaks and irrational partisans in charge of sensitive positions. Partly by slowing down trade and destroying connections which took decades to build. Mostly by simply insisting on a world view that few but crackpots and charlatans accepted only a few years ago, but which everyone now has to figure out for themselves - so that it makes some sense at least. Points will be pulled from this as people seek to understand it which may compel us down this path, as we try to function according to some sort of logic.

Worst case, if he screws it up really bad, the voters throw him out in four years, and the next person, with a mandate from the voters, works to restore much of what was lost. (If he lasts two terms, then how bad could he really be (at least the first term) if the people who elected him last time, largely on economic issues, elect him again, IMO?

For good or bad, most rational people want economic "success" in the short to intermediate term, because they see it as in their self interest. Thus, while all the mess might not be moving toward being cleared up quickly (example: trade issues from Brexit), with long term trade partners, once a return to a leader with economic stability in mind is demonstrated, pure self-interest from trading partners will help clear up the issues.

No, the system certainly isn't always self correcting, and is most likely never completely self correcting. However, given the rather remarkable overall level of long term relative prosperity from major trading relationships, clearly (IMO) there is a significant amount of self-correction inherent in the system.

And this is a very good thing, else we would see much more economic chaos over time, even in "prosperous" economies.

...

Note: I'm NOT supporting Trump here, merely opining that I think the system is much stronger over time than the constant panicky calls of relative doom from one side for political points make it out to be -- and that principle applies regardless of who happens to be POTUS and/or the Beltway majority at the time.


Except that you can get into a rate structure crisis that lasts through several administrations. A crisis brought about by bias toward a direction of rates within the system. Stopping it may be easy, but the people might think that what it takes is immoral. We have our own views on capitalism in America. If those aren't satisfied, then it can be hard to stop those cycles. We're in this period where we are enjoying the results of a Fed that went after the business cycle in a big way. We still have recessions, but they aren't like those that came before. That's probably the capital that Trump is playing with. Move us back into the previous world and the business cycle of old will probably return. But the world has changed since then.

Sorry, in that other post above I should have said then instead of now. Saying now implies some sort of connection to the present day. I didn't mean to imply that. I only meant that the forces at work during the Depression that caused the world to slip back from recovery seem similar to what is going on under Trump with the trade war stuff.
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Re: The Financial System is Destroying the World Economy

Unread postby KaiserJeep » Sat 07 Jul 2018, 12:44:19

I suppose I have little skin in this game, being retired. But somebody like baha, still working for a living, is now looking at stiff increases in the cost of solar panels from China, as almost all are sourced from there today.

Silicon Valley has long struggled with unfair trade practices. I have personally had to deal with unauthorized Chinese-made copies of my own computer designs, purchased by tightwad customers. Without the price burden that pays for sustaining engineering, design change management, and a service organization, the former Chinese manufacturer (whom I had disqualified for reasons of poor hardware quality) was making unauthorized copies of our hardware from the very documentation we had given them, and selling the untested hardware to our customers who were inserting it into our computer systems for which we had maintenance contracts. Our maintenance costs skyrocketed, and it took a while to figure out why. The bogus hardware was obviously my design, but the serial numbers did not make sense, those numbers on the labels linked to other and different hardware in our database.

I ended up having to make a policy that when such unauthorized hardware was confirmed in a computer system, we would refuse to service it under contract. The re-certification process involved a painstaking system inventory and test/integration process that should have been occurring in a factory floor environment, and not at a customer site. Then after we were paid time & materials for the re-certification, we began servicing under contract again.

The tightwad customer (a major stock exchange) witheld an entire quarter's order for new hardware because of the controversy. Engineering and Marketing clashed over my policy. However, corporate management backed my play.

Now I'll be completely frank about the offensive racial terminology we engineers use when confronted with such unauthorized hardware. We call such hardware when discovered "monkey copies".

Those solar panels I mentioned earlier are actually being made on silicon wafers that are 6" and 8" in diameter. These in turn are produced in silicon rod-growing electric furnaces that were designed and made here in Silicon Valley. Those monocrytalline wafers are then sliced off the silicon rods by diamond band saws. The fabrication machinery here in Silly Valley moved to 10" and even 12" diameter rods some years ago, and the older generation 6" and 8" machinery was sold to China. Then they began a Chinese government supported policy of dumping high quality monocrystalline solar panels in market countries below cost, fabricated on the machinery sourced from Silly Valley by Chinese government funds.

Baha of course has benefitted from this for a number of years, but now with the Trump tariffs, may have to pay a competitive price for solar panels that allows for US manufacturers to compete. But perhaps our domestic solar panel manufacturers can now compete with Chinese panels being "dumped" below manufacturing cost into the USA.
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Re: The Financial System is Destroying the World Economy

Unread postby Outcast_Searcher » Sat 07 Jul 2018, 13:53:07

evilgenius wrote:Sorry, in that other post above I should have said then instead of now. Saying now implies some sort of connection to the present day. I didn't mean to imply that. I only meant that the forces at work during the Depression that caused the world to slip back from recovery seem similar to what is going on under Trump with the trade war stuff.

Thanks for the clarification. Given Trump was mentioned, I assumed we were talking about now.

You mentioned rate structures being hard to correct (I assume that means interest rates). I lived through relatively high, systemic interest rates from the time I was old enough to care (not liking it when candy prices shot up at the dime store at age 10 or so) through about age 25.

That caused me, early on in my career to be terrified of inflation, consider inflation the number one enemy against real wealth accumulation, etc. I bought quite a bit (relative to my savings) of gold and silver bullion and foreign currencies in the 80's to hedge inflation.

So sure, interest rate structures can become hard to shake. For one thing, and economists talk about this: in time expectations can become entranched relative to expected inflation, and then it can be hard to get people to change behavior re those expectations.

As I recall, this was a problem with Japan in the 90's, re stimulus. Habitual super-savers, which Japan has LOTS of in its culture/demographics, weren't having ANY of it -- they wanted lots of money in the bank.

For me as an example of US people from that high inflation era who I can relate to re inflation and interest rates:

In the 80's and beyond, despite what interest rates might be on long term bonds, I was having NONE of it -- too much risk (to own long term bonds, IMO). So whether it was getting roughly 15% interest in 20 year treasuries near the peak of interest rates (I was terrified of hyperinflation risk at the time), or 6%ish US 30 year treasuries in the 90's, or sub 4% long term US treasury rates in recent years -- for me it's a giant "NAY". And I'm sure that my caution regarding inflation risk is why.

(I don't mind taking risk in a diversified stock portfolio -- but only if I perceive the likely rewards over time to be WORTH that risk. I just don't see that for bonds.)

And like many people with corporate pensions, with no inflation rider on that pension at all -- I am already locked into one income stream which behaves much like a long term bond re inflation -- whether I like it or not.

...

Now, what's interesting to me is I'm still not convinced we actually know that much about overall macroeconomics. So I think it's possible that these interest rate regimes (whether low or high) might be as much about luck as some sort of skillful financial engineering or planning. I cite the MESS that is generally government as my reason.

...

So I agree that relatively recent history and (micro) economic logic re self-interest points to interest rate regimes that can last quite a while. However, we may not have much of a real world clue about truly controlling what sort of regime we're in. It may be mostly luck and external pressures / factors like demographics, relative resource scarcity, etc.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The Financial System is Destroying the World Economy

Unread postby Pops » Sat 07 Jul 2018, 22:29:32

Funny, I've been thinking about tariffs, nationalism, world war and such lately and was looking for an excuse to rant.

A little OT but as already mentioned, in '29 Smoot-Hawley tariffs were moving through congress and likely precipitated the stock crash to a considerable extent. After the crash austerity was the plan, by '34 the money supply had contracted by a third and credit was unavailable to businesses. Exports by then had fallen from over $5B to below $2B. World wide, countries erected more and more barriers and in combination with the Germans reparations bill from the first war sent us toward the second.

Today for better or worse the world's supply chains are integrated to a much greater extent than the '20s when most exports were agricultural. We in the US at least are not as prone to austerity nowadays, as shown by the reaction to the recession of 08. The current level of US debt to GDP is multiples higher than ever before. And we are still at very low interest rates. That crimps the 2 main levers of fighting recession. Not only that but our primary lender is also, theoretically, our primary trade foe —except for those heathen Canadians.

I'm not a globalist at heart, being a bunker boy by inclination I'm inclined to protectionism. But I recognize that it is much harder to attack a country with whom you have financial interests in common rather than one with whom you are at odds and vice versa. The trend toward nationalism around the world and in the US particularly is very worrying. I just can't fathom the rational of sticking a thumb in the eye of the allies and institutions we built and championed and have benefited from more than any other.


But yeah, bankers are a giant blood sucking squid on the face of humanity. Who was the Marxist/capitalist investor that used to hang here? He could likely quote chapter and verse of the end of capitalism. IIRC Capitalism ends with consolidation and "technology improves and productivity rises, more goods are produced, which are worth less," the end of growth and so profit.

This is good,
The final stages of capitalism, Marx wrote, would be marked by developments that are intimately familiar to most of us. Unable to expand and generate profits at past levels, the capitalist system would begin to consume the structures that sustained it. It would prey upon, in the name of austerity, the working class and the poor, driving them ever deeper into debt and poverty and diminishing the capacity of the state to serve the needs of ordinary citizens. It would, as it has, increasingly relocate jobs, including both manufacturing and professional positions, to countries with cheap pools of laborers. Industries would mechanize their workplaces. This would trigger an economic assault on not only the working class but the middle class—the bulwark of a capitalist system—that would be disguised by the imposition of massive personal debt as incomes declined or remained stagnant. Politics would in the late stages of capitalism become subordinate to economics, leading to political parties hollowed out of any real political content and abjectly subservient to the dictates and money of global capitalism.
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Re: The Financial System is Destroying the World Economy

Unread postby Outcast_Searcher » Sat 07 Jul 2018, 22:44:28

Pops wrote:This is good,
The final stages of capitalism, Marx wrote, would be marked by developments that are intimately familiar to most of us. Unable to expand and generate profits at past levels, the capitalist system would begin to consume the structures that sustained it. It would prey upon, in the name of austerity, the working class and the poor, driving them ever deeper into debt and poverty and diminishing the capacity of the state to serve the needs of ordinary citizens. It would, as it has, increasingly relocate jobs, including both manufacturing and professional positions, to countries with cheap pools of laborers. Industries would mechanize their workplaces. This would trigger an economic assault on not only the working class but the middle class—the bulwark of a capitalist system—that would be disguised by the imposition of massive personal debt as incomes declined or remained stagnant. Politics would in the late stages of capitalism become subordinate to economics, leading to political parties hollowed out of any real political content and abjectly subservient to the dictates and money of global capitalism.

OTOH, however, looking at, say household debt to GDP ratios in the US, things have been looking quite good over the previous decade. Maybe folks DID learn just a bit from the great recession?

https://tradingeconomics.com/united-sta ... ebt-to-gdp

Oh, and counter-intuitive as it was in 2009, here we are with full employment, and lack of workers becoming such an issue in the US that the danger (IMO) is spurring higher inflation as at SOME point employers realize whining won't solve the problem, but higher wages just might, as they need to bid for workers vs. other employers who don't want to pay. :roll:
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The Financial System is Destroying the World Economy

Unread postby Pops » Sat 07 Jul 2018, 23:02:42

True, but that may have something to do with this

Image


I really have no clue as to what is happening or why - seriously.
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Re: The Financial System is Destroying the World Economy

Unread postby rockdoc123 » Sat 07 Jul 2018, 23:25:35

True, but that may have something to do with this


well my first guess would be that this is just showing the whole low cost mortgage issue that lead up to the collapse in 2008. There are tons of stories of folks who were leveraging themselves into ridiculous positions to buy numerous homes that they hope to flip when mortgage rates were low. And then that whole thing with trading derivatives on those mortgages.
We've talked about this quite a bit before. Probably the worst thing to happen to US and global economy post the collapse of the market in the early 20th century.
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Re: The Financial System is Destroying the World Economy

Unread postby Newfie » Sun 08 Jul 2018, 07:46:55

I really have no clue as to what is happening or why - seriously.


Ha! An honest man.

Exactly which is why I generally demur from opining in the oil threads, I can make no sense if the various data factoids and opinions. All I know is, sooner or later, it’s gonna run out, then we will get serious about coal gasification and burn yet more.
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Re: The Financial System is Destroying the World Economy

Unread postby Pops » Sun 08 Jul 2018, 08:54:43

I like that site Outcast, poked around and surprised by this, personal savings rate:

Image


So looked for savings rate vs recessions and of course Calculated risk had it (through Feb 18):

Image

Don't know what that means except that people are not borrowing and they aren't saving so where is their money going? Rent?

Institutional investors buying up single family homes...

Image

Oops, back to the giant blood sucking squid

After the recession, nearly 4 million single-family homes, many purchased in foreclosure auctions, became rentals. (That’s about three percent of the total U.S. housing stock.) Big-time landlords who own dozens or even hundreds of properties are a rising force in U.S. cities, and their purchases have taken a big chunk of homes off of the market. There are fewer single-family homes for sale than at any time since 1982. Adjusted for the nation’s population gains in that time, the shortage is even more severe.

https://slate.com/business/2018/06/amer ... -ever.html

http://www.pewresearch.org/fact-tank/20 ... -50-years/
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