Volker-This is not an Ordinary Recession

purch

Quite an interesting speech by Paul Volker, one of the better Central Bankers of the recent past, and a man that luckily is now an adviser to President Obama.

You should be able to find the full text on Fullermoney.com

I really feel a sense of profound disappointment coming up here. We are having a great financial problem around the world. And finance doesn’t work without some sense of trust and confidence and people meaning what they say. You take their oral word and their written word as a sign that their intentions will be carried out.

This is not an ordinary recession. I have never, in my lifetime, seen a financial problem of this sort. It has the makings of something much more serious than an ordinary recession where you go down for a while and then you bounce up and it’s partly a monetary – but a self-correcting – pheno menon. The ordinary recession does not bring into question the stability and the solidity of the whole financial system.

Why is it that this is so much more profound a crisis? I’m not saying it’s going to get anywhere as serious as the Great Depression, but that was not an ordinary business cycle either.

Generali

purch wrote: »

Quite an interesting speech by Paul Volker, one of the better Central Bankers of the recent past, and a man that luckily is now an adviser to President Obama.

You should be able to find the full text on Fullermoney.com

I really feel a sense of profound disappointment coming up here. We are having a great financial problem around the world. And finance doesn’t work without some sense of trust and confidence and people meaning what they say. You take their oral word and their written word as a sign that their intentions will be carried out.

This is not an ordinary recession. I have never, in my lifetime, seen a financial problem of this sort. It has the makings of something much more serious than an ordinary recession where you go down for a while and then you bounce up and it’s partly a monetary – but a self-correcting – pheno menon. The ordinary recession does not bring into question the stability and the solidity of the whole financial system.

Why is it that this is so much more profound a crisis? I’m not saying it’s going to get anywhere as serious as the Great Depression, but that was not an ordinary business cycle either.

Paul Volker is a very bright lad. For those who haven't heard of him, he made head of the Federal Reserve by Jimmy Carter and then reappointed (unusually) by Ronald Reagan - normally you'd expect a Republican President to get shot of a Democratic Fed boss. He used monetarist principles to drive inflation out of the US economy.

I still think that "fokking fokk" is a pithier version of the same, even if it lacks gravitas.

Wookster

Generali wrote: »

I still think that "fokking fokk" is a pithier version of the same, even if it lacks gravitas.

Just out of curiosity, whats your bet on what the next 5 years bring?

Rochdale_Pioneers

He's right of course - this is a global event. All the modelling we have on how economies recover from recession assume that other economies are not also in a recession.

Personally I think we're going to write off 1st world debt. The sums needed to pay off all the bad debts and investments are unavailable and unsustainable - an EU bill of EUR16tn for example.

Wookster

Rochdale_Pioneers wrote: »

global event

My god you really are Gordon's padawan aren't you?

Generali

Wookster wrote: »

Just out of curiosity, whats your bet on what the next 5 years bring?

There are too many variables for it to be more than a guess, especially in these chaotic times.

I doubt the Euro will be anything more than a memory in 5 years time and a few more countries will either go bust or have to severely restrict spending (Ireland? Spain? Italy? France?? Germany?? UK?).

India's economic miracle may well go back a decade as the Indians have a fine tradition of voting for Mental Marxists who ruin their country.

China? An interesting one. Will they be able to keep the people happy enough that living under 'communism' is satisfactory? I have my doubts personally. The Party are a pretty tough bunch though.

UK GDP is likely to be lower than now. The welfare state a lot smaller too. Private pensions nationalised in one way or another. There'll be a lot of Public Sector strikes as Civil Servants lose their jobs, have their wages cut and lose their pension scheme.

This really is all a guess though. Very small changes can make very big differences at times like this and things are moving too fast to be able to keep up, let alone get ahead!

chewmylegoff

i reckon we'll still have the euro and chinese communists in 5 years. hell, even starbucks will still exist.

Generali

Rochdale_Pioneers wrote: »

He's right of course - this is a global event. All the modelling we have on how economies recover from recession assume that other economies are not also in a recession.

Personally I think we're going to write off 1st world debt. The sums needed to pay off all the bad debts and investments are unavailable and unsustainable - an EU bill of EUR16tn for example.

It's true. The trouble is, nothing exists in isolation.

For example, AIUI annuities are required by law to be covered with investments in long dated Gilts. If the UK refuses to pay out on her debt then every annuity company in the UK will have to stop paying out to pensioners - every pensioner relying on a private pension will have their life savings taken at a stroke.

Generali

chewmylegoff wrote: »

i reckon we'll still have the euro and chinese communists in 5 years. hell, even starbucks will still exist.

Quite possibly. I said it was a guess.

chewmylegoff

Generali wrote: »

Quite possibly. I said it was a guess.

my guess is that everything will be a bit like it is now, but slightly older and a bit dirtier. they'll be a few more KFCs and, hopefully, jamie oliver won't be on the telly quite so much.

dealsearcher

I cannot see the world recovering to the levels we had in 2007 / 08. Those levels were based on a false economy where people believed the lies put about by the likes of Bernie Madoff. Even the politicians believed them, including our Great Leader :rolleyes: , because it was not in their interest not to believe them, and they appeared to be correct because they weren't investigated by the regulators. The regulators did notice some problems but it was almost like they were too frightened to dig too much in case they might uncover something nasty.

Even now the politicians' heads are in the sand. If we do pull out of this recession it will be a long, slow, painful pull out and then back to normal economics rather than the false economics we have had in recent years.