End of the world?

talexuser

I usually fill in my PEP/ISA spread sheet with the weeks prices at the weekend but was curious about the extent of the damage today.

I saved the sheet from my last revamp of funds (that was the first in some years) in Aug 2010... lo and behold todays values are up 11.9% today compared to then.

I saved another sheet from other portfolio revamps in Oct 2010 and am up 4.7% since then.

Is the panic type reporting a little over done compared to other corrections over the years?

Ark_Welder

Ah! But yesterday was another time. So today's 'panic' is newsworthy!

Geoff23

talexuser wrote: »

Is the panic type reporting a little over done compared to other corrections over the years?

No. The opposite is true. Most of those people are yet to fully understand how serious the underlying problems are.

In 1971 the global financial system which had been agreed to at the end of WWII (after lobbying by the all-powerful US against Keynes' preferred "Bancor" commodity-based system) was unilaterally ended by the US itself when President Nixon decoupled the dollar from gold. At that point a fully-fiat US dollar replaced a gold-backed dollar as the world's primary reserve currency, and that is the system which still exists today. Unfortunately, that system can only work if all of the people who are using it believe that the people in control of printing fiat currency are (a) not going to default on their debts under any circumstances and (b) not going just keep the printing presses rolling in order to inflate the debt away. This confidence/belief is in the process of being totally destroyed. We are witnessing the death of the existing global financial system and the beginning of the birth of a new one. If you have a large amount of savings in fiat-money-denominated assets, then you have every reason to worry.

Although panicking won't help. That just stops people from thinking clearly.

talexuser

I understand your point, but if US does another round of QE and if Germany agrees to a Eurobond the sticking plaster might work for a further length of time if people accept balanced budgets and some inflation without too much rioting!

I just wonder how bad it is compared to world war (which effectively bankrupted us), terrorist attacks, 70s oil price shocks, 3 day weeks, 1930s, etc etc.

Geoff23

talexuser wrote: »

I understand your point, but if US does another round of QE and if Germany agrees to a Eurobond the sticking plaster might work for a further length of time if people accept balanced budgets and some inflation without too much rioting!

Yes, but the sticking plaster won't last more than a few weeks and "they" are running out of plasters.

I just wonder how bad it is compared to world war (which effectively bankrupted us), terrorist attacks, 70s oil price shocks, 3 day weeks, 1930s, etc etc.

I think that any comparison to anything that has happened before, certainly on the timescales you are talking about, will be misleading. The monetary catastrophe I described above isn't actually the main show, although anybody could be forgiven for thinking that it is. There is an even bigger problem, and that is to do with the human race reaching a fundamental tipping point with respect to population levels, consumption levels, availability of natural resources and the capacity of the Earth to absord the pollution/waste our civilisation produces. In other words Peak Oil, or rather "Peak Everything."

So two things are happening together. Firstly the fiat currency system is collapsing, secondly we have a resources/population crunch coming. The link between these things is the basic premise that creating economic growth is the key to future prosperity. Fiat currency systems are inherently unstable anyway, but when they work at all then they depend on people borrowing against predicted future profits - there is an inbuilt assumption that growth will continue (otherwise there's no way to pay off your debts). Therefore we can say something about whatever system rises from the ashes of the existing monetary system, and that is that it needs to be able to cope with a situation where long-term "sustainable" economic growth cannot be relied upon.

What I've just said is, I believe, firmly based on things like history, science and reason, but we are currently a very long way from the point where the majority of people are likely to accept it.

ETA: I mean a long way in terms of how people's belief systems need to change, not necessarily a long way in terms of time. It depends what happens...

chrismac1

Bunkum.

Read the literature of the 1500s. The Western World was on the verge of chaos, with a massive fuel crisis looming as the developed world ran out of.....wood. Meanwhile some bloke in a back garden near Newcastle found a bit of funny black stuff which seemed to burn well, called it Coal and the rest is history.

Then to the late 1890s. A study for New York City estimated that by 1920 no-one would be able to move anywhere because of the ecological crisis brought about by horse dung. Meanwhile over in Germany, a bloke called Daimler was tootling around in a funny contraption he called a car.

At the same time it was widely believed that the world would run out of food as the Great Prairies had all been turned into wheat in USA, Russia, Europe etc. At that time over 20% of the populus worked the land. Cue the combine harvester, nitrate and other fertiliser, research into better crop strains. Now in a country like the USA 4% of the people produce food for the other 96% who themselves are much more numerous than their grandparents.

If you are a "going to hell in a hand basket" believer, you should have signed up with that bloke who said the world would end about 3 months back. We've been here before, in the overall scheme of things we'll look back on this crisis in a similar vein to 1987. Remember 1987? No, thought not. A 23% fall in one day, massive trade deficits with no end in sight. Just 6 years later there were equally big surpluses.

The question is not whether to invest more, it's merely when.

Geoff23

chrismac1 wrote: »

Read the literature of the 1500s. The Western World was on the verge of chaos, with a massive fuel crisis looming as the developed world ran out of.....wood. Meanwhile some bloke in a back garden near Newcastle found a bit of funny black stuff which seemed to burn well, called it Coal and the rest is history.

Then to the late 1890s. A study for New York City estimated that by 1920 no-one would be able to move anywhere because of the ecological crisis brought about by horse dung. Meanwhile over in Germany, a bloke called Daimler was tootling around in a funny contraption he called a car.

At the same time it was widely believed that the world would run out of food as the Great Prairies had all been turned into wheat in USA, Russia, Europe etc. At that time over 20% of the populus worked the land. Cue the combine harvester, nitrate and other fertiliser, research into better crop strains. Now in a country like the USA 4% of the people produce food for the other 96% who themselves are much more numerous than their grandparents.

If you are a "going to hell in a hand basket" believer, you should have signed up with that bloke who said the world would end about 3 months back. We've been here before, in the overall scheme of things we'll look back on this crisis in a similar vein to 1987. Remember 1987? No, thought not. A 23% fall in one day, massive trade deficits with no end in sight. Just 6 years later there were equally big surpluses.

Well, I think I'm happy to let the readers of this thread decide for themselves whether they think what I posted was bunkum, or whether you haven't quite grasped the enormity of what is happening. It is true that there have been energy and food crises before, but only on local/regional and non-industrialised scales. What is happening now is a whole different ballgame. I don't particularly want to expend much effort convincing nay-sayers that this is true. I've spent far too much time over the years trying to do this with climate change deniers, peak oil deniers, believers in the power of technology to save us from ourselves, etc...

Big changes are coming. The sooner individual people wake up to this and start taking actions to protect themselves from the worst of the consequences, the better it will be for them. It is inevitable that some people will figure it out more quickly than some others.

kidmugsy

"Read the literature of the 1500s. The Western World was on the verge of chaos, with a massive fuel crisis looming as the developed world ran out of.....wood." Such panics did grip the literary world occasionally, but the evidence for "massive" shortages is pretty thin. It's like the oft-repeated !!!!!!!! about running out of timber for shipbuilding: saying doesn't make it so.

"Meanwhile some bloke in a back garden near Newcastle found a bit of funny black stuff which seemed to burn well, called it Coal and the rest is history." Tyne coal was being burnt in the south in Roman times and, for all I know, before that.

Anyway, back to the present - we are still not out of the decades-long problems that started with LBJ's lunatic spendthrift policies on War and the Welfare State and Nixon's limp accomodation to them. There I agree with Geoff. Huge quantities of bad debt are problem enough: but the fact that governments decided to nationalise the banks' debts rather than let the shareholders and bondholders carry the can makes the present circumstances utterly dire.

Ark_Welder

kidmugsy wrote: »

Huge quantities of bad debt are problem enough: but the fact that governments decided to nationalise the banks' debts rather than let the shareholders and bondholders carry the can makes the present circumstances utterly dire.

Never heard of Northern Rock?

Thrugelmir

Ark_Welder wrote: »

Never heard of Northern Rock?

or B&B ..?

kidmugsy

Ark_Welder wrote: »

Never heard of Northern Rock?

Are you claiming that the bondholders were wiped out? That it cost the taxpayer nothing?