The GFC Can be Solved.....

StevieJ

kabayiri

Joe_Bloggs wrote: »

kabayiri wrote:-
Please enlighten the MSE readership as to the biblical policy and the overall success of it.

J_B.
ILW wrote:-


Check out Little Dorrit.

I don't have a link to the Sumarian system (I'll hunt for one), but there's an interesting article here.

http://schalkenbach.org/on-line-library/works-by-michael-hudson/the-lost-tradition-of-biblical-debt-cancellations/

Really2

ILW wrote: »

And a judge can decide who bought it on themself and deserves to be punished.
Simple really.

As said before sounds like the costs are rising, every little bit you to decide adds cost.
It seems a highly impracticle solution and one with vast cost.

Generali

Kennyboy66 wrote: »

Possible flaws

1) one of the the drivers in the 1930's US depression was the fact that so many banks went bust and there was no depositer insurance.
More than 40% of banks went bust

2) US GDP contracted by 30% between 1929 & 1933
Industrial production fell by 45% - I can't see why that level of GDP fall should possibly happen.

3) Governments were committed to high interest rates because of the gold standard.

4) Trader barriers went up (could happen again) in the 30's.

5) Private debt although high is certainly manageable under current interest rates - although I have always thought the OBR forecasts for increases in household debt were fanciful to say the least.

It is pure tin hatter nonsense - and neither would it be sensible.

There would arguably be more demand destruction though loss of savings than by the writing off of debt. Why ? Well who would ever keep their savings in a bank again. It would be kept under the mattress or in precious metals.

It will be long grind of low interest rates, Sterling devaluations and relatively high (3-5%) inflation.

Your conclusion that retirees are going to have a hard time of it seems correct. Inflation plus negative real interest rates coupled with low annuity rates as life expectancy continues to increase is guaranteed to be painful.

The bit about the interest rates is wrong. Nominal interest rates fell to 0%, e.g.:

Over 1929-1933 overnight rates fell to zero, and they remained on the floor through the 1930's.

http://www.ltadvisors.net/Info/research/Hanes.pdf

You're right about real GDP dropping dramatically and it took until 1942 for US GDP to return to where it had been in 1929!

Protectionism is starting to rear it's very ugly head:

http://www.businessweek.com/ap/financialnews/D9QAF0HG0.htm

The Senate voted Tuesday to threaten China with higher tariffs on Chinese products made cheap through an artificially undervalued currency, which lawmakers blame for destroying American jobs. The House, though, is unlikely to take up the bill, which some American businesses warn could trigger a trade war.

Although that needs to be set against:

http://www.forbes.com/feeds/ap/2011/10/12/general-us-congress-trade_8731789.html

Free trade agreements with South Korea, Colombia and Panama were approved by the House on Wednesday and immediately headed for votes in the Senate as Congress rushed to complete work on deals that have the potential to spur economic activity and put Americans back to work.

The GOP mainstream seems to be moving towards increased protectionism, Democrats not.

I think the problem is we can't have it both ways. Either the economy stays screwed enough that interest rates can remain extremely low or it recovers, they rise and servicing the debt becomes a problem. Let's not forget the rising pensions and age-related healthcare bills too. If the economy is still down in a few years they are going to look unaffordable.

I'm not sure you're right about the bank thing. In the modern world you have to have a checking account and people forget this stuff over time. Look at Russia for example; they repudiated their sovereign debt and were back borrowing in the markets in less than a decade. Argentina too, and Brazil.

Kennyboy66

Generali wrote: »

The bit about the interest rates is wrong. Nominal interest rates fell to 0%, e.g.:



http://www.ltadvisors.net/Info/research/Hanes.pdf

You're right about real GDP dropping dramatically and it took until 1942 for US GDP to return to where it had been in 1929!

Protectionism is starting to rear it's very ugly head:

.

Sadly when I access that paper the tables and graphs just display with a large red X.

I am pretty sure that the Fed raised interest rates in 1928 and 29 (curb the stock market excesses), and after falling then raised them in 1931 (gold standard).

I thought nominal interest rates were still 2.75 in 1932, making a real interest rate of 13% as deflation was 10% ish.

It was only in 1933 that interest rates (real and nominal) were appropriate.

I think the choice between

1) deflation
2) medium inflation

In the UK has already been made.

As I've no doubt said before Governments and central banks know how to create inflation and know the tools to eliminate it, painful as they may be.

80 years after the US depression, people are still arguing over the causes and remedies of deflation.

My gut feel is that the UK at least is in for 6 to 7 years of low growth (average 1 -2%), inflation of 3-4%, high unemployment (3-3.5 million).

People in work will barely feel the pain.

Those on fixed incomes (pensioners), the unemployed, school leavers and the low skilled will feel the brunt of the pain.

The NHS will be significantly worse than it has been over the last 10 years (which will be seen as something of a golden age for the NHS).

Oh yeah, nominal house prices won't see much increase.

pqrdef

Generali wrote: »

Look at Russia for example; they repudiated their sovereign debt and were back borrowing in the markets in less than a decade. Argentina too, and Brazil.

Of course the people who were lending to them weren't lending their own money. With enough links in the chain, the people whose money it really is don't know where it's going. It would be different in a much wider write-off.

Also, wealth is more democratised in modern western economies. In previous crashes, the large majority of the population may have lost their jobs, but they didn't lose their assets, because they didn't have any to start with.

Generali

kabayiri wrote: »

I don't have a link to the Sumarian system (I'll hunt for one), but there's an interesting article here.

http://schalkenbach.org/on-line-library/works-by-michael-hudson/the-lost-tradition-of-biblical-debt-cancellations/

That is absolutely fascinating. Any idea if it's accurate? It's quite long and very, very interesting (to me).

Who knew that the late lead singer of INXS was such an amazing historian?

Generali

Kennyboy66 wrote: »

I am pretty sure that the Fed raised interest rates in 1928 and 29 (curb the stock market excesses), and after falling then raised them in 1931 (gold standard).

I thought nominal interest rates were still 2.75 in 1932, making a real interest rate of 13% as deflation was 10% ish.

It was only in 1933 that interest rates (real and nominal) were appropriate.

You are definitely correct to say that the 'Refinancing Rate' (the interest rate at which banks could borrow from The Federal Reserve) and the Bank of England Bank Rate were both increased in 1929 in the lead up to The Great Crash, The Fed increased rates more than once in 1929.

It cut rates in the 30s and also tried the Gold Standard version of QE and financial repression by making it illegal for citizens and corporations to hold gold and also cutting the amount of gold behind each dollar issued.

Kennyboy66 wrote: »

I think the choice between

1) deflation
2) medium inflation

In the UK has already been made.

As I've no doubt said before Governments and central banks know how to create inflation and know the tools to eliminate it, painful as they may be.

80 years after the US depression, people are still arguing over the causes and remedies of deflation.

My gut feel is that the UK at least is in for 6 to 7 years of low growth (average 1 -2%), inflation of 3-4%, high unemployment (3-3.5 million).

People in work will barely feel the pain.

Those on fixed incomes (pensioners), the unemployed, school leavers and the low skilled will feel the brunt of the pain.

The NHS will be significantly worse than it has been over the last 10 years (which will be seen as something of a golden age for the NHS).

Oh yeah, nominal house prices won't see much increase.

I agree. I think that's a pity because, to use a crap analogy, this is like pulling off a plaster (NB not pulling off a plasterer). If you do it quickly then there is probably less pain than if it's done slowly.

My experience of the NHS is that it is dreadful. Unfortunately, I am well acquainted with the French and Aussie health systems and the quality of treatment in both is far better from a patient's viewpoint. I wouldn't live in the UK again without decent medical insurance.

Conrad

Kennyboy66 wrote: »

My gut feel is that the UK at least is in for 6 to 7 years of low growth (average 1 -2%), inflation of 3-4%, high unemployment (3-3.5 million).

Sluggish growth for 2012, but picking up considerable momentum from 2013.

2013+ will see strong and sustained growth for years to come.

I know people will scoff at this, but many bricks have been falling into place that will facilitate this.

I'm a natural pessimist incidentaly.

My prediction is built on the foundations being laid now such as rebalancing our economy, nations developing themselves, the bio - tech boom and frankly the safe haven effect that we surely enjoy - although some of you will find this impossible to accept just now.

Property prices in somewhere such as Poplar, will double in the next 7 years.

Joe_Bloggs

There is an official statistic called the Household savings ratio.
There is so much alleged information ,speculation and hyperbole in the media. Does anyone have a grip as to where this statistic is coming or going. Does it in fact matter.

J_B.