The Bull and the Bear

Generali

I had an interesting conversation with 2 people that are paid to invest other peoples' money and who have made a very successful and long career out of doing so.

One of them is convinced the world's economy is on the up: China has stabilised and is looking at GDP growth of about 7.5% a year for the next 2 years. The US is onshoring manufacturing and the deficit is receding.

The other feels that we're still just 'can kicking'. No debt to speak of, the source of the problems, has been paid down and we can expect at least another 5 years of pain until we resolve the problems of debt, probably Iceland-style.

Both of them are very convincing but only one can be right.

BTW, they both reckon Europe is FUBAR'd because of excessive welfare spending.

System

Sounds like you had a conversation witb Hamish and Graham

chucknorris

Generali wrote: »

I had an interesting conversation with 2 people that are paid to invest other peoples' money and who have made a very successful and long career out of doing so.

One of them is convinced the world's economy is on the up: China has stabilised and is looking at GDP growth of about 7.5% a year for the next 2 years. The US is onshoring manufacturing and the deficit is receding.

The other feels that we're still just 'can kicking'. No debt to speak of, the source of the problems, has been paid down and we can expect at least another 5 years of pain until we resolve the problems of debt, probably Iceland-style.

Both of them are very convincing but only one can be right.

BTW, they both reckon Europe is FUBAR'd because of excessive welfare spending.

I had to google FUBAR'd although in reality the context more or less gave it way.

Graham_Devon

Joeskeppi wrote: »

Sounds like you had a conversation witb Hamish and Graham

Which is a bit cscary really, as neither of us should be allowed anywhere near other peoples money!

Carl31

Theoretically, if the deficeit is going down, then things are on the up. Once its paid off, we can then receive the benefit of the repayments in the economy, instead of servicing the debt, its just a timing thing

of course, this is theoretically

ILW

Carl31 wrote: »

Theoretically, if the deficeit is going down, then things are on the up. Once its paid off, we can then receive the benefit of the repayments in the economy, instead of servicing the debt, its just a timing thing

of course, this is theoretically

Can you pay off a deficit?

Wookster

We don't need a rocket scientist to tell us Europe is screwed. Largely they have an inflexible workforce and corrupt leaders (Britain and a few Northern European countries excluded) who have no interest in building competitive economies.

These problems cannot be plastered over while there is a currency union with Germany.

The Euro crisis is not dead, its just sleeping.

vivatifosi

Generali wrote: »

Both of them are very convincing but only one can be right.

Could they both be wrong? Move over bears and bulls, this is the period of the Sloth. Sloths are slow moving but get to their destination eventually. They also surprise people with their sturdiness, although they can fall prey to predators.

Snails could of course be another metaphor given that the economy is moving at a snail's pace, however they own their own home, so this would be unfair to slugs.

Generali

vivatifosi wrote: »

Could they both be wrong? Move over bears and bulls, this is the period of the Sloth. Sloths are slow moving but get to their destination eventually. They also surprise people with their sturdiness, although they can fall prey to predators.

Snails could of course be another metaphor given that the economy is moving at a snail's pace, however they own their own home, so this would be unfair to slugs.

I read a research note recently entitled, "Hawk, Dove or Owl?" those being people that think money prices should be raised (higher interest rates/reverse QE), lowered (lower interest rates/more QE) or that we should sit in a tree and watch.

Maybe economic views could be split into Eeyore (depression to continue), Tigger (bouncing and excited) or Pooh (fat and going nowhere in a hurry).

Generali

Nologo wrote: »

Even the bear sounds quite optimistic. If it resolves in 5 yrs Iceland style what will that mean for the world economy?

He means repudiate a lot of the debt as it can't be repaid so you might as well. That means a catastrophic time for a while as without debt there is no trade. For Iceland that meant shortages of medicines, nappies and some food.

After a year or two things slowly sort themselves out as debt can be re-established by using collateral to avoid the same problems of repudiation.

It's pretty bloody in the short term and probably wouldn't be a good time to get some hideous disease or cancer or something requiring expensive and life saving drug treatment as most likely the money wouldn't be there. It would also trash the savings of the rich (in fact of everyone but only rich people have substantial savings by definition) as savings are debt.

It's a solution to the current problems, albeit one that is currently being rejected.

kabayiri

Is it possible to separate the health of nation states and the health of global corporations ?

Google, Amazon, Apple, to name but a few. Why should their continued success hinge on the problems of the US? Their focus is replacing ailing revenue streams and customer base with new ones isn't it? They don't care if the new aspiration class comes from the Far East or other BRIC economies.