Posted on 08/29/2009 4:44:21 PM PDT by bruinbirdman
Never in modern times has there been such a flat contradiction between the euphoria of markets and the stern warnings of officialdom at central banks and financial watchdogs.
Corporate credit has seen the steepest rally in almost a hundred years, according to Morgan Stanley. Hedge funds are reviving the final bubble play of early 2007, writing put options on long-dated "volatility" contracts to wring out extra profit.
It is as if the Great Contraction – as the Bank of England now calls it – was just a random shock, as if we should naturally expect "V-shaped" resurgence to take us back to where we were. Yet that is what precisely we are being told will not and cannot happen.
"The current financial crisis is unlike any others," says the Bank for International Settlements. Lasting damage has been done. The "cumulative output loss" is likely to reach 20pc of GDP in the major economies.
The message is the same at the International Monetary Fund. "The world is not in a run of the mill recession. The crisis has left deep scars. In advanced countries, the financial systems are partly dysfunctional," said Olivier Blanchard, the Fund's chief economist.
Mr Blanchard said an IMF study of post-War banking crises led to an unpleasant finding. "Output does not go back to its old trend path, but remains permanently below it."
Then the sting: we are exhausting the limits of fiscal stimulus. "The average ratio of debt to GDP in the G-20 economies was high before the crisis, and is forecast to exceed 100pc in the next few years".
We cannot add debt, so the IMF says we must draw down our future pensions and future health spending to keep today's economy afloat. "A modest cut in the growth rates of entitlements can buy substantial
(Excerpt) Read more at telegraph.co.uk ...
Ping
Bye, bye, Grandma.
The largest factor leading to and which have led to municipal bankruptcies are public sector pension obligations.
Interestingly, when Argentina defaulted on its sovereign debt for the second time, it confiscated (nationalized) all private pension funds instead of cutting public obligations.
Hussein's campaign website did not plan to nationalize private pensions, just tax all IRA's.
"If someone is rich enough to have an IRA, they are rich enough to pay taxes on it. The government should not subsidize private pensions."
yitbos
Howard Davidowitz, 10% Jobless Rate, `World of Liquidation’
Likes Dollar Store, Pawn Shops,
“we are going to close 12000 stores”
“we are in a world of liquidation”
“we see no turn arround”
“Eddie Lampert...not an operator”
“Akerman... he is lossing his butt...the shareholders are going to get killed”
This time Europe will have the soup kitchens and we'll have the fascism.
Hello bruinbirdman, TigerLikesRooster, dennisw, et al.,
I’ve been following everything Pritchard has posted through his column and blog since the troubles began March ‘08, while he pushed too hard on some fronts, he’s been good at what he does, we all know that. However, for the first time into this cycle I’ve personally reached the point of indifference.
13 years ago I made a decision to go to Uni to study Finance after reading some Mandelbrot and Austrian economists, now I sit here and see everything being manipulated to this building crescendo where exogenous shocks could cause rapid and widespread systematic failures. Even if not a single individual shock causes the failure, there will still be systematic failure from the agency conflicts inside the US government, Treasury, and the Fed Reserve.
Look how long Mugabe has been able to manipulate the Zimbabwe elite class through controlling the entire game, just how much longer can the Fed Reserve and TBTF institutions continue on from here? The market is irrational and this bull rally is manipulated to increase irrational economic activity. Malinvestment today to maintain the state of the US governmental and financial elites is going to cause untold long term pain.
Leaving me with not many options but to stop reading Pritchard so often cause there isn’t much left to do but watch the generals inside ZANU-PF scheme to take control after Mugabe’s passing.
—— No one knows the ACTUAL present close of trading day market value of Citi because there are billions of shares unaccounted for, meanwhile the stock is still rising.
Don't forget the knowledgeable comments that follow his articles and blogs.
What I appreciate about AEP is he investigates and reports on the international financial scene; here U.S. economics, there the Baltics, East Europe, Germany, China, IMF, Eurozone, Japan, etc. He then connects the dots.
The theme may be the same, but as he says, ". . . we are already in a social war: one caste against another, and it will become very bitter.
I think policy should pursue a middle course. It should not sacrifice the interests of savers/pensioners against workers, or vice versa. Balance in all things. "
His financial recommendations vary depending on what various governments are up to.
yitbos
In evolutionary terms, we are suddenly forced under an acute selection pressure. Survive or go extinct, it all depends on how soon we can make "the hard choice."
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