Posted on 09/16/2011 3:11:56 PM PDT by blam
Gordon Brown: Euro Crisis Is Even Worse Than Lehman
Nick Jardine
Sep. 16, 2011, 4:34 PM
Brown says things are worse now than they were in 2008.
Former British Prime Minister, Gordon Brown says that the current financial woes are worse than they were in 2008, reports the Telegraph.
Speaking at the World Economic Forum in Dalian, China, Brown said he believes that the world's economy could fall into a 1930-like slump if matters continue in the same vein.
He told the audience:
"The European banks as a whole are grossly under-capitalised: they have liabilities far in excess of American banks. We have now got the inter-play with sovereign debt because we socialised the liabilities,"
"It has morphed into a sovereign debt crisis, and is more serious than 2008 because governments then could intervene to sort of out banks. Now both banks and governments have problems,"
"You cannot begin to solve this unless you realise that it is a banking problem and a growth problem, as well as being a fiscal problem. You have to take co-ordinated action in all three areas,"
Brown added that if Greece were to leave the Euro it would be positive for the whole of Europe since few believe it can push on without a default.
(Excerpt) Read more at businessinsider.com ...
It's 2008, only more so.Bloomberg reports:
European Bank Job ‘Bloodbath’ Surpasses 40,000 By Gavin Finch and Liam Vaughan - Aug 24, 2011UBS AG (UBSN)’s decision to cut 5 percent of its workforce brings to more than 40,000 the number of jobs cut by European banks in the past month as the region’s worsening sovereign debt crisis crimps trading revenue.
But it's not just "the sovereign debt crisis" that's "crimping trading revenue", it's regulators' response to it....
They have several ‘Lehmans’ over there. All waiting to go boom, and go down together. The sooner it happens the better. The good thing about many of them is they aren’t too big to fail, they are too big to bail out. What amazes me is the ass raping Germany is subjecting itself to trying to save the bankers that are on the hook. The German politicians must be more thoroughly bought than ours!
i.e. treat them like the bums they are.
Yes, if Greece and one or two other basket cases left the Euro, the Euro would bounce back into relative health again. However, I think Greece is probably holding out for a write-off of much of its debt, which would kill a number of banks in Europe, especially in France.
I don’t get why the market rallied when it learned that Euro central banks were pumping dollars into French banks. The bankrupt soveriegns are pumping up the bankrupt privates. Madness.
Don`t worry about it. Geithner and obama are all over this.
They`ll ( G & O ) be pouring billion if not trillions into the EU to save it because they know if one goes down they all go down together these bunch of neo-marxist central planning keyneisians .
Well, Brown should know. He caused half the problems.
You said it before I could. Totally agree.
We are on the cusp of the largest debt deflation in the history of the world.
"We are on the cusp of the largest debt deflation in the history of the world."
According to the debt deflation theory, a sequence of effects of the debt bubble bursting occurs:
1. Debt liquidation and distress selling.
2. Contraction of the money supply as bank loans are paid off.
3. A fall in the level of asset prices.
4. A still greater fall in the net worth of businesses, precipitating bankruptcies.
5. A fall in profits.
6. A reduction in output, in trade and in employment. 7. Pessimism and loss of confidence.
8. Hoarding of money.
9. A fall in nominal interest rates and a rise in deflation adjusted interest rates.
Irving Fisher
And, when the sovereign itself is not overly indebted the concept of reflation through policy actions can mitigate and even reverse the cycle.
However, when the sovereign (the foundation of the currency) is overly indebted (classically this is the 1:1 ratio of debt to real GDP), there is no option but to allow the deflation to run it's course.
The ONLY OTHER, HOWEVER SLIGHT the prospects of success in breaking the cycles is to literally give everyone free money. Issue a check to every man, woman and child in the country.
But there's enormous risk to this whose downsides far exceed the prospect of horrible debt deflation: The total and complete loss of faith in the currency.
That's where we're at folks. One terrible choice over another.
I do not believe the country has the leadership or the collective will to endure the former (debt deflation) and will continue to act to undermine faith in currency.
This does not necessarily result in nominal inflation.
Euro minds stop at the word "default," but ther is more...you see, Greece's problem isn't just it's accumulated debt. After all, that's what everyone thinks that Greece can default on.
Oh no, Greece's problem is much bigger than that debt. You see, Greece's government is over-spending its revenues so vastly that it will be back in this same position in a mere 4 years even after a full sovereign default on its current debt.
Without solving how much the Greece government over-spends, there is no solution. A "default" merely buys Greeks 4 years of not having to make painful fiscal choices.
Of course, the Greeks are so "soft" that they think that they are already in pain due to "austerity!" LOL!
...They've yet to see the pain headed their way. For that matter, Europe and the U.S. aren't too far behind.
By printing money, quantative easing?
Won't that eventually send us to high/hyper inflationary conditions where gold would/could be a wealth savior?
Will you venture a guess when? A guess, that's all.
1. A country does not have to experience nominal inflation for people to lose faith in it's currency. For instance there is not hyper-inflation in Greece even though everyone knows the full faith and credit of the Greek government is worthless.
2. Gold MOSTLY just preserves wealth and usually offers little appreciation. However, there can be a bubble in gold as in any other asset. I believe we have that now. In general gold and land/real estate should achieve equilibrium at some point. Now they continue to move in opposite directions.
This is a harbinger of either serious overvaluation in gold, or serious undervaluation in real estate/land.
My bet is on the former. The capital stock of property exceeds the capital stock of gold by several orders of magnitude.
Want to know what's going to happen to the economy and the currency? Watch the largest asset class in the world...US Residential Real Estate.
The dollar is going up. Real asset prices are going down...in spite of the illusory commodity gains brought about by Fed printing. Such "money" usually stops and disappears within two or three transactions as the VELOCITY of money continues to decline. Also, because most borrowers cannot take on more debt and most banks can not issue more loans and remain solvent.
Nope, Gold is in a bubble, a big one.
Only the psycho-social dynamics of the Austrian School can explain it...as purely rational actors would drive the price of gold to equilibrium with land.
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