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The World Economy Looks a Bit Like It's the 1930s
#1
http://www.bloomberg.com/news/articles/2...an-stanley



Quote:To understand today’s global economy, look back 80 years.
 Just like in the 1930s, growth is being constrained by companies unwilling to spend, falling inflation expectations and governments backing away from fiscal stimulus. 
The trigger for the current malaise was the financial crisis that left a hangover of debt and deleveraging amid tighter banking regulations that are exacerbating deflationary pressures. It’s similar to the kind of shock that preceded the 1930s slump, according to an analysis by Morgan Stanley economists led by Hong Kong-based Chetan Ahya...



http://www.bloomberg.com/news/articles/2...an-stanley
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#2
Dan\82 Wrote:To understand today’s global economy, look back 80 years.



Sorta...
Dan\82 Wrote: Just like in the 1930s, growth is being constrained by companies unwilling to spend

::Facepalm::   NO.  What really happened is a down ratcheting of  worker demand as such:

Way back in the 1980's, corporations started a process of financial engineering/offshoring/outsourcing/labor uniong busting  to reduce the cost of labor. After some time you get a positive feedback loop as follows :

Let C(x) = company(1), company(2), company(3)... company(x)
P(C(x)) = aggregate profits.
W(C(x)) = aggregate private sector wages.
T(C(x) + W(x)) tax receipts from private sector.

y=1
The feedback loop can be described as such:

1:  C(y) -> does any of the aforementioned financial engineering.
P(C(2)...C(x)) = P - cost saving derived from C(1)
{
W = W - more financial engineering for C(y+1)
T = T - more financial engineering
}
y = y +1
goto 1


So corporate profits go up over a certain time span ... until falling demand catches up at the time of reckoning and profits start falling in tandem with wages.  Of course this does not include major screwups like the black swan year of 2008. The black swan was when the banking system seized up from outright fraud and some unseen event exposed it.  Of course 2008 type stuff can feed into falling demand. The economy has gone nowhere for most folks because the feedback is still going on.

Dan\82 Wrote:falling inflation expectations


That's a symptom and a minor detail. The big detail is falling wages and debt serf nation. If your wages are falling and you're up to your eyeballs in debt, you ain't gonna buy much.  Add in aging population and that's more demand destruction. Middle aged folks don't need stuff beyond replacing broken stuff and perhaps more healthcare.


Dan\82 Wrote:and governments backing away from fiscal stimulus.

The US governments at most levels have huge debts. I'm sure MMT has some assistance, but it's not unlimited.

Dan\82 Wrote:The trigger for the current malaise was the financial crisis that left a hangover of debt and deleveraging amid tighter banking regulations that are exacerbating deflationary pressures.

Huh?  Why are there 120% LTV house loans and subprime autoloans then?

Dan\82 Wrote:It’s similar to the kind of shock that preceded the 1930s slump, according to an analysis by Morgan Stanley economists led by Hong Kong-based Chetan Ahya...

Sorta and sorta not. The demand destruction began in the 1980's and here it is 2016. That's 30 years of a clusterfuck.  Offshoring/outsourcing are new.  Henry Ford for example knew that demand for his stuff originated from wages.  Our loser MBA's did precisely the opposite. Here's hoping they all get replaced by an algo.  After all, it's not hard to do.  The algo can just read spreadsheets and use a number of function calls as such:

outsource(spreadsheet,true,false);
offshore(spreadsheet,true,false)
layoff(spreadsheet,true,false);
stockbuyback(spreadsheet,true,false);
lietoregulators(spreadsheet,true,false);
dressinsuit(spreadsheet,true);
enhanceshareholdervalue(spreadsheet,true,false);
saybuzzwords(true);

If one looks at those function calls, it should be easy to surmise that the C suite is the easiest cost to reduce.
Get a robot, program it with above algo, and dress the thing in a suit.  Next fire all the fuckwit MBA's and get real shareholder value.


Quote:http://www.bloomberg.com/news/articles/2...an-stanley

Uh, why can't Bloomberg do a write up on which CEO's are the least cost effective so they can be shitcanned first?

It's been oh so long, but at last

* dumdum award for Corporate America

[Image: The_Great_Gazoo.png]
---Value Added Cool
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#3
Workers can avoid buying new stuff by keeping and using their old stuff. People in economic distress do not replace a ten-year-old divan.
The ideal subject of totalitarian rule is not the convinced Nazi or the dedicated Communist  but instead the people for whom the distinction between fact and fiction, true and false, no longer exists -- Hannah Arendt.


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#4
Most people in economic distress don't even know what a divan is. Besides fainting couches went out of fashion several decades ago. In any event I don't predict that MMT will be of much use now. The Fed has been talking about negative interest rates which actually destroys the concept of money itself.

https://mises.org/blog/dumb-and-dumber-%...pter-money

I've become convinced what we need to do, what we should have done from the start was to let the whole works crash and burn. Trying to prop up a system so fragile will only make the inevitable failure that much worse.
It really is all mathematics.

Turn on to Daddy, Tune in to Nationalism, Drop out of UN/NATO/WTO/TPP/NAFTA/CAFTA Globalism.
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#5
Ragnarok -- it is the speculative boom that is the true disaster. It devours capital that might be used just about anywhere else to better effect, and it quickly forces a ride down the curve of diminishing returns. Prices in the object of the boom rise, but but without a foundation in sustainable prosperity. Whoever is caught as the last buyer gets burned worst, but anyone else who got in during the boom gets to endure a loss.

Speculative booms cover much fraud. Some people see the paper profits as genuine growth and decide to take a secretive cut (embezzlement) so that they can join in on the sure thing. But the paper profits are themselves fantasy. When people quit believing in the Ponzi schemes the whole edifice becomes as useful as the old Packard plant in Detroit.
The ideal subject of totalitarian rule is not the convinced Nazi or the dedicated Communist  but instead the people for whom the distinction between fact and fiction, true and false, no longer exists -- Hannah Arendt.


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#6
Pbrower2a Wrote:Ragnarok -- it is the speculative boom that is the true disaster. It devours capital that might be used just about anywhere else to better effect, and it quickly forces a ride down the curve of diminishing returns. Prices in the object of the boom rise, but but without a foundation in sustainable prosperity. Whoever is caught as the last buyer  gets burned worst, but anyone else who got in during the boom gets to endure a loss.

You won't get an argument from me on that one. 

1. I know first hand about the aftermath of the 1980's oil boom/bust. My first house was a half off fire sale foreclosure in Houston.  I know this because for some odd reason, the mortgage holder sent a letter to the former owners stating that their current mortgage was about $79,000.  I bought the house for $40,000.  I have no idea why they sent that letter.

2. http://www.doctorhousingbubble.com/san-f...ouseholds/

Does this sort of thing look sane to you?  It sure doesn't look that way to me. In this case again, I might add is that houses are the object of some crazy speculative boom. Of course you'll get the same refrain - "this time it's different".  

Quote:Speculative booms cover much fraud. Some people see the paper profits as genuine growth and decide to take a secretive cut (embezzlement) so that they can join in on the sure thing.

Yeah,  the S&L crisis in Texas was an example of that one. At least people went to jail back then, unlike 2008.

Quote:But the paper profits are themselves fantasy. When people quit believing in the Ponzi schemes the whole edifice becomes as useful as the old Packard plant in Detroit.

Sometimes mass foreclosures lead to blight  ... You'd be amazed on how correct the above statement is.
http://www.lohud.com/story/news/local/ro.../84245420/
---Value Added Cool
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#7
(06-26-2016, 11:03 AM)Kinser79 Wrote: Most people in economic distress don't even know what a divan is.  Besides fainting couches went out of fashion several decades ago.  In any event I don't predict that MMT will be of much use now.  The Fed has been talking about negative interest rates which actually destroys the concept of money itself.

https://mises.org/blog/dumb-and-dumber-%...pter-money

I've become convinced what we need to do, what we should have done from the start was to let the whole works crash and burn.  Trying to prop up a system so fragile will only make the inevitable failure that much worse.

I have been saying this for years since this sleigh ride started about eight years ago.  I see you have been studying real economics.
Democracy is the theory that the common people know what they want, and deserve to get it good and hard. -- H.L. Mencken

If one rejects laissez faire on account of man's fallibility and moral weakness, one must for the same reason also reject every kind of government action.   -- Ludwig von Mises
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