The Great Depression Ii?

[pongo]

Its quite simple woolly, anyone can make money in times of good, but only clever peeople can make money when times are hard, pongo is wise enough to see a depression as an opportunity.

 

Well I'm not some kind of genius spiv pauld So if you say "opportunity" - well that might not mean money or material wealth per se. I'm really just saying that I trust myself to try to do my best and to try to find it interesting. And that's what I mean about not being worried.

[Matt Bawden]

Are we within days/weeks of a complete financial meltdown? Time to learn Mandarin?

我们都注定死於贫困。 ... but obesity levels will continue to rise, beer, fags and ipods will still outsell fresh vegetables, books and getting out in the fresh air for some exercise.

 

Its always a bit dangerous wondering what the future will hold - but I've a feeling we are more robust than many people claim - sure there's been the oil shock, stagflation, Thatcher's cuts, Major's bust, the Asian financial crisis, the tech crash, the bank crash and now the lingering hangover of the various debt crises, but have things really been so terrible overall over the last 40 odd years?

 

I don't discount the huge hardship the unemployed etc face - but for the vast majority that is a temporary burden and for those not so burdened I don't think people will face terrible suffering if the TV doesn't get replaced quite as quickly, the cars, on average, are a few years older and that easter holiday in the sun gets cancelled.

 

For me the mindset of taking on too much debt, often to pander for materialistic treats rather than necessities, wasn't economically or socially healthy.

 

Maybe the slowdown will be a chance for society to think what its priorities are.

 

Material destitution does exist, but I suspect the bigger problem is people placing their happiness in excessive materialism.

 

Measure your wealth through your lack of wants, not material things, and understand how society and culture nurtures your wants via advertizing and social pressures.

 

In the 1930s people starved, now we face an obesity epidemic and rising deaths from diebeties etc - both are symptoms of serious problems within society, but I'm not convinced that our problems currently are totally economic - I feel we face more serious political and cultural problems.

 

Obviously they are interlinked, but over a 40 year time span, I'm not that worried about Europe's debt, or Barclay's liquidity - rather its how to get people being useful members of society, satisfied with their lot.

 

China has brought, and will bring, lots of opportunities, but also changes - the massive hardwork the ordinary people have put in to uplift themselves, in the face of political oppression, corruption, and a misdirected communist rhetoric is really something to inspire - but its also a wake up call - there's no free ride in this world.

 

Has the west been living on the never never while the east has laboured - probably, but I don't think that needs to bring total disaster on us - rather a change in mindset. C'est la Vivre!

 

What a fantastic post....probably the best I've read on MF

[Gladys]

This is not big, nor clever.

[Gladys]

Very simplistically, has 'money' had its day? Money, currency or cash is only a token for an underlying value. But, with the various financial shenanigens of the past few years, the connection between money and real value has widened. A simple example, because that is what I understand, with the layered securitisation of low quality debt (ie debt that had a high probability it would never be repaid), you could buy say USD1million of debt at a discount, say USD750K, but you were betting that actually that because the debt was mixed and the risk spread through securitisation, the likelihood was that the repayment would be nearer, say, USD900K so that was marketable. So, although there was a loss on the issue value, the price you bought at and the eventual sale gave to a profit of USD150K; not a bad deal. And so it would go on, with the securitised debt being traded on its own merit, not the merit of the tangible thing it was supposed to be secured on.

 

There lies the disconnect between money and something of real worth.

 

So the next question has to be why the flight of money from Europe to the US? Given the importance of the dollar (Bretton Woods, thank you dearly, great idea at the time but we are paying for it now), the only way to ensure stability in currencies linked to the dollar (and most western economies, indeed international trade, are linked) is to fly to support it; there is no other reason, it certainly isn't an economy that would be a natural choice for investment. Keeping the dollar buoyant as it is the international trade currency is critical to avoid a complete economic meltdown. (If dollars were blue glass beads and I had a lot or the customer I dealt with converted his red glass beds at an acknowledged rate of two blue to one red, I know how much blue glass bead value I have. But then someone comes in with green glass beads and says blue glass beads are worthless, then I would push him out and say no they aren't because I want more and value my blue glass beads, so preserving my perceived wealth) Again, 'money' of itself is a failed economic tool unless it correlates to an underlying tangible value.

 

Too late to undo it now, unless anyone has an appetite for a return of the gold standard?

[ScotsAlan]

 

China has brought, and will bring, lots of opportunities, but also changes - the massive hardwork the ordinary people have put in to uplift themselves, in the face of political oppression, corruption, and a misdirected communist rhetoric is really something to inspire - but its also a wake up call - there's no free ride in this world.

 

Has the west been living on the never never while the east has laboured - probably, but I don't think that needs to bring total disaster on us - rather a change in mindset. C'est la Vivre!

 

Totally wrong.

 

The success of the east is nothing to do with hard working drones working under an oppressive and corrupt Government.

 

It is greedy shareholders that pushed manufacturing east. All China done was market it'self as a low cost base. "Come here" they said, and see your profits raise...

 

And the companies went their in their droves, not quite understanding that by getting their costs down by making redundancies in the west, they were actually depleting their market.

 

But China had an answer. they told the internationals not to worry, because they would develop the Chinese consumer market, so there was new people to sell product to. More money to be made. Don't worry about the west, we are the new market.

 

But the Chinese consumer market has not developed as they had hoped... so the profits went down..and the manufacturing costs are going up.

 

The Ironic thing, in my opinion anyway, is that the biggest investors in China are probably our very own pension funds. They promised us a big return, but they did not tell us we would need to lose our jobs in the process :-(

 

Compared to the west, China is incredibly inefficient at manufacturing. But what they do have is a smart Government who know how to make things happen. Something which we are sadly lacking....

 

rant over :-)

 

Edit to add... I think the mistake China has made is not to have universal health care. Because to have a consumer market, you need some sort of health system you can rely on. Ok, the US does not have free healthcare, but consumers can buy insurance. That's not the case in China. Health insurance and hospitals are unreliable. So people save money for sickness. You can't create a consumer market in those conditions.

[woolley]

"Too late to undo it now, unless anyone has an appetite for a return of the gold standard?"

 

Yes!. Huge mistake (or con depending on your point of view) coming off it.

[pongo]

"Too late to undo it now, unless anyone has an appetite for a return of the gold standard?"

 

Yes!. Huge mistake (or con depending on your point of view) coming off it.

 

1. Returning to the gold standard resulted in the world economic depression which ultimately resulted in WW2. It supressed the creation of liquidity and therefore investment.

2. Why gold ? For historical traditional reasons or because it looks pretty ? Why not some more useful element such as lithium or uranium which are traded on more than sentiment. Or oil.

[Evil Goblin]

I have to agree with Pongo on this - a return to a gold standard (or any other physical object) would be disastrous for the world economy and hence human beings. Fiat currency has enabled the expansion of economic activity and the improvement of the material standards of human life which could never have been achieved under the Gold Standard. The problem is that the fiat currency system has been mismanaged by Central Banks and Governments over the decades with the all too obvious results.

[Ringwraith]

[woolley]

"Too late to undo it now, unless anyone has an appetite for a return of the gold standard?"

 

Yes!. Huge mistake (or con depending on your point of view) coming off it.

 

1. Returning to the gold standard resulted in the world economic depression which ultimately resulted in WW2. It supressed the creation of liquidity and therefore investment.

2. Why gold ? For historical traditional reasons or because it looks pretty ? Why not some more useful element such as lithium or uranium which are traded on more than sentiment. Or oil.

 

Don't accept that the rise of Hitler would have been avoided. That was due to lots of other factors, chief among them the harsh terms of Versailles.

 

OK, maybe another commodity other than gold but at least some inbuilt discipline. The fact that the 1913 pound of the gold sovereign has lost nearly 99% of its value in less than a hundred years tells me all I need to know about the "promise to pay the bearer".

[pauld]

i could never understand golds intrinsic value, i mean what use is it really, might aswell just have a limited number of shiny beads.

i mean so what if some dastardly bankers ended up with all the worlds gold, what use would it be to them, not as if people would go short of shiny jewelry.

 

the only thing about gold that i can see is it cant be faked.

[pongo]

the only thing about gold that i can see is it cant be faked.

 

If you can physically get your hands on it and have it tested then it cannot be faked. But who knows whether all of the gold many people are invested in actually exists. The liberal libertarian US Ron Paul has argued, for example, that Fort Knox should be audited. He may have only been half joking.

 

Also - Google: irregular physical gold settlements.

[pauld]

So what is the upshot if the yanks are ever pressed to deliver to an investor, an investor such as a major country, and some of it is fake, as has already happened as per your link.

 

And the gold can be electrically tested according to one of those sites, so wouldnt any governments holding gold know if some was fake, as surely it would be tested.

 

and i get your point about metric tonns claimed to exist, and not all of it actually existing.

[pongo]

dunno. Many of those links are the same source syndicated.

 

I suppose that a thing about gold is that it holds a special almost atavistic and mystical attraction - so it does inevitably tend to be the subject of tales of conspiratorial intrigue and political shenanigans. And gold is popular with people who are certain that govt money is a con.

[Gladys]

You are all missing the point, really. My point is that for too long the tokens that are money have had little real value behind them and the tokens have been traded now to exhaustion. Money should be linked to something meaningful and beneficial, not some high stakes gambling game of whatever hue dependent on someone's stomach for a gamble.