World financial crisis Part 5

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NDPP

A Record $31.5 Trillion Hoarded By Corporate Oligarchs

http://wsws.org/en/articles/2018/09/08/pers-s08.html

"In other words, a group of oligarchs equal in number to the population of Plano, Texas or Nottingham, England, own more than the poorest 80 percent of the world - some 5.6 billion people..."

Time for some serious global housecleaning and wealth redistribution

epaulo13 epaulo13's picture

To Stop the Next Financial Crisis, We Need Public Ownership of Banks—Now

quote:

Public ownership of banks is not as crazy as it may sound. It has been the default political response to financial crises around the world for decades—including in the United States 10 years ago when the government took controlling ownership positions in Fannie Mae, Freddie Mac, AIG, Citigroup, and GMAC, and provided capital injections to over 700 banks.

Almost all commentators who supported these bailouts and short-term nationalizations emphatically rejected long-term public ownership. Such offhand judgments, however, deliberately ignore the extensive, and often highly successful, experience with public banking both in the United States and around the world.

Across Europe, more than 200 public and semi-public banks account for roughly a fifth of all bank assets. In Germany, the Sparkassen, a network of around 400 publicly owned municipal savings banks, “[came] through the crisis with barely a scratch,” according to the Economist, unlike some of the country’s larger private banks. The nearly 100-year-old Bank of North Dakota, which has around $7 billion in assets and a loan portfolio of $4.9 billion, is widely credited with helping the state get through the 2008 crisis with the lowest foreclosure and credit card default rates in the country, and with no bank failures for more than a decade. The bank made loans while private banks were freezing credit, all while continuing to contribute revenue to the state’s budget.

Before the financial crisis, neoliberal economics and public policy dismissed publicly owned banks as a relic of the past, the prevailing wisdom being that they were inherently less efficient than private banks. However, the available research does not universally support that “wisdom.” For example, the Organization for Economic Cooperation and Development, in a 2014 summary of available research of publicly owned German banks, concluded that “savings banks appear to be at least as efficient as commercial banks.” Similarly, researchers in the United Kingdom found in 2010 that “the notion that governments [can’t] run banks effectively” was “not well founded” and “if anything, government ownership of banks has, on average, been associated with higher growth rates.”

Mr. Magoo Mr. Magoo's picture

By a "publicly owned bank" do you mean publicly owned via the state?  I think the problem there would be that the state can only own one bank (or, go through the sham of owning four banks).  There would be no competition, and no options.

Or, do you mean a "co-op"model in which the bank is owned by its users?  In which case we don't need to invent these, or do anything really, because they already exist.

Funny thing, though:  when people have complained that workers' co-ops and other communally owned business endeavours cannot get financing through private banks (who hate them for their freedoms!) I've suggested going to co-ops -- basically a bank built on the exact same model as the worker's co-op -- but apparently they sometimes say "no" too!

iyraste1313

But while out of control government spending is clearly a concern, an even bigger problem is what happens to not only the US debt, which recently hit $21.3 trillion, but to the interest on that debt, in a time of rising interest rates.

As the following chart shows, US government Interest Payments are already rising rapidly, and just hit an all time high of $538 billion in Q2 2018. 

Interest costs are increasing due to three factors: an increase in the amount of outstanding debt, higher interest rates and higher inflation. Needless to say, all three are increasing; furthermore, a rise in the inflation rate boosts the upward adjustment to the principal of TIPS, increasing the amount of debt on which the Treasury pays interest, turbocharging the amount of interest expense.

The bigger question is with short-term rates still just around 2%, what happens when they reach the mid-3% as the Fed's dot plot suggests it will?

...checkmate?

Mr. Magoo Mr. Magoo's picture

I thought public debt was a good thing, and we should not vote for those parties that won't heap more of it on us.

Quote:
...checkmate?

If you mean "the all-out collapse of the financial market, and the rise to power of citizens' collectives", I'm going to put my chips on "no".

But if you mean governments -- supported by their right-wing contingent who wants no debt, and also by you who is scaremongering it -- slashing spending, well, that I might put a few bucks on.

iyraste1313

Debt Threat Rises: The Government Will Soon Spend More On Interest Than On The Military

Authored by Mac Slavo via SHTFplan.com,

As debt and interest rates rise, the government is about to be in a disastrous situation. Very soon, they will spend more money paying interest on the national debt than they will on the bloated military budget.......

...and as the market rate and the Fed rate is expected to continue to rise? With the trade war with China, means increasing inflation of real goods imported to the US...with a continuing flight to "safety"? to US markets as the global financial collapse carries on? meaning high US dollars and uncompetitive export products? ad nauseum!

Major political upheavals as the economics and finances become unsustainable....strategic reexamination of our politics is essential!

Mr. Magoo Mr. Magoo's picture

Quote:
As debt and interest rates rise, the government is about to be in a disastrous situation. Very soon, they will spend more money paying interest on the national debt than they will on the bloated military budget.

Huh.  It's a shame that "balanced budgets" are such a right-wing conspiracy to de-fund things that could be funded by putting them on the People's Credit Card.

And now it's a problem?

Certainly if the battleship fleet doesn't get their new coat of "freedom paint" that's not a problem.  But we probably shouldn't act like national debt is worthy of concern, lest we give comfort and succour to the people who've consistently argued against it (not to mention pushing under the bus all those people who say "spend, spend, now is the time to borrow and spend and spend and borrow..."

NDPP

Keiser Report: Helicopters in Demand as Empire Crumbles

https://youtu.be/6Ey0yAxPkM4

"Max and Stacy discuss helicopter money being promised to rescue stock markets for the next crash and the helicopter rescue of reserve currency status as more and more nations, including Germany - reject the hubris of the hegemon..."

NDPP

Professor Richard Wolff - Global Capitalism: Economic Nationalism 

https://youtu.be/fqrU_Qw0R_o

"As global capitalism changes, each country tries to grab gains from and shift losses onto others: nationalist hostility becomes the new 'spirit of the age'..."

NDPP

Against Globalisation: Deciphering Geo-Political Games (podcast) *MUST HEAR*

https://michael-hudson.com/2018/09/deciphering-geo-political-games/

"Professor Michael Hudson dismisses the globalisation fallout as new trading blocs distance themselves from US dollar-denominated trade. Will the US be able to maintain its imperialist tendencies in light of these trends? How much further can the rentiers push their free-for-all?"

NDPP

Dow Jones Drops Almost 500 Points After Major Stock Market Declines in Europe & Asia

https://on.rt.com/9h2n

"Main US equities crashed after the opening bell on Wall Street. American stocks joined a global sell off that hit stock markets in Europe and Asia on Tuesday..."

epaulo13 epaulo13's picture

Unintended Consequences: US Sanctions on Russia and Iran Weaken Dollar’s Rule

As the US tries to keep countries such as India from dealing with Iran and Russia, it is driving more and more countries to seek alternatives to the US dollar, threatening the dollar’s hegemony, says Vijay Prashad

NDPP

This critical area was addressed by Putin recently

https://youtu.be/4fECrSQ9ifM

"It's a typical mistake of empires..."

Pondering

Mr. Magoo wrote:

Quote:
As debt and interest rates rise, the government is about to be in a disastrous situation. Very soon, they will spend more money paying interest on the national debt than they will on the bloated military budget.

Huh.  It's a shame that "balanced budgets" are such a right-wing conspiracy to de-fund things that could be funded by putting them on the People's Credit Card.

And now it's a problem?

Certainly if the battleship fleet doesn't get their new coat of "freedom paint" that's not a problem.  But we probably shouldn't act like national debt is worthy of concern, lest we give comfort and succour to the people who've consistently argued against it (not to mention pushing under the bus all those people who say "spend, spend, now is the time to borrow and spend and spend and borrow..."

The right builds deficits through cutting taxes for the wealthy and then uses them as an excuse to cut public services. Ideally the deficit is stimulating growth so the debt to GNP drops even though in absolute termst he debt is larger. 

NDPP

Stock Market Drops Again, Wiping Out 2018 Gains For the Dow and S&P 500

https://t.co/VSsBMZwcIV

"The latest swoon, which knocked the S&P 500 down more than 3 percent Wednesday, signaled to many Wall Street pros that the decline was entering a new, more dangerous phase..."

Mobo2000

Matt Taibbi on this:

https://www.rollingstone.com/politics/politics-news/stock-market-slump-t...

"

In any trade war with China, the United States would seem to have an advantage. We import a lot more of their goods (last year, about $524 billion in Chinese products) than they import of ours (about $188 billion of U.S. exports). But all of this is moot if China suddenly stops buying U.S. debt, or even just slows down a bit.

Experts claim to think this is unlikely, given China’s own dependence on U.S. Treasuries as a safe destination for its trillions in foreign exchange reserves.

Bloomberg over the summer wrote, “Treasuries are nearly as crucial an underpinning to China’s economic plumbing as America’s.” They quoted a Goldman Sachs analyst who added: “We don’t see any evidence that China is planning to use Treasuries as part of its trade negotiations.”

But what if Trump’s big populist gambit announced in September — slapping 10 percent tariffs on $200 billion of Chinese products — hurts the Chinese economy to the point where they can’t afford to keep subsidizing our exploding debt? What if it just dulls their enthusiasm for doing so?"

NDPP

Former Fed Chair Warns of New Financial Crisis

https://www.wsws.org/en/articles/2018/10/26/yell-o26.html

"In the midst of increasing volatility on global financial markets, the former chair of the US Federal Reserve, Janet Yellen, has pointed to a potential source of major instability with 'systemic risks'. The warnings by Yellen and major financial institutions point to the undeniable fact that ten years after the global financial crisis, none of the contradictions of the global economy and financial system have been resolved. Indeed the very measures enacted by the Fed and other central bankers in propping up the system through the injection of trillions of dollars have only created the conditions for an even bigger disaster..."

NDPP

Rescuing the Banks Instead of the Economy (audio)

https://soundcloud.com/guns-and-butter-1/rescuing-the-banks-instead-of-t...

Prof Michael Hudson: 2018 marks the 10th anniversary of the stock market crash of 2008. 

Sean in Ottawa

The point obvious from a few posts is that the economy has ben in crisis for a while. The stock market is catching up. The policies that make the stock market do well often make the economy most people live in fail.

There is a degree of uncertainty drive by US elections and so the stock market tends to perform badly before them and well after. However, the real economy of everyone else is decided by other factors. of which this is only a small part of it.

iyraste1313

Unprecedented "Desperation" Lending Directive Sends Chinese Stocks Reeling

 

 

by Tyler Durden

Fri, 11/09/2018 - 08:27

 

¨On November 8, China shocked markets with its latest targeted stimulus in the form of an "unprecedented" lending directive ordering large banks to issue loans to private companies to at least one-third of new corporate lending, said Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission. The announcement sparked a new round of investor concerns about what is being unsaid about China's opaque, private enterprises, raising prospects of a fresh spike in bad assets.

Guo’s comments were the latest attempt by authorities to try to improve funding access for China’s non-state companies, which have been struggling to get bank loans in the aftermath of China's crackdown on shadow lending. More importantly, it was the first time financial regulators had given targets on private lending, confirmation that earlier efforts hadn't sparked the necessary credit activity.

More importantly, this is the first time China set formal goals for private lending, a step it refrained from even during the financial crisis of 2008 according to BloombergThe stimulus package it implemented at the time swelled bad debt levels, which now threaten to swallow any new money poured into private companies. Non-state firms defaulted on 67.4 billion yuan ($9.7 billion) of local bonds this year, 4.2 times that of 2017, while the overall Chinese market is headed for a year of record defaults in 2018

...I can´t remember the exact percentage drop of the China and Asian stock markets.....but this is where the financial collapse has been expressing itself most recently....It´s a chain reaction of falling dominos, first with the ¨emerging markets¨, Argentina, Turkey, Brazil etc......now well into the collapse of Asia...the stagnating western imperialist markets along with its deteriorating real estate bubbles is another sign of the worse to come for us...we are well into the final collapse of industrial oligarchic capitalism, globally.....

iyraste1313

November 9 - Bloomberg (Saijel Kishan): "After beleaguered hedge fund managers had their worst month in seven years, many are bracing for an industry D-Day: Nov. 15. That's the deadline for investors to put managers on notice to get some -- or all -- of their money at year end. If history is any guide, the rush for the exits will be swift and accelerate. Clients have already pulled $11.1 billion even before funds fell into the red for the year. The last time the industry careened toward annual losses was in 2015…The fallout: clients withdrew $77.2 billion between the fourth quarter of that year and the first quarter of 2017 -- the biggest withdrawals since the global financial crisis.

 ¨However, the real economy of everyone else is decided by other factors. of which this is only a small part of it.¨

i.e. Sean´s reference to the bursting financials.....the Dow stands on its financial manipulators and e.g. its MBS or Mortgage Backed Securities....the flight from these will seriously impact the real estate market...

The US corporate bond market is in serious decline...so many of our favourite corps and their prices in the markets depend of their capacity to borrow from their collaborating big banks...but with bond rates reaching junk status for most? The cost of borrowing will bury them into bankruptcy!

iyraste1313

 

"The Collapse Has Begun" - GE Is Now Trading Like Junk  by Tyler Durden, zerohedge.com

GE of course is a major player in the world of mafiosa like finance, an anchor to the Dow Index and a major player in mortgage backed securities...the collapse beginning with the bursting of the Emerging Market bubble late February, is now picking up steam, with the Dow on target!

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