Max Keiser interviews Steve Keen from Debtdeflation.com. It has been five years since global debt crisis began. The debt is now so great that it can no longer be hidden. Max and Steve discuss what triggered the current debt crisis as well as the Great Depression, and the way in which bankers have been instrumental in both. Steve Keen is a professor in economics and finance at the University of Western Sydney and the author of Debunking Economics. Here is a direct link.
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I thought gold was supposed to get pounded out of existence. Instead, it’s up 39 to 1,691.00
Time to get short Danielle?
“Money is like a sixth sense-and you can’t make use of the other five without it.”
( Somerset Maugham )
A Keynesian analysis of what’s gone wrong would not yield up much of an explanation because Keynes doesn’t tend to deal with underlying problems, only with “solutions.”
Real inflation
http://www.zerohedge.com/news/guest-post-shape-40-years-inflation
Iceland seems to be on the right track…
http://www.icenews.is/index.php/2012/08/22/icelands-recovery-continues-declared-impressive/
Iceland’s recovery continues, declared ‘impressive’
Posted on22 August 2012.
Experts continue to praise Iceland’s recovery success after the country’s bank bailouts of 2008.
Unlike the US and several countries in the eurozone, Iceland allowed its banking system to fail in the global economic downturn and put the burden on the industry’s creditors rather than taxpayers.
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http://www.bloomberg.com/news/2012-02-20/icelandic-anger-brings-record-debt-relief-in-best-crisis-recovery-story.html
Icelandic Anger Brings Debt Forgiveness in Best Recovery Story
By Omar R. Valdimarsson – Feb 19, 2012
Icelanders who pelted parliament with rocks in 2009 demanding their leaders and bankers answer for the country’s economic and financial collapse are reaping the benefits of their anger.
Since the end of 2008, the island’s banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population, according to a report published this month by the Icelandic Financial Services Association.
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http://www.businessweek.com/news/2012-08-12/imf-says-bailouts-iceland-style-hold-lessons-for-crisis-nations
IMF Says Bailouts Iceland-Style Hold Lessons in Crisis Times
By Omar R. Valdimarsson on August 13, 2012
Iceland holds some key lessons for nations trying to survive bailouts after the island’s approach to its rescue led to a “surprisingly” strong recovery, the International Monetary Fund’s mission chief to the country said.
Iceland’s commitment to its program, a decision to push losses on to bondholders instead of taxpayers and the safeguarding of a welfare system that shielded the unemployed from penury helped propel the nation from collapse toward recovery, according to the Washington-based fund.
“Iceland has made significant achievements since the crisis,” Daria V. Zakharova, IMF mission chief to the island, said in an interview. “We have a very positive outlook on growth, especially for this year and next year because it appears to us that the growth is broad based.”
Iceland refused to protect creditors in its banks, which failed in 2008 after their debts bloated to 10 times the size of the economy. The island’s subsequent decision to shield itself from a capital outflow by restricting currency movements allowed the government to ward off a speculative attack, cauterizing the economy’s hemorrhaging. That helped the authorities focus on supporting households and businesses.
We must remember that a banker is a guy in an expensive suit lending you someone else’s money.
I agree with Professor Keen that the money is lost and a poorer world has to forget the loans and investments that were made and move on. Fairness and moral outrage demand justice, but justice is a rare commodity. In banking it is an unknown commodity because it is not the banker’s money that is lost so how do you punish them for their wrongdoings. Also as long as the charade of central banks liquefying banks (QE n+) continues there will be no reconciliation of these loses.
Professor Keen’s suggestion of governments directly giving money to people won’t work. The US budget problem today is that social security and medical program spending is driving the current and future levels of debt out of control. Now Professor Keen wants to add unfunded income security on top of this. It’s like accelerating on the road to hell.
Governments are already giving away money and these are the QE’s. We haven’t seen consumer inflation because consumers never get that money, but there have been huge gains (inflation) in bonds and equities (S&P 500 has doubled since 2009). If the QE’s stop then bond prices will fall, interest rates will rise and loan payments will rise for governments and individuals causing massive defaults.
The developed economies are grieving their loss of wealth. In the five stages of grief there are the early stages of denial, anger and bargaining and that is where we are now but, in the end, the final stage is acceptance. Accepting that the wealth (money) is lost and moving on. But sadly for us, acceptance comes after the fourth stage which is depression (in our case emotional and economic) and we will have to eventually face that stage before we can reach acceptance.
Let’s look a little deeper at Iceland.
From the article by Mr. Valdimarsson
“In Iceland, the krona’s 80 percent plunge against the euro offshore in 2008 helped turn a trade deficit into a surplus by the end of the same year. Unemployment, which jumped nine-fold between 2007 and 2010, eased to 4.8 percent in June from a peak of 9.3 percent two years ago.”
A little reasearch on the Internet shows that a 2005 Ford Explorer sells for about 7 years of average wage.
Will those levels currency devaluation solve the economic problem…you bet! But ouch.
Will the real cause of the financial collapse please stand up:
It was our current president!!!!! YES, it’s true – you cannot make this stuff up:
http://scrapetv.com/News/News%20Pages/Politics/pages-6/President-Obama-apparently-caused-the-subprime-mortgage-crisis-all-by-himself-Scrape-TV-The-World-on-your-side-2012-09-03.html
another one:
http://news.investors.com/ibd-editorials/090412-624522-obama-launched-subprime-crisis-with-lawsuit.htm
more:
http://www.jdnews.com/articles/republicans-107798-straight-economic.html
Sure, the bankers, and even Obama himself, are responsible for the debt crisis. But so are the vast majority of the rest of the adults in this nation. Many of us (maybe most of us) have benefited from the out of control government spending and idiotic low interest rates; at least to date we have benefited.
I think the solution should be pain for all: for me, for you, for every economic class. I don’t think it would need to be awful pain, just mild pain for a few years. We need across the board spending cuts in every level of government from the Homeowners Association to the Defense Department, WITHOUT EXCEPTION. AND we need across the board tax increases for every tax payer WITHOUT EXCEPTION. A 20% cut in government spending and a 10% increase in taxes will go a long way toward balancing the budget, then we can get busy amending the constitution to not allow deficit spending in the future.
The problem? The young people want to blame the boomers, the poor want to blame the rich, the rich want to buy politicians and get richer and the politicians are happy to sell out the country in exchange for more money, blah, blah, blah… – WE HAVE A NATION OF SELFISH PEOPLE WHO DO NOT CARE ABOUT THE COUNTRY. NOONE IS WILLING TO SACRIFICE. IF THIS DOESN’T CHANGE SOON WE ARE GOING DOWN HARD. IT MAY ALREADY BE TOO LATE.
Roberta, thanks for posting. Your post beautifully illustrates the denial, anger and bargaining that I talked about in my post. I do disagree with you that what you are proposing will cause “just mild pain”. My guess is that the US passed that stage in the late 90’s. This is a real problem and I think it will cause some real pain.
Barack Obama? He promised what he could not deliver then he failed to deliver what he promised and so will the next President. Elections are popularity contests based on denial and anger.