A new crash

[Young Master Smeet]

OK, we're only 8 years since the last slump, but yesterday's stock markets have given a lot of people juitters.  The steel industry is crashing and burning in the UK, oil has gone for a burden (which will impact North Scotland badly).

Damian McBride (former spin doctor to Gordon Brown, and resident of Norf Islington) has been prognosticating another slump for somewhile.  Today the Scum has given him a column:

http://www.thesun.co.uk/sol/homepage/news/politics/6875587/Former-special-advisor-to-Gordon-Brown-Damian-McBride-warns-UK-on-brink-of-recession.html

McBride wrote:

So here’s the really bad news. Yesterday, the Baltic Dry Index hit its lowest level EVER.

  he explains what that index does:

McBride wrote:

how much it costs to ship iron, coffee beans and other raw materials around the world — that’s what the Baltic Dry Index tells you

. So raw materials aren't being shipped.

McBride wrote:

But now China is in serious trouble. Its demand was a myth. They’ve built cities that no one lives in, airports that no one uses and factories that can’t sell their products.

So, it looks like an eight year cycle, 1992, 2000, 2008, 2016? I know it won't be that exact, but basically, it took around four years to clear away the debris of the last slump, growth has returned, albeit pathetic growth in the UK.  So, last time round the US and US dodged the asian tioger crisis.  It may not hit us badly here, but essentially what we are talking about is pure bloody chaos.

[Young Master Smeet]

Paul Mason can see the cycle, and is deeply pessimistic:http://blogs.channel4.com/paul-mason-blog/governments-tackle-unsustainable-global-economic-trends/4336

Mason wrote:

But don’t let the apparent symmetry of the peaks fool you. This pattern of boom and bust is progressively destructive. The first peak destroyed the company pension system, whereby skilled workers and the salariat could expect to retire on around 2/3 their final salary.  The second peak destroyed the global banking system, hiked government debts to levels usually seen at the end of world wars and left the entire global economy on life support. The third downturn is happening because the effectiveness of that life support is running out.

[alanjjohnstone]

And it has really pissed me off, too…I took out an investment bond to provide a monthly income when i sold my house and got my redundancy money to move abroad…and the 2008 hit just months later, wiping out its expected returns for a number of years and now on the eve of it maturing you tell me another slump in the offing which will dramatically reduce its value, yet again….workers just can't win, can we?…arrrggggggggggg..So who do i blame?…the Chinese capitalist class  ..the oil producing countries now joined by Iran…Or me for believing i should save it instead of spending it while i could?

[alanjjohnstone]

Back to blaming the banks againhttp://www.independent.co.uk/voices/oil-is-a-goldilocks-problem-there-s-no-right-price-and-we-can-t-predict-what-will-happen-to-the-a6826351.html

[alanjjohnstone]

So according to this report, i'm wrong to suggest the blame is because of the Chinese bubble burstinghttp://www.theguardian.com/commentisfree/2016/jan/21/dont-blame-china-global-west-economic-recovery-asset-bubbles "…Unless you are a developing economy whose export basket is mainly made up of primary commodities destined for China, you cannot blame your economic ills on its slowdown…"

[Young Master Smeet]

https://www.google.co.uk/finance?q=INDEXFTSE:UKX(choose the All option) for the FTSE over the last 30 years.  If I'm looking at it right, the peak this time is on the trend line, which means can only go down below trend fairly quickly if we slump.

[alanjjohnstone]

Asia has the jitters again…http://www.theguardian.com/business/2016/feb/09/panic-situation-as-asian-stocks-tumble-amid-fears-of-new-global-recession. 

Quote:

“The ‘fear factor’ in markets has morphed from being about an emerging market hard-landing and collapsing oil prices to being about the extent of the slowdown in the developed world and the ability of central banks to reflate asset values yet again,” said analysts

[alanjjohnstone]

Not sure how refelctive this analysis appears since there was a lot ot take in but it does make interesting reading but it does centres the up-coming crisis on the West and the banks again rather than China's fall in growth.http://www.counterpunch.org/2016/02/10/the-return-of-crisis-everywhere-banks-are-in-deep-trouble/

[alanjjohnstone]

Over-production again?http://www.bbc.com/news/business-35533056

Quote:

Wang Shi, founder and chairman of Vanke, the world's largest home builder by sales."It's a real problem," he concedes. "Many cities have an oversupply of housing."…every Chinese city is ringed by empty developments…far too much was built and in the wrong places."In the west, if a city faces financial difficulties, it'll go bankrupt. But in China, cities will be subsidised by the Ministry of Finance. So some small- and medium-sized cities aren't worried about going bankrupt. They figure the central government will help them out."This is an extraordinary assertion from a major Chinese developer: that companies and local governments can spend, safe in the knowledge that Beijing will open its wallet if they run into difficulty. But this free spending by local governments has helped inflate the biggest debt bubble in world history – and it can't go on forever.

[alanjjohnstone]

Another view of the futurehttp://www.commondreams.org/news/2016/02/16/unlikely-critic-says-banks-still-too-big-fail-pose-nuclear-risk-us-economy

Quote:

Federal Reserve official Neel Kashkari warns "we won't see the next crisis coming, and it won’t look like what we might be expecting."….Kashkari, who was the 2014 Republican nominee for California governor, also expressed skepticism about whether regulatory tools created in the wake of the bailout "will be useful to policymakers in the…scenario of a stressed economic environment." He said:"Given the massive externalities on Main Street of large bank failures in terms of lost jobs, lost income and lost wealth, no rational policymaker would risk restructuring large firms and forcing losses on creditors and counterparties using the new tools in a risky environment, let alone in a crisis environment like we experienced in 2008. They will be forced to bail out failing institutions—as we were. We were even forced to support large bank mergers, which helped stabilize the immediate crisis, but that we knew would make TBTF worse in the long term. The risks to the U.S. economy and the American people were simply too great not to do whatever we could to prevent a financial collapse."

[Young Master Smeet]

http://www.theguardian.com/commentisfree/2016/feb/15/crime-terrorism-and-tax-evasion-why-banks-are-waging-war-on-cash?CMP=twt_guPaul mason pedicts the end of cash, as a possible emergency government response to prompt investment:

Quote:

Why would a central bank want to eliminate cash? For the same reason as you want to flatten interest rates to zero: to force people to spend or invest their money in the risky activities that revive growth, rather than hoarding it in the safest place.

Quite why people wouldn't hoard jewelery and gold is another matter.

Quote:

The advantages of a digital-only payment system to the user are clear: you can emerge from the surf in only your bathing shorts and proceed to buy beer, food, or even a small car, providing your balance is positive. The advantages to banks are also clear. Not only can all transactions be charged a fee, but bank runs are eliminated. There can be no repeat of the queues outside Northern Rock, nor of the Greek fiasco last summer, because there will be no ATMs, only a computer spreadsheet moving digital money around. The advantages to governments are also clear: all transactions can be taxed. Capital controls are implicit within the system.

[alanjjohnstone]

I was going to post on the robotics thread but since you brought up Paul Mason on this one, you might find his latest article on automation of interest.http://www.theguardian.com/sustainable-business/2016/feb/17/automation-may-mean-a-post-work-society-but-we-shouldnt-be-afraid

[alanjjohnstone]

An interesting readhttp://www.aljazeera.com/indepth/opinion/2016/02/china-true-economic-growth-rate-160217134132315.html

Quote:

China's exports fell  for the seventh consecutive month in January, fears are mounting about China's economy. China's purchasing managers' index also indicates contraction. Related indices that don't usually make the headlines are doing even worse. All eight business indexes published by   China's National Bureau of Statistics point towards recession. The open orders index, which tracks purchasing orders actually awaiting fulfilment, has been in negative territory for more than a year. The orders just aren't coming in…Taiwan's exports to China have fallen by double digits over the past year. Taiwan exports advanced components such as semiconductors that are used in China's manufacturing industries, which just aren't buying these days. South Korean companies are suffering even more. Korean exports to China are down more than 20 percent…The Chinese government has a special name for deficit spending: "Proactive fiscal policy". Proactive fiscal policy means pumping money into the economy to prevent a recession. The rest of the world calls this Keynesian economics. In 2015 China's national government spending rose at a wildly unsustainable pace of 15.8 percent. Local government spending may have risen even faster; nobody knows the true figures. At the same time taxes are being cut. And the State Council expects these "proactive fiscal policies" to be "continued and strengthened" in 2016. And China is doing much more than building bridges and cutting taxes – the orthodox Keynesian approaches to propping up a faltering economy. In a country where all commercial banks are state-owned, the government has the capacity to pump money into the economy through the banking system too… bank lending expanded at record levels in January…bank lending quadrupled between December and January, adding an extra $400bn to the economy. Adding in other government-sponsored lending programmes boosts this figure even higher…China claims not to be teetering on the brink of recession. If the Chinese economy really is growing at an annual rate of more than 6 percent, Keynesian economic policies make no sense.

[alanjjohnstone]

Another for the reading list http://www.counterpunch.org/2016/02/19/the-next-global-financial-fault-line/

[ALB]

Young Master Smeet wrote:

http://www.theguardian.com/commentisfree/2016/feb/15/crime-terrorism-and-tax-evasion-why-banks-are-waging-war-on-cash?CMP=twt_guPaul mason pedicts the end of cash, as a possible emergency government response to prompt investment:

Others have also speculated on the possibility of a "cashless society'':http://www.worldsocialism.org/spgb/socialist-standard/2010s/2014/no-1318-june-2014/cooking-books-towards-cashless-society

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