the next chapter of this global crisis the next chapter of this global crisis
Page 1 of 2 12 LastLast
Posts 1 to 10 of 11
  1. #1

    I Am Legend

    BrilloPad has reached the peak. Play again?


    Join Date
    Aug 2006
    Posts
    103,363

    Default the next chapter of this global crisis

    http://www.telegraph.co.uk/finance/c...al-crisis.html

    Swiss slide into deflation signals the next chapter of this global crisis
    Watch Switzerland closely. It is tipping into deflation, the first Western country to succumb to Japan's disease.

    Swiss consumer prices fell 0.4pc in March (year-on-year). Swiss CPI will be minus 1pc at least by July, nearing the level where spending psychology changes. By the time you have a self-feeding spiral, it is too late.

    "This is something that we must prevent at all costs. The current situation is extraordinarily serious," said Philipp Hildebrand, a governor of the Swiss National Bank.

    The SNB is not easily spooked. It is the world's benchmark bank, the keeper of the monetary flame. Yet even the SNB's hard men have thrown away the rule book, taking emergency action to force down the exchange rate of the Swiss franc.

    Here lies the danger. If other countries try to export deflation by this means, we will face a second phase of the global crisis. Taiwan is already devaluing. Korea, Singapore, and Sweden all seem tempted to follow. Japan is chomping at the bit.

    "We don't fully realise in the West what a catastrophic collapse Japan has suffered," says Albert Edwards, global strategist at Société Générale. "The West has dumped a large part of its economic downturn onto Japan by devaluing against the yen."

    This is about to go into reverse as Tokyo hits the ping-pong ball back across the net. "As the unfolding collapse in the yen gathers pace, the West will see its green shoots incinerated to dust," he said.

    Japan's industrial output fell 38pc in February (year-on-year), mostly concentrated into the last four months. No major economy imploded at this speed in the 1930s. The country has been hit by a double shock. As an export power it has taken the brunt of Anglo-Saxon belt-tightening: as the world's top creditor it is cursed by a "safe-haven" currency that soars in moments of danger – largely because the Japanese bring home their wealth till the storm passes. Normally, Japan can cope. This time, the yen's rise has pushed the economy over a cliff.

    The yen must come back down to earth, and soon, or Japanese society will start to disintegrate. If necessary, the Bank of Japan will force it down by intervention, as occurred in 2003-2004.

    Will China stand idly by as Japanese unleashes a shock to the global system through competitive devaluation? That depends whether you think China's spring recovery is the real thing, or an inventory build-up before the next downward slide. The Communist Party says 20m jobs have been lost since the bubble burst. This cannot be tolerated for long.

    It is remarkable that China's fall into deflation has attracted so little notice. China's CPI was minus 1.6pc in February. The country has built too many factories producing goods that the world cannot absorb. The temptation is to shunt this excess capacity abroad. A faction of the politburo is already itching to devalue the yuan.

    Of course, Britain has already played the currency card. That is different. The pound's fall, though welcome, is a side-effect of the Bank of England efforts to stem the credit crunch. There has been no currency intervention.

    Crucially, Britain has a current account deficit. Many countries toying with devaluation are exporters with surpluses – 15.4pc of GDP for Singapore, 8.4pc for Switzerland, and 6.1pc for China. If these countries refuse to let their imbalances correct, world demand must implode.

    Mr Hildebrand denies that the SNB is pursuing a "beggar-thy-neighbour' strategy. Like the yen, the franc suffers from the safe-haven curse: everybody buys it in a storm. This tightens monetary conditions. The SNB cannot easily offset this. It has already cut interest rates to near zero. There are not enough Swiss government bonds in the market to rely on the sort of "QE" asset purchases being carried out by the Bank.

    Ultimately, I suspect this crisis may mark the moment when the Swiss franc loses its safe-haven role. Credit default swaps (CDS) measuring risk on five-year government debt have reached 127 for Switzerland, higher than Britain at 118. Norway has the world's lowest CDS at 48, reflecting its status as a petro-democracy.

    Switzerland's banks are over-leveraged. Loans to emerging markets equal 50pc of GDP (half to Eastern Europe). Banking secrecy is dying. Fortunately for the Swiss, they have built up $700bn in net foreign assets for a rainy day. Improvident Britons are less lucky. But that is another story. What we risk now is a game of deflation "pass-the-parcel" worldwide. The economic establishment was caught off guard from 2003 to 2007 because it overlooked the way that Asia's unbalanced relationship with the West was feeding a credit bubble.

    It may be caught again as the same warped structure leads to a chain of (panicked) devaluations.

    Enjoy the "bear-trap" rally on global bourses this spring. But remember, we have only just begun to see the mass lay-offs and hardship caused by this slump. The politicians will act to save their skins. Markets may not like the result.
    ===========================================



    I dont like the last paragraph. Please somebody tell me that Ambrose is wrong and recovery is imminent.

  2. #2

    Super poster

    SantaClaus has more data than eek

    SantaClaus's Avatar
    Join Date
    Dec 2005
    Location
    #JeSuisGeorge
    Posts
    3,442

    Default

    Quote Originally Posted by BrilloPad View Post
    [url]
    Enjoy the "bear-trap" rally on global bourses this spring. But remember, we have only just begun to see the mass lay-offs and hardship caused by this slump. The politicians will act to save their skins. Markets may not like the result.
    ===========================================



    I dont like the last paragraph. Please somebody tell me that Ambrose is wrong and recovery is imminent.
    I've said it all along, this is a bear rally and just the start of a long depression.
    'Orwell's 1984 was supposed to be a warning, not an instruction manual'. -
    Nick Pickles, director of Big Brother Watch.

  3. #3

    Godlike

    Doggy Styles is a permanent contractor


    Join Date
    Nov 2008
    Posts
    9,818

    Default

    Sounds like the perfect time for Gordon's government to buy Swiss Francs!

  4. #4

    Super poster

    SantaClaus has more data than eek

    SantaClaus's Avatar
    Join Date
    Dec 2005
    Location
    #JeSuisGeorge
    Posts
    3,442

    Default

    Quote Originally Posted by Doggy Styles View Post
    Sounds like the perfect time for Gordon's government to buy Swiss Francs!
    I'd laugh if he bought gold now. He sold at the bottom, so why not buy at the top
    'Orwell's 1984 was supposed to be a warning, not an instruction manual'. -
    Nick Pickles, director of Big Brother Watch.

  5. #5

    Banned

    Cyberman has no reputation


    Join Date
    Apr 2007
    Location
    Berkshire
    Posts
    4,892

    Default

    Quote Originally Posted by SantaClaus View Post
    I've said it all along, this is a bear rally and just the start of a long depression.

    I agree with you. Many people are going to be very surprised at the depths that our economy will plumb.

  6. #6

    I Am Legend

    BrilloPad has reached the peak. Play again?


    Join Date
    Aug 2006
    Posts
    103,363

    Default

    Quote Originally Posted by Cyberman View Post
    I agree with you. Many people are going to be very surprised at the depths that our economy will plumb.
    Except in cybertoryshire. If HIPs were abolished prices would be rising the whole county........

  7. #7

    Richer than sasguru

    DimPrawn is a fount of knowledge

    DimPrawn's Avatar
    Join Date
    Jul 2005
    Location
    Brexit Britain
    Posts
    34,554

    Default

    Quote Originally Posted by BrilloPad View Post
    Except in cybertoryshire. If HIPs were abolished prices would be rising the whole county........
    It's amazing what a £400 piece of paper can do to a £500,000 property.

    I was miserable and depressed, but CUK turned it all around. Now I'm depressed and miserable.

  8. #8

    Godlike

    Doggy Styles is a permanent contractor


    Join Date
    Nov 2008
    Posts
    9,818

    Default

    Quote Originally Posted by DimPrawn View Post
    It's amazing what a £400 piece of paper can do to a £500,000 property.

    It's amazing what a 20-stone glob of one-eyed, scottish fat can do to a £1 trillion economy!

  9. #9

    Better than AtW

    sasguru - scorchio!


    Join Date
    Jul 2005
    Posts
    35,761

    Default

    Quote Originally Posted by BrilloPad View Post


    I dont like the last paragraph. Please somebody tell me that Ambrose is wrong and recovery is imminent.
    No he's not wrong. Next.
    Hard Brexit now!
    #prayfornodeal

  10. #10

    Banned

    Cyberman has no reputation


    Join Date
    Apr 2007
    Location
    Berkshire
    Posts
    4,892

    Default

    Quote Originally Posted by Doggy Styles View Post
    It's amazing what a 20-stone glob of one-eyed, scottish fat can do to a £1 trillion economy!

    are you really amazed ? I am certainly not, having experience of Labour's economic policies in the 70s.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •