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The return of economic risk

A number of not unsubstantial problems that have dogged the economy in recent times threaten to flare up again


 

Not long ago it seemed  the global economy had settled into a healthy recovery mode—albeit a fragile one.  But lately,  economic headwinds are blowing strong again. The attacks on Libya suggest oil fears will not ease anytime soon and the extent of the fallout from Japan (nuclear and economic) is still largely unknown. What’s more, a number of not unsubstantial problems that have dogged the economy in recent times threaten to flare up again. David Rosenberg, chief economist at Gluskin Sheff, outlines a few of those risks today, including:

-The chance that the foreclosure crisis in the U.S. could intensify.

-The unresolved European debt crisis (banks are still carrying billions in toxic loans and there remains the possibility that “some combination of Greece, Portugal, and Ireland will be defaulting at some point in the future”)

-The sorry state of U.S. finances (and the possibility that “its interest expense to revenue ratio will trigger a downgrade within the next seven years”).

-And onging geopolitical troubles in the Middle East.

2010 had its shares of ups and downs. 2011 could be even worse.


 
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The return of economic risk

  1. It seems our 'window of opportunity' to re-order the world financial system is closing…with very little accomplished beyond Basel.

    Brace!

  2. So Colin.. assuming the worst. US gets downgraded, banks start foreclosing on more and more homes which nobody can now afford. What happens next?

    Does the land stop growing food?
    Do the people stop being able to work?

    No. What happens is the investor class, those who make their money primarily from the practice of usury, suddenly might have to start taking up a trade to put food in their mouths. Will it be painful? Of course, they won't do that before trying to milk absolutely every cent they can out of everybody else, and most people have become so focussed on the imaginary economy that they'll let them.

    But we can hope for better. We can look at places like Argentina and realize that just because factory owners shut the doors doesn't mean we can't produce. Just because the bank says it owns the land doesn't mean the people can't band together to keep it.

    It takes courage. It takes solidarity to be able to stand up to law-enforcement when they come to try to force your neighbours out of their home. But if people work together we can take our countries back from the banks, back from those who would own everything while producing nothing.

  3. Lordy, what tosh. The Bolshevism around here lately is reaching epic proportions.

  4. I breathlessly await your idea.

  5. Well going backwards to the agricultural and industrial ages in some brave 'people's revolution' isn't a solution. It would wipe out the last half-century of advances…which have been considerable.

    There are 200 countries..give or take…in the world. All operating their own economies with their own standards and regulations and currencies. And now we're trying to trade with each other, so naturally we have crashes and crises. This is the current problem with the EU.

    We need one integrated world economy….one set of standards and regulations….no barriers and no tax havens, with proper oversight.

  6. History suggests we have crashes and crises regardless of who/what we trade with. It comes from this idea debt being the generator of wealth.

  7. Yes, until we upgrade to the next level. And now, the day of the nation-state is over.

    Nothing wrong with debt. We've always had debt.

    But you can't overdo it…you have to be able to pay it off eventually.

  8. "regardless of who/what we trade with" means even within ourselves. Even within our own villages. Thinking one global hegemony, even if it wasn't a complete pipe dream with somwhere between 0 and a negative chance of becoming reality, would solve the boom and bust of economics is insane.

    Care to try for an idea that doesn't rely on fairy dust and unicorns?

  9. You're just suffering from future shock, that's all.

  10. We need one integrated world economy….one set of standards and regulations….no barriers and no tax havens, with proper oversight.

    If that's truly the only solution, we're toast. Because that'll never happen.

    We can have as many "free trade zones" (as less-than-adequate as even that would be) as we can muster. And Canada was setting off in an exciting direction ever-so-briefly: NAFTA, several side agreements with Latin American and SE Asian countries, and a push to something big with the EU. We are not hearing anything promising from that corner, lately.

  11. You're currently living in a world that people throughout history have said 'would never happen.'

    Yet it has, all the same.

    Free trade 'zones' are temporary…eventually everyone will free trade everywhere.

    It's difficult getting news about the EU deal, but negotiations are ongoing.

  12. Fair point. Here's another. I am also NOT living in millions of other worlds that people throughout history have also correctly said 'would never happen.'

    I admire your optimism about free trade everywhere. Shall you off our dairy farmers or shall I?

  13. Oh well….if you're going to drag in all the other dimensions in the universe…..Just no string theory please. LOL

    It's not optimism….it'll happen from necessity….including for our dairy farmers…although I don't know why everybody blames dairy farmers….we have lots of marketing boards.

  14. What happens to those whose standards of living depend on cheap credit when interest rates spike?

    What happens when working people's pension funds collapse?

    What happens to fixed incomers when inflation accelerates?

    What happens to the booming number of retirees relying on government cheques when people stop buying treasury bonds?

    What happens to small businesses when taxes increase?

    What happens when governments can't meet their pension promises to their public sector unions?

    What happens when the yuan appreciates and all the cheap imported goods become less cheap?

    What happens to capital goods when investment declines?

  15. Oh no doubt people are going to suffer. But that's going to happen anyway. Whether now, or whether they manage to put it off for a few more years, people will eventually suffer because our economy is built on debt these days, not production. It's built on people needing things instead of people providing things.

    And when we can't produce fast enough to match the inexorable needs of the usurers, it collapses.

    So people are going to suffer. All that we can do is try to direct the resultant anger and energy to developing an alternative system. Not just another rehash.

  16. I think you got this argument got off on the wrong foot when you equated investment with usury, when they're two different things. An investor takes an interest in the enterprise e's investing in, winning if its a successful enterprise, loosing if its not. A usurer is a money-lender who takes no direct interest in the enterprise, instead requiring a return of all isr money + interest, all guaranteed by the right to confiscate the enterprenuer's property w e has been required to put up as collateral, should e be unable to make isr payments. In other words, the usurer has a win/win situation, while the entreprenuer must take a flyer (which e loses 2 times out of 3). This obviously doesn't bode well for the future of free-enterprise. Combine usury based capitalism with the fact that the usurers are now printing-up our money for us without backing it up with anything of their own, yet still claiming that the money they print-up belongs to them & we have to do their bidding to get some of it, & it's easy to see why not only our economy, but also our freedom, is tanking fast.

  17. The world financial system is controlled by a handfull of people and that's the way it will always be. They are not interested in any wealth going to the common people.

  18. When you are starving none of this matters. We have been too successful as a species and we are reaching the carrying capacity of the planet. Watch 'HOME' on youtube if you really want to see just how bad it really is.

  19. The world financial system isn't controlled by anyone…that's why it keeps crashing all over the place.

  20. You could put every human being on the planet in Texas, and still have room left over.

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