If you are new to this blog, you are invited to read first “The Largest Heist in History” which was accepted as evidence and published by the British Parliament, House of Commons, Treasury Committee.

"It is typically characterised by strong, compelling, logic. I loosely use the term 'pyramid selling' to describe the activities of the City but you explain in crystal clear terms why this is so." commented Dr Vincent Cable MP to the author.

This blog demonstrates that:

- the financial system was turned into a pyramid scheme in a technical, legal sense (not just proverbial);

- the current crisis was easily predictable (without any benefit of hindsight) by any competent financier, i.e. with rudimentary knowledge of mathematics, hence avoidable.

It is up to readers to draw their own conclusions. Whether this crisis is a result of a conspiracy to defraud taxpayers, or a massive negligence, or it is just a misfortune, or maybe a Swedish count, Axel Oxenstierna, was right when he said to his son in the 17th century: "Do you not know, my son, with how little wisdom the world is governed?".

Tuesday, 1 June 2010

Kill your saviour: currencies' crisis is looming


In February this year [2010] the author of this blog wrote a report which was commissioned by an organisation of sovereign wealth funds, "Money Multiplier effect on currency risk" *. The conclusion was inescapable at that time, which was well before the Greek crisis. The currencies of countries which are heavily in debt are facing realistic to high risk of collapse. This was true especially with respect to eurozone which was (and still is) facing a break-up or major realignment. The US dollar is not much on the radar but does not look much better. Since then German Chancellor, Angela Merkel, confirmed "The euro is in danger".

The global pyramid scheme which was engineered by bankers and financiers (with help and blessing of regulators and some politicians: how are you Mr Gordon Brown?) resulted in a very high Money Multiplier. I.e. $1 (£1, €1) real cash has to service to many dollars (pounds, euros) of liabilities on banks balance sheets. This resulted in ongoing liquidity crisis. Governments "rescued" the banks by pumping cash (and cash guarantees) into them thereby putting economies heavily in debt to a tune, globally, of trillions of dollars. However this has been only a temporary reprieve since it covered only a very tiny portion of banks liabilities (especially toxic papers on their books). Although Money Multiplier was reduced (i.e. improved) as described in "The largest heist in history" the improvement was insignificant and, very likely, it has grown since then. This put the economies into a deep financial trouble. Now chickens are coming home to roost: as predicted at the time (end of 2008) rather than curing the problem in the private financial sector, governments decided to buy their time by spreading it and making it much worse dragging taxpayers (and future generations of taxpayers) into it.

To repeat the advice from the end of 2008: "If governments do not liquidate the global pyramid scheme [as explained in this article what it was but primarily write offs of many financial instruments and liabilities of so-called "casino" banking], the money they injected will be, in time, converted into toxic instruments (e.g. securities) and cashed in by organisers and privileged customers of these schemes (or in the case of Albania, gangsters and their customer friends). As the amount injected is around 200 times less than the notional value of toxic instruments, the economy will not even see a difference. It will be a step back to September 2008, only now with trillions of dollars of taxpayers' money spent to sustain the pyramid scheme. It will be merely throwing good money after bad. But can governments afford to come up again with the same amount money and do it 200 times over or more? This is based on a very optimistic assumption that the notional value of toxic instruments is not increasing. If governments take the route of continuing to inject money, they will make taxpayers dependant on the financial system in the same way that criminal loan sharks control their customers — their debt is ever increasing and customers keep on paying forever as much as it is possible to extract from them."

The ongoing liquidity (banking) crisis and the sovereign debt crisis, that just blew up, are two sides of the same coin: much too high Money Multiplier, or in simpler terms the global financial pyramid is simply too huge and keeps collapsing.

There is a perverse, sinister side of this process: the very same bankers and financiers whose institutions (i.e. the vehicles of their actions and source of rather exuberant income; this must not be confused with proper ownership, shareholding) were saved from spectacular collapse with "stimulus packages" are now using their institutions, saved by taxpayers' money, and taxpayers' money to attack the budgets of governments (i.e. taxpayers). Kill your saviour if you have an opportunity to do so and it brings you benefits: it is a free market version of an old rule "dog-eat-dog". In fact a prediction made on this blog over a year ago that the financial system – society relationship would turn into a relationship akin to loan sharks and their victims has materialised. As it is taxpayers, and their children, have to keep on paying ever more, as much as they possibly can, with no hope of any recovery. This is called "austerity packages". Loan sharks developed such ideas for their victims in the past and now the mainstream financial industry has learnt such methods and is scaling it up to encompass entire economies. This was a predicted result of "stimulus packages" exposing governments as weak, incompetent and corrupt.

The next step on this path is very likely to be a currency crisis. We already see its beginning with euro. The US dollar will also not escape a reality check. But as pointed out in April 2009 in an article "A US way out?" this make take some time and end up in a somewhat unorthodox solution.

There is only one way out: a combination to a greater or lesser degree of the two processes:

- Zimbabwe way: inflating this crisis out (printing money will reduce Money Multiplier by increasing the volume of cash available to satisfy liabilities on banks balance sheets);

- Chapter 11 way: write offs of liabilities on banks and countries balance sheets (removing liabilities on banks and countries balance sheets will reduce Money Multiplier by reducing the size of liabilities that cash available has to satisfy): an extreme form of such scenario, which is quite likely, was presented over a year ago in a short article mentioned above "A US way out?".

(And of course banks must be banned from recreating the same problem again, for example by lending with loan to deposit ratio above 100%. This is all on this blog: a bit complicated for a paragraph of explanations here.)

From banks liquidity crisis and banking collapse to sovereign debt crisis to currency crisis. These are the stops on the same path: a collapse of the global financial pyramid scheme engineered by the financial world (or technically a result of much too high Money Multiplier). The Great Depression that started in October 1929 reached its grand finale in 1939 with the World War Two. Whether the end of the current crisis will be as dramatic and "spectacular" time will tell. But there is very little to feel optimistic since politicians live in a state of denial and do not tackle the root cause of the current situation. Well, they are unlikely to have a clue about it.

====================

* If you would like to obtain a complete copy of this report published by Arab Financial Forum titled ”Sovereign Wealth Funds – Where Are They Going?”, please send a request to Arab Financial Forum Secretariat: info@meconsult.co.uk

41 comments:

  1. The UK end Europe economies are having structural problem. Lowering the interest rate won’t help. The government spending in UK is almost 50% of GDP and some EU states are even higher to almost 80%. In China the proportion of government expenditure is just about 17% of the nation’s GDP and 22% in United States. There are plenty of rooms for these two countries to raise tax filling the government’s funding hole.

    1in every 5 working population in UK is public sector employees where all communist members in China accounts for 10% of the population.

    I would say UK and Europe is a socialist state and China and USA are entrepreneurial state!

    ReplyDelete
  2. Whilst I agree with many of your observations and views I do not think it leads to an acceptable conclusion with respect to the current crisis. It is like say to a loan shark victim: "get a better and pay more of its debt". The fact is that the debt is so massive - and will keep on increasing - that the outcome will be that the loan sharks will keep getting even more money for ever, and the victim still live on the same minimal subsistence. Therefore I do not see a convincing argument to be more efficient: for what purpose? To be robbed even more?

    Best

    Greg

    ReplyDelete
  3. I think the USSA way out will be taken , as the Zimbabwe hyperinflation way will let the little guy off with his debts.The little people will not be let off that easy.
    What effect do you think such a way out would have on house prices in the uk?

    Regards
    Ozzy

    ReplyDelete
  4. Ozzy, regarding the US have a look at "The US way out?" - http://gregpytel.blogspot.com/2009/04/us-way-out.html

    With regards to the UK house prices: I do not know. On one side there will be a downward pressure, but on the other UK properties are a really good long term investment. So those who do not have to sell are unlikely to sell, and those with money will be happy to have it as a long term investment. All in all: I do not know.

    Best

    Greg

    ReplyDelete
  5. If you compare the inflation rate in the USA which is about 2% and Europe of 1.4% at present with that of UK’s 3.7% (which growth steadily throughout recent months), you would wonder how USA and Europe could contain inflation rate at such low level.

    Everyone thinks increasing liquidity in the economy will lead to hyperinflation but you shouldn’t forget US dollar is still a reserve currency. What USA does is to socialize inflation among Central Banks across the world in that it helps to contain local inflation in States.

    ReplyDelete
  6. A number of people have reached a similar conclusion as to the end game. The historian Niall Ferguson has written and spoken about the four ways out of a debt crisis - 1)growth 2)cut spending 3)inflation 4)outright default.

    We may not be as special as we think as looking back in history it has been common for govts to get into debt crisis. The lesson Niall takes from history is that govt don't tend to cut spending and almost all govts either default or inflate.

    We know this but no-one will believe until the moment comes. After which everyone will agree that they saw it coming and it was inevitable.

    Another point which prof Ferguson makes, again a point which has been made by many economists, is the suddenness of the collapse. One moment greek debt is a few basis points over german bunds and the next moment its at 38%, game over.

    The hard things for me is to determine whether inflation or default comes first. This has implications for what people should do with their assets.

    The other hard thing is working out how long the system can last. If the west can rumble along for another say 10 or 15 years just slowly grinding down then this again has different implications for what one does for say a job compared to if the whole thing is going to collapse next year.

    ReplyDelete
  7. I agree. But for the record: I have never thought we are anything special. I also have no clue whether high inflation or default comes first and where.

    I think my analysis is possibly the only one that proves that the current crisis was engineered as a pyramid scheme using lending with loan to deposit ratio greater than 100%. Hence it is a result of criminal activities. It is practically the same as Albanian pyramid crisis 1996 - 1997 but on a global scale.

    Best

    Greg

    ReplyDelete
  8. " I dont know"
    lol.Not what i was expecting.
    Both a refreshing AND depressing answer.

    Regards
    Ozzy

    ReplyDelete
  9. Ozzy, this blog is not a fortune teller’s or clairvoyant’s shop window:-) It merely present the analysis of the current crisis with some risk analysis.

    Best

    Greg

    ReplyDelete
  10. Thank you for this article Greg. I think that it highlights a problem that the bankers seem to always win in current society. It is like there is an unholy alliance between them and our politicians.
    In a similar view I was reading some analysis of bond purchases by the European Central Bank on the notayesmanseconomcs web blog.

    "Moving this debt from private-sector balance sheets (banks) to a public-sector one (the ECB) is again exposing taxpayers to financial risks of which I bet they are not aware. Also there is yet another moral hazard for the banking sector not only do they get offered easy money and easy profits but should the taxpayer subsidised trade ever go really badly wrong then the central bank will step in again. I cannot help the feeling that rather than getting nearer to the needed reforms to the worlds banking systems we may in fact be getting further away."

    If you want my view I think that the UK government is trying to inflate its way out of trouble.

    ReplyDelete
  11. Annabelle, thanks for your comment. Please spread the link to my blog around if you think it is worth it.

    Over a year ago during the first banking bailout I warned that the financial community (with the politicians help) is shaping the relationship between them and taxpayers in the same way as it exists between loan shark and their victims (see my first article on this blog "The largest heist in history").

    Now we see it all too clear that this actually happened and the bankers, sorry loan sharks, are tightening the grip on the neck of the taxpayers.

    Best

    Greg

    ReplyDelete
  12. Why would UK housing be a safe long term investment without future wage inflation? Also, what level of inflation would be required to fix the money shortage? From my admittedly very ignorant point of view, I don't see governments deliberately abandoning their own currencies (and pensions).

    ReplyDelete
  13. What I foresee in UK is stagflation.

    Consumers goods inflation but assets price deflation.

    ReplyDelete
  14. Why Japan government debt is standing at more than 200% of GDP but Japanese Yen is still strong? Although the Japan Government is heavily in debt but the Japanese households are rich. There are high savings rate in Asian countries, for instance for each $ GDP generated in China $0.50 is being saved.

    Whereas UK households debts (exclude business sector debts) at about 150 billions pounds more than UK GDP, if we take into account the households debts with UK government altogether will sum up to about 4 trillion pounds. It is obviously not sustainable.

    In view of government spending in UK take almost 50% of the UK GDP that has a crowd out effect blocking resources available for capital formation/investment in commercial sector. Government is not a wealth creation entity but a wealth destruction entity. What government does is just to transfer payment via tax from the rich to the poor.

    ReplyDelete
  15. Ka Ming, I am minded to agree with many of your comments (and thanks for reading my blog: please spread the link to it around if you think it is worth it).

    In the UK the likely "consumers goods inflation but assets price deflation" is likely to accompany low growth. It is actually a way of reducing Money Multiplier (or liquidation of the financial pyramid). However I think that the pyramid may simply be too big (or a Money Multiplier much too high) and such process, as normal, may be insufficient. Therefore I think some dramatic events are quite likely.

    Best

    Greg

    ReplyDelete
  16. Hi Greg

    Yes, I will send round your blog to my friends. It is very informative and inspiring.

    I know there is a massive growth in US monetary base but not M3 money supply since US banking institutions is reluctant to lend and commercial sector is unwilling to borrow money. Those banks who received cheap money from US government just engage in stock or bonds investment activities or lend the money back to Federal Reserve.

    In fact, US private sector (households and enterprises) are undergoing de-leveraging process that may take years to complete. Everyone is just wishing to pay down debts.

    ReplyDelete
  17. Ka Ming, in response: thanks a lot and have you looked into an article "Why banks are still not lending?" - http://gregpytel.blogspot.com/2009/08/why-banks-are-still-not-lending.html

    Does it make sense?

    Best

    Greg

    ReplyDelete
  18. Price of rent is determining factor for properties price in UK.

    Rent rise sees home ownership drop to lowest for 20 years

    Home ownership has fallen to its lowest level in 20 years, according to a Government-commissioned report unveiled by the British Property Federation.

    The English Housing Survey, commissioned by the Department for Communities and Local Government, found just 67.9% of English households owned their home, the lowest percentage since 1991.

    There was a decrease in the number of owner-occupied households from a peak of 14.8 million in 2005 and 2006 to 14.6 million in 2008-09. In contrast the number of households renting privately surged by one million since 2001, from 2.1 million to 3.1 million in 2008-09.

    Private rented sector (PRS) housing has accounted for nearly all household growth over the past decade, with 1.1 million additional households in the sector versus 2000. The PRS is up from 13.9% of households in 2008 to 14.2% in 2009.

    ReplyDelete
  19. Rental yields fell in January

    Yields on residential property fell to 4.75% in January as rents slipped while property prices powered ahead.

    Nia Williams, 12 February, 2010

    This is the lowest level since August 2008, according to the latest buy-to-let index from LSL Property Services. Yields peaked at 5.1% in March 2009 when house prices reached the bottom.

    Rents fell 0.5% in January and are now 2% lower than in September 2009 following the fourth month of consecutive declines. Declines were broadly spread by region. By contrast, house prices are 3.3% higher.

    This followed a period of more intense activity in the housing market as investors rushed to benefit from the stamp duty holiday. The additional supply of rental housing pushed rents lower.

    Total returns in January (combining rental income and house price growth) were 16.7% on an annualised basis. This means a landlord would make a total return of £27,500 on a typical property this year. Almost £20,000 of this return would be in the form of house price inflation.

    David Brown, commercial director of LSL Property Services, commented: "Landlords moved fast to add to their portfolios before the stamp duty holiday ended in December. This has meant higher rental supply at a time of year when tenant demand is traditionally quieter. Landlords have had to cut rents in order to avoid even costlier void periods.

    ”Sacrificing a few pounds a month in rent to save themselves an average of £1,600 tax on each property bought was a very shrewd move as it would take years to recoup that saving through gradual rent hikes. Now the holiday is over, it's crucial landlords don't lose sight of rents. Total returns look very enticing at present as house price increases contribute a larger share of a landlord's profit.”


    The total return on buy-to-let investment properties isn’t attractive if the government is to impose 40% capital gain tax. Landlords are happy to charge a lower rent with potential of significant house price appreciation. If this capital profit is to be eaten to a large extent by CGT; I can foresee BTL investment activities will slowdown from 2010 onwards. If the properties price is to fall by 40% where is becomes cheaper for tenants to buy rather than let; then the percentage of owner occupiers will rise again.

    ReplyDelete
  20. We must decimate Larissa, Athus and cavala with thermonuclear bombings to prevent the soviets from taking the straits from
    our staunch, secular Turkish allies

    ReplyDelete
  21. Hi Greg

    I ve just started following this blog and i m wondering if you have ever been on mainstream TV?
    Would be good to see you quizzing a few politicians.
    Regards
    Ozzy

    ReplyDelete
  22. Hi Ozzy, I have not been on a TV yet. I was only interviewed once on BBC Radio Scotland. But I would enjoy discussion (especially on the mainstream media) with politicians.

    Best

    Greg

    ReplyDelete
  23. On the subject of rental income, I know a guy in a smallish building/services company who also have a fair sized portfolio of rental properties gained over the years.
    When I saw a large pile of council rent rebate forms on his desk he said that he had to fill them in because the recipients would never get round to it themselves (made so useless by state dependency.) but also because there were no professional , job holding, wage/salary earning tenants around.
    So it would seem some part , how big I don't know, of the rental market is being held afloat by the state.Apparently the state does pay quite good rates which makes the form filling worth it.
    Seems all a bit unsustainable under the circumstances.

    ReplyDelete
  24. Yes, I agree that housing benefits put a floor on rental income across the market.

    ReplyDelete
  25. Is the root cause the high price of oil and its cascading effects on inflation etc? I argue that the bloated financial services sector needs readjustment to more critical industries that require attention. Raw material production, food production, manufacturing. I know this sounds absurd given our current economic structure, but its clear we need to get back to basics.

    I am an advocate of industrial Hemp, and think that its cultivation and promotion as a core resource would generate wealth for advanced, industrialised economies. Plus, Hemp is truly sustainable.

    We need 1/3 of the UK land area to grow enough hemp to provide around 600 million barrels of methanol a year, about our yearly consumption of crude oil. Its a project that would need national focus, are we able to do that?

    ReplyDelete
  26. Hi Jimmyb189

    I agree with your proposition. The financial and services industry accounts for 70% of UK’s GDP. UK produces nothing and exports nothing. UK is now the 10th largest exporting country in the world just above Hong Kong. Hong Kong has no production for decades except propping up the estates markets and selling luxury properties to rich PRC people.

    Financial services industry is just zombie sector. If the government did not inject money into major banks or nationalized some of them, they should have been gone in 2008. What they relied on to survive is the un-precedent low interest rate, ripping off pensions and savers to help filling out their bad loans.

    China is piling up commodities/resources, mines in Australia, Brazil & Africa instead of fiat currencies such as US dollars, Euros or Pounds.

    ReplyDelete
  27. My solution to hyperinflation? a sack of seeds, the ability to purify water from local sources, and a small garden or plot to grow food on.

    The real question is: When you inflate and destroy your debt and currency, how does any political or elite structure remain in place when millions of people have been robbed overnight? Another oversight i guess, Why doesn't anyone consider the human reaction to these shenanigans? People will go ballistic!

    ReplyDelete
  28. UK is not United States nor Eurozone!

    While the exact margin of spare capacity in the economy must be open to debate, at this early stage of the recovery it is more likely than not that this will bear down on inflation for some time. That is what has happened overseas, with inflation in the year to April standing at 2.2pc in the US and just 1.5pc in the eurozone.

    In 2007, the UK had the world's third largest current account deficit, despite significant oil revenues, according to the IMF. This was mainly the result of a large deficit in the trade in manufactured goods. During May 2008, the IMF advised the UK government to broaden the scope of fiscal policy to promote external balance.

    It has been suggested that the UK initially lagged behind its European neighbours because the UK entered the 2008 recession later. However, German GDP fell 4.7% year on year compared to the UK's 5.1%, and Germany has now posted a second quarterly gain in GDP. Commentators suggest that the UK suffered a slightly longer recession than other large European countries, as a result of government policy dating back to the policies of the Thatcher government of 1979, in which UK governments have moved away from supporting manufacturing and focused on the financial sector.

    ReplyDelete
  29. If UK does not pursue radical change in its economic structure, it will ultimately lose its triple A rating and follow the path of Greece.

    ReplyDelete
  30. Greg, I am interested as to what you think the correct value of money multiplier should be?

    I think you are wrong to focus on this metric as it is a derrivative measure, not the core problem. What matters is that banks lend money based either on real assets to companies that have a realistic chance of repaying through the creation of wealth. For example, if somebody saves £1 in a bank and the allowed money multiplier is, say, 5 then that bank could lend out, say, £1 to each to 3 companies to invest in their businesses, leaving £1 in reserve. As long as these are good companies then the invented extra £3 soon becomes a real £3 and non inflationary growth is achieved. When the invented money, notes issued by the bank, are not guaranteed by the government, the loan to asset ratio determines the risk of investing in that bank. Too small a money multiplier and the bank is overly dependent on a small number of investments and at risk of a run; too many and the bank is at risk of a run from matters outside their control. However, in both cases what really matters is the loan to asset ratio and the quality of the bank's lending staff, not the money multiplier. In the old days lending was done by a bank manager looking the borrowing in the eye and, quite often, knowing him and his family personally or by reputation. These days it's done by spreadsheets in Canary Whaft.

    However, as I said above, what really matters is the loan to asset ratio and at the root of the financial crisis is doubt about this asset ratio primarily due to creative accounting (i.e. fraud). The modern bank doesn't lend to wealth creating companies (hence the wails from real business); it lends to other banks. In turn, these other banks lend to further other banks or even back to the original bank. In theory, these loans are all secured against property but in practice the underlying asset has been chopped up and double counted so many times that nobody really knows who it belongs to in the event of a default. All we know for certain is that the underlying real assets are only a fraction of the total loans. For example, RBS has $4 trillion of liabilitied, matched in theory by about $4 trillion in assets. Whilst the liabilities are real (and now belonging to the taxpayer) the asset values are far less certain. This is the pyramid that Greg talks about. It should not, however, be confused with the money multiplier, which is a perfectly legitimate and indeed essential part of a growing economy.

    ReplyDelete
  31. Hi Scary Biscuit,

    Thanks for reading my blog. If you think it merits it, please pass the link to it around (e-mails, Twitter, fora, etc).

    I do not think there is a theoretically good response regarding good Money Multiplier (MM), say it is 85%. We have to go by experience.

    Traditionally Loan to Deposit ratio (LTD) was 86.5% giving MM 7.41(41). I think that up to 10 (with Money Multiplier 90%) it is relatively safe, if there is a confidence. (This is around what HSBC and Standard Chartered has at the outset f the crisis. And they went through it well.)

    But please also note that LTD at proper offshore banks is 40% - 50% giving MM below 2. Safe is it not? (Have you heard about liquidity crisis at offshore banks. Mind you Iceland was not offshore; just mental who thought they were an offshore centre.)

    The higher the confidence in the system the higher LTD (and MM) that is sustainable. But it is a very delicate balance that cannot be tested. Once you test it (e.g. causing a bank run) by getting MM too high the confidence collapses and a sustainable MM is likely to be much, much lower (in extreme going down to 1, no re-lending, keeping all the deposit) than before such test. (The government deposit guarantees are a mechanism to try to maximise LTD. But as even a government cannot give infinite guarantees as this crisis shows then this must not be tested either.)

    My view on MM is based on LTD:

    - LTD below 80%, giving MM below 5 is sound

    - LTD between 80% and 90%, giving MM between 5 and 10, should be OK: it is a pragmatic decision between lending a bit excessively to grow faster and occasional liquidity cost of it: there is a balance there

    - LTD between 90% and 100%, giving MM from 10 to… infinity (at 100% MM grows to infinity at linear pace) is getting on the edge

    - LTD above 100%, giving MM growing to infinity at extremely fast exponential pace is a sheer madness.

    The only thing I can say with absolute certainty is that lending with LTD 100% or higher is a sheer madness (lending with LTD above 100% is an exponentially galloping madness). And this is what happened.

    Best

    Greg

    ReplyDelete
  32. Hi Scary Biscuit (again),

    I think in your analysis you consider a generation of Money Multiplier as a result of one (two, three,…) off lending rather than a recursive unbounded process. (What you described is not really a Credit Creation process.) This is where you get confused. Basically you do not seem to appear to understand Credit Creation dynamics (i.e. it is a recursive process).

    I proved on my blog that an unbounded Money Multiplier (resulting from lending with Loan to Deposit ratio above 100%) results in 100% risk of collapse to zero (in a finite time) of what you called “assets” in the second paragraph.

    Summarising your explanation within my model: if LTD is above (or equal 100%), MM tends to infinity, assets value tends to zero and loan to asset value tends to infinity. That's why lending with LTD above 100% was a sufficient (not necessary or only) condition that guaranteed the current banking crisis.

    Best

    Greg

    ReplyDelete
  33. Hi Scary Biscuit

    What you said is proven by the 2008 crisis. The derivative time bomb of 600 trillion US dollars is many times the world’s money supply where major international banks hold that caused the financial crisis.

    ReplyDelete
  34. Hi Ka Ming

    to underline your point: the world GDP is 50 trillion US dollars a year. So $600 trillion is 12 times more. Good luck to those who believe that this crisis can be solved by a combination of "stimulus" and "austerity" packages.

    I think we are going for a spectacular...

    Best

    Greg

    ReplyDelete
  35. Properties Price in UK is just a fake greenland in desert.

    The Japanese did possess properties boom in 1980’s. At that time all properties in the city of Tokyo worth more than entire California State in United States, thereafter Japan experienced/is still experiencing decades of house price depression.

    Some press said Russians are urging to buy London properties currently is just self-fulfilling masturbate. Foreigners are only interested in buying something that can produce value, and stand the test of time.

    ReplyDelete
  36. Take a look at the funds performance in 2010, you should know where international monies are flowing into or out of…………

    Best Performance:

    (1) Technology & Telecoms

    (2) North American Smaller Companies

    (3) Global Emerging Markets

    (4) North America

    (5) Asia Pacific Excluding Japan

    Worst Performance:

    (1) Money Market

    (2) Absolute Return

    (3) UK Gilt

    (4) UK Index – Linked Gilts

    (5) Protected

    I wonder how UK Government can make up funding to source the Olympic Game event in 2012 without cutting essential budgets for social works (e.g. parenting, children, family, anti-social behaviors, homophobic hate crime, youth crime & drug and alcohol issue).

    ReplyDelete
  37. Who is the winner in G. Brown cohort?

    Bankers, properties speculators, extravagantly paid civil servants, BTL properties owners and those who take advantage of housing bubble squander on things they don’t need on money they don’t possess.

    Who is the loser?

    Pensioners and savers who suffer technically negative interest rate. In fact everyone through hyper-inflation to eat out their monthly pay.

    ReplyDelete
  38. People will nag at government if there is any increase in profits tax or income tax. However, no one notice about the stealth tax (hyper-inflation) caused by reckless acts of government to introduce endless quantitative easing (money printing out of the thin air).

    The more BOE to go down the QE measure the more international capital will repatriate from UK and the higher the stealth tax (hyper-inflation) as a result, and foreigners to dump UK gilts and pounds and all sterling denominated assets including properties.

    ReplyDelete
  39. It’s all about fairness.

    Someone said tax those who have caused the global recession (world banks) when they are in profit. Penalise the same banks if they are seen to be taking risks with public money and those who benefited from properties bubble stoked up by easy credit from financial institutions.

    Rather than impose stealth tax (hyper-inflation) against those that are poor and vulnerable.

    ReplyDelete
  40. There are two ways out and the former will be chosen, I believe, and we will (almost) all be worse off because of it (generally). The world is not mentally or emotionally capable of dealing with the problem at this time. Something will have to happen.

    ReplyDelete
  41. Great article Lot's of information to Read...Great Man Keep Posting and update to People..Thanks
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    ReplyDelete