Nicely done vid, thought I would share.
The Crisis of Credit Visualized on Vimeo
Nicely done vid, thought I would share.
The Crisis of Credit Visualized on Vimeo
it's an ok video, it's obviously very simplified.
the seeds of the crisis started well before 2001, and the lowering of interest rates by the Fed.
You could go back to 81, and the removal of capital reserve requirements for banks, and the lassez-faire environment that followed. Or you could even go back to the 30's and the abolition of the gold standard....or you could look at the different economic ideologies which have gained the upper hand following deflationary shocks. But certainly greenspan has been at the centre of much of the madness over the last 30 years.
It's quite clear we've had a half century of good times by and large, save for the odd oil shock and various minor recessions. But the price of this has been a serious expansion in debt which is now coming to a head. What caused the current credit crunch was a GLOBAL credit bubble that really ramped up in the late 90's, the manifestation of which could be seen quite clearly on 'main street',
in estate agents windows for instance.
Those high house prices, all those new cars and holidays people bought every year....no-one really believed they were anything but illusory wealth surely ?.
And they weren't unique to the UK, what will shock most is the similarities between countries, this credit/debt bubble has been a global phenomenon and there was certainly nothing unique about the UK economy being particularly prosperous. That's one of the great myths that has enable new labour to regain power on three successive occasions.....the only prosperity that is marked in the uk is the expansion of the financial sector in the uk due to the govts. lassez-faire attitudes to the city of london. nulabour welcomed and encouraged the spivs to prosper. don't you feel proud.
One leading economist dubs the Finance, Insurance and Real Estate functions as the 'FIRE' economy.
He describes it as a parasitic entity that raps around sucks lifeblood from the real productive economy.
For credit crisis read debt crisis. For credit crisis establishes an idea that the problem is banks aren't lending which exacerbates the contraction in the economy. correct. banks are deleveraging, that's why they aren't lending, a 'debt crisis' would more accurately explain why there is currently a 'credit freeze' and why banks are deleveraging. we've been lent too much money and too much leverage and speculation has gone on in lieu of productive enterprise in the real economy...too many people have been chasing a free lunch in the parasitic 'FIRE' economy taking wealth from those in the real economy, and as a result there will come a stage where all we will be capable of doing with our is servicing the debt that we run up on a personal level and the debts govt. run up in our name.....it appears the govt. and BoE would like us to reach that stage sooner rather than later. :(
I blame Maggie & Ron for de-regulating banks back in the 80's. Two complete and utter morons running some of the worlds most powerful countries. They of course don't give a dam now.
I find the parallels with the 1930's very clear, the excesses of the roaring 20's and the fallout from the great depression scarred a lot of people few of whom were adults then and are still alive today to explain it to current generatoins about the shift in attitudes back then.
today we have excesses stretching back decades, and at each tremor along this path of illusory wealth, central banks have intervened to keep the merry-go-round going following the consequences of excessive speculation....in 1987 for instance following the stock market crash and then again in 2000/2001 following the bursting of the dotocm bubble.....these crisises were relatively short becuase the central banks worked hard to mask and patchup the fundamental problems. thus creating a bigger bubble to burst later on...and this is what we've had in the last year or so.
Previous central bank intervenions were a band aid on a gaping wound that was never going to stick for long, now we should have the mother of all fallouts but central banks are working hard yet again to keep the free lunch going and to burden the taxpayer with the losses from this monster credit bubble, and they are also working hard to get the taxpayer to sort the mess out by enocuraging them to continue to borrow like in previous years. An 8 year old could understand why this strategy is flawed, and why this will create major problems down the line. And yet people get nobel prizes for dreaming up this $hit. Japan in the 90's is a good example of where we could be headed for the next few years and it could be as bad because of central bank/govt. intervention!!!. It's called debt deflation.
Don't think for a second that more regulation is going to sort things out. That just isn't going to happen, it's a fairytale. Do you seriously think regulators can follow what's going on in the financial sector and how that affects the wider economy ? no no. regulators will do what is politically expedient.
Well that's interesting as you are the only second person who agrees with me on that. That was not as well documented in the press as this current mess so not many people were aware.Quote:
Japan in the 90's is a good example of where we could be headed for the next few years
well, there are some differences between japan and the uk, so i understand why some don't see it as a template......but in the uk and globablly we have seen phenomenal wealth destruction. How may trillions have been wiped off the value of our companies on the stock market ? How many trillions have been wiped off the value of the housing market ?
those are some seriously big black holes to fill, i'm not calling a problem as long as the japanese problems in the 90's. but there's no way we can get a quick bounce back, irrespective of how much funny money the boE decide to print.
the ponzi scheme will rely on mugs to borrow this money to cover these losses, it could well be that we wise up and turn our noses up at this idea, like the japansese. but then the japanese had much higher savings rates, i doubt most people have even a couple of months of expenses in the bank. so we have been addicted to credit and complacent. ofcourse there are other issues in a debt deflation as people attempt to pay down those debts instead of continuing with the borrowing and spending binge and they see what happens to the size of that outstanding debt inspite of trying to pay it down.
basically we have created a huge problem by asusming low interest rate's and low inflation were all that mattered, and that ignoring debt was ok as the priority was that we didn't get a 70's style high inflation situation. how could this crisis have happened inspite of low ir's and low inflation ? wages in real terms haven't increased and the debt mountain has been getting bigger and bigger. that's why.
As i said, it's basic stuff 10 year olds can understand.
not everyone fell for it -
[ame="http://www.youtube.com/watch?v=2I0QN-FYkpw"]YouTube - Peter Schiff Was Right 2006 - 2007 (2nd Edition)[/ame]
yes, but peter shiff is wrong, way out infact, about hyperinflation and the collapse of the dollar.
He's a gold bug, so what do you expect ? But the dollar is a global reserve currency [for now atleast]
and we are clearly in deflationary territory [for now atleast]. Also there's no decoupling from the US, japan or china or the eu haven't been isolated from the problems in the US.....every economy is up to their necks in it. some more than others. That's globalisation and world finance for you. ;0)
Peter does deserve credit for calling the crisis however, he was one of the few dissenting voices.
I personally prefer to read the blogs of Steve Keen and Mike Shedlock [mish] among others, for analysis that makes a whole lotta sense. Both keen and mish have also been predicting trouble for some time. Making predictions is extremely hard and no-one can be 100% correct, but fundamentally what they are saying i subscribe to mostly.
Disgruntled ex-industrial engineer...