Here is a rough transcription of the presentation for people who are hard of hearing. Apologies for the lack of grammar, I am working to improve the automated transcriptions -
hello Friday from me this opening series is probably RISS document bank of International settlements but it’s all in pictures so it’s fine to be looking at don’t take any known notice of what their graft number is follow mine mine should be correct what the writer here is trying to put across and it’s a very effective way of showing what has happened as the macro picture for what happened with the great economy world economy thing okay normal circumstances we have banks there lending to households and is a certain amount of leveraged on both sides are how obviously and households and firms is leveraged because that’s intrinsic in borrowing and banks are borrowing arm to keep everything bouncing along an open getting to any arm technical stuff on here so we going to get into the green arrow bottom right their source of strength and a red arrow which is source of weakness at 10 to get through so I’ll go at it when we have a bust in corporate and or household lending this becomes a source of weakness red arrows pointing in towards banks because the is either a corporate or household bust busting corporate or household lending leads to a credit crunch we’ve been through this only down with big we’ve been through all of this but this just sums it up in Kendal pictures so we have both ways source of weakness going down so what happens is with a busting corporate or household all the lending leading leads to government recapitalisation of banks were in 2008 now for instance in the Western world so the sovereign comes in and helps the banks because they’re having trouble with either household or corporate lending then we get banks become a source of weakness towards the sovereign the red arrow going out there because many times the balance sheets of banks are even bigger than what we could call the balance sheet of the sovereign so it weighs heavily upon the sovereign then we get weakness because the sovereign comes under pressure because of its lending toward banks which gives us a double edged source of weakness this weakness in the bank and the sovereign so next we get sovereign and banks as two-way source of weakness leads to a credit crunch and more of a credit crunch more where we are now and this goes out to a lack of lending going out to the real world the corporate and household sectors that were already in trouble and we get the last one where the sovereign is not strong enough to give enough confidence to the banking system that they will go and do lending to the real world so what has to happen is the multi-sovereign which should be the IMF or the FSF OPSM in Europe coming in and backing up the sovereign now I just quickly add the end of this that this I think in 10 little diagrams sums up quite prettily where we find ourselves in the world the UK in the US have only gone to the sovereign being in trouble and the both sovereigns are still to a certain extent in trouble because the banks aren’t sorted out and there is still a credit crunch there is lack of lending toward the household and corporate sectors but mainly because the household and corporate sectors to a greater extent don’t want to borrow into a crap economy and over in Europe we got the multi-sovereign is coming and we have to ask ourselves if there’s a failure in the multi-sovereign what would graft number I think on mine were up to 10 I’ll be right says nine and what would graft number ten-day multi-multi-multi-sovereign all the central banks at have to get together in invent some other way of coming in and backing everything up but the this the the thing is it is backing up are the United States and the UK are not solved by any stretch of the imagination and Europe hasn’t been solved by the multi-sovereign coming in are in different areas there so the question is this is still ongoing and what happens next there is still a lot of pressure in this system but it is shown as how adaptable and wonderful emigrate away the central banking system is with the IMF and inventions that dead people have put in place have really saved our bacon but is it going to be enough if this continues right time to move on to the financial times and Gavyn Davies who is an ex-Goldman Sachs chap who now works for our forget the name of his outfit are but regularly blogs in the financial times for the financial times and he’s jumped on the American incredible shrinks shrinking labour force so that he’s been able to set his team on working out quite what going on and we can see in that diagram in that Graaf: grafts long-term growth rate 1.2 per and so that’s and that back to 1992 but as I showed on my chart to goes back to 1948 and probably goes back to 1848 but her top right of that Graaf recent growth is zero so from hundred years of exponential growth is it tight and arm it stopped the some reason and that’s what we were looking into an at what he’s that looked into one of the great constants in the world economy for the past few decades model is more than a few decades but costs are past few decades has been that the consistently strong growth in the US labourforce yet okay because he’s including from the 60s are belied he’s coming in and doing the work as well so your last few decades this is given American economic performance demographic Headstart compared with other developed countries not only has it been the main factor in insular in that US GDP growth has remained well above that in Europe it is also injected flexibility and dynamism into the US economy but all of that is now at risk the US labourforce suddenly stopped growing in 2008 and has been falling slightly ever since okay good on them to pick this up right is obviously follow the link to well worth while reading article am but I pulled this one out weeks I can’t do all of it because the financial times very very picky on copyright it is clear that the stagnation of the labourforce in the latest cycle represents a very different pattern from that seen previously what the consequences of this he’s actually put it down to ladies and girls falling out of the labourforce and staying at home doing other things playing tennis maybe the first is that the measured rate of unemployment has fallen to levels which are far lower than would otherwise have occurred in the past three years about 4.8 million people have disappeared from the labourforce instead of becoming unemployed and this is allowed the unemployment rate to drop from the peak of 10% in October 2009 down to 8.5% now if these people had stayed in the labourforce instead of drifting away from it the unemployment rate would now be about 11.3% and the whole debate on the US economic policy would look very different and surely it would governmentally and what he goes on to talk about at the central bank level what is the fed thinking about the unemployment rate it has a dual mandate does it think the unemployment rate is 8.5 does it think it’s 11.3 and surely the would be a great amount of policy differential depending how they look at it the last two paragraphs of the article or blog posting and if they do not act quickly enough to restore job opportunities to these missing workers this is particularly the fed but obviously the government here as well then this to percent of potential GDP might be completely lost her he’s mentioned in the posting here that this drop in labour and labour productivity probability possibility the backpack that they this 4.8 million have dropped out is probably costing GDP headline about 2% okay if they do not act quickly enough to restore job opportunities to these missing workers this to percent of potential GDP might be completely lost there would be a rising risk that the absentee workers would become too old to disenchanted ever to return to active participation in the labour market this is what happened in Europe after the recession in the early 1980s it most certainly did when as cyclical rise in unemployment became permanently baked into the system for the next two decades it did in Europe as UK to a certain extent got a bit of a dip down in the unemployment unemployment here in France that say has only recently gone down under 10% it’s just accepted in Europe the your unemployment level is 10% this is what happened in Europe after the recession of the early 1980s when as cyclical rise in unemployment became permanently baked into the system for the next two decades up to you economists call this is derris this which is fantastic name but I am no idea what it really meant to be saying but it’s a name hysterics this and Americans are usually quite disdains full disdainful of the European economic model because with so much unemployment this terraces is one feature of the European labour market which they could or should try hard not to imitate and he saying really the fed and the government should be thinking that there is 11.3% unemployment in the United States not dropping down to 8.5 look how good we doing you only get into trouble if you think you’ve got a .5 and dropping what you have is a good solid 11+ right over CMIS capital he now fronts are Gavyn Davies and this is actually a CMIS capital chart that I put the yellow line through US employment non-farm payrolls going back to 1994 and I put the yellow line in because I think it’s about accepted that the US Hass to employee 150,000 new people per month to keep up with the population rise the population rise hasn’t apparently over the last year been quite as big as it use usually is but that hundred and 50,000 is a good starting point and if you look to the left of the year 2000 most all those stacks those columns well north of the yellow line but since the year 2000 plants across and that average you can see is great testily below that yellow line for at least a decade the American employment has been dropping below potential dropping terribly below potential right and come back to that are go to this first it from credit gates from calculated risk and its remittances to Mexico from the bank of Mexico and you can see it peaked up in 2006 and seven when the was lots of construction work being done and then as construction work dropped off it drop back but it’s stepping up again and is not so much construction work it will be construction work but it’s everything else basically United States knows that to make profit they cannot employee are good white as in nonblack are workers they need black workers off the books cheap to make nice lots of profit and that’s why Mexican remittances are going up again because that big businesses are employing them and are just go back to a comment that was left on back Gavyn Davies blog because it passes is on very well points raised are all very valid but consider this the wealth lost by middle-class consumers through the recession and the housing bust have been enormous the they have the average American in his mid-60s can no longer afford to retire furthermore the culture has changed Americans don’t want to be given a watch when they turn 65 and live out their years watching television and sitting on the front porch baby boomers will want to consume and spend more in their later years than their parents and will be willing to work longer possibly in reduced hours capacity to do so I think if demand for employees was there we would see the labourforce partition participation reach new highs the good news is that potential GDP for the US is actually much higher than most project all we need to do is stimulate demand and get all those willing workers back on the job and I think that are well good points TiVos made it to a certain extent here that people will be willing to work later the trouble is where are those jobs going to come from that is the big thing point right I’ll just go to the pew research Centre in finish here rising share of America’s Americans see conflict between rich and poor and an article written written by Richard Morin which is quite funny rising share of Americans see conflict between rich and poor so started the bottom kind of here but you don’t know that London workup this is the percentage who say there is a very strong or strong conflict between these parties starting at the bottom so this is a very strong or strong conflict between the young and the old the light green is 2009 the dark rings 2011 not much conflict in either of those that polls are dates 2009 2011 think there’s much conflict between young and old that might come later it might not between blacks and whites it actually drop back from 2000 92,011 a slight increase in immigrants and nativeborn people are that’s very strong or strong conflict between these 255 to 60 to 62 starting to get worrying up towards two thirds at two thirds now we have rich and poor when it was only 47 back in 2009 preoccupy Wall Street people have done a job party identification on the same question starting at the bottom again independents have gone up from 2009 to 2000 1123 points from 45 to 68 and strangely Democrats and Republicans have gone up a very very similar amount 18 in 17 but from a different base Democrats FT 5 to 73 very large man now think this conflict between rich and poor Republicans not so much but it can increase 38 to 55 now in the article this is going up against a will start at the bottom again this is same percentage who says there’s a very strong or strong conflict between rich and poor only the rich and poor question in question here that Hispanics are gone up six not much in the blacks are gone up eight not much that they didn’t need to go up much because they thought back in 2009 there was a strong or very strong conflict between rich and for 55 and 66 in 2009 which have now been pushed up to 61 and 74 whites have gone up an awful lot 22 coming from 43 up to 65 that kind of called on to what those funny funny coloured people were thinking back in 2009 and now they think it overall there is a repeat of the number 19 from 2000 947 to 66 now two thirds of Americans thinks there is either a strong or very strong conflict between the rich and the poor and this I think is America’s dream the last dream that they get is that they think that they can in some way take the money from the rich and spread it down among what the next the 80% below are relieved 20% Forex spread the rich money from the 1% down to the 80% below and all will be well know it will not be well what the 80% below need all the 99% below need are jobs and that is where it is at and will be at the decades to come by
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