Race to the bottom

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 today write and read this paragraph to you and you’ll soon recognise that it’s not of today but here we go anyway the current excessive debt structure has obtained its present astronomical proportions due to an unbalanced distribution of wealth during our week years of prosperity to much of the product of labour was diverted into unproductive investments and as a result what seemed to be our prosperity was maintained on the basis of abnormal credit both at home and abroad when the crisis finally hit debtors were forced to curtail their consumption in order to reduce their debts this naturally has led to falling prices and increased unemployment and unemployment further decreases the consumption of goods which further increases unemployment and thus the vicious cycle of deflation has continued to the point where we now file and almost one fifth of our entire working population unemployed in many countries with of the entire working population unemployed in many countries with prices of everything greatly reduced our national income below the level achieved before the crisis and I debt burden greater than before so that is well pertinent to some countries harmed Greece or be the obvious one hand let’s move on to the last paragraph of this is actually speech to God you make speeches to Congress testimony testimony to Congress the programme which I have proposed is largely of an emergency nature designed to bring rapid economic recovery we need urgently to address this debt and unemployment problem or we are going to get a collapse of our whole credit structure which means a collapse of our capitalist system and we will then have to start all over again we simply have got to take care of the unemployed or we will have a revolution in this country that was actually Marriner Eccles who was FDR’s man said he was governor of the Fed at the time and that was as I say a tester mini to Congress the end of it it is just to say these things do happen over and over again and it was a credit boom and its credit bust and there are ramifications for that and it has to be handled in a certain way author are certain ways of handling it right let’s move on and go back to our labour force parties participation participation rate for women this time in United States we saw the men one and it was going all the way down top left bottom right on that one it was just since the Second World War it was up and then since it’s just come down and down and down or should I say die in dying and I and this is the shape of the women obviously low just after Second World War 33% to 1/3 of the women in the workforce and then it was went through half women in the workforce in the late 70s and it came up to 60% never made two thirds and it’s tailed off against likely since calmed the dot-com crash this next chart is the two of them together now to get the both in the same chart the men in red then don’t look like they’re coming down as steeply as they did render it looks a lot steeper in a charter gave you but to widen up the chart to get the winning in at their initial 30% in the eat doesn’t look as though the men are coming down because even numbers are obviously the same up towards 90% about 87% and down all the way to 70% now and the women going from their 33% up to 60 and tickling down since the great recession worse since the dot-com crash and the accelerating through the great recession and just to show that it can be seen in this chart it’s not looking wild and obvious but you can see now got 1998 on the left so that first bar is the dot-com crash and the wider grey bar is the great recession and were coming at 75 the men in 1998 came down through the dot-com crash maintained itself maintained working through the housing boom that since the great recession has now got down to 77 men 75 down to 70 from 1998 and the women have come down from 60 and their drop-down is mainly after the great recession and they’re down to 57.5 then not this huge sounding numbers 75 down to 70 and 69 to 57.5 but that actually adds up to an awful lot of people that can just push home this at US unemployment think I’ll go back to this one which the civil civilian unemployed appointment and then we got the popular to good percentage of population ratio call the M ratio and we can see how it really from 1960 went up and up add till into nearly 2/3 but since the dot-com crash has come down to a rate of 58 1/2 which was actually achieved in the mates first achieved in the late 70s there is an awful lot of unemployment there and in most Western countries is a lot of unemployment and is a really big question of how people are to be put back to work because at the moment the way money is spread out is generally via wages and are a lot of people that aren’t receiving wages right let’s move on and say that in the capitalist way and then not liable to receive wages because this is Asian aggregate export growth by destination this is just to say that pleasure is catching a cold because the West is not buying their goods that these are percentage year-on-year increases or deep creases in the export growth or export non-growth and see the great recession where at its peak downwards am it was down to -30% but that wasn’t much to beat and there was soon +50% year year-on-year in 2009 everything was starting to get going again after the great recession BBC the shape of it exports from Asia to the United States at the EU which is at liberty of the lowest their Japan Asia with and not Japan and the rest of the world all them showing exactly the same shape from the coming out of the boom, let’s go guys everything is fine it’s been downhill ever since and that’s a long to work to half years of going down in downhill less and less exports going out from Asia and that’s very important because the world needs Asia and Asia needs the world right will just finish with this which is kind of going back to the United States and this is the USD expert dollar index one-year chart stretching back one year so the dollar came in at it to number a balanced against a basket of other currencies mainly the Euro 76 he came started the year ago actor knits wobbled about but generally for 10 months it was going up really from 76 all the way up to 84 at one time now this was going to damage US exports with the dollar is strong up at 84 so in the summer time the vibrations were going out that the Fed would be doing some sort of QE or something that was going to reduce the US dollar value and as summers gone on and obviously with acceleration lately that QE was definitely coming and now we have the US dollar index down to well under 18 years 79 point nothing much this is the great race to the bottom to try and did base your currency enough so you can have the exports so you can call money in from the external world but everybody is trying to do it and obviously when everyone is trying to do basic their currency it’s classic race on the bottom and nobody is going to win certainly not people holding currencies because everyone is just that debasing them at set by

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  • Bigcollapso

    The idea that the Fed can obtain their employment target by debauching the USD is not even sane. Hyperinflation, here we come. 

    • Windslice

      Hyperinflation is not coming your way any time soon.

      There are massive deflationary forces afoot which the Bernank is fighting tooth and nail.

      • Bigcollapso

        This is true from one aspect. What is “deflating” is the “assets” from the bubble blowing of the Fed. That is, reality is being revealed after the Feds criminal bubble blowing to increase the revenue of its banks from increasing the housing prices and government debt.
        This really has nothing to do with the real economy that has to keep us all alive. The Fed is destroying the money and the information that this system needs to keep us alive, in order to hide the losses (that occurred years ago) from its bubble blowing.
        There is a small chance that the Fed can do this, that is, they can transfer the losses from the bubble pop into the hands of the working class by inflating away their buying power. If this works, it will leave the middle and working class utterly poor and leave the banksters with everything.
        Buy there will be massive damage to the economic systems that we all need to stay alive, for several reasons. One is that the technical economy is not evolving to handle the physical world that it must operate in, but rather to try to survive this constant inflation of the monetary system, and the ever increasing wealth capture and consumption.
        Another reason that it is unlikely to work is that it by definition holds the monetary system very close to collapse for years or decades as it attempts to inflate away the buying power of the money.
        This means that everyone must behave “normally” to keep the system from collapsing.
        History shows that a “smart” guy or a government will take advantage of that situation and collapse the system for his own gain.

  • Windslice

    All that debt.

    http://www.gfmag.com/tools/global-database/economic-data/11855-total-debt-to-gdp.html#axzz26UhLDvRV
    Oodles and oodles of it.

    But surely that is the system?

    Without all the debt, much of the existing assets would never have been built or manufactured. And debt can only be paid off by the creation of even more debt somewhere in the economy. And as the debt is created by the finance industry, then this tends to suck all the wealth into the banks.

    But I am struggling with the Bernank’s latest scheme for rescuing the economy from, well, itself. The vast bulk of MBS’s are created by Freddie, Ginie, and Fannie. as we know, MBS’s are barrels of mortgages (with the occasional iffy apple) sold into the market. The buyer then receives an income stream from the interest payments.

    So along comes the Bernank buying at will up to half a trillion USD’s worth of this stuff every year for as long as he thinks the economy needs it.

    Right.

    So if you are holding a bunch of MBS’s which are generating a cash stream, why on earth would you sell out to the Bernank for cash, which will give you 0.0% income, unless you have something better to do with the cash? The only reason I can think of is that you know there are a few rotten apples in the bunch and so we’ll sell out on the Bernanke “put”.

    OK, so now you have flogged off the MBS, so what are you going to do with the cash? As there is already a massive pile of cash sitting idly in the FED I suppose that the pile will simply get even bigger. It cannot be lent out, as we have already discussed this issue.

    So where is the transfer mechanism back into the general economy and into the peoples’ pockets so they can go out and spend? I must be missing summat.

    Apropos banking.

    The brain is working overtime again.

    Say we have Bank A which has flogged off all it’s loan book as an MBS to the Bernank. The very simplified balance sheet will look like

    Asset : 5 cash

    Liability : 5 depositors’ accounts

    This bank cannot lend out without expanding the money supply.

    Now the Bank sets up a subsidiary, BAAM. (Bank A  Asset Management).

    Then the cash 5 pile is given to BAAM to manage and Bank A receives a slip of paper as a receipt.

    Now, the cash 5 pile is sitting in BAAM’s account somewhere. Can BAAM start issuing mortgages and slowly move all the cash 5 into new mortgages without creating new deposits and expanding the money supply?

    I think the fallacy of my reasoning lies in transfer of the cash to BAAM and accepting a piece of paper. This has in itself just increased the money supply. Say BAAM keeps the money it manages in a separate deposit account at Bank A.

    After transferring the money to BAAM, the bank’s balance sheet looks like

    Asset:
    Piece of paper 5
    cash 5 (having come back in through the deposit of the cash)

    Liability
    Depositors 5
    BAAM managed money account 5

    Whatever.

    Another thought, the old style Building Societies that the UK used to have before everything became deregulated (maybe derailed is more appropriate). Did they have to collect enough depositors’ deposits to make a loan, or where they also in the “money from nuffin” business?

    • http://overthepeak.com/wordpress/ Mystic

       Thanks for the link …….. it’s a goody~!

      I could not follow your BAAM thing, but I think all banks have always, always, always used fresh air money.
      Building Society or whatever ….. it is the only way to do it.
      (I don’t think there is a `building society accounting system`)

      It is then just a matter of self-control. 

      • Windslice

        Self control. Yep, that’s a good ‘un.

        BTW I’ll soon be off up the hills of the Himalayas for a month or more, so you won’t see me around here until I get back.

        • http://overthepeak.com/wordpress/ Mystic

          Wots the point of goin’ again ………. yer went there last year~!?

          • Windslice

            And the year before that…..

            Sum tings is wurf repeatin’, innit?

            Wot did’ya do wiv da nice snowy hills pic?

            • http://overthepeak.com/wordpress/ Mystic

               There ya go~!

              • Windslice

                Thanks, and here’s one I took in Nepal. Ama Dablam.

                • http://overthepeak.com/wordpress/ Mystic

                   Looks like a bit of a chilly hilly~!

    • Bigcollapso

       Windslice, you are well on the way to understanding the scheme. The one thing that you need to take a a step back and think about is the concept, “Without all the debt, much of the existing assets would never have been built”
      This is a common and incorrect way of thinking.
      Our money is pure fiat. That is, it does not take money to do something in the technical world. In other words everything that has been done could still have been done without the debt. It just that the banks are licensed to be owed perpetual revenue (weath transfers) from the use of the money.
      You can think of it like an odometer that runs on up, whenever you need to use money. This odometer runs faster the more work you do, and the smarter that you are. The larger the number, the larger the future that is owed the financial system.

  • Windslice

    I guess you read AEP on the latest QE

    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9542270/Era-of-jobs-targeting-begins-as-Fed-launches-QE3.html

    I have now added “BeveridgeCurve” to my list of economic terms.

    “Yet something is deeply wrong. The percentage of long-term unemployed has surged to 40pc, double previous recessions. The labour participation rate has fallen to a 30-year low of 63.5pc.
    Headline unemployment is 8.1pc – viz 11.3pc in Euroland – but this does not count millions who have dropped out of the system. For the doves this screams “cyclical”, caused by lack of demand. “The loss to the economy is enormous,” said Nobel economist Peter Diamond. “If you leave school and can’t get a job, it hurts for years. You lose earnings for a decade.””
    But then we have a very strange sentence

    “America’s output is now well above its previous peak in late 2007, unlike Japan and most of Europe.”

    Pity there are no figures or anything to support that. AEP is a little lacking here.