tag:blogger.com,1999:blog-1527766217650773141.post6549913257370634958..comments2023-07-12T06:12:30.772-07:00Comments on Demand Side Transcript: Transcript: 386 Real world, fantasy solutions, are making a messAlanhttp://www.blogger.com/profile/07323700324276425194noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-1527766217650773141.post-19899994896507748922010-05-26T21:31:34.434-07:002010-05-26T21:31:34.434-07:00Agreed.
Absent a recovery in demand that is not o...Agreed.<br /><br />Absent a recovery in demand that is not on the horizon, markets are in trouble. <br /><br />I do not think the banks are save-able. Their function is necessary, however. <br /><br />As for default and leaving the EU. The only country whose departure would actually improve things is Germany. Then everybody could revalue the currency relative to the Germans and perhaps balance the trade.<br /><br />Very depressing that the IMF's regime is still taken seriously. Austerity is not the answer. Reform, yes, but we are not going to shrink our way out.<br /><br />I'm starting to think Michael Hudson is right. We're going to become serfs to the debt holders.Alanhttps://www.blogger.com/profile/07323700324276425194noreply@blogger.comtag:blogger.com,1999:blog-1527766217650773141.post-48541715519213049552010-05-26T13:00:41.943-07:002010-05-26T13:00:41.943-07:00There are a number of problems with the derivative...There are a number of problems with the derivatives market. The first is that at somewhere between $600 and $700 trillion it is substantially larger than the world economy. So there is not enough money to back stop these if there were a problem. While many will cancel out, there will be a substantial number where the seller collapses. Leaving the buyer nursing losses. If there were another major default then the banks who have been the major writer of these deals will find themselves insolvent again, and nursing losses that even the national governments cannot plug. Banks are gambling that governments will do everything possible to avoid default. So can demand higher risk premiums on the idea that they may fail, thinking that is an outside risk. <br /><br />One is that they are betting against the lenders of last resort. If they were to start betting that the US Treasury would not be able to clear its debts then interest rates would have to rise to compensate buyers of treasuries for any potential risk, this could might raise incomes for the banks who have access to free money from the fed and can lend to the Treasury at considerably higher rates, at least for the short term. It could also close off the free Fed money, which is keeping them solvent for now. <br /><br />If there were a plan by a number of european governments to default and leave the euro, it would devastate a number of other countries banks. The greek bailout is a not so secret bailout of the german banks. If Greece were to default then many of the german banks would probably be close to collapse. The german public are not happy to bail out anyone, even german banks. Though a series of defaults might actually make others consider it as an option. Making credit default losses astronomical. That will wipe out the remaining big money centre banks. Though it will have a huge benefit. Governments will not be able to hold off breaking up the banks and even nationalising them temporarily. <br /><br />The options of too many countries imposing austerity measures will have a serious impact on stock markets who are seriously overvalued on the expectation that normality has returned.David Lazarusnoreply@blogger.com