The fundamental disconnect between almost anyone and the economists is that the latter use jargon – they can’t help it – and consequently, they don’t so much talk down to us but they ignore us in their analyses.
This is an attempt to make it more comprehensible. The recent post on The True State of the Recovery was almost completely ignored, except for Wolfie who is in the business. His comments appear further on.
There are three major things going on which even we can comprehend:
1. There is money being printed and poured into the economy as if it’s going out of fashion;
2. Bankers are being given an armchair ride by the Central Banks – incest is so much fun;
3. Less understandable for the layman is the OTC derivative. This one needs a bit of explanation.
Firstly, an economic writer explains that an oversight committee in the U.S. not only refused to take testimony on the out of control OTC market but actively blocked the testimony being placed on the official record.
Still all at sea? Well so are the derivatives, which are just transactions which are essentially bad debts and the bottom line is that no one knows how many there were nor where they actually are now. They were privately negotiated deals between two players.
This explains it a little:
A swap is a very common type of OTC derivative, which includes that destroyer of economies, the credit default swap (CDS). While industry folk commonly speak of a buy-side and a sell-side to the swap market, you can’t really buy or sell a swap in the classic sense, since a swap is an instrument in which both sides have obligations to perform in the future.
Naturally the Fed would like to see these under its control and you can read about that here.
To simplify it even further – the very preconditions which contributed to the crash have not only not been reformed but the financial markets are virtually going back to where they were before and doing the same things over again. I mean this in the sense that the same Madoffs and semi-Madoffs [yes I know he was different – I was using the word as a pejorative adjective] are still in there playing.
All that’s happened is that people in the game have covered their butts for now and the banks have been obscenely bailed out. You and I, however, face unemployment, mortgage default and housing price crashes. Wolfie again on these players:
Worse, it gets quite disheartening to keep knowing that it’s going to happen and yet see the monster go on and draw yet more people into its maw.
I still believe that we would have had a bust and debt deflation in 2003 if it wasn’t for Sir Printsalot and Chopper Ben cutting rates to 1% to prevent the coming debt-deflation.
Naturally this simply took a mortgage bubble already on a moonshot and gave it a stardrive. Those guys will yet go down in history as the folks who saved a recession at the cost of a depression.
So there’s no escaping that the general economies are going to hit the skids.
Pretty clearly the first hits will be in the financial sector. There are going to be swathes of redundancies in banking, stockbroking, estate agencies, builders and petty much anyone else who’s been an intermediary in the game.
Worse, since everyone is going to need a scapegoat (nobody blames themselves for their financial stupidity and politicians are adept at finding someone else to blame) some of those folks are going to jail. If you’re an estate agent, or a buy to let landlord, then keep your nose clean and your head down.
I’m serious: some of you are going to jail simply because someone has to. All folks need is some sort of chicanery which will suffice as a charge. An unsympathetic jury is already guaranteed.
Let me point out here that this above comment was written on November 25th, 2009, so when it refers to the future, it is actually the future from here on in. To continue:
Frauds are easy to hide when everything is booming, but not so easy when folks start nervously counting their money. The great Warren Buffet pointed out that it’s only when the tide goes out that we find out who’s been swimming naked. Needless to say, when these frauds are discovered, there will be a whole lot more nervousness to go around.
So all this talk of us coming out of the recession later than the rest of Europe but we are coming out of it, truly ruly, is so much hogwash. There is an enormous amount of fraud and bad debt being hidden, like a mouth full of abscessed teeth and it’s going to come to light in the next year or three. Hold on to your seats or at least to the roofs over your head.
The single most essential thing to do is not to fall for the leftist’s use of the term “capitalism”. Their argument is that because the global socialists the CBs et al, along with the bankers and the greedy have caused all this, that ALL free enterprise needs to be swept away and a “responsible state regulated system” be put in its place – people just can’t be trusted to look after their own money.
This whole collapse occurred because of people in the financial sector, along with the greed of the average punter.
It did NOT occur because of the shopkeeper, the buyer and seller of produced goods or because of the provider of services. The great error would be for the average voter to allow this subterfuge to be put over them.
In fact, the only way back is to put the shysters out of business and go back to ordinary transactions – I’ve produced something, I sell it to you, you sell your product to someone.
For the moment, do not believe a word of it when they say we’re coming out of it, particularly if that comes from the money markets, the CBs or the government.
In a nutshell
People don’t understand the nuts and bolts of economics as a rule and I have learnt some in the past three years. Maybe you have too.
People are therefore dependent on the ecopundits and these people who got it wrong and failed to predict the crash, are now predicting recovery. They announce and the media picks up on it that the recession has ended.
What they mean is that the recession in the bailed out money markets has ended but as an aside, they mention that there is still residual trouble in the employment and productivity fields. “Still”, as in “about to get better”.
On what basis “about to get better”? Is there new industry? Is there a complete Labour overhaul of the tax regimes and the crippling laws? Has the bureaucracy been slashed?
Labour are out of touch economically but they have their finger on the pulse of the community better in that they are playing on the fears of the average citizen that the Tories are going to slash spending straight away. They’re not going to do that immediately in terms of jobs but that fear is enough to give people pause.
So the economy is the number one issue, yes. But for David Cameron to say that the EU comes a distant second to the economy is either naive or just plain wrong or both.
Recovery depends specifically on withdrawal from or a fundamental renegotiation with the EU because it is they who are sucking us dry – look at the TPA figures. Even allowing for some exaggeration, as Europhiles charge, the figures are still mindboggling.
That’s before we even start on the social legislation.
Thus we need the referendum but even with a referendum, people are dangerously lulled into a “recovery”, based on huge injections of newly printed money – that’s not a recovery in any real sense of the term.
For goodness sake, many people are even considering voting back the same government again which lay in bed with the EU and exacerbated the American crisis to become ours as well. And others will vote for them because they’ve always done so. Really?
Excuse the rude word here but people have largely got it arse-end round in their analyses. Then what should we be doing? N1 – putting the referendum on EU membership. Even one year into the new parliament it will be too late for the second crash, the mooted “double dip” but as it can’t be done any sooner, it can’t be done any sooner.