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Wealth & Economics > Great Depression? Again?

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message 1: by Nik (new)

Nik Krasno | 16032 comments Yeah, these letters...
Sometimes it's scholars, another - Hollywood celebs, army veterans, etc. People like to petition in numbers. This time economists warn against Trump's protectionist policy: https://www.theguardian.com/us-news/2...
What do you think? And would prozac help?


message 2: by Holly (new)

Holly (goldikova) Nik wrote: "Yeah, these letters...
Sometimes it's scholars, another - Hollywood celebs, army veterans, etc. People like to petition in numbers. This time economists warn against Trump's protectionist policy: h..."


Heavy sedation is probably the most workable solution.


message 3: by Nik (new)

Nik Krasno | 16032 comments -:)


message 4: by J.J. (new)

J.J. Mainor | 2328 comments We're, what? 17 months into Trump's Presidency and unemployment continues to tick down...numbers this week bring it down to 3.9%. Consumers are more confident than ever, and frankly, the disastrous hurricanes should keep large sections of the country busy while the rebuilding goes on. Couple that with a housing market that's still on fire - inventory continues to drop and prices continue to rise.

We're due for a hic-up, sure, but it's ridiculous to think we're headed for another major crash so soon...these things usually work on 30 or so year cycles because that's how long it seems to take society to forget the lessons from the previous crash.


message 5: by Scout (new)

Scout (goodreadscomscout) | 6151 comments I'd assume that one reason for teaching history in schools is so that we won't repeat our mistakes. I wonder why that doesn't work.


message 6: by Ian (new)

Ian Miller | 11768 comments The question I ask is if unemployment is down to 3.9%, why impose protectionist policies? Given that most others will retaliate, with China being particularly selective in picking things where Trump supporters predominate rather than for economic purposes, I think it is too soon to dismiss the economists, after all the policies are only just being started now. Sure, no recession in the near future, but economic policies seem to take a couple of years or so for the consequences to start appearing.


message 7: by J.J. (new)

J.J. Mainor | 2328 comments It's hard to pinpoint a specific reason, but there are a lot of possibilities. It's worth noting that when he announced the tariffs on steel and aluminum, he backed off on his threat to institute them on our European allies...and so far, none of the tariffs toward China have actually taken effect. At times he's indicated they're a bargaining chip to bring China to the table and discuss some of the trade issues a lot of American companies have, including the theft of intellectual property. It feels like so far Canada has been the only country we've actually targeted with tariffs - Can't really say it's the reason, but it is coincidental that he's got Canada willing to renegotiate NAFTA when it's been long ratified.

There's a program called Market to Market that airs on the local PBS station in the wee hours of the morning, and they were talking about the implications of a trade war with regards to our agricultural industry. Some of the points they discussed is that it does leave our farmers in the dark when it comes to who will buy our produce, but what they pointed out is that there is no real glut of product on the market. They used soybeans as an example, pointing out that Brazil cannot meet China's demand by itself. China might be able to shift their purchasing to other countries, but they will still have to come to the US to fill the remainder of the orders. Additionally, if Brazil sells all their soybeans to China, that means Europe will have to go elsewhere to by their supply...that means they'll come to the US and buy the soybeans China stops buying.

It seems to me if we're talking trade war specifically with China, we can go to any 3rd world country for our manufacturing needs. Some of our manufacturers will lose business from China, but with the global nature of many of our companies, why couldn't Boeing for example sell their planes through another country and sidestep the war? Can their European competitor meet the increased demand if China were to suddenly place all their orders elsewhere?


message 8: by Ian (new)

Ian Miller | 11768 comments So far, Canada is not the only country he has targeted. New Zealand has also been tariffed, which, as an aside, has left a number asking ourselves, why the hell do we have our military training people in Afghanistan and Iraq? I know - NZ hardly matters on the world scale, but if he is acting this way on other countries, he will not be making friends.

A trade war with China is less than a good idea - China is making a lot of diplomatic efforts with other countries and as they get closer to China, there may be consequences. Right now China provides most of the US rare earth elements, and pulling the plug on those exports, which China really does not need or want because it is a polluting industry, will hurt.


message 9: by Graeme (new)

Graeme Rodaughan Scout wrote: "I'd assume that one reason for teaching history in schools is so that we won't repeat our mistakes. I wonder why that doesn't work."

Perhaps the net effect of studying history is to repeat the mistakes of the past as people keep assuming that 'this time will be different.'


message 10: by J.J. (new)

J.J. Mainor | 2328 comments Ian wrote: "New Zealand has also been tariffed,..."

I'm sure you're certainly the biggest threat to American trade...

*shakes head*


message 11: by Michel (new)

Michel Poulin Graeme wrote: "Scout wrote: "I'd assume that one reason for teaching history in schools is so that we won't repeat our mistakes. I wonder why that doesn't work."

Perhaps the net effect of studying history is to ..."


Maybe that is because so many history books around the World have been rewritten to fit versions that make the governments/countries concerned look good/less bad? Look at how Japan has been mostly erasing the history of its past war crimes from its school books, or at how many American states school systems are trying to push aside the teaching of Evolution, to replace it with Creationism.


message 12: by Ian (new)

Ian Miller | 11768 comments J.J. wrote: "Ian wrote: "New Zealand has also been tariffed,..."

I'm sure you're certainly the biggest threat to American trade...

*shakes head*"


I gather it will put about a half dozen of our workers out of work. More serious is the Iran sanctions. We have developed significant food exports to Iran following the original deal Obama signed. Today there is a lot of head scratching trying to work out what to do now.


message 13: by J.J. (new)

J.J. Mainor | 2328 comments Ian wrote: "J.J. wrote: "Ian wrote: "New Zealand has also been tariffed,..."

I'm sure you're certainly the biggest threat to American trade...

*shakes head*"

I gather it will put about a half dozen of our w..."


Threatening our allies like that is mind boggling. A lot of voters were looking for a fighter because they feel we're too worried about hurting feelings around the world to get what we want out of these deals...it's a little refreshing to have a President who's tough, this feels like it's going beyond "brutal honesty."


message 14: by Ian (new)

Ian Miller | 11768 comments On a slightly different note, it seems that the US Congress is busy rolling back the Dodd-Franck restrictions on the big banks. The idea seems to be that they can self-regulate, but that was what they were doing, or if you prefer, not doing, around 2007. Besides the crap trades, derivatives, and whatnot, we had extreme leverage. I gather Lehmann's had something like 3 cents equity for every dollar they were sending out there. So, do you think this roll-back of legal coverage, albeit rather slight already as most of the evil derivatives are back out there under a different name, will lead to another bubble and crash, and if so, what can the average person do to survive?


message 15: by Scout (new)

Scout (goodreadscomscout) | 6151 comments I saw something disturbing yesterday. There was a sign in the front yard of a house for sale that claimed "100% financing." Isn't that what caused so many problems in the past? I thought those days were over.


message 16: by Ian (new)

Ian Miller | 11768 comments Scout, I agree that looks disturbing. The finance will be derivatized, spread, and there is a real risk the whole lot will fall over.


message 17: by Scout (new)

Scout (goodreadscomscout) | 6151 comments It makes no sense to lend that much money with no down payment. The buyer has little incentive to pay off such a huge loan or take care of the property when he has nothing invested.


message 18: by Ian (new)

Ian Miller | 11768 comments Usually, the buyer can't or won't repay. By not paying the loan until evicted, it is cheap rent.


message 19: by Athzin (new)

Athzin (achoque) | 2 comments Liabilities under uncertainty is contributing to financial crisis, Minsky reviewed splendid


message 20: by Graeme (new)

Graeme Rodaughan NINJA No Income, No Job, loans are a big red flag - any of those around?


message 21: by Graeme (last edited Jul 19, 2018 11:24PM) (new)

Graeme Rodaughan Scout wrote: "I saw something disturbing yesterday. There was a sign in the front yard of a house for sale that claimed "100% financing." Isn't that what caused so many problems in the past? I thought those days..."

Hi Scout - precisely nothing was fixed post the GFC.

TARP socialized banking risk from the corporate banks and their owners to the taxpayers to the tune of $700B and helped entrenched a wall street culture where the profits are theirs and the losses are for the taxpayer.

Furthermore the US Federal reserve bought 100s of billions (or was it over a $1T) in toxic sludge mortgage backed securities off the banks at their "Book Price," i.e. $1 for $1, rather than their market value (something approximating $0).

That toxic sludge still resides on the FEDs books as there is no mechanism to get rid of it.

It's a wonderful business mode for the banks. /sarc.


message 22: by J.J. (new)

J.J. Mainor | 2328 comments Graeme wrote: "Scout wrote: "I saw something disturbing yesterday. There was a sign in the front yard of a house for sale that claimed "100% financing." Isn't that what caused so many problems in the past? I thou..."

Couple things on TARP. Only about half the 700 billion was paid out. Of the money that was, the government did get its money back and then some...TARP actually turned a profit for the Government.

https://projects.propublica.org/bailout/


They chart the separate bailout for Fannie May/Freddie Mac as well and apparently the government has made a profit of $84 billion on that as well.

Digging through, I see the massive AIG bailout made the government $17.7 billion when it was all done.

I think the problem politically for the bailouts was that they were necessary. We forget that President Hoover did nothing when the banks collapsed under his administration, and the whole country suffered far worse. What I imagine Bush had to consider was that if he let the banks fail, FDIC insurance put the government on the hook for the deposits that were insured at each and ever one of those banks. The payout would have been far more than the $700 billion covered by TARP and the government would not have seen any of that money back.

If anything, the biggest failure is loosening regulations once again. While I'm normally for less regulations on business, the banks have proven over and over again that they're going to act recklessly no matter what. They need to be put on a very tight leash.


message 23: by Scout (new)

Scout (goodreadscomscout) | 6151 comments Right, the banks should be on a tight leash, but it seems they're not. What can a little guy do to stop another fallout?


message 24: by J.J. (new)

J.J. Mainor | 2328 comments For one, I'd start by being careful where you open your accounts. People complain about the big banks, but they're still banking with them. Wells Fargo for instance has had some inexcusable scandals in the past couple years, and it amazes me that they still have customers. They've even screwed over their high-dollar business customers. But people stick with them.


message 25: by Nik (new)

Nik Krasno | 16032 comments Unfortunately, banks just like shaving brands enjoy a very high rate of customers' loyalty and changing a banker is still not that widespread, as far as I'm aware


message 26: by Ian (new)

Ian Miller | 11768 comments I must confess that I do not change banks largely because here there is little to choose between them as far as stability and rates go in NZ, or, in the case of stability, if there is I don't know about it. What they tend to do is charge fees for exiting the various things like bank cards and then starting them up, so it is not so much a case of loyalty as lethargy and no real advantage. I would be curious to know what people in other countries think.


message 27: by Philip (new)

Philip (phenweb) | 3078 comments In a further echo of the Great Depression - I read that the US Gov has proposed a massive package of support for US farmers due to the sudden loss of sales, caused by retaliatory tariffs on US farming exports, caused by the imposition of tariffs by the US on other goods

https://www.ft.com/content/21051570-8...

I know $12bn seems a lot and of course that will have to come from taxes or more debt or perhaps the money raised by imposing tariffs on other imports. Although in a further article I'm sure I read that the imposition of tariffs had resulted in fewer imports therefore no tax raised. Then of course the competition for those products will reduce allowing local manufacturers to increase prices or do we believe that the companies will keep prices low out of the goodness of their hearts.

Not sure how the US gains form this situation - as far as I can tell:
It's annoyed its allies (as well as enemies) thus making all normal diplomacy (and trade talks harder)
Hurt its own manufacturing base for component prices
Hurt its own farmers
Had to spend more on subsidies (Something its supposed to be against)
Probably added to inflationary pressure on US prices leading to further interest rate increases

Perhaps this is the plan. Perhaps one of our regular contributors can explain or is this all 'fake news' including the $12bn for farmers?

Happy to be enlightened but a further great depression similarity was the rise in the stock markets up to 1929/30 or the rise in sock markets more recently in 2007/08

I don't know a crash is coming. (Nor does any other economist or analyst by the way) but given household income levels the UK has still not recovered from 2008/9. I'm not sure about the rest of the world. I need to check the data not the politicians words.


message 28: by Michel (new)

Michel Poulin Without being a financial expert, I do smell a depression about to explode in our face, as I have zero faith that the banks will not screw us up to profit as much as possible from this trade war and its fluctuating financial situation. If anyone has not learned or refused to learn the hard lessons of the past, it is the banks: short term profits over everything else.


message 29: by Scout (new)

Scout (goodreadscomscout) | 6151 comments Maybe we should Tweet Trump and ask for stricter bank regulation? Why the heck are banks still able to be reckless? Unless something is done, we'll be right back to 2008. I know people don't learn from history, but that's recent history.


message 30: by Ian (new)

Ian Miller | 11768 comments The biggest threat, in my opinion, lies in "what next?" The latest issue that Trump has moaned about is the yuan and ruble have declined about 7% against the USD, and Trump is accusing them of currency manipulation, and he will take action. Unfortunately for Trump, this is not necessarily manipulation at all. The NZD has also declined about 6% against the USD since Trump put tariffs on our steel and aluminium industries (and the irony is, the biggest loser will be the US multi that effectively owns the Al plant). The NZD is not manipulated - its value is set by the market, i.e. the currency traders. If the yuan and ruble are similarly set, it is a miracle they haven't fallen further because China and Russia have been singled out by Trump for sanctions and tariffs, coupled with various threats. On top of that, the Fed is raising interest rates. Does it not occur to Trump that what he is unhappy about now is a direct consequence of his own actions?


message 31: by Nik (new)

Nik Krasno | 16032 comments Ian wrote: "The latest issue that Trump has moaned about is the yuan and ruble have declined about 7% against the USD, and Trump is accusing them of currency manipulation, and he will take action. .."

Confess I didn't make a serious research, but from a quick glance on google I see 'moaning' dating back to 4 months ago: https://www.reuters.com/article/us-us...
Is there anything fresh?
Yeah, currencies of countries targeted by sanctions take a sharp dive, be it Turkey or Iran.
As far as I'm aware, yuan is not freely convertible and thus the market influences its exchange rate only partially. Not sure, ruble either is driven solely by market forces. And a major disruption of local currency in Eastern Europe usually results in equally major discontent of population, so some governments 'manipulate' for their own private needs the rate rather than let the market determine it.
Yes, raising the rate by the Fed automatically causes the dollar to appreciate as all speculative players want dollars to at least have some interest on their savings, while other central banks and consequently private banks offer no interest on the money. And most central banks still staying low in an attempt to reignite their economies. However, there may be a catch in betting on USD beyond situational speculative trading, as the stability of the US economy post tax reform and in the onset of trade wars is unclear.


message 32: by Ian (new)

Ian Miller | 11768 comments The reason I picked on this "moaning" was I saw a TV clip in which Trump gave a warning to China he was going to do something about countries that were deliberately manipulating their currencies. I don't know how much the yuan is convertible, because I gather that a number of Chinese have exported a lot of them into foreign "safe havens". I gather the limit at the moment, without special approval, is $50,000/a. (Information from my daughter-in-law.)


message 33: by Nik (new)

Nik Krasno | 16032 comments I read they also maintain a 'corridor' limiting the fluctuation of the exchange rate for yuan


message 34: by Ian (new)

Ian Miller | 11768 comments As a general rule, if the currency is convertible, it is extremely difficult to defend any value because the value of just about every currency in the world is determined by traders, not by actual trade or by governments. George Soros alone made a biillion pound in a few days by betting against the British pound and the UK government.


message 35: by Philip (new)

Philip (phenweb) | 3078 comments Excellent BBC article with some interesting statistics on Greece

https://www.bbc.co.uk/news/world-euro...


message 36: by Ian (new)

Ian Miller | 11768 comments What it leaves out is that probably the ones that left are the ones that would give Greece the best chance of recovery, namely those with skill and ambition - because those are the things needed to optimize your chances elsewhere.


message 37: by Michel (new)

Michel Poulin Very true, Ian. The future of Greece appears very dark indeed.


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