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So, there's a financial meltdown in progress ... what you gonna do about it?

by BruceMcF Sat Feb 23rd, 2008 at 05:31:05 PM EST

Hmmm, maybe that's me, second from the left
... you know if it was free coffee and donuts, I'm there
Yeah, I'm looking at you, Mr/Mdm European.

My country's financial system is going to go through the wringer over the next two years at a minimum ... and much longer unless the initial reaction is constructive. Bear in mind the "lost decade" in Japan in the 90's after their bubble burst ... and while it was a quite impressive bubble, the Japanese financial system was nowhere near as fragile then as the US financial system is now.

So, OK, those running things here have screwed the pooch.

My question is, what are y'all going to do about it?

Figure 1: Japan's Lost Decade
Now, it occurs that one thing y'all could do is to reach some kind of accommodation with China, where they agree to shift their "hidden basket" peg from dollars to euros, which would mean that in defending the peg, they would start to accumulate far more Euro assets than Dollar assets.

And of course, the Chinese defending their hidden basket peg, which is primarily focused on the dollar at the moment, is one of the primary things propping the US dollar up, so that if y'all reach some form of accommodation with the Chinese, we here in the US will find out that we aint seen nothing yet in terms of how low the dollar can go.

Which means that this would be a terrific time for someone living on next to nothing to start looking for how to buy dollar denominated Euro call options, since dollar denominated savings along the lines of a hundred or two a month are simply going to be wiped out in the series of inflationary spikes coming up for the US in the decade ahead.

Also, if there is any prospect of that coming off, that improves the prospects of the Chinese keeping their headlong rush to growth going for another five year spell, staving off the political catastrophe that will strike if they get stuck in employment growth rates of 5% a year or less, at least until they have cleared the demographic hurdle created by Mao's insane "people are wealth" policies of the 1950's.

And if China keeps growing over the medium term, that means that dollar denominated call options on Australian dollars are also a good thing to think about ... especially since in an age of Peak Oil, Australia has substantial untapped natural gas reserves.

So, that's why I am asking.

If it seems likely that y'all might reach an accommodation with the Chinese and cut the US loose to fend for itself ... could y'all give me some advance warning?



I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sat Feb 23rd, 2008 at 05:36:31 PM EST
They furrow their brows

Jarrow March - Wikipedia, the free encyclopedia

The marchers arrived in London on October 31, almost a month after leaving. The total amount of signatures on the petition was 12,000, and was handed into Parliament by Wilkinson. The Prime Minister of the day, Stanley Baldwin, refused to see any of the marchers' representatives, claiming he was too busy. The marchers generally received sympathy, though no proposal was made to help Jarrow, despite the petition being accepted in the House of Commons.

Several years after the Jarrow March, in 1938, a ship-breaking yard and engineering works were established in Jarrow. The following year, a steelworks was established. Still, the depression continued in Jarrow until the beginning of World War II, when industrial production increased due to the nation's need for re-armament.

The Jarrow March is fondly remembered by those on the left in British politics as a landmark in the history of labour movement, even though the Labour Party of the day opposed it, and the Trades Union Congress circularized Trades Councils advising them not to help the marchers[2].

The last surviving member of the march, Cornelius Whalen, died on September 14, 2003, at 93.[3]

Great diary--great picture!

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Sat Feb 23rd, 2008 at 05:58:04 PM EST
[ Parent ]
Yeah, this is probably not the best time to be nearing retirement on a fixed income.  Unless, of course, its fixed really high.

"I said, 'Wait a minute, Chester, You know I'm a peaceful man...'" Robbie Robertson
by NearlyNormal on Sat Feb 23rd, 2008 at 08:57:58 PM EST
[ Parent ]
did sweet FA for Jarrow--unfortunately. The reason shipbuilding and refurbing (and associated industries) came back to Jarrow in 1938 was because the UK was preparing for war with Germany, and the NE was in the right place with the right rivers and coastal access.
Jarrow now is almost entirely without decent jobs, unless you count retail work in Sunderland or Newcastle, call centres, or low-level back-office government jobs.
The North East is going to have it worse than anywhere else in Britain as the economy tanks. House prices there have skyrocketed beyond what any normal person can afford on local wages, and there are ever fewer of those local wages to be had it seems. When I was living there, you met so many people trying to get by "American style," with three low-wage jobs... one woman who was a cleaner where I worked got up early to make pasties for the morning shift at Gregg's, then did a couple hours cleaning before we opened, then worked at a school cafeteria for lunch, then came back for end of the day cleanup with us. Your main alternative to that was being on the dole and running some sort of scam to add enough extra cash to live on to that.
And the chances of people coming together to do something about it when things get even tougher? That was well beat out of folk by what the government did to the area after the Miner's Strike--which was, of course, the point.
by expatyank on Sun Feb 24th, 2008 at 05:31:55 PM EST
[ Parent ]
I think you are talking to the wrong continent. We aren't the actors, we are the price.
An even stronger Euro is certainly not something I think is to appreciate.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Thu Feb 28th, 2008 at 10:19:34 AM EST

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