Sovereign Debt Default Warning - FIBONELLI's own thread

[fibonelli]

Thought I'd start another thread specifically around the potential risk of Governments defaulting on their Debts in the light of them "guaranteeing" all bank deposits.

Here's an article which explains the issue.

Mish's Global Economic Trend Analysis: Worthless Guarantees and Printing Presses

and here's a worthless guarantee in effect
Icelandic Stocks Drop 77% as Trading Resumes After 3-Day Halt

The other relevant thread is here
http://www.trade2win.com/boards/news-current-affairs/39416-hyperinflation-warning.html

 

[fibonelli]

or this!

 

[Atilla]

or this!

Great post Fibonelli and so true.

Not only that but they can borrow from the Bank of England at base rate 4.5% and lend to us our own money at 7%.

As for the politicians, no doubt they will keep milking their expenses and have inflation linked wage increases as well as allowances...


The tax payer is literally gang banged by Politicians and Bankers...

 

[fibonelli]

"Wall Street Monsters & Meat (You)"

 

[fibonelli]

GEAB N°28 is available! Global systemic crisis Alert - Summer 2009: The US government defaults on its debt
- Public announcement GEAB N°28 (October 16, 2008) -

 

[fibonelli]

Fiscal Cat 5 Hurricane Warning - The Market Ticker

Flattening of the short end of the US yield curve.

If there's an inversion..............................

 

[fibonelli]

Mish's Global Economic Trend Analysis: Argentina Default Looms, Pension Fund Seized
Argentina. What a Surprise. Not!

 

[fibonelli]

 

[fibonelli]

Swiss Finance Guru sees bankruptcy for the U.S
Marc Faber telling it straight.

 

[fibonelli]

Warning: Please do not click the article if you are easily offended.

Are-You-Tired-Of <censored>

 

[Atilla]

Warning: Please do not click the article if you are easily offended.

Are-You-Tired-Of <censored>

Really sound arguement well presented Fibonelli. Will the politicians or the Fed take it? I doubt it.

It always puzzles me how some daft politician can go on TV and blurt out rubbish which everybody would accept. Moreover, in this day and age of liberty and civil rights in US the fact that the Fed is a private institution behind closed doors, not accountable to any power in the land is a disgrace.

One can only reach the conclusion it is the only power in the land as it is accountable to no one else but God almighty.

Somebody suggested the US can revolutionalise and take over the world if instead of sending it's marines to kill people it paid the salaries of the marines and monies spent on weapons to the masses of the country it wishes to wage war on.

However, the concept is difficult to grasp for some people.

 

[fibonelli]

 

[fibonelli]

M1 Money Multiplier (MULT)

 

[arabianights]

M1 Money Multiplier (MULT)

uh oh...

 

[Atilla]

M1 Money Multiplier (MULT)

Hi Fibonelli,

I'm having trouble interpreting these charts.

Link to site. St. Louis Fed: Series: MULT, M1 Money Multiplier

Here is another http://research.stlouisfed.org/fred2/data/M1_Max_630_378.png

Are these charts telling us people not using cash to pay for items and credit instead? I believe notes and coins circulating in the economy has been falling for some time due to greater use of credit and debit cards.

Looked up components of M1 and it does have bank accounts in there but not sure if Credit cards are included.

In general at laymans level people less likely to part with cash or credit card expenditure than ever before and thus falling multiplier.

 

[fibonelli]

Hi Attila,

Sure.

The M1 Money Multiplier measures the velocity of money. It is important to note that over 97% of money is in fact debt. M0 represents notes and coins in circulation.

The more it circulates the higher the impact and the more everyone's activity do for the economy.

However, when the multiplier is less than one the more money (i.e. debt) you create into the economy the worse the impact, as you get less for each additional currency unit created.

Have a look at the graphs on #8 and #10. They tell the same story, that is, an excessive amount of debt in the economic system. This excessive debt has to be either reduced by paying it back or defaulted if it is unpayable. A bit like going on a detox after a Christmas eating and drinking binge!!

 

[Atilla]

Hi Attila,

Sure.

The M1 Money Multiplier measures the velocity of money. It is important to note that over 97% of money is in fact debt. M0 represents notes and coins in circulation.

The more it circulates the higher the impact and the more everyone's activity do for the economy.

However, when the multiplier is less than one the more money (i.e. debt) you create into the economy the worse the impact, as you get less for each additional currency unit created.

Have a look at the graphs on #8 and #10. They tell the same story, that is, an excessive amount of debt in the economic system. This excessive debt has to be either reduced by paying it back or defaulted if it is unpayable. A bit like going on a detox after a Christmas eating and drinking binge!!

I forgot about M0.

It is very worrying that multiplier is < 0 as it's a net leakage from the system which I suspect is being used to pay off debt.

Given that people have massive debt and asset prices are falling wealth is going down.

As you say I can't see how pumping more money into the system is likely to bring asset prices back other than inflation.

I'm thinking that the only way all this debt can be erradicated is default or massive inflation. I guess it may well be a mixture of both...

Gee that's bad. It's dawning on me that I may have been too optimistic in some of my views :-0. I'll have to further downgrade my doom and gloom scenarios... :smart: