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The world can't afford another financial crash – it could destroy capitalism as we know it

Discussion in 'Historic Market Crashes' started by Ahillock, Feb 11, 2016.



  1. Ahillock

    Ahillock A nobody Mother Lode

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    The world can't afford another financial crash – it could destroy capitalism as we know it
    A new economic crisis would trigger a political backlash in Britain, Europe and the United States which could drag us all down into poverty

    By Allister Heath
    10:24PM GMT 10 Feb 2016

    They bounce back after terrorist attacks, pick themselves up after earthquakes and cope with pandemics such as Zika. They can even handle years of economic uncertainty, stagnant wages and sky-high unemployment. But no developed nation today could possibly tolerate another wholesale banking crisis and proper, blood and guts recession.

    We are too fragile, fiscally as well as psychologically. Our economies, cultures and polities are still paying a heavy price for the Great Recession; another collapse, especially were it to be accompanied by a fresh banking bailout by the taxpayer, would trigger a cataclysmic, uncontrollable backlash.

    [​IMG]


    The public, whose faith in elites and the private sector was rattled after 2007-09, would simply not wear it. Its anger would be so explosive, so-all encompassing that it would threaten the very survival of free trade, of globalisation and of the market-based economy. There would be calls for wage and price controls, punitive, ultra-progressive taxes, a war on the City and arbitrary jail sentences.

    [​IMG]
    Two men walk along the road to Los Angeles in 1937, during the Great Depression

    For fear of allowing extremist or populist parties through the door, mainstream politicians would end up adopting much of this agenda, with devastating implications for our long-term prosperity. Central banks, in desperation, would embrace the purest form of money-printing: they would start giving consumers actual cash to spend, temporarily turbo-charging demand while destroying any remaining respect for the idea that money needs to be earned.

    History never repeats itself exactly, but the last time a recession was met by pure, unadulterated populism was in the Thirties, when the Americans turned a stock market crash and a series of monetary policy blunders into a depression. President Herbert Hoover signed into law the Smoot-Hawley Tariff Act, dreamt up by two economically illiterate Republican senators, slapping massive taxes on the imports of 20,000 goods and triggering a global trade war. It was perhaps the most economically destructive piece of legislation ever devised, and it took until the Nineties before the damage was finally erased.


    "Last year was the worst for global growth since the crash and this year opens with a dangerous cocktail of new threats from around the world. For Britain, the only antidote to that is confronting complacency and delivering the plan we’ve set out."
    George Osborne.

    That is why we must all hope that the turmoil of recent days in the financial markets, and the increasingly worrying economic news, will turn out to be a false alarm. It would certainly be ridiculously premature, at this stage, to call a recession, let alone a financial crisis. But at the very least we are seeing a major dose of the “dangerous cocktail of new threats” rightly identified at the turn of the year by George Osborne, a development which will have political repercussions even if the economy eventually muddles through.


    Investors in equities, including millions of people with private pensions and Isas, have already lost a fortune; they won’t be too happy when they begin to realise the extent of the damage. Growth is slowing everywhere, and the monetary pump-priming of the past few years is looking increasingly ineffective. Traders believe that interest rates won’t go up in Britain until 2019, and there is increasing talk that negative interest rates could become necessary across the developed world, further crippling savers.

    No positive spin can be put on any of the latest developments. Banking shares have taken a beating; China’s slowdown continues; Maersk, the shipping giant, believes that conditions for world trade are worse than in 2008-09; industrial production slumped in December, not just in Britain but more so in France and Germany; energy prices are devastating Middle Eastern and Russian economies; and sterling has tumbled.

    It is always a sure sign that panic has broken out when financial markets respond badly to all possible scenarios. The prospect of higher interest rates? Sell, sell, sell. A chance of lower rates? Sell, sell and sell again. A rise in the price of oil is met with as much angst as a decline. The financial markets remain addicted to help from central banks: they are desperate for yet more interventions, regardless of the consequences on the pricing of risk, the allocation of resources or the creation of unsustainable bubbles that only enrich the owners of assets.

    This is exactly the tonic that the populists have been waiting for. Despite their dramatic emergence, they have so far failed to make a real breakthrough. The SNP was unable to win the Scottish referendum and the National Front didn’t gain a single region in France. Mariano Rajoy remains Spain’s prime minister, and anti-establishment parties have been thwarted in Germany. Even lighter forms of populism, such as Ed Miliband’s, were rejected. Syriza’s victory in Greece was one of the few genuine populist triumphs; but it was soon crushed by the combined might of Brussels and Frankfurt.

    [​IMG]
    The Republican presidential nominee often proclaims that his presidency will make America a "great" country again

    This could be about to change. The fact that Donald Trump and Bernie Sanders both won their respective New Hampshire primaries is certainly one remarkable indication of the state of mind of many US political activists. Any economic relapse would help Marine Le Pen’s chances in next year’s French presidential election, and further undermine Angela Merkel’s sinking popularity in Germany.

    But it is in Britain that the immediate impact could be the greatest. The Brexit debate is already being overshadowed by the migration crisis, undermining the Government’s attempts at portraying a Remain vote as a safe, low-risk option; a sustained bout of economic volatility would further ruin the pro-EU case, especially given that the eurozone, rather than the City, is likely to emerge as one of the epicentres of any fresh crisis. It would be hard for bosses of large financial giants to credibly tell the electorate to vote Remain when their own businesses are in crisis.

    Britain will noticeably outperform the EU this year: our labour market remains strong and our banks far better capitalised than many of their eurozone competitors, too many of which are still sitting on massive amounts of bad debt. The Chinese slowdown is worse for Germany than for us. But while the Eurosceptic cause to which some of us are partial is likely to benefit from the turmoil, it would be madness for anybody who cares about this country’s future to feel anything but dread towards the economic threats facing the world. The sorry truth is that there is very little that governments can do at this stage, apart from battening down the hatches and hoping that central banks succeed in kicking our problems even further down the road.


    http://www.telegraph.co.uk/finance/...t-could-destroy-capitalism-as-we-know-it.html
     
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  2. Usury

    Usury Gold Chaser Platinum Bling

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    This is my fear too--market crash before Nov and Bernie gets elected on promises of Robin Hood.

    Then the layoffs/starvation and shortages will start after enough time.....
     
    Thecrensh likes this.
  3. Ahillock

    Ahillock A nobody Mother Lode

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    If the collapse finishes before November, there might not be an election.
     
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  4. earplugs

    earplugs Gold Chaser Platinum Bling

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    oh please, the zombies are so brainwashed, steve erkel could come on tv, say everything's fixed, and the show would go on as people dribbled doritos and budweiser on themselves.
     
  5. VTEEZER

    VTEEZER Silver Member Silver Miner

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    If been saying for a couple years that we may have to pry Obummer from the WH. World economical collapse......only the .5 Black Massiah can save us!
     
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  6. VTEEZER

    VTEEZER Silver Member Silver Miner

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    When the shelves go bare the zombies will get the message.
     
  7. nickndfl

    nickndfl Midas Member Midas Member Site Supporter ++

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    The financials markets are being reset as we read. Buy gold and short the stock market. Not much else going on. Hopefuls keep calling the bottom and get wiped out.
     
  8. gringott

    gringott Killed then Resurrected Midas Member Site Supporter

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    Americans didn't cause the Great Depression. The Federal Reserve did.
     
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  9. Thecrensh

    Thecrensh Gold Member Gold Chaser

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    No they won't...they'll just blame the "0.01%" even harder and then burn more Bush effigies...

     
  10. OverOver

    OverOver Silver Member Silver Miner Site Supporter

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    "...capitalism as we know it."

    Is that with markets of price discovery when I was naïve about all the market
    manipulations or after I became somewhat aware of all the market manipulations?
     
    Last edited: May 25, 2016
  11. madhu

    madhu Silver Member Silver Miner

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    Price discovery is the problem. You cannot figure out the true market price of any thing anymore. Everything is at the mercy of some kind of intervention. The measuring yard stick the usdx itself is corrupted and its price fluctuates arbitrarily.

    This is planned destruction of capitalism.
     
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  12. Malus

    Malus Gold Chaser Platinum Bling

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    In a world gone mad....

    And if thats the case, doesn't Obummer keep the job?
     
  13. Usury

    Usury Gold Chaser Platinum Bling

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    I've wondered since 2008 if he would go quietly after his term(s) were done. :popcorn:
     
  14. Veli Hopea

    Veli Hopea New Member

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    Have you read James Rickards' new book The Road to Ruin?

    Rickards says that this system has not long time left.

    Also Clif High who interprets his web bots has been telling essentially the same.
     
  15. the_shootist

    the_shootist The war is here on our doorstep! Midas Member Site Supporter ++

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    8 days to go then Trump can have the gay Kenyan and the Killery monster arrested
     
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  16. GOLDBRIX

    GOLDBRIX God,Donald Trump,most in GIM2 I Trust. OTHERS-meh Site Supporter Platinum Bling

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    Nothing a Worldwide JUBILEE would not fix.
     
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  17. madhu

    madhu Silver Member Silver Miner

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    Wont the banks love the debt jubilee. Then they can wile off all the savers and their obligation to pay the deposit. The government would just pass another law making us serfs responsible for whatever comes after through increased taxes
     
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  18. GOLDBRIX

    GOLDBRIX God,Donald Trump,most in GIM2 I Trust. OTHERS-meh Site Supporter Platinum Bling

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    A JUBILEE as Biblicly defined : Leviticus 25:8-12
    “You shall count seven weeks of years, seven times seven years, so that the time of the seven weeks of years shall give you forty-nine years. Then you shall sound the loud trumpet on the tenth day of the seventh month. On the Day of Atonement you shall sound the trumpet throughout all your land. And you shall consecrate the fiftieth year, and proclaim liberty throughout the land to all its inhabitants. It shall be a jubilee for you, when each of you shall return to his property and each of you shall return to his clan. That fiftieth year shall be a jubilee for you; in it you shall neither sow nor reap what grows of itself nor gather the grapes from the undressed vines. For it is a jubilee. It shall be holy to you. You may eat the produce of the field.”

    So on the Day of Atonement, liberty would be proclaimed “throughout the land to all its inhabitants” and then all of the property that had been taken by others for unpaid debts would have to be returned to the original families (clans). On that year there would be no reaping or planting or gathering of the crops for it was to be “holy to” the nation Israel and everyone could “eat the produce of the field.” What a celebration that must have been. Everyone that had been indebted was then released from that debt and able to start over again by having their land returned to them.

    That would include GOVERNMENTS, BANKSTERS, EVERYBODY, EVERY ENTITY.
    Banks would return SAVINGS as that is considered Property.
     
  19. FunnyMoney

    FunnyMoney Silver Member Silver Miner

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    They can cause another deleveraging recession which will buy some more years, and squeeze the workers harder to prevent any sudden inflationary spark as things turn a corner. It worked for them in 2008 and as long as gold can be kept below $2400 the illusion of paper money as king remains.

    A crash in 2017 is still quite likely but may be just another 2008 repeat. The big reset, the crash of cash target is shifting to 2022 which means we should begin to see the tremors by late 2019 or early 2020. The big increase in mining shares last year and the Euro-exit issues are simply not enough in terms of what I would expect in the way of tremors to have the big one actually hit this year. We should have seen more cracks by now and what we've seen have been too few and too shallow. This means gold and silver bugs should have more time to accumulate at artificially low prices.


     
  20. Thecrensh

    Thecrensh Gold Member Gold Chaser

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    What a perfect way to bring in facism/marxism to America on a large scale. Manufacture a crash, blame Trump, then have progressives get voted in to office for the next 100 years.
     
  21. mayhem

    mayhem Silver Member Silver Miner Site Supporter

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    Defiantly one of the options, the other being a dictatorship w/the military in full support. I guess we will have to just wait and see

    m
     
  22. Ragnarok

    Ragnarok I'd rather be Midas Member

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