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How do you think this will end

Poll ended at Sat Jul 30, 2011 5:34 pm

U.S. misses payment on bonds
Deal is reached
Deal is reached, that is essentially smoke and mirrors.
Rating agency downgrades, with or without deal
They reach a deal, but kick it down the line for another day
All of the above
None of the above
No votes
President invokes the 14th, payments are made, everyone goes to the supreme court while the debt is doubled waiting for a decision
Dollar takes a beating
Gold rockets
Total votes : 56

Re: Countdown to the U.S. default, downgrade, or devaluation

Postby john » Thu Mar 22, 2012 2:56 pm

Simon Johnson: The Limits of American Exceptionalism - ... tionalism/

Pushing Back Against Austerity - ... lobal-home

BBC News - Republic of Ireland falls back into recession

Budget 2012: IFS criticises 'hotch' potch' of tax reforms ... ax-reforms
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Re: Countdown to the U.S. default, downgrade, or devaluation

Postby admin » Thu Mar 22, 2012 8:26 pm

The china / europe trade loop slowdown ... 16460.html

All kinds of articles on the revised Chinese figures, and if the Chinese central government is revising down you know the real number is way below it.

I picked the above article among the thousands on the wires today for this little understated nugget:

"China has been growing its economy (real GDP) at an average rate of 10% per year. To fall below 7% is a quasi-recession," said Michael Livian, chief executive officer at investment firm Livian & Co. "It's a very export-driven economy," he said, adding that all signs are pointing to a deepening housing and infrastructure slump, which only makes exports all the more important for China's economy.

With a major portion of the World's population, among which most have still not been lifted out of poverty or are rushing to modernization like a freight train, under 8 percent growth IS a recession. Anything below 5 percent (which is likely where the real number is closer to), could be called an outright depression. The real numbers are too fuzzy to trust, because of the way the central government still manipulates the economy. It is not just done with free money, but with direct orders to say invest in one sector or ignore another sector.
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Re: Countdown to the U.S. default, downgrade, or devaluation

Postby California South » Fri Mar 23, 2012 6:07 pm

To that end, Admin: China Coup: Communist Party Government Stamps Out Internet Rumors Following Bo Xilai's Dismissal ... -xilai.htm

I heard some brief discussion about this yesterday, streaming US alternative news, but the info dried up and no updates.
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Sweden vs US: Who Are The Socialists?

Postby JHyre » Sat Mar 24, 2012 10:32 am

From John Mauldin's most recent newsletter. Pay special attention to how Sweden indexes its social security payments and deals with its banks (skip to the 2nd part of the article for that) - that was news to me. I do not care for their socialism, but I must admit, they do seem rather pragmatic about it.

Sweden, the Socialist Mecca

I was brought to Stockholm to speak for Swedbank. They arranged for me to meet a wide variety of local people, as well as to have dinner with readers. I talked with a number of people who were in positions of authority during the Swedish credit and debt crisis of the early 1990s. And a crisis it was. The currency was under attack, as the fundamentals were negative. This was at the same time that Soros was attacking the British pound. Interest rates had been rising in Sweden, but the financial environment was being loosened. This meant that Swedish businesses and consumers could borrow in foreign currencies that had much lower interest rates, and borrow they did. The central bank made it very clear that they would protect the value of the currency, and everyone believed them. Remember, this is a relatively small country, and basically everyone knows someone who at least knows someone who was involved with the central bank. The central bank was adamant in its belief that it could protect the value of the currency, and it raised rates by 500% in order to do so.

Why such a fetish for a strong currency in a country that was driven by exports? Because their past experience had dictated that not defending the currency was the wrong thing to do. My guests went into detail about Swedish history (which I found fascinating), explaining the thought process at the time. Just as hyperinflation in the 1920s had scarred Weimar Republic Germany, leaving that nation with a visceral reaction to loose monetary policy, the history of Sweden had colored Swedish views as to appropriate monetary actions.

That seems to me the classic problem of generals always fighting the last war in their planning," I said. "Precisely," came back the quick answer. To even mention publicly that "maybe we should allow the currency to float or weaken" invited late-night phone calls from the leadership, raising the question of the individual's future participation in polite circles.

Ultimately, of course, the market dictated that the currency could not be kept at artificially high rates in either Sweden or Great Britain. The Exchange Rate Mechanism broke down. The Swedish Krona was allowed to float and overnight dropped 21%. Which meant that the incomes produced in Sweden to pay the interest on foreign loans dropped 21% in relationship to interest-rate costs. Property was immediately less valuable in terms of the currency that had been borrowed to pay for it.

Unemployment soared as a recession hit. The government deficit rose overnight to 10%, as there were less tax revenue and higher unemployment costs. Government debt rose, and the bond market wanted higher interest rates, which of course made the situation worse.

"Let me guess. Most of the larger businesses and investors saw the crisis coming and protected themselves. The smaller people and businesses were hurt the most." My hosts (who, even though younger than I, were at that time were already in responsible positions) had all lived and suffered through those times. And they all smiled and nodded yes. Well, they remembered, as they talked among themselves, that there was one large company that believed the central bank up until the end, and it went bankrupt.

What the US Needs Is a Good Swedish Socialist

Interestingly, no matter the politics of the persons I talked with, there was universal disagreement (if not disdain) with how the US had handled its recent banking crisis.

"We did it much differently and it proved to be the right way. If a bank wanted government help, the government said 'Sure. No Problem. Just give us all your private equity.' Shareholders were wiped out in exchange for government help."

They recalled that bankers did everything they could not to fall into the gentle hands of the government. But if they did, the government took the assets and put them into a good-bank and a bad-bank pile. Typically, the assets that were under water were real estate-related. As an aside, as the government sold the assets after some time and ended up not losing on their real estate portfolio, which shows the value of being patient money in the middle of a crisis.

If we had only had Swedish socialists running our TARP program.

And speaking of Swedish socialists, if someone tried to introduce their "solution" to the Swedish equivalent of our Social Security program in the US, there would be weeping and wailing and gnashing of teeth in both parties. It would be deemed the end of the world and heartless cruelty.

Sweden's system is set up as a "pay as you go" model of social security. What current retirees get is a direct function of what current employees pay. If during a recession the revenue goes down, then the social security payments go down. You can actually have a case where your retirement pension goes down within a given year rather than up, if the country is in recession. In essence, their social security costs are indexed to GDP. They can never run a deficit in the program. I suppose they could raise the tax, but there seems to be little appetite for raising taxes.

There was some clear chafing at being labeled a socialist nation, which most of us in the US think they are. "We could teach you a lot about being responsible socialists" was the universal response. "In many ways, we are less socialist than you."

Going back to the crisis, many remembered reading a report from a major European group, talking about how Sweden was doomed to years of depression and endless malaise. Yet within a few years Sweden was again growing, as those socialists got their government act together, and the country has never looked back. From a very large debt-to-GDP (I can't recall the exact number, but was indeed large [and there is no internet on Air France]), it is now between 30 and 40%, much more like that of an emerging-market nation. It helped their recovery that they had a strong export sector, which was aided by a drop in their currency valuation. They now run surpluses everywhere, and their currency floats. While Europe went into a recession with the credit crisis and is once again rolling into recession, Sweden has grown, albeit slowly.

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UD Dollar Art

Postby JHyre » Sun May 27, 2012 11:58 am

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Re: Sweden vs US: Who Are The Socialists?

Postby hermeticist » Sun May 27, 2012 1:15 pm

JHyre wrote:I do not care for their socialism, but I must admit, they do seem rather pragmatic about it.

They're not socialist -- they never were (unless you're using some vague American definition, where even Obama gets called a socialist). In the golden age (1945-1973), they had a strong social welfare state -- which they started rolling back as global competition unraveled the ties between the state, Swedish companies, and trade unions. Both Denmark and Sweden have in recent years cut back ever more drastically in social welfare provisions. I would suggest Asbjorn Wahl's recent book, "The Rise and Fall of the Welfare State," for context about Scandinavia and the European welfare model generally. A couple of recent reviews of the book: ... mber=11909
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