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http://www.telegraph.co.uk/finance/...lers-know-enough-to-avoid-a-1930s-replay.html


Do our rulers know enough to avoid a 1930s replay?
Events are moving with lightning speed as the global credit freeze evolves into something awfully like a classic trade-depression.

By Ambrose Evans-Pritchard
Last Updated: 11:17AM BST 20 Oct 2008

Comments 86 | Comment on this article

The commodity and emerging market booms are breaking in unison, leaving no more bubbles left to burst. Almost every corner of the world is now being drawn into the vortex of debt deflation.

The freight rates for Capesize vessels used to ship grains, coal, and iron ore have fallen 95pc to $11,600 since May, hence the bankruptcy of Odessa’s Industrial Carriers last week with a fleet of 52 vessels. Cargo deliveries dropped 15.2pc at the US Port of Long Beach last month, but that is a lagging indicator.

From what I have been able to find out, shipping is slowing as fast as it did in the grim months of late 1931. “The crisis is now in full swing across the entire world,” said Giulio Tremonti, Italy’s finance minister. “It is hitting the real economy, the productive forces of industry. It’s global, it’s total, and it’s everywhere,” he said.

Italy’s industrial output has fallen 11pc in the last year. Foreign orders have dropped 13pc. But we are all in much the same boat. Europe’s car sales fell 9pc in September (32pc in Spain). US housing starts fell to a 45-year low in September.

Last week, the International Monetary Fund had to rescue Hungary and Ukraine as contagion swept Eastern Europe. It would not surprise me if Russia itself were to tip into a downward spiral towards bankruptcy (again) and fascism (again).

Russia’s foreign reserves have fallen by $67bn since August. Ural crude prices fell to $65 a barrel last week, below the budget solvency threshold of the now extravagant Russian state.

The new capitalists have to repay $47bn in foreign loans over the next two months. In Russia, oligarch fiefdoms built on leverage - Mikhail Fridman (Alfa), Oleg Deripaska (Basic Element), and Vladimir Lisin (Novolipetsk) - are lining up for state bail-outs from a $50bn rescue fund.

Brazil is free-fall as well. Sao Paolo’s Bovespa index is down a third in dollar terms in a month. Hopes that the BRIC quartet (Brazil, Russia, India, and China) would take over as the engine of world growth have proved yet another bubble delusion.

China says 53pc of the country’s 3,600 toy factories have gone bust this year. Economist Andy Xie says China is at imminent risk of its own crisis after allowing over-investment to run rampant, like Japan in the 1980s. “The end is near. They’ve been keeping this house of cards going for a long time with bank support,” he said.

Lord (Adair) Turner, the head of Britain’s Financial Services Authority, offers soothing words. “There is no chance of a 1929-33 depression. We know how to stop it happening again,” he said.

I hope Lord Turner is right, but his Olympian certainty bothers me. It assumes that the economic elites a) understand what happened in the 1930s – on that score I suspect that few, other than the Fed’s Ben Bernanke, have delved into the scholarship (sorry, Galbraith’s pot-boiler The Great Crash does not count);

b) that central banks will now jettison the dogma of inflation-targeting that got us into this mess by lulling them into a false sense of security as credit growth and housing booms went mad. Will they now commit the reverse error as credit collapses?

c) understand that non-US banks – especially Europeans – have used the shadow banking system to leverage a $12 trillion (£7 trillion) spree around the world, and that this must be unwound as core bank capital shrivels away;

Yes, the Fed made frightening errors in the early 1930s by raising rates into the crisis, but they were constrained by the norms of the age: the fixed exchange system (Gold Standard), and fear of the bond markets. Are today’s central banks are doing much better? The Europeans fell into the trap of equating this year’s oil and food spike with the events of the early 1970s.

As readers know, I view European Central Bank’s decision to raise rates to 4.25pc in July – when Spain’s property market was already crashing, and Germany and Italy were already in recession – as replay of 1930s ideological madness.

You could say the ECB also acted under the constraints of the age: its rigid inflation mandate. But I suspect that Bundesbank chief Axel Weber and German finance minister Peer Steinbruck were quite simply too arrogant to listen to anybody.

Mr Steinbruck insisted that “German banks are far less vulnerable than US banks” just days before the collapse of Hypo Real with €400bn (£311bn) of liabilities. Had he not read the IMF reports showing that German and European lenders have an even thinner Tier 1 capital base than American banks?

One can only guess what French President Nicolas Sarkozy has been saying to ECB chief Jean-Claude Trichet, but he must have warned in blunt terms that Europe’s leaders would exercise their Maastricht powers to bring the bank to heel unless it slashed rates. Democracies cannot subcontract monetary policy (with all its foreign policy implications) to committees of economists in a fast-moving crisis. Those accountable to their electorates have to take charge.

Whatever occurred behind closed doors, the ECB is now tamed. It has cut rates to 3.75pc, and will cut again soon, perhaps drastically. The risk is that rates have come too late in Europe and Britain to stop a nasty denouement, given the 18-month lag on monetary policy.

We should be thankful that President Sarkozy and Gordon Brown took action in the nick of time to save our banking systems. Their statesmanship should at least spare us mass bankruptcy and unemployment.

But it will not spare us a decade-long toil of pitiful growth – or none at all – as we purge debt. The world stole prosperity from the future for year after year, with the full collusion of governments, regulators, and central banks. Now the future has arrived.

end article.

NO !!!!! :eek: :(
 

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I truely don't think our leaders (Maybe a few folks OUTSIDE the goverment) really have a grasp, on the complete situation.

If we come thru this one, I believe it will be a matter of luck after all the fancy footwork.
 

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Our rulers don't know ****. And that includes our financial masters.

Maybe 60-odd years ago we could have avoided it through the strength and smarts of our political leaders and the financial elite, but not today.

The financial elite of today are taught that great rewards come only through great risk. Bye bye bailout money. They'll gamble everything on that one sure deal and doom their own little systems and processes at the same time.

Good for us when the smoke clears, but bad for them.
 

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Information is Ammunition
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if yes- then this is by design- which I don't really buy
 

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But wait! If the US government collapses then:

1. No funding for the UN, so no blue helmets can round us up.

2. No payment for the military, so no soldiers can round us up.

3. No federal police, so the BATF/FBI can't round us up.

4. No government contracts for Blackwater, so they can't round us up.

I guess we'll have to round ourselves up!


Snort!
 

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The insane are running the asylum,.....they are talking about another stimulus checks in the works.:juggle::juggle:
I smell the printing presses burning.:rolleyes:
 

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But wait! If the US government collapses then:

1. No funding for the UN, so no blue helmets can round us up.

2. No payment for the military, so no soldiers can round us up.

3. No federal police, so the BATF/FBI can't round us up.

4. No government contracts for Blackwater, so they can't round us up.

I guess we'll have to round ourselves up!


Snort!

Walking myself to the local FEMA deathcamp...uh...can someone point the way?:zombie
 

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LOL !omg! they could if they truely wanted to, the problem is all of this is by design. its all about problem ,reaction, solution. they create a problem, we scream for a solution, so the solution they come up with is much worse than the problem by giveing up our rights and them getting more control,as well as, stealing our money, then the problem they created goes away.

like this bailout, did you know in the fine print there is a carbon credit/tax in it? so now not only are we going into greater debt but added taxes too!!that will go to the U.N (world bank) also they are moveing to give GREATER power to the world bank so nothing like this will ever happen again. so now THE WORLD BANK will have monetary power over all goverments!! its all about gaining more power over all the goverments of the world,and the gov. will have to do the bidding of the bank!! but they will not use this power until all their cards are in play. problem is we told them not to do something! and they still did it!!because they needed this bailout and all the hidden new laws. :thumb:
 

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Lone Wolf
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Very insightful. With everything going on it's next to impossible for anyone to grasp all the important issues going on. However, that's not be necessary if you can address the heart of the matter which is what Bernanke is trying to do.
 

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The real question is DO WE?

I work for a non-publicly traded company and our business has been great!

Stop the fear-mongering.
 

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Very insightful. With everything going on it's next to impossible for anyone to grasp all the important issues going on. However, that's not be necessary if you can address the heart of the matter which is what Bernanke is trying to do.
LOL! bernanke ? LOL! omg !! he truely is part of the solution, their solution not ours. lol you really think all these ppl truely care about us?? lol. the only thing they care about is themselves and the power they can gain,some might care about their familes but thats about it. they dont care about us, we ALL are consider tailer park trash, they see shows like COPS/ jerry springer and they think all of us are that kind of ppl.and they teach their childern that as well. they have NO contact with us in the real world they dont really go to any public events unless they have it under control and keep out common ppl like us.they live in their own controled world. even president clinton said it ,they all are from a BAD gene pool. and that is their attiude about us.we are worthless conumers. only thing benanke is doing is what he is told to do.he is just a small imp among demons.
 
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