GFC2 #PeakCollateral The Next Crisis #PauseReplay #DejaVu #GolemXIV #GrubStreetJornal #ConquestofDough

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The Next Crisis – Part one

The present global financial ‘crisis’ began in 2007-8. It is not nearly over. And that simple fact is a problem. Not because of the life-choking misery it inflicts on the lives of millions who had no part in its creation, but because the chances of another crisis beginning before this one ends, is increasing. What ‘tools’  – those famous tools the central bankers are always telling us they have – will our dear leaders use to tackle a new crisis when all those tools are already being used to little or no positive effect on this one?

I think it is worth remembering how many financial crises we have had since the economy became globally interconnected and since we began the deregulation of finance and the roll back of all Great Depression safeguards under Reagan and Clinton.  It’s also worth noticing that the causes and pattern of the various crises have an unpleasant ring of familiarity about them – as in – the bank lobbyists making sure nothing gets learned and nothing gets changed.

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The Next Crisis – Part two – A manifesto for the supremacy of the 1%

The present crisis is not yet over and yet we are already overdue for the next.

In Part One I suggested that not only are the 1% well aware of this but that while they have been telling us how we must ‘save’ the present system and assuring us that any radical break with the policies of the past will result in catastrophe, they have in fact been working hard to engineer very radical changes.  We have all seen the decline in living standards and are all acutely aware of the changes which directly effect us. But I wonder if  the true significance of the changes, when taken together, has largely gone unnoticed? Certainly the Over Class has not made clear their real intentions. Why would they?  I believe the 1% know that to protect their wealth and power next time will require radical political dismantling of what is left of our democracy.  Necessarily much of what follows is speculative. But the speculation is, I think, rooted in and extrapolated from what we can already see happening today.

3) Neuter Democracy by Professionalizing Governance.

The Global   do not like democracy. In their less guarded comments this is beginning to show. Here is the EU Trade Commissioner, Karel De Gucht, quoted in a piece over at The Automatic Earth talking about the Scottish independence vote,

 A Europe driven by self-determination of peoples … is ungovernable … ”

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The Next Crisis – Part Three – The World Turned Upside Down

At this point I would like to make it clear that just because I have suggested the Global Over Class are likely to have thought ahead to what they will need to achieve before the next crisis arrives and have outlined some of what I think their Manifesto might contain, does not mean I think they will succeed. I am merely saying watch out for them trying. If we know what to look out for we are in a far better position to stop them. You can’t defuse a bomb if you don’t know how it works. Moreover, I do not think their position, for all that they strut and pose at their meetings and offer endless, dire warnings and stern advice to our leaders, is in any way secure. I think they and their paper wealth are as precariously at risk as they were when Hank Paulson threatened the US Congress with anarchy if he and his friends were not bailed out. He didn’t quite say it like that of course but that is what it amounted to. Nor do I think people should despair at what the Over Class calls, and sincerely hopes is, voter apathy. People are not apathetic. One look at the Scottish referendum tells you that people will engage and vote in their droves, when there is something worth voting for.  I want a tee shirt which says “Give me something worth voting for!” and on the back it will say, “And I’ll vote for it”.

It is true that there is a palpable despondency in the air. But I believe it is more from shock than despair. People, I think, have been genuinely  sickened and slightly stunned by how massively they have been betrayed. There is something which leaves you feeling winded for a moment, when someone betrays you. People feel violated. But this moment of stunned silence is passing. And what might follow frightens our Dear Leaders and the people they work for – the Over Class. And in my opinion they have every reason to be afraid and we have reason for hope.

So now we come to the heart of it: Items 6 and 7 from the Manifesto for the 1%.

6) Effective ways must be found to convince people that democratic rule is no longer sufficient to protect them.

7) An alternative to Democracy must be introduced and praised. That alternative must be the Rule of International Law as written and controlled by the lawyers of the 1%.

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Peak collateral – a strange attraction

I wonder if we are reaching what we might call ‘Peak Collateral’?  That state when the creation of assets, which the market will accept as collateral, is insufficient to sustain the demand for credit.

It’s funny isn’t it, how the terms we use, or are encouraged to use, have such an influence on how an analysis unfolds. So much of the eventual conclusion is already encoded in them. Especially the terms we are encouraged to choose as our starting place. Our leaders and the bankers have been so very concerned that every analysis begin and end with liquidity. But I think it is becoming clearer by the month that collateral is a more revealing term.

When Lehman Brothers and AIG collapsed was it just a shortage of liquidity? No of course not. That’s like saying a man with the plague died of a high temperature. Certainly he had a temperature when he died but it was a symptom not a cause. Both Lehmans and AIG were running out of collateral and without collateral for the oxygen of repo and short term funding, they began to suffocate. Once those two began to choke, the money ran out for others. The collapse of Depfa and Hypo in Germany/Ireland, for example, was a direct result of them not being able to get the funding they relied upon from their sugar-daddy funder, AIG. That created a domino effect. AIG had run out of assets that it could pledge as collateral. It could not raise money that it could then use to lend to HYPO/Depfa. Hypo in turn had such poor assets they too had little or no chance of anyone accepting them as collateral.

It seems to me we are moving back to a similar situation.  You might ask, out of sheer exasperation, how it could be, given all the tough talk and all the new requirements for capital and risk management? How, after all the bailing outs and now ins, all the endless and global QE, all the new rules and capital buffers, that we do not seem to have really got anywhere?

The image that comes to my mind is of the strange attractors which govern the lives of any non-linear system. And global finance is certainly made of many such non-linear systems.

http://www.golemxiv.co.uk/2013/06/modernising-money-a-review/

http://www.golemxiv.co.uk/2013/06/the-head-of-the-fed-who-will-it-be/

http://www.golemxiv.co.uk/2013/06/etfs-a-warning/

http://www.golemxiv.co.uk/2011/03/nuclear-and-market-melt-downs/

http://www.golemxiv.co.uk/2013/05/what-bankers-didnt-know/

http://www.golemxiv.co.uk/2012/11/where-has-all-the-risk-gone/

http://www.golemxiv.co.uk/2013/05/chinese-wage-rises/

 

Peak collateral – a strange attraction

I wonder if we are reaching what we might call ‘Peak Collateral’?  That state when the creation of assets, which the market will accept as collateral, is insufficient to sustain the demand for credit.

It’s funny isn’t it, how the terms we use, or are encouraged to use, have such an influence on how an analysis unfolds. So much of the eventual conclusion is already encoded in them. Especially the terms we are encouraged to choose as our starting place. Our leaders and the bankers have been so very concerned that every analysis begin and end with liquidity. But I think it is becoming clearer by the month that collateral is a more revealing term.

When Lehman Brothers and AIG collapsed was it just a shortage of liquidity? No of course not. That’s like saying a man with the plague died of a high temperature. Certainly he had a temperature when he died but it was a symptom not a cause. Both Lehmans and AIG were running out of collateral and without collateral for the oxygen of repo and short term funding, they began to suffocate. Once those two began to choke, the money ran out for others. The collapse of Depfa and Hypo in Germany/Ireland, for example, was a direct result of them not being able to get the funding they relied upon from their sugar-daddy funder, AIG. That created a domino effect. AIG had run out of assets that it could pledge as collateral. It could not raise money that it could then use to lend to HYPO/Depfa. Hypo in turn had such poor assets they too had little or no chance of anyone accepting them as collateral.

It seems to me we are moving back to a similar situation.  You might ask, out of sheer exasperation, how it could be, given all the tough talk and all the new requirements for capital and risk management? How, after all the bailing outs and now ins, all the endless and global QE, all the new rules and capital buffers, that we do not seem to have really got anywhere?

The image that comes to my mind is of the strange attractors which govern the lives of any non-linear system. And global finance is certainly made of many such non-linear systems.

 

 

 

 

 

 

 

 

 

 

 

 

https://surplusenergyeconomics.wordpress.com/2019/09/02/155-the-art-of-dark-sky-thinking/comment-page-6/?unapproved=15054&moderation-hash=b710d9a93eb5fc3585497d8b8d8dde7b#comment-15054

 

4 thoughts on “GFC2 #PeakCollateral The Next Crisis #PauseReplay #DejaVu #GolemXIV #GrubStreetJornal #ConquestofDough

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