IMMINENT FIRST WORLD DEBT CRISIS WORSE THAN ‘THIRD WORLD’
Daniel J. Lavigne
ECONOMY REACHING `TIPPING POINT' - MIDDLE CLASS CONSUMERS WILL CARRY
THE CAN FOR FINANCIAL COLLAPSE
A new annual report on the global economy published by nef today,
Monday September 1st, predicts that a giant credit bubble, created by
globalisation's decades of `easy money', has now reached a "tipping
point" – a point that has historically triggered financial crises.
Ground-breaking new analysis in the report – titled Real World
Economic Outlook - shows that Japan's financial crisis was triggered
in 1990 when the total stock of financial assets began to outstrip
GDP by nine times.
Two of the world's richest countries, the US and UK have followed
Japan's example, inflating the credit bubble and the accumulation of
financial assets through de-regulation and reckless lending and
borrowing. This bubble has been fuelled further by the decisions of
Central Bank governors and their boards to lower interest rates to
historically low levels.
Jubilee research at nef, the team that spearheaded global awareness
of a third world debt crisis, are releasing provocative new research
into the first world's huge debts. This shows that credit and other
paper `promises to pay' now exceed levels of real income (GDP) by
ten times.
Recent stock market falls, drastic though they have been, have barely
dented the credit superstructure. When this credit bubble bursts, the
report concludes, it will be middle class consumers in both the US
and UK that will bear the brunt of the financial crash.
Ann Pettifor, editor of the annual report, the Real World Economic
Outlook, said:
"Gullible consumers, acting as heroically as Atlas once did, are
holding up the US and UK economies by dutifully borrowing and
spending. But take-home pay is falling in the UK, and unemployment is
up in the US, so consumers will soon buckle under the strain of
single-handedly propping up these economies. As we live in a
deflationary era, the burden of debt will be much more painful than
it was say, during the aftermath of the Lawson boom."
"When tipping point is reached, consumers buckle and the credit
bubble bursts, it is the middle-class debtors who will bear the full
brunt of a debt-deflationary financial crisis. Sadly, they will
suffer much more pain than a minority who have resisted the siren
calls of lenders and instead watched as their assets have been
inflated by the actions of central bankers – enriching the already
rich."
The report notes that the decades since 1970s have been characterized
by a near-total abrogation by central bankers and politicians of any
control over the growth of credit. As a result the total stock of
financial assets has mushroomed. At the same time, these central
bankers and politicians have clamped down on wages and consumer price
inflation.
Ms Pettifor added: "Central bankers and finance ministers have
engineered the Anglo-American economies so that we now have a
combination of consumer price deflation and asset price inflation .
The rich can't believe their luck. This is their dream economy as
labour and commodity costs fall, but property, stocks and bond assets
rise. But for farmers, manufacturers, retailers and employees, these
economies are turning into a nightmare".
Romilly Greenhill, senior economist at nef added: "While Japan has
managed to keep interest rates very low through a financial crisis –
the same will not be possible here and in the US. The British and
American governments are building up substantial foreign and domestic
debts – and in order to continue attracting finance to fund these
debts, will have to raise interest rates. There are already signs in
the US bond markets of this happening…. .A rise in interest rates
would, in our view, tip the credit bubble over the edge and cause it
to burst."
The report warns that in a deflationary environment the real value of
debts rise, and against a backdrop of rising unemployment in the US
and falling real wages in the UK, will fast become unpayable for
many. While house prices remain artificially high both in the US and
UK, there are ominous signs that these assets too could fall in
value. Falling asset prices combined with spiralling debts would
impact most severely on middle class borrowers in the UK where total
household debt is now 120 per cent of disposable income
When the "tipping point" comes, likely to be triggered by higher
interest rates in the UK and US - then it will be those same
obliging middle income borrowers and spenders that will be made to
bear the burden of the ensuing debt crisis.
"Debtors tend to forget that assets do not pay off debts. Debts are
paid off out of take-home pay, and in the UK take-home pay is falling
in real terms", said Ms Pettifor.
http://www.neweconomics.org/gen/news_rweobubble.aspx
Rob W. Oz
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pencil
"Daniel J. Lavigne" <tax...@taxrefusal.com> wrote in message
news:3F555347...@taxrefusal.com...
"Robert Windt" <meridia...@yahoo.com.au> wrote:
ECONOMY REACHING `TIPPING POINT' - MIDDLE CLASS CONSUMERS WILL CARRY
THE CAN FOR FINANCIAL COLLAPSE
Good news at last
Mark K
ECONOMY REACHING `TIPPING POINT' - MIDDLE CLASS CONSUMERS WILL CARRY
THE CAN FOR FINANCIAL COLLAPSE
Thanks. Excellent. If convenient, please post material like this to
newsgroup: us.politics
Dwayne Johnson
news:jQk5b.259356$Oz4.68869@rwcrnsc54..> ne...@taxrefusal.com...
> "Robert Windt" <meridia...@yahoo.com.au> wrote:
>
> ECONOMY REACHING `TIPPING POINT' - MIDDLE CLASS CONSUMERS WILL CARRY
> THE CAN FOR FINANCIAL COLLAPSE
>
> Thanks. Excellent. If convenient, please post material like this to
> newsgroup: us.politics
it's not convenient, please find your own financial collapse
prognostications
abelard
typed:
the item is rubbish..see comments at the original fred...
--
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abelard
<tax...@taxrefusal.com>
typed:
>Jubilee research at nef, the team that spearheaded global awareness
>of a third world debt crisis,
the writer clearly doesn't understand the vital difference between
internal and external debt....
that lack of understanding is carried through to the fred header....
> are releasing provocative new research
>into the first world's huge debts. This shows that credit and other
>paper `promises to pay' now exceed levels of real income (GDP) by
>ten times.
meaningless until methods of counting are made clear....
>Recent stock market falls, drastic though they have been, have barely
>dented the credit superstructure. When this credit bubble bursts, the
>report concludes, it will be middle class consumers in both the US
>and UK that will bear the brunt of the financial crash.
why should it 'crash'?
>"When tipping point
i do get very suspicious when fashionable cliches are substituted
for reason and analysis....
so far, all i have seen in this item is empty rhetoric....
lots more empty rhetoric binned...
>"Debtors tend to forget that assets do not pay off debts. Debts are
>paid off out of take-home pay, and in the UK take-home pay is falling
>in real terms", said Ms Pettifor.
the writer doesn't understand fiat currencies....
as stated above the writer clearly also doesn't understand the vital
difference between internal and external debt....
this item is written by someone who should study economics for
a few years before writing further on the subject...
the article is empty pap...
Hill St. dues
> On Tue, 02 Sep 2003 22:34:49 -0400, "Daniel J. Lavigne"
> <tax...@taxrefusal.com>
>
> the writer clearly doesn't understand the vital difference between
> internal and external debt....that lack of understanding is carried
through to the fred header....
>
> >into the first world's huge debts. This shows that credit and other
> >paper `promises to pay' now exceed levels of real income (GDP) by
> >ten times.
>
> meaningless until methods of counting are made clear....
>
> >Recent stock market falls, drastic though they have been, have barely
> >dented the credit superstructure. When this credit bubble bursts, the
> >report concludes, it will be middle class consumers in both the US
> >and UK that will bear the brunt of the financial crash.
>
> why should it 'crash'?
>
> >"When tipping point
>
> i do get very suspicious when fashionable cliches are substituted
> for reason and analysis....
> so far, all i have seen in this item is empty rhetoric....
>
> lots more empty rhetoric binned...
>
> >"Debtors tend to forget that assets do not pay off debts. Debts are
> >paid off out of take-home pay, and in the UK take-home pay is falling
> >in real terms", said Ms Pettifor.
>
> the writer doesn't understand fiat currencies....
> as stated above the writer clearly also doesn't understand the vital
> difference between internal and external debt....
>
> this item is written by someone who should study economics for
> a few years before writing further on the subject...
>
> the article is empty pap...
>
perhaps you are the "empty rhetoric" in this article -- am i correct ?
_ k o s h e r @hotmail.com Hognoxious
...
Edited for brevity and accuracy
...
> the article is empty pap: web site at www.abelard.org - news and comment