Rubbish. Shockwaffle and Koli understand it perfectly. Maybe they should explain it to him...

Soros is right by the way

However, it appears to be a system to be feared,worshiped and revered, with criticism dismissed with the flimsiest of reason - notably that of ignorance. However, when people who claim to understand it admit that really they are equally clueless, then we have to pause, and admit criticisms of ignorance enveloped at the uninitiated are suddenly null and void. The nub of the problem is that those who are supposed to know are n the brink of being shown to be fools and charlatans in the eyes of those who have been looked down on by that cabal for those very reasons. Ignorance is the great leveller here. We are doomed until we can find a better way.

Hayek and Minsky both commented about exuberance of markets and Keynes called the process Animal Spirits. The Central banks flooding the markets with liquidity has provided the problem banks with enough liquidity to avoid bankruptcy, but they have not solved any of the problems. The banks are still over indebted. The debt clearance that we need has not been allowed to happen this time. The banks have been saved by hundreds of billions in secret funding and QE. So both Minsky and Hayek followers are still waiting for the restructuring.

The UK banks are actually making progress in reducing their debts but that is counter to what the government wants which is lending to businesses. The two are contradictory. They have also gambled on commodities and we have had bubbles in food products. These commodities have caused food riots through out the third world. Africa is particularly vulnerable right now.

The banks are still very risky and Deutsch Bank has leverage approaching 46 times Tier 1 Capital. Lehman Brothers when it collapsed was over-levered a mere 33 times. They have used magnitudes of derivatives to make profits and to trade their way out of trouble. JP Morgan's big loss last year was down to hedging their entire portfolio with derivatives. They were caught out, and their losses from that hedge alone are already above $6 billion, and rising as they try to exit from it. They at least can afford it, but they are not alone.

Many investors are concerned about rising interest rates, from a collapsing credit bubble. I think that they may have to wait a long time before they are proved right. Japan has faced this for twenty years. Though Japan has been stagnant for the entire period with short growth periods being offset by more recessions, they have the ability to print money to keep going. The UK is going through that now. There may be no official triple dip recession, but I do not think that any growth will be long lived. The reason being is that the debt burden is still too high. While big businesses are sitting on hundreds of billion in cash, small businesses are desperate for capital to expand or just keep going. Banks are being very risk averse which can be seen by the lending terms. Finally consumers are being squeezed by inflation eroding their real disposable income. So the trend is for stagnation. There will be no growth for a few years, and gradually companies that are holding on to staff will finally let them go.

Soros is right to be concerned about derivatives. There are so many derivatives out there that the value of them is more than ten times the entire world economy. It is the tail wagging the dog.

Don't be a whiny bitch. We've covered lots of macro economic issues in this forum and in every case I have consistently argued that they are complex and imperfectly understood. It's always you and Amnesia who think you have certainty, and that is always my problem with your analyses. Just search the forum for our discussions on austerity for proof of this if your memory is letting you down, you will quickly discover that I regard macro economic policy (both fiscal and monetary) as little better than a collection of rules-of-thumb.

You are the guys who demand certainty in things. You think there must be a correct price for a share or a house to be*, and there must be a correct policy that makes all money problems go away. I adopt a position of epistemological insouciance on these matters - what works here and now might not work elsewhere even in apparently similar circumstances. As far as I'm concerned, economics is known as the dismal science for good reason. And if you think I haven't made that point clear enough before (although I have said exactly this many times) I humbly apologize for misleading you.

I don't need to inhabit your fairytale vortex of cheap little good v evil political narratives; brilliant v stupid economic ones; or Amnesia and MrRogers' little sideline in revolution, despair and the end of all life as we know it.


Soros is right by the way, in that we don't have a proper understanding of market operation. But that's hardly worth mentioning, as it is something that I have already said many times, and I was far from the first to do so. Here's a little article about people trying to fix the uncertainty that I am so happy to live with. Spoiler - Amnesia will love it, it says that economic modellers didn't include banks in their economic models. He's going to poop his pants with glee and declare imminent revolution everywhere!
http://www.economist.com/news/finance-a ... model-army



* in fact this is so true that under normal circumstances I would expect Amnesia to join this thread soon with a comment about what price houses should be. And you guys know that if I hadn't put this little warning not to - he would have done exactly that.

The reason he doesn't like Germany, is that they are against credit!

i believe there is a lot of hope, just that hope is outside the EU nowhere within
and if that takes a revolution to achieve, so be it ...