Comments: Bank experiments with a 5% solution

I have read some of Roubini's recent blogs on the state of the US economy and he is pretty apocalyptic about the coming six months.

He is not of the school that says as the American economy cools, Europe and Japan will take up the slack and carry on driving the global economy. Indeed, from a UK perspective, it's hard to see how demand from heavily indebted consumers could grow significantly to help take up any slack.

Do you not share Roubini's view that if the American economy hits the skids, the knock-on effects for the global economic picture will be pretty unpleasant?

Posted by Tom at August 14, 2006 10:26 AM

When labour came to power ' things could only get better'
lets summarise today's fundamentals:
Real unemployment is rising.
Real inflation is rising.
Real consumer debt is rising.
Real government expenditure is rising out of control.
Real interest rates are rising.
two out of the five above would be enough to be concerned, all five have now created an inevitable scenario that is irriversable.
Oh well, We can always agree as an nation to go collectively in denial!!!!!

Best wishes

Arik Schickendantz

Posted by arik schickendantz at August 15, 2006 06:08 AM

The real questions we should ask about banking are these:-

i) Is it right that private commercial companies create "out of thin air" virtually the entire money supply of the world as a loan with interest on it?

ii) Is it right that the governments create just a near non-existant portion of money as coins, and cash debt free into the economy?


It would be interesting to see what David Smith has to say about this if anything.


Posted by Robert Searle at August 15, 2006 09:37 AM
Therefore, the danger is that when energy prices fall, firms will seek to rebuild those margins and may relax their grip on wages.

On what do you base your suggestion that energy prices will fall? As North Sea gas extraction rates fall, as nuclear power stations are decommissioned and as coal generation plant is closed under the EU large combustion plant directive electricity prices are set to continue increasing indefinitely. Gas for heating and chemical feedstock is also increasing due to increasing reliance on imports which will consistently be higher priced than indigenous production (if even available).

Globally there is no evidence for oil price falls without demand reduction. So yes, energy prices falls are a phantom danger. Not for the reason you suggest but rather because the price fall itself is phantom.

Posted by Chris Vernon at August 16, 2006 08:32 AM

David won't answer because he's away with the fairies in a dreamworld of falling oil prices (any time now! no really!), eternally soaring property prices (lalala I'm not listening), ever low inflation (the official figures are spot on, and the skip index says it all) and ever low interest rates (Wha!? A rise?).

He's getting on you see, and unfortunately red braces, pinstripe shirts and Gordon Gecko hairstyles aren't in fashion any more.

Have a heart and wish him on his way into retirement.

Posted by Paul Owen at August 16, 2006 09:36 AM

I think that's a bit mean - this website has always promoted an intelligent discussion about economics. I don't agree with everything David Smith says, indeed I don't agree with quite a lot of what he says, but he makes a good case for the opposing view. Resorting to personal jibes only gives the impression you can't find real holes in his argument.

Posted by Jonathan at August 16, 2006 04:23 PM

Fair point Jonathan, I don't agree with everything that David says but give the guy his due respect.

Posted by Werewolves at August 16, 2006 06:14 PM

Dear All,

We live in a spineless society that does not address the issue of the need for interest free monetary reform. I am not suprised by the response.......It is shame people cannot understand what really MATTERS in economics, and why it is so important. Addressing the status quo is not going to achieve for banning anyone from the site because they are speaking the truth does not say for the kind of calibre of individuals here.

You will pleased to know I will not be disturbing you things that MATTER.


Posted by Robert Searle at August 17, 2006 08:31 AM

I agree with R.Searle. Relentless credit inflation wrecks the capital structure of the economy and we will all regret it in the end.

Posted by M.Scott at August 21, 2006 01:21 PM

The reason I discouraged Paul Owen from posting comments is that he never has intelligent to say, unlike almost everybody else - so nothing's changed there. He's also posted comments on the site under my name, which is probably breaking the law, and which is why he was banned. Anyway, he's clearly got his difficulties.

In response to Robert Searle, I've had a brief look at your work. The trouble is, we have to live in the world as it exists, not a theoretical construct. I don't see the world changing along the lines you suggest.

On energy prices, you'll see a big debate on this in the discussion forum. My argument is that oil prices have overshot because of a combination of circumstances - the strongest period of world economic growth for more than three decades, post-Iraq Middle East tensions, including Lebanon and Iran, and temporary supply worries elsewhere, including Nigeria and Alaska. One of these I am confident will not last is the strength of the global economy. The others can be debated, though the supply-demand balance is improving.

Posted by David Smith at August 21, 2006 03:16 PM