From: http://elainemeinelsupkis.typepad.com/money_matters/

A wonderful dawn for the wizards of finance! Throwing away all caution, the biggest financial houses in the world have convinced the biggest central banks to arbitrarily reduce to cost of borrowing money so the savings crisis in the West can get much worse. I found an online book that talks about the Great Depression the same way as I do: the collapse in the USA was triggered by the collapse of the German and British empires who couldn't pay off the increasing volume of debt they took on due to their wasteful, dangerous war called WWI. Only this book, which I have never read before, was written in the early 1930s! Wow. There is no excuse for misunderstanding how excessive credit can cause a sudden decompression of credit!

Manias, Panics and Crashes by Charles Kindelberger is probably the best book that I have read on crashes, and he subscribes to the theory that it is all about credit getting too loose. You are correct though in that the cause of crashes has been known for a long time.

I've just been watching the 'Money As Debt' video and although I have watched it before it now seems more relevant to what is happening at the moment.

It mentions the drying up of credit which cause the 1929 depression - perhaps we are only a couple of years away from this again? The video also mentioned that tinkering around the edges of the debt based system is not sufficient for it to keep existing in it's current form.

The party will come to an end sooner or later and I wouldn't trust gold as my only savings (so what can we do?) as the governments and banks will have plans for debasing its usefulness.

Please advise how gold's usefulness can be debased.

interestingly, the US banks were protected for years during the great depression.

It wasnt until the money really ran out that they let the market destroy a lot of banks and within weeks the depression ended.

Get real stuff, anything thats real that you can keep at home and will use yourself diesel. toilet rolls, tinned food, reams of paper, batteries, booze etc. Nothing can devalue the usefulness these assets have to you.

Some gold and silver of course.

Unless you are 100% certain the current money system will fail totally (I am not)some in it - pension funds, NS&I etc.



Gold is excellent as money and has a few other minor uses. (jewellrey is to some extent a store of value=savings=money(it is seen this way particularly in India))

With the most powerful nations that have ever existed trying to devalue gold it has to be somewhat risky, 100% gold is therefore very risky

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The austrian approach, let the free market be really free no bailouts=bankrupsy=asset auctioned=person that can make best use of it aquires it=economic recovery

Just finished reading it.

Great stuff and amazingly familiar.

"10 years of credit expansion"

"you can't send the sherriff to foreclose if the debt is overseas"

"the bankers don't know where the losses are. And what can be done about it? Nothing"

"what does the buyer of a foreign bond get? They got a promise...It is a promise that is designed to be kept by the children of men now living. That bond rely upon the people of the Japan taxing themselves a generation from now to pay back the principal of that bond to the children of the person who invests in that bond today...it is a startling idea."

Thanks for this!

...I thought Gordo was an educated man ....obviously his education took him in the wrong direction ....there is education and education ...then there is common sense ....when will he realise the inflation bubble is not the way to go forward.... ?...

just think, they have the biggest bubble ever & they know it's just about to pop....imo....they really just don't know what to do now.....it's just a game of who is going to get the blame now........who do you think will get the blame......?
the BoE, the government or both ??

oops, missed the obvious one......can they blame it ALL on the US.

By making it into Sovereigns and putting it in those awful rings and necklaces.

....when you have / had 'authorised' lenders offering 'sub prime BTL mortgages' among other interesting offerings in the UK, apparently, without any regulatory control, the pointing figure goes one way only .....the Government...after all who is defined as responsible in the 'tripartite' management between the Treasury, BofE and FSA .....ah well ..they didn't get round to agreeing that after almost ten years ....

Good point, it is completely useless to start with.

I read a paper on the great depression. Having read here many times how it was some kind of "typical" examples it was fascinating to read just how unique the conditions were and how poor the decisions made at the time were too. The conclusion I drew was that it is very unlikely we will ever see this again. For example we now well know that the government could have ended it much sooner if it had made decisions that now seem normal to us but were unheard of at the time.

Comparing to 1930s economics is about as useful as comparing to 1930s technology. Things really have changed. Go get yaself a good book if you arent familiar enough with events to get this .

..the economics of greed never change....it was so in '29 ...and the same ingredient is there for the '08 recession...sadly a big boogie depression ....

The really interesting thing about the great depression is it shows that every time the government interferes, they wreck the ability of people to plan ahead and therefore make things worse. Capitalism is all about saving today so you can do more tomorrow and that's damn hard to do when idiots keep changing the rules every five minutes.

And they are doing the exact same thing this time.

The only real solution to a market proble is to let the market sort it out. But that means bank failures and the death of our overbearing, expensive state so it will be fought all the way... making the whole thing much, much worse.

Tell that to the Japanese!

Damn right. When a public stop spending, the government will have to get very creative. I don't know everything the Japanese tried, but the certainly had the 0% rates to help the banks out. They also tried massive government spending, but I think we don't have the scope to do that.

I guess they could try

Abolish stamp duty
Abolish HIPS
No VAT on conveyancing
Tax relief on mortgage interest
Abolish ISAs
Increase tax on savings
Legal cap on credit card rates

Interested in the 0% Japanese rates, there were a number of well informed sounding posts saying that those rates were for external consumption only. I can't find the thread. However, be that as it may, were the Japanese 0% rates actually covering up for insolvent banks?

I wonder, because I have little confidence that the BoE (or treasury or FSA) would tell us if banks went to the wall, they'd try to cover-up, and Mervyn has said that is what he'd do.

Is there evidence that the Japanese recession was prolonged at all by Banking failures that the Government tried to prop up?

I am increasingly coming to the view that the only sensible approach is to do away with all central bank intervention in banking failures, and allow the markets (and consumers) to make decisions for themselves. This is an Augean Stables situation, and we need to just wash away all the cr@p from the banking sector. Covering up just makes the smell worse in the long term!

There is something deeply wrong with that man. He's spent too much time obsessively studying what made people 'great' or 'courageous'; then somehow spends his entire political career bending over for the opinion polls & the bankers.

gold is a good conductor of heat and electricity though, its got some uses

The Japanese situation is now a totaly controlled con trick on the Japanese people according to many accounts Ive read, they of course dont have access to the 0% rates, this is used to keep the Yen down against the $ £ and E etc so the big industrialists can sell to them (all aided and abeted by western banks etc re the carry trade). Japanese CPI is very much manipulated and used to keep wages and pensions etc down. Its many years since Japanese companies realy looked after their workers and most dont get those perks anymore even though they are still expected to work free overtime and never take their holidays etc. As a trick economy, it cant work if repeated all over the world, the Japs already hate China for pulling similar tricks (without US approval though). We couldnt get away with it, however Im sure the big VI's and BOE will try something to keep their bonus flow cash positive. A race to the bottom is what I would call it.

you cant move for Japanese tourists wherever you go in the world

Thanks for that link, I am just going to start reading it. Here is another good online book link from the von mises site, Its called Fiat Money Inflation in France, printed in 1933 based on what happened from 1789 onwards as the French began printing money.



http://www.mises.org/books/inflationinfrance.pdf

BoJ bail-out example.
Bad loans kept on Japanese bank balance sheets.

Still, it didn't stop them selling me a Toyota

Are you sure you're not confusing them for Chinese?

I see far fewer Japanese tourists around these days than I used to.

Venice last Christmas: 40% of tourists were Chinese.

Interesting post. I'd be interested in details of the accounts you've read, if you have them.

http://www.mapsofworld.com/japan/economy-o...n-mortgage.html
The recent scenario of mortgage in Japan is that the corporate has basically stopped borrowing from the banks thus the banks had to mainly depend on personal loans mainly housing. The average mortgage rate of Japan is 2.37%.

There are two types of mortgage rates in Japan fixed and floating the rates also vary with the number of years. Like for example, 5 years of fixed mortgage rate is from 2.23% to 2.68% and 15 year fixed rate mortgage rate is 2.81%to 3.26%.

http://www.economywatch.com/mortgage/japan.html
Japan, being a developed country, has the second largest mortgage market among the selected Asian countries. Japan has a very low mortgage rate of 2.375%.

Quite often they will only take 1 week per year, I spent some time in a classroom where a friend of mine was teaching English within a big Japanese company, after getting drunk with these people a few times, all their gripes came out, seems that they get allocated 4 weeks per year, however they cant justify taking any more than their immediate manager, and if he takes 1 week you take one week and it will never be more than a week, young females however can take the lot. One poor chap there hadnt had a holiday in 10 years. However when they do go away they are very intense, can see most of Australia in a week or 7 cities in Europe sightseeing 12 hrs per day.




Here are a few paragraphs from http://elainemeinelsupkis.typepad.com/money_matters/
She did put a big article together re the Japanses situation however cant find it, I have here a few paragraphs from the last couple of months, she seems to put a lot of effort into researching this stuff, not just opinon


''I have pointed out in the past, if we allow Japan to run an aggressive export market program coupled with 0% loans, a fake depression in Japan with falling wages while necessities there inflate greatly, we will end up imitating them. And this is what Roubini wants to do! Argh.
I used to debate with him long ago. I kept pointing out the contradictions about Japan. Today, we know that Japan's depression is fake. So fake, the government this year tried to resort to sales taxes to kill commerce so they could claim, the depression is just terrible. This last week, Japan's Nikkei news openly boasted about 6 years of GROWTH. You don't get that in depressions.
(Japanese)Consumers have LESS INCOME. So they 'resist' sales because they MUST! And the government knows this. Pretending consumers are doing this willfully is part of the Samurai code---'Blame the peasants for all problems.' A top Korean company just closed down all their outlets in Japan because they can't make money there. This is the other good side to this fake depression. Japan wants as few imports as possible. This is better than all the other Fortress Japan schemes! Not only do they prevent competition and imports, they get the world to feel SORRY for them as they ruthlessly do this! Neat trick. And the Goldman Sachs people have noticed this and are very eager to imitate this.
I am very certain they want this model for us. This is why I am so alarmed with what is developing and want to stop them.
When the Japanese banking collapse happened, they were very woeful. But by 1997, they hit on a new scheme. One aspect was to increase their FOREX reserves until it was the biggest on earth. The other was to depress wages and consumers and thus, switch the country into enforced savings and then the kisser: GIVE NO INTEREST TO SAVERS! Ha. This confiscation of the savings of the workers was a stunning success and now is being kept running in the teeth of workers sending savings out of the country. Indeed, this weakens the yen so it is encouraged!''

Comparing to 1930s economics is about as useful as comparing to 1930s technology. Things really have changed. Go get yaself a good book if you arent familiar enough with events to get this .
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Correct, in those days there was abundent cheap energy. Things are different now because we are close to peak oil, peak population and peak food. Things are worse.

Comparing the two markets is like comparing apples and oranges.

i've lived in Japan. they have insane amounts of public holidays and nobody works on those. on the days they do work - they work silly hours. starting a little later than in the UK but working until your boss goes home is the norm, and that can often be midnight. they work very hard but very inefficiently because the bosses never make decisions until absolutely necessary. making a wrong decision is almost worthy of Hari Kari and so it's far better for your CV (but not for the mental health of those working beneath you) to simply avoid making a decision at all, and just hope that you are on holiday when it all goes tits up.