Weekend Economists Salute Our (Founding) Fathers June 14-16, 2013

[DemReadingDU]

8. Five Stonking Crashes by Ilargi at The Automatic Earth

6/14/13 Ilargi:
Little by little the realization is seeping through that, provided we can agree a recovery cannot be purchased outright, there is no such thing as a recovery anywhere in the western world. Mind you, I said seeping, and I could even have said trickling; it's a slow process. And that is a direct consequence of various vested interests in producing the illusion of recovery and growth which exist in the realms of politics, finance and media.
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In the words of the Guardian:
Cheap credit has inflated the markets, and we could be in for a crash landing...

During the past four centuries, there have been five occasions when major credit bubbles have led to stonking crashes. Tulip mania in 17th-century Holland was the first; the South Sea bubble in the 18th century was the second; the US real estate crash of the 1830s was the third; the 1929 Wall Street Crash and the Great Depression was the fourth. The sub-prime crisis that began in 2007 was the fifth.

No matter what happens next, the chance that central banks will be able to continue to manipulate down both bond yields and interest rates is getting slimmer by the day. Nonetheless, they'll keep on doubling down on their bets: the more they lose control (or the more it's obvious they never had any), the bigger the losses for the financial community will get, and the more they will clamor for more stimulus.
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It's a shame for the people in the street that it must come to this, because the costs for them will be many times higher than if they had made their voices heard earlier. But perhaps, given the entanglement of governments, central banks, the financial community and the media, this was unavoidable.

What's positive for those people is that it means the entire investor model of the economy as we know it is dead (though I don't think many are ready to accept this), once it's obvious it was only held standing up through ever larger injections of taxpayer funds. At least they won't have to worry so much about vultures picking at the carcasses of their lives, even as these lives will in most cases be pretty destitute.

http://theautomaticearth.com/Finance/five-stonking-crashes.html


6/8/13 The Guardian: Cheap credit has inflated the markets, and we could be in for a crash landing
http://www.guardian.co.uk/business/2013/jun/09/something-nasty-global-banking-no-plan