Europe heading into recession
Discussion
CzechItOut said:
Why wouldn't a country on the verge of recession and with a 58bn euro budget surplus engage in some kind of short term stimulus?
They are just a couple of generations back from the collective memory of the sort of inflation that helped establish Nazism. It was a grim time for Germany and it formed a deeply rooted adherence to what is often referred to as Austrian school economics.CzechItOut said:
isaldiri said:
They aren't hoarding cash. Probably some other bond redemptions are taking place and they are merely rolling forward another chunk of maturities and they have very little need to pay down outstanding debt as their debt levels are pretty low.
Why wouldn't a country on the verge of recession and with a 58bn euro budget surplus engage in some kind of short term stimulus?1) Test the floor before buyers go on strike (we won't see how the demand / subscriptions played out till later)
2) Their budget rules seem to NOT allow them to take pre-emptive stimulus action. They need to be "IN" the recession before they start spending their way out (which is not what the markets want to hear - but kinda makes sense if you need to know what to target). Scholz has refused to do anything thus far, even when Draghi was begging on his knees. Even Trump has been knocking.
We might see something more solid after the G7 this week, Or at least germany can formulate a targeted fiscal drop. Trump's coming to drive a wedge between Macron and Merkel - rounding on the EU after he's dealt with China. The main problem for US exports in Europe is France (and protectionism). In order to put pressure on the EU's he's going to go after Germany exports (which is a huge problem for Merkel).
All the while, BJ will be in town also doing divide and conquer (but on the micro scale).
fesuvious said:
...
Since the 'gfc' it seems to have become the widespread norm for economic predictions to dictate current policy. Its as if from somewhere collectively central planners, central banks, and govs somehow believe we have developed new predictive powers and skills to manage our way through events that haven't happened.
Its f
king bonkers.
...
It is bonkers, but I suspect being caught with pants down in 2008 is what has prompted it. And a noble desire not to let it happen again. Since the 'gfc' it seems to have become the widespread norm for economic predictions to dictate current policy. Its as if from somewhere collectively central planners, central banks, and govs somehow believe we have developed new predictive powers and skills to manage our way through events that haven't happened.
Its f
king bonkers....
It now doesn't matter how s
t the models are they stick to them like a tongue on an icy lamppost "because there's nothing better". People on here do it all the time (I suspect as a direct consequence). It's nuts, but challenge it and you get accused of "ignoring experts".
fesuvious said:
Tongue in cheek response from me, slightly sarcastic, but not at you Digga, more the overall picture.
Why would a country not engage in stimulus to deal with a problem that hasn't happened?
My answer is in the way I have written your question. Twenty years ago economic data determined where policy went. It was normal here in UK to discover the economy was either too hot, or too slow and adjust rates accordingly, for example.
Since the 'gfc' it seems to have become the widespread norm for economic predictions to dictate current policy. Its as if from somewhere collectively central planners, central banks, and govs somehow believe we have developed new predictive powers and skills to manage our way through events that haven't happened.
Its fking bonkers.
For all the undoubted Weimar related reasons why Germany doesn't like inflation, the other explanation is that they're not stupid enough that they do actually know what they don't yet know and therefore take the view that to tinker to fix a problem that hasn't occurred yet to even judge the start of let alone severity of is mad.
ETA
it is the equivalent of buying a gender specific 18th birthday present for your child...….before your partners even given birth.
It's not really "f**king bonkers" though (albeit you are writing tongue in cheek), is it?Why would a country not engage in stimulus to deal with a problem that hasn't happened?
My answer is in the way I have written your question. Twenty years ago economic data determined where policy went. It was normal here in UK to discover the economy was either too hot, or too slow and adjust rates accordingly, for example.
Since the 'gfc' it seems to have become the widespread norm for economic predictions to dictate current policy. Its as if from somewhere collectively central planners, central banks, and govs somehow believe we have developed new predictive powers and skills to manage our way through events that haven't happened.
Its f
king bonkers.For all the undoubted Weimar related reasons why Germany doesn't like inflation, the other explanation is that they're not stupid enough that they do actually know what they don't yet know and therefore take the view that to tinker to fix a problem that hasn't occurred yet to even judge the start of let alone severity of is mad.
ETA
it is the equivalent of buying a gender specific 18th birthday present for your child...….before your partners even given birth.
Getting a gender specific birthday present wrong is unlikely to kill you, the next major financial collapse may well do that. The global economy went to the brink in mid Sept 2008, if Goldmans and Stanleys did'nt succomb to the Fed and become bank holding companies - they would'nt have survived thus bringing the whole system down.
If you've looked into the abyss; it's going to re-align your thinking. People are absoluitely petrified of what happens next time - and the "markets" are demanding pre-emptive steering (and the unindented consequence of post crisis regulation was to increase contagion risks). The madness of this is not doing the predictive bit; but we are always in "can kicking" mode; drinking the cool aid and NOT the medicine. We are locked into a policy response cul de sac - (with the problem getting bigger $23tr+ in Central Bank balance sheets) - the govts put everyone in. You always have to pay the piper at some point - those inflationary and economic growth bills have landed firmly at the Eurozones door; but no ones got th ecash to pay.
stongle said:
It's not really "f**king bonkers" though (albeit you are writing tongue in cheek), is it?
Getting a gender specific birthday present wrong is unlikely to kill you, the next major financial collapse may well do that. The global economy went to the brink in mid Sept 2008, if Goldmans and Stanleys did'nt succomb to the Fed and become bank holding companies - they would'nt have survived thus bringing the whole system down.
If you've looked into the abyss; it's going to re-align your thinking. People are absoluitely petrified of what happens next time - and the "markets" are demanding pre-emptive steering (and the unindented consequence of post crisis regulation was to increase contagion risks). The madness of this is not doing the predictive bit; but we are always in "can kicking" mode; drinking the cool aid and NOT the medicine. We are locked into a policy response cul de sac - (with the problem getting bigger $23tr+ in Central Bank balance sheets) - the govts put everyone in. You always have to pay the piper at some point - those inflationary and economic growth bills have landed firmly at the Eurozones door; but no ones got th ecash to pay.
And what of the unintended consequences of following a model that is flawed/simply wrong?Getting a gender specific birthday present wrong is unlikely to kill you, the next major financial collapse may well do that. The global economy went to the brink in mid Sept 2008, if Goldmans and Stanleys did'nt succomb to the Fed and become bank holding companies - they would'nt have survived thus bringing the whole system down.
If you've looked into the abyss; it's going to re-align your thinking. People are absoluitely petrified of what happens next time - and the "markets" are demanding pre-emptive steering (and the unindented consequence of post crisis regulation was to increase contagion risks). The madness of this is not doing the predictive bit; but we are always in "can kicking" mode; drinking the cool aid and NOT the medicine. We are locked into a policy response cul de sac - (with the problem getting bigger $23tr+ in Central Bank balance sheets) - the govts put everyone in. You always have to pay the piper at some point - those inflationary and economic growth bills have landed firmly at the Eurozones door; but no ones got th ecash to pay.
I get why they want to crystal ball gaze... But wasn't there a piece, links posted on NPE a while ago, that looked at the accuracy of economist predictions since the war and they never once forecasted a crisis correctly??
Murph7355 said:
And what of the unintended consequences of following a model that is flawed/simply wrong?
Well, there are not many people left calling in for more monetary policy - so it's getting less unintended consequence. So "if" we keep on can kicking; something quite terrible eventually.There is increasing talk of helicopter money. I mean it's nice and easy, but its pretty f
king difficult to control. Run away inflation? or just pay off existing debt?This is some interesting stuff just published this week by Blackrock (its fairly easy going), strangely this has been debated on here in forms since 2016 (but you cant time the market):
https://www.blackrock.com/corporate/literature/whi...
Edited by stongle on Tuesday 20th August 14:05
Edited by stongle on Tuesday 20th August 16:34
stongle said:
Well, there are not many people left calling in for more monetary policy - so it's getting less unintended consequence. So "if" we keep on can kicking; something quite terrible eventually.
There is increasing talk of helicopter money. I mean it's nice and easy, but its pretty fking difficult to control. Run away inflation? or just pay off existing debt?
This is some interesting stuff (its fairly easy going), this has been debated on here in forms since 2016::
https://www.blackrock.com/corporate/literature/whi...
Sweet Jesus stongle, I voted Leave. You should know I can't read anything with more than 12 words on a page There is increasing talk of helicopter money. I mean it's nice and easy, but its pretty f
king difficult to control. Run away inflation? or just pay off existing debt?This is some interesting stuff (its fairly easy going), this has been debated on here in forms since 2016::
https://www.blackrock.com/corporate/literature/whi...
Will have a read later - thanks.
stongle said:
Well, there are not many people left calling in for more monetary policy - so it's getting less unintended consequence. So "if" we keep on can kicking; something quite terrible eventually.
There is increasing talk of helicopter money. I mean it's nice and easy, but its pretty fking difficult to control. Run away inflation? or just pay off existing debt?
This is some interesting stuff just published this week by Blackrock (its fairly easy going), strangely this has been debated on here in forms since 2016 (but you cant time the market):
https://www.blackrock.com/corporate/literature/whi...
As interesting as ever, Stongle.There is increasing talk of helicopter money. I mean it's nice and easy, but its pretty f
king difficult to control. Run away inflation? or just pay off existing debt?This is some interesting stuff just published this week by Blackrock (its fairly easy going), strangely this has been debated on here in forms since 2016 (but you cant time the market):
https://www.blackrock.com/corporate/literature/whi...
I have been an advocate of effectively ignoring government bonds held by their own central banks for years - everyone pretends they will get cancelled or recycled back into the private market in the future, but that isn't really what will happen in my view. Certainly the UK balance sheet looks a hell of a lot nicer when you view through that filter.
Further issuance gives those who control their own currency the ability to inject cash into the economy quickly, but it will be as addictive as drugs to the populace if we aren't careful.
Mind you, in a world of low inflation and competitive devaluation, perhaps some microdosing might be fun...?!
loafer123 said:
As interesting as ever, Stongle.
I have been an advocate of effectively ignoring government bonds held by their own central banks for years - everyone pretends they will get cancelled or recycled back into the private market in the future, but that isn't really what will happen in my view. Certainly the UK balance sheet looks a hell of a lot nicer when you view through that filter.
Further issuance gives those who control their own currency the ability to inject cash into the economy quickly, but it will be as addictive as drugs to the populace if we aren't careful.
Mind you, in a world of low inflation and competitive devaluation, perhaps some microdosing might be fun...?!
Yep, its why inverted yield curves maynot be yhe precursor of a recession if your own CB owns all the long dated stuff.I have been an advocate of effectively ignoring government bonds held by their own central banks for years - everyone pretends they will get cancelled or recycled back into the private market in the future, but that isn't really what will happen in my view. Certainly the UK balance sheet looks a hell of a lot nicer when you view through that filter.
Further issuance gives those who control their own currency the ability to inject cash into the economy quickly, but it will be as addictive as drugs to the populace if we aren't careful.
Mind you, in a world of low inflation and competitive devaluation, perhaps some microdosing might be fun...?!
I find it fascinating that we see this nexus point of monetary and fiscal policies. If the likes of Blackoick are strongly advocating it - it fits very nicely into BJs new narrative. If he can truly build a new small conservatism - could be fascinating. I can only imagine the closed door lobbying taking place.
Digga said:
They are just a couple of generations back from the collective memory of the sort of inflation that helped establish Nazism. It was a grim time for Germany and it formed a deeply rooted adherence to what is often referred to as Austrian school economics.
It was also a deliberate policy to screw the French out of their war reparations. Hyperinflation lasted a very short period and completely wiped out their debts as a nation.
Mark blyth covers this quite well in one of his lectures.
jsf said:
Digga said:
They are just a couple of generations back from the collective memory of the sort of inflation that helped establish Nazism. It was a grim time for Germany and it formed a deeply rooted adherence to what is often referred to as Austrian school economics.
It was also a deliberate policy to screw the French out of their war reparations. Hyperinflation lasted a very short period and completely wiped out their debts as a nation.
Mark blyth covers this quite well in one of his lectures.
markcoznottz said:
jsf said:
Digga said:
They are just a couple of generations back from the collective memory of the sort of inflation that helped establish Nazism. It was a grim time for Germany and it formed a deeply rooted adherence to what is often referred to as Austrian school economics.
It was also a deliberate policy to screw the French out of their war reparations. Hyperinflation lasted a very short period and completely wiped out their debts as a nation.
Mark blyth covers this quite well in one of his lectures.
fesuvious said:
Cheers Stongle,
+1 I will read that at tea break.fesuvious said:
We have discovered the spend / borrow and spend limit. We're there. Assets are too expensive, debt is too high, and too scary. The pschycology at play post 'gfc' is immense.
...Japan...
A mate and his wife were staying at the weekend. Mrs Digga had (unusually, because we seldom get papers these days) walked to the village shop on Sunday morning to buy The Sunday Times....Japan...
While I was cooking the breakfast, my mate (who knows not too much about finance or economics and panics, vociferously about Brexit too I might add) was reading the paper and remarked about 100+ year mortgages. I told him they'd had multi-generational mortgages in japan for decades. This may be where we go.
loafer123 said:
Definitely a contrarian view. In my view we are on minimal interest rates for the foreseeable future.
Until all the retards who overleveraged buying btls, and remortgaged thier house to buy a holiday, a conservatory and new his and her cars have been subsidised until thier mortgages have been cleared. No thanks for anyone who was prudent, you can have zero interest in your savings. Great. The once-in-a-generation opportunity to correct the U.K. economy with zero political fallout came with the GFC - and went again because IMHO those “in charge” lacked the foresight to see the golden goose they had before them.
Japan shows us another style of how not to do it. 100 year mortgages and so on and decades of stagflation.
Also don’t let what you read lead you to misunderstand the Japanese market. There’re plenty of beautiful places in Japan where you can buy a fantastic house for essentially no money (free as in beer). Very different to the UK.
Meanwhile Japanese labour laws that make it hard if not impossible to get rid of staff mean that people with salaries are likely to have them for a very long time. Which is important, because Japanese wages are pretty low by U.K. standards.
Japan is admirable in many ways, but it is a “road to Dublin” type of non-solution to our own immediate problems.
Japan shows us another style of how not to do it. 100 year mortgages and so on and decades of stagflation.
Also don’t let what you read lead you to misunderstand the Japanese market. There’re plenty of beautiful places in Japan where you can buy a fantastic house for essentially no money (free as in beer). Very different to the UK.
Meanwhile Japanese labour laws that make it hard if not impossible to get rid of staff mean that people with salaries are likely to have them for a very long time. Which is important, because Japanese wages are pretty low by U.K. standards.
Japan is admirable in many ways, but it is a “road to Dublin” type of non-solution to our own immediate problems.
skwdenyer said:
The once-in-a-generation opportunity to correct the U.K. economy with zero political fallout came with the GFC - and went again because IMHO those “in charge” lacked the foresight to see the golden goose they had before them.
Japan shows us another style of how not to do it. 100 year mortgages and so on and decades of stagflation.
Also don’t let what you read lead you to misunderstand the Japanese market. There’re plenty of beautiful places in Japan where you can buy a fantastic house for essentially no money (free as in beer). Very different to the UK.
Meanwhile Japanese labour laws that make it hard if not impossible to get rid of staff mean that people with salaries are likely to have them for a very long time. Which is important, because Japanese wages are pretty low by U.K. standards.
Japan is admirable in many ways, but it is a “road to Dublin” type of non-solution to our own immediate problems.
Don't get me wrong, I am not advocating Japanese stagflation, I just think that is where we are heading. We do have the advantage of a more flexible economy and one of the best demographics in the western world as well. Japan shows us another style of how not to do it. 100 year mortgages and so on and decades of stagflation.
Also don’t let what you read lead you to misunderstand the Japanese market. There’re plenty of beautiful places in Japan where you can buy a fantastic house for essentially no money (free as in beer). Very different to the UK.
Meanwhile Japanese labour laws that make it hard if not impossible to get rid of staff mean that people with salaries are likely to have them for a very long time. Which is important, because Japanese wages are pretty low by U.K. standards.
Japan is admirable in many ways, but it is a “road to Dublin” type of non-solution to our own immediate problems.
I do think, however, that you are wrong on housing. I see no difference between crazy prices in London and Tokyo and free houses in rural Japan and Liverpool.
You can buy a decent house in alot of the UK for less than £300 psf which is perfectly affordable by most households who look to buy. Don't mistake the craziness of London and the South East for reality in the majority of the country.
fesuvious said:
Give them the money, have rates at banks that low they can't hoard it/save it and hey presto, we're off to splurge.
Inflation .
QE direct, it's mad, it's bad but we're even more fked if we don't.
Australia pulled it off in 2008. Although to how much success is up for debate.Inflation .
QE direct, it's mad, it's bad but we're even more f
ked if we don't.http://andrewleigh.org/pdf/fiscalstimulus.pdf
Art0ir said:
Australia pulled it off in 2008. Although to how much success is up for debate.
http://andrewleigh.org/pdf/fiscalstimulus.pdf
Australia is all about a huge expansion in exports of minerals to China, they benefited from the expansion China experienced. China slows, Australia is fhttp://andrewleigh.org/pdf/fiscalstimulus.pdf
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