UK double dip recession... implications?
Nov 28th 2011, 8:00 pm
#32
Banned
Joined: Jan 2011
Location: The REAL Utopia.
Posts: 9,910
Re: UK double dip recession... implications?
You are a glass half empty type arent you ? 
I think it's going to be incredibly bad.
Merkel blabbing on about war in Europe is just a furphy - it's not going to happen but it sounds good when you need to justify a centralized government.
What will happen is huge cutbacks in government spending - health, education, Defence, infrastructure, aid etc. There will be massive unemployment, and there will be no money to pay benefits. There will be high taxation, and a dramatic drop in standard of living.
I can't see any other alternative. We stopped producing things and became addicted consumers to cheap Asian products. Wealth flowed from west to east, and it didn't flow back. We made up for that missing wealth by borrowing.
The GFC was a minor correction caused by private borrowing. Unemployed Americans were buying houses and cars that they could never pay for. They were buying on credit. Remember the buy now and don't pay nothing until 20xx adverts on TV here? When people couldn't pay they defaulted and banks went down.
Now scale that stupidity up to soveriegn level borrowing. Nations like Spain hav built new highways, nations like Greece have built new underground railways. They didn't have the money to pay for it - they didn't have the tax revenue. So they borrowed by issuing bonds.
Now just like the Lehman Brothers, everyone is realizing that no one can repay the loans. The rest is history, except it hasn't happened yet.
We are in deep shit.
Merkel blabbing on about war in Europe is just a furphy - it's not going to happen but it sounds good when you need to justify a centralized government.
What will happen is huge cutbacks in government spending - health, education, Defence, infrastructure, aid etc. There will be massive unemployment, and there will be no money to pay benefits. There will be high taxation, and a dramatic drop in standard of living.
I can't see any other alternative. We stopped producing things and became addicted consumers to cheap Asian products. Wealth flowed from west to east, and it didn't flow back. We made up for that missing wealth by borrowing.
The GFC was a minor correction caused by private borrowing. Unemployed Americans were buying houses and cars that they could never pay for. They were buying on credit. Remember the buy now and don't pay nothing until 20xx adverts on TV here? When people couldn't pay they defaulted and banks went down.
Now scale that stupidity up to soveriegn level borrowing. Nations like Spain hav built new highways, nations like Greece have built new underground railways. They didn't have the money to pay for it - they didn't have the tax revenue. So they borrowed by issuing bonds.
Now just like the Lehman Brothers, everyone is realizing that no one can repay the loans. The rest is history, except it hasn't happened yet.
We are in deep shit.
Nov 28th 2011, 8:01 pm
#33
Proudly Deplorable
Joined: May 2003
Location: Alloha snack bar
Posts: 24,246
Re: UK double dip recession... implications?
we're all doooooooooooooooooooooomed. Dooooooooooooooooooooomed I tell ye!
Nov 28th 2011, 9:43 pm
#34
Not allowed opinions.
Joined: Nov 2009
Location: Sydney
Posts: 4,565
Re: UK double dip recession... implications?
Not quite.
Sovereign debt can be defaulted on, or if you have control of your currency, inflated away in currency devaluations. That's much more likely for the PIIGS. Lots of options to play with if you are Country PLC that Company PLC doesn't have.
It's more that global trade will take a hit, since simplistic austerity measures can't cut very deep without revolution. That and personal savings are likely to be the main sufferers.
Sovereign debt can be defaulted on, or if you have control of your currency, inflated away in currency devaluations. That's much more likely for the PIIGS. Lots of options to play with if you are Country PLC that Company PLC doesn't have.
It's more that global trade will take a hit, since simplistic austerity measures can't cut very deep without revolution. That and personal savings are likely to be the main sufferers.
I was shocked diring the GFC when my father told me he was spreading money around banks as he was worried that Westminster bank would go under.
Countries could print their way out of the problem, but getting out of the Euro brings them down anyway, and they can't print unless they return to soveriegn currencies.
The ABC just mentioned Depression for the first time in my watching. Moodies just said a series of Eurozone defaults is no longer "negligible".
Things are happening very fast now, and the pace will accellerate rapidly from now on. Goodbye Euro, goodbye the Europe we know, and goodbye much of the lifestyle we know.
Nov 28th 2011, 10:10 pm
#35
snɐןɔ ʎʇıuɐs
Joined: Nov 2006
Posts: 6,558
Re: UK double dip recession... implications?
Therefore, I'd suggest that European governments might put a brake on the rate of shifting money out of accounts to keep the banks alive. Coupled with the already increased requirements to hold reserves (fractional reserve), they have some scope to maintain the status quo (eg keep the banks afloat with hot air) long enough to sift the rubble and con something together.
The real fun I'm waiting for is import tariffs. Sooner or later that's going to have to come - the current situation is unsustainable. When it does, all hell will break lose.
Nov 28th 2011, 10:22 pm
#37
Not allowed opinions.
Joined: Nov 2009
Location: Sydney
Posts: 4,565
Re: UK double dip recession... implications?
Fully agree. Free trade agreements will go out the window and protectionism will return - either via quotas or tariffs. The problem is many industries have simply disappeared in some countries, so some things will just attract tariffs....
