global financial crash yay!
- Thread starter sufi
- Start date
crackerjack
Well-known member
Which is why it should've been higher - 5p over £150,000 is modest enough not to scare off the upper-middle class, but too modest to raise significant funds (£2bn a year estimated). I agree it's significant break with policy, but it's also an opportunity lost.*
Ah, but they all live on VATable takeaways dontcha know.
*unless it's the thin end of the wedge and Gordy plans to squeeze the bastards dry, bit by overpaid bit. We can but dream.
Mr. Tea
Let's Talk About Ceps
Is there VAT on booze and tobacco in addition to those goods' specific duties?
And there's still VAT on household fuel, isn't there? If this is reduced it could help soften the blow of inflation-busting (and then some!) gas/leccy price rises. Conversely, road fuel duty has gone up 2%, which more than wipes out the VAT reduction...
And there's still VAT on household fuel, isn't there? If this is reduced it could help soften the blow of inflation-busting (and then some!) gas/leccy price rises. Conversely, road fuel duty has gone up 2%, which more than wipes out the VAT reduction...
crackerjack
Well-known member
There is VAT on household fuel, but at a lower rate (8% iirc) - dunno what's happening to it.
The petrol rise is a serious gamble - if the falling pouund pushes petrol prices back up sharply, he could regret that.
vimothy
yurp
Yeah, I guess the fall in demand is a pretty good reason not to raise taxes in the near term, but in-and-of-itself this is surely not going to have much of a stimulative effect.
crackerjack
Well-known member
Will Hutton was saying the other week that now is the perfect time to join the Euro. Ain't gonna happen though.
I read that a couple of Sundays ago
http://www.guardian.co.uk/commentisfree/2008/nov/16/comment-will-hutton-euro
I think there'd be blood on the streets, sadly.
vimothy
yurp
Looks like the Fed is going for inflation:
http://www.nytimes.com/2008/11/26/us/politics/26paulson.html?_r=1
http://www.nytimes.com/2008/11/26/us/politics/26paulson.html?_r=1
Slight tangent, but what are the prospects of sterling gaining ground on the Euro again? Can we expect a long term level < €1.20 to the pound or is there trouble stored up on the continent that will see the pound rise? I buy a lot of stuff in Euros, but it only seems to be going south for sterling lately.
crackerjack
Well-known member
Most of my money is coming from germany for the next couple of months. Here's praying for parity.
vimothy
yurp
Think both the fundamentals (UK recession will be worse, BOE has more political room for rate cuts, also think Darling has already started talking down the pound in anticipation of deflation) and the longer term technicals point to a strengthening Euro.
vimothy
yurp
Choice Links: Not waving... edition
Roubini -- (total pessimism) -- The Deadly Dirty D-Words: “Deflation”, “Debt Deflation” and “Defaults”. And How Central Banks Will Have to Resort to “Crazy” Policies as We Have Reached Such Bermuda Triangle of a “Liquidity Trap”
How to halt deflation -- monetise debt:
More ideas from Hamilton:
http://www.econbrowser.com/archives/2008/11/time_for_a_chan.html
Satyajit Das watch:
http://www.rgemonitor.com/financema...bal_financial_system__calling_for_the_plumber
CDS watch:
http://www.bloomberg.com/apps/news?pid=20601109&sid=aD.qjkK0K5QU&refer=home
The Institutional Risk Analyst -- bankrupt the speculative CDS market:
More from IRA: Great interview with Bill Janeway; "In the Fog of Volatility, The Notional Becomes Payable".
The Next Bubble is already here
And it’s in Treasuries....
...take a look at this chart for LT debt circa the Great Depression:
And it’s in Treasuries....
...take a look at this chart for LT debt circa the Great Depression:
* * * *
* *Roubini -- (total pessimism) -- The Deadly Dirty D-Words: “Deflation”, “Debt Deflation” and “Defaults”. And How Central Banks Will Have to Resort to “Crazy” Policies as We Have Reached Such Bermuda Triangle of a “Liquidity Trap”
* * * * *
How to halt deflation -- monetise debt:
Some of my colleagues still talk of the possibility of a liquidity trap, in which the central bank supposedly has no power even to cause inflation. Their theory is that interest rates fall so low that when the Fed buys more T-bills, it has no effect on interest rates, and the cash the Fed creates with those T-bill purchases just sits idle in banks.
To which I say, pshaw! If the U.S. were ever to arrive at such a situation, here's what I'd recommend. First, have the Federal Reserve buy up the entire outstanding debt of the U.S. Treasury, which it can do easily enough by just creating new dollars to pay for the Treasury securities. No need to worry about those burdens on future taxpayers now! Then buy up all the commercial paper anybody cares to issue. Bye-bye credit crunch! In fact, you might as well buy up all the equities on the Tokyo Stock Exchange. Fix that nasty trade deficit while we're at it! Print an arbitrarily large quantity of money with which you're allowed to buy whatever you like at fixed nominal prices, and the sky's the limit on what you might set out to do.
Of course, the reason I don't advocate such policies is that they would cause a wee bit of inflation. It's ridiculous to think that people would continue to sell these claims against real assets at a fixed exchange rate against dollar bills when we're flooding the market with a tsunami of newly created dollars. But if inflation is what you want, put me in charge of the Federal Reserve and believe me, I can give you some inflation.
To which I say, pshaw! If the U.S. were ever to arrive at such a situation, here's what I'd recommend. First, have the Federal Reserve buy up the entire outstanding debt of the U.S. Treasury, which it can do easily enough by just creating new dollars to pay for the Treasury securities. No need to worry about those burdens on future taxpayers now! Then buy up all the commercial paper anybody cares to issue. Bye-bye credit crunch! In fact, you might as well buy up all the equities on the Tokyo Stock Exchange. Fix that nasty trade deficit while we're at it! Print an arbitrarily large quantity of money with which you're allowed to buy whatever you like at fixed nominal prices, and the sky's the limit on what you might set out to do.
Of course, the reason I don't advocate such policies is that they would cause a wee bit of inflation. It's ridiculous to think that people would continue to sell these claims against real assets at a fixed exchange rate against dollar bills when we're flooding the market with a tsunami of newly created dollars. But if inflation is what you want, put me in charge of the Federal Reserve and believe me, I can give you some inflation.
* * * * *
More ideas from Hamilton:
http://www.econbrowser.com/archives/2008/11/time_for_a_chan.html
* * * * *
Satyajit Das watch:
http://www.rgemonitor.com/financema...bal_financial_system__calling_for_the_plumber
* * * * *
CDS watch:
http://www.bloomberg.com/apps/news?pid=20601109&sid=aD.qjkK0K5QU&refer=home
* * * * *
The Institutional Risk Analyst -- bankrupt the speculative CDS market:
Q: Does anybody really believe that the global central banks and the politicians that stand behind them are going to provide the liquidity to fund $15 trillion or more in CDS payouts? Remember, only a small portion of these positions are actually hedging exposure in the form of the underlying securities. The rest are speculative, in some cases 10, 20 of 30 times the underlying basis. Yet the position taken by Treasury Secretary Paulson and implemented by Tim Geithner (and the Fed Board in Washington, to be fair) is that these leveraged wagers should be paid in full.
Our answer to this cowardly view is that AIG needs to be put into bankruptcy....
President-elect Obama and the American people have a choice: embrace financial sanity and safety and soundness by deflating the last, biggest speculative bubble using the time-tested mechanism of insolvency. Or we can muddle along for the next decade or more, using the Paulson/Geithner model of financial rescue for the AIG CDS Ponzi scheme and embrace the Japanese model of economic stagnation.
And, yes, we can put AIG and the other providers of protection through a bankruptcy and force the CDS market into a quick and final extinction. Remember, when AIG goes bankrupt the insurance units are taken over by NY, WI and put into statutory receiverships. Only the rancid CDS positions and financial engineering unit of AIG end up in bankruptcy. And fortunately we have a fine example of just how to do it in the bankruptcy of Lehman Brothers....
The bankruptcy court process also allows for parties to terminate or "rip up" CDS contracts, something that has also been fully enabled by the DTCC. The bankruptcy can dispose and the DTCC will confirm.
BTW, while you folks in the Big Media churned out hundreds of thousands of words last week waxing euphoric about the prospect for enhanced back office clearing of CDS contracts, the real issue is the festering credit situation in the front office.... The danger of CDS is not a systemic blowup - though that will come soon enough. It is the normal operation of the now electronically enabled CDS market wherein lies the threat to the entire global financial system, this via the huge drain in liquidity illustrated above as CDS contracts are triggered by default events.
The only way to deal with this ridiculous Ponzi scheme is bankruptcy. The way to start that healing process, in our view, is by the Fed emulating the FDIC's treatment of DSL, withdrawing financial support for AIG and pushing the company into the arms of the bankruptcy court. The eager buyers for the AIG insurance units, cleansed of liability via a receivership, will stretch around the block.
By embracing Geithner, President-elect Barack Obama is endorsing the ill-advised scheme to support AIG directed by Hank Paulson et al at Goldman Sachs and executed by Tim Geithner and Ben Bernanke. News reports have already documented the ties between GS and AIG, and the backroom machinations by Paulson to get the deal done. This scheme to stay AIG's resolution cannot possibly work and when it does collapse, Barak Obama and his administration will wear the blame due through their endorsement of Tim Geithner.
The bailout of AIG represents the last desperate rearguard action by the CDS dealers and the happy squirrels at ISDA, the keepers of the flame of Wall Street financial engineering. Hopefully somebody will pull President-elect Obama aside and give him the facts on this mess before reality bites us all in the collective arse with, say, a bankruptcy filing by GM (NYSE:GM).
You see, there are trillions of dollars in outstanding CDS contracts for the Big Three automakers, their suppliers and financing vehicles. A filing by GM is not only going to put the real economy into cardiac arrest but will also start a chain reaction meltdown in the CDS markets as other automakers, vendors and finance units like GMAC are also sucked into the quicksand of bankruptcy. You knew when the vendor insurers pulled back from GM a few weeks ago that the jig was up.
And many of these CDS contracts were written two, three and four years ago, at annual spreads and upfront fees far smaller than the 90 plus percent payouts that will likely be required upon a GM default. That's the dirty little secret we peripherally discussed in our interview last week with Bill Janeway, namely that most of these CDS contracts were never priced correctly to reflect the true probability of default. In a true insurance market with capital and reserve requirements, the spreads on CDS would be multiples of those demanded today for such highly correlated risks. Or to put it in fair value accounting terms, pricing CDS vs. the current yield on the underlying basis is a fool's game. Truth is not beauty, price is not value.
Our answer to this cowardly view is that AIG needs to be put into bankruptcy....
President-elect Obama and the American people have a choice: embrace financial sanity and safety and soundness by deflating the last, biggest speculative bubble using the time-tested mechanism of insolvency. Or we can muddle along for the next decade or more, using the Paulson/Geithner model of financial rescue for the AIG CDS Ponzi scheme and embrace the Japanese model of economic stagnation.
And, yes, we can put AIG and the other providers of protection through a bankruptcy and force the CDS market into a quick and final extinction. Remember, when AIG goes bankrupt the insurance units are taken over by NY, WI and put into statutory receiverships. Only the rancid CDS positions and financial engineering unit of AIG end up in bankruptcy. And fortunately we have a fine example of just how to do it in the bankruptcy of Lehman Brothers....
The bankruptcy court process also allows for parties to terminate or "rip up" CDS contracts, something that has also been fully enabled by the DTCC. The bankruptcy can dispose and the DTCC will confirm.
BTW, while you folks in the Big Media churned out hundreds of thousands of words last week waxing euphoric about the prospect for enhanced back office clearing of CDS contracts, the real issue is the festering credit situation in the front office.... The danger of CDS is not a systemic blowup - though that will come soon enough. It is the normal operation of the now electronically enabled CDS market wherein lies the threat to the entire global financial system, this via the huge drain in liquidity illustrated above as CDS contracts are triggered by default events.
The only way to deal with this ridiculous Ponzi scheme is bankruptcy. The way to start that healing process, in our view, is by the Fed emulating the FDIC's treatment of DSL, withdrawing financial support for AIG and pushing the company into the arms of the bankruptcy court. The eager buyers for the AIG insurance units, cleansed of liability via a receivership, will stretch around the block.
By embracing Geithner, President-elect Barack Obama is endorsing the ill-advised scheme to support AIG directed by Hank Paulson et al at Goldman Sachs and executed by Tim Geithner and Ben Bernanke. News reports have already documented the ties between GS and AIG, and the backroom machinations by Paulson to get the deal done. This scheme to stay AIG's resolution cannot possibly work and when it does collapse, Barak Obama and his administration will wear the blame due through their endorsement of Tim Geithner.
The bailout of AIG represents the last desperate rearguard action by the CDS dealers and the happy squirrels at ISDA, the keepers of the flame of Wall Street financial engineering. Hopefully somebody will pull President-elect Obama aside and give him the facts on this mess before reality bites us all in the collective arse with, say, a bankruptcy filing by GM (NYSE:GM).
You see, there are trillions of dollars in outstanding CDS contracts for the Big Three automakers, their suppliers and financing vehicles. A filing by GM is not only going to put the real economy into cardiac arrest but will also start a chain reaction meltdown in the CDS markets as other automakers, vendors and finance units like GMAC are also sucked into the quicksand of bankruptcy. You knew when the vendor insurers pulled back from GM a few weeks ago that the jig was up.
And many of these CDS contracts were written two, three and four years ago, at annual spreads and upfront fees far smaller than the 90 plus percent payouts that will likely be required upon a GM default. That's the dirty little secret we peripherally discussed in our interview last week with Bill Janeway, namely that most of these CDS contracts were never priced correctly to reflect the true probability of default. In a true insurance market with capital and reserve requirements, the spreads on CDS would be multiples of those demanded today for such highly correlated risks. Or to put it in fair value accounting terms, pricing CDS vs. the current yield on the underlying basis is a fool's game. Truth is not beauty, price is not value.
More from IRA: Great interview with Bill Janeway; "In the Fog of Volatility, The Notional Becomes Payable".
Grievous Angel
Beast of Burden
I don't buy that letting AIG go bust has an antiseptic effect.
I certainly don't buy all the conspiracy theories about Geithner and Paulson either. Most of the finger-pointers were into financial engineering as much as them.
I certainly don't buy all the conspiracy theories about Geithner and Paulson either. Most of the finger-pointers were into financial engineering as much as them.