John Ward – Crash2: Today’s Big Signs – 1 October 2014

JohnW I think they are as follows:

1. The ECB’s Mario Draghi wants the bank to buy Greek and Cypriot sub-junk. It is a real sign of desperation which, the FT suggests, “may increase tensions between Germany and the European Central Bank”. That seems to me the height of Pink understatement.

2. The EU’s money market funds are ‘struggling to stay afloat as negative interest rates drain the industry’s lifeblood, with many at risk of crippling downgrades by the rating agencies,’ writes Ambrose Evans-Pritchard at the Daily Telegraph. S&P thinks  the €500bn of funds in the eurozone faces serious stress, they being increasingly unable to generate profits since the European Central Bank cut its deposit rate to -0.02pc….and pulled down short-term rates across the spectrum of maturities.

3. ‘On a global level, growth is being steadily drowned under a rising tide of debt, threatening renewed financial crisis, a continued squeeze to living standards, and eventual mass default’, write another Telegraph financial hack Jeremy Warner, adding ‘….even developed market economies have struggled to make progress, with rising public debt cancelling out any headway being made in reducing household and corporate indebtedness….the [UK] government has been piling on borrowings like topsy, notwithstanding attempts by the Chancellor, Osborne, to bring the deficit under control. Total national non financial indebtedness has therefore barely budged since the start of the crisis. The UK remains the fourth most highly indebted major economy in the world after Japan, Sweden and Canada, with total non financial debt of 276pc of GDP. The US is not far behind with debt of 264pc of GDP.’

Average sovereign indebtedness as a % of GDP across the globe can be viewed courtesy of Fifi Lagarde’s International Manipulation Fund:

debtworldFor those whose ageing eyes aren’t up to this, the basic rule of thumb here is dark red bad, dark green good. Note how the USA, UK, eurozone, Canada, India, and Japan are all bad. Whereas Russia, China, Australia, Africa and South America are all good.

My cynical view is that – on the basis of this map – the debt/GDP ratio is a crock of old whatnot. For example, purely in terms of economic knock-on ramifications, much of South America, most of Africa, and the entire Australian economy will be in very deep doo-doo if the ruddier countries stop either consuming or producing. But there you are: that’s comparisons for you. On the whole, I am not a relativist.

Whatever: relativist, schmelativist. If you think these are good signs, you are very probably either Dan Hannan or George Osborne.

Earlier at The Slog: Money remaining in politics = no change. Never,, no way, not ever. /link to original article


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