Sunday, October 18, 2015

Governments and central banks risk tipping the world into a fresh financial crisis, the International Monetary Fund has warned, as it called time on a corporate debt binge in the developing world.  Emerging market companies have "over-borrowed" by $3 trillion in the last decade, reflecting a quadrupling of private sector debt between 2004 and 2014, found the IMF's Global Financial Stability Report.  This dangerous over-leveraging now threatens to unleash a wave of defaults that will imperil an already weak global economy, said stark findings from the IMF's twice yearly report. The Fund warned there was no margin for error for policymakers navigating these hazardous risks. The slightest miscalculation, they said, could collapse into a "failed normalisation" of interest rates and market conditions, wiping 3pc from the world's economic output over the next two years. Governments borrow, and borrow and borrow from banks in order to spend. Their security is their power to tax the people. But by spending they buy the electorate. But the ability to tax is being eroded by companies registering in tax havens. So they borrow even more, which sets the interest rates through demand.   Eventually the system collapses. All Governments should be restricted in their ability to borrow as a prudent measure. "The IMF forecasts that global output will fall to its lowest level in five years at 3.1%" I think you'll find that refers to the GROWTH of output rather than its level. Which is hardly Armageddon, even if you believe the IMF's forecast - which as we know, are notoriously unreliable. "The world's major central banks should ensure policy remains "accommodative" for fear of setting off a new wave of instability that would see bond prices rise and asset prices collapse, said the IMF." I think you'll find they fear a FALL in bond prices (the counterpart to a rise in yields). Do any of you journos understand anything about economics and finance? As for the IMF itself, clearly they are aiming for a new Great Inflation. They know the current level of debt is unsustainable, and the only question is who takes the loss? By stoking up inflation they will ensure that ordinary savers take most of it, rather than banks and governments.
The same economists that governments of every political colour have listened to for decades still rule supreme! They have been paid to tell each administration all they need is to spend more money to make it 'right'. That money has never existed because it has never been produced as a profit, so excess, of anything! It's merely been printed as valueless paper.  Governments have freely allowed the banks to make profits regardless making governments the problem, not the banking system!
We have no clue how economies may have improved had governments let banks fail before these crises ever became a part of our economies.  An earlier comment welcomes the demise of capitalism and sees that as the whole problem. I'm not sure whether there has ever been a true capitalist or free market economy in any modern country in recent history? There is certainly not a single one today. Capitalism, right or wrong, only succeeds when it is accepted that some will fail and there will be victims who cannot succeed and so will not survive.  We all now live with only left wing governments who are not allowed to accept the concept of failure in any member of their societies regardless of any self imposed shortcomings!  No economy can afford that which is why socialism has never worked anywhere it has been tried. Government control and mismanagement have been totally to blame for the economic mess we find ourselves in. The only other culprits who bear just as much blame are we the voters who put them in place. If a child has only a pound/dollar, or whatever, in its hand and the object in the store it must have costs that pound/dollar plus a couple of pennies or cents, it understands it can't afford to buy it!  The child may have hysterics and demand its parents make it right and find the extra, but it still actually recognizes basic economics, something our governments have chosen to ignore for decades.  The IMF is no less crooked than any other financial agency, the world's banking system or the governments who support them all. You can bet your life that when this inevitable recession and world financial crisis arrives it will still be the likes of the IMF, the bankers and a majority of politicians world wide who make sure they are taken care of well before the communities they will ruin.  Wake up and welcome to the real world. You can't live on ever increasing debt. Our biggest shame is that it is quite obvious that those who will be left to survive the economic mess we are making are the children who we all pretend are the future of our world. We all continue to be hypocrites and narcissists only interested in ourselves.

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