By Raúl Ilargi Meijer, editor-in-chief of The Automatic Earth, Cross posted from Automatic Earth
Last week, I was reading parts of a report issued by Japanese investment bank Nomura, which started out saying that the “Global Financial Crisis” is over. If I lay out a statement like that side by side with a lot of other things I see, I can only conclude that Nomura doesn’t reside in the same universe I do. Well, it’s either that or they have the idea that a financial crisis is something that exclusively plays down in, and affects, the “world” of investors. If the latter is true, that would of course be some pretty myopic thinking.
So I’m left with just one possible conclusion: that we live in parallel universes. And I understand from perusing the notions about such universes in physics theories that they tend to include every possible universe. Therefore, if some of the best and brightest physicists who live in the same universe that I do tell me that there are other universes in which Elvis is very much alive, I must acknowledge the possibility that there are also some in which the Global Financial Crisis is indeed over.
That still leaves me with the fact that I live in the universe I live in, and not in Nomura’s one. And even though the theory states that I may live in many others as well, that part of the theory is simply not of much practical use. So, given the fact that Nomura’s analysts write reports about a universe that may be parallel to mine but is decidedly different, these reports don’t seem to be of much practical use either. I therefore hope these analysts won’t be too disappointed that I don’t intend to turn to them for advice.
They picked a nice title:
The end of the end of the world
There wasn’t any memo, but FYI the Global Financial Crisis is over. Not that clocks have simply rewound to 2006, but: the US property market has been recovering for no less than 20 months, the US household balance sheet is largely repaired, the renminbi is stronger and the US-China current account imbalance vastly reduced, China is grasping the nettle of structural reform, European core-vs-periphery cost differentials have substantially narrowed, and Europe is growing again.
Looking forward, we thus see 2014 as a year in which macrosystemic risks will not dominate equity performance – unfinished QE ‘taper’ business notwithstanding – but equally as a result, a year in which returns will not be spirited along by ‘risk compression’ and multiple expansion either. Rather, global stocks in 2014 will stand or fall in large part simply on whether they deliver earnings. The good news is, 2014 should serve up a reasonably robust growth platform for global corporate earnings: Our economists expect global nominal GDP growth to rise to 7.0% next year from 2013’s 6.1% — leaving our strategy preferences inclined toward cyclical- and reflation-sensitive sectors. But the acceleration will be unevenly skewed toward the Developed Market economies, while Emerging Market growth plateaus and China’s growth further moderates (to 6.9% in real terms).
Looking toward 2014, we believe much of the ‘deep value’ argument for stocks has now played out as the Global Equity Risk Premium has fallen to just 0.4 standard deviations currently vs. its late-2011 high of 2.2 standard deviations. With this, global equities have outperformed the aggregate global bond index since mid-2012 by a sizeable 45% over the same time period.
From here, equities will increasingly require more of a growth rationale for upside, rather than the macro-risk compression of 2012-13. The fact is, after fairly undramatic passages (by 2010-12 standards) of such episodes this year as the Cyprus banking failure and October’s US fiscal standoff, very few developments from here are likely to rise to the level of true systemic contagion threats. But this also begs the question where the superlative earnings growth will be found.
Surely the Nomura people are aware of the fact that without the QE “family” of global measures, which in essence take wealth away from the public and give it to the financial system, broad asset valuation would be hugely different from what it is now? And while it is true that QE thus doesn’t entail new overall debt creation, it does create new debt for one segment of society: the public. That same public is good for 70% of GDP in the US, and a few percentage points less in other countries. And if you put more forward pressure on those 70%, how you’re going to create GDP growth is a really obvious and really big question mark. In my universe, that is.
The poster child for optimism of the blind variety, but in my view also the poster child for a mental and financial bubble, is Britain. In that regard, the Financial Times seems to play on the same team, or live in the same universe, as Nomura. And for a newspaper that’s got to be more worrisome than for an investment bank that simply talks it book.
UK revival leaves envious eurozone in shade
The strength of the UK economy is drawing covetous and occasionally envious glances from the eurozone as investors from around the world size up the opportunity presented by Britain’s recovery.
The UK economic revival has taken almost everyone by surprise, confounding domestic and international forecasting groups. Having failed to predict the turn, most explain the sudden resurgence as a rebounding of confidence linked to the removal of previous impediments to growth, such as weak banks and fears of a eurozone crisis.
Some economists believe the UK will be the world’s fastest growing developed economy over the next five years. This is a tempting prospect for foreign corporates and investors, but they are weighing up potential opportunities against the political uncertainty of an EU referendum, as the coalition government staggers from one populist measure to another. [..]
Eric Chaney, chief economist at Axa, the French-based insurer, says he and his team think the British economy is more likely to surprise on the upside next year, partly due to more robust credit growth and a flexible labour market. [..]
Here the FT starts to defy its own chosen title for the article. And it does more of the same later on:
There is one stark exception – Germany – where the prevailing opinion among economists is sceptical. Holger Schmieding, chief economist at Berenberg bank, said that for German businesses “the UK is not on the list of top places to expand. The sentiment, especially in Germany, is that the UK is blowing up a property bubble, and it will end in tears. If it sucks in imports, we are happy to supply them – but we don’t think the UK is a wonder economy.” [..]
Outside the eurozone, some US investors also have a sceptical slant on the UK recovery. Marshall Stocker, global equity strategist at Eaton Vance, which has $280bn under management, says that while there is evidence of “onshoring” of manufacturing in the UK, the country’s exports had remained weak.
“To say we are off to the races in terms of GDP growth in the UK would be irresponsible,” Mr Stocker says. “[It] has been driven by increases in household spending, but there has been no real wage growth and it is very difficult to see sustainable economic growth until workers are feeling the benefit of a growth cycle. Household spending seems to be up because of confidence from housing, but one must worry about a bubble. The confidence that comes from the asset value of a house may not be there in the future.”
A “flexible labor market” is a questionable parameter. If it means it’s easier to fire people, it’s at best a toss up, with workers on the short end of the stick. “More robust credit growth” is not even questionable. With record debt levels, more debt is not a solution, it’s merely something that may make one look good until tomorrow morning (or the next election). It’s also what lies at the basis of the property bubble (and not just in the UK). Even the Bank of England has called a halt to what the government has been trying to do:
Bank of England steps in amid fears of a new house price bubble
The governor of the Bank of England on Thursday reined in the mortgage market as he sought to prevent five years of ultra-low interest rates and George Osborne’s Help to Buy scheme from fuelling a pre-election housing bubble.
Amid concerns that the UK is in the early stages of a new property boom, Mark Carney announced he was refocusing the Funding for Lending (FLS) scheme that gave lenders financial incentives to provide home loans. The governor said it was “no longer appropriate or necessary for us to have our foot on the accelerator, better to shift into neutral”.
But as property prices go up, wages go down. How long can this last?
British wage-earners have taken £5,000 pay cut in five years, figures show
Britain’s wage-earners have taken a £5,000 pay cut in the past five years, according to government figures, suggesting ministers will struggle to engender a feelgood factor before the 2015 general election. The figures published by the Office for National Statistics show wages and salaries for the middle fifth of non-retired households fell from £33,100 in 2007-08 to £28,300 in 2011-12.
Wage earners lost 15% of their income. Young workers, who have much lower incomes to begin with, lost 12% since 2008.
Young workers’ pay has tumbled since financial crash, says thinktank
The pay of workers in their 20s has tumbled by almost 12% since the peak of the recession, according to a leading thinktank. The Resolution Foundation said younger workers faced an almost unprecedented squeeze on both the wages and employment chances four years after the financial crash.
The same Resolution Foundation has another “nice” stat in its report:
Low Pay Britain shows that 4.8 million Britons (20% of all employees) earn below the Living Wage – a leap from 3.4 million (14% in 2009 – at the height of the recession.
UK incomes are down 15%. 20% of employees are below the “Living Wage”. Now please explain to me how the economy can be doing well, as the UK government and (most of) its media are proclaiming.
Oh wait, silly me. What am I thinking? Of course! Robust credit growth! Curiously, the following Telegraph article came with two titles. Once you opened the article, it was called: “UK mortgage approvals near six year high in October”, but the link on the business page was different. Can we read something into that?
Growing concern as Britons run up an average of £22,000 debt each
Household debt touched a record high of £1.43 trillion in October, surpassing the levels seen at the start of the financial crisis. Amid renewed concerns that Britain’s economic upturn is being fuelled by debt, Bank of England data yesterday showed total net lending in the UK increased by £1.7bn in October, following an rise of £2.2bn in September. Including mortgage payments, Britons now owe a total of £1.4296 trillion, or around 22,000 for every man, woman and child in the UK. The previous high was £1.4294 trillion in September 2008, when Lehman Brothers collapsed.
I guess if you take away 15% of people’s wages, but you still manage to spend by convincing them to ratchet up their debts ever higher, you sort of have it made as a government, right? Though it might be better if you could get everyone to agree.
Debt could trigger next crash, says thinktank
A growing band of credit-hungry consumers could trigger another financial crash in 10 years as banks, payday lenders and credit card companies add to the debts of low and middle income earners, a leftwing thinktank has warned.
The Smith Institute said policies adopted by the government and regulators since the crash had failed to prevent an escalation of debt among vulnerable younger workers and young families keen to establish a home and live independently.
In a report, Tomorrow’s Borrowers: Personal debt by 2025, the thinktank suggests that urgent action is needed “to stop the UK sleep walking into a major personal debt crisis“.
Too late for stopping that one, I would think. Now, you may claim this is all just Britain, but does anyone really believe the US housing market is not experiencing a similar bubble? Or that American wage or debt developments have been more benign than the British? Don’t think so. There are plenty examples like this one:
Average US student loan debt: $29,400
Student loan debt continues to pile up on America’s college graduates, topping an average $29,000 per student last year. The average debt load for the class of 2012 was $29,400 – up more than 10% from the previous year, according to a report released Wednesday by the Institute for College Access & Success’ Project on Student Debt.
At the same time, colleges across the country have been hiking tuition and fees and families’ incomes have been shrinking, student loan debt has risen at an average rate of 6% per year from 2008 to 2012, the report found. Seven in 10 seniors graduated with student loan debt, and a fifth of that debt was owed to private lenders, which often charge high interest rates.
And we haven’t even talked about the biggest spoke in the “GFC is over” optimism wheel.
Eurozone youth unemployment reaches record high of 24.4%
The crisis facing the younger generation across the Eurozone worsened last month as youth unemployment hit a new record high of 24.4% with under-25s in Spain, Italy and Portugal finding it harder to get jobs.
The grim news on on employment came as the Netherlands was stripped of its prized AAA credit rating despite the country’s recent exit from a year-long recession.
The Eurozone jobless data showed Spain’s youth unemployment rate has now increased to 57.4%, only marginally below Greece’s August high of 58% – which remains the highest rate of youth unemployment for any country in the eurozone’s history. Italy’s youth unemployment rate rose to 41.2%, from 40.5% the previous month. In Portugal, it rose to 36.5% from 36.2%.
The startling figures from southern Europe contrast with rates in the north where Germany has a 7.8% youth unemployment rate and the Netherlands an 11.6% rate.
US youth unemployment was at 16.3% in July 2013. Not Greece or Spain, but a whole lot worse than Germany or the Netherlands. Feel lucky, punk?
If for a second we can delve into the worst case in Europe, don’t let’s forget that Nomura said “European core-vs-periphery cost differentials have substantially narrowed, and Europe is growing again.”. Athens University economics professor Yanis Varoufakis:
What Europeans should know about the current situation in Greece<
It takes a passionate disregard for the truth to suggest that Greece is recovering. Investment has fallen by 18% since the dismal levels of 2011/12, credit to non-financial institutions is 20% down from the asphyxiating depths of 2012, poverty has reached record heights, and is still growing, employment is at levels that are best narrated in the style of Steinbeck’s Grapes of Wrath, public debt is exceeding the worst expectations of the greatest pessimists, private debt is reaching for the sky at a time when the collateral posted (e.g. house prices) are sinking fast, the government’s tax take is trailing the worst forecasts.
The list of woes is endless and the so-called ‘Greek Success Story’, or ‘Greek-covery’, reflects nothing except the determination to reverse the truth, Goebbels-like, by those who insisted on the policies which resulted in this debacle.
All this leads to ever lower pay for those who even have jobs …
The price we pay for poverty wages is too high
Living on low pay in 2013 is a rough and all too common experience, but being stuck on poverty-pay for a decade or more is tougher still. Yet for all the talk in Westminster about living standards, and the growing recognition that nearly five million workers are paid less than the living wage, there is very little understanding of the fact that many people survive on low pay for years on end. Low pay is too often thought of in terms of a series of snapshots rather than a motion picture.
… many cling to the complacent view that, yes, there is a lot of low paid work but it overwhelmingly afflicts young people before they go on to earn more (never mind the fact that the earnings of a typical twentysomething have plummeted by more than 12% since 2009). Poverty-pay, according to this argument, is a rite of passage, to be endured then exited. Over a lifetime, things even out.
Except, it turns out, they don’t. [..] If we look at the last decade, the great majority – nearly three-quarters – who started off on low pay failed to escape it. More than a quarter (28%) didn’t leave low pay at any point; 44% moved in and out of low pay but didn’t exit it; only 18% broke free of low pay altogether. Half of those stuck on low pay are aged between 40 and 60.
… while pensions go up in smoke (let Detroit’s bankruptcy be an example for you).
Youth unemployment will lead to widespread poverty in old age – OECD
High levels of youth unemployment will lead to widespread poverty in old age as young people struggle to save for retirement, according to the Organisation for Economic Co-operation and Development. A new breed of private pension schemes, which are built on monthly contributions, will be undermined if younger workers stay unemployed for long periods, said the Paris-based thinktank.
[..] the UK has pursued every avenue to both improve the lives of older people and cut the cost of providing them with a decent income, said the OECD, [which wrote] in its report Pensions at a Glance 2013 that the UK had raised the average incomes of people above the retirement age and introduced plans to expand coverage through the workplace pension savings scheme Nest, which is expected to automatically enroll 10 million workers over the next three years.
But it said the knock-on effect of policy reforms, many of which protect the benefits accrued by older workers at the expense of young employees, was that in many OECD member countries younger workers were now more at risk of poverty than retirees.
Not only is the Global Financial Crisis not over by a long shot, it’s deepening and worsening for most people. And they haven’t even found out at what price, which they will be on the hook for, their governments have shielded the banks from the fall-out of their own losses, an ultimately useless course of action because of the size of these losses. More unemployment, lower wages, more poverty, these are not temporary phenomena, they are set to be everyday reality for fast growing groups of people for many years to come.
And while I’m sure there are different opinions on the matter, in the end you cannot solve a financial crisis by unloading its consequences on whoever happens to be weak and have no voice. By trying it regardless, our governments and other “leaders” are not just creating two different worlds, but different universes. However, if for a moment we allow ourselves to still see just one universe, it becomes painfully obvious that Nomura’s “the Global Financial Crisis is over” is a nonsensical claim.
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I agree with the two-parallel-universes analogy.
What gets interesting is when both lines move close enough to intersect at some point. Will that happen, when, and then what?
It seems the forces of truth are bending the line of reality toward the fantasy universe line to force that intersection, but that universe is like a repelling magnet.
Perhaps the law of physics holds the answer.
As usual, Seinfeld addressed all this with “The World’s Theory” some time back:
http://www.youtube.com/watch?v=6w4K3Gt2SWk
They talk about QE “tapering” like it’s giving up eating snickers bars for lent. More akin to a crack addict trying to “taper” their use. Rarely easy or pretty to watch. And far more prone to relapses and the need for continued use.
They wouldn’t by any chance be looking for the next cohort of Greater Fools would they ?
And yes, here in the UK we’re in the midst of a truly bubble-odious housing boom. Had two real estate agents shoving letters through the door in the past fortnight claiming “cash buyers want properties like mine”. Which I have, unfortunately, a hunch is actually true. That would be a return to the bad old days of 2007.
Have booked an appointment with one of them to get the low down — I want to find out for myself what’s really going on in housing. But like I say, I fear the worst.
I know people have short memories, but crikey, this does take the biscuit.
You probably do have a few cash buyers waiting in the wings to buy your property, although it’s likely they don’t speak the Queen’s English.
No surprise that the London property market is boiling over, just following Canada’s lead…
http://aaronlayman.com/2013/12/carney-warns-against-taking-out-big-mortgages-pulls-funding-for-lending-scheme/
Yep. Brit Bubble Bingers heading for a Bust again! Is there nothing the Neo-Con governments they keep electing won’t oblige them with?
Maybe what they mean is….
Ireland has a major financial crisis in the 1820s……in the 1840s there was a major famine in the UK unions periphery….there was no major financial crisis – life went on for the union…not so much for a million or 2 million people in Ireland and Scotland.
England has benefited from a flight of capital (inc oil) and goods from the Eurozone.
Its free banking operations in the past gained a income from wasting oil in the Euro periphery.
Now the banks must somehow blow a bubble from the external goods not consumed in the periphery closer to their base of operations.
Housing /car bubbles are caused by primary goods deficits flowing into countries and concentrating capital (with the help of free banks issuing credit to consume the physical capital made available)
The UK is the only major EU economy with a surging private car sector.
Revisions to the Irish energy balance in this recent PDF document (not explained in detail)
But if we compare Irish fuel inputs into the electricity sector we can see that the dash for gas is over.
https://www.epa.ie/pubs/reports/air/airemissions/Ire_GHG_Emissions_1990_2012_M_Howley.pdf
Flow of energy in electricity generation expressed as a % of total.
Y2010
Gas : 61.4%
Coal :17.6%
Peat : 10 %
Fuel /gas oil : 2.8 %
Hydro : 1%
Wind : 4.9 % (what were the transmission losses in this sector ?)
Back to the world of using lower quality fuels for electricity generation
Y2012
Gas : 49.1 %
Coal : 25.1 %
Peat :12.1 %
Fuel / gas oil : 1.1%
Hydro : 1.5 %
Wind :7.5 %
As I have argued on the Irish economy blog a few years ago available Nat gas should be used for home cooking and heating (in that order.)
Using Nat gas for elec power is a high crime.
The UK / Qatar LNG crisis is also our crisis…..
Also :Continued overuse of diesel in the private car fleet is to be questioned.
If we were living in a sov state new private car purchase should be banned for some years as the last remaining bits of our capital was directed elsewhere….however our role remains as a small market for the cores car market – helping to keeping them afloat for just a bit longer.
Another 5.7% reduction of our transport fuel inputs seen between 2011 & 2012
Petrol down 9.1 %
Diesel up : 0.1 %
Kerosene (jet fuel) down : 16.3% …. that is a big drop by any standard.
The Dublin / London route (when you combine all the airports of London ) was once the busiest in Europe…now not so much.
Peripheral airports in Ireland have seen traffic totally collapse.
Oil not burned in places such as Ireland or Spain will get burned in the UK.
Whats most striking about the UKs energy balance is its relative stability since the early 1980s when compared to the free banking conduits of Ireland and Spain.
I think the parallel universes idea works, but with a Friedmanian twist—In real physics, the idea is a theory without any significant experimental support to be considered “real”; however, using Friedman’s definition of causality, since we keep letting the banksters get away with QE, thereby letting them create something that looks like a parallel universe, then there must be real parallel universes.
See? Now economics can claim to have solved one of the most fundamental problems in physics and philosophy!
“Surely the Nomura people are aware of the fact that without the QE “family” of global measures, which in essence take wealth away from the public and give it to the financial system, broad asset valuation would be hugely different from what it is now?”
No, I don’t see why they would be aware of that. We had unsustainable asset price growth for years without quantitative easing and with tight reserves. Assuming there is a causation here (which no one has demonstrated) it would be indirect at best, meaning morons hear the Fed is “money printing” so run out to buy stuff and pushing up prices, a self-fulfilling prophecy.
“And while it is true that QE thus doesn’t entail new overall debt creation, it does create new debt for one segment of society: the public.”
Reserves do not create debt. They are electronic entries on hard drives at the Fed. Liabilities for the central bank, but that’s all. In fact one could crudely argue QE decreases the quantity of debt held by the public as the central bank purchases bonds, removing them from the private sector.
I don’t know about “running out to buy stuff,” but I know at least one person who hears and believes the Fed is “money printing” and thinks it will inevitably lead to hyper-inflation and/or destruction of the dollar; so they have put much of their savings into gold (and gold mining stocks, though I’m not sure how that works, because wouldn’t those be denominated in dollars?)
“Reserves do not create debt…” Thanks for bringing this up; I’m *still* trying to get a more solid grasp of MMT, and your comments seem to be in line with what Warren Mosler said about QE in some recent interviews. Naked Capitalism doesn’t seem to walk a clear line on this, which I guess is good, the more the merrier, but it does make me have to work to try to piece together what’s really “right”…
Mosler IIRC said that QE was almost more a psychological sop to the markets, and maybe somewhat to the public at large, to imply that the people in charge were “doing something.” He said if it was “tapered” or ended, there might be temporary tumult in the markets, but then they would quickly shake out and they would see it was more illusion than reality, and return to some form of status quo.
“Normal” US interest rate levels have been heading down for the past 30 years of bubble/bust Central Banker-led “growth” itself largely a product of lunatic levels of financialization. The Greenspan/Bernanke/Yellen? “put” inexorably pumps money from the poor and public to the wealthy as they are repeatedly raped when debt levels can no longer support asset prices and a bust ensues – the policy response being, of course, to drive the cost of money even lower, then negative (now) then – well let’s see if they’re stupid enough to do the same idiot thing after the current, global bubble blows.
You can try to blame “Chinese savers” or some such, but only someone attempting to make the real world fit the model would be so bold.
Anyone else have a misanthropic urge that wants to say “…fuck it” and just sit back and watch the whole stupid thing burn? Starting with the towering house of cards we call industrial civilization followed by slow extinction of whatever remains of humanity by climate change gone into overdrive.
Wipe ourselves out entirely and maybe in a couple hundred million years the sapient beetle-people or whatever rises up next will have better luck.
IIragi should know that the UKs energy consumption balance has remained pretty stable since the early 1980s when the last of the UKs domestic coal / production system was shut down as it was finally restructured to take only external energy products once the North Sea ceases production.
This is in dramatic contrast with extreme banking conduits such as Ireland or Iberia.
2012 has seen another major decline of Irish liquid fuel inputs.
In particular the Kerosene (jet fuel area)
Where did this stuff go ?
To the core ….TO THE CORE.
Countries such as the UK or Holland do not have internal physical economies….they depend on external rent….rent on the money supply , rent on natural utilities , rent on carbon….
The most recent SEAI document on Irish energy consumption in 2011 vs 2012 is showing continual decline.
https://www.epa.ie/pubs/reports/air/airemissions/Ire_GHG_Emissions_1990_2012_M_Howley.pdf
With jet fuel use down 16.3 %
Liquid fuel in transport down 5.7 %
To compare a energy flow chart of Ireland in 2007 and Ireland of 2012 is to look at Cuba post 1990 but without any rational internal economy measures.
Y2007 oil inputs (excl non energy) : 9,047ktoe
Y2012 oil inputs (excl non energy) : 6,005ktoe
Loose lending standards in the auto finance space with LTVs of 110% for new vehicles and 133% for used cars. 19 percent of new car loans were for 6 years or more!
Who cares if average loan losses are piling up, we’re selling more cars. LOL!
http://www.reuters.com/article/2013/12/04/us-banks-autoloans-idUSBRE9B30K320131204
Interesting.
It sure looks like it’s car loans and student loans where the U.S. merchants of debt are making their comeback:
http://cdn.theatlantic.com/newsroom/img/posts/us-non-mortgage-debt-outstanding-in-billions-home-equity-auto-credit-card-student-other_chartbuilder.png
Overall, both housing and non-housing debt began ticking up in 3rd Qtr 2013, so maybe that’s what the merchants of debt are crowing about:
http://www.newyorkfed.org/microeconomics/hhdc.html#2013/q3
As this chart shows, households in the UK never deleveraged as they did in the United States:
http://themoneycharity.org.uk/media/Debt-Stats-Full-December-2013_r.pdf
So in the UK what you find is households carrying the same amount of debt as they did back in 2013, but with 15% less income?
I suppose it’s possible to keep this up as long as there’s room to drop the interest rates being charged to houselholds.
In the US this is what the Household Debt Service Payments as a Percent of Disposable Personal Income (TDSP) looks like over the past few decades:
http://research.stlouisfed.org/fred2/series/TDSP
I could not find any similar data for Great Britain.
Great chart, also explains how the Fed has kept this charade going. Of course the problem is that the cost of servicing all that debt rises as soon as interest rates spike, and what was once affordable becomes increasingly unaffordable. It’s already happening with real estate.
Average wages in the UK have been increasing considerably less than the CPI for the past three years (Sorry, tried to post link but it wouldn’t post.)
Average (mean) wages don’t really tell the whole story, though. If we dig a little deeper, what we find is that between 3rd Qtr 2011 and 3rd Qtr median wages haven’t increased at all. See EARN04 here:
http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-283783
Try this again. Here’s the link. See Chart 10:
http://www.ons.gov.uk/ons/dcp171778_332467.pdf
I wonder just how real that US de-leveraging is, especially as viewed across the income spectrum. For instance, here’s a study accepting the de-leveraging claim that attempts to provide some light on the total decline from peak of US Household Debt, with a breakdown of debt instruments (mortgage, car, student loan etc) and percent contributions.
The claim is US Household Debt declined by “roughly 11%” from Peak to 3rd Q 2012. While I don’t think that’s a particularly impressive figure to begin with, as it still leaves a hopelessly indebted overall consumer picture, you’ll note that no mention is made of re-financings – yet those with money and debt (and the well-off owe far, far more proportionately than the rest of the population) never had it so good for five straight years. I would be very wary of the idea that the more typical “American consumer” now has some real room to “borrow and spend”.
http://econintersect.com/b2evolution/blog1.php/2013/04/23/why-has-household-debt-reduced-following-the-great-recession
Why is Icelandic general energy & diesel consumption so different from Ireland ?
Is it because it is not a member of the IEA and does not follow its advice ?
Imagine the frustration for financial capitals when they see countries such as Iceland injecting more diesel into their countries domestic primary production activities then it valued added (toy) activity…..
Meanwhile Irish energy policy as seen through the neo liberal European funded SEAI – (see above) applauds at the marginal increase in the efficiency of its brand new Diesel BMWs as they go around in ever decreasing circles.
We are dealing with a Anglo / Dutch / German monetary /energy Pox.
The last thing financial capitals want to see is shorter production – distribution – consumption loops.
Not really – in the past much more of Irish oil consumption was directed at local and basic secondary industry.
http://www.corkpastandpresent.ie/mapsimages/corkphotographs/corkcameraclubhistoricalphotos/marinaquayandsilos/
Now we consume products such as BMWs which we as a collective society cannot afford.
The state socializes the cost of this malinvestment on the general population.
Irish Society and economy has been structured in such a way as it no longer exists – it therefore does not need fuel inputs….however the products which we cannot afford yet are shoved down our throats require massive fuel inputs ,add in depreciation costs and you have a wonderful cocktail of human misery.
Might be an issue of evolutionary speciation.
This is the sort of neo classical energy policy nonsense we must put up with in Ireland….
http://www.rds.ie/cat_webcast_detail.jsp?itemID=1099577
1. A general characteristic of Dublin castle talks is a focus on carbon ( to pay off London)
2. A Price focus and not the ability to pay. (price as defined by money as if it were a hard currency which it is in the Euro area)
3. ….cost of capital……..but this guy never asks why the cost of capital is so high………because of free banking operations in Ireland consuming capital the moment it becomes available….i.e a car / bank operation giving credit for private cars etc etc
Destroying the capital base.
You get the impression from this talk that the investment in Moneypoint (our only coal plant) was a bad investment just because it was not very profitable – somewhat unable to understand the role of natural utilities is not to make a profit – its the bloody industrial ecosystem.
In reality Moneypoint coal plant is keeping the lights on.
As elec consumption decreases Moneypoint will again take over the base load increasing perhaps to its 1990 level of 40 % of total elec demand.
When this happens of course elec utility operations will become less profitable (as he explains in the early 90s) but the people will have spare tokens to buy other stuff.
We are dealing with scarcity merchants disguising themselves as economists.
http://www.rds.ie/cat_webcast_detail.jsp?itemID=1099577
A true pox on this now bleak landscape.
Do you sometimes wonder Dork as I do why the good people of the Republic wasted their time to gain independence from Britain ? For a brief few decades, it actually meant something. That was until the political classes bent over, pulled down their breeches and said to Brussels / London “okay, come on then, spank me”. I often speculate that the real reason the “troubles” subsided was that in both the North and the South, the folks there realise that whatever they ended up with — a united Ireland, a continuation of the Union, Home Rule, whatever — it was all going to just be meaningless. Subservience to the EU or subservience to Britain (actually, London), take your pick so what’s the point ?
(my family on my mother’s side were passionate about Welsh independence but before my mother passed away, she did start to wonder out loud what in reality that would mean in the light of the power structure of British, European and corporate hegemonies)
@Clive
Dublin Castle has not changed its tune in 800 years…anybody who knows anything about Ireland knows that Dublin is not a Irish city.
Cork city deflated after the Great war and never returned to it prosperity as taxes were directed toward Dublin (and the civil service jobs) which followed were used to manage the local and small sort of kind of but not really free state.
I grew up with a great Skepticism of Dev but now I think I can see where he was coming from…
Our little effort to dance at the crossroads was always going to be overpowered by the the Anglo / Dutch – monetary / energy cartel.
They can inflate and deflate economies at will.
Burning places down is their only mechanism to maintain relative wealth disparity.
The economic war of the 30s took some effort – to get Irish farmers to scorch their own farmyards is a superhuman feat – we effectively defaulted on the London Vatican in our own small way back then.
It was our finest moment.
The British Isles needs a fiat King to smash the banks – otherwise we are all doomed to shop till we drop.
I doubt eleanor roosevelt intended for the US to accept the caste systems of the globe as the price to pay for globalonization…but here we are…in a world where only the important people (and their supplicant carabinieri) are to be satisfied…plutopolitanism…
but thats because there are no hungry children in new york city, and if there are, its not my concern, or its better you than me…
current asian morals in a modern western world
yes there was “first nights” when the lord of the manner did as he wished with the serfs on HIS lands…at least thats the nice way europeans describe slavery…it was not really slavery…you had your hovel and as long as you went to the fields and gave the plantation owner, i mean the nobleman, his required yield you did not have to worry about starving, or was it that he left us enough food so that we might be able to continue providing yield…hmmm…
“Horse sense is the thing a horse has which keeps it from betting on people.” ― W.C. Fields
Nomura looking forward…
[“The fly sat upon the axel-tree of the chariot-wheel and said, ‘What a dust do I raise!’” – Aesop]
“The future is the present projected. Our notions of the future have something of that significance which Freud attributes to our dreams. And not our notions of the future only: our notions of the past as well. For if prophecy is an expression of our contemporary fears and wishes, so too, to a very great extent, is history.” – Aldous Huxley
There exists a determined refusal to learn from history. Whatever interests anyone may possess in economic history are always secondary to his or her political biases, which are notoriously inflexible. The lessons of economic history are too inconvenient.
The Financial Times seems to play on the same team, or live in the same universe, as Nomura.
[“Rarus enim ferme sensus communis in illa Fortuna.” / “Generally common sense is rare in that higher rank.” – Juvenal: Satires Book I
What remains are delusions of grandeur and “common sense” at the other end of the spectrum. Vast numbers find “common sense” appealing and conclude that austerity is exactly what should happen. We all must tighten our belts in these hard times, and the government should do the same.
[“Science is a first-rate piece of furniture for a man’s upper chamber, if he has common sense on the ground floor.” – Oliver Wendell Holmes Sr.]
“Common sense ain’t common.” – Will Rogers
I believe in parallel universes. We are a segmented and fractured society that does not have a common view of what sort of society (if any) we should build at least in the USA. I think this fragmentation is also spreading to the rest of the Western world.
Workers and small business are suffering in this economy while corporations, professionals, and wealthy people are doing well. This situation cannot, from a political POV, change at the moment because of the weakness of the left. To me the major change in recent decades has been not the growth of the right but the self-destruction of the left best described by Chris Hedges in his book The Death of the Liberal Class.
Banger, you’re certainly right in part, but we’re talking here a basic inability of people in positions of authority to see anything but what they want to see. Willful suspension of disbelief may work in a movie theatre, but in positions of power it is lethal. Some may argue that the cushion of wealth and power in the hands of global elites is still so large that they can afford Daisy and Tom Buchanan-style carelessness, but I’m not convinced that they or any of their minions can clean this mess up.
Not only are the ‘elites’ only seeing what they want to see, but so are the rest of us. And with corporate control over the internet, we are going to be herded deeper and deeper into our own echo chambers. Pretty soon you will only be able to see those things that Google thinks you should see.
Re what Google wants you to see, “sometime” is already here to some extent – not just individuals or companies paying to have what they’re peddling listed near the top for searches including a particular term or phrase, but the decision by Google or someone (including Government)to bury a site or specific piece many pages further in the listings than had or should have been the case – typically good work but controversial topics – rather than wipe it altogether, though that also happens, even on the day posted
Yes, I think that’s about right.
The cure is at hand yet. nobody talks of it – it’s been schooled out of us by neo-classical economics.
It’s an unjust tax system – nothing more nothing less.
When I have time I will try to connect the dots.
Hint – it’s a land problem.
Wait – the dots were connected at one time – a hundred years, give or take, ago.
So please, take a look, a deep look into it.
Land, labor, capital – tax and economic rent interaction with same.
“Tax Facts – Published in the Interests of Sound Economics and American Ideals.”
This is a 1920s series of articles.
Please jump in at any random page – don’t start in the beginning but do make your way through it all – you will not regret it.
And no – it does not encourage but, actually discourages Communism, Natzi-ism, Marksism and all other false isms that are turned to when the global economies look the way they do today.
Enjoy
The financial crisis is over. The ongoing depression, or Great Stagnation or Great Recession or Great Malaise whatever you want to call it is not a financial crisis.
The financial crisis is what precipitated the depression; it is not what is perpetuating it. It’s like if you tires are bald and as a result you crash our car into a tree. When the busted up car is sitting in your driveway, you are not faced with a “tire crisis”
The stagnation is being perpetuated by rotten and dysfunctional social institutions and power relations. The plutocrats have divided up the world and are impoverishing and subjugating part of it. They are willing to accept lower aggregate economic dynamism and socioeconomic stasis in exchange for privilege and power – for a giant piece of an unchanging pie. Keeping people poor and under the rulers’ thumb is not a “financial crisis.”
Corporations are now seeing world record profits as a share of GDP. They are sitting on piles and piles of money and liquid assets. Yves just posted the other day on the fact that real economy firms and households don’t want to borrow. This is not a case of financial incapacity. It’s much deeper.
Sorry about all the typos. I need better glasses.
That’s disconcerting because it implies there is not just a carrying capacity for the planet but also one for maintaining an elite class of imperialist rich corporatists. And the rest of us are expendable. I’d always prefer to think that this formula will fail because the wealth of the elites will dwindle for a variety of reasons and they will resort to undermining each other. Sort of like a race to the top.
That’s what I was vaguely thinking as I read the post but wasn’t articulate enough to say. He may well be right. The financial crisis is over. So the %$# what? The depression we’re in now is not.
The depression itself is just the exposed wound of what had been going on for a long time, that the wealth that had been directed to the wealthy by the application of the Reagan/Thatcher doctrine had failed to trickle down to the rest of us in any way but by indebting or enslaving us. Or something like the Ford doctrine whereby the workers are paid enough to buy the goods produced, roughly what had supported the amazing virtuous prosperity cycle of the latter 20th century, however sometimes contentiously and with a deal, no doubt, of corruption, had been reversed, so there no longer are decent wages causing prosperity to be shared with the masses, only again, debt and slavery. So now, they don’t really pay us for our work, only make loans to us. When we can’t pay any more we forfeit all we have, basically our homes.
There no longer is coming to be a functional economy as we once had, but they own all the dreck and feel holy and smug about it as, I presume, the “nobles” of old once did.
Dan, I guess from Nomura’s perspective the “crisis” had better be over or they are toast along with Abe, so talking up the prospects for returns to those they’re pitching is less surprising perhaps than the thought those hopes are premised on the average US household being in better shape. Looks like an invitation to dive into a whirlpool.
Actually, Nomura is absolutely right. The Global Financial Crisis is over. For the finance industry like Nomura, times have never been better, with record profits, bonuses, and a govt that has made much of the previous implicit public backstop now fully explicit and codified in law. Citigroup can even go back to issuing toxic CDOs like the goold old days knowing there will be fools to buy it, with the greatest fool, the Fed, as a last resort.
Oh what’s that? You’re talking about the rest of the world? You mean us ants who must rely on real onions and not trading onions to survive? Just the fact that a global crisis that has thrown millions of people into poverty, homelessness, and despair is called a global *financial* crisis tells you exactly how important our lives and concerns are to TPTB…
The economy must be getting better…evidence? Wages are down and personal debt is up!
{facepalm} WTF, Nomura? If your definition of a good economy is one in which every bit of wealth is being inexorably sucked into the pockets of the top 1% (or .01%), then yeah, I guess things are looking pretty good. If you’re concerned with having a sustainable and just economy…not so much.
Most people depend on wages for their livelihood. Anyone who claims that lower wages (“flexible labor market”) are a good thing is simply showing how divorced from the reality of most people they are.
It’s all a matter of perspective, I guess.
It’s not just Nomura and its ilk, it is the major media outlets of both Japan and China. NHk and CCTV. Both their business reports (in English and for a US audience) are glowing. Claiming that the crisis is over because the US economy has recovered. And so has the EU. Amazing. They’ve been on this line for over a week now as if poof! – pessimism suddenly disappeared. And curious that both Japan and China would simultaneously follow this lead even tho’ they would seem to have seriously different national interests right now. Biden notwithstanding. At the same time as this nonsense is coming from them, our own media looks cautious by comparison – maybe because they don’t want to cause a controversy over their factless reporting tactics.
When the global financial crisis is over the people will die en mass.
People are but a asset on the banks books.
When they no longer hold monetary value they can be disposed of without loss.
The end of the financial crisis is the period of time which is of greatest danger to the proles & outer party…
It is part and parcel of the propaganda of kleptocracy to constantly find green shoots and silver linings even as things are falling apart. We are long past the point, indeed years past it, of considering that the people at Nomura, the FT, or academic economics are acting in good faith but simply mistaken. It is really part of their job description to be better informed and more insightful. Yet here they are years behind the curve ignoring recurrent bubbles, ongoing extraordinary efforts like QE, depression in the real economy, and the proliferation of toxic derivatives. To call them charlatans would let them off too easy. They are indispensable cogs in the machinery of looting. They are criminals.