China Posted February 5, 2016 Share Posted February 5, 2016 Toxic Loans Around the World Weigh on Global Growth Beneath the surface of the global financial system lurks a multitrillion-dollar problem that could sap the strength of large economies for years to come. The problem is the giant, stagnant pool of loans that companies and people around the world are struggling to pay back. Bad debts have been a drag on economic activity ever since the financial crisis of 2008, but in recent months, the threat posed by an overhang of bad loans appears to be rising. China is the biggest source of worry. Some analysts estimate that China’s troubled credit could exceed $5 trillion, a staggering number that is equivalent to half the size of the country’s annual economic output. Official figures show that Chinese banks pulled back on their lending in December. If such trends persist, China’s economy, the second-largest in the world behind the United States’, may then slow even more than it has, further harming the many countries that have for years relied on China for their growth. But it’s not just China. Wherever governments and central banks unleashed aggressive stimulus policies in recent years, a toxic debt hangover has followed. In the United States, it took many months for mortgage defaults to fall after the most recent housing bust — and energy companies are struggling to pay off the cheap money that they borrowed to pile into the shale boom. In Europe, analysts say bad loans total more than $1 trillion. Many large European banks are still burdened with defaulted loans, complicating policy makers’ efforts to revive the Continent’s economy. Italy, for instance, announced a plan last week to clean out bad loans from its plodding banking industry. Elsewhere, bad loans are on the rise at Brazil’s biggest banks, as the country grapples with the effects of an enormous credit binge. Click on the link for the full article Link to comment Share on other sites More sharing options...
mcsluggo Posted February 5, 2016 Share Posted February 5, 2016 this was a known... a very well known. BEFORE this crisis the average recovery time was 10 years for an economy that had a financial crisis brought upon by real asset problems (the real estate market).... working out the bad loans and "resetting" a financial system is a butt slow, and butt painful process (and its why you have the politically unpalatable bank rescues as the time of the crisis, to minimize the pool of bad assets to full extent you can possibly limit liquidity challenged assets suffocating and turning into junk) .. that 10 year average was for relatively small economies that suffered from localized financial crises, and could rely on the strength of the global economy to drag them out of the doldroms: sweden, finland, in the early 90s, thailand, philippines in the late 90s .. etc.... in the case of 2008-?? the source of the crisis was the US, the big kahuna that underpins everything else (if you think Citi is "too big to fail".. the US is the one gorilla that as of right now the world cannot afford to lose) and our real estate cum financial crisis dragged everybody else down with us (or at least we were the catalyst that exposed the underlying stresses that existed in the global financial market) .... given those dynamics (EVERYONE sick at once, starting with the big kahuna), recovery from the crisis taking 10 years from 2008 was a really rosey, best possible case scenario. Now you add to that the fact that the second Kahuna, China, appears to have reached the end of its meteoric (and historic) "catch-up" phase of double digit growth, so the backup engine is fading as well.....................yeah.... clearing out all the cobwebs and bad assets is hard to do when there isn't health ANYWHERE. if Chinese investors aren't going to rushing to the firesale of European grey assets, and the Russians are sucking wind, and Brazil and Turkey are back into their historic roles of "maybe it will be different/better next time" and the US is fairly anemic and India is mediocre, and South Africa is worse than mediocre, and the GCC countries are trying to cope with the low price of oil while continuing to try to keep Jordan and Egypt limping along.... which brings us back the poor struggling Europeans.... we might still have a little while to wait. And... as lukewarm as things are in teh US right now, we are the hottest thing out there for the time being. Link to comment Share on other sites More sharing options...
PeterMP Posted February 5, 2016 Share Posted February 5, 2016 Is it my imagination or have we globally had a prolonged period of over consumption as compared to productivity and we are paying for it? At least with respect to the middle and lower classes. Link to comment Share on other sites More sharing options...
zoony Posted February 5, 2016 Share Posted February 5, 2016 Is it my imagination or have we globally had a prolonged period of over consumption as compared to productivity and we are paying for it? At least with respect to the middle and lower classes. I think we need to take a very long, hard look at the lenders. Link to comment Share on other sites More sharing options...
tshile Posted February 5, 2016 Share Posted February 5, 2016 Is it my imagination or have we globally had a prolonged period of over consumption as compared to productivity and we are paying for it? At least with respect to the middle and lower classes. I keep looking at people around me, who I know fall into the category of over consumption, and thinking that it will eventually come back and bite them in the ass. It hasn't yet though. So right now I look like the idiot. *shrug* Link to comment Share on other sites More sharing options...
twa Posted February 5, 2016 Share Posted February 5, 2016 I think we need to take a very long, hard look at the lenders. The Fed? Cheap money enables excess risk and over consumption......sure is nice to get high returns(increased govt revenue) though. Humans Link to comment Share on other sites More sharing options...
zoony Posted February 5, 2016 Share Posted February 5, 2016 The Fed? Cheap money enables excess risk and over consumption......sure is nice to get high returns(increased govt revenue) though. Humans All of the above. I think the financial sector has long been a parasite on the collective good. I would take a closer look at the Goldman Sachs and the Merrill Lynchs of the world They add no value. Just have figured out how to get rich by trading little pieces of paper back and forth to each other that are intrinsically worthless ... On the backs of those who truly add value to the economy The wealthiest people in a market economy should never be those who add no value and assume no risk. But that's what we have Link to comment Share on other sites More sharing options...
twa Posted February 5, 2016 Share Posted February 5, 2016 The wealthiest people in a market economy should never be those who add no value and assume no risk. But that's what we have They are the first jumping from their high rise windows though(before we decided bailing them out was best) Link to comment Share on other sites More sharing options...
zoony Posted February 5, 2016 Share Posted February 5, 2016 They are the first jumping from their high rise windows though(before we decided bailing them out was best) In some respects Bernie Sanders might be the most pro market candidate we have. (Some) Problem is the ignorant constituency who think that Wal Street adds value Link to comment Share on other sites More sharing options...
CurseReversed Posted February 6, 2016 Share Posted February 6, 2016 Its curious why so many democrats (and some republicans) want to get tough on wall street, yet almost every democrat senator voted against auditing the fed and nobody talked about it. For so long the fed got a pass as regulations and greedy corporate fat cats got the blame. But now, It has become too obvious to ignore the vital role the fed has played in the growth of this financial mess. Unfortunately all we have got so far, from most people, is some token acknowledgement. But what will it take for full blown realization? I guess we will see what happens when the fed has to reverse its one little .25 point hike because the bubble its blown up, cant even handle the slightest restriction on its cheap money drug habit. I'd like to think people will start to realize, then, that things are out of control. We'll see... Link to comment Share on other sites More sharing options...
Springfield Posted February 6, 2016 Share Posted February 6, 2016 I think that there is a lot of fear that the international markets are hanging by a thread right now. Oil is down, interest rates going up, employment turning flat, China collapsing because of a propped up market, foreign currency issues. There isn't a lot of positive right now. Even my safest of investments are stagnant at best. Link to comment Share on other sites More sharing options...
twa Posted February 6, 2016 Share Posted February 6, 2016 There isn't a lot of positive right now. Even my safest of investments are stagnant at best. invest in payday loan/pawnshops ...if ya have a strong stomach Link to comment Share on other sites More sharing options...
PeterMP Posted February 6, 2016 Share Posted February 6, 2016 Its curious why so many democrats (and some republicans) want to get tough on wall street, yet almost every democrat senator voted against auditing the fed and nobody talked about it. For so long the fed got a pass as regulations and greedy corporate fat cats got the blame. But now, It has become too obvious to ignore the vital role the fed has played in the growth of this financial mess. Unfortunately all we have got so far, from most people, is some token acknowledgement. (Just last night I was talking about how view points only a small amount of people on the right support end up getting expressed here last night. While we haven't seen the auditing of the Fed here recently, I'd like to point this out as one.) Now, with respect to the substance of the post, I'm not sure how one is really connected with the other. My understanding is that the auditing of the Fed is connected to the (conspiratorial) idea that they have sold off all of the gold in the Fort Knox without telling anybody. How is that really associated with the possibility that they actually aren't any good at managing the monetary supply? It seems possible that the Fed might be okay at keeping their books balanced and not having had to sell of all of our gold and still be really bad at monetary policy. The two things don't seem to be that connected. I'm honestly not against the idea of auditing the Fed, but I'm also not sure what difference it would really make, and if the gold is actually gone, then auditing the Fed might actually be bad. I'm also not against taking a look at how well they've really done with monetary policy. I would warn though it isn't like the everything was peachy before the Fed was created. There were issues that caused the creation with the Fed. Some people want to compare the economy with the Fed to an economy that never has an issue. That isn't reality based on history or any other country in the world. Lastly, it always tickles me that in these cases that the party that preaches personal responsibility ends up blaming the Fed for people over spending/burrowing as if those people when doing the spending/burrowing shouldn't have been able to recognize that interest rates were low and that interest rates are made low to prop up a bad economy in most cases. Link to comment Share on other sites More sharing options...
Larry Posted February 6, 2016 Share Posted February 6, 2016 I'm honestly not against the idea of auditing the Fed, but I'm also not sure what difference it would really make, and if the gold is actually gone, then auditing the Fed might actually be bad. I confess, I'm having trouble figuring out why it would even be bad if there wasn't any gold in Fort Knox. I mean, it's not like that gold is collateral for anything. I'm pretty sure that nobody values dollars because they think that they're going to get some gold with it. (At least not from Fort Knox.) When international investors are setting a value for the dollar, I'm pretty sure that the amount of gold in Fort Knox does not enter into their calculations in any way. Link to comment Share on other sites More sharing options...
twa Posted February 6, 2016 Share Posted February 6, 2016 Doesn't matter as long as we have a piece of paper with the number on it, or a coin right? Link to comment Share on other sites More sharing options...
CurseReversed Posted February 6, 2016 Share Posted February 6, 2016 (Just last night I was talking about how view points only a small amount of people on the right support end up getting expressed here last night. While we haven't seen the auditing of the Fed here recently, I'd like to point this out as one.) Now, with respect to the substance of the post, I'm not sure how one is really connected with the other. My understanding is that the auditing of the Fed is connected to the (conspiratorial) idea that they have sold off all of the gold in the Fort Knox without telling anybody. How is that really associated with the possibility that they actually aren't any good at managing the monetary supply? It seems possible that the Fed might be okay at keeping their books balanced and not having had to sell of all of our gold and still be really bad at monetary policy. The two things don't seem to be that connected. I'm honestly not against the idea of auditing the Fed, but I'm also not sure what difference it would really make, and if the gold is actually gone, then auditing the Fed might actually be bad. I'm also not against taking a look at how well they've really done with monetary policy. I would warn though it isn't like the everything was peachy before the Fed was created. There were issues that caused the creation with the Fed. Some people want to compare the economy with the Fed to an economy that never has an issue. That isn't reality based on history or any other country in the world. No, it has little to do with gold, although i wouldn't put it past them I am glad you are not against it. While this is an example of the token gestures I was reffering too, its at least a step in the right direction. Just because the wizards tells the people of oz the curtain is for their benefit doesn't mean it isnt still for him to hide behind. Link to comment Share on other sites More sharing options...
PeterMP Posted February 6, 2016 Share Posted February 6, 2016 I confess, I'm having trouble figuring out why it would even be bad if there wasn't any gold in Fort Knox. I mean, it's not like that gold is collateral for anything. I'm pretty sure that nobody values dollars because they think that they're going to get some gold with it. (At least not from Fort Knox.) When international investors are setting a value for the dollar, I'm pretty sure that the amount of gold in Fort Knox does not enter into their calculations in any way. I think it might cause some panic. Sometimes perception is important. The loss of the supposed wealth might have a psychological impact greater than the actual loss of wealth. In addition, I think it would create more distrust of our economic/political institutions. You get into where did the gold go and why weren't we told. No, it has little to do with gold, although i wouldn't put it past them I am glad you are not against it. While this is an example of the token gestures I was reffering too, its at least a step in the right direction. Just because the wizards tells the people of oz the curtain is for their benefit doesn't mean it isnt still for him to hide behind. Can you explain then why you want to audit the Fed? What is the objective? When I do a search of "audit Fed" "fort Knox" gold, I get pages and pages of results. https://www.google.com/#q=%22audit+Fed%22+%22fort+knox%22+gold So at least for some people the idea seems connected. Link to comment Share on other sites More sharing options...
twa Posted February 6, 2016 Share Posted February 6, 2016 I think it might cause some panic. Sometimes perception is important. The loss of the supposed wealth might have a psychological impact greater than the actual loss of wealth. In addition, I think it would create more distrust of our economic/political institutions. You get into where did the gold go and why weren't we told. More than might , gold isn't supposed wealth vs paper or a coin when things go South. If ya couldn't trust the Fed who could ya trust? personally I wish they had sold some to the Chinese at the peak.....we can get it back at a bargain (unless our paper goes bad ) Link to comment Share on other sites More sharing options...
CurseReversed Posted February 6, 2016 Share Posted February 6, 2016 Can you explain then why you want to audit the Fed? What is the objective? When I do a search of "audit Fed" "fort Knox" gold, I get pages and pages of results. https://www.google.com/#q=%22audit+Fed%22+%22fort+knox%22+gold So at least for some people the idea seems connected. Here is one article i found pretty quickly that has a decent explanation http://www.thedailybeast.com/articles/2014/10/02/the-sane-case-for-auditing-the-fed.html If you searched those terms then of course you got those results Many people are probably legitimately concerned with the location of supposed gold reserves and how they may be encumbered . Far more people are probably concerned with who they have handed out money too, how much, and why. Among other things. Link to comment Share on other sites More sharing options...
twa Posted February 6, 2016 Share Posted February 6, 2016 . Among other things. agreements with foreign banks and such I wonder if the Fed regrets the minor interest rate hike Link to comment Share on other sites More sharing options...
s0crates Posted February 6, 2016 Share Posted February 6, 2016 I'm no expert, but isn't this inevitable given the way banking works? There's never enough money in circulation to cover all the outstanding debt. So you pump more money in, more debt created, rinse and repeat. There are always people unable to pay, there is always inflation, and more and more debt. It's good for the lenders, bad for the rest of us. Again I'm no expert, so I'd welcome an explanation of anything I've misunderstood. Link to comment Share on other sites More sharing options...
PeterMP Posted February 6, 2016 Share Posted February 6, 2016 I'm no expert, but isn't this inevitable given the way banking works? There's never enough money in circulation to cover all the outstanding debt. So you pump more money in, more debt created, rinse and repeat. There are always people unable to pay, there is always inflation, and more and more debt. It's good for the lenders, bad for the rest of us. Again I'm no expert, so I'd welcome an explanation of anything I've misunderstood. No not really. If I borrow ten dollars from somebody, I'm in debt, and I have to pay it back, but the money came from somewhere. Now, at the national level things are more complex because we pretty much constantly increase our money supply, but we want to do that. If the same number of total dollars was in circulation as 1950, the value of a dollar would be threw the roof. It would be to the point that the cost of printing a dollar wouldn't make sense in the context of the value of a dollar. Inflation happens when the value of goods increases with respect to a given currency. Nothing more and nothing less. Now, that's partly tied to how much money is in circulation, but it is also related to the supply and demand (and therefore prices) of whatever you are using to measure inflation. If we refused to pay more for the things in the CPI basket, inflation (as measured by the government) wouldn't happen, and if the government continued to print money, we'd actually have deflation. Link to comment Share on other sites More sharing options...
zoony Posted February 6, 2016 Share Posted February 6, 2016 I'm pretty sure that India has more gold than any other country in the world proving that gold indeed is irrelevant in determining a country's wealth Someone check that though Link to comment Share on other sites More sharing options...
twa Posted February 6, 2016 Share Posted February 6, 2016 I'm pretty sure that India has more gold than any other country in the world proving that gold indeed is irrelevant in determining a country's wealth Someone check that though Actually they probably do if you count the public holdings, but the US is the country with the largest govt owned reserves. the other major players have large reserves as well(I think India is #10 as far as govt holdings) add Link to comment Share on other sites More sharing options...
China Posted February 6, 2016 Author Share Posted February 6, 2016 Doesn't matter as long as we have a piece of paper with the number on it, or a coin right? Link to comment Share on other sites More sharing options...
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