Friday, October 10, 2008

The global economic crisis - explained!

Many of you, I know, are furrowing your brow and shaking your head in a fruitless attempt to understand the global economic crisis*.

I’ve been following events closely and reading all the experts and I don’t have the foggiest about what’s happening either (and neither, I suspect, has anybody else).

I have noticed, however, certain turns of phrase keep cropping up so as a bonus to YOU, the loyal readers of TSFKA, I present the “Ramon Insertnamehere Handy-Dandy, cut out and keep, bluffers guide to the recent global economic unpleasantness”.

The important thing is to stress is “this is a liquidity crisis, rather than a credit crisis”. Now, for you and me (and more particularly, me) a “liquidity crisis” is where the pub hasn’t opened yet but it seems that money is like water – which means it can be boiled to make a refreshing cup of tea.

So there’s not enough money sloshing around the system, which means the major financial institutions are being forced to go to the financial regulators to ask for another bucket of water until the global plumber gets back from his tea break and reconnects the pipes.

The second point to stress that the Australian banks are still fundamentally sound. Why we should have more liquidity in the middle of a severe drought is something that has not, to my knowledge, been addressed but it probably boils down to Kruddy being very, very clever and keeping an extra bucket out by the back shed at The Lodge.

Or something.

The third point is that this is an international crisis. Extra points for knowing five countries in the G-7 group and throwing in references to the Bretton Woods Conference, the IBRD, GATT and IMF.

There you have it. You may want to print this out and put it on your fridge, so you don’t look like a complete goose at dinner parties** when the subject comes up.

*Except for EMS who has been googling Rebecca Smart, so she can track her down and give her a richly deserved smacking.

**I am no longer invited to dinner parties, after that unfortunate “Catherine Deveny incident”.

41 comments:

wari lasi said...

Thanks for clearing that up for me Ramon. Now I finally understand what's been going on.

Not.

And your reference to "Handy Dandy" wouldn't have anything to do with Blue's Clues notebook? Been watching a bit of tellie with The Boy?

Ramon Insertnamehere said...

The Boy is a big Thomas the Tank Engine fan, wari.

Which may explain why he's developing a faint Geordie accent.

catlick said...

I nearly have an aneurysm when that cunt John Roskem blames the current American under-regulated over-pillaged mortgage market on Jimmy Carter. Encouraging Fannie Mae to lend to the working poor in 1978 is supposed to account for the current mess. He then gets a stiffy because he thinks the current fiscal tremors will trump any climate change reforms. Don't get me started!

Ramon Insertnamehere said...

In that vein, catlick, I suggest you avoid reading The Australia.

Or looking at it.

Or walking past a newsagency where they sell it.

catlick said...

"In that vein,"

*chortle

Mr E Discharge said...

An excellent summary, Ramon, and timely. Here was I madly trying to convert paper assets to Gold Bullion,when a quick trip to the off-license would have solved the whole thing. Now all I have to do is figure out how to bury 8000 slabs in my backyard.

Once again, a cool head prevails.

squib said...

I still don't get it

Perseus said...

Squib: Banks planned on making money one day from some stuff. Based on that asumption, they both loaned and invested that not-yet-existant money to Some People who couldn't do much with it because it didn't actually exist. Then when the banks realised they weren't going to make any money, they asked those Some People to give back their non-existent money and they said, "We don't have it any more and anyway it never really existed."

It is not actual money that has gone missing. It is 'worth' that has fallen away. The money that never existed has simply been wiped away from the records, but of course, people were counting on that money to one day appear . They had planned around it.

So the Governments are now running about giving our tax money away to these banks, so at least some of that money magically will exist.

As a Uni Economics boy, all I can say is: They fucked up in the hunt for quick profit.

The Irish are right: Land. That's what you need. Land. Not an apartment, not a stock portfolio... land.

squib said...

they both loaned and invested that not-yet-existant money to Some People who couldn't do much with it because it didn't actually exist.

Oh so it's like economic magic realism?

Ramon Insertnamehere said...

Oh so it's like economic magic realism?

That would explain why the markets have welcomed the new Governor of the Reserve Bank.

A Mr Gabriel García Márquez.

Mr E - you can send some of those slabs down my way. I've got a safe place for them.

catlick said...

See Mr E, interest on your investment already.

wari lasi said...

I saw on the news that the screen or whatever it is that shows US foreign debt is having another two digits added to it.

That should fix things.

Puss In Boots said...

It's also a combination of a) lending money to people who couldn't afford to pay it back and b) not keeping a proper watch over the people doing the lending.

I'm more annoyed about the stupid RBA dropping the interest rate. The exchange rate has plummeted, and now my trip is going to cost $7,000 more than it initially was. *grumble*.

wari lasi said...

and now my trip is going to cost $7,000 more than it initially was

It must be some trip.

We expats who earn money in a foreign currency and remit funds back to Australia are having a great time. Long live a weak AUD!

WitchOne said...

WHAT????!!!! That's at least 4 less handbags Puss, or in my case, shoes.

Doesn't matter, it would cut spending money considerably!

wari lasi said...

Witchie, you wear $1,500 shoes?

I don't think I can afford you, I think I'll have to reconsider our virtual affair.

Perseus said...

Puss finances our virtual affair. I'm a stay at virtual home man.

(I can hear Stubb's angry footsteps from here)

Ramon Insertnamehere said...

You did an economics degree, Pers?

Why aren't you rolling in the dosh - as opposed to chainsawing your own fire wood in some squalid rural hamlet?

Perseus said...

Because I had no interest in it, and besides, I wasn't very good at it. I was good at arguing a point, but no good at proving it with x & y axis and numbers and stuff. I single-handedly solved Argentina's stagflation prblem, but because I couldn't graph it nobody believed me.

Puss In Boots said...

It's a very big trip, Wari. 8 months around the world, without working. $7,000 is a substantial part of the budget, so I'm not happy.

And there will be no $1,500 handbags or shoes on this trip, Witchie. I'm backpacking it.

Perseus, as long as you keep the virtual house warm with the firewood you can chop with your chainsaw, I'm happy to finance our virtual affair.

Mr E Discharge said...

I wasn't very good at it.

If we've learned anything in the past few weeks,it would be that in the world of Economics, "not being very good at it" is no barrier to a wildly lucrative career.

Boogeyman said...

The current financial crisis in the US is God's way of saying, "Checkmate, Mr McCain. Now take that insane bible-bashing gun nut of yours and fuck off."

I wear $1500 shoes, Wari. But only because I no longer trust the banks with my money, so each shoe holds $700 in cash.

Liquid bonds indeeed!

Perseus said...

So true, Mr. E. By not being 'very good at it', you can score one of those lucrative payout packages.

Fad MD said...

We expats who earn money in a foreign currency and remit funds back to Australia are having a great time.

The PNG coconut or bone or whatever it is is staying strong then?

I'm surprised the shitty Peso is holding up here, but then again there's so much money flowing back from the middle east.

wari lasi said...

I guess we won't hear much from you while you're away Puss? When do you go? I'm missing you already. You can have the backpacking though, I'm strictly a "hard top" traveller these days. Unless we're out in the bush murdering wildlife that is.

Boogey, they said on the news this morning that in Germany sales of safes have gone through the roof. Perhaps a better option than your shoes if you've lost faith in the banking system.

wari lasi said...

Yes fad, the PGK (Kina) is holding up very well. The rate has moved from sub 0.40 to over 0.55 in two weeks. And the PHP appears to have faired fairly well too. There's certainly a lot of Philippinos here repatriating funds back there. My love interest *sigh* is one of them.

Ramon Insertnamehere said...

You're backpacking it, Puss?

How are you going to cope with all those germs.

Germs, GERMS, THOUSANDS OF THEM!!!

I did an Arts degree and was very good at it.

Explains why I'm always broke.

wari lasi said...

And on topic ... (Very unlike me)

The AUD and the All Ords have copped another thrashing, there's still 35 minutes of trading left but the market is down another 8% and the Aussie is just over .65

It's not good and nobody I talk to will hazard a guess as to where the bottom is.

Puss In Boots said...

I fly out in the beginning of December. I'm completely stressed right now. Too much to organise.

I don't necessarily want to be backpacking, but if I did it 5 star (or even 3!), I'd be shelling out hundreds of thousands, and I'd rather not.

I'm taking a netbook with me though, so I'll be commenting sporadically.

As for the germs, I am taking bottles of anti-bacterial hand gel, and also have my own sleeping bag and silk sheet, so I don't have to sleep inside the linens in the hostels. I've also booked single rooms with ensuites in all the hostels, so I won't have to worry about sharing a bathroom with someone. I'll just buy little bottles of disinfectant wherever I go, so I can clean the bathrooms before I use them. But I do that when I stay in 5-star hotels here, so that's nothing out of the ordinary for me!

Ramon Insertnamehere said...

The AUD and the All Ords have copped another thrashing, there's still 35 minutes of trading left but the market is down another 8% and the Aussie is just over .65

And Australia is five for 314.

Mr E Discharge said...

Wari, When was the last time you heard of anyone blowing up a shoe?

wari lasi said...

Point taken Mr E.

eat my shorts said...

Except for EMS who has been googling Rebecca Smart, so she can track her down and give her a richly deserved smacking.

Google! Of course!

WitchOne said...

I want to wear $1,500 shoes Wari, they'd have to be at least twice as good as my $700 ones! Besides, I've never asked you to virtually pay for my shoes have I?? Complaints? No. Thought not.

Puss, backpacking, ohhhh honey, I feel for you. However, I am immensely jealous about the trip in general so my feelings aren't necessarily great for you right now.

patchouligirl said...

I just feel sorry for some people who really rely on their investments to live. A friend of mine is 70 and lives very modestly. She worked all her life, never had a family and cares for her elderly mum. I hate seeing her worry as she watches all her savings in shares dissapear. Unlike us, she wont be around long enough for things to recover.

Alex said...

Wari, When was the last time you heard of anyone blowing up a shoe?

Wasn't there somebody who tried to do this on a plane a while back? I don't think it had anything to do with trying to get at the fortunes locked inside though.

catlick said...

" Unlike us, she wont be around long enough for things to recover."

Crikey! Assuming she's not terminally ill, just how many years do we expect this "recovery" to take?

wari lasi said...

As Pereus has correctly pointed out, the wealth that was created was never real. To a certain degree what we are seeing is a return to normalcy. A "correction" in the market as it were.

patchouligirl said...

how many years do we expect this "recovery" to take?
That is a bloody good question. We can only guess, but it has been a major shake up and I wouldn't be suprised if it takes a decade or longer. Real Estate usually goes in 7 year cycles. How long do you reckon Perseus?

Melba said...

To be able to talk really knowledgeably about the world financial crisis, you can also throw in something about Iceland, and UK's Brown using terrorism legislation to stop the Iceland banks from pulling out their monies deposited in England. Iceland might go bankrupt, for real. Apparently.

And you can nod and maybe smoke a pipe as well.

I learned this important tidbit about Iceland this morning from my bro who is an economist (and NOT rich, by the way, so you haven't missed out there, Perseus. Interestingly, he has also played in bands. Is there some sort of triangulation between economics and music?)

patchouligirl said...

I listened to David Kochs 'money matters' last night (while making wontons - I had actually tuned in to watch Jamie Durie create a Japanese garden but he got bumped to next week) and recovery time frames of 20 years and 3 years were mentioned. Aparently we've all lost about 20% of our super but housing prices should hold unless you live in WA. The wontons were a success.