(Crazy) economy news

[Skybird]

Corona economics:

https://www.manager-magazin.de/polit...a-1306445.html

In an interview with the Süddeutsche Zeitung on Monday, Italy's Prime Minister Giuseppe Conte criticized the position of the German and Dutch governments. Their perspective "must change now". European solidarity in the corona crisis is needed and common bonds are now needed.

This Thursday the EU heads of government meet to decide on a reconstruction fund. Meanwhile, there is talk of a volume of 1500 billion euros and it all boils down to the fact that joint repayments are agreed depending on the economic strength. Translated this means: Germany would have to pay 29 percent of the repayments, even if we do not receive anything from the reconstruction fund. We would then have to raise 435 billion euros in the coming decades and actually give them to our partners in Europe.

Apart from the fact that I prefer to help Italy intelligently and to mobilize our ever increasing TARGET2 demands, as explained here, there is also the question of justice. Not only are the Italian households, according to all available data, significantly richer than we are, they are also less indebted.

Last weekend, I pointed out on Twitter that Italy could solve its debt problem on its own. A one-time levy of 20 percent would be enough to reduce Italian public debt by 100 percent of GDP - to a level below the German one. Even after such a cut, Italian households would have more assets than the German ones.

This thesis sparked fierce discussions and culminated in the statement of a leading German economist that it was a dubious calculation and would inevitably lead to a severe depression in Italy, an attempt was made in this way to reduce the Italian government debt. That is why it is not a viable option and one has to help Italy by means of joint bonds.

Let's do the math

Reason enough for me to take a closer look at the numbers. Because if one vehemently rejects taxing private wealth in the country that is asking for solidarity, and at the same time sees no problem in imposing additional burdens on local taxpayers, it really must be impossible.

But the opposite is the case.

The starting point for my considerations are the following facts (all numbers rounded):

The Italians have private assets of 9,900 billion euros.
The debt of the Italian state is 2500 billion euros.
Italian GDP before Corona was 1,800 billion euros.
A 20 percent tax on private wealth would result in 1980 billion euros: the state would then have debts of 520 billion euros, which corresponds to less than 30 percent of GDP. If you wanted to reduce the debt to 60 percent of GDP, a tax of 14 percent on private wealth was sufficient to reduce the public debt.

Since this rough calculation met with criticism, we take a closer look at the data. The table provides an overview of the debt levels of the various sectors - government, non-financial corporations and households - as a percentage of the gross domestic product of the respective countries, sorted in ascending order by total debt:

Sector debt levels



Country State Enterprise Private households Total private sector Total
Germany 61.0 59 54 114 175
Austria 71.1 90 49 139 210
Italy 137.3 69 41 111 248
Spain 97.9 95 57 152 250
Portugal 120.5 100 65 164 285
Netherlands 49.3 163 101 264 313
Belgium 102.2 150 61 212 314
France 100.4 155 61 216 317
Source: Bank for International Settlements, as of Q3 / 2019, in% of GDP

This representation is extremely interesting:

France is at the forefront of debt, with 316.8 percent non-financial debt relative to GDP. No one should therefore be surprised that France in particular places so much value on joint debts at EU / Eurozone level.
The Netherlands has the least public debt, but its very high level of private debt.
In no country is the private sector as indebted as it is in Italy! Nowhere are private households so indebted and only in Germany do companies have less debt relative to GDP.

So it is obvious - as I have done - to raise the question of why Italy does not help itself. Obviously, it is not a problem of excessive debt, but of an incorrect distribution between the state and the private sector. If the Italian government shifted part of its debt to the private sector, it would still be less indebted than the private sector in most other countries.

So it's definitely not the numbers. This is why the critics have put forward such a consideration that it cannot be implemented to burden the private sector in this way.

The advocated alternative of my critics is that the other states of the EU - above all Germany - should assume the debts. But this is nothing more than a repayment based on economic strength, which is why this idea only satisfies me to a limited extent. As I underlined several times, here too, I am in favor of helping Italy. But the country should and could do something for itself.

It is completely easy to enforce such a one-off property levy. According to Credit Suisse data, Italian households have the largest wealth relative to the GDP of all countries.

The Banca d'Italia reports regularly on the development of private wealth.

In 2017, it was 9743 billion and these were the most important positions (in billions each):

Private wealth

The most important positions in billion euros

Residential real estate 5,247
Cash / bank deposits 1,361
Shares 1,038
Insurance / pensions 995
Commercial property 679
Investment fund 524
Bonds 314

Incidentally, Italian households directly hold only 100 billion government bonds. The main creditors are the Italian banks and foreign institutions and - of course - the ECB. A taxation of wealth would therefore not be a haircut, as another critic of my considerations on the Italian wealth tax noted.

Let's go on: Let's assume that the Italian state wants to organize a new start and drastically reduce its debt by the 100 percent of GDP that I put in the room. That would be 1,800 billion euros or around 18.5 percent of the wealth of Italian households. Assuming an allowance to protect smaller assets could correspond to a 25 percent rate.

Assuming a more moderate debt repayment of 50 percent - a step that would lower Italian public debt below the level of most euro area countries - we speak of 12.5 percent of assets. By the way: the burden equalization that was introduced in Germany after the Second World War was 50 percent of the ascertained assets and had to be paid in 120 quarterly installments.

Obviously, Italians don't have that much cash. This reflects the better investment compared to us Germans. Real estate is the most important asset position. On the other hand, the debt is very low. The Italians could easily borrow the money needed to pay the tax. If we assume that the owners of cash and cash equivalents make the payment directly from the portfolio and that above all the smaller assets are invested - and therefore the exemption limit applies accordingly - this would already result (assuming a rate of ten percent) around 300 Billion euro. The remaining 1,500 billion euros in the maximum scenario correspond to around 25 percent of Italian property assets.

As early as 2017, the French think tank France Stratégie suggested that the state become co-owner of all properties and could levy an annual tax in return. If an owner does not want or cannot pay annually, the discount would be deducted from a sale or inheritance. The French government distanced itself from the proposals. But that does not change the fact that states could make use of this option in financial difficulties.

In the specific case of Italy, it makes sense that the state levies compulsory mortgages on the real estate. Payments would go directly to the state, and repayments would be made over the longest possible period, for example, as in German load balancing over 30 years, and at very favorable rates given the ECB's monetary policy.

If we assume a volume of 1,500 billion euros, this would correspond to an annual burden on private households of 67 billion euros with two percent interest and a term of thirty years. That is around 3.5 percent of the annual economic output. If the government is satisfied with a lower burden than in the maximum scenario, we are talking about an annual burden of around one percent of GDP.

In return, the Italian government could significantly reduce other taxes and duties once the debt has been reduced. There would no longer be a need to achieve a so-called primary surplus, i.e. a surplus in the household before interest payments. The state would release the country's growth forces instead of slowing them down as in recent years. This would give Italy the chance to overcome the stagnation of the past 20 years.

What speaks against suggesting that the Italians solve their problems in this way? It would be the key to an economic upswing. If you instead rely on the significantly poorer German households to take the burden off the Italians' debt, in whatever way, packed and veiled - not only promotes the Euro-critical forces here, they also deny Italy a unique opportunity!

It would definitely not be a rescue of the EU and Euro project. Friendship cannot be bought. Given the heated debate in Europe, we can experience the validity of this saying on a daily basis. If local economists and politicians think that the solution lies in moving assets towards the wealthiest private households in Europe, they overestimate the performance of the German economy. Given demographic change, structural change and the disappointing development of productivity, we are facing difficult years.

Germany should still help, as I appealed here two weeks ago, namely with direct investments, loans and targeted support for the health system. In return, we should press for the participation of the Italian private sector.

By the way: Spain, Portugal, Belgium and even France could also help themselves, as a look at the numbers shows.

[Skybird]

"At what cost?"



https://www.zerohedge.com/markets/fo...nflation-setup

With central banks either purchasing corporate bonds or accepting them as collateral, it may be soon until their mandate is being changed to facilitate the buying of equities, too. As other commentators already noted: we may have abandoned free markets and now head to a centrally planned set up.

[Skybird]

Panic bites at all directions. Twitching and twisting in agony. But the stillborn stays as dead as it always has been.


https://www.zerohedge.com/markets/mo...out-bundesbank

[Skybird]

Not just possible, but sooner or later: likely.

Gone will be worldwide fiat currency debt, amounting to some $250—$300 trillion. Gone will be all OTC derivatives which settle in fiat, amounting to a further $560 trillion. Gone will be listed derivatives, a further $33 trillion. Gone will be options, a further $65 trillion. All these, totalling over $900 trillion, are only part of the destruction.
Global deposits held as bank balances totalling $60 trillion will evaporate. Worldwide equity markets denominated in fiat are a further $70 trillion; anything that does not migrate from fiat pricing disappears, including most, if not all ETFs. Goodbye to hedge funds. Goodbye to offshore financial centres. Goodbye to onshore financial centres. Goodbye to $100 trillion of fiat money.
Life will be very different, and those not prepared for it, principally by retaining a store of non-fiat, sound money, which can only be physical gold and silver until credible substitutes arise, will face impoverishment. Measured in real money, the value of non-financial physical assets will collapse due to the preponderance of desperate sellers to whom survival is most important, even though priced in worthless fiat their prices will have risen. The experience of inflationary collapses in Germany and Austria in the early 1920s showed the way, when country estates went for almost nothing in gold-back dollars and $100 would buy a mansion in Berlin.
None of this is expected. It may not happen, but the chances of it happening appear to have increased significantly from 23 March.

https://www.zerohedge.com/geopolitic...ing-end-dollar

If fiat money is just a dream, then dread the day when dreaming ends.

[Skybird]

Bail out everything! - Bailing out everything?

https://www.dlacalle.com/en/the-risk...ng/#more-11070

[Skybird]

https://www.zerohedge.com/political/...-loses-control

In fact, in a debt-saturated system, the Fed’s massive bond purchases never transmit anything outside the canyons of Wall Street. This money-printing madness only drives bond prices higher and cap rates lower—meaning relentless and systematic inflation of financial assets’ prices.
As a practical matter, of course, the bottom 90% don’t own enough stock or even inflated government and corporate bonds to shake a stick at. Instead, what meager savings they have accumulated languish in bank deposits, CDs or money market funds earning exactly what the Fed has decreed—nothing!
So, when Powell says he’s only trying to help the average American, you have to wonder whether he is just stupid or the greatest lying fraud yet to occupy the big chair at the Fed.

Similiar developement in the Eurozone - just even slightly worse, maybe.

[Skybird]

The German industry has declared itself officially "overloaded" with bureaucratic hurdles and overregulations, saying that it already was almost no longer to should the many regulatory needs and paperwar in normal times, but now in Corona times its all a millstone around their neck. At the same time when - imo reality-disconnected - politicians babble of using the crisis to invest and change for the wanted "Green deal", over 55% of those German companies and corporations who get financial Corona aid and got promises for more in order to help them making the metamorphosis into the better, the brighter, the greener future- as a matter of fact have substantially reduced their financial investing activity. They just struggle and fight for their survival. Last thing they need after Corona and overregulation and paperwar, is even more burdens loaded onto them.

The German industrial powerhouse is struggling dangerously, and is expected to finance the exploding financial redistribution schemes of the EU . And some have nothing better to do then to load even more burdens onto its shoulders, to make sure that is MUST break down.

A timing could not be any more off the mark. But what else to expect iof a generla understanding of market economy has gone almost extinct and has been replaced with state-planned fantasies.

[Skybird]

Originally Posted by https://www.welt.de/wirtschaft/article212912200/Goldpreis-Die-2000-Dollar-Marke-belegt-fehlendes-Vertrauen.html

The gold record is also a vote of no confidence against politics

The precious metal will cost more than $ 2,000 for the first time. This is also due to the corona crisis. But the real reasons lie deeper - the massive price surge also directs the focus on central bank policies and their handling of the euro, dollar and Co.

Gold has made history twice in just a few weeks. It was only in July that its price in the key currency, US dollars, broke the previous record high of September 2011, which had been at $ 1921. And on Tuesday, it was trading above $ 2,000 for the first time.

This clearly demonstrates the dynamics currently prevailing on the market for precious metals. The reason for the massive price increase is always the uncertainty that results from the consequences of the Corona crisis for the global economy. That is not wrong, but the causes are deeper.

In order to recognize this, it is worth looking back. The record of September 2011, which was valid for many years, resulted from the currency turmoil from a currency crisis. It was not until Mario Draghi's promise by the European Central Bank to do whatever it takes to save the common currency that the markets calmed down. As a result, the gold price fell again, also because there was an investment alternative with the bond market that - unlike interest-free gold - could be used to generate returns.

That has changed. The collateral damage that the major central banks - worldwide, and not just in the euro zone - accept with their limitless flood of liquidity and their zero interest rate policy is a global market for government bonds, in which there are now over 14 trillion bonds Bring in dollar negative returns.

It has been observed for years that this development has a clear correlation to the gold price - large investors are apparently switching from bonds that cost them money to the precious metal, which does not generate interest, but at least does not cost investors any penalty interest.

The billion-dollar rescue packages that governments and central banks are now putting together in the fight against the corona pandemic - as correct and appropriate as they may be - will continue to fuel this trend.

It has now taken its toll on politicians for almost a decade to waste the time that the central banks bought it to stabilize the foundations of public finances with decisive reforms after the devastating financial and euro crisis. And still no one knows how far the aid packages can carry. A second wave could require a similar action to save the economy.

The debt burden of the western industrialized nations was immense even before the corona pandemic - and only because the central banks kept interest rates low and thus redistributed wealth from citizens to the state.

Now, however, the quotas continue to rise, the states are reaching the limits of debt sustainability. And this is also expressed by the gold price: confidence in the currencies has deteriorated. In retrospect, it does not seem to be a coincidence that the low point of the gold price fell in the founding phase of the euro. The common currency has since lost a good 80 percent of its value in gold.

Many investors and those in whose sight the metal is now falling due to the record hunt may now be wondering whether the price will continue to rise. It depends on many factors. One of the most important is the question of whether politicians and central banks recognize a stable currency as a value in itself - and act accordingly.

The states will crave to implement ways to plunder private gold reserves sooner or later, I fear. They always do like this sooner or later. Some already moved into that direction, India for example. Restrictions in Europe over the past years have nbeen tightened as well, also in Germany.

Gold means private independence from state fraudulent money and state expropriation schemes hidden in harmlessly sounding word dresses. Politics wants dependency of the people, not independence. Nobody should be able to escape the states' and central banks' yoke.

2500 Dollar per ounce of gold within the next 12-15 months imo are absolutely possible.

[Catfish]

Gold is only valuable as long as all agree that it is, just like any currency.
It's "worth" will continue to rise and fall, and in case of a real crisis you will not be able to buy food with it. Or maybe you are, like a kilogram for a loaf of bread.

[Skybird]

Originally Posted by Catfish

Gold is only valuable as long as all agree that it is, just like any currency.
It's "worth" will continue to rise and fall, and in case of a real crisis you will not be able to buy food with it. Or maybe you are, like a kilogram for a loaf of bread.

Now compare to a Rucksack of Euro or Dollar notes, and compare to the history of the past centuries or millenia.

Paper moneys come and go, and over their lifespan, their value developement knows only one direction: downward. Compared to gold, the Euro has lost already 80% of its starting value, the dollar since the time immediately before WWI even over 95%. Gold stays since millenia. Only 2-3% of gold traded per year, is newly mined gold, the rest is old gold that just changes the owner. - How much newly created book money floods the market every year?


Estimations on how much gold has ever been mined in total in human history, range from 190 thousand to 245 thousand tons. In total. In all of mankind's history. Its a limited comodity for us on planet Earth. That limited availability is part of its success story that lasts since millenia.



And if it would be so worthless as you imply, please explain why central banks have moved in recent years to buy it in huge quantities, while handing out their fraudulent paper stuff inflationary and in careless ammounts and biblical quantities. Because paper money has worth and gold has not? Are they stupid, then? That they sold parts of it this year is due to the need for cash in corona times.


Voltaire said that every paper money sooner or later reaches its natural intrinsic value: nill. Gold however over the course of history has acchieved a net gain. Over centuries and millenia. It simply is "wertbeständiger" in people'S appreciation and preference. Kill an industry, destroy a company, and your stocks are worth nothing anymore. Destroy a state, brign down a bank system, and bank notes and bonds are worth nothing anymore. But certain other things still get traded, and keep their value. Thats why they are wanted,m always have been wanted, and for the forseeable future always will be wanted. Granted, if we find a 1 billion tons of gold reserve on the moon, that would do the trading value on planet Earth no good - but we have not found a billion tons of gold on the moon so far.

[Skybird]

The moment of truth for the monetary system.



http://translate.google.com/translat...ny7Q0ozVRssBHc

In 1848, as is well known, Marx (and Friedrich Engels) called for the "centralization of credit in the hands of the state by a national bank with state capital and exclusive monopoly". A downright creepy scenario: The all-powerful central bank or the special interest groups that collect it would now have control over who receives credit and money, when and under what conditions - which state, which industry, which workers and employees. The path to a de facto dictatorial command and control economy - as many proponents of climate rescue policy and "green monetary policy" long for - would thus be practically through the back door.


No question about it, the world has a "money problem": sooner or later, fiat money will destroy the free market economy and thus also the free society; the coronavirus crisis only reinforces the existing momentum. Because the rulers and the ruled are now attached to fiat money like flies on the flycatcher, the central banks have even more room for maneuver. They can monetize the national debt and thereby also drive up price inflation without having to fear insurmountable opposition: In order to avoid the great evil of the “megacrash”, inflation costs are accepted as the comparatively lesser evil.

You can already guess what will come in the time "after Corona": The already great dependency of economies on fiat money will affect the central banks and the groups that know how to use them for their purposes - states, but of course also the banks and banks Financial industry as well as large corporations - make it even bigger. The drive to save the bare currencies from collapse will bring the cartel of central banks closer together. That everything will boil down to a uniform world monetary policy with world money has certainly not become less likely; It does not need to be emphasized separately which totalitarian potential dangers would be associated with it.

[mapuc]

(I use this thread, because it's about economy)

Do you have what it takes ?

Do you master State economy and what follows in this area of economy ?

Do you accept lots of journalist running after you, for a comment ?

Do you think you could pass the highest clearing.

If you have said yes to all these question then there's a great job waiting for you.

The Danish Government are looking for a new Governor to the National bank

Markus

[Skybird]

Bank run in Turkey. People are rushing into gold on Istanbul Bazaar. Is it the end game for the Turkish Lira? Not yet. We have Covid returning, and we remember the run for toilet paper. The virus could provide the Lira a second life.

https://uk.reuters.com/article/us-tu...-idUKKCN25A0GW

https://www.zerohedge.com/markets/tu...old-while-lira

Too late. You should have gotten your fix of gold BEFORE these things start to turn ugly.

Watch closely, rest-of-the-world. Where Turkey is now, whewre Arenbtia has been repeatedly, we others will be in the future. Say ten years, say twenty years: the timetable is open for discussion. The outcome not.

[Skybird]

https://www.scmp.com/comment/opinion...-borrowed-time

Germany has given up the ghost on trying to control the ECB’s monetary excesses. There seems to be a palpable sense of “if you can’t beat them, join them” for the sake of presenting a united front and avoiding a damaging public row. In the pre-euro days, tough Bundesbank policies and the strong Deutschmark were solid anchors of the European monetary system, implacable yardsticks which helped other European countries govern their own performances.

These days, Frankfurt’s fiduciary responsibility seems to have been quietly abandoned in favour of political expediency, economic survival and a softening in standards. The ECB has abandoned Germany’s monetary rigour, spending its way out of recession through debt monetisation and underwriting Europe’s explosive fiscal expansion in the process. The forefathers of the Deutsche Bundesbank would turn in their graves.
(...)
Like in the US subprime crisis, it’s fine while the charade lasts, but once confidence begins to wobble, that is where the danger lies. It’s a bit like the tale of the emperor’s new clothes – once someone calls attention to the reality, the pyramid of risk starts to implode.

What I have started to fear some years ago already is that when the moment of truth has come, what states' politicians will do to not drown. It is known to rescue swimmers that people drowning can even easily panic and then kick and poull other sudner water in desperation for keeping their head above the waterline, rescue swimmer I think are beign told to knock them out them (at least Kevoin Costner said that in his The Guardian movie). I fear that states will turn openly authoritarian and totalitarian to enforce their fiscal regimes and the expropriation of private property.

[Skybird]

Like the ECB, so the FED:


"OPEN THE FLOODGATES!"


https://www.nbcnews.com/business/economy/fed-will-let-inflation-rise-target-jobs-n1238278


Now my most feared consequences from the pandemic starting to show: their effect on the systemic change of the "money" system.

If one is not ashmamed to stil, call it a "money". Its pure worthless claim for debts made before.

And we will never recover from the monetarian massacres we currently witness. Never. Its impossible, the debts have been allowed to grow too far. Factors too far.


"(Ungedeckter) Kredit ist vorgezogener Konsum, der in der Zukunft ausfällt." - Ludwig von Mises
That has the logic of a Vulcan, and the simplicity and elegance of a poet.