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Since this will probably keep the news busy for the coming few weeks, I thought it might be useful to have a central overview and discussion place, otherwise there's 4-6 megathreads to keep on reading: General Welp, 2016 started hasn't so much started with a bang as with an (awaited) implosion:
NON-EXHAUSTIVE List of Issues and/or problems: OIL Oil has been skidding downwards for a long while now, at first fueled by the growth of shale gas/fracking and then by the Saudis et al. opening the pump as fast and hard as they can. The Saudis are flooding the market in order to drown the shale gas industry. This appears to be working as US fracking etc needs very high initial investment to get the wells going, which means borrowing lots of money from commercial banks. Currently, the oil price (at 28$ per barrel) is too low to support the investment and US fracking companies have been going bust at a fairly impressive rate, with estimates of one half to to one third in danger of fading before 2017. The problem for the US is that all the fracking financing, which seemed like a dream-come-true a few years ago, may now turn sour in a big way. The default risk in the US energy sector is the highest since the Great Depression. Already banks are putting money aside to deal with collapsing investments. Depending on how big they are, those banks may be in trouble. In the Middle east meanwhile, the collapsing oil prices mean that IMF has estimated that state could go bankrupt by 2020 if oil prices do not recover. Right now, the riyal is pegged to the dollar, but that might not last. In order to plug the current gap, the Saudi's are even considering selling shares in Aramco, the state oil company, which is their equivalent to selling the family silver on the cheap. Not to mention that the Iranians, fresh from getting out from a lot of sanctions, are back in the global oil market in a big way. This could, of course, see oil prices go even lower as they join a massive global oversupply. The upside of all of this is that consumers will see lower prices at the pump, leaving them with more disposable income etc. which can increase consumption in the West - the 'traditional' motor of global of economic growth. The downside is that the collapse in price of commodities like oil, gas , iron and copper ore are no good at all for developing countries and others (looking at you, Canada and Australia) who depend on bulk commodities in order to make their budgets and economies move. EUROPE Austerity is bad, and Europe continues to prove it. If you thought that Greece was settled, think again: quote:Farmers’ roadblocks, ferries immobilised in ports, pensioners taking to the streets: protest has returned to Greece in what many fear could be the beginning of the crisis-plagued country’s most confrontational winter yet. While it's no longer the threat it posed in 2010, a collapse in Greece would still be very nasty for the EU economy, the Euro project and the EU as a political/civic union, especially if you look at how many refugees they are processing. The Italian banking system is still in a bad way and any bail-in or out will be very expensive indeed if it goes on the slide. There are rumours that the 3rd largest bank is suffering from a bank run, and its shares are taking a nosedive. In Portugal meanwhile, there is a new left-wing coalition and the Presidential elections are expected to be won by the right. Austerity is the name of the game here and more uncertainty, in possible combination with Greece, could make things interesting again. New election results in Spain meanwhile mean that their Parliament will be in a jam for a while to come, with reversal of austerity rules possible, depending on the outcome. France, with only 0.3% growth in Q3 2015 is saddled with persistent high unemployment at 10.6% and 25.7% youth unemployment and is currently led by the go-nowhere government of Francois Hollande, who is still stuck at 30% approval ratings even after the Paris attacks. The Front National, under Marine le Pen, is a serious contender now, and they are no good news for anyone. Germany is still doing well. with higher wages, economic output and all kinds of indicators doing well. However, 1.7% GDP growth isn't exactly a star.. What happens to Volkswagen (either the largest or second-largest company in Germany) after their revolting cheating is still to be seen. Plus, with the current migrant crisis, their politics could take a large wobble, especially if another Cologne-like event takes place. In short, Europe's definitely not out of the weeds yet, may be pulled back into them, and what happens when they are is anyone's guess. Plus, the current EU refugee crisis continues to roil the continent, costing much more than expected, the Schengen common border area may collapse, and it's causing more problems everywhere. The joint EU-Turkey solution is a joke. Also, Brexit. CHINA https://www.youtube.com/watch?v=rPILhiTJv7E Hurling down the economic cliff as we speak,, the once-great hope of the global economy is cracking very badly. A hugely inflated market, with over 28 TRILLION $ in debt, with probably even more in the super opaque shadow banking system, and literal ghost cities full of empty buildings could be on the edge of some pretty horrid shocks. With so much (western) capital now inside the Chinese market (due to lack of returns anywhere else), a collapse in China would be very bad for the global banking system. Plus, who would be left to export to? Mars? Improving / making matters much worse is the Chinese state, which does everything from forcing shareholders to buy in a crashing market to injecting capital to fluffing numbers. The official growth figures for the last quarter are 6.7%, but who really knows at this point. THE STOCK MARKET https://twitter.com/Schuldensuehner/status/690062595668209669/photo/1?ref_src=twsrc%5Etfw Global markets have been taking a bath for the last few days due to the abovementioned reasons and more. quote:Shares in Asia experienced further turmoil after an earlier rally petered out, extending the rout on global stock markets prompted by growing fears over the global economy. INEQUALITY Richest 62 people as wealthy as half of world's population, says Oxfam quote:The vast and growing gap between rich and poor has been laid bare in a new Oxfam report showing that the 62 richest billionaires own as much wealth as the poorer half of the world’s population. One address in the Cayman Islands houses 20.000 companies quote:When Barack Obama criticised tax havens, he singled out one building on Cayman, Ugland House, which he claimed housed “12,000 corporations. Now, that’s either the biggest building or the biggest tax scam on record.” But Obama got it wrong – there are closer to 20,000 companies registered there, and 100,000 companies in Cayman as a whole. They include ones linked – or that have been linked in the past – to a bewildering array of British household names: Tesco, Sainsbury’s, BP, Manchester United – even the National Grid. In total, Cayman is home to nearly twice as many companies as people. Which is odd, because when I went to find them, there wasn’t much physical evidence of their presence. But they’re here all right, on paper. There might be as much as 21 Trillion Dollar hidden offshore quote:A global super-rich elite has exploited gaps in cross-border tax rules to hide an extraordinary £13 trillion ($21tn) of wealth offshore – as much as the American and Japanese GDPs put together – according to research commissioned by the campaign group Tax Justice Network. The burden of bailing out the last crisis has already fallen on the poorest, both globally and in western societies. How much more do they have to give? Or are willing to take it up the rear end? Their lack of consumption isn't doing the global economy any good and another hammer blow could see significant numbers of people pushed out of the middle class. So what now? Is this a crisis? Are we hosed? The consensus seems to be that it's not one .... yet .... but all the ingredients for a second Great Blowout are in place. However, the Royal Bank of Scotland gives the following advice quote:Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small. The only thing that we can already say is that the tools to get out of the next crisis will need to be invented, probably by our paralysed political systems (with US elections on the horizon). Any further crisis could put a whole host of unpleasant people (Le Pen, Trump, Wilders et al) in power and essentially turn the page towards nationalism and economic competition through tariffs and whatnot. Even without them, the Western Central Banks have very little ammunition left, with interest rates already through the floor. Resources Austerity is entirely self-defeating and cannot work https://www.youtube.com/watch?v=JQuHSQXxsjM Why the American Housing Bubble led to the Eurocrisis led to the China Crisis: https://www.youtube.com/watch?v=V3FPmu2_J_0 (Yes, I happen to like Mark Blyth) If you need one, this site doesn't do a terrible job at providing a daily smorgasbord of economic news links. Don't read their opinion pieces as they are often vague. Junior G-man fucked around with this message at 16:13 on Jan 21, 2016 |
# ? Jan 21, 2016 16:09 |
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# ? May 13, 2024 06:41 |
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I would like to add the caveat that my "We'll Coast Along" vote is very America centric. Other sections of the world may be hosed.
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# ? Jan 21, 2016 16:30 |
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This is end stage capitalism as predicted. The same highs and lows we have always had, except the cycle is faster and the high is a little less higher and the lows are a little lower each time. Now I'm not necessarily knocking capitalism here. Death is certain regardless of your socio-economic system.
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# ? Jan 21, 2016 16:33 |
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7c Nickel posted:I would like to add the caveat that my "We'll Coast Along" vote is very America centric. Other sections of the world may be hosed. This is very true, but I'm assuming that whoever reads 'we' in that sentence will apply that to his/her own country/region.
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# ? Jan 21, 2016 16:37 |
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A lot of large corporations are starting layoff proceedings - I think they've already seen where this road leads and are dropping excess weight Transporter style. Of course if anyone had any money to drive demand in this economy all this could be avoided...
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# ? Jan 21, 2016 17:01 |
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Cohan wrote this piece back in 2012 on why the Dodd Frank and the Volcker Rule couldn't theoretically protect us from another banking crisis:How We Got the Crash Wrong posted:ONE OF THE most seductive narratives about the recent financial crisis is that it was caused by dizzying increases in the amount of leverage on the balance sheets of Wall Street firms, leaving the financial system virtually no margin for error. Leverage, we’ve been told repeatedly, went from about 12-to-1 in 2004 to 33-to-1 in 2008. (Leverage is the ratio of debt or assets to equity; at 33-to-1 leverage, a mere 3 percent drop in the value of a firm’s assets can wipe out its equity.) The reason for the increase, so the story goes, was an underappreciated change, in April 2004, to an obscure Securities and Exchange Commission rule, which let Wall Street off its short leash and allowed unprecedented risk-taking. If not for that, according to the popular press and many accomplished scholars, the crisis might not have happened. The acceptance of this thesis has colored not only how we think about what happened but also the new laws that were designed to prevent the next crisis. The problem is, it’s flat wrong. And because we have misunderstood the facts, we may now be trying to cure the wrong disease.
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# ? Jan 21, 2016 17:07 |
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Shao821 posted:A lot of large corporations are starting layoff proceedings - I think they've already seen where this road leads and are dropping excess weight Transporter style. Well, we can create more debt-driven demand, but uhhhh .... even that's now reaching its limits. Household debt is still ballooning everywhere, and especially the UK is trying to cover it by inflating another housing bubble (can't go wrong, that!).
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# ? Jan 21, 2016 17:30 |
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OP please don't worry too much, I've been informed that these markets will regulate themselves and the invisible hand of the markets will keep us saf-
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# ? Jan 21, 2016 17:33 |
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Dead Cosmonaut posted:Cohan wrote this piece back in 2012 on why the Dodd Frank and the Volcker Rule couldn't theoretically protect us from another banking crisis: Yeah, I don't entirely disagree with that reading about incentives vs. leverage, but my answer to this would be that even if you got incentives under (better) control, allowing leverage of 30-35 to one would still be irresponsible (and should be illegal) for systematically important (i.e. too-big-to-fail) banks; even when the incentives are right even a small black swan event can crash such a bank, needing bailouts. He's wrong to pose it as an either-or proposition; it should certainly be both. Or you know, we need to unwind all banks that are capable of causing systemic risk. That would be the real answer.
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# ? Jan 21, 2016 17:41 |
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So Recession and fascism is on the rise throughout europe and most of the west. Welp WAR CRIME GIGOLO fucked around with this message at 17:48 on Jan 21, 2016 |
# ? Jan 21, 2016 17:42 |
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LeoMarr posted:So Recession and fascism is on the rise throughout europe and most of the west. Welp Woah can you resize that? And it's not necessarily fascism that follows recession. Although traditionally speaking, closed borders and pointing fingers at 'other' people has been really popular. To be frank, I don't even know what would happen to the European social democratic model; it could go hard left, hard right, or mutate into something else entirely.
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# ? Jan 21, 2016 17:47 |
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Junior G-man posted:Well, we can create more debt-driven demand, but uhhhh .... even that's now reaching its limits. Household debt is still ballooning everywhere, and especially the UK is trying to cover it by inflating another housing bubble (can't go wrong, that!). It's not just the UK, Canada and Australia are also inflating housing bubbles. I don't know a lot about the Australian case but in Canada it's essentially being done to allow debt-laden consumers to continue spending even while underwater because there's nothing else driving any economic growth at all.
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# ? Jan 21, 2016 17:49 |
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Junior G-man posted:Woah can you resize that? Not to say that fascism is a direct result of receding economies. However fascism has been on the rise recently and that will definitely affect Europe in conjunction with a receding economy and
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# ? Jan 21, 2016 17:51 |
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vyelkin posted:It's not just the UK, Canada and Australia are also inflating housing bubbles. I don't know a lot about the Australian case but in Canada it's essentially being done to allow debt-laden consumers to continue spending even while underwater because there's nothing else driving any economic growth at all. See: the related thread. With oil prices cratering Canada's last major industry is housing. Coupled with Canadians saddled with tremendous mortgage debt backed by a federal mortgage agency and, well, you Americans know how well that goes.
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# ? Jan 21, 2016 17:54 |
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LeoMarr posted:So Recession and fascism is on the rise throughout europe and most of the west. Welp This movie sucked bigtime.
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# ? Jan 21, 2016 18:02 |
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Are we going to see even more countries thrown into an Austerity death spiral because of this economic climate? Greece's issues are resurging as austerityXXX takes its toll as well as the possibility of a brexit. This could be the last hurrah of the EU.
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# ? Jan 21, 2016 18:04 |
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Any kind of European economic crash that affects Britain is going to make things very interesting for the tories in the UK. They have bet the horse on being better economically than the Labour opposition, having a 'Long Term Economic Plan' (now slowly being replaced with 'gently caress Off Brown People) and that austerity will cure Britain's ills. A crash would almost certainly be a huge blow to the tories but whether people start flocking to Labour or just blame it all on Europe and back UKIP will remain to be seen.WorldsStrongestNerd posted:Death is certain
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# ? Jan 21, 2016 18:27 |
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MikeCrotch posted:Any kind of European economic crash that affects Britain is going to make things very interesting for the tories in the UK. They have bet the horse on being better economically than the Labour opposition, having a 'Long Term Economic Plan' (now slowly being replaced with 'gently caress Off Brown People) and that austerity will cure Britain's ills. A crash would almost certainly be a huge blow to the tories but whether people start flocking to Labour or just blame it all on Europe and back UKIP will remain to be seen.
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# ? Jan 21, 2016 18:29 |
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LeoMarr posted:Are we going to see even more countries thrown into an Austerity death spiral because of this economic climate? Greece's issues are resurging as austerityXXX takes its toll as well as the possibility of a brexit. This could be the last hurrah of the EU. The economic core areas of Germany and Japan are in deflationary death spirals, but the periphery of Europe that Germany's forcing austerity on are more likely to just elect fascists like Poland/Hungary and tell the austerians to piss off. Not sure which is the better outcome
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# ? Jan 21, 2016 18:36 |
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Besides Automotive production and its side industries Manufacturing in the US is taking a bloodbath right now. My company is seeing a lot less than expected already and a lot of our customers have either done shutdowns or in some cases that were a major deciding factor in opening a new shop gone out of business. Along with that a lot of the big companies are dumping product to stay busy which is starting to kill off smaller companies and compounding problems. That isn't even considering that China has flooded alot of the base material in tube pipe and other assorted material to get out what they have stocked up to inflate their GDP and other number, we have been seeing more and more material and steel that is of horrible quality or worthless in the last 6 months. If something doesn't start changing soon expect to see manufactoring number in the news and last time that happened it was a precursor to the economy dropping.
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# ? Jan 21, 2016 20:07 |
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When China has its coming implosion and damages the world economy expect to hear a bit of "we need a world government to make sure this doesn't happen, people are literally dying because of greed" and a cacophony of "PROTECTIVE TARIFFS!!! ISOLATIONISM!!! TRADE IS BAD!!! GLOBALIZATION IS AWFUL!!! XENOPHOBIA HATE HATE HATE THE CHINESE ARE AWFUL AND DID THIS ON PURPOSE ALSO IRAN IS INVOLVED SOMEHOW!!!" Meanwhile those 62 people that effectively own everything are going to mysteriously and suddenly own more while money they touched just happens to find its way into the pockets of people that find reasons to justify austerity.
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# ? Jan 21, 2016 20:13 |
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ToxicSlurpee posted:When China has its coming implosion and damages the world economy expect to hear a bit of "we need a world government to make sure this doesn't happen, people are literally dying because of greed" and a cacophony of "PROTECTIVE TARIFFS!!! ISOLATIONISM!!! TRADE IS BAD!!! GLOBALIZATION IS AWFUL!!! XENOPHOBIA HATE HATE HATE THE CHINESE ARE AWFUL AND DID THIS ON PURPOSE ALSO IRAN IS INVOLVED SOMEHOW!!!" Meanwhile those 62 people that effectively own everything are going to mysteriously and suddenly own more while money they touched just happens to find its way into the pockets of people that find reasons to justify austerity. Jeb! 2016
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# ? Jan 21, 2016 20:15 |
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WorldsStrongestNerd posted:This is end stage capitalism as predicted. The same highs and lows we have always had, except the cycle is faster and the high is a little less higher and the lows are a little lower each time. That or we're just in the bad part of a kondratieff wave.
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# ? Jan 21, 2016 20:24 |
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Helsing posted:That or we're just in the bad part of a kondratieff wave. Ultimately, the question is if the world will go on another reformist course as it did 1929-1980 or that without the immediate threat of Marxism/the Soviets or if the world will gradually and inevitably slide into a series of stagnating basket cases run by hard right populist governments because that threat doesn't exist?
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# ? Jan 21, 2016 20:31 |
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That assumes that some kind of left liberal reformism is the only solution to the crisis. I find that plausible from an ethical standpoint but not necessarily an economic one. Could be that some authoritarian political system will stumble onto a workable economic formula for the 21st century. Stranger things have happened.
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# ? Jan 21, 2016 21:06 |
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Helsing posted:That assumes that some kind of left liberal reformism is the only solution to the crisis. I find that plausible from an ethical standpoint but not necessarily an economic one. Could be that some authoritarian political system will stumble onto a workable economic formula for the 21st century. Stranger things have happened. One of the big contradictions of it all is that poo poo is only going to get worse until governments start running into the banks and cracking heads.
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# ? Jan 21, 2016 23:16 |
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ToxicSlurpee posted:One of the big contradictions of it all is that poo poo is only going to get worse until governments start running into the banks and cracking heads.
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# ? Jan 21, 2016 23:19 |
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Out of the god drat million years of human race on this Earth I had to experience both the death of David Bowie and the End Times. gently caress my life.
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# ? Jan 22, 2016 00:36 |
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The recession part of the economic cycle is due right about now, right? Why isn't this just another regular dip?
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# ? Jan 22, 2016 00:44 |
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Junior G-man posted:Austerity is entirely self-defeating and cannot work I'm only about half way through this but god he's good. I don't understand how people don't get why Germany keeps holding up the Euro (hint: they need export markets,) but he gets it.
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# ? Jan 22, 2016 01:04 |
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His 2015 Glasgow Lecture was pretty spot in in terms of explaining greece and other potential death spirals. https://www.youtube.com/watch?v=B6vV8_uQmxs You borrow at one You buy at ten You use the spread To bury the dead You bank it at four And repo more And then go knock On the ECB's door
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# ? Jan 22, 2016 01:08 |
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Australian banks are over-leveraged, our mining boom is over and successive governments have stopped all attempts at renewable energy (to support the biggest political donors, the oil and coal industries). House prices are some of the least affordable in the world. We escaped relatively unscathed after the 2008 crisis but this was due to our mining sector generating massive gains. We have nothing to buffer ourselves this time around. A massive amount of people have something like 20 - 30% of their superannuation funds stuck in commodities which is exactly what happened last time around (although a lot of people were 100% in property last time). In short, we will be pretty hosed.
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# ? Jan 22, 2016 01:14 |
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That lecture is fantastic. Thanks for linking it.
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# ? Jan 22, 2016 01:20 |
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Baxta posted:Australian banks are over-leveraged, our mining boom is over and successive governments have stopped all attempts at renewable energy (to support the biggest political donors, the oil and coal industries). House prices are some of the least affordable in the world. Australia, the first country on the War on Coal's butcher bill.
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# ? Jan 22, 2016 01:24 |
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Chiming in from Mexico: Doing better than most of Latin America and weathering the storm for now. Low oil prices and speculation have pummeled the peso, and it went from 15 for a dollar a year ago to 19 per dollar today. This has the manufacturing and tourism sectors sitting happy, but anyone importing anything is feeling the pain. Curiously, this still hasn't resulted in rampant inflation yet, so that's good (keyword: yet). The national oil company is in rough shape and has debts for more than it's assets' worth. 18 dollars per barrel doesn't help at all. Salaries are mediocre and there's a massive informal economy, but hey, we're not Venezuela. Tl;dr, have your holidays in Mexico, it's dirt cheap for you gringos now.
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# ? Jan 22, 2016 02:24 |
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Freezer posted:
And it's loving awesome, but it's my secret so I don't tell anyone. My most recent trip was way under-budget.
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# ? Jan 22, 2016 02:48 |
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For me and most of the people I know, the past eight years since the '08 crash have been pretty god awful, even while things were "recovering". I don't want to think about how things are going to be when economy really starts going south again, especially if fate sees fit to give us a US government under the full control of current GOP leadership. I could foresee a future where historical documentaries explain the year 2016 using grainy footage of Donald Trump rallies and dark, ominous accompanying music.
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# ? Jan 22, 2016 02:49 |
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As a transplant from the NYC-area to Buffalo, I can honestly say that the stock downturns have no real consequences to our put-putting economic engine... but that's because Buffalo has been economically depressed since the first Great Depression. In all seriousness, America will probably come out on top of this one sitting pretty. Everyone who lost their jobs and money in the last bubble haven't gone back to building in the "flood zone", as it were. I would wager to say that, save for the oil industry, Americans haven't anywhere to go but up - if only because they've already hit rock bottom. To expand on this, I see less idiots getting into sub-prime debt obligations - nobody doubles down on that poo poo just 'cause anymore. Those who have, well, they obviously can't learn from the past. My suggestion to you, SA, is to move to a place where they're about to start manufacturing some sweet high-tech poo poo (big ups to Our Benevolent Oligarchs, Elon Musk and Terry Pegula).
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# ? Jan 22, 2016 03:20 |
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UV_Catastrophe posted:I could foresee a future where historical documentaries explain the year 2016 using grainy footage of Donald Trump rallies and dark, ominous accompanying music. Good news! Digital video doesn't get grainy as it ages.
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# ? Jan 22, 2016 03:47 |
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# ? May 13, 2024 06:41 |
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I work in the Oil Services industry and I'm shocked I still have a job. I'll probably be making GBS threads unicorn eggs if I still have the same job by this time next year (unless we glass the middle east or something).
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# ? Jan 22, 2016 05:51 |