Recession Again ?

[tsk1979]

But isn't it a good thing to not have AAA rating.
I remember, that the last guys given AAA rating by S&P crashed the world economy (mortgage bonds, lehmann etc,m)
So I guess S&P says
Standard and Poors Ratings are basically telling you how soon you can get poor . the higher the rating the greater the chance of poverty

Jokes apart, I am quite amazed how people keep trusting these finance companies when there is proven record that will give high ratings to just about anybody.

[alpha1]

In financial world - everything operates via nexus.
Even the ratings.

I wonder how can anyone who is not in that coterie actually trust them to take decisions on everyone's behalf?
But then I guess this is how humans work (e.g. govts also work in similar fashion!).

***

Talking about recession, could anyone actually elucidate me about the basis of printing of money. How does the govt decide how much paper currency to print?

In the olden days it was just a based on mining of few valuable minerals like gold, silver.
So the amount of precious minerals mined becomes the sort of informal currency (in the olden days) or actually the currency backing (in the more recent olden days). Everyone agreed to transaction based on gold/silver - and the value of this was based on demand/supply of gold or silver. Thus the currency was a representation of the universally acceptable physical goods held fpr valuation (=gold or silver).

So in the olden days - say I held 10 ounce of gold. That was the wealth which can provide me with any other goods or services in return of its exchange.
Or later, 1 pound sterling had an equivalence with respect to the gold held by say Bank of England. (so it is equivalent of me holding 1 pound's equivalence of wealth)
And the only way to increase the wealth was to mine / or acquire gold/silver.

So if England wished to increase the currency in circulation, it had to obtain that much gold for the pound.
Of if India wished to increase the currency in circulation, it had to acquire or mine that much more silver for the rupiah.


But what happens today?
From what I understand the basis of today's currency is fiat.
Which means money without any intrinsic value (the value is arbitrarily promulgated by the central reserve bank based on whatever justifications it deems necessary).
(That means it has no backing of universally acceptable commodity)

So back to my question: how does Govt decide how much money to print additionally?

***

Inflation as a phenomena is simple over abundance of paper currency vs scarcity of actual commodity.
Doesn't that mean that the central reserve is again "deceiving" ppl using their paper currency about the value.
Of course the value of this paper currency is bound to go down, when it is in excess compared to the actual goods in the country. (which means we have printed money for the value we haven't even created or acquired).

So again there will some reason by the govt to direct these central reserve bank to churn out "worthless" money.
What is that reason?

[mayankjha1806]

Originally Posted by tsk1979

But isn't it a good thing to not have AAA rating.

Originally Posted by alpha1

Talking about recession, could anyone actually elucidate me about the basis of printing of money. How does the govt decide how much paper currency to print?

That's exactly the problem with the Rating downgrade. Most of the financial world is perception driven (Heard mentality). US has been having a field day for last 30+ years purely because $$ was the de-joure international currency. They can print as many as they want, and then buy whatever they want (Import). Later countries like China invest back the $$ earned back into US and get returns. This eventually killed manufacturing in the US and if we see today nothing (well almost nothing) gets manufactured in US.

When $$ go down, it will reduce the ability of the US to buy things because they have $$ as countries will try and diversify their Forex reserves and would rather prefer to be paid in EUROS or something else for that matter.

Finally this means lot of pain in US, until the economy starts producing something which they can export and not be a purely import dependent economy.

[RS_DEL]

Originally Posted by alpha1

In financial world - everything operates via nexus.
Even the ratings.

bank to churn out "worthless" money.
What is that reason?

Yes the money(currency) we now use to measure our wealth is fiat currency i.e. is not backed by gold. This development is the result of Nixon dumping the dumping the gold standard.

How do central bankers determine money supply? The money supply is measured in terms of several measures ( 3 to be precise). This ostensibly forms the basis of determining how much liquid cash there is in the system and whether more cash is required or not. This would need to be verified by our banker friends on the board. However my guess is, I repeat this is just a guess, the exact basis for determining the amount of currency that needs to be injected into the system is known only to a small coterie that would involve administration and central bank officials in most economies. Opacity is what makes these jokers powerful.

If someone can figure out their mind set and thought process of the central bankers then you will have a situation like the Soros attack on the GBP which forced them out of the European Exchange Rate Mechanism.
It is not for nothing Soros is one of the most reviled names in the closed group that constitutes the central bankers of the world.

[mkh]

Originally Posted by shankar.balan

food inflation through the roof. interest rates leaping skywards. any chance at all for the regular working joe in this country of countries? in the meanwhile the politicos of the state and country buy bigger and bigger homes, cars and salt away more and more crores in untraceable accounts.

where will it end?

A question i have asked so many many times. But to be honest- as long as people just rant and complain, nothing. Including yours truly wish we had more guts to do something like what happened in Libya, maybe a trigger is needed for a mass movement to weed out the crap.

[alpha1]

Originally Posted by RS_DEL

Yes the money(currency) we now use to measure our wealth is fiat currency i.e. is not backed by gold. This development is the result of Nixon dumping the dumping the gold standard.

How do central bankers determine money supply? The money supply is measured in terms of several measures ( 3 to be precise). This ostensibly forms the basis of determining how much liquid cash there is in the system and whether more cash is required or not. This would need to be verified by our banker friends on the board. However my guess is, I repeat this is just a guess, the exact basis for determining the amount of currency that needs to be injected into the system is known only to a small coterie that would involve administration and central bank officials in most economies. Opacity is what makes these jokers powerful.

If someone can figure out their mind set and thought process of the central bankers then you will have a situation like the Soros attack on the GBP which forced them out of the European Exchange Rate Mechanism.
It is not for nothing Soros is one of the most reviled names in the closed group that constitutes the central bankers of the world.

So the Govt is in any case responsible for printing additional money regularly, which has no intrinsic value.

If the amount of money is fixed, then the value of this money would increase over a period of time (because of increased value of goods and serviced).

But the govt doesn't chose to do so in order to force public not to hold on the the currency but to invest it. And as a final result (net summation of money circulation) govt gets to finance its projects by money which it has in reality no value!

Which means in "actual worth" sense - building "sand castles" in air in the name of progress and development.


Funny thing is that when banks or financial institutions do this kind of financial jugglery for their profit - they get bad names.
When govt does it - no one even bothers about it.

Which brings me to recession.
The recession is a phase of negative growth of economy.
Of course it hurts the public.
But something that hurts even more is that in such times, the money that you hold, loses its value further (because of inflation).

So this means that even in negative growth phases - the govt continue with their nefarious scheme of printing worthless money, so that their ends can meet!

But what do the gov't do in times of recession?
They reduce the interest rates (in the name of fueling growth).
Which means whatever worthless money is there in the economy - it becomes even more accessible to everyone - which means a greater circulation. Which means more "zero intrinsic value" printed money available, in the times of lesser value/productivity in the economy.

Which means even higher inflation rate.
Which hurts the public even more.

LOL, looks like:
1) either the reserve banks actually know nothing and try to tame a raging bull by playing with interest rates and printing money
2) or they do so in cahoots with those stand to gain financially = FIs

[Spitfire]

This image would give a better perspective.



Source: DOGHOUSE | America’s Credit Rating

[curiosity]

Sharing a link of an article I read. Interesting: How seriously should we take Roubini’s doomsday predictions? | Firstpost

[mayankjha1806]

There is this video on facebook which talks about the real problem with US. It explains that this has been going on for some time and eventually might lead to worsening of the US economy to a state no one has seen before and no one knows how to handle it.

Here is the link

https://www.facebook.com/video/video...68690&comments

[sgiitk]

I think the US has ' had it'. They are not willing to take their medicine. The World Bank has been prescribing and forcing the bitter pill on the rest of the world, but when Papaland is concerned they chicken out. I remember Herr Helmut Schmitt delivering the Dimbleby on the Beeb lecture in 1990 or so and warning that unless the US learns to live within its means there may be a very heavy price to pay. Now the cows are coming home to roost. The US answer, The Boston Tea Party Group. Their mindset is as ancient as the origin of their name. A real bunch of Rednecks, if ever I saw one.

[Lalvaz]

Originally Posted by lambuhere1

Source: The great www

Do you guys see what I see. In June - July 2007, Greece crises erupted. From then, you can see what happened.

Will we reach the bottom somewhere soon, around 2012-2013. Only time will tell.

Experts can notice Head and Shoulder pattern currently formed on the right side of the chart. What does it mean? Are we slopping down. God alone help us.

Mods: Kindly remove the post if inappropriate!

A lil late in the day, since I only just noticed your post. Did the Greek crisis erupt in June July 2007? I thought it was 2009, or atleast thats when I first read about their burgeoning debt. I can see on BBC that they did falsify their financials right at the time of joining the Eurozone in 04, but did'nt know that the current crisis was detected as early as 07.
BBC News - Greece timeline

Also, whats the inference from the chart you've posted? Are you saying there's a lot more pain left, and we wont see the bottom till 2012-2013. What levels are we talking about here?

[sgiitk]

So far the US is only working with Band Aid and not serious surgery. So I am not that optimistic.

[akas_chauhan]

If you have not checked out "Insider Job", i would recommend to watch it. It has all the answers you guys are looking for.

[lambuhere1]

[quote=Lalvaz;2588515]A lil late in the day, since I only just noticed your post. Did the Greek crisis erupt in June July 2007? but did'nt know that the current crisis was detected as early as 07.
BBC News - Greece timeline quote]

My understanding is a bit old [ grey cells at work ], but if i remeber correctly, the day when greece took the initiative of reforms/default, thats when I preceived the trend.

Looking at the pain, current trend should end in 2012-2013, in which a worst case scenerio predicted would be an "economic third world war", which is already started, based on my interpretation.

Hope I am not scaring you. Just my thoughts though

[hellmet]

It is evident from the events around the developed world that another financial hurricane is coming to our shores sooner or later. Back in 2008, India was able to wriggle out of the mess due to strong local growth, however this time it is a different story altogether, what with double digit inflation, economic slowdown and RBI's interest rate tightening, high fuel prices and more (remember that one of the triggers for 2008 recession was the $140+ crude oil price among other things).

If Europe's and USA's banking sector failure and debt crises hit the world economy it is going to wreak chaos, cause a loss of millions of jobs in a spiral and even possibly a meltdown of modern society (yes these might sound extreme but hasn't been ruled out).

How do you plan to survive this recession and what are your preparations?

It would be helpful to get an insight into other fellow citizens' awareness of the situation and how they're handling this. I am pretty frightened by the goings-on and have started saving (not in cash) as much as possible on my paltry salary. I've also kept my spending very low in order to be ready for the day when I (might) have to live on less or nothing. I've started cycling short distances to keep fit and I hope to increase the distance slowly, one way to wean off automobiles (!). (Survivalist ideas)

If this sounds like a ridiculous thread, feel free to delete, maybe this is taking "Shifting gears" too far from automobiles.