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Global credit markets are braced for deflation and perhaps depression

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posted on Aug, 18 2011 @ 06:46 PM
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Bond markets signal 'Japanese' slump for US and Europe



Panic flight to safety has pushed the yield on 10-year US Treasuries below 2pc for the first time in American history, exceeding the extremes of the Lehman crisis and the banking crash of the 1930s.

Investors scrambled to buy the bonds of strongest industrial states on Thursday on fears of a double-dip recession on both sides of the Atlantic and a European banking crash, driving down their returns to investors. German yields fell to 2.08pc and Switzerland's 3-month rates have turned deeply negative.

Markets were stunned by a plunge in the manufacturing index of the Philade lphia Federal Reserve to minus 30.7 in August from plus 3.2 in July, one of the most violent falls ever recorded.

"It is a catastrophic collapse," said Rob Carnell from ING. "Markets are in a fearful state right now, and data like this gives them plenty of excuses to panic."

"It won't take much for the interbank market to collapse," said Lars Frisell from Sweden's Riksbank. "It is extremely important that we don't see a repeat of the situation in 2008."

Morgan Stanley warned that both Europe and America are "dangerously close to recession". The banks said a repeat of the Lehman meltdown in 2008 is unlikely since households and companies have healthier debt levels today, but the risk is there if the eurozone drifts into a policy blunder and allows the default of a sovereign state. "This could bring down the whole financial system," it said.

Elga Bartsch, the bank's Europe economist, said euroland remains the "weakest link" in the global chain. "The risks of another shock pushing the region over the edge are significant," she said.

Jacques Delors, the ex-president of the European Commission and the euro's "godfather", pleaded for a "partial mutualisation of debts" to save the European Project and prevent the EU degenerating into a "mere free-trade zone".

"Open our eyes: the euro and Europe are on the brink of the abyss. From the start of the crisis Europe's leaders have refused to face reality," he told Belgium's Le Soir, saying it was staggering European leaders had gone on holiday after the EU's July summit without activating the emergency measures agreed.


What a mess. How else can it be described? The article also mentions how southern European states can no longer 'resort to emergency stimulus to cushion the downturn and may have tighten fiscal policy to satisfy the bond vigilantes' and 'changes to the Lisbon Treaty and a profound reform of the Maastricht system if monetary union is to survive'. They are fast running out of tools and options to address the crisis and it appears to be rapidly worsening. This may save the US from having to face the world as responsible for the next global market collapse as they will be able to point the European crisis as the cause.

Anyway, have a look also at the article cited in the commentary re Philly Fed index warns that risk of double-dip recession is growing
.

Is this indicator cause for alarm?

From the commentary we read:


In a fresh blitz of weak data, economists were particularly shaken after a survey of confidence among manufacturers around the eastern city of Philadelphia collapsed to its lowest level since 2009.

The main index tumbled to minus 30.7 this month – against forecasts of a reading of plus 3.7 – its weakest since the US was still mired in its last recession during the first quarter of 2009, compared with a reading of plus 3.2 in July....

"The Philly Fed index is the first indicator to send an unambiguous recession signal," said Chris Low, an economist at FTN Financial in New York. "But it must be confirmed by something else before betting the farm on it."


It's referred to as The Scariest Chart Ever, and maybe with good reason.

Lots of news generally today with markets tumbling, fears of global recession on the horizon, downgrades and downward forecasts popping up everywhere. Talk of feeling like 2008 again. Interesting times!




posted on Aug, 18 2011 @ 06:56 PM
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Double dip recession? What a crock! We never left the recession and are currently in a depression.



posted on Aug, 18 2011 @ 07:02 PM
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reply to post by sonofliberty1776
 


Oh I agree, but you know, the pollyannas of the world don't want to hint at that.



posted on Aug, 18 2011 @ 07:06 PM
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Originally posted by sonofliberty1776
Double dip recession? What a crock! We never left the recession and are currently in a depression.


No your wrong cause his holiness was on TV just a while back saying how the recession was over!
So it's back to the recession for us all it looks like, the good ole days are over temporarily anyhow.

Don't worry though I am sure that the big O has something up his sleeve along the lines of a stimulus that will make everything all rainbows and unicorns again!



posted on Aug, 18 2011 @ 07:07 PM
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Originally posted by SpaDe_

Originally posted by sonofliberty1776
Double dip recession? What a crock! We never left the recession and are currently in a depression.


No your wrong cause his holiness was on TV just a while back saying how the recession was over!
So it's back to the recession for us all it looks like, the good ole days are over temporarily anyhow.

Don't worry though I am sure that the big O has something up his sleeve along the lines of a stimulus that will make everything all rainbows and unicorns again!
What else is there to say when they feed us crap like that?



posted on Aug, 18 2011 @ 09:44 PM
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World on edge of crisis, ANZ's chief executive Mike Smith says


THE world economy is on the brink of another economic crisis, ANZ chief executive Mike Smith says.
Policy makers in Europe and the United States have failed to show leadership in dealing with massive debt problems, and risk causing serious financial and social pain around the world if the trend continues, he says.

"Europe is frankly a mess," he said while delivering a trading update for ANZ this morning.

"And the United States, which I'm normally much more optimistic about, we've seen a crisis which was created by the partisan nature of its current politics.

"That's created further concern to what was already a pretty fragile recovery."

"I think it is fair to say that right now this is all now very delicately poised," Mr Smith said.

"I think further mis-steps from European and US policy makers really risks converting the cracks in their economies into a much deeper global system crisis which would have worrying economic and social consequences."


Hey Smithy feeling some jitters now eh? Dampen some of your optimism? Nevermind, the Australian banks are having a profit party currently with interest rates the highest among the developed world.



posted on Aug, 19 2011 @ 08:56 AM
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Prices are still going up where I live.

I'm not seeing the threat of this so-called horrible deflation.



posted on Aug, 19 2011 @ 09:13 AM
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Originally posted by Rockdisjoint
Prices are still going up where I live.

I'm not seeing the threat of this so-called horrible deflation.



Here is an article from Answers.com
talking about how prices go up during deflation.


1.The supply of money goes up.
2.The supply of goods goes down.
3.Demand for money goes down.
4.Demand for goods goes up.

why don't prices decline during A Recession


Expect it to get worse.


David Grouchy
edit on 19-8-2011 by davidgrouchy because: (no reason given)



posted on Aug, 19 2011 @ 09:22 AM
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Originally posted by Rockdisjoint
Prices are still going up where I live.

I'm not seeing the threat of this so-called horrible deflation.


Around here luxury prices are slipping lower and lower while day to day necessities are sky rocketing. I don't know how it works but guess it all depends on what exactly they put in the basket they are using to determine if we are experiencing inflation/deflation.

But then again I could be talking out my bum as I am not sure how it works but it feels like everything I need to buy is getting dearer.



posted on Aug, 19 2011 @ 09:52 AM
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reply to post by thoughtsfull
 

reply to post by davidgrouchy
 

Or, this not so threating threat of deflation doesn't really exist and they just want an excuse to keep printing money.



posted on Aug, 19 2011 @ 10:26 AM
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If they stop raising the debt ceiling and cease extending the entitlement programs, you can betcha a deflation is gonna come. Rejoice!




posted on Aug, 19 2011 @ 04:27 PM
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Originally posted by thoughtsfull

Originally posted by Rockdisjoint
Prices are still going up where I live.

I'm not seeing the threat of this so-called horrible deflation.


Around here luxury prices are slipping lower and lower while day to day necessities are sky rocketing. I don't know how it works but guess it all depends on what exactly they put in the basket they are using to determine if we are experiencing inflation/deflation.
Yet another prophecy being fulfilled before our eyes.


New International Version (©1984)
Then I heard what sounded like a voice among the four living creatures, saying, "A quart of wheat for a day's wages, and three quarts of barley for a day's wages, and do not damage the oil and the wine!"

New Living Translation (©2007)
And I heard a voice from among the four living beings say, "A loaf of wheat bread or three loaves of barley will cost a day's pay. And don't waste the olive oil and wine."

English Standard Version (©2001)
And I heard what seemed to be a voice in the midst of the four living creatures, saying, “A quart of wheat for a denarius, and three quarts of barley for a denarius, and do not harm the oil and wine!”

New American Standard Bible (©1995)
And I heard something like a voice in the center of the four living creatures saying, "A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not damage the oil and the wine."

International Standard Version (©2008)
I heard what sounded like a voice from among the four living creatures, saying, "A quart of wheat for a denarius, or three quarts of barley for a denarius. But don't damage the olive oil or the wine



posted on Aug, 19 2011 @ 05:16 PM
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Originally posted by Rockdisjoint
Prices are still going up where I live.

I'm not seeing the threat of this so-called horrible deflation.



well then your 401K must be prospering...unlike 99% of us others...
also your stock holdings must have excaped the current 1500-1800 downturn
... duh --- these are forms of 'Deflation'
your gasoline & food, energy price increases are not really 'Inflation' they are the result of the Dollar being deflated in value !
get your head on straight first... don't be swayed by the MSM propogandists



posted on Aug, 19 2011 @ 05:29 PM
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reply to post by St Udio
 



these are forms of 'Deflation'

You're wrong, deflation is a contraction of the money supply.



your gasoline & food, energy price increases are not really 'Inflation' they are the result of the Dollar being deflated in value !

Um, no. It really is inflation, since the govt is printing money and lots of it. Inflation is what causes the dollar to lose its value.



get your head on straight first... don't be swayed by the MSM propogandists

You're the one repeating mainstream economic lines here. Not me.

edit on 19-8-2011 by Rockdisjoint because: (no reason given)



posted on Aug, 19 2011 @ 10:04 PM
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Originally posted by Rockdisjoint
reply to post by St Udio
 



these are forms of 'Deflation'

You're wrong, deflation is a contraction of the money supply.


Which would cause inflation.



posted on Aug, 19 2011 @ 10:06 PM
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reply to post by sonofliberty1776
 


That prophecy's been fulfilled in the Weimar Republic.



posted on Aug, 21 2011 @ 10:46 AM
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Originally posted by eldard

Originally posted by Rockdisjoint
reply to post by St Udio
 



these are forms of 'Deflation'

You're wrong, deflation is a contraction of the money supply.


Which would cause inflation.

No it wouldn't.

This is my main problem with you pro-inflationary types. You consistently make stuff up to fit your point of view, although rarely anything you people say is based on actual facts.

Deflationary credit contraction is needed for our economy to have a real recovery.



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