Lewes Forum thread

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World economic and environmental crisis begins.

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On 8 Jan 2016 at 2:07am Alarm call wrote:
This is the most dangerous century the human race has ever had to face since the Toba volcano exploded 70,000 years ago and reduced the human population two a few thousand reproductive adults.

Cameron and Osborne clearly do not understand that cutting carbon emissions is such an urgent problem that global emissions must fall now, on a steep ski slope trajectory, not a linear fall, or worse a ballistic arc, if there is to be a likely possibility of not exceeding a +2C rise in Global Mean Surface Temperature (relative to 1870) and they presumably have no comprehension that +2C GMST is not an assured safe zone for humanity.

This is no time for Europe to break apart into small quarrelling competing nations, too small to have any influence on America, China or Russia; too small to have all the resources necessary to provide security in the face of the pressing global problems.

Cameron and Osborne are not visionary statesman, nor competent decision makers. They have proved to be untrustworthy, shallow thinkers, still believing in the failed economic ideology of cut taxes, deregulate, remove government, let markets decide everything; never mind that this Anglo American experiment experiment brought about the corruption and crash of the global financial system, never mind that resource consumption on this planet is neither sustainable nor compatible with maintaining the stability of the biosphere and climate system that modern civilisation is dependent upon for food production, fresh water, and stable habitation zones making organised economies possible.They do not see that the world of pre 2007 is gone forever.

They do not see that the America is failing because the US Congress is deadlocked by Republican leaders with fossil brains that do not accept the first class climate science produced by their own universities, Nasa Giss, NOAA and leading research institutes such as Woods Hole and Scripps, many of them do not accept evolution, some even think the world is just a biblical age.

They do not see that Europe needs to replace our weak Union with a strong Union, able to fend for itself if needs be, but striving to bring rational management to this rock in space before war comes to all nations in desperate wars on a climate ravaged world. Only a large united geographic region will be able to offer its people the security that comes from access to food, water, habitable zones, healthcare, minerals, and renewable energy, in the harsh decades ahead. Only such a union can maintain the skills base, higher education, manufacturing, engineering, steel production, and the scale of research and development also necessary for security.

Of course there must be harmonisation of taxation, laws, social conditions, rights, and responsibilities.

It is time for Parliament to wake up, see itself for what it is, an unrepresentative failed institution unfit to govern that requires a total reformation of both Houses, a new voting system, less politics, far more professional expertise, and an emphasis on rational decisions based on trustworthy data from independent sources.

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On 8 Jan 2016 at 4:44am Lewes Voter 3 wrote:
This is copied wholesale, including spelling errors, from a Guardian comment by a very prolific commentator there known as "Alarmcall".
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On 8 Jan 2016 at 6:01am Are you sure wrote:
the spelling errors are the Grauniad's and not the Lewes illiterati ?
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On 8 Jan 2016 at 10:26am Groan wrote:
Sounds like it was written by a failed arts student or journalism student unfamiliar with the subjects being discussed. The tone is reminiscent of my own hilarious (to others) rants when I was a early twenties " genius " who knew how to save the world. Luckily nobody gave a ...... what I said.
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On 8 Jan 2016 at 11:57am truth wrote:
The financial turmoil and worst four-day drop to start a year for the broad U.S. stock market has jittery investors flashing back to the dark days of the financial crisis. But most Wall Street pros still insist this not the first act in a sequel to the panic of 2008.
That’s not to say U.S.-based market strategists are downplaying the severity of the financial turbulence, as the Standard & Poor's 500's 4.9% drop so far this year eclipses the 4.48% four-day plunge in 2000. The market-funk comparisons being tossed around include:
* The summer swoon of 2015. Similar shock waves out of China this past summer sent U.S. stocks skidding to their first correction, or drop of 10% or more, in four years.
* The USA’s credit rating cut scare in 2011. With Europe’s debt crisis hanging over markets, Standard & Poor’s dropped a bombshell on Wall Street when it downgraded the USA’s mint-AAA credit rating that August, sending the Dow Jones industrials down more than 1,400 points – or nearly 12% -- in eight trading days.
* The financial crises of 1997 and 1998. Markets were roiled by the Asian currency crisis in the summer of 1997 and the collapse of hedge fund Long-Term Capital Management in the fall of 1998.
While all these steep market drops were scary, what they had in common was they did not result in major financial contagion or long-lasting stock market declines. Most Wall Street pros are betting on a similar outcome this time, though a major correction or 20% bear market drop, could occur.
“This is not 2008,” says Brian Belski, chief investment strategist at BMO Capital Markets, who believes this is more akin to the selloff in August. “2008 always comes up when there is weakness because it was the most recent ‘big scare.’”
The general consensus, based on the thinking of a dozen top market strategists contacted by USA TODAY, is that the latest market mayhem originating in China – sparked by massive declines and trading halts in China’s stock market and growing fears that a more serious slowdown in the world’s second-biggest economy will dent global growth – won’t morph into an event similar to the monumental bust in 2008 when the stock market lost more than half of its value and the U.S. economy was sideswiped by the “Great Recession.”
“Big correction,” is the way David Kotok, chief investment officer at Cumberland Advisors, describes the latest market stumble.
Adds James Paulsen, chief investment strategist at Wells Capital Management: “My guess is this is an ongoing correction to readjust the U.S. stock market’s valuation rather than a bear market or a recession. I think the stock market needs to find a lower valuation level which is sustainable given new challenges it faces.”
Paulsen ticks off a few reasons why he thinks Wall Street is going through a corrective phase rather than facing another financial crisis.
“I don’t think the world economy is that close to a recession,” he says. “Most of the world economy and particularly the U.S. is in solid financial shape. U.S. consumers have record setting net worth of some $85 trillion (about 25% higher than the previous peak in 2007) and face a record low debt service burden. U.S. businesses have perhaps the strongest balance sheets in post-war history and the U.S. banking industry has never been this well capitalized. Second, I don’t think the China economy is that bad.”
At the moment, however, U.S. investors are heading to the sidelines because they are getting hit with a lot of negatives at once: China, North Korea's H-bomb test, Iran-Saudi tension, plunging oil prices, shifting Federal Reserve interest rate policy and earnings concerns, says Bill Hornbarger, chief investment strategist at Moneta Group.
"It doesn’t appear to be the start of a bear market yet," he says. "Remember in 2008, the markets just quit functioning. This has been relatively orderly and liquidity has been available to handle the selling. (It) doesn't feel like 2008."
Not everyone is so sanguine. Billionaire and investing titan George Soros, for example, said in a speech abroad that the current market troubles reminded him of the “crisis we had in 2008,” The Sunday Times in Sri Lanka reported Thursday.
Stocks are facing many headwinds: interest rate hikes from the Federal Reserve, slowing earnings growth, weak commodities and slowing global growth --at a time when the market is fully valued.
Axel Merk of Merk Funds says the stock market is already in a bear market which started last summer.
“We haven't seen anything yet,” says Merk. “Central banks took fear out of the market; as the Fed has started raising rates, fear is creeping back in. China's turmoil is just a symptom here, hence my view that things will get a lot worse before they get better. Is this a panic? No. But the shift from buying the dips to selling the rallies may be intensifying.”
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On 8 Jan 2016 at 12:29pm truth wrote:
Less than a decade ago, the world economy sank into the Great Recession: the deepest and most widespread downturn since the Great Depression of the 1920s and '30s. Since the stock market crashed in 2008, recovery has been long and slow, marked by persistent bumps in the road along the way. Nonetheless, an economic recovery has, indeed, taken place. The S&P 500 index has risen more than 92% over the past five years, and U.S. unemployment has dropped from nearly 10% at the height of the Great Recession to close to 5% today.
A lot of this apparent growth, however, has been fueled by government bailouts, loose monetary policy and huge injections of capital in the form of quantitative easing. The problem is that expansion cannot continue forever, fueled only by cheap money and central bank support. Ultimately, the underlying fundamentals of an economy must catch up with the stimulus to create real growth. Because the real economy has lagged in many ways, it might be the case that we are on the verge of another global recession. Here are some signs that a recession may be on the horizon.
The European Situation Has Gotten Worse
The sovereign debt crisis that followed the Great Recession in Europe has been a persistent issue, and Europe represents a significant part of the world economy. The European Central Bank (ECB) has also taken the extraordinary measure of implementing quantitative easing in the Eurozone to stimulate growth.The so-called PIIGS nations (Portugal, Ireland, Italy, Greece & Spain) have been bailed out repeatedly by the European Union and the IMF, with mandatory austerity measures imposed on their populations. Not only has austerity been unpopular, such measures may have also restricted growth by reducing aggregate demand and keeping the debt burdens in these nations high. (See also: Who Are the Biggest Losers for a Greek 'No' Vote.)
The worst of the PIIGS has been Greece, which recently defaulted on an IMF loan. The Greeks had elected an anti-austerity government which called a popular referendum, rejecting EU bailout terms and calling for an end to austerity. Even though Greece itself represents a relatively small portion of the Eurozone, the fear is that if Greece leaves the European common currency (the so-called Grexit), other PIIGS countries will follow and contagion will spread, putting an end to the euro experiment. A collapse of the euro would have widespread negative consequences for the world economy, perhaps bringing on recessions. (For more, see: How PIIGS Defaults Could Affect Markets.)
The Chinese Bubble Has Begun to Pop
The Chinese economy has grown by an extraordinary amount over the past few decades. Chinese GDP is second in the world only to the United States, and many economists believe that it is only a matter of time before China will overtake the United States.
China's government, however, imposes capital controls in order to keep its money within its borders. Therefore, as the Chinese middle class has grown, they have few options when it comes to investing their new wealth. As a result, Chinese stocks and real estate, two of the places where Chinese people can invest, have become increasingly expensive, with the hallmarks of a bubble forming. As early as a few months ago, the Chinese stock market had an average P/E ratio higher than the rest of the world's, with the Chinese technology sector showing bubble-like valuations of more than 220 times earnings on average. To put that in perspective, the tech-heavy NASDAQ market had an average P/E of 150 times before the dot-com bubble burst. Recently, the Chinese stock markets have experienced a correction, with the government taking such cautionary measures as curbing short selling. (See also: Is This Massive Chinese Bubble About to Burst?)
Meanwhile, the real estate boom has led to overproduction of building resulting in so-called ghost cities, entire urban landscapes where nobody lives. When the market sees that the oversupply cannot meet demand, prices may collapse in the Chinese housing market. (See also: Basics of the Chinese Real Estate Industry.)
If the Chinese economy slips into recession, it is likely to drag down the rest of the world as well.
A Debt Problem Growing in Student Loans
The debt crisis that accompanied the Great Recession had a lot to do with the burden of home mortgages that were issued to people who simply could not pay them back and bundled into securities called collateralized debt obligations (CDO) and sold to investors with an illusory 'A'-credit rating. Today, something similar seems to be going on in the student loan market.
The U.S. government backs nearly all student loans, so ratings agencies pin a high credit rating to these debts, even though a student may not have the ability to repay. Right now, the government is on the hook for over $1.2 trillion in outstanding student loans that need to be paid back. To put that in perspective, Australia's GDP in 2014 was only $852 billion.
Not only could a wave of defaults impede the U.S. treasury's ability to function properly, but student loan burdens prevent young people from engaging in other economic activity such as buying homes and cars.
The Unemployment Picture is not as Rosy as it Seems
The U.S. unemployment rate fell to 5.3% in June, 2015, the lowest level since the crisis began. But that so-called headline unemployment rate does not include discouraged workers who have taken on temporary or part-time work to make ends meet. When accounting for that part of population (called the U6 unemployment figure), the unemployment rate jumps to 10.5%. There has been a steady decline in the labor force participation rate, which measures how many people in the potential workforce are actually working, to levels not seen since the 1970s. Since even the U6 unemployment rate accounts for those in the workforce, the actual unemployment rate when accounting for the declines in the workforce participation rate is much higher.
Even for those working, the real wage has remained fairly stagnant, or has even fallen for the average American from pre-2008 levels. The real wage accounts for the effects of inflation, and a stagnant real wage can indicate a weak economy that isn't showing real economic growth. (For more, see: Will You See Higher Wages in 2015?)
Central Banks Have Little Room to Work With
Central banks typically employ loose, or expansionary monetary policy to stimulate an economy when it appears to be slowing down. They do this by lowering interest rates, engaging in open market operations, or through quantitative easing. Since interest rates are already near-zero, with some European countries even deploying a negative interest rate policy (NIRP), that policy tool is no longer effective for banks to use to stave off the next downturn. Meanwhile, quantitative easing and the buying of government assets has already ballooned central bank balance sheets to unprecedented levels. Again, central banks will see their hands tied in trying to avert a recession. (See also: Understanding the Federal Reserve's Balance Sheet.)
Economic Data Shows Patterns Similar to Right Before the Last Recession
Aside from the "stories" unfolding in the global economy above, some finer economic data is beginning to show some eerily similar patterns that have predicted recessions in the past:
- Retail Sales have dropped the most since before the last recession. The same is true with wholesale sales.
- U.S. factory orders have dropped the most since the collapse of Lehman Brothers.
- Real U.S. GDP growth has begun to decline, turning slightly negative last quarter.
- U.S. export growth has been weakening.
- Corporate profits are beginning to decline.
The Bottom Line
We may be on the verge of another global recession. Patterns in economic data are showing signs of weakness, and the troubles persisting in Europe or the bubble bursting in China may be the trigger that sends the economy over the edge. Unlike in 2008, when central banks were able to lower interest rates and expand their balance sheets, central banks now have much less elbow room to enact loose monetary policy to prevent a recession from happening. Recessions are a normal part of the macroeconomic cycles that the world experiences, and happen from time to time. The last recession was already seven years ago. Signs may show that the next is right around the corner.
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On 8 Jan 2016 at 4:45pm Enviroconomist. wrote:
Global capitalism needs needs ever increasing growth to keep moving forward and togenerate increasing profits.Unfortunately the world`s resources are finite and the tipping point has already arrived.Something has to give.It`s that simple.we are destroying the foundations of the ecosystem we depend on for our existence.
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On 8 Jan 2016 at 9:13pm bob wrote:
Personally I think everything will be ok. But I'm just an optimist.


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