Hey Bruce, in light of the events of the past week, how about an update on this topic? I'm far from knowledgeable about financial matters, but it sure seems like there is a LOT of exposed beach right now. I think I'll move quickly to high ground.
For better or worse, the US still has its own currency, as do many other countries outside the G7, which at least gives them a certain measure of economic sovereignty. Here in the eurozone, we are trapped in a broken monetary system. When the eurozone melts down, it will be hellish extracting ourselves. Those European countries who still have their own currency, such as Hungary and Poland, will have an easier time of it. Within the eurozone, probably Italy is the country to watch. If it breaks, I can't see the currency union surviving.
Though I'm surprised more Americans aren't upset with sanctions that are damaging Russia more than America, I admit to being mystified as to why more Europeans aren't in the streets opposing sanctions which are clearly suicidal for the European economies. I recognize we mostly have to talk about a free press in America and Europe in the past tense, but surely the internet is porous enough people should have some clue what is going on.
There's a lot of complacency here. The sanctions boomerang hasn't really hit home yet. The bump in food and gas prices is still at the grin-and-bear-it stage. Perhaps it will only dawn on people when unemployment spikes due to industry shutting down.
With the risk of default rising everywhere, I suspect a lot of billionaires and not a few bankers are starting to sweat. Europe has seriously compromised it's economic viability with sanctions on Russia. It's fine for Europeans to feel uncomfortable with being so dependent on Russia gas over the long term, but to pretend in the short-term that dependency doesn't exist, is tantamount to economic suicide. And, after imposing six rounds of economic sanctions on Russia, it's a bit rich for the Europeans to accuse Russia of 'weaponizing' gas.
Europe and Japan are stuck between a rock and a hard place. If they allow interest rates to rise, their debts will crush them. If they don't, devaluation of their currencies subjects there citizens to worse and worse inflation due to the rising cost of imports. Lenders are demanding higher interest rates - the Banker's Rule of 72 means 8 percent inflation causes prices to double in only nine years - halving the value of savings. Once the dollar comes back to Earth, that's when inflation in the US will really take off. Though a rising dollar has crushed US exports, until now it has protected US consumers from the worst of rising prices. That will change soon enough.
Here in Europe, skyrocketing energy costs are going to break our economies. How can modern industry compete without affordable energy supplies? The German misleadership thinks it can do without Russian fossil fuels, that it can turn of the tap overnight...
One thing I've never understood in global economics is how everyone can be in debt simultaneously. Somebody has to be on the positive side of the ledger sheet, right? Is it just private billionaires?
I believe it was Warren Buffet who said: "When the tide goes out you find out who's been swimming naked." I suspect we will find out soon who is holding all that debt. Hopefully it's not your bank or mine. Or my wife's pension fund, for that matter...
Hey Bruce, in light of the events of the past week, how about an update on this topic? I'm far from knowledgeable about financial matters, but it sure seems like there is a LOT of exposed beach right now. I think I'll move quickly to high ground.
You read my mind. I was planning to do a post this week on Disinformation, but current events in the banking world demanded some comment.
Bruce
Awesome! I saw the new post not long after I typed my comment. I should have known you would be all over the story. Thanks!
For better or worse, the US still has its own currency, as do many other countries outside the G7, which at least gives them a certain measure of economic sovereignty. Here in the eurozone, we are trapped in a broken monetary system. When the eurozone melts down, it will be hellish extracting ourselves. Those European countries who still have their own currency, such as Hungary and Poland, will have an easier time of it. Within the eurozone, probably Italy is the country to watch. If it breaks, I can't see the currency union surviving.
Though I'm surprised more Americans aren't upset with sanctions that are damaging Russia more than America, I admit to being mystified as to why more Europeans aren't in the streets opposing sanctions which are clearly suicidal for the European economies. I recognize we mostly have to talk about a free press in America and Europe in the past tense, but surely the internet is porous enough people should have some clue what is going on.
There's a lot of complacency here. The sanctions boomerang hasn't really hit home yet. The bump in food and gas prices is still at the grin-and-bear-it stage. Perhaps it will only dawn on people when unemployment spikes due to industry shutting down.
When the world debt is so high like this it does make me worry but I also start to wonder who we owe. Jupiter?
With the risk of default rising everywhere, I suspect a lot of billionaires and not a few bankers are starting to sweat. Europe has seriously compromised it's economic viability with sanctions on Russia. It's fine for Europeans to feel uncomfortable with being so dependent on Russia gas over the long term, but to pretend in the short-term that dependency doesn't exist, is tantamount to economic suicide. And, after imposing six rounds of economic sanctions on Russia, it's a bit rich for the Europeans to accuse Russia of 'weaponizing' gas.
Thanks for helping me to understand this.
Europe and Japan are stuck between a rock and a hard place. If they allow interest rates to rise, their debts will crush them. If they don't, devaluation of their currencies subjects there citizens to worse and worse inflation due to the rising cost of imports. Lenders are demanding higher interest rates - the Banker's Rule of 72 means 8 percent inflation causes prices to double in only nine years - halving the value of savings. Once the dollar comes back to Earth, that's when inflation in the US will really take off. Though a rising dollar has crushed US exports, until now it has protected US consumers from the worst of rising prices. That will change soon enough.
Here in Europe, skyrocketing energy costs are going to break our economies. How can modern industry compete without affordable energy supplies? The German misleadership thinks it can do without Russian fossil fuels, that it can turn of the tap overnight...
Thanks for this, Bruce.
One thing I've never understood in global economics is how everyone can be in debt simultaneously. Somebody has to be on the positive side of the ledger sheet, right? Is it just private billionaires?
I believe it was Warren Buffet who said: "When the tide goes out you find out who's been swimming naked." I suspect we will find out soon who is holding all that debt. Hopefully it's not your bank or mine. Or my wife's pension fund, for that matter...
I'm guessing that all the banks are tentacles of very few octopi.