World economy talk

[uls]

There is very little major global economic activity. This new round of money infusion will not create economic activity any more than it did between 2009 and 2012. June 30th will mark the day the global economy starts going into a recession with nations seeing economic activity shrinking. This is because of three years of population growth and three years of increasing government deficits. Governments have no monetary power nor can afford to “stimulate.”

That June 30th date will also mark the beginning of major price inflation although the inflation will not start becoming apparent for 12 to 18 months.

The reason there has been low inflation for three years was the belief that increased economic activity could soak up all the excess cheap money. In a year, that belief will be totally destroyed. Commodity prices will go up. Stock markets will rally and emerging-market currencies will go to levels not seen since 1997.

there's inflation and there's deflation

when there's a lot of borrowing and spending going on you get inflation

when borrowing and spending slows down you get deflation

to combat deflation central banks try to create inflation by lowering interest rates (encourage borrowing by making money cheap to borrow)

but when you get to ZERO RATES and there's hardly any inflation what do central banks do?

they monetize debt. QE

[uls]

but what happened in recent years is the money the Fed pumped into the system went back to the Fed

the Fed bought debt from banks. the banks got cash. what did the banks do with the cash? they deposited it at the Fed

[wowiesy]

I understand the part about Spain.. Greece... pero yung sa US...

meaning they can just increase their ASSET column by just printing in more money and releasing it in circulation? I've heard that phrase "print money"... by doing that yes they got more in the ASSET as CASH...

grabe pala... sila pinaka capitalist.. and yet sila din maghihila pababa sa economy ng mundo... in a way may pinaghuhugutan nga yung mga "occupy" movement... greed lang talaga...

[wowiesy]

"they monetized debt"...

yan di ko ma gets... how do you monetize debt? ginawang pera ang utang? debt is supposed to be liability di ba? ginawang asset?

[uls]

to banks loans are assets

loans appear on the asset side of their balance sheet

[uls]

I understand the part about Spain.. Greece... pero yung sa US...

meaning they can just increase their ASSET column by just printing in more money and releasing it in circulation? I've heard that phrase "print money"... by doing that yes they got more in the ASSET as CASH...

grabe pala... sila pinaka capitalist.. and yet sila din maghihila pababa sa economy ng mundo... in a way may pinaghuhugutan nga yung mga "occupy" movement... greed lang talaga...

the Fed had to keep the banks alive. if the big banks failed the global financial system would have collapsed

the Fed bought bad assets from the banks using money it created from thin air. the banks got cash. they were saved

too big to fail

[interruptedz]

nahihilo ko sa mga pinaguusapan nyo.hehe

tanong lang.bakit nagka crisis sa EURO ngayon?ano mali sa ginawa ng GREECE,SPAIN and PORTUGAL? to think na may mga PHD pa mga economic planners nyan.pero sa interview sa TV.majority of greeks gusto pa rin sa EURO.sabi sa BBC kaya daw nagkacrisis sa greece.dahil advantage daw na drachma pa rin pera nila kasi mas weaker daw ang drachma kaya ganun.medyo di ko magets

[uls]

tanong lang.bakit nagka crisis sa EURO ngayon?ano mali sa ginawa ng GREECE,SPAIN and PORTUGAL?

sa Greece at Portugal malaki utang ng gobyerno nila. since kulang ang tax collection umuutang sila pambayad sa utang. ok sana basta may nagpapautang kaya lang dumating ang panahon na ayaw na sila pautangin

yung Spain naman nagkaroon ng real estate boom. yung mga bangko nila dami mortgage loans, construction loans. nag bust yung boom. yung mga loans di nababayaran. patay mga bangko. so kailangan ng Spain govt i-bailout mga bangko. kulang naman ng pera

umabot sa point na aywa nmajority of greeks gusto pa rin sa EURO.sabi sa BBC kaya daw nagkacrisis sa greece.dahil advantage daw na drachma pa rin pera nila kasi mas weaker daw ang drachma kaya ganun.medyo di ko magets

advantage ng may sariling currency pwede ka mag print pambayad ng utang (basta denominated sa currency mo yung utang)

like pag nangutang ang gobyerno natin in peso walang problema sa pag bayad dahil may ari ng Pinas ang Bangko Sentral na taga print ng peso

pero pag nangutang ang gobyerno natin in dollar dapat may dollar pumapasok sa economy natin para may dollar na pambayad

when you run out of dollar reserves to pay dollar loans IMF ang bagsak mo

ang mga bansa sa eurozone di sila maka print ng euro

ang ECB lang makakaprint ng euro

the ECB is outside the control of individual governments

[uls]

kaya kung drachma ang currency ng Greece at ang utang ng gobyerno nila denominated in drachma walang problema ang pambayad

pag bumalik ang Greece sa drachma automatic devaluation more than 50% siguro (against the euro)

that will make everything in Greece so damn cheap to euro holders

magiging sobra mura labor nila

magiging very competitive ang Greece

[wowiesy]

to banks loans are assets

loans appear on the asset side of their balance sheet

because for banks, these loans are receivables?

[wowiesy]

the Fed had to keep the banks alive. if the big banks failed the global financial system would have collapsed

the Fed bought bad assets from the banks using money it created from thin air. the banks got cash. they were saved

too big to fail

yeah.. read the book.. and saw the movie din... grabe...

[uls]

para sa banks loans are assets coz borrowers repay the loan amount (principal) plus interest

dyan sila kumikita

para sa borrowers naman loans are liabilities coz they owe a bigger amount than they borrowed

[wowiesy]

kaya kung drachma ang currency ng Greece at ang utang ng gobyerno nila denominated in drachma walang problema ang pambayad

pag bumalik ang Greece sa drachma automatic devaluation more than 50% siguro (against the euro)

that will make everything in Greece so damn cheap to euro holders

magiging sobra mura labor nila

magiging very competitive ang Greece

kung yan ang upside sa Greece (at least for their domestic concerns).. what are the downsides?

para naman sa external (like us).. upside and downside?

[uls]

kung yan ang upside sa Greece (at least for their domestic concerns).. what are the downsides?

para naman sa external (like us).. upside and downside?

if Greece goes back to the drachma, imports will become very very expensive for them

if Greece will transition from euro to drachma, that transition will be painful not only for them but for anyone who Greece owes money to

if you're owed euros by a company in Greece, you wouldnt wanna be paid back in drachma

internally, if you have euro deposits in Greece banks then they shift to drachma, all your euros will be converted to drachma

[uls]

the EU is thinking up a bailout program for the Spanish govt to aid its banking sector

the idea is to impose not-so-strict conditions so the Spanish govt would be more willing to accept a bailout

[interruptedz]

kaya kung drachma ang currency ng Greece at ang utang ng gobyerno nila denominated in drachma walang problema ang pambayad

pag bumalik ang Greece sa drachma automatic devaluation more than 50% siguro (against the euro)

that will make everything in Greece so damn cheap to euro holders

magiging sobra mura labor nila

magiging very competitive ang Greece

so are you saying its better for greece to get out of euro? ano naman ang cons ng pag labas sa euro?
i think printing more money wont work kasi ganyan din ginawa ng ARGENTINA dati.ano nangyari?sumobrang taas presyo ng bilihin at bumagsak value ng pera nila.masyado silang naghirap noon.di ko na nasundan pano ginawa nila to save the economy

[interruptedz]

sa Greece at Portugal malaki utang ng gobyerno nila. since kulang ang tax collection umuutang sila pambayad sa utang. ok sana basta may nagpapautang kaya lang dumating ang panahon na ayaw na sila pautangin

yung Spain naman nagkaroon ng real estate boom. yung mga bangko nila dami mortgage loans, construction loans. nag bust yung boom. yung mga loans di nababayaran. patay mga bangko. so kailangan ng Spain govt i-bailout mga bangko. kulang naman ng pera



advantage ng may sariling currency pwede ka mag print pambayad ng utang (basta denominated sa currency mo yung utang)

like pag nangutang ang gobyerno natin in peso walang problema sa pag bayad dahil may ari ng Pinas ang Bangko Sentral na taga print ng peso

pero pag nangutang ang gobyerno natin in dollar dapat may dollar pumapasok sa economy natin para may dollar na pambayad

when you run out of dollar reserves to pay dollar loans IMF ang bagsak mo

ang mga bansa sa eurozone di sila maka print ng euro

ang ECB lang makakaprint ng euro

the ECB is outside the control of individual governments

so umuutang ang portugal and greece para pambayad sa utang?are you refering to domestic debt? and saan sila umuutang? foreign?

[uls]

so umuutang ang portugal and greece para pambayad sa utang?are you refering to domestic debt? and saan sila umuutang? foreign?

yup. that's called rolling over debt. issuing new bonds to pay off maturing bonds. everyone does that

investors lend them money. bond investors. local and foreign

[uls]

so are you saying its better for greece to get out of euro? ano naman ang cons ng pag labas sa euro?

if Greece leaves the euro there could be contagion. the market will then look to Portugal leaving the euro... then Spain

not good. if the collapse of Lehman was bad this could be worse

--

Greece leaving the euro will be painful in short run

better for Greece in the long run

[uls]

i think printing more money wont work kasi ganyan din ginawa ng ARGENTINA dati.ano nangyari?sumobrang taas presyo ng bilihin at bumagsak value ng pera nila.masyado silang naghirap noon.di ko na nasundan pano ginawa nila to save the economy

i'm neutral on money printing

Japan has been printing for years but the yen keeps strengthening

the Fed added trillions of dollars to its balance sheet but the USD is still in high demand specially in fearful times