Tag Archives: Eurozone

The Marginal Productivity of Debt.


The key to understanding the problem is the marginal productivity of debt, a concept curiously missing from the vocabulary of mainstream economics. Keynesians take comfort in the fact that total debt as a percentage of total GDP is safely below 100 in the United States while it is 100 and perhaps even more in some other countries. However, the significant ratio to watch is additional debt to additional GDP, or the amount of GDP contributed by the creation of $1 in new debt. It is this ratio that determines the quality of debt. Indeed, the higher the ratio, the more successful entrepreneurs are in increasing productivity, which is the only valid justification for going into debt in the first place.

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Empty nonsense talk from European policy makers.


It is time to end globalism, time to end European Union, time to abandon Euro currency and shut down the Brussels parasitic state once and for all. European people don’t need their stinking opinions on how to run their lives. The sooner this modern economic and political systems come down, the sooner we’ll all breathe easily. It applies to all countries around the world.

G7’s Sheeple Distraction in IQALUIT, Canada, while Central Bankers Meet Secretly in Australia.


We don’t know what the Central Bankers will be discussing during their secret two day meeting in Australia, but what we know is that you don’t hold a well publicized G7 economic ministers meeting at the same time for no reason. If the CBs need a distraction that means that something is very grave and serious is going on. Whether we are on the verge of a new panic and financial crisis or something else, but it cant be good. Perhaps the sovereign debt issues in Europe are on the verge of causing a big monetary implosion and stock markets collapse.

Dubai default is DEFLATION.


When a debtor reneges on its loan repayment obligations or asks to postpone them this is deflation by definition. The debts that cannot be repayed are defaulted on and so the total debt outstanding in the economy deflates. And what about prices? The prices on real estate in Dubai are down as much as 50% since the beginning of the world financial crisis. So when debt deflation takes hold assets lose value and cause even more defaults. We say that we are in a deflationary spiral then. When it stops is a big question, but given world wide government intervention in free markets this almost assures that the so much needed adjustment will take a long and painful haul. Yet the prices will get to their natural level in spite of all government actions to support them.

One can hope that the Dubai default situation will give a much needed kick to accelerate the process of deflation and wipe out the speculators and their central bank friends.

Here goes Dubai.

Deflationary consumer attitudes: Beds made of hay are latest hotel craze in Europe.


Ultimately deflation is rooted in consumer attitudes toward taking on more debt for speculative and consumption purposes. When the proverbial consumer finally reaches the point when he is no longer capable of taking on more debt, an anti-deflationary mind set becomes entrenched and no Central Bank in the world with all its stimulative programs can kick start spending and encourage businesses and individuals to take on more debt. It is not the levels of debt that are catastrophic and lead to its deflation, but it is the inability or unwillingness of debtors to take on more debt is what spells doom for the finance “industry” and the rest of so called economy, which in reality is just a consumption mirage based on fiat money that supports inordinate levels of debt. The point of catastrophe has been reached and we are now gleefully deflating. Deflation can take many forms, such as walking away from your negative equity house, cutting your credit card debt, not being able to get a loan from a bank, or from booking a room in a Hay Hotel. This is a sign of times and only confirms the deflationary trend that, hopefully, will take a very firm hold and straighten this world economy for good.

Japanese bonds and Swiss National Bank err on the side of deflation.


Unlike Government orchestrated propaganda campaign to proclaim imminent recovery, the Government bonds investors and Central Bankers know that deflation is no where near the end. Both Japanese Government bond prices and Swiss National Bank officials tells us – deflation is here and not going away.

Deflation is here and now and everywhere.


If one were to listen to the policy makers and news media, one might think that deflation may still be averted and has not yet arrived. But if one reads the official economic statistics from around the world one will see that deflationary spiral has already arrived and is beginning its whirlwind motions in earnest.

German Consumer Prices Post First Annual Decline in 22 Years.


Just a month ago the ECB officials were confidently BSing everyone that there was not threat of deflation in Eurozone while the credit was collapsing all around them and the CPI was edging lower. Here we are in July and CPI is now drops at fastest pace in Germany, the biggest Eurozone economy. When will ECB admit the truth?

Global deflation pandemic begins to brew.


Behind a global deflation virus is a collapse of demand in the U.S. Unless the economic engine in the U.S. can get cranking again, deflation could keep spreading.

Britain is now deeply in deflationary territory.


Britain is now deeply in deflationary territory. Inflation has registered its steepest decline since statisticians began compiling the figures in 1948. The broad measure of inflation, known as RPI, slumped by 1.6pc on an annual basis.