DiggerUK

Does the IMF Warning Indicate a Repeat of 1930s Banking Crises?

On Apr 22 12:44 PM dcb wrote:

> What do you do when all the countries are racing to the bottom?

Stay beyond the minimum safe distance from the finishing line ?
Just a wild guess.

Does the IMF Warning Indicate a Repeat of 1930s Banking Crises?

Sorry,
"inflation multiplier of x25 in 40 years" not 30 years.
Must study maths.
Must study maths.
Must stu................

Does the IMF Warning Indicate a Repeat of 1930s Banking Crises?

Peter,
".......it is still clear that there must be a day of reckoning"
Don't have a fundamental disagreement with that.

What I think we should do is look at what is different between now and 1930, and concentrate our thoughts there.

Exchange rates, gold price, fractional banking multipliers, major world players, were more fixed then, it is a lot more flexible now.

The weakest link in this flexible chain is the world's number one reserve currency. An IOU from the biggest debtor in world history.
At one point it was $35 to an ounce of gold, now it is $880/890 an inflation multiplier of x25. In 30 years.

I think that the systems ability to keep a lid on crisis' blowing out of control has moved from periods measured in days, to periods measured in years.

Capitalism has a remarkable knack of keeping going, so long as people follow a few basic rules. Everybody has been breaking the rules with abandon, that seems quite a meltdown to stop from were I'm sitting.

Plastic: The Next Credit Crunch

In early September last year I was in Iceland on holiday, it seemed that something was up. Never realised until a few days after I got back exactly what.

An interesting story I was told on a number of occasions, was the extension of credit card companies period of settling payments to retailers.

In May retailers were told it would be lengthened to 5 days. Many told of having to wait up to 30 days by September. This has made me think of what would happen if retailers stopped taking payment by credit cards.

Customers would have to pay by cash, or by debit card as the author of this article seems interested in. Such payment methods are well used here in UK. Retailers love it as they get paid instantly into their bank, and pay a fixed fee of about 30 pence (40 cents) per transaction. As against the 4/5% to the credit card companies.

Up till now the credit card companies have had to go on the money markets to borrow the cash to pay the retailers. If trade moves away from credit cards, to cash or debit cards, could the banks handle the increase in a retail cash economy. I think not.