Credit Crunch: Housing Bubbles, Globalisation and the Worldwide Economic Crisis

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Credit Crunch: Housing Bubbles, Globalisation and the Worldwide Economic Crisis Pub. Date: 7/28/2008 Publisher: Pluto Press
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The Credit Crunch: Housing Bubbles, Globalisation and the Worldwide Economic Crisis (Library Binding) Pub. Date: 7/28/2008 Publisher: Pluto Press

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Overview

This book argues that the current financial turmoil signals a crisis in globalisation that will directly challenge the free market economic model.

Graham Turner shows that the housing bubbles in the West were deliberately created to mask the damage inflicted by companies shifting production abroad in an attempt to boost profits. As these bubbles burst, economic growth in many developed countries will inevitably tumble. The Japanese crisis of the 1990s shows that banks and governments may struggle to contain the fallout. The problem has not been limited to the US, UK and Europe: housing bubbles have become endemic across wide swathes of emerging market economies. As the West slides, these countries will see an implosion of their credit bubbles too, shaking their faith in the free market.

Turner is an experienced and successful economic forecaster, whose opinions are sought by large international banks and top financial journalists. Drawing from his first hand experience of the Japanese property crash of the 1990s, he presents his analysis in a clear and persuasive style, showing that the end of housing market growth spells disaster for neoliberal globalisation.

About the Author:
Graham Turner is the founder of GFC Economics, an independent economic consultancy which provides forecasting services for some of the world's largest banks

Product Details

ISBN-13: 9780745328102
Publisher: Pluto Press
Publication date: 7/28/2008
Pages: 256
Sales rank: 1,222,108
Product dimensions: 5.30 (w) x 8.40 (h) x 0.60 (d)

Meet the Author

Graham Turner is the founder of GFC Economics, an independent economic consultancy which provides forecasting services for some of the world's largest banks. He has worked in the financial sector for over 20 years, spending the 1990s working for Japanese banks.

List of Tables and Figures

Glossary

GFC Economics

1 Introduction 1

2 Global Contagion 14

3 Addicted to Debt 26

4 'Free Trade' and Asset Bubbles 48

5 Dealing With the Fallout 84

6 A Global Credit Bubble 109

7 Japan's Bear Market 135

8 Policy Failures in a Liquidity Trap 159

9 Where Are We Heading? 188

Notes 194

Index 222

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Willp

Posted June 4, 2009

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Useful analysis, lousy politics

Graham Turner is the founder of a firm that 'provides forecasting services for some of the world's largest banks'. He writes, "the free trade agreements . drained jobs from the heart of industrial America, caused the real median wage to fall and led to an inexorable rise in debt." Globalisation causes the export of jobs, increases profits and forces wages and prices down. This keeps interest rates low, encouraging easy loans and reckless lending, driving up debt levels and house prices, and creating housing and credit bubbles.

Governments and banks encouraged extreme borrowing by individuals, companies and local authorities. In 1997 in Britain, individuals' debts totalled £570 billion, by 2007, £1,512 billion, rising from 102 per cent of disposable income to 173 per cent, the highest level in the developed world. Since 2000, more than a hundred countries have seen debt levels rise even more than in Britain, e.g. Belarus by 6000 per cent, Kazakhstan by 4000 per cent and Ukraine by 3000 per cent.

Global free trade inevitably becomes an engine of destruction. Debt-driven consumer demand sucks in record amounts of imports, again forcing wages down. As Turner notes, "Imports of cheap goods from low-cost countries have been fundamental to the downward pressure on wages for many workers." Free trade policies are 'beggar-my-neighbour' policies.

We have record trade deficits against low-cost competitors like the new EU members: between 2004 and 2008, our imports from the Czech Republic rose by 106 per cent, from Hungary by 113 per cent, from Poland by 133 per cent, and from Slovakia by 390 per cent.

As Turner admits, "The jobs lost since New Labour came to power have been the result of free trade and cost-cutting." All the parliamentary parties support 'the free trade policies that underpinned New Labour's economic mirage'. 1.3 million manufacturing jobs have been destroyed since 1997. In machine production, 30 per cent of the jobs have gone, and a £3.8 billion surplus in 1997 became a £17.4 billion deficit in 2007. In road vehicle production, a £6.9 billion deficit worsened to £15.2 billion.
He sums up the reasons for Japan's debt deflation: "The inexorable slide into a liquidity trap had been initiated by uncontrolled asset inflation, record borrowing and corporate excess. This could happen to any country that failed to check the forces of unbridled speculation. . By putting so much pressure on companies to dispose of bad debts and boost profitability, the Japanese government inadvertently sent wages spiralling down, fuelling deflation and boosting real borrowing costs." Japan's profits and debts rose, while its wages fell by 14 per cent between 1998 and 2006.

What does Turner propose we do? He veers from liberalism to realism. First, he calls on employers to 'allow' higher wages. Then he admits, "Out of a naked self-interest, companies will never voluntarily agree to partake in a less uneven and destabilising mode of globalisation."
He opposes workers' efforts to protect our industries and jobs, writing, "Free trade is a good thing, but not when it is used by companies simply as a ruse to cut costs." And how would he stop companies using this 'ruse'? He wants a 'new economic agenda . that balances the interests of companies and workers more evenly, and promotes a free trade that does not fuel the boom and bust seen today." All he wants is free trade without its inev
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Credit Crunch: Housing Bubbles, Globalisation and the Worldwide Economic Crisis

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Useful analysis, lousy politics