Announcements

I'll post announcements here.

First announcement:

Stop saying "COUNTRY X SURVIVES RECESSION THROUGH AWESOMENESS". I've repeatedly seen countries say that they aren't being affected as severely as other countries, without even bothering to do any minimal RPing on the matter. This is a global crisis, and unless you're doing some incredible RPing on the matter, you're going to be facing a moderate to severe slowdown.

I don't mean to single out people here, but Finland was a great example. He said that two of his major corporations collapsed, but that these catastrophic failings cost the economy a few hundred million Euros and that everything was going to be peachy. Also that Finland "had learned its lesson."

Quite frankly, if when big corporations collapsed, the economy just shrugged it off, then the Fed wouldn't be rescuing companies left and right in America. When two of your major financial institutions fold in the middle of a crisis of confidence in, you guessed it, financial institutions, you're looking at basically a worst-case scenario. What makes a real worst-case scenario is when the government's response is to say that "it's learned its lesson", and encourage banks to lend less and to keep more reserves.

If banks lend less during a crisis caused by banks lending less and two banks collapse, that's a catastrophic financial meltdown. I'm talking on the order of Sweden, Norway, Denmark, and Iceland getting hurt.

So basically, stop saying that you aren't affected by the crisis, because you probably are.

Actually, you did single me out, so please allow me to respond.

This is fully on par with what is happening in Finland right now. The two cases you refer to, Lehman Brothers and Kaupthing, are actual cases, with actual numbers and actual reaction by the Finansinspektionen. Not something i made up. You can read about it here:

http://www.fin-fsa.fi/eng

It is fully natural that in times of finacial crisis, governments try to tone down the risks, so as not to shed oil on an already burning fire. Finland has a history of rescuing corporations that collapse, it is nothing strange or new. people fully expect the state to bail out large corporations, to save jobs amongst other reasons. In Finland we have a bank guarantee, the state guarantees that my savings up to 25000€ will be available even if my (finnish) bank collapses. The impact at this point for Finland is smallish, compared to weaker nations like Iceland or the Seychelles. What the future holds i cannot say of course.

I hope this sheds some light on why and how i made the RP?

He was using you as a positive example, I believe. He meant nothing ill towards you.

My quotes about the Turkish economy being in decent shape come directly from the Industry Minister - in real life. Turkish economists and even the IMF and World Bank have said: "Turkey will be fine."

Really? oh well, Finnish schools arent that good at teaching english and here we have the evidence

I wasnt offended, i just wanted to show that i wasnt making up bizarre things like portable holes or anythng.

Come on. No one seems to think about indirect effects. The Eastern Coast of Turkey lives for Tourism. I know I have been there twice in three years. What happens when Western Tourists cannot afford the trip? The Turkish workers. Work the holiday season and live off their earnings. They don't come back to jobs and smiles.

No one and I mean no one. From Cuba who has limited Interaction with the Global market to Iceland who is looking down the barrel of the IMF no one is unaffected. If not directly then it’s indirectly.

No one is living in a bubble here. We are all in the shit.

haha, so you really are from Finland? Sweet! I envy you. You're in Europe like our UK friends.
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And guys, I don't mean to vouch for him in his absence, but I am, I guess:

In my interpretation, this isn't exactly one of those things where everybody needs to post a defence to their current actions (or lack thereof, myself included). It's simply a (third?) reminder that there is an international economic crisis happening right now. Take the message, and in future actions, bear this in mind. Now, let's all just slow the fuck down, go to your nearby Starbucks, and chill!

News Room Finland:

http://newsroom.finland.fi/stt/showarticle...&group=Business

Some 39% of Finnish consumers have cut spending, 11% of Finnish companies have laid off workers. 50% of firms have reported a downturn in demand.

You are not isolated from the crisis. And I got a little worked up in the example, I apologize for that.

Okay, my two cents:

We have had almost no time to really RP much, and what we have RPed is irrelevant in that measures taken are not going to show significant impact in a mere 2-3 months. RPing, at least for this year, should have little to no bearing on the economies of the nations.

Rather, growth should be based more on realistic RL projections, at least in this one case. I also take exception to this absurd notion that everyone is getting hit hard. This isn't the case in reality. The more modern nations are getting hit the hardest, but many developing ones are suffering little more than a slight hiccup. It depends on what is important to the economy. Almost everyone will see slowed growth, but many will still be growing, and even at impressive rates.
It has nothing to do with the relative strength of the economy, but rather how important the sectors that have been hit are, and how badly they've really been hit.

Ironically, even at it's worst, it is projected IRL that most African nations will survive because... they have little or no economic infrastructure.

Most developing countries export commodities. Commodity prices are plunging, and demand isn't going to climb with developed countries still trying to pick up the pieces. Throw in a sudden drop in promised foreign aid for 2009 and developing countries aren't in good shape either.

Global recessions aren't pleasant because they affect everyone. If this was an American recession (an increasingly rare concept), there I would agree. But it's not; most EU economies are sliding down the crapper, and when Latin America started to fold too, things started showing just how bad they were going to be for everyone. Asia's markets, including Japan, are starting to hurt as well. Really, it's only a matter of time.

I wholeheartedly agree with Chile's statements. People really do not understand the severity of this GLOBAL trend towards a recession. The fact of the matter is that all economies in the world are intertwined, this is not the Middle Ages. We are in the age of Globalization. If consumer spending in the US and Europe fall, which they have significantly in the past few months, everything will go to hell. Most developing nations that rely on exporting everything like India will be greatly affected as a result. Lets use Dell as an example. If consumer spending and business spending for that matter in the US goes down, people will be less inclined to purchase a Dell computer. Therefore Dell will be forced to lay off hundreds if not thousands of workers in India, causing their consumer spending to also decrease and causing a chain reaction. The same thing in happening with oil and other commodities.

And frankly if anything developing nations will get hit the hardest. Even Cuba was impacted by the global recession in the 70s, my grandparents were there and they always tell stories about how food prices soared and people were starving.

China will be affected, India, Egypt and even Turkey will be affected. Nations that rely on tourism will be devastated. Diamond exporters in Africa will be destroyed. The prospect of discovering new oil will go down since it is so cheap, thereby halting the creation of new jobs in the industry.

Frankly, and I mean this in the nicest possible way U.S., from what I have seen I do not think that the world will ever recover without a recovery in the US. I do not feel that the current US player plays enough attention to the economy. Venezuela and Chile have made more posts about their economies than the US has.

Also Brazil, the thing that you posted about your corn/ethanol market being in its best state ever is kinda total crap lol With the price of oil free-falling down, people will be less likley to invest in ethanol, especially with the expectation that food prices will soar as a result.

I agree with all points except the Brazil one - speculators will still be happy to see McCain elected, with the hope that he'd drop the tariff on Brazilian ethanol. It would probably push stocks up.

The rest of the stocks would likely fall with the US stock market.

I really get annoyed when people make blanket assumptions that, because it's a global recession, everything will fall.

Stocks are down, that is true. You know what happens when stocks go down? Commodities go up. This includes, contrary to what Venezuela thinks, diamonds (they saw a huge spike in price earlier this year, and continue to rise). Along with gold, silver, and the like. Prices of these are still going up. Countries that produce or refine these are getting a boost to their economy.
When consumer spending goes down, people only stop buying certain things, such expensive homes, cars, computers, electronics, etc. Note that these mostly come from developed nations. For many things, people just switch to cheaper variants or alternatives, such as what comes from (gasp!) developing nations. This is currently helped by the reduction in oil prices, which also means reduced transportation costs. If you want a more personal example of this: some of the best performing stocks in the US stock market are grocery store brands. Contrary to the overall freefall, companies like Campbell's and Kellog's have been doing quite well. Why? Because people are forgoing restaurant meals for home food. They're still eating though, and when they eat less of one thing, they eat more of something else.
Many developing nations are net exporters, and they may well benefit from exchange rates too. As their currencies rise to those of their trading partners, that means their exports increase in value while imports decrease. Again, good for the economy.
Tourism is down, yes. However, business projects in nations that still have growing economies may represent good investments, especially now. Thus, they tend to attract more foreign capital in situations like this because they represent sustainable growth for western investors - something that's difficult to find at home. Again, good for the local economy.

I'll say this again:
Just because it's a global recession, things are not all doom and gloom. By their very nature, when certain markets go down, other markets go up. While almost everyone will see a reduction in economic growth due to issues like tighter finances and rising material costs, the extent of that reduction is based on what the staples of that economy are, and how it fits into the larger picture. Many African nations will benefit greatly from higher commodity prices. Many Asian ones from greater demand for cheap goods. On the other hand, many Middle Eastern countries are taking quite the hit after oil prices were cut nearly in half. That's just the way it works.


That said, people do need to look at what will happen to their economies, and not just say "we'll be okay because I say so." At least show some understanding of what's going on. Just remember that it goes for the other extreme as well!

Just to add on to CSJ, the spillover from the US economy has caused housing prices in Turkish cities to drop in price - which is now causing a real estate boom in urban areas. Alot of people in Turkey hold foreign currency, as opposed to their national Turkish Lira, and can now afford to invest in real estate - and they are doing it in large numbers.

Also, I belive this may come in handy rather than doing guestimations:

http://www.imf.org/external/pubs/ft/weo/20...data/index.aspx

World Economic Outlook Database, October 2008 - updated taking into account the financial crisis.

Taking into account the financial crisis, it has estimates for Gross domestic product (PPP), GDP official exchange rate, Gross domestic product per capita, Investment, Inflation, General government balance, General government net debt, General government gross debt and Unemployment rate all the way up to 2013.

Egypt, conventional economic knowledge tells us that when a consumer's purchasing power, purchasing confidence, and or real income drops, they will be less inclined to buy luxury goods. Diamonds are among the most luxurious of those goods. What you are saying is that if people becoming poorer, they will buy more diamonds? I dont think so.

Note: Im not saying that all economies will enter a recession, but GDP growth will still be severly cut.

With your own site Turkey, you experience a recession in 2009, with your GDP decreasing. And experience less than 1% growth till 2013. So yes, I call that being severly affected since Turkey is a nation where the economy was booming.

IMF Forum

The reason diamonds, gold, silver and other high-value commodities experience a massive increase in investment during a recession is because those markets are relatively safe. Diamonds are going to be valuable and stable regardless of the global economic condition. People invest in them because it's a safer investment than, say, IBM or Microsoft or Coca Cola.

There was recently a story on BBC about Austria receiving a recent gold rush upon global economic downturn.

The UK is responding to this crisis, by making jobs and spending. We will probably get to 50% of our economy in defecit or spending or whatever (Recon will know), breaking Brown's 40% target (which he has even said he will break). But hey, I'm responding.

YOU'RE BREAKING THE GOLDEN RULES! YOU ARE MAD!

"The Golden Rule is a guideline for the operation of fiscal policy. The Golden Rule states that over the economic cycle, the Government will borrow only to invest and not to fund current spending. In layman's terms this means that on average over the ups and downs of an economic cycle the government should only borrow to pay for investment that benefits future generations. Day-to-day spending that benefits today's taxpayers should be paid for with today's taxes, not with leveraged investment. Therefore, over the cycle the current budget (ie, net of investment) must balance or be brought into surplus.

The core of the 'golden rule' framework is that, as a general rule, policy should be designed to maintain a stable allocation of public sector resources over the course of the business cycle. Stability is defined in terms of the following ratios:

The ratio of public sector net worth to national income
The ratio of public current expenditure to national income
The ratio of public sector income to national income.
If national income is growing, and net worth is positive this rule implies that, on average, there should be net surplus of income over expenditure."

The Sustainable Investment Rule, which requires it to keep debt at a "prudent level". This is currently set at below 40% of GDP in each year of the current cycle. (Its something like 36.5% now Channel 4 news shown last night. However in 2009 it goes 41.5% and in 2010 its way up on that.)

Damn, I was wrong. Commodity prices will skyrocket! This graph must just be upside-down.

Since the next few paragraphs are based on that flawed assesment, I'm going to skip to the next point, that developed countries will greatly benefit from the cost of their most prominent exports plunging. When you are selling something, and the price goes down (say, if you export food), then you are less happy.

To Turkey: Thanks for the sources!

Dax's analysis for why diamonds, gold, and silver are increasing in value. They always do during recessions, because people freak out, buy guns, spam, and gold, and hide in their basis. And because rational people are afraid that currencies will collapse and buy gold as a backup.

To the UK, good work.

I know I posted that the crisis has had less damaging effects on Brazil than for example in the US and Europe. I did that because that's what seem to be the consensus here.

There are many sources that say explicitly that the chance of banks breaking because of the crisis in Brazil are close to zero.

As you know, the banking system in Brazil is way different than that in the US (No such thing as subprime lending here ), so that's why i posted that, but bear in mind that i'm not ignoring the crisis at all.

Chile, please read what's there before categorically ignoring it (seriously, only 1 paragraph was devoted to the commodities point), and make sure your sources aren't irrelevant to begin with. A lot of things there are going down, but that's because those aren't the commodities people invest in. Those are the commodities that are used immediately, not the ones held onto. But, if you look at another part of that: ZOMFG! GOLD HAS BEEN GOING UP!!!!!!!. And here I'm using the exact same source.
As you and Dax said, certain valuable commodities become popular investment items as an alternative to stocks or currency because they have no real danger of failing. The worst that can happen is the price goes down a bit, compared to a complete failure on a stock and loss of all the money put into it, or hyperinflation from a currency. The people that are buying them and driving up price are thinking of them as an investment, not a gift. The price increases are slowing (and may fall a bit) because the big scramble is at the start of the market failure, but they are, and will continue to, increase or at least remain high, at least so long as the stock market remains anemic. Gold, silver, diamonds, and platinum are the most popular, but other materials such as zinc, copper, and various gemstones also rise because they still represent an investment that can't fail. Countries that produce those will gain a significant boost. And note that even a temporary boost, such as what happened with oil, is a huge boon to the economies of producing nations.

You also failed to refute the other point you addressed because I was talking about the developing countries that import, not the developed ones that export. Again, make sure you're responding to what's written there.


More importantly, Turkey provided an excellent link that shows a distinct trend among many developing nations, particularly in Africa and Asia, to maintain their growth rates to a large degree. Wait a minute, isn't that what I've been saying all along? Fancy that.
Wanna see:
http://www.imf.org/external/pubs/ft/weo/20...pr.x=25&pr.y=11
http://www.imf.org/external/pubs/ft/weo/20...pr.x=59&pr.y=12
http://www.imf.org/external/pubs/ft/weo/20...&pr.x=77&pr.y=5


@Venezuela: you need to learn to read the figures . GDP growth is measured under "Annual percent change." For Turkey, that remains positive and will not drop below 3%. The only drop you see in 2009 is based on official exchange rate, and represents the effects of a rising dollar, not an actual downturn. Where this 1% thing comes from, I have no clue. That chart shows growth jumping to 5% in 2010 and sustaining it through at least 2013.

I shall only make two short points:

1) What is it MTTezla wants from me? Shall i delete my post about the US and Icelandic banks? Or do you want me to RP the effects of the global recession more/better? Please bear in mind that i only have played for a few days and still try to learn what kind of posts goes where.

2) I am not a economics wizard, and neither is anyone else on this forum. What i do know is that making any kind of projection is a piss-poor guess-work, as noone knows what exactly will happen nor the effects of what has happend so far. Hence i think, for gaming purposes, that whatever MTTezla says, should be considered reality. Arguing about what is happening in october 2008, when in-game is already march 2009, should be done in an OOC/off-topic part of the forum.

Porrsche out.

CSJ, the problem is that you keep using gold and precious materials as examples of commodities, and then extending that. They're only a tiny subsection of commodities, ones that can also be substituted for wealth. The price of the vast majority of commodities, the ones that affect economies for 99% of countries, are going down in price. Hence the graph.

The rebuf you posted to the source is the Economist saying that they had updated their commodity price index to make it more accurate. It's from 2005. Mine is from 2008. I'm not sure who is using outdated sources, but I do have an idea...

Commodities that people invest in are a tiny sliver of commodities aren't relevant to macroeconomic discussion outside of some diamond-mining African countries, which nobody RPs. The possible exception of South Africa would have been more convincing 20 years ago.

You say that copper and other mostly non-precious metals are increasing in value, which is again contrary to the basic evidence:

http://www.economist.com/business/displays...ory_id=12429604

The truth is that you're not checking the facts as they appear, just guessing to try to prove a point.

Developing countries don't import, they export. Developed countries import. The US runs a trade defecit, Chile runs a trade surplus. Great Britain runs a trade defecit, South Korea runs a trade surplus.

I think that you have a basic level of understanding, but are extrapolating incorrectly. Luckily, these are the facts to back up my arguments thus far.

To Finland:

I just got frusturated when you said that you were doing fine. Just avoid that kind of language, really, and you'll be OK in the future. Also, some government response to the crisis will help your economy.

As to the second point, that is how it works, but I won't stop people from questioning my decisions. Keeps me sharp and from BSing.