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brickabrack
Joined: 17 May 2010
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 Posted: Sun Jul 04, 2010 4:08 am Post subject: |
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"If the dollar falters China is toast. Period."
Which is one very big reason why the dollar keeps being held up by the Red kickstand and the debt growing, cheating politicians and bankers.
I guess I could take the time to learn how to put multiple posts and quotes all together so I'm not hogging the next page or two. Apologies. |
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brickabrack
Joined: 17 May 2010
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| Posted: Sun Jul 04, 2010 4:21 am Post subject: |
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" You pay income tax (as another poster mentioned) which goes directly to the Fed."
What IF he is not paying taxes?  |
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rollo
Joined: 10 May 2006
Location: China
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| Posted: Sun Jul 04, 2010 3:11 pm Post subject: |
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Okay brickabrack I agree China is toast. their housing bubble is unsustainable and is about to burst.
A total melt down of the dollar , probably not. But severe damage. The euro was an unbelievably bad idea but it didnt have to be that way. there probably is going to be a new reserve currency. I just hope that it isnt some artificial contrived thing slapped together in some backroom deal. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sun Jul 04, 2010 8:27 pm Post subject: |
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| The Happy Warrior wrote: |
Kinsley: We can stabilize the debt, if we do nothing on spending, for 75 years
| Kinsley wrote: |
A couple of graphs [are] in the Congressional Budget Office�s annual Long Term Budget Outlook. One graph, on the cover, seems to show that the national debt as a share of GDP levels off in a couple of years and stays that way until at least 2035 even if we do nothing about it. The other, on page five, seems to show that under current policies, federal revenues and federal spending will be more or less equal for the next 75 years.
Keep in mind, too, that the first scenario assumes no policy changes: nothing new for the environment, for education, for infrastructure, for any military threats that might arrive. For 75 years. And it�s 30 percent of GDP! |
I consider this argument self-refuting. Even if we freeze all social spending and somehow magically cap and contain entitlement spending, there will still be political pressure for STIMULUS! STIMULUS! Actually, Kinsley continues:
| Kinsley wrote: |
| The most enthusiastic deficit hawk in the long run could still believe that we need another jolt of stimulus in the short run. In fact that�s more or less where I am. |
*headslap* |
His assumption is that the debt will decrease relative to GDP as the economy grows. The problem is that the debt is now so large that growth is strongly diminished. Growth for the past 20 years or so has been mostly via the accumulation of debt. To assume that spending stays the same and GDP growth continues assumes the debt problem away.
http://www.debtdeflation.com/blogs/wp-content/uploads/papers/KeenAreWeItYetPaperFinal.pdf
As usual, the American public intellectual has no understanding of the fundamental characteristics of the American economy. No new debt = no growth. Period. This can only be changed with a deliberate policy of diminishing debt. Inflation is one way to do this, but the velocity of money has broken down. To cause inflation Ben would have to digitize many trillions all at once so that banks stop hoarding. You'd get no inflation, and then sudden hyper inflation, followed by the destruction (by loss of faith) of the currency. That's no strategy. Next option is austerity and a slow paying down of debt which is a better than option one but will grind up the middle class.
I like this:
http://www.zerohedge.com/article/why-americas-latest-birthday-may-not-have-many-more-follow
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| It is my firm belief that we have come to the �end of the road� for the financial system, as we know it. The myriad of problems that it is creating are only going to get larger as time moves forward � until the US Government takes decisive action to correct the fundamental issues. To this end it needs to fix the value of each unit of currency by linking it to a basket of commodities (not only gold since the total quantity of gold is limited and so that would in turn limit the total quantity of money - this was the problem that resulted in the initial creation of the Federal Reserve), and it needs to eliminate the fact that money can only be created through debt. Under the current financial system, everybody ends up in debt and the banks get to continue reaping from that state. It really is a time for change and I firmly believe that the US will once again lead the world in a new direction, one that is equitable and fair for all economic participants. |
And this:
http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart.html
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The oligarchs have almost ruined the US and the UK. They will now seek to subtly starve the middle and lower classes to pay for their piles of wealth which are largely pieces of paper, useless wagers, and will resist every effort to repeal the absolutely irresponsible tax cuts enacted during the administration of their chosen candidate G. W. Bush, and the setup to divert reform through their stalking horse, Barrack Obama.
They will speak out of both sides of their mouths. Unemployment insurance, Social Security benefits, healthcare, relief for the poor, and pensions are bad, and their unfortunate recipients lazy, stupid and an expendable drag on society. But the maintaining of ill gotten gains of the oligarchs, the enormous fortunes obtained through financial fraud, and paying little or no effective taxes on them through various loopholes, is a somehow a sacred requirement for economic recovery. And so we see how reform is floundering, and the smirks of the congressional chimps and pigmen are maintained even as the nations suffer the worst unemployment since the Great Depression.
There will be many 'useful idiots,' well outside the real circle of power but who consider themselves the well-to-do, that will agree with this injustice, and vehemently attack the unfortunate in society because of a combination of character flaws, usually selfishness, emotional immaturity, and just plain meanness. It is how it always is. Most Gestapo informants were actually neighbors, co-workers, bearing petty grudges and spites, not realizing the damage they were doing to real people. The coldness of the unenlightened human heart and the obtuse vanity of people in wishing suffering on others, with a kind of perverse self-righteousness, is sometimes a wonder to be hold.
As for the politicians and financiers, the oligarchs and those that surround them, I have tried to figure them out for a long time, often first hand. Some are just sociopaths, obsessively driven, as lacking in human feeling as the fellow who would shoot you in the face for your wallet. These white collar jokers have merely had better educational opportunities.
But as for the others, the many, I think that are just ordinary hard working people that over become so intellectually inbred that their viewpoint becomes like a clique, or a cult. They tend to be in positions where they can make or enforce the rules to suit themselves, and spend most of their time talking with others like them, with similar attitudes and feelings towards the world extensively influenced by their profession. They develop a feeling of isolation from the great bulk of humanity.
Principles such as morality, right and wrong, cease to be relevant, without the common cultural context, for them. They become so preoccupied in the particularities of their own piece of game. They lose sight of the big picture. And sometimes this can lead to terrible abuses and excesses.
...
The US cannot obtain a sustained recovery without serious and significant financial reform and restructuring of its economy, and the legal repatriation of the wealth stolen by the financiers through fraud. What complicates this is that the politicians have allowed themselves to be tainted by the same brush of corruption, so in the short term everything is illusion, deception, and cover up. Slowly but surely, the truth will out. But the delay causes damage.
The bad debts will be liquidated. They cannot be repaid. Starving the common people alone will not work, and selling the sovereign assets will not be enough. Taxes would have to be raised to post WW II levels, along the lines of 70+% for the wealthy. How likely is this? The wealthy elite will promote the confiscation of pensions and Social Security first. These will be dangerous times, full of deception. Greed and fear will reach high emotional states.
Therefore default, albeit selective, is the rationale alternative, excepting the contrivance of yet another war to stimulate demand and encourage compliant behaviour. And that default will be accomplished through devaluation of the currency, the basis of all the debt, which is the Fed's note of zero duration. It will spread the pain throughout all holders of US debt, including those that do not vote. Bernanke and his economists know this.
They will not admit it, because they are playing a confidence endgame with the people and with the holders of US sovereign debt, many of whom are foreign. The last thing they wish to cause is a panic. But at some point, there will be one, and it will not be pretty. The Democrats will attempt to kick that can down the road, delivering it to the successor to Obama, who is like to be a one term wonder 'unless something happens.' |
Maybe the 4th inspired Jesse (who is a phenomenal analyst) because the first sentence was changed from this:
| Quote: |
| The oligarchs have ruined the US. They will now seek to subtly starve the middle and lower classes to pay for their bonuses, and will resist every effort to repeal the absolutely irresponsible tax cuts enacted during the administration of their chosen candidate G. W. Bush, and the setup to divert reform through their stalking horse, Barrack Obama. |
He's right. The US was robbed. How many divisions has Goldman? Repatriate the stolen loot and get back on a commodity standard.
Stimulus is an expensive distraction. It hides the problem. Democracy can't work when problems are hidden (and made worse for the near future). The economy is in an economic depression. Stimulus will not change this. Stimulus will give it a jolt for a bit, and then things return to depression. Deal with the god damn problems now and get on with it. It really won't be so bad. |
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bacasper
Joined: 26 Mar 2007
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| Posted: Sun Jul 04, 2010 10:27 pm Post subject: |
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^ That Jesse is one smart cookie!  |
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brickabrack
Joined: 17 May 2010
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| Posted: Mon Jul 05, 2010 2:54 am Post subject: |
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"As usual, the American public intellectual has no understanding of the fundamental characteristics of the American economy. No new debt = no growth. Period. "
I keep getting in trouble for using 'Period'. Maybe it is a subliminal contrivance via your posts. Do you mean the 'global economy' vs. the Am economy.
I feel like the next reserve currency has been 'slapped together'. |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Mon Jul 05, 2010 7:53 am Post subject: |
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The US government will have to eventually default, in one way or another, on all its debt and repeal all entitlements.
Then we can get on a 100% gold standard.
A basket of commodities is a far less effective system.
It is preferable to have a 100% gold backed currency. There are absolutely NO problems from the fact that the quantity is limited and the supply of money does not expand. This has no ill effect whatsoever, but rather is an advantage.
However, many people of weak mind and limited analytical ability have postulated the need for monetary expansion. This is just slow inflation, however, and is akin to accepting a bit of the disease that we are right now suffering from.
In a free market economy, the absence of monetary inflation and the absence of any significant expansion of the supply of money is ideal.
In a world with a fixed supply of money, the average price of a basket of goods will gradually fall. The value of money will gradually increase. Saving will have a guaranteed reward. Borrowing and debt will always have an automatic cost and financial common sense available to the simplest of mankind will allow all individuals to have access over their lifetimes to a life of abundance and security.
Governments, the evil fascist-socialist governments of the world must be abolished.
New governments must be prevented from issuing any currency that is not backed 100% by gold. Government must be prohibited from borrowing of any kind. Governments must be required to have balanced budgets or operate from accumulated past surpluses (government savings). Governments must be prohibited from taxing income or property. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Mon Jul 05, 2010 7:57 am Post subject: |
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| Quote: |
| I keep getting in trouble for using 'Period'. |
Yeah, I shouldn't use it. Is just a habit.
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| Do you mean the 'global economy' vs. the Am economy. |
I don't know all that much about most of the world so I can't say. The US and many other western states have hit debt saturation - peak debt - and as growth was largely due to debt accumulation in the recent past there will be no growth in the near future unless the debt is restructured. |
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The Happy Warrior
Joined: 10 Feb 2010
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| Posted: Mon Jul 05, 2010 5:27 pm Post subject: |
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Here's the Economist's debt map
It combines Gov't, Household, Financial, and Non-Financial debt, but you can isolate for each. So I guess Fannie and Freddie would file under Household debt, but it might as well be Gov't. The Economist just assumes the Gov't is liable for it all, given recent bailout trends. |
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The Happy Warrior
Joined: 10 Feb 2010
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| Posted: Fri Aug 06, 2010 1:54 am Post subject: |
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'Buy' new for only $1000 down!
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�Buy new with $1,000 down,� the advertisement says, the words resting atop a trim green clapboard house offset by a bright blue sky. �The time has come. Stop wasting rent check after rent check and start building equity in your own home. And with only $1,000 down, affordable monthly payments and no private mortgage insurance required, the dream is closer than you think.�
It sounds too good to be true. But it is true. This offer does not come from a subprime lender, looking to reel in thousands of unqualified and ill-advised homebuyers, only to slap them with add-ons, fees and variable rates. It is not a teaser or a trick. The advertisement references a program initiated by the National Council of State Housing Agencies and Fannie Mae, the taxpayer-backed, government-sponsored enterprise that buys up mortgages from lending banks. |
Government policy fail. |
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bucheon bum
Joined: 16 Jan 2003
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| Posted: Fri Aug 06, 2010 4:53 am Post subject: |
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The more things change, the more they stay the same
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Alternative financing:
The key to this business: Finding alternative financing to limit your out of your pocket money. Montelongo maintains there is "both hard money and private investor money available which are two of the major components to alternative financing. There are lenders who lend specifically on damaged properties so you as an investor can flip the property for big profits." The draw back: Such groups charge high interest rates for the loans. Montelgongo agrees, but asks "Who cares if you are making $50,000 on a flip deal." |
Isn't it that behavior that put the real estate market where it is today?
And why should you flip?
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Why now?
Like many a realtor we know and love, Montelongo urges us to believe that "right now is the BEST time do to real estate," but his reasoning is actually that the market is still unstable, which may not be the party-line you're used to. He says "Housing prices are cheaper than in decades, there is little to no competition in flipping, the government is giving loans to buyers (the average person does not know about this) and public perception is at a low for making money which is the BEST time to make money. Once the market stabilizes, these opportunities will be more scarce." |
Right. I'm going to go rush out and buy a house now with the little savings I have, then flip it and make a killing. Sounds like a plan. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Fri Aug 06, 2010 7:30 am Post subject: |
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^ A recent Fed research paper (I can't find it) written by one of the governors stated that (and this is a loose quote from memory) "policy makers will not abandon the asset appreciation model of growth". Something like that. The two posts above are evidence that this is the case. They don't know how grow an economy aside from asset appreciation. They'll try anything to get it going again. They want to stimulate aggregate demand by bringing back the wealth effect of rising prices.
This is bad news (surprise!). Their goal is to make houses expensive again. I don't think they can do it, but I have underestimated their determination before.
http://blogs.barrons.com/stockstowatchtoday/2010/08/05/bailout-rumor-for-underwater-loans-roils-mbs-market/?mod=rss_BOLBlog
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A Reuters blog post (An August Surprise from Obama?) � suggesting the Obama administration will order the government-sponsored enterprises (GSE) Fannie Mae (FNMA) and Freddie Mac (FMCC) to forgive a portion of mortgages that exceed the deflated value of the properties backing them � is roiling the mortgage-backed securities market.
The mortgage-backed securities, or MBS, market is worried that if the principal on these loans gets written down, the homeowner then could refinance and take advantage of today�s sub-5% rates. The loan-to-value ratio then might be within the 80% required to refi. Other rumors are for Fannie and Freddie to loosen their standards for refis to help out homeowners who don�t currently qualify.
A wave of refis could be disastrous for the bulk of the agency MBS market, where virtually every security trades at a huge premium, 106 to 108. (When a loan is refinanced, the investor gets back par, resulting in a loss of the premium.) But even older, high-cost 7% and higher mortgages aren�t getting refinanced because the homeowners lack equity in their property, stable employment or both.
Refis would cost the Fed (which bought $1.25 trillion of MBS as part of its quantitative easing), the GSEs and thus the tax payers.
There then would be a flood of new, low-coupon securities that would drive down the price of outstanding issues, and thus drive up mortgage rates. Talk about unintended consequences.
But as one mortgage pro notes, non-performing loans aren�t in pools of mortgages that back MBS. The million delinquent loans are in Fannie�s and Freddie�s own portfolios. Thus, a mortgage principal forgiveness ploy would have not have an impact on prepayments on MBS. Even so, he says the MBS market has been on a roller-coaster today because of the swirling rumors.
The probability of such a scheme is mitigated not by the bond math but the political calculus. As this pro observes, such a bail out would probably do more to anger the two-thirds of homeowners that wouldn�t qualify for the deal than to please the one-third who would make out well. In any case, such talk shows that November is getting closer.
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^ A half good, half bad policy. I'd prefer indivdiuals get over their emotional attachment to the house they "own" and walk away from underwater houses. Yes the banks will suffer. The evil siblings (Fannie and Freddie) need to be abolished, as advocated by Paul Volcker. Cutting principle is a good thing but loosening standards is a bad thing. What they want is to cut principle and loosen lending which will return the market to appreciation and allow people to cash out equity and spend on middle class bling.
Instead, how about focusing on domestic production. This will involve a move away from NAFTA and the WTO. States should create public banks for industrial investment whereby cheap loans are offered to organizations that will manufacture in the US. Right now cheap money is given to the housing sector. Direct that credit not to consumption but to production. This won't happen (yet) because it smacks two taboos: 1) free trade and 2) public credit. I was a diehard devotee to the ideas of free trade and private credit but no more. If my stubborn mind had been changed I'm confident that eventually a reassessment of economic dogma is already underway among the kings.
http://www.nakedcapitalism.com/2010/07/summer-rerun-dani-rodrik-looks-at-the-free-trade-math-and-finds-some-of-it-wanting.html |
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Junior
Joined: 18 Nov 2005
Location: the eye
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| Posted: Sat Aug 07, 2010 9:14 pm Post subject: |
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| The Happy Warrior wrote: |
| I'm pretty depressed about this. If Obama had the courage to tell us the truth, I might be able to be optimistic. But if he, and the rest, are trying to hide our problems, we as a country are screwed. |
"Employers in the US shed twice as many jobs as expected in July, adding to fears that the recovery in the world's largest economy will not see a revival in employment.
The White House urged critics not to read too much into a single month's data while president Barack Obama said it was a "good sign" the US had added private sector jobs every month this year".
http://www.guardian.co.uk/business/2010/aug/06/us-job-losses-double-expected |
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Senior
Joined: 31 Jan 2010
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| Posted: Sat Aug 07, 2010 11:00 pm Post subject: |
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How could some one with the username "Mises"not believe in free trade? May I ask what was so persuasive as to change your mind?
I agree that NAFTA and WTO agreements are free trade in name only, but I don't see how you could have a competitive domestic production sector, without cheap inputs from overseas. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sun Aug 08, 2010 8:40 am Post subject: |
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Many reasons. I'm familiar with the free trade/gains from trade arguments and models and have come to the conclusion that they're neat but don't reflect reality. I know that NAFTA and WTO are corporate trade agreements and not free trade, but both are not useful. We can't have nations that are both prosperous and stable when the underclass only have opportunity at Burger King. The 'strong back' jobs are very important. We can't compete with China (though peak oil should take care of that - we'll be competing with Mexico). We can't have a system whereby we borrow to buy foreign produced goods. We need to produce and for that to happen we need protectionism.
http://isteve.blogspot.com/2010/08/dogma-of-globalism.html
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| A few years ago, Stephen Roach of Morgan Stanley asked one of Bush's Treasury Secretaries (not Henry Paulson) how America would earn its way in the world after our productive sector collapsed. The answer was that we (the U.S.) would act as 'capital allocator to the world.' Of course, this insane dialog attracted zero attention at the time or subsequently. The only good news is that U.S. credibility as a 'capital allocator' is within rounding error of zero. |
They really thought this. The US would be a big hedge fund. 100,000 people would "allocate" and 300,000,000 would consume. That was the idea. Isn't that insane?
Also, an interconnected system is more prone to catastrophic blowups. I strong recommend this interview below:
http://www.docstoc.com/docs/27558649/James-Rickards-in-WellingWeeden
^ JR speaks of the risk that interconnected and complex systems pose in reference to financial globalization, but the arguments are applicable to trade as well.
I've been waiting for China to correct because I know that will thrust Canada into a severe recession if not depression. It will also severely harm Brazil and Oz, among others. One big link in the chain goes and the consequences are felt everywhere. I'd rather more self-sufficient economies, to the extent that is possible. I'm in favour of protectionism. It's time to roll back globalization. |
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