Off topic from is Australia entering Japans Nightmare

[Pachipro]

Yes, the USA has problems, but you can bet that people will be buying up those properties within a year. The US will take a while to pick up, but the world didn't go into a recession in 2000 when the USA faced a comparable asset crisis. Most Americans are sitting on a lot of equity in their homes. Higher interest rates in the USA, probably, but there will not be depression for another 15 years. We are in the midst of a super-cycle. This is just a pause for absorption of credit. So I suggest breathing before you hyperventilate.

No hyperventaliting here, just breathing easy because I have no mortagage and own my home outright. Mostly only those with cash will be able to pick up homes at basement or below bargain prices as banks are not giving mortgages so easily anymore. In fact, they are not even lending to each other because no one knows who will be out of business on Fridays. Thus, the rest of the world looked at America and thought they were doing fine when the truth was they were not. It was only a ruse perpetrated by the Fed to stave off a recession in 2001.

The reason why the world and the US did not go into recession in 2000 during the dot.com bubble bust was the implementation, by the Fed, of low cost housing loans to anyone who breathed and could sign their name at very low teaser rates of 2-3%. Thus, the US did not go into recession and housing prices went through the roof as many people hoped to make a huge profit flipping houses. Also, it enabled many people to buy more house than they could afford. This is the sole reason why the US did not go into recession in 2000 when it most definitely should have.

Also, with the faux rising of housing prices many Americans were duped into taking out second mortgages against their "rising" equity to purchase TV's, cars, furniture, etc. Also, the easy availibity of credit with "no payments until 3 years later enabled Americans to go on a spending spree thinking that their homes would continue to increase by 20% per year. Now they are all broke and way in debt and the world back then was also duped into believing that the US economy was sound when the truth is, it was far from sound. The result today is the sad fact that the average American is upside down in their home and car and have more than, on average, more than $8,000 in credit card debt and 7 out of 10 households are 1 - 2 paychecks away from bankruptcy.

Sadly, Shouganai, you need to do a little more research as the majority of homeowners today are upside down in their mortgages and have no equity whatsoever; have not only a mortgage, but also a HELOC (Home Equity Line of Credit) and cannot afford to pay two mortgages today. Thus, many are simply walking away from their homes and the banks suck them up at 30 - 50 cents on the dollar. The simple fact is that real income for the average American DOES NOT support housing prices even at their currently depressed levels. 9% of US mortgages are either in default or foreclosure and the economy is worsening on a daily basis. Therefore, the government had no choice but to take over Fannie and Freddie.

This amounts to bankruptcy and nationalization. According to recent Treasury figures, foreign holdings of US Agency debt, that is debt of Fannie Mae and Freddie Mac, rose from $107 billion in 1994 to $1.304 billion as of June 30, 2008. Foreigners own about $800 billion of that debt. Thus, you can see why bondholders were bailed out. In addition, Fannie and Freddie are responsible for $5.3 trillion in mortgages, that impact, by comparison, is 13 times greater than the Bear Stearns failure.

Therefore, the CDO's (Collaterized Debt Obligations), ABS's (Asset Backed Securities), etc. that were US mortgages, were bundled up, chopped up and sold to foreign investors, by Fannie and Freddie, like the Chinese and the Japanese and the Australians, etc.

Now that the majority of homeowners have no equity, are "upside down in their mortgages, and many are being foreclosed upon, including the "flippers", they are just walking away and, if the US government did not step in to help Fannie and Freddie, foreigners would be very upset and may have sold their treasuries to make up for their losses. This would bankrupt the US.

Therefore, Australia, Japan, and the Chinese are very worried right now and it is the US taxpayer who will ensure they do not lose their money.

Maybe you shoud think about investing in US foreclosures as anyone with cash is most welcomed today by banking institutions. However, the end is not in sight yet and may not be for at least two more years as now ALT-A mortgages are beginning to default.

You can add the byline "Now with twice as much pachipronomics" to give a real sense of these threads.

You don't have to believe me or call me names like "Pachipronomics". The partial story is here on Bloomberg: US Foreclosurers Hit Record in August As Housing Prices Fell

U.S. foreclosure filings rose to a record in August as falling home prices made it harder to sell or refinance homes to pay off the mortgage, RealtyTrac Inc. said.
Owners of 303,879 properties, or one in 416 U.S. households, got a default notice, were warned of a pending auction or foreclosed on last month. That was the most since reporting began in January 2005. Filings increased 27 percent from a year earlier, about half the annual pace of previous months, because of high default totals in August 2007, the Irvine, California- based seller of foreclosure data said in a statement today.......

 

[Shouganai]

I don't dismiss the fact that the US is going through pain, and I certainly appreciate that the world is looking at higher interest rates and inflation, but that does not spell depression, nor is the credit bubble going to unwind just yet. The sad reality is that people will recover from this thinking there will be no depression in future because people called 'wolf' on this occasion. That cannot be helped.
So why is the credit bubble not going to unwind? Because the mechanisms for expansion are still in place. China, India and other countries still have a lot of capacity to expand their output. Developing markets aside from China and a few Eastern European countries are not overvalued. So there is more scope for asset inflation, cost of living deflation, as we have become accustomed to. For this reason, I say there is another leg to this bull, and I would expect the Fed to support it. The evidence is they are doing just that.
I do agree with your comments on the Fed, just disagree on your premature diagnosis of mayhem.

The reason why the world and the US did not go into recession in 2000 during the dot.com bubble bust was the implementation, by the Fed, of low cost housing loans to anyone who breathed and could sign their name at very low teaser rates of 2-3%. Thus, the US did not go into recession and housing prices went through the roof as many people hoped to make a huge profit flipping houses. Also, it enabled many people to buy more house than they could afford. This is the sole reason why the US did not go into recession in 2000 when it most definitely should have.

This is all true, but you have to make a case for why inflation should persist as a problem. It is rising because asset prices are falling. So I'm saying they will fall to a point, but they will turn around. Europe is already lowering its interest rates, Japan's are low, Australia is falling, NZ will. Just America is raising its rates. The US needs to attract savings, so US rates will be relatively high, but I don't think too excessive. The lack of returns in the US will cause an Asian property boom. China and India will be investing in global commodity projects.

Now they are all broke and way in debt and the world back then was also duped into believing that the US economy was sound when the truth is, it was far from sound. The result today is the sad fact that the average American is upside down in their home and car and have more than, on average, more than $8,000 in credit card debt and 7 out of 10 households are 1 - 2 paychecks away from bankruptcy.

Those statements make for a great human interest story but actually they do not constitute statistics that support your argument. The reason the global economy will turn around is because of the critical issue you have missed - there is no big or significant capacity shortage. On the contrary, a lot of markets are tight. I'm focused on commodities, but notice how the prices for iron ore, coal, alumina and copper are still quite high. Even your precious housing stock will be absorbed within 2-3 years. Mass migration will bail the world out, and the credit tap will keep flowing. Sure few Americans will jump in at first, but they will.

Sadly, Shouganai, you need to do a little more research as the majority of homeowners today are upside down in their mortgages and have no equity whatsoever; have not only a mortgage, but also a HELOC (Home Equity Line of Credit) and cannot afford to pay two mortgages today.

More sensational headlines. Where is the statistics showing that its so bad that we need to worry about depression. The depression was marked by a period of mass over-supply. Where is it - other than US housing stock? This was just an asset price correction causing a spike in inflation. It will recede.

The simple fact is that real income for the average American DOES NOT support housing prices even at their currently depressed levels. 9% of US mortgages are either in default or foreclosure and the economy is worsening on a daily basis. Therefore, the government had no choice but to take over Fannie and Freddie.

Well I wouldn't be surprised if real income is falling at the moment, but unemployment is 6.1%, and I doubt it will breach 9%, which is a recession number, but it will be absorbed in 2-3 years tops. This boom will continue. Oil prices have already cooled, so those people in default or foreclosed (you say 9%, but have not sourced it and you dont even seem to differentiate. So let me cite Bloomberg's numbers are a lot lower than yours. See "bloomberg.com/apps/news?pid=20601087&sid=aMA9irftpUpI&refer=home" Maybe your numbers are California or Florida.
Bloomberg says "new foreclosures increased to 1.19%, rising above 1% for the first time in the survey's 29 years, the Mortgage Bankers Association said in a report today. The total inventory of homes in foreclosure reached 2.75 percent, almost tripling since the five-year housing boom ended in 2005. The share of loans with one or more payments overdue rose to a seasonally adjusted 6.41 percent of all mortgages, an all-time high, from 6.35 percent in the first quarter".
Now those figures will not take into account the falling oil prices and broader fall in some commodity prices, eg. zinc, lead, nickel. Some good new don't you think. Notice that foreclosures only marginally increased. The reason is that people are in default not because of failure to pay debt but because of falling asset values. So they are being forced to sell 2nd homes, knowing full well they have fully paid off one home. We are talking 2.75% of homes - not your 'scary 9%'.

This amounts to bankruptcy and nationalization.
Actually there is a world of difference between foreclosure, debt delinquency and bankruptcy. You ignore the assets they hold. There is also a world of difference between absorbing a private banks debts and your presumption that they would be redeeming the housing stock.

According to recent Treasury figures, foreign holdings of US Agency debt, that is debt of Fannie Mae and Freddie Mac, rose from $107 billion in 1994 to $1.304 billion as of June 30, 2008. Foreigners own about $800 billion of that debt. Thus, you can see why bondholders were bailed out. In addition, Fannie and Freddie are responsible for $5.3 trillion in mortgages, that impact, by comparison, is 13 times greater than the Bear Stearns failure.

I guess you are quite impressed by those numbers. I think you mean $1.3 trillion. The twin [quasi-government) underwriting agencies for the bulk of US housing debt, so of course their liabilities have grown considerably. Yes, the US government has over-stretched. Its just not going to cause more than 2-3 years of recessed US market, and the US will resume its growth.

Now that the majority of homeowners have no equity, are "upside down in their mortgages, and many are being foreclosed upon, including the "flippers", they are just walking away and, if the US government did not step in to help Fannie and Freddie, foreigners would be very upset and may have sold their treasuries to make up for their losses. This would bankrupt the US.

Well I've established that 2.75% are in foreclosure, so I don't know how you get 'majority' have no equity. I assure you banks foreclose before they have no equity, so the implication is that less than 2.75% have no equity. We have to remember that some of these are 2nd home owners. A bit too early to hit the panic button don't you think.

Maybe you should think about investing in US foreclosures as anyone with cash is most welcomed today by banking institutions. However, the end is not in sight yet and may not be for at least two more years as now ALT-A mortgages are beginning to default.

Well I wouldn't invest in US foreclosures unless I was living there because the economy is going sideways for 2-3 years. I prefer the Philippines because it has far better dynamics. I guess all the US foreclosed you are talking about can afford to retire there.

You don't have to believe me or call me names like "Pachipronomics". The partial story is here on Bloomberg [bloomberg.com/apps/news?pid=20601213&sid=aWKdjgdwQZQI&refer=home"]US Foreclosurers Hit Record in August As Housing Prices Fell[/URL]

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Actually this article does not support your point, they say 11% increase, not 11% foreclosures I didn't call you any names.

 

[Pachipro]

I do not have the time to address all your inquiries but I will adress what I can. Suffice it to say that my sources are accurate. I just browse so many web sites and subscribe to more than a few newsletters that I don't source them all.

I don't dismiss the fact that the US is going through pain, and I certainly appreciate that the world is looking at higher interest rates and inflation, but that does not spell depression, nor is the credit bubble going to unwind just yet. The sad reality is that people will recover from this thinking there will be no depression in future because people called 'wolf' on this occasion. That cannot be helped.

The sad fact is that the credit bubble is unwinding. It is now harder for anyone, including major institutions to get credit these days without an excellent credit rating. And even then it is not easy. Today anyone wanting a mortgage will have to have a credit rating above 700 and a 20% down payment and even that is not guaranteed. Car loans are harder to come buy and even major stores are starting to cut back as many are defaulting on their credit or just walking away from their homes. The next meltdown will be in the credit industry. Just watch. Maybe not now, but after the elections.

Well I wouldn't be surprised if real income is falling at the moment, but unemployment is 6.1%, and I doubt it will breach 9%, which is a recession number, but it will be absorbed in 2-3 years tops. This boom will continue. Oil prices have already cooled, so those people in default or foreclosed (you say 9%, but have not sourced it and you dont even seem to differentiate.

Well according to the unofficial FHA Mortgage Site .com they quote from a statement from the Center for American Progress entitled STATEMENT: Foreclosure Stats Say It's 1930 Again....Banks now own same share of homes as beginning of Depression that

With RealtyTrac reporting in excess of 750,000 bank-owned properties, we estimate that nearly 0.6 percent of all housing units in the United States are now bank-owned. While this may appear to be a small slice of the total housing stock, this is the same ratio of foreclosed properties to housing units in 1930. Foreclosures increased steadily from 1930 until peaking in 1933, at which point 10 percent of all homes had become bank-owned. They did not return to pre-Depression levels until 1938.
.......Whether the situation is truly a harbinger of things becoming as dire as they did between 1930 and 1933 is something we will only know after the fact. But foreclosures are mounting, with 1 in 11 American families with a home loan in trouble as of June.

I believe that 1 in 11 homes is close to 9% if you ask me. In addition I believe their figures to be more accurate than the controlled media and government wants us to believe as they do not want a panic to arise..

Well I wouldn't be surprised if real income is falling at the moment, but unemployment is 6.1%, and I doubt it will breach 9%, which is a recession number, but it will be absorbed in 2-3 years tops.

The sad fact is that we are already in a recession and have been for many months now, but you will not hear it from the government with their release of bogus figuers. Real unemployment in the US is way above 9%, probably near 10%. With the outdated "birth/death" model the government uses for unemployment stats the truth will never be told as they do not count those who have fell off the unemployment rolls because their benefits have run out or those that just gave up and took a lesser paying job/jobs paying far less than they were previously or those that have taken jobs off the books. The government will never release the true figures, but I see it all around me.

Thanks for your input anyway Shouganai as your comments and questions are warranted and justified and adds to a lively discussion.

Note to mods: As these past few posts do not add to the OP concerning Australia, I would appreciate you cutting them and adding them to the off-topics section as the subject is a serious one and deserves serious discussion from all sides. Thanks.

 

[Shouganai]

I do not have the time to address all your inquiries but I will adress what I can. Suffice it to say that my sources are accurate. I just browse so many web sites and subscribe to more than a few newsletters that I don't source them all.

I don't think it matters how much you read, its a matter of your understanding, capacity to think critically, honesty and the quality of what you read.

The sad fact is that the credit bubble is unwinding. It is now harder for anyone, including major institutions to get credit these days without an excellent credit rating. And even then it is not easy. Today anyone wanting a mortgage will have to have a credit rating above 700 and a 20% down payment and even that is not guaranteed. Car loans are harder to come buy and even major stores are starting to cut back as many are defaulting on their credit or just walking away from their homes. The next meltdown will be in the credit industry. Just watch. Maybe not now, but after the elections.

Yes, credit is being liquidated, but that does not preclude credit expanding again. Yes, people have lost confidence in the financial system, but that is always the case at a time of crisis. These concerns dissipate. As we know, central banks around the world are flooding markets with liquidity and lowering interest rates. Inflationary? Yes, but asset inflationary more than cost-of-living inflationary. So asset prices are going back up. I'm waiting for an Aust nickel producer to fall to $1, in 3 months it will be $1.50.

Banks now own same share of homes as beginning of Depression

Not a very good measures because it really doesn't matter who owns them, the issue is whether they exist and whether they can produce an income. I would also suggest that the 1920s resulted in the creation of excess capacity, we are in a period of inadequate capacity now, except in US housing. The Depression was more the result of bad policy during the Depression. Banks are much more astute now in managing crises.

I believe that 1 in 11 homes is close to 9% if you ask me. In addition I believe their figures to be more accurate than the controlled media and government wants us to believe as they do not want a panic to arise.

Your beliefs don't seem to account for the issues I am raising. A lack of confidence only stops new lending, but only as long as asset prices are falling. Once they turn around, what the market turn around, confidence restore, and cost-of-living inflation fall. There is another leg in this market.

The sad fact is that we are already in a recession and have been for many months now, but you will not hear it from the government with their release of bogus figuers.

Yes we are in recession, and the US probably will be for another 18-24 months, but that is a far thing from Depression. You had a short recession in 2000, but life resumed. Why? Because the underlying deflationary forces were still in place - cheap labour in China. Whilst there is tight capacity and underutilised Chinese & Indian workers, you are not going to see this cycle ending. I think we are 10 years away from that, probably more like 15 years when you add Bangladesh and Vietnam. You will not get the same productivity in the Philippines or Indonesia, but there are other countries too which will offer the world cheap labour, which will keep things going. This is not a usual economic cycle. Your assertions about US unemployment are not facts, its conjecture, but I agree that the politicians would happily manipulate data, and could be done readily. Really it doesn't matter because at a time of 'relatively' tight capacity, that is more growth potential.
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[Pachipro]

I don't think it matters how much you read, its a matter of your understanding, capacity to think critically, honesty and the quality of what you read.

And I can say the same thing to you. You really need to do a little more reading outside the box of so called controlled media who want you to believe what they want and you do it fairly well I might add.

This is all true, but you have to make a case for why inflation should persist as a problem. It is rising because asset prices are falling. So I'm saying they will fall to a point, but they will turn around.

Not in our lifetime maybe. Inflation will persist because of the Fed's, (and all Central Banks I might add), 18% increase in the money supply with nothing to back it up. They just print it at will or enter about $85 billion in digital numbers as they did with AIG and, like magic it is there. Inflation is already well over 12%. Ask any person who buys groceries or who does any shopping. Also, without the massive importing of oil, when we have more than enough for 200 years, thus exporting inflation, it will come home to roost in droves and kill the US economy in a matter of months. Therefore, what the US has not outshored in jobs and such they will buy out until we become a facist state and, if the last few weeks is any indication, we are well on our way. And who is going to pay the Fed (aka Elitist bankers)? Me, you, your kids and grandchildren as it will be paid for by your hard earned wages in the forms of taxes. As of today the US is well over 10 trillion ($10,000,000,000,000) in debt and there is absolutely no way to ever, EVER, pay it back. Only the slaves will pay it back and they will make sure they are paid back.

Today, 20 years later, Japanese housing still has never returned to the levels back then and neither has the stock market which was at 44,000 back then. Therefore, how can you say they will return to their previous levels when they have yet to do so in Japan after 20 years?

Not a very good measures because it really doesn't matter who owns them, the issue is whether they exist and whether they can produce an income. I would also suggest that the 1920s resulted in the creation of excess capacity, we are in a period of inadequate capacity now, except in US housing. The Depression was more the result of bad policy during the Depression. Banks are much more astute now in managing crises.

Really? Banks, that are owned by the elites and wealthiest families in the world are much more astute in managing crisis? Jeeze, man, they created the freaking crisis to stave off a recession after their dot.com bubble burst! it is Far, far, far from reality and really shows how out of touch you are with real goings on in thsi world and the central banks and their purpose for being, and the news, and the markets, and the price of gold, (which today which reached an historical one day high,) etc, etc. Maybe you should take the time to read this article: "Central Bankers Safety Confidence Trick as Great Depression 2.0" of which I will quote a few paragraphs here:

Rising gold prices are a cold sore on the lip of central bankers. In the world of paper money, it's a clear sign something's not right

.....Central bankers are the keepers of the keys to the kingdom. The kingdom, however, is on the edge of bankruptcy and in danger as never before. Comparisons are now being made to the Great Depression of the 1930s. The comparisons, however, are just that.

.....In some ways, the situation is similar. In many ways, it is not. In a very fundamental way, the conditions are much worse. The systemic strains on the global financial system are today much more profound than even during the Great Depression.

.....The Great Depression of the 1930s was unique in the history of capital markets built on debt-based money, sic capitalism. Until the creation of the Federal Reserve System, the US economy had been a savings-based, not debt-based, economy. The difference between the two, although rarely understood, is profound

.....The price paid for credit-based expansion is debt. Increasing the debt-based money supply increases the amount of debt; and, over the naturally limited life of a debt-based economy, the constantly increasing and compounding levels of debt will grow until the economy collapses.

.....Compounding debt, the wellspring of bankers' profits, will eventually destroy the economy on which it lives. The time it takes to do so is dependent on the strength and productivity of the underlying economy.

.....No economy, however, no matter how strong initially, can out run the constantly compounding debt of credit-based money—not even the United States .

.....In 1913, the Federal Reserve System began feeding debt-based money into the previously savings-based US economy; and in just ten years, the newly available cheap credit poured into the stock market and drove shares prices to historic highs. In 1929, the stock market collapsed and the Great Depression began in 1933, only thirty years after the Federal Reserve Act was approved.

.....It was the vast amounts of cheap credit from the Federal Reserve that fueled the meteoric rise of the stock market bubble in the 1920s, a bubble so large its collapse plunged the US and the world into the first Great Depression in the 1930s; and, now, today, the same is again about to happen.

.....The amount of debt that will soon come crashing down will make the Great Depression seem exactly as it is, a prelude to something much larger and much more dangerous—a possible hyperinflationary deflationary collapse that will soon dwarf the merely deflationary collapse of the 1930s.

.....Americans often tell themselves that safeguards are in place that will prevent another Great Depression; and, as we are now on the edge of another such collapse, it would do us well to take another look at those ﾂ"safeguardsﾂ" to see how safe we actually are—or aren't. (Please read them in the article or don't, if you desire to stay safe in your thinking that all is well and the great banks will take care of us sheeple.)
Glass-Steagall was designed to protect America from another Great Depression, a time where one in four had been out of work, where 60 % of banks had failed, and where bread lines were as common as family misery. But in 1999 Glass-Steagall was repealed by those elected to represent the peoples' will.

.....The subversion of democracy did not happen overnight or by chance. It was built into the process itself. Alexis deToqueville in his seminal work, Democracy In America written in the 1830s, believed that America's version of democracy suffered from a fatal flaw, a flaw that derived from the American character itself.

.....DeToqueville observed that Americans had two conflicting desires: (1) The desire to be free, and (2) the desire to be led. It is America 's second desire that has now led to the undoing of the first.

.....Irrespective of America 's truly revolutionary Declaration of Independence and extraordinary Constitution, America today has become a debased mockery of the founding fathers' original dream and the manifestation of DeToqueville's dire predictions; and, this November, Americans will again go to the polls to choose ﾂ"their mastersﾂ".

.....This is what DeToqueville said of the process: It is in vain to summon a people, who have been rendered so dependent on the central power to choose from time to time the representatives of that power; this rare and brief exercise of their free choice, however important it may be, will not prevent them from gradually losing the faculties of thinking, feeling, and acting for themselves, and thus gradually falling below the level of humanity.

.....Delusions die hard. But like the patrons in strip clubs, only when the money is gone, does reality return and so in 2008, America may now be on the verge of a reawakening. With gas above $4 a gallon, its credit cards tapped, home foreclosures rising and its telephones increasingly called by bill collectors from India, Americans, like the patrons in the strip club, are realizing their wallets are now empty—the money's now gone, America's last bubble may be about to pop.

.....The loss of our freedoms has been accomplished by the collusion of two powerful forces, private bankers and public government. Both those forces, however, are counterfeit. Bankers no more represent real money than governments today represent those they govern; and the power of both derives from the false money that has fueled the ambitions of each.

.....When bankers and government first colluded in England in 1694, they replaced gold and silver with government counterfeit coupons and the world has not been the same since. It is little wonder that over the years, bankers have become more and more wealthy, governments have become more and more powerful, and we, the citizenry, have become more and more impoverished and indebted to bankers and enslaved to government.

Remember, back in the 30's there were no credit cards and no credit whatsover. It was only for the wealthy. The nation was a nation of savers and they paid cash for nearly everything. Today, it is all based on crediit and living above ones means. Back then if one had a Cadillac, one was rich and everyone knew it. Today your typical Cadillic, Lexis, Beemer, Mercedes, etc. owner is probably lower middle class and leasing the vehicle as is so prevalent in the US today and they owe more than the vehicle is worth. The same with housing. Most people today are living in far more house than their income allows and when their adjustable rate mortgage resets, they can't afford the payments and just walk away leaving the banks holding the bag. Today, with the bailout of "Funny" and "Fraudie" and AIG the banks and the Feds have shifted that burdon back onto all taxpayers and ALL Americans and they are now holding the bag and the bankers are laughing themselves all the way to the bank with your hard earned cash and savings and retirement.

Deny it at your own risk, and whether you believe it or not doesn't matter. I am not debasing you, I am just asking you to look at reality. What matters is that in the not too distant future I believe I will be vindicated, but still then you may not allow yourself to see the forest for the trees and only believing what you want from the controlled media conglomerates. Just look at the markets today and strap yourself in for a wild, wild ride as there will be many bumps, and ups and downs today and in the next year before it finally goes off the cliff to crash into the rocks below. Keep an eye on the major banks, airlines, auto companies, etc, because I believe they all will eventually be taken over by the US government ala the former USSR and communist China for, as Heny Kinssinger once said, and I paraphrase, he really respects communist China in that so few have such complete control over so many hundreds of millions. He believes the US should follow that example.

But that's ok as there are many like you who choose to remain ignorant of the facts staring them in the face and instead, choose to believe in the utopia they are led to believe in that the government and banks, (as they are one and the same anyway) know what is right and will do right without bending to greed, and that there is an invisible guiding had directing market forces, when that hand is the hand of the bankers. I know because I was there...once. Today, after years of being duped and believing in the "system", I know better and am better off because of it...... Maybe. Hmmmm.

 

[Shouganai]

And I can say the same thing to you. You really need to do a little more reading outside the box of so called controlled media who want you to believe what they want and you do it fairly well I might add.

Well you can say a lot, but you don't respond to my points. You make up evidence, and just caste dispersions on my knowledge. I read some of the same material as you, I agree with a lot of what you say, but I critically analyse what you accept as gospel. Totally agree the media is controlled.

Inflation will persist because of the Fed's, (and all Central Banks I might add), 18% increase in the money supply with nothing to back it up. They just print it at will or enter about $85 billion in digital numbers as they did with AIG and, like magic it is there. Inflation is already well over 12%. Ask any person who buys groceries or who does any shopping.

Agree partly with that, but you don't understand how inflation works. Its not as simple as money supply rises so inflation rises. There are 2 classes of marketable items resulting in two types of inflation - cost of living inflation and asset inflation. Falling asset prices places pressure on cost of living inflation because otherwise the relationship between prices & money supply will be out of balance. If you want to support the market the Fed will support asset prices. Expect central banks around the world to support asset prices because people have loans against those. If asset prices resume their climb, that will take pressure off cost-of-living inflation. The problem for the government is they will be creating more money, so not solving the problem, just delaying it. You have to explain why the government can't just keep supporting debt creation. I'm arguing buyers are going to enter equity markets at some point soon.

The other point we disagree on is that you seem to think that asset prices are going very low. Whereas I say the Fed will delay that. I guess your argument is that they don't have the power. But they do, since they can issue as many $US as they like. So they are undermining the value of the USD and its purchasing power.

Also, without the massive importing of oil, when we have more than enough for 200 years, thus exporting inflation, it will come home to roost in droves and kill the US economy in a matter of months. Therefore, what the US has not outshored in jobs and such they will buy out until we become a facist state and, if the last few weeks is any indication, we are well on our way. And who is going to pay the Fed (aka Elitist bankers)? Me, you, your kids and grandchildren as it will be paid for by your hard earned wages in the forms of taxes. As of today the US is well over 10 trillion ($10,000,000,000,000) in debt and there is absolutely no way to ever, EVER, pay it back. Only the slaves will pay it back and they will make sure they are paid back.

Oil imports have no direct relevance to inflation, though a weaker USD will increase their cost to Americans. Inflation will mean a higher interest rate environment. The lesson is to hold real assets. I see the equity markets turning around in the next few days. Why? Lower oil prices, relatively low equity prices, Fed stimulus. Interest rates going back to 1%. I would not be surprised to see the USD falling to Y80.

Today, 20 years later, Japanese housing still has never returned to the levels back then and neither has the stock market which was at 44,000 back then. Therefore, how can you say they will return to their previous levels when they have yet to do so in Japan after 20 years?

You don't seem to understand that Japan is a very different market to the USA. Japan still has a lot of foreclosed residential property hanging over the market 17 years after the crash. The US markets will clear out its debts in a few years. The Japanese government is using public spending to stimulate the economy rather than private debt creation. Why? It wants to use public funds to stay in power; for political control. It actually wouldn't mean much if the Nikkei returned to their previous level, as it could just be inflation-induced, at the expense of driving the yen lower.

Really? Banks, that are owned by the elites and wealthiest families in the world are much more astute in managing crisis? Jeeze, man, they created the freaking crisis to stave off a recession after their dot.com bubble burst! it is Far, far, far from reality and really shows how out of touch you are with real goings on in thsi world and the central banks and their purpose for being, and the news, and the markets, and the price of gold, (which today which reached an historical one day high,) etc

God, your like my mother. Don't listen. I agree with you on many issues, just dont agree with your extrapolation on where things are going. I would argue that there are a great many banks, some run by elites, others just wanting their option payouts, who have a vested interest in boosting stock prices. Really they only need to be concerned with holding market share, that means being better than the other banks as the economy will refloat. I agree, the markets are detached from reality. There will be a doomsday, I just think there is one more credit expansion cycle left in this market in the greater scheme of things. Give it 3 years. I agree holding gold is a good idea, and today is a good day to buy it. You should have bought last night.

Remember, back in the 30's there were no credit cards and no credit whatsover. It was only for the wealthy. The nation was a nation of savers and they paid cash for nearly everything. Today, it is all based on crediit and living above ones means. Back then if one had a Cadillac, one was rich and everyone knew it. Today your typical Cadillic, Lexis, Beemer, Mercedes, etc. owner is probably lower middle class and leasing the vehicle as is so prevalent in the US today and they owe more than the vehicle is worth. The same with housing. Most people today are living in far more house than their income allows and when their adjustable rate mortgage resets, they can't afford the payments and just walk away leaving the banks holding the bag. Today, with the bailout of "Funny" and "Fraudie" and AIG the banks and the Feds have shifted that burdon back onto all taxpayers and ALL Americans and they are now holding the bag and the bankers are laughing themselves all the way to the bank with your hard earned cash and savings and retirement.

Yep the US has its problems, I don't disagree. I just don't see any reason why it need fall apart now. I see the doom coming after another cycle. Just as you said the Fed deferred the 2000 doom until today, ask yourself why the Fed can't print paper to get itself through the current correction.

Deny it at your own risk, and whether you believe it or not doesn't matter. I am not debasing you, I am just asking you to look at reality. What matters is that in the not too distant future I believe I will be vindicated, but still then you may not allow yourself to see the forest for the trees and only believing what you want from the controlled media conglomerates. Just look at the markets today and strap yourself in for a wild, wild ride as there will be many bumps, and ups and downs today and in the next year before it finally goes off the cliff to crash into the rocks below.

Well your not addressing your arguments to my point - why can't the Fed keep printing. Why wouldn't it want to keep the party going? I say it will turn around in a few years, you think its depression soon. I think another 12-15 years. I'm not denying anything. I hold cash & gold stocks.

Keep an eye on the major banks, airlines, auto companies, etc, because I believe they all will eventually be taken over by the US government.

I agree with you, but that doesn't really support your argument. Those enterprises had problems because they are poorly managed. They had problems during the credit expansion, which is why other airlines & Toyota took market share.

........... there is an invisible guiding had directing market forces, when that hand is the hand of the bankers. I know because I was there...once.... believing in the "system", I know better and am better off because of it...... Maybe. Hmmmm.

Why don't you tell us just what conspiracy you have seen. Share it with the world. So I can determine how realistic you are? I don't necessarily disagree with you, neither do I support this system. I just don't see any reason why it will change YET.

 

[Pachipro]

Agree partly with that, but you don't understand how inflation works. Its not as simple as money supply rises so inflation rises.

As I said above, you really do need to do more reading outside the box. The increase in the money supply (M3) which the US government stopped publishing a few years ago to hide the real inflation figures, is a most accurate indicator of inflation or why would they stop publishing it? Their very own reasons are bogus. You don't have to believe me, but you can check for yourself here at Inflation Data.com where they articuletly lay it out:

In other words, M3 tracks what the big boys are doing with the money. This includes US dollars held in banks in Canada and the UK (called Eurodollars) not to be confused with the Euro which is the standard currency of Europe.

With all its efforts at "Tracking Inflation" most everyone agrees that the last thing the Government really wants is for the general public to know how much it is stealing out of your pockets through inflation.

Inflation has been called "the hidden tax" and that is exactly what it is. When the Government "prints" extra money what do you think it does with it? It spends it of course!

Today, in 2008, M3 has increased about 18% yearly which is near the true inflation rate of about 12%. If the government were using the figures they were using in the 1970's to calculate inflation then 12% would be the correct figure. Instead, we are given the new terms of "core inflation" which excludes energy and food prices! Well what does the average American spend most of their money on? Food and energy! Duuuuh!

But the government will keep on supporting debt creation in order to hide the true inflation figures. They will just keep on printing money, as they are doing as we speak by bailing out Wall Street with money we do not have. Even though hard assets like housing and such are decreasing in value, true, core inflation, may be falling, but food and energy is continually rising. Food and energy prices have increased by nearly 15-20% these past two years.

Oil imports have no direct relevance to inflation, though a weaker USD will increase their cost to Americans. Inflation will mean a higher interest rate environment. The lesson is to hold real assets. I see the equity markets turning around in the next few days. Why? Lower oil prices, relatively low equity prices, Fed stimulus. Interest rates going back to 1%. I would not be surprised to see the USD falling to Y80.

Oil imports DO have a direct correlation to inflation because the US$ is the world's reserve currency and all oil is purchased in US$ as the US forced on the world and also forced them to purchase US T-Bills. If it weren't and we produced our own oil, we would have massive inflation. Therefore, we are exporting our inflation by forcing other counties to purchase their oil in US$. This is changing soon and even Alan Greenspan mentioned to Middle Eastern Countries that they might want to consider using another currency to purchase their oil: "Greenspan Tells Middle East They Should Consider Dropping Dollar Pegs" Now why would he do this and it not be reported in the US? Hmmmm.

Yes, real assets are the way to go, but besides real estate (which can lose value in the short term) one should have a significant amount of gold and silver and foreign curerencies to ward against long term inflation as not only will the yen reach 80/$ again, but gold is predicted to reach more than $1,500/oz and silver $100/oz in the not too distant future. Trust me, in the near future the dollar will be as worthless as toilet paper. Unless you really have to "go" then it may be worth the paper it is printed on.

God, your like my mother. Don't listen. I agree with you on many issues, just dont agree with your extrapolation on where things are going. I would argue that there are a great many banks, some run by elites, others just wanting their option payouts, who have a vested interest in boosting stock prices. Really they only need to be concerned with holding market share, that means being better than the other banks as the economy will refloat. I agree, the markets are detached from reality. There will be a doomsday, I just think there is one more credit expansion cycle left in this market in the greater scheme of things. Give it 3 years. I agree holding gold is a good idea, and today is a good day to buy it. You should have bought last night.

If you don't agree on my "extrapalation of where things are going" just look at what is transpiring in the US today. It is not good and is just as I said only it is at a much quicker pace. As I mentioned above, Gold and silver are the way to go and I'm glad you are among the few that also realize it. I have been purchasing them since 2000 when gold was $250/oz and people thought I was crazy.

One more credit expansion? Credit is the anasthesia of the masses and that's why they are unaware of exactly what is transpiring before their very eyes. Maybe you are correct, but I do not see it happening as even banks today are afraid to lend to each other as they do not trust their balance sheets. It may happen, but I do not think it likely. Maybe a form of socialism, yes, but not like it was in the past.

Yep the US has its problems, I don't disagree. I just don't see any reason why it need fall apart now. I see the doom coming after another cycle. Just as you said the Fed deferred the 2000 doom until today, ask yourself why the Fed can't print paper to get itself through the current correction.

I believe doom will be BEFORE another cycle as I think this is the end of the road, so to speak. Things will look good until after the election, but come February 2009, when 4th quarter results come in which will probably be the worst in history, all hell will break loose and the US will continue to spiral downward under the weight of its massive debt bubble.

Of course the Fed can print paper to get itself out of this mess, but it is just that, paper, with nothing to back it up, except hard assets which foreigners are sucking up in the US. In fact today the Fed is printing $700billion and who will pay for it? The average working stiff that's who through inflation and higher taxes at the expense of education, infrastructure, housing, etc. The US, in the end, will become a third world country with their money, assets, retirements, etc stolen from them by the elites as they have done for the past several hundred years.

Does not one find it interesting that today Goldman Sachs stands as the only winner on Wall Street and they are now a bank holding company also and all banks and financial institutions under the control of the government in the not too distant future? Does not any one consider it interesting that the former head of the Bank of Japan, The Bank of Canada, The Central Banks of Europe, etc, as well as the Fed Head Paulson were/are former Goldman Sachs CEO's/Chief Executives? Does not anyone make a connection and a possible connection to, <gasp> a New World Order with one government and one currency and a return to a feudal system? I hope not, but I see no other course based on their (the elites) very own words of which I will elaborate on later.

In a way you and I do see see eye to eye on most things, it just in our interpretation that we differ.

 

[Shouganai]

As I said above, you really do need to do more reading outside the box. The increase in the money supply (M3) which the US government stopped publishing a few years ago to hide the real inflation figures, is a most accurate indicator of inflation or why would they stop publishing it? Their very own reasons are bogus.

You're the one who needs to read. Start with what I say. I know about the M3 coverup. I'm not arguing that there is inflation. I'm saying you don't know even what is inflation if you are looking at CPI because its just 'cost of living' inflation, ignores asset price inflation.

Today, in 2008, M3 has increased about 18% yearly which is near the true inflation rate of about 12%. If the government were using the figures they were using in the 1970's to calculate inflation then 12% would be the correct figure. Instead, we are given the new terms of "core inflation" which excludes energy and food prices! Well what does the average American spend most of their money on? Food and energy!

Don't disagree with that. But food prices only started going up in recent years, commodities only since 2001 from record 15-year lows. You miss the asset inflation, thats why you overstate inflation. Observe that when asset prices fell, food prices & CPI started rising.

But the government will keep on supporting debt creation in order to hide the true inflation figures. They will just keep on printing money, as they are doing as we speak by bailing out Wall Street with money we do not have. Even though hard assets like housing and such are decreasing in value, true, core inflation, may be falling, but food and energy is continually rising. Food and energy prices have increased by nearly 15-20% these past two years.

I believe this was my argument, you changed your mind over the last few days when you saw the bail out. I actually anticipated it, and I picked the bottom . Remember that nickel stock (MCR.ASX) I recommended at $1 support, it went to $1.03, recovered to $1.35. That was when you were clutching at straws worried about depression. True, but you are a decade too soon. As I was years ago.
By the way its the USD value falling as well as housing prices, but house prices will turn around in a few years and there will be another run.

Oil imports DO have a direct correlation to inflation because the US$ is the world's reserve currency and all oil is purchased in US$ as the US forced on the world and also forced them to purchase US T-Bills. If it weren't and we produced our own oil, we would have massive inflation. Therefore, we are exporting our inflation by forcing other counties to purchase their oil in US$.

That is partially true, but actually oil is an asset class, and its being traded like other asset classes. Also its not directly correlated with inflation because its only one element of CPI.

This is changing soon and even Alan Greenspan mentioned to Middle Eastern Countries that they might want to consider using another currency to purchase their oil: Now why would he do this and it not be reported in the US? Hmmmm.

It matters little what currency oil is sold in, its the currency you hold the cash in, to be struictly correct. Yep, he's quite the hypocrite.

Yes, real assets are the way to go, but besides real estate (which can lose value in the short term) one should have a significant amount of gold and silver and foreign curerencies to ward against long term inflation as not only will the yen reach 80/$ again, but gold is predicted to reach more than $1,500/oz and silver $100/oz in the not too distant future. Trust me, in the near future the dollar will be as worthless as toilet paper. Unless you really have to "go" then it may be worth the paper it is printed on.

Well I know you don't read because I said I hold gold stocks, and I bought more small gold stocks whilst you were panicking. Oh, and gold will go higher than $1,500. Try $2,400/oz and counting based on historic ratios.

If you don't agree on my "extrapalation of where things are going" just look at what is transpiring in the US today. It is not good and is just as I said only it is at a much quicker pace. As I mentioned above, Gold and silver are the way to go and I'm glad you are among the few that also realize it. I have been purchasing them since 2000 when gold was $250/oz and people thought I was crazy.

Well you were crazy because gold has under-performed compared to other assets. Too self-righteous I guess to make the best asset pick, but you won't loose money if you sell at the right time. And you were not alone. I also over-invested in gold back then, though did better than you because I bought gold stocks. Made a lot on Aquarius Platinum opts (3200%). Sorry you didn't join it.

One more credit expansion? Credit is the anasthesia of the masses and that's why they are unaware of exactly what is transpiring before their very eyes. Maybe you are correct, but I do not see it happening as even banks today are afraid to lend to each other as they do not trust their balance sheets. It may happen, but I do not think it likely. Maybe a form of socialism, yes, but not like it was in the past.

Well there will be one more credit expansion because there is no huge over-supply of capacity. The Fed is partially recapitalising the banking sector with funny money, so in a few years when the foreclosed properties are absorbed, it will happen again. People will say, oh this is a few era. The Fed bailed us out last time, they can do it again. The fear of bank credit is short term, and the central banks will just underwrite the whole banking sector. Well its fascism, but you are close enough because fascism & collectivism come from the same root cause - collectivism. Read Ayn Rand.

I believe doom will be BEFORE another cycle as I think this is the end of the road, so to speak. Things will look good until after the election, but come February 2009, when 4th quarter results come in which will probably be the worst in history, all hell will break loose and the US will continue to spiral downward under the weight of its massive debt bubble.
Of course the Fed can print paper to get itself out of this mess, but it is just that, paper, with nothing to back it up, except hard assets which foreigners are sucking up in the US. In fact today the Fed is printing $700billion and who will pay for it? The average working stiff that's who through inflation and higher taxes at the expense of education, infrastructure, housing, etc. The US, in the end, will become a third world country with their money, assets, retirements, etc stolen from them by the elites as they have done for the past several hundred years.

Well ask yourself what made the market fall? It was not inflation because asset prices started falling before they did; since they move adversely. The US will rest for a few years and underpriced Asia will have a property boom, and commodities will go back up supported by a weaker USD too. So inflation will restore yields over the next few years in the USA. Ok, no credit creation in that period, so recession. You can't compare with the Great depression as that period was mismanaged by an inexperienced central bank.

Does not one find it interesting that today Goldman Sachs stands as the only winner on Wall Street and they are now a bank holding company also and all banks and financial institutions under the control of the government in the not too distant future? Does not any one consider it interesting that the former head of the Bank of Japan, The Bank of Canada, The Central Banks of Europe, etc, as well as the Fed Head Paulson were/are former Goldman Sachs CEO's/Chief Executives? Does not anyone make a connection and a possible connection to, <gasp> a New World Order with one government and one currency and a return to a feudal system? I hope not, but I see no other course based on their (the elites) very own words of which I will elaborate on later.
In a way you and I do see see eye to eye on most things, it just in our interpretation that we differ.

Yep, agree with all that.

 

[Pachipro]

You're the one who needs to read. Start with what I say. I know about the M3 coverup. I'm not arguing that there is inflation. I'm saying you don't know even what is inflation if you are looking at CPI because its just 'cost of living' inflation, ignores asset price inflation.

You're jumping to conclusions. I'm not only looking at CPI. The US economy, as well as most economies, depends on Asset Price Inflation to fuel it's growth, but when real wages are deteriorating, and jobs are being offshored, and factories closing, unemployment is increasing, where are people going to get the money to purchases these inflated asstes especially when more than 75% of the US economy depends on consumer spending? Now that credit has all but dried up and a majority of the middle class is in debt up to their eyeballs where are they going to get the money? Therefore, there will be a contraction in these assets as the economy slowly collapses as is evident from the sharp drop in housing prices.

In a boom economy, lenders lend based on the value of assets, but in a bust economy, when the prices of the assets deteriorates, lenders are not so willing to lend. Thus we have the dire situation we are in today with the US government nationalizing many financial institutions to hide the real effects of this bust. It will get alot worse before it even attempts to get better.

It is crucial that central banks and regulatory authorities be aware of effects of asset price inflation on the stability of the financial system. Lending activity based on asset collateral during the boom is hazardous to the health of lenders when the boom collapses. One way that authorities can curb the distortion of lenders' portfolios during asset price booms is to have in place capital requirements that increase with the growth of credit extensions collateralized by assets whose prices have escalated. If financial institutions avoid this pitfall, their soundness will not be impaired when assets backing loans fall in value. Rather than trying to gauge the effects of asset prices on core inflation, central banks may be better advised to be alert to the weakening of financial balance sheets in the aftermath of a fall in value of asset collateral backing loans.

It seems to me that financial institutions have not avoided this pitfall, but have ignored it completely in recent years.

Well I know you don't read because I said I hold gold stocks, and I bought more small gold stocks whilst you were panicking.

Again you jump to conclusions aboutr someone you don't even know. Glad I dont listen to you, even though you are quite read. I have been in and out of gold and silver stocks for a long time now and if you held your gold (and silver, etc) stocks, as you stated above, you probably lost alot of money these past several weeks. But they will come back again.

Well you were crazy because gold has under-performed compared to other assets. Too self-righteous I guess to make the best asset pick, but you won't loose money if you sell at the right time. And you were not alone. I also over-invested in gold back then, though did better than you because I bought gold stocks.

There you go agian, jumping to conclusions to show how "smart" you are. Look, I'm not here to decided who's dick is bigger and who can make the most money in the short term. I am not a day trader like you. In gold and such, I care not about other assets as they are a different class. Do you mean to say that I lost money purchasing hard gold (gold in my posession) at $250/oz and in subsequent years when it is trading at more than $880/oz today? You completely lose me there especially when you say you did better because you bought gold stocks. Yeah riiiiight. Gold has maybe lost 10-15% of it's value over the past several weeks and bounced back again, but most gold stocks today are trading at 50% or more less than they were just 8 weeks or more ago! If you held them like you claim above who is more ahead? Oh nevermind. This is pointless.

Well there will be one more credit expansion because there is no huge over-supply of capacity. The Fed is partially recapitalising the banking sector with funny money, so in a few years when the foreclosed properties are absorbed, it will happen again. People will say, oh this is a few era. The Fed bailed us out last time, they can do it again. The fear of bank credit is short term, and the central banks will just underwrite the whole banking sector. Well its fascism, but you are close enough because fascism & collectivism come from the same root cause - collectivism. Read Ayn Rand.

Agree with you to a point, butI kind of doubt it IMO as there is a huge oversupply of housing that the Fed will just suck up from the banking sector. Is it any wonder why the Feds took over these banks and in stitutions? Because if they were allowed to file for bankruptcy then tghe bankruptcy courts would discover exactly how much worthless paper they actually held on their balance sheets. The next bubbles to burst will be the credit bubbles and the derivatives bubbles. Also, 20 odd years later, Japanese housing prices have still come nowhere to their peak back then as well as their stock market which today is below what it was in February 2002.

Well ask yourself what made the market fall? It was not inflation because asset prices started falling before they did; since they move adversely. The US will rest for a few years and underpriced Asia will have a property boom, and commodities will go back up supported by a weaker USD too. So inflation will restore yields over the next few years in the USA. Ok, no credit creation in that period, so recession. You can't compare with the Great depression as that period was mismanaged by an inexperienced central bank.

The market started falling because mortgages were sold at 32X their value and when housing prices started falling these derivatives and Credit Default Swaps and Asset Backed Securities, and Mortgage Backed Securities, etc., that were sold worldwide, started falling in value like a rock they were worth pennies on the dollar. The Fed had no choice but to bail them out at taxpayer expense to hide the true value of their losses and back them up with worthless US currency printed on a computer screen. The more $'s in circulation reduces the value of all $'s leading to inflation and if they keep up leading to hyperinflation and maybe even, heaven forbid, deflation as Japan was wise enough to allow to occur. Japan will probably be among the very few countries that will not be involved in this meltdown as they already experienced it, allowed deflation to take hold, and survived because of it.

Even today the BOJ refused to lower interest rates because the governor of the BOJ did not want to participate in this bailout. Or so they said.

Remember in the great Depression there were no credit cards and hardly any credit, most people didn't own their own homes and, if they did, and had a second mortgage, they were considered losers. There is no comparision between then and now and this one will be far worse as it already is, but no one is willing to admit it yet.

Wikipedia an Ben Bernanke:

On Milton Friedman's ninetieth birthday, November 8, 2002, he stated: "Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve System. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."

Sorry Ben, but it's happening again and you are making it far, far worse. This will dwarf the Depression of the 1930's IMO

In 2002, when the word "deflation" began appearing in the business news, Bernanke gave a speech about deflation.[13] In that speech, he mentioned that the government in a fiat money system owns the physical means of creating money. Control of the means of production for money implies that the government can always avoid deflation by simply issuing more money. (He referred to a statement made by Milton Friedman about using a "helicopter drop" of money into the economy to fight deflation.) Bernanke's critics have since referred to him as "Helicopter Ben" or to his "helicopter printing press". In a footnote to his speech, Bernanke noted that "people know that inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation."

I do not believe it will work.

In the end shouganai, I guess we'll just have to wait it out to see who is right and I do not want to prove, as I state d above, who's dick is bigger as this is not the point. You see it from your point of view and I see it from mine. Only time will tell who is correct for as in economics, no one is always right and no one is always wrong for if that were the case, we would not be in the situation we are in today. The truth is no one knows!

 

[Shouganai]

You're jumping to conclusions. I'm not only looking at CPI. The US economy, as well as most economies, depends on Asset Price Inflation to fuel it's growth, but when real wages are deteriorating, and jobs are being offshored, and factories closing, unemployment is increasing, where are people going to get the money to purchases these inflated asstes especially when more than 75% of the US economy depends on consumer spending? Now that credit has all but dried up and a majority of the middle class is in debt up to their eyeballs where are they going to get the money? Therefore, there will be a contraction in these assets as the economy slowly collapses as is evident from the sharp drop in housing prices.

Well jobs going offshore is a good thing globally, just not direct benefit to the USA, its offshore for cheap labour. Factories are closing because asset prices are collapsing, not because of an inherit over-capacity, but because purchasing/credit is tightening. This is bad news as you rightly point out, but its a problem for a few (3) years, then the economy will grow again. People are still making money, property is a form of savings, better than money dont you think in an inflationary environment. Yes property prices are still inflated because foreclosures will take time to clear, but I would suggest stocks are close to bottom. Oil, commodities are off, interest rates is some countries are falling. US will need to stay high to rebuild savings. The task will fall to the Democrats again! (1st Clinton after Reagan). Markets clear, within 3 years new borrowing capacity will emerge.

In a boom economy, lenders lend based on the value of assets, but in a bust economy, when the prices of the assets deteriorates, lenders are not so willing to lend. Thus we have the dire situation we are in today with the US government nationalizing many financial institutions to hide the real effects of this bust. It will get alot worse before it even attempts to get better.

Partly true, assets are priced at the margin. When foreclosed properties are absorbed over the next few years, the market will recover. Most of the money created will still exist, the Fed is just about to create another $700bil to replace a lot of the debt destroyed by foreclosures. Nevertheless leaving real assets behind which I say will be absorbed with 3 years, maybe by foreigners like me. The US is not a bad place to live for wealthy foreigners. There are 38,000 foreclosures in Las Vegas. Yummy!

Agree with you to a point, butI kind of doubt it IMO as there is a huge oversupply of housing that the Fed will just suck up from the banking sector. Is it any wonder why the Feds took over these banks and institutions? Because if they were allowed to file for bankruptcy then tghe bankruptcy courts would discover exactly how much worthless paper they actually held on their balance sheets. The next bubbles to burst will be the credit bubbles and the derivatives bubbles. Also, 20 odd years later, Japanese housing prices have still come nowhere to their peak back then as well as their stock market which today is below what it was in February 2002.

Well the Fed is not going to allow the derivatives market to fail, which is why the Fed is being sensible by underwriting the whole system. This is why I think the next market move will result in depression because the Fed's actions I think will save the market this time, but it won't next time. I'm not agreeing with the system, just think they are doing all they can do to prevent bank failure contagion.
How can you compare the US and Japanese market. Japan has taken years to disclose and liquidate its debts. Its still foreclosing properties now. I bought one. It has not transformed its economy aside from allowing contract/part time labour.

The more $'s in circulation reduces the value of all $'s leading to inflation and if they keep up leading to hyperinflation and maybe even, heaven forbid, deflation as Japan was wise enough to allow to occur. Japan will probably be among the very few countries that will not be involved in this meltdown as they already experienced it, allowed deflation to take hold, and survived because of it.

Well those liquidations are reducing the amount of money in circulation, plus inflation, so what is unfolding now is actually part of the correction process. I give the market 3 years to absorb the foreclosures and more adjustment through inflation. Agree with you on Japan. The implication of that is that Japan has some incentive to kickstart its economy through reform. We don't see any signs of it yet mind you. Maybe the current circumstances will push that agenda.

Even today the BOJ refused to lower interest rates because the governor of the BOJ did not want to participate in this bailout. Or so they said.

Well at current rates, dropping them will not add any stimulus. The economy needs reform measures, clear its debts, banks to start lending. That will take time, not sure when.

Remember in the great Depression there were no credit cards and hardly any credit, most people didn't own their own homes and, if they did, and had a second mortgage, they were considered losers. There is no comparision between then and now and this one will be far worse as it already is, but no one is willing to admit it yet.

Does that make sense. I think a lot of the foreclosures would be on 2nd houses. True, credit card debt is a problem. Its unsecured though, so that's easily cleared. The Great Depression was mostly caused by an inappropriate response. They raised rates, they undermined confidence in the banking system.

In the end shouganai, I guess we'll just have to wait it out to see who is right and I do not want to prove, as I state d above, who's dick is bigger as this is not the point!

Yep, lets see. I have a pretty good track record on these things. I used to be as dire as you, in fact, stretch your fears out another 10-15 years and I think you will be right; but I've since come to see another expansion before the ultimate collapse. This is because we are in a super cycle like you have not seen before. The productivity benefits of China & India will not disappear I believe, the scalability of internet solutions. You will not see more protection as you did in the 1930s. I think you will see more liberalisation not less. Asia is going to catch up faster than you can imagine.

 

[Pachipro]

Yep, lets see. I have a pretty good track record on these things. I used to be as dire as you, in fact, stretch your fears out another 10-15 years and I think you will be right; but I've since come to see another expansion before the ultimate collapse. This is because we are in a super cycle like you have not seen before. The productivity benefits of China & India will not disappear I believe, the scalability of internet solutions. You will not see more protection as you did in the 1930s. I think you will see more liberalisation not less. Asia is going to catch up faster than you can imagine.

Well please share your thoughts and opinions in a thread or two as I am always willing to learn from others and I am not being sarcastic either, unless you charge a yearly fee for your newsletter! LOL

Still things do look dire for the short term as the yen for a "Global Economy" from those that actually run this planet seems to have been accelerated a bit and many are scratching their heads wondering what the hell is going on. MAny have said that nothing is going to the formulas they, and I and maybe you, were taught in economics in which I majored. But hey, these past several weeks has completely changed the face of economics and the books will probably have to be rewritten.

Do you really believe there will be another expansion before the "ultimate collapse"? Perhaps you are right, but I think if it is to be it will be a far different market environment and will more centralized and controlled. However, I believe this is the beginning of the ultimate collapse. I hope I am wrong. At least the yen I bought at 121 about a year ago is starting to show some profit with the yen finally falling below the 100/$ level. Perhaps this is the end of the carry trade. I can't say the same for the Aussie $'s I bought, but I will hold them and maybe add to my position.

Stock markets around the world are in free fall and Japan's fell the most since October 1987 (which I experienced when I lived there) and the world treasuries are just pumping money into the banks like there was no tomorrow. Even Iceland may go bankrupt!

I agree that China and India will lead the world in productivity and may just be the sole suppliers to the world with China providing goods and India providing the brains and services. That's why I am still holding my indexes on these two countries.

Anyway thanks for a good discussion. You are about as informed as anyone I've debated with. Even though we have varying views we agree for the most part. Please continue adding to this discussion.

 

[Shouganai]

Well please share your thoughts and opinions in a thread or two as I am always willing to learn from others and I am not being sarcastic either, unless you charge a yearly fee for your newsletter! LOL

Well, I dont offer as rich debate as this so you might not be interested, just views on market based on charts and my interpretation of the factors driving the markets. But the portal is sheldonthinks.com.

Still things do look dire for the short term as the yen for a "Global Economy" from those that actually run this planet seems to have been accelerated a bit and many are scratching their heads wondering what the hell is going on. MAny have said that nothing is going to the formulas they, and I and maybe you, were taught in economics in which I majored. But hey, these past several weeks has completely changed the face of economics and the books will probably have to be rewritten.

Well yep, I didn't find economics particularly useful. But I have studied the economy over the last 4-5 years, maybe like yourself. Critically analysed everything in the last few years.

Do you really believe there will be another expansion before the "ultimate collapse"? Perhaps you are right, but I think if it is to be it will be a far different market environment and will more centralized and controlled. However, I believe this is the beginning of the ultimate collapse. I hope I am wrong. At least the yen I bought at 121 about a year ago is starting to show some profit with the yen finally falling below the 100/$ level. Perhaps this is the end of the carry trade. I can't say the same for the Aussie $'s I bought, but I will hold them and maybe add to my position.

I don't believe this is the end because there is no huge over-capacity. This collapse will create over-capacity, but I think we didn't start with one, so not as serious. I don't see any reason why the government would come away thinking that derivatives are wrong. So I can see another cycle where these products are misused because they didn't destroy us in 2008-9. I think there is going to be a property boom in Asia, as Marc Faber has indicated. You can't have such a long growth period without an adjustment. I do get some things wrong. eg. I'm confused by the USD, didn't expect such a weak AUD, but think you should definitely be adding to that position on the current weakness, as the AUD economy is in good shape. Plans for 3 LNG terminals here, iron ore mines, etc. These are long term investments, so will likely still get built. Some are more advantaged than others, some will be delayed. We have the 4th largest superannuation pool in the world, plus a $A120 billion govt future fund, of which $80bil is going into railways. The economy will be aided by a weak $AUD, as imports curtailed. Lovely natural hedge.

Stock markets around the world are in free fall and Japan's fell the most since October 1987 (which I experienced when I lived there) and the world treasuries are just pumping money into the banks like there was no tomorrow. Even Iceland may go bankrupt!

Japan has a way to go, but I think Dow will find support at 9000pts. If I remember, the next support after that is 7500? I'm buying a platinum stock today.
Yep, thanks for the discussion, always good to test one's ideas.