Rolling US Economy Into The Shitbin Thread

wrong thread!!!

see where it says "into the shitbin?!" not "buoyed by foreigners!"

Hahaha. BUT IT'S ABOUT ECONOMICS!

kudlow.jpg

http://www.whatnotreviews.com/images/personal_finance/jim_cramer_book.gif

Fight to the death.

for a while, i've had a flip line about how the only time to worry about illegal immigrants is when they start leaving. and there they go.

Good column from Martin Wolf in the FT today about why the credit crisis is a paradigm-shifting event:

http://www.ft.com/cms/s/0/90126fca-a810-11dc-9485-0000779fd2ac.html

Alan Greenspan's take on how we got where we are, from the WSJ:

The Roots of the Mortgage Crisis

And after reading that Statfor thing:

http://seattletimes.nwsource.com/html/travel/2004067332_webchinesetourists12.html

Yes, maybe new competing thread is a good idea. Then again, having a In Da Shittybins vs. Boyed By Fauranurz fight here makes the thread more fun (IMHO)

Hmm.. now if we can just get all those Chinese tourists to buy a couple of houses while they're here.

"LOL HONGKOUVER!"

http://www.lakelandsd.com/tutorial/sinking.jpg

http://farm2.static.flickr.com/1180/753867454_b2849f7a8b_o.jpg

Seamus Milne in today's Guardian

It might be entirely true that the channeling of foreign-held dollars back into USA investments is preventing large amounts of shit from reaching the fan, this dynamic will only hold things in place if the Chinese tolerate a drastic fall in the value of their dollar-holdings. That fall is inevitable unless the USA makes a hard turn from its present course.

What I see as most likely is the Fed will hold interest rates steady, even as the recession becomes apparent in February-March of 2008. The recession will put increasing pressure on mortgage holders from the real estate bubble and loan defaults will increase through out the year as unemployment rises. This will cause the banking system to scream in pain, crying for lower interest rates.

At that point, the Fed is screwed. Lowering rates would further crash the dollar. Not lowering rates would crash the banking system. They'll choose the dollar. Then we'll see the real crisis appear. Whether we can wiggle out of it will depend on whether the central bankers of the world can agree on a plan.

The USA has benefitted enormously from becoming the world's reserve currency at a time of ballooning international trade. It's about time for the world to reclaim the keys to the world economy. I would expect some sort of 'currency basket' to be devised to replace dollars as the reserve currency by 2011. Either that, or big dose of chaos.

As usual, I do not claim to hold any special expertise in the Economics of the Future. I just read, watch, think and make my best guess.

http://invivoanalytics.com/2007/12/17/the-real-yield-negative-interest-rates/

note use of real CPI including energy, food etc. instead of what keeps getting reported as CPI in the press

forecast: (hyper)inflation or deflation?

presume will go for former but i still dont really get how this is done when wage inflation would be severely constrained

None dare call it stagflation.

No deflation is in sight in the USA, apart from housing prices unbubbling.

How this is done when wage inflation is severely constrained is simple enough. We'll import our inflation as the dollar buys progressively less in foreign markets, including raw materials (think: oil) and manufactured goods (think: almost everything in WalMart).

The USA has the most globalized economy. The erosion of USA wages will slow the price inflation down, but the loss of purchasing power will be the pertinent gauge to watch, not just wages or prices.

not helping
http://www.economist.com/images/20071208/20071208issuecovUS400.jpg

Increasing the money supply through....more credit? But won't it need takers? And institutions to happy to lend more?

The world is awash in dollars already. All that is necessary is for a signifigant portion of foreign dollar holdings to be repatriated for the USA money supply to balloon. When a nation refuses to accept its own currency... well, let's just say it isn't done by solvent nations.

As for lending and credit, when the private sector won't borrow, the government can always step in. If the government is a poor credit risk, it will just have to offer more interest, won't it? If the USA government cannot borrow even at high rates of interest... well, let's just say that is rarely the case with solvent nations.

So like, wtf is about to happen in real terms? Are we most likely looking at a depressed economy where it's tough to find a job and we have to cut our expenses a lot or a genuine crisis?

the world is awash in dollars..agreed. don't rate cuts mean yet more dollars though? meaning (hyper)inflation (possibly).

i guess foreign dollar holdings dont want to repatriate...but doesn't this make those holdings look less pleasant with each cut?

The Economist has been getting progressively worse under the new editor-in-chief
I would love to hear how "cheap food" is going to end when McDonald's is on the verge of waging its economy of scale on an even wider variety of foods across an even larger geographical range - are they all of a sudden going to have so much competition that they lose their price control?

What's to happen, in real terms?

I think it will be a very slow-motion sort of economic deterioration that will basically look like a recession with stagflation for a while, with continued degradation of infrastructure from year to year. Just a steady impoverishment, falling down from our past levels of opulence.

Whether it turns into a really nasty 'hot' crisis will depend a lot on the quality of USA politics - both among the politicians and the general public.

In the past, the USA has shown the ability to toughen up, change direction and do what has to be done to get the nation going the right way again. Whether this can happen again depends largely on how tightly the general public clings to its delusions and its old, comfortable ways of thinking and how much they are encouraged to stay deluded by leaders who shovel out loads of platitudes instead of useful information.

I can't say the signs are very good for our chucking away our delusions and facing up to the problems we've caused ourselves any time soon. We still have several more layers of fat and comfort to strip away before we come into contact with hard, sharp reality. When we reach that point, it could go any direction - but I'd bet on the country getting its act together eventually.

If we could only get rid of those damned Armageddon-believers I'd feel a whole lot more confident about where we'll be in 20 years.

1. in real terms, wages have been going down for like four years, for most americans anyway
2. additionally with the dollar being in flux so much lately a lot of other figures need to be rejiggered to see where we really are and where the trend is headed
3. "hyperinflation" should not happen because despite the decreasing purchasing power of the median household, that median american household still remains the target customer of the majority of business worldwide
4. the ultimate (c. 2012) result is going to largely depend on how overheated China is and whether they experience their own crash sooner or later
5. deflation is totally out of the question

Whether this can happen again depends largely on how tightly the general public clings to its delusions and its old, comfortable ways of thinking and how much they are encouraged to stay deluded by leaders who shovel out loads of platitudes instead of useful information.\

Actually I think the general public and the political leadership have fuck all to do with american economic resiliency. It depends more on if my generation is smart enough and tough enough to pursue effective entrepreneurship and on the capital supply for those ventures - both of which look promising at the moment, to be honest.

basically what I think is going to really happen (is happening) with the dollar is that we are going to stick median wages almost exactly where they are and then let the purchasing power of the dollar fall until the average plant worker in Kansas makes the same real amount per month as the average plant worker anywhere else in the world - since that's the competition, and since any other method of adjusting things would be too dangerous to business

2. other currencies (sterling and euro anyway) are poised to follow the dollar downwards, this might make the falls seem less harsh..in time?

3. which is presumably why foreign holdings won't repatriate dollars, but rate cuts might test that at some point?

3a. isn't rate cutting just allowing more cheap money in the economy? hair of the dog?

4. thought china were running into similar problems right about now also?

5. not much incentive to save then?

Nah, Tom. They used to call it 'political economy' instead of just 'economics'. There was a reason why. That switch of nomenclature was connected to politics, too.

I save. But the incentives are shite right now.

I'm sure you're not saying that our elected leadership runs the economy as opposed to the other way around

The power to make law and impose taxes is not a lightweight factor in how economies operate. Who makes policy and the policies they make swings a lot of weight in what outcomes you get, especially when the government is multi-trillion dollar enterprise.

That importance is reflected in the amount of effort and money that is expended by various corporate interests into keeping our representatives captive and our electorate docile. Economic pain tends to make the electorate less ruly and more likely to glom onto a Huey Long or a Townsend Plan, or technocracy... or something much worse.

Too late in the game for gold/silver/platinum? Or still early?

Or: Is money supply going to continue to grow and fiat currencies going to continue to fall? Or will the buck stop somewhere soon?

I'll take this thread as an opportunity to raise awareness for an underappreciated cult classic

http://rh.foto.radikal.ru/0709/57/19975fea5422.jpg

BofA to buy Countrywide, allow Angelo Mozilo http://latimesblogs.latimes.com/laland/2008/01/mozilo-severanc.html10 million for his ties:

http://latimesblogs.latimes.com/laland/images/2008/01/10/31893826.jpg

Phew, that was ugly formatting. $110 million in severance, as noted here:

http://latimesblogs.latimes.com/laland/2008/01/mozilo-severanc.html

should i be buying gold?

Sell your child into slavery. It's the only answer.

this looks like more fun:

http://www.lambdapsiphi.com/daft/daft/images/dtopen5.jpg

im kindof like scroge mcduck. every mornign i juimp into a money bin filled with used condoms

wow, maybe angelo mozilo will dodge a bullet after all ... seriously, i had that dude pegged as the subprime crisis's kenneth lay or dennis kozlowski.

i still hold that the subprime crisis will = Lawyers' Full Employment Act of 2008, tho'.

also, subprime crisis = the closest thing yer typical gold bug will ever come to an orgy.

and BoA may be biting off more than it can chew if its acquisition of Countrywide goes through.

This very wtf. Other than a huge portfolio of questionable loans, what kind of assets does BofA hope to acquire? A lot of employees they can let go? I am stumped.

whatever BoA is getting out of this deal, it may be the start of a trend --> WaMu Has Discussed Merger With JP Morgan Chase.

i dunno what countrywide shareholders or BoA will get out of the acquisition, but mozilo may get over http://www.latimes.com/business/la-fi-mozilo11jan11,0,2459321.story?coll=la-home-center00M outta this. (keep in mind that countrywide is already being sued for his exercise of over $100M in countrywide stock options a year or so ago -- for his grandchildrens' "college education," mozilo said!)

oh, and because i can't resist any opportunity to bash jim cramer -- Countrywide Still Looks Like a Buy, February 6, 2007

The price of gold has risen 239% since 2001, while the price of oil has risen 267%. That means if the dollar had remained as 'good as gold' since 2001, oil today would be selling at about $30 a barrel, not $99.

should i be buying gold?

-- sunny successor, Friday, January 11, 2008 4:02 PM (

depends which of the following you think will happen

a) sound fiscal policy
b) bernanke revving his helicopter

it'll be one hilarious day when all the goldbugs retire and flood the market with their precious Au, devaluing their fortunes and fucking shit right up all over the place