Indeed. When it will happen in this day and age it will make the Great Depression like a walk in the park. People need to realise that the America of today is at the mercy of foreign investors, when America is no longer attractive to them they simply look elsewhere, and thats when it will hit! It will get very, very very nasty!!! Mark my words. When the dollars is loosing its value so quickly and the government keeps printing more of it, thats a tell tell sign. It is coming, be prepared, be ready, have a survival plan.
During the Great Depression and up until the 70s owning gold was prohibited by the government. At some point the Fed will need to increase interest rates to 1980s levels or the dollar will really collapse. In the early 1980s the fed rate was 16% and in 1989 was 9.5%
except inflation in the early 80s was in the 10-13% range which is why interest rates where so high, it had nothing to do with the maintaining value of the dollar.
No, you don't get it. People with more money than you or I combined can lobby the government to give them control over various industries, putting their competition out of business and creating monopolies. Think about the oil industry for example. If through lobbying, a global corporation influences government in such a way that makes it hard for its competitors to get ahead, then you can't say you live in a free market. By your post, you've admitted that we don't live in a free market. You didn't deny that lobbying happens, and you couldn't explain why it is a good thing. And as far as outsourcing is concerned, I don't know if you realize this, but many people in these poor countries don't even get paid enough to support their families. What is more, once enough competition is competing for outsourcing workers in a specific region, eventually, the workers in that region will charge more for their services supply + demand, and the corps, always looking for new cheap labor pools, will abandon the country for another region they can exploit. I suspect that once enough companies are outsourcing to India, Indians will begin charging more to work for companies to outsource to the country, forcing corporations to move into places like Africa, South America, and South East Asia. I believe Africa is the next hot spot for outsourcing once the Indian market is saturated. What statistics? Both me, Guru Seo, Guerilla, and Bogart have already showed statistics which indicate the U.S. economy is not doing well. Even more than that, many trained economists agree with us. Pretty happy about what? How happy will you be when we enter a recession due to the fall of the dollar, and then if it completely bottoms out, our economy enters hyperinflation? Since you're so happy, do you have any gold and silver, or will your money get turned into toilet paper? By the way, if you don't have any silver and gold, right this second, any paper money you have is being devalued, and will continue to fall in value as time goes on. I never said companies had the pricing power to increase prices. Where did you get this information from? I just said my cost of living is increasing, and to me, that doesn't show the sign of a good economy. Wrong. To the contrary, I have plenty of evidence which shows we're in a recession right now. Want to see? My information comes from none other than Jerome Corsi, a Harvard Doctor of Political Science. You can read the article right here:http://www.infowars.net/articles/august2007/150807Corsi.htm But this is only the tip of the ice berg. You see soniqhost, I don't have to be an expert in economics like you. All I have to do is go find economists who support my point of view. If I didn't have them backing me, I would not be able to make my arguments. Speaking of argument, NOBEL prize winning economist Joseph Stigliz again refutes your claims that we are not in a recession, and moving towards a depression. You can read his powerful article here:http://www.prisonplanet.com/articles/october2006/301006globalcrash.htm Now, I have at least three economists and experts which back of my views. Show me evidence from experts which indicates the contrary. Soniq Host, I encourage you to read the links below, which will take you to a bunch of threads started all this year which are specifically related to the U.S. economy, and its decline. Neither you nor anyone else in this forum can refute the information in these threads, simply because it comes from the mainstream news/government. 1. 41 million Americans can't afford basicsThread started by Gworld) http://forums.digitalpoint.com/showthread.php?t=509691 2. Income Inequality Worst Since 1920s, Says the IRS: http://forums.digitalpoint.com/showthread.php?t=512273 3. Uncle Sam, Your Banker will See You Now: http://forums.digitalpoint.com/showthread.php?t=431244 4. Return of the Robber Barons: http://forums.digitalpoint.com/showthread.php?t=422771 5. Americans Collectively Owe Almost $1 trillion in Credit Card Debt http://forums.digitalpoint.com/showthread.php?t=546843 6. Living Paycheck to Paycheck gets harder in the U.S.: http://forums.digitalpoint.com/showthread.php?t=520896 Now go read all these threads, and the articles I linked to in each, and come back and tell me we're not in a recession. No one in the forum can counter all this evidence to show we're not in a recession. But I'm not finished yet, I'm going to come back and link to some more articles. 7. One in six New Yorkers hungry, says advocacy group: http://www.nydailynews.com/news/200...ix_new_yorkers_hungry_says_advoc.html?ref=rss 8. Don't Look Now, Here Comes the Recession(We're already in it, other Economists have said): http://money.cnn.com/2007/11/23/mag...sion.fortune/index.htm?postversion=2007112615 9. Global crash imminent, warns expert: http://www.arabianbusiness.com/504237-global-market-crash-imminent-warns-expert 10. Banks face more pain as crunch bites: http://www.guardian.co.uk/business/2007/dec/02/subprimecrisis.banking 11. US Economy in "Relentless" Decline http://infowars.net/articles/october2007/311007decline.htm So I have 11 articles above, many written by economists Soniqhost, which shows that you, and everyone in this forum who agrees with you, are wrong. Now I challenge you to put up some articles like me which refutes my claims. You won't be able to, because the facts speak for themselves. If you still think the economy is great, after reading all the information above, well enjoy your life. I hope you have some precious metals, because if not, all your dollars and your dollar based investments will become worthless. You have been warned....
Wow! What a great thread! Took me an hour to read and digest. I to believe that we are in a recession. What the government says is worthless to me because their statistics are rigged. Common sense and the reality of our lives shows what is happening to us all. The fed is cornered. How? If it cuts interest rates the dollar goes bye-bye. If it raises interest rates the economy will come to a complete halt (worse than 1929). Either way we are in deep doo doo. I have stocked up on food and have a survival plan. P.S. Keep your dollars out of the bank. Only keep enough in to pay bills. When the bank run comes you will have a few days to spend your fiat while everyone else cry's in the teller lines. Doug
A recession looms for the U.S. economy in the first half of 2008 due to faltering consumer spending and nonresidential construction, which have so far helped offset the housing slump, a report released on Wednesday said. http://news.yahoo.com/s/nm/20071205/bs_nm/usa_economy_recession_dc;_ylt=Ajb4WyAnjokvY3tvH85e3ipv24cA
After reading through a description on the complex financial instruments (CDO's) that carried high risk mortgages and the potential size of the bad loans it is easy to sense a traditional recession as a result of a credit crunch. http://www.washingtonpost.com/wp-dyn/content/article/2007/12/04/AR2007120402186.html Of interest the administration and fed have come up with a plan to freeze mortgage rates on these adjustable rate mortgages to try and stem the flood of defaulted mortgages. I lived through and worked first hand in the industry that caused the last credit crunch recession; the commercial real estate industry which collapsed nationwide in the late 1980's and caused a nationwide credit crunch and recession. An overwhelming volume of bad loans ultimately hit the financial industry forcing it and all its players to seriously tighten credit and cut back on all loans across the board. Tightening of available money ran all across the nation and all industries and a recession of some size and significance hit the US starting in the late 1980's and really hitting in the early 1990's. As described in that article above, this volume of bad loans could similarly impact the economy. Of interest to me above was reference to a CDO that sold at $0.27 on the dollar of stated value. That is a fire sale price acknowledging the serious devaluing of these billions of dollars of financial instruments. Freezing interest rates on cdo's and adjustable rate mortgages within them would also devalue the cdo instruments but by a far less level. It would also create a recognizable level of instrument payments assuming the defaults significantly disappeared. In any case, the size of bad loans, the possible write downs that lending institutions would be forced to take could easily restrict the free flow of capital and lead to a recession. One interesting difference between this potential event and credit caused recessions of the past, is that there are current efforts being made to stem the disaster...and that there is a predictability to the potential size of a future disaster. All of that gives hope that the credit crunch might not be as severe if efforts were not made to freeze mortgage rates. We will see what happens.
Bernanke is a known inflation fan, he thinks you can fight inflation with inflation. The problem with all of these really scary egghead economists, is that they refuse to acknowledge that the problems in the economy are a result of mal-investment from previous tampering with the interest rate. The only real cure, is to take away the drug of inflation. If you keep feeding the addict, his dependency only grows. And we all know, that sooner or later, a credit based economy, with no true economic value except for debt spending, will collapse. There are numerous examples throughout history on this. I've said it many times before. We're either going to hurt a little now, or a lot later. It all depends upon how much market interventionism is used to preserve the sickness in the system now.
The S&L scandal and the commercial real estate crash of the late 1980s is a good comparison. Over the last 5 years housing prices have gone up as much as 100% on the Northeast, California and Florida. http://en.wikipedia.org/wiki/Image:USA_home_appreciation_1998_2006.png Easy money and speculation have driven prices too high. A bailout on interest rates is not going to work. Prices are falling and the subprime loans are going into negative equity.
Guerilla: I think that is hogwash and based on crazy economic theory. Every fed chief since the early 80's has focused on low inflation and low interest rates. I find it fascinating that the government has quickly agreed on a plan to freeze interest rates for a compromised period of time. The fascinating thing is that there is some level of predictability as to the potential level of defaults and the potential level of problems it could cause to the US financial system and lending institutions. Take two hypothetical examples for the potential corrective measures. Case A. A large investment package of CDO's sells for $0.27 on the dollar as referenced above. Its a million dollar package. The lending institution/seller needs to write down its investment in the CDO by $730,000. It runs that against its operating profits and reduces profits by $730,000 or shows a loss because of it and thereby must increase loan reserves against bad credit and has less to loan. Multiply that in the hundreds of billions because of the potential size of massive foreclosures and you have reduced lending capacity by an enormous amt. Case B. A large investment package of CDO's sells for something less than the face value of loans because interest rates have been frozen for 7 years (or whatever the compromise period was). There is a risk element as is normally the case for the value of the loans but it is in an acceptable level. Meanwhile the CDO package is worth less than sold at face value because the previously made mortgage loans were valued and priced with known adjustable rate increases that have now been eliminated for a compromised period of time. Instead of selling at a firesale type price of $0.27 on the dollar it is recalculated at a more manageble price of $0.85 on the dollar (a calculation based on the difference between the higher anticipated adjustable rate and the frozen rate). In lieu of losing $0.73 on the dollar the lending institutions lose $0.15 on the dollar and don't suffer the size of losses. The credit problem is somewhat aborted as lending institutions are not severely limited due to overwhelming losses. Its a creative solution and hopefully one that might stem an overwhelming credit problem. We will see what will happen going forward.
Earl, before you call what I posted "crazy", I'd like you to address the market fundamentals, not the mechanics. Everyone is hung up on mechanics. I want to know if the market is sound. And if not, shouldn't unsound investment be purged, so the system is healthy again? Btw, you better grab a coffee if you want to talk inflation with me. I can arrange to be here all night.
To follow up on Fundamentals, every time the market drops, the FED cuts interest rates (creates new money) to bolster investment. But this investment is not from savings, it is from credit. It's from artificially created money trying to rescue poor market fundamentals or a lack of confidence. So every time there is a change in the economic landscape, everyone is concerned with the inevitable cure, not the cause. And the cause doesn't get addressed, because the cure is a drug, it keeps the money flowing. Even if it is increasingly becoming more worthless.
Guerilla: One would expect that as the population and the economy grows there would be expansions of credit. I think it would be interesting to track growth in credit against growth in population and the economy. To assess your theories that would be an interesting study. Imagine if there were no more dollars to lend than 100 years ago. The fierce demand for credit would drive up interest rates to crazy levels.
Inflation is Germany is running 3.3% and the EU is ready to increase interest rates in Dec. This will elimate the interest rate gap between the EU and Us and send the dollar into a downward spiral.
How can there be an expansion of credit without an expansion of the monetary supply? And how can you produce more money, without devaluing the money already in circulation? I've posted the data you require recently. The FED discountinued the publication of M3 which was the measure of all money in the system, including credit. Probably because it was a smoking gun. But regardless, you should be able to pull up on Google some M3 graphs, and chart that against GDP (which is a joke anyways, try GNP) and population size. These aren't theories. These are a grasp of the fundamentals of the monetary system. Btw, don't you find it odd that the interest rates would be frozen, in order to save the lending institutions? It seems banks, never go bankrupt anymore. Maybe because they play for the House, or rather, they are the House and the game has terrible odds for the player (tax payer/citizen). You either play at their winning rate, or the House subsidizes their losses with your tax dollars. Not necessarily. Banks would have to offer higher interest rates to attract savings/investment, so they could lend out again. But as the rates increased, the bank's liquidity would also increase, until a new equilibrium would be reached. Market ups and downs are natural. The market is self correcting. We're in an artificial market, of all ups and no downs. That is due to interventionism. The .com crash should have severely beaten up the economy, but the FED issued 1% overnight rates, which sparked the housing boom to pick things back up. But it was all artificially created. People were getting houses with credit they should never have been extended, at rates that were way too low. Home builders were filling the artificially induced demand and over extended themselves. Too much credit, leads to mal-investment. In a true free market, a credit crunch will come because the fundamentals are poor, and the mal-investment will be purged. The only way to avoid these "days of reckoning" is to continue adding liquidity into the market, in the form of new credit. Which is inflation. Inflation of the money supply. I don't know how many times I have to say it, but I REALLY appreciate that you "get it".
I'm neither inclined or trained to get into complex theoretical discussions of money supply and its impact on the economy. That is a highly technical topic. From experience in dealing first hand with a recession caused by a collapse of the lending community though, I think that the relatively fast response of the treasury dept, the fed and lending giants the quick response to freeze variable rate mortgage loans makes lots of sense. Based on the volume of recent foreclosures due to these high risk loans mortgage loans that are going into foreclosure the financial experts can put some level of expectation to future loans doing the same. Establishing a five year freeze will dramatically alter the financial landscape for lenders and holder of these CDO's. I found nothing more frightening then the piece I referenced above that had a CDO selling at $0.27 on the dollar. That is a reflection of anticipated financial disaster. The bandaid to keep these variable rate loans from escalating will solidify pricing at below $1.00 on expected value but keep the losses well above firesale prices of $0.27 on the dollar. Lending institutions will have manageble losses. Credit availability on this basis alone will be more easily handled. Will there be other consequences? Absolutely. But having lived through a credit crunch recession. Having had limits on credit lead to significant personal losses, having seen my industry collapse, having seen many businesses across the board be tied down due to unavailable credit, even with typically and historically dramatically strong credit records, I can't emphasize how strong a move this appears to me.