United States Heading towards a Depression?

OPEC is getting used to $90+ on a barrel of oil and may cut supplies to support the price.

Food prices are increasing 11.4% in China and China is under a lot of pressure to revalue the Yuan to higher levels which will increase inflation further.

75 basis points cut in the Fed rate will further weaken the dollar and increase inflation.

 

Great line from Robert Higgs, at the 2008 Mises Institute Circle in Houston, Texas

Here is the MP3
http://mises.org/MultiMedia/mp3/misescircle-houston08/2_HMC_Higgs.mp3

and here is his letter to the WSJ Editor re: War Prosperity in 2003
http://www.lewrockwell.com/higgs/higgs16.html


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The US dollar is weaker against the yen on speculation Federal Reserve Chairman Ben Bernanke will later this week reiterate that interest rates will fall further amid slowing economic growth.

The Japanese are trimming the carry trade as the Fed is likely to cut rates to 2 percent from 3 percent in the coming months

Elsewhere, The Australian dollar is trading at 90.13 US cents from 89.68 cents after the Reserve Bank of Australia said the nation continues to face inflationary. Core inflation is running at 3.5% in Australia.

http://www.forbes.com/markets/feeds/afx/2008/02/11/afx4637603.html

 

It will be interesting to see if the Dow takes a bath tomorrow, as the expected rate cut already seems to be priced into the market with a moderate rally today of 57 odd points.

You can tell when a rally isn't genuine IMO, because the market did not gain at the expense of commodities.

We saw the new credit spent in both areas, not in the market exclusively, which might have been a sign of recovery.

 

C-Coffee is up 3.25 cents a pound last Friday and now at 153.25
http://www.ico.org/prices/pr.htm

Back in the days of stagflation in the late 70s Coffee, Gold and Oil were going up through the roof.

 

The Asian and European markets have dropped substantially more so than the US market overall. On the surface this doesn't make sense. The only explanation is inflation or market manipulations. Talk of a recession is mainstream in the US now, in Australia and other places in Asia, the economic outlook is a lot more optimistic but for whatever reason the Asian markets are more volitile than the US and losing money.

 

Australia is a commodity exporter of food and metals, so Australia is in good shape.

Asia is holding a lot of weak US dollars and has a problem. How long can they continue to accept devalued US dollars in return for hundreds of billions in exports? (Food and commodity prices are increasing and interest rates are decreasing.)

 

You're right about Australia however Australia faces crisis drought problems which are putting a lot of pressure on the farming industry.

The interesting thing about Australia is that most of the mining exports come from Western Australia which a lot of the rest of Australia bludge off. The Western Australian export profits have allowed Australia as a whole to increase its external debt. In the long term if I stay in Australia I'll move to Western Australia.

 

The subprime mess is sure to get worse. Around 2 million subprime mortgages are due to reset to higher rates this year and next.

More bailouts and more inflation.

 

Buffett was circling overhead some time eyeing the monoline insurers and looks like he is biting. But this isn't going to help out anything, except to make Buffet and BRK.A / B some more moola. He is cherry picking and will not touch mortgages, which is the problem. This will make it hard for these insurers to dodge insolvency. What will happen once the crap that Buffett wants is off the financial statements? These insurers get curb stomped.

On a lighter note, looks like the market is off like a rocket, save monoline insurers hahaha, which was due. Don't get me wrong we are in a bear market, but if you play your cards right you can make some good money.

 

I think Buffet is playing a dangerous game.

 

Not really, he knows what he is doing, and will make a ton off of this.

 

Yeah you're right, I read more into it, Buffet is only offering to insure the muni bonds and leave the junk. One of the insurers has already refused the offer.

 

Good chance of a recession. I can tell for myself that money doesn't go as far as it did 10 years ago. But then again with the looming threat of our [myself and my husband's] factory jobs going overseas, that's all we'd need to go into some personal hot water. Until then, all we can do is save and build up a nest big enough to keep us afloat until the hard times are over. That's pretty much all anyone can do, while the media poisons the majority into voting for Mr. (or Mrs.) Sellout for president.

 

As long as I am saving a lot on motorcycle insurance, he can play whatever game he likes.

 

Two of the insurers have refused Buffet.