United States Heading towards a Depression?

Understand, the entire idea of fiat currency is ludicrous.

Money is a measure of productive gain, in a form that allows it to be a means of exchange.

If you have no money, how can you acquire some? You could provide labor, you could sell a good you own, you could build, grow or make something and exchange with someone who has money.

So based on that simple fact, money represents "something" of tangible value, effort or sacrifice.

If that is the case, then how can anyone print more? Even the government? If you or I printed more money it would be counterfeit, if they do it, it is also counterfeit. They've introduced more money into the system that was not productively gained. Which totally undermines everyone who is earning money the hard way. By means of exchange.

Read up on fiat currency on Wikipedia. It's never worked for a prolonged period of time. The tendency to inflate and debase until it is worthless always undermines paper money that is unbacked.

The reality is, we live in a world with fiat currency, so the best one can do, is know how to mitigate the loss of wealth through inflation.

 

This is priceless. Peter Schiff debating Art Laffer in 2006 over whether there will be a recession.

http://www.youtube.com/watch?v=LfascZSTU4o

Laffer was in the Reagan Administration, and a typical idiot neocon economist who sings that bull markets can never end in Pax Americana.

 

We haven't even hit a recession yet and the Fed is using depression era procedures, not used since 1930, to bail out Bear-Sterns.

The Fed is digging us into a hole. What will the Fed have left when we enter the envietable recession? And will the damage the Fed is causing trigger a depression?

J.P. Morgan Chase is trying to reach a deal to buy Bear Srearns for 2.2 billion dollars before financial markets in Asia open for Monday trading.

 

I don't think we will see a recession until after the 2008 presidential election.

There's still a lot of air in the bubble. Once unemployment breaks 6% the situation will get grimmer. The Feb Unemployment rate is 4.9% and the Fed is set to lower rates .75 points at the March 18th meeting.

 

The numbers are totally cooked. Parts of the country have been feeling a recession for some time.

We're gunna wait for the NBER measure of 2 periods of negative GDP growth?

We're not going to have negative GDP growth if the FED keeps inflating. Not nominally, and since we can barely trust headline CPI numbers, not in real terms either.

There is a point when you have to believe what you see and feel, over statistics....

 

FED cut rates by 25 bps.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a5MdIqIevEW0&refer=home

 

Basically what I wrote to Soniqhost earlier. Liquidity is not going to prevent insolvency.

 

We could see another 100 bps cut tomorrow, and if volatility is high a possible trading curb.

 

The 2 negative quarters of negative GDP growth is only a rule of thumb and you can have a recession with tow consecutive negative quarters.

There's still a lot of air in the bubble. Housing prices have only dropped to 2005 levels.

That is crazy that the Fed dropped rates .25 a couple of days before the Fed meeting.

I read in the article that the Fed may drop rates a full 1%

The dollar is sure to take a hit on the carry trade and commodities.

 

If there is no FED intervention tomorrow, unlikely, we are going down hard. And if they do they'll cut rates by 100bps.

Banks are going to be hit hard tomorrow, especially the weaklings (LEH). Goldman Sachs is supposed to write down $3 Billion.

And if things gets out of hand expect a trading curb. http://www.nyse.com/press/circuit_breakers.html

 

Breaking News: March 17 Tokyo

Dollar Slumps Below 97 Yen to 12-Year Low on Subprime Losses

http://www.bloomberg.com/apps/news?pid=20601087&sid=a1ODVaoXMy38&refer=home

The Investment Banks have already suffered the losses and it's been a game of hiding them in their balance sheets.

 

Level 3 Accounting
http://www.itulip.com/forums/showthread.php?t=2370



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Seeing how BSC only could get $2/share I am assuming there are some other banks out there that are in the same boat, and I've always assumed it to be Lehman Bros. (LEH) and probably WaMu (WM). I have kind of forgotten about WM they are probably going under.

It is not who is getting hit by subprime, it is who can take the hits and still keep their heads above water, all others I want to short

Yen carry trade going to hurt the dollar. I got some FXY a while ago.

 

Gold hit $1030, it's holding just over $1,020 right now.

 

UPDATE:

The dollar plunged to 95.72 yen and euro rose to US$1.5839 in overnight trading.

Investors on guard ahead of the release of quarterly earnings reports from big U.S. investment banks this week, including Lehman Brothers Holdings Inc., Goldman Sachs Group Inc., and Morgan Stanley.

O.K. so that's where they are hidding the losses in Level 3 assets

Kenneth Heebner, manager of the top-performing real-estate fund over the past decade, said U.S. home prices may plunge as much as 20 percent because of rising defaults on riskier mortgages. That would leave home prices at levels last seen in 2003 and 2004, the middle of boom that lifted prices to a record in 2005.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aonDdgoWQ.pg&refer=patrick.net

Any loans made 2004 and before should be in the black. We are probably at inflated 2005 prices at the moment. I wonder what else is going on besides subprime?

 

SIVs that are based around credit debt. Credit cards, no down payment finance (like furniture, consumer electronics).

Any funds that are leveraged heavy will be in trouble. With losses mounting and a potentially (see below) flooded market of bad paper, anyone in a leverage position, better be able to make their calls.

The big problem is that so many municipalities and pensions hold SIV and CDO paper that is triple A rated. Ratings drop, and by law they have to be sold. Many of these types of funds are not allowed to hold anything below a AAA rating.

If it was just this tempest it would be confined and could probably liquidate the worst in 6 or 8 months.

But the dollar is tanking badly.

We're supposed to take this kind of guns and butter beating AFTER the war is done, and we can tighten our belts. IMO, right now, we're sick at our most vulnerable moment, politically and militarily. It's a bad deal.

The scary thing is, we need the money from the sovereign wealth funds overseas to stabilize capital, but it's not proving to be enough.

Nothing is sticking...

 

There should be more pain as the foreclosures hit the market. 2% of homes were in forclosure in the 4th quater of 2007 alone and forclosures will get worse as the cost of living increases.

More than one of every 20 home mortgages was delinquent during the last three months of 2007, the highest level in 23 years, according to a report Thursday by the Mortgage Bankers Association.

More than 938,000 home loans were in foreclosure nationwide in the fourth quarter of 2007, a record 2 percent of all outstanding home loans.

http://www.mcclatchydc.com/100/story/29686.html