# Calling all economic experts



## thesurefire (Jul 25, 2007)

Last night the US dollar was scraping what is said to be the all important ‘shelf’ level of 80. This morning Its back up to nearly 80.8, and gold and silver and down. What on earth could possibly cause a .8 increase overnight? It doesn’t make sense to me. 

Here is one chart, updated every few minutes

http://quotes.ino.com/chart/?s=NYBOT_DX&v=w

Here is a chart to give you an idea of how the dollars been doing in the recent past.

http://www.fxstreet.com/rates-charts/usdollar-index/


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## TedTheLed (Jul 25, 2007)

terrorist threat anouncement vs. the market?


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## js (Jul 25, 2007)

thesurefire,

I don't know the answer to that question, but I can tell you that it won't be all that long before the dollar loses a lot more buying power. Every month billions of USD go out of the country--essentially I.O.U's to foreign entities--and those dollars are held because it is thought that the dollar is a good investment, a safe holding for value. In Mexico, when I was there, people would take USD happily. But once the illusion of the strong US economic situation disappears, people will be scrambling to get something, anything, for all those dollars, and they will all come home to roost, and the fed won't be able to do a damn thing about it. Contracting the money supply by raising prime, or increasing M1 won't help in the least--on the contrary. It's going to happen sometime in the next 10 years, in my opinion, and when it does there is going to be a serious revaluation of goods and services.

It's astonishing how bamboozled the public is about very basic issues such as inflation and the basis of our money supply. People think that inflation is "the natural result of an expanding economy" when the exact opposite is true! Inflation results when the power of the economy _decreases_ for the same money supply, or when the money supply increases faster than the economy grows. We have inflation because the Fed is increasing the money supply more than is warranted. This is essentially stealing value, or if you prefer, it is taxation. However, as the Federal Reserve is not a government agency, nor is there anything held in reserve, it's not really taxation per se. But whatever.

Or people have this idea that when the bank lends you money that they are taking their depositors hard earned cash and lending it out to you, and thus that they need to take care regarding the soundness of the loan.

Not true.

The money that you are given is actually *created*. The strange and uncanny truth is that *the money is the debt; the debt is the money*. If all debt, including the National Debt, were paid off, there would be no money left. Not Federal Reserve Notes, anyway. The Fed controls when and how the banks can create money out of nothing via various policies, and this allows the Fed to dramatically increase or decrease the money supply and spending power of consumers.

The Fed and the government both have a vested interest in keeping the price of gold and other precious metals low, and they have reserves and powers on hand specifically do accomplish this. But they've been unable to keep gold down, and it's been on the rise for about the last decade. I think the low point was about 265 USD per ounce and it's now about 675. It should, by rights, be about two or three thousand dollars an ounce, given the current purchasing power of the dollar, so gold is still a good investment. Although, if the economy completely collapses, the best thing would be a self-sufficient estate like a small farm, owned free and clear. (or, obviously, BOTH).

I've felt for years that real estate prices and the attitudes of people towards mortgages and home ownership have been *INSANE*. I had one guy here at work telling me I should buy a home (this was a couple or so years ago) because "money was cheap". What he meant was that lending rates were low, historically low, and thus you could get a low monthly payment ("cheap") on any given sum ("money"). I have to say that that one sentence flabergasted me. It's not that it was any revelation about economics to me, but it WAS a revelation about peoples attitudes towards money and loans.

Most people are only looking at the low monthly payments. That's just about all they see. As if the PRINCIPLE + INTEREST + TAXES + INSURANCE summed up over the 20 or 30 years of repayment were insignificant. You have people buying a house with zero money down! CRAZY! These people aren't home owners! No more than someone who rents! The bank owns their house, just like the land lord owns the house of a renter.

There have been record foreclosures this past year, all due to people over extending themselves and then being unable to keep up when the prime rate went up. Not to mention all those people who took out second mortgages on their homes, which means they *monetized their houses*. There was a whole lot of money injected into the economy just from all they people that did that--but it didn't represent any actual increase of production or service value in the economy.

Insane. Insane. Insane.

And then there are all the people graduating from colleges with HUGE debt--like $80,000 or $100,000 even--and without any high powered skill to balance that debt out. $80K for a liberal arts degree? WTF? I love the liberal arts and don't for a second think that everyone should be a doctor or an engineer, but COME ON! You can educate yourself and save the 80 grand, or go to a cheaper college. When I went to school, I paid about $5,000 a year, and this included room and board, and I feel pretty happy about my education, and would definitely not have increased my debt fourfold in exchange for graduating from Harvard or MIT or Cornell instead.

And, even more crazy, there are a lot of people who really would be happier and more suited for a trade or skill, such as training to be a plumber or an electrician or a carpenter, and so on. You can even get trained for free, or even get paid to learn the trade, by apprenticing. Why does everyone have to go to college now? It's dilluting the value of a college education, and is dumbing down the curriculum because the colleges can't count on the same minimum level of education and ability that they used to.

There will be signs, I suspect. If I ever hear that China is no longer pegging their currency to ours, that will be a scary bit of news for example.

But, I'll cut myself off as I still haven't answered the question posed by this thread, nor will I be able to anytime today.


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## Manzerick (Jul 25, 2007)

This could be final straw. I keep seeing the issue as multi-facated...

Picture if "Joey Bag of Donuts" refinanced his house and pulle dout say 50K in equity. WItht hat equity he buys, a car, boat and pays off his credit cards. This stimulates the economy but... at what long-term cost?

If Joey were to default and forclose on his house, what is the affect? Reduced economic activity as poor Joey won't be able to take out a loan nor have any real assets. if Joey was say mid-forties in age... Where does this hit put him during his retirement years?

i get very sad to think of this "self-sustaining economy" and the real world people who jus tdidn't know any better 




js said:


> I've felt for years that real estate prices and the attitudes of people towards mortgages and home ownership have been INSANE. I had one guy here at work telling me I should buy a home (this was a couple or so years ago) because "money was cheap". What he meant was that lending rates were low, historically low, and thus you could get a low monthly payment ("cheap") on any given sum ("money"). I have to say that that one sentence flabergasted me. It's not that it was any revelation about economics to me, but it WAS a revelation about peoples attitudes towards money and loans.
> 
> Most people are only looking at the low monthly payments. That's just about all they see. As if the PRINCIPLE + INTEREST + TAXES + INSURANCE summed up over the 20 or 30 years of repayment were insignificant. You have people buying a house with zero money down! CRAZY! These people aren't home owners! No more than someone who rents! The bank owns their house, just like the land lord owns the house of a renter.


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## jtr1962 (Jul 25, 2007)

js said:


> I've felt for years that real estate prices and the attitudes of people towards mortgages and home ownership have been *INSANE*.


At the risk of taking the thread further off topic I feel the same. Just because the cost of money (i.e. interest rates) have been historically low, people have thought nothing of paying ludicrous prices for real estate. My parent's house, where I currently live, cost $52,000 in 1978. Had the price kept pace with general inflation it might be worth $150,000 now. Instead, the price actually peaked at about $650,000 a year ago, and now it's worth maybe $575,000. As we experience further price deflation, all these people who bought homes with no money down and/or interest only payments will _actually be owing more than their home is worth_. This is a frightening prospect because most mortgages have a clause where they can call in the portion of the loan above and beyond the net worth of the home immediately. So far this clause hasn't been used, but _could be_ if the banks need money. So what happens if someone who bought a home like the one I'm in a year ago gets the loan called for $75,000? They certainly won't have it. The bank will be stuck owning a home it doesn't really want. The former tenant (really, that's what they were) will have lost any money put into it. I see a huge real estate collapse around the corner, followed by an even larger economic collapse. The stock market is ridiculously high right now given that the economy is at best mediocre. Look for a large correction soon, and then a long, downward trend.



> Not to mention all those people who took out second mortgages on their homes, which means they *monetized their houses*. There was a whole lot of money injected into the economy just from all they people that did that--but it didn't represent any actual increase of production or service value in the economy.


Amen to that. This is a topic my mom and I often discuss. The so-called economic boom in recent years was fueled solely by a hot real estate market, which in turn was mostly driven by real-estate speculators. People making $50,000 a year were able to live like they made $100,000. That house of cards is coming down now. And as you said in the interim the boom hardly created a thing of lasting value to the economy. There was no huge investment in public works projects, or alternate energy, or any of 100 things which could have kept the economy going down the road. I see tough times ahead.


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## greenlight (Jul 25, 2007)

I keep hearing about loan defaults and mortgages people can't pay. That's going to really mess up the economy, but some people are going to end up getting some nice cheap houses to rent out. So far the prices in my area haven't gone down, but they're not soaring like they used to.


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## js (Jul 25, 2007)

Manzerick and jtr1962,

Nice posts! Wow! I'm having a moment here. So rarely do I talk about this sort of stuff with people who don't in large part disagree with me that I've come to expect disagreement, and having to explain why my wife and I are still renting. My mom especially thinks I'm crazy for not having purchased a house and keeps thinking and talking about all the money I am "throwing away" by renting. And I'm like, "Look, mom, if I bought any kind of house that we would be willing to live in, the interest, taxes, and insurance payments of the mortgage would exceed what we are paying for rent (for at least a decade), and then on top of that, we would have to pay utilities (which are right now included in our rent) and upkeep and maintenance on the house. And worse than that, I wouldn't have the extra money I would want to make changes and improvements to a not-so-great house. We'd be strapped just making the mortgage payments and keeping the house up."

It's like people don't understand that when you are paying on a 20 year (or God forbid, a 30 year) mortgage that very very little of the payment is actually going towards the principle in the first 5 years of the mortgage. You end up paying, if I remember correctly, almost three times what the "cost" of the house is.

And, then, as you say so very well, jtr:



> Just because the cost of money (i.e. interest rates) have been historically low, people have thought nothing of paying ludicrous prices for real estate. My parent's house, where I currently live, cost $52,000 in 1978. Had the price kept pace with general inflation it might be worth $150,000 now. Instead, the price actually peaked at about $650,000 a year ago, and now it's worth maybe $575,000. As we experience further price deflation, all these people who bought homes with no money down and/or interest only payments will actually be owing more than their home is worth. This is a frightening prospect because most mortgages have a clause where they can call in the portion of the loan above and beyond the net worth of the home immediately.



Ain't it the truth! Even around here in Ithaca NY house prices are significantly inflated above the real worth of the house. All because low interest rates are allowing people to "buy" houses that they really can't afford, which drives up the prices due to the competition. I see this houses for $90,000, and I'm like "WTF? That thing is a shack! 90 grand for THAT? Forget it."

I figure I'm better off renting and taking the extra money and investing it in Gold and gold stocks. We'll see who's right in a decade, but I can tell you this, my gold isn't going to evaporate over night and become worthless. Perhaps it won't perform as well as other investments, but it's certainly a safety net if nothing else.

Anyway, yeah, Off-Topic stuff again I guess. But, on topic, I will ask my dad and see if he knows why/how the dollar took a .8 increase.

On another note, I heard the Fed stopped publishing statistics on M1, M2, and M3. Is that correct? If so, that's at least as disturbing as how they keep messing with the list of goods in the CPI, and what they exclude, all to make the inflation rate appear smaller than it is.


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## TedTheLed (Jul 25, 2007)

Leon would know.

Some f you may have read the posts on the economics of capitalism by my cat, Leon, was it a couple years ago? Anyway the posts seem to have gotten lost in the CPF shuffle, if anyone knows of a copy I would love to have one -- or know where it is if it can be found onliine..(you can tell it's Leon's post because he "meows" every once in a while)

In the meantime I will ask Leon for his comments when he wakes up, and after he eats, hopefully he'll have time to answer before he takes his after-dinner nap..


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## tygger (Jul 26, 2007)

js said:


> .
> 
> On another note, I heard the Fed stopped publishing statistics on M1, M2, and M3. Is that correct? If so, that's at least as disturbing as how they keep messing with the list of goods in the CPI, and what they exclude, all to make the inflation rate appear smaller than it is.



They stopped reporting the M3 figures from what I've read. BTW, a website that has great info about monetary policy, economics, etc. is lewrockwell.com. They have new daily articles from people like, Murray Rothbard (archived), Gary North, Bill Bonner, etc, etc. Anyway, there's much informative discussion on the fed's manipulation of monetary policy.

http://www.lewrockwell.com/


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## PEU (Jul 26, 2007)

thesurefire said:


> Last night the US dollar was scraping what is said to be the all important ‘shelf’ level of 80. This morning Its back up to nearly 80.8, and gold and silver and down. What on earth could possibly cause a .8 increase overnight? It doesn’t make sense to me.



It seems you are playing the Forex market, take a look at this posts they are a nice tutorial/explanation of the market.

I would never enter it, far too risky for a common investor.


Pablo


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## thesurefire (Jul 26, 2007)

PEU said:


> It seems you are playing the Forex market, take a look at this posts they are a nice tutorial/explanation of the market.
> 
> I would never enter it, far too risky for a common investor.
> 
> ...



No, I don’t do forex, other then buying currency to places I will be going at a good rate.

I was just looking at the euro exchange rate for a possible trip and it was high, this prompted me to investigate more.


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## js (Jan 16, 2008)

Thought I'd bump this to the top in light of recent economic events and announcements. Gold is currently at $900/oz. and the Fed has just allowed some rather drastic and very _public_ measures to happen in regards to large banks and their ownership. They wouldn't have allowed this to happen if any of their usual economic control methods were working.

This year is going to be bad for the US economy and the US dollar. Very bad. That's my prediction. I hope I'm wrong, but I don't think I am. The number of foreclosures on houses is also going to be way up, and real estate will continue to fall, on the whole. Not good, but you can't cheat reality for ever. You can only delay the consequences.


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## kelmo (Jan 16, 2008)

Remember back in the late 70's early 80's when all those South American countries defaulted on their loans? Bank of America almost ceased to exist. Hell, even the State of New York went belly up. President Ford had to bail them out. Well the same thing is happening all over again. Instead of Venezuela defaulting on a loan its your neighbor(s)! Corporate greed gives us a very short term memory.

Back when the Euro became a currency our M1/M2 was 666 billion dollars (I'm not being cheeky with that figure, go look it up) and the Euro was worth $0.85. Now the M1/M2 is about 1.2 trillion dollars and the Euro is crusing around $1.48. It's no stretch of the imagination that the dollar is weaker. The intrinsic value of our economy hasn't changed, we just have twice as many dollars to account for it.


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## js (Jan 16, 2008)

kelmo,

That's it in a nutshell. But it has to be modified with the VAST number of USD that are being held in "reserve" by foreign entities. If (or rather when) those entities start trying to get something of value for their dollars, THEN you will REALLY see more and more dollars chasing the same amount of goods, driving up the prices (i.e. inflation).

There are a LOT of "IOU" 's out there that will come home to roost. Perhaps the plan all along was/is to manipulate the money until the last possilbe moment, then let the dollar crash, basically making the IOU's worthless, and making draconian economic measures look acceptable in the eyes of the world's various governments. It's a way to reneg on the IOU without actually catching the moral flak and world disapproval that would normally incur if we just up and said "all those foreign investors who have USD, too bad. We won't accept your dollars anymore."

Who knows what will happen. But it won't be pretty, that's for sure.


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## kelmo (Jan 16, 2008)

I think that our dept is a controlling factor. If for example the Saudi's want to cash in the 5% stake in our national debt that they control, someone in Washington will say, "Sure, you can have your money only if we get oil for $30/barrel for the next 10 years."

You know the saying, "Hold your friends close, and your enemies closer." That is what we are doing with our debt. Only very large economies, economies that compete with us on a global scale buy a meaningful amount of our debt. The Asian's for example. Japan and China have purchased hundreds of billions of dollars of treasury notes. If they decide to crash our economy with our own debt they will go down with us. Who will buy their goods? Who will fill the void?

But I agree with you, there will be alot of pain coming soon. I hope you don't work for Citigroup...


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## Brock (Jan 16, 2008)

One thing about a "falling" dollar is we export a lot more because our exported goods become cheaper and our imported good become more expensive. Honestly if we wanted to even out the trade deficit all we have to do is get the dollar to about 50% of where it is now. Then it would be cheaper to buy US made good then import it from where ever and our exports would also skyrocket. I am not saying this is good or bad, just that is what happens as the dollars value goes down comparatively.


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## Lightraven (Jan 16, 2008)

Government debt is not really that different from personal debt. If you have a home loan, the mortgage lender cannot just arbitrarily say one day, "You owe us $150,000 and we want it right now." The contract is that you pay a set amount monthly. The U.S. government is paying interest on it's bonds on a daily basis, to bondholders around the world. It is also paying out principals on a daily basis to bonds that have matured. 

And when somebody says, "Japan (China, Saudia Arabia) holds a meaningful amount of debt," do they refer to private citizens or the governments of those countries? Because I'd bet a lot of money that the vast majority of the U.S. debt is held by U.S. citizens and corporations. I've got mine.

I don't know how one country crashes another's economy, short of a war. The U.S. economy is the product of a hundred million of the wealthiest, most productive, most highly educated workers in world history! You don't just stop buying some Treasury Bonds and affect that.


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## kelmo (Jan 16, 2008)

I disagree. We are approaching the 10 trillion dollar mark in our national debt. At that point we will literally need an act of Congress to go beyond that amount. The big knock on the American consumer is we don't save enough. If we did I doubt you'd see any senior citizens working at McDonalds or Walmart. There would be no credit crunch. The 100 wealthiest people in our country could not even cover 10% of our national debt.


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## jtr1962 (Jan 16, 2008)

What are the practical courses of action to protect oneself from what's coming? Should I cash in the T-bills I inherited from my father and buy gold with them? Should I do the same with anything in my savings account or IRAs? I don't want to have my life savings evaporate overnight on account of other people's stupidity. Unfortunately, there are tax consequences to these courses of action, but I'd rather pay taxes and protect my assets than have nothing.

On another note, I think going through dumpsters to find what's valuable and what isn't is suddenly going to be a useful skill.


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## London Lad (Jan 16, 2008)

js said:


> thesurefire,
> 
> I don't know the answer to that question, but I can tell you that it won't be all that long before the dollar loses a lot more buying power. Every month billions of USD go out of the country--essentially I.O.U's to foreign entities--and those dollars are held because it is thought that the dollar is a good investment, a safe holding for value. In Mexico, when I was there, people would take USD happily. But once the illusion of the strong US economic situation disappears, people will be scrambling to get something, anything, for all those dollars, and they will all come home to roost, and the fed won't be able to do a damn thing about it. Contracting the money supply by raising prime, or increasing M1 won't help in the least--on the contrary. It's going to happen sometime in the next 10 years, in my opinion, and when it does there is going to be a serious revaluation of goods and services.
> 
> ...



What a brilliant and spot on post. Things are very much the same in the UK but very few seem to realise it.


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## MarNav1 (Jan 16, 2008)

js said:


> kelmo,
> 
> That's it in a nutshell. But it has to be modified with the VAST number of USD that are being held in "reserve" by foreign entities. If (or rather when) those entities start trying to get something of value for their dollars, THEN you will REALLY see more and more dollars chasing the same amount of goods, driving up the prices (i.e. inflation).
> 
> ...


Someone is getting close. Just remember they aren't and haven't been "dollars" for a very long time. They are called "Federal Reserve Notes" which is a very different beast.


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## tygger (Jan 16, 2008)

kelmo said:


> You know the saying, "Hold your friends close, and your enemies closer." That is what we are doing with our debt. Only very large economies, economies that compete with us on a global scale buy a meaningful amount of our debt. The Asian's for example. Japan and China have purchased hundreds of billions of dollars of treasury notes. If they decide to crash our economy with our own debt they will go down with us. Who will buy their goods? Who will fill the void?
> 
> But I agree with you, there will be alot of pain coming soon. I hope you don't work for Citigroup...




Yeah, I agree that its not in their interest to dump the dollar overnight. I do think they'll continue to be more aggressive in diversifying their currency reserves though. But right now the low dollar is also working to their favor because foreign companies/governments are buying large stakes in US based companies like citigroup. I read today that government run investment firms in Singapore, Kuwait, and the Saudis, Abu Dhabi, etc. are pumping in billions in much needed cash for preferred stock.


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## js (Jan 16, 2008)

Lightraven said:


> Government debt is not really that different from personal debt. If you have a home loan, the mortgage lender cannot just arbitrarily say one day, "You owe us $150,000 and we want it right now." The contract is that you pay a set amount monthly. The U.S. government is paying interest on it's bonds on a daily basis, to bondholders around the world. It is also paying out principals on a daily basis to bonds that have matured.



Lightraven, how are you? Good to see a post from you! How's your M6? I should mention that in a momentary lapse of mind I mistook robocop for you and made a similar post to this one. He was probably like "Huh? I don't own an M6". hehe. Senility: it's not just for the old anymore.

Anyway, I suspect you're maybe misunderstanding the crux of this issue. Let's just leave the question of the nature of the National Debt aside for the moment and pretend that ALL of the trade export imbalance is from USD that have real value behind them, in the sense that they were spent out of the pockets of companies or people who had worked to earn them in the first place.

So, every month 40 BILLION US dollars go out of the country. This is the trade imbalance. It used to be that all trade debts between countries were settled in gold, if they couldn't be settled in goods. This meant an even exchange of REAL GOODS AT THE TIME OF THE EXCHANGE.

But, that's no longer the case, and hasn't been for quite some time. Right now, the majority of those USD that leave the country are being held by foreign entities, which is essentially an IOU. It means, OK, we'll give you, China (or whoever), all these USD in exchange for all these goods, and at some future time, you will try to complete the transaction by using those dollars to buy something of value from us.

If this situation kept going like this without any intervention from the Fed, there would be serious deflation, because the money supply in actual circulation would keep going down and down, while still needing to represent the same or even an increasing economy. But the Fed does intervene and increases the money supply to create a 5 percent (more or less) inflation per year, as measured by the Consumer Price Index, --which, I might add, some say is rigged to make the inflation rate look even lower than it is.

Thus, they are effectively STEALING the value of those USD held in reserve!!! And pretending that they don't need to be taken into account.

A person could never do that!!! I couldn't keep handing out IOU's to people without ever really paying on them. Pretty soon, that would come to an end. And it would never start because I can only do this by getting a loan, and a loan is almost always ensured with collatoral. Credit card debt is not however, and is another reason why we're getting ourselves into deep trouble. Even there, however, the credit card companies are collecting interest. Further, the dollars they lent out don't represent actual work or goods--they were created out of thin air for the most part.

There's only one personal parallel that I can think of, and that is back in the days of Gold deposit certificates in the Wild West at a local bank. What happened is that the bank would take your gold and put it in their safe and give you a certificate for it. This kept your gold safe. Pretty soon, people started trading the certificates as if they were money and they became money because they did represent value.

And thus the gold all stayed in the vault and the certificates circulated. Well, it didn't take long for the bank owner to think of the idea of PRINTING UP GOLD CERTIFICATES FOR GOLD HE DIDN'T ACTUALLY HAVE IN THE BANK VAULT.

Thus, enter the notion of "fractional reserve". This is the fraction of fiduciary money (like gold certificates) over actual reserve (like gold). The idea is that 90 percent of the gold stays in the vault so there's no reason you couldn't print up 2 or 3 or even more times more certificates than you have gold.

The bank that does this is STEALING VALUE FROM THE ECONOMY. Morally, no different than someone robbing the bank at gunpoint and taking the actual gold. Worse, really, in some ways, because it's much harder to see.

I mean, suppose you had the power to just create money: print it up, or even more simply, just add it electronically to your bank accounts. WHY THE HELL WOULDN'T YOU LEND IT OUT? The banks only truly MAKE real money on the interest. That's how THEY make money. So there's an obvious motivation to get as much money lent out as possible so as to make as much money from interest as possible.

But I digress. I'd love to go on and explain how the fractional reserve of banks today is greater than 10 to 1, and how there isn't even anything held in reserve on top of that. The ratio is for "real" money taken in from interest or down payments to money created out of nothing via Fed low (0 to 1 percent) interest loans. But I won't.

The point is just that the Fed has already spent that money that those on the other side of the trade defecit hold in trust. The value is pretty much gone.

They just don't know it yet. It's like mortgaging your house many, many times over. Only the house is the entire economy.

As for the bank not being able to call a loan in whenever they want, that is, sadly, WRONG! Read the fine print of most loans and there is just such a clause in it. They can, these days, if they need to, demand the whole damn loan. Very unsettling.



> And when somebody says, "Japan (China, Saudia Arabia) holds a meaningful amount of debt," do they refer to private citizens or the governments of those countries? Because I'd bet a lot of money that the vast majority of the U.S. debt is held by U.S. citizens and corporations. I've got mine.
> 
> I don't know how one country crashes another's economy, short of a war. The U.S. economy is the product of a hundred million of the wealthiest, most productive, most highly educated workers in world history! You don't just stop buying some Treasury Bonds and affect that.



A significant percentage of the national debt, in the form of Treasury Bonds, is indeed held by foreign investors.

But, economies can be crashed by the government screwing with the money supply. It's happened a number of times in the past to a number of governments, even our own (in colonial times). Just take a look at what happened in Argentina a decade ago (more or less).

Again, however, it's not that people will stop buying treasury bonds (although that will certainly happen). It's that all those IOU's will come home. The Fed is good at expanding the money supply without immediate consequence, but not so good at contracting it with the same impunity.

Injecting money into the economy in the way they do it is a lot like (at a system level) injecting yourself with a stimulant. You can fool your body into using up its reserves AS IF they were free and available and abundant energy stores.

But they're not. And when the stimulant wears off, you have one helluva hangover.

The day of reckoning will come.


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## London Lad (Jan 16, 2008)

This huge amount of US$ IOUs being held by other countries is one of the reasons the US government is so obsessed with counterfeiting.

A local guy turning out a few bills and buying a new TV is one thing but a foreign counterfeiter churning out millions and millions of $ will eventually start to undermine confidence in the currency and cause people to start calling in those $ bill IOUs.


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## LightInTheWallet (Jan 17, 2008)

Buy platinum, sell gold, grab your ankles.


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## tygger (Jan 17, 2008)

Question for you guys. When the fed prints more money, doesn't it first go to the capital goods and defense sector? So the money is 'spent' at current value, unbeknownst to everyone else (for at least a year or so) that its already devalued? Or am I understanding it wrong?


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## Lightraven (Jan 17, 2008)

Hey JS,

M6 is working well. Used it to arrest some guys the other night.

I could be out of my depth, here. I am not an economist, of course.

OK, China gets $40 billion dollars more from U.S. citizens than U.S. citizens get back from China through commerce. And you're saying that the U.S. government may have to print a lot of currency to cover that (since I'm sure that most transactions are electronic)? And that printing would devalue the dollar?


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## HarryN (Jan 17, 2008)

I agree in general with the postings here, but lets bring the turkey home to roost. The primary problem is the trade deficit, really, 2 deficits.

a) Energy trade deficit
b) Far east trade deficit

As far as (a), it was hoped / imagined that if the price of oil were a constant, then (a) would be helped by dropping the dollar value - effect - price went up, and up and up - even beyond value of dollar drop.

b) Reagan attempted to fix the trade deficit with Japan a long time ago by dropping the dollar vs yen. Effect - dollar dropped 50 % in value. Trade deficit = increased every year. Reason = The free trade concept is not real as far as Japan is concerned.

c) Bush - attempts to repeat the same policy, this time with China. Effect = China is buying up America with our dollars. Exports to China = more or less unchanged. Reason = The free trde concept is not real as far as China is concerned.

Taiwan = currency is tied to US dollar, so dropping dollar does not work.

Bottom lines
1) If you are buying foreign goods (like Toyota / Honda cars), you are part of the problem, not part of the solution.

2) China / Japan / Taiwan use the US income tax system against us. Goods made there are able to avoid US tax, so US companies / people are forced to subsidize imports.

Only solution I can think of = forget income tax completely. Convert to a 10 percent sales tax on ALL transactions including stocks, food, cars, new, used, etc.

If you think I am kidding, just keep in mind that the only reason the trade deficit was down in December, was because so much US equity (stocks and companies) were purchased by China / Middle East so they can dump dollars before they take their monthly bath.


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## London Lad (Jan 17, 2008)

Lightraven said:


> Hey JS,
> 
> M6 is working well. Used it to arrest some guys the other night.
> 
> ...



China sells the US real goods that have real value, say steel for instance. The US pays them in USD, which are just bits of paper of no REAL value, which China can exchange for other real goods later. This money is now out of circulation so the US prints more, and so on and so on. At some stage China will want real goods in exchange for all these bits of paper its holding. That's when the real trouble starts.

As a side note it always amazes me in the discussions on CPF about international shipping that Americans just don't seem to realize that you HAVE to export. Its just not an option not to export unless you don't import (unless of course you have gold in reserve to cover all the notes you have printed) In the UK (and we are just as much in the poop as the US) the need to balance the trade deficit is often paramount to financial decision making.

Its very difficult to slow or stop importing so we really have to think about increasing our exports.

Out of interest, on a Bank of England 5/10/20/50 pound note it says 'I promise to pay the bearer on demand the sum of' and as JS says, the note is really just a promise for gold (that we don't have any more)


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## jtr1962 (Jan 17, 2008)

HarryN said:


> Only solution I can think of = forget income tax completely. Convert to a 10 percent sales tax on ALL transactions including stocks, food, cars, new, used, etc.


I agree completely with that for at least four reasons:

1) All US made goods have the corporate income tax built into their price structure. All other things being equal, this increases the cost of these goods by probably 20% over those made overseas, giving a huge competitive disadvantage.

2) Most companies which sell goods in the US collect state/local sales tax, if applicable. Many imported goods are sold directly over the Internet, avoiding collection of sales tax. It's irrelevant whether or not the purchaser is still technically liable for this tax as almost nobody will voluntarily pay sales tax unless it is charged at the point of sale. While collection of sales tax on US goods does help state/local governments, it still puts US goods at a competitive disadvantage. A national VAT will be built-in to the price of all goods sold here, regardless of how or where sold. It will be more difficult for vendors to avoid collecting it.

3) The cost of record keeping for tax purposes, and income tax preparation, is an enormous drain on the economy. The money spent here could instead be spent on real, tangible goods and services. The extra labor used for tax purposes could be used for production instead. Income tax accountants produce nothing at all of value to the economy when the same amount of tax could be collected via a much simpler sales tax. Same thing for the tax lawyers who write tax law.

4) Tax money would be collected from drug dealers and other cash businesses which currently pay no taxes of any kind. This means the tax burden on the rest of us is lessened.

Besides these four obvious reasons, it's been argued that elimination of the income tax would have a stimulatory effect on the economy. There are many people who are underemployed by choice due to their marginal income tax rates. A good example might be a self-employed person making $6000 a year who instead might be able to earn $12000. Right now the way the tax system is set up they pay roughly $900 in self-employment tax but get back half via the EIC, making their tax burden at most $450. Some states like NY match part of the federal EIC and have other refunds, making their tax burden less, often under $100. Now if the same person makes $12000 their self-employment tax rises to $1800. They also have to pay perhaps $300 to $500 in federal/state/local income taxes. The EIC is phased out at this income level for single people. Their tax burden may increase by over $2000 due to another $6000 in earned income, a marginal rate of 33% on a person who is poor by any standards. This person may well chose to not bother earning more money when $1 out of every $3 extra goes to the government. And you have elderly in similar situations where earnings make more of their SS taxable. Under a sales tax, such dilemmas are avoided. 100% of your earnings go into your pocket regardless.

Besides all these reasons, the sales tax avoids the need for government to know a person's income, or for that matter the need for the person to even bother keeping track of their income. The less government knows about citizens, the better.

BTW, none of the sales tax proposals will tax used goods, only new goods. I can't think of any valid reason to tax used goods. The tax is a value-added tax. There is no net value added to the economy when a used good changes hands. This occurs only when a new good is produced.


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## London Lad (Jan 17, 2008)

Although it would cause riots, i have often thought that the simplest and fairest method would be to do away with all personal taxes and put the tax on food. Cost of collection would be slashed and none would escape paying.

In the UK we are into punishing people for doing well. Do nothing pay no tax, do a bit pay 10%, work hard and pay 22%, work really hard and pay 40%.


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## LuxLuthor (Jan 17, 2008)

Understanding the US economy is actually extrememly complicated, multi-faceted, and unprecedented. It is one of the best examples of "The Emperor Has No Clothes" story, and virtually no Americans have any idea what is going on with their own finances, let alone their city, state, federal, or globally.


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## daveman (Jan 17, 2008)

Too late for the U.S. now. The past 15 years were all a scam, a bubble. There never was a boom, it was a hoax... the American government, even the entire Western world, thinks they can defy 5000 years worth of human history and sustain a fiat currency system through their aircraft carriers. This abomination will not last much longer, it'll be back to the basics pretty soon and the countries holding the manufacturing card will be the ones to hit the ground running. And that won't be the U.S. Anyhow, this is all I can say without giving away more knowledge for free...bad bargain.


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## LuxLuthor (Jan 17, 2008)

LOL! Like I said, virtually no Americans....


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## js (Jan 17, 2008)

tygger said:


> Question for you guys. When the fed prints more money, doesn't it first go to the capital goods and defense sector? So the money is 'spent' at current value, unbeknownst to everyone else (for at least a year or so) that its already devalued? Or am I understanding it wrong?



No. You're understanding it correctly. When creating money from nothing (which is why it is called FIAT currency, from Latin, "let it be done", like "Let there be light"), whether it is printed, or just electronically created, the FIRST entities to spend it get the full pre-inflationary value of those dollars. Then, as they begin to spread through the economy, and the economy responds by inflation, all those people who never saw ANY benefit whatsoever, see the dollars they do have (in savings or retirement accounts) lose buying power. So the aging grandmother living from her retirement check finds that it doesn't buy what it used to buy anymore, and just puts it all up to "inflation" a "natural result" of an expanding economy. Ah well. Too bad. Just the way these things happen.

And, often, the first entities to spend the new money are indeed government defense contractors.

A more equitable way to insert money into the economy would be through tax refunds. Not that that is perfect either.

Does anyone know the REAL reason for taxation? At this point it actually isn't (philisophically speaking) for government revenue, so much as it is a way to keep inflation down by removing money from the economy. LOL! Crazy, isn't it? So when the Fed stops injecting money, the natural "gravity" of taxation starts reducing the money supply. It's a really screwy system in the sense that the money supply is incredibly elastic and the "economy" can be yanked around like crazy.

Economics today isn't really economics as Von Mises and the economists of his day understood the term. Really, today it is very largely about MONETARY POLICY. That's what most people mean when they say "economics" and that's what most "economists" spend their time focusing on. Will the Fed lower rates? Will the Fed raise rates? etc. etc.

I don't think people understand the INCREDIBLE POWER that we have given to the Fed and the government. I don't think people understand what it is we have entrusted them with. It's really very much as if we said to the politicians "OK. You will now define morality for us, and excellence. If you suddenly are caught stealing, you now have the power to morally re-define things." We would NEVER do that, would we? We actually never could do that, of course.

But handing over to them the power to change the "meaning" of the currency is much the same. When you work long and hard to earn $1,000, that money holds the VALUE of your work. Money is a repository and safeholding of value. It represents in many cases the life savings of families. And we allow the Fed to arbitrarily and consistently drain the value from the money. And people think they are getting a great deal by earning 5 percent in their savings account!!! That doesn't even beat inflation!

A precious metals based economy has its problems, to be sure, but the great advantage is that THE GOVERNMENT CAN'T CREATE MONEY FROM NOTHING. And thus you're hard work stored in the form of money can not simply be invisibly and ineffably stolen from you.

As for what to do about all this, well, the best thing is to truly own something of real value, like real estate or precious metals or stock portfolios based on precious metals and mining companies and so on. I wouldn't advise anyone to withdraw funds from a portfolio at a loss in order to invest in gold, though. Be conservative. Stocks do represent real value, even though that may be inflated right now. And, of course, if you have any debt, I suggest that you pay it off. Depending on what happens (and it's hard to say exactly how the cookie will crumble) debt could turn into a real ball and chain.

London Lad,

Great posts! And thanks for your kind words about mine.


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## PEU (Jan 17, 2008)

There is an excelent chapter from a G. Edward Griffin book called The Mandrake Mechanism, you can read it here It goes all the detailed way about what JS explained about the US monetary system.

I saw Argentina mentioned in a previous post, we go thru economic crisis about every ten years, last one was in 2001... but I will refer you guys to the wikipedia entry of what happened in 1989 when we had hyper inflation. 
Can you imagine all your bank deposits transformed into bonds cashable in ten years? without prior notice... compulsory... and overnight? no? well it happened here TWICE!
Can you imagine not being able to withdraw cash from your bank? no? well it happened here too.

All these disasters have the same root, *currency devaluation due to lack of reserves*, not thats the only cause (corruption comes to mind too) but its a very important one.

Lets hope for the best 


Pablo


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## daveman (Jan 17, 2008)

PEU said:


> Lets hope for the best
> 
> 
> Pablo


Hahaha, that's all the Americans can do when no one's prepared for the worst.


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## js (Jan 17, 2008)

PEU said:


> There is an excelent chapter from a G. Edward Griffin book called The Mandrake Mechanism, you can read it here It goes all the detailed way about what JS explained about the US monetary system.
> 
> I saw Argentina mentioned in a previous post, we go thru economic crisis about every ten years, last one was in 2001... but I will refer you guys to the wikipedia entry of what happened in 1989 when we had hyper inflation.
> Can you imagine all your bank deposits transformed into bonds cashable in ten years? without prior notice... compulsory... and overnight? no? well it happened here TWICE!
> ...



Pablo,

Thanks so much for this post. Very incisive and powerful. I remember back when one of these crashes was happening watching a news program on it, and they mentioned also that any USD in peoples accounts were converted into Argentine currency and then spent by the government. People had gone to the trouble to save USD, thinking they were a better bet, and the banks/government just stole them! I remember seeing the lines of people at the (closed) doors of the banks.

Heck, not too long ago here in this country it was illegal to own gold.

I definitely worry about these sorts of things, which is why I think its a good idea to have a decent amount of cash ($200 to $500) in your house in case the banks do shut down. That and a good amount of real silver currency--dollars, half dollars, quarters, and dimes--in case it becomes necessary to barter. But even if that never happens, silver isn't a bad investment. I bought all of mine back before it jumped in price. I think I paid only 4 times face value for all of it. And gold was $325 when I last bought it. Now it's $900. Some people looked at me like I had three heads when I said I wanted all of my monthly allocation to go into Fidelity Select Gold portfolio, but it's performed at some insanely high level over the time I've been investing in it.

Two books spring to mind regarding the Fed:

The Creature from Jekyll Island, by Griffin

and

Secrets of the Temple, by Greider


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## turbodog (Jan 17, 2008)

jtr1962 said:


> What are the practical courses of action to protect oneself from what's coming? Should I cash in the T-bills I inherited from my father and buy gold with them? Should I do the same with anything in my savings account or IRAs? I don't want to have my life savings evaporate overnight on account of other people's stupidity. Unfortunately, there are tax consequences to these courses of action, but I'd rather pay taxes and protect my assets than have nothing.
> 
> On another note, I think going through dumpsters to find what's valuable and what isn't is suddenly going to be a useful skill.




Protect yourself? Sell that overvalued house and buy a cheaper place with the money. Then do something with the tons of leftover $. Ta Da!


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## turbodog (Jan 17, 2008)

Find a job that is still critical in a down market.

Appraisers made $ through the depression. The bank had to get an appraisal before during a foreclosure.

Trash still has to be picked up. Waste mgmt has been a good stock to own.


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## jtr1962 (Jan 17, 2008)

turbodog said:


> Protect yourself? Sell that overvalued house and buy a cheaper place with the money. Then do something with the tons of leftover $. Ta Da!


It's not mine to sell. Besides that, not too many places in the US where you can get by without a car. That's a load of savings right there which makes up for the more expensive housing. With gas pushing $4 a gallon the last thing I would do is move anyplace I needed to drive. Honestly, the last thing I want to do is move, period, even locally. Oh, and last I checked, the prices in the suburbs weren't a whole lot cheaper (400s versus 500s). The real estate taxes in the 'burbs are totally ridiculous compared to here (~$10K versus $3,400). That's equal to another ~$100K in mortgage.

Good idea though on buying stocks of companies unlikely to be affected by a downturn. I'll add anything having to do with basic food to your list. People have to eat.


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## turbodog (Jan 18, 2008)

jtr1962 said:


> It's not mine to sell. Besides that, not too many places in the US where you can get by without a car. That's a load of savings right there which makes up for the more expensive housing. With gas pushing $4 a gallon the last thing I would do is move anyplace I needed to drive. Honestly, the last thing I want to do is move, period, even locally. Oh, and last I checked, the prices in the suburbs weren't a whole lot cheaper (400s versus 500s). The real estate taxes in the 'burbs are totally ridiculous compared to here (~$10K versus $3,400). That's equal to another ~$100K in mortgage.
> 
> Good idea though on buying stocks of companies unlikely to be affected by a downturn. I'll add anything having to do with basic food to your list. People have to eat.



No, I mean really move.... like to the right small town. There's a town not far from where I live that the mayor's making bike/walk friendly. Solid houses there are available in the very low 100's. This is a town on the top 50 places to live in the US.

Then, invest the extra 400k.

You see problems. I see solutions I suppose.


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## jtr1962 (Jan 18, 2008)

turbodog said:


> No, I mean really move.... like to the right small town. There's a town not far from where I live that the mayor's making bike/walk friendly. Solid houses there are available in the very low 100's. This is a town on the top 50 places to live in the US.
> 
> Then, invest the extra 400k.


Homes are really cheap in upstate NY, too. I suppose a drastic move like that is a thought if things got really tight, but I'd still be like a fish out of water. I lived in NJ for three semesters in college (small town atmosphere) but couldn't really adjust to it. I guess try to imagine yourself living maybe in a midtown Manhattan apartment compared to your present lifestyle. You would have as difficult a time as I might in a small town. Don't get me wrong, there are a lot of positive things about the middle America small town experience. I just know it would never work for a born and bred city person like me based on my own personal experiences.



> You see problems. I see solutions I suppose.


Well, I had a great aunt who became a millionaire buying foreclosures during the Great Depression. I can certainly smell another opportunity like that coming. Southeast Queens right now is ripe with homes bought with sub-prime mortgages. I just want to make sure I still have cash to do something with if the opportunity comes along.

I hate to say it but this thread has really got me worried. A lot of intelligent people are saying basically the same thing-the chickens will come home to roost, and it isn't going to be pretty when they do. I personally feel we'll soon be looking at the greatest economic downturn since 1929 regardless of what government does or doesn't do. The only question then is how to avoid being someone in a shanty town.


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## jtr1962 (Jan 18, 2008)

js said:


> But even if that never happens, silver isn't a bad investment. I bought all of mine back before it jumped in price. I think I paid only 4 times face value for all of it. And gold was $325 when I last bought it. Now it's $900.


I remember when gold was at $325. My dad was mulling over buying some $20 gold pieces (the real ones from the 1800s thru 1920s, not the bullion coins). I tried to talk him into it, saying that gold probably isn't going to go much lower. How I wish he would have listened instead of spending it on baseball cards and figurines (his idea of an "investment"). At least we have a fair amount of silver, almost all of it pulled from change at face value in the 1960s.


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## turbodog (Jan 18, 2008)

Not *too* small town..... it's about 400k people.


I don't see things getting too bad. A lot of that's a load of crap. The subprime DEFAULTS are a tiny fraction of a small fraction.

The stock market...... it's down ~10% or so from a recent peak, but that's less than the 2000 dive.

A whole lot of companies made plenty of cash in the past 2 years. I see business booming practically everywhere I look. The up and down is all part of life.

US exports are up and gaining due to the weaker dollar, so that buffers the US economy to a degree. And there are so many buffers that's it's impossible to predict (short of a nuclear war) where it will all end up.


This reminds me of a joke....

If you lined up all the ecomonists end to end, they still wouldn't reach a conclusion.


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## daveman (Jan 18, 2008)

What has already floated to the surface is very bad, what will happen rest of this year will be even worse. The party is over, nothing but bad news for the U.S. economy for the next 12 months, if not 12 years. Watch and see.


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## London Lad (Jan 18, 2008)

PEU said:


> There is an excelent chapter from a G. Edward Griffin book called The Mandrake Mechanism, you can read it here It goes all the detailed way about what JS explained about the US monetary system.
> 
> I saw Argentina mentioned in a previous post, we go thru economic crisis about every ten years, last one was in 2001... but I will refer you guys to the wikipedia entry of what happened in 1989 when we had hyper inflation.
> Can you imagine all your bank deposits transformed into bonds cashable in ten years? without prior notice... compulsory... and overnight? no? well it happened here TWICE!
> ...




This sort of think always seems less of a threat when its in someone else's country..................

But it soon makes you jump when it happens in your own.










Lines of people outside a Northern Rock bank branch in September 2007 *in the UK*.


The banks share price collapsed partly due to its heavy investment in the *UK* and *US* sub prime markets. The Bank of England had to prop it up with tax payers funds and guaranteed savers money but the savers didn't trust them and started a run on the bank.

Who knows how many other UK banks are now being propped up by the UK government secretly?


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## PEU (Jan 18, 2008)

London Lad said:


> This sort of think always seems less of a threat when its in someone else's country..................
> 
> But it soon makes you jump when it happens in your own.
> 
> ...



Yeah, I recall that, thats a quiet crowd compared to the riots and death by the dozens we had here in 2001 



jtr1962 said:


> Well, I had a great aunt who became a millionaire buying foreclosures during the Great Depression. I can certainly smell another opportunity like that coming.



It looks like the same, but IMO its not, at that time homes had a reasonable price, now the price, even at foreclorure values, is over-inflated.


Pablo


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## js (Jan 18, 2008)

jtr,

Don't do anything drastic based on the advice of a bunch of arm chair economists (and I DEFINITELY include myself in that description). Be conservative, I would say. And be mindful of your own happiness. If you like where you are, stay there. Besides, real estate is still over-inflated in my opinion (as PEU said above), and it's not a great sellers market on top of that. It's not that the idea of cashing out and moving to small town is a bad idea. It's not--in general. It just may be a bad idea FOR YOU. In fact, it sounds as if maybe it is.

Reduce or eliminate debt, reduce expenditures on luxuries and superfluous stuff, have 2 to 3 months of income in the bank, and then look to investments. And a good investment plan is diverse, not all in gold. I did what I did because the gold portfolio was just such a damn bargain and I knew it. But soon I will start buying stocks when they fall even lower and when gold rises even higher.

Don't go selling your house based on anything I've said here! Please! A community you like and are familiar with, with friends and family and favorite spots, is worth a lot. What good does it do you to be a bit more "financially secure" and depressed?

Besides, THERE IS NO FINANCIAL SECURITY for most of us. That's the point of much of what I've said. When the currency is a fiat currency and is being manipulated left and right; when there is a continual, massive trade defecit and continual inflation, there's really no security for anyone, --or at least for only a very few. Abandon all hope ye who enter here. :devil: Go have a cup of coffee and laugh about it with your friends. Being poor and happy beats being rich and depressed any day.


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## KC2IXE (Jan 18, 2008)

kelmo said:


> Remember back in the late 70's early 80's when all those South American countries defaulted on their loans? Bank of America almost ceased to exist. Hell, even the State of New York went belly up. President Ford had to bail them out. ...snip...



It was the city of NY - and to quote the NY Post headline of what Ford said when NYC asked for a bailout "Ford to NY: Drop Dead" - NYC had to bail their own butt out


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## MarNav1 (Jan 18, 2008)

In politics nothing happens by "accident". If it happens it was planned that way. FDR


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## kelmo (Jan 18, 2008)

KC2IXE said:


> It was the city of NY - and to quote the NY Post headline of what Ford said when NYC asked for a bailout "Ford to NY: Drop Dead" - NYC had to bail their own butt out



I stand corrected. Many brain cells have parished since that time. Besides, what do I know, I live in a flood plain...

This is for js.

Through me you pass into the city of woe:
Through me you pass into eternal pain:
Through me among the people lost for aye.

Justice the founder of my fabric mov'd:
To rear me was the task of power divine,
Supremest wisdom, and primeval love.

Before me things create were none, save things
Eternal, and eternal I endure.
All hope abandon ye who enter here.

Such characters in colour dim I mark'd
Over a portal's lofty arch inscrib'd:
Whereat I thus: Master, these words import.

Is our economic woe(s) a "Divine Comedy?!"


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## js (Jan 18, 2008)

There's something diabolical about the Fed and fiat currency, yes. It's certainly diabolically clever and obfuscated, I would say.

The analogy with the Divine Comedy is most appropriate in that when Dante realized that midway through his life's course he had lost the way, he couldn't just go straight back to the clear, but instead had to go all the way to the heart of hell before he could start back up again.

That seems to fit the situation, actually. hehe.


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## thesurefire (Jan 18, 2008)

All the signs are pointing at the same thing; the dollar is going to fall like a rock in the next months. 

I've learned much about the economy over the last few years and feel that things are getting worse and worse.

Its not a bad idea to have at least 6 months of food and 1000 dollars in cash, or enough money that you can run out and buy 6 months of food if things get really bad quickly. I've heard people speculating that the government may outlaw gold ownership again as well. The introduction of a new currency is another possibility. 

The bottom line is there is very little good that can come of our current economic situation. 

If you don’t think things are getting bad look at the USD index, the DJIA, gold and siver prices, and the credit crunch over the last 5 years.


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## HarryN (Jan 18, 2008)

jtr1962 said:


> BTW, none of the sales tax proposals will tax used goods, only new goods. I can't think of any valid reason to tax used goods. The tax is a value-added tax. There is no net value added to the economy when a used good changes hands. This occurs only when a new good is produced.



You are right that the proposals usually don't include tax on used goods, but this is a point I don't agree with at all. The idea of a Value Added Tax - to me, this is actually worse than a "Sales Tax".

a) Imagine if you will a tax based only on "new items". It takes only the smallest imagination to see that a clever person in China will simply take a toy ball, roll it 3 inches across a table, and now it is "used" - ie, free of tax on used goods. 

b) It would be quite easy for tax collectors to simply force firms like "EBay" to collect a 10% sales tax on every transaction - if it is across the board. How are you ever going to decide what is "new" vs "used" when we can't even tell the difference beween melamine sawdust + flour does not equal wheat glueten ? Fraud must be an assumed part of the system.

c) The proposals for sales tax on "new goods only" are something like 28%. That is simply too high. Rich people will go overseas to buy expensive things, and the locals will be left holding the bag.

d) If you eliminate the income tax as a whole, you still need to find a way to tax the very wealthy - remember, the guys that make $ 100 million off of a stock transaction. We also need to try to keep the Chinese from owning the entire equity of the US by buying up the stocks. 

Applying the 10 % sales tax to ALL transaction, including stocks (a used good, not a new good) is perhaps the most important part of any attempt at a sales tax based strategy - in fact, one could argue it should be the starting point. I would gladly see an arrangement where there is no income tax on stocks / equity transactions in exchange for a flat 10% of its value, especially if you stay with the concept that an option is just an alternative payment plan.

FICA is a separate issue from income tax, but obviously, it is not practical to keep the cap on income level where it is and charge such high rates on the sub $ 100 K income group.


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## LEDninja (Jan 18, 2008)

I was reading the news on the CTV website:
*Bush seeks economic boost package worth $145B*
http://www.ctv.ca/servlet/ArticleNe...17/economy_bush__080118/20080118?hub=CanadaAM
I scrolled down and read some of the other viewers comments.
For a while I thought I was reading this thread.


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## jtr1962 (Jan 18, 2008)

HarryN said:


> b) It would be quite easy for tax collectors to simply force firms like "EBay" to collect a 10% sales tax on every transaction - if it is across the board. How are you ever going to decide what is "new" vs "used" when we can't even tell the difference beween melamine sawdust + flour does not equal wheat glueten ? Fraud must be an assumed part of the system.


And the minute such a tax is passed you'll see a lot of $20 items selling for $1 plus $25 shipping (to be added after the auction so eBay doesn't know about it). Sellers and buyers will find ways around such a tax, believe me. I agree that the proposed VAT tax of 23% (not 28% as you say) on new goods only is too high. It doesn't have to be that high if the US government reigns in spending. A 10% VAT tax only might well be enough. As skirting around the tax by saying slightly touched goods are "used", that probably won't fly. If a shipping container of stuff from China comes in, the blanket assumption should be that it's all new stuff.



> FICA is a separate issue from income tax, but obviously, it is not practical to keep the cap on income level where it is and charge such high rates on the sub $ 100 K income group.


The current proposal also eliminates FICA tax as it should, instead funding SS/Medicare from the VAT tax. People would be screaming bloody murder if the politicians said they were getting rid of the income tax, and they _still_ had FICA deducted from their paychecks. To most people, FICA tax is just another income tax. I agree that if we keep the current system in place the FICA rates on the sub-$100K group need to be reduced. A good idea might be to exempt the first $15,000 or $20,000 in income from both FICA and income taxes. And the rate for self-employed persons should be the same as the rate for every else. Charging double, and starting taxes from the first dollar of income, is highly regressive.


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## jtr1962 (Jan 18, 2008)

LEDninja said:


> I was reading the news on the CTV website:
> *Bush seeks economic boost package worth $145B*
> http://www.ctv.ca/servlet/ArticleNe...17/economy_bush__080118/20080118?hub=CanadaAM
> I scrolled down and read some of the other viewers comments.
> For a while I thought I was reading this thread.


Yep. I get annoyed every time I read about proposed bailouts. If people made bad financial decisions, such as using their home equity to fund vacations, new cars, or useless consumer crap, then they should live with the consequences. Moreover, they should accept the fact that there going to have to live within their means. That means only buying what you can pay in full when the bill comes, driving your car until the wheels fall off, not flying to some tropical island every time there's a snow storm, not buying stupid, expensive prepackaged foods, etc. Those of us who already live like that should not be forced to bail out those who won't. If nothing else, the times ahead are going to be a reality check for lots of people.

I always used to wonder how people I knew with mediocre jobs were always buying stuff that I couldn't afford, taking vacations, etc. Now I know-they were living on the rising tide of real estate prices, pulling every dollar in equity out of their homes. Now that real estate is falling, the party's over. Even worse, they're stuck in homes which are worth less than what is owed on them. In essence these people have a huge negative net worth.


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## 9volt (Jan 18, 2008)

I think most people in the US don't know what living within their means means. Even fewer realize that if they aren't increasing their income every year that they need to buy less every year.


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## HarryN (Jan 18, 2008)

JTR, just so you know, a surprisingly large amount of stuff from China / far east in shipping containers that is called "packing". Packing can be any loosely set in item, but clothing is pretty common.

Regardless of E Bay, shipping can be a taxable transaction. I suspect that it would not be hard to ensure that shippers like USPS, UPS, Fed Ex, etc collect sales tax on the cost of shipping.

The "underground" economy of cash transactions / hand carrying items is not really the main concern anyway, nor is grandma with a few chickens selling some eggs at a Saturday market. The primary goal is to capture tax revenue from equity transactions / stock / options / derivitatives, Walmart / target, and auto / home sales.

There are no favorites for exclusion in my book.


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## daveman (Jan 18, 2008)

I think now would be a great time for China to stop "manipulating," according to the neo-cons, the Yuans, and start acting like a "responsible," according to the White House, international player by raising the Yuans another couple notches higher in value to the dollar. I'm sure this would finally contribute something positive to the inflationary pressure in the U.S. economy since this is what the American government, both left and right, has been asking for all along? Surely this has drawn the ire of the U.S. government not because of politics, but actual harm being done to the American economy...


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## tygger (Jan 18, 2008)

Has anyone calculated what the possible effects the Iranian oil bourse would have on the dollar once its up and running? A 'currency basket' type oil bourse is definitely coming, its only a question of when. The obvious change I can see would be:

Major oil buyers (Japan, Europe, etc) would no longer be required to exchange their currency for dollars in order to buy oil which means they don't lose any value on the exchange rate and there's less demand for dollar holdings. 

My question is, would that substantially increase inflation due to the billions of oil trade dollars coming back into circulation?

BTW, thanks to everyone, I'm learning quite a bit from this thread.


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## jtr1962 (Jan 19, 2008)

Regarding any coming recession, I'd say it's more like a reality check than an economic downtown. People are just going to learn living within their income since the days of easy credit are over. BTW, since we're supposedly in a recession, where was the economic boom which preceded it? Where exactly was this "great economy" we were supposed to have had in between recessions? Truth is things weren't that great when I got out of college in 1985, and nobody I knew or heard of did that great any time since. I don't consider a "great economy" to mean you have a job which barely covers your living expenses, yet that's been the reality for the majority. So if the coming recession is a media fabrication, which it is to some extent, so was the preceding boom. The media made it sound like everyone and his brother was making $250,000 a year at the height of the dot com boom. Most people were scraping by even when things were supposedly at their best. Every time I've looked at jobs typically available during the last 20 years, they were mostly low paying. Those who apparently did a little better often just used the equity in their homes to finance profligate spending. Now that housing prices are down, they have a negative net worth, and only a crappy paying job to cover expenses.


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## 9volt (Jan 19, 2008)

jtr1962 said:


> Regarding any coming recession, I'd say it's more like a reality check than an economic downtown. People are just going to learn living within their income since the days of easy credit are over.



I hope you're right, I can deal with that.


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## MarNav1 (Jan 19, 2008)

jtr1962 said:


> Regarding any coming recession, I'd say it's more like a reality check than an economic downtown. People are just going to learn living within their income since the days of easy credit are over. BTW, since we're supposedly in a recession, where was the economic boom which preceded it? Where exactly was this "great economy" we were supposed to have had in between recessions? Truth is things weren't that great when I got out of college in 1985, and nobody I knew or heard of did that great any time since. I don't consider a "great economy" to mean you have a job which barely covers your living expenses, yet that's been the reality for the majority. So if the coming recession is a media fabrication, which it is to some extent, so was the preceding boom. The media made it sound like everyone and his brother was making $250,000 a year at the height of the dot com boom. Most people were scraping by even when things were supposedly at their best. Every time I've looked at jobs typically available during the last 20 years, they were mostly low paying. Those who apparently did a little better often just used the equity in their homes to finance profligate spending. Now that housing prices are down, they have a negative net worth, and only a crappy paying job to cover expenses.


The "great economy" was only in the minds of the media pundits and government "think tanks" IE the Tavistock Institute etc trying to keep the sheeple dumbed down. But the Federal Reserve Note game of musical chairs is over and will be replaced soon with the "Amero" scam to try to keep the illusion going a little longer. The movie "Braveheart" is a great example of what we are going back to. I hope people are able to come back to reality soon, I'm afraid it's too late for most. :sick2:


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## PEU (Jan 19, 2008)

thesurefire said:


> The introduction of a new currency is another possibility.



Regarding alternative currency system, this is an interesting read

Its not a long read, here is an excerpt:



> *Creating an Interest and Inflation Free Money*
> TOWARDS THE END of the 19th century Silvio Gesell,
> a successful merchant in Germany and Argentina,
> observed that sometimes his goods would sell quickly and yield
> ...




Pablo


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## PEU (Jan 19, 2008)

daveman said:


> I think now would be a great time for China to stop "manipulating," according to the neo-cons, the Yuans, and start acting like a "responsible," according to the White House, international player by raising the Yuans another couple notches higher in value to the dollar. I'm sure this would finally contribute something positive to the inflationary pressure in the U.S. economy since this is what the American government, both left and right, has been asking for all along? Surely this has drawn the ire of the U.S. government not because of politics, but actual harm being done to the American economy...



Not that I agree, but why would they do that??? Does Ben Bernanke asks the Chinese autorithies every time he changes the rates?


Pablo


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## mudman cj (Jan 19, 2008)

js said:


> Besides, THERE IS NO FINANCIAL SECURITY for most of us. That's the point of much of what I've said. When the currency is a fiat currency and is being manipulated left and right; when there is a continual, massive trade defecit and continual inflation, there's really no security for anyone, --or at least for only a very few. Abandon all hope ye who enter here. :devil: Go have a cup of coffee and laugh about it with your friends. Being poor and happy beats being rich and depressed any day.



+1

I'll bet some of you guys have seen, "The Money Masters". If not, check it out. It's a 3 1/2 hour documentary on the political/economic power structure.


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## daveman (Jan 19, 2008)

PEU said:


> Not that I agree, but why would they do that??? Does Ben Bernanke asks the Chinese autorithies every time he changes the rates?
> 
> 
> Pablo


Which part of my post do you not agree with? They were all over the news for the past year.


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## PEU (Jan 19, 2008)

daveman said:


> Which part of my post do you not agree with? They were all over the news for the past year.



Here is the unabridged version of my previous reply 

Not that I agree* with the Chinese autorithies manipulating the exchange rate to their advantage*, but why would they do that(*)??? Does Ben Bernanke asks the Chinese autorithies every time he changes the rates?

(*) change their exchange rate to benefit the USA?


Pablo


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## daveman (Jan 19, 2008)

PEU said:


> Here is the unabridged version of my previous reply
> 
> Not that I agree* with the Chinese autorithies manipulating the exchange rate to their advantage*, but why would they do that(*)??? Does Ben Bernanke asks the Chinese autorithies every time he changes the rates?
> 
> ...


Their reasons for agreeing to what the U.S. has been asking for is unbeknownest to me as well, but President Bush, the U.S. Congress (both parties), and Henry Paulson have repeatedly claimed that China has been manipulating their Yuan to the disadvantage of American businesses. Why would you disagree with them? I have no reason to think the President, Congress, or Paulson would lie to the entire country about this; and certainly, if they're right on this, China would be doing the U.S. a favor to let their Yuan rise against the dollar now, no?


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## Russianesq (Jan 19, 2008)

*I vote to rename this thread " ECONOMICS BY FLASHAHOLICS"*

*Who will second my vote :thumbsup:*





*P.S. Great Stuff*


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## TIP AND RING (Jan 20, 2008)

"The "housing bubble" implosion is broadly misunderstood. It's not just the collapse of a market for a particular kind of commodity, it's the end of the suburban pattern itself, the way of life it represents, and the entire economy connected with it. It's the crack up of the system that America has invested most of its wealth in since 1950. It's perhaps most tragic that the mis-investments only accelerated as the system reached its end, but it seems to be nature's way that waves crest just before they break.
This wave is breaking into a sea-wall of disbelief. Nobody gets it. The psychological investment in what we think of as _American reality_ is too great. The mainstream media doesn't get it, and they can't report it coherently. None of the candidates for president has begun to articulate an understanding of what we face: the suburban living arrangement is an experiment that has entered failure mode." 

A very well worded excerpt from James Kunstler's web page. I hope the economy recovers, but my gut is telling me otherwise.


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## daveman (Jan 20, 2008)

In all honesty, the so called housing bubble is not the trouble for the U.S. economy. Yes, this would seem to run contradictory to what most people, economists, even, are seeing. But the housing sector is simply the last straw, a mediocre sized straw, neither too big nor too small, on the camel's back. The 500 billion to 1 trillion mortgage debt that may eventually go down is not enough to sink the U.S. economy IF we had not been spending like there's no tomorrow for the last 15 years. Now that the Fed cannot (technically, they still can) print more money, summon more credit out of thin air because they have already done too much of that for the last 7 years, America is going to have to actually EARN the money they wish to spend, instead of just have its Fed spreading it out of Bernanke's helicopter. Except, what does America have to sell to the rest of the world???? Nothing.


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## jtr1962 (Jan 20, 2008)

TIP AND RING said:


> "The "housing bubble" implosion is broadly misunderstood. It's not just the collapse of a market for a particular kind of commodity, it's the end of the suburban pattern itself, the way of life it represents, and the entire economy connected with it. It's the crack up of the system that America has invested most of its wealth in since 1950. It's perhaps most tragic that the mis-investments only accelerated as the system reached its end, but it seems to be nature's way that waves crest just before they break.
> This wave is breaking into a sea-wall of disbelief. Nobody gets it. The psychological investment in what we think of as _American reality_ is too great. The mainstream media doesn't get it, and they can't report it coherently. None of the candidates for president has begun to articulate an understanding of what we face: the suburban living arrangement is an experiment that has entered failure mode."
> 
> A very well worded excerpt from James Kunstler's web page. I hope the economy recovers, but my gut is telling me otherwise.


Yes, this is something I've known would take place for _years_. Fundamentally, low-density suburban living just can't work long term because of the huge amount of infrastructure required per capita compared to denser living. A road costs the same per mile to build whether in the middle of nowhere or the center of NYC. Well, actually that's not completely true but for our purposes here the approximation is close enough. Ditto for electric lines, gas lines, sewers, etc. However, when that mile of road services 2% or 8% of the population it might in a larger city, then it suddenly doesn't become cost effective. We've already seen the results of trying to make it work-ever increasing real estate taxes, plus a need to government to fund the initial building of infrastructure.

We've hit a crossroads at this point in time. Much of the infrastructure built at government expense in the 1950s and 1960s to jumpstart suburbia is now falling apart. Government can't afford to build it over, residents in these areas cannot afford the taxes necessary to keep it in good repair. Note that this is _independent_ of what fuel prices are doing. Higher gas prices will accelerate the trend, but it would have happened eventually even with $1 per gallon gas. There was just no way, short of perhaps robots maintaining infrastructure, or slave labor doing the same, that a suburban lifestyle dependent upon mechanized transportation could be self-sustaining.

Note that this new type of low-density living is quite different from old rural America, which may well have been even less dense. The need for transport and roads was far less. A dirt road to go into town once a month was more than sufficient. People worked and lived on their farms, not traveled 50 miles a day to work, plus shopped on weekends. The railroad and interurbans were sufficient for the very occasional trips farther than the local town. Electricity was often not needed at all, or if it was, in far smaller amounts than demanded by a typical suburban household. In short, the lifestyle meant that a very basic, low cost per capita infrastructure sufficed. Those who wanted all the modern amenities moved to cities where these things were cost effective to provide.

I could go on but I'll stop for now. Suffice it to say that abandoning a part of the economy into which trillions were invested is going to have very dire repercussions. However, it will cost even more long term to continue a lifestyle which can't be than to abandon it. It will hurt the American psyche even more since few alive today don't remember a time when the proverbial American dream was the house in suburbia, the car, dog, and 2.1 children. The new American dream may well be a modest house on 1/10 or 1/15 of an acre in an area convenient to a subway, with plenty of shopping a short walk away.


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## jtr1962 (Jan 20, 2008)

Relevant to the thread:

The coming financial collapse of the U.S. government


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## daveman (Jan 20, 2008)

America is about to get humbled big time... there will be alot of begging and borrowing and very little pride. Nothing other great nations haven't gone through in the past, but the problem is, they usually don't recover in less than a century, if they recover at all.


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## LuxLuthor (Jan 20, 2008)

LOL ! You better all sell your flashlights while the gettin's good.

This topic is truly funny....and EVERY great civilization/ruling power will eventually be hoist with his own petard.


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## PEU (Jan 20, 2008)

daveman said:


> Their reasons for agreeing to what the U.S. has been asking for is unbeknownest to me as well, but President Bush, the U.S. Congress (both parties), and Henry Paulson have repeatedly claimed that China has been manipulating their Yuan to the disadvantage of American businesses. Why would you disagree with them? I have no reason to think the President, Congress, or Paulson would lie to the entire country about this; and certainly, if they're right on this, China would be doing the U.S. a favor to let their Yuan rise against the dollar now, no?



All governments play with their exchange rates to their own advantages in some way... I know my country does it, we keep the Dollar (against the peso) at an inflated rate (1dollar=3.20 peso) so our industry can sell at competitive prices overseas, I guess the same applies to China.

Im not doubting what the US congress, president, etc are saying, what Im trying to say is: why China would change their economic policy to benefit the US? They will change the rate when they think its time to do it, and be sure it won't be because the US asked, in the first place it will be because it benefits them...


Pablo


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## js (Jan 20, 2008)

jtr1962 said:


> Yes, this is something I've known would take place for _years_. Fundamentally, low-density suburban living just can't work long term because of the huge amount of infrastructure required per capita compared to denser living. A road costs the same per mile to build whether in the middle of nowhere or the center of NYC. Well, actually that's not completely true but for our purposes here the approximation is close enough. Ditto for electric lines, gas lines, sewers, etc. However, when that mile of road services 2% or 8% of the population it might in a larger city, then it suddenly doesn't become cost effective. We've already seen the results of trying to make it work-ever increasing real estate taxes, plus a need to government to fund the initial building of infrastructure.
> 
> We've hit a crossroads at this point in time. Much of the infrastructure built at government expense in the 1950s and 1960s to jumpstart suburbia is now falling apart. Government can't afford to build it over, residents in these areas cannot afford the taxes necessary to keep it in good repair. Note that this is _independent_ of what fuel prices are doing. Higher gas prices will accelerate the trend, but it would have happened eventually even with $1 per gallon gas. There was just no way, short of perhaps robots maintaining infrastructure, or slave labor doing the same, that a suburban lifestyle dependent upon mechanized transportation could be self-sustaining.
> 
> ...



jtr,

I would suggest that your thinking above needs to be balanced out by the HUGE demands of cities, all provided by mass transport of goods and services and trash and waste into and out of the city. All those people crammed into that small a space certainly does mean that they don't need cars and can walk or take public transit

BUT

It also means that all the food and other life necessities that they require must be brought into the city on a daily basis, and that their trash and waste must be transported out on a daily basis.

The modern trend is toward concentration--larger egg "factories", larger grain farms, larger flour mills, and so on. But when you do this you create a great many problems. Keeping 2.5 million chickens in a single building creates a living hell with hellish problems associated. The egg factory drains the local water table, and then poisons it unless the waste is managed properly, and then all those eggs must be shipped out for hundreds of miles in all directions.

Large urban cities suffer from much the same problems, and are, in a sense, highly unnatural. If you stopped the supplies into and out of NYC, it would collapse into a disaster area in a matter of days.

Not that I disagree with what you wrote, though. Just that I'm pretty much a Distributist when it come to this sort of thing. I want to see more local production and consumption of goods, and more small businesses owned by local individuals. I don't think it's a really great idea to have all the grain grown in one part of the country and all the fruit in another. Nor do I think it's a great idea to reduce the genetic diversity of your crops down to a handful of varieties, or even just ONE strain. I guess the potato famine in Ireland is a lesson not learned, but lost to history.


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## jtr1962 (Jan 20, 2008)

js said:


> I would suggest that your thinking above needs to be balanced out by the HUGE demands of cities, all provided by mass transport of goods and services and trash and waste into and out of the city. All those people crammed into that small a space certainly does mean that they don't need cars and can walk or take public transit


I think you're missing my point a bit. The suburbs have pretty much the same demands for goods and services cities do, but spread out over a much larger area, thus costing much more per capita to deliver. In short, they have the same problems of a large city without also having the many advantages of one. Also, a car in NYC is a convenience, not a necessity. Indeed, for many trips a car is actually slower, and always more costly. A lot of the cars which are here are actually suburban commuters. And a lot more people might have had more convenient public transit if not for the suburbancentric public policy which funded highways instead of mass transit for the last 50 years.



> Large urban cities suffer from much the same problems, and are, in a sense, highly unnatural. If you stopped the supplies into and out of NYC, it would collapse into a disaster area in a matter of days.


As would the suburbs. Old rural America was way more self-sufficient than either. As for unnatural, man has lived in large cities for centuries in order to put many conveniences within walking distance. The relatively new development of suburbia is probably more unnatural than anything else as it's basically a place designed for automobiles.



> Not that I disagree with what you wrote, though. Just that I'm pretty much a Distributist when it come to this sort of thing. I want to see more local production and consumption of goods, and more small businesses owned by local individuals. I don't think it's a really great idea to have all the grain grown in one part of the country and all the fruit in another. Nor do I think it's a great idea to reduce the genetic diversity of your crops down to a handful of varieties, or even just ONE strain. I guess the potato famine in Ireland is a lesson not learned, but lost to history.


I agree, but if anything the trends for the last 50 years are what has produced the current situation. By turning valuable farmland into suburban housing tracts you had to utilize your remaining farmland more efficiently. That means factory farming.


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## js (Jan 20, 2008)

jtr,

No, I understood where you were coming from regarding the suburbs, I think. I never contradicted you there.

I'm not missing your point. I pretty much agree with it. BUT, not entirely, and now that you've said more, I find more that I would take issue with.

First, the place we agree: the suburbs are the worst of both worlds, roughly speaking.

It's just that you seem to see the suburbs as some kind of city planning gone wrong. If only all those people could have been put into cities instead, we could all ride the subway and have fewer cars and more farmland to suport the cities. But instead of doing that sensible (according to you) thing, government and society have supported suburbia by unnatural and unwarranted financial and moral support for roads and cars and infrastructure, thus creating this repulsive half-breed known as the "burbs".

I disagree.

The suburbs were created because it's unnatural to cram all those people into that small a space, and limits are reached. People need work to live and support themselves and their families. The work is often to be found only in the cities, but finding apartments or condos in the city is both hard, and far more costly. Thus they live in the suburbs and work in the city.

You can't lay the blame for the suburbs and "urban sprawl" clearly on any one factor, and you can't simply say all those people should move to the cities. Suburbia is intertwined with a great many of the strands that make up the warp and weft of modern society.

It's a flat oversimplification to say that the suburbs have all the disadvantages of a large city without any of the advantages. How about home ownership? How about a front lawn? How about trees and a very different sort of neighborhood?

_Humans_ have indeed lived in cities for centuries untold, but the balance has shifted dramatically. It used to be that the great majority of people were involved directly in the production of food and related products. Now less than 2 percent of the population is directly involved in food production.

It's a common myth that factory farms are more efficient.

Not true.

By far the MOST efficient use of farm land is in very small farms, 3 acres or less--and we're talking like 2 to 3 times more efficient than factory farms.

Further, the whole agribusiness system of production is only possible _because of cheap oil_. Take that away and the costs of food items will start to rise dramatically. That's really the second part of the story of our times. The first part could possibly be summarized under the heading "Gold" and would involve a tale of the rise of the fiat currency system and modern economics.

The second part could possibly fall under the heading "Wheat" and would involve a tale of the unsettling of America and the heart rending relocation of the rural population into the cities and urban centers. We're in for a RUDE FREAKING awakening when oil starst to rise in price--and more than that, when the agribusiness industry is FORCED to start to pay and benefit its workers something like the way other industrial workers are compensated.

You say the answer is cities, and see the suburbs as somehow optional--as if we could have a city without surrounding suburbs.

I say that the two go hand in hand. It's not simply the fault of taxes being used for highways.

I say that the only answer will be the serious re-population of rural America. This will not really happen until food prices rise to 5 to 10 times what they are now; until the inverted triangle tips over and more people take a hand in food production, with many many small farms serving local markets.

It's a myth and a modern stupid stuborn prejudice that we somehow "can't go back" to that. OF COURSE WE CAN! And we will. It's already happening. There are more and more small local farms (some of them organic, some of them not) here in the Fingerlakes region of NY every year, and Ithaca's farmers market and co-operatives are among the best in the country.

Some people will always be city people, and there will always be cities, and there need to be cities. But right now, far too many people have been forced due to "the economy" into urban lifestyles that they have no wish for, and that do not suit them.

In general, it's probably not their fault that they live in the suburbs. It's the fault of our unnatural and unstable modern economy and the choices that have been made over the last century by many different forces and entities.


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## tygger (Jan 20, 2008)

PEU said:


> Im not doubting what the US congress, president, etc are saying, what Im trying to say is: why China would change their economic policy to benefit the US? They will change the rate when they think its time to do it, and be sure it won't be because the US asked, in the first place it will be because it benefits them...
> 
> Pablo



You're right. Its laughable that the treasury secretary would ask China to manipulate its currency for the US' benefit. But its much easier for politicians to blame China's low Yuan for our troubles than their own irresponsibiliy. Its almost as silly as Bush asking the Saudis to produce more oil.


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## jtr1962 (Jan 21, 2008)

js said:


> It's just that you seem to see the suburbs as some kind of city planning gone wrong. If only all those people could have been put into cities instead, we could all ride the subway and have fewer cars and more farmland to suport the cities. But instead of doing that sensible (according to you) thing, government and society have supported suburbia by unnatural and unwarranted financial and moral support for roads and cars and infrastructure, thus creating this repulsive half-breed known as the "burbs".
> 
> I disagree.
> 
> The suburbs were created because it's unnatural to cram all those people into that small a space, and limits are reached. People need work to live and support themselves and their families. The work is often to be found only in the cities, but finding apartments or condos in the city is both hard, and far more costly. Thus they live in the suburbs and work in the city.


I'm not totally disagreeing with you here, but the picture is a bit more complex than that. Even though what I'm writing here in response is lengthy, it's but a small part of the whole story.

As far as my research has led me to determine, the suburbs were largely created to sell cars. Up until the great experiment begun in the 1950s, cars were mostly a solution in search of a problem. Sure, they were useful in rural areas, but they were little more than expensive toys for most city dwellers. Yes, they had some utility, but for the most part they were optional. Lots of people could live without a car, and did. The burgeoning auto industry wanted to sell more cars, but couldn't unless lifestyles changed such that autos were necessary for daily life. The auto industry at the time represented a way for the heavy industries used in WWII to continue to employ a large workforce. Building roads and other facilities for autos would create yet more employment. I'm not implying there was any evil here. I highly doubt the long term ramifications of what was being done were thought out. The politicians of the time simply saw it as an economic stimulus package. The benefits of more open space which you mentioned were the carrot used to entice people to relocate to the new suburbs. To urban dwellers living in a crowded tenement, this undoubtably had some appeal.

Unfortunately, this change of lifestyle had dire consequences. To be sure, the cities of the time were far from utopia. They were often dirty, smelly, overcrowded, lacking in amenties. However, there was nothing wrong with them that couldn't be fixed. Lack of personal space could be alleviated by building taller buildings, but with much more parkland in between them. This was also solve the overcrowding and sanitary problems. The transportation grid already existed in the form of urban railways. They simply needed to be brought up to current standards of technology, and expanded where needed. Ironically, doing all of these things would have created as much employment as the alternative, but because it wasn't really "new" like the autos or suburbia, it didn't appeal to the public's fancy.

Anyway, the very changes which brought suburbia into existence nearly destroyed urban America. Besides the obvious, such as lack of funding for rail transit, there was also a "brain drain" from the cities. Those who did well left the cities in droves, leaving mostly the underclass. Soon, cities became ghettos of the poor, places to drive through as quickly as possible on your way to or from work. Central business districts where suburbanites worked were slower to decline, but as more jobs flocked to the suburbs in time many did. For a time in the 1970s it was even thought that cities were an anachronism, no longer necessary in the scheme of things. Of course, this line of thought didn't account for what would happen to the millions of poor stuck in inner cities who couldn't afford the house in suburbia. It also didn't account for the small percentage of not so poor who stubbornly rejected the suburban lifestyle. This last group is probably what kept the cities alive enough for their resurgence in the early 1990s.

The resurgence of cities is not without its own set of problems. Unfortunately, the decades of infrastructure neglect in favor of the auto make rebuilding cities more expensive than it would have to be. Wholesale abandonment of many railway lines means that cities will have many of the same transportation problems as the suburbs, at least until such time as we can replicate what once was to reduce auto dependence. However, the fact that cities survived is testament to their not being obsolete, even in this day and age of instant communication. There is an inherent need among many humans to be in close proximity to thousands of other humans. This is no more unnatural than many other ways of living. There are also great advantages to things being an easy walk away, without direct dependence on mechanized transport. There is inarguably still an indirect dependence on such transport to get supplies into the city, but for that much more efficient rail and water transport is largely adequate. And in time cities are perfectly capable of locally producing much of what they need once cheap sources of power are available, along the lines of the distributism model. I envision a few 100-story hydroponic gardens powered by fission or fusion growing all of the food needed in NYC, for example. As much as it was cheap oil funding factory farming, it will likely be cheap fission or fusion power enabling things to be grown and consumed locally. At its essence, all you really need to grow food is a source of cheap, abundant power. The sun is still that source, but once we have another, we don't even need the most precious commodity of all, fertile land, in order to feed ourselves.



> It's a common myth that factory farms are more efficient.
> 
> Not true.
> 
> By far the MOST efficient use of farm land is in very small farms, 3 acres or less--and we're talking like 2 to 3 times more efficient than factory farms.


I won't even try to argue this as it seems that you may well be right. And incidentally I also happen to like the model of lots of small mom and pop farms over what we have now. Factory farming produces mostly tasteless, generic food. It also provides mostly lousy jobs. I agree a return to rural America seems inevitable. What better way to run our society than to have those who hunger for open space running their own small farms, while those who prefer the urban lifestyle can reside in our revived cities. And it will all be interconnected by a system of mostly railway as in the days of old, but with more modern technology. So in essence I'm agreeing completely here with your last paragraph:



> I say that the only answer will be the serious re-population of rural America. This will not really happen until food prices rise to 5 to 10 times what they are now; until the inverted triangle tips over and more people take a hand in food production, with many many small farms serving local markets.
> 
> It's a myth and a modern stupid stuborn prejudice that we somehow "can't go back" to that. OF COURSE WE CAN! And we will. It's already happening. There are more and more small local farms (some of them organic, some of them not) here in the Fingerlakes region of NY every year, and Ithaca's farmers market and co-operatives are among the best in the country.
> 
> Some people will always be city people, and there will always be cities, and there need to be cities. But right now, far too many people have been forced due to "the economy" into urban lifestyles that they have no wish for, and that do not suit them.


I guess the old saying everything old is new again will prove to be true. Since the cities can't handle the entire influx of displaced suburbanites, nor would many of them want to live in cities anyway, the new small farm business will offer them a new way of life. They'll have all the things they moved to suburbia for, such as open space, cleaner air, etc. but without the need to spend half their lives in a automobile. In essence we'll probably go to a combination of very low density or very high density living arrangements, with in between ones (suburbs and exurbs) pretty much gone. And most of the Interstate highway system will be gone as well since the need for frequent intercity trips (i.e. the aforementioned 50 mile daily commutes to work) will vanish. High-speed trains will largely replace the car and aeroplane in that function, performing the same function as the steam railroads of old, but powered by electricity from solar, nuclear, or hydroelectric sources instead of coal. I don't know how the auto will fit into any of this. They'll undoubtably exist for the trips into town in rural areas. Perhaps some urbanites will have a small electric grocery getter, but then again a shopping cart or bike with a trailer can serve just as well. Mostly gone will be the need for long-distance fossil fuel powered Interstate cruisers.


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## daveman (Jan 21, 2008)

tygger said:


> You're right. Its laughable that the treasury secretary would ask China to manipulate its currency for the US' benefit.


Henry Paulson took at least 2 trips (I think it was more like 4) last year to China for meetings with various Chinese officials to try to convince them into raising the Yuan. 



tygger said:


> But its much easier for politicians to blame China's low Yuan for our troubles than their own irresponsibiliy.


What are you saying, that China's competitive advantage over the U.S. isn't due to their cheap Yuan?


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## PEU (Jan 21, 2008)

daveman said:


> What are you saying, that China's competitive advantage over the U.S. isn't due to their cheap Yuan?



Of course my friend!

There isn't a single way to become competitive in the global markets nowadays, there are many, governments use rate change as a tool to this purpose.

A brief history of my country regarding this can put some light in this matter:

As posted by me before in this thread, we had a crisis in 1989 that led to hyperinflation. The only way to keep the money value was to exchange it for US dollars as fast as you can. This was done by the worker, middle and upper classes. 

So after the crisis was history the minister of economy at the time had the idea to change our currency and put it par with the dollar, 1peso=1dollar and the dollar was legal tender here, why not? everyone was doing it to protect the value of the hard earned money, government just made a law what all of us were doing.

As you can imagine, a deficitary government at the time, barely had the reserves in the central bank to meet this now imposed 1=1 parity (we cannot print dollars as the US) so our economy was stable for about a year or two. But the government kept printing pesos (again, we cannot print dollars doh!) but the exchange rate remained the same. If you do the math, you quickly figure out that the money needs to be backed with something.
Enter the era of Carlos Menem, our president during the 90s. A carnival of foreign debt bonds was used to back the ever expanding amount of pesos being printed without reserves in the central bank, this was done, of course, to not have inflation.

Another consequence of this, but this time for the general population was that the peso was "strong" This meant that it was cheaper for us to visit Miami than our own country for example.
This was also the death sentence of the local industry, when the peso became "strong" many quickly realized that importing stuff was cheaper than manufacturing it here, so during most of the 90's our industry almost died in slow agony.
These bonds were used, by foreign companies, to buy the Govt owned water/telephones/petrol/energy companies at pitty prices, as these bonds sometimes held only 1/10 of its value...

Fast forward to 2001, our next crisis, I also posted links about this early in this thread.

The carnival of bonds was over, our foreign debt skyrocketed, lots of dead people in the streets, we had 5 presidents in a week, one of them proclaimed in congress: "we will not honor the foreing debt" and everyone applauded... morons :shakehead

After the turmoil settled, the dollar no longer was tied to the peso, people with dollars in their accounts had them converted to bonds, and the rate went from 1=1 to 1dollar=4pesos to settle around 1=3

But there was a benefit of this new exchange rate, our almost defunct industry, with years of not updating their machinery, was all of the sudden "competitive", not because all of us went to work 20 hours a day for low wages, but because our products were cheap again for the global markets...

Over the recent years this led to an increase in reserves in the central bank, we paid all our debt with the IMF (International Money Fund) and other debts are being paid, our national foreign debt is slowly decreasing, or at least not increasing at the pace it used to grow.

Having more reserves meant that the peso/dollar rate would decrease right? NO, the govt keept the 3ish=1 rate so the industry remains "competitive"


So, in this brief history of my country I guess you can learn some things:

1- exchange rates can be modified at will by the governments.
2- if you pay using bonds, iou's, etc at some point these must be paid in hard cash
3- if you print money without real reserves, sooner or later it will lose it buying power.
4- if you don't have hard cash, iou's/bond owners will buy your land, basic industries for cheap.
5- the industry benefits from devalued currency, it makes them more competitive.

Like Hitler's failure to conquer Russia failed in the same way that Napoleon attempt, history repeats itself, there is something to learn by the US from Argentina failures in the last 20 years.


Pablo


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## js (Jan 21, 2008)

jtr,

OK. Wow. I don't even know where to start.

In fact, I don't think I will. Let's agree to disagree where we disagree, and to agree where we agree.

Let me just sumarize the main differences thusly: if you think that we can dispense with land (via hydroponics and fission or fusion energy) and with roads and that we will have robot shoppers in some George Jetson future-rama world . . well, I think you're wrong.

As for the suburbs and cars being foisted on the public back in the 50's, I bet there's something to that and that you have a good point there, but, nonetheless, it doesn't bear on the situation today. Even if back then there had been no push for cars and roads and suburbs, there would have been a natural spontaneous demand for them both (without any policy decision from the powers-that-be) by the 70's and 80's, if not sooner.


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## js (Jan 21, 2008)

PEU,

Fantastic post!


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## MarNav1 (Jan 21, 2008)

Reguarding PEU's point's 3 and 4. We don't have any real reserves or hard cash either one. Federal Reserve notes don't qualify on either count. The hard currency was taken away from us in 1933, and the people of the United States were forced to use monopoly money since that time. Our land, homes, industries have been gone for quite some time. The ONLY reason everything hasn't come down already is that people have been duped into believing that Federal Reserve Notes and Dollars are the same thing. They are NOT the same thing and never have been the same thing. And now it has been taken one step further to where your "money" is simply numbers on a computer screen, in the next few years after some planned economic "crises" there will be no more money it will all be numbers on a screen. Probably 60-75% of it is now. We have been living in Disneyland for 75 years or so already. The "easy" credit is done on purpose to get people "indebted" to the banks and when enough of us fall for the trick they call in the loans or raise the interest rates and then you are scrambling to keep up with payments etc and the trap is closed. This is part of the reason we are seeing so many homes going down now, the middle class guy just can't keep the "game" going any more. The simple fact of the matter is the country is not "going" broke, the Congress declared bankruptcy many years ago. The United States and everything in it has been owned by the bankers for many years now.


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## PEU (Jan 21, 2008)

Are you sure the US dont have reserves? look again.

They could buy your banks, heck, they are already doing it:
http://www.reuters.com/article/marketsNews/idUKL2141450720080121?rpc=44

They could mandate what do you pay for energy, they already doing it too: oil prices.

They could buy the land, etc, in brief, they could buy whatever is on sale or listed in the stock market...

Hopefully the next US president will have more common sense and stop the spending carnival.

Am I in a depressive mood? maybe, read today news, its a black Monday for stock markets worldwide. I'm really intrigued about what will happen tomorrow when US markets reopen...


Pablo


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## MarNav1 (Jan 21, 2008)

What would they use for reserves? Federal reserve notes? You can't use monopoly money for reserves or anything else for that matter. You can't use numbers on a computer screen for reserves either. All that is left for "reserves" is the property of the US, that is gone too. All that has been used these past years are IOU's, IE Federal Reserve Notes. The only thing left is "sweat" equity, IE the slaves go out and perpetually work and dont get paid for it. You can figure out who the slaves are I'm sure. Thus the story about Pharaoh in the book of Exodus telling the Hebrew slaves to make bricks without straw, is being repeated right now before our eyes. What is the worlds so called "reserve" currency? The Dollar Bill? Nope. Federal Reserve Notes ie monopoly money. There is a world of difference there, do some research and you will see the scam going on here.


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## PEU (Jan 21, 2008)

I think you missunderstood me.

Now foreign companies/govts keep the US iou/bonds in their reserves because they trust the US.

These papers hold their face value, they even pay interests.

But if in the future they decide to let these go, for any reason they see fit, they will use them to purchase US goods, like they did in my country. 

Even worst, if you flood the market with these bonds, and creditors lose their faith in their value, they of course will lose value, for example: you could buy bonds at 75% their face value or even less (Argentina bonds, when we defaulted our foreign debt, were valued at around 10% its face value)

These iou/bonds are legal tender and they keep their face value in the US, no matter the value these were purchased in the open market.

So you see, you purchase money at a discount, but you use it in the US at face value... nice proposition if you are on the buying side right? 


Pablo


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## MarNav1 (Jan 21, 2008)

PEU said:


> I think you missunderstood me.
> 
> Now foreign companies/govts keep the US iou/bonds in their reserves because they trust the US.
> 
> ...


No I didn't misunderstand you. What I an trying to point out is FRN's have zero value. When you buy anything with FRN's it is a PROMISE to pay, the item in question that you bought is NEVER paid for. It's only a PROMISE to pay for the item. Same way with your paycheck, it is a PROMISE to pay that is never fulfilled. The reason this is true is because FRN's are not lawful money so you don't have a way to pay. You can postpone payment indefinately. You cannot print FRN's in your basement and use them to buy anything, they would jail you for counterfeiting. Yet the Federal Reserve can and does it everyday and has for years. There is only one reason why this is possible, the courts and the Congress and Senate have been bought off. If you doubt what I am saying go into almost any courtroom in the US and look at the flag. It will have a gold fringe on it which means the "common law" ie gold and silver coin ie "lawful" money has been replaced by "Admiralty law" ie FRN's ie the law of the banker. The bankers hate lawful money because it is an honest money system and it makes it much harder for them to defraud the common man. Use google and do some searches and study these things here, you will see more clearly what is going on. :huh:


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## LuxLuthor (Jan 21, 2008)

OMG, so much craziness being thrown about in this topic....some of it may be technically accurate, but as you saw in world markets today, the US economy is at the center of the world's economy, and all interconnected in very intricate manners. 

Many of these conversations remind me of a good friend who at best, described himself as a survivalist. Back in the late 1980's and early 1990's he had a 5,000 gallon diesel oil storage tank put into his back yard, then an elaborate underground survival bunker stocked with many tons of dehydrated and canned foods. In addition, he began liquidating his holdings and accumulating gold and silver coins, firearms and other bizarre habits. He died 2 years ago still defending his ridiculous actions.

The world has way too much investment and dependency on many aspects of the US global position. It is obvious there is no other place for any of the world's powers to go as an alternative to US investments and markets. You don't see a world reaction like we saw today when France or Argentina's economy gets in trouble.

Once this correction and financial bloodbath satisfies all the "nervious nellies," naysayers, doom and gloomers, get ready to buy stock. There is no other game in town. There are always cycles, and they are mostly created or exaggerated by "crowd panic theory." No one wants to be the last person in a theater after some idiot yells "fire."

Again, for those who have extra money set aside, you are about to have a very rare investment opportunity...and it's not in gold or gold stocks.


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## kelmo (Jan 21, 2008)

Are you refering to the housing market?


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## daveman (Jan 21, 2008)

LuxLuthor said:


> OMG, so much craziness being thrown about in this topic....some of it may be technically accurate, but as you saw in world markets today, the US economy is at the center of the world's economy, and all interconnected in very intricate manners.
> 
> Many of these conversations remind me of a good friend who at best, described himself as a survivalist. Back in the late 1980's and early 1990's he had a 5,000 gallon diesel oil storage tank put into his back yard, then an elaborate underground survival bunker stocked with many tons of dehydrated and canned foods. In addition, he began liquidating his holdings and accumulating gold and silver coins, firearms and other bizarre habits. He died 2 years ago still defending his ridiculous actions.
> 
> ...


Lux Luthor, I disagree with everything in your post to the last possible degree, and I believe within 10 years time, you will disagree with what you have posted here as well.
Good luck with those stocks.


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## tygger (Jan 21, 2008)

daveman said:


> What are you saying, that China's competitive advantage over the U.S. isn't due to their cheap Yuan?




I'd say their competitive advantage has much more to do with things like how our respective economies are structured. Production vs. consumption. Plus the availability of easy personal credit is a huge factor, enabling americans to spend way outside the realm of their earning capacity.


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## jtr1962 (Jan 21, 2008)

js said:


> jtr,
> 
> OK. Wow. I don't even know where to start.
> 
> In fact, I don't think I will. Let's agree to disagree where we disagree, and to agree where we agree.


Fair enough. At this point I went off on so many tangents I don't think it's possible to address everything I said anyway in a reasonable amount of time. I could literally write a book on this subject. Indeed, I may well do that one day.



> Let me just sumarize the main differences thusly: if you think that we can dispense with land (via hydroponics and fission or fusion energy) and with roads and that we will have robot shoppers in some George Jetson future-rama world . . well, I think you're wrong.


I never mentioned anything about robot shoppers, but fact is androids doing a lot of the menial chores of society will come to pass. Whether this happens in 10 years, 20, or 100 I don't know, but it will happen. What this means economically is anybody's guess. My take on it is that in time the concept of money may well be meaningless. You'll have the means to turn raw materials into whatever you want for practically the cost of the raw materials themselves, and to recycle them when they're no longer useful. That will mean a society where goods and services don't need pricing to ration them. I think it'll be a good thing but I also think getting there will be painful.

As for dispensing with land for growing food, it'll happen once we have cheap abundant energy, and the cost of using land for growing food is more than using it for housing. Or perhaps climate change decreasing the amount of arable land will push us into this also. I didn't say this new way of providing food will happen soon. It may well be a century before all the pieces are in place. I think something like our Internet was envisioned even in the 1800s but the technology to build it didn't come of age until nearly the 21st century. Same thing here.



> As for the suburbs and cars being foisted on the public back in the 50's, I bet there's something to that and that you have a good point there, but, nonetheless, it doesn't bear on the situation today. Even if back then there had been no push for cars and roads and suburbs, there would have been a natural spontaneous demand for them both (without any policy decision from the powers-that-be) by the 70's and 80's, if not sooner.


Several things besides marketing created the demand for cars. One as I mentioned was the decision not to invest in our cities. Had we done this to make them more liveable, there would have been less desire to move to far flung places which required an automoble. Had we not neglected passenger rail transport, there would have been less need for autos also. Sure, some city dwellers had cars even in the days before we built suburbia, but they were mainly the upper class who used them occasionally to go to their country homes. Almost nobody needed or felt like driving every single day.

Another big factor was the Interstate Highway system. Prior to its construction, it was actually faster to travel by train. The new highways tipped the balance in favor of the auto in many cases. Trains still could have competed had they used new technology. Indeed, state of the art railways are about 2 to 3 times faster than driving even now. However, the political will wasn't there because trains were "old", cars and aeroplanes were "new". Anyway, once you could travel as fast or faster by car than by train, that was the final nail in the coffin of passenger rail train. Once the mainline passenger service went, the interurban, trolley, and subway networks which connected them locally disappeared to a large extent, forcing many to rely on cars even for local travel. In short, we dismantled a great, comprehensive system instead of modernizing it. We replaced it with a new system where the price of entry was much steeper (namely buying a car and getting a license instead of just paying a fare). This new system favored mainly the middle and upper classes. The poor were pretty much left without viable transportation, or at best substandard public transit suffering from lack of funding.

Had our cities and our public transportation networks not be neglected, I honestly highly doubt there would have been any huge demand for autos or suburbia, at least not to the point that auto ownership is practically universal. Many would have stayed in the cities. Even today, look at a viable city like New York. Fully half the Manhattanites don't have a driver's license. Even more don't own cars. Car ownership is higher in the outer boroughs, but even here it's far from universal. And it would be far less had we built more subways in the outer boroughs. In short, public policy was largely responsible for creating the _difference_ in auto ownership between what existed in the 1940s, versus what we have today. Some people love cars and would own them regardless. The majority however would get rid of them in a heartbeat if they had equally convenient ways to get to work or run their errands. Public policy made many of those other ways just disappear. You can't walk to the store even if you wanted to in much of the USA. In essence, we removed choices. Doing so in a democracy is always a bad thing. It will have long term repercussions for the economy.

Note that I didn't even get into the indirect costs of autos/suburbia yet. In a nutshell, they include a public health epidemic of obesity, cancer, diabetes, and traumatic injury. Funny how when the robber barons ran the railroads the public was up in arms over the few hundred to perhaps a thousand annual deaths on the railroads due to lack of safety devices. Nowadays we quietly tolerate 50,000 deaths and 2 million annual injuries from the automobile with barely a whimper. I wonder why? That's a real question I'm asking as I so far haven't found any rational answer.


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## thesurefire (Jan 21, 2008)

jtr1962,

Convenience. Id rather be 10 times as likely to die and spend 10 times less time in transit then take 10 times as long getting there but be 10 times safer. The bottom line is that while driving may be the most dangerous thing most of us do day to day, it has allowed us as a race to accomplish great things. Do you think we would be where we are today without the automobile? 

I’d rather die at 70 and have feel like I lived every minute then live to 120. 

in NYC, what is the ratio of cab drivers to everyone else? how about that same ratio is say LA?


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## MarNav1 (Jan 21, 2008)

Well I did my best, what more can I say? If that is "crazyness" then so be it. If acquiring real money and some guns is a "bizarre" habit then I guess we deserve what we are getting. I'll offer no more on the subject, I have better things to do.


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## jtr1962 (Jan 21, 2008)

thesurefire said:


> Convenience. Id rather be 10 times as likely to die and spend 10 times less time in transit then take 10 times as long getting there but be 10 times safer.


You're compared apples to oranges here. Had both types of transportation received similar funding, public transit would be as fast or faster than the automobile. Even in the present skewed system, driving is slower in many places than taking the train. In most of the country public transit doesn't even exist, so you really have no basis at all for a speed comparison. It's certainly not 10 to 1 as you imply. At best auto travel can average ~70 mph. In the real world the overall average is closer to 40 mph since most trips are a mix of local and expressway driving. Except for crosstown buses in Manhattan during rush hour, I'm not aware of any type of public transit which averages only 4 mph. NYC's local subways average roughly 18-20 mph (that includes dwell time at stops). The expresses average around 25 mph. Commuter rail is something like 33 mph. Amtrak overall is around 50 mph, but on the electrified Northeast Corridor it's closer to 75 mph. In many cases here average waiting time is under 10 minutes. It's a myth that car travel is faster where moderately funded rail transit exists. I used to travel 70 miles each way to college on public transit with three vehicle changes. It took the same amount of time as driving would have, even counting waiting time. If the US had the foresight to build high-speed rail lines as exist in Europe and Japan driving would at best be less than half the speed of trains.

The main point here is that if you're doing a speed contest cars lose almost every time. In a congested place like NYC cars may be slightly faster late nights, but during the day the train rides over or under the congestion. Over long distances a car can't compete, period, except maybe if our roads had no speed limits and cars could all go 200 mph. What cars are good for is not long distance travel, or commuting medium distances to work, but rather running errands with frequent stops. Here admittedly public transit is often impractible. However, this is a niche use for cars at best. And sadly, today's cars are designed more as long-distance cruisers than the errand goers which they are better suited for.



> The bottom line is that while driving may be the most dangerous thing most of us do day to day, it has allowed us as a race to accomplish great things. Do you think we would be where we are today without the automobile?


Since you asked, my answer is a lot better off. Can you enumerate the "great things" the auto let us accomplish which we couldn't otherwise have accomplished? Honestly, I can't think of any. People can and did get to work in a timely fashion when a decent rail network existed. They took business trips, vacations, really did the same things we did now. Think if the amount of economic activity centered around the auto were devoted to something more productive. After all, we're talking about basically getting from point A to point B here. We could do this as fast and more efficiently with rail, and with far less indirect costs. That leaves more money to go into actually creating wealth.



> I’d rather die at 70 and have feel like I lived every minute then live to 120.


And die in something as pointless as an auto accident? A few weeks ago a car ran off the road into a local Arby's, killing a 69-year old woman. What a pointless, useless way to die. That's really the rub here. If the convenience of autos only endangered the lives of those who chose to use them than it's their choice. When they start taking others with them it becomes bad public policy to go on as we are. After all, a dead person can no longer produce anything. Neither can a severely injured person.

How high a price shall we put on our convenience? And is all this mobility really making us happy, or are we just trying to run away from our problems rather than facing them? I'll also add that a lot of the "need" for convenience stems from simple lack of advance planning in our lives. Years ago people went into town once a month with a list of everything they needed. Nowadays we run to the store to buy a pack of batteries. We don't even have the foresight to get two or ten packs so that we don't need to run out on an unplanned trip again. A lot of the need for the convenience of autos would simply vanish with a bit of planning in our lives.

BTW, in case anyone thinks this is getting too off-topic, I feel this is all highly relevant to the thread. Lack of planning in mainly responsible for the coming collapse. CEOs only think about the next quarter. Gone are the 5 year and 10 year plans. Politicians are the same way. Small wonder the general public has lives which are a microcosm of public policy.



> in NYC, what is the ratio of cab drivers to everyone else? how about that same ratio is say LA?


There are 11787 taxi medallions in NYC. That's roughly one for every 800 people. I have no idea what the ratio is in LA. Taxis aren't used more here because fewer people own cars, if that's what you're implying. For one thing, they're too expensive. For another, it actually takes longer by taxi in many cases than by subway.


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## jtr1962 (Jan 21, 2008)

MARNAV1 said:


> Well I did my best, what more can I say? If that is "crazyness" then so be it. If acquiring real money and some guns is a "bizarre" habit then I guess we deserve what we are getting. I'll offer no more on the subject, I have better things to do.


Well, I get what you're saying. IMHO returning to the gold standard would be the best thing we could do. It would keep government from having the ability to just print up more money, which in turn would force it to live within its means.

BTW, why is deflation such a bad thing? Home prices could use a bit of deflation right now. A home like the one my mom owns is worth about $575,000. It was purchased for $52,000 29 years ago. Had the price kept pace with inflation, it would now be worth maybe $175,000. Unfortunately, the nonsense of using the monthly payment, rather than purchase price, as the basis of affordability is what drove prices to this level. It used to be that a good basis for a house you could afford was 2 to 2.5 times your annual gross income. The ratio was skewed to as high as 10 times due to lower interest rates AND no down payments. Had even the traditional 20% down payment been retained, housing prices might have been much lower.


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## Diesel_Bomber (Jan 21, 2008)

Great thread! Really makes me wonder about the security of some of my investments........

Automobile vs. suburban lifestyle, chicken vs. egg. I think surburbia had more to do with personal preference than the automobile. People wanted to move out of the city anyway, and it was the widespread use of the automobile that made that possible. Those that wanted to stay in the city, did.

:buddies:


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## jtr1962 (Jan 21, 2008)

Diesel_Bomber said:


> Automobile vs. suburban lifestyle, chicken vs. egg. I think surburbia had more to do with personal preference than the automobile. People wanted to move out of the city anyway, and it was the widespread use of the automobile that made that possible. Those that wanted to stay in the city, did.


Not entirely true here. I have a little story based on my own personal experience. I studied electronics in college. If I wanted to work in my field there were few jobs in NYC, and no major electronics firms. Same thing for many other fields which used to be headquartered in major cities. Many city dwellers who finish school here face a choice of being either perpetually unemployed or underemployed, or moving to a suburb. This is especially true in anything having to with science or engineering. It's obvious what choice I made, but for every one of me there are likely ten more who were forced into the suburban lifestyle. And as I said, many of those who you say wanted to move out of the city only wanted to because of the poor conditions which could have been fixed. Suburbia was an experiment. I suppose it had to be tried. The mistake was the wholesale adoption of this lifestyle. Had we done only limited trials, eventually the pitfalls would have been seen. Whatever the advantages of suburbia, there are greater disadvantages. Owning a car is a huge expense, driving is dangerous, commute time is essentially wasted since you can't read or sleep, there's social isolation, etc. I don't even really feel it's better for the children. I had my independence, both physically and mentally, once I could ride the subways alone. I could go to Manhattan alone, travel miles to shop, whatever. That was when I was 13. Some of my friends started when they were 10 or 11. I wouldn't have traded that for a bigger room, or a front lawn, or a supposedly safer environment.

I should also point out that there's a big distinction between modern suburban and older rural/small town living here. The latter was and is a sustainable way of life, the former isn't. A good but imperfect predictor of what will likely survive the coming upheaval will be if it existed pre-1950 then it will likely be around. If it didn't, and it consists mostly of separate areas for housing, work, and shopping, with lots of parking lots, and separated by great distances, then it probably won't. The towns of old were similar in many respects to cities, only much smaller, much less dense. They supplied the surrounded farms and residences. They were the physical and economic center of their communities. Modern suburbs are simply just spread out for the sake of being spread out, with each different type of development neatly isolated from the others. They're not viable precisely because there is no real center. The towns of old could be nicely serviced with a railroad station or even a siding. That was the only long distance connection they needed to the outside world. Everything else was local, with either trolleys, interurbans, horse-drawn carriages, or even bicycles. The resources per capita were far less. Suburbs need roads going every which way, and require everyone to provide their own mechanized transportation. They easily use ten times the resources per capita that a small town or large city might.

Ugh, maybe I really should write a book on this. I'm probably already half way there in this thread.  Every sentence here on this seems to elicit a few paragraphs in response from me.


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## HarryN (Jan 22, 2008)

tygger said:


> I'd say their competitive advantage has much more to do with things like how our respective economies are structured. Production vs. consumption. Plus the availability of easy personal credit is a huge factor, enabling americans to spend way outside the realm of their earning capacity.



It is easy to imagine / conceive that the reason China has been able to export so much to the US is related to the currency question. I personnally believe that this has almost nothing to do with it, and here is why:

1) Pres. Reagan said the same thing about the trade deficit with Japan, and pushed / helped drop the dollar from 220 yen / dollar to about 120 yen / dollar. Did this reduce the trade deficit - no, not at all. The result was that the Japanese used their new found buying power not to buy goods, but companies and real estate. There economy / policies strongly favored an export concept and greatly repelled an import marketplace.

China's structure is like this, but even more so. As PEU pointed out, they will let the value of their currency rise when it is a good time for them - then the dollar will crash vs the yaun, and they will buy US Companies - not goods.

2) In case we have all forgotten, China is a communist country. Over the years of the cold war, we liked to imagine that a communist structure is not as efficient as a capitalist structure. While this might be true in general, a blended system can be quite challenging to compete with, regardless of the currency system / ratio.

Think of it this way, a businessman in China wants to start a car company (in China) What does it take

a) The land is owned by the govt, so they GIVE them the land for the factory - more than they ever asked for
b) Same with the building
c) They guarrantee a labor pool and the wages
d) They "acquire" the design of a BMW or Mercedes or GM Truck by buying (one) and draw it up - or even better (e)
e) They offer to let a foreign company come in and set up a plant - but they must use the "chosen partner" and no matter how much capital they put in - they can never own more than 50 % of the plant.
f) Condition of deal - at leat 1/2 must be exported to the US.
g) Financial support - as needed

OK, maybe I am missing something, but if pretty much ANY country set up that kind of system, they could have a pretty competitive product line. Imagine if GM / Ford / Intel / AMD were GIVEN that much stuff and told "export" - I imagine they would be competitive.


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## js (Jan 22, 2008)

MARNAV1,

I think you're misunderstanding what PEU was saying:

He wasn't saying that the FRN isn't a fiat currency. He wasn't saying it was *backed* by anything of intrinsic value, like a reserve note or something like that.

He was pointing out that there is a difference between USD that are already in the economy, circulating, being earned and spent, and USD that are created out of nothing and injected into the economy in one way or another.

USD (until the point of total collapse, which can happen very quickly, of course) *will buy something of value*.

USD are *NOT* the same as monopoly money because monopoly money won't be accepted by anyone.

I know you know this, and I agree with you in an ultimate, philosophical sense.

BUT, I disagree with your take on this. The fact is that if the government were run by ANGELS or SAINTS or (INSERT TERM FOR PERFECTLY MORAL BEINGS HERE) then a fiat currency system could be maintained indefinitely, and would be better than a reserve currency at maintaining a stable value.

You seem to think that money must have intrinsic value, but that's not true. Money represents value. Even if the money were gold coins, it's worth would not be determined by the intrinsic value of the gold, but by the economics of the free market and the amount of gold available to be minted. This is why the argument that there isn't enough gold to go back to a gold economy is false: whatever amount you have will represent the value of the economy. You don't need to find an amount of gold VALUED AT the same value as the economy.

I'm saying that the reason the US fiat currency system is in trouble (and probably doomed in the long run if they keep this crap up) is because THEY HAVE BEEN CREATING TOO MUCH MONEY OUT OF NOTHING FOR TOO LONG. And because of the continual trade defecit.

If the powers-that-be had NOT done this sort of thing, stealing the wealth from the economy via inflation, then things would be different. Of course, the thing is that no government or regulatory agency has EVER been able to resist doing just that. It's like a drug addict being in a room with his or her drug of choice, just waiting for him to use, and all sorts of pressure and withdrawal symptoms bothering him until he does.

This is the reason for a currency that has intrinsic value: money CAN NOT be created out of nothing, not unless you can create silver or gold or platinum out of nothing!!!

BUT THIS DOES NOT MEAN THAT THE VALUE OF THE MONEY REFLECTS THE INTRINSIC VALUE OF THE METAL.

The two do indeed become equal by law, normally because of free minting of bullion, but that isn't a natural, intrinsic measure of the value of the metal.

Point in case: when the US went off the bi-metalic currency, a huge amount of silver was dumped onto the market to the point where its value dropped so much that people started turning it into forks and knives.

MONEY REPRESENTS VALUE.

A fiat currency _can_ and _does_ also represent value. It's just that there is nothing solid behind that value, and in our case right now, that value is entirely dependent on "confidence" in the economy.

We're like the coyote walking over the cliff onto thin air, still walking and staying up simply because we haven't realized we're no longer standing on solid ground.

So, I pretty much agree with you, as you can maybe see (?), but I disagree that a fiat currency system's money is nothing. It's not. It can become nothing pretty damn quick after decades and decades of mismanagement, and historically no fiat currency system has ever lasted. BUT, theoretically speaking, if the money system were run only by entities that safe guarded its value and stabilized that over time relative to real goods and services, there's no reason it couldn't last indefinitely and be every bit as serviceable as a reserve currency.

That's a science fiction tale I've just described, of course! But still . . .

Again, the point is just that I think PEU is right, and that's why.


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## js (Jan 22, 2008)

thesurefire said:


> jtr1962,
> 
> Convenience. Id rather be 10 times as likely to die and spend 10 times less time in transit then take 10 times as long getting there but be 10 times safer. The bottom line is that while driving may be the most dangerous thing most of us do day to day, it has allowed us as a race to accomplish great things. Do you think we would be where we are today without the automobile?
> 
> ...



thesurefire,

jtr believes that the purpose of government and social institutions is to make people better, whether they like it or not.

And, if I remember correctly, he has theoretically designed an ideal society in his mind.

Am I remembering that correctly, jtr? :devil:

This is my favorite bit:



jtr said:


> . . . but fact is androids doing a lot of the menial chores of society will come to pass. Whether this happens in 10 years, 20, or 100 I don't know, but it will happen. What this means economically is anybody's guess. My take on it is that in time the concept of money may well be meaningless. You'll have the means to turn raw materials into whatever you want for practically the cost of the raw materials themselves, and to recycle them when they're no longer useful. That will mean a society where goods and services don't need pricing to ration them.



A Brave New World indeed and the ideal dream of many a utopian architect.

I have an even better idea! Why don't we just transfer everyone's brain onto the internet and then just dispense with all these pesky bodies and have robots maintain the infrastructure needed to keep the internet and the virtual world going.


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## cat (Jan 22, 2008)

LuxLuthor said:


> This topic is truly funny....and EVERY great civilization/ruling power will eventually be hoist with his own petard.




 

Thanks for the reminder.


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## MarNav1 (Jan 22, 2008)

I enjoyed PEU's post as well. He gave us a clear picture of the manipulation going on. I think you and I agree on most points, however American Jurisprudence does not allow for ANYTHING other than gold or silver coin. FRN's represent no value whatsoever under common law, which our country is supposedly founded on. But since the common law has been replaced by Admiralty law, the floodgates are open and under the merchant law you are stuck with whatever the banker in collusion with the government says you are going to use for currency or the swindling term they like to use "legal tender". Let me give you a couple examples of the swindle 1) A FRN is merely an IOU. Here is how it works. When politicians want more money, they dispatch a request to the Federal Reserve for whatever sum they desire. The Bureau of Printing and Engraving then prints up bonds indenturing taxpayers to redeem their debts. The bonds are then "sold" to the Federal Reserve. But note this unusual twist- the bonds are paid for with a check backed by nothing! It is just as if you were to look into your account and see a balance of $412 and then hearing government bonds were for sale, write a draft for $1billion. Of course if you did that, you'd be in the crossbar hotel. The bankers do not, they print the money to enable their check to clear. And we the taxpayers have to pay interest on their "legal tender" as well. 2) Let us see how a bank creates a mortgage lien on a house. A man who owns a building lot and has $20k needs an additional $75k to build a house. If the banker finds the collateral sufficient he may credit the man's account with $80k minus several points for expenses- against which checks can be written to pay for construction. When the house is completed it will usually have a thirty year lien at 12 to 15% (example). After working 30 years to liquidate the debt (which is not liquidated under common law) FRN's are only a promise to pay. The owner will have paid $300k for something that did not cost the banker a dime in the first place. This is how fractional reserve banking works. Your coyote example fits well. A disordered currency is one of the greatest political evils. It undermines the virtues necessary for the support of the social system, and encourages propensities destructive to its happiness. It wars against industry, frugality and economy, and it fosters evil spirits of extravagance and speculation. Of all the contrivances for cheating the laboring classes of mankind, none has been more effectual than that which deludes them with paper money. Daniel Webster March 4, 1846


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## London Lad (Jan 22, 2008)

LuxLuthor said:


> ........................snip
> 
> The world has way too much investment and dependency on many aspects of the US global position. It is obvious there is no other place for any of the world's powers to go as an alternative to US investments and markets. ...........................................



Just what Great Britain used to think when we owned the world, you just have to look at our past to see your future.


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## js (Jan 22, 2008)

MARNAV1 said:


> I enjoyed PEU's post as well. He gave us a clear picture of the manipulation going on. I think you and I agree on most points, however American Jurisprudence does not allow for ANYTHING other than gold or silver coin. FRN's represent no value whatsoever under common law, which our country is supposedly founded on. But since the common law has been replaced by Admiralty law, the floodgates are open and under the merchant law you are stuck with whatever the banker in collusion with the government says you are going to use for currency or the swindling term they like to use "legal tender". Let me give you a couple examples of the swindle 1) A FRN is merely an IOU. Here is how it works. When politicians want more money, they dispatch a request to the Federal Reserve for whatever sum they desire. The Bureau of Printing and Engraving then prints up bonds indenturing taxpayers to redeem their debts. The bonds are then "sold" to the Federal Reserve. But note this unusual twist- the bonds are paid for with a check backed by nothing! It is just as if you were to look into your account and see a balance of $412 and then hearing government bonds were for sale, write a draft for $1billion. Of course if you did that, you'd be in the crossbar hotel. The bankers do not, they print the money to enable their check to clear. And we the taxpayers have to pay interest on their "legal tender" as well. 2) Let us see how a bank creates a mortgage lien on a house. A man who owns a building lot and has $20k needs an additional $75k to build a house. If the banker finds the collateral sufficient he may credit the man's account with $80k minus several points for expenses- against which checks can be written to pay for construction. When the house is completed it will usually have a thirty year lien at 12 to 15% (example). After working 30 years to liquidate the debt (which is not liquidated under common law) FRN's are only a promise to pay. The owner will have paid $300k for something that did not cost the banker a dime in the first place. This is how fractional reserve banking works. Your coyote example fits well. A disordered currency is one of the greatest political evils. It undermines the virtues necessary for the support of the social system, and encourages propensities destructive to its happiness. It wars against industry, frugality and economy, and it fosters evil spirits of extravagance and speculation. Of all the contrivances for cheating the laboring classes of mankind, none has been more effectual than that which deludes them with paper money. Daniel Webster March 4, 1846



I agree, MARNAV1. I agree. I said something similar regarding banks and money in my first one or two posts in this thread. In short, we are a _credit_ economy. The debt is the money; the money is the debt. The money is a promise to pay, an IOU, and is neither secure, nor controvertible into any definite amount of goods or services. It's totally elastic.

I understand that. I've been saying these things.

I'm just also saying that foreign or domestic entities can take this so-called "monopoly" money and turn it into something real, like land or a business, and then OWN that REAL thing. When the situation turns really bad, there will be just such a rush of entities trying to get something, anything, real for the IOU's.

And right now, they can and do represent real worth. That situation could change in a hurry, but nonetheless, that's the way it is at this moment in time, Jan 22, 3:39 PM EST.


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## js (Jan 22, 2008)

LuxLuthor said:


> OMG, so much craziness being thrown about in this topic....some of it may be technically accurate, but as you saw in world markets today, the US economy is at the center of the world's economy, and all interconnected in very intricate manners.



It's not just "technically" accurate. I think it's accurate, period. The US is _one of_ the economies at the center of the worlds economy, but not the only one, and soon not even the most important one. 



> Many of these conversations remind me of a good friend who at best, described himself as a survivalist. Back in the late 1980's and early 1990's he had a 5,000 gallon diesel oil storage tank put into his back yard, then an elaborate underground survival bunker stocked with many tons of dehydrated and canned foods. In addition, he began liquidating his holdings and accumulating gold and silver coins, firearms and other bizarre habits. He died 2 years ago still defending his ridiculous actions.



I don't think this has any bearing on people's (some of them anyway) desire for a more stable and faithful currency--one that can't be expanded or contracted or used to institute instant and unavoidable taxation and theft of value. You don't have to be a survivalist odd-ball to see that our current economic policies and situations are untenable and ill-advised.



> The world has way too much investment and dependency on many aspects of the US global position. It is obvious there is no other place for any of the world's powers to go as an alternative to US investments and markets. You don't see a world reaction like we saw today when France or Argentina's economy gets in trouble.



If you think this means that our economy can't crash, I totally disagree. In fact, as I have explained, it will be the very reason for the crash, as foreign investors realize (1) that *no*, the US economy isn't the best place to put their money, and (2) they'd better get something of value for their USD before the dollar becomes worthless.



> Once this correction and financial bloodbath satisfies all the "nervious nellies," naysayers, doom and gloomers, get ready to buy stock. There is no other game in town. There are always cycles, and they are mostly created or exaggerated by "crowd panic theory." No one wants to be the last person in a theater after some idiot yells "fire."
> 
> Again, for those who have extra money set aside, you are about to have a very rare investment opportunity...and it's not in gold or gold stocks.



The rare opportunity of the last five or six years WAS gold and gold stocks, actually, and gold still is, I believe, a good value as it is still undervalued.

But yes, at some point stocks will become a good value, assuming that there is any currency system left standing to allow for such transactions to take place. *weak laugh*

We really haven't been in a "cycle". We've really been in a downward spiral, like a sky diver with a fouled parachute, and at some point the ground is going to smack us in the face. That's my take on the situation, for whatever that's worth (not much).


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## PEU (Jan 22, 2008)

PEU said:


> Am I in a depressive mood? maybe, read today news, its a black Monday for stock markets worldwide. I'm really intrigued about what will happen tomorrow when US markets reopen...
> Pablo



Well it seems, it wasn't me  after an emergency FED rate cut of 3/4 of a point, the markets are still on the red, even worst, after the bell when more companies posted results the decline was even more notorious...

A rate cut this deep, IMHO sends many alarming messages, the most obvious one is: *things aren't going great.*

Take for example one of the tech sector poster childs: Apple, it sunk about 15% (at the time of this post) after they posted record profits... talk about confidence... and it took the entire tech sector even more in the red.

I won't even start giving examples of the finance sector, they are writing down tens of billions like I write down lost pocket change, its so common these days that nobody seems to be alarmed by these HUGE numbers... :shakehead

With only 3.5 points left to cut, I wonder what the FED is going to do if the markets keep sinking. It seems rate cuts are not enough.

I hope for the best, I really do. 
My country (and the world) suffers in this kind of crisis, remember the Tequila effect, the Asian financial crisis, the Russian default and the list goes on...


Pablo


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## jtr1962 (Jan 22, 2008)

js said:


> thesurefire,
> 
> jtr believes that the purpose of government and social institutions is to make people better, whether they like it or not.
> 
> ...


Not true at all. Most of what I wrote has to do with why I felt suburbanization and the dismantling of our once wonderful passenger rail transportation system, a lot of which was done at the hands of government, was a huge economic and social mistake. And it seems ironically that what you wrote about government making people "better", whether they liked it or not, actually had some part in this. All you need do is read about Robert Moses and the way he literally rammed his highway projects down the throats of New Yorkers who neither benefited by them nor wanted them. Thankfully he was stopped before he built his dream-an expressway which divided Manhattan in half. However, his expressways ruined a lot of once viable neighborhoods just so those rich enough to afford cars could get to the suburbs a few minutes faster. Or so that was the plan. In reality his roads eventually became parking lots for 12 hours a day, spewing pollution into cities while doing nothing at all for them.

In essence, choices on ways to get around and where to live were removed. A lot of it wasn't market driven, either. It used to be that you could get to many parts of the country without a car. You could also take a car if you chose to. Nowadays the car is probably the sole means of transport for 95% of the population, even in places where others forms of transport would be viable. You can't even buy a car which is powered by something other than an internal combustion engine, putting the public at the mercy of a highly volatile commodity. Believe me, putting all your transportion eggs in one basket is not good on many levels. Neither is putting a lot of your investment into one way of living.

In case I seem pissed at all this, it's because I am. I like living in the city. I've been told by so many apparently brainwashed by the media people that I should "move out of that cesspool". A few of my teachers in college were dumbfounded when the words "I'm not relocating" came out of my mouth. They _just couldn't comprehend_ why I wouldn't love loving in a place where everything was geared to the effin automobile. It actually bothered one of my teachers when I took my bike a few miles to his house for a get together with him and some students instead of hitching a ride with one of the people who drove. This is how pervasive the push by government and media for suburbia over cities has been. Just show them only one way, and soon all other ways seem wrong, or strange. If it wasn't so disgusting it might actually be funny, sort of like a comedic version of the Stepford wives. To this day I still remember Mayor Koch talking about "the sterile suburbs", and me shaking my head in complete agreement.



> A Brave New World indeed and the ideal dream of many a utopian architect.
> 
> I have an even better idea! Why don't we just transfer everyone's brain onto the internet and then just dispense with all these pesky bodies and have robots maintain the infrastructure needed to keep the internet and the virtual world going.


Horrible idea. I'm all for ways to extend the lives of our bodies but only for those who want to do so. If a person wants to age and die naturally, well, that's a choice which they should be free to make, as illogical as I personally see it. I guess if a person wants to live in a virtual world then they should be free to also, but never forced to.

Anything so bad about androids doing the menial chores of society instead of illegal immigrants? Either way it seems Americans don't want to be bothered doing the dirty work. At least the robots avoid the problems the illegal immigrants create. And nothing at all wrong with getting rid of the need for money if we can completely automate the manufacture of everything. Think about it. A nice system of making goods and then recycling used ones would be great. It would be a closed loop so you wouldn't continually be raping the planet to provide a higher standard of living. And here again, if someone for whatever incomprehensible reason wants to live in a society where you actually manually perform all your chores free of machines, nobody is stopping them. We have the Amish today who live like it was 1800. It doesn't bother me that they do, nor would I even dream of forcing them to live as we do. I want more choices, including the choice to live forever, without having to be bothered with pesky things like earning money to pay for things. I want all my time free to do what I want. Maybe that's spending 200 years building a nice train layout, then the next 2000 exploring the solar system, etc. Nothing more human than giving people more choices. Isn't that what we're supposed to be about? It seems with what we have now a choice won't exist unless somebody can acquire money or power or both providing it. I personally think that's disgusting.

BTW, I think the rate cut was a collosal mistake. They're in essense trading a shorter recession now for a much deeper one down the road. They're also severely hurting those investors who are in fixed interest products.


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## MarNav1 (Jan 23, 2008)

Hey js, maybe with your take and mine we can buy a cup of coffee. We could watch the Wizard (Federal reserve) of Oz while we drink it eh?


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## js (Jan 23, 2008)

jtr1962 said:


> Not true at all. Most of what I wrote has to do with why I felt suburbanization and the dismantling of our once wonderful passenger rail transportation system, a lot of which was done at the hands of government, was a huge economic and social mistake. And it seems *ironically* that what you wrote about government making people "better", whether they liked it or not, actually had some part in this. . . .



The irony was intentional! I meant my post to cut both ways. I wasn't being serious, though, more just having some fun (a bit at your expense--but to make up for it, also a bit in your defense).

The misunderstanding is my fault, though, and the post was largely gratuitous for my own fun and amusement.

hehe. Sorry, jtr.



> In essence, choices . . . were removed.



Almost never a good thing. I totally agree.



> In case I seem pissed at all this, it's because I am. I like living in the city. I've been told by so many apparently brainwashed by the media people that I should "move out of that cesspool". A few of my teachers in college were dumbfounded when the words "I'm not relocating" came out of my mouth. They _just couldn't comprehend_ why I wouldn't love loving in a place where everything was geared to the effin automobile. It actually bothered one of my teachers when I took my bike a few miles to his house for a get together with him and some students instead of hitching a ride with one of the people who drove. This is how pervasive the push by government and media for suburbia over cities has been. Just show them only one way, and soon all other ways seem wrong, or strange. If it wasn't so disgusting it might actually be funny, sort of like a comedic version of the Stepford wives. To this day I still remember Mayor Koch talking about "the sterile suburbs", and me shaking my head in complete agreement.



I totally understand, jtr. In fact, I was the one who told you not to sell your house, and to stay in the city where you liked to be. The city needs a bunch of people like you who LOVE it, and not a bunch of people who commute in every day, complaining every second of the way, hating it, but going there every day nonetheless.



> . . . I'm all for ways to extend the lives of our bodies but only for those who want to do so. If a person wants to age and die naturally, well, that's a choice which they should be free to make, as illogical as I personally see it. I guess if a person wants to live in a virtual world then they should be free to also, but never forced to.



Glad to hear it.



> Anything so bad about androids doing the menial chores of society instead of illegal immigrants? Either way it seems Americans don't want to be bothered doing the dirty work. At least the robots avoid the problems the illegal immigrants create.



This was my point: Americans don't want to be bothered doing the dirty work. And there will always be dirty work. Always. But it doesn't have to be "dirty" just like the city doesn't have to be a "cesspool".



> And nothing at all wrong with getting rid of the need for money if we can completely automate the manufacture of everything. Think about it.



I've thought about it a great deal, and I *totally* disagree with you. There would be many things wrong with getting rid of money--which I suppose is slightly different than getting rid of the _need_ for money. But still. I have thought about it, and NO, I don't endorse this idea.



> A nice system of making goods and then recycling used ones would be great. It would be a closed loop so you wouldn't continually be raping the planet to provide a higher standard of living.



This is a separate issue from the one of getting rid of money.



> BTW, I think the rate cut was a collosal mistake. They're in essense trading a shorter recession now for a much deeper one down the road. They're also severely hurting those investors who are in fixed interest products.



They're aware of these things, jtr; they're just desperate.


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## js (Jan 23, 2008)

PEU said:


> Well it seems, it wasn't me  after an emergency FED rate cut of 3/4 of a point, the markets are still on the red, even worst, after the bell when more companies posted results the decline was even more notorious...
> 
> A rate cut this deep, IMHO sends many alarming messages, the most obvious one is: *things aren't going great.*
> 
> . . .



Indeed. The 75 basis point cut was the single largest cut in quite some time--larger than the one after 9/11, and larger (or equal to?) than the one after the last "black Monday" in 1987. It points to a SERIOUS CRISIS.

Funny. I was listening to NPR on the way home and the news guy was talking about a "surprise" Fed rate cut, and I was like "surprise? WTF? It wasn't a surprise!" Of course the magnitude of the cut was maybe surprising to some, but the fact that there was a cut was totally predictable.

And on the way into work today, an economist being interviewed about the global effect of all this basically said that it would end up meaning that the US was no longer the most important economy in the worlds economy. Guess I wasn't so terribly off base in suggesting that exact thing earlier.


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## js (Jan 23, 2008)

MARNAV1 said:


> Hey js, maybe with your take and mine we can buy a cup of coffee. We could watch the Wizard (Federal reserve) of Oz while we drink it eh?



Can you buy something of real worth (cup of coffee) with monopoly money? With only a _promise_ to pay? :thinking:

Well, I mean, I guess if we can GET a cup of joe with this funny money, I'm all for it. Just in case I'll bring along some REAL money (silver dollar from back when money was real) and see if we could get a cup or two of joe with it. The ironic thing is that they probably wouldn't know what to do with it, and probably would only value it as equal to one FRN.

That will change, of course.


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## MarNav1 (Jan 23, 2008)

It's an almost unbelievable story isn't it? And there are other factors that go into the reason why you can acquire something with no way to pay for it. But I'm not going there number 1 because my post would need to be 50-100 pages long to explain why and number 2 nobody will believe me anyway. I only exposed part of the story against my better judgement to see if anybody is paying attention, but Americans don't like the truth much. I have tried to expose the scam in other places too, nobody is home and nobody reads history anymore. I'll say no more. Don't bother with the silver, you may as well hand them a rock.


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## js (Jan 23, 2008)

MARNAV1,

My _favorite_ irony of this whole situation is that Andrew Jackson is the President who appears on the 20 dollar bill. Andrew-freaking-Jackson. On the most widely circulated FRN bill. He is definitely rolling over in his grave.


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## MarNav1 (Jan 23, 2008)

You know what's even better than that. FDR is quoted as saying the banks have controlled ie taken over things since the days of Andrew Jackson. Thats 1832 friends.


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## Manzerick (Jan 23, 2008)

Very well put! The collective attitude was WAY OFF!!


I had someone tell me that "our parents were house rich... but cash poor" and that by paying down their houses and actually making a down payment was "OLD THINKING".. the "NEW ECONOMY" does not require that and lalalalala we will all be buying houses like this forever!!!! (in a nut shell). I believe it ended with "you should really buy right now.. money is cheap"

Scared!!!! Very scared!!!





js said:


> thesurefire,
> 
> I don't know the answer to that question, but I can tell you that it won't be all that long before the dollar loses a lot more buying power. Every month billions of USD go out of the country--essentially I.O.U's to foreign entities--and those dollars are held because it is thought that the dollar is a good investment, a safe holding for value. In Mexico, when I was there, people would take USD happily. But once the illusion of the strong US economic situation disappears, people will be scrambling to get something, anything, for all those dollars, and they will all come home to roost, and the fed won't be able to do a damn thing about it. Contracting the money supply by raising prime, or increasing M1 won't help in the least--on the contrary. It's going to happen sometime in the next 10 years, in my opinion, and when it does there is going to be a serious revaluation of goods and services.
> 
> ...


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## js (Jan 23, 2008)

Manzerick said:


> Very well put! The collective attitude was WAY OFF!!
> 
> 
> I had someone tell me that "our parents were house rich... but cash poor" and that by paying down their houses and actually making a down payment was "OLD THINKING".. the "NEW ECONOMY" does not require that and lalalalala we will all be buying houses like this forever!!!! (in a nut shell). I believe it ended with "you should really buy right now.. money is cheap"
> ...



I just couldn't bring myself to buy a house back when the rates were low. The bank approved us for enough money to buy a somewhat liveable house, but I kept seeing these places selling for $90,000 or $110,000 and thinking "these piles of crap are only worth about half that", and thinking about all the work I would have to do and all the money I would have to put into them, and the size of the mortgage payment, and the cost of utilities and maintenance, and our margin, and I was like "NO FREAKING WAY". I just couldn't bring myself to do it.

We live in a good apartment that is very cheap for what we get. And I don't pay real estate taxes on it.

I'm always being told that I'm "throwing my money away" on rent, and I always respond that mortgage holders are throwing their money away in interest and taxes and mortgage insurance (because who puts 20 percent down anymore?)

At this point, I am SO, SO, SO GLAD that we didn't buy a house. I don't care how "cheap" money was a few years ago.

I don't think people really think through some of these MAJOR life decisions, don't run the numbers. They just take it on the word of someone else: "Oh, well, don't forget the tax break you get on your house". Really? Have you ever calculated that? I did. And for me, that was a laughable component for the price range I was looking at.

And when these people are strapped with a mortgage they can barely pay each month, and money gets tight, then tensions run high, and life just isn't as enjoyable. How many marriages did this sub-prime craziness ruin, I wonder? I can tell you for sure who benefited from all that: the real estate agencies. They got their 6 or 8 percent on every sale, and will get a cut of every foreclosure.

I hate the way that houses are bought and sold and financed. It's a whole mindset that has permeated our culture. Does anyone know that the word "mortgage" means, at root, "DEATH PLEDGE". Somehow seems appropriate when you think that you pay like 3 times the value of the house by the time you're done. All on money that was created from nothing. Credit. Fiat. Let there be a mortgage.

USURY.


----------



## shakeylegs (Jan 23, 2008)

*The Economy, What's your take*

We hear a lot about the economy lately and I'm wondering how you see it. How have you been affected by current economic conditions? Has your lifestyle changed in any way?

I own a specialty retail store in a town that depends partially on tourists for it's survival. The price of gasoline has definitely changed peoples driving habits, reducing the number of visitors to our region. The profile of visitors and their buying habits has also changed a couple of times over the last few years. 

Local business owners of all types are reporting "slump". Wholesalers around the country say the same - small business retail is not pretty right now. And yet, my numbers are pretty descent. I have fewer serious customers but those that buy are spending more on average than in years past. Still, I'm cutting back on inventory purchases, and searching for higher value, lower priced goods. 

From what I see, lots of people are up against the wall financially, most people are cautiously conservative with expenditures, and some are flush with $$$$$ and without a financial worry.

With the exception of flashlight parts and knives, I'm in the cautious conservative mode for the time being. I expect this to be a prolonged economic slump similar to the mid 80's, and I'm don't think the recovery will be anything like the 90's. It looks like a long slog back to recovery.

What's your take?


----------



## BIGIRON (Jan 23, 2008)

*Re: The Economy, What's your take*

Thanks Shake, that's interesting info from your part of the world. 

I can address our real estate market. It has slowed, but to what I would consider a "normal" market. Fairly priced properties are selling and qualified borrowers have no trouble getting funding at reasonable rates. The poorly qualified buyers are no longer able to easily borrow money and the predatory lenders are no longer able to make loans they shouldn't have made in the first place. In other words, the bubble has burst and we're seeing an adjustment to normalcy.

Just yesterday I spent some time with a couple of well-established, conservative stockbrokers who tend to feel the same about the stock markets. The anticipated "adjustments" are occuring and the brokers think (hope) the markets are nearing a "bottom" and will begin a slow climb back to normalcy.

Our personal spending has always been kind of conservative so we aren't making any changes.


----------



## raggie33 (Jan 23, 2008)

*Re: The Economy, What's your take*

im afraid to be honest.very afraid


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## Nitro (Jan 23, 2008)

*Re: The Economy, What's your take*

Bigiron is righton about the Real Estate Market. There is nothing wrong with the US Economy. All this negativety is being HYPED by the media, and in-turn scaring Mr. Market. The less you listen to the media, the better off you'll be.


----------



## da.gee (Jan 23, 2008)

*Re: The Economy, What's your take*



Nitro said:


> Bigiron is righton about the Real Estate Market. There is nothing wrong with the US Economy. All this negativety is being HYPED by the media, and in-turn scaring Mr. Market. The less you listen to the media, the better off you'll be.



Best advice yet.


----------



## LuxLuthor (Jan 24, 2008)

*Re: The Economy, What's your take*



Nitro said:


> Bigiron is righton about the Real Estate Market. There is nothing wrong with the US Economy. All this negativety is being HYPED by the media, and in-turn scaring Mr. Market. The less you listen to the media, the better off you'll be.



+1 Just would add restricted to Real Estate Market & Banks/Mortgage Companies.

People's outlook and mood (as in many people) cycle between up and down. The longer the period of economic growth, increasing real estate prices (albeit inflated), increasing stock market, decreasing unemployment....the more people get worried that bad times are coming....and in a direct proportional relationship.

Then conversely, once their expectation of the bad times arrives, without realizing they joined in creating the negative reality....they begin believing that things will get better. People collectively react to that sense of optimism, various steps are taken...and sure enough things get better.

Then it starts over again.

Until you die.

The End.

LOL!


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## shakeylegs (Jan 24, 2008)

*Re: The Economy, What's your take*

Nitro, da.gee, Lux - this thread was meant as an end around the media. Rather than listen to a talking head, I wanted to hear from our diverse membership about their views of the economy. Are your lifestyles and personal habits unaffected by the current state of the economy?


----------



## Nitro (Jan 24, 2008)

*Re: The Economy, What's your take*



LuxLuthor said:


> +1 Just would add restricted to Real Estate Market & Banks/Mortgage Companies.
> 
> People's outlook and mood (as in many people) cycle between up and down. The longer the period of economic growth, increasing real estate prices (albeit inflated), increasing stock market, decreasing unemployment....the more people get worried that bad times are coming....and in a direct proportional relationship.
> 
> ...


 
In other words, be optimistic when others are afraid, and afraid when others are optimistic.


----------



## Nitro (Jan 24, 2008)

*Re: The Economy, What's your take*



shakeylegs said:


> Are your lifestyles and personal habits unaffected by the current state of the economy?


 
Yes.


----------



## MarNav1 (Jan 24, 2008)

*Re: The Economy, What's your take*

Everythings Peachy!


----------



## shakeylegs (Jan 24, 2008)

*Re: The Economy, What's your take*



MARNAV1 said:


> Everythings Peachy!



That's what I'm hoping to hear more of.


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## Nitro (Jan 24, 2008)

*Re: The Economy, What's your take*



MARNAV1 said:


> Everythings Peachy!


 
Never is "Everything Peachy". That would be boring.

My point is, our Economy is a long way from being in trouble. UNLESS we allow ourselves to believe the "talking heads". I'm optimistic we won't.


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## LEDninja (Jan 24, 2008)

When I 1st got a job long ago, I wanted to get a colour TV. The ad said $300 or $20 a month for 36 months. Out came my trusty TI-21. $20*36=$720! I was not going to pay more than double and did without for a couple of months. I have paid cash for purchases ever since. (A lot of people would choose $20 over $300)
When I got laid off a couple of years ago I went into a blue funk until I looked at my retirement savings. If the money collapse you guys are predicting does not occur I have enough money for 35 years and took early retirement.

Nowadays they no longer say $300 or $20 a month for 36 months. Just "Will that be on your charge card sir?" And the credit card bill does not tell you what is the total cost if you pay the minimum every month. I am amazed people will run all over town to find a 10% or 15% off deal, then put it on their credit card and end up paying way more than what I pay full price but cash.


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## MarNav1 (Jan 24, 2008)

*Re: The Economy, What's your take*



Nitro said:


> Never is "Everything Peachy". That would be boring.
> 
> My point is, our Economy is a long way from being in trouble. UNLESS we allow ourselves to believe the "talking heads". I'm optimistic we won't.


Okay, whatever you say. Everythings perfect! :thumbsup:


----------



## Nitro (Jan 24, 2008)

*Re: The Economy, What's your take*



MARNAV1 said:


> Okay, whatever you say. Everythings perfect! :thumbsup:


 
I don't believe I said "Everything's perfect". Did I?:thinking:


----------



## MarNav1 (Jan 24, 2008)

*Re: The Economy, What's your take*

I'm just agreeing with you.


----------



## da.gee (Jan 24, 2008)

*Re: The Economy, What's your take*



shakeylegs said:


> Nitro, da.gee, Lux - this thread was meant as an end around the media. Rather than listen to a talking head, I wanted to hear from our diverse membership about their views of the economy. Are your lifestyles and personal habits unaffected by the current state of the economy?



Yes. Unaffected. I have no plans to alter my lifestyle or personal habits. The market is being driven by fear and emotion. This is a great thing for those whose actions do not hinge on the latest "story" coming from the talking heads. The Dow starts out down 300 today and closes up 300; a 600 point swing. Do you believe this is based on fundamentals? Hardly. 

All those worrying themselves about their investments, I have a document I saved somewhere from an investment manager about the psychology of negative returns. Might be time to pull it out. You should not make changes to your portfolio based on short-term market fluctuations. Only make changes if your long term goals change. The negative impact to your returns by being out of the market at the wrong time can be significant.

As far as the economy in general, I'm going to bore you with some information from my very good and conservative money manager. 



> As far as recession are we really in one? Historically a recession occurs when simultaneous declines occur in employment, income, production and sales. So do we have those conditions present?
> 
> We have had no declines in employment at this time. The January report showed an increase in unemployment but actual employment grew (18,000)
> The last reading on Personal Income showed a year over year gain not a decrease.
> ...



I tend to let pros do their thing and I have both my Series 7 and Series 63 securities licenses. I don't fret the markets anymore. I watch as an interested party and because it is my industry. I let someone else do the day to day crunching. With good funds/stocks/bonds whatever and with approriate allocations for your situation stay disciplined and stick it out.

I would ask those here on a personal level, have you lost your job? Are you making less money? How about your friends and acquaintances? Except for paper losses in accounts you can't touch until you retire have you lost anything? Guess what you haven't lost a thing until you panic and sell.

Apologies for the long post. The sheep market mentality irks me. Remember your Mom saying, "If Johnny jumped off a bridge would you?"


----------



## LightInTheWallet (Jan 24, 2008)

*Re: The Economy, What's your take*

IMHO The bosses choose the statisticians, the statistics look decent/glowing .The glowing statistics indicate now is the time to buy. Less monied folks are generally more cautious/ willing to embrace negativity as a default way of thinking. Pyramid schemes always involve unfathomable positive/ magical thinking to continue pulling money up from the new layer of investment. The flashlights I want are not in my price range yet...In other words I am positive I need more lights.


----------



## Nitro (Jan 24, 2008)

*Re: The Economy, What's your take*



shakeylegs said:


> Local business owners of all types are reporting "slump". Wholesalers around the country say the same - small business retail is not pretty right now. And yet, my numbers are pretty descent.


 
Nuff said.


----------



## DonShock (Jan 24, 2008)

*Re: The Economy, What's your take*

There's a local financial advisor who has a weekend radio show that I've listened to for the last 10 years. He was addressing the latest worries and investing on this weekend's show. He mentioned that when you look at the actual P/E ratios of most stocks right now, they are actually bargains in comparison to long term historical trends. His training initially was as a cultural anthropologist so he tends to relate a lot of the current market/financial trends to how people's natural behaviour has historically led to similar trends in the past. He points out that people's memories for negative happenings last three times as long as they remember positive things. And that tends to lead people to believe things are worse than they've ever been when an objective look at the actual numbers show them to be better than ever.

As for people's behaviour with their 401K and other investments, he was discussing the long term performance of the market in general as opposed to the return seen by the casual investor. (FYI: This is from memory, so my recall of the numbers may be off.) He mentioned a study that showed the average return for the market as a whole over the long term was 12% annually. But over the same time frames, the casual investor only saw a 6% average return. The same study also looked at the cause for the difference. It was found that by the time the rises and falls of the market started making news, which was when the casual user was taking action, the market had already moved 2/3 of the way through it's swing. So the casual investor was getting in after missing 2/3 of the gains and getting out in time to only miss 1/3 of the losses. The study also showed that missing just 1% of the "UP" days in the market resulted in missing 50% of the total gains.

Personally, I made my 401K choices based on the long term numbers and stuck with them. Yep, sometimes I was down 30% as the market experienced it's normal fluctuations. But then at the high side I was up 60%, and even with the latest down turn I'm still up 40%. I understand the temptation to panic when you see the losses on your quartely statements. But you only make those losses real if you move the money while it's down. If you leave it alone and the initial decision was a sound one, history shows it will most likely come back up. No guarantees that it will go back up, but if you get out you are locking in the loss.

I think how the personal effects of the normal economic swings is highly dependant on how you choose to make your money and how you choose to live your life. Personally, I work in the water supply business. It's a steady and slowly growing business that is not affected much by a temporary downturn in the economy. People use the water they need and don't let the costs change their habits much. So there is a certain safety in the bad times. But the other side of that coin is that things don't really get any better in the good times either. When the economy is booming, there's not a lot of extra money to be made either. People still use the same amount of water and still pay the same price. You might get a slight uptick from new businesses and new big homes, but nowhere near the growth that the rest of the economy is seeing.

On the other hand if your business is in luxury goods, you probably see a big boost in sales and profits when times are good. Of course, that also means you will see bigger drops when times are bad. It's a personal choice: boring, steady pay, with job security; or exciting, chances for big payoffs and losses, with the possibility of losing your job entirely. I'm paranoid and always planning for the worst to happen, so I'm in the water business. And I always plan on the lowest possible paycheck when planning my bills. Times like this christmas when I work a ton of overtime, that's when I treat myself to a few extra toys.


----------



## London Lad (Jan 24, 2008)

*Re: The Economy, What's your take*

Both the US and UK are in a dire economic situations at the moment.

OK as the OP said let's forget the stock market and let's forget share prices (US = stocks) and I'll talk about the UK as that's where I have interests but the UK is much the same as the US at the moment.

How is the economic situation affecting me?

Well over the last few years, taxes are up and there are more of them, government provided services are being reduced, prices are up (fuel is €10 a gallon in the UK) Credit is harder to get, and the interest rates charged are starting to increase. My customers are demanding lower rates and my suppliers are increasing prices, capital gains tax, as applicable to my company, has in effect been doubled. My pound is weaker against the Euro. The UK chancellor has quietly sold off great chunks of the UK's gold reserves so the £ note (like your $) isn't worth the paper its printed on.

Banks are having to be propped up by the government because they can't borrow from other banks to support the sub prime lending they have been doing.

The housing market has stalled and repossessions are up.

I could go on and on. If you think everything is OK you are sticking your head in the sand.

Have a look at this thread https://www.candlepowerforums.com/threads/170424

especially the posts by JS

The US and UK are in major trouble. One of the main reasons is the fact that we have massively over borrowed both personally with credit and mortgaging over inflated property and nationally by printing £ and $ that have no real backing. We then use these bits of paper to import good that at some stage will have to be paid for with real value, real goods or commodities that we don't have.

Anyway, back on topic, the economy is affecting everyone who has a £ or $ in their pocket, no matter if they realize it or not.


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## LuxLuthor (Jan 24, 2008)

*Re: The Economy, What's your take*

There's some good common sense in this thread, but it is useful to face the reality that most people grow increasingly pessimistic the better things get factually. We could elect the most inspiring and great leaders at any level of society, and we will begin immediately to tear them down.

You can learn a lot about the general public watching the insane popularity of "tabloid/Hollywood" or other stories that have no direct effect on your daily life, or just watching the local news in most cities. Good or "positive" news is almost not on the radar for most people, and knowing that is useful in staying above the fray. People in general are "at home" or even addicted to hearing negative/bad news....they look for it rather than something uplifting. People are all talking about the stock market and possible recession (despite the facts) because bad news is REAL news to most people, despite no facts to support it.

For me personally, none of the economic, political, or global events has affected me or my lifestyle since 9/11/01 when I lost 3 personal friends working in NYC that day.


----------



## mdocod (Jan 24, 2008)

*Re: The Economy, What's your take*

reading a thread like this and I feel like I am in the presence of what is probably one of the smartest online communities around. 

Have changes in the economy effected my life:
YES, definitely, I deliver pizzas right now (still), I'll just say I work for a major national chain.. lol, I've watched a notable reduction in overall sales in the last 1-2 years, (steady decline, but nothing major). I am one of those drivers who has been around long enough to have an interest in the books. So I know how much was sold for the day, the week, the month. I look at the history for the store and see changes.... I should also point out that the store I work at is on what used to be the edge of town and the area has been expanding rapidly for most of the last 20 years or so. I have watched the "servicing area" expand about 25% in the 5+ years I have been there.... That expansion always resulted in continuously increasing business, with things at a halt, we are not only experiencing no new business, but I think consumer confidence is down a bit, causing less pizza purchases as a whole. Obviously this is only 1 mans observation from one little pizza store on the edge of one little city. So I don't speak for the nation 

Anyways... The other component that has really effected the business is the cost of gasoline and the effects of Ethanol on the food market. The cost of gas has tripled since I started delivering. My operating costs went way up. The amount I am being payed to compensate for that change did not change more than 15%, and that compensation keeps getting cut back as of late. The effect of ethanol on corn has substantially increased the cost of many food products that are linked to corn. Cheese costs have ~doubled, and many other ingredients have increased in price anywhere from ~10%-50% depending... Minimum wage was forced up in our area by vote (I was already above the amount it was raised to, so it was pointless for me).... the result was another pay cut on the side of milage reimbursements. The cost of running the joint has forced price increases on the menu, and pay cuts for drivers. I make less today than I did 4 years ago by a noticeable margin. I should point out that the management team is no longer a very profitable arena to be in either, 3-5 years ago managers made big bonuses and took home respectable pay, (enough to support a family in a decent house in a decent neighborhood), that is no longer the case, the "bonus" structure has been re-evaluated and re-structured multiple times, the result is substantially lower income for the management team. You might say that spirits are lower overall. I used to work for happy people, now I work for people who are less than thrilled. It's frustrating. oh well. 

Anyways, my point is, after all that is said and done, me and many of the people I work with have less buying power than we did a few years ago. In the end, it is my fault for staying with them and gracing them with my talented presence and letting them take advantage of me over and over, I should have been long gone a long time ago. 

however, I'm a firm believer that we have the media to blame for shifting public opinion negatively and in turn causing some reduction in economic growth that otherwise could have occurred... We have a republican president, the media wants to make sure they get their point across that it's the republicans fault that things are "bad" even though it's the left media causing most of the problems to begin with. I don't particularly like Bush as a president, but blaming him for all problems is ridiculous. Do I sound like an AM talk show yet?

Mostly I am sick of a world that thinks governments are supposed to be in place to solve your personal problems. Take our irresponsible government out of the picture, and the economy would be much better off and our dollar would be a lot stronger.


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## jtr1962 (Jan 24, 2008)

*Re: The Economy, What's your take*

This really isn't about the stock market. In fact, the focus on the DJIA is really what hurt us. So long as the market was rising, which it was for a long time, people assumed the economy was hunky dory when it wasn't. The stock market can be made to rise or fall by the actions of a few large speculators, same as the housing market. The current still high stock market doesn't mean we're doing well. It just means lots of people overpaid for stocks, same as lots of people overpaid for homes in recent years. Home prices in most areas are still 2 to 4 times above what they should be based on prevailing inflation rates. The $52,000 home my parents bought in 1978 should be worth about $175,000, not $575,000. There's still a long way for both the stock market and real estate market to fall.

The _fundamentals_ in the economy are what's lousy. We supposedly had all this prosperity in recent years (another myth but that's an entirely different story) and what did we do with it? Did we do sensible things like invest in the decaying infrastructure, bolster our electrical grid, develop alternative energy, build more sorely needed public transit, or anything else which might have helped us long term? Noooo. Instead we spent the prosperity on stupid consumer crap, or literally burned it taking a gazillion pointless trips. We didn't save one dime, or invest one penny for the future. That is what will kill us. It may not be sexy, but spending money to provide power, or transportation, or manufacturing capability is what would have put the US on solid footing. The US was a power to be reckoned with when we actually produced tangible goods for the rest of the world. Now we're a joke. All we do is import consumer crap, and lead profoundly ignorant lives watching inane reality shows or worrying about the latest celebrity gossip. Bread and circuses the Romans called it. The coming hard times will fall on the typical blissfully unaware American like a ton of bricks. I'm glad the board members here aren't typical of that, but willing to listen to bad news as well as good.

Besides all that, the coming bankruptcy of the federal government has been a topic of conversation for me for quite some time. After all, we owe ten trillion dollars. We just added an expensive prescription drug benefit to Medicare. We'll spend over a trillion dollars on the Iraq fiasco before all is said and done. We're talking about funding national health care with money we just don't have. And on top of that a bunch of Baby Boomers are starting to enter retirement. They're healthier than any previous generation of retirees, which means they'll be drawing Social Security checks longer. The ratio of workers paying into the system versus those collecting is going down. 2.1 people with McJobs can't afford to pay for one retired Baby Boomer. What usually happens to an individual when they have more debts than assets is what will happen to the US government. Nobody should be surprised. Debts eventually have to be repaid. Entitlements have to be reined in. The political will to do either astonishingly still isn't there. When the US government falls, it will take the entire world economy with it. The fall can still be prevented by quick, decisive action, but nobody's listening.


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## frosty (Jan 24, 2008)

*Re: The Economy, What's your take*

In light of all this turmoil I've recently converted most of my savings into gold bullion. I think I paid about $795 an ounce, so I'm already up a fair bit. I plan to hang onto it for at least five years, although who can tell!


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## js (Jan 24, 2008)

*Re: The Economy, What's your take*

As far as my personal situation, the economy hasn't affected me too much. The rising price of gas and a few other things definitely counts for something in my bottom line, but mostly over the last 5-10 years I've been focused on paying down debt. First my credit card debt, then my student loans. In just a handful of months from now, I should be debt free, except for a bit left on my car loan.

When doing this, I watch my checking account balance to determine how much I pay on my debts. So, unless I really went back and ran the numbers, I wouldn't know exactly how my free income has been changing over the last 3 or 4 years.

The availability (or not) of easy credit doesn't have much bearing on me.

That said, I think that over this coming year we will see economic changes that will affect everyone. Perhaps I'm wrong. I hope I'm wrong. But, I can tell you this: I'm not buying any luxuries or extravagances. I'm battening down the hatches. But that's not that different than previous years, I guess. I don't earn a lot of money, and I don't trust that my job is secure, so I don't want to be in debt and I don't want to gamble anything, and I want as much security against the coming economic crises (plural) as I can get. I bought into gold and gold stock portfolio back when it was $325, and as you might imagine, it has performed spectacularly. But I wasn't in it for the short term. I just wanted a base investment that couldn't evaporate overnight due to unscrupulous and idiotic behavior of the powers-that-be.

YMMV.


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## ledlurker (Jan 24, 2008)

*Re: The Economy, What's your take*

I could go on and on about the current stuff going on, but I no longer have the patience. In a nutshell I have returned to the financial principles of my grandparents that got married in 1924. We live way below what we make. We have nine months of expenses in reserves. We do invest in my wife's retirement fund because we have faith in our Country. Some of my great aunts and uncles became millionaires because they had faith during the depression. We just bought a car for my wife and gave the old one to the mother in law without a penny of credit. It is unlikely we will ever buy anything again on credit except for property. For the most part that was how it was done years ago because you never know what the future will bring.

Have faith and invest your furture in physical assets that will always be needed.


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## da.gee (Jan 24, 2008)

*Re: The Economy, What's your take*

The failure of government and our elected officials to address the issues of infrastructure and debt is indeed outrageous but it is a separate discussion vs. the current economy as posed by the OP. Clearly there is a slowdown in the economy. Everytime there is people freak. In most cases people need to be hit over the head with a bat to think beyond next week. Once again I bring it back to the personal level, If you have skills or services in demand on a personal level you will likely be fine. If you're depending on the government or the psychology of the consumer for your support than you are subjecting yourself to the vagaries of those entities.


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## powernoodle (Jan 24, 2008)

*Re: The Economy, What's your take*



London Lad said:


> Both the US and UK are in a dire economic situations at the moment.



Dire? Not hardly.

The prime rate hit 21.5% in December 1980, the highest rate in U.S. history under any President. Inflation increased every year from 1976 through 1980, peaking at more than 12%. Unemployment hit 7.6%. 

And even then, it was not dire. There were no food shortages, no riots, and anyone who wanted a leisure suit could find one at the nearest mall.

In the last 18 months, parts of Africa experienced an inflation rate of over 900%. Citation to authority. *Now thats dire!*

The American economy remains strong. Inflation is low, unemployment is moderate (around 5% last I heard), and the stock market is up. The residential real estate market is feeling a slight pinch, but thats because of dimwitted lenders loaning money to dimwitted borrowers who could not pay repay the loans and should never have received mortgages in the first place.

Most of what we hear in the media about the R word is pure hype, the purpose of which is to harm economic activity for political purposes.

And one more thing. Consumer optimism is "inexplicably" (in liberal speak)* up*. Citation to authority. Thats is (realistic) optimism, and indicatates to me that - when digested together with the economic numbers - America's economic future is anything but dire.

Lastly, I've chosen a vocation that is insulated from economic downturns. So even if the R word did happen some day, I'm not going to participate. If anything, its would be an opportunity for me to throw some cash into an S&P 500 fund while its down.


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## js (Jan 24, 2008)

*Re: The Economy, What's your take*



da.gee said:


> The failure of government and our elected officials to address the issues of infrastructure and debt is indeed outrageous but it is a separate discussion vs. the current economy as posed by the OP. Clearly there is a slowdown in the economy. Everytime there is people freak. In most cases people need to be hit over the head with a bat to think beyond next week. Once again I bring it back to the personal level, If you have skills or services in demand on a personal level you will likely be fine. If you're depending on the government or the psychology of the consumer for your support than you are subjecting yourself to the vagaries of those entities.



People who are really aware of what is REALLY going on with our economy, our money system, our banks, our currency, our trade situation, and related topics, are *WELL AWARE* of the puppet show and the psychology of consumers and investors, and how that is played by the "man behind the curtain". The Fed actually _causes_ many of these so called "cycles".

The media does indeed sensationalize and hype all sorts of news, including doom and gloom predictions of recession. And even economists do this to some extent, although with more sincerity: Larry King joked that "economists had correctly predicted 36 out of the last 2 recessions"! LOL!

That's all true. But it doesn't mean that anyone who sees trouble ahead is just a "nervous nellie" or a sensationalist.

And I totally disagree that "The failure of government and our elected officials to address the issues of infrastructure and debt is indeed outrageous but it is a separate discussion vs. the current economy."

It won't be (can't be) separate for long.

Let me put it this way: if there was a confidence man we knew, who went around trading on his goodwill and charm, issuing IOU's to a lot of people around town, including some rather powerful people, and pretending everything was fine, and manipulating things so that his financial situation looked better than it really was, -- and he kept at this life style for months and months, putting people off with even more IOU's, and paying off IOU's in money gotten from new IOU's, continually and consistently living beyond his means, never balancing his income and expenses. Month after month after month.

And then someone says "OMG! This can't continue! This isn't good! This guy is going to meet a sticky end, and lose many of these nice things, or at the very least, have to change his lifestyle." But, then someone else said "Oh, this guy will be fine. I believe in this guy. There are always these cycles. People are too gullible and need to look to the long term."

*HELLO!?!* The first person IS looking to the long term!

WE'VE ALL BEEN LIVING BEYOND OUR MEANS. Every one of us. Not at a personal financial level, but in the sense that what the dollar actually buys right now in terms of real goods and services *IS WAY MORE THAN IT SHOULD BUY*. All because we have been playing a confidence game with the world.

It can't continue. It will end. And we will have to meet this sticky end. And it will affect all of us.

Unless we make some significant and far reaching changes, within a decade, or probably 5 years, you will see food prices rise dramatically, and oil prices rise dramatically, and unemployment rise dramatically, and the so-called 'standard of living' fall somewhat. And the US will lose it's unique place as the worlds only super-power, or even as the most important super-power.

I say this not because I don't love my country. I say it because I *do* love my country.

I suggest that people might find Francisco's Money Speech from Ayn Rand's "Atlas Shrugged" worth reading, although I definitely don't agree with every single word of it. Still, it's well worth reading.


----------



## DonShock (Jan 24, 2008)

*Re: The Economy, What's your take*



frosty said:


> In light of all this turmoil I've recently converted most of my savings into gold bullion. I think I paid about $795 an ounce, so I'm already up a fair bit. I plan to hang onto it for at least five years, although who can tell!


That's one thing I would never get into, Gold. I guess it's because I remember all the hype in the 80's when it was up over $800 an ounce and everybody was being urged to use it as a safety net. Then it dropped like a rock and stayed down for the next 20 years. I've heard a financial advisor mention that the long term price of gold will probably be in the $300-$400 range because once it stays above that range, a bunch of different techniques for recovering the gold become profitable and the supply will just increase to bring down the price as more mining is done.

Here's a source I found that has a 1975-2008 chart of prices. The current runup looks too much like the pre-1980 runup. I'm a chicken and would be afraid the next 20 years would look like that middle section of the graph. I did buy my stepfather some 1 oz. gold coins at $300 each for his collection several years ago. In a sense it would be nice to have extras to sell, but since it's impossible to predict the swings and the time to recover losses can be so long, there's really not a lot of regret. But I did tell my stepfather that I wouldn't mind a bit if he sold them now that prices ar so high. He declined, I think he likes that they are the one thing he has in his collection that is better than his richer brother who sells as soon as the price goes up.


----------



## WAVE_PARTICLE (Jan 24, 2008)

*Re: The Economy, What's your take*

99% of the general population do not truely understand what is going on behind the scenes. What most of you see is what's provided by the media and it takes a few weeks afterward for most to learn what actually happened.

The first two days of this week was a direct reflection of a specific problem in the financial markets. We're talking about bond insurers (aka monolines, aka guarantors). If you've been following the market closely, you will probably see names like ACA, AMBAC and MBIA flashing across the headlines. As an industry, the bond insurers provide guarantees to bonds and loans for a total of approximately $2.5 trillion. AMBAC and MBIA take a large share of the market with over $1 trillion. Until recently, these monolines held AAA ratings (which is the top credit rating possible). They use this high credit rating to provide guarantees (or insurance) to bonds so that these bonds will also get AAA ratings as opposed to the rating from the issuer. Having a AAA-rating on your bond issue is advantageous, because it opens up your target market signficantly since many pension funds and other regulated portfolios are mandated to hold only the top tiered debt. Unfortunately, these monolines also provided guarantees to assets related to subprime mortgages and high-risk, highly leveraged instruments like CDO's (collateralized debt obligations) which are also linked to mortgages. As we all know, the meltdown in subprime has caused a lot of these instruments to go south and being the guarantor, the monolines are contracted to step up and make these instruments whole. Needless to say, these monolines have suffered losses and writedowns in the billions. So much so that their very solvency is now at stake. The credit rating agencies have taken notice of the dire situation these guys are in, so they are stripping the AAA ratings by several notches. ACA went to junk status. The others, not so bad...yet. This is not the real problem. The real problem lies with the insured assets because once the guarantor is downgraded, the billions upon billions of assets that they insure all get a simultaneous downgrade as well... the credit rating of an asset is only as strong as its strongest backer. So, what does this mean? Well, I alluded to earlier that many portfolio managers around the world are mandated to hold AAA assets.....well, they will now be forced to sell in the market.....at the same time. This is what is called a firesale. If the entire monoline industry got downgraded, the losses that would be incurred will be catastrophic. Also, there are behind-the-scenes derivative instruments that would default because these monolines are also counterparties to these instruments. We will be the generation that will witness the first complete collapse of the U.S. banking system. 

That was Monday and Tuesday. There has not been a firesale yet, because AMBAC only received a two notch downgrade (but still placed on a credit watch list) and MBIA has not been downgraded (yet!).

Late Wednesday afternoon (that's yesterday), we receive rumors that a bailout plan by the government and big banks was in the works. A bailout would entail an injection of billions of dollars of new capital into these struggling monolines so that they can make good on their obligations and get to keep their AAA rating. Just the rumor alone caused the Dow to do a 600+ point swing into positive territory. The New York State Insurance Department confirmed that bailout talks were, indeed, underway, but no concrete plan has materialized yet. But, obviously, this was good enough for the market, because a potential disaster beyond all comprehension is being addressed. Whether or not a plan is put into place will determine where our market will ultimately go. This is huge.....because we are talking about trillions of dollars at stake. All the writedowns to date relating to subprime mortgages totaled a little over $100 billion, and that cause a lot of heartache. Imagine a number 5 to 10 times that.

So there you have it. That's what happened over the course of three days. More volatility to come, you can count on it. The media is always the last to know things and they don't necessarily know the truth. But I do, because I am in the thick of the action in my day job.

As to how this downturn affect me here in Canada? Well, I am enjoying the volatility and have turned some profit in this ordeal as I have been betting on a serious downturn for the U.S. market. I've closed out my positions now and will sit on cash until I can see some stability in the market.

But to tell you the truth, guys.....if you can ride out the storm, then ride it out. Recessions are part of the economic cycle. They are as ubiquitous as taxes. The long-term investor is always rewarded. Just ensure you maintain liquidity through the process and you will come out alive.


----------



## da.gee (Jan 24, 2008)

*Re: The Economy, What's your take*



js said:


> And I totally disagree that "The failure of government and our elected officials to address the issues of infrastructure and debt is indeed outrageous but it is a separate discussion vs. the current economy."
> 
> It won't be (can't be) separate for long.



That is one of the bats to which I refer. Unless people see it in front of their face right now, affecting them tangibly right now it is merely an abstract concept that most won't or don't grasp. I would like nothing better than for this to be addressed but who can win an election on that platform? Who has the balls to tell people put down your Wii numchucks and wake up. Who would listen if they did? 



js said:


> WE'VE ALL BEEN LIVING BEYOND OUR MEANS. Every one of us. Not at a personal financial level, but in the sense that what the dollar actually buys right now in terms of real goods and services *IS WAY MORE THAN IT SHOULD BUY*. All because we have been playing a confidence game with the world.



Elaborate. Are you saying we have fooled the world into thinking what we give them for their product is a sham (i.e our worthless artificially propped up dollars)?



js said:


> It can't continue. It will end. And we will have to meet this sticky end. And it will affect all of us.



Apocalypse Now? Anarchy? Rule of Force over Reason? 



js said:


> Unless we make some significant and far reaching changes, within a decade, or probably 5 years, you will see food prices rise dramatically, and oil prices rise dramatically, and unemployment rise dramatically, and the so-called 'standard of living' fall somewhat. And the US will lose it's unique place as the worlds only super-power, or even as the most important super-power.



Oil prices haven't risen dramatically? Processed food may get expensive but i can't see basic staples ever getting beyond the average citizens reach but I'm open to your theory. 

Perhaps a fall is needed to rise. 



js said:


> I suggest that people might find Francisco's Money Speech from Ayn Rand's "Atlas Shrugged" worth reading, although I definitely don't agree with every single word of it. Still, it's well worth reading.



All opinions are worth a read.


----------



## HarryN (Jan 24, 2008)

*Re: The Economy, What's your take*

Wave Particle - You have a good, sophisticated short term analysis of the credit challenge. There have been articles on how this part of the market was subject to some interesting manipulation for similar reasons - profit.

My concern is not particularly that there was a short term bond rating / insurance problem, but the fundamental reason for the defaults in the first place. While it is useful (and at least partially correct) to blame certain firms and sub prime debt defaults for the "problem", the real issue is "why can't people pay their debt off in the first place ?". 

Paying bills and debt requres jobs, not just retail jobs, but manufacturing or decent technology jobs. Government related workers are somewhat insulated from this, but most people are not. A large, long term trade deficit of goods is not a viable economic situation for any country. France, UK, Germany, etc, along with the US face these same problems.

BTW, for those who imagine that the official rate of inflation of approx 5% is accurate, please keep in mind that once unemployment benefits stop (6 months) you are now considered "officially employed" - regardless. The Great Lakes region of the US has "real" unemployment well above 15 %.

As far as "retraining and re-education" being the answer, I know a bunch of unemployed PhDs under 35 years old with an education in various high technology areas. This is not the answer. The answer lies in converting our tax system from an income basis to a Sales Tax (on all goods and services) bais.


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## HarryN (Jan 24, 2008)

JS, there are various ways to look at the concept of a home mortgage.

When I was renting, my rent would increase at least 5- 10% per year. The same place I was renting when I purchased my home now rents for nearly 2x what it did back then, and much more than my mortgage is.

Buying a home under a mortgage essentially let me achieve a "predictable rate of monthly rent". My property taxes keep rising, but that is a different matter. Yes, I have to do home fix up, but my experience is that I had to do this when I rented as well, or it did not happen.

I had an interesting discussion with a VP at B or A regarding the idea that if your home is destroyed in a disaster, is it better to have a mortgage, or have it paid off. She told me that in the case of her parents, they owned a home free and clear that was destroyed in a flood. FEMA gave everyone around them with motgages all kinds of help - they gave them none at all. Bottom line, if you have a loan, it carries with it a hidden insurance policy.

There are a lot of nasty things buried in loan contracts - My wife and I actually read our loan agreement before signing our life away, but in the end, I am happy to be paying a mortgage instead of renting. Frankly, it is the same thing in the end. If we had kept renting, we might actually be homeless today.

If the trade deficit can get under control, then I will actually make enough money in the long term to keep paying the bills.

From a very practical matter, my health insurance monthly premium (self employed) is now about the same as my mortgage - around $ 1300 / month each. Take a guess at which one I hate to pay the most ? Guess why I would like a greater role of government in Major Medical costs ? I can pay my normal bills just fine, it is the "big surprise that might happen" that gets to you, especially if you have a family.


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## js (Jan 24, 2008)

HarryN,

Sure. Absolutely! I wasn't saying that a mortgage was generally a bad idea, only that in my case it was. My rental is a very good deal. A very, very good deal. So that's part of the equation.

Another part is me not having enough savings to put down 20 percent like I would want to.

The final part was the inflated home prices due to all the easy low interest loans chasing the same amount of houses around: result: inflation of house prices.

There ARE various ways to look at, and to reckon, the pros and cons of house mortgages, and I wasn't trying to say that they are always a bad idea. The point is just that they aren't ALWAYS a GOOD idea, unequivocally. It would depend.


----------



## js (Jan 24, 2008)

*Re: The Economy, What's your take*

da.gee,

I don't really want to elaborate. Lately, I've had an overdose of disagreements with people about things. I'll just say that it's not a case of anarchy or apocalypse now of the "rule of force over reason" or whatever other glitzy terms you might want to slap on it. It's simply a matter of economics.

Back when I was taking first year physics, I remember a really complicated problem with a rope coming down, around a pulley attached to a platform, back up through something else, and then a change of direction and another pulley, and then a guy standing on the platform, pulling up on the rope (and thus pushing down on the platform). It was a bit of a nightmare if you were trying to really figure out all the forces and the tensions of the rope at various places, and so on.

BUT, if you simply drew the right circle around the whole damn thing, and considered a free-body diagram of THAT, everything became clear, and all the unimportant internal force-reaction pairs just vanished. And then you saw what the answer was.

In the same way, it's very easy to get focused on all the many sophisticated and complicated and difficult to understand and predict details of the credit economy of the US, and how it relates to and interacts with the world economy. And I'm not saying that that isn't worth studying! And I very much enjoyed reading the really great post by WAVE PARTICLE.

But, ultimately, you simply can't get something for nothing, and you can't create something out of nothing.

It's that simple.

You can live on credit for only so long as your creditors/supporters are willing to extend you credit and/or sell you things on credit.

We're coming to the end of that situation now (or soon).

And, no, I'm not saying that staple food will be beyond the reach of the average citizen. That's not my "theory".

I'm saying that food should cost a lot more than it does right now. I'm saying that oil is going to get a lot more expensive than it is right now. I'm saying that the buying power of the dollar is going to take a serious hit.

And that's about as much elaboration as I'm going to do.


----------



## jtr1962 (Jan 24, 2008)

*Re: The Economy, What's your take*



HarryN said:


> Paying bills and debt requres jobs, not just retail jobs, but manufacturing or decent technology jobs.


That's really the heart of the problem. It used to be that one person working could support a family, even put some money aside. That was when we had decent-paying jobs in industries which actually made tangible goods. Nowadays everything is service sector. Employees are basically middle men moving goods someone else made. There's only so much a service sector employer can afford to pay. Net result is both spouses work. This increase in employees further drives down wages.



> As far as "retraining and re-education" being the answer, I know a bunch of unemployed PhDs under 35 years old with an education in various high technology areas.


Funny how I always hear the shortage of suitable employees being the reason US firms employ engineers overseas, yet many here with the proper qualifications can't get work. I think part of the reason is US firms are so used to paying service sector wages that the thought of paying $150K to an engineer makes them cringe. So the engineer ends up working at Walmart for $10 an hour, assuming they even hire him/her rather than tell them they're overqualified. I went through this nonsense upon graduating college in 1985. Never able to get an engineering job in my field because nobody was hiring. Any potential value my skills might have had to the economy was lost when I was forced to take menial jobs paying $6, $7, in one case $2, an hour just to pay my student loans as they came due. Multiply me by perhaps 1 million, and you begin to see the enormous effect the lack of suitable high technology employment has had on the economy. Add to that intangibles like feeling disenfranchised from society after being told 50 times that you're not economically viable. I'm actually telling young people to not bother going to college unless they can do so without loans, preferably with a full scholarship so their parents don't have to pay, either. The majority of jobs out there don't need college, and pay accordingly. A sixth grade education suffices.

Long term I wonder if I would have gotten a better deal moving to China.


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## DonShock (Jan 24, 2008)

*Re: The Economy, What's your take*

Not all use of credit and/or debit spending is bad. For example, how many people could afford a house or a car if they had to save up all the cash first. And many small businesses are run on credit cards as a means of cash flow.

It's different in other countries. People aren't able to move up in society because they do have to save up the cash to afford things like houses and cars and it's almost impossible. Differences in the societies also explains some of the differences in the savings rates. In the US most people have relative stability in their lives and thus don't feel the need to save. Most people haven't exprienced catastrophic problems and thus don't feel a need to plan for them. Many other countries are much more unstable as far as the lives of individuals are concerned, so most people have had the worse happen to them or others they are close to. So they have seen catastrophes, plan for them, and thus tend to save more against a rainy day. People in the US tend to either invest or spend their disposable income. Although I haven't double checked the actual numbers myself, I've heard it mentioned that if you looked at invested money (like 401Ks) and savings together, it put the US about on par with the savings rates of other countries.


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## WAVE_PARTICLE (Jan 24, 2008)

*Re: The Economy, What's your take*

For those interested, here's how it all started....the super summary version. I can write a book on this, but here it goes.

It all started with China. More specifically, when Hong Kong went back to Chinese rule. Probably more of a symbolic event, however, it really moved China more quickly on the road towards democracy. China's markets started to become more "open" and the communist controls were slowly, but surely being removed. Economic development and growth started to really take wind. Most people knew back then that China has the potential to be a huge player in the global environment in terms of trade and overall economic influence. One person who really noticed was some guy named Alan Greenspan. Turns out this Greenspan guy was the Chairman of the Federal Reserve and arguably the most powerful man on earth.

Well, Greenspan predicted that China is going to be a real heavy influence on the world stage and just might tip the balance of power (economic power) to the far east. To counter this, Greenspan had a master plan to "artificially" enhance growth in the U.S. by making sure there is plenty of liquidity in the markets and to keep interest rates low while balancing inflation to a specific target. The side effect of this was a bubble economy as the artificially cheap credit tends to favor certain segments of the economy over others. One significant bubble of note the big credit bubble that lead to the failure of Long Term Capital Management. This was a big burst which sent shockwaves around the world and the Fed and the goverment ended up with a bailout plan. Of course, Greenspan still had his masterplan going and insisted to micro-manage the economy. So a few years later, a Tech bubble was fueled... Now keep in mind that, nearing the turn of the millenium, tech was hot and didn't really need help in becoming popular.....but with credit so cheap and liquidity plentiful, the "hot" tech sector became a "wildfire". We all remember what happened in 2000.

At this point, I'd like to take a step back and make note that Greenspan had a few tools other than monetary policy to help him with his goal of keeping America competitive on the global landscape. He has endorsed sweeping changes in the financial industry that allowed cheap credit to exist. Couple examples that come to mind is the growth of the securitization sector which had the full stamp of the Federal Reserve. To aid in this end, Fannie Mae and Freddy Mac were also created to facilate a huge amount of liquidity on the mortgage marketplace by allowing these government agencies to buy and sell mortgages. In a short matter of time, mortgages became somewhat of a commodity as the securitization trend grew and allowed these debt instruments to be packaged and sold to investors. The Federal Reserve also backed and encouraged the innovation in the industry such as credit default swaps, hedge funds, structured products... as long as these instruments enhanced the liquidity in the marketplace. The complexity of the financial landscape rose exponentially, but the goal of enhanced liquidity was achieved. Unfortunately, it was at the expense of transparency. 

You see, in Greenspans mind, as long as there was plenty of liquidity in the marketplace, the economy can absorb the minor bumps along the way. And these bubbles were just a minor irritance that can be sorted out on its own. Another big bubble that was slowly (and quickly) brewing before the millenium was the housing market. Many areas in the U.S. saw double digit annual gains in home values.... some areas at such alarming rates. Over the years, Greenspan insisted that this phenomena were isolated and pocketed events and that "there was no housing bubble at a national level". :shakehead Well....we know better now.

Anyways, we now come to September 11, 2001. A significant event in its own right, but also in terms of the financial landscape, it was a real catalyst of what is to come. Immediately following this event, the Federal Reserve kicked into high gear and started flooding the market with liquidity by reducing interest rates at every single FOMC meeting for the next 3 to 4 years....until the fed funds rate went well south of 2%. Borrowing became so cheap. Credit spreads became practically non-existant. The yield curve flattened out quickly (i.e. the cost of borrowing short term became the same as the cost of borrowing long term). Eventually, the yield curve inverted (cheaper to borrow long term than it was short term). Everyone loved it......everyone that is, except for the banks....who relied on a normal yield curve (low short-term rates, high long term rates) to make money. The banks were really stuck on an interesting situation where their bread and butter (long term mortgages) were not earning as much as what they are paying out in funding (generally short term). So the banks were forced to get creative and they focussed on volume lending as opposed to quality lending. And why not? Make a bad loan, you can always securitize it away! So lending standards were really relaxed as banks tried desperately to make up the lack of "spread" with volume. The banks also got really, really creative by enhancing spreads through leverage and then the birth of the SIV (structured investment vehicle) occured... You see, the banks figured out this brilliant solution in optimizing their use of capital. SIVs are a little complex and likely out of the scope of this post, but let's just say that billions of dollars of sub-prime asset backed paper (leveraged) were the main source of income. And what a juicy business that was! We're talking about tens of billions of dollars of NET INCOME going straight to the banks' coffers. After 9/11, we saw the stock prices of financials fly through the roof.....another bubble, fueled by cheap credit.

For a time, the banks didn't mind that 25% of their mortgage lending went to people who couldn't afford it. Hey....with the housing market so hot....where's the harm? The collateral (i.e. the property) was GROWING in value and more than enough to protect the principle. Besides, the more mortgages they do....subprime or not....they can build up another portfolio basket that they can securitize and make some money off of.

Greenspan, being the smart man that he is, realized what was happening at around 2004 and started sounding some alarms that lending standards were too relaxed and needs to be tightened up. Didn't happen. Even following the next couple of years of raising interest rates steadily at every FOMC meeting, the yield curve didn't move like he predicted. Short term rates were going up, sure.....but long term rates remained sticky and didn't move at all. So the yield curve inverted even more. I bet at around the turn of 2005/2006, Greenspan already knew that the monster that he created was loose and there is no bringing him back.

Sometime during 2006, the U.S housing market started to slow down.....it was inevitable. Prices on properties started to stablize. At this point in time, many people had multiple properties and even more people had less home equity than they did 15 years ago. People in general had overextended themselves....but the economy was still very strong....low unemployment, low interest rates, and healthy consumer spending. Even the poor had their own home and an SUV.

As the end of 2006 approached, the housing market started to contract. Home prices were no longer stable and were actually declining. The banks, with 25% of their loan portfolio being subprime, soon found themselves stuck with defaulting mortgages with collateral that became lower than the principle of the loan. The structure investments such as mortgage backed securities started having problems meeting cashflow requirements because the mortgage holders are not able to pay up. Foreclosures started to happen.....which is bad because all it did was add more housing on the market, which in turn puts even more downward pressure on housing prices. The domino effect has started.

Fortunately for Greenspan, his tenure was over and Ben Bernanke (the current Chairman of the Federal Reserve) had the buton. Bernanke also started to see what was happening, but he was more or less in denial and failed to see how embedded and systemic this problem was.

During the first half of 2007, the economy was still charging ahead at a healthy pace, but behind the scenes, certain financial deals and structured products were going sour. It wasn't really until Bear Stearns hit the market with its news about their hedge fund going bankrupt. Firms go bankrupt.....it's no big news.....however, in this case, we had financial instruments with AAA ratings being defaulted on. Not just one....but several. Now, for those of you who do not understand credit ratings, AAA is just slightly below the credit standing of the United States government. To have a AAA go under is almost like having the U.S government fail to make a payment on a loan. It is unfathomable. But then we started seeing another AAA deal go south......then another....then another. 

BAM! :sick2:

With AAA instruments defaulting, the entire financial system ground to a halt. No wonder.....if you can't trust a AAA, then who can you trust? Time to hoard some cash. Liquidity disappeared in an instant.....

Ok. I will stop here.....because what happens after this point is an ever so complex series of events....each linked somehow to the subprime mortgage business... but so intricately linked and nontransparent that even the banks themselves don't know that they are sitting on billions of dollars of worthless assets that they need to writedown. The very fabric of the banking system was (and is) at risk......as.....somehow, the massive amounts of value that wasn't supposed to exist needs to be wiped out....cleansed. However, its not so easy because nobody knows where the exposures are.....as everything had been packaged up....divided up and sold ...and re-sold. And leveraged.

The monolines that I referred to earlier is just the latest in a series of shoes that are dropping. Rest assured, there are more shoes to drop. 

I apologize for such a long winded post, but you asked for it.....hahaha!

WP


----------



## AWGD8 (Jan 24, 2008)

*Re: The Economy, What's your take*

Very informative! Thanks .Now I`m going to put all my money into B/S/T flashlights.
It seems like the B/S/T is always at it`s best ---> BULL MARKET :devil:

Flashaholics are everywhere...recessions doesn`t affect addicts.. :kiss:




WAVE_PARTICLE said:


> 99% of the general population do not truely understand what is going on behind the scenes. What most of you see is what's provided by the media and it takes a few weeks afterward for most to learn what actually happened.
> 
> The first two days of this week was a direct reflection of a specific problem in the financial markets. We're talking about bond insurers (aka monolines, aka guarantors). If you've been following the market closely, you will probably see names like ACA, AMBAC and MBIA flashing across the headlines. As an industry, the bond insurers provide guarantees to bonds and loans for a total of approximately $2.5 trillion. AMBAC and MBIA take a large share of the market with over $1 trillion. Until recently, these monolines held AAA ratings (which is the top credit rating possible). They use this high credit rating to provide guarantees (or insurance) to bonds so that these bonds will also get AAA ratings as opposed to the rating from the issuer. Having a AAA-rating on your bond issue is advantageous, because it opens up your target market signficantly since many pension funds and other regulated portfolios are mandated to hold only the top tiered debt. Unfortunately, these monolines also provided guarantees to assets related to subprime mortgages and high-risk, highly leveraged instruments like CDO's (collateralized debt obligations) which are also linked to mortgages. As we all know, the meltdown in subprime has caused a lot of these instruments to go south and being the guarantor, the monolines are contracted to step up and make these instruments whole. Needless to say, these monolines have suffered losses and writedowns in the billions. So much so that their very solvency is now at stake. The credit rating agencies have taken notice of the dire situation these guys are in, so they are stripping the AAA ratings by several notches. ACA went to junk status. The others, not so bad...yet. This is not the real problem. The real problem lies with the insured assets because once the guarantor is downgraded, the billions upon billions of assets that they insure all get a simultaneous downgrade as well... the credit rating of an asset is only as strong as its strongest backer. So, what does this mean? Well, I alluded to earlier that many portfolio managers around the world are mandated to hold AAA assets.....well, they will now be forced to sell in the market.....at the same time. This is what is called a firesale. If the entire monoline industry got downgraded, the losses that would be incurred will be catastrophic. Also, there are behind-the-scenes derivative instruments that would default because these monolines are also counterparties to these instruments. We will be the generation that will witness the first complete collapse of the U.S. banking system.
> 
> ...


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## LuxLuthor (Jan 25, 2008)

*Re: The Economy, What's your take*

WP, a series of excellent posts....and it is not easy to give a relatively understandable explanation to current events. I agree with most of what you have posted, but belive it is more complex and unpredictable. You have to factor in the enormous impact of speculation/futures trading, international currency valuations, and politcal/nationalistic manipulations of various markets. This recent example of one of the largest banks in Europe losing 7B through trading fraud is an example. 

When you have countries recently stepping in to support US financial institutions for various reasons, or Communist China manipulating trade and currency for various reasons, not everything will follow logical predictions. There are many events that could radically alter the dire predictions for the US economy and debt.

Just think for a moment if significant non-oil based energy changes & technologies were effectively developed. U.S. stores of coal and/or shale oil alone are each many times the total oil reserves of Saudia Arabia. If they, and/or nuclear, and/or hydrogen, wind, solar power could be used effectively, cleanly, and safely it would radically change the US economic predictions.

US legislative changes could curtail retirement & social benefits. New (currently) illegal and/or additional immigration policies could add significantly to the US population, thereby increasing the tax base and labor supply. This policy could result in a huge new source of revenue to reduce the national debt. 

The world is currently choosing to overlook China's Communistic control in order to profit from their new growth & population market. However, if China invaded Taiwan, decided to nationalize foreign investments, or persists in manipulating trade and propping up their currency value, huge amounts of money and investment would be moved to more transparent vehicles in western democracies. The US currently has 1/3 of the worlds total economy, so it makes sense that it would benefit significantly.

I again stand on my earlier posts regarding the importance of the general population's perception (even if as a result of hype and misinformation) being a significant factor of what happens economically. One of the main purposes of the Fed's decreased interest rates, the legislative stimulus package, and Treasury Dept. steps is to alter the public's perception which is tantamount to keeping the US in a pro-growth, non-recessionary direction.

For those who speak of gold investments, you must view it in inflation-adjusted terms which exposes the poor return it has had relative to other investment vehicles. It should be obvious that $800/oz gold today is but a fraction (1/3 to 1/4th) of the 1980 $800 value... and as we saw then, it can spike down precipitously solely because of futures trading manipulation.


----------



## 9volt (Jan 25, 2008)

*Re: The Economy, What's your take*



MARNAV1 said:


> Everythings Peachy!



I was hoping someone would say that. I need a bigger TV.


----------



## js (Jan 25, 2008)

*Re: The Economy, What's your take*



DonShock said:


> Not all use of credit and/or debit spending is bad. For example, how many people could afford a house or a car if they had to save up all the cash first. And many small businesses are run on credit cards as a means of cash flow.
> 
> It's different in other countries. People aren't able to move up in society because they do have to save up the cash to afford things like houses and cars and it's almost impossible. Differences in the societies also explains some of the differences in the savings rates. In the US most people have relative stability in their lives and thus don't feel the need to save. Most people haven't exprienced catastrophic problems and thus don't feel a need to plan for them. Many other countries are much more unstable as far as the lives of individuals are concerned, so most people have had the worse happen to them or others they are close to. So they have seen catastrophes, plan for them, and thus tend to save more against a rainy day. People in the US tend to either invest or spend their disposable income. Although I haven't double checked the actual numbers myself, I've heard it mentioned that if you looked at invested money (like 401Ks) and savings together, it put the US about on par with the savings rates of other countries.



There is a HUGE difference between lending out REAL money that was EARNED in the first place, and creating money out of nothing and lending that out. Or creating money out of nothing and using that to bail out a bank or whatever.

A credit economy is different than an economy that offers loans and keeps track of peoples credit ratings. The first type of economy expands and contracts the money supply like crazy (mostly expands). The second type can't lend money out unless it is first taken from somewhere else.

An example of the first type would be the government just printing up money and using those bills to pay its debts. The second type would be taking tax dollars and using those dollars to pay its debts.

No modern economy should be without a way for entities to borrow money. But no modern economy can survive indefinitely on fiat currency created out of thin air.


----------



## js (Jan 25, 2008)

*Re: The Economy, What's your take*



LuxLuthor said:


> . . .
> 
> For those who speak of gold investments, you must view it in inflation-adjusted terms which exposes the poor return it has had relative to other investment vehicles. It should be obvious that $800/oz gold today is but a fraction (1/3 to 1/4th) of the 1980 $800 value... and as we saw then, it can spike down precipitously solely because of futures trading manipulation.



Lux, not to pick on your post in particular, but rather, I've been thinking of the general sentiment that people have that all "investments" should go up in value, should yield a "rate of return".

Where did that come from, exactly? It's a bit counter-intuitive. I mean, yes, if you think of your money as being used for capital, thus gathering interest, then there should be a rate of return because that's the agreement of the "borrower" in exchange for getting the money from the "lender".

That's not what's counter-intuitive. What's counter intuitive is this notion we have that money invested in something like a house, or real-estate, will just naturally increase in value -- somehow, some way.

SAY WHAT?

That just doesn't make any sense to me. Not in general, anyway. I mean, house DEPRECIATE in value. They need new roofs, new plumbing, new furnaces, foundation repairs, and so many other maintenance items. Houses do NOT just naturally get more valuable. If there are fewer houses sought by more and more buyers, then, yes, the price will go up due to simply supply and demand principles. And I suppose you could argue that the population is just increasing and increasing. But, it's not actually the population that matters, it's the production capability * population. A population of people who can only do menial labor is a whole lot different than a population of skilled and trained workers and engineers and tradespeople.

You MAKE money by work or intelligence that increases work efficiency. That used to be the old notion of making money.

Now, it's this idea of just stuffing your money (even if you have to borrow to do it) into housing or stocks and just waiting. The credit economy, the fiat economy, has given us all this vague notion that all we need to do is invest a sum of money early on and wait 50 years and we'll be rich. I'm sorry, but this just isn't sustainable. This just doesn't seem sane to me. Maybe I'm just old fashioned.

Just like it's not sustainable for everyone here to turn into some kind of service worker or accountant or secretarial worker. You can't have an entire nation of service workers. Moving the means of production out of the country is a losing proposition.

Liquidity? Who the hell is that fooling? What does liquidity matter if you keep losing the means of production and keep needing massive quantities of oil to keep your country running?

Gold isn't supposed to yield a "rate of return". Gold is supposed to be something that can't disappear into worthlessness when the Fed dumps billions and billions of dollars of "liquidity" into the economy. It's a safe haven (relatively speaking) of value, and nothing more (or less).

As far as investment potential of various precious metals--looking for an increase to come--silver is probably a good bet right now. Gold, probably not so much. But anything that will naturally follow inflation (because of inherent value) is probably a good idea right now. You might not make any money from it, but that's not its purpose.


----------



## WAVE_PARTICLE (Jan 25, 2008)

*Re: The Economy, What's your take*



js said:


> No modern economy should be without a way for entities to borrow money. But no modern economy can survive indefinitely on fiat currency created out of thin air.


 

You have highlighted a particular vulnerability of our modern day economy that requires a separate discussion in its own right.

In today's economy, money is created out of thin air on a daily basis and not just by the central banks.....all thanks to the abandonment of the gold standard and the introduction of the Fractional Reserve Requirement (FRR).


----------



## js (Jan 25, 2008)

*Re: The Economy, What's your take*



WAVE_PARTICLE said:


> You have highlighted a particular vulnerability of our modern day economy that requires a separate discussion in its own right.
> 
> In today's economy, money is created out of thin air on a daily basis and not just by the central banks.....all thanks to the abandonment of the gold standard and the introduction of the Fractional Reserve Requirement (FRR).



Yes, indeed! I'd love to see a post from you detailing this! Let's have a separate discussion! I talked about this some in the other thread "Calling all economic experts" that is current in the CAFE right now. Maybe you might read that thread and we can discuss this there, as this ones OP pointed towards a more personal and less theoretical topic range?


----------



## WAVE_PARTICLE (Jan 25, 2008)

*Re: The Economy, What's your take*



js said:


> Yes, indeed! I'd love to see a post from you detailing this! Let's have a separate discussion! I talked about this some in the other thread "Calling all economic experts" that is current in the CAFE right now....


 

:thumbsup: .... I love these types of discussions!


----------



## MarNav1 (Jan 25, 2008)

*Re: The Economy, What's your take*

You can't base the value of gold on IOU nothings anyway js, I'm glad you pointed this out. The powers that be try to manipulate gold and silver in this way and it does not work. 1 oz of gold = 1200 FRN's or whatever the "rate" is right now set up in the London exchange, I don't think so. But most people think a "dollar" is the same as a FRN, this is part of the swindle as well. I think you see it and maybe a couple others, but I have tried over and over to enlighten people to the scam and it just doesn't compute. History has been rewritten very effectively and we have all heard the line about telling a lie long enough and convincingly enough and people will believe it. I think most people know that things are terribly wrong and don't know what to do about it so they have to go along with the system. Most of us have lived our entire lives under this "illusion" of wealth so we don't even think to question it. Yes there have been a few "bumps" in the road here and there but in general everything has been okay. This present system is close to the end but no worries, the bankers have a "fix" for that too. Regional and then one world currency is the goal and they are "very" close to achieving this reality I'm afraid. I would like to hear Wave Particles take myself as I have a feeling he knows what is going on as well.


----------



## js (Jan 25, 2008)

*Re: The Economy, What's your take*

MARNAV1,

Most people don't know that things are terribly wrong. Most people don't examine the fundamental basis of their perceptions and conceptions. It won't be until the SHTF that people understand why you or me or whoever was talking about gold or silver or the real legal definition of the USD as "471.25 grains of troy silver.":



Wikipedia said:


> The U.S. dollar was originally specified by the Coinage Act of 1792 to be a unit of weight (471.25 grains of troy silver (about 30.54 g of silver)) and not one of money as it is thought of today. The value of gold or silver contained in the dollar was then converted into relative value in the economy for the buying and selling of goods. This allowed the value of things to remain fairly constant over time, except for the influx and outflux of gold and silver in the nation's economy. According to an evaluation of data from the U.S. Department of Treasury, the cost of goods and services remained relatively consistent between 1635 and 1913, around a level of roughly 25 times the buying power of the U.S. dollar in 2006



The misunderstandings of basic economic concepts are burried so deep that you and I should just go get that cup of coffee instead of spending any more time posting here.

Things are peachy, MARNAV1 !!! Just peachy!!! Or they will be. It's all good.


----------



## LuxLuthor (Jan 25, 2008)

*Re: The Economy, What's your take*

JS, no problem with looking at this back and forth. A couple things I saw in reading your last response as my opinions....

1) There is a very real tangible and intangible value to the US that I'm not sure you are taking into account when you raise legitimate concerns about the Fed printing money and dumping it into the market. While it was easy to link the dollar's value to the US gold reserves when it was in effect, that assumed by agreement of the other nations that gold was the basis of international value.

Since we went off the gold standard, it simply became one of many things that are relied upon now. There was never anything inherent to Gold (or Silver) that automatically made it the original basis of value except a limited amount and everyone agreeing. It could have started out that diamonds or platinum were the agreed upon "currency," my point is that inherent value and currency of trade are all by common agreement.

The US has value beyond their gold/silver reserves. There is enormous tangible value in our national resources, our real estate, our cities, our buildings, museums, artwork, highways, bridges, waterways, coastlines, minerals, agriculture, educational/industrial/military institutions and complexes, and many other physical assets that do not exist elsewhere. 

There is the incalculable value of our intangible assets such as the leadership of our democracy, freedoms, trading markets, corporations (represented by their traded stock value.), employment opportunities, technology, educational experiences, charities, trusts, NGO's, military power, and many other unique public and private services that contribute to our world leadership.

All of these have a very real value that is in addition to the nearly obsolete quantities of gold bullion sitting in our bank vaults. The US Dollar represents the value of our entire set of values and assets, so in many ways it never made sense to link value to something like ownership of gold and silver. A more accurate instrument of currency today is oil...but as new energy sources come online, that too will be rendered obsolete.

I am not saying that there is an endless value to the US that justifies endless quantities of dollars to be printed....only that you must expand and include all the value that people grant to the United States. The dollar represents all of it to the rest of the world.

..... lol..this is one of those long posts...oh well.....

2) You questioned the notion of an investment needing to increase in value. I don't think that is an absolute, but it depends on how you define investment. You could consider a dog an investment in your happiness, but it is not going to increase in value (unless you get into breeding).

Generally, the idea of investments implies a value that is intended to increase, or at least there is that expectation. I contrast the expectation of buying a house or condo with that of buying a car, refrigerator, lawn mower, or light bulb. There is a value to each 'investment' but only an expectation that a home/condo will increase in value.

Mostly what creates an increasing value to anything is demand outpacing supply. If more people want to live in New York City than Iowa or Bangladesh, then a relative value ensues. There is no guarantee that anything will keep or increase its value. If a catastrophe befalls a geographical area, its value will fall.

Diamonds are only valuable because DaBeers has been very effective at stockpiling the world's supply, and creating a demand through advertising and marketing.

Real Estate (by which I include homes, businesses, other developments, and undeveloped land), especially in desireable locations is one of the things that has a finite, limited supply. The usefulness of real estate and its limited supply creates an expectation of an increasing value....especially in a world with a steadily increasing population.

While parts of a house need to be upgraded (need a new roof), there is enough total value in the investment even discounting for wear and tear, that it is not seen as leading to an inevitably worthless value as you would view an appliance or car. A home (some type of shelter) is one of the most important priorities that people have in our modern society, and demand for a nice home outpaces the supply. In the "Old West" it was likely more valuable to have a good horse and gun.

Thus, I don't see it as counter-intuitive to consider a home as an investment likely to appreciate over one's lifetime. The idea of depreciation as it applies to structures is an accounting/tax notion. There are many many buildings in my area that were built in the 1800's and early 1900's that are still standing and being used to this day. Land that sold for a few dollars over a hundred years ago can now be worth millions now based upon location and changes in community locations creating new demand.

3) I don't agree with your linkages between types of jobs/workers (i.e. unskilled vs. higher skilled) and production remaining in this country to having a sustainable future, but that is a complex topic in an already bloated post that probably only you are reading. LOL! 

4) Your notion of what gold is supposed to be is based upon the obsolete gold standard. It literally is no longer supposed to "be" anything other than what remaining traditional/historical/industrial demand remains for it. What I am saying is that gold now has more of a "collectors" value than a national value. You may not like that, but it is the reality since the gold standard was ended. See my #1 for what is the new value standard of a nation.

5) I don't agree with your idea about investing when we have a credit economy. It is very sensible to assume that buying and adjusting your investment portfolio as the times change over a 50 year period will yield an increased value over someone who bought gold at $800/oz in 1980 and then just left it sit in their home safe. You would have lost 2/3rds of your investment even if you waited until last week's peak value to sell it. I'm not saying to buy land next to a toxic waste dump as an investment.

Without some fundamental anticipated demand outpacing the supply of gold, there is no reason to waste your money buying it...especially when it is subject to ridiculous speculative manipulation. The Hunt brothers demonstrated the risk in relying on such commodities with any expectation of future value.

It is important to diversify when investing, and pay attention to changing times and trends. If that is beyond your interest or ability, then finding a quality mutual fund that has a diverse investment portfolio and track record is a sensible alternative. In any case, I would buy a dirt lot in a reasonable location than 20 bars of gold if I wanted a better predictor of value. They don't trade dirt lots in good locations on commodity futures markets subject to all the risks that entails. And nothing in life is guaranteed.


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## js (Jan 25, 2008)

Here's a nice bit of info I just found on wikipedia:



> In 1995, over US $380 billion were in circulation, two-thirds of which was outside the United States. By 2005, that figure had doubled to nearly $760 billion, with an estimated half to two-thirds being held overseas.



I'm so comforted to know that 1/2 to 2/3 of the USD in circulation are being held overseas. That's just so great to know. Gee. Those FRN will never come home to roost. Of cousre not. The US has the most freaking super great and impressive economy in the UNIVERSE. Where else would people put their wealth if not in our economy. We're so cool !!!!!!! People just love these little bits of paper! They're nice and green and black with good ink and good fiber in the paper. Yeah. They'll never try to get actual real goods for them. Why would they? These notes are just so darned pretty that people just want to hold them for their own sake, and are willing to trade iPods and circuits and socks and shirts and running shoes and endless other things for them. Yup. And they're willing to work 12-16 hours a day, 7 days a week in a factory away from their family for months or years so they can have these nice Federal Reserve Notes.

It's all good. It shouldn't worry anyone the 50 to 66 percent of the USD in criculation are being held by foreign entities. No worries, mates. No worries.


----------



## bimemrboy318 (Jan 25, 2008)

*Re: The Economy, What's your take*

This may sound crude... but I'm not worried. I've been taking a hard look at some very large purchases. One being a new home, and the another a rather large boat. Both I expect to get fair deals on due to other people's financial situations. 

Although I do feel bad and can empathize for those less fortunate... not too long ago I was the mis-fortunate one when everyone else seemed to be at an all time high with life in general. I find it ironic how my lifestyle seemed to be down in the dumps during the "good" days and is what it is in the now "doom" days.


----------



## WAVE_PARTICLE (Jan 25, 2008)

*Re: The Economy, What's your take*



js said:


> .....that things are terribly wrong. .....


 

I hate to say it, but this is actually an understatement.
Things are downright #^*/!$ up!

Without going into specifics, I will say there there are huge structural problems in the financial system now. Many of these problems never existed in the past....so to say that this whole debacle will blow over like before would be a naive statement. There are a lot of new things happening here.

The problems will work themselves out through the system in time, but not without significant casualties. There will be some hard lessons learned.

WP


----------



## WAVE_PARTICLE (Jan 25, 2008)

*Re: The Economy, What's your take*



LuxLuthor said:


> ....The US Dollar represents the value of our entire set of values and assets, so in many ways it never made sense to link value to something like ownership of gold and silver...


 

This statement is wrong on so many levels...


----------



## js (Jan 25, 2008)

*Re: The Economy, What's your take*



LuxLuthor said:


> JS, no problem with looking at this back and forth. A couple things I saw in reading your last response as my opinions....
> 
> 1) There is a very real tangible and intangible value to the US that I'm not sure you are taking into account . . .
> 
> The US has value beyond their gold/silver reserves. There is enormous tangible value in our national resources, our real estate, our cities, our buildings, museums, artwork, highways, bridges, waterways, coastlines, minerals, agriculture, educational/industrial/military institutions and complexes, and many other physical assets that do not exist elsewhere.



When setting up a _commodity currency_, the commodity can be any number of things. Precious metals are ideally suited because they are fungible, permanent, and infinitely divisible. But whatever the commodity is, it doesn't need to have any economic "relevance". Gold doesn't need to be "in" or anything. Money REPRESENTS value. It needn't be gold to do that. It doesn't even need to be a commodity money like oil or land, to do that. I understand that. I've pointed it out before. But that isn't the strength behind a commodity currency. The strength of that economic money system is that the government can't make money out of thin air.

So, I do agree that the USDs in the form of Federal Reserve Notes REPRESENTS value, the value of the entire "economy". (Of course, gold and silver could do the same thing! The idea was never that the "value" of the gold must = the "value" of the economy!) There's lots of stuff of value here in this country, of course; lots of tangible stuff. And soon more and more of it will be owned by foreign entities because $400 or more billion USD are being held in reserve by these entities because they think they are a good place to put their wealth. When they realize that it is NOT a great place, they will dump the FRN for tangible assets--like all the things you mention. This will drive the prices of things way, way up, but you and I won't have any more USD to draw on to follow the inflation up. Hard times, those will be.



> There is the incalculable value of our intangible assets such as the leadership of our democracy, freedoms, trading markets, corporations (represented by their traded stock value.), employment opportunities, technology, educational experiences, charities, trusts, NGO's, military power, and many other unique public and private services that contribute to our world leadership.
> 
> All of these have a very real value that is in addition to the nearly obsolete quantities of gold bullion sitting in our bank vaults. The US Dollar represents the value of our entire set of values and assets, so in many ways it never made sense to link value to something like ownership of gold and silver. A more accurate instrument of currency today is oil...but as new energy sources come online, that too will be rendered obsolete.



I don't think we can say that gold is obsolete.. As a medium for commodity money it will always be able to serve admirably. It can REPRESENT value just fine, no matter how much or how little there is of it.

Plus, a commodity currency system has a natural way to regulate the money supply. As gold becomes more precious due to expanding economy vs. stationary money supply, then mining and gold extraction become more profitable, and thus more money enters the economy through free-minting of coins. Thus the deflation is offset naturally, and not because some guy at the Fed decides to "inject liquidity" into the economy.

As for the "incalculable" value of all our various intangibles like freedom and democracy and leadership and charities and what not, well, I think that a great many other countries would pipe up at about this point and say that they want our form of government like they want a hole in the head, and that they wish we would stay the hell out of their business and keep our "leadership" to ourselves. These things are "incalculable" because they are not economic quantities and we can't trade on them (or, more importantly, bank on them).



> I am not saying that there is an endless value to the US that justifies endless quantities of dollars to be printed....only that you must expand and include all the value that people grant to the United States. The dollar represents all of it to the rest of the world.



Indeed. The Fed has expanded and included "value" that wasn't/isn't there---hence the constant rate of inflation. This can't continue indefinitely without totally devaluing the currency.



> . . .
> 
> 4) Your notion of what gold is supposed to be is based upon the obsolete gold standard. It literally is no longer supposed to "be" anything other than what remaining traditional/historical/industrial demand remains for it. What I am saying is that gold now has more of a "collectors" value than a national value. You may not like that, but it is the reality since the gold standard was ended. See my #1 for what is the new value standard of a nation.



Well, I guess time will tell. But, in any case, whether it is an unfashionable notion or not has no bearing on the simple fact that GOLD DOES EXACTLY WHAT I WANT IT TO DO. Gold is, in point of fact, a commodity, with an inherent value. THAT is a reality. And I like that. And it's why I have gold investments.



> 5) I don't agree with your idea about investing when we have a credit economy. It is very sensible to assume that buying and adjusting your investment portfolio as the times change over a 50 year period will yield an increased value over someone who bought gold at $800/oz in 1980 and then just left it sit in their home safe. You would have lost 2/3rds of your investment even if you waited until last week's peak value to sell it. . . .



People keep harping on the last gold peak. Look, I wouldn't have bought gold at that exact time either!!! LOL!

I bought gold when it was $325. I think it was a good deal at that price. And I don't think I'll be sorry later on in my life about this investment. But more importantly, the gold trends over the last three or four decades do not reflect a "natural" trend, but rather also display some SERIOUS "unnatural" influence from the powers-that-be, whose interest it was to keep the price of gold in FRN's low. But they have lost their hold on it, and it is now rebounding back up more towards what it should cost per ounce. And it will stay that way--certainly above about $700 or $800 for the foreseeable future, in my opinion.

Still, I'm not advising anyone to buy gold. So, anyone reading my posts, please don't run out and sell off a bunch of stocks to buy gold bullion based on my account. I'm not an investment advisor and I won't take on that responsibility for anyone but myself.


----------



## LuxLuthor (Jan 25, 2008)

*Re: The Economy, What's your take*

WP, if my statement was wrong on so many levels, then the Fed would not be able to print money as it has been doing, and at least up to now have the world buy into our economy. On a practical basis we now link our currency to what we believe the world will regard as our value, and what they believe is our ability to honor our debts and provide an acceptable return on their investment.

There is a very real value for a country like Kuwait or Dubai to invest their oil currency in a country that protects them, and it is not tied to any gold or silver bullion we have.

JS, just wanting to make sure you don't misunderstand fundamental differences in perceptions as ignorance on an issue. 

My main point is on a practical basis is that we are no longer on a commodity currency system like we used to be. If I had a preference I would go back to the gold standard linkage. I'm also well aware that the gold or paper currency that represented the physical gold in bank reserves back then was a representation of the US value. 

My whole point was based upon the reality that we are no longer linked to the commodity standards. If we were, the Fed would not be able to print the money it chooses to print, willy nilly. So I am presenting that currently the practical value of the USD is linked to the entire tangible and intangible assets of the US that I previously mentioned.

It sounds like you think we will go back on a gold commodity value basis as a result of the Fed and international banking system doing what it is doing. There is no certainty that I see to draw that conclusion....even if we both agree it would be a better system.

The risk of foreign investment being withdrawn from the US requires that there is a reliable and certain superior alternative. It ignores changes that our country could make, some of which I mentioned in my last post, and including changing our elected officials. 

If wanting what we have "like a hole in the head" was accurate, we would not have tens of millions of illegal immigrants, after Reagan's amnesty, with tens of millions more behind these. How many tens of millions are illegally immigrating through perilous deserts to Mexico, Canada, Britain, France?

Despite the irrational Bush Derangement Syndromes I have witnessed over that last few years, and which will pass as elections occur and new policiies are passed, it was quite interesting to see the pro-USA political changes in France & Germany, as well as continued support from Britain....so I don't see the same negative foreign hatred as you suggest. I also take note that we represent 1/3 of the world's economy, so there is a lot of dependency on what happens here. Of course that could change over time, but that is an unknown.

I said (or at least implied) that gold is obsolete *as the standard upon which national value is based*, not that it is obsolete as a traded commodity. As a commodity it no longer has the same value as when it was the basis of our currency. Again, I'm not saying it is worthless, just that it is *mostly *moving in the direction of having a value based upon commodity trading markets. 

As such, any value of such an item needs to be viewed from the risks associated with its trading, and appraised relative to other valued items, adjusted for inflation. There's the traded price of gold, and the inflation adjusted value of that price. The inflation adjusted value of gold is not an investment that has had a good return relative to other vehicles. 

Inflation is also a complex issue, but has always existed to some degree. It is not just related to how many dollars the Fed prints, although that is a factor. What is more useful is to examine charts of the degree of inflation rates over time, relative to interest rates, world events, etc.

Anyway....it was fun for one post.


----------



## NA8 (Jan 25, 2008)

*Re: The Economy, What's your take*

It was the best of times, it was the worst of times.

Wave_Particle, good job. :thumbsup:


----------



## js (Jan 25, 2008)

*Re: The Economy, What's your take*

Lux,

Good point. My tone was off! Please accept my apologies. I *DID* mean to take issue with _my impression_ of your understanding, and not make grandiose, insulting, and sweeping statements about your understanding (which I don't know much about).

Sorry! I'll edit my post.


----------



## WAVE_PARTICLE (Jan 25, 2008)

*Re: The Economy, What's your take*

Lux, before you continue, just note that a currency is just a medium of exchange and that the value of this currency is determined by supply and demand. It's as simple as that. The supply is controlled by the Fed and the Banks (via the Fractional Reserve Requirement). And the demand is controlled by the market. You cannot directly link a currency to a value of an economy.....simply because the latter is a measurement....and the former is a unit of measure. It's like saying the kilometer is representative of how long a road is.


----------



## Wattnot (Jan 25, 2008)

*Re: The Economy, What's your take*

I believe the economy is in horrible shape. I've been waiting for this latest stock market dump because it was a false rise anyway. I'm fairly certain the entities that are claiming it's good are blowing smoke to avoid panic. Look at the dollar's worldwide value!! We're under Canada now!

EVERY SINGLE person I know is worse off than they were in the 90's. Several people I know have had to downgrade their homes and 3 people I know lost theirs either by reposession or by taking a LOT less to avoid reposession. All of this and I'm in a normally VERY HOT real estate area/high tech area.

You can print in the paper how great our economy is all you want but the dark cloud is approaching fast. It will get better though, eventually.


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## jtr1962 (Jan 25, 2008)

*Re: The Economy, What's your take*



LuxLuthor said:


> Real Estate (by which I include homes, businesses, other developments, and undeveloped land), especially in desireable locations is one of the things that has a finite, limited supply. The usefulness of real estate and its limited supply creates an expectation of an increasing value....especially in a world with a steadily increasing population.


Traditionally housing prices have kept pace with inflation. This was true at least until the stagflation of the late 1970s. That combined with cheap money in last few years has resulted in real estate prices almost everywhere going through the roof. There was no supply or demand involved, although speculators had a large part in driving up housing prices as well. Look for a major correction in the housing market eventually as houses drop to what they historically should be, roughly 25% to 50% of what they are right now, perhaps a little more in places where demand has actually outstripped supply. Oh, and real estate in desireable locations isn't a finite resource. If 2000 families want to live on the same 100x100 piece of real estate you just build a 50-story apartment building. Problem solved.



> 3) I don't agree with your linkages between types of jobs/workers (i.e. unskilled vs. higher skilled) and production remaining in this country to having a sustainable future, but that is a complex topic in an already bloated post that probably only you are reading. LOL!


There's this concept in economics known as creating wealth. In general you can only do so if your labor results in a tangible physical asset being, either directly (you build it) or indirectly (you design it). In short, I'm talking about manufacturing, engineering, or research jobs. All are in short supply in this country. Service type jobs are basically manipulating wealth someone else created. By definition they have to pay less because the added value of your labor is less. In some cases, such as tax accountants, they create no value at all but only exist due to government regulations (i.e. income tax laws in this case).

I agree with js that the service economy can't go on. You now have an entire generation of potential engineers and scientists whose abilities have been for the most part squandered. I studied engineering but couldn't even find a job in my field. People stopped studying engineering and science because of lack of career opportunities. Many of the patents issued in the last decade have gone to foreigners. And this can go on? I wonder how many of those predisposed to careers in science and engineering will flock to countries like China and India where they can actually do something they enjoy, rather than a mind-numbing, half-assed, low-paying service job? It's called "brain-drain". It happened once when many engineers from countries like Germany came to the US following WWII. Now the younger generation of engineers will flock out of the US unless we actually start creating employment where they can use their talents. Designing cell phones doesn't cut it.



> The US has value beyond their gold/silver reserves. There is enormous tangible value in our national resources, our real estate, our cities, our buildings, museums, artwork, highways, bridges, waterways, coastlines, minerals, agriculture, educational/industrial/military institutions and complexes, and many other physical assets that do not exist elsewhere.


True except more and more foreigners are choosing to invest their US dollars buying these things. In essence, we're selling off the country piece by piece to finance our excessive consumption. This is akin to selling the family jewels to pay for a night on the town.


----------



## bitslammer (Jan 25, 2008)

*Re: The Economy, What's your take*

Not changing my lifestyle at all and not really feeling affected. I would add that I've always tried to live well within my means and not been extravegant with my spending. Luckily the tings that make me happy in life are more experential and not material.

That said my take is that hopefully things here in the US are "normalizing." I have a neighbor who works for the local utilty company and he and I got off a a tangent discussion about people spendign and priorities. I told him about the time last week when I drove to work and in the dark noticed that a house that I pass that appears to have two very broken down cars in the drive and almost a hole in the roof, drooping gutters, etc. had a ~46" plasma TV that I could see int eh front room as I drove by. He laughed and told me of the countless times he has to go into houses where the people have no food, the kids have no decent clothes, their heat is broken/turned waaaayyy down, but they have that brand new flat screen TV with cable.

While nobody can know all of the details and I'm not saying that people can't have a little pleasure in life I'm convinced that as a nation there are way too many people living beyond their means and with very screwed up financial priorities.

Hopefuly this "correction" will bring things (and people's behavior) back to a more realistic level.


----------



## Nitro (Jan 25, 2008)

*Re: The Economy, What's your take*



bitslammer said:


> Not changing my lifestyle at all and not really feeling affected. I would add that I've always tried to live well within my means and not been extravegant with my spending. Luckily the tings that make me happy in life are more experential and not material.
> 
> That said my take is that hopefully things here in the US are "normalizing." I have a neighbor who works for the local utilty company and he and I got off a a tangent discussion about people spendign and priorities. I told him about the time last week when I drove to work and in the dark noticed that a house that I pass that appears to have two very broken down cars in the drive and almost a hole in the roof, drooping gutters, etc. had a ~46" plasma TV that I could see int eh front room as I drove by. He laughed and told me of the countless times he has to go into houses where the people have no food, the kids have no decent clothes, their heat is broken/turned waaaayyy down, but they have that brand new flat screen TV with cable.
> 
> ...


 
That reminds me when I lived in Indianapolis years ago. I drove by some parts of that city where you would see rows of houses with boards on the windows and half of the roof gone. Meanwhile in the driveway sits a BMW or Mercedes. Granted, cars are easier to buy with unclaimed cash then houses.


----------



## jtr1962 (Jan 25, 2008)

*Re: The Economy, What's your take*



bitslammer said:


> While nobody can know all of the details and I'm not saying that people can't have a little pleasure in life I'm convinced that as a nation there are way too many people living beyond their means and with very screwed up financial priorities.


One of my mother's friends worked as a real-estate appraisor for a while and noticed the same thing. Whenever he went into houses in poor neighborhoods they wouldn't have food in the refreigerator, the house would be in disrepair, the kids would be running around with old clothes, but they would always have computers, ipods, and big-screen TVs. There would often be a late model car sitting in the driveway. No doubt they were renting some of these things. Totally screwed up priorities. Renting a TV is about as dumb as it gets financially.

Since I've always lived in a pretty austere manner since I've never had much income, I don't think much will be changing with me. For me a spending spree is buying the big bag of Doritos when it's on sale for half price.


----------



## Cydonia (Jan 25, 2008)

*Re: The Economy, What's your take*

I find it refreshing that many people here have their heads screwed on properly when it comes to the economic realities that are unfolding _*rapidly*_ around us. These are profoundly transformational times. Living way below your means and having a “preparation attitude” for all manner of disasters will pay great “dividends” in the immediate future as well :naughty: (Sub_Umbra, you know what I mean!)

May I suggest the concept of... actually getting supplied with foodstuffs at today's prices in the event of _any_ disaster, man made or natural. Everyone should aim for a year's supply of basic dry and canned food on the shelf. Having 3 or 4 years of bathroom tissue and a decades worth of soap, razors, toothbrushes, clothes, shoes etc., is a logical investment. Things you are gonna need anyway... but whose price will rise naturally. So just buy it now. (By the way, there are survival forums full of those who think in a similar manner... might want to check those places out for ideas too...)

There are tremendous imbalances that will be corrected - whether anyone likes it or not. The above mentioned perversity of priorities (Massive TV over food and clothes, rampant sick consumerism etc.,) will be "taken care of" in due course by the Hard Times ahead.

Moderator js, WAVE_PARTICLE, and MARNAV1 have a grasp of what we are dealing with here. It ain't your typical "slump" or "recession". Let me put it this way; I don't think it is possible to be _too prepared_ for what is coming.


----------



## js (Jan 26, 2008)

*Re: The Economy, What's your take*



Cydonia said:


> . . .
> 
> May I suggest the concept of... actually getting supplied with foodstuffs at today's prices in the event of _any_ disaster, man made or natural. Everyone should aim for a year's supply of basic dry and canned food on the shelf. Having 3 or 4 years of bathroom tissue and a decades worth of soap, razors, toothbrushes, clothes, shoes etc., is a logical investment. Things you are gonna need anyway... but whose price will rise naturally. So just buy it now.
> 
> . . .



Really good advice! Food and other basic necesities are being sold at amazing prices right now. They are a flat out bargain. Take the money you get from the $150B (!!!) economic "stimulus" package and BUY FOOD, like canned goods and flour and rice and pasta and so on--stuff that will last. Also, having some amount of extra cash on hand in case the banks close is a good idea as well.

Even if everything turns out to be peachy and the nay-sayers are wrong, it will still be money well spent (or rather, money well turned into value, money "saved".)


----------



## js (Jan 26, 2008)

*Re: The Economy, What's your take*

You know, I just have to add that the size of this economic stimulus package, and the urgency with which it is being pushed through, really worries me. I knocked the "calling all economic experts" thread back to the top 10 days ago when I heard that the Fed had allowed foreign bailouts of some central banks. RED FLAG! RED FLAG! Then they convened an emergency meeting just 1 week before the scheduled meeting in order to lower the prime rate by one of the largest steps in a couple decades. Then there was this economic stimulus package.

They're going to flood the economy with even more USD. Desperate, desperate measures.

Previous to this, a couple years ago they stopped publishing the most important measure of the US money supply: M3. M1 and M2 are still published, but M3 they just stopped with little or no justification. At the time they stopped, the Fed had increased M3 by *40 percent* over the last 6 years (2000 to 2006). In the early 1990's it was about 4,000B, and at the time they stopped publishing it, it was over 10,000B. And I'm sure with all of the spending on the war that right now it could even have reached 15 or 20T.

The Bush administration, more than any previous administration in recent history, has been funding itself by _devaluing the dollar_. It's illict taxation. If governments had to actually ask the taxpayers outright for the actual, real cost of these wars, it's likely that we wouldn't have had as many of these wars or military actions.

It boggles the mind. I really would love to know what M3 is right now. (or :thinking: maybe I don't want to know.)

Honestly . . . I'm scared. Genuinely scared.


----------



## Retinator (Jan 26, 2008)

*Re: The Economy, What's your take*

All I know is that some of my investments have taken a small turn for the worse, and they can stay there until they regain themselves. 

I think the fact that we've had low rates for awhile, has only encouraged overspending. I mean ppl are still paying a mortgage while upgrading their homes ($ 30k kitchen/bathrooms etc...). 

I have friends with giant loans because it's free money to them. Retirement time is gonna be a rough road for many.

I also think oil prices are out of control. We could have put China/India and others on hydrogen(or something else), let the economies of scale lower the costs then bang no more oil. You don't start these guys out on oil, now we're all screwed.

I think things need at least 5 years before they really settle down. I doubt the entire thing will collapse, but we need to get our heads screwed on right. Everyone's jumping left then right. Time for a sit down


----------



## jtr1962 (Jan 26, 2008)

*Re: The Economy, What's your take*



js said:


> Previous to this, a couple years ago they stopped publishing the most important measure of the US money supply: M3. M1 and M2 are still published, but M3 they just stopped with little or no justification. At the time they stopped, the Fed had increased M3 by *40 percent* over the last 6 years (2000 to 2006). In the early 1990's it was about 4,000B, and at the time they stopped publishing it, it was over 10,000B. And I'm sure with all of the spending on the war that right now it could even have reached 15 or 20T.


M3 is currently over $13,000,000,000,000 according to this reconstruction so you weren't off by much. They claim 5 9's of correlation going back to 1980. The number itself is scary, but the rate of growth is even scarier. Looks like it's trending towards infinity very soon.

This huge number reminds me of something I saw on TV years ago. They flashed a similarly huge number, and said asked what does it represent? The multiple choice answers were the national debt, the number of times we could blow up the planet with our nuclear weapons, and the number of fish in the sea. The correct answer was all three.


----------



## MarNav1 (Jan 26, 2008)

*Re: The Economy, What's your take*

Why do they need an economic stimulus package? I thought everything was hunky dory? Also, what's the problem with M3? Since 95% of it is just numbers on a computer screen you can make it a million trillion, no worries. Then if the computers or servers crash, no problem just start over. Kind of like etch-a-sketch, if you dont like the picture just start over.


----------



## LightInTheWallet (Jan 26, 2008)

*Re: The Economy, What's your take*

Here is a version of M3 and other valuable stats: Shadow Government Statistics » Alternate Data Series


----------



## shakeylegs (Jan 26, 2008)

*Re: The Economy, What's your take*

Like js, some recent official responses to the economy smell to me of near, perhaps outright "PANICK". I suspect the reasons are many and varied. Still, I'm puzzled as to why Big Ben couldn't wait a week for the regularly scheduled meeting. Then again, as I recall, the markets had already priced in a 1/2 point drop in rates. So maybe Ben just responded in a timely fashion.

There has been some speculation in the thread about the potential for a dire downturn in the economy. So let me ask all of you, with a more globalized economy and all the various protective mechanisms in place to prevent a 30's style crash, how do you feel about the possibility of a similarly devastating economic crash happening now? No way Jose, or Bet-your-Boots it's coming. Personally, I think almost anything is possible, but I'm betting against it.


----------



## LightInTheWallet (Jan 26, 2008)

*Re: The Economy, What's your take*

This past monday, MLK day in U.S.the stock market was closed. International markets started tumbling badly. Tuesday morning The U.S. stock exchanges started tanking badly, The Presidents "plunge protection team" had already put into place an idea for buoying the falling market by doing two things: Drastically cutting interest rates via the "Fed" and having the "Fed" member banks purchase large amounts of indicator stocks used in the major indices used to determine the general "averages" , Thus concealing the appearance of a severe downward trend, and setting the market up for a bad situation when the fed INCREASES interest, which will gut the T-bill market auction mechanisms.... then again, maybe I am just a worrywart google scholar with sub-par posting skills.


----------



## js (Jan 26, 2008)

*Re: The Economy, What's your take*



jtr1962 said:


> M3 is currently over $13,000,000,000,000 according to this reconstruction so you weren't off by much. They claim 5 9's of correlation going back to 1980. The number itself is scary, but the rate of growth is even scarier. Looks like it's trending towards infinity very soon.
> 
> This huge number reminds me of something I saw on TV years ago. They flashed a similarly huge number, and said asked what does it represent? The multiple choice answers were the national debt, the number of times we could blow up the planet with our nuclear weapons, and the number of fish in the sea. The correct answer was all three.



OMG! 13T? OMG!

MARNAV1,

It matters.


----------



## MarNav1 (Jan 26, 2008)

*Re: The Economy, What's your take*

Nah, go back to sleep!


----------



## LightInTheWallet (Jan 26, 2008)

*Re: The Economy, What's your take*

The M3 recreation I linked in a previous post pegged the M3 at 15T. I fear that the "go back to sleep" option won't be possible after next friday:tinfoil:YOU SHOULD BE WARY OF THIS MARKET REBOUND


----------



## brightSwede (Jan 27, 2008)

*Re: The Economy, What's your take*

I have a question for you:

Regarding the current economic situation, should I try to repay my student loan, or hope that an increasing inflation will "eat" it?

For some time I've been considering repaying it as fast as I can, but if inflation kicks in I'm not sure that's the best way of spending money.

I live in Sweden, and while we have our own currency, I guess we're quite tightly connected to the euro area anyway.


----------



## Uncle Bob (Jan 27, 2008)

*Re: The Economy, What's your take*

Watched "CBS News Sunday Morning" today. An economist showed a chart of the U.S. economy over the last 100 years. Even with blips for recessions the economy has always rebounded. I would take the "sky is falling" folks with a grain of salt.


----------



## Sub_Umbra (Jan 27, 2008)

*Re: The Economy, What's your take*

What's my take?

If the crisis is real -- that would be really bad but these are uncertain times and our reality is affected by the perceptions of the masses. For many in the West the 21st century is all about uncertainty. 

In that regard _it doesn't have to be real_ to have a *very real* negative impact on our society. Rising food prices, rising energy prices, it doesn't matter whether this is real or not, _it's just one more uncertainty_ and as such it will have effects that will probably be quantifiable at some point a little farther downstream.

Personally, we've stepped up our food purchases a little bit. I'd love it if this all just turned out to be nothing. Then we could just eat the food and everyone would live happily ever after...


----------



## Sub_Umbra (Jan 27, 2008)

*Re: The Economy, What's your take*

Sorry, double post.


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## LightInTheWallet (Jan 28, 2008)

+ 1


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## WAVE_PARTICLE (Jan 28, 2008)

js said:


> It's all good. It shouldn't worry anyone the 50 to 66 percent of the USD in criculation are being held by foreign entities. No worries, mates. No worries.


 
China has more than a trillion U.S. dollars held in reserve. They buy up all these dollars so that they can maintain their loose currency peg to the greenback (not technically a peg, because they are allowing the yuan to increase in tiny and controlled increments per day....but the effects are similar to a peg). It is a bit of a game that China is playing in order to artificially prop up their economy at the expense of the rest of the world. Technically, the yuan....if traded openly and freely in the market, would have a much higher value than it does today. Because it is kept artificially low by the government, it makes all goods and services and investments very very attactive. Huge amounts of foreign inflows (capital) go into China. China "subsidizes" these inflows by lending to countries like the U.S. (by buying over a trillion dollars worth of Treasury notes). In essence, China is putting cash into Americans hands so that they can, in turn, buy Chinese goods...

What this whole thing does is weaken the U.S. dollar because of all the investments coming out of America (sell USD) and going into China (buy yuan)....purely due to the fact that the yuan is kept artificially cheap.

But this game China is playing is not without its consequences. You see, China is currently grappling with an inflation problem that can quickly get out of control. If not dealt with effectively, it can bring down their entire economy. The problem stems from the contrasting economies. The Chinese economy is in a boom. A boom is naturally accompanied with lower unemployment, higher capacity utilization and therefore wage pressures. This results in higher inflation, which can normally be dealt with by raising interest rates to slow growth. On the other hand, we have the U.S. economy which is currently grappling with _contraction_. The U.S. Federal Reserve is dead set on an interest rate decreasing track for the rest of the year and probably into 2009. Every rate decrease weakens the dollar because it makes USD denominated investments less attractive so people don't hold as many USD assets in their portfolios. But because of the yuan/dollar peg, a U.S. interest rate decline will, by default, also weaken the yuan. This makes Chinese goods even cheaper than it already is and foreign investment floods the market. Inflation would be magnified and not under completely under the control of the Chinese government. If the People's government does not act decisively, they will find themselves in an uncontrollable hyperinflationary environment that will bring their great nation down to its knees.

So, in summary, while the Chinese are exporting a huge amount of cheap goods to the U.S., the U.S. is exporting a huge amount of inflation to China. Funny how what goes around, comes around...huh?

China is a big cause of a lot of imbalances in the world marketplace... the balance of trade.....foreign exchange..... inflation. Their government needs to let market forces determine the natural course of economic development....I fear that their blatant government intervention will only lead to future woes for China and the continuing problems for the rest of the world.

WP


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## js (Jan 28, 2008)

A trillion USD held in reserve by China. A *TRILLION*?

That. Can't. Be. Good.


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## da.gee (Jan 28, 2008)

You have something against a global economy? If we can invest in China why can't China invest in the US?


----------



## mdocod (Jan 28, 2008)

*Re: The Economy, What's your take*

Man, A lot of this is over my head so bear with me. I listen to a AM radio show every saturday morning here in the springs. The show is now called "Money for Life" and is hosted by what I understand are the owners of a brokerage type firm here in the city by the name of "presidential brokerage." They have a solid track record of building wealth for people with their programs and have a very informative show. They are straight forward and honest investment analysts who seem to have good heads on their shoulders. They are "worried" about the economy to some degree, but they have pointed out that we have seen much worse times economically speaking in our countries history. The housing fiasco will have a trickle down effect on a LOT of markets over the next few years, in their words, it's like an ice berg. "You only see about 10% of it above the water, 90% of it's girth is under water, that is the part we have yet to experience." But they are still optimistic. To sum up their overall recommendation, ProActively manage your money in this modern world, don't stick money in an investment and wait around for something to happen or hope for a rebound after a loss. Set stop-losses on investments, get out and Move your money. If you can't find a place to put it that feels safe, sit on awhile and wait for a good "buy-in" price.


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## js (Jan 28, 2008)

da.gee said:


> You have something against a global economy? If we can invest in China why can't China invest in the US?



da.gee,

Of course I don't have something against a global economy!

That's not the issue. The point is that China has 1 trillion USD that *it has not YET invested* in the USA. They have WAY more "reserve" currency in USD than all of the US citizens combined (if personal debt is factored in).

And we haven't "invested" in China. Owning an iPod or a bunch of stuff from WallMart is hardly an investment. Kind of the opposite, really.


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## daveman (Jan 28, 2008)

WAVE_PARTICLE said:


> China has more than a trillion U.S. dollars held in reserve. They buy up all these dollars so that they can maintain their loose currency peg to the greenback (not technically a peg, because they are allowing the yuan to increase in tiny and controlled increments per day....but the effects are similar to a peg). It is a bit of a game that China is playing in order to artificially prop up their economy at the expense of the rest of the world. Technically, the yuan....if traded openly and freely in the market, would have a much higher value than it does today. Because it is kept artificially low by the government, it makes all goods and services and investments very very attactive. Huge amounts of foreign inflows (capital) go into China. China "subsidizes" these inflows by lending to countries like the U.S. (by buying over a trillion dollars worth of Treasury notes). In essence, China is putting cash into Americans hands so that they can, in turn, buy Chinese goods...
> 
> What this whole thing does is weaken the U.S. dollar because of all the investments coming out of America (sell USD) and going into China (buy yuan)....purely due to the fact that the yuan is kept artificially cheap.
> 
> ...


Wow, your insightful and complete understanding of the U.S. monetary system so astounds me that I'm left with utterly no words for reply...except to recommend you to go back to pg. 3 of this thread and read what we have already discussed.


Daveman posted:
"I think now would be a great time for China to stop "manipulating," according to the neo-cons, the Yuans, and start acting like a "responsible," according to the White House, international player by raising the Yuans another couple notches higher in value to the dollar. I'm sure this would finally contribute something positive to the inflationary pressure in the U.S. economy since this is what the American government, both left and right, has been asking for all along? Surely this has drawn the ire of the U.S. government not because of politics, but actual harm being done to the American economy..."


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## PEU (Jan 28, 2008)

OMG this thread entered a loop... should I explain you again why China exchange rate is none of US business? :nana:


Pablo


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## daveman (Jan 28, 2008)

PEU said:


> OMG this thread entered a loop... should I explain you again why China exchange rate is none of US business? :nana:
> 
> 
> Pablo


I hope you're addressing WaveParticle, Peu. In case you couldn't tell, my questions and posts in this thread were ALL rhetorical... and thanks for participating bro.


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## WAVE_PARTICLE (Jan 28, 2008)

daveman said:


> ....except to recommend you to go back to pg. 3 of this thread and read what we have already discussed.
> .


 
Ok... I'll be the first to admit that I did not read all the posts from start to finish. I am new to this thread and to read 130+ long posts, well....the thought of it is a little dizzying. :sick2:

Anyhoo.....my apologies for digging up a beaten down point...my bad.... 


Carry on....


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## MarNav1 (Jan 28, 2008)

*Re: The Economy, What's your take*

Nothing left to "invest" when you work for $10-15 hour. Don't have $30k for school so I guess the common Joe is SOL once again.


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## thesurefire (Jan 29, 2008)

for those of you that don’t follow daily:
US dollar index hovering around 75.5
Silver up to 16.70
Gold trying to break 930 but hitting heavy resistance
oil still hovering around 90
Dow is in the green by 175 today closing at 12384
S & P up 23 points to close at 1353

with talk of another rate cut the markets may prove very volatile tomorrow.


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## da.gee (Jan 29, 2008)

China is playing a dangerous game. It has to allow the yuan to rise and is already doing so. They cannot continue to artificially keep the yuan down because of the inflation pressures WP outlines. The Peoples Bank of China (PBOC) raised rates seven times in 2007 to help the cause but it is unlikely to have a great affect on imported inflation. China now has higher yields than the US which means even more foreign currency will flow into their country making the cost of keeping the yuan low even greater to the Chinese government. They will have to buy more foreign exchange. It can't go on forever and there will be an adjustment. Add to that the flag waving politicians calling for heavy tariffs on Chinese goods to make up for their artificial yuan devaluation and there is tremendous pressure on them to make changes. You can only kind of play in the free market for so long before those forces catch up to you. Yes, we in the US need a good waking up and we're going to get it, but don't think it is all roses in China.


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## turbodog (Jan 29, 2008)

*Re: The Economy, What's your take*



powernoodle said:


> Dire? Not hardly.
> 
> ...
> 
> ...



Solid.

Can anyone say 'election year'? 

Duh.

The s&p is as the lowest level in about 18 months or so. It's a great time to buy. Then sit back and watch as late 2008/early 2009 brings some great returns. After the election of course.


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## daveman (Jan 29, 2008)

da.gee said:


> ...Add to that the flag waving politicians calling for heavy tariffs on Chinese goods to make up for their artificial yuan devaluation and there is tremendous pressure on them to make changes. You can only kind of play in the free market for so long before those forces catch up to you. Yes, we in the US need a good waking up and we're going to get it, but don't think it is all roses in China.


 
Tariffs? So as to force the Chinese to raise the value of their currency? So as to make the Chinese goods Americans buy EVERYDAY more expensive??? 

*SO AS TO DRIVE UP THE INFLATION RATE HERE IN AMERICA EVEN HIGHER??? SO AS TO LET THE CHINESE MAKE EVEN MORE MONEY ON THE SAME GOODS THAT WE'LL HAVE TO BUY FROM THEM??? *

Everytime I read about some red-blooded American economist scream of injustice by the Chinese "manipulating" their currency to take advantage of Americans, I have to fight hard to hold back my . 


*CHINA HAS BEEN HOLDING THE LINE FOR AMERICA THE PAST 8 YEARS BY THEIR ARTIFICIALLY LOW CURRENCY. WITH THE AMOUNT OF PAPER/DOLLAR/CURRENCY/CREDIT THE DESPICABLE FED HAD BEEN PRINTING THE LAST 15 YEARS, CHINA IS A BIG, BIG REASON WHY MONSTROUS INFLATION WILL ONLY START TO HIT AMERICANS NOW.*

The politicians, despite their outcries, NEED China to continue to "manipulate" its currency so the American voters will not come out for blood come election day in rage over the virtually instant increase in inflation. 

It's all a dog-and-pony show, people, and only the idiots would go along with the politicians yelling "raise the Yuan, raise the Yuan." :shakehead


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## turbodog (Jan 29, 2008)

*Re: The Economy, What's your take*

So what if foreigners hold 400 billion. The boomers' parents that will die off are getting ready to disburse about 55 trillion dollars in inheritance.

400B is a drop in the ocean.


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## turbodog (Jan 29, 2008)

*Re: The Economy, What's your take*



mdocod said:


> Man, A lot of this is over my head so bear with me.
> ...




Don't berate yourself. A lot of this is all under your belt instead of over your head. By that I mean that several people here are blowing smoke up your butt.


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## LightInTheWallet (Jan 29, 2008)

According to the CIA World Factbook, China is ranked #1 and the United States is ranked dead last ( using the account balance method ) here is the link CIA - The World Factbook -- Rank Order - Current account balance


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## LightInTheWallet (Jan 29, 2008)

*Re: The Economy, What's your take*

"Election year" This is an Internationally occurring phenomenon, well documented in the foreign press, the international markets are not wholly confident in the US financial markets now. The reasons can be debated, the severity can be debated, but to say that nothing is happening except for political mindgames seems a little naive IMHO. Are the rate cuts and stimulus packages a reaction to non-existant circumstances?


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## da.gee (Jan 29, 2008)

But politicians would never do anything just for show would they? They have their, er, uh, I mean, our best interests at heart. 

Let the imbalances correct themselves. The pressure on China from within will force action and has already. It is not in China's best interest to trash the US economy.


----------



## da.gee (Jan 29, 2008)

*Re: The Economy, What's your take*

The stimulus package is a short term "fix" for our heads. Do you think the planned $150 billion is going to turn the economy around? For how long? A week? A month? A quarter? Its real function is to soothe the hearts and minds of the masses. Oh, and it does happen to be an election year. 

What about all those NOT eligible for the stimulating? The collective purchasing power of that demographic dwarfs the $150 billion of the stimulus package. Are they being swayed by this giveaway to "save" the economy? Do they even think the economy needs saving?

Who cares if international markets are "not confident" in the US financial markets? Money will chase where the money is. Where is your diversification? Surely you have some international exposure in your portfolio should US markets decline? Somewhere someone is making money. Asian index fund anyone?

Concensus estimates still call for earnings of the S&P 500 companies to RISE by 7.7%. P/E multiple for the S&P 500 has historically been at about 17.7, currently it is trading at 13.7 making valuations quite attractive. Institutional investors have already been buying bargains in oversold sectors. We are closer to the bottom than the middle. The numbers may look unattractive now but think past a couple quarters or even this year.


----------



## mdocod (Jan 29, 2008)

*Re: The Economy, What's your take*

The stimulus package looks like a wealth redistribution package to me. I guess I have the wealthy people to thank for this one, THANKS!! lol...

Oh.. and thank you Mother Iris and Father Gov.


----------



## LEDninja (Jan 29, 2008)

*Re: The Economy, What's your take*

Some random thoughts caused by this his thread and the other two: 
(Calling all economic experts https://www.candlepowerforums.com/threads/170424
Food prices and emergency planning https://www.candlepowerforums.com/threads/187665)

Stock Market:
1) I read an article a long time ago (~12 years) where the researcher discovered the shape of the DOW follows the US birthrate but lags it by 41 years. He decided this is a result of the # of people in their prime earning years investing for retirement. His projections (shifting the birthrate graph 41 years) show the DOW in a steep and fairly protracted decline starting around 2010-2012. I figure this will happen as baby boomers withdraw their savings/investments to fund retirement and there are not enough gen-X investing to make up for the money withdrawn.
2) The Japanese housing market bubble bursting caused their stock market to crash way back in 1990. 17 years later it still has not recovered. Hope it does not happen in the US.

Food:
Read a recent article where there is not just a problem with food prices but famine may actually occur in North America. Reasons?
1) # of farmers are declining. Many current farmers are either leaving the business or retiring with no young 'uns taking their place.
2) A lot of NA farming is possible only due to irrigation but the water table in a lot of states is depleted faster than it can be replaced. Soon the water will run out. No water > no farming > no food. (No water > no farming > no food - this is happening in Darfur and parts of Auatralia though the cause seems to be no rain rather than a depleted water table)
3) NA farming is so mechanized the author considered it a way to turn oil into food. With rising oil prices so will food prices.

China.
The US$ has dropped considerably against most major currencies of the world. As a result imported goods (food and oil for example) has increased dramatically in the US. The US has not felt the full impact of the devaluation of the US$ because China has artificially kept the Yuan down. If China cannot keep the Yuan down the USA will see 100% inflation real fast. Imagine Fenix costing more than Surefire!

Canada.
If the US sneezes Canada catches a cold.

Tough times are ahead and it can be hard for a retiree like me with no way of earning more income.


----------



## daveman (Jan 29, 2008)

da.gee said:


> But politicians would never do anything just for show would they? They have their, er, uh, I mean, our best interests at heart.
> 
> Let the imbalances correct themselves. The pressure on China from within will force action and has already. It is not in China's best interest to trash the US economy.


Of course not, the Chinese have been saving the Amercian economy from a runaway inflation nightmare the past 8 years.* AMERICA OWES CHINA A "THANK YOU," NOT A SCREW YOU*.


----------



## daveman (Jan 29, 2008)

*Re: The Economy, What's your take*



LEDninja said:


> China.
> The US$ has dropped considerably against most major currencies of the world. As a result imported goods (food and oil for example) has increased dramatically in the US. The US has not felt the full impact of the devaluation of the US$ because China has artificially kept the Yuan down. If China cannot keep the Yuan down the USA will see 100% inflation real fast. Imagine Fenix costing more than Surefire!


Somebody gets it right... the U.S. owes China (no pun intended) big time for saving its sorry butt from the inflationary nightmare the American government (Fed) had created.

Honestly, I don't know how the Chinese leadership can take the dog and pony show from the American politicians year in and year out, being used as the scapegoat when it was China that had kept the inflationary sharks at bay for Washington. I would've told Washington to %@#@ off a long time ago...


----------



## PEU (Jan 29, 2008)

daveman said:


> I hope you're addressing WaveParticle, Peu. In case you couldn't tell, my questions and posts in this thread were ALL rhetorical... and thanks for participating bro.



Yes I was 


Pablo


----------



## js (Jan 29, 2008)

*Re: The Economy, What's your take*



mdocod said:


> The stimulus package looks like a wealth redistribution package to me. I guess I have the wealthy people to thank for this one, THANKS!! lol...
> 
> Oh.. and thank you Mother Iris and Father Gov.



The money isn't coming from wealthy people. It's being created out of thin air.

As for $400B being a "drop in the bucket", that would be true if we were talking about ECONOMIC VALUE, but I was talking about actual $$$ held by foreign entities. And WP tells us that it's actually $1,000B. 1 trillion USD being held in reserve by overseas holders.

They hold the USD because it is (or was) the worlds reserve currency of choice. But if (when) that changes, all those dollars will get dumped.

And that amount of liquidity entering the economy is most definitely *NOT* a drop in the bucket.


----------



## js (Jan 29, 2008)

daveman said:


> Of course not, the Chinese have been saving the Amercian economy from a runaway inflation nightmare the past 8 years.* AMERICA OWES CHINA A "THANK YOU," NOT A SCREW YOU*.



+1


----------



## WAVE_PARTICLE (Jan 29, 2008)

If the Chinese do not recify their self-imposed bubble soon, the eventual burst will be felt around the world. Guess where 80% of your products come from? These products keep prices low....

Anyhow, I'm not about to argue whether or not nations should have influences on the policies of other nations, but I can tell you that nothing good ever comes out of government intervention that interferes with the natural equilibrium of the market. This activity creates massive bubbles and only magnifies the inevitable adjustment that must happen.....will happen.

I fear that the longer China takes to freely float their currency, the harder they will fall. You can bet that they will not be the only casualty. Think about what will happen when a country dumps more than $1 trillion of USD into the market.... 

WP


----------



## MarNav1 (Jan 29, 2008)

*Re: The Economy, What's your take*



js said:


> The money isn't coming from wealthy people. It's being created out of thin air.
> 
> As for $400B being a "drop in the bucket", that would be true if we were talking about ECONOMIC VALUE, but I was talking about actual $$$ held by foreign entities. And WP tells us that it's actually $1,000B. 1 trillion USD being held in reserve by overseas holders.
> 
> ...


Oh come on js, what are ya worried about? Just wait till after the election and then invest ma man! It'll all blow over! Then Aunt Hillary or Uncle Obama will save ya! Till then just chill, take a nap, it'll be okay! Oh I forgot, if they don't save ya the Federal Reserve will. New printing presses solve alot of problems!


----------



## MarNav1 (Jan 29, 2008)

WAVE_PARTICLE said:


> If the Chinese do not recify their self-imposed bubble soon, the eventual burst will be felt around the world. Guess where 80% of your products come from? These products keep prices low....
> 
> Anyhow, I'm not about to argue whether or not nations should have influences on the policies of other nations, but I can tell you that nothing good ever comes out of government intervention that interferes with the natural equilibrium of the market. This activity creates massive bubbles and only magnifies the inevitable adjustment that must happen.....will happen.
> 
> ...


Seems like 95% of the products anymore and the majority of it isn't the greatest that's for sure.


----------



## shakeylegs (Jan 29, 2008)

*Re: The Economy, What's your take*



daveman said:


> Somebody gets it right... the U.S. owes China (no pun intended) big time for saving its sorry butt from the inflationary nightmare the American government (Fed) had created.
> 
> Honestly, I don't know how the Chinese leadership can take the dog and pony show from the American politicians year in and year out, being used as the scapegoat when it was China that had kept the inflationary sharks at bay for Washington. I would've told Washington to %@#@ off a long time ago...



I imagine the Chinese government has it's own economic tiger by the tail. Having kept the Yuan artificially low during the go-go years, they should face significant and difficult inflationary pressures when they let it float against other currencies. A fenix won't be the only thing more expensive than a surefire. Imagine the new wallyworld, prices right up there with Neiman's.

American and European corporations have been investing their profits (our consumer dollars) in chinese and indian production capacity, ignoring the decaying domestic production infrastructure. We, as consumers, temporarily "benefited" by lower priced, if somewhat cheesy and occasionally toxic consumer goods, at the expense of productive jobs and manufacturing readiness. So when the Yuan re-values, prices of consumer goods should rise world wide. Our burger-flipping service economies can't possibly produce enough jobs to maintain the current (slipping) standard of living. 

On the other hand, the Yuan's rise might mark the beginning of a long pendulum-like reversal - poor american and european workers can be put to work in the new chinese and indian built factories. Imagine the world's largest noodle and shark fin soup factory in detroit - "Edsel Noodle and Shark, Inc". Might look good on the back of a bowling shirt.


----------



## WAVE_PARTICLE (Jan 29, 2008)

*Re: The Economy, What's your take*



daveman said:


> Somebody gets it right... the U.S. owes China (no pun intended) big time for saving its sorry butt from the inflationary nightmare the American government (Fed) had created...


 

I guarantee you, the Chinese did America no favors. You think artificially holding back inflation from the U.S. (via FX manipulation of the yuan) will last? All it created was a enormous BUBBLE. The day will come when China will be forced to DUMP their USD reserves ($1 trillion worth). China's super-heated growth is not sustainable and they will need to deal with their runaway inflation problem. The day will come when hundreds of billions of USD will flood the market, and it will be a day of reckoning. Remember, China isn't the only one holding massive USD reserves....it's all over the Middle East too (Saudi Arabia)....all currency pegs to the USD. When China's peg decouples, those pegs will decouple too....they will have to....or risk hyperinflation.

Instead of a GRADUAL shift to the new market equilibrium over time, it will be a SUDDEN and FORCEFUL shift to that new equilibrium....all thanks to China and every other government who has tried to "control" and "manipulate" natural market forces.

No favors.....


----------



## js (Jan 29, 2008)

*Re: The Economy, What's your take*



WAVE_PARTICLE said:


> I guarantee you, the Chinese did America no favors. You think artificially holding back inflation from the U.S. (via FX manipulation of the yuan) will last? All it created was a enormous BUBBLE. The day will come when China will be forced to DUMP their USD reserves ($1 trillion worth). China's super-heated growth is not sustainable and they will need to deal with their runaway inflation problem. The day will come when hundreds of billions of USD will flood the market, and it will a day of reckoning. Remember, China isn't the only one holding massive USD reserves....it's all over the Middle East too (Saudi Arabia)....all currency pegs to the USD. When China's peg decouples, those pegs will decouple too....they will have to....or risk hyperinflation.
> 
> Instead of a GRADUAL shift to the new market equilibrium over time, it will be a SUDDEN and FORCEFUL shift to that new equilibrium....all thanks to China and every other government who has tried to "control" and "manipulate" natural market forces.
> 
> No favors.....



It's validating to hear your take on these things, WP, given your obvious expertise and knoweldge in this area.

I'd still love to hear more of the nitty gritty details of FRR and currency creation by the banks, though . . .


----------



## js (Jan 29, 2008)

WAVE_PARTICLE said:


> If the Chinese do not recify their self-imposed bubble soon, the eventual burst will be felt around the world. Guess where 80% of your products come from? These products keep prices low....
> 
> Anyhow, I'm not about to argue whether or not nations should have influences on the policies of other nations, but I can tell you that nothing good ever comes out of government intervention that interferes with the natural equilibrium of the market. This activity creates massive bubbles and only magnifies the inevitable adjustment that must happen.....will happen.
> 
> ...



This is exactly what I have been thinking about. And like you say in the other thread, it won't end with just China. They aren't the only country holding USD in reserve, are they?


----------



## da.gee (Jan 29, 2008)

I should add to my comment that it is not in the best interests of China to trash the US economy but that may be the result of the forces correcting themselves.


----------



## da.gee (Jan 29, 2008)

*Re: The Economy, What's your take*

Hey _js_,

Would it be too confusing to combine the two economic threads ("Calling all economic experts" and this one) currently active? Seems like the same thread to me with responses sometimes duplicated but valuable discussion nonetheless.


----------



## WAVE_PARTICLE (Jan 29, 2008)

*Re: The Economy, What's your take*



js said:


> It's validating to hear your take on these things, WP, given your obvious expertise and knoweldge in this area.
> 
> I'd still love to hear more of the nitty gritty details of FRR and currency creation by the banks, though . . .


 

The feeling is mutual, js! 

Hey...FRR is my favorite topic! :thumbsup:


WP


----------



## WAVE_PARTICLE (Jan 29, 2008)

da.gee said:


> I should add to my comment that it is not in the best interests of China to trash the US economy but that may be the result of the forces correcting themselves.


 

Nobody wants to trash the US economy....Americans are, by the widest of margins, the biggest consumers in the world. But as you alluded to, there may be no choice. I'm not saying that what I said before WILL happen. This is a hugely complex process and highly political. All I know is that the imbalance in terms of currency and trade is enormous and there will have to be an adjustment. Perhaps the Chinese can allow their currency to float within a larger band....and keep widening that band at a faster, but still a controlled pace. I don't know the answers....

Just a note, that as at the end of December 2007, China holds *$1.53 trillion* of USD reserves.

Japan holds $973 billion (end of Dec 2007)
Eurozone holds $501 billion (end of Nov 2007)
Russia holds $478 billion
India $285 bililon
Taiwan $270 billion
South Korea $262 billion
Brazil $186 billion
Singapore $163 billion
Hong Kong $153 billion
Germany $136 billion

Now, keep in mind that there are some EUR reserves in these numbers, but the lion's share is USD. More importantly, these numbers IGNORE sovereign wealth funds. If we included those, the add:

*$1.3 trillion* in Abu Dhabi Investment Authority (United Arab Emerites)

and a whole slew of others.


----------



## WAVE_PARTICLE (Jan 29, 2008)

So, China and the Middle East, alone accounts for almost $3 trillion in real USD denominated reserves. *$3 TRILLION*.

And guess who has their currencies tied to the USD?

China and the Middle East are both HUGE EXPORT regions.
U.S. is a HUGE import region.

China and the Middle East are seeing double digit economic growth.
U.S. is seeing economic contraction.

China and the Middle East have high inflation and need to raise interest rates.
U.S. is on a huge rate decreasing trend....and will stay that way for a while.


If the U.S. continues to reduce interest rates, that in turn, weakens the USD....which, by default, will weaken the yuan and whatever currency the Arabs use. The weaker foreign currencies will spur economic growth for China and Middle East and boost inflation to potentially dangerous levels (they're probably already there).

Now...we all know that nobody wants to see the American economy go down....but we all know what hyperinflation does to a country's economy.....it can spell disaster. Do you think China and the Middle East will sit on their laurels and allow their countries to be sacrificed so that the U.S. consumer can go about their days all happy and smiling?

Before we all panic and move to the mountains, there is good news. The good news is, we are not yet at the point where China and Saudi Arabia are backed into a corner. Their growth, while not sustainable, is barely manageable at the expense of a gradual increase in inflation. But at some point, they have to call it quits and say we have enough of this and have to take measures to stabilize prices. Are we at that point yet? Don't know.... will be be there in 5 years? 5 months? 5 days? Who knows...


----------



## daveman (Jan 29, 2008)

WAVE_PARTICLE said:


> Now...we all know that nobody wants to see the American economy go down....but we all know what hyperinflation does to a country's economy.....it can spell disaster. Do you think China and the Middle East will sit on their laurels and allow their countries to be sacrificed so that the U.S. consumer can go about their days all happy and smiling?


Why not? Can't speak for the Middle East (Saudis) as their elite ruling class is hanging on to power by the courtesy of U.S. Army, but I'm sure the Chinese are just dying to dish out some pay back to the U.S. for all the "appreciation" the U.S.A. has shown China the past 25 years. We got nothing to loose sleep over...


----------



## daveman (Jan 29, 2008)

*Re: The Economy, What's your take*



WAVE_PARTICLE said:


> I guarantee you, the Chinese did America no favors. You think artificially holding back inflation from the U.S. (via FX manipulation of the yuan) will last? All it created was a enormous BUBBLE.


Is that so? Then I'm sure you would have no objections if China were to raise the value of their Yuan, *as the politicians and pundits have been asking for,* tomorrow to some 40+% of what they are now?



WAVE_PARTICLE said:


> ...All it created was a enormous BUBBLE...


No, WP, I can't tell you how disappointed I am by your remark after some of the other more insightful, if not downright astute, posts you made before.

*THE DESPICABLE AMERICAN GOVERNMENT, SPECIFICALLY THE FEDERAL RESERVE, WAS THE ONE RESPONSIBLE FOR THE BUBBLE. *China wasn't the one issuing credits as fast as they can press the enter key. 
*AMERICA HAS NO ONE TO PIN THIS $%[email protected] ON BESIDES ITSELF.*



WAVE_PARTICLE said:


> ...Instead of a GRADUAL shift to the new market equilibrium over time, it will be a SUDDEN and FORCEFUL shift to that new equilibrium....all thanks to China and every other government who has tried to "control" and "manipulate" natural market forces.
> 
> No favors.....


See what I typed above.

Heck, I'll type it again.

*AMERICA HAS NO ONE TO PIN THE COMING $#%@ STORM ON BUT ISELF. AS FAR AS "CONTROLLING" AND "MANIPULATING" NATURAL MARKET FORCES GO, AMERICA WAS AND IS THE MASTERMIND BEHIND THE ACTION, COURTESY OF ITS PHONY FIAT MONETARY SYSTEM, AND IT WILL BE PUNISHED ACCORDINGLY.*

A lot of Americans will want to blame someone else for their coming misery, as they have been kept in the dark for so long by their own ignorance that a sudden reckoning, despite however appropriate, deserving, or predictable it is, will put them in such frustration that they will give themselves over to WHATEVER nutty story the politicians feed them. "It's the Chinese, it's the Europeans, it's the Japanese, it's the damn UN, it's the media..."


----------



## MarNav1 (Jan 29, 2008)

*Re: The Economy, What's your take*

Now Dave, the Federal Reserve ie not Federal and questionable reserves wouldn't do that would they?


----------



## daveman (Jan 29, 2008)

*Re: The Economy, What's your take*



js said:


> They hold the USD because it is (or was) the worlds reserve currency of choice.


JS, once you realize why that was (and still is, despite that embarrasment of a M3 number that was cancelled by the Fed), you'll have completed the puzzle.


----------



## Nitro (Jan 29, 2008)

*Re: The Economy, What's your take*



daveman said:


> Is that so? Then I'm sure you would have no objections if China were to raise the value of their Yuan, *as the politicians and pundits have been asking for,* tomorrow to some 40+% of what they are now?
> 
> 
> No, WP, I can't tell you how disappointed I am by your remark after some of the other more insightful, if not downright astute, posts you made before.
> ...


 
I recommend trying decafe.


----------



## da.gee (Jan 29, 2008)

The US deserves what it gets for manipulation of the liquidity markets among other financial market misteps. Short sighted, self interested, politically motivated , consumer pillaging mind set. Preach the free market economy while pulling the puppet strings with the other hand. I still believe we will get through wahtever is coming but it is going to be a bumpy ride and unfortunately, it will be the same people who take the brunt of the punishment. You, me, Uncle Joe and all the other regular people who make up the 99% unwealthy.


----------



## daveman (Jan 29, 2008)

*Re: The Economy, What's your take*



Nitro said:


> I recommend trying decafe.


Nitro, I have never discouraged, mocked, or derided anyone for making an attempt to understand the extremely complicated (leveraged) scheme that is today's U.S. economy, for I can barely understand its intricacies myself; so MY recommendation to you, in the face of your implying my post being unnecessarily serious, would be to go do some more studying (not in schools, because they don't teach you stuff this good) and rejoin the thread when you can understand it.


----------



## daveman (Jan 29, 2008)

*Re: The Economy, What's your take*



MARNAV1 said:


> Now Dave, the Federal Reserve ie not Federal and questionable reserves wouldn't do that would they?


Mark, I think you know better than I do how this will end. The Fed is getting more predictable everyday.

Guns and gold, man, trade in our dollars for some more ammo and batteries while we can.


----------



## Nitro (Jan 30, 2008)

*Re: The Economy, What's your take*



daveman said:


> Nitro, I have never discouraged, mocked, or derided anyone for making an attempt to understand the extremely complicated (leveraged) scheme that is today's U.S. economy, for I can barely understand its intricacies myself; so MY recommendation to you, in the face of your implying my post being unnecessarily serious, would be to go do some more studying (not in schools, because they don't teach you stuff this good) and rejoin the thread when you can understand it.


 
Unnecessarily Serious Post? I wouldn't call it that. I'd call it a bunch of Anti-American Political Garbage that will (and should) get this thread closed.


----------



## daveman (Jan 30, 2008)

*Re: The Economy, What's your take*



Nitro said:


> Unnecessarily Serious Post? I wouldn't call it that. I'd call it a bunch of Anti-American Political Garbage that will (and should) get this thread closed.


Of course...America going down the drain, AND having the Americans admit it was their own doing that brought them such humiliation. Of course it's Anti-American Political Garbage (capitalized?). 

The only thing that is truly anti-american in this entire thread, Nitro, is your post above. You will see that soon. :shakehead


----------



## Nitro (Jan 30, 2008)

da.gee said:


> The US deserves what it gets for manipulation of the liquidity markets among other financial market misteps. Short sighted, self interested, politically motivated , consumer pillaging mind set. Preach the free market economy while pulling the puppet strings with the other hand. I still believe we will get through wahtever is coming but it is going to be a bumpy ride and unfortunately, it will be the same people who take the brunt of the punishment. You, me, Uncle Joe and all the other regular people who make up the 99% unwealthy.


 
+1

I'm not worried, because I'm invested in sound companies that I bought cheap. So, while the rest of the stock market has been declining, my stocks have been doing ok. I'm in for the *long haul*.


----------



## Nitro (Jan 30, 2008)

*Re: The Economy, What's your take*



daveman said:


> Of course...America going down the drain, AND having the Americans admit it was their own doing that brought them such humiliation. Of course it's Anti-American Political Garbage (capitalized?).
> 
> The only thing that is truly anti-american in this entire thread, Nitro, is your post above. You will see that soon. :shakehead


 
If you believe American is going down the drain, go ahead and stick your money in your matress, and make it a sure thing.

Don't bother crying _*free speech*_ in CPF, you should know better. If you want free speech there's a place for it, underground.


----------



## daveman (Jan 30, 2008)

*Re: The Economy, What's your take*



Nitro said:


> If you believe American is going down the drain, go ahead and stick your money in your matress, and make it a sure thing.


No, Nitro, I guess you don't understand what we have been discussing in this thread...the "money" that you want me to stick under my matress, will soon be no money at all, and I sure as heck will not be hanging on to any of it if I can help it. I recommend you do the same, mate.



Nitro said:


> Don't bother crying _*free speech*_ in CPF, you should know better. If you want free speech there's a place for it, underground.


What are you talking about?

edit: I see now. I called your post "unamerican" not because of anything remotely related to the 1st amendment, Nitro. It's unamerican because you're attitude will not awake the sleeping/ignorant american masses that need to be educated. Does it sound comfortable? No, but it is necessary.


----------



## daveman (Jan 30, 2008)

Nitro said:


> +1
> 
> I'm not worried, because I'm invested in sound companies that I bought cheap. So, while the rest of the stock market has been declining, my stocks have been doing ok. I'm in for the *long haul*.


The best position to take in the long haul is to get out of USD assests. That includes stocks. 

If you really bought them cheap, I recommend you to unload them now and diversify into gold, Austrailian dollars, and maybe some Yuan (but you won't be able to get out of it for some time).


----------



## Nitro (Jan 30, 2008)

*Re: The Economy, What's your take*



daveman said:


> No, Nitro, I guess you don't understand what we have been discussing in this thread...the "money" that you want me to stick under my matress, will soon be no money at all, and I sure as heck will not be hanging on to any of it if I can help it. I recommend you do the same, mate.


No Daveman, I don't want you to stick your money under your matress. I'd rather you spend or invest it.



> What are you talking about?


If you don't understand that statement, then forget it.


----------



## Nitro (Jan 30, 2008)

daveman said:


> The best position to take in the long haul is to get out of USD assests. That includes stocks.
> 
> If you really bought them cheap, I recommend you to unload them now and diversify into gold, Austrailian dollars, and maybe some Yuan (but you won't be able to get out of it for some time).


 
Gold? What kind of return would I have gotten in gold for the last 20 years?


----------



## daveman (Jan 30, 2008)

Nitro said:


> Gold? What kind of return would I have gotten in gold for the last 20 years?


Pitiful, courtesy of the CBGA. But the long haul INTO THE FUTURE will produce a different result. The world is changing, Nitro, and the experience and assumptionsAmericans have had the past 60 years will not be very useful in the near future.


----------



## Nitro (Jan 30, 2008)

daveman said:


> Pitiful, courtesy of the CBGA. But the long haul INTO THE FUTURE will produce a different result. The world is changing, Nitro, and the experience and assumptionsAmericans have had the past 60 years will not be very useful in the near future.


 
If I thought everyone had that attitude, I would be worried.

But I'll bite. What does your Crystal Ball say?


----------



## shakeylegs (Jan 30, 2008)

*Re: The Economy, What's your take*

I suspect economies are less fragile than most egos but it's interesting to hear the opinions of real people living real lives. Whatever your take on the economy, it's easy to see emotions are running high. Remember that eminently skilled economists can't predict much of anything with accuracy. So your opinion and my opinion are just that - opinions. You may think someone is a complete putz for holding their opinion, but at least let them express it. Then, if you disagree, take the high road and make your case. Who knows, you may be right! Pissing matches, while strangely entertaining, don't do much more than discourage meaningful discourse. And discourse is all we have on a forum. 

As for anti-American political garbage, America was born of dissent and rebellion, as well as the desire to speak and live freely.


----------



## Nitro (Jan 30, 2008)

*Re: The Economy, What's your take*



shakeylegs said:


> As for anti-American political garbage, America was born of dissent and rebellion, as well as the desire to speak and live freely.


 
I agree totally. But CPF wasn't. CPF and Politics don't mix.


----------



## mdocod (Jan 30, 2008)

*Re: The Economy, What's your take*



js said:


> The money isn't coming from wealthy people. It's being created out of thin air.
> 
> As for $400B being a "drop in the bucket", that would be true if we were talking about ECONOMIC VALUE, but I was talking about actual $$$ held by foreign entities. And WP tells us that it's actually $1,000B. 1 trillion USD being held in reserve by overseas holders.
> 
> ...


thank you for clearing that up, from the "outside" looking in, it looked to me like a wealth re-distribution left wing operation going on. Like I said in my previous post, a lot of this is above my head, I'm learning a lot in this thread. Kinda scary.


----------



## Nitro (Jan 30, 2008)

*Re: The Economy, What's your take*



daveman said:


> edit: I see now. I called your post "unamerican" not because of anything remotely related to the 1st amendment, Nitro. It's unamerican because you're attitude will not awake the sleeping/ignorant american masses that need to be educated. Does it sound comfortable? No, but it is necessary.


 
Let me get this straight. Are you saying the "American" thing to do is convince the Sleeping/Ignorant American Masses to pull all their money out of the stock market, and buy Gold?


----------



## shakeylegs (Jan 30, 2008)

*Re: The Economy, What's your take*



Nitro said:


> I agree totally. But CPF wasn't. CPF and Politics don't mix.



As Empath states here in the cafe thread creation sticky https://www.candlepowerforums.com/threads/109475, The objective of the Cafe is to provide a place of less restrictive topical content, permitting discussion of lighter and sometimes weightier matters, in a manner that permits a comfortable and relaxed atmosphere without concern for whether it fits within the definitive grouping of a particular forum. So, nearly any topic that fits within the family-friendly expectations and within the CPF rule structure, and does not result in the loss of that comfortable and relaxed atmosphere is permitted and encouraged.

I see no reason that Politics per se should be banned from a cafe thread as long as the participants remain reasonably civil. If you think someone is injecting politics provocatively, perhaps a polite and gentle reminder would be the best approach. It's hard to rant seriously when people aren't taking the bait.


----------



## Nitro (Jan 30, 2008)

*Re: The Economy, What's your take*



shakeylegs said:


> As Empath states here in the cafe thread creation sticky https://www.candlepowerforums.com/threads/109475, The objective of the Cafe is to provide a place of less restrictive topical content, permitting discussion of lighter and sometimes weightier matters, in a manner that permits a comfortable and relaxed atmosphere without concern for whether it fits within the definitive grouping of a particular forum. So, nearly any topic that fits within the family-friendly expectations and within the CPF rule structure, and does not result in the loss of that comfortable and relaxed atmosphere is permitted and encouraged.
> 
> I see no reason that Politics per se should be banned from a cafe thread as long as the participants remain reasonably civil.


 
Empath also stated this:



Empath said:


> The ones that had to inject political opinion, rather than enjoy the humor, are the reason for it to close. Political bickering is slight now, but it will increase beyond the level desired here. At least we do have a link to the joke.





Empath said:


> Anyone wishing to continue adding commentary regarding the joke, or even wish to inject actual political opinion, please feel free to open the discussion in the Underground.


in this thread. https://www.candlepowerforums.com/threads/187327



shakeylegs said:


> If you think someone is injecting politics provocatively, perhaps a polite and gentle reminder would be the best approach.


 
I thought I was being "polite and gentle" when I recommened decafe.


----------



## shakeylegs (Jan 30, 2008)

*Re: The Economy, What's your take*

Nitro, I have to admit I got a chuckle out of your decafe line. The exchange that followed seemed more testy. But I'm not trying pointing a finger at anyone specifically. I find this thread interesting, if impassioned. Your suggestion it be closed got me to thinking - Don't react to the random rant and things won't escalate. Quite a few interesting threads might have been saved. Just my opinion.


----------



## mdocod (Jan 30, 2008)

*Re: The Economy, What's your take*

this thread is running reasonably smooth for our CPF cafe IMO and if I were mod status I would allow it to continue it's course provided all parties remain civil. Nothing in thread has transpired that I would consider too "harsh" for CPF proper. I think most mods would agree but would be keeping a close eye on how things transpire. Politics can get aggressive fast, lets all keep it functional and educational, it's simple, don't say "this is" say "this is what I feel or heard about this" and we can all potentially learn something without feeling like our ego needs redemption. 

keep it coming... I'm really enjoying this thread.


----------



## Nitro (Jan 30, 2008)

*Re: The Economy, What's your take*



shakeylegs said:


> Nitro, I have to admit I got a chuckle out of your decafe line. The exchange that followed seemed more testy. But I'm not trying pointing a finger at anyone specifically. I find this thread interesting, if impassioned. Your suggestion it be closed got me to thinking - Don't react to the random rant and things won't escalate. Quite a few interesting threads might have been saved. Just my opinion.


 
Me, testy, never. 

If it were up to me, I'd leave all the threads open. But then we'd have to kick out the kids, and call it something else, like, say The Underground.


----------



## Nitro (Jan 30, 2008)

*Re: The Economy, What's your take*



mdocod said:


> this thread is running reasonably smooth for our CPF cafe IMO and if I were mod status I would allow it to continue it's course provided all parties remain civil. Nothing in thread has transpired that I would consider too "harsh" for CPF proper. I think most mods would agree but would be keeping a close eye on how things transpire. Politics can get aggressive fast, lets all keep it functional and educational, it's simple, don't say "this is" say "this is what I feel or heard about this" and we can all potentially learn something without feeling like our ego needs redemption.
> 
> keep it coming... I'm really enjoying this thread.


 
Does that include calling Americans (which would be me) Sleeping, Ignorant and deserving of our coming misery?:thinking:


----------



## LuxLuthor (Jan 30, 2008)

*Re: The Economy, What's your take*

I support Nitro's points.


----------



## tarponbill (Jan 30, 2008)

*Re: The Economy, What's your take*

ADDI 2003 worked as planned. Now what do we do?

http://www.hud.gov/offices/cpd/affordablehousing/programs/home/addi/


----------



## MarNav1 (Jan 30, 2008)

daveman said:


> The best position to take in the long haul is to get out of USD assests. That includes stocks.
> 
> If you really bought them cheap, I recommend you to unload them now and diversify into gold, Austrailian dollars, and maybe some Yuan (but you won't be able to get out of it for some time).


Maybe some Kruggerands too. Anything that can't be inflated so easily. For some reason people want to tie gold or silvers value to Federal Reserve Notes when it CANNOT be done. It's just that simple. Gold will hold it's value no matter what any other paper "currency" does. Now if you could take your $20 FRN down to the bank and redeem it for $20 in gold it would be a different story. Remember what a dollar is by definition and this is according to the Coinage Act of April 2, 1792. It is based on the Spanish milled Dollar 1) Silver- 412.5 grains, 90% pure, 10% alloy added for strength and durability. 2) Gold- 27.5 grains, 90% pure, 10% alloy added for strength and durability. Article 1, Subsection 8, US Constitution states the Congress is responsible "To coin money, regulate the value thereof, and of foreign coin, and fix the Standard of Weights and Measures". Also and this is most important, the government coined and issued our money "
DEBT FREE". No interest would be paid to the Federal Reserve or anybody else, that is why this foundation is so very important. When Congress illegally gave their money making authority away to a foreign entity by allowing passage of the Federal Reserve Act and the Income Tax which is also illegal, the stage was set for the destruction of the United States. Section 19 of the Coinage Act states: If any of the said officers or persons shall embezzle ANY of the metals, every such officer or person who shall commit any or either of the said offenses, shall be deemed guilty of felony, and shall suffer DEATH. Such was the importance of an honest money system to our ancestors. This is what our country was founded upon and it has been corrupted completely, even the scriptures talk of this. And our country was based on that once too, you CANNOT build a house on sand as when the storms come it will eventually fall, and our Creator HATES unjust weights and measures because it enriches a few and steals from the many. This is the situation we find ourselves in today. I don't know how much more plain I can make it. There are plenty of books and resources where history and these concepts can be studied, there isn't enough space here to cover it all. Most of this is just common sense stuff, you don't need a degree in Economics to figure this out because they won't teach you these things anyway. There is no "mystery" to this at all.


----------



## WAVE_PARTICLE (Jan 30, 2008)

*Re: The Economy, What's your take*



daveman said:


> Is that so? Then I'm sure you would have no objections if China were to raise the value of their Yuan, *as the politicians and pundits have been asking for,* tomorrow to some 40+% of what they are now?...


 
Hence the term "bubble"....the bubble is already there and has been building up for the past few years.




daveman said:


> No, WP, I can't tell you how disappointed I am by your remark after some of the other more insightful, if not downright astute, posts you made before....


 
If I may, I would suggest that you do not take posts personally. 



daveman said:


> *THE DESPICABLE AMERICAN GOVERNMENT, SPECIFICALLY THE FEDERAL RESERVE, WAS THE ONE RESPONSIBLE FOR THE BUBBLE. *China wasn't the one issuing credits as fast as they can press the enter key.
> *AMERICA HAS NO ONE TO PIN THIS $%[email protected] ON BESIDES ITSELF.*....


 
Perhaps you think that America is the center of the universe and is the only place on Earth that can create bubbles. The bubble I was referring to was not about US credit, but about the unsustainable economic expansion of China itself.....exacerbated by the artificially low yuan.




daveman said:


> See what I typed above.
> 
> Heck, I'll type it again.*.*....


 
Daveman....I've read what you wrote....in big bold lettering.... there is no need to patronize me.



daveman said:


> A lot of Americans will want to blame someone else for their coming misery, as they have been kept in the dark for so long by their own ignorance that a sudden reckoning, despite however appropriate, deserving, or predictable it is, will put them in such frustration that they will give themselves over to WHATEVER nutty story the politicians feed them. "It's the Chinese, it's the Europeans, it's the Japanese, it's the damn UN, it's the media..."


 
I am not pointing fingers randomly here. I am merely providing my opinion from my perspective as a trader. More often than not, I do get a glimpse of what's going on behind the scenes before the general public does and I do get a chance dive really deep into the intracacies of the financial markets on a global scale. As well, I have access to a lot of expert opinions from my counterparts around the world as to what is happening on a realtime basis.

Daveman, I do not expect you to fully appreciate what I have to say, nor do I care. However, I would ask that you take a step back and try to take a less emotional approach to this discussion. Otherwise, I think this will be my final post in this particular thread, as I do not particularly enjoy engaging in emotionally charged exchanges....especially when directed at me when I have not instigated anything.


----------



## MarNav1 (Jan 30, 2008)

*Re: The Economy, What's your take*

I agree for the most part with both posts, with WP's because he gives us an idea of the way the central banks are manipulating things and Dave's too because he is right about what Americans will probably do. I have to remind myself constantly that Americans have been defrauded on an immense scale, as have other people's of the world and that education is what is needed. It's difficult to cut through 75 and more years of indoctrination that's for sure. As for emotionally charged exchanges that probably is a given but when iron rubs against iron sparks will fly, no doubt about it. This is a VERY important topic and I get frustrated too, I hope we can keep it civil to a degree or ya know the mods or Sasha will close er down. We can do it.


----------



## js (Jan 30, 2008)

*Re: The Economy, What's your take*

If everyone would please refrain from making personal comments or taking things personally, we can avoid this thread becoming a train wreck.

This means, for example, that instead of calling someone "irrational", you focus instead on the topic, and where you disagree, and why.

Making insulting comments about people, or groups, or opinions, or the discussion as a whole, will not help us keep a civil discussion going here.

If anyone is unclear on this concept, please feel free to send me a PM.


----------



## WAVE_PARTICLE (Jan 30, 2008)

daveman said:


> The best position to take in the long haul is to get out of USD assests. That includes stocks.
> 
> If you really bought them cheap, I recommend you to unload them now and diversify into gold, Austrailian dollars, and maybe some Yuan (but you won't be able to get out of it for some time).


 

If I understand you correctly, you recommend to *sell low, buy high*?



I might take a slightly different approach.


----------



## PEU (Jan 30, 2008)

MARNAV1 said:


> Maybe some Kruggerands too. Anything that can't be inflated so easily.



Marnav1, we get what are you trying to say in your last posts, the dollar is not tied to anything...

But, you have too much faith in commodities such as gold and other minerals, there is a Dilbert comic strip that puts this in context, I tried to find it but only found the text:

Dilbert's Dog Dogbert enters a jewelry store:

Clerk: Are you interested in purchasing one of our diamonds?

Dogbert: Let me get this straight. I give you a pile of money, and in return you give me a pebble you found on the ground.

Clerk: But these aren't ordinary pebbles! They're very special, very rare ones!

Dogbert: That's only because you made a marketing decision to restrict the supply.

Clerk: Rats! You know our secret. Here, have a free bag of diamonds.


My point is, commodities can be manipulated too...


Pablo


----------



## daveman (Jan 30, 2008)

WAVE_PARTICLE said:


> If I understand you correctly, you recommend to *sell low, buy high*?
> 
> 
> 
> I might take a slightly different approach.


No, I recommend buy low, sell high. It's just that your perception of value these days, what's high and what's low, is off, WP.

If you think U.S. stocks is "low" right now, wait till summer. As for gold, I won't explain myself, but will let time tell the story.


----------



## daveman (Jan 30, 2008)

MARNAV1 said:


> Maybe some Kruggerands too. Anything that can't be inflated so easily. For some reason people want to tie gold or silvers value to Federal Reserve Notes when it CANNOT be done. It's just that simple. Gold will hold it's value no matter what any other paper "currency" does. Now if you could take your $20 FRN down to the bank and redeem it for $20 in gold it would be a different story. Remember what a dollar is by definition and this is according to the Coinage Act of April 2, 1792. It is based on the Spanish milled Dollar 1) Silver- 412.5 grains, 90% pure, 10% alloy added for strength and durability. 2) Gold- 27.5 grains, 90% pure, 10% alloy added for strength and durability. Article 1, Subsection 8, US Constitution states the Congress is responsible "To coin money, regulate the value thereof, and of foreign coin, and fix the Standard of Weights and Measures". Also and this is most important, the government coined and issued our money "
> DEBT FREE". No interest would be paid to the Federal Reserve or anybody else, that is why this foundation is so very important. When Congress illegally gave their money making authority away to a foreign entity by allowing passage of the Federal Reserve Act and the Income Tax which is also illegal, the stage was set for the destruction of the United States. Section 19 of the Coinage Act states: If any of the said officers or persons shall embezzle ANY of the metals, every such officer or person who shall commit any or either of the said offenses, shall be deemed guilty of felony, and shall suffer DEATH. Such was the importance of an honest money system to our ancestors. This is what our country was founded upon and it has been corrupted completely, even the scriptures talk of this. And our country was based on that once too, you CANNOT build a house on sand as when the storms come it will eventually fall, and our Creator HATES unjust weights and measures because it enriches a few and steals from the many. This is the situation we find ourselves in today. I don't know how much more plain I can make it. There are plenty of books and resources where history and these concepts can be studied, there isn't enough space here to cover it all. Most of this is just common sense stuff, you don't need a degree in Economics to figure this out because they won't teach you these things anyway. There is no "mystery" to this at all.


Worthy of a repost...


----------



## PEU (Jan 30, 2008)

And another half point slashed by the FED, markets reaction seems to be good, it was expected at least that...


Pablo


----------



## daveman (Jan 30, 2008)

PEU said:


> And another half point slashed by the FED, markets reaction seems to be good, it was expected at least that...
> 
> 
> Pablo


Hahahaha, 3% rates? Hahaha, why wouldn't people get themselves into more debts and keep borrowing? Why should American families save and work off their debts when the real interest rates are lower than the inflation rate (already tortured to the low side by the government)?

This is too sad to be funny, but I still want to give it one more laugh. 
HAHAHAHA.


----------



## daveman (Jan 30, 2008)

PEU said:


> Marnav1, we get what are you trying to say in your last posts, the dollar is not tied to anything...
> 
> But, you have too much faith in commodities such as gold and other minerals, there is a Dilbert comic strip that puts this in context, I tried to find it but only found the text:
> 
> ...


Correct, Pablo, but if commodities can be manipulated, how much more so for paper money?


----------



## js (Jan 30, 2008)

PEU said:


> And another half point slashed by the FED, markets reaction seems to be good, it was expected at least that...
> 
> 
> Pablo



Another 50 on top of the 75 already made just a week ago. That has got to be some kind of record, right? 1.25 percentage point drop in, what?, 7 days?


----------



## daveman (Jan 30, 2008)

*Re: The Economy, What's your take*



Nitro said:


> Let me get this straight. Are you saying the "American" thing to do is convince the Sleeping/Ignorant American Masses to pull all their money out of the stock market, and buy Gold?


No, but once the masses realize the pyramid scheme that is today's U.S. economy, they won't wait for anybody to tell them to head for the exits.

But, of course, the doors automatically lock when the customers all try to leave at once. The booze has ran out, the cops have arrived, and Bernanke showing up with a couple more kegs of beer won't keep the orgy going much longer, if at all.


----------



## daveman (Jan 30, 2008)

*Re: The Economy, What's your take*



WAVE_PARTICLE said:


> Hence the term "bubble"....the bubble is already there and has been building up for the past few years.
> 
> Perhaps you think that America is the center of the universe and is the only place on Earth that can create bubbles. The bubble I was referring to was not about US credit, but about the unsustainable economic expansion of China itself.....exacerbated by the artificially low yuan.


The unsustainable economic expansion of China creating a bubble in the Chinese economy? First of all, let me pretend that is the case, as any layman may find that agreeable seeing how China's latest inflation numbers are some 7%. But even if there is a "bubble" (the term was used incorrectly in your post) in China, even if the corrupt Chinese banks, and they are very corrupt, go belly up on their corrupt loans, the Chinese government have the money to fill that hole, all of it... nothing will pop in China. All because their economy is growing, is actually creating wealth, by manufacturing, by making items that foreigners will have to hand over money for (as a sidenote, if they should start disliking what they're getting for the goods they're handing off, they will start demanding something else more tangible), they're inflation is accompanied by REAL GROWTH. Which leads to the following: there is no bubble in China, just inflation that can be managed. The Shanghai stocks, the housing "bubble," will not pop, deflate a little, maybe, but not pop. The money has no where to go in China; those hard working, hard saving Chinese have no where else to put their money.

On the other hand, America... well, the picture is clear without me having to elaborate. 



WAVE_PARTICLE said:


> Daveman, I do not expect you to fully appreciate what I have to say, nor do I care.


That makes one of you; I do appreciate and care about what you have said, but was just a little let down by the last post. Guess I am the only weirdo in here...


----------



## daveman (Jan 30, 2008)

*Re: The Economy, What's your take*



js said:


> If everyone would please refrain from making personal comments or taking things personally, we can avoid this thread becoming a train wreck.
> 
> This means, for example, that instead of calling someone "irrational", you focus instead on the topic, and where you disagree, and why.


Thank you, JS, I couldn't have said it better myself, but was hoping for a mod to say it.


----------



## turkdc (Jan 30, 2008)

*Re: The Economy, What's your take*

I think that a lot of good points have been made in this thread. In response to Nitro's question about everyone selling their stocks and buying gold, I personally hope that that doesn't happen. Ownership of stocks can be a great way to make money. The problem is that the "money" that is "made" is backed by nothing. The person that holds gold is probably not going to "make" a lot of money. What that person will do is protect the money that he does have from the insidious power of inflation. 

Regardless of whether it is China's fault or Saudi Arabia's fault, or our own; when those foreign countries dump their USD we are going to see some crazy stuff happen to our economy. I personally wouldn't be surprised to see inflation and possible MASSIVE inflation. If that happens, gold, silver and other commodities become a way of protecting some of your assets. 

In the United States we really don't understand economics. We have an "economy" that is manipulated through monetary policy. Fiat money systems, historically, don't last forever. Good luck to everyone.


----------



## daveman (Jan 30, 2008)

js said:


> Another 50 on top of the 75 already made just a week ago. That has got to be some kind of record, right? 1.25 percentage point drop in, what?, 7 days?


The Fed is getting more predictable each day, this will not end well.


----------



## daveman (Jan 30, 2008)

*Re: The Economy, What's your take*



turkdc said:


> Regardless of whether it is China's fault or Saudi Arabia's fault, or our own; when those foreign countries dump their USD we are going to see some crazy stuff happen to our economy. I personally wouldn't be surprised to see inflation and possible MASSIVE inflation. If that happens, gold, silver and other commodities become a way of protecting some of your assets.


That logic is certainly true, and is what most folks think will happen before the gig is up. But the truth is, foreigners don't need to "dump" their USD holdings to crash the dollar. The dollar is already stretched too thin to require any dumping to get burned.




turkdc said:


> Fiat money systems, historically, don't last forever. Good luck to everyone.


That's the understatement of the century...


----------



## WAVE_PARTICLE (Jan 30, 2008)

js said:


> Another 50 on top of the 75 already made just a week ago. That has got to be some kind of record, right? 1.25 percentage point drop in, what?, 7 days?


 

125 basis points in two weeks is unprecedented....never happened in modern day history.

All the gains in the markets following the rate announcement has been completely erased due to reignited concerns over the bond insurers. FGIC was downgraded by Fitch and rumors are out that AMBAC and MBIA may suffer combined writedowns of $23 billion.....which would put these guys into bankrupcy. Also, some reporter from CNBC mentioned today that he thinks that AMBAC and MBIA downgrades are imminent, and that sent the markets into a selloff.


----------



## MarNav1 (Jan 30, 2008)

I understand what you are saying Pablo, anything can be manipulated. But in American Jurisprudence the foundation is gold and silver coin. The dollar is tied to something as I stated in a previous post. Federal Reserve Notes are not and this is a major point, people think they are the same thing and they are entirely different animals and operate in different jurisdictions of law as well. Very early on we used to be able to get gold and silver certificates that were redeemable in "lawful" money ie coin. They are gone too and have been for a long time now. Gold has been a standard of value for 3500 years minimum. It's the logical choice for an honest money system. There is no country in the world that I know of that wouldn't accept gold coin as payment of a debt. I know it has been at least since ancient Egypt, Moses and the golden calf. Probably far longer than that.


----------



## Nitro (Jan 30, 2008)

*Re: The Economy, What's your take*



daveman said:


> No, but once the masses realize the pyramid scheme that is today's U.S. economy, they won't wait for anybody to tell them to head for the exits.
> 
> But, of course, the doors automatically lock when the customers all try to leave at once. The booze has ran out, the cops have arrived, and Bernanke showing up with a couple more kegs of beer won't keep the orgy going much longer, if at all.


 
I also recommend trying coffee without Kahlua.


----------



## Sigman (Jan 31, 2008)

Merged like threads...


----------



## daveman (Jan 31, 2008)

*Re: The Economy, What's your take*



Nitro said:


> I also recommend trying coffee without Kahlua.


I guess that's about as much economic understanding as can be expected of you. 

Honestly, Nitro, if you don't understand the subject, you can sit in and read, or even ask questions; no one will think any less of you for not trying to appear the wiser, we all have to start somewhere.


----------



## LightInTheWallet (Jan 31, 2008)

"Helicopter Ben" sure has been a busy fellow. I heard the economy was hunky-dory. Dang these internets with the rumors and such. Citibank and Countrywide look like high potential investments. :thumbsup:


----------



## daveman (Jan 31, 2008)

LightInTheWallet said:


> Citibank and Countrywide look like high potential investments. :thumbsup:


Citi still has alot of Level 3 assests to sort through, and when they have, they'll have writtend down alot more losses then they had the past quarter. Their shares may rebound eventually, but it'll get worse before it gets better.

As for countrywide, their mortgage defaults are rising. That's after the BOA takeover. It'll get worse before it gets better.


----------



## js (Jan 31, 2008)

This is the last time I'm going to say this:

KEEP POSTS CIVIL AND FOCUSED ON THE DISCUSSION.

Posts that state or imply that people are drunk, stupid, irrational, or whatever, are not appreciated. If you think someone's posted opinion is out-to-lunch or way off base or ignorant, then _please_ address yourself _to the posted opinion_ and refrain from making insulting remarks about the poster him- or herself. And people better not use the "well, he started it" defense. I hope we are all clear on this matter now.


----------



## js (Jan 31, 2008)

WAVE_PARTICLE said:


> 125 basis points in two weeks is unprecedented....never happened in modern day history.
> 
> All the gains in the markets following the rate announcement has been completely erased due to reignited concerns over the bond insurers. FGIC was downgraded by Fitch and rumors are out that AMBAC and MBIA may suffer combined writedowns of $23 billion.....which would put these guys into bankrupcy. Also, some reporter from CNBC mentioned today that he thinks that AMBAC and MBIA downgrades are imminent, and that sent the markets into a selloff.



WP,

I'd love to hear more about this if/when you get more information and feel inclined to post about it.

I'd also still love to hear you explain in detail how FRR and credit creation by the banks work! Also, one question, what is above a AAA credit rating? "AAAA"? And what entities have a AAAA (or whatever) rating? The US government, presumably, and who else?


----------



## PEU (Jan 31, 2008)

Check this table from wikipedia: http://en.wikipedia.org/wiki/Bond_credit_rating






You can also check rating companies websites, such as Standard and Poors, Fitch, Moody's, etc


Pablo


----------



## js (Jan 31, 2008)

PEU,

Thanks for that. But this would suggest that there is NOTHING above a AAA credit rating. Perhaps that's true! WP?


----------



## da.gee (Jan 31, 2008)

There is no rating above AAA.

Government bonds. Treasury bonds and bills. Guaranteed by the government so always AAA.

Municipal bonds. A little different animal than government bonds. State, city or local governments issue these. Generally considered very low risk. Nearly always AAA. Municipal bonds have different credit criteria and rating system then corporate bonds. Favored by those with a large tax burden as interest is federally and often state tax exempt.

Agency bonds. Major ones include Ginnie Mae, Fannie Mae, Freddie Mac, Sallie Mae, Federal Home Loan Bank. Always AAA rated. Of those listed only Ginnie Mae and Sallie Mae (I think) are guaranteed by the government. The two biggest issuers of mortgage-backed securities, Fannie Mae and Freddie Mac are not. 

Corporate bonds. Basically a loan to the corporation and a promise to repay to the bondholder. This is where the rating agencies provide their input. Major agencies are Moody's, Standard and Poors and Fitch. They rate the company itself, not each individual bond issuance. Different financial metrics are examined to determine the likelihood of default. Things like debt-to-equity ratios, cash flow, ROE. interest coverage ratios, etc are evaluated and a rating is determined. Rating is important becasue it determines the rate at which a bond will be issued. Lower rated companies have to pay higher yields to compensate for the risk.

Corporate debt can be AAA rated but those companies that are have to have a pretty darn good balance sheet. When things start to go south you will see "downgrades" of corporate debt. It is much better to get an upgrade obviously.

Anything down to BBB is considered "investment grade". Anything lower is called "non-investment grade" or if you want to make it sound better it is often called "high yield".


----------



## WAVE_PARTICLE (Jan 31, 2008)

Triple A is pretty much the highest rating you can get. Essentially zero probability of default....


Why MBIA continues to have a AAA rating kinda makes me want to 


As for FRR, it would probably be better to start a separate thread on that....cause it can really dominate the discussion.... maybe I can start one.... I know a nice YouTube vid that can start off the discussion with... :thumbsup:

WP


----------



## Nitro (Jan 31, 2008)

*Re: The Economy, What's your take*



daveman said:


> I guess that's about as much economic understanding as can be expected of you.
> 
> Honestly, Nitro, if you don't understand the subject, you can sit in and read, or even ask questions; no one will think any less of you for not trying to appear the wiser, we all have to start somewhere.


 
Ok Daveman, I have a question.

You said:


Daveman said:


> The best position to take in the long haul is to get out of USD assests. That includes stocks.
> If you really bought them cheap, I recommend you to unload them now and diversify into gold, Austrailian dollars, and maybe some Yuan


 
Then you said:


Daveman said:


> I called your post "unamerican" not because of anything remotely related to the 1st amendment, Nitro. It's unamerican because you're attitude will not awake the sleeping/ignorant american masses that need to be educated


 
So naturally I put 2 & 2 together and asked this:


Nitro said:


> Let me get this straight. Are you saying the "American" thing to do is convince the Sleeping/Ignorant American Masses to pull all their money out of the stock market, and buy Gold?


 
But then you said this:


Daveman said:


> No, but once the masses realize the pyramid scheme that is today's U.S. economy, they won't wait for anybody to tell them to head for the exits.


 
I really want to understand this, so help me out. Should I try to convince (teach) Americans to pull their money out of the Stock Market, or not?


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## daveman (Jan 31, 2008)

*Re: The Economy, What's your take*



Nitro said:


> I really want to understand this, so help me out. Should I try to convince (teach) Americans to pull their money out of the Stock Market, or not?


What's the "American" thing to do? It would be to boldly speak the truth in the face of blatant and vicious lies, as the case is with current monetary system and the stock market it has propped up the past 15 years. 

After having done that (speak the truth and dispelling the lies), it wouldn't be an "american" thing, but rather a self-perservation thing for everybody to get out of the stock market as they would have realized the current stock market is SO COMPLETELY detached from the real economy on main street that it is everybit as much of a bubble as the housing market had been.

So if you want to do the honorable thing to your fellow mankind, you will tell them to get off the trainwreck that's the U.S. stock market before it goes up in flames.


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## Nitro (Jan 31, 2008)

*Re: The Economy, What's your take*



daveman said:


> So if you want to do the honorable thing to your fellow mankind, you will tell them to get off the trainwreck that's the U.S. stock market before it goes up in flames.


 
I want to be sure. You are saying I, and all other Americans should pull our money out of the US Stock Market. Do I have that correct?


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## jtr1962 (Jan 31, 2008)

*Re: The Economy, What's your take*



daveman said:


> So if you want to do the honorable thing to your fellow mankind, you will tell them to get off the trainwreck that's the U.S. stock market before it goes up in flames.


I agree but what should they do with their money? Anything with US dollars such as bank accounts or bonds will become near worthless as well once we get hyperinflation. Same with housing. In fact, if I could I think I'd be playing the sell short game with housing right now. That's how much I feel they're headed sharply downwards.

So what's left? Hard commodities like precious metals or even food? Problem with both is the prices can fluctutate wildly, and often not in relation to their true value. Honestly, it looks like no matter what anyone does they're going to be screwed unless this train wreck can be prevented. The recent dual rate cuts totalling 125 basis points shows how desperate the situation really is. They only have 300 basis points left to cut. If that fails to help, you'll have to start _paying_ people to borrow money.

And to answer one of your earlier questions, yes, Americans will continue borrowing and get into a bigger hole so long as they are able to. Do they really have any choice? There are lots of people whose fixed expenses (not counting extras) are as much or even more than their take home pay from the $9 an hour Walmart job they have. The era of McJobs is partially responsible for the mountain of debt many families have. $9 or $10 an hour doesn't cut it, yet corporate America considers this "good money". Maybe it was 35 years ago. It doesn't even cover necessities nowadays.


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## daveman (Jan 31, 2008)

*Re: The Economy, What's your take*



Nitro said:


> I want to be sure. You are saying I, and all other Americans should pull our money out of the US Stock Market. Do I have that correct?


Unless you, or some other one of the other 300 million Americans holds stocks in the next Google or Bankrate, then I would absolutely recommend sell sell sell.

If everyone were to sell right away, the market will crash immediately, BUT, even if everyone stays in and let the market survive on life support, the market WILL STILL CRASH (DOW at ~8000, it's above 12000 now) ANYHOW BY YEAR'S END. So either way, people will burn, BUT WHOEVER GETS OUT FIRST, NOW, will get to keep some skin still.


You're welcome.


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## daveman (Jan 31, 2008)

*Re: The Economy, What's your take*



jtr1962 said:


> I agree but what should they do with their money? Anything with US dollars such as bank accounts or bonds will become near worthless as well once we get hyperinflation. Same with housing. In fact, if I could I think I'd be playing the sell short game with housing right now. That's how much I feel they're headed sharply downwards.


I posted on pg.8

"The best position to take in the long haul is to get out of USD assests. That includes stocks. 

If you really bought them cheap, I recommend you to unload them now and diversify into gold, Austrailian dollars, and maybe some Yuan (but you won't be able to get out of it for some time)."



jtr1962 said:


> So what's left? Hard commodities like precious metals or even food? Problem with both is the prices can fluctutate wildly, and often not in relation to their true value.


Fluctuate upwards, yes. Gold still has some ways to climb...until it is time to sell them again, at a REAL profit, most likely.




jtr1962 said:


> They only have 300 basis points left to cut. If that fails to help, you'll have to start _paying_ people to borrow money.


The Fed is already paying people to borrow money . I'll let you figure out this one yourself.


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## Nitro (Jan 31, 2008)

*Re: The Economy, What's your take*



daveman said:


> Unless you, or some other one of the other 300 million Americans holds stocks in the next Google or Bankrate, then I would absolutely recommend sell sell sell.
> 
> If everyone were to sell right away, the market will crash immediately, BUT, even if everyone stays in and let the market survive on life support, the market WILL STILL CRASH (DOW at ~8000, it's above 12000 now) ANYHOW BY YEAR'S END. So either way, people will burn, BUT WHOEVER GETS OUT FIRST, NOW, will get to keep some skin still.
> 
> You're welcome.


 
I won't ask how you KNOW the stock market is going to crash by years end, but I do have another question.

If everyone were to pull out of the market all at once, and after it crashes, what do you think will happen to the U.S. Economy?


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## daveman (Jan 31, 2008)

*Re: The Economy, What's your take*



Nitro said:


> I won't ask how you KNOW the stock market is going to crash by years end, but I do have another question.


Good, because I wouldn't have told you unless you paid me. You sound surprised that somebody should happen to know what will happen to the market "shortly" before it happens; know this then: somebody ALWAYS knows ahead of time.



Nitro said:


> If everyone were to pull out of the market all at once, and after it crashes, what do you think will happen to the U.S. Economy?


Exactly what this guy said will happen:



daveman said:


> If everyone were to sell right away, the market will crash immediately, BUT, even if everyone stays in and let the market survive on life support, the market WILL STILL CRASH (DOW at ~8000, it's above 12000 now) ANYHOW BY YEAR'S END. So either way, people will burn, BUT WHOEVER GETS OUT FIRST, NOW, will get to keep some skin still.


 
Didn't you read his post?


Oh, and once again, you're welcome.

EDIT: You see, Nitro, the stock market, and to a lesser extent, the overall economy, will crash regardless of the masses waking up and getting out of the pyramid scheme in time. But the big boys, the main players, want to keep the small guys (you and me, I assume) in the scheme until after they have completely pulled out of the deep end, if they haven't already. Whoever gets on the last bus is will be the sorry ones, so get off the bus now, and don't worry about it crashing, BECAUSE THE BUS HAD BEEN RIGGED WITH A TIME BOMB FROM THE VERY START.


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## Nitro (Jan 31, 2008)

*Re: The Economy, What's your take*

Daveman, I asked you what will happen to the U.S. Economy, not the Stock Market.


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## daveman (Jan 31, 2008)

*Re: The Economy, What's your take*



Nitro said:


> Daveman, I asked you what will happen to the U.S. Economy, not the Stock Market.


How the heck would I know?

But if the U.S. economy should crash due to the burst of an artificial and unsustainable stock market bubble (which I suspect it will) that propped up the economy in the first place, then this economy was doomed to serious catastrophy in the very beginning, no need for any patriotic American to feel sorry for this weak, poorly conceived, and fraud (I assume this would qualify as un-american to you) of a system having been corrected.

There, I hope you've learned something from all my typing. I didn't have somebody patiently typing out answers to my question in a one-on-one session during my learning process. I had to dig, dig, and dig some more from various sources; hope you at least don't despise my effort.


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## Nitro (Feb 1, 2008)

*Re: The Economy, What's your take*



daveman said:


> How the heck would I know?


 
You claim to know the Stock Market is going to crash by the end of the year. How could you not know what would happen to the U.S. Economy if everyone (directed by your infinite wisdom) were to pull out of the stock market, and cause, not just a crash to ~8000, but a 
disintegration to ZERO?


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## daveman (Feb 1, 2008)

*Re: The Economy, What's your take*



Nitro said:


> You claim to know the Stock Market is going to crash by the end of the year. How could you not know what would happen to the U.S. Economy if everyone (directed by your infinite wisdom) were to pull out of the stock market, and cause, not just a crash to ~8000, but a
> disintegration to ZERO?


 


daveman said:


> But if the U.S. economy should crash due to the burst of an artificial and unsustainable stock market bubble (which I suspect it will) that propped up the economy in the first place, then this economy was doomed to serious catastrophy in the very beginning, no need for any patriotic American to feel sorry for this weak, poorly conceived, and fraud (I assume this would qualify as un-american to you) of a system having been corrected.


 
My post was right above yours, man....


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## Nitro (Feb 1, 2008)

*Re: The Economy, What's your take*



daveman said:


> My post was right above yours, man....


Ok, I'll ignore you posting this


daveman said:


> How the heck would I know?


to my direct question


Nitro said:


> Daveman, I asked you what will happen to the U.S. Economy, not the Stock Market.


and ask another question.

Ok, so all Americans should pull their money out of the Stock Market, therefore killing it. Sould we also stop buying unnecessary items, and only buy food, clothes etc.?


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## daveman (Feb 1, 2008)

*Re: The Economy, What's your take*



Nitro said:


> Ok, I'll ignore you posting this
> 
> to my direct question
> 
> ...


Your answer is still in my post above, where I had left it. 

Now, as to your new question, people pulling their money out of the stock market will not kill it, but rather, the market is doomed because of the fradulent boom that has artificially kept it up the past few years. 

As for your shopping strategy, I think you would better off adjusting that to your needs. I don't know what you mean by "should we" stop buying xyz, this and that, as I don't know how your finance is doing. 

Is it just me or do your questions sound like they're repeating themselves now?

EDIT: And the tone of your posts doesn't sound very appreciative of my efforts to educate you? It's already past 10 here and I do have work next morning, so I'm basically staying up just to answer your questions because I never had anybody to answer my questions for free.


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## Nitro (Feb 1, 2008)

*Re: The Economy, What's your take*



daveman said:


> Now, as to your new question, people pulling their money out of the stock market will not kill it.


You don't believe if EVERYONE pulled their money out of the market it would kill it? 



> As for your shopping strategy, I think you would better off adjusting that to your needs. I don't know what you mean by "should we" stop buying xyz, this and that, as I don't know how your finance is doing.


This a general question. Do you think Americans should buy anything that they don't need? After all, if they shouldn't buy a company's stock, why should they buy a new HDTV.


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## Empath (Feb 1, 2008)

It is finished. If there is still a desire to continue, please start a thread in the Underground. 

Thread closed.


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