The News seems frantic today. The word recession is being tossed around quite a bit.

So? When does it start and when does it end and what does it mean for most of us?

It means we should all bow down to the Lord God Bush II and the Republicans and thank them for the this prosperity that they have brought us. We are so fortunate to be able to suffer and serve them.

Greenspan was on BBC and he said this is a once in a century event.

I've heard Washington Mutual bank is going to go into failure today as well.

According to Billy, it will be an October surprise.

Mal-investment can only go on for so long.

More reason to elect Bush III.

It's a problem older than dirt.
Credit is a scam. So are Gov.aid programs and fiat currencies.

These aren't issues that either candidate are willing to confront.

Hey, and Palin can see Russia from her house! Another reason to vote for Bush III.

So your views are in line with the SNL writers? Impressive.

And,like them, your jokes are ALMOST funny.

Quit trying to derail this thread.

So your views are in line with the SNL writers? Impressive.

And,like them, your jokes are ALMOST funny.

Quit trying to derail this thread.

You think that was a joke?

Palin also said she had some "insight" into Russia because "they are our next-door neighbors, and you can actually see Russia from land here in Alaska." But she acknowledged that she had never met a foreign head of state.

http://www.theleftcoaster.com/archives/013157.php

So your views are in line with the SNL writers? Impressive.

And,like them, your jokes are ALMOST funny.

Quit trying to derail this thread.

Facts are pretty tough for Bushies. Palin did say she could see Russia from Alaska.

GIBSON: "What insight into Russian actions, particularly in the last couple of weeks, does the proximity of the state give you?"

The correct answer would be : None
Instead she answered with a random fact. Not smart, IMO.

Now explain the relevance to this thread, please.

It is relevant because it is this kind of politics, thinking and leadership that has gotten us to this mess which is collasping in on us...that has devistated the economy. And truth be told, we have yet to feel the real pangs of our mismanagement if we continue down this path.

What is needed is new leadership. Albert Einstein said it best:

'Insanity: doing the same thing over and over again and expecting different results."

The Republicans offer us the same old politics. The same old policies and even more novice, inexperienced and untrained people to hold high office. McCain has said himself, he knows nothing of economics and business after being in congress for all these years. He has no training in this arena either. Palin, has minimal education as journalist. She has no idea about the monetary versus fiscal policy. She didn't even know what the Bush doctrine is, and yet he Republicans are willing to make her vice president and president...scarry! And then you wonder why things are so screwed up...duh!

It sounds like you're mistakenly looking to Government to save the economy. This mindset is a huge part our problem. The Government produces nothing. They only take from those that do.

This is one Fundamental truth that the founding fathers were aware of. It has been lost in both parties.

I agree that we need new leadership. Obama, unfortunately, offers nothing new at all.

Believe me, i'm not trying to defend Bush...but he wasn't the one who made all of the ill-advised variable interest loans to people who couldn't afford a rate change. This is just the greed of the companies biting themselves in their own ass.

It sounds like you're mistakenly looking to Government to save the economy. This mindset is a huge part our problem. The Government produces nothing. They only take from those that do.

This is one Fundamental truth that the founding fathers were aware of. It has been lost in both parties.

I agree that we need new leadership. Obama, unfortunately, offers nothing new at all.

The government regulates the markets and corporations, at least, it's supposed to. Since the Republicans let the corporations regulate themselves, short term greed has overtaken responsible capitalism.

Well, if it's this October I was only off by two years when I made my own predictions of this kind of thing in 2004.

I'm hoping we still got a good 6 months left here in Canada though ;)

This is just the greed of the companies biting themselves in their own ass..

I agree. High risk money actions are just that.
That said, the private companies weren't exactly working alone at the conception.

It sounds like you're mistakenly looking to Government to save the economy. This mindset is a huge part our problem. The Government produces nothing. They only take from those that do.

This is one Fundamental truth that the founding fathers were aware of. It has been lost in both parties.

I agree that we need new leadership. Obama, unfortunately, offers nothing new at all.

Clustering you completely missed the point. Today, the government regulates the market...like it or not. The arguement is not about if the government should be regulating markets...it has and continues to regulate the markets. So that is not the issue. The issue is, do you want change or more of the same?

And my point is that your Change IS more of the same, "like it or not".

Obama will not appoint to the regulatory agencies members of the industry being regulated.

And my point is that your Change IS more of the same, "like it or not".

And I think you are prejudicing the opposition...give them a chance. It is hard to think that even on their worst day, they could be any worse than what we have. And as Spider has said, the Obama camp is not going to put the fox in charge of the hen house as bush II did.

The Obama camp has not used the foxes yet. But the McCain camp is littered with them. So gee, I wonder who should I give the benefit of the doubt too?

This mindset is a huge part our problem. The Government produces nothing. They only take from those that do. The punctuation was wrong there.

Here:
"This mindset is a huge part our problem: The Government produces nothing. They only take from those that do."

So gee, I wonder who should I give the benefit of the doubt too?
Niether.
The government sponsored enterprises (GSEs) are a group of financial services corporations created by the United States Congress. Their function is to enhance(regulate) the flow of credit to targeted sectors of the economy
You're telling me that they failed to regulate companies created as regulatory measures. The regulators failed to regulate the regulators. So maybe we should add a third party of regulators to regulate the regulators of the regulators. It never stops.

But let me guess, with a few more tax dollars they can get it right.

Don't you realize how ridiculous this is?

You can't prop up a bad investments forever. Let the chips fall as they may. I'm out.

Niether.

You're telling me that they failed to regulate companies created as regulatory measures. The regulators failed to regulate the regulators. So maybe we should add a third party of regulators to regulate the regulators of the regulators. It never stops.

But let me guess, with a few more tax dollars they can get it right.

Don't you realize how ridiculous this is?

You can't prop up a bad investments forever. Let the chips fall as they may. I'm out.

Cluster, I think you are ignoring the facts here and making up a few as well. No one is calling for increased taxation to regulate the securities industry. No one is calling for regulators to regulate the regulators.

Investment is key to and economy. Investment is based upon trust. When you invest, you have to be able to trust the information that is being presented. What we have here is a failure of trust. That is why it is so messy. No one really knows the size of the problem or who has problem assets. Some people in very powerful places violated the trust that was given to them. Bush II appointed foxes to watch the chickens..and guess what the chickens got taken to slaughter.

From Wiki:
The SEC consists of five Commissioners appointed by the President of the United States with the advice and consent of the United States Senate. Their terms last five years and are staggered so that one Commissioner's term ends on June 5 of each year. To ensure that the SEC remains non-partisan, no more than three Commissioners may belong to the same political party.

The SEC is a non-partisan organization.

Cluster, I think you are ignoring the facts here and making up a few as well. No one is calling for increased taxation to regulate the securities industry. No one is calling for regulators to regulate the regulators.

Investment is key to and economy. Investment is based upon trust. When you invest, you have to be able to trust the information that is being presented. What we have here is a failure of trust. That is why it is so messy. No one really knows the size of the problem or who has problem assets. Some people in very powerful places violated the trust that was given to them. Bush II appointed foxes to watch the chickens..and guess what the chickens got taken to slaughter.

Not yet, you mean.
My post is an exaggeration to show the nature of Big Government.
With the recent Gov. "buy outs" some of the tax funds of your favorite programs just got re-directed. Taxes raises are the only option for statists with these pet projects now going "under funded".
With Obama's "across the board" tax approach, it's only a matter of time and nothing is off limits.

All of which outlining the failure of government regulation as a whole.They're stealing your money to make things worse.
But, hey, thanks to their inflation of the money supply, you're not giving them as much as you think you are.:rolleyes:

As for trust, no one in their right mind would have mich faith in a loan to someone who can't afford it.

Public debt in the US is over $9.6 trillion, what happens when banks and governments start to call in those loans as global economies slow down?

Lehman and Merryll Lynch are only the beginning. The only reason the BOA bought Merryll Lynch is to make themselves too big to fail, so when they too are looking at bankruptcy in the next few weeks the government will bail them out.

... The only reason the BOA bought Merryll Lynch is to make themselves too big to fail, so when they too are looking at bankruptcy in the next few weeks the government will bail them out.Perhaps, but it will not work. By letting Lehman fail, Paulson has admitted that the further pumping out of money (bail-outs and economy stimulus handouts etc.) is now counterproductive - Just as I predicted more than a year ago here:
http://www.sciforums.com/showpost.php?p=1502039&postcount=1

When describing the "6L Cycle" which has been successfully repeated several time, but I stated the one in progress more than a year ago would be the last. - I.e. end not in the start of the next "6L Cycle" but a run on the dollar and banks that becomes soon thereafter the worse depression ever of the US and EU.

Quoting from myself in that old post, but compressing to remove reference to the last cycle etc. yet repeat the "6 Ls":
"...
LIQUIDITY ... pumped out more money. This lead to:

LOANS to unqualified ...put cash in their pockets, which they quickly spent. This lead to a:

LINKAGE between increasing home price and the general economic prosperity, but jobs were being exported ... Joe American’s real wages went down ...his home became a:

LIABILITY, not an asset that he could borrow more against... The US might have been able to avoid depression and only have mild recession if it were not for the

LEVERAGE, which pooled many of these low quality mortgages together ... so banks and brokerage firms allowed large investors to buy them with only small fraction of the face value ... only one dollar was buying 25 dollars of face value assets. But then the “failure to perform” (mortgage default rate) went up and exposed the last buyers in the chain to bankruptcy and the:

LIQUIDATION ...of stock values have evaporated over night around the world in one day. {DOW down 504.5 today. (inserted today)} ...It threatens the entire banking system, but I expect that it will still be possible for central banks to save the system one more time with more {It did. (inserted today)}

LIQUIDITY (starting this “6L cycle” again) before this house of cards all comes crashing down in history’s worst depression with the dollar collapsed to pennies of current value. ... Here we go again, but this is the last time, I predict, before the crash...." {end of old post quote}

SUMMARY - I was correct: The last time the FED. ECB BoJ etc. pumped out money it did work - corporations prospered, banks made historic fortunes (Lehman paid $5.7 billion in bonuses last year, but now those recipients are without jobs. etc.) but the US debt grew ever faster and Joe American also added to his debt by refinancing his house and used his credit cards to keep buying at the stores, but as I predicted the music has now stopped and the piper must be paid.

Now more pumped out LIQUIDITY will just make the problems worse. The set of "6L cycles" has ended.

If the FED had bailed out Lehman after the bail out of Bear Sterns failed to stem bank failures (on top of the essentially mandatory, but huge unknown cost of the Freddy and Fanny bail out) everyone would know that it is all by printing press money (even without M3 data available to confirm that fact) so one would buy the US Treasury promises to pay later (called bonds). I.e. the US would soon have run-away inflation or default on its bonds. (It will eventually, but probably after the elections.)

I bet on the inflation choice so I put my funds still in the US into TIPs as I told in a post more than year ago also, except for stock related to medical drugs which wealthy will still buy or things China will be buying still from Brazil or Brazilians need (like the local Sao Paulo Water company, SBS is it ADR, It is my largest single holding but has given up 1/3 of my gains as foreigners are desperate for funds their banks will not lend so have been taking some of their profits in BRIC stocks.)

Hi Billy, thanks for your posts.
What would be the right move if you have 10k debt in Euros ?
I have been thinking the way how to play the situation if Dollar runs, and how will that effect Euro ?

Hi Billy, thanks for your posts.
What would be the right move if you have 10k debt in Euros ?
I have been thinking the way how to play the situation if Dollar runs, and how will that effect Euro ?I do not give specific advice, but in general with both US and EU in over their heads and growing problems there will be inflation so being a debtor is OK - loan will be easier to pay back later. I wish my choices were so easy. I have the curse of being relative rich :D so do not know what to do but am old also so do not care too much. :shrug:

I do not give specific advice, but in general with both US and EU in over their heads and growing problems there will be inflation so being a debtor is OK - loan will be easier to pay back later. I wish my choices were so easy. I have the curse of being relative rich :D so do not know what to do but am old also so do not care too much. :shrug:

LoL you are good people Billy.

I plan on just liquidating my money, will try to ply my trades in a barter system and when they make that illegal(or just start prosecuting it), I will have a lot of bullets to make them pay to take my freedom. Fuck their plans for a credit based slave system.

Well, Billy could be right.
I just heard again, from an advisor for the NY times on Detroit radio, IHO,this thing has months to go before it hits bottom.
What will be left is hard to say. There are already tumble weeds rolling through the midwest industrial areas.

So let's elect Bush III!!!

The News seems frantic today. The word recession is being tossed around quite a bit.

So? When does it start and when does it end and what does it mean for most of us?

May be USA could merge with Canada, since Canada does not seem to have any problem. Better yet, all three (USA, Canada, and Mexico) could merge, use oil from Mexico and Gas from Canada - then we save ourselves....

Wait a minute...is not that the plan between the Pres of these three countries?

I do not give specific advice, but in general with both US and EU in over their heads and growing problems there will be inflation so being a debtor is OK - loan will be easier to pay back later.

-Yeah, thats what I have been thinking too, but my problem is those the frikin interest rates which is eating me today :mad:
-Whats the easiest way to bet against Dollar, I think dollar will run faster than Euro ? Been thinking the way to benefit from the possible downfall of Dollar and pay my debt with "their own" money :D

Since Canadians are much better at electing responsible leaders, they should annex The United States and help us out...show us how a country should be run.

Since Canadians are much better at electing responsible leaders, they should annex The United States and help us out...show us how a country should be run.


You have my vote....but let us run the technology business, we are good at it.

May be USA could merge with Canada, since Canada does not seem to have any problem. Better yet, all three (USA, Canada, and Mexico) could merge, use oil from Mexico and Gas from Canada - then we save ourselves....

Wait a minute...is not that the plan between the Pres of these three countries?

-Yeah, the NAU and Amero, I´ve been saying that for a long time,
I saw it how it was done here in Finland, they screwed our national currency
down to the drain and then the Euro was easy to sold us, and to others.
Am I wrong but it seems to me that countrys with Monarchy (Brits, Sweden, Norway, Denmark) didnt apply Euro, whats with that ?

After reading Billy's 6L I was thinking about my buddies shop. He runs a souvenir shop in Sydney. Anyway, he hired this really cute but kind of psycho Korean girl. This girl has it in her head that every man wants a peace of her. So, in her confidence she walks and acts in an extremely seductive manner. I have to say, the first time I saw her I thought "I want a peace of that" :) anyway, in comes Joe American credit card in hand and before long like a siren from the deep he's caught in this woman's song. He couldn't pull his eyes away from her and everything she handed him he just took and said yes. Suddenly his card was through the reader and he was out nearly $2000 USD! Shit, you should have seen the look on this guy's face. I can't really explain it. He was havening a heart attack maybe?

I remember thinking, man, if this is how Americans are managing their money no wonder we're in deep shit.

M

He sounds like a Republican to me.

One thing I have been investing my money over the years is vinyl records, classics ones,
the original first-run prints with flawless condition, Jimi Hendrix, Doors, Beatles and so on.
I got the idea over ten years ago when everybody was dumbing them and replacing
those with CDs, I think that those classics will never loose value compared to artificial
stock markets and stuff like that. Last week I bought flawless vinyl version of...
...Saturday night fever :D lol Travolta on cover doing hes famous move, hilarious, I did pay for it 1 € in flea market :)

http://tbn6-beta.google.com/images?q=tbn:VMVZULOh44dcsM:http://ecx.images-amazon.com/images/I/51HEysRJ86L._SL500_AA280_.jpg

One thing I have been investing my money over the years is vinyl records, classics ones,
the original first-run prints with flawless condition, Jimi Hendrix, Doors, Beatles and so on.
I got the idea over ten years a go when everybody was dumbing them and replacing
those with CDs, I think that those classics will never loose value compared to artificial
stock markets and stuff like that. Last week I bought flawless vinyl version of...
...Saturday night fever :D lol Travolta on cover doing hes famous move, hilarious,
I pay for it 1 € :)

That's exactly what's happening on different scales everywhere. There are classic American cars and motorcycles that are being bought up by foreign investors left and right. You never see an Harley Shovelhead anymore when just a few years ago they were all over.
On the other hand, there was some fluxuation in commodities markets recently that seemed a bit hard to justify with the current state of things.

Billy,
I really enjoyed your 6L post. (boy I bet it's great calling your shot :) )

As a novice of finance, would you mind explaining what caused this situation. I understand some of your 6L points, but a "joe six pack" version would be nice. From what I understand, and please correct me if I'm wrong, is the economy was sagging. The Fed lowered interest rates several times to boost the economy. Some "creative" lenders used the low rates to pitch variable rate mortgages. The low starting interest rate made for very low monthly payments in the beginning, so people bought more house than they could afford, and when the rate went up..so did their monthly payment...beyond the range of their earnings. So many people defaulted. Some companies bought the bad paper, and were left with nothing in the end.

I'm I on the right track?

Too much of the US economy is taken up by the financial sector...as compared to Europe for example.

A major downsizing in this area will mean more investment for the REAL economy.

I waiting gleefully for more investment banks to fail. :)

-Yeah, thats what I have been thinking too, but my problem is those the frikin interest rates which is eating me today :mad:
-Whats the easiest way to bet against Dollar, I think dollar will run faster than Euro ? Been thinking the way to benefit from the possible downfall of Dollar and pay my debt with "their own" money :DI bet against the dollar more than six years ago. - Moved money to Brazil's Real soon after it seem clear that it would not repeat the prior inflation history. I got four Real for each dollar (on average) then. A dollar buys only 1.81 at Cob today o or conversely I could buy almost three times my original dollars now. (It was at 1.56R$/US$ within last monthbut dollar has recovered some recently)*

I do not know how to do it, and do not trust the chinese government, but the Yuan is under valued all would agree, so just convering an investind in Chinese bank would appear to be good, perhaps chinese stocks even better (they are down now) but some day I think China will just say screw you capitalist dogs. - you have exploited us long enough. Probably this will be combined with huge drop in dollar value and they will agree to return you original number of dollars (worth very little compared to what they were when sent to china.)

There is no "sure thing" - if they were it would soon be killed by flow of funds taking advantage of it. Reason why I got good deal on Real had to do with fact now President Lula was prior to elections as major labor leader speaking to mass telling he would defalut on the debt , freeze big bank deposites, make social justice, repudiate Brazil's debt, etc. Anyone with wealth was despirate to get into dollars and I helped them on the black market (which is legal or at least very public in fixed location stores etc.) I knew (or at least bet) that Lula was much too smart to actually do any of his campaign promisses. When he was running for second term -the very same people who were afraid he might get elected the first time got scard he might NOT be reelected! his current approval rateings are 64% for & 8% against and more than 50% in ALL social economic classes - something that has never even come close before in quite polararized classes in Brazil.
---------------
*I have pondered a good bit trying to understand why. Part is what all say about Euroland not looking so good and chance that US may need to raise interest rates both to contol inflation and to sell Treasury bonds, but I also think fact that some need dollars and the banks will not leand is causing them to sell stocks invested in the BRICs (taking considerable profit in many cases) as the only way to raise needed cash. They want that cash in dollars, so that makes demand for dollars. Ironically, the troubles in US are actually making the dollar gain some lost ground IMHO. - I have never seen this idea in print so you are the first to know.

LATER By edit. Now I Have:
"Had Wall Street endured the same sized collapse, {as the Russain "dow"} the Dow Jones Industrial Averages would be trading at 6,500 and the S&P 500 at 720. Predictably, Prime Minister Vladimir Putin has vociferously denied that the remarkable collapse of Russian markets during the last four months had anything to do with his own shenanigans and Russia's invasion of Georgia. Invoking the finely honed rhetoric of his Soviet predecessors, he blamed Russia's market collapse on "speculative" moves by Western institutions withdrawing funds because of the "mortgage crisis" in the United States and Europe." - Obviously, I think Putin has a point here, but the way he has treated western investors is IMHO, much more important even that Russain actions in Georga. All of the BRIC markets are down more than the DOW becuase foreigners are need cash badly, as I said yeaster day above.

Well, that's one more government bailout added to the list. Who's next in line?

I just don't see how it's fair for the Government to give a private company 85 billion dollars, and not give it to every company.

Believe me, i'm not trying to defend Bush...but he wasn't the one who made all of the ill-advised variable interest loans to people who couldn't afford a rate change. This is just the greed of the companies biting themselves in their own ass.

Bingo, Mac - you pegged it right on the button.

It was the senseless greed of management who's salaries and bonuses were computed on the dollar amount of outstanding loans - REGARDLESS of how risky those loans were. (And they also misrepresented the value/risk of those loans when they bundled them and sold them to others. That's why many of them are going to jail today.)

I just don't see how it's fair for the Government to give a private company 85 billion dollars, and not give it to every company.

Logistics.
The Gov. doesn't have any money either. They have to pick who they think are the most influential firms. If they keep bailing everyone out it becomes obvious that it's printing press money. That's when people loose faith in the US dollar and buy up "real" things instead. They would rather have a chunk of land ,for instance, than a bunch of dollar assets that are loosing value by the second.

I just don't see how it's fair for the Government to give a private company 85 billion dollars, and not give it to every company.

Careful! You're making the same mistake that Michael made - it's not a gift (giving), it's a loan. Don't you agree that that's a big difference?;)

Believe me, i'm not trying to defend Bush...but he wasn't the one who made all of the ill-advised variable interest loans to people who couldn't afford a rate change. This is just the greed of the companies biting themselves in their own ass. The people who made the big money off of this aren't the ones who will get bit, mostly. They're rich, and they've enjoyed huge tax breaks and other benefits allowing them to keep even more of their money than the rich of the past.

Almost everyone in this game made money, and gets to keep it.

the people who made usurious and un-repayable loans on terms and representations that used to be prosecuted in the courts made large fees and bonuses

the bankers that bundled these loans for sale in ways that concealed their intrinsic worthlessness, and entered them as assets in violation of formerly established accounting rules, a practice formerly illegal and guarded against by the government, made big money

the people who set up insurance operations to guarantee these bad loans in ways formerly prevented by government regulation made fat salaries and bonuses

the various hedge fund CEOs and other upper level financial operators that took commissions for putting together highly leveraged and complex deals involving these phony assets and other people's investments made huge money - all time planetary records were set, and the tax rates were lowered especially for them, so they got to keep it

and so forth, all around the horn.

Many trillions of dollars were extracted from the US mortgage industry, and where it all went would be an interesting question. Off shore, away from the crash, would be likely for much of it.

And all of that was made possible by Phil Gramm and other members of the Republican Congress, W&Co and their tax cut mantra and revocation not only of regulation but of enforcement of the remaining regulations, and the other players in the Reagan legacy era.

If all we had to worry about was the makers of the bad loans getting bit in the ass, we wouldn't be reading these headlines.

Great post, Iceaura.

Great post, Iceaura.Yes it was, but nothing I did not explain more than a year ago at:
http://www.sciforums.com/showpost.php?p=1502039&postcount=1
When defining the "6L cycle." (A condensed version of that link’s post is post 30 of this thread.)

I can add to Iceaura's post some quantative information:

Lehman paid bonuses totaling 5.7 BILLION last year. - All that churning and repackaging of now nearly worthless paper did bring in lots of profits and they were shared out with the employees who did that creative re-packaging of mortgages, to make marketable securities which brought in more funds to buy still more mortgages etc. etc. building the leverage ever higher.

Also more than a year ago, as posted in the above "6L cycle" OP, that Leverage (one of the "6Ls") ratio was only 25 (still outrageously dangerous) and now (actually a few months ago - current data not available) it is 32! That means these greedy guys and their firms lent $32 dollars out for every one they had so it only took a 3% default rate to bankrupt them. But before the s*** it the fan, it was great for the annual bonuses. Now most of Lehman's staff is looking for a job. - I suggest the they could work in the prison laundry or license plate plant. They knew what they were doing. The risk they were taking with the US economy for personnel gain.

Hell if they had stolen a TV and got caught they would be in Jail. In GWB's government stealing a few million is OK. He has taken millions from the Saudi to keep the US hooked on oil. His scheme of making alcohol from corn uses essentially as much oil as the as the cars running on pure gasoline would use so it was / is just a way to distract Joe American into thinking GWB was not still the faithful servant of the Saudi Royal family that started funding him 30 years ago with a gift of money (to his father) to buy a small oil company for GWB.

With his management skills, GWB was able to bankrupt even an oil company! Now he has graduated and bankrupted the entire USA by deregulations, tax transfers to the wealthy supporters, starting needless wars (certainly not against his financial patrons, the Saudi, who trained the 9/11 in their "religious" schools and indirectly funded the attackers with their oil profits.)

Careful! You're making the same mistake that Michael made - it's not a gift (giving), it's a loan. Don't you agree that that's a big difference?;)

Sorry, I understand it's a loan. Wrong word used there. I'm just not in love with the idea of the Government loaning money to a single private company, without offering those kinds of loans to all business. To me, that's favoritism. It might me necessary to bail out AIG, I just don't think it's fair to cover the ass of one company because of bad management, when other smaller companies would not even be considered for such things. (ie. Joe's Diner)

Sorry, I understand it's a loan. Wrong word used there. I'm just not in love with the idea of the Government loaning money to a single private company, without offering those kinds of loans to all business. To me, that's favoritism. It might me necessary to bail out AIG, I just don't think it's fair to cover the ass of one company because of bad management, when other smaller companies would not even be considered for such things. (ie. Joe's Diner)

Yes, and I agree.

I just don't see how it's fair for the Government to give a private company 85 billion dollars, and not give it to every company.

Yup, that little point seems totally lost on so many people.

It another bubble they(Global Financiers that control your FED) are purposely building to bust spectacularly.

You are going to have to learn Canadian and Mexican soon. (Kidding)

Sorry, I understand it's a loan. Wrong word used there. I'm just not in love with the idea of the Government loaning money to a single private company, without offering those kinds of loans to all business. To me, that's favoritism. It might me necessary to bail out AIG, I just don't think it's fair to cover the ass of one company because of bad management, when other smaller companies would not even be considered for such things. (ie. Joe's Diner)

The first difference is that AIG stands as a financial intermediary, insurer and reinsurer in a huge number of situiations. If Joe's diner fails, that may affect Joe, his employees and the businesses that are in the immediate area, but if AIG fails that affects Bank of America, Chase, JP Morgan, lots and lots of leasing companies, Travelers Insurance, Wachovia...it's probably a shorter list to name the companies that do *not* have some exposure to AIG. Worse, AIG doesn't even have to go under, their being downgraded has already caused a lot of problems in a large number of financial transactions that were counting on them maintaining a high credit rating. To take an easy example, let's say you liek to fly in airplanes....AIG's aircraft leasing subsidiary finances or backstops the financing on a lot of them, and AIG's downgrade puts that company in a precarious position, which puts lenders involved in a precarious position which makes them think about repossessing planes, which puts many of the major airlines (many of which lease their planes) in danger.

So there is a disparate effect on the economy between Joe's Diner and AIG. The fall of AIG could trigger a panic, the fall of Joe's Diner, probably not.

The second reason is that AIG has a lot going for it. It has $78 billion worth of equity right now, despite its losses (almost all of which were generated by one subsidiary, AIG Financial Propducts). That means if you take the (book) value all their assets and subtract the book value of all their liabilities, they should have $78 billion of assets left over. If you let AIG FP go bankrupt and leave the parent alone (which means the creditors of AIG FP are screwed, but would leave all its insurance operations intact, AIG is still earning a net profit. At the end of the last fiscal year, despite the losses by AIG FP, AIG still manages to earn $6 billion in net profits. This year it is losing money, so far, though those losses are again ties to their participation in the financial products. (Though I suppose the aircraft lease products are "financial products" as well, and that sub makes a tidy profit and is estimated to be worth $11 billion all by itself.)

AIG has a lot more ability to repay $80 billion in loans than Joe's Diner. Many restaurants have negative equity, where their liabilities exceed their assets.

Yeah whatever, we'd all love to be able to run a business that, even though accused of fraud all the last decade and makes huge mistakes, still gets bailed out by the big boys.

Thanks for the response, Pandaemoni,

I see what your saying. Maybe the diner was a bad example, I was just trying to make the point that most businesses do not have the luxury of a government bailout and just have to make it on their own.

No company should be allowed to be so big, that failure would kill the economy...or am I just living in a pipe dream?

You are 100% correct Mac

You see if what Pandemoni said was correct, there would be a bunch of billionaires lining up to invest and inject a cash infusion to that company for stock options. It happens all the time.

That company getting bailed out is going to help reinforce the mentality of corruption and no penalty of loss or punishment for mistakes or illegal wrongdoing.

Yeah whatever, we'd all love to be able to run a business that, even though accused of fraud all the last decade and makes huge mistakes, still gets bailed out by the big boys.

I do agree that something needs to be done about the "too big to fail" companies. Preferably those companies should be compelled to buy insurance against their own collapse from the federal governent (i.e., pay a special "too big to fail tax") that offsets the need for the government to step in. Hard to price that insurance, but not impossible, and it shifts the risk of these market disruptions back onto the markets themselves.

That said, the impact of AIG is global, and the feedback from its falling would circle the globe in a way that it wouldn't from most businesses. We can wish it weren't so, but wishing alone won't solve the problem.

Something weird happened. Let me just say that i believe this started at the lower level and i dont think the people involved understood that people take out loans they wont\cant pay for.

I do agree that something needs to be done about the "too big to fail" companies. Preferably those companies should be compelled to buy insurance against their own collapse from the federal governent (i.e., pay a special "too big to fail tax") that offsets the need for the government to step in. Hard to price that insurance, but not impossible, and it shifts the risk of these market disruptions back onto the markets themselves.

That said, the impact of AIG is global, and the feedback from its falling would circle the globe in a way that it wouldn't from most businesses. We can wish it weren't so, but wishing alone won't solve the problem.

Nope. You cannot have a free economy that only goes up up up, particularly in such an irresponsible time that the U.S is having right now. From expensive wars, to CEOs getting away with fleecing Billions out of legitimate investors, to Joe blow with all kinds of shit he doesn't need that he bought on creditcards...with a bumper sticker "He with the most toys wins".

I know America just likes to win. Win all the time. Sometimes, you lose and it is important to acknowledge it and rebuild, or you will lose bigger.

You see if what Pandemoni said was correct, there would be a bunch of billionaires lining up to invest and inject a cash infusion to that company for stock options. It happens all the time.

That company getting bailed out is going to help reinforce the mentality of corruption and no penalty of loss or punishment for mistakes or illegal wrongdoing.

No there would not be a bunch of billionaires lining up, but feel free to put words in my mouth and senselessly and incorrectly expand on my remarks the next time you don't understand what I'm saying, m'kay? It is true that AIG has a healthy equity cushion, but you need a strong risk tolerance and a long term outlook to rely on that, and most investors do not have it. If AIG's assets were liquid (and hence you could realize a return on them swiftly), AIG wouldn't need the loan. If that company defaults on the loan (a real possibility), the government will need to seize its assets and sell them in a divestiture that could take a decade if you want to get full value for them. No private investor want's to buy their way into a bankruptcy, even in a secured position, and in this case it's hard to tell what the market value oif the assets would be. Governments, not caring about "returns" as much, tend to have a higher risk tolerance and more of a tendedncy to place value on externalities like enhanced market stability that private investors do not care about.

Nope. You cannot have a free economy that only goes up up up, particularly in such an irresponsible time that the U.S is having right now. From expensive wars, to CEOs getting away with fleecing Billions out of legitimate investors, to Joe blow with all kinds of shit he doesn't need that he bought on creditcards...with a bumper sticker "He with the most toys wins".

I know America just likes to win. Win all the time. Sometimes, you lose and it is important to acknowledge it and rebuild, or you will lose bigger.

You see if what Neizschefan said is correct, then the economy has not gone steadily up since the middle ages, after all you can't keep going up, up, up! No doubt we are due for the crach backwards to medieval levels of income and economic prosperity any century now.

LOL you don't care if your government gets fucked on the loan? That's GOT to get paid someday too Panda(the government debt)!

You must work in some kind of financial circle to have a fucked up idea like that...

You see if what Neizschefan said is correct, then the economy has not gone steadily up since the middle ages, after all you can't keep going up, up, up! No doubt we are due for the crach backwards to medieval levels of income and economic prosperity any century now.

Right and if we are to believe you, there has never been a "correction" for bubbled markets, uninformed or ill-advised investing(RAMPANT now).

LOL you don't care if your government gets fucked on the loan? That's GOT to get paid someday too Panda!

You must work in some kind of financial circle to have a fucked up idea like that...

I do care if the loan is repaid, but the loan can be repaid by liquidating AIG in along and deliberative process, as opposed to liquidating it in a firesale this week and hoping everyone else can pick up the pieces. One way (my way) gives people the time needed to unwind deals and ease the fall. Another way (your way) threatens to leave many, many more people unemployed, homeless and looking for soup kitchens.

If you can't understand the difference between a slow liquidation and a quick collapse, then I propose we illustrate it thusly: Let's find a tall tree and climb to the top. I will climb down a ladder, and you can jump off and freefall to the ground. We'll both wind up at the bottom, but one path there will have inflicted a great deal more damage.

Right and if we are to believe you, there has never been a "correction" for bubbled markets, uninformed or ill-advised investing(RAMPANT now).

Of course there are corrections and cycles, please point to where I said otherwise . . . Go on . . . Do it!

Oh, I'm sorry, I seem to have set fire to your straw man. Learn to argue like an adult, using logic. Please. You make me embarrassed for you.

Sounds to me like you Americans love the benefits of a free market economy, without the pains of an honest, downturn. Good luck. Governments always grow, they never shrink. Hand them a few more powers while you are at it.

Jesus christ, and my country is freaking about spending 10-15billion a year on the Afgan war. I'm starting to think Canada, will come away pretty clean even if U.S completely topples.

The News seems frantic today. The word recession is being tossed around quite a bit.

So? When does it start and when does it end and what does it mean for most of us?

There is no recession. Don't believe a word you hear in the Newspapers! What the poor and middle class call "recession," the super rich call "f**k yeah, honey time."

Its a maneuver where the rich get richer and the middle class are shoved around by fat-ass corporations, creating a sort of modern feudal spiral. CEO's do insider deals, ruining all the stocks. Businesses rape government funds by going bankrupt and getting bailed out with public funds, thus destroying and inflating the dollar.

Meanwhile food goes up in price, gas goes up in price, the middle class are then found wearing 1500's dark age type peasant clothing. (k, maybe not quite that bad, but you can see whats up)

The problem is that filthy rich people are getting angry and greedy with each other and thus beating the hell out of everyone else.

The gas prices go up when a hurricane hits, or when a man somewhere in Malaysia sneezes and shits simultaneously, thus qualifying as a "good reason to increase the price of gas."

But it isn't just that, the dollar is inflating like hell because corporations are jumping on the "feudal bandwagon" and abusing government funding, such as the many corporations that now infest (invest?) Iraq, millions and millions of dollars disappearing into building a country you and I will never visit! (it wouldn't be so bad if the corporations didn't make everything so overpriced)

MUTHERF**KERS!

Exactly, this is nothing less than the premeditated, carefully planned and executed, road to economic Feudalism.

Sounds to me like you Americans love the benefits of a free market economy, without the pains of an honest, downturn. Good luck. Governments always grow, they never shrink. Hand them a few more powers while you are at it.

I am not sure your remark is incorrect...though it's rather like saying, "You Americans love the benefits of living in homes, without the pains of an honest house fire." In fact, it is true, we love living inside walls, and yet we also call the fire department when those walls catch on fire, as some homes invariably will do from time to time. In this case, though, the analogy isn't so much to a single housefire, but to a conflagration that threatens to set an entire neighborhood ablaze.

Your suggested solution seems to be that Nero had it right. The emperor should fiddle while the whole of Rome burns (at least, that is, if Romans want the benefits of housing).

There is nothing illogical about wanting the benefits of a free market and wanting the government to mitigate the effects of downturns. We can debate the effectiveness of the mitigation, different bail outs the government might try or even whether (or why) certain targets are more deserving of it than others, but nothing suggests the two desires should be mutually exclusive.

In my case, if the effect of the collapse were limited to a single company and its investors (e.g. "Joe's Diner"), I'd be more or less in favor of letting it collapse. Even then, I'd be in favor of the government providing job assistance and unemployment compensation to Joe, and his employees. When a business's collapse generates significant negative externalities, though (which is precisely when people call it "too big to fail") then government efforts to at least control those externalities make sense and are appropriate.

The problem is that controlling the externalities on a one-by-one basis is a fool's errand. There are too many loose ends to grab ahold of and piece together. It's easier to shore up the troubled company itself. That gives everyone affected time for the mess to come in to a relatively smooth landing, as compared to the looming crash.

The 1949 recession was halted by an inflationary injection of $10 billion *(M1 measure, unadjusted). Stopping the very serious 1982 recession required about $100 billion. The mild 1990 reccession was halted by an injection of about $350 billion.
-Maybury

MZM is talking $2 Trillion this time around. Adjusted for consumer price index is still an over 22 fold increase of that of the 1950's.

The roof, the roof, the roof is on fire. You know the rest.

What does AIG insure?

What does AIG insure?

http://www.aig.com/insurance-individuals_20_16514.html

Thank you for the link KM,

How is AIG linked to bad mortgage investments?

The problem is that controlling the externalities on a one-by-one basis is a fool's errand. There are too many loose ends to grab ahold of and piece together. It's easier to shore up the troubled company itself. That gives everyone affected time for the mess to come in to a relatively smooth landing, as compared to the looming crash.

I wonder. IF the dollar crashed, would it be possible for the economy to continue running, using trade of goods and services? Hopefully it won't crash, maybe it will just slump a little? :shrug:

What percentage of the national debt is owed to American banks, As compared to owed to other Banks? :confused:

Can ethanol be implemented without food shortage or food price increase?

Thank you for the link KM,

How is AIG linked to bad mortgage investments?

I recommend Charlie Rose show where Charlie interviewed the founder of AIG - Hank Greenberg. My understanding is that greed took over risk management after they kicked him out and got involved in risky financial instruments.....

http://www.charlierose.com/shows/2008/9/16/1/a-conversation-with-hank-greenberg

The whole thing boils down to super greed in the absense of sound regulation. After all, the money belongs to someone else and if your competitor says, they will give you 30%, then you have to match it....

I wonder. IF the dollar crashed, would it be possible for the economy to continue running, using trade of goods and services? Hopefully it won't crash, maybe it will just slump a little? :shrug:
Some major currencies have had huge declines in value over the last century without collapsing.

The British pound and the Japanese yen are both examples.

Can ethanol be implemented without food shortage or food price increase?
Only if its from sugar cane...sugar is not really food.

Lots of calories...empty calories.

All sugarcane should be diverted to ethanol production, with corn syrup or sugar beets used for food sweetening agents.

And it could benefit the world....

What percentage of the national debt is owed to American banks, As compared to owed to other Banks?

http://www.fincher.org/images/2007-10-03-WhoOwnsNationalDebt.png

Which means Japanese are nice. They give us the money to buy TOYOTA....:D

We'll see if things free fall tomorrow. Looks like the AIG bailout might have done absolutely shit all nothing.

goddamn, our economy is worse than I thought. Could it really be an American Meltdown? It's some crazy shit. Gas went up quite a bit in my area. POEPLE SERIOUSLY, we cannot AFFORD another 4 years of Republicans and expensive wars, we need help here at home. Sun, this is the brokest I been in over 4 years.. im hurtin bad right now. AGAIN, please no republicans!

I am an under-educated and over-paid middle management level executive at the world's largest bank whose stock has been falling for months on end and has been involved in far too many scandals over the past few years for comfort.
This "recession" could very seriously impact me directly - and soon.
Honestly, though, I think, depending on how the elections go (not just presidential) and how we deal with it, a serious market crash could end up being positive for this country and help get us from under the thumb of corporate giants.
We should have never let ourselves get into the position that just a choice few companies failing could send our whole nation's economy into a tailspin and profoundly affect the markets in the rest of the world.
If my bank fails or goes into receicvership, there will likely be a stock market crash reminiscent of '29 - and that just may be what this country needs to reinvest it's resources locally and make "ownership society" more than just a placebo campaign slogan.
It may help us to replenish manufacturing jobs, local craftsmen and privately owned small businesses - which I think would make for a MUCH more stable, resilient economy.

I would have to file for banruptcy and start from below zero once again, but it just may be worth it.

Thank you for the link KM,

How is AIG linked to bad mortgage investments?

AIG acted as counterparty, on a massive scale, on what are known as "credit default swaps" that (to boil down something that gets complicated) are generally used as a way to guarantee loan payments. AIG was, thinking of it that way, guaranteeing payment on a large number of mortgage loans (sort of), and when they went belly up, the lenders had rights to call on certain payments under the swaps.

(More exactly they were entering credit default swaps on Notes that were themselves collateralized by pools of mortgages (aka "mortgage-backed securities"). When the mortgages tanked in value, the collateral for the securities looked bad, and they had to may both payouts and pay margin calls under their swaps forcing them to take a loss and tying up a lot of their liquid assets. In effect, they were "insuring" payments under the mortgage backed securities, and were not properly diversified.)

I feel you Raven, I also look at it almost prophetically. I've been thinking, could the 2012 Prophecies actually influence a stock market crash and recession and usher in an era resembling the Great Depression? Shit's starting to look bad. And Im already feeling it. Damn yo..

http://www.fincher.org/images/2007-10-03-WhoOwnsNationalDebt.png

and thanks for this info Carcano. First time I actually thanked you.

It may help us to replenish manufacturing jobs, local craftsmen and privately owned small businesses - which I think would make for a MUCH more stable, resilient economy.

I would have to file for banruptcy and start from below zero once again, but it just may be worth it.

Well said. I agree wholeheartedly. I would go broke also, to obtain that environment of craftsmanship , quality, and rampant small business entrepreneurship and more importantly, the accountability that goes along with that.

We have been beholden to the corporations for far too long and have let it get far too out of hand.

It's kind of ironic...
Every investment advisor admonishes us all to be diversified in our investments, but our nation is not.
We should have thousands of local banks and investment firms and not allowed the size and scope of firms today.
A single coprorate entity failing should be a blip on the market radar, not the cause of a worldwide recession.

^wisdom to my ears, or eyes in this case.

We have been beholden to the corporations for far too long and have let it get far too out of hand.

It's kind of ironic...
Every investment advisor admonishes us all to be diversified in our investments, but our nation is not.
We should have thousands of local banks and investment firms and not allowed the size and scope of firms today.
A single coprorate entity failing should be a blip on the market radar, not the cause of a worldwide recession.

The question is: how much are we willing to pay for it? It was not all that long ago when banks were all pretty much local, and it was relatively expensive and inconvenient. Banks became larger because there are advantages to pooling capital. We can prevent that in the same way that we can prevent Walmarts from moving in. The problem is, not many want to pay for the expensive Mom & Pop operations, if inexpensive Walmart is an option.

There is also the problem that big banks run the financial system in the world. No big banks in America, just means that America loses its seat at that table. Banks in the U.K. (like Barclays) and elsewere (Credit Suisse, Soc Gen, Paribas, Danske Bank, Commerzbank, Mizuho, The Bank of Tokyo-Mitsubishi, etc.) would reap those rewards.

It seems to me that there are better fixes than arbitrary limits on bank sizes.

As for insurers, insurers have to be big. There are no Mom & Pop insurance companies, because their credit sucks. You need insurers with lots of money and geographic diversification.

The question is: how much are you willing to pay for it. It was not all that long ago when banks were all pretty much local, and it was relatively expensive and inconvenient. Banks became larger because there are advantages to pooling capital. We can prevent that in the same way that we can prevent Walmarts from moving in. The problem is, not many want to pay for the expensive Mom & Pop operations, if inexpensive Walmart is an option.
The inconvenience would be a thing of the past with the communication advances we have achieved since then.
The so-called advantages to pooling capital is exactly what causes us to be in the situation we have with individual banks which own upwards of 40% of the Nikkei (or at least did at one time recently).
With banks investing in local companies, rather than multi-national corporations we not only invest in our own communities, but as I said, diversify our resources.
Banks do not need to have $14 Billion quarterly earnings to remain solvent or even profitable - just to become a corporate superpower.

I never shop at Walmart, and would much rather buy from the guy who owns the store, knows my name and my mother's name.
He has a sense of pride and responsibility in teh community in which he lives.
You're right that many do not agree with that, and it's a terribly sad fact - this is the reason we are where we are now.

We work for the corporations...
We pay taxes to support the tax breaks they get to spend trillions of dallors a year on deductible advertizing to convince us to buy the shit...
We invest in them...
Their lobbyists have our politicians in their pockets...
More and more public services get privatized and sold off to them...
Our society is beholden to them, as are all of us, and there is little to no direct public accountability.
We are damned fools and are now settling into the bed we made and hiding our heads under the covers hoping these same coprorations and the corrupt politicians will see us through this mess, because we have sold off our power for shares in a company beyond our control.
Yes, you can say that people have the power because they can choose who they do business with. Think about what the repurcissons would be if Citi, HSBC, Ford and GM failed. The country would be in turmoil and it would take generations to recover from it - generations of unskilled laborers and white-collar deal brokers.

As I see it, there is no better, more stable, more resilient economy than one that empowers it's citizens to go into business for themselves or support themselves by craft.
The stronger the individual is, the stronger the nation is.

There is also the problem that big banks run the financial system in the world. No big banks in America, just means that America loses its seat at that table. Banks in the U.K. (like Barclays) and elsewere (Credit Suisse, Soc Gen, Paribas, Danske Bank, Commerzbank, Mizuho, The Bank of Tokyo-Mitsubishi, etc.) would reap those rewards.
What rewards are they?
The more we position ourselves as brokers, the more vulnerable we are to world markets, which can be disrupted by a single executive's string of stupid mistakes or megalomania.

It seems to me that there are better fixes than arbitrary limits on bank sizes.
Arbitraray? Where did that come from?
What better fixes do you have in mind?

As for insurers, insurers have to be big. There are no Mom & Pop insurance companies, because their credit sucks. You need insurers with lots of money and geographic diversification.
That's not entirely true.
Yes, they have to be rather large and have credit and capital, but they don't need to be nearly as large as AIG, nor do they necessarily need geographic diversification.
When I worked at the North Carolina Department of Insurance, we dealt with a good number of local, moderately sized insurance companies.
Again, if you want to be a monster and insure the world, you have to be the size of AIG, and when AIG crashes, we all pay $85 Billion.
I dealt with a lot of insurance companies with only several thousand clients.

Wow one_raven,

I hope you turn out ok. I agree, we need something to jar Americans into thinking again.

Michael

Here's an update on some financial institutes. I didn't realize Citibank was doing so badly.

http://newsimg.bbc.co.uk/media/images/45027000/gif/_45027679_market_values466.gif

Thats amazing, and scary. They lost so much in value.
But did the government really have to step in and take over AIG, Fanny Mae, and Freddie Mac? Couldnt they have just loaned them the money to recover?

Which means Japanese are nice. They give us the money to buy TOYOTA....:DAnd to keep the seventh fleet warships between them and China. - Why they will be left holding a big big bag of nearly worthless green paper someday. They do not dare do what all others with lot of Treasury bonds are doing - set up a sovern fund to buy real assets instead. Probably still economically smart decision - they have had very low denfense expenses since 1945, so even if all of their US reserves are lost, it may be about a wash. - IMHO, in addition to the better education provided to ALL OF their children than the US does, the fact that their economy has not been burdend by huge annual militrary expenses is why a nation with no natural resources is the second (perhaps soon the first?) economy in the world. (They will still be selling ever increasing amounts of High Value added stuff to China when US & EU are in depression.)

U.S importing goods from China made China what it is today.

Have you seen the amount of gold they have?
http://query.nytimes.com/gst/fullpage.html?res=9501EFDD1439F931A1575AC0A9679482 60 No I had not. thanks. Seems like Japan has gold fund, not a sovern wealth fund.Perhaps that is better as gold held dose not depend on ownership laws of some other country as title to a coal deposit etc. dose.

I know that India has huge amounts. What is just on the arms and finger of their women is impressive.

Do you know how much physical gold held in India, Japan & China compared to the annual production total?

Perhaps someone good at searching can get this data? Also how much physically in the USA is owned by other governments, etc. not USA or Americans?

PS to SAM: Think how much richer both India and Packestan would be if they simply agreed to make Casmir et. al. in dispute areas a separate nation and drastically cut their mutually off-setting military budgets.

And to keep the seventh fleet warships between them and China. - Why they will be left holding a big big bag of nearly worthless green paper someday. They do not dare do what all others with lot of Treasury bonds are doing - set up a sovern fund to buy real assets instead. Probably still economically smart decision - they have had very low denfense expenses since 1945, so even if all of their US reserves are lost, it may be about a wash. - IMHO, in addition to the better education provided to ALL OF their children than the US does, the fact that their economy has not been burdend by huge annual militrary expenses is why a nation with no natural resources is the second (perhaps soon the first?) economy in the world.

Have you seen the amount of gold they have?

http://query.nytimes.com/gst/fullpage.html?res=9501EFDD1439F931A1575AC0A9679482 60

By country:

Japan $881 billion (2006 est.)

http://www.globalfirepower.com/list_gold_reserves.asp

The only country with more gold is China at $1493 billion

Is it a coincidence that they also hold the most US treasury securities?

Japan: 593.4 billion dollars

China:518.7 billion dollars

http://www.ustreas.gov/tic/mfh.txt

edit: interesting pattern in Japanese holdings of US treasury notes from July 2007, don't you think? ;)

... interesting pattern in Japanese holdings of US treasury notes from July 2007, don't you think? ;)Yes. Japan is being more clever than I realized. - Growing their gold and reducing the paper US paper assets.

And Japan too.

Yes. Japan is being more clever than I realized. - Growing their gold and reducing the paper US paper assets.

You have to think like an Asian. :D

You do know they pay for oil in yen?

But since Nippon Oil agreed to pay for Iranian oil imports in yen, the US dollar has tumbled by 3.5-yen to as low as 119.10-yen.

http://www.financialsense.com/fsu/editorials/dorsch/2007/0726.html

You have to think like an Asian. :D

And walk like an Egyptian?

And walk like an Egyptian?

Does that lead to gold?:D

As I recall, that was the strategy used by the US after WWII to convert the dollar into an international currency [hoarding gold, not walking like an Egyptian]


Do you know how much physical gold held in India, Japan & China compared to the annual production total?

Nope but it would be interesting to know. A lot of gold in India is "hidden" because once people buy it, they rarely sell it.


Perhaps someone good at searching can get this data? Also how much physically in the USA is owned by other governments, etc. not USA or Americans?


This is the latest I could find, its a year old.

Foreign investors own $13.6 trillion of U.S. assets, including Treasury bonds, stocks and real estate. That is exactly 109% of the total GDP for 2005. In other words, if foreign entities called in their loans and sold all their assets, it would take over a year for the U.S. economy to generate enough revenue to buy it all back.

http://useconomy.about.com/b/2007/07/04/foreign-ownership-of-us-assets-greater-than-2005-gdp.htm

http://roflrazzi.files.wordpress.com/2008/09/mr-t-i-pity-the-foo.jpg?w=451&h=617

I read one of the reasons Japanese wanted to invade mainland China in WWII had to do with gold fever. Even hundreds of years before, Japanese pirates told stories about Chinese hoards of gold - but, the Chinese never kept their gold in any centralized location (aka never with the State) and supposedly they buried it somewhere around or in their family compounds; and so the Japanese spent a lot of time trying to find this gold. A little more added myth is - - the Japanese moved masses of gold they had stolen in WWII over to the Philippines (think of the thousands of years of Chinese gold building up!). Supposedly this gold was lost and there may still be a mega horde just waiting to be found, enough to make the Philippines a rich nation. OR, and more likely, the US forces took it back to the USA. We did occupy the Philippines for a long time. Which is another twist in the story. The Germans melted down the Mega Load and hid it in a bunker - there are films of this gold. It was massive. I mean massive. Just piles and piles and piles of gold as far as the eye could see. All the gold went back to the USA after WWII (we also occupied Germany) and hence Happy Days are Here Again. By the 1970s the USA had blown through all this gold (supposedly) and so that was added incentive to decouple the dollar from the gold standard. Most of that gold is back in Asia.

Interesting huh?

Well, that's the way I heard it :)

Also, Japan does spend a lot of money on their military. I think they are fourth or fifth in the world. And they PAY for the US military. Something that has pissed off a lot of Japanese for a long time. You should see the size of some of these bases in Kanagawa. Huge.



Lastly, now the US government is setting up a sheme to buy ALL of the bad debt?!? :wtf:
That is going to make me so pissed off. Those institutions need to go bankrupt for their insolence and competence. Jesus H Christ where's the justice in all this?! The RICH get to party and little Joe American gets stuck with the f*cking bill again.... pure BullShit. I can not believe I'd see the day Republicans would support this BS. It's shocking. I swear we're living the book 1984 and in the middle of the pep rally the party have switched messages.

Lastly, now the US government is setting up a sheme to buy ALL of the bad debt?!? :wtf:

That is going to make me so pissed off. Those institutions need to go bankrupt for their insolence and competence.

I can not believe I'd see the day Republicans would support this BS. It's shocking.
It shows us that Capitalism is fundamentally flawed. And the flaw has to do with SIZE!

If its too risky for huge economic entities to be a in private hands then private hands should not be allowed to hold them.

Officially the government is saying...'Yes we believe in private ownership...except when that ownership becomes so large and powerful that its failure would destroy us all.'

There is no point in trusting capitalism ONLY when it succeeds.

Michael: "now the US government is setting up a [scheme] to buy ALL of the bad debt?!?"

We are the bad-debt leaders of the world! We're #1! Can't touch this! USA! USA! USA! USA!...:yay:

um, can I borrow another cuppla billion or two pleeeeez? Hashimoto? Yasin? Jun San? C'mon, guys! :eek:

Couldnt they have just loaned them the money to recover?

And leave the existing management structure and policies that allowed the catastrophic failure in the first place?
Not a good idea.

It's a 6month stay of execution for the whole HOUSE OF CARDS.

And leave the existing management structure and policies that allowed the catastrophic failure in the first place?
Not a good idea.

Sorry, I was assuming that they would change the risk management policies when I asked about the loan. Won't it cost even more for tax payers if the government helps manage AIG? They have to help operate it. Its similar to the reason that private banks don't like to manage properties I guess.
If AIG could have fixed their risk policies, then maybe all they would have needed was the loan. :shrug:

I think it should be put into receivership and the policies sold off piecemeal or allowed to expire.
That's what we used to do in the Department of Insurance.

I don't see the benefit of allowing a failing company to continue to operate.

I think it should be put into receivership and the policies sold off piecemeal or allowed to expire.
That's what we used to do in the Department of Insurance.

I don't see the benefit of allowing a failing company to continue to operate.

"The company" is actually a huge collection of companies. AIG Financial Products is the albatross, for the most part, because it issued derivatives tied to the U.S. housing market.

The insurance businesses, though, are profitable taken in isolation and in no risk whatsoever of failing to pay off on the policies they issued. They bear no risk from the credit default swaps and no liquidity issues that result from them. (The insurance companies alone have something like $27 billion in net assets to pay off claims that may arise.) The reason AIG was looking to take loans from those subs (actually they were looking to trade them illiquid assets for $20 billion in municipal bonds, but the press has been calling it "loans").

AIG is in an odd position because they have a $24 billion "liability" for the swaps, but that amount is not the amount they expect to pay with respect to them, it's the amount of collateral they have to post in the form of cash. If they could unwind them, the $24 billion would be reduced without AIG needing to (necessarily) make a payment. It's a liquidity crisis, not a net worth issue.

Liquidity issues can be unwound so long as there is time. Technically it is a classic bankruptcy reorganization situation. They likely will sell off a few subsidiaries to raise the cash needed under the swaps, but the swap contracts require payment within 2 to 10 days, and you can't close a merger in 2 to 10 days. They have far more in value in their subs (even excluding the insurance subs, which AIG will never sell) to meet their needs so long as they have time to sell and negotiate deal terms normally.

It's a liquidity crisis, not a net worth issue.

Thats why I thought the government made a profitable deal, as they were merely buying TIME for the company.

Seems that AIG owns a whack of assets aside from financials. An airline leasing company with hundreds of Airbus planes, office buildings all over the world and so on. They just couldnt unload the peripherals in time, before going over a cliff.

It's profitable if those assets are actually "profitable". It might actually be the equivalent to swampland if everything goes to shit anyway.

It's a 6month stay of execution for the whole HOUSE OF CARDS.Probably but October is only 11 days away and that is all I granted for sure, three years ago. :D

This may be a good place to say a few things about Corporate Management System.

Several years ago, I had the opportunity to setup Business and Competitive Intelligence systems for several Banks and Financial Brokerage Companies. Usually you buy expensive computer hardware and software to the tune of 20 to 30 million dollars and store the data in a format that is easy to datamine to find relevant information quickly and do fancy stuff to the data to manage risk as well as predict the future the best you can.

What I found is that the upper management insisted on getting paper printout of weekly, monthly summary and had no idea how to use the tools to visualize the data that you see in the movies. Basically they were information illiterates.

I do not think, things have changed much...as a matter of fact it has become worse...and so here we are blind leading the blind....

The Companies that did not hire me (the company I worked for then) were K-Mart, Sears, Kodak, Polaroid, Winn-Dixie (WINN, went bellyup, came back and still on Oxygen).

Probably but October is only 11 days away and that is all I granted for sure, three years ago. :D

Yup you called it and I read it all and pulled out of the market, 2 years ago. I suspect it won't matter much though...

http://news.yahoo.com/s/ap/20080919/ap_on_re_eu/eu_spain_paying_immigrants

Spain: Jobless immigrants paid to go home

MADRID, Spain - Spain will pay jobless immigrants to go home under a decree approved Friday, more evidence of how its once-booming economy has quickly gone bust.

Labor Minister Celestino Corbacho said the Cabinet approved the measure under a fast-track procedure and it will take effect in about a month.

The plan targets tens of thousands of non-European Union citizens who have been laid off in Spain and are entitled to unemployment benefits. It offers them a lump sum payment of 40 percent of that money once they renounce their work and residency permits, and the rest once they get home.

The voluntary program applies to people from 19 non-EU countries with which Spain has signed bilateral accords under which social security benefits accrued in one nation can be paid in the other.

Those who sign up for it must agree not to return to Spain for three years, with the promise they will be able to recover their work and residency permits after that.

Spain is grappling with ever-swelling jobless ranks in an economy that had posted more than a decade of solid growth but is now flirting with recession. Unemployment is now an EU-high of 10.7 percent, according to the bloc's statistical agency.

The government said in July it believed some 10,000 jobless non-EU citizens — out of a total of 165,000 recorded as of that month — would go along with the plan.

A university of Sydney professor was in the Sunday Telegraph and he basically said he was selling his home in the city because in 2 years it will be 40% cheaper.

By the Gods I hope that's the case :D

...Spain: Jobless immigrants paid to go home...We have had a version of that for decades in Brazil. Mayors of small towns give box lunch and one way bus ticket to Sao Paulo to their citý's bumbs.

A university of Sydney professor was in the Sunday Telegraph and he basically said he was selling his home in the city because in 2 years it will be 40% cheaper.

By the Gods I hope that's the case :D

holy shit. Thats happening here in the states too. good time to rent?

Hmmm...

Here is "good news" that is really "bad news:"

US trade deficit was only 40.4 billion dollars in November 2008. This was despite exports dropping 5.8% because the "broke Americans" could not import as they once did. (Imports were down 12%.) Americans are drinking more home brew and less French wine, etc.

In contrast, China has doubled the import of French wine YoY. - at least that is what the owner of the two main Paris airports reports: In late December 2008 the Chinese tourist returning to Peking bought in the airport free shops twice as much (in value) as in December 2007 (including some very expensive old Baron Rothschild bottles) Clearly some well connected Chinese are much more equal than others.

But the contraction of US imports has a greater significance: China will be earning less dollars and thus have fewer dollars with which to buy US Treasury bonds with - just when the US will need to sell about a trillion more to finance the stimulus plans. - It is little wonder that Bernanke confirmed again today in his London speech that the FED would be buying Treasury bonds and some others as well (and some other agencies of government will be doing the same - all with printing press money of course as the US is broke.) - They are the buyers of last resort - when China and oil exporters not only stop buying, but will not roll those maturing.

Few mention this "won't roll" possibility, but it could easily mean that new printing press dollars will be needed not only for the current deficit spending, but for that of years gone by also. The dollar collapse is not many years away now - probably in Obama's first term. Years ago I predicted it between Oct2008 and Oct2014 a six year window, which I am now willing to reduce to only about five. (The downward spiral is feeding on itsself already.) - I.e. the dollar will collapse before 11/12/13* to be very specific and easy to remember. (in day/month/year notation)

The contracting global trade (and the associated, but very foolish, impetus that gives to protectionism) will make that collapse and the depression come sooner than I originally thought.
--------------
*probably before 10/11/12, but not predicting that.

The contracting global trade (and the associated, but very foolish, impetus that gives to protectionism) will make that collapse and the depression come sooner than I originally thought.
Protectionism was one of the cornerstones of growth during the early days of the American republic...as well as the success of Asia in winning the global trade wars.

Protectionism was one of the cornerstones of growth during the early days of the American republic...as well as the success of Asia in winning the global trade wars.First part is probably true, but hypothetical as one does not know what the growth would have been if "free trade" existed. I tend to agree with Adam Smyth and think (as do >95% of modern economists) that free trade benefits all greatly in the long run, but admittedly can be disruptive in the short term to the industries that cannot compete when protective walls come down.

One of the long term results of the protectionism of the US's early days was the civil war, at least "protectionism" of the New England textile mills was a major reason for that war (More important than the "slavery issue" IMHO.)*

The "Dixie" south wanted to sell their cotton to England, whose larger and more efficient mills could pay more for it than the small New England mills powered by small dams (water power, not steam engines). The New England mills needed that cotton and to have Dixie as a market for their cloth. So the US prohibited Dixie from buying cloth from England or selling cotton to them. (Yankees had the ships - had been whalers - so could enforce this protectionism.) England, of course helped Dixie, even encourages their revolt. France, never happy to see England grow stronger, helped Lincoln’s army, which with that aid and its more industrial base, won that bloody war.
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*Most wars in truth have an economic base, but all always are wrapped in some noble cause - I.e. "To make the world safe for democracy" "To insure "freedom of the sea." "To liberate the oppressed in _____ ." etc.


Not sure to what you refer by “Asia in winning the global trade wars” but I think the low cost of labor and a population very accepting of central command economies, which could and did focus economic activity on production facilities (instead of pop music concerts and ball games etc.) is much more responsible for Asia’s great GDP growth rates. Also fact that the populations saved a large fraction of their incomes (for the “hard times” they had learned often came) was important, at least initially. Later, when it was obvious that investments in Asia yielded several times more than in the developed world, huge FDI “trickled down” from the US and EU wealthy to build the modern factories now in Asia. (Lower paid workers working longer hours in more modern factories, closed factories in US and EU.) The only way the US & EU could have competed was via better education population, but the converse is true, in math and physics at least up to graduate school. – I.e.US and EU are now lost as Asia will lead the world in a generation or two, at most.

Protectionism had little to do with is, IMHO. The huge growth of China, came from the ending of their protectionism – accepting and learning from the West to trade, and import more as well as export. Living standards in Asia are rapidly improving as they decline in the US.

Protectionism had little to do with is, IMHO. The huge growth of China, came from the ending of their protectionism.
China is definitely less protectionist than is was under Mao, but they are still far more protectionist than western nations. Theyre just sneakier about it.

They may have few tariffs but they have kept their currency undervalued for years while taking over the productive capacity of the world...leaving industrial ghost towns in their wake back in America.

Japan has also become very clever about protecting its auto industry from foreign imports by making the process almost impossible. A foreign car model has to be disassembled and all its parts inspected and cataloged before being allowed for sale in Japan. They use a deliberately slow bureaucracy to wear down the competition.

Congress has been complaining about these problems for years but nothing ever gets done.

I know this is a biased article and it ran its course a month or so ago, but what is your take on it?
http://www.forumpakistan.com/russian-professor-igor-panarin-predicts-the-break-up-of-the-t21238.html

I tend to agree with Adam Smyth and think (as do >95% of modern economists) that free trade benefits all greatly in the long run, but admittedly can be disruptive in the short term to the industries that cannot compete when protective walls come down.


Free Trade or Fair Trade? What does the "Free" stand for? For example, since America subsidizes their agricultural products, what happens when Chinese subsidize their manufacturing as they do now? Also what happens if Chinese companies are not for sale but American companies are? What happens if workers demand high wage rate to foreign companies in China but get special municipal benefits when they work for Chinese companies. There are many ways to favor your own companies under the table.

Free Trade or Fair Trade? What does the "Free" stand for? For example, since America subsidizes their agricultural products, what happens when Chinese subsidize their manufacturing as they do now? Also what happens if Chinese companies are not for sale but American companies are? What happens if workers demand high wage rate to foreign companies in China but get special municipal benefits when they work for Chinese companies. There are many ways to favor your own companies under the table.Too many questions here to answer all so I just take the basic one to comment on:

Free trade means that each nation allows others to enter its market to sell goods and services at the price the selling nation (or company) is asking. I.e. the market country does not add a tariff to make the selling price higher. How the selling country (or company) structures it economy is its business. I.e. they can decide to subsidize X production perhaps to build the volume and make X production per unit cheaper, but the cost of that subsidy will fall on all their other products and services.

In general subsidies are good for all if there is free trade as then instead of every country having small volume production of everything different countries will specailize, often related to their natural resources. For example not every country should try to make cars. Some should and trade them. Japan post wwII subsidized with low cost loans etc shipbuilding and the whole world benefited with lower cost ships that the large Japanese shipyards could make.

I do not know what is "fair trade." "Fair anything" is a very subjective concept, which to some extend is different for everyone. I.e. it is impossible to define what is "fair."

The basic reason free trade is a benefit is that the consumers of the market country get the opportunity to buy the imported goods and services at lower cost. (Can you say "Wal-Mart?" :shrug: :D ) These consumers should be free to decide if they want to buy and preferably well informed, not only about the quality of the items offered but also about the conditions under which they were produced.

Some consumers may think: "Great that suppling country uses starving child labor as that is why the price is so low." Others may think: "I will not support such unfair labor practice by buying products made with slave labor." etc. For me neither of these POVs has the right to make those with different POV conform to their POV, but they do have the right to try to persuade those of a diffent POV to adopt theirs.

To take a hot issue: Some may want to boycott Israeli products now but that should be a personnel choice, not be achieve by law, IMHO. I saw nothing "wrong" (stupid pehaps) with some Arabs boycotting Danish cheeze after the Profit was displayed in a Danish newspaper in a way that offended them. I.e. I support free choice.

If you want me to comment more specifically on one of your questions, ask it again. It is my bed time now (may correct my typos, etc. tomorrow.).

G2 meeting:

“… Geithner and Secretary of State Hillary Clinton are hosting Vice Premier Wang Qishan and Dai Bingguo, a state councilor, at the meetings today and tomorrow… “We are committed to taking measures to maintaining greater personal saving and to reducing the federal deficit to a sustainable level by 2013,” Geithner said in opening remarks for Strategic and Economic Dialogue meetings with Chinese officials in Washington.

Geithner’s comments reinforced his efforts to reassure China, the largest foreign holder of American government debt, that this year’s record U.S. budget gap won’t pose a long-term danger. The shortfall is on course to reach $1.8 trillion in the year through September.

Geithner also repeated his call for China … to increase demand at home: “China’s success in shifting the structure of the economy towards domestic-led growth, including a greater role for spending by China’s citizens, will be a huge contribution to more rapid, balanced, and sustained global growth,” Geithner said. …”

From: http://www.bloomberg.com/apps/news?pid=20601087&sid=acY016BvYo5c

Billy T’s comments: Here (in blue) is the Geithner / Clinton /Bernanke game plan:

US brings it1.8 trillion annual deficit down; Gets Joe American to save so China does not need to finance so much debt. In fact with 330 million Chinese (more than US population) now with growing wealth in the middle class in China and no longer saving 40+ % of their income, they will be importing more from the US. – That is who is buying what Joe once did, but is not now as is saving or paying down his debts. Also with Chinese buying US made product and Joe buying less at Wal-Mart, the US balance of trade problem with China disappears. The flood of dollars into China stops so China need not soak those dollars up and lend them back to the US in an effort to keep the Yuan undervalued. The production of China’s factories will be sold domestically, instead of exported to the US etc.

As you can see it all hangs on Step 1: US brings it 1.8 trillion deficit down, but that will be tough if unemployment is double digit and the states are going broke unless getting federal aid. So if you think the Geithner / Clinton /Bernanke economics team is about to score a touchdown with this game plan, I have a bridge in Brooklyn, I will sell you cheap.

We still have trade deficits with Canada, Japan, Mexico, Germany. If we save a lot, would not those countries be in trouble too?

We still have trade deficits with Canada, Japan, Mexico, Germany. If we save a lot, would not those countries be in trouble too?Probably. That is why I say that when the dollar collapses it will send not just the US (all of North America)* into depression but EU also.

Only some Asian countires will still be growing. Perhaps Japan can keep ahead of China in technology as they educate their population well (unlike the US) and have a very strong work and savings ethic in their culture.

Brazil, and several others which provide Asia with food stocks, energy and minerals will avoid the depression also as "economic colinies" of Asia.

------------
* I expect Canada and US will export food and some minerals but probably not enough to become "economic colinies" of Asia as lower cost producers will sell for less. For example, China may buy wheat from Canada when Argentina has drought problems and some storgage cost can be avoided as Canada's harvest is 6 month before or after Argentina's.

Billy:

Assuming there will be a Meltdown say the second week of January 2010 (the reasoning is that when Christmas sales numbers come in, and it is a disaster, all hell could break lose, China could refuse to go along etc.); what format it will take?

For example, can we buy gasoline or they will be rationed? What about WalMart and Grocery stores ? Will Saudis still send Crude Oil? What would happen in the first 2 weeks of the Meltdown before National Guards are employed and perhaps Army to cover the whole country?

Since we have the ability to print more money, would that be IOUs to Canada and Mexico for their oil and stuff? Is China the key player where one day it is just inflation and the next day it is hyperinflation?

I think as long as we have access to gas (even if rationed) and food, people should be OK, right? We just can not import everything Wal-Mart sells. Which should be good for the country for 6 months. It would be a time like "Stop buying sh*t"

Any thoughts as to what would be the possible scenarios in daily life for a few months after the Meltdown?

Billy:

Assuming there will be a Meltdown say the second week of January 2010 (the reasoning is that when Christmas sales numbers come in, and it is a disaster, all hell could break lose, China could refuse to go along etc.); what format it will take?

For example, can we buy gasoline or they will be rationed? What about WalMart and Grocery stores ? Will Saudis still send Crude Oil? What would happen in the first 2 weeks of the Meltdown before National Guards are employed and perhaps Army to cover the whole country?

Since we have the ability to print more money, would that be IOUs to Canada and Mexico for their oil and stuff? Is China the key player where one day it is just inflation and the next day it is hyperinflation?

I think as long as we have access to gas (even if rationed) and food, people should be OK, right? We just can not import everything Wal-Mart sells. Which should be good for the country for 6 months. It would be a time like "Stop buying sh*t"

Any thoughts as to what would be the possible scenarios in daily life for a few months after the Meltdown?I don't know how things will unfold, but think it will not be for most people any sudden change on a week time scale as the dollar rapidly loses value. Everything imported, like oil for gasoline will rapidly get more expensive and the "rationing" would be more economic than by decree at least for a few months, I would guess. The real origins of the social chaos I think would be when food is too expensive for many of the poor in the urban ghettos we have made. Hard to tell what hungry people with guns will do - but I think it will be hard on the suburbs soon thereafter too.

It seems to be melting down:

"U.S. Recession Worst Since Great Depression, Revised Data Show"
is the title of Boomberg article at: http://www.bloomberg.com/apps/news?pid=20601087&sid=a5_5Vq2hV3EQ

All trends are still down and accelerating downward, if compared to a year ago, not last month or quarter to avoid short term changes.
For example:

The quarterly GDP drop in 2Q08 was zero (unchanged GDP from 2Q07). Here is that trend for the last year (last four quarters, YoY.):
0, -1.9, -3.3, -3.9

Number of unemployed currently 6.5 million, keeps rising as does the rate of unemployment.

Number of homes being foreclosed is steadily rising.

Number of commercial properties being foreclosed is rising, but not steadily - it is starting to explode.

Commercial properties vacancy rates are at all time high in commercial centers, like NYC.

Number of bankruptcies, both individual and corporate is rising. (Some very big ones like GM & Chrysler)

Value of dollar is dropping.

US debt is dramatically increasing and will for years at greater than 1 trillion /year rate. {FED has more than doubled "assets" on its books in less than a year and lower their quality to now include corporate issues and even some "toxic trash"! These "assets" entered books as the dollars were pumped out.}

Global trade is rapidly contracting, faster in percentage fall than even in the 1929 depression. (Current "Protectionism" is more via subsidies to local producers and "Buy local" programs in China and in US & EU like the "cash for trading in old cars." But old fashioned tariffs are still used. For example $0.54 on each gallon of tropical alcohol imported in additon to the large subsidies on both the corn and the dometic alcohol production from it. This increases Joe American's cost of food, cost of driving, and taxes so naturally he is less able to make his mortgage payments. - How dumb does it get? )

More recent changes on two points of post 141:...
Number of commercial properties being foreclosed is rising, but not steadily - it is starting to explode.
Commercial properties vacancy rates are at all time high in commercial centers, like NYC. ...

"The Term Asset-Backed Securities Loan Facility, with a capacity of as much as $1 trillion, will expire June 30 {2010} for newly issued commercial mortgage-backed securities, instead of Dec. 31, the Fed and U.S. Treasury said today in a statement in Washington.

Property values have fallen 35 percent since peaking in October 2007, according to Moody’s Investors Service. That’s making it tough for owners to refinance almost $165 billion of mortgages for skyscrapers, shopping malls and hotels this year.

While financial-market conditions “have improved considerably in recent months,” the markets for ABS and CMBS* “are still impaired and seem likely to remain so for some time,” the Fed and Treasury said. ..."

FROM: http://www.bloomberg.com/apps/news?pid=20601087&sid=aNUlYQ.TIz2M

Looks like the tax payers will be getting more assets worth less than we paid for them until mid 2010 at least. Enough "negative gain ïnvestments" will "melt down" any buyer, including the USA.
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*ABS = Assets backed securities & CMBS = Commercial Mortgage Backed Securities.

The News seems frantic today. The word recession is being tossed around quite a bit.

So? When does it start and when does it end and what does it mean for most of us?

The economy is a massive creature. Making any statement about it can lead to pages of details.

If I say "Debt is bad," corporate employees of failed companies say, "Debt is not bad, it keeps this inefficient business running!"

If I say "Helping everyone to maintain good health is very pro-life." You could say, "The quality of socialist health care systems isn't always the best."

Gratitude is to be the most compatible attitude.

“… The world’s biggest bond fund, said the dollar will weaken as the U.S. pumps “massive” amounts of money into the economy. The dollar will drop the most against emerging-market counterparts, Curtis A. Mewbourne, a Pimco portfolio manager, wrote in a report on the company’s Web site. The greenback is losing its status as the world’s reserve currency, he said. “Investors should consider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure,”
FROM: http://www.bloomberg.com/apps/news?pid=20601087&sid=aLW8jvysIe5k

“…The excess of expenditure over revenue for July climbed to $180.7 billion compared with a $102.8 billion gap in July 2008 as the government spent more than in any month in U.S. history, the Treasury said Aug. 12.
Berkshire has been buying securities issued by governments outside the U.S. The company held about $11.1 billion in foreign government bonds in its insurance units as of June 30, compared with $9.6 billion three months earlier, Berkshire said in a regulatory filing on Aug. 7. The value of holdings in U.S. Treasuries and so-called government sponsored enterprises slipped 5.3 percent in the three months ended June 30 to about $2.5 billion. …”
FROM: http://www.bloomberg.com/apps/news?pid=20601083&sid=ay3ayJvt3t3s

Billy T comments:
I.e. In less than 40 days, Warren Buffett’s Berkshire Hathaway fund has DECREASED holding of US Treasury paper by 5.3% (possibly more like 15%)* and INCREASED holdings of foreign bonds by 15.6% !!!

Brazil has done the same in the last few months: I.e. dumped 25.5 Billion dollars of US Treasury bonds to reduce the dollar fraction of its reserves by 17%. Even Italian bonds look like a better deal to Brazil’s central bank now. The USA does not deserve its triple A credit rating – but probably will keep it for a year or two more – until one of the major agencies is taken to court by a big time loser in US Treasuries. That probably will be a large pension fund, which cannot pay its obligations to the pensioners, because of the losses.** There will be big loses by investors in US treasury paper when interest rates start to sharply rise in effort to control inflation. Because China can destroy the US economy (with ever decreasing self-inflicted pain as they buy real assets with their reserves, especially oil fields.) the US will (as recently announced) print more TIPs for China to buy and continue to finance the US deficits, at least for a few years more.
---------------------
* I bet Warren's holding of TIPs have actually increased.*** If true, that would make the amount of regular bond dollars he has dumped even larger than 5.3%.
His fund must file with SEC its holdings periodically (Quarterly. This bloomberg report, came from 30June09 filing.) but I am too lazy to get the change in Berkshire's TIP position. Perhaps someone good at searching the SEC will and see if my guess is correct.

**Most will be able to pay their claims even if the dollar drops to only 10% of current value as pension firms are the main buyer of long term Treasuries, which will be paid. (US will never default, so long as there is paper and ink for printing presses.) They try to balance their obligations, fixed in dollars, to the maturing of the bonds they hold. I.e. they don’t give a dam if what you collect is only worth 10% of what you paid them. Some pension funds, especially those run by states for their employees, have been taking more risk as the state is hard pressed for revenue now. They, like their state, may go “belly up.” With their pension fund incomes, (payroll deductions from employees) States act much like the Federal Government does with Social Security fund tax deduction incomes - I.e. spend them now and hope to be able to pay claims later.

***May help explain the following: Vanguard Inflation-Protected Securities Fund Investor Shares, where part of my 403b tax deferred pension is, yesterday closed at $12.22/unit. Less than nine months ago (5Jan09, to be exact, when I bought some more) it was worth $11.33/unit.

For years I have been tell via posts to buy stocks of Brazilian companies (via their ADRs if you have dollars) or if lacking the balls for that,**** at least put your dollars in TIPs, but via a tax deferred account, like an IRA so you do not pay taxes on "phantom income." (The annual appreciation, which is not paid until maturity but is annually taxed as if you got it.)

**** Brazilian stocks are more volatile as when foreign investors cannot get needed loans from their bank they often pull money out of Brazil (and Mexican) stocks.

Last paragraph of speach Ben Bernanke is giving now at Jackson Hole, Wyo:

"Although we have avoided the worst, difficult challenges still lie ahead. We must work together to build on the gains already made to secure a sustained economic recovery, as well as to build a new financial regulatory framework that will reflect the lessons of this crisis and prevent a recurrence of the events of the past two years. I hope and expect that, when we meet here a year from now, we will be able to claim substantial progress toward both those objectives."

Read it all if you like (not anything on how FED will mop up the money it has printed when money velocity ceases to be near zero) at:

http://www.federalreserve.gov/newsevents/speech/bernanke20090821a.htm

“... The question is not whether the dollar will weaken over time, but how it will weaken,” said El-Erian, a former deputy director of the International Monetary Fund, in an interview. “The real risk is that you will get a disorderly decline.” The greenback is threatened as net debt will increase to 56 percent of U.S. gross domestic product, the billionaire investor Warren Buffett wrote in a New York Times commentary this week. ..."

From: http://www.bloomberg.com/apps/news?pid=20601087&sid=arogi_UcR0PQ

Not news to me. A year before end of GWB's term as POTUS, I fore told his policies made a dollar collapse prior to Halloween 2014 inevitable with US and EU in deep depression, worse than 1929's - My only error thus far is that it seems to be coming sooner than that terminal date.

I told you to get your money into a sound currency like the Brazilian Real, Norwegian Kroner, or at least into US TIPs.

“... The question is not whether the dollar will weaken over time, but how it will weaken,” said El-Erian, a former deputy director of the International Monetary Fund, in an interview. “The real risk is that you will get a disorderly decline.” The greenback is threatened as net debt will increase to 56 percent of U.S. gross domestic product, the billionaire investor Warren Buffett wrote in a New York Times commentary this week. ..."

From: http://www.bloomberg.com/apps/news?pid=20601087&sid=arogi_UcR0PQ

Not news to me. A year before end of GWB's term as POTUS, I fore told his policies made a dollar collapse prior to Halloween 2014 inevitable with US and EU in deep depression, worse than 1929's - My only error thus far is that it seems to be coming sooner than that terminal date.

I told you to get your money into a sound currency like the Brazilian Real, Norwegian Kroner, or at least into US TIPs.

I'm gonna take your advice man. Can you give some advice how to actually get into buying currency as an investment? Go to the bank and ask if they have a fund for that or something?

I'm gonna take your advice man. Can you give some advice how to actually get into buying currency as an investment? Go to the bank and ask if they have a fund for that or something?The easiest way for most is to buy stocks of Brazilian or Norwegian companies that have ADRs. (American Depository Receipts - Some big bank is holding the actual stocks and issues ownership papers that trades just like a stock).

If you are in NYC, you can go to Bank of Brazil or a Norwegian bank and buy the currency, perhaps open a bank account, especially if you say you want to import items for resale, need a checking account etc.. (I am just guessing as I live in Brazil) Holding stock in a growing company is in the long run better than stuffing currency under your mattress and much more liquid if you do not visit the country.

To find many ADRs, go here: http://www.adr.com/Home/Home.aspx (It is free.)
Click on "I accept."
Click on DR Search (Top left, just under big type J.P. Morgan)
Then six tiny pages with blue tops will appear. Use only the page called "country" to select countries of interest to you. (use others later if you like.)
If you find one you like, click on it and more detailed data will appear (at least for the major ones - I recommend you stick with them as if JP Morgan does not follow developments in a stock, neither should you. - Probably is thinly held and not very actively traded.
Then when you know what you want to buy, call your broker and do it.

Chile may be a good country to look at also. I own a gold producer in Peru (ADR is BVN & some of MEN which has joint operations with them in Peru) IMHO, Brazilian stocks are a little too high to buy now - when the crash comes many will get scared again and very stupidly run the "safety of the dollar" Soon they will learn that was a big mistake.

Good luck. (I do not recommend stocks and if I told all which I hold that would appear self serving - promotion of the price.)

The News seems frantic today. The word recession is being tossed around quite a bit.

So? When does it start and when does it end and what does it mean for most of us?

I-15, Friday. Highway, as always, is packed with cars going from LA area to Las Vegas. NASCAR races are packed with fans. And so on. It seems that larger chunk of of population is not touched by recession at all (I'm not among the lucky ones though).

Traffic was relatively light (still gridlock) in the Bay area for most of the last year. Lately the old franticness and congestion seems to returned. I think those who still have jobs have become bored with the recession and are starting to spend normally again which means the recession will start ending now.

Of course spending normally in the USA means spending money with credit cards that people really should not be spending even if they have a job. Underlying fundamental problems with the US economy remain and and the US economy will continue to follow the same path to eventual economic disaster that the US economy has been on since 1973. But the disaster will be in the future and in the mean time get ready to party, it's spending time again.

Speaking of cars and traffic:

“… many buyers traded in paid-off vehicles in return for new cars financed through loans. A survey of 1,000 Cash for Clunkers participants, conducted by CNW Research, an automotive research firm in Oregon, found that 17 percent had doubts about their vehicle purchase after taking on monthly car payments of $275 to $350 per month.

dealers submitted 690,114 sales totaling $2.88 billion, bringing the program to a close under its $3 billion budget. …”

FROM: http://www.businessweek.com/ap/financialnews/D9AAP9H80.htm

Billy T comments:
$4,173.20 was average gift from tax payers to the buyer, not counting the administrative cost and interest on the increase of US debt by $2.88 billion. That will make program cost about 6 billion or $20 for each American man woman & child. This buying is to a large extent borrowed from future car sales and reduces the purchases of other items now as the new cars owners go deeper into debt now. I.e. not much of a plus for the auto industries total sales on annual basics but a dip in TV, furniture etc, sales as car loans are paid.

The second shoe is starting to fall:

“… The default rate on commercial mortgages held by U.S. banks more than doubled in the second quarter from a year earlier amid falling rents and occupancies for malls, office buildings and warehouses. Loans that were 90 days or more past due climbed to 2.88 percent of outstanding balances in the second quarter, from 1.18 percent a year earlier, ... Defaults increased from 2.25 percent in the first quarter.

Banks held $1.087 trillion of commercial property loans in the quarter, up from $1.077 trillion in the previous three months. … Defaults are rising both for lenders who hold commercial mortgages and for bondholders in the $700 billion U.S. market for securities backed by commercial mortgages.

The CMBS market accounts for about 22 percent of the nation’s $3.4 trillion in commercial real estate debt, according to the Real Estate Roundtable. Defaults and late payments on loans bundled into CMBS could surpass 7 percent by the end of this year, research firm Reis Inc. said on July 30.

FROM: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a9FRZ6ipJB8Y

It is little wonder that banks are failing faster than ever before (1930s a possible exception - I have no data for then.):

{post 137} ...Rate of bank failure still accelerating - Now less than 3 days between bank failures.
2009's failure rate is now a failure every 2.95 days. It was more than 3 calendar days between failures only 21 days ago when I started to note the failure rate in post 126 (Friday of this big failure, needing a foreign buyer, was day 238 of 2009.) Only 25 failed in 365 days of 2008. That’s vs. 14.6 days between failures in 2008. Read all of post 137 at:
http://www.sciforums.com/showpost.php?p=2350382&postcount=137

Life is not better the second time around:

http://www.economyincrisis.org/images/line.jpg

"... Americans' purchasing power has been battered by the 6.7 million jobs that have vanished since the recession began in December 2007. Companies also have cut costs by forcing workers to take unpaid days off or to work only part time.

And some consumers have pared their spending because their pay hasn't kept pace with their expenses or because they're using more money to save or reduce debt. Personal incomes were unchanged in July, the Commerce Department said Friday. It was the eighth month out of the past 10 in which incomes have either fallen or failed to grow. ..."

FROM: http://news.yahoo.com/s/ap/20090828/ap_on_bi_go_ec_fi/us_economy

The official unemployment rate is now 9.7% but when the under employed and the too discouraged to even look of job are added to the official roles the rate is at least twice that. Even the official rate for teenages (not yet discouraged) is 23% and for men it is 10.1% (Finally women, under paid for the same job, are getting even - firms fire the more expensive labor first.)

But just as a matter of politics, would you say that this coming meltdown must be laid at the feet of Bush and the Republicans? Dems have fought Bush policies but were unable to prevent the inevitible catastrophe?

And why not recommend gold?

But just as a matter of politics, would you say that this coming meltdown must be laid at the feet of Bush and the Republicans? Dems have fought Bush policies but were unable to prevent the inevitible catastrophe? And why not recommend gold?I place a lot of the blame for the present (and yet worse to come) problems on GWB and Republican "trickle down" economic thinking which built the more modern factories in Asia, especially China, so older US factories could not compete, even if their workers received Chinese wages! Greenspan must also share the blame, and fortunately is getting it now. (surplus capital ALWAYS trickles down as investments but to place where the risk reward ratio is most favorable - that was China buy about a factor of 3 when their GDP vs. US's were compared back when GWB was giving tax relief to the already wealthy and real salary (purchasing power) of Joe American were falling.

As for gold, even I am tempted now as I expect the purchasing power of an ounce of gold may recover to what it was back in early 1980s, but I tend to be a long term investors (as not much good at short term market timing.) so expect gold will continue its centuries old habit of losing purchasing power in the long run.

Also as there are so many tons of it held in vaults that could be dumped I am scared of some of it coming out to the market. For example, the pound and England in general are in deep trouble - one way out - to restore the pound might be to sell 30 tons of gold, taking some of the printing press pounds out of circulation.

Should a major block of vault gold come to market the price could easily drop below $500/ oz but if that does not happen, $1500 / oz is not an unrealistic possibility also in only a couple of years.

Also as there are so many tons of it held in vaults that could be dumped I am scared of some of it coming out to the market. For example, the pound and England in general are in deep trouble - one way out - to restore the pound might be to sell 30 tons of gold, taking some of the printing press pounds out of circulation.
Central banks have far less gold to dump on the market than they used to, but this is another reason I prefer silver, which is depleted in its industrial applications.

Central banks have far less gold to dump on the market than they used to, but this is another reason I prefer silver, which is depleted in its industrial applications.I am nearly sure your "far less" is false. There is an agreement between the major government owners that limits the amount they can sell into the open market. England did sell its nearly limit a couple of years ago. So, yes there is slightly less gold in the vaults of the major governments now: BUT several of the Mid East oil suppliers have been ADDING gold to their reserves (like me fearing the collapse of the dollar).

Even China has added small amounts of gold, purchased from the market, to its reserves, and much more, but how much more is a state secret, from domestic production. (Some well informed experts think China is now the world's largest producer of gold. - Mainly from a band of rich gold deposit near and along the Northern border with Russia.) -If that is correct and China has world's lowest production cost for new gold, that is a second "economic gun" China has aimed at the Western economies.* I.e. they may be able to drive price of gold down to $500/oz and yet make a profit selling more of it. No one knows their cost of production, but lack of strong environmental restraints and very cheap labor make it probably that it is much lower than S. Africa's gold from more than mile deep mines, some of which are now closed as they are not profitable with gold less than ~$1000/oz.

I agree that sliver is probably the better choice in the precious metals market than gold (if neglecting less volume ones -that are less easy to sell) because Ag has real industrial (and medical) uses. Also the damage done to Ag by digital cameras is essentially over now.
---------------------
*It is not yet in China's economic interest to fire either gun. China is rapidly trying to convert some of its treasury holding into real assets or at least not Treasury bonds (only buying shorter term Treasury notes) Even adding Euros, which I think will not help much as when dollar collapses so will the Euro, IMHO. China needs to convert into a domestic market economy** (not an export oriented one) before it is in China's interest to send the US and EU in deep, long lasting depression. (Reduce the US & EU buying of oil and minerals China needs to keep the cost down.) China may not need to ever fire either gun as GWB and Re[publican "trickle down" economic policy probably will make US and EU enter deep depression without any push from China - but if a push is needed, China can and will give it when China is ready.

** China is rapidly doing this: China is already the world's largest market for cars***,trains & busses, TVs, cell phones, computers, digital cameras, etc. steel, concrete, paint & glass, etc. World's largest maker of electric cars, solar cells, wind mills, smart power girds, large hydro-electric dams, etc. to "go green" rapidly.

It upper middle class (define as having net worth of more than 10 million RNB or > 1.5 million dollars) is now 320,000 strong and the middle class has increasing purchasing power in their salaries and is still expanding in numbers.

Summary - Soon China will not need to ship anything to Wal-Mart and that will add to US's problems via increased cost of living / inflation. - It does not look good for US and EU. - Remember to thank GWB and the Republicans who controlled US Congress, but NOT the Banking & Wall Street "fat cats" who paid for their election campaigns. - For more on this lack of control, even a lack of enforcing the laws, See:
http://www.sciforums.com/showpost.php?p=2360246&postcount=4

*** "GM said yesterday its sales in China may rise more than 40 percent this year after sales more than doubled from a year earlier in August. Changan Ford Sales Co. also doubled sales last month after China cut vehicle taxes to spur demand. GM and its two Chinese ventures, both part-owned by SAIC, sold 152,365 vehicles last month. Full-year industrywide sales may climb as high as 12 million, {Us will be lucky to sell total of 10 million and most of the profit on them will go to Japan & S. Korea} the Detroit-based automaker said in an e-mailed statement. That’s 32 percent more than last year...."

FROM: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aequztEsRUxY

Note that even with the "cash for clunckers" program which probably mainly borrow from future sales, US cars sales are down YoY.

I place a lot of the blame for the present (and yet worse to come) problems on GWB and Republican "trickle down" economic thinking which built the more modern factories in Asia,

Clinton and most of the Democratic politicians went along with the trickle down program. The Democrats just talked more about helping poor kids go to college.

Somebody forgot to tell the politicians and their Wall Street buddies that India and China have exponential growth in university grads and India and China won't be hiring American University grads to mange their companies and financial sectors and supply their engineering needs. It's only a matter of time before India and china take over more and more of the "good jobs" that are still left in the USA if the currency markets don't fix the underlying problem of Indian and Chinese workers at all skill levels being paid less for doing the same work that Americans do.

There are 2 main problems threatening the future of the world economy. One is global warming and the other is the unsustainability of trading patterns based on the the overvaluing of first world currencies particularly the dollar.

I don't think Peak oil is as serious a problem because there is so much waste of energy and there are many alternative sources of energy that will become viable.

Clinton and most of the Democratic politicians went along with the trickle down program. The Democrats just talked more about helping poor kids go to college.

Somebody forgot to tell the politicians and their Wall Street buddies that India and China have exponential growth in university grads and India and China won't be hiring American University grads to mange their companies and financial sectors and supply their engineering needs. It's only a matter of time before India and china take over more and more of the "good jobs" that are still left in the USA if the currency markets don't fix the underlying problem of Indian and Chinese workers at all skill levels being paid less for doing the same work that Americans do.

There are 2 main problems threatening the future of the world economy. One is global warming and the other is the unsustainability of trading patterns based on the overvaluing of first world currencies particularly the dollar.

I don't think Peak oil is as serious a problem because there is so much waste of energy and there are many alternative sources of energy that will become viable.I tend to agree with all of your post above. On "trickle down" I agree it can be great help - it is not by its nature, bad.

For example, the post WWII GI education program is IMHO, one OF THE BEST investments the US government ever made - In large part responsible for the great technical advances the US made in the decade after those guys joined the labor force -The hippy movement ("tune in and drop out") that came a decade later - destroyed the US's ability to lead the world - Perhaps the hippies should have been drafted into some educational "boot camp"? Made to learn how to solve a differential equation, find the max of a function, and understand electro negativity etc. in chemistry etc. if they did not want to eat only bread and water for dinner.

I have long supported free education for all who want to work hard and learn. I did at Cornell as I was badly prepared by public schools of West Virginia and in an especially rough experimental 5 year program. (Discontinued after a few groups went thru it, with about half transferring out to an easier regular four year program.) It meet all the requirement of BOTH the Liberal Arts college AND the engineering school. -About 155 credit hours in five years. One year there were five labs each week. Everything you can imagine from pouring iron into your "green sand molds" then next year, using your castings, making gears, large bolts with right and left-handed treaded ends and a hex central section,* etc. with the ever type of machine tool that exists. - That actual helped me later - I made everything my experimental Ph.D. needed -avoiding the shop delays most graduate students had to put up with as professors bumped their job further down the priority list.
------------
* Then still later discovering the stress / strain curve of it to rupture. Etc. Somewhere during the years my 28 tooth gear got lost.** I had one of the best educations ever offered in the US and never paid one cent for it. (A full "needs scholarship" as I was very poor.) My defects are mine alone.

**There were a couple of girls in my class. One set the indexing milling machine up slightly wrong. - She made a 27.5 tooth gear.

More about the dollar meltdown, but sort of the same thing when US can not afford to import the oil needed for it inefficient "suburban infrasturcture."

“UN Says New Currency Is Needed to Fix Broken Confidence Game” * is the title of following Bloomberg article:

The dollar’s role in international trade should be reduced by establishing a new currency to protect emerging markets from the “confidence game” of financial speculation, the United Nations said. UN countries should agree on the creation of a global reserve bank to issue the currency and to monitor the national exchange rates of its members, the Geneva-based UN Conference on Trade and Development said today in a report.

China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency after the financial crisis sparked by the collapse of the U.S. mortgage market led to the worst global recession since World War II. China**, the world’s largest holder of dollar reserves, said a supranational currency such as the International Monetary Fund’s special drawing rights, or SDRs, may add stability.

“There’s a much better chance of achieving a stable pattern of exchange rates in a multilaterally-agreed framework for exchange-rate management,” Heiner Flassbeck, co-author of the report and a UNCTAD director, said in an interview from Geneva. “An initiative equivalent to Bretton Woods or the European Monetary System is needed.”

From: http://www.bloomberg.com/apps/news?pid=20601087&sid=aSp9VoPeHquI

-------------------
*Not quite calling the US's triple AAA bond rating and the dollar a "Ponzi scheme" but getting close to that.

**China is not waiting for dollar replacement. China is rapidly using dollar reserves to buy real assets. For recent buying see:
http://www.sciforums.com/showpost.php?p=2360922&postcount=848

A graph worth 10,000 words, but here are a few: Note how short the blue bars are becoming.
Job holders are stopping to quit. Not much now of "Take this job and shove it." attitude around - More like: "Please God, don't let me be next to lose my job."
Also note the collapse (green line hires) started to be clear, in hind sight, by Jan 2008.
That cost reduction is why profits are recovering, but who will buy the production as green line trend continues down?
US population & labor force is growing. - US needs to ADD at least 100,000 net hires each month (to avoid social unrest, etc.).

http://2.bp.blogspot.com/_pMscxxELHEg/SqU9topoIbI/AAAAAAAAGT4/JmHMtTVXWT4/s1600/JOLTS.jpg

http://www.bloomberg.com/apps/data?pid=avimage&iid=i4iGs9HJbHvk From: http://www.bloomberg.com/apps/news?pid=20601087&sid=a3dnPxhcGAxs

Sept. 10 “ Foreclosure filings in the U.S. exceeded 300,000 for the sixth straight month as job losses that boosted the unemployment rate to a 26-year high left many homeowners unable to keep up with their mortgage payments. A total of 358,471 properties received a default or auction notice or were seized last month … That’s up 18 percent from a year earlier, and down 0.5 percent from July ... One in 357 households received a filing.
Foreclosures rose from a year earlier as companies cut payrolls by 216,000 workers last month, boosting the U.S. jobless rate to 9.7 percent … The rise in unemployment is having a bigger impact than an effort by the U.S. government and banks to modify mortgages and prevent foreclosures … “The foreclosure numbers are largely unemployment related,” Davis, a former Federal Reserve Board economist, said in an interview. “As long as 15 million Americans are unemployed, record foreclosures will continue.” Foreclosures aren’t abating even as demand is returning to the U.S. housing market after a three-year slump. ..."

Billy T comment:
Because the banks taking back a foreclosed house do not want to rent it or risk vandals stealing the dishwasher, etc. or burning it down, etc. they dump it quickly with low price even if they do not get the full mortgage repaid. Thus, the increasing number of foreclosed properties is a large factor in why home sales are improving, but still far below normal for a healthy economy. Workers are still losing jobs and just to keep the unemployed of the growing work force a static percentage, the US needs to ADD 100,000 jobs each month, not lose 200,000+ each month.

Who to Blame:
The steady reduction of the purchasing power of salaries while GWB was POTUS, combined with the tax relief for the already wealth (more than the 900 billion Obama’s health care plan will cost) that built the modern factories in China and closed the older non-competitive ones in the US is still dragging the US down into depression. Joe American had to go deeper into debt under GWB to compenstate for the decreasing puying poer of his salaries – cannot now be 72% of the US economy and Government spending with borrowed money cannot replace Joe’s buying for long, before the house of cards falls down.

BTW, Warren Buffett is planning to boost his ownership of BYD motors from 10% to between 20 and 25% soon. They are doing very well selling: ~200,000 electric hybrids this year mainly in China, which is also doing very well thanks to the “trickle down” investments GWB’s tax relief for the already wealth, like Warren, made possible.

So remember to blame GWB and the “trickle down” economy supporters, not Obama, when US government can not borrow more to replace Joe’s former 72% of US economy spending. Joe is saving now or at least trying to pay off some of his debts.

omg its just like 1975 and 1980 something.

The graph of post 162 is no longer displaying. It had the link to the site included in the graph so I did not add it to my text, but found it in article atwww.calculatedriskblog.com/

I to give a direct link to the post 162 graph in post 167. The above link was to the article it was in but that site seems to be a collection of financial aricles (mainly blogs, I think) that are newly replaced each day - I.e. unless they hav3e an archive you can search for the artilce the graph came from a few days ago, you will only be able to access the graph (perhaps only for a week or two?)

Graph splits job lose totals into two stacked bars: Red was the discharged & blue was the "I quit" loses. The blue was a decreasing percent of total job loses. Hence my comment about there being few singing "Take this job and shove it." now.

There was a green line that showed the new hires (now below the losses), which somewhat surprizing to me was an nearly steady down sloping line that broke from the nearly flat section of years at the START of 2008. - I.e at least 9 months before Wall Street realized the economy was in trouble - a little known "leading indicator" I think.

When you stop to think about it, this makes sense for an economy that is 72% consummer driven. Presumably if the net jobs creation turns up, even before it becomes positive - that would be a leading indicatior too. (that recovery is coming.) Unfortunately the downward slope of the green line, although nearly steady decline was curving slightly more downward.

As a poor replacement for the original 162 graph look at this one:

http://graphics8.nytimes.com/images/2009/09/04/business/economy/joblossesaugust.jpg A semi-log plot would be better as 0.001 lose now is greater % than earlier.*

This graph shows that the job loss rate is still growing – becoming a higher fraction of the total work force – and much worse than any recent recession. I.e. supports my years old prediction, based on policies of GWB’s administration, that depression was inevitable for US and EU. Obama and his team are doing the best they can to avoid that, but there is no way that Joe American can resume support of 72% of the economy as he went too deep into debt when GWB’s policies cut purchasing power of his salary (and burdened the economy with needless war for oil, gave trickle down tax relive to build the modern factories in China etc. – Those factories will still be keeping US’s older ones closed in 2020. – They will not just disappear.)

----------------
*On semi-log graph, the slight recent curve upwards, (slope becoming less negative) would not be there. I.e. the current percentage of REMAINING employed losing their jobs is actually increasing, not decreasing, as the slight decrease in the negative slope of the last few months suggest.

To overstate my point for those who don't know much math: The curve MUST become flat horizontal when everyone has lost their job.

no one would just take your word on these things. you are biased and deceptive so you cannot be used as a source for speculation.

I found post 162 graph! at:
http://2.bp.blogspot.com/_pMscxxELHEg/SqU9topoIbI/AAAAAAAAGT4/JmHMtTVXWT4/s1600-h/JOLTS.jpg
It will not post still but if you go there you can see it. (I just did) If it works for you, please tell me and if you can make it display please do so.

no one would just take your word on these things. you are biased and deceptive so you cannot be used as a source for speculation.Fortunately, they do not need to now that I have (in post 167) given a direct link to the graph that no longe automatically displays in post 162. I.e. they can see for themselves.

If you think that graph (or the "poor subsitute" in post 165) is false, or carefully selected due to the "bias" you assert (with no evidence provided) I encourage you to find* even one graph that tells a significantly different story than the FACT that the current decline is the worst since the 1929 depression. Also I have in a post a about month ago, posted graphical data showing the current decline is running ahead of the 1929 collapse. I may try to find that post and give link. - There were lots of graphs in a set of three post as you can only include three in any one post.

In the mean time Try to support your post 166 claim that I am posting biased data (or retract it.) You said there "... you are biased and deceptive ..." I take offense at that false, unsupported, post. I am just telling it like it is while many are in a state of denial.

------------------
*You may be able to find one or two false ones. While searching for the post 162 graph, I got more than 400 hits of graphs of the job loss data. I did not open them all but the few dozen I did, all support my facts any none your POV about them being biased and deceptive.

IMHO a smarter move would be for you to retract your unsupported slur against me while you can still edit and before I report it.

your graph that show mid 80s and present is designed to look dramatic. the increment is 0.970 and 0.960 at lowest points.

'I am just telling it like it is'

Honestly i dont read your posts all through.

IMHO a smarter move would be for you to retract your unsupported slur against me while you can still edit and before I report it.

so report it.

your graph that show mid 80s and present is designed to look dramatic. the increment is 0.970 and 0.960 at lowest points. ...I have no idea what graph you refer to. None I can find include the "mid 80" nor any "increment” (of what?) certainly not in such as small range.

Tell at least where that graph is and what you are posting about - your post is incoherent!

Tell at least where that graph is and what you are posting about - your post is incoherent!

you dont understand what you are posting.


I have no idea what graph you refer to. None I can find include the "mid 80" nor any "increment”

Some interesting graphs: http://www.oxfonline.com/MMR/img/WorldSurging.gif
Since this is http://www.oxfonline.com/MMR/img/WheretheIncome.gif
I.e. Many governments & wealthy individuals have been buying in London, Frankfort, Dubai, Hong Kong,(even Brazil) etc. now Instead of USA. - A smart move with the dollar falling in value, but it does make their local currence increase in value and that hurts their exports. Consequently, many, especially China and Brazil, are building their internal domesting demand while exports to US fall. (As dollar falls, Americans can not affort to buy as much and also Joe American is now trying to pay off debts and / or save so is not buying many domestic goods either, without government aid such as "cash for clunkers"or grants to first time home buyers etc.)

Same facts with more details and numerically presented for various stock markets etc.:

For the period ending 4/30/09: 3 mos .. 12 mos ...3 yrs ... 5 yrs
MSCI Brazil USD ....................... 27.34 .. -47.94 ... 2.04 ... 26.73
MSCI Indonesia USD ................ 43.48 .. -36.42 ... 0 ........ 15.43
MSCI EM Latin America USD ..... 22.08 .. -46.43 ... -1.56 ... 19.4
BSE Sensex LCL India ............... 21.00 .. -34.04 .. -1.28 ... 15.08
MSCI Argentina USD ................ -4.78 .......n/a ... -25.13 ... -5.64
MSCI Turkey USD .................... 23.51 .. 42.53 ... -17.25 ... 7.38
MSCI Metals & Mining USD ....... 20.06 .. -54.46 .. -9.34 ... 10.39
MSCI Mexico USD ..................... 12.6 .. -46.27 ... -9.37 ... -9.69
MSCI EM GR USD ..................... 25.93 .. -42.72 ... -5.23 ... 11.46
MSCI Chile USD ........................ 9.75 .......n/a ..... 2.26 ... 12.88
S&P 500 ................................. 6.48 .. -35.51 ... -10.77 ... -2.7

Only in badly governed Argentia, the US (and closely tied to US, Mexico) would you be better off if you had kept your money under the mattress for last 5 years!

"Annualized Average Returns (in US$) are up to 25 Times Better Than the US."
{Billy T notes: Rapid fall of USD in last 10 days makes foreign gains even larger when converted into dollars. Also table data only goes thru 30April09. Typically foreign market gains in last 4.5 months since then have been twice the US's S&P gains.}
This graph, however does shows only three months of relative gains (ends 1 June 09): http://www.oxfonline.com/MMR/img/PaysBusiness.gif

“…Even after a 32% rebound in the U.S., the S&P 500 still lags the world badly. Amazing, isn't it? Chile…Turkey…Indonesia…Brazil…are all returning on average up to 25 times more to investors than the good old USA. And this trend is going to continue… for the rest of our investing lives. {bold & underlined in original}
You may not like hearing this. Few people do. But if you don't invest with this trend, you're going to get left far, far behind. It's just a fact. …”

Quote & graphs from: http://www.oxfonline.com/MMR/MMR0809book.html?pub=MMR&code=EMMRK922&o=27515&s=28824&u=40779324&l=46750&r=Milo

For more details about China (a major part of the rest of world / Asia data here) See:
http://www.sciforums.com/showpost.php?p=2364719&postcount=869 and al posts 868 & 870, by X-Man2.

The US has screwed itself over to the point of no return,I think we should just sell ourselves to the Chinese,hell they practically own us anyway.I can see it a coming,The United States Of China.Hey it was fun for some while the party lasted.

Two setp link to animated history (by Bloomberg) of how US triggered the current global collapse of credit. (Lehman bankrupcy was trigger).
Go to: http://www.bloomberg.com/apps/news?pid=20601087&refer=top_news&sid=avI7UENmRggQ

Then
Step 1: Click on orange graphic tab.
Step 2: With small triangle in upper right of new screen, step thru history pages.

To speed your understanding of what you will see:
The "CP" label on two small graphs in lower right of screen is for "Commercial Paper." I.e. corporate promises to pay with interest later for loan now.
Promised payment is usually only a few months into the future. (longer terms are corporated bonds.)

Sequence has most steps in Sept 2008, then jumps to July 2009 for last two screens. A vertical yellow line in the two small graphs show time of the comments on their time scales. I.e. these last two time steps are sort of the present conditions, but the white circulating balls, that represent money flow, still travel at the same speed. That is misleading as the velocity of money is very slow now.

Because the velocity of money is slow, the effect of the trillions pumped out by central banks is greatly reduced -almost as if that money had not been sent into the economy. This is the main real problem, IMHO: When the velocity of money does return to even half its normal value we EITHER have run-away-inflation, OR high interest rates (higher than investing the money and high enough to compensate for the erosion of value the lesser inflation is making). Thus the recovery will be killed in its crib by "tight money" money policy if the "OR" solution is followed, unless the central bankers are very lucky and wise. (I.e. manage to find a path between the "EITHER" and the “OR." As both are unstable with positive feel back, that will be like trying to walk a tight rope. - Tilt slightly too much to either side and you fall into the abyss of run-away inflation or deep depression. With bad luck, or a little "help" from Congress, you can have both.

On example of why BRIC currencies are stronger than the Dollar - more secure:

The S&P 500 has gained 54.5% since its March 9, 2009 low, it remains 33.2% below its all-time high of 1565.15 on Oct. 9, 2007. (From Business Week today)

The Brazilian Bovespa index 27Oct 08 low was 29.434 and yesterday 14 Sept09, it closed at 58.867 for a recovery from the low of 100.00% but in dollar terms nearly 150% as value of the dollar has continued to decrease vs. the Brazilian real. (from Folio de Sao Paulo today)

"Unemployment rose in 27 U.S. states in August, with California and Nevada reaching record levels of joblessness. ... Labor Department reported today in Washington. California’s unemployment rate reached 12.2 percent and Nevada’s climbed to 13.2 percent. ... Economists surveyed by Bloomberg News this month said the unemployment rate nationally will reach 10 percent this year, a reminder that consumers are unlikely to lead the recovery {THEY WERE 72% OF IT}. ...Unemployment in the District of Columbia also exceeded 10 percent, for a fourth consecutive month, rising to 11.1 percent from 10.6 percent.

“I’m caught up in the horrible transition phase between entry-level and mid-level professional,” said Jason Chang, 31, who lives in Arlington, Virginia, a suburb of Washington. ..."

FROM:http://www.bloomberg.com/apps/news?pid=20601087&sid=aNfVuMdRsGgA

PS 92 US banks have now failed in 2009. FDIC just announced, on Bloomberg radio, that they need more funds. May ask Congress for help or try to float bonds etc.
More on this at: http://www.bloomberg.com/apps/news?pid=20601087&sid=anA40Xh8bco4

Billy T comments:
I'm sorry for Jason, but more so for the recent and coming college grads, many of whom will be moving back into their parent's home as with no job - they can not even pay rent on a trailer. -As far paying back on their student loans -forget about that for years. Until their dad loses his job, they can put their feet under Dad's dinning room table.

SUMMARY: THE MELT DOWN CONTINUES.

Why is my beloved Canada still considered such a shabby place to do business, given all the crap going on down south? We've always been told how bad our unemployment rates are, yet 12.2% like you're claiming for California is utterly disgusting by our standards, and I'll bet those stats don't even count the border jumpers. 12.2% is like what we get out on the east coast, which we already recognize as an economic basket case where hardly anyone lives anyhow. Add up the amount the average American pays in user fees (i.e. private healthcare) and taxes, and I'll bet even on those grounds Canadians come out ahead at this point. Yeah we're not perfect, but why does the world still treat us like a bunch of retarded lumberjacks?

Irwin Financial’s 2 Bank Units Seized, Pushing U.S. Toll to 94


Sept. 19 (Bloomberg) -- Irwin Financial Corp.'s bank units in Kentucky and Indiana, with $2.5 billion in deposits and offices in nine states, were closed by regulators, pushing the tally of failed US lenders this year to 94.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aPtgVuIMrCnU

Irwin Financial’s 2 Bank Units Seized, Pushing U.S. Toll to 94 ...In series of 6 posts, the first when only 72 banks had failed, I have been reporting “progress” towards my prediction that 100 US banks would fail in 2009 vs. only the 3 that failed in 2007. See more extensive details and my discussion on the latest at:
http://www.sciforums.com/showpost.php?p=2368339&postcount=149

The main point being:

The interval (averaged for all of 2009 to date) is now one bank failure every 2.75 days. It was more than 3 days between failures when I first started to note and post this data, less than 50 days ago! If one only used the failures after my post 126, the rate would be about one every 2.2 days now. I.e. failure rate is really rapidly accelerating (amid the "green shoots" ). So ~140 banks will fail in 2009. - Nearly six times more than in 2008, which included the collapse of December. Or ~45 times more than the normal year of 2007.

Even if several hundred SMALL banks fail this year its a drop in the bucket considering there are thousands of banks in the US.

The government will not let any MAJOR banks fail.

They can take all the risks they want.

The government will not let any MAJOR banks fail.

I thought it was the Federal Reserve (major private banks) that is keeping the government from failing?

Even if several hundred SMALL banks fail this year its a drop in the bucket considering there are thousands of banks in the US.

The government will not let any MAJOR banks fail.

They can take all the risks they want.

Who are the smaller banks customers? Small business? I would like to know the straight up facts of the impact this is going to have.A lot of smaller banks add up do they not?

Small banks provide better personal service, loans etc to small businesses than large banks. However, the reason small banks are having trouble is that they started to charge fees and getting stricter to their customers while large banks are marketing well to these small businesses.

In the mean time small depositors who are not very savvy in finance use to flock to small banks for various reasons. But as the fees pile up, the small depositors are slowly leaving these small banks except in rural areas where there are no large banks.

Many years ago, when I moved from one location to the other, I closed my bank account at the local bank. Little I knew that the bank charged a service fee after the account was closed and since I have already moved, I was not aware of it. So, when I tried to open an account at a small bank in the new place, I could not. So I had to go to a national bank and they opened my new account with them.

I could not resolve the service fee problem as the old bank got sold to another. It took seven years for the issue to go away.

I thought it was the Federal Reserve (major private banks) that is keeping the government from failing?
The Federal Reserve may have private components...but its brain is controlled by the government.

The Federal Reserve may have private components...but its brain is controlled by the government.Certainly the FED is special, but it is not "controlled by the govenment." The whole point of creating it was to have it NOT controlled by politicians who have a strong tendency to see no further than the next election and load up all the pork they can for their district to get re-elected.

Brazil's "FED" is not leagally independent, but for more than a decade it has been widely accepted that politcal control of it earlier was largely what lead to run-away inflation years ago. So not once in the last decade has any politician dared to do anyting except exercise his free speech - almost always calling for greater reduction in Brazil's basic interest rate (from the current 8.75%)

"China’s central bank also functions quite differently compared with the U.S. model. Unlike our Federal Reserve System, the People’s Bank of China is not politically independent. It reports directly to the State Council, which serves as China’s cabinet as well as its highest executive body. Monetary policy in China aims at limiting the appreciation of mainland China’s official currency, the renminbi (RMB),3 while keeping economic growth at a sustainable pace and inflation under control and preserving a fragile banking system. In contrast, the Federal Reserve’s monetary policy has a dual objective of maximum employment and price stability."

"China’s central bank also functions quite differently compared with the U.S. model. Unlike our Federal Reserve System, the People’s Bank of China is not politically independent. It reports directly to the State Council, which serves as China’s cabinet as well as its highest executive body.

It's not just the People's Bank of China: essentially all of the major commercial banks in China are owned by the state. Major bank lending in China is all more-or-less explicitly centrally directed. This (plus endemic corruption) is why the asset quality at the big Chinese banks is so consistently poor.

This (plus endemic corruption) is why the asset quality at the big Chinese banks is so consistently poor.

And the effect is? China is a poor nation... dude...

And the effect is? China is a poor nation... dude...

? Effect?

? Effect?

If the perceived asset quality is poor, so what? Unlike American assets that is so hyped up that it is in its own bubble universe...

If the perceived asset quality is poor, so what?

"Perceived?" This stuff is measured in very concrete terms: what percentage of loans made by the bank are actually making their payments. This has a direct impact on the solvency of the banks, their ability to make loans, capital productivity in the Chinese economy overall, prospects for meaningful liberalization of the banking sector, long-term benefit of the recent stimulus packages, etc.


Unlike American assets that is so hyped up that it is in its own bubble universe...

? America is currently undergoing a financial crisis characterized by poor bank assets, yet still exhibits nonperforming asset ratios roughly an order of magnitude smaller than those of the Chinese commercial banks (which run around 25%). If China's commerical banks were privatized tomorrow, they would immediately go under, as they have all been losing money hand-over-fist for decades.

But what's the relevance of the comparison anyway? American problems don't make China's banking issues any less problematic; even if China would allow significant foreign investment in these banks (and they won't), no amount of disaster in the US would make them attractive investments. That would require cleaning them up and allowing them some independence so they could be profitable. As is, they're essentially clearing-houses for the CCP to distribute hand-outs to politically connected businessmen.

"Perceived?" This stuff is measured in very concrete terms: what percentage of loans made by the bank are actually making their payments. This has a direct impact on the solvency of the banks, their ability to make loans, capital productivity in the Chinese economy overall, prospects for meaningful liberalization of the banking sector, long-term benefit of the recent stimulus packages, etc.


So, you think if Chinese banks are insolvent according to American standards, the country of China will go bankrupt? Since these are government banks? Wow!

So, you think if Chinese banks are insolvent according to American standards,

According to any cogent definition of "insolvent."


the country of China will go bankrupt?

No.

Certainly the FED is special, but it is not "controlled by the govenment." The whole point of creating it was to have it NOT controlled by politicians who have a strong tendency to see no further than the next election and load up all the pork they can for their district to get re-elected.
Billy, as long as the governors are appointed and approved by the government...its controlled by the government.

Billy, as long as the governors are appointed and approved by the government...its controlled by the government.Does that logic apply to the Supreme Court also? Government employees they may be (I am not sure.) but if they are, the government still cannot fire them if they go against the wishes of the government. - Job security makes for independance.

FHA & FDIC both are now with reserves less than the law allows, so will either issue bonds or ask Congress for bail out. In FDIC's case asking stronger banks to pay next years fees in advance is also and option, as FDIC is supposted to be funded by the banks, but with ~140 to close in 2009 vs. only 3 in 2007, FDIC expenses have greatly out paced its income from the banks.

As if that were not enough, the job losses have cut the payroll tax income to Social Security and older unemployed are opting to start collecting ASAP (age 62) even if they will get lower payments for the rest of their lives. Some Baby boomers, fearful that they will be fired (they tend to be replaced with much lower wage - fresh out of college kids who have trouble finding any job and work for less than half what the end of carrier emplyee was collecting) are also taking "early out" retirement offers instead of getting fired.

That BTW, is keeping the unemployeed percentage lower than real as they are "early retired" not "unemployed" even though many wanted and planned on working ~5 years more to make up for their loses in their 401k savings and stocks etc.

This is also straining SS as their replacments contribute less into SS and the early out retire group, older than 61 is now collecting from SS.

Net effect is that contray to expectations SS will pay out more than it takes in for at least next two years (or "for ever" if the recoveryis slower than hoped).

SUMMARY: US will borrow not only for the stimulus (Joe American not doing his 72% of the economy) but also to fund FDIC, FHA and Social Security.
Sure hope US credit with China remains good or else there will be an even bigger flood of printing press dollars.

UP date on post 197: FDIC is mandating that banks pay the next 13 quarters of their regular fees by end of this year to keep from going broke. - Talk about pushing a problem into the future - that is what FDIC is doing and making it worse as some additional banks will fail under this "front loading" stress.

And the FDIC doesn't know or doesn't care?

Are they trying to destroy the economy for some reason?

And the FDIC doesn't know or doesn't care? Are they trying to destroy the economy for some reason?"...The FDIC is required by law to rebuild the fund when the reserve ratio, or the balance divided by insured deposits, falls below 1.15 percent. It was 0.22 percent on June 30… The FDIC’s projections of future losses are pretty severe, and they are trying everything they can to avoid tapping the Treasury. {That increases US debt and may require act of Congress as close to the limit now.}

The Federal Deposit Insurance Corp.’s plan to rebuild its reserves may cost Bank of America Corp. and three of the largest U.S. banks more than $10 billion. … FDIC yesterday proposed asking banks to pay premiums for the fourth quarter and next three years on Dec. 30. The fees will raise $45 billion. …”

From: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=auEG9sH4Cs2g

Oct. 2 (Bloomberg) -- The number of U.S. lenders that can’t collect on at least 20 percent of their loans hit an 18-year high, signaling that more bank failures and losses could slow an economic recovery. … 26 firms {are} with more than one-fifth of their loans 90 days overdue or not accruing interest as of June 30 -- a level of distress almost five times the national average. … The number of distressed banks is larger, with the FDIC counting 416 companies on its confidential list of “problem” lenders at mid-year.

Ninety-five banks have failed this year at the fastest pace in almost two decades, depleting the FDIC’s insurance fund. … The cost of this year’s failures to the FDIC equals 25 percent of the banks’ assets,* according to agency data. Applying the same ratio to the $14.1 billion of assets held by the 26 lenders on SNL’s list means the FDIC could face additional losses of $3.5 billion. {Plus cost of any of the 416 “problem banks.”}

FROM: http://www.bloomberg.com/apps/news?pid=20601087&sid=aXZinRhF5tlA

---------------
* From this you can infer that FDIC is recovering 75% of book value of the assets the failed banks had. Considering that >20% of their loan assets were non-performing, that is so good that I suspect some cooking of the books is occurring. Perhaps Fanny May is buying bad assets at falsely elevated prices (to help the FDIC out)? If so, this is more "pushing problem into the future." - Over paying for assets does not make them good.

Billy T makes no other comments as the facts speak for themselves.

I follow the world news like you do and a lot of it is about the dollar today (I know to look because my Gold jumps when the world shuns the dollar).

It was interesting to hear how Europe responded to the US saying we support the strong dollar. Their response was "sure you do, that is why you are being so responsible with your spending". They went on to imply that the US better be interested in a strong dollar. Most know that a weak dollar helps the US by lowering the price of exports and raising the price of imports. But the Europeans are saying that the rest of the world has been over invested in the dollar for a long time and now it is finally questioning the ability of the US to stop the dollar slide. There are limited ways to boost the dollar in this environment and none of them are good.

The People’s Daily states the unspeakable (for westerners) truth (in bold text below):

“…The Group of Seven rich nations {at just concluded Istanbul meeting} have again pushed developing China to appreciate its currency, the RMB Yuan, so as to promote a so-called "more balanced growth." In so doing, the rich nations have obviously intended to shirk their due responsibilities in the wide-spreading global financial turmoil: As it is known to all that the current crisis has been a result of developed countries' lax financial regulation, excessive consumption and their lasting monopoly on the international financial system.{that last is obvious reference to the dollar & US} …

For the past two decades, the developed countries have transferred their low value-added manufacturing industries to the developing nations including China, which helped the developing world build a trade surplus. Moreover, the trade barriers they have imposed on their high-tech products have also contributed to a slow import growth in the developing countries. {That last refers to advanced computers, jets, etc. which cannot get US’s export permits.}

… a stronger Yuan will not necessarily lead to a balanced trade in the Western nations because the vacuum left by China will be filled up quickly by other major manufacturing economies.* In short, a dramatic appreciation of the Yuan is by no means a miraculous cure for the present economic woes of the Western nations. ..."

From: http://english.peopledaily.com.cn/90001/90778/98506/6777007.html

---------------
* India, Thailand, Malaysia, Viet Nam, Indonesia, to name some of the large ones with lower, low-skill, labor costs than China and not to mention any in Africa.

Indian work habits are improving but in attitudes towards quality control and doing mistake free work the average Indian worker is probably still is less precise than the average Chinese worker and therefore the average Chinese worker is probably worth a little more money.

If the Yuan was a floating currency and the dollar dropped 50% against the Yuan, in the short term prior to plants leaving China and relocating to India there would be some decline in American purchases of Chinese products. If a radio that Walmart sells for $60 earned the Chinese $20 with Walmart and the distributors and Brand owners taking the other $40 then the price of the radio would have to rise to $80 after the dollar fall against the Yuan. Most Americans would still buy the radio at $80 if they were going to buy it at $60 because it would still be the lowest cost product of it's type. But some Americans would decide a new radio is not in their budget if the price is $80 rather than $60.

Contrary to what outdated economics textbooks say, in the short term (prior to Chinese plants relocating to India) the US trade deficit with China will expand when the radio's price jumps from $60 t0 $80 with the Chinese share increasing from $20 to $40 (ignoring that the contracts are probably priced in dollars). The economics textbooks theorized that American companies would start making radios if the Chinese doubled their prices. The Chinese Yuan would have go up by a multiple of about 15 times before the USA starts taking it's manufacturing jobs back from China. Doubling the value of the Yuan will just double the cost of American purchases from China and will increase the trade deficit.

Of course if the Yuan doubles in value China will be able to afford to buy more from the USA so expect the price of pasta, meat and toilet paper to rise in the USA if a double Yuan allows the Chinese to eat more and eat more expensive foods, and use more paper products. But the sale of more agricultural goods to China would a minor event compared to the rise in cost of manufactured goods sold to Americans. A rise in the Yuan will create a rise in the US trade deficit rather than the fall in the US trade deficit predicted by the economic textbooks that I had twenty years ago.



A fall in the dollar against all currencies would help the USA compete against Europe and Japan in some higher tech areas in which china does not participate.

The second tier nations like Taiwan and Korea have not yet finished taking their share of high tech market share away from the more established European, Japanese and American producers. Third tier nations like Brazil, Malaysia and Poland will probably invade 2nd tier nations like Korea's market niches. Fourth tier nations will invade third tier markets and fifth tier nations will invade fourth tier markets. I know I am over simplifying to make a point and then in reality a nation like India or any nation can be simultaneously producing the highest tech products using the highest tech techniques and producing the lowest tech products using the lowest tech techniques.

The unique problems that the USA has are 1: that business people all over the world who should know better but don't still continue to view the USA and it's dollar as the ultimate in financial safety and stability and 2: that Americans still believe in American exceptionalism and don't understand that Americans will never be able to compete if the dollar is too high. Obama and most of his piers and the people at Goldman Sachs and all of their piers at Wall Street don't know that sending American kids to college does not mean that they will be able to out compete Indian college graduates willing to work for much less money. Obama and Wall Street do not even understand the problem. Most of the good jobs left in the USA are only here because business leaders were too lazy and incompetent to take advantage of the opportunities that outsourcing to developing nations presents. Granted you can't outsource high tech jobs to a place without college grads and decent phone lines but developing nations are increasing their supply of college grads and decent phone lines rapidly.

I don't think America's leaders understand what they are dealing with because they are blinded by the egotistical false idea of American exceptionalism.

--------------------------on Saving Rate ----------------
"... After bottoming out below 0% in 2005, personal savings jumped above 6% in May. This is a seismic shift: a 6% savings rate annualizes out to $681 billion. That's $681 billion that was recently being spent and is now suddenly being dumped into savings accounts. While that's created a nightmare for discretionary-based companies like Best Buy and Home Depot. ..."

FROM: http://www.fool.com/investing/general/2009/10/07/a-brutal-truth-facing-consumers.aspx

That sort of puts the multi-year stimulus in proper perspective as replacement demand.

--------------------------on the dollar ----------------
“… The weaker dollar may boost America’s exports as the economy recovers from the deepest recession since the 1930s. The risk is that it may also drive away America’s largest creditors just as the Treasury relies more than ever on foreign investors to buy the bonds … The dollar’s share of global currency reserves fell in the second quarter to 62.8 percent, the lowest level in at least a decade, the International Monetary Fund in Washington said on Sept. 30

The dollar’s 15 percent decline against the euro and 11 percent depreciation versus the yen since early March are increasing concern among world leaders. The decline means it’s becoming relatively more expensive to live in the U.S. The difference in per-capita income with Canada has shrunk 87 percent since October 2008. At the same time, Americans are getting poorer. - Per capita net wealth tumbled to $172,749 in August from a peak of $212,599 in September 2007 - A United Nations Human Development Report released Oct. 5 showed America’s quality of life dropped to No. 13 in a 2007 global ranking from No. 5 in 2000.

While the dollar dropped in global currency reserves, holdings of Euros rose to a record, the IMF report shows. The U.S. currency’s portion declined to 62.8 percent from 65 percent in the first quarter. The euro’s share rose to a record 27.5 percent from 25.9 percent while the pound and yen gained.

FROM: http://www.bloomberg.com/apps/news?pid=20601109&sid=aNsHa7QfIvGU

Billy T’s comment: Stay tuned, more to come.

"... After bottoming out below 0% in 2005, personal savings jumped above 6% in May. This is a seismic shift: a 6% savings rate annualizes out to $681 billion. That's $681 billion that was recently being spent and is now suddenly being dumped into savings accounts. While that's created a nightmare for discretionary-based companies like Best Buy and Home Depot. ..."



I don't think the new savers will keep this up. We have seen spikes in savings during other recessions and the spikes in savings did not last long. People will get bored with the recession when it becomes old news. When the people get bored with the recession the people will forget to be scared and will once again start buying all the things that the advertisers tell them to buy. If spending money that the people don't have is required to live the the life style that is expected of successful people then people will spend money that they don't have just as soon as their desire to see themselves as successful once again becomes greater than their fear of failure.

I don't think the new savers will keep this up. We have seen spikes in savings during other recessions and the spikes in savings did not last long. People will get bored with the recession when it becomes old news. When the people get bored with the recession the people will forget to be scared and will once again start buying all the things that the advertisers tell them to buy. If spending money that the people don't have is required to live the the life style that is expected of successful people then people will spend money that they don't have just as soon as their desire to see themselves as successful once again becomes greater than their fear of failure.I agree with the psychology you are basing this post on, but there is no blood in a stone. i.e. Joe's credit cards are maxed out. Unlike California, he can not print and pay with IOUs. Joe really is not saving - he is paying down debt so his TV will not be reposesed etc.

Reducing credit card interest charges is the only interest rate attractive to him now, certainly not his bank's saving account.

Joe's credit cards are maxed out. Unlike California, he can not print and pay with IOUs. Joe really is not saving - he is paying down debt so his TV will not be reposesed etc.

Reducing credit card interest charges is the only interest rate attractive to him now, certainly not his bank's saving account.

Joe may be maxed out but Jill and Paul still have jobs and plenty of unused credit.

I agree with you if you feel that just based on Economics 101 America should melt down. Actually based on Economics 101 America should have melted down 15 years ago or further back and the hollow American economy situation justs gets worse every year that America does not melt down.

I am not very good at market timing but I don't this was the beginning of the next great depression. I think there will be one or two more business cycles before the next great depression starts and I think that great depression might not be more than another major recession outside of the USA which should be at the center of the crisis because the long term over-inflated dollar is the underlying cause of the crisis.

I think the bursting of housing and financial bubbles in this major recession may prove to be a godsend by having America face it's problems in stages rather than face it all at once. Unfortunately it looks like Wall Street is taking off again on it's way to reinflate some bubbles.

Joe may be maxed out but Jill and Paul still have jobs and plenty of unused credit. ...I agree with this, but probably not with your intent. Yes Jill and Paul have "unused credit" and little intention of using it! That is why, despite the FED's best efforts, the banks are not lending significantly still. - Jill and Paul have no loan applicactions at the bank, unless they are taking advantage of the "first time home owner" grants....Unfortunately it looks like Wall Street is taking off again on it's way to reinflate some bubbles.It is not much like a bubble inflating if Dow etc. is expressed in Euros or gold, instead of dollars. I.e. a large part of what is going on is that it takes more of the less valuable dollars to buy anything foreigners are also buying. (Even the cost of your local hair cut will be going up to, but more slowly. Deflation is due to the barber etc not wanting to risk losing business in these tough times, so he is trimming his real profits as well as your hair.) For example:

"... Investors outside the U.S. are purchasing companies in the Standard & Poor’s 500 Index at the cheapest valuations on record,* their buying power boosted by a seven-month decline in the dollar. ..."

Quote from: http://www.bloomberg.com/apps/news?pid=20601087&sid=aT1nPG0YoeYo

----------------
* Note that ~50% of the S&P 500 earning comes from foreign sales. Then when these profits are converted back into dollars they increase very significantly - a major reason why US corporations are doing so well is that the dollar is not! And also why they are not re-hiring Joe.

It is not much like a bubble inflating if Dow etc. is expressed in Euros or gold, instead of dollars. I.e. a large part of what is going on is that it takes more of the less valuable dollars to buy anything foreigners are also buying.

Sure, as American inflation rises Colgate should rise and as the Dollar falls any US corporation selling products in other currencies should rise in dollar value. Those effects would not be bubble inflation.

Gold is doing well so no there is no reinflation of a Dow bubble as measured in gold. The Dow bubble is reinflating when measured in Euros or Canadian dollars which while rising against the dollar are not rising as fast as the Dow is.

The best way to measure Dow bubbles might be in PE ratios but you would have to make adjustments for the unattractiveness of current interest rates and the relative quantity of quality companies to invest in for those who insist in being invested in the stock of nominally American corporations. As PE ratios in the 1990s and then again after the tech bubble crash Stock Brokers and media financial pundits often said that we are in a new era and old ideas about what normal PE ratios should be no longer apply. These people never managed to explain why old norms for PE ratios no longer applied but I came up with scarcity of quality investment opportunities as one possible explanation and overabundance of money seeking investment in relation to money seeking to buy products as another way of looking at the situation. As the American rich got a larger share of American profits and the American workers got decreasing shares of American profits (due to new pressure from international cheaper labor) the rich who invest money had more money to invest while the workers who create corporate earnings by buying stuff had less money to by stuff therefore average PE ratios should go up.

So what to measure the Dow in when checking for bubble inflation, Gold which itself is in a irrational bubble, PE ratios which may not mean what they used to mean, the Euro which like the dollar is an overinflated currency, oil which is quite volatile or perhaps the Dow bubble status should be measured in wheat.

http://moneycentral.msn.com/content/data/images/120/smalldollar_120.jpg Photo worth 10,000 words.

As predicted, 100 banks have failed. My current data projects that the 2009 total will exceed that of the 1992 "saving and loan" collapse (and on average the banks are larger) For full details, See: http://www.sciforums.com/showpost.php?p=2395023&postcount=165

I have not heard more on the FDIC's plan to force heathy banks to pay in advance the FDIC fee but my worst fears are becoming more likely. Namely some bank (or jointly the 3 biggest banks who are being asked for 10 billion dollars not yet due.) will get that ruled an illegal abuse of power (collecting inadvance all that is due thru end of 2012.) Then FDIC would be forced to ask Congress for money when Congress is home for the Christmas recess. More people would not be able to do their normal Chrismas shopping with no access to their bank accounts.Post 200, in part...
The Federal Deposit Insurance Corp.’s plan to rebuild its reserves may cost Bank of America Corp. and three of the largest U.S. banks more than $10 billion. … FDIC yesterday proposed asking banks to pay premiums for the fourth quarter and next three years on Dec. 30. The fees will raise $45 billion. …”

Also a problem coming at about the same time is that the Congress will need to raise the US debt limit. That is always done, but only after a lot of political grandstanding and delay. Christmas period looks to be "interesting" this year. (Recall the Chinese curse.)

I don't think America's leaders understand what they are dealing with because they are blinded by the egotistical false idea of American exceptionalism.

America has a serious problem. The whole country moved to ~88% consumption over the last 20 years. As a result, most of the producers have retired or flipping hamburgers. Switching to Production will not be easy.

Our Government is now at $3.55 Trillion Consumption. We could be producing $3 Trillion while Consuming $7 Trillion with a total economy of $13.55 Trillion. It is definitely lopsided.

Oct. 26 (Bloomberg) -- The dollar weakened against the euro and the yen as Asian stocks gained on signs the global economy is recovering, reducing demand for the greenback as a refuge.

America has a serious problem. The whole country moved to ~88% consumption over the last 20 years. As a result, most of the producers have retired or flipping hamburgers. Switching to Production will not be easy.

[/I]

"Things that can't last forever won't".

I guess the American people were as guilty as their leaders in refusing to see reality but rather choosing to live now and pay later under the assumption that America and Americans and themselves were so special that surely somebody would want to pay for our services in the future. Americans just are not that special. We are replaceable.

I think the dollar really needs to collapse or the infatuation with free trade must be abandoned prior to the reversing of the trend towards ever decreasing real production in the USA. Doing each others taxes and babysitting each others children and cooking each other dinner won't get us any Saudi oil.

Well some American live high at others expense...

http://www.people.com/people/gallery/0,,20284072,00.html#20631469

http://img2.timeinc.net/people/i/2009/galleries/trump/ivana-trump-4-660.jpg

Well some American live high at others expense...

http://www.people.com/people/gallery/0,,20284072,00.html#20631469

'Twas ever so, in any society, and ever will be so...:rolleyes:
--------------
Mod Billy T has removed repeated copy of photo to save space (both in thread and archives) as this post is adjacent to kmguru's photo

Thread is "American melt down" and usually that is taken to mean economic problems in America, but this post interperts that to mean a global economic problem caused by US policy. Sort like me calling the coming depression, GWB's depression, it is "America's melt down."

http://www.bloomberg.com/apps/data?pid=avimage&iid=i62dAjxzQbig Liu Mingkang, teller of the truth that the emperor has no clothes.

IMHO, the Chinese chairman of China's Banking Regulation Commision, Liu Mingkang has publicly and correctly identified the major cause of the global crisis and the coming depression in US and EU. He did this no doubt to deflect critism from China's policy of fixing the Yuan at 6.83 to the dollar, but his reasons do not detract from the truth of his point:

"... “The continuous depreciation in the dollar, and the U.S. government’s indication, that in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation,” Liu told reporters in Beijing today at the International Finance Forum.

Liu said this has “seriously affected global asset prices, fuelled speculation in stock and property markets, and created new, real and insurmountable risks to the recovery of the global economy, especially emerging-market economies.” {Note Brazil had to impose a 2% tax on funds entering or leaving Brazil as the carry trade flood of dollars into Brazil was destroying the capacity of Brazilian factories to export. I.e. Brazil is responsibly controlling inflation with basic interest rate of 8.75% and US government effectively lends money at less than 2.75% for two years. Thus with a 6% very safe margin, a huge "carry trade" has flooded Brazil with hot money funds, making the Brazilian Real super strong as many want it to invest in Brazil.}

His view echoes that of Donald Tsang, the chief executive of Hong Kong, who said the Federal Reserve’s policy of keeping interest rates near zero is fueling a wave of speculative capital that may cause the next global crisis. {Recall that Greenspan set very low interest rates and fueled the real estate bubble with cheap loans. Investors took on ever greater risks in search of a few percent better return on the money they were lending, etc.}

“I’m scared and leaders should look out,” Tsang said in Singapore Nov. 13. “America is doing exactly what Japan did last time,” he said, adding that Japan’s zero interest rate policy contributed to the 1997 Asian financial crisis and U.S. mortgage meltdown.

Zhao Qingming, a Beijing-based analyst at China Construction Bank Corp., said today that low interest rates in the U.S. have spurred a carry trade with some currencies, notably the Australian dollar after recent interest rate increases by that nation’s central bank.

“The carry trades will further drive down the dollar’s value and fuel commodity prices,” Zhao said. “The dollar’s depreciation has also caused excessive liquidity in the global market.” ..."
{It certainly has in Brazil - Dollar has dropped 33% in value vs. Brazilian Real in only 2009. This is a "positive feedback" system, driving the dollar lower. - The larger the carry trade, the faster the dollar falls. To say the US supports a "strong dollar" is as hypocritical as it gets. As Lincoln said: "You can fool all of the people, some of the time, ... but..."}

Quoted text from, but with Billy T inserts in blue http://www.bloomberg.com/apps/news?pid=20601087&sid=aPggdjyUi.30&pos=3

Summary: US under GWB and Greenspan made the the current crisis and Obama and Keynes are making it worse in an effort to delay GWB's unavoidable depression in US & EU, which is coming before Halloween 2014, IMHO, despite Obama's efforts.

If American imported less, the trade deficit would go away but it is easier to blame China for its Yuan pegged to the dollar than to stop borrowing to live beyond your means. The only way to get Americans to import less is to make the dollar weaker. - Say officially that "US is for a strong dollar" but do everything possible to make it grow weaker. - Set interest rate near zero, run dollar printing presses 24/7 at record setting output of new dollars. (More than 1 TRILLION/ PER YEAR!)

This situation predates Bush Jr. . China and Japan's and everybody else's previous and current attempts to hold the value of their currencies buy buying assets in the only nation (the USA) that would not object to having it's currency driven up in value is the realcause of the world's economic problems.

Now the dollar carry trade makes it difficult for business as usual to continue. What is the USA supposed to do; raise interest rates during the worst recession in 60+ years just so so nations that want to suppress the value of their currencies can continue to suppress the value of their currencies?

I prefer for the USA to face it's problems in stages and not go straight into a depression at this time even if an eventual depression in the USA is unavoidable. If low interest rates can get the USA out of a recession before the rising cost of all foreign products puts the USA back into a recession that would in my opinion be a good thing.

I first noticed the dollar carry when it was unwinding in the fall of 2008 prior to these rock bottom interest rates. It looked to me like their might have been a coordinated effort to defend the dollar in August and September of 2008 that may have included naked shorting of Gold by JP Morgan. This attempt to defend the dollar may have triggered the wave of hedge fund redemptions that started with hedge funds focused on commodities and emerging markets but which eventually spread to the tanking of the stock market in general.

You can see in charts that during 2008 and 2009 the Dollar and Yen as the carry trade currencies move in one direction together while the Euro moves in the other direction.

I think the winding and unwinding of Dollar and Yen Carry Trades will be the main driving force behind mass moves in the financial markets for the next 2 years. I expect more attempts at manipulating markets in an attempt to prop up the dollar. Nobody wants a sudden and dramatic collapse of the dollar but between the low interest rates/Carry trade and the trade deficit it won't be easy to defend the dollar. The flight to the safety of the dollar reflex in older financial decision makers is the only low cost force that can be used to prop up the dollar but this force can only be activated by creating mini panics in the dollar's alternatives like gold, oil and the Euro.

Japan and China and the Saudi's, Koreans and Europeans can keep buying US assets to prop up the dollar but this will cost them a lot of wealth in the long run. How should they chose among themselves which nations should take these losses? It used to be that the nations that most wanted to depress their own currency had to buy the US assets; but how will they feel about continuing this behavior as it becomes increasingly clear that they are buying overpriced assets?

I am like a broken record on the dollar and probably will be for a long time. I need a new metaphor because younger people never experienced scratched vinyl records that boringly and irritatingly repeat the same section of a song over and over.

http://www.bloomberg.com/apps/data?pid=avimage&iid=i7KT.vnQguIU Bank of Japan Governor Masaaki Shirakawa, The second “TRUTH TELLER.”

See post 217 for first “TRUTH TELLER.” - Their truths are not popular in USA* He said:

“… “There are also risks involved in continued low rates,” Shirakawa said today at a Paris Europlace Financial Forum in Tokyo. Having borrowing costs near zero may strain government finances if it spurs speculation that the dollar will continue to slide, he said, while warning that easy policy by officials globally may have repercussions in the long term. “Monetary easing in advanced economies has stimulated capital inflows to emerging economies,” Shirakawa said. If emerging nations continue to recover at a faster pace than advanced ones, they “might overheat and experience financial turmoil, triggering a recession,” he said.

From: http://www.bloomberg.com/apps/news?pid=20601087&sid=aQz3J1NVh0wI&pos=4

*The more typical US position is reflected here:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aUfFcvYQthng
I.e. not one word about global problems caused by US’s near zero interest rates nor the excessive US’s imports, or fiscal deficits due to US living beyond its means for more than a decade. Only “blame on the victims” who are trying to prevent destruction of their domestic manufactures by buying up dollars to slow (or in China's case reverse) the super evaluation of their local currency or use other means to protect themselves from the flood of cheap, hot money, dollars entering and distorting their local economies.

“Other means” include Australia and Norway raising interest rates (mainly "bubble" / inflation prevention) and Brazil placing a 2% tax on foreign funds either entering or leaving Brazil. Some countries are also adopting or strengthen tariffs to protect their domestic manufactures. All this “protectionism” is forced on them by the US policy of prolonged low interest rates. Some of it is retaliation for open US protectionism trying to save US jobs. For example, US placed high new tariff on Chinese tires and two days later China retaliated with a new tariff on US chickens. Most scholars agree that Protectionism was one of the major causes of the great depression – It will have the same effect again.

The Chinese POV (US is cause of the economic problems, not China protecting its industries with fixed 6.83 Yuan to the dollar) is here:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a5RZmvRKUkK0&pos=4

"... The Mortgage Bankers Association (MBA) reported today that mortgage delinquencies hit a record high in the third quarter:
"The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.64 percent of all loans outstanding …”
The MBA data does NOT include mortgages that have entered the foreclosure process, and those are rising as well. In the third quarter 4.47% of all mortgages were in some stage of the foreclosure process,* up from 4.30% in the second quarter and 2.97% a year ago. The graph below (from http://www.calculatedriskblog.com/) shows the percentage of all prime loans that are in trouble (both fixed and ARMs). …”

http://www.zacks.com/images/upload_dir/1258660104_scaled_425.jpg

From: http://www.zacks.com/stock/news/27475/Mortgage+Delinquencies%3A+Record+High
Red is foreclosure & blue is "late payments". Each bar is for 3 months. The % scale top is 12% with steps of 2%. Left most bar is for 1Q05. (Hard to read so I tell)

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*Thus the fraction of mortgages that are paying late or already in foreclosure in 3Q09 is: 9.64 + 4.47 = 14.11% or significantly higher than the official unemployment rate but less than the more general under or un-employed rate of 17.5%; however the graph shows only 10%, so simply adding may be wrong by some double counting? Or perhaps, as the text states only "prime loans" are included in the graph and the extra 4.11% in the numerical data includes the subprime loans too?

In any case, the curve slope in bar chart above shows problem is still growing worse ever more rapidly but ignore that - "The economy is recovering." :rolleyes:

Also I do not think that either graph or the numerical data includes the "under-water agreed walk aways." I.e. Banks recognize that the home buyer can not pay the mortgage and does not want the cost and delay of foreclosure to further increasing their losses so agrees that owner can just sign the title over to the bank and walk. There is considerable risk to the bank, that if it does not agree to let the debt be cancelled by transfer of title: The house may be "TRASHED" (Not by the owner, of course. His out of town brother, etc. backs his story that he was not even in town when house was trashed., etc.* I.e. a loss of 15K on the deal is more attractive to the bank than having 50K of broken sinks, copper wires stripped from the walls, etc. to repair.)

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* They were on a camping / fishing trip that weekend and even have the park entry fee reciept to prove it.

Yes, interesting. We are far from being out of the woods. Gold and silver have been and remain wise investments. Be ready.

http://www.upi.com/Top_News/Analysis/2009/11/20/Walkers-World-Europes-drab-new-leaders/UPI-55231258725938/
This article refers to a report produced by Societe Generale, France's second-largest bank. I selected a few interesting paragraphs from the article:

The irony is that their appointment comes as one of Europe's top banks warns that the global economy looks like heading for another crash, with a collapse of the U.S. dollar, another plunge in share and property prices, and a Japan-style "lost decade" of low growth and massive unemployment “Nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report produced by Societe Generale, France's second-largest bank.

"High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.

It saw the debt levels of all Group of Seven governments soon exceeding 100 percent of gross domestic product, with Japan's heading for 300 percent. The overall debts of the world's leading developed economies were now higher than they were in the aftermath of World War II, with the health and pension demands of aging populations adding to future debt pressures.

The Soc-Gen report saw the massive rise in government debt triggering a new crisis with the gold price soaring and the oil price tumbling back to $50 a barrel because of low demand. The bank advised its clients how to survive "an extreme worst-case scenario" by selling the dollar, buying government bonds and defensive companies like telecoms and utilities.

See the graphs and tell me if we are melting?

http://img693.imageshack.us/img693/3883/12867082.gif

The reason we are in such a pickle is that, either the Government decided to drop the tax rate drastically or our real Industrial output and employment fell drastically that caused for government to take in less money each year since 2001. The cumulative loss compared to normal growth is staggering. No amount of tax hike will compensate the past loss due to collapse of our Industries.

Is there a HTML command resize the picture?

http://img695.imageshack.us/img695/6567/13277093.png

...Is there a HTML command resize the picture?
I tested the "size cmd." I.e. tried "......" and that cmd does not reduce the image. (Note in my test there was no space after the "1" in [SIZE=1], but I inserted one in this illustration so it would fail as a cmd and print here.) I have had the same problem. I hope someone will tell us how to solve it. Sometimes, at the source, a very small graph can be enlarged by clicking on it and then the expanded image can be posted, but when source image is already too large, I know of no "fix."

Do you know why in about 2002 the red line slope dramatically changes -even turns negative and crosses the blue line?

Kinda makes you wonder what happened say about 1981, '82, don't it?

Kinda makes you wonder what happened say about 1981, '82, don't it?

and 1996.

Do you know why in about 2002 the red line slope dramatically changes -even turns negative and crosses the blue line?

Maybe the end of capital gains revenue from the tech bubble coupled with Bush's tax cuts for the wealthy.

Do you know why in about 2002 the red line slope dramatically changes -even turns negative and crosses the blue line?

The blue line is an extrapolated trend line from the total data set. Because the data is skewed from normal growth curve, the trend line is biased slightly to the right.

I think nirakar is correct that perhaps IRS got some extra money that way

Correct values are
1999....2000....2001....2002....2003....2004
1,904 ..2,097...2,129...2,017...1,953....2,019

I am truly amazed you guys don't know(or don't say)the primary reason for your trade deficit was first "free trade" with Canada in the 80s and Nafta in the 90s.

I am truly amazed you guys don't know (or don't say) the primary reason for your trade deficit was first "free trade" with Canada in the 80s and Nafta in the 90s.It is not so much that we do not recognize that "free trade" can (and did) have an adverse effect on a nearly closed society, IF that society has much higher consumption level (living standard) than others it might trade with.

The US was not reduced to ashes during WWII, - quite the contrary - its industrial capacity and production efficiency was greatly expanded. Thus as long as the US was more productive (not mainly just rebuilding to recover from the destruction) it was able to sustain a high standard of living / strong economy which attracted capital for further improvements in production efficiency.

Also very important was fact my generation of students were willing to study hard - made great advances in "human capital" within the USA. The "beatniks" came later with their "tune in (to drugs) and drop out (from productive work ethic)" Then the US had the most advanced universities etc.

These great centers of higher learning attracted large number of foreigners; especially Asians who unlike the hippies / beatniks were also willing to study hard greatly increase their "human capital." For a decade or two many of these well trained foreigners graduated and took jobs in the USA and filled the "human capital" deficits caused by the Hippie/ Beatnik lazy bum’s POV not replacing to the human capital of the older generation dying away.

By approximately three decades after WWII, the destroyed regions of the world had recovered and in some case (especially steel factories) they had more modern production, more efficient factories. I.e. the US was no longer to sole "land of opportunity" So some of the US educated Ph.D.s in the hard sciences begun to return to their native lands, especially India and China. This influx of human capital was at least as important as the financial influx of financial capital. - that initially came to take advantage of the much lower wage levels, but now is flowing into China and India to take advantage of the huge markets in countries where the purchasing power of the population is rapidly expanding, especially if compared to the US populations.

Now the US finds itself with less than the most modern factories, a student population that on average is less willing to study hard - I.e. not replacing the human capital that is dying off - and an unsustainable salary and debt structure. If understood in these terms, the future is relatively obvious. The US standard of living will drastically drop as those in nations which have been adding to their human capital rapidly rise.

The US is no long the sole "land of opportunity" - in fact it is hardly even in the top five. Now free trade is part of the mechanism which will lower the US standard of living down. I.e. cheaper than US can produce imported goods will ease the pain for a while - so long as the producers of those goods can be persuade to part with them for green pieces of paper - but that will soon end, IMHO. I.e. there will be a run on the dollar as all try to get something of real value for it instead of watch its purchasing power decrease further.

Normally this would stabilize with US exports becoming more competitive, but the US deficit in human capital and modern factories will not be reversed quickly. I.e. the US salaries must drop LOWER than those of it commercial competitors to compensate for the less well educated workers (especially in math and hard sciences), the less efficient transport systems (private cars, driving to suburban infrastructure, etc.) and the on average older, less efficient, factories. Not all this is yet true - I am comparing the US to China, India etc. in about 2020, not today.

Summary: The Hippies will win: I.e. the US will tune in (to reality altering drugs, including alcohol) and drop out (from world leadership). Yes “free trade” will accelerate this process, but is not the fundamental cause. That is more related to decreasing human capital, aging (or closed) factories, and decades of accumulating debt which US productivity cannot repay. I.e. the US lived beyond it means for too long as foreigners were willing to send goods and services for green paper.

I am truly amazed you guys don't know(or don't say)the primary reason for your trade deficit was first "free trade" with Canada in the 80s and Nafta in the 90s.

BillyT explained it perfectly. Personally as a world class manufacturing and automation engineer, I can concur with him. Since late seventies, American students went on to study anything but Engineering which reduced the technology human capital. We also put too much emphasis on Sales and Marketing such that these people went up the Corporate ladder and made both technical and business decisions.

Even recently people like Carly Fiorina with a degree in philosophy and medieval history ran the HP and almost destroyed it. She is now running for Congress and taking up Economy as the primary campaign topic. She probably does not know the deference between a blade server and a food server.

The members of the "Politburo Standing Committee of the Communist Party of China" are all engineers (except one). I do not think we have any engineers in the leadership role in the U.S. Congress or Cabinet level secretaries. You can not run a highly industrial society with no knowledge in Technology. We do not even have a "Industrial Policy", but China does.

As to productivity numbers, we used smoke and mirrors. According to BLS, Productivity = Output/Input. Our Output was calculated using the import numbers that falsely increases the numerator while we did not count the human capital used from Contract + Outsourcing components. That reduces the denominator thus showing the Productivity much higher than it really is.

In the meantime, our technically illiterate Lawmakers spend too much time in raising funds for the next election while their novice interns write all the laws helped by lobbyists.

Take for example, the American auto companies. The upper management never cared for quality. So they kept producing crap while Japanese and later Koreans beat them with quality. I worked for an air-bag manufacturing company where each department was a mini-kingdom. Luckily I was working for the CFO and therefore authority to manage "change". One time, the transportation department was ready to spend $3 million dollars to warehouse good products next to the car companies because the production department was sending bad products - without solving the quality issue. Who knows how many bad air-bags are in cars now. If they can do that in safety systems, imagine, the starter, alternator etc. Last month one of my Chevy van brake started leaking. As I replaced the brake piston, I found the seal was deformed. They call it factory defect.

We are definitely in a pickle with morons running the country.

Ahh I see blame it on the newest generations. Well while the silver spoon fat boys are fucking lazy I will admit, there are a LOT of hungry Americans and hard working americans, I really don't put a lot of salt in "well americans are lazy". That's bullshit to me.

I am Canadian and have worked for and with Americans in American and Canadian companies. They often work too hard in my opinion. They get all stressed out about nonsense that doesn't even affect the bottom line, they are too busy playing cover their own ass to give a shit about the bottom line (unless it helps cover their ass). This shitty modus operandi has spread into Canada over the past 12 or so years. That kind of attitude "politics first", bullshit second and getting the job done somewhere at the end of the list has not one fucking thing to do with a small minority of hippies back in the 60s-70s. What a load of hogwash.

The whole thing is a goddam pyramid scheme, it's real simple why Canada and Mexico(not sure about mexico actually) have trade surpluses and the U.S doesn't. It's got nothing to do with education and hard work. Canada's resources get raped by huge multi-national corporations, the people are generally not benefiting hardly as much as they should, in Canada. These things are shipped to the states and less and less getting used for finished products to be sold wherever. Now they go to Mexico to get made into finished product. I'm speaking generally not the same for all resources of course. Mexicans are not hard workers not anymore than the average pleb in Canada or the U.S. Their country is so fucked up and corrupt they have to work for pennies(pesos even) on the dollar. So the multinational corporations have managed to get a deal in three counties (like they fucking own them and they DO) where they can rape the resources of one, rape the people of another and Pillage the fucking currency and tax payers of all three.

Well these locusts are all over the earth now, pull out as many charts as you need to try to explain the very simple math of this pyramid scheme:

It's running out of suckers to buy in.

... I really don't put a lot of salt in "well americans are lazy". That's bullshit to me.

I am Canadian and have worked for and with Americans in American and Canadian companies. They often work too hard in my opinion. They get all stressed out about nonsense that doesn't even affect the bottom line, they are too busy playing cover their own ass to give a shit about the bottom line (unless it helps cover their ass). This shitty modus operandi has spread into Canada over the past 12 or so years. That kind of attitude "politics first", bullshit second and getting the job done somewhere at the end of the list has not one fucking thing to do with a small minority of hippies back in the 60s-70s. What a load of hogwash. ...I did not say Americans are Lazy. Many work hard, especially the poor, but the problem is that on average their education is poor in math and hard sciences compared to almost all other advanced and many developing countries. Pre college education is much more concerned with Johnny’s "social development" than his "analytical development" (ability to understand problems and formulate solutions) at least in areas that are productive for the economics of the society. Just look at how many of the most gifted college grads become lawyers, stock brokers, salesmen, entertainers, etc. - people concerned with making money, not products (software is a product so "products" need not be tangible) I.e. we have become, by and large, not a nation of producers, but of "mutual back scratchers" - a service industry economy.

I did not mean to blame the hippies or beatniks - I agree they were too few in numbers to be very important. However, they and the rest of the "WOODSTOCK generation" did make a fundamental change in American attitudes, which greatly contributed to the decline in the US. Unlike their parents generation who saved first and then bought their first car they are the "I want it now" generation which buys until the plastic cards are maxed out. Etc. Both the government (which they elect) and they themselves seem to think that there is no limit to debt and credit. Enjoy the things you want now. This includes the courses they tend to take in college - avoid those that give tough home work - take those that reward well written BS on the exams (and perhaps some regurgitated facts that require no understanding or computational ability). The reference to hippies was merely trying to compactly refer to this destructive change in typical attitudes which replaced the "work and save" attitude of their parents with "buy on credit and enjoy" attitude.

You comments about Canada were interesting. This new "buy on credit and enjoy" attitude will probably spread and in a few generations even infect India and China too.

The buy on credit thing started with their generation, but hippies were all about communal ownership, material objects are meaningless etc etc and now they often own lexus and 3000 sqfoot houses.

Very educated and "usefully" educated people, I have found, are often completely mercenary. It doesn't matter if their 300K/yr job is in the U.S or Japan, they just go. Doesn't matter where they got educated. Some really good universities in the U.S, there are a few in Canada too. The Governments and RRB(really rich bastards), keep them going as they have a vested interest (like I said the multinational corporate interest - again they own most governments). They don't really care who enrolls. People and disciplines who seek knowledge for knowledge sake are pretty rare these days and the wealthy and intelligent that pursue them are considered "eccentric" by the unimaginative numbers counters and their slaves.

I am personally hoping this shift into forced "living in your means" will be a good thing. You are 100% correct about the buy on credit generations(mine was the worst until Gen Y came along and put everyone to shame). They are going to make ME into a hippie, because there is no use saving for a devalued future.

Engineering educations should have been free, paid for by the government while liberal arts, (psychology, art history, archaeology and any other education that produces products consumers don't want to pay for) should have received absolutely no government aid and Law and MBA programs which arguably produce people who will actually harm the economy should perhaps be taxed.

Thinking that America could educate itself of of this problem is a false idea that interfered with the Clinton administration and Democrats in general's ability to face the problems of Americans trying to compete with cheaper labor. As we saw programing jobs leave to India we should have been able to understand that the same dynamics apply for highly skilled jobs in growing fields as apply for low skilled manufacturing jobs. If a corporation can make more money by simply placing it's brand on a product made by foreign subcontractors using cheaper labor than the corporation can make by paying American workers then the corporation will use the foreign subcontractors or will go ou of business when it's competitors use the foreign subcontractors.

It is a false idea to think that less developed nations will not compete for high tech jobs just because they have not traditionally produced the highly educated employees needed for these jobs. Less developed nations are rapidly increasing their production of domestically educated engineering students.

Even if lazy pothead Americans reformed themselves and became hard working engineering students this would only stall off the movement of engineering jobs out of the USA. Engineering jobs are still in the USA for the same reason that manufacturing jobs were still in the USA in 1969. The foreign infrastructure for taking those jobs is still developing. By 1969 the shoe industry had left the USA and Japan had taken over the low end consumer electronics market. The deindustrialization of America could have been predicted in 1969 based on what had happened in shoes and cheap consumer electronics and now this is 1969 for the engineering jobs.

Unless the dollar crashes (as it would if the currency markets were rational and unmanipulated) or unless the policy of predominately free trade is abandoned then market forces will over time move the engineering jobs out of the USA regardless of how many engineers the USA produces. Until American engineers are willing to work for the same wages as Indian, Filipino and Chinese engineers it would be preferable to utilize the lower paid foreign engineers. As the emerging markets exponentially increase their supply of Engineering graduates the global shortage of engineers will eventually come to an end. The lower skill level of "Emerging Market" nations engineers will not persist as the developing nations high tech industries and universities mature.

Why did America screw itself? These phrase "Emerging Markets" is a clue. Wall Street salivates over getting a piece of he action. Mature economies grow more slowly. GATT from a Wall street perspective was a deal in which the USA gives up the right close off it's consumer market to protect it's workers in exchange for the right for Wall Street to invest in the higher growth emerging markets. Also Philip Morris wanted to try selling branded cigarettes in China.

Perot warned of the "giant sucking sound of jobs going to Mexico" if NAFTA passed. For a little while that was coming true; then the GATT passed and companies that moved operations to Mexico pulled their operations out of Mexico and moved them to China because Mexican labor was not cheap enough. Mexico got screwed because they allowed subsidized American corn into Mexico in exchange for the jobs that they were supposed to get that ended up going to China instead. Subsidized American corn meant that he option of being a poor but dignified corn farmer in Mexico was being destroyed which depopulated rural Mexico and sent those previously poor farmers into the urban slums and into the USA.

nietzschefan, if you subtract natural resources out of Canada's trade picture would Canada's balance of trade look any different than the USA's on a per capita basis?

Canada has a great ratio of natural resources to people. Hard working people and highly educated people will keep on becoming more and more plentiful in the world but global natural resources per capita will continue to fall. There are only a few nations in the world as blessed in natural resources per capita as Canada is. The question for Canada will be how to keep the hordes of Americans out of Canada and how to keep Wall Street's greedy fingers off of Canada's natural resources. Global Warming might even improve Canada's farm land if it does not reduce rain fall.

nietzschefan, if you subtract natural resources out of Canada's trade picture would Canada's balance of trade look any different than the USA's on a per capita basis?

Canada has a great ratio of natural resources to people. Hard working people and highly educated people will keep on becoming more and more plentiful in the world but global natural resources per capita will continue to fall. There are only a few nations in the world as blessed in natural resources per capita as Canada is. The question for Canada will be how to keep the hordes of Americans out of Canada and how to keep Wall Street's greedy fingers off of Canada's natural resources. Global Warming might even improve Canada's farm land if it does not reduce rain fall.

You are correct Canada would be in the same spot as the U.S if it had not stripmined all it's resources. The Average Canadian is kinda screwed anyway as they work for American companies, work for companies dependent on exporting to U.S or work for multi-national locust flick and flee(when they are done raping you). These fucking equity conglomerates actually have the frikin gall to bitch about the massive fees entrepreneurial Albertans are charging them to run water and cargo up north to where the goodies that are gobbling are.

Do you know that the U.S Violated freetrade and NAFTA and tariffed Canada lumber, because WE PLANT TREES AND DO NOT DEPEND ON COMPANIES TO DO THIS. Unbelievable.

There is no need for a wall to keep Americans out. Simply it's too cold for them, it too hard to live, it's too "commie" or whatever. People in the states often still believe the mantra "Land of the free", "American dream", "Land of opportunity". From what I can tell that's bullshit in the U.S right now, while they proclaim it loudly - Canadians quietly LIVE it...at least for now.

Furthermore there is no need for Americans(or anyone else) to come north for resources/water/whatever. Just pay off a politicians and take it. We're so nice we traded with China even when they actually were commies gave them all our grain at cost, they couldn't even buy enough and had to pay our farmers to not farm(now that's fucked). We let spain come and take all our fish, we let U.S and U.K oil companies take all our oil. Why the fuck would you want to live in harsher environs when the idiots who live there will do all the work and ship it to you at nearly cost thanks to free-trade agreements?

Do you know that the U.S Violated freetrade and NAFTA and tariffed Canada lumber, because WE PLANT TREES AND DO NOT DEPEND ON COMPANIES TO DO THIS. Unbelievable.

I learned about that when I was looking into buying into BC grown lumber with the idea that China and Japan will use up Indonesia and then will need to clear cut BC for cardboard in which to send their products back to all of the USA's Walmarts.

Furthermore there is no need for Americans(or anyone else) to come north for resources/water/whatever. Just pay off a politicians and take it.

I thought that was te plan but will this cozy arrangement last? For the owners of natural resources free trade is good because it gets them the highest price for their products. Taxpayer subsidies for the owners of the natural resources will make them even happier.

My understanding is that as a not Canadian I amnot allowed to buy shares in Canadian farmland Reits; the nerve of those Canadians. It is one thing to stop disposable Americans like me from exploiting Canada's natural resources but if Canada ever interferes with the USA's fat cats pursuit of greed the USA may be forced to invade Canada or at least ban Canadians from visiting Disneyland.

I think Canadians should tax the hell out of their natural resource exports to make sure that Canadians get the benefits from their resources. If Canadians could stop the bribes of their politicians, Canadians could and should use their natural resources to remain wealthy while the USA slowly becomes a second world nation in terms of median income. My prediction is that the USA will continue to lose ground on Canada economically and that Canadians will eventually about 15 years from now feel that American illegal immigrants are a serious problem.

I learned two things from the last posts: Make engineering education free. I will help do that in Africa. And that Canada has a lot of potential that need to be used in a responsible way.

Here is a great Nassim Taleb discussion that explains a lot.

http://www.youtube.com/watch?v=kcjFJUMmA40&NR=1&feature=fvwp

Interesting Website and specially about Australia...

Will the exchange rate kill manufacturing (http://www.brookesnews.com/092311exchangerates.html)

http://www.brookesnews.com/index.html

and America...

Obama's economic policies are turning into a global disaster (http://www.brookesnews.com/092311devaluation.html)

What does BillyT think?

Data from America’s Federal Deposit Insurance Corporation highlighted the difficulties that persist in the banking sector. The number of “problem” lenders that the FDIC lists grew to 552 in the third quarter, the highest number in 16 years. And confirming the reluctance of banks to loosen their lending policies, total loan balances held by financial institutions fell by 3%, the fastest pace since 1984.

Could not collect the graphics that looks exponential from this weeks Economist magazine.

Interesting Website and especially about Australia...

Will the exchange rate kill manufacturing (http://www.brookesnews.com/092311exchangerates.html)...I have only read this first of your links. Yes it is interesting (and I think basically correct).

I was vaguely aware of the existence of an Australian school of economic thought, which many disagree with (including this link's author). It appears to be based in the IPA and claim that floating currencies cannot have an inappropriate value, wrt their impact on trade (and possibly other POVs too - I just know little of them).

Perhaps it is true, that in the long run (decades) all floating currencies will reach their correct purchasing power values for trade. The US dollar has been overvalued for decades, but does appear to be correcting now. The link author should have explained why a floating currency can be overvalued for decades, in addition to his graphs showing that this is a historical fact. I.e. he should have mentioned that demand for the dollar was large for reasons unrelated to trade (Store of value, especially in times of global economic stress) held the floating dollar overvalued.

He concludes with:
"Davidson is a fellow of the Melbourne-based Institute of Public Affairs. This in effect means that from now on only Davidson's views on manufacturing and exchange rates will be aired. No debate will be permitted."
If true that is indeed sad and shows the IPA has much too much influence in Australia - especially as I too think Davidson (and IPA) are incorrect about floating currency always having the correct value for trade. That is based on too simple a theory which ignores non-trade demand for the currency. Very obviously in the dollar's case the "non-trade" demand has been very important (if not the dominate factor) in keeping the dollar over valued for decades.

Recently, this "non-trade" demand has essentially collapsed or even turned negative. That is why in the "long run" average (many decades) Davidson & IPA's POV may be correct, but that "long run" is so long that it is not very interesting - As Shaw, quipped: "In the long run, we are all dead."

In case you think that Davidson is correct in the short run, for all currencies except the dollar - I note that the decision of Russia a few days ago to include the Canadian Loonie in Russia's reserves (a "non-trade" demand) is already helping drive the Loonie towards parity with the dollar. Russia is even thinking of including the Brazilian Real, which is up 30% in value wrt the dollar just in the last 10 months (In 2009). As I have been posting for years, holding US treasury paper is an almost certain way to destroy the purchasing power of your reserves. Even stupid central banks seem to have finally understood this.

I will get to your other links later, probably today but certainly local industry is hurt by increased demand for your non-industrial exports - I.e. any country that has a surge in demand for its non-industrial exports will see its currency rise in value and its industrial exports decrease (the "Dutch disease" - discovery of North Sea gas destroyed their industrial exports.)

In Brazil, high labor cost industry like making shoes for export, has been destroyed. (We call this "de-industrialization") Many years ago, I posted forecast that Brazil's ultimate fate was to become an "economic colony" of Asia, especially China. I probably will have more to say on this later as this relates to the "comparative advantages" discussed in your references.

Interesting Website and especially about Australia...
I have now looked at second of your links. Yes it is interesting and contains more than one sub link on your subject, For example:
http://www.brookesnews.com/090911exchangerates.html and
http://www.brookesnews.com/092311exchangerates.html which seems to be identical to your first link.

There are many, many sublinks at your second link. I will be reading quite a few and did not know of this source to other discussions.

I can’t quickly find post but someone (superstring01?) gave his suggestion for what would be the next crisis trigger. I replied that I thought it would be the commercial real estate mortgages, but I was thinking of NYC etc., not Dubai. I want to watch Wall Street’s reaction, so will terminate this post.

217 points down Dow in first minute!
In less than 10 minutes: "Gold down $26.68 at $1,161.70 per ounce" - I bet this is due to expectation that Dubai (et al?) will sell some of their gold to pay debts. If true, it is as I predicted some months ago, but for England, not Dubai. I.e. Dollar will strengthen but gold may drop if a sovern state needs to dump gold. There is a huge amount of "vault gold" hanging over the market that may come to market to pay debts.

American Food Stamp use

http://www.nytimes.com/interactive/2009/11/28/us/20091128-foodstamps.html?hp

It is hard to tell which disaster comes next: Commercial real estate mortgages default sinking many smaller banks local communities depend upon OR
Credit card defaults sinking the national firms that issue them. Arguments for the later are:

"... According to Moody’s Investors Service the charge-off index for British credit-card companies was 11.8 percent in September, almost double what it was in the first quarter of last year. In effect, one pound in every 10 owed on British credit cards right now isn’t going to be paid back. Nor is the picture much better in most other developed countries, the U.S. in particular. It is hard to imagine how anyone really thinks that situation is sustainable.

Huge swathes of the population are living wildly beyond their means, spending money that appears magically from thin air. If you don’t think that is going to blow up one day, then you need to lie down in a dark room until you’ve figured out how to think straight again.

The problem is always the same -- just as it was for the mortgages that were the root of the original subprime crisis. Too much debt is being loaded onto a flimsy base. Eventually the whole edifice comes crashing down. Dubai has given us a preview of the trouble ahead. The main performance is still to come.

From: http://www.bloomberg.com/apps/news?pid=20601039&sid=aj.9optQm8vg

There is no need for a wall to keep Americans out. Simply it's too cold for them, it too hard to live, it's too "commie" or whatever.

The main thing keeping me out is the requirement to pledge allegiance to the Queen in order to gain citizenship. The cold I can deal with, provided I'm close enough to mountains to ski regularly. But swearing allegiance to a hereditary monarch (and a European one, at that)? No way.

Everywhere you look in the US there are signs that we are generally, as a population, oblivious of the risks. We move forward on huge expenditures, increased taxes, new fees and local taxes and little or no effective mitigation of the risks. Real unemployment is almost twice the official number, stimulus jobs have been grossly overstated, everything is being spun, etc.

Based on Dubai you must consider a shift of assets into gold bullion and if you have paper gold you better keep your finger on the sell button :).

The main thing keeping me out is the requirement to pledge allegiance to the Queen in order to gain citizenship. The cold I can deal with, provided I'm close enough to mountains to ski regularly. But swearing allegiance to a hereditary monarch (and a European one, at that)? No way.As I understand it, quite a few Brits think the monarchy should end with the death of the present queen. It is an expensive institution, is one agrument and others feel as you do.

Perhaps you should get ready to sneek in when she dies and join the "kill the monarchy too" movement? Given that England is nearly bankrupt, and many fewer Americans can afford to come to England for summer holidays, watch the "beefeaters" etc., with the weaker dollar that movement may succeed. (As a "tourist attraction" I doubt if the queen is paying her cost now.)