American Melt Down?

Discussion in 'Business & Economics' started by Michael, Sep 15, 2008.

  1. Pinwheel Banned Banned

    Or smoke 'em. :m:
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  3. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member


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    US’s new generation lacks jobs. It is getting worse as more graduate.

    “… While everyone is hurting since the financial collapse, young adults bear a disproportionate burden, constituting just 13.5% of the workforce while accounting for 26.4% of those unemployed. Even with good credentials, it is difficult for young people to find work and keep themselves afloat. … Jobs aren’t the whole story. Recent college graduates, those in the labor force with the freshest batch of knowledge and skills, are currently underwater and sinking fast with unprecedented student loan and personal debt. Average student debt for the class of 2008 was $23,200, an increase over four years of about 25%, meaning that students are knee deep in negative equity between their educational investment and actual earnings. …”

    Text from:

    Graph form: but read article there too which explains part of the young worker’s lack of jobs as follows::

    “…With plummeting home values and shrinking 401(k)s, many people lost a significant portion of their planned retirement. For example, the median household with a person between the ages of 55 and 64 saw their wealth fall by almost 38% between 2004 and 2009 (Baker 2009). In the face of such a loss, many older workers chose to delay retirement and either continue working or go back to work because they could not afford to retire. ... Not only are there fewer jobs in the economy, but also fewer workers retiring and opening up positions. …”

    PS Don't blame me - I retired at age 55.
    Last edited by a moderator: Nov 26, 2010
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  5. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

    Latest on the jobs problem from: Schwab's "Morning Market View for December 03, 2010" Email today:

    "... Nonfarm payrolls rose by 39,000 jobs in November, well below {74% below !} the consensus
    estimate of economists surveyed by Bloomberg, which forecasted a 150,000
    increase. Additionally, excluding government hiring and firing, private
    sector payrolls increased by 50,000, versus the forecast of a gain
    of 160,000, after expanding by a modest upwardly revised 160,000-from
    an initially reported 159,000 gain-in October. The unemployment rate
    rose from 9.6% to 9.8%, compared to expectations of the rate to remain unchanged ..."
    Last edited by a moderator: Dec 3, 2010
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  7. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

    “… The U.S. Treasury Department sold its remaining stock in Citigroup Inc.for $10.5 billion, { 2.4 billion shares at $4.35 each,} … Treasury said its average price for selling 7.7 billion Citigroup shares was $4.14. The government acquired the shares at a conversion price of $3.25. The share increase produced a gain of about $6.85 billion. … the profit for taxpayers on the rescue to about $12 billion, including the share gain, dividends and proceeds from other securities. …”


    Uncle SAM seems to being doing OK with his bank bail outs*, but GM price must rise a lot before he gets out of that one even.

    *That is the current appearance. To some extend, perhaps a large extent, a very false appearance. (TRUE COST ONLY KNOWN YEARS FROM NOW.) I.e. the tax payers via the FED have given a lot of essentially zero cost funds to the banks. The hope was that they would make loans, grow the economy, create jobs, etc., but that did not happen. What happened was the banks sent the money to the Treasury by buying new (and on the market) bonds. I think this is an effective subsidy to the banks larger than “welfare” payments in the same period. I.e. the banks got funds at ~ zero cost and invested them at nearly 4% return. When they profit thus, it is the tax payers in the end that pay thru the nose.

    Last edited by a moderator: Dec 7, 2010
  8. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

    "... U.S. home values are poised to drop by more than $1.7 trillion this year amid rising foreclosures and the expiration of homebuyer tax credits, said Zillow Inc., a closely held provider of home price data.

    This year’s estimated decline, more than the $1.05 trillion drop in 2009, brings the loss since the June 2006 home-price peak to $9 trillion, the Seattle-based company said today in a statement.

    “It’s definitely going to continue into 2011,” Stan Humphries, Zillow’s chief economist, said in an interview on Bloomberg Television today. “The back half of 2010 looked horrible and 2011 should look like the mirror image of that.”

    The percentage of homeowners with mortgages with so-called negative equity reached 23.2 percent in the third quarter, up from 21.8 percent at the end of 2009. ..."


    Billy T comment: 9 trillion, or 9E12 dollar drop spread over 3E8 Americans is $30,000 drop in home component of net worth since June 2006, for every man, woman and child! (Easily more than $100,000 loss for typical home-owning family.) Little wonder many are more poor now.

    One thing recently helping quite a few American with underwater homes to still shop is that with "mortgage gate" and associated frozen foreclosures, they have stopped paying their mortgages without fear of eviction. This has made a lot of cash now available to spend in the stores for Christmas, so sales will probably look a little better this end of year - But that, instead of paying down the mortgage, is just digging their debt hole deeper. - But Hey! If the government can do that, why not under water Joe American too?

    Just don't be tricked by improved end of year sales data to think the economy is recovering. That, assuming it happens, is just more false "green shoots" for the optimists to talk about. - Again remember, you heard it first from me. By June 2011 many others will reach this "more false green shoots" conclusion.

    --------------More depressing projections (from same Bloomberg article):
    "... Prices will be as much as 36 percent below their 2006 peak before finding a bottom, Morgan Stanley analysts led by Oliver Chang wrote. Sales will stay “depressed” through next year amid tightened lending standards, they said. As many as 8 million homes are in some stage of default or foreclosure, known as shadow inventory, and may be offered for sale over the next five years, according to Morgan Stanley. The looming supply will combine with tight credit and questions about housing-finance regulation to reduce prices 6 percent to 11 percent from current levels, the analysts said.
    Last edited by a moderator: Dec 10, 2010
  9. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

    “… Marc Faber, who advised investors to buy U.S. stocks in March 2009 as the Standard & Poor’s 500 Index began a rally of as much as 86 percent, said U.S. Treasuries are a “suicidal” investment. … “If you print money, the currency goes down and the S&P 500 goes up,” he said. “By the end of 2011, people will look at 2012 and think 2012 could be a very bad year because the policies applied are not sustainable and create a lot of instability. Investors may look at 2012 and 2013 with horror.” …” From:

    Billy T comment:
    My prediction of dollar collapse by Halloween 2014, made back when GWB still had about 2 years a POTUS, I recognized more than a year ago was very likely excessively cautious, so in mid 2009, without officially changing that prediction, I said that I expected the collapse to come shortly after Obama’s first and only, by choice, term as POTUS is over (January 2013).

    I.e. He and Bernanke will borrow and print money to get that collapse to occur after they are out of office, regardless of how much worse that policy will make difficult any recovery from the deep, long-lasting, depression in US & EU will be. That depression will quite promptly follow the dollar collapse.
    Last edited by a moderator: Jan 2, 2011
  10. Carcano Valued Senior Member

    “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
    -Ludwig Von Mises.
  11. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

    Thanks for the 100% true,IMHO quote. Here is some of the mechanism leading to rapidly growing interest payments (made with newly printed or borrowed money of course)

    "... yield on the two-year note 4 bps higher to 0.63%, the yield on the 10-year
    note up 10 bps to 3.39%, and the 30-year bond yield advancing 9 bps to
    4.43%. ..." Early today data from: Schwab's "Morning Market View for January 03, 2011" Email to me.

    Interest payments growing because (1) Debt is growing & (2) cost of borrowing is growing.
    Soon the "bond vigilantes" will swing into action and really accelerate (2). When it is too costly to borrow, the US will follow Germany's and other's path - just print money - until hyperinflation make that useless.
    Last edited by a moderator: Jan 3, 2011

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