World economy talk

[tidus1203]

ARROYO GRANDE, Calif. -- Remember that hot 1973 Stealer's Wheel song marking the end of the Nixon era? "'Cause I don't think that I can take anymore. Clowns to the left of me, jokers to the right, here I am stuck in the middle with you!"
It's still a perfect metaphor. Testifying before Congress: Fed Chairman Ben Bernanke on the left. Treasury Secretary Henry Paulson on the right. The American public stuck in the middle.
Last summer they assured us the subprime-credit crisis was "contained." We now know that was a big lie. They knew, had the facts, early warnings, lied and are still lying. More proof? They just told Congress: "America will avoid a recession." New data tells a different story.
Clowns to the left ... jokers right ... stuck in the middle ... can't take it anymore.
But we have to, we have to hang on at least 10 months more, praying they won't do too much more damage. But I'm afraid they will: more lies, blunders and incompetence will drag out this bear. Like the song says: "Got a feeling something ain't right."
Read the new InvestmentNews, a professional journal for financial advisers. The lead headline grabs you: "Bad times for stocks could last many years." A long secular bear.
Do you believe it? That's the big question today: When's the next bull? How long will the bear last? And forget Washington's rhetoric about "no recession." The truth is, you can call it a "bear," "slow growth," a "downturn," a "recession" -- call it whatever you want. Timing's the real question. How long will it last? When will it bottom? 2008? 2011?
Test your timing skill. You tell us, what'll drag this out 30 months, like in 2000-2002? Or shorten it? Here are 11 critical factors for your timing equation, things that could make this bear-recession shorter or longer. You tell us. Add a comment. What's your prediction: How long before the next bull?
1. Stagflation: Bernanke's no-win Achilles heel
Reading Fed-watcher William Fleckenstein's new book, "Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve," you get the feeling that for 18 years America's banking system was run like a "new age" hippy commune, by a Ayn Rand free spirit who believed "anything goes."
Now the Fed's run by a college professor and Fleckenstein says he's "in over his head." Except this is the real world, a $13 trillion economy in a $48 trillion world, not a college seminar on economic theory.
In the 1970s Nixon faced a similar problem, convinced then by Fed Chairman Arthur Burns: "No one ever lost an election on account of inflation." Wrong! Low rates generated inflation not growth. That stagflation triggered a bear/recession. Is Professor Ben trapped, repeating history?
2. Housing-credit meltdown: We've got a long way to go!
It's far from over folks and still spreading: Years of inventory, foreclosures, building slowdown, risky bond insurers, weak rating agencies, funds holding bad debt, freezing exits and fuzzy math on values. Yet Bernanke and Paulson still live in a Washington bubble of wishful-thinking fantasies.
Economic realists say what's needed is a massive $1.6 trillion demand-driven program (that's the record cash Corporate America's hoarding) not a dinky $160 billion supply-side "appease the voters" giveaway that ends up increasing the odds of a lengthy Nixon/Burns style bear-recession.
3. Commodities: World's new reserve 'currency,' not dollars
Forget paper money and IOUs. Commodities are the world's new "currency:" Hard stuff like oil, grains, metals, gold. And that means America is financing the growth of our enemies, surrendering our long-term economic power for short-term oil-guzzlers and plastic toys. We are responsible for making Russia and China into threatening world powers. Buffett warned us. We're selling the farm, piece by piece.
4. Toxic derivatives: World's $516 trillion ticking time bomb
Derivatives are great for deal-by-deal risk management in a $48 trillion GDP world. But leverage them 10 times over across the globe and we got a financial "weapon of mass economic destruction."
Bill Gross warns that the world's new unregulated "shadow banking system" is printing new money, now at $516 trillion, out of thin air, with no "central banks of last resort" backing up the "Frankenstein" monsters they've created.
5. Massive debt: Everywhere, trade, federal, states, local
America's Comptroller General David Walker, Congress's head accountant who is leaving his position next month, warns our government is "bankrupting America." Using unethical accounting worse than Enron's. Fiscal responsibility lost. He sees "striking similarities" with Rome. Both parties are gluttons in a spending orgy.
We spend-spend, load debt on future generations, then use accounting gimmicks to hide our greedy excesses: Hidden earmarks. Supplemental war appropriations. Meaningless IOUs after stealing from Social Security.
6. America's new 'pushers:' Banks feeding consumer addicts
Trader's Daily captured it perfectly: "Never underestimate the power of the superpsycho, hyper-spending American consumer. Where there is no cash, they will sell their soul. Or just charge it. Let's just not think about what it all means for credit-card debt down the road."
Meanwhile, the credit meltdown is making banks desperate for money. A recent Chase credit-card commercial fuels consumer addictions: Wife wants bigger television. Husband smiles. They shop to the pounding drumbeat of Queen's hit 80s song: "I want it all, I want it all, I want it all ... and I want it now!" Tag line: "Chase what matters!" Yes, Chase debt, all you addicts. Forget saving, spend like there's no tomorrow.
7. More wars: Pentagon predicts bigger, costlier conflicts
The Pentagon's internal studies see a perfect storm accelerating wars worldwide: Global population growth, limited natural resources and global warming. Our war machine is exploding. The Pentagon gets over 50% in the new federal budget. We're only 21% of the world's GDP, yet spend 47% of the world's total military expenditures.
Our power-hungry mindset is becoming self-destructive, suicidal. Remember Nixon strategist Kevin Phillips' warning: "Most great nations, at the peak of their economic power, become arrogant and wage great world wars at great cost, wasting vast resources, taking on huge debt, and ultimately burning themselves out."
8. Greed: Wall Street and Corporate America's defining 'value'
Values start at the top. But the top won't change for 10 months. Leadership, statesmanship and character are vanishing. Five short years ago Corporate America and the mutual fund industry were consumed by greed. How quickly we forget.
It's worse today. We see greed consuming not just Wall Street's clueless CEOs, but the entire industry: Outrageous bonuses of $38 billion amid mega-billion write-offs. Fire sales of billions more American equity to sovereign nations.
From the top down, greed is driving America from bubble to bubble. Wall Street's already fueling the next bubble, trading on a volatile market.
9. Democracy failing: America now run by 35,000 lobbyists!
Forget government "of the people, by the people, and for the people." Adam Smith's "invisible hand" is now a small group of 35,000 highly paid, greedy lobbyists demanding handouts. They run America from the shadows, for those at the top of the economic food chain and vastly outnumber Washington's 537 elected officials.
Nationally there's an estimated quarter million lobbyists, with hundreds of millions of dollars to buy favors in campaign contributions. Politicians talk "change," but America's lobbyists will still be working for their special interest clients in 2009. And they'll fight all "changes."
10. America's already in a recession, and in denial
This year's elections will be a huge factor in lengthening the recession. Our lame-duck government will delay action on critical issues. It reminds me of my days counseling addicts and alcoholics. Change never happens until they admit they have a problem. Same here.
Paulson and Bernanke cannot admit there's a recession. They'd have to take blame for America's failed policies. And congressional Democrats are weak co-conspirators in this meltdown. Nobody has the guts to take responsibility. They're all like addicts and alcoholics, in denial, giving lip-service to "change," while they blame the other guys and support ineffectual stimulus plans.
Vote for whomever, but this lame-duck mindset plus lingering partisan rancor will push any recovery at least into 2009, probably delay the next bull till 2010 or 2011.
11. Class warfare: Superrich vs. Main Street America
No matter who wins, the presidential campaign is warning us: A major battle's coming between "the rich and the rest;" over taxes, benefits, cuts, power.
For years the media collaborated with Wall Street and Corporate America, hyping "Ownership, the New American Dream," where everyone benefits, shares the wealth, gains a piece-of-the-action, ownership in "The Dream" through the magic of housing, stocks, growth, profits, retirement plans. But the housing-credit contagion killed the dream.
Yes, the superrich did get richer. But "the rest" didn't. And they're waking up to a widening gap. A backlash is brewing and will explode ... delaying a recovery and a new bull.
Clowns to the left, jokers right, we're stuck in the middle. Can't take it anymore? Add a timing comment. Tell us: When's the recovery? Next bull? Late 2008? Not till 2011?
Copyright © 2008 MarketWatch, Inc.

[shadow]

:book:


copy paste rule

[uls]

Eto ang mga macro scenario for the US economy:

Baseline scenario: Bad Q1, signs of recovery in Q2

Best case scenario: Recovery late Q1

Worst case scenario: Bad Q1 & Q2, recovery late 2008

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If u read the articles written by the doomsayers, nakakatakot talaga.

The scariest thing i've read is the unwinding of the incredibly huge derivatives bets. (like bets that corporate bonds will default)

A lot of people have placed huge bets that will hit triggering mechanisms soon, and those that are suppose to pay up have no money.

That will send shockwaves all over the financial world.

People and financial institutions will be ruined.

That's why the FED and other regulators and banks are doing all they can to save the bond insurers from losing their AAA rating.

Dito mo makikita na wala pala talaga free market sa States.

Meron sa States socialism for the rich.

When poor people make bad bets, they get ruined.

When rich people make bad bets, they get bailed out.

[tidus1203]

The best places are still hard assets like commodities, and land (not land in financial districts, I am more inclined into farmland which can produce commodities). If you must have some fiat currencies, IMO the best places to be is the Australian Dollar (at least they have their priorities right combating inflation first), the Euro (being the anti-dollar, the Euro itself is not a good currency but being the anto-dollar it will be a huge benefit of a dollar collapse plus at least their central bank is acting much more responsibly). The Japanese Yen and the Chinese Yuan (two very undervalued currency especially the Yuan). If there was a safe investment then it has to be the Chinese Yuan this thing will surely go up without a doubt.

If you hold a lot of US Dollars and do not act now then I pity you. You will lose tremendous amounts of purchasing power as the USD loses its status as the world's reserve currency just like the British Pound lost its status back then 80% drop from top to bottom.

[empy]

there is a lot of truth in the article. although i am in the consumer finance industry in the US, and in my opinion (after looking at our spending and credit data) i don't think it's as gloom-and-doom as the article suggests. i could be wrong though, and it would certainly be stupid to say that the USD and US stocks won't take a short to medium term hit at least.

unfortunately, i have little choice. my income is all in USD and that won't change unless i move. but i am putting as much money i can in foreign stocks.

one thing about the Chinese yuan/renminbi: the reason it's undervalued is that it is pegged by the Chinese government to the USD. one main reason why they do that is to "subsidize" the Chinese export industry (the lifeblood of their economy) - the pegged x-rate allows Chinese exporters to take in artificially high revenues with artificially low expenses.

unless the government removes that peg and allows the yuan to "float", you're not likely to see a huge appreciation in your investment.

[tidus1203]

there is a lot of truth in the article. although i am in the consumer finance industry in the US, and in my opinion (after looking at our spending and credit data) i don't think it's as gloom-and-doom as the article suggests. i could be wrong though, and it would certainly be stupid to say that the USD and US stocks won't take a short to medium term hit at least.

unfortunately, i have little choice. my income is all in USD and that won't change unless i move. but i am putting as much money i can in foreign stocks.

one thing about the Chinese yuan/renminbi: the reason it's undervalued is that it is pegged by the Chinese government to the USD. one main reason why they do that is to "subsidize" the Chinese export industry (the lifeblood of their economy) - the pegged x-rate allows Chinese exporters to take in artificially high revenues with artificially low expenses.

unless the government removes that peg and allows the yuan to "float", you're not likely to see a huge appreciation in your investment.

I am speculating on the idea that the Chinese government will essentially have to depeg out of the US Dollar to fight inflationary pressures. Currently they have a semi-float currency with trading bands and the Chinese Yuan has appreciated since then. The theme is inflation, as the US dollar drops their inflation will soar given their limited float. Inflation is a big problem in China and by letting the currency appreciate inflation can be fought.

We foreigners who don't need US dollars for our daily use have normally been more objective in our currency allocation than people who use the said currency.

[creepy]

one main reason why they do that is to "subsidize" the Chinese export industry (the lifeblood of their economy) - the pegged x-rate allows Chinese exporters to take in artificially high revenues with artificially low expenses.

You probably read too much of the China-bashing literature that comes out from the States.

The renminbi-USD peg has been there a loooong time -- well before this issue of undervaluation (vs USD) was an issue. In the late 1990s, the US-run institutions (multi-laterals like the IMF) were all applauding China for keeping the peg steady to keep the Asian crisis from becoming worse.

Now, the peg is being portrayed (by US companies/workers hurt by competition) as an unfair manipulation of exchange rates.

[tidus1203]

The Japanese Yen and the Chinese Yuan (two very undervalued currency especially the Yuan). If there was a safe investment then it has to be the Chinese Yuan this thing will surely go up without a doubt.

I am gonna pat myself in the back here for awhile so bare with me . But the Chinese Yuan has breached pass the 7RMB to 1USD last week, it has pullback somewhat but I still maintain my RMB and have no plans of selling it. This will surely go up even more. Same for the Japanese Yen, the Euro is still solid but I am not as optimistic about it as the Japanese Yen and the Chinese Yuan.

[frenchtower]

Has anyone of you guys heard about "AMERO" ? There is so much buzz around the rumor mill that this will be the one single currency being eyed by the North America Union (NAU) to represent Canada, USA, & Mexico. The objective is much the same as the EURO. I guess the US is contemplating on seeking salvation to its recently unpopular currency thru this route. Any inputs sirs?

[mazdamazda]

If you must have some fiat currencies, IMO the best places to be is the Australian Dollar

Soooooooooooooo... if I listened to you back in Feb, I would have lost nearly 10% of my money's value in US dollar.

:hysterical:

[tidus1203]

Yep times have change, ganun kabilis , but back then it worked. Anyway I sold my Aussie at 0.9321. Now I am making my killing in the Japanese Yen

[ghosthunter]

Moderator's Note: Thread fixed... have fun guys.

[uls]

Thanks GH



---

leonleon

So is this the dreaded hyperinflation everyone's saying will come upon us sooner than later? Ano ang magagawa o dapat gawin ngayon ng mga simpleng tao tulad ko?

first, a chart:



what is excess reserves?

wiki:

In banking, excess reserves are bank reserves in excess of the reserve requirement set by a central bank. They are reserves of cash more than the required amounts. Holding excess reserves is generally considered costly and uneconomical as no interest is earned on the excess amount. Therefore, many banks minimize their excess reserve amounts by putting them to more productive use.

the banks are hoarding cash

they arent putting money to work

they're not lending much

there's very little money multiplier

that's why inflation is quite low... for now

when those excess reserves are finally put to work, that's when inflation will take off like a rocket

what do you do?

you have to own hard assets

land, commodities

[leonleon]

the banks are hoarding cash

they arent putting money to work

they're not lending much

there's very little money multiplier

that's why inflation is quite low... for now

when those excess reserves are finally put to work, that's when inflation will take off like a rocket

what do you do?

you have to own hard assets

land, commodities

Agree. So dapat ilabas na pera natin sa bangko and start investing in the likes of real estate (?), gold, oil, and stocks in mining and oil companies. If this is the right track, medyo dapat lang to start learning the ropes because for inexperienced people it's just plain scary.

As for currency wars, what happens if indeed the US Dollar falls as the world's reserve currency? Will they start another war just to keep it from falling? Just me and my thoughts wandering off.....

[leonleon]

Has anyone here heard of this guy, Chris Martenson:

[ame="http://www.youtube.com/watch?v=0F7SCbrU5sQ&feature=fvst"]YouTube - Crash Course: Chapter 15 - Bubbles by Chris Martenson[/ame]

Very very eye-opening ang 20 chapters ng "crash course" niya. I'm still not yet finished listening to it all. Parang si Tidus o si ULS and nagsasalita.

[uls]

Agree. So dapat ilabas na pera natin sa bangko and start investing in the likes of real estate (?), gold, oil, and stocks in mining and oil companies. If this is the right track, medyo dapat lang to start learning the ropes because for inexperienced people it's just plain scary.

hey, not so fast dude

easy ka lang hehe

there's still very little inflation

yes, they (the USG, Fed) are trying to inflate out of this recession, but it hasnt been working so far

households and businesses are still deleveraging

consumers arent borrowing and spending like in the boom years (pre-subprime implosion)

businesses are still laying off workers and arent investing

and one thing people overlook -- the securitization market is practically dead

during the boom years, a lot of credit creation went to mortgage lending, which went to the creation of mortgage backed securities

there's very little of that going on now

we all know what happened to those securities

trillions of dollars of capital has disappeared from the US economy

now the USG, Fed are trying to replace those trillions of dollars

the USG, Fed are trying to fill the vacuum left by the consumers

but so far it isnt working yet

just look at the CPI

anyway, sooner or later they will succeed in creating inflation

just be vigilant

[uls]

Fed says economic contraction slowing, economic activity to remain weak

inflation to remain subdued

keeps rates unchanged

QE continues

http://www.federalreserve.gov/newsev.../20090624a.htm

Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months. Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.

The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

[uls]

European banks are in bad shape

they're all highly dependent on the ECB now

they'll collapse without the help of the ECB



-------------------------------------


MODERATOR'S NOTE:

Original thread can be found at:

http://tsikot.yehey.com/forums/showt...47471&page=240

[tidus1203]

The ECB has only one weapon just like the Fed. A PRINTING PRESS. I hope its just as fast as the Feds, maybe they should ask the Fed to let them borrow theirs. Kaso it only prints USD!

[uls]

The ECB has only one weapon just like the Fed. A PRINTING PRESS. I hope its just as fast as the Feds, maybe they should ask the Fed to let them borrow theirs. Kaso it only prints USD!

yep

that's what the ECB is doing

printing money to buy sovereign debt from the banks

bailing out the banks