View Full Version : The curse of cheap money
Skybird
10-31-07, 06:25 PM
In plain English: Inflation.
I always thought that the trouble on the american mortgage market is only a first trembling, confirming that the major earthquake is still to come. The drastic growing of prices over here, and the obvious high public (=unhidden) inflation are two other warning signals.
http://www.spiegel.de/international/world/0,1518,druck-514621,00.html
No shares I hold over here, not only for practical but also for moral reasons, the reserve I have put aside is in gold (the real thing, not just some stupid document saying it serves as a call option - if for any reason the trading of gold is blocked, that document helps you nothing).
The globe is becoming smaller, energy more precious, demands more vicious, readiness to wage wars for economical influence more determined, and the gap between the rich and the poor is widening fast, with few and fewer people becoming more and more rich, and more and more people having less and lesser. more wealth and power is accumulated in fewer hands. Communal systems are economically eroded, political systems corrupted, international finances messed up and in over-debts, and in many third world countries people are still breeding like crazy.
Nice future to head for. "PROXIMITY ALERT - COLLISION IS IMMINENT"
The mortgage crisis hitting the US is not dissimilar to what happened in the UK in the aftermath of Margaret Thatcher's era, albeit for very different reasons. In the UK, it was MT's attempt to squash the unions at any cost, that cost including letting coal mines get closed down, running down the steel and shipbuilding industry and selling off public assets into private hands, which then got 'rationalised' - i.e. lots of people got sacked. All these were union strongholds.
Regardless of whether anyone agrees or does not agree with that policy, the upshot was that a lot of people ended up much poorer, and as a consequence, a great many could not afford to maintain their mortgage payments. The wealth went into fewer hands, and as a result, the UK now cannot afford a large military and thus its influence continues to wane.
In the US, it's the influx of cheap goods from China which is one of the main causes for its indigenous industries starting to struggle. They simply cannot compete with cheap labour and cheap goods. All of which is leading to the US losing its industrial might in a vicious downward spiral, that industrial base being the engine that allowed the US to win WW2. As it declines, China and Russia are on the upswing, widening the gulf between them ever quicker, and that is the worrying aspect of it all. At what point are the US going to decide that picking a fight is the only option left before they cannot afford the military forces which they have been able to afford for so long, while they still have them?
:D Chock
SUBMAN1
10-31-07, 07:08 PM
Hmm - slight difference here in America. A lot of industrial jobs left, but a lot remains, especially in research. And to top it off, the companies / factories, all of it is still owned by America, so the money is still flowing in on whole. Our economy has drastically improved over the last few months, and show no sign of being dragged down by the collapse of the sub prime market, so you tell me? In Americas eyes, as long as they hold on to the money, not much can put a stop to it. It is a very different world from the MT days. Today things have gone global. In MT's time, things were still very much a home based economy.
-S
Skybird
10-31-07, 07:57 PM
The outstanding public debts of the US of over 9 trillion dollars, and the massive trade deficit, also have something to do with it.
U.S. NATIONAL DEBT CLOCK
The Outstanding Public Debt as of 01 Nov 2007 at 12:30:42 AM GMT is:
http://www.brillig.com/debt_clock/debtiv.gif
The estimated population of the United States is 303,408,709
so each citizen's share of this debt is $29,860.44. The National Debt has continued to increase an average of
$1.39 billion per day since September 29, 2006!
http://www.brillig.com/debt_clock/
Also: a history of US debts in tables:
http://www.sgipt.org/politpsy/finanz/schuldp/usa/usa0.htm
On the deficit:
Most economists are extremely alarmed about the effect of the expanding deficit on the current account. In 2004 the deficit stood at $668 billion, or 5.7% of the gross domestic product (GDP). For 2005 we have estimated that the deficit was around $788 billion, or 6.3% of GDP. As a result of the ballooning deficit, the value of US net external liabilities, expressed at historical cost, jumped to $5.1 trillion in 2005 from $4.3 trillion in 2004. As a percentage of GDP, net external liabilities climbed to 41% in 2005 from 37% in the previous year and 4.9% in 1980.
http://www.mises.org/images4/Shostak/3/1.gif http://www.mises.org/images4/Shostak/3/2.gif
It is held that this increase in foreign debt cannot go on forever. If the Americans do not begin reducing their trade deficit, there will come a time when foreigners will become less willing to hold dollar denominated assets. This in turn will weaken the US dollar. Consequently, once this happens the United States will be forced to increase interest rates (maybe sharply) to continue to attract foreign investments. Higher interest rates in turn will plunge the economy into recession. In short, given the size of the current account deficit it is held that the US dollar has to plunge in a big way against most currencies, and it is not possible to avoid a painful adjustment as a result of this. It would appear that the trade deficit is a major economic problem that must be urgently addressed in order to avoid serious economic disaster.
http://www.mises.org/story/2029
The second text is from early 2006, but note that it already predicted the massive plunge of the dollar against other currencies, which mayby was no difficult prophecy to do. the eurpo is stron against the Dollar, not becasue the Euro is so strong, but beacuse the dollar is so extremely weak, and weakening further. At no cost I would do financial investements in Dollars again today, these times are over, I think. We already experience widespread chair-moving of nervous nations holding huge dollar reserves. when the first major player starts to change them into other currencies, especially Eeuros, and this becomes public, the dam will break.
What does it all mean? A massive threat of national bancruptcy, combined with the vulneability that tzhe Us policy-making simply will be (or already is?) bought. a growing inflation worldwide due to the low intersts on US finance markets wich should helpt to increase sales in the US and lure more foriegn money into the national Us market - at the pörice of flooding the market with even more cheap money due to the good credit conditions (low interests). Together with the massive deficit, thios has more thahn enough potential to push the whole globe into far more serious trouble than 1929 or 1985.
It also means that the Us is doing it's stellar military investements - on tick only. By own weight, it would not be able to afford that.
The system is totally overstretched, and unsolid. It is living on tick exclusively, it seems, and war on tick as well.
Why do I say that? Because it is foreign short-sighted hopes that makes foreign investors still pumping money into this washed-out system like additional blood is pumped into an ailing body. the whole finance and stock market has it's head not inside a bubble, but is inside the bubble completely. the crash I expect to be far more desastrous than the past 2 crashes in the last century. taking benefit of this will be china's great hour, and maybe Russia as well. Loosers will be Europe, the better part of SE Asia, and North America, of course.
Most people preferred hope to ratio, and wanted it like this, and everyboy played the game, greedy, buying shares more and more. So nobody shall complain - Cheers!
bookworm_020
10-31-07, 08:05 PM
Well at least your not in Zimbabwe!
The inflation is around 11,000% and one dollar U.S. will make you a millionare over there!:o
Last I checked the Loonie was a buck 5 american. :smug:
And to top it off, the companies / factories, all of it is still owned by America, so the money is still flowing in on whole.
Owned by who? Rich people that get tax breaks from Bush? You're the American capitalist. How does the wealth trickle down to the little people when all the trickling is happening overseas?
Skybird
11-01-07, 03:47 AM
Random find:
Saying that the majority of the country's economic gains in recent years have gone to the top 1 percent of the income ladder understates the trend," said Heather Boushey, a senior economist at the Washington-based Centre for Economic and Policy Research.
Indeed, the top 1 percent of U.S. citizens earn as much as the bottom 33 percent together (about 100 million people), according to Ted Howard, executive director of the Democracy Collaborative at the University of Maryland.
While the U.S. economy grew 160 percent between 1973 and 2005, those in the top 0.01 income bracket saw their income levels rise by 250 percent. During this same period, the average real income for the bottom 90 percent actually dropped 11 percent.
http://ipsnews.net/news.asp?idnews=39594
The weak dollar has caused sales of US companies to foreign investors and companies this year to reach a record mark both in number of companies sold, and price total. Amongst the top investors are Saudi Arabia and china. With America buying goods in China with a value five times as high as the total of Chinese buyings in America (2006: $288 mio compared to $55 mio), and a dollar that is destined to become even weaker, this trend is unlikely to change so soon. The opposite is the case, it seems: foreigners have started to buy bridges, key road installation and similiar traffic hotspots as well. All this will not help to restrengthen the dollar, and it seems we have entered a vicious circle here. Which of course starts to become a problem for european economy as well, which already starts to feel the damage from a too strong Euro: projected growth rates had to be reduced due to the low dollar and the expensive export perspectives (especially of interest for germany, of course, which regarding size of national economy also has been driven from third to fourth place in the world by China some weeks ago). To keep internal consummation and financial markets liquid, even more money will be pumped into the market by the Fed, and interest rates will remain low and see further cuts. Which keeps inflation spinning, of course.
The american deficit and debts are bringing all of us into trouble. Instead of investing into silly wars that cannot be won and thus will be run for years and years coming (seeing the American armories and military contractors being the big winner of this), America should bring it's trade and finances back into order. The mortgage crisis is just the beginning of the future troubles that raise at the horizon, and they are raising fast. and if cou read carefully, you can see more and more brokers giving hefty warnings of a future crash that likely will outclass the "black Friday" and "black Monday" in size and quality, with quite some very famous names now joining these voices. It's a giant bubble we are sitting on. Question is not if it will burst or not, but when. the result from this as well as the upspeeding inflation could bring global economy into a devastating recession - independantly from each other.
bradclark1
11-01-07, 07:30 AM
One in four companies sold in America today are bought by foreigners.
Jimbuna
11-01-07, 09:48 AM
You can up that to just over 2 in 4 in the UK
SUBMAN1
11-01-07, 10:24 AM
Last I checked the Loonie was a buck 5 american. :smug:Perfect! It now has become expensive to export from Canada. This hurts you more than helps you if you know anything about economics. All a sudden, your jobs are about to get exported! Maybe even to America.
Owned by who? Rich people that get tax breaks from Bush? You're the American capitalist. How does the wealth trickle down to the little people when all the trickling is happening overseas?This shifts our jobs to more lucrative positions than manufacturing. Yes, loosing manufacturering does hurt the working class with only manufacturing skill, but for those of us with a broader set of abilities, it has actually helped.
By the way, that is a myth about rich people. If you analyze it, rich people pay more taxes than anyone else.
-S
bradclark1
11-01-07, 10:42 AM
By the way, that is a myth about rich people. If you analyze it, rich people pay more taxes than anyone else.
By percentage income/tax they pay less.
Skybird
11-01-07, 01:19 PM
Jim Rogers saying that the US is in a recession, that Bernanke is a mad man, that Wallstreet will suffer a bloodbath, and that it makes no sense anymore to invest into a deeply sick currency like the Dollar.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/10/24/bcnrog124.xml
http://www.reuters.com/article/idUSL1470530620070314
http://www.reuters.com/article/businessNews/idUSL2474133320071024?feedType=RSS&feedName=businessNews
German language:
http://www.welt.de/finanzen/article1321132/Hedgefonds-Milliardaer_warnt_vor_US-Crash.html
He doesn't sou8nd like a rocketscientist to me, but like a man with a good ammount of healthy reason. It obviously has served him well in his life.
Skybird
11-01-07, 01:28 PM
The European Bank's reaction to the Fed's move: opposite direction:
http://www.spiegel.de/international/business/0,1518,514847,00.html
Zayphod
11-02-07, 11:32 AM
Well at least your not in Zimbabwe!
The inflation is around 11,000% and one dollar U.S. will make you a millionare over there!:o
Yes, but a million pieces of worthless paper isn't worth that much.
That is, unless you intend to re-cycle it.
"Of course, since we've all adopted the leaf as our national currency, we're all filty rich. Then again, due to inflation, we've had to resort to deforrestation to keep the number of leaves down."
---Hitchhiker's Guide to the Galaxy
"Of course, since we've all adopted the leaf as our national currency, we're all filty rich. Then again, due to inflation, we've had to resort to deforrestation to keep the number of leaves down."---Hitchhiker's Guide to the Galaxy
Great one. :rotfl:
Perfect! It now has become expensive to export from Canada. This hurts you more than helps you if you know anything about economics. All a sudden, your jobs are about to get exported! Maybe even to America.
Just an economic reality we gotta face. We can't base our country's prosperity on the concept of a powerful American dollar and expect to leech off that economy forever. Times change and if Canada doesn't want to get screwed over by being faithful traditional subserviance to the Yankee buck then we'll figure it out.
This shifts our jobs to more lucrative positions than manufacturing. Yes, loosing manufacturering does hurt the working class with only manufacturing skill, but for those of us with a broader set of abilities, it has actually helped.
HA! I like the way you described how it hurt the working class as if it were just... minor. If its harder for people with few skills to get ahead cause of this isn't this possibly limiting their opportunities to advance? Its not very fair for a working class kid who's family can't afford post-secondary is it. Not to mention the fact that every economy needs low skill workers. You can't go on and on about China and not trading with meanwhile downplaying the damage to your own manufacturing ability at home.
Everyone is always so ready to shrug it off when the working class take a hit cause of something that has absolutely nothing to do with them.
By the way, that is a myth about rich people. If you analyze it, rich people pay more taxes than anyone else.
-S
Where did I talk about taxes? You're not telling me that capitalism believes taxation is the only way for those without control of the means of production to earn a share of the pie are you? Because I thought that capitalists thought that the wealth which the few control would trickle down to the multitude through the active involvement in the economy of the machinery of said wealth's production. If all this wealth is being made over there and nobody over here is even involved in most of the process where does the trickling happen? Notice the explosion of possibilities in China and the dimishing of them here. This is where the socialists start to feel very confident that the capitalists are full of it. Talking about how this helps the middle class by shifting the economy etc... sheesh. Thats like saying "well your house burned down Jim. I suppose that frees you up to find a new one". Nevermind that alot of people don't have the means to find a new one. This is where the blame for being such a lame competitor in the market starts up.
I'm not saying socialism is the answer, but this is where all us crazy lefties get the motivation to think differently.
The WosMan
11-02-07, 05:09 PM
You know, this forum is filled with people who are experts, bull-s&$ters, armchair generals, and folks who are legends in their own mind....but it makes me laugh and I enjoy it.
Unlike some people here, I actually work in the finance and banking industry. My professional opinion is that nobody really knows what the hell is going on and everyone is guessing. I have even heard conspiracy folks mentioning that the US government is intentionally devaluing it's currency in order to prepare for the "Amero". I will say this, both Greenspan and Bernake are not the experts and geniuses that people think they are. This mortgage and housing problem was exacerbated in part because the federal, state, and local governments put pressure on banks to make loans to folks they should not make but you have Hillary and the rest of these morons complaining about predatory lending and how they are going to bail people out. Bail outs would be the biggest mistake. People need to learn from their mistake and get burned to teach them a lesson.
one dollar U.S. will make you a millionare over there in Zimbabwe!...Im saving my money and moving there then lol...jk...be nice when we reach the point of enlightment and realize money is silly and no one can posses all the land....maybe the poor 90% will take the rich 10%s back and figure out how to live on the planet in peace and harmony...
I still am reminded of George Carlins analogy of the planet just shaking us all off like a dog shakes off water...that is a funny picture in the mind lol.
Such bright suunny news here always lol :)
http://www.youtube.com/watch?v=eScDfYzMEEw
You know, this forum is filled with people who are experts, bull-s&$ters, armchair generals, and folks who are legends in their own mind....but it makes me laugh and I enjoy it.
Unlike some people here, I actually work in the finance and banking industry. My professional opinion is that nobody really knows what the hell is going on and everyone is guessing. I have even heard conspiracy folks mentioning that the US government is intentionally devaluing it's currency in order to prepare for the "Amero". I will say this, both Greenspan and Bernake are not the experts and geniuses that people think they are. This mortgage and housing problem was exacerbated in part because the federal, state, and local governments put pressure on banks to make loans to folks they should not make but you have Hillary and the rest of these morons complaining about predatory lending and how they are going to bail people out. Bail outs would be the biggest mistake. People need to learn from their mistake and get burned to teach them a lesson.
Great post...I watched the Rev Jesse Jackson get asked about this problem this morning and he had the balls to say that Blacks were purposly targeted for loans they couldnt afford and claming discrimination..to me all that says is you are admitting blacks are just more ignorant than whites...and I do not believe that ...people need to learn and pay for they're own mistakes and shortsightness...period...let the banks sit on ther property and to me it will just force them to lower the price on homes and the market will readjust naturally.
Jimbuna
11-04-07, 08:09 AM
You know, this forum is filled with people who are experts, bull-s&$ters, armchair generals, and folks who are legends in their own mind....but it makes me laugh and I enjoy it.
Unlike some people here, I actually work in the finance and banking industry. My professional opinion is that nobody really knows what the hell is going on and everyone is guessing. I have even heard conspiracy folks mentioning that the US government is intentionally devaluing it's currency in order to prepare for the "Amero". I will say this, both Greenspan and Bernake are not the experts and geniuses that people think they are. This mortgage and housing problem was exacerbated in part because the federal, state, and local governments put pressure on banks to make loans to folks they should not make but you have Hillary and the rest of these morons complaining about predatory lending and how they are going to bail people out. Bail outs would be the biggest mistake. People need to learn from their mistake and get burned to teach them a lesson.
Great post...I watched the Rev Jesse Jackson get asked about this problem this morning and he had the balls to say that Blacks were purposly targeted for loans they couldnt afford and claming discrimination..to me all that says is you are admitting blacks are just more ignorant than whites...and I do not believe that ...people need to learn and pay for they're own mistakes and shortsightness...period...let the banks sit on ther property and to me it will just force them to lower the price on homes and the market will readjust naturally.
Two great and enlightening posts guys :up:
The WosMan
11-04-07, 03:07 PM
You know, this forum is filled with people who are experts, bull-s&$ters, armchair generals, and folks who are legends in their own mind....but it makes me laugh and I enjoy it.
Unlike some people here, I actually work in the finance and banking industry. My professional opinion is that nobody really knows what the hell is going on and everyone is guessing. I have even heard conspiracy folks mentioning that the US government is intentionally devaluing it's currency in order to prepare for the "Amero". I will say this, both Greenspan and Bernake are not the experts and geniuses that people think they are. This mortgage and housing problem was exacerbated in part because the federal, state, and local governments put pressure on banks to make loans to folks they should not make but you have Hillary and the rest of these morons complaining about predatory lending and how they are going to bail people out. Bail outs would be the biggest mistake. People need to learn from their mistake and get burned to teach them a lesson.
Great post...I watched the Rev Jesse Jackson get asked about this problem this morning and he had the balls to say that Blacks were purposly targeted for loans they couldnt afford and claming discrimination..to me all that says is you are admitting blacks are just more ignorant than whites...and I do not believe that ...people need to learn and pay for they're own mistakes and shortsightness...period...let the banks sit on ther property and to me it will just force them to lower the price on homes and the market will readjust naturally.
Right, well that is how the poverty-pimps and race-baiters like Sharpton and Jackson make all their money. What they do to earn a dollar is no different than the mafia extorting businesses for cash.
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