CountryPlans Forum

earlier today:

Yields of all the PIIGS (Portugal, Italy, Ireland, Greece, Spain)
Italy 2 year down almost 1 point, over 4%
Spain 2 year down 5/8th point, ~4.2%
Greece 2 yer down 3/4 point, 31%
Portugal 2 year down over 2 points, 18.3%
Ireland 2 year down 2 3/8th, 18.3%

Also earlier today:
http://www.bloomberg.com/news/2011-07-10/consob-may-ban-restrict-naked-short-selling-at-meeting-sunday-night.html
Italy banned short sellers, does that ring a bell, does that echo a 2008 moment to you?

"Italy cannot afford to pay the interest rates it's paying right now,"

tonight...

http://www.guardian.co.uk/business/2011/jul/12/greece-set-to-default-massive-debt-burden

"European leaders bowed to the inevitable and conceded that Greece is likely to default on its massive debt burden, which would be a first among the 17 countries using the euro."

---
there is a big boom being made tonight but only few people will hear it. 

I've been trying to keep an eye on things but have learned over the past 5 or 6 years that each time I think I have a better idea of when something is likely going to happen, someone figures out a way to delay it.

So, with that in mind, I believe the PIIGS will all collapse as well as the Eurozone and the US but I won't even dare try to predict when and I pray later not sooner.

Could be the first domino in a global collapse.  As Thatcher said, "the problem with Socialism is you eventually run out of other people's money."  We are there in the US; we just won't admit to ourselves yet.

 

We can often cure Pneumonia----but not a simple cold.

Greece and some of the other "progressive and enlightened" nations of Europe may have to experience some Pneumonia before they can be cured. We may get a whiff of it too before our progressives get on the road to recovery. 

As Robb Emanuel said; "Never let a crisis go to waste."
 

jarhead, those are very perceptive comments.  They have kicked the can for so long it seems they will be able to kick it forever somedays.  However, along the way there are pivotal shifts.  swings in direction and momentum; the history of our planet is littered with them.  Things work, until they don't.  This was a eurozone boom; but just like any financial event - most will not understand the event at the time, and they will not see the ripples of it in their daily lives for months.  Then they will not correlate the event with the effects. 

Native, it wouldn't be the first domino, but it might be a momentum shift. 

rwanders, I'm pretty sure it's Rahm Emanuel - not Robb. 
But were not talking about something we can cure if we just got the progressives on track.  That money is gone, it was mostly never real in the first place.  It was fraud and theft and grift.  There and here.  If you want to use a medical analogy, think of a parasite that has 100% infected its' host.  To kill the parasite, you kill the host.  There is nothing left of either system if you remove the fraud but unfortunately the losses are simply to great to paper over and continue to cover.  Them admitting that, is why this is significant. 

Realized I had typed Robb instead of Rahm but forgot to edit.  Used pneumonia metaphor because being in a little debt is not frightening to most people and they often don't know when it has turned into death by debt spiral (pneumonia) until too late.

I think Rahm will find it's not as much fun when he realizes Chicago has no mint to print money for him and they are already broke in a state that is broke too.  Alas, his old boss doesn't have any left for him either----yes sir, no fun at all.

Hmmm....Personally I think FIAT money has to burn so many people (and it will I think) that nations no longer have the guts to allow it to exist again.

I pray American's wake up and ban it through the Amendment process (fat chance I know).

I believe a collapse is coming and history bares that out, however history has also taught me that some smart guys from time to time manage to outwit everyone else and kick the can a long ways off -- I don't think we're there, but I know we could be.

The Romans kept messing with the Byzant after all and it had lasted something like 800 years, yet in the end failed.

I believe we must go to a specie standard and allow TRUE free market banking because only then will the market drive where it goes.

If one looks at the few times the free market started to work in the USA past you will notice big banks lost there share and small banks flourished and provided better services.  Then when the central banks (any of them) were brought into being the big banks pocketed the profits, screwed the little guy and Uncle Sam got to do all manner of damage to the dollar.

It's simple really, in my uneducated opinion, let the free market be, well, FREE and let the chips fall where they may.

Muldoon, If Europe doesn't pull down the whole house around us too, I think we still have the resources and economic basis to survive. It will take a real sea change in the thinking and habits of our citizenry and our governments, state and federal. A great deal of pain will be involved and like any addict, we will backslide more than once as we try to get well.

But, the world will still spin around the sun and like all things, the threatening clouds of this crisis shall one day pass and the sun will shine again---hope I live long enough to see it---or maybe it would be a blessing to not have to witness the pain.

RW

p.s.  I see no point in giving up and nowhere to go anyway. We have to ride this horse till it goes lame, I reckon. (it is limping though)  

*IRELAND CUT TO JUNK BY MOODY'S, OUTLOOK REMAINS NEGATIVE
http://www.moodys.com/research/Moodys-downgrades-Ireland-to-Ba1-outlook-remains-negative?docid=PR_222257

the can is full of concrete. 

Anyone know how much gold would have to be worth today if we went back to the gold standard? 

In the unlikely event of a return to the gold standard, the government would be almost forced to again make it's possession a federal monopoly. I doubt if current owners would be allowed to reap a windfall from such an action---the price of gold would again be set by statute and, other than jewelry, the only legal buyer would be the mint. They would still be able to control the money supply by doing so. Gold standard had it's own problems for our economy----that's why it was abandoned by, I think, the whole world.

Muldoon is our source for the arcane features of economic history and he may correct my memory.

That was my point.  There is not enough gold. The money supply in the US, for example, is estimated at $9.0 trillion. 

I don't see us going back, but in absence of some standard fiat money rules, and inflation and devaluation are a certainty.  I'm not sure what we do. 

Quote from: rwanders on July 12, 2011, 06:34:49 PM
In the unlikely event of a return to the gold standard, the government would be almost forced to again make it's possession a federal monopoly. I doubt if current owners would be allowed to reap a windfall from such an action---the price of gold would again be set by statute and, other than jewelry, the only legal buyer would be the mint. They would still be able to control the money supply by doing so. Gold standard had it's own problems for our economy----that's why it was abandoned by, I think, the whole world.

Muldoon is our source for the arcane features of economic history and he may correct my memory.

You see the problem is that argument presents a view from those who do not want a specie money but rather prefer fiat money.  I see it as defeatism.  What you are saying is that returning to the gold standard means the government will not let it be free and THAT is the real problem.

Best solution?  Specie money under a true free market...it is the only way.

Quote from: Native_NM on July 12, 2011, 06:51:47 PM
That was my point.  There is not enough gold. The money supply in the US, for example, is estimated at $9.0 trillion.  

I don't see us going back, but in absence of some standard fiat money rules, and inflation and devaluation are a certainty.  I'm not sure what we do.  

I categorically disagree.  The amount of gold is not relevant.  What you are doing is thinking in terms of current value of US dollars.

Like him or not, Griffin explains this perfectly and so too does Woods.  Read The Creature from Jekyll Island or Meltdown (there are others as well) and at the very least you will see that there are solutions but the first is to return to the Constitution.  It does not give the Federal Government the power to print FIAT money nor to determine the value of gold but rather only the weights and measures of coinage and what metals can be used.  Yes we ignore that today, but the men who put it there had already gone through the collapse of fiat money and knew full well what we obviously don't today:  fiat money cannot survive and will always be abused.

By the way, the Byzant did last 800 years so clearly you CAN use gold as a stable currency.

Just to throw my 2 cents in, but...

Regardless of form of tender (fiat, specie, gold standard), I think the underlying problem is an overall lack of faith.  Market systems only truly exist when everyone believes that the form of currency they hold in their hand can be traded for some needed good (at said quantity) at some point.  This therefore infers that there will fluxes, severe or not, depending on what everyone decides to believe today.  Thus stable currency is not possible unless we, globally, dictate that 2 chickens = 1 pig for ever and always.  And we all know what happens when we do that - no one wants to produce any chickens.

The only way that any person or any political, market, government, constitution, or other governing body can stabilize this situation is to install confidence in the people of the world to get back to work and keep the machine going.  That it will all be OK.  That they will have food on the table every night and a bright future ahead for them and their children.  And when people do finally get back to work, things will self-correct.

I hope we can find said person in our next president.

So if we only mine a billion dollars worth of new gold in a year, the money supply can only increase by a billion?

I need to study the topic more.  

Quote from: h0rizon on July 13, 2011, 12:23:49 PM
Just to throw my 2 cents in, but...

Regardless of form of tender (fiat, specie, gold standard), I think the underlying problem is an overall lack of faith.  Market systems only truly exist when everyone believes that the form of currency they hold in their hand can be traded for some needed good (at said quantity) at some point.  This therefore infers that there will fluxes, severe or not, depending on what everyone decides to believe today.  Thus stable currency is not possible unless we, globally, dictate that 2 chickens = 1 pig for ever and always.  And we all know what happens when we do that - no one wants to produce any chickens.

The only way that any person or any political, market, government, constitution, or other governing body can stabilize this situation is to install confidence in the people of the world to get back to work and keep the machine going.  That it will all be OK.  That they will have food on the table every night and a bright future ahead for them and their children.  And when people do finally get back to work, things will self-correct.

I hope we can find said person in our next president.

To clarify 'specie' money is money that is based in some tangible thing which has intrinsic value.  So, the 'gold standard' just another way of saying 'specie money'.  Money that is backed by gold is specie.

The value of goods in a free market is based on factors that cannot be controlled by government dictating what something should or should not be worth. Having said that, a dollar being worth 1 oz of silver or 1/10th of an oz of silver is fine and is what 'specie' money is.  However, saying that a dollar is worth one oz of silver and 1 oz of silver is worth X amount of gold is not, because it utilizes government to decree what something is worth and this is not what a 'free' market is.

The answer is to have a single metal system (rather then a bimetal system) in which you use ONLY a specific metal to guarantee your money/dollar but in which you do not utilize 'legal tender' laws to force citizens to use silver, dollars or anything else to pay their bills.  You just say something along the lines of:  you may pay your bills and obligations using the dollar, or silver, or gold or anything else of perceived value however the US Government reserves the right to accept payment at the going rate of exchange and to refuse non-standard forms of payment (as defined standard forms of payment would be gold, silver, dollars, copper, etc but not chickens, eggs, milk etc).

This may sound silly or simplistic (it is simple actually) but in truth has worked well in the past when allowed to.  Our modern system is more then capable of handling it also.

I guess in the end I encourage anyone who doesn't quite believe in using specie money to read Meltdown or 'the Creature' because where you believe the ideas the authors propose or not, you will learn a ton about money and why today's system doesn't work, has never worked, and will end in failure.  Even if you change everything to a 'one world currency' it won't work in the end.

For the US the answer is simple, go back to hard money, real money, specie money, gold OR silver standard and money and the rest of the world will figure it out.

Oh by the way, doing so would end all deficit spending pretty much overnight.

Quote from: Native_NM on July 13, 2011, 02:32:49 PM
So if we only mine a billion dollars worth of new gold in a year, the money supply can only increase by a billion?

I need to study the topic more.  

Money supply isn't the issue actually.  That's one of the fallacies of today's politics and Keynesian economists.  And no, mining gold does not increase or decrease the 'money supply' per say, but perhaps would for a reason not usually thought of.  Just as growing wheat can.

You see in a free market based system with specie money the price of things pretty much always settles in the same place:  the amount of human effort it takes to produce something (and perhaps in the modern world you could add the amount of capital ass automation reduces labor but increases capital expenditures).

For example:  if building a solar panel was so easy the average guy could build one in ten minutes and once sold could make $100 from selling the panel what would happen?  Lots of average guys would get into the solar panel making business.  At first some of them would get pretty wealthy making solar panels as they'd earn over one million dollars in a year if they just worked 7 hours per day 5 days a week.

But as more and more of them joined the party the profits would have to go down.  WHy?  Competition.  Soon you'd only be making $10 per panel and then perhaps $5 each.  At $5 per panel if you made 42 panels a day you could make $54000 a year which isn't bad by today's standards right?  But what if lots and lots and lots of guys jumped in (no one wants to work at 7-11 right?) and the profits dipped to a paltry $2.50 per panel?  At that point people would leave the business and try something else and the panels would eventually settle at a rate that was about right for that specific item more or less based on the amount of human effort it takes to make them.

Take a suit, it's the age old gold standard argument but it works.  It takes something raising the sheep (if it's wool), sheering them, turning the wool into thread and fabric etc etc eventually the fabric gets to the tailor who measures you and makes the suit for you.  In the end, the amount of effort is said to be about the same amount of effort (which is considerable really) that it takes to dig into a mountain, blast away rocks, haul out dirt, rock and gold, smelt it (or whatever is done to purify and solidify) and send it off to someone who will grade it, melt it down, press it into a usable bar and send it to the bank or treasury who will melt it, make it into plugs and them stamp it with the stamp which took time to create and make etc etc etc...through in all the machinery, processes, accounts and everything else and you have a lot of human effort......the two are so close that in 1920 you could have purchased a fine suit with ONE OUNCE of gold.

Well guess what?  At $1580 per ounce today you can bet your behind you can purchase a fine suit.

So what changed?  Not gold obviously, and not the suit either....the DOLLAR changed and THAT IS IT.

If you actually look at the cost of things in gold and silver over the last 100 years it hasn't changed much though most things have actually come DOWN in price which they well should (manufacturing processes are better, more automated, mass production, computers, robots etc etc) but EVERYTHING takes MORE DOLLARS to buy.  Why?  Because THE DOLLAR HAS LOST VALUE so you need more of them to buy the same thing.

What happened to the dollars value?  It is the greatest (and most evil and despicable) tax of all time:  inflation.  The government took the value folks and left you with something worth about 3 cents.

Yes that's right, your dollar is no longer really a 'dollar' as it was originally conceived but rather THREE CENTS disguised as a 'dollar'.

The dollar has lost over 97% of it's value but gold has not.  Silver has not and things priced in gold and silver are slightly LESS then they were in the past which is in fact the natural course of things.

We've just forgotten that, or been taught the lie which we now believe: that inflation is normal.

It isn't.

I should add this:  to increase the 'money supply' you must increase the labor/production of society in a free market system.

Ol Jar, I'm having hard time understanding what the gold standard would accomplish----unless we stopped all paper money and lugged gold coins around it would just mean that we would need to have faith that we could actually go to govt and exchange a dollar for the amount of gold it represented. Unless we drastically reduced the amount of money in circulation it could mean that a dollar would only represent an extremely small speck of gold---almost microscopic in size. And, why gold? Other than a few minor industrial uses and jewelry there are few reasons to have it. Iron or aluminum  has more intrinsic value then gold.

If we instead, drastically reduced our money supply to match the gold we may or may not have, it would probably result in catastrophic deflation which would wipe out your savings since you may only get a few "new dollars" in return for thousands of your "old ones". Yes, prices would fall also but so much that a merchant with an inventory he has 100,000 dollars in would suddenly be worth a very small fraction of that. You may be able to buy a car for 5 dollars but your cash available would also shrink at the same ratio.

Your constitutional question/issue may be interesting academic exercise but, I know of no authoritative sources who support that viewpoint. Ones wearing tin foil hats do not pass the laugh test. I know you are not a wearer of one of those.

I just don't see what it would accomplish other than chaos. Runaway deflation or inflation are just two sides of the same coin and it doesn't seem to matter if that coin is gold or tin.

Getting our collective financial house in order is what we need---if it is sound then "fiat money" is accepted at par and so it works just fine. Gold only has the value it does right now because people have faith that others will also think it does.

I'm open if someone can explain what the Gold Standard would do for us.

OL Jar, per your own assumptions:

The human effort to produce that suit is Much less now than in 1920.

The human effort to earn the $1580 is also Much less now than in 1920.

Also, the value of most things is NOT based on "How hard somebody worked to build it. It's based on what a willing buyer will pay for it and what a willing seller will sell it for. When/if you sell a home you worked on for many years, that effort by you is not a relevant fact----you can only sell for what a willing buyer perceives it to be worth-----he will not care how much effort it took.

The argument you retold is accurate in many respects but, in the end it is a numbers game without any difference in the end.  As long as your income rises at about the same rate as price inflation for goods and services it is all the same. 

Seems to me anyway but, what do I know?

RW

Fiat currency is fine, the problem is the interest attached to it when it is created. Why should a bank get paid to create money out of thin air? The government should create the money interest free. No more federal debt. Money is basically a store of the value of labor. A way for me to trade my work for your work. Every thing on the planet started out free, it is the work that has a cost and therefore a value. If the government made the money the value could be regulated by making more or less of it as needed. It could be kept stable if you could somehow get the crooks out of the loop. Problem is some people have access to the printing press and just make free money for themselves to enjoy and use without having done any work.

Gold or any other metal has intrinsic value only because we believe it does.  It is not edible, it does not build a house on its own, it does not download a free new app for you.  It is worth something only at the time it is traded, for what the perceived value of the good it is being traded for is.  Until then it is useless.  This value fluctuates in tandem with normal free market supply/demand principles, as does any other trade mechanism. 

Now what i can agree on is that we need to go back to a hard system - even just dollars/cash.  Credit/debt, and moreover credit cards, are the sure-fire way to guarantee the collapse of any monetary system.  It permits you to trade with something you might have in the future.  Not only is the creditor putting faith on the credit note being paid, but that what they are paid with will be worth at least what it was worth at the time of the trade (inflation adjusted).  When this fails, faith is lost not only on the payer (credit score) but the payee (return-on-investment growth).  This stacks exponentially, as the underlying tender system MUST be sharply re-valued in response to the loss of anticipated future value (because tender essential vanished).  This feeds back into the credit system and thus the downward spiral.  Essentially Credit backs tender which backs credit. 

I have not yet read the books mention, so I am sure there is much more I can learn on this subject.  This is how I currently interpret the tender/market systems.

QuoteAlso, the value of most things is NOT based on "How hard somebody worked"

Actually that's what the whole services industry is based off of  ;)  It's the "Cost of goods sold" part of the equation.  No, the buyer doesn't really care how much effort was put in, he'll care about the overall value.  But the seller does.

Perceived value of man hours + Perceived value of materials = Cost of Goods sold.

COGS + Perceived supply + Perceived demand = Perceived value, is how it generally goes I think. 

And then you can stack:

Perceived current value of tender + Perceived anticipated value of tender + Perceived value of good = Amount paid.

It gets confusing real quick  ???

Quote from: rwanders on July 13, 2011, 03:40:50 PM
I'm open if someone can explain what the Gold Standard would do for us.

Absolutely nothing.

And it will never,  ever,  happen,  so what's the point.  It's like arguing about how many fairies you can fit on the head of a pin.

From what I've been reading, a return to a modified gold standard is a given.  Has happened throughout history on the collapse of fiat systems.   

Me... I'm going to buy some cases of whiskey and bury them.  If the SHTF then I've got some tradable goods, if not than it ages longer.  Not sure what kind to buy...

One things for sure... the folks on this board will be much better prepared than most with thier small well-built homes.

I'd suggest Vienna Sausage, Twinkies, and Spagettios.  The currency of the post-crash economy.   ;D ;D

probably some twinkies buried from the last economic collapse that are still good...     

http://johngaltfla.com/wordpress/2011/07/11/total-euro-chaos-tonight/

This is your Eurozone on Keynesian Economics.  Kinda reminds of that 'This is your brain on drugs' commercial.

A couple of fun videos. This from performance guru Tony Robbins: http://www.youtube.com/watch?v=Z_rShZA_IjE&feature=player_embedded

This about a family of "Preppers" in Phoenix: http://www.youtube.com/watch?v=SMPepJpadbo&feature=player_embedded

My own suspicion is that with all the concerns, fears, predictions and expectation of collapse that we are probably at or near the bottom and things will be looking up soon. Not that I expect a rosy recovery, but I do think we will likely muddle through and have a better economic picture 12 months from now.

Of course, I could be wrong and this could be the one time it really does all go down the gurgler! 

John, your muddle through predictions are based on sound history in this country.

My melt down prediction is based on reasoning which could well be flawed. The nice thing about my prediction is that I'll be delighted if I'm wrong, but everyone will be unhappy if you're wrong ;D

I'll tell a short personal story that should cover all the predictions. c*

A number of years ago I got shot.
I had spent a lot of time and money learning how to NOT get shot but had also mentally prepared myself for the possibility and what it would be like.

When it actually happened, it took me a few seconds to realize it. There was no pain, I didn't go flying through the air and obviously, I didn't die.
I made a morbid observation at the time...."This isn't what I was expecting it to be like".

I think a lot of us will be saying that soon!

Yep, that's a good story and a good prediction. Most all of us will be surprised by the unexpected - and no matter how prepared we are for our idea of the future, it is unlikely we were preparing for what actually shows up.

I can't help but think that if our recent ancestors (from, say, the great depression era or earlier) came back and took a look around, they would laugh and say "suck it up solider, this ain't nothin'!"

Remember when most women stayed home and income was earned mostly by men?  By today's terms I think we'd call that 50% unemployment.

I don't think we're near the bottom yet, but I do think that this is the new norm and it's a sharp contrast to the old one.  Sorry no more 20% return on investments or shiny new shoes every month.  Learn to live on less, work fewer hours and spend time with family.  You know, all the stuff humans have been doing for millennium up until the last 30-40 years or so  d*

Of course I'm preaching to the choir here  ::)

Quote from: John Raabe on July 14, 2011, 12:26:01 PM
Yep, that's a good story and a good prediction. Most all of us will be surprised by the unexpected - and no matter how prepared we are for our idea of the future, it is unlikely we were preparing for what actually shows up.

For some reason, your comment reminded me about a quote about something else many of us expect or hope for;

"To himself everyone is immortal; he may know that he is going to die, but he can never know that he is dead."

By   Samuel Butler (British Victorian era author)

Probably not really germane but, always thought it was an interesting viewpoint about a future event we may fear but cannot describe.

09:36 15Jul11 RTRS-S&P PLACES U.S. 'AAA/A-1+' RTGS ON CREDITWATCH NEGATIVE
09:37 15Jul11 RTRS-S&P PLACES U.S. RATINGS ON CREDIT WATCH NEGATIVE
09:38 15Jul11 RTRS-S&P SAYS AT LEAST A 1 IN 2 CHANCE IT COULD CUT RATING
09:39 15Jul11 RTRS-S&P SAYS COULD LOWER U.S. RATINGS WITHIN 3 MONTHS

think about that wire feed, read each one and think about it because s&p has never said anything like that about us debt ever. 
...
http://www.reuters.com/article/2011/07/14/market-ratings-creditwatch-us-idUSWNA372820110714

...
credit events are global, the ripples from a few days ago are starting to show.  like I said then, the ripples take time to show up in daily lives but when they do -- people don't often line up the events.  There is a panic sign flashing in debt markets.

- as for better in 12 months, John I just don't see it. 

If we used the same stats to determine the unemployment rate today as was done in the great Depression we would have as high unemployment today as we did then during the worst part of the depression.

During the depression we did not have Food Stamps, we had soup lines, we did not have HUD, we had Hoovervilles, we did not have Social Security, we had Grandparents living with family or eating dogfood.

However, social programs are like morphine.  Helps for a little while until you get addicted to them, then it ruins your life unless you break the habit.

Today we have Obamavilles, you're just not seeing them, we have 'Parking lot' sleeping towns, we have unemployment that is off the chart and poorly reported (when reported) and we have a lot of people hoping and not so many actually willing to make the hard choices to solve the problem.

We have Keynesians running the show and in the end, no matter what you believe, it will not work out.

I pray that all the guys who were right about the collapse of 08/09 who now say we're in for it still and aint seen nothing yet, will finally be wrong but I won't hold my breath.

So far though, Celente, Schiff, Roubini, Faber and the rest of that gang seem to continue to be right and Obama, Bernanke and the little tax cheating Elf continue to be wrong.  Who are you going to listen to?

I remember Obama and his crew claiming the Stimulus would keep unemployment rates from going above 8%....they went above 10% after the stimulus was passed and continue above 9%.

The above mentioned gentleman all warned of this.

I seem to recall the likes of Barney Frank and Chris Dodd claim that Freddy and Fanny were in perfect health and a great investment.....boy were they wrong!

The above mentioned all disagreed and warned us about them and others.

Today the 'DOOM and GLOOM' ers pretty much say buy farm land, buy guns and buy food.

They may be wrong, and I pray that they are and somehow the country wakes the hell up and realizes that the party is over and it's time to return to Liberty and the Free Market but I won't hold my breath because frankly I have little faith in mankind.  I've seen him at his worst (trust the old jarhead on that one) and best and frankly I doubt as a whole we're capable of stopping ourselves from collapse.

Increasing the debt ceiling based on some pie in the sky deficit cut (what a bloody joke that is -- kinda like selling a $200 billion INCREASE in spending as a tax cut -- amazing) program is nothing more then kicking the can further down the road....sooner or later folks we have to pay the piper.

Franklin was right:  "When the people find that they can vote themselves money, that will herald the end of the republic."

And each time American's demand their health care, social security, etc etc, they are doing just that.

Goodbye Republic.

So folks, what does America look like at the end of the Republic?  Every other nation in the world where Freedom is a pipe dream and the elite ruling class runs the show.

This is not about doom, not about the republic, not about gold, not about guns.  not about all the boogiemen you have heard for thirty years that never came true. 

This is not about the republic, or Obamacare, or democrats and republicans.  Those are bread and circus; to give people seomthing to squawk about while they fight over a ever smaller piece of the pie.  this is much larger than national politicking. 

It's about debt, it's about sovereign credit.  Take a look at borrowing cost increases in the last week.  Just 5 business days.  No business can survive a 15% increase in cost of borrowing in a week, much less the 20%, and 30%ers in there.  It went boom, and no one gets it yet. 


(http://loopy.org/cds-spreads.7-14-2011.jpg)

Jeez.  Try and cheer up a bit.

You may think me an unrealistic optimist at best or, a fool at worst but, I still have some faith that we will survive this umpteenth existential crisis. We were founded as a nation with very few believing we would survive even ten years, indeed that we would never exist as an independent nation at all.

There is another quote I like to recall at times like this:

" The Americans will always do the right thing in the end but, not until they have first tried every other way."

By Winston Churchill c. 1940

I think what he was really saying was, we just don't give up or, as someone else said, " There ain't no quit in us." Doom forecasters are always with us. Someday, they will be right----but, not yet, Bubba, not yet.

RW

That happens to be one of my favorite Churchill quotes.

But I think what he is saying is that America can be counted on the do evertything first,  before doing the right thing.

Kind of like now,  the rush to cut spending during an economic crisis.

All the anti-Keynsians are pushing for spending cuts,  in both parties,  when that is exactly the opposite of what we should be doing.  And we'll keep doing the wrong thing until there is nothing left to do,  except the right thing.

Quote from: archAll the anti-Keynsians are pushing for spending cuts,  in both parties,  when that is exactly the opposite of what we should be doing.  And we'll keep doing the wrong thing until there is nothing left to do,  except the right thing.

There is no such thing as a "bailout." It simply is a magical creature that doesn't really exist. A "bailout" is just a method of shifting the loss onto someone else.  That's why money printing doesn't work. It just shifts the loss around onto the general population destroying the real economy and making the problems worse.

To say that we have not done enough stimulus, while we go on credit watch negative today because of massive stimulus, is ludicris. 

That is besides the point, this, I repeat, is not about American politics.  This is about global debt.  The things that always preclude massive changes.  Let me ask this, given the above rates for cds swaps, should Greece be stimulating?  Italy?  Spain? 

How do you suppose it should be paid for?  Should they borrow at 30% to "invest" in their economy?  What kinda of return will they see?  Will they generate 30% back dollar for dollar.  or will it just be chewed up with the same fraud that created this mess like the last few trillion?

I wouldn't deny the possibility or, even the certainty of big changes in the world and certainly we would not be immune from serious repercussions. It doesn't mean "the end of civilization as we know it". It could mean the decks we play with will be shuffled quite well. As in all sea changes, political or economic, there will be losers and winners.

I am pretty sure that the guys hiding in the woods, peering out at the world around them with fearful eyes and loaded guns, will not be among the winners. The winners will be the ones embracing the changes. Big changes bring big opportunities. They WILL bring big risks too---those two always appear among us holding hands. Ain't no guarantees.

RW

Quote from: archimedes on July 14, 2011, 09:38:16 PM
That happens to be one of my favorite Churchill quotes.

But I think what he is saying is that America can be counted on the do evertything first,  before doing the right thing.

Kind of like now,  the rush to cut spending during an economic crisis.

All the anti-Keynsians are pushing for spending cuts,  in both parties,  when that is exactly the opposite of what we should be doing.  And we'll keep doing the wrong thing until there is nothing left to do,  except the right thing.

Nonsense.  There is historical evidence that proves unequivocally that spending cuts and tax cuts work.  Look up the depression of 1920 and the resultant roaring 20's.

Spending by government is never the answer.

And as for cuts, I'd start by cutting the 'watch the whales mate' program and all like it.  I'd cut DC's budget to a point in which it hurt like hell -- I think the cafeteria could serve mac -n- cheese before we cut SS spending.  I'd end the war on drugs (what a waste anyway) and so many other wasteful programs.

There are many many ways to cut the budget that would be a great help and would lower spending to a manageable level.  Those who disagree are being dishonest or informed.

Quote from: rwanders on July 14, 2011, 09:29:49 PM
You may think me an unrealistic optimist at best or, a fool at worst but, I still have some faith that we will survive this umpteenth existential crisis. We were founded as a nation with very few believing we would survive even ten years, indeed that we would never exist as an independent nation at all.

I guess a lot depends on your outlook Rewanders.

If you are happy with a top heavy government, red tape and taxes that make running a small business, which is the backbone of what made this country great...impossible, career politicians, a cop on every corner just looking for a violation that can bring in fine money...and all the other goodies we now have,
Then I guess it's Gloom and Doom! >:(

If you aren't happy and see the collapse as a rebirth of American Values rather than the end of American values or as Genesis instead of Revelations,
It ain't all that gloomy. ;D

One of my old laptops is so choked up with spy and spam, it hardly boots.
I can run antivirus and spyware all day and it won't help much. It's time to format the drive and reload. Give you any ideas. ???

I agree with peternap. A reboot may be in order. The system is choking on it's own BS. On the topic of debt, only a portion of the so called debt is real. Most of it is owed to the fed. That money was made from nothing so can be re-payed with nothing. It's the money owed to China and other countries that concerns me.

Quote from: muldoon on July 14, 2011, 10:18:18 PM
... while we go on credit watch negative today because of massive stimulus, is ludicris. 

We're going on credit watch not because of stimulus,  but because Congress has indicated that it may choose to default on our debts.  The whole debt limit fiasco is a totally manufactured crisis.  Completely unnecessary.

Quote from: rwanders on July 14, 2011, 10:51:59 PM
I am pretty sure that the guys hiding in the woods, peering out at the world around them with fearful eyes and loaded guns, will not be among the winners. The winners will be the ones embracing the changes. Big changes bring big opportunities. They WILL bring big risks too---those two always appear among us holding hands. Ain't no guarantees.

RW

RW,
I can pretty much guarantee that you're right about that.

Quote from: OlJarhead on July 14, 2011, 10:52:08 PM
There is historical evidence that proves unequivocally that spending cuts and tax cuts work.  Look up the depression of 1920 and the resultant roaring 20's.

Spending by government is never the answer.

Anyone who can make a statement like that knows very little about history and even less about economics.

Quote from: archimedes on July 15, 2011, 08:26:03 AM
You know very little about history and even less about economics.

I'm sorry you feel the need to make such a childish statement, however like many I suspect you probably never heard of the depression of 1920 and know even less of it's causes and what ended it.  If you do, then your statement is downright ignorant, if you don't then I suspect you just have some kind of political agenda and feel that insulting someone is a good way to hide your lack of knowledge. 

Of course, my Maryland State History Prof might have agreed with you but then since I was the top of the class I kinda doubt it.

You see sir, there was a depression in 1920 in which a huge portion of American workers lost their jobs.  Many in government wanted to try the Keynesian answer to such things but thankfully an election took place and Woodrow Wilson, a progressive Democrat, lost to Warren G Harding.

Wilson gave us the FED (actually the banks gave us the FED but that's for another discussion I guess), who's supposed role was to prevent the business cycle from happening -- no more boom bust cycles (ya right) and the WWI boom was over.  What was worse is the European soldiers went back to being farmers and US Agriculture took a major hit.  The depression started, revenues dropped, people were unemployed so what did Harding do?

Cut taxes and cut spending.

But Harding dies and Coolidge assumes the Presidency and continues the cut spending cut taxes plan and gee whiz Wally, the depression ended and the roaring 20's came out of it!  WOW!

But then I'm just a dumb Jarhead who doesn't know anything about history.  Heck I probably can't even read or write and I sure as heck can add two dollar bills together.

Fact is my insulting and unfriendly friend, you post like a pompous and arrogant elitist but I'm sure it's all just a misunderstanding and in real life, sir, you are a gentleman.  So this old marine will let your silly post go and continue to enjoy the debate even though I'm clearly just an old bullet stopper who has no business opening his mouth around the likes of geniuses like yourself.

Wow this is getting heated  :o

I think making a blanket statement of "spending cuts and tax cuts work/don't work" is wrong in and of itself.  There are alot of variables to consider, including:

     1.  Where the cuts are (Welfare? Education? The Poor? The Rich?)
     2.  Who benefits and who loses from the cuts
     3.  How many people are directly affected (# of government employees come to mind)
     4.  How the money gets re-invested

What worked in the 20's may not necessarily work now.

So much of this debt crises lies within the problem of FUD (Fear, Uncertainty, Doubt), Faith, and plain ol' bad balance sheets all around (Government, Corporate, Individual).  No one has any money because they used it 5 years ago.

OlJarhead,
Your the one with the clear idealogical agenda.

For you to make a statement that history "proves unequivocally that spending cuts and tax cuts work".
Is a false statement.

Sometimes they do, sometimes they don't.  It depends on the need at the time.  

Your one size fits all solution to every situation is based on your idealogical beliefs grounded in your lack of willingness to look beyond any evidence that supports your beliefs.

There are plenty of historical examples where tax/spending cuts have not worked,  and plenty of examples where spending increases have worked,  you just choose not to look at those because it doesn't validate your idealogy.

In the appropriate situation,  tax and spending cuts are the right solution,  and can be very effective.  In others they are not.  And history and economic theory show that over and over again.

Quote from: OlJarhead on July 15, 2011, 09:04:01 AM
.  The depression started, revenues dropped, people were unemployed so what did Harding do?

Cut taxes and cut spending.

Harding raised taxes

Quote from: archimedes on July 15, 2011, 08:15:23 AM
We're going on credit watch not because of stimulus,  but because Congress has indicated that it may choose to default on our debts.  The whole debt limit fiasco is a totally manufactured crisis.  Completely unnecessary.

archimedes, your thinking this is about politics - it's not.  It's about money. 

How necessaray is this? 
Jamie Dimon, CEO of JP Morgan, board member and director of the New York Federal reserve bank. 

http://www.thestreet.com/story/11185157/1/dimon-warns-of-us-default-catastrophe.html?cm_ven=GOOGLEN

"NEW YORK (TheStreet) -- A credit downgrade to the U.S. could benefit JPMorgan Chase(JPM_), bank CEO and Chairman Jamie Dimon acknowledged Thursday during a conference call with analysts. "

...
"In a follow-up email exchange Cassidy explained that a one notch credit downgrade to the U.S. could lead to increased sales activity since triple-A treasuries are used as collateral for certain transactions and/or contracts.

"If they were downgraded to AA+, some of those contracts that require triple-A investments as collateral would need to be sold leading to increased sales activity," Cassidy explained.

Earlier on the same call, Dimon said a U.S. default would force some owners of U.S. Treasuries to sell their holdings, and possibly lead to a multi-notch downgrade of the U.S. credit rating. "

--

Yes,  but the whole "deadline" situation is an entirely manufactured crisis.

Bond yields,  even in the face of imminent default,  are still at historic lows.  Congress,  not the markets,  is creating this crisis  -  for political gain.

Quote from: h0rizon on July 15, 2011, 09:29:50 AM
Wow this is getting heated  :o

I think making a blanket statement of "spending cuts and tax cuts work/don't work" is wrong in and of itself.  There are alot of variables to consider, including:

     1.  Where the cuts are (Welfare? Education? The Poor? The Rich?)
     2.  Who benefits and who loses from the cuts
     3.  How many people are directly affected (# of government employees come to mind)
     4.  How the money gets re-invested

What worked in the 20's may not necessarily work now.

So much of this debt crises lies within the problem of FUD (Fear, Uncertainty, Doubt), Faith, and plain ol' bad balance sheets all around (Government, Corporate, Individual).  No one has any money because they used it 5 years ago.

It is perfectly correct to say "raising taxes can raise revenue", after all when income tax was 1% and raised above it I'm certain revenues went up.  Art Laffer did a fair job of showing this in the 'Laffer Curve'.

It is also perfectly legitimate to make the statement that not all spending cuts work -- after all, cutting spending to a small portion of the budget while ignoring the big items won't make nearly the difference that cutting the big items will.  And let's not forget this years fiasco of 'cutting $38 billion' in spending!  After all, that 38 billion dollar haircut netted a gain of 200 billion in spending....so it's clear that 'cut' didn't work.

But looking closer at that 'cut' one sees it was no cut at all but a lowering of proposed spending to a rate still higher then previous years.

However, who can argue that cutting spending will not work when our government is so bloated that a $500 toilet no longer even raises eybrows?  When it has more law enforcement agencies then you or I can probably mention in a first attempt?  When it's employees make something like twice the average private worker etc etc  etc....I think there is so much room for cuts it's pretty much insane not to do so.  Heck, I think we worked just fine as a nation back in 2000 and we only spent $1.9 TRILLION that year.....seems to me a cut of $1.8 TRILLION is in fact doable and would prevent any need to raise any debt limit.

Yes,  but the whole "deadline" situation is an entirely manufactured crisis.

Huh?  You don't think there's a crisis?  Pehaps you mean to say that issue is being used by both parties to promote agendas... sure... but there is a crisis.   We're spending trillions and getting no where and when rates jump (and they will), they'll start throwing the "austurity" burden on you and me and our kids and their kids.

I used to be in the mortgage industry (pre-scam) and I can tell you from taking applications that most people (over 75%) had virtually nothing in savings... while the other 25% had their act together.  We are witnessing the great delveraging and they are just trying to kick the can down the road until there is no road left.  A trillion here, a trillion there and pretty soon you're talking about real money.

Quote from: archimedes on July 15, 2011, 09:31:52 AM
OlJarhead,
Your the one with the clear idealogical agenda.

For you to make a statement that history "proves unequivocally that spending cuts and tax cuts work".
Is a false statement.

Sometimes they do, sometimes they don't.  It depends on the need at the time.  

Your one size fits all solution to every situation is based on your idealogical beliefs grounded in your lack of willingness to look beyond any evidence that supports your beliefs.

There are plenty of historical examples where tax/spending cuts have not worked,  and plenty of examples where spending increases have worked,  you just choose not to look at those because it doesn't validate your idealogy.

In the appropriate situation,  tax and spending cuts are the right solution,  and can be very effective.  In others they are not.  And history and economic theory show that over and over again.

If by this you mean that I am vehemently opposed to Keynesian Economics, Marxism, Socialism, Communism and the like then thank you sir!   I'll proudly wear that label.  However, if you mean to say that I am blindly Libertarian I would have to disagree as I do see valid points in other political philosophies and I am no anarchist.

What I am sir, is someone who believes that spending is way out of control, that social programs will bankrupt the nation, that both Republicans and Democrats are the problem, that socialists and their like are utopian fools and that the useful idiots who actually think we have to spend our way into prosperity are just that, fools.  That may seem harsh but Liberty cannot be attained or maintained by harnessing citizens with debt in order to redistribute wealth in the name of creating prosperity in some pie in the sky fashion dreamt up by those who don't believe in freedom in the first place must less a free market which, sir, is exactly what will give us prosperity and liberty.

Sir, you may believe that you are more educated then I (you may be), you may believe that you know more about economics (you may well), you might even believe that you have more intellect (perhaps) but from your posts what I see is arrogance, rudeness and elitism.  So I would propose, that your statements alone make you the very picture of what you accuse me of.

Am I wrong about money, the economy, history?  Perhaps and I'm willing to admit I'm no PHD in American history, much less economics.  However, I've read dozens of books on the subjects in question in the last few years and studied history in college and I assure you, I'm no dummy and my points are worth merit at least.  My opinions are my own, however.  

I do not believe either party has the answer and I pray that men like those who founded this great nation will step up to the plate and steer us back on course to Liberty and Prosperity where the laws of Nature and Natures God are the law of the land and where men respect that the unalienable rights to Life, Liberty and Property cannot be legislated away by partisan ideologues.

Quote from: Ajax on July 15, 2011, 10:15:11 AM
Harding raised taxes

I'm retracting this statement.  I found it in an otherwise pretty solid paper, however, when I did more research, I don't think it is exactly true.  I actually sent the author an email.  His response was that the point he was trying to make was that the tax cuts that Harding made were minimal and did not contribute to the recovery.

Let me share this with you:
the first Bush budget was 2002 and was: $2.0 TRILLION Dollars.
The Senate was controlled by Democrats but Republicans controlled the House and spending had risen from $2.0 TRILLION under Clinton's last budget of $1.9 TRILLION in 2001.
2003 was $2.2 TRILLION Republicans controlled both houses.  Spending up 10%
2004 -- $2.3 TRILLION Republicans controlled both houses.  Spending up ~5%
2005 -- $2.4 TRILLION Republicans controlled both houses.  Spending up ~4.5%
2006 -- $2.7 TRILLION Republicans controlled both houses.  Spending up ~12.5%
2007 -- $2.8 TRILLION Democrats control both houses.  Spending up ~4%
2008 -- $2.9 TRILLION Democrats control both houses.  Spending up ~4%
2009 -- $3.1 TRILLION Democrats control both houses.  Spending up ~7%
The first Obama Budget was 2010 and was $3.6 TRILLION
Democrats controlled both houses AND the Presidency.  Spending is up ~16.5%
2011 IS $3.8 TRILLION Republicans control House, Dems control Senate.  Spending is up ~5.5%
2012 submitted by Obama is $3.7 TRILLION – Budget not debated or passed at this time.


So it is clear to me that we could cut spending and cut it enough to prevent the need for a debt ceiling increase.  However, if the raising of the ceiling were truly something that HAD to be done then I'd say we ought to at least consider some real compromise, like say instead of returning to 2000 spending levels how about we just return to 2005 levels?  That's $2.4 TRILLION dollars and a REAL cut of $1.4 TRILLION off the budget....which by the way would almost entirely eliminate the deficit next near.

What would we have to cut?  Government agencies would be first on my list starting with all increases in government workers since 2006.  Then departments -- redundancy must be eliminated and would mean the end of all Federal Law Enforcement except the FBI.  Then entitlements.  First up?  Allow individuals to opt out of Social Security (I'll go first), then change it so only the most destitute could get it (sorry but if you earn enough to save for retirement then damn well you should be), then get rid of HUD, Food Stamps and the like ("I'm all for doing for the poor, I just differ in the method of doing.  I would make the poor difficult in their poverty or lead them out of it" paraphrasing Ben Franklin).  Yes I would cut those programs complete and tell Churches and NGO's it's time to step up and help the poor because Uncle Sam is broken.

I'd go after illegal aliens use of social programs, I'd institute a tax system which taxes everyone who earns a living (though I am personally opposed to individual taxes I know that no one in America would go for it in our climate today) and end all redistribution programs.  I'd end subsidies for farmers, oil companies, GE and banks alike.

I'd also create a 'United States Dollar' which would be a silver note and make it legal tender along with the FRN and then I'd use FRNs to pay on the debt until it was gone, at which time I'd eliminate the FRN all together and return the nation to a silver based monetary system in which Gold would also be legal to use but would not have a set value (exchange rates would have to be posted like foreign currency rates).

Ya, I'm an evil Libertarian and I'm proud of it :)

OH and I'd end the war on drugs, get rid of the DEA and tell American's that the Federal Government has no place telling them what they should or should not injest.  

I don't know if this is flawlessly researched data (and I don't really have a strong opinion on what is the best way to close the deficit), but this is interesting:

QuoteOne of the most underrated presidents in American history Warren G. Harding (1921-23) cut the top rate from 73% to eventually 25% in 1926 posthumously and the "roaring 20's" were born. Calvin Coolidge (1923-29) continued Harding's economic policies of cutting taxes and spending resulting in GDP growth rate of 27% from 1921 to 1929.

In 1932 President Herbert Hoover (1929-33) raised the top rate to 63% and Roosevelt (1933-44) followed that in 1936 with an increase to 79%. It should be noted raising taxes was not Hoover's only monumental economic blunder. He passed the infamous Smoot-Hawley tariff act that raised effective rates to over 60% as well as increased federal spending 57% in his four years.

This from: http://usa-wethepeople.com/2011/05/does-raising-personal-taxes-increase-federal-revenues/

Quote from: Ajax on July 15, 2011, 12:10:53 PM
I'm retracting this statement.  I found it in an otherwise pretty solid paper, however, when I did more research, I don't think it is exactly true.  I actually sent the author an email.  His response was that the point he was trying to make was that the tax cuts that Harding made were minimal and did not contribute to the recovery.

http://www.balloon-juice.com/wp-content/uploads/2009/03/graph.jpg

Quote from: OlJarhead on July 15, 2011, 12:23:02 PM
http://www.balloon-juice.com/wp-content/uploads/2009/03/graph.jpg

I'm well aware of what the top rates are.   The paper I read stated the Harding lowered the top rate from 73% to 58%, but also said that he increased the number of individuals affected by the top rate.  My research brought that into question, so I emailed him about it.

There are a variety of reasons cut taxes in the early 20's.  The biggest was that the war was over.  (Remember, we used to pay for wars)

Quote from: Ajax on July 15, 2011, 01:33:00 PM
I'm well aware of what the top rates are.   The paper I read stated the Harding lowered the top rate from 73% to 58%, but also said that he increased the number of individuals affected by the top rate.  My research brought that into question, so I emailed him about it.

There are a variety of reasons cut taxes in the early 20's.  The biggest was that the war was over.  (Remember, we used to pay for wars)

We were in a depression with unemployment in 1920 at 20% and getting worse (I thought I read somewhere that it approached 45% at one point but that sounds pretty crazy) and Harding cut spending by a large percentage (I beleive as much as 50% at one point but would have to check).

Quote from: cbc58 on July 15, 2011, 12:00:47 PM
Yes,  but the whole "deadline" situation is an entirely manufactured crisis.

Huh?  You don't think there's a crisis?  Pehaps you mean to say that issue is being used by both parties to promote agendas... sure... but there is a crisis.   We're spending trillions and getting no where and when rates jump (and they will), they'll start throwing the "austurity" burden on you and me and our kids and their kids.

I used to be in the mortgage industry (pre-scam) and I can tell you from taking applications that most people (over 75%) had virtually nothing in savings... while the other 25% had their act together.  We are witnessing the great delveraging and they are just trying to kick the can down the road until there is no road left.  A trillion here, a trillion there and pretty soon you're talking about real money.

No,  I meant to say exactly what I said. 

There is no immediate crisis that needs to be resolved by August 2.  That is a politically manufactured "crisis" date.  We have a long term debt problem that needs to be addressed.  It is not a "crisis".  Nor does it need to be resolved immediately.  That's not my opinion,  that's a fact.  Just look a US bond yields.  They'll tell you all you need to know about how much of a "crisis" we are in.  None.

Let me repeat we do have a long term debt problem that needs to be addressed.  But it is not an immediate "crisis".

The President has suggest a plan to cut $4 trillion off the deficit.  But that was reject by the Tea Party because it contained $1 in revenue for every $3 in spending cuts.    Political posturing at it's worst.

Well that's just plain hogwash. 

I am sure there were a number of Romans that felt the same way you do way back when.  Seen any Romans lately?

It's funny how some people react when the facts won't coincide with their belief system.  I know it must be frustrating,   but facts are facts - regardless of what you want to believe.

There is no "crisis" plain and simple.

BTW.  The debt to GDP ratio of the UK is 400% higher than that of the US.  Last time I looked the UK still existed.  Germany's is nearly double our's.  I think the Germans are still around,  aren't they?

It is a recession when your neighbor is out of work but it is a depression when you are at of work. I think that is the best explanantion I ever heard.

You guys are confusing the Balance Sheet with the Statement of Cashflows.  Companies don't shut down because they run out of earnings, they shut down when they run out of cash. Accounting 101.

Your friend in accounting,

Trapper

Ps, in case you didn't figure it out, the US has a cashflow problem....

Quote from: Native_NM on July 15, 2011, 11:03:32 PM
Ps, in case you didn't figure it out, the US has a cashflow problem....

Only because of these nonsense over the debt ceiling.  Raise the ceiling and the government will have plenty of cash

Quote from: Ajax on July 16, 2011, 07:25:01 AM
......  Raise the ceiling and the government will have plenty of cash

Huh?    That's not cash; that's credit/debt, isn't it?

There is presently, and has been for some time, more dollars spent than dollars coming in. That is the cashflow issue Native_NM mentioned.

Quote from: MountainDon on July 16, 2011, 09:43:49 AM
Huh?    That's not cash; that's credit/debt, isn't it?

There is presently, and has been for some time, more dollars spent than dollars coming in. That is the cashflow issue Native_NM mentioned.

That is correct.  At one point, I owed three times what I earned in a year, and it didn't bother me a bit.  I had sufficient cashflow to service my debt.  My balance sheet was debt-heavy, but my "cash from operations" was adequate, which allowed me to push the excess to "cash used for financing'.  

The current "boom" in my mind is not "raise or don't raise the ceiling", but rather "who is going to buy it even if we raise it to infinity?" Current yields for US Treasuries are artificially low.  The Fed knows that if they raise the rates, the additional interest needed to service the debt will add hundreds of billions to the deficit.  If they don't raise them, our securities are not attractive in the market, given the apparent risk involved.  We run out of cash.  There have been treasury auctions over the last year where there were no buyers.  When you hear about the Fed "monetizing" the debt, it simply means they create money out of nothing and buy it from themselves.  Its fake money, which devalues the existing currency.  Result: inflation.  

We are at a crossroads for sure.  My opinion is the 25-year problem is not as bad as the short-term problem.  There are 75 million baby boomers, and a whole bunch of us are going to die over the next 25 years.  I'd propose that we leave SS alone for anyone born before a peg year - maybe 1993.  Those kids are just entering the workforce and have no real expectations.  Phase out the the SS tax on the those young kids over a period of time as the baby boomers die (post peg year), but leave the employer tax.  The kids will spend every dime, stimulating the economy a bit.  Start to phase out SS over the next 30 years.  We adopt a voluntary pension plan tied to US treasuries, but operate it as a true pension plan as opposed to an insurance plan.  

As the baby boomers die, they will leave trillions to their kids.  Eliminate the estate taxes, and allow the kids to use the proceeds to offset SS by means-testing those who score a big inheritance.  If dad leaves you a zillion dollars tax-free, you and your siblings give up SS.  Seems fair.  These ideas are still tax increases, but a little more palatable and the attempt is to at least be fair-minded.  In addition, we need to end refundable tax credits, and have an Alternative Minimum Minimum Tax (AMMT) of at least $500 or $1000 for anyone making over $10,000 or so.  That sounds harsh, but only when everyone has a financial incentive to vote fiscally responsible will it happen.  I can vote to spend your money all day long, because it does not affect me.  We have half the nation at that point now - they don't pay federal income tax, and they view SS as a savings and pension plan instead of an insurance plan.  If we could reach the point where we balance the annual budget, or perhaps even achieve a surplus, we could perhaps refund the tax to the poorest.  This gives them incentive to vote for candidates who are fiscally responsible.  

There is already a plan to legalize millions of illegals.  It is almost a financial necessity at this point.  I'm opposed to illegal immigration, but both sides have allowed the problem to stagnate, and we are past the point of criticality.  Our birth rate is negative net of Mexicans. That is a fact.   In a few years, the first generation of the kids of illegals (citizen children) will begin another baby boom.  This will become a new source of revenue in 25 years assuming we can educate them.    

There are no good short-term solutions.  Build a small house, live below your means, and don't worry about things you have no control over.

As always, I reserve the right to change my mind next week....



 

QuoteThe current "boom" in my mind is not "raise or don't raise the ceiling", but rather "who is going to buy it even if we raise it to infinity?"

..
The boom I was attempting to bring to light has nothing to do with America or American politics.  It is about credit, or debt, or however you want to consider it.  It is about trillions of dollars globally shifting and moving right now.  These moves create fundamental changes in the world.  Rantings from the democrats or the republicans is just noise.  They are reacting to a crisis in the debt markets which possibly less than 1% of their constituents will ever understand.  So they squawk about who has private jets and which people are on welfare which is what people seem to want to talk about anyway.  A nation obsessed with finding a bad guy ..  when the problem is mathematical. 

Two exponential functions running away from each other always ends the same.

Quote from: muldoon on July 16, 2011, 11:11:32 AM
..
The boom I was attempting to bring to light has nothing to do with America or American politics.  It is about credit, or debt, or however you want to consider it.  It is about trillions of dollars globally shifting and moving right now.  These moves create fundamental changes in the world.  Rantings from the democrats or the republicans is just noise.  They are reacting to a crisis in the debt markets which possibly less than 1% of their constituents will ever understand.  So they squawk about who has private jets and which people are on welfare which is what people seem to want to talk about anyway.  A nation obsessed with finding a bad guy ..  when the problem is mathematical. 

Two exponential functions running away from each other always ends the same.

Correct.  It is about certain countries and their ability to raise capital or fund the standard of living they have grown accustomed to.  I think the US has a better chance of weathering the storm long-term if we act now.  The changes don't have to be draconian, but decisions need to be made today, as they are 25 year decisions.

Europe is dead folks.  Anything happening there right now is Hospice care. 

"The end is not near"     ;)

For many people, it is the end of times as they were accustomed.  I agree the end is not near in general.  Download Reagan's innagural address. What is old is new again. 

A TED talk on the God Complex and its antidote. This could be a more productive adaptation to the complexity of modern life than the rigid dogma of partisan ideology that we see in common usage today.

It would help if we could stop thinking we know what we are doing. :D :D :D

http://feedproxy.google.com/~r/TEDTalks_video/~3/W5r4Svr9sYA/1190

Fear not, they got it covered:

http://www.youtube.com/watch?v=6JPcimrnXGA&sns=em

Thanks Native_NM:

Great video from the Onion  :D :D :D (I wonder how much Cash4Gold.com paid for the placement?)

http://www.marketoracle.co.uk/Article29477.html

Quote
The $1 Billion Armageddon Trade Placed Against the United States Bond Market

Jack Barnes writes : Someone dropped a bomb on the bond market Thursday - a $1 billion Armageddon trade betting the United States will lose its AAA credit rating.

In one moment, an invisible trader placed a single trade that moved the most liquid debt market in the world.

The massive trade wasn't placed in bonds themselves; it was placed in the futures market.

The trade was for block trades of 5,370 10-year Treasury futures executed at 124-03 and 3,100 Treasury bond futures executed at 125-01.

The value of the trade was about $850 million dollars. In simple terms, if that was a direct bond buy, no one would be talking about it.

However, with the use of futures, you have to have margin capacity behind the trade. That means with a single push of a button someone was willing to commit more than $1 billion of real capital to this trade with expectations of a 10-to-1 return ratio.

You only do this if you see an edge.

This means someone is confident that the United States is either going to default or is going to lose its AAA rating. That someone is willing to bet the proverbial farm that U.S. interest rates will be going up.

I believe what happened is a debt-ceiling deal was done in Washington and leaked to a major proprietary trader. Everyone knows the debt negotiations in Washington have been an extreme game of brinksmanship between political parties, but now someone knows how that game played out.

This had the hallmarks of one of the largest bond shops in the world knowing something the rest of the market didn't.

The number of shops or even central banks that can take on this level of market risk is extremely small. Some that come to mind are hedge fund manager John Paulson, Bill Gross's PIMCO, and the U.S. and Chinese central banks.

Paulson already scored big - about $6 billion big - on a similar trade years ago when he bet against subprime mortgages, the investments that helped bring down Lehman Bros. and many other investors.

Whoever was behind it wanted a trade on ASAP, and didn't care about the ripples they would cause.

This is a 1 billion dollar bet, this is serious money.  The boom hit international credit markets two weeks ago, enormous amounts of capital the world over moved, many global, central banks and governments lost big in these moves.  Pay NO attention to the news you see in the media or the politicians feeding you chicken-squawk and trying to vie for political points on the winds of the spin.  This is not a USA event, it is a global event, the usa has alot of proverbial meat on their bones. 

There is a reason the "credit ratings" agencies suddenly have awoken after being blind for years.  I can think of billions of reasons. 

This is a USA == Lehman event in my opinion.  To be clear, also in my opinion it has zero to do with the us debt ceiling although that seems to be the scapegoat right now. 

Just a side bar on the financial discussion, I was made aware of the Elliott Wave principle (theory) last week by an individual whose son in law works in a brokerage house and the son in law showed him a model that indicated a second collapse in 18 months. This was in June of this year, which falls right in line with the December 2012 scenario.
We will have to wait and see.
If you watched the speech's last night, then you see exactly where the problem lies. We the people have allowed this finger pointing, do nothing, just give me a check mentality to morph into the current drama we see in going on in our nation's capital.
When a nation allows the abortion of unborn children, it is a small step to next disregard any future generation and be concerned about their ability to pay a ton of debt that we saddle them with. Instead of pay it forward, it is push it forward.

This means someone is confident that the United States is either going to default or is going to lose its AAA rating

This does not a leak make.  Someone is willing to play the odds 10:1 to hopefully cash in big.  Yes, $1 billion is a huge chunk of change, but under a large managed fund firm it may be a small portion of their cash holdings.  That's play money in hopes of raking in big earnings for themselves and their investors if it does come to fruition.  If the bet fails, they write it off as a bad investment and it is negated with any other earnings they make from the market going up.  Investors none the wiser.  They are hedging their bets, plain and simple.

That said, it doesn't mean that the bet is unfounded.

a model that indicated a second collapse in 18 months

A second collapse is coming, just a question of when, how deep and how long will it last?  Is it a giant wave or a small blip?  House prices are already down 4.5% over last year.

Finally some intelligent commentary on the crisis from our leaders.


http://www.youtube.com/verify_age?next_url=http%3A//www.youtube.com/watch%3Fv%3DJnX-D4kkPOQ%26feature%3Dplayer_embedded

http://twitter.com/#!/larry_kudlow

Quote
Larry Kudlow
@larry_kudlow Larry Kudlow
Sources tell me Italy has to restructure bonds.Deposit run on Italian banks.EU will have to mount Tarp rescue.
Big stress on interbank loans.
15 hours ago via web

...
This.  tick tick.  Timing of this rumor 100% on with yesterdays market waterfall into the close.  something in Europe continues to blow up, money needed to cover huge mounting losses, that money comes from somewhere.  There has been 2 trillion in paper losses in US markets in the last 10 days.  Money is never lost, it moves.  Where did it go?  Critical thinking required to see this.  3rd grade math required to fore-see this. 

Italian bond yields in early trade
2y 4.96 +27
5y 5.73 +16
10y 6.39 +19


Italy raids Moody's, S&P offices
http://blogs.marketwatch.com/thetell/2011/08/05/italy-raids-moody%E2%80%99s-sp-offices/

Quote
August 5, 2011, 3:15 AM

The cost of Italy's borrowing jumped yesterday and Prime Minister Silvio Berlusconi promptly urged his citizens to wait it out and not ditch the debt-laden nation's government bonds.

Italy, it's worth recalling, is one of the largest government bond markets in the world, and the third largest economy in the euro zone.

"I don't think the markets will get worse," Berlusconi said this week.

But of course on Thursday they did and the bourse in Milan closed down over 5%.

The Tell thinks this is pure coincidence, but Britain's Telegraph newspaper reported Friday morning that Italian prosecutors have raided the local Moody's and Standard & Poor's offices "over allegations that the ratings agencies were involved in 'anomalous' movements in domestic share prices."

A rising note of tension has been accruing between ratings agencies and euro-zone governments in recent months and the Telegraph writes that the "agencies are blamed by some for exacerbating the region's sovereign debt crisis by downgrading many of the indebted countries."

For their part, Moody's and S&P have largely  shrugged off the Italian investigation.

Scaremongers or scapegoats, it's hard to say.

That Italy's under pressure is beyond doubt.

Another 'Friday Night Special'- S&P lowers US rating to AA+. First time it's been lowered since attaining AAA in 1917. Have you noticed these little bombshells seem to come out on Friday nights with this administration/media? I guess they think nobody will notice.

Quote from: MushCreek on August 06, 2011, 06:21:11 AM
Another 'Friday Night Special'- S&P lowers US rating to AA+. First time it's been lowered since attaining AAA in 1917. Have you noticed these little bombshells seem to come out on Friday nights with this administration/media? I guess they think nobody will notice.

The administration does not decide what S&P does.  S&P made an error in their calculations anyways. 

The stock market is just another form of taxation and banking.  Think about that for a minute at a very macro level.

"There has been 2 trillion in paper losses in US markets in the last 10 days.  Money is never lost, it moves.  Where did it go?  Critical thinking required to see this.  3rd grade math required to fore-see this."

Quote from: Ajax on August 06, 2011, 07:12:57 AM
The administration does not decide what S&P does.  S&P made an error in their calculations anyways. 

No- But the White House argued with S&P about it all day, from what I read. Didn't hear a peep about it until this morning.

This thread spans about a month.  In it I tried to make clear statements about the state of the global credit markets and the effects of such distortions.  I re-read it tonight and realize I completely failed to convey any useful information because not a single person understood what I was getting at. 

When I go back re-read only my posts it seems clear as day. 

Quote from: muldoon July 12th
They have kicked the can for so long it seems they will be able to kick it forever somedays.  However, along the way there are pivotal shifts.  swings in direction and momentum; the history of our planet is littered with them.  Things work, until they don't.  This was a eurozone boom; but just like any financial event - most will not understand the event at the time, and they will not see the ripples of it in their daily lives for months.  Then they will not correlate the event with the effects. 

Quote from: muldoon July 12th
But were not talking about something we can cure if we just got the progressives on track.  That money is gone, it was mostly never real in the first place.  It was fraud and theft and grift.  There and here.  If you want to use a medical analogy, think of a parasite that has 100% infected its' host.  To kill the parasite, you kill the host.  There is nothing left of either system if you remove the fraud but unfortunately the losses are simply to great to paper over and continue to cover.  Them admitting that, is why this is significant. 

Quote from: muldoon July 14
09:36 15Jul11 RTRS-S&P PLACES U.S. 'AAA/A-1+' RTGS ON CREDITWATCH NEGATIVE
09:37 15Jul11 RTRS-S&P PLACES U.S. RATINGS ON CREDIT WATCH NEGATIVE
09:38 15Jul11 RTRS-S&P SAYS AT LEAST A 1 IN 2 CHANCE IT COULD CUT RATING
09:39 15Jul11 RTRS-S&P SAYS COULD LOWER U.S. RATINGS WITHIN 3 MONTHS

think about that wire feed, read each one and think about it because s&p has never said anything like that about us debt ever.
...
http://www.reuters.com/article/2011/07/14/market-ratings-creditwatch-us-idUSWNA372820110714

...
credit events are global, the ripples from a few days ago are starting to show.  like I said then, the ripples take time to show up in daily lives but when they do -- people don't often line up the events.  There is a panic sign flashing in debt markets.

- as for better in 12 months, John I just don't see it. 

Quote from: muldoon July 14th
This is not about doom, not about the republic, not about gold, not about guns.  not about all the boogiemen you have heard for thirty years that never came true.

This is not about the republic, or Obamacare, or democrats and republicans.  Those are bread and circus; to give people seomthing to squawk about while they fight over a ever smaller piece of the pie.  this is much larger than national politicking.

It's about debt, it's about sovereign credit.  Take a look at borrowing cost increases in the last week.  Just 5 business days.  No business can survive a 15% increase in cost of borrowing in a week, much less the 20%, and 30%ers in there.  It went boom, and no one gets it yet. 

Quote from: muldoon July 14th
There is no such thing as a "bailout." It simply is a magical creature that doesn't really exist. A "bailout" is just a method of shifting the loss onto someone else.  That's why money printing doesn't work. It just shifts the loss around onto the general population destroying the real economy and making the problems worse.

To say that we have not done enough stimulus, while we go on credit watch negative today because of massive stimulus, is ludicris.

That is besides the point, this, I repeat, is not about American politics.  This is about global debt.  The things that always preclude massive changes.  Let me ask this, given the above rates for cds swaps, should Greece be stimulating?  Italy?  Spain?

How do you suppose it should be paid for?  Should they borrow at 30% to "invest" in their economy?  What kinda of return will they see?  Will they generate 30% back dollar for dollar.  or will it just be chewed up with the same fraud that created this mess like the last few trillion?

Quote from: muldoon July 16
..
The boom I was attempting to bring to light has nothing to do with America or American politics.  It is about credit, or debt, or however you want to consider it.  It is about trillions of dollars globally shifting and moving right now.  These moves create fundamental changes in the world.  Rantings from the democrats or the republicans is just noise.  They are reacting to a crisis in the debt markets which possibly less than 1% of their constituents will ever understand.  So they squawk about who has private jets and which people are on welfare which is what people seem to want to talk about anyway.  A nation obsessed with finding a bad guy ..  when the problem is mathematical.

Two exponential functions running away from each other always ends the same.

Quote from: muldoon July 25
This is a 1 billion dollar bet, this is serious money.  The boom hit international credit markets two weeks ago, enormous amounts of capital the world over moved, many global, central banks and governments lost big in these moves.  Pay NO attention to the news you see in the media or the politicians feeding you chicken-squawk and trying to vie for political points on the winds of the spin.  This is not a USA event, it is a global event, the usa has alot of proverbial meat on their bones.

There is a reason the "credit ratings" agencies suddenly have awoken after being blind for years.  I can think of billions of reasons.

This is a USA == Lehman event in my opinion.  To be clear, also in my opinion it has zero to do with the us debt ceiling although that seems to be the scapegoat right now. 

What do you think BOOOOM  means? 

Quote from: muldoon on August 08, 2011, 06:07:12 PM
This thread spans about a month.  In it I tried to make clear statements about the state of the global credit markets and the effects of such distortions.  I re-read it tonight and realize I completely failed to convey any useful information because not a single person understood what I was getting at. 

When I go back re-read only my posts it seems clear as day. 


What do you think BOOOOM  means? 

Quote from: Native_NM on July 15, 2011, 07:47:52 PM
You guys are confusing the Balance Sheet with the Statement of Cashflows.  Companies don't shut down because they run out of earnings, they shut down when they run out of cash. Accounting 101.

Your friend in accounting,

Trapper

Boom means no more cheap cash. If any.

Let's really get them riled and talk about the derivative market and the trillions at risk therein.

go ahead, invest with Timmy.  He couldn't even get his taxes right.  Trust that guy. 

Quote from: muldoon on August 08, 2011, 09:25:43 PM
go ahead, invest with Timmy.  He couldn't even get his taxes right.  Trust that guy. 

Turbo Tim is a partisan hack and a pawn....just my $0.08234 cents, adjusted for the inflation we are about to experience...

 [rofl2]