if I didnt know any better...

[muldoon]

I havent posted much on the economy lately, I figure everyone knows it's broken now so not much point in me regurgitating it. 

That being said, if I didnt know better I'd say were sitting on a cliff face right now and the bottom is gonna fall out somewhere in the next 2-10 days.  Next leg down coming up real soon in my opinion.  They are stuck between collapsed debt and bond market buyers strike.  Theres nowhere to hide, and its obvious by how they keep anouncing and recanting options.  Got to do this .. oh no we cant .. got to do .. 

boom.  As peternap says, hide and watch. 

also, for the record, I now firmly believe we are in the D.  In a few years history will show us it began sometime in Fall of 08. 

[ScottA]

Look on the bright side. Odds are there will be a sunrise tomorrow. 

[glenn kangiser]

Keep posting thoughts, muldoon -- I keep wondering as they sit in their in-admission.  It helps.

Broke, I think too - just when the bottom is going to slap us I don't know.

[tesa]

i thank god every day we don't have any credit cards

i thank god every day we actually sold our house in this wretched economy!
(we closed two weeks ago!!)

and i am so thankful that i had the forsight to sock away that stimulus check we got back in '08!

yup, thats right, still sittin' in the bank as we speak

i saw something in the news today, that the government was sayin' folks need to stop saving/hording money
and start spending, its the only way to save our economy!

yea, right

no thank you

i'll keep on saving

we actually went out to dinner last night for the first time in over 6 weeks, minus the friends birthday
party we attended at a pizza place

tesa

[peternap]

Yep, keep posting Muldoon!

[lonelytree]

Look on the bright side. Odds are there will be a sunrise tomorrow. 

Unless the volcano goes off for me. Then it could be a couple unpaid days off. It is bad enough when the boss cuts my overtime, now Mother Earth wants to cut my regular time. Good thing I am not trying to save for a cabin.......... 

[muldoon]

Yep, keep posting Muldoon!

as crazy as it sounds, my new target for the dow is either 5500, or 2000.  one of those targets to be reached in the next two weeks.  I'm hoping for the 5handle.  2k would end very badly after 3 months for it to "land".  I'm hoping I'm wrong.  They need a sticksave and it needs to be a doozy.  not sure they have the powder anymore.  we'll see. 

[ScottA]

I'm wondering what factors you are looking at to come to this conclusion muldoon. I personaly feel the market is being controled at this point by the powers that be and no one can really predict where is will go because it is no longer a free market. I do belive though that if allowed to price itself the market will indeed go to 2000.

[sparks]

Hi Muldoon,

Being mostly computer illiterate, I was wondering if I could ask you to chart the NYSE vs the price of gold from circa 1979 to present. IIRC, the NYSE was around 800 then. And gold was getting ready to spike from around  $250 to $800.

Here's what I find interesting.......gold nowadays is hovering around $800 and the Dow is at 8000 (and tanking)..... ie the Dow is 800% above levels nearly 30 years ago, yet gold is nearly the same.

What gives?.....besides you and I 


sparks

[wildbil]

This actually makes me sick. Every time I hear news like this it reminds me that I'll never get rid of this house, be able to get into a cabin, or get a different job. Makes me depressed. Just when I think I got things figured out. As of right now I have no backup plan. I guess if things go to crap we can just pack into a camper and get out of dodge? I really don't know what to expect, is society going to collapse in a year, or is it just going to be constantbad news through the media until its over?

[considerations]

I think most of us are worried to some degree or another.  I've had ups and downs in this life, but I've never crashed and burned.  I don't plan to now, no matter what happens.

As for credit, its what got us into this mess in the first place, and now the gov't wants us to take up more. 

The house of cards finally blew down.  I may be adding a bedroom for my mother sooner than I thought.

[muldoon]

I'm wondering what factors you are looking at to come to this conclusion muldoon.

money flows and debt market mostly.  treasury are seeing tails to close the auctions.  they need more money to buy this debt were racking up and china has slowed down...  well really just not escalated to meet us. 
I would say that the 2 concepts most important to understand are quite simple. 
1) money moves like water - it never goes to the sidelines.  if something is going down in value, something else usually is going up.  example, when the dollar goes down oil or gold goes up.  when stocks go down, bonds go up as people seek "safety".  as the pound and the peso crash the dollar goes up, etc.  money always chases a return because it is always due to be repaid with interest so it must chase a return.  it always moves. 

2) money is never really lost in a market.  it is transferred.  trillions of dollars have been lost in the stock market, well thats not exactly correct.  that value is still there - it has moved into other areas or been transferred.  as the amount of dollar (or however it is measured) decreased the value of each remaining dollar increases.  the value is still there but it has only been transferred.  Were in the building stages of a bubble in us givernment bonds because money is still being driven into it.  There is still a supply/demand mismatch because the supply is huge and not enough demand for it. 

Last time this came out they removed funds from the open market operations via calling in loans and not making new ones.  this is called the slosh.  as the money dried up the stock market starts to jitter a bit,  panic sets in and the dow drops a big leg down.  that money goes into treasuries and keeps the wheels on the bus for another from months. 

(O's Trillion dollar bailout/stimulous keeps getting delayed... I wonder why?  ) 

Here is the slosh http://www.gmtfo.com/reporeader/OMOps.aspx
this data comes from the federal reserve banks daily, its right out in the open.  click include TAF and TIOs and set a date, go back and look at what happened last Oct for grins. 

...  you might be interested in a documentary call the money masters, its like 3 1/2 hours long and goes into some detail on the history of banking and how various families and people have been involved in the same things for centuries. 
http://video.google.com/videoplay?docid=-515319560256183936

see if you notice something common with nearly every panic and problem going back the last 200 years. 

Here's what I find interesting.......gold nowadays is hovering around $800 and the Dow is at 8000 (and tanking)..... ie the Dow is 800% above levels nearly 30 years ago, yet gold is nearly the same.

yes, gold has not exactly been the store of value that many claim it to be.  there are some reasons to hold it now,  but there are no guarantees in life.  I personally do not have gold other than a wedding ring. 

This actually makes me sick.

wildbil - you cant let this fear of the unknown cripple you.  there is always opportunity to better your life every single day.  Make small changes if you need to, get rid of some debt, live smaller.  Life is what happens while we plan and maneuver through these obstacles.  You cant think of it like a destination, because you'll never get there -- thats the trap of a ratrace.  Thats the mentality of a treadmill without end.  You do have options and can make changes today.  It may not be a cabin in the woods, but thats not necessarily the best way to weather the storm anyway.  just my opinion. 

[glenn kangiser]

Thanks for the added wisdom, muldoon.

[akemt]

2) money is never really lost in a market.  it is transferred.  trillions of dollars have been lost in the stock market, well thats not exactly correct.  that value is still there - it has moved into other areas or been transferred.  as the amount of dollar (or however it is measured) decreased the value of each remaining dollar increases.  the value is still there but it has only been transferred.  Were in the building stages of a bubble in us givernment bonds because money is still being driven into it.  There is still a supply/demand mismatch because the supply is huge and not enough demand for it. 

Are you considering the use of fiat currency in this, though?  Yes, as long as US dollars have ANY value, something is being transferred, but there is nothing backing the US dollar so it no longer has any value of its own, only the value we give to it.  Things keep crashing, the value we give it may not compare to a bag of beans.

wildbil - you cant let this fear of the unknown cripple you.  there is always opportunity to better your life every single day.  Make small changes if you need to...

I agree completely with the above.  A year ago we knew things were going downhill, KNEW we needed to get out of debt, and KNEW we needed to get out of our house mortgage.  It took us over a year to get rid of the house and we're still working on the medical bills and debt, but we're JUST now starting to see the light of day.  Don't give up hope.  A year doesn't sound like a long time but I honestly don't know how we're paying everything off so quickly except by the Grace of God.  I'm a sahm homeschooling 4 kids, dh's take-home is about $29,000/yr in an expensive local and yet we've paid over $20,000 in medical bills this past year (my pregnancy care comes with a high price tag), we've paid off a credit card, etc, etc, etc.  It isn't like we are some family making $75K a year with 10,000 in debt talking about how hard it was to go without my weekly spa date.  I swear I don't know how it happened to mostly go away but it is happening.  We're down to $7,000 in credit card debt and a few smaller debts to family that our tax return will cover.  We've taken out our IRA's to pay off the last of our credit card, dh asked for a raise and got it, and he is likely going to work a second job part time as needed and wanted.  It takes work, but even when you can't see the end if you keep moving in the right direction it comes around eventually.  One major thing I can see is that as we went through the pain --it is pain-- of waiting for the chance to pay those things off, our perspective changed A LOT.  What I wanted in a house, what I spent my money on, etc, etc.  And my starting point was already better than most people's. 

Our priorities had a make-over.  We constantly reprioritize as things change.  Paying off debt is first, then making sure our supply of food storage (among other things) is complete, then saving up for land and a cabin (20 x 24 is the current starting point), then paying the land off and so on.  If you honestly feel getting out of your place is a lost cause, do your best to be prepared in other ways...pay off every other kind of debt that you can, start up a serious supply of food.  There are always ways to improve your situation, even if it is only by smiling.  Okay, corny as heck, but it is true.  I still feel the blues on the horizon when I think about whether the economy will hold out long enough for us to get our own place, but I work towards it.  Would rather know I've done my best and didn't really have the chance than to look back in the end and know that if I'd just tried one more month I could have saved myself a bucket of trouble.  Hmm...something else that might help, have you heard of Dave Ramsey?  It might help you to get fired up with the motivation to work hard to make some of those wanted changes happen.

Sorry, you probably weren't looking for a drawn-out pep talk!  Probably talking to myself more than anyone...

[muldoon]

2) money is never really lost in a market.  it is transferred.  trillions of dollars have been lost in the stock market, well thats not exactly correct.  that value is still there - it has moved into other areas or been transferred.  as the amount of dollar (or however it is measured) decreased the value of each remaining dollar increases.  the value is still there but it has only been transferred.  Were in the building stages of a bubble in us givernment bonds because money is still being driven into it.  There is still a supply/demand mismatch because the supply is huge and not enough demand for it. 

Are you considering the use of fiat currency in this, though?  Yes, as long as US dollars have ANY value, something is being transferred, but there is nothing backing the US dollar so it no longer has any value of its own, only the value we give to it.  Things keep crashing, the value we give it may not compare to a bag of beans.

Yes, I am considering the state of the USD in this. 

Here's an example.  Lets say you own a company.  What is that company worth?  You have 2 trucks (each worth say 10k), you have one building on land you own, (let say its worth 100k total as an asset), you have 25k in inventory to sell, and over the last 10 years you do 100k in business a year on average, with some years being above.   I would say 20k + 100k + 25k assets, and expected revenue of 100k a year.  Therefore if I was willing to begin turning profit in 3 years it would be reasonable to say your company is worth assets+revenue or 145k+300k, roughly 450k as a rough number for this example. 

What is the USA worth?  Assets include all the buildings, the power grid, the water, the oil, the real estate, the technology companies, the hardworking contingent, everything.   I dont know what the number is, but It's not a zero.  We are not zimbabwe. 

Yes, inflation has been roughly 3% a year for almost a hundred years.  It tends to conincide with the cost of the debt to create the currency.  Therefore yes, the value of a dollar continues to decrease due to inflation.  A loaf of bread might have been a penny in 1915, where now it takes 2 bucks.  Some would say the currency has lost value.  And it has lost value because there is much much much more of it in circulation.  HOWEVER, there are many many more assets because of that currency as well.  If we were to evaluate the value of the USA in 1913, how much did we have invested in roads?  In power grids?  In schools?  in Space exploration?  6000 nuclear weapons, a standing army.  etc.  We had no assets to speak of compared to where we are today.  The value of the us dollar is in those assets.   Not necessariy in spending power. 

Consider this, lets say you owned 10% of everything in the US in 1920.  How much would that be? 
Now, lets say you owned 10% of everything in 2007.  How many more assets would that be?  It took capital to create those assets, some would say that the value of that dollar was reduced by the creation of dollars.  I would say that the assets of the nation were increased as well.  Therefore, the VALUE behind that dollar cannot go to zero.  It's spending power will fluctuate with time but it's like a seesaw- when it goes up something else goes down.  The net affecting value behind it tends to trend stable. 

But I'm not particularly a US dollar fanatic either, we are making horrible mistakes.  If our dollar were to slide, how far can it go?  Or to put it another way, is there a currency that you think would do better?  I cannot.  Currencies are rated on a differential index that measures their strength to each other.   Nearly every country on the planet is doing just as bad if not worse than us right now.   

Start thinking about countries that have a good tax base and not a heavy load. 
- That takes the communist countries out.  consumption slump puts people out of work and kills tax collection. more people need government assistance which makes the government insolvent. 
- Those socialist european countries are hurting too, same reasons. 
- What about those new developing nations that were doing so well on exports?  oops. 
- Latin america .  oops. 
- tourist traps?  oops.
- ...  ? 

[ScottA]

Good point muldoon. There was also alot of money created with debt that was backed by non existant assets. The huge bubble in the stock market is an example of this. There is no way the value of the companies in the DOW went up as much as the market did over the last 20 years. What went up was the amount of dollars chasing those assets. Sure some value was added but not near as much as showed on paper. Housing market was the same senario the house didn't so much gain value as there was simply more buyers avalable. Lots of that fictional value got borrowed into existance and used to buy Ipods and DVD players. So the Chineese where living on the same funny money we where. So what happened? The pyramid ran out of new money and the whole thing collapsed. Well half collapsed then Uncle Sam and uncle Ben started pouring more funny money in to make up for the money being destroyed by people paying thier bills. The stock market you see today is being proped up with that new funny money. But the black hole that's been sucking up the dollars for the past couple of years is still there and most of us belive that uncles Sam and Ben are gonna run outa ink at some point.

[muldoon]

Scott, I dont profess to have the answers, I just refuse to believe anything I read until it makes sense in my own mind.  I need to understand the math, the logic, the motivation, the variables, and such.  I could be way off base with this, and if thats the case I'll happily let it go and figure something else out. 

However...  until someone can show me why I'm wrong... 

Good point muldoon. There was also alot of money created with debt that was backed by non existant assets. The huge bubble in the stock market is an example of this. There is no way the value of the companies in the DOW went up as much as the market did over the last 20 years.

exactly.  the last 10 years, or maybe the last 20 years with things really cookin the last 5.  But what else was going on then?  fraud.  massive amounts of it.  everywhere.  in every sector, in every level.  from homebuilders to apprasiers to tax assessors to mortgage brokers to insurance companies to banks to bond rating agencies to investment companies that bought it to pension companies to sovereign wealth pools.  Thats just one "stream" but the same can be said across the board, fraud is everywhere.  Where are the cops.  Hell Obamas 4th cabinet person today has tax evasion issues.  Dashel flat out stepped out and walked away.  4 cabinet leaders evading taxes?  No, every congress critter and the like are guilty of it and it may infact be impossible to get someone connected enough to the system to understand how it works and be effective and still be clean.  That is the part that failed us.  They changed the laws that stopped them, and then they broke the laws that were still there.  There was no enforcement. 
[/quote]

What went up was the amount of dollars chasing those assets. Sure some value was added but not near as much as showed on paper. Housing market was the same senario the house didn't so much gain value as there was simply more buyers avalable. Lots of that fictional value got borrowed into existance and used to buy Ipods and DVD players.

Yes, and if we wiped all that fraud away - our economy could easily revert back to say 1995 numbers.  Would that be so bad?  I remember 1995, it wasnt so bad.  The US dollar was not a zero then. 

So the Chineese where living on the same funny money we where. So what happened? The pyramid ran out of new money and the whole thing collapsed. Well half collapsed then Uncle Sam and uncle Ben started pouring more funny money in to make up for the money being destroyed by people paying thier bills.

So I also like to watch what people do, especially when it doesnt match what they say they are doing.  Yes, they did make huge loans, however those loans were TOMOS or temporary open market operaions.  They were not POMO or permanent, it means they had to be paid back.  Those loans that poured in had to come back out with interest. 

I give you 10billion today, but tomorrow I want 11billion.  Tomorrow you need 11 billion, ok but the day after I want 12 billion back.  Tell me how that gets you inflation.  Thats a net DRAIN.   Look around, do you see any inflation going on?  The "money supply" may indeed show that you put 13 billion into the system, but if it never reached the people - how can it chase anything? 
(I used round numbers to make the point above)

The stock market you see today is being proped up with that new funny money. But the black hole that's been sucking up the dollars for the past couple of years is still there and most of us belive that uncles Sam and Ben are gonna run outa ink at some point.

Another possible perspective is that the stock market you see today is a net effect of the borrowing and need to pay the due.  If money is simply transferred, and money is needed for us treasury bonds/debt origination, and every dollar is precious, and you constantly need more and more of it, how do you get it?

borrow it from foreign creditors - been done forever, now it's slowing.

tax it - not so much these days.

scare it from other asset classes into you - hummm ...  if money flows like water then all I need to do is make someone want to leave something else - like the stock market, and make them want to put their money with me - because I am the safest place on the planet for funds.  How would I crash the stock market?  I would drain funds and force the banks to sell assets under market to meet obligations.  Just an idea in theory of course.

lastly - I could print it.  the problem with that is that it destroys the dollar you want to get.  They have talked of it several times, yet it still has not happened.  I understand the condition by which a political figure attempts this, I do not understand any banker having a motivation to pursue this. 

[Windpower]

Interesting thread

I think that there are indeed things that have broken in the last few years

the vast amount of credit supplied by the banks created demand --alot of that went into housing but a lot went into 'junk' that people really didn't need too

the problem is you can only create demand by increasing debt fo so long -- eventually there is a limit

the middle class wage has not gone up in real terms for perhaps 30 years

the monitary policy of cheap credit falsley created the demnad that drove the the us economy  -- the bubble

Then there is the fact that the dollar was supported by oil (since oil is denominated in dollars) this was in effect a black 'gold' behind the dollar

an interesting read is 'Confessions of an Economic Hit Man" by Perkins

he expalins how the post WWII US empire has been running

One particularly interesting thing to mewas how the US debt is being financed by oil through Saudi Arabia

We buy oil fro SA they buy bonds (our debt)

in effect we are paying a tax every time we fill the tank


this is  a very loongstory and I don't have time to write it all out here ...


but google Lindsay Williams

or never mind here it is

http://video.google.com/videosearch?q=energy+non+crisis+lindsey+williams&hl=en&emb=0&aq=0&oq=energy+non+crisis#


watch the whole thing -- it is an interesting story

The thing that got me is that I am sure he is telling the truth

I was on a moose hunt in AK back in 96 (in the Matanuska Range and no I didn't get a moose)

Austin, the guide told me one evening that "there is more oil up there than the US can burn in 200 years"

Austin was a 'connected' man (ran the food concession for the whole pipeline construction project, friend and hunting companion to Senator Ted Stevens etc etc)

I said  "and so why are we sending all our money to the middle east for oil"

he smiled and said "because that is the way they want it"

didn't make any sense at the time....

but it did after Perkin's book

My take on this is that we (basically the 'first world' population) are being taken to the cleaners -- the ultimate goal is toput us back into our place as serfs

my favorite blogon economic topics lately is

http://www.urbansurvival.com/week.htm

 

[ScottA]

Must read. http://solari.com/blog/?p=2058

I think Catherine Austin is on to something here. This goes perfectly with what I've been suspecting that we are being rolled back to the 1970's. Our standard of living is being lowered by design to equal out with other developed countries. China and India go up and the U.S. U.K. amd much of Europe go down. This would be a nessacary prelude to global government.

[peternap]

Hmmm. I hate to break away from the conspiracy theories...but I am convinced that what we're going through now, is a runaway train.

We are going through a meltdown or very possibly, have melted down and it's being covered up day by day.

At any rate, if it is engineered, it's bad and we are in TROUBLE. If it is not engineered, it's bad and we are in TROUBLE.

[glenn kangiser]

I also think we are being made into a third world country -- why don't we have jobs here- they don't need us - they are global - we now become all lower class - seems we are helping to do it to ourselves, willingly or unwillingly. 

We can't afford more so we buy cheaper - Corporations want a lower bottom line - bigger bonuses - jobs go overseas  - more of us go out of work - a vicious circle.

The jobs will slowly come back when our standard of living gets low enough- when we will work for minimum wage.  If they would abolish minimum wage more jobs would come back from overseas.  Living the American dream.