John, I have been writing on deflation for awhile myself. I wish I could get all the stuff I have posted on Prudent Bear over the past 8 years, as I would like to see how accurate it has come out to be. I missed 8 years ago because I didn't understand they were going to extract almost every dime of home equity by every means possible. I spent my post college years in the residential real estate business and home mortgages until the boom in DFW went bust in the mid 1980's. I couldn't get back into housing knowing the bubble was going to burst. Here is a guy that likes my stuff over in China.
there is about to be a run on the money market accounts (mannfm11 2008-02-16 11:37:45
I am getting a feeling there is about to be a run on the money market accounts as the writing is on the wall with the failure of these muni-auctions and the investment banks behind them to bid to take theircustomers out of the trades. Are they going to step in and keep the money markets at a dollar for dollar redemption? The minute one of them doesn't, the game is over.
I am suspecting that the street and the government are buying time for the rats to get off the sinking ship. The devaluing dollar keeps money flowing to the US to purchase the stocks of the US multinationals or I believe this market would be down another 20%. It is clear that the Fed Chairman and the Secretary(who might be such a bull that he couldn't figure we were in trouble ifthey spelled it out to him) are loathe to mention how bad it really is when interviewed. This is a lot worse than subprime mortgages. As Dougf inishes up writing, old time conventional financing means aren't goingt o keep this game going. Fictional models and fictional risks built this mess and now that they have failed, there is really nothing that is going to keep it going. Old time lending standards would be like putting a 3 HP lawn mower engine in a Rolls Royce and expecting it to accelerate to freeway speed. It is clear that the Fed Chairman and the Secretary (who might be such a bull that he couldn't figure we were in trouble if they spelled it out to him) are loathe to mention how bad it really is when interviewed. This is a lot worse than subprime mortgages .
I am almost about to lose my mind looking at some of this stuff as some of it on a trailing basis would make me bullish if it wasn't for what I see in the real game, the financing game. It is hard to recognize that literally 100% of what we see has been created by excessive financing, including the high earnings and as far as that goes, the recent Asian miracle. I fully expect China to implode along with the US and most likely even the oil producing states go down. The dollar will survive better than thought unless the government and Fed refuse to allow the needed adjustment. An earlier post about Ron Paul showed him saying how bad we needed a recession and we are to the point that the US could fail soon if we don't have one. As Doug writes here, what transpired in financing and what we see going on right now bodes poorly for the economy, as financing is the economy in a fractional reserve boom/bust system. I give it to about June before the real dust gets blown off the next major entity, FNMA. Federal Agencies are already being priced for trouble and as financing liquidity dries up, the trouble will show up. http://translate.google.com/translate?h ... %26hl%3Den
Financial topics
Re: Financial topics
I have a sinking feeling that the coming depression is going to hit its low point later than in the 1930s. 2015 seems about right to me.
Re: Financial topics
Matt -- is that because you feel we'll have a sustained rally in the interim, due to euphoria / mass optimism because of Obama election? Or, do you think it's because this downturn / depression will be worse than you were originally thinking?
Re: Financial topics
The fundamentals of the economy are much weaker than in the last depression. I fully expect the whole financial edifice (certainly more complex than in 1930) to unravel, and it will have to be built again from the ground up. A few programs won't be enough to set the stage for recovery; it's a long way to the bottom.ojavaid wrote:Matt -- is that because you feel we'll have a sustained rally in the interim, due to euphoria / mass optimism because of Obama election? Or, do you think it's because this downturn / depression will be worse than you were originally thinking?
Our system is unsustainable, but for most Americans, it's going to take a looong time to figure this out.
-
The Grey Badger
- Posts: 176
- Joined: Sat Sep 20, 2008 11:50 pm
Re: Financial topics
The L.A. Times suggests that a low, steady, real economic stimulus - rebuilding infrastructure - might be in order. Do you realize that some people are against it?
As a road to a better economy, an old idea gains ground
Often dismissed in favor of the quick-jolt stimulus, spending on bridges, streets and sewers is on the table again. Obama backs the public works idea, an echo of the FDR era.
By Richard Simon and Jim Puzzanghera
November 9, 2008
Reporting from Washington -- As recently as a few months ago, the idea of trying to bolster the troubled economy by pumping money into public works projects such as roads and bridges was dismissed as too slow -- not the quick pick-me-up that was needed.
But today, economists and policymakers are beginning to change their minds.
Most experts still think infrastructure spending is a slower way to put money in consumers' hands than simply mailing out government checks the way President Bush did over the summer. What's changed is that the economic crisis now looks to be so deep and likely to last so long that a stimulus plan that pumps out benefits for months and years seems to fit the situation -- with the added bonus of providing long-term benefits to the country.
"Now we're in a situation where it looks like we're going to be in a prolonged downturn, so speed is still relevant, but it's not the be-all end-all," said Douglas W. Elmendorf, a former economist for the Federal Reserve Board, the Treasury Department and the Clinton White House.
Elmendorf, now a senior fellow at the Brookings Institution, co-wrote a paper in January arguing against infrastructure spending because it was not fast-acting enough. "The concern at the time was that it would be a very sharp, short drop in economic activity, and we wanted to try to prevent that," he said recently.
Since then, the situation has changed, Elmendorf said -- becoming more dire.
Infrastructure spending, which is supported by President-elect Barack Obama, is expected to be a centerpiece of a $60-billion to $100-billion stimulus package Democrats may bring before Congress in a postelection session later this month.
Lawmakers are looking at a wide range of projects, such as building new roads and repairing old ones, improving airports, and constructing schools and sewage treatment plants. They also are considering making funding available to help transit agencies buy buses and rail cars.
The focus will be on job-producing projects that can get underway quickly.
In a new twist, Obama and congressional leaders have talked about ensuring that a good chunk of the infrastructure spending goes to "green jobs," providing funds for energy-efficiency projects, for example, promoting growth while reducing oil imports and greenhouse gas emissions.
Rep. James L. Oberstar (D-Minn.), chairman of the House Transportation and Infrastructure Committee, traces the history of infrastructure spending as economic stimulus to the massive public works programs launched by President Franklin D. Roosevelt in response to the Depression.
"From the Works Progress Administration of the Great Depression to the Accelerated Public Works Act of 1962 and the Local Public Works Capital Development and Investment Act of 1976, investment in public infrastructure has created and sustained jobs in difficult economic times," Oberstar said recently, "and it can do so again today."
Former Treasury Secretary Lawrence H. Summers, who is a possible Treasury secretary in an Obama administration, told a congressional committee that "properly designed infrastructure projects have the virtue of being helpful as short-run stimulus, especially for the employment of the workers most hard hit by the housing decline, while at the same time augmenting the economy's productive potential in the long run."
The liberal Economic Policy Institute estimated that $75 billion in infrastructure spending would create 1 million jobs.
Infrastructure spending creates "economic ripple effects across the entire economy -- for example, by providing more business for construction equipment manufacturers and the steelmakers that supply them -- and this money will quickly circulate back into the economy as workers spend their salaries, increasing overall demand for goods and services," the institute said in a recent paper.
Mark Zandi, chief economist of Moody's Economy.com, estimates that every dollar of infrastructure spending boosts the gross domestic product by $1.59.
Government and industry officials insist there are plenty of projects they can start quickly.
Jared Bernstein, a senior economist at the Economic Policy Institute, cited $100 billion in deferred maintenance and repairs at 16,000 public schools, involving such things as antiquated wiring and leaky plumbing. He said that most of the projects could be completed in 60 to 90 days.
In California, Department of Transportation Director Will Kempton said that the state has as much as $1 billion worth of transportation projects that could be undertaken within 180 days. Many of those could be launched within 90 days, he said.
"These projects are ready to go, and we don't have the money. So they're sitting in a queue, waiting for these dollars to become available," he said.
As a road to a better economy, an old idea gains ground
Often dismissed in favor of the quick-jolt stimulus, spending on bridges, streets and sewers is on the table again. Obama backs the public works idea, an echo of the FDR era.
By Richard Simon and Jim Puzzanghera
November 9, 2008
Reporting from Washington -- As recently as a few months ago, the idea of trying to bolster the troubled economy by pumping money into public works projects such as roads and bridges was dismissed as too slow -- not the quick pick-me-up that was needed.
But today, economists and policymakers are beginning to change their minds.
Most experts still think infrastructure spending is a slower way to put money in consumers' hands than simply mailing out government checks the way President Bush did over the summer. What's changed is that the economic crisis now looks to be so deep and likely to last so long that a stimulus plan that pumps out benefits for months and years seems to fit the situation -- with the added bonus of providing long-term benefits to the country.
"Now we're in a situation where it looks like we're going to be in a prolonged downturn, so speed is still relevant, but it's not the be-all end-all," said Douglas W. Elmendorf, a former economist for the Federal Reserve Board, the Treasury Department and the Clinton White House.
Elmendorf, now a senior fellow at the Brookings Institution, co-wrote a paper in January arguing against infrastructure spending because it was not fast-acting enough. "The concern at the time was that it would be a very sharp, short drop in economic activity, and we wanted to try to prevent that," he said recently.
Since then, the situation has changed, Elmendorf said -- becoming more dire.
Infrastructure spending, which is supported by President-elect Barack Obama, is expected to be a centerpiece of a $60-billion to $100-billion stimulus package Democrats may bring before Congress in a postelection session later this month.
Lawmakers are looking at a wide range of projects, such as building new roads and repairing old ones, improving airports, and constructing schools and sewage treatment plants. They also are considering making funding available to help transit agencies buy buses and rail cars.
The focus will be on job-producing projects that can get underway quickly.
In a new twist, Obama and congressional leaders have talked about ensuring that a good chunk of the infrastructure spending goes to "green jobs," providing funds for energy-efficiency projects, for example, promoting growth while reducing oil imports and greenhouse gas emissions.
Rep. James L. Oberstar (D-Minn.), chairman of the House Transportation and Infrastructure Committee, traces the history of infrastructure spending as economic stimulus to the massive public works programs launched by President Franklin D. Roosevelt in response to the Depression.
"From the Works Progress Administration of the Great Depression to the Accelerated Public Works Act of 1962 and the Local Public Works Capital Development and Investment Act of 1976, investment in public infrastructure has created and sustained jobs in difficult economic times," Oberstar said recently, "and it can do so again today."
Former Treasury Secretary Lawrence H. Summers, who is a possible Treasury secretary in an Obama administration, told a congressional committee that "properly designed infrastructure projects have the virtue of being helpful as short-run stimulus, especially for the employment of the workers most hard hit by the housing decline, while at the same time augmenting the economy's productive potential in the long run."
The liberal Economic Policy Institute estimated that $75 billion in infrastructure spending would create 1 million jobs.
Infrastructure spending creates "economic ripple effects across the entire economy -- for example, by providing more business for construction equipment manufacturers and the steelmakers that supply them -- and this money will quickly circulate back into the economy as workers spend their salaries, increasing overall demand for goods and services," the institute said in a recent paper.
Mark Zandi, chief economist of Moody's Economy.com, estimates that every dollar of infrastructure spending boosts the gross domestic product by $1.59.
Government and industry officials insist there are plenty of projects they can start quickly.
Jared Bernstein, a senior economist at the Economic Policy Institute, cited $100 billion in deferred maintenance and repairs at 16,000 public schools, involving such things as antiquated wiring and leaky plumbing. He said that most of the projects could be completed in 60 to 90 days.
In California, Department of Transportation Director Will Kempton said that the state has as much as $1 billion worth of transportation projects that could be undertaken within 180 days. Many of those could be launched within 90 days, he said.
"These projects are ready to go, and we don't have the money. So they're sitting in a queue, waiting for these dollars to become available," he said.
Last edited by John on Sun Nov 09, 2008 3:59 pm, edited 1 time in total.
Reason: Deleting ads.
Reason: Deleting ads.
Re: Financial topics
Dear Barry,
really love having them back.
part of the generational panic and crash.
rates -- indicates either inflation or deflation.
Sincerely,
John
You ought to write to them and see if they'll help you. You'llmannfm11 wrote: > John, I have been writing on deflation for awhile myself. I wish I
> could get all the stuff I have posted on Prudent Bear over the
> past 8 years, as I would like to see how accurate it has come out
> to be.
really love having them back.
This has been a great fear of policy-makers, and it's sure to be amannfm11 wrote: > I am getting a feeling there is about to be a run on the money
> market accounts
part of the generational panic and crash.
It's hard for me to see how this one indicator -- T-bond interestOldebare wrote: > In order to have a real understanding about whether inflation is
> rising or falling you have to have a very reliable long-term
> indicator. Thatindicator is the interest rate demanded by
> investors in one of thelargest markets on the face of the planet.
> That market is the USTreasury market , Which is 10 times the size
> of the stock markets andtherefore a very reliable indicator about
> what the majority ofinvestors, believe is really happening
> regarding rising or decliningrates of inflation in the future.
> Eight years ago the interestdemanded by investors buying the
> 30-year T-Bond was around 6.5%. Todayinvestors are demanding an
> interest payment of around 4.5%. Inpercentage terms that huge and
> it's a true indication about what the world believes is the real
> direction of inflation, which of course isdown. Eight years ago
> the interestdemanded by investors buying the 30-year T-Bond was
> around 6.5%. Todayinvestors are demanding an interest payment of
> around 4.5%. Inpercentage terms that huge and it's a true
> indication about what theworld believes is the real direction of
> inflation , Which of course is down.
rates -- indicates either inflation or deflation.
Sincerely,
John
Market Summary, Monday morning, November 10, 2008
-- Market Summary, Monday morning, November 10, 2008
Markets around the world are up sharply today, thanks to China's
announcement of a 4 trillion yuan stimulus package.
This equals around $570 billion, and it's absolutely gargantuan,
representing 18% of the country's annual GDP of $3.3 trillion.
By contrast, America's $700 billion bailout represents 5% of the
country's $14 trillion GDP.
increasingly in serious trouble.
** China's economy slowing down significantly
** http://www.generationaldynamics.com/cgi ... 02#e081102
But that's not all. There are bailouts a-plenty going on, as
the US government announced a new, improved $150 billion bailout of
just one company, American International Group (AIG).
http://www.bloomberg.com/apps/news?pid= ... refer=home
This is an increase over the $85 billion bailout announced just two
short months ago.
** The Fed will loan American International Group (AIG) an $85 billion bridge loan
** http://www.generationaldynamics.com/cgi ... 17#e080917
It just seems that $85 billion doesn't go very far these days.
John
Markets around the world are up sharply today, thanks to China's
announcement of a 4 trillion yuan stimulus package.
This equals around $570 billion, and it's absolutely gargantuan,
representing 18% of the country's annual GDP of $3.3 trillion.
By contrast, America's $700 billion bailout represents 5% of the
country's $14 trillion GDP.
This is a desperate move, in response to an economy that's> China said on Sunday it will loosen credit conditions, cut taxes
> and embark on a massive infrastructure spending program in a
> wide-ranging effort to offset adverse global economic conditions
> by boosting domestic demand.
> A stimulus package estimated at 4 trillion yuan (about 570
> billion U.S. dollars) will be spent over the next two years to
> finance programs in 10 major areas, such as low-income housing,
> rural infrastructure, water, electricity, transportation, the
> environment, technological innovation and rebuilding from several
> disasters, most notably the May 12 earthquake.
> http://english.gov.cn/2008-11/09/content_1143763.htm
increasingly in serious trouble.
** China's economy slowing down significantly
** http://www.generationaldynamics.com/cgi ... 02#e081102
But that's not all. There are bailouts a-plenty going on, as
the US government announced a new, improved $150 billion bailout of
just one company, American International Group (AIG).
http://www.bloomberg.com/apps/news?pid= ... refer=home
This is an increase over the $85 billion bailout announced just two
short months ago.
** The Fed will loan American International Group (AIG) an $85 billion bridge loan
** http://www.generationaldynamics.com/cgi ... 17#e080917
It just seems that $85 billion doesn't go very far these days.
John
Re: Financial topics
There may be some people interested in this. It's apparently open to
everybody:
everybody:
A message from Bob McCann, vice chairman and president of Merrill
Lynch Global Wealth Management:
REMINDER: Live Webcast Tonight, at 8 pm Eastern Time
Please join us for "Volatility, the Markets and You" tonight at
8:00 pm Eastern Time. I'll host a distinguished panel of CEOs,
investment strategists and business experts, who will share their
insights on the markets, the economy and what investors can do
going forward. We hope the program will help you better grasp and
deal with the market’s volatility—as well as prepare for the
recovery to come.
You can sign in at http://www.totalmerrill.com/event anytime after
7:00 pm tonight and submit questions for the panel before and
during the event. A password is not required to register - simply
your name, e-mail and zip code. The live Webcast will begin at
8:00 pm, with on-demand replays available on the site one hour
after the close of the program.
I encourage you to take advantage of this unique opportunity, and
talk with your financial advisor about the insights provided in
this Webcast.
Sincerely,
Bob McCann
Re: Financial topics
In other words, everybody who you DO NOT want to hear from.John wrote:There may be some people interested in this. It's apparently open to
everybody:
A message from Bob McCann, vice chairman and president of Merrill
Lynch Global Wealth Management:
REMINDER: Live Webcast Tonight, at 8 pm Eastern Time
Please join us for "Volatility, the Markets and You" tonight at
8:00 pm Eastern Time. I'll host a distinguished panel of CEOs,
investment strategists and business experts, who will share their
insights on the markets, the economy and what investors can do
going forward. We hope the program will help you better grasp and
deal with the market’s volatility—as well as prepare for the
recovery to come.
A different view on "China collapse"
Yesterday, China announced a US$586 billion stimulus plan.
That stimulus will be used mainly for infrastructure and social welfare.
Some of this big money (US$29 billion) will come from government borrowing.
It is not clear how much of that US$586 billion are new and additional spending on top of the existing pump priming already earmarked. Since this is just an announcement, the devil is still in the details.
The stock markets in Asia and Europe were ignited after the announcement. But the US stock markets did not share that enthusiasm. America does not have much to rejoice for. Why?
The reason is because China’s stimulus is hardly good news for America.
There are a couple of important differences between American and Chinese government spending:
1. So far, most of the billions of dollars of American government spending go to bailouts. Every dollar that is spent on bailouts and rescues will be a dollar not be spent on rebuilding and maintaining the existing decaying and aging infrastructures in the nation. For China, apart from social welfare and tax benefits, the money will be spent on building new infrastructure.
2. The US is already a colossally indebted nation. They have to borrow or print even more big money for non-productive purposes. China, on the other hand, is the world’s largest creditor nation. They can easily finance all the big money with cash (figuratively). All these big monies are spent on more productive purposes (definitely more productive than bailouts and rescues).
So, since the Chinese government is flushed with ‘cash,’ where is the ‘cash’ going to come from?
China’s trillions of US dollars reserve is a form of savings that will be used to acquire their future needs for resources to power their economy in the long term.
Most of China’s US dollar reserve exists in the form of US Treasuries.
Currently, the US Treasury bond market is the last bubble that is yet to burst.
Along with that, with the collapsing commodity prices over the past few months, every Chinese US dollar reserve is worth even more (i.e. every US dollar that China has can buy more commodities then before).
The implications for the US are grim:
1. The US government can forget about borrowing from China for their bailout and stimulus spending.
They have to either borrow from their private sector (which is in no mood to lend because it is drowning in US$41 trillion of debt itself) or print money.
2. China has to either sell down its hoard of US Treasuries or at least slow down its pace of accumulation considerably.
With the US consumers choking on too much debt, the leakage of US dollars to China (through the Current Account Deficit) will dry up. This means the back flow of US dollars back to the US via Treasury bonds purchases will dry up too. This means long-term interest rates in the US will have to rise. Since US mortgage rates are largely derived from long-term interest rates, this will mean trouble for US mortgage borrowers.
3. Chinese liquidation of US Treasuries is bad news for the US dollar.
In fact, without 'foreign central banks’ accumulation of US Treasuries, the US dollar would have collapsed long ago.
The question is, will China be able or willing to engineer an orderly liquidation of US Treasuries?
That stimulus will be used mainly for infrastructure and social welfare.
Some of this big money (US$29 billion) will come from government borrowing.
It is not clear how much of that US$586 billion are new and additional spending on top of the existing pump priming already earmarked. Since this is just an announcement, the devil is still in the details.
The stock markets in Asia and Europe were ignited after the announcement. But the US stock markets did not share that enthusiasm. America does not have much to rejoice for. Why?
The reason is because China’s stimulus is hardly good news for America.
There are a couple of important differences between American and Chinese government spending:
1. So far, most of the billions of dollars of American government spending go to bailouts. Every dollar that is spent on bailouts and rescues will be a dollar not be spent on rebuilding and maintaining the existing decaying and aging infrastructures in the nation. For China, apart from social welfare and tax benefits, the money will be spent on building new infrastructure.
2. The US is already a colossally indebted nation. They have to borrow or print even more big money for non-productive purposes. China, on the other hand, is the world’s largest creditor nation. They can easily finance all the big money with cash (figuratively). All these big monies are spent on more productive purposes (definitely more productive than bailouts and rescues).
So, since the Chinese government is flushed with ‘cash,’ where is the ‘cash’ going to come from?
China’s trillions of US dollars reserve is a form of savings that will be used to acquire their future needs for resources to power their economy in the long term.
Most of China’s US dollar reserve exists in the form of US Treasuries.
Currently, the US Treasury bond market is the last bubble that is yet to burst.
Along with that, with the collapsing commodity prices over the past few months, every Chinese US dollar reserve is worth even more (i.e. every US dollar that China has can buy more commodities then before).
The implications for the US are grim:
1. The US government can forget about borrowing from China for their bailout and stimulus spending.
They have to either borrow from their private sector (which is in no mood to lend because it is drowning in US$41 trillion of debt itself) or print money.
2. China has to either sell down its hoard of US Treasuries or at least slow down its pace of accumulation considerably.
With the US consumers choking on too much debt, the leakage of US dollars to China (through the Current Account Deficit) will dry up. This means the back flow of US dollars back to the US via Treasury bonds purchases will dry up too. This means long-term interest rates in the US will have to rise. Since US mortgage rates are largely derived from long-term interest rates, this will mean trouble for US mortgage borrowers.
3. Chinese liquidation of US Treasuries is bad news for the US dollar.
In fact, without 'foreign central banks’ accumulation of US Treasuries, the US dollar would have collapsed long ago.
The question is, will China be able or willing to engineer an orderly liquidation of US Treasuries?
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