Financial topics

[Higgenbotham]

I admit, I expected the collapse to begin this year, but it looks like I again underestimated how determined they are to go further into debt in order to kick the can.

I had also thought it would begin the first half of this year at the latest. I underestimated not only the determination of the authorities to kick the can (Germany in particular) but also the public's tolerance, especially the tolerance of the younger people around your age. Turned out Marc was right when he said the can would be kicked through most of this year.

[at99sy]

I admit, I expected the collapse to begin this year, but it looks like I again underestimated how determined they are to go further into debt in order to kick the can.

I had also thought it would begin the first half of this year at the latest. I underestimated not only the determination of the authorities to kick the can (Germany in particular) but also the public's tolerance, especially the tolerance of the younger people around your age. Turned out Marc was right when he said the can would be kicked through most of this year.

the collapse is not going to happen until after the election. I said that awhile ago. If Romney gets it, there will be an quick rebound in the business world and then the collapse will happen within 90 days of his inauguration after TPTB pull the rug out from under the new administration, and Romney will immediately get the blame. If it is Obama again then all bets are off. Either way wars are coming. Just a matter of who, when, and what is going to be the spark. The BS that Obama has pulled would have gotten him executed for treason as a soldier in WWII.

I see Obama attempting to disarm the public and using the public refusal as an excuse to declare a national emergency and martial law be attempted. His ambition is to drive us into the ground. The emperor has no clothes and even the blindest fools are beginning to recognize that, however the election is probably rigged and the outcome will to no benefit to the working people of this nation.

I have been getting prepared for whatever comes so that my family is protected. Plenty of food and places to "shop" nearby if need be and if the wrong people come down the road it will not be a picnic for them.

It's a damn shame the few fools who always end up in charge wreck it for millions.

On the bright side a massive hurricane/nor'easter is a coming at us.

Cheers!

sy

[Trevor]

I had also thought it would begin the first half of this year at the latest. I underestimated not only the determination of the authorities to kick the can (Germany in particular) but also the public's tolerance, especially the tolerance of the younger people around your age. Turned out Marc was right when he said the can would be kicked through most of this year.

Hopefully, he won't be too arrogant about it, LOL.

I think its more that the public isn't willing to assert itself in the same way. The European system and population is different than us. We're much more individual, even in recovery periods, than they tend to be. You've got plenty of riots in the countries that are falling apart and a lot of fury in countries like Germany, but they're used to being ignored. I noticed that in the last two years, most of the European countries just spiked up taxes without consulting the people; it's much harder to get away with that kind of crap here.

[Higgenbotham]

The US has had some good fortune in the past 18 months. The big quake and tsunami hit Japan; a lot of experts felt that the big one could have hit the US west coast. Europe fell apart before the US did this time around. In 2007/8, the US was the first bubble to start to unravel while Europe and Asia remained stronger. The US stock markets were the only major world stock markets to post new highs in the first half of 2012, and the S&P 500 is still above its 2011 high. To me, it's remarkable that no adverse event has happened in the US in 18 months except for the downgrade of US debt, but that really had no impact on behavior, as the debt ceiling was raised and deficit spending continued as usual. Heck, I can even remember an assassination attempt on Reagan during better times - now, nothing.

[Trevor]

The US has had some good fortune in the past 18 months. The big quake and tsunami hit Japan; a lot of experts felt that the big one could have hit the US west coast. Europe fell apart before the US did this time around. In 2007/8, the US was the first bubble to start to unravel while Europe and Asia remained stronger. The US stock markets were the only major world stock markets to post new highs in the first half of 2012, and the S&P 500 is still above its 2011 high. To me, it's remarkable that no adverse event has happened in the US in 18 months except for the downgrade of US debt, but that really had no impact on behavior, as the debt ceiling was raised and deficit spending continued as usual. Heck, I can even remember a couple assassination attempts on Reagan during better times - now, nothing.

I've talked to quite a few people about this and it seems that the fact that our economy actually is growing means that we can continue this degenerate behavior for as long as we want. "If anything happens, we can just print money and we'll be fine". In Europe, this attitude is mostly evaporated, even if they've had little luck getting the insanity under control.

This may be just my opinion, but we're the last domino. A couple have already fallen, more are close, we're near the last in line, but ultimately it'll hit us the same way it's hit everyone else. Our bond yields are currently at record lows for this reason, but instead of acting, our leaders use the opportunity to continue to rack up trillion dollar deficits.

[Higgenbotham]

This may be just my opinion, but we're the last domino. A couple have already fallen, more are close, we're near the last in line, but ultimately it'll hit us the same way it's hit everyone else. Our bond yields are currently at record lows for this reason, but instead of acting, our leaders use the opportunity to continue to rack up trillion dollar deficits.

This is also where I got it wrong. I thought once the larger dominos started falling it would go fast - that the crisis in Japan and now some of the larger countries in Europe would be enough to roll the world economy over by now. Turned out there was enough strength left that the US got some benefit.

Here's a quote from an old book on the Great Depression: "The 1930s were the only decade in this century when the British economy strikingly outperformed the American economy. By some measures, Great Britain grew more rapidly during the 1930s than in any other decade since the 1850s. As depression was settling over America, John Maynard Keynes, who was the economic philosopher of Britain's withdrawal as the world leader boasted, "England is really richer than she has ever been before..." '" The chapter is "America Follows in Britain's Footsteps". It shows a chart of British and American stock prices from 1929 to 1940. In the 1930s, British stock prices "recovered considerably above their 1929 highs, whereas American stock prices did not match the 1929 highs until 1954." The authors conclude, "We doubt that will happen. But it could. It may be that as a fading power, America is due for a milder depression than we expect."

[Trevor]

Here's a quote from an old book on the Great Depression: "The 1930s were the only decade in this century when the British economy strikingly outperformed the American economy. By some measures, Great Britain grew more rapidly during the 1930s than in any other decade since the 1850s. As depression was settling over America, John Maynard Keynes, who was the economic philosopher of Britain's withdrawal as the world leader boasted, "England is really richer than she has ever been before..." '" The chapter is "America Follows in Britain's Footsteps". It shows a chart of British and American stock prices from 1929 to 1940. In the 1930s, British stock prices "recovered considerably above their 1929 highs, whereas American stock prices did not match the 1929 highs until 1954." The authors conclude, "We doubt that will happen. But it could. It may be that as a fading power, America is due for a milder depression than we expect."

It could also be because their bubble was not as large as ours was. Germany was in the worst position in the 1930's, one of the big reasons Hitler came into power. Today, the countries with the largest bubbles have the worst economic situation, Spain being an excellent example of that. I believe they had the biggest housing bubble in Europe or at least one of the biggest.

Second, Britain was a debtor nation at the time, while we were the creditors. In terms of our financial relationship, that part of it has reversed itself.

[aedens]

David Rosenberg pointed out "In fact, netting out the government sector, real GDP came in at a 1.3% annual rate in the third quarter and on the same basis the pace was 1.4% in the second quarter. Perhaps not a recession in the private sector but whatever cushion there is, it is extremely thin. There is no margin for error here."
That is an extremely important point. With exports declining which is impacting corporate profit margins, employment conditions deteriorating, and business spending contracting - these are all the necessary ingredients to spin out a negative economic growth rate at some point in the not so distant future. For investors this is becoming a much more critical issue as stock prices have already begun to revalue future profit growth expectations. Our previous calls for a recession in early 2013 are beginning to look much more probable. ZH

Confirmation of the imbalances. The wasting theme from the macro parasitic implosion. I remember the Economic Hitman book and the actual response
in the States of the sickness of Apathy. After that I read Keys to this Blood and I knew it was rope burn for some and opportunity pillage for others.
Meanwhile in our corner we had brutal price to meet competion and the overall decadal implecation on moral and margin. The point was it had lasting implecation to few remember. Point blank is has not changed. This weather event upcoming has lasting impact so we can, or more see the Katrina effect or the actual America show up. I think the current inertia is more relalent than the secular minds wish to ponder. Culture change is not a rendition of effect but a state of mind. I feel key themes many have considered here are very relavent and accuarate. The fork in the road is here and the second and third quarters will be outlined as we already know. As we conveyed " Smell the Coffee Test ".

[John]

Dear Trevor,

> Second, Britain was a debtor nation at the time, while we were the
> creditors. In terms of our financial relationship, that part of it
> has reversed itself.

This gives rise to a very interesting speculation. Maybe Great
Britain did better during the 1930s because it was a debtor nation.

Suppose that the U.S. were a creditor nation today, rather than a
debtor nation. What would be the consequences?

The only thing holding back the government at all from even more
massive fiscal stimulus is the debt. If the U.S. were a creditor
nation, then this wouldn't be an issue, and there would be even more
fiscal stimulus, creating even larger bubbles and distortions. Maybe
that would make the outcome of the current crisis even worse.

On the other hand, the U.S. military is shutting down at a time when a
world war is approaching. China is a creditor nation, using fiscal
stimulus to keep social order, and to fund a massive military buildup.

[Reality Check]

Here's a quote from an old book on the Great Depression: "The 1930s were the only decade in this century when the British economy strikingly outperformed the American economy. By some measures, Great Britain grew more rapidly during the 1930s than in any other decade since the 1850s. As depression was settling over America, John Maynard Keynes, who was the economic philosopher of Britain's withdrawal as the world leader boasted, "England is really richer than she has ever been before..." '" The chapter is "America Follows in Britain's Footsteps". It shows a chart of British and American stock prices from 1929 to 1940. In the 1930s, British stock prices "recovered considerably above their 1929 highs, whereas American stock prices did not match the 1929 highs until 1954." The authors conclude, "We doubt that will happen. But it could. It may be that as a fading power, America is due for a milder depression than we expect."

One has to raise the question, by which realistic measures did Great Britain do better than the United States in the 1930s?

The Stock Market bubble in the United States, which reached a peak in the United States in 1929, was fueled by the same deposits in U.S. Commercial and Local Banks being used as collateral, by multiple parties ( the bankers and many depositors ) for the leveraged purchase of stocks on margin, as well as the same deposits being used as collateral multiple times for local loans made by the banks.

One could argue that using that U.S. stock market peak in 1929, as a reliable measure of economic strength in the United States in 1929 is simply a false indicator.

The government policies of Roosevelt in the 1930s resulted in that bubble being lanced when the bank holiday went into effect and the depositors in the banks ended up holding empty balloons, also known as there worthless bank records showing they had substantial monies deposited in banks, with said banks no longer legally existing. The Federal Reserve System survived, the United States government survived, the physical plant and the future operational capacity of the local banks survived under new ownership, but the deposits left with the previous owners of the banks had been transferred to some other party. Virtually everyone in the private economy relying on the fractional reserve banking system as the repository for their wealth, lost their wealth on the day Roosevelt implemented the bank holiday ( if they had not already lost it when individual banks had failed one by one before that day ).

The U.S. private economy did not begin to recover from this lancing of the debt bubble until emergency deficit spending on the U.S. build up for World War II began at the very end of the 1930s.

I am also not sure the stock market peak in the United States occurred in the same year as the stock market peaks in Europe.