10-Dec-10 News -- Personal conflicts poison Europe

[vincecate]

I don't think you can from the graph alone. The slope of the uptrend line is 2.0% per year. My opinion is that represents an approximate real growth rate (plus the annual growth in above ground gold supply of approximately 1% per year). Along with the graph, it would be necessary to have an opinion on whether or not the growth rate can be maintained. If it can be maintained, then stocks and real estate should be the better buy. My guess is the real growth rate will (probably already has since 2007) flatten to zero. If so, stocks will undergo a tremendous repricing at some point. But if the economy can return to 3% long term real growth, then all bets are off. I think that's the really critical question right now. Until it's resolved, these huge 20% or even greater short term swings in stocks can probably continue. Bernanke wants to keep the stock market propped until they can get some growth. The propaganda machine is out in full force, maybe unconsciously, realizing how critical this is.

I think much of the US economy in the last 10 years has come from printing money that the world accepts. And the ability to print the main world money means that unemployed people in the US are much better paid than the average Chinese, which means jobs move out of the US. The US can print up some pieces of paper (or add something to an account on a computer) and get a real oil tanker full of real oil. This is too good to be true forever. When the world no longer trades US dollars imagineered out of thin air for real things, the US is going to be on hard times. There is enough grumbling about the rate of US money creation, and enough movement to get away from the dollar, that I think the end is near. I think less than 2 years.

Here is another stock market vs gold graph that is interesting:
http://2.bp.blogspot.com/_m5i6pLhlNWU/T ... IGOLDR.JPG

[Higgenbotham]

I see the financial problems, the money problems, as being an effect, not a cause. It's still mostly an industrial economy. Energy is used to produce materials and output and for transport. There is some efficiency improvement and some information economy, but that's not enough to hold everything together. US companies like Apple are creating a lot of cutting edge products and doing real well, but that's not most of the economy.

World oil production is flat to slightly up since 2005. Once it turned flatter the world economy fell apart with a time delay. And production isn't the whole story because extraction of the oil takes more and more energy, capital and equipment (is less efficient) as time goes on. A new monetary order doesn't solve the problem if it's growth dependent unless more energy growth can be attained or the economy fundamentally changes to something other than industrial, but how? I think Livermore or whatever government lab that is working on fusion has said they are going to be able to get that to work within months. The rollout would take at least a decade, I would think.

One of the strange things about our economy that I wonder about is as autos and homes become smaller and more energy efficient out of necessity, they use less materials up and down the line, which reduces GDP. In other words, if GM sells small fuel efficient cars instead of SUVs they go bankrupt and the oil companies don't make as much money either.

So it's like the economy needs to be wasting resources to stay afloat, but there is no more to waste.

Going back to 2008 and looking at things as they are now, I couldn't see then and can't see now how monetary policy solves anything. It seems that the fundamental problem is exactly as it was in 2008 except asset prices and the oil price is at a lower peak.