Financial topics

[wvbill]

From a web site reader:

web site reader wrote:
> I have been reading the recent postings from StilesBC and Malleni
> regarding inflation vs deflation. Specifically StilesBC thinks
> that the Fed printing money will be ineffective due to the fact
> that money would not go into circulation because IF the government
> could manage to get a large enough quantity directly to the
> people, the people would use it to pay down debt or deposit it
> into their bank accounts. In this case I understand that it would
> not stimulate the economy (I think) and there would be a slim
> chance for inflation, but what if the government handed every
> family in the USA a prepaid credit card with $10,000. The card
> would have an expiration date of 3 months and no money could be
> withdrawn from the card, nor could the card be used to pay down
> old debt? In this preposterous hypothesis wouldn't inflation be
> possible?

I sure hope Bernenke doesn't read this...

Bill

[John]

> John, This recent rally looks very convincing. Do you now think we
> hit a bottom at 6500?

No, absolutely not.

John

[aedens]

From a web site reader:

In this preposterous hypothesis wouldn't inflation be
> possible?

It is characteristic of current political thinking to welcome every suggestion which aims at enlarging the influence of government. Inflation can be pursued only so long as the public still does not believe it will continue. Once the people generally realize that the inflation will be continued on and on and that the value of the monetary unit will decline more and more, then the fate of the money is sealed. Only the belief, that the inflation will come to a stop, maintains the value of the notes. If the practice persists of covering government deficits with the issue of notes, then the day will come without fail, sooner or later, when the monetary systems of those nations pursuing this course will break down completely. The purchasing power of the monetary unit will decline more and more, until finally it disappears completely. The most serious dangers for American freedom and the American way of life do not come from without. What is needed to prevent any further credit expansion is to place the banking business under the general rules of commercial and civil laws compelling every individual and firm to fulfill all obligations in full compliance with the terms of the contract. If you have to convince a group of people who are not directly dependent on a solution of a problem, you will never succeed. Only to bureaucrats can the idea occur that establishing new offices, promulgating new decrees, and increasing the number of government employees alone can be described as positive and beneficial measures. The issue is always the same: the government or the market. There is no third solution. As a result, while attempts to clean up and recapitalize the US and European financial systems make sense, and are needed to support any eventual recovery, this will not immediately stop the process of financial contraction and economic decline. Fiscal stimulus similarly can soften the blow of the recession but will not directly address the underlying problems, and many countries are constrained by high debt levels.

[freddyv]

web site reader wrote:
>but what if the government handed every
> family in the USA a prepaid credit card with $10,000. The card
> would have an expiration date of 3 months and no money could be
> withdrawn from the card, nor could the card be used to pay down
> old debt? In this preposterous hypothesis wouldn't inflation be
> possible?

I had it figured at $5,000 for 200,000,000 taxpayers = $1 Trillion

...but what's an extra trillion these days?

I think a better way would be to allow the taxpayer to pay off debt or bills or whatever and then you would almost instantly have a very much more healthy taxpayer, an energized economy and we would have only spent $2 trillion rather than whatever we have already thrown into the black hole. But it's too late now.

Would it be inflationary? I think that it would be easier to balance out deflation with this method because there seem to be no unintended consequences (other than people expecting government to give them five or ten thousand dollars every year) but either way we would end up with lots of taxes to pay in coming years but at least those taxes would have gone to us instead of to the idiots who caused all this.

--Fred

[freddyv]

Freddy,
I can agree just partly with your logic.
Namely - that Shiff until now did not predict things "perfectly", i.e. exactly in time perspective.

But - if we taking a short look on the GFC until now - how long it lasted jet?.... 14-15 months....
How long (at least) many of the pundits predict it will last?... At least 3-5 year (some of them predicting even 20 years!)
With other words - we are at the beginning of the crises!

It is really difficult to me to understand this kind of reaction: "... He got most of the basics right and then he failed to predict the correct outcome..."

Who did it?

I meant he didn't come up with the proper way to trade this fiasco, which, obviously (to me at least) was to short the market or at least be out of it.

So the answer is me, I did. I got it right and I am not alone. But I didn't figure out what was going on by myself as Mr. Schiff did and he deserves a lot of credit for that. All I did was apply the simplest of solutions, I went to the bottleneck (the stock market) and shorted. I think that that is where many very brilliant people go wrong, they make it too complex or are too wrapped up in what might possibly happen rather than what will happen: economy stinks = stocks go lower

--Fred

[wvbill]

> John, This recent rally looks very convincing. Do you now think we
> hit a bottom at 6500?

No, absolutely not.

John

Sharp rallies are very common in Bear markets. From my point of view DOW 8,000 is now the resistance. If Dow breaks through 8,000 and then establishes a new low above 8,000 we could see a sustained intermediate term rally. But, I agree with John and others here--the long term is down--and, the second leg down, to come, should be spectacular.

Bill

[aedens]

> John, This recent rally looks very convincing. Do you now think we
> hit a bottom at 6500?

No, absolutely not.

John

Sharp rallies are very common in Bear markets. From my point of view DOW 8,000 is now the resistance. If Dow breaks through 8,000 and then establishes a new low above 8,000 we could see a sustained intermediate term rally. But, I agree with John and others here--the long term is down--and, the second leg down, to come, should be spectacular.

Bill

Monetae cudendae ratio
Failure to clarify by the Democrats own liberal agenda which is fact, and the bloggers dangerous ability to see ahead of the curve in my opinion to date.

Stated was bend the curve:

Goal: Regulatory Process
No Global currency as such:
Stiff Conditions:
Long term growth:
Derivatives are insurance contracts OTC so what is A. Taxpayer regard’s to currency puts.

And given that I respect the office of the President we looked to reason:

http://generationaldynamics.com/forum/v ... dens#p1922

By spring Obama's campaign promises will not produce miracles. He also cited the "vulnerable political set up," "lack of unified laws," and "divisions among the elite," which becomes clear in these crisis conditions.

Benjamin Disraeli, then a young novelist,
If you establish a democracy, you must in due time reap the fruits of democracy. You will in due season have great impatience of the public burdens, combined in due season with great increase of public expenditure. You will in due season have wars entered into from passion and not from reason; and you will in due season submit to peace ignominiously sought and ignominiously obtained, which will diminish your authority and perhaps endanger your independence.

[JimZ]

aedens,

That chart (projections out through 2080) is pretty amazing. Can you tell me where you got it and how I can get a copy?

[John]

Dear Jim,

> That chart (projections out through 2080) is pretty amazing. Can
> you tell me where you got it and how I can get a copy?

See also the following chart from Calculated Risk that I posted in
2005:



(Income vs Outlay as %-age of GDP for Federal Government,
1971-2005, not including Social Security
http://calculatedrisk.blogspot.com/2005 ... ficit.html)

** Alan Greenspan blames the Republicans for the financial crisis
** http://www.generationaldynamics.com/cgi ... 16#e070916

This graph shows that the huge deficit, which was supposedly caused
by the Iraq war, actually began in 2000, the last year of the Clinton
administration, with the dot-com crash. The outlays caused by the
Iraq war were not particularly large by the standards of the
preceding three decades. What mattered was the collapse of tax
revenues.

In fact, tax revenues depend on the state of the economy, and have
almost nothing to do with anything else. Tax revenues went up in
2006 because of the credit bubble, and this year they're going to
crash dramatically, because corporate earnings, and the economy in
general, are crashing.

So when I see a graph that estimates tax revenues out to 2080, I have
to wonder if it was produced by a monkey at a typewriter.

Also, one of the major assumptions in Obama's budget is that the
economy will rebound and tax revenues will increase. That's one more
reason why Washington's budget plans are a frigging disaster.

Sincerely,

John

[umoguy]

I make my living trading, and this site has been invaluable over the past year. However I am certainly having an off month with the market moving against several of my long term short positions. My biggest problem is that I am short several of the home builders who have been running up over the past week or so, on better than expected home sales, and a general move in the markets. I know there is still a huge inventory overhang, and that large home builders should be going bankrupt at some point as this depression drags on and people don't buy new McMansions with sub prime loans.

It is also hard to fight the fed with Timmy G. coming on over the weekend and offering to put all the bank losses on the Taxpayer's tab. It seems that in the short term the deck has been stacked against those who take a realistic view of what it is really going to take to recover from this downturn...time..... and hardship. The more we put off taking our medicine, the worse it is going to taste. My largest short holding, LENNAR corporation, has earnings on Friday, they should be terrible, but I have a feeling they will pad the numbers as best they can to stave off the inevitable rumors of bankruptcy that swirl around this overextend homebuilder. Any thoughts on where the market will be over the next few weeks? I know generational Dynamics is a longer term theory, but I like to put it's conclusions to practical use.