Financial topics

[Higgenbotham]

In the 1930s there were large daily ranges as the market trended down by large amounts; now there are large daily ranges where the market on net is doing almost nothing. Therefore, the volatility today relative to the trend is larger, meaning there is a lot of noise and disorder in the system.

[OLD1953]

You have to keep the computer traders in mind. They aren't programmed to panic, they always assume a 10% price drop means stocks are bargains. As soon as that first shred of technical support appears, they start pushing the market back up. This is pretty much the way market manipulation worked in the 20's. The markets won't break until the sovereign debt market breaks, this time. Really, the markets were in recovery mode in the 30's until the bank failures.

The main reason why I don't think the FED can drive inflation now has already been given. Neither the FED nor the Treasury can create money in those amounts. You would have to have banks that felt secure in making higher risk loans. They don't feel like that now, and won't for years to come. And it simply does not matter how much the FED offers, at what interest rate, they still have to pay it back. They aren't making those loans. Therefore, the money needed for hyperinflation is not forthcoming.

[vincecate]

They aren't making those loans. Therefore, the money needed for hyperinflation is not forthcoming.

I don't think any hyperinflation has been caused by bank loans. It comes from government debt over 80% of GNP and deficits over 40% of spending. As people try to get out of the no longer safe bonds (due to inflation and money printing) the central bank has to print more money so the government can keep operating. Nothing to do with private loans. It is the $15 trillion in govenment debt that is the danger. If people don't want to roll over bonds then either the government will have to cut expendetures in half or the central bank will print like crazy (doubling the taxes has no chance of working). If you look at the historical odds, printing is a rather safe bet.

[Higgenbotham]

New Year's party in Las Vegas may attract a record 314,000
By Richard Lake
LAS VEGAS REVIEW-JOURNAL
Posted: Dec. 29, 2011 | 4:50 p.m.
Let us recap what is known so far about New Year's Eve in Las Vegas this year:

■ It will happen on a Saturday night.

■ The weather will be perfect.

■ The economy is picking up, albeit slowly.

■ The fireworks show will be huge.

What's all this mean?

It means that the authorities think this will be the biggest New Year's Eve ever here. They're expecting 314,000 people to stop by for a visit. That makes it the nation's second-largest New Year's Eve party.

Today Could Bring More Big Crowds To Theme Parks
Parkgoers Met With Hours-Long Lines
POSTED: 7:15 am EST December 30, 2011

ORLANDO, Fla. -- Another busy day is expected at Walt Disney World and Universal Orlando -- 'tis the season for huge crowds at local theme parks.

On Thursday, Universal Orlando Resort's Islands of Adventure closed its gates to incoming guests due to reaching capacity just before noon; the second day in a row the park filled up.

Read more: http://www.wesh.com/themeparks/30102221 ... z1i2l3otXw

I recently heard about a guy who will lose his 6 figure job at an electronics company next year. He is taking the wife and 3 kids on vacation over the Christmas holiday. He thought he would get another job within the company but "there aren't any jobs he wants." I asked whether he thought it would be easy to find a similar job at another company. He's not worried. I said keep me posted and let me know how it goes. The job search starts after the New Year. Some offered the opinion that he is in for a rude awakening. Someone asked me why the hell someone who is losing his job would be blowing money on a vacation. I basically said the majority of the country is in denial but let's see how the job search goes.

[John]

I heard an analyst on BBTV yesterday say that he expects the S&P 500
to exceed 1400 in 2012. He says most of the gain will be in the "back
end," the last half of the year, since by that time Europe and
Congress will have solved all their problems, and things will be back
to normal.

[John]

Just to be clear, when I talk about a global financial crisis and a
huge deflationary spiral, I'm talking about the generational crisis
era that began in 2000 and will end with the climax of the Clash of
Generations war. I am not talking about the first turning Recovery
era that will follow the war, when hyperinflation is a possibility.

As far as I know, no major economy, whether creditor or debtor nation,
experienced hyperinflation during the period 1929-1945, the equivalent
previous period. Some of them experienced great inflation after
1945.

It makes no difference today whether you're a creditor or debtor
nation, since all debts will be repudiated for the duration of the
war, just as they were repudiated during WW II. For example, when the
U.S. is at war with China, then China will not be lending money to the
U.S., and the U.S. will not be repaying previous debts to China.

During the war, imports and exports will be pretty much at an end,
except for weaponry to allies. Each economy will have to depend on
its own resources, as it will be neither borrowing nor lending nor
repaying money, nor being repaid.

After the war ends, it's possible that some of the debts may
be reinstated by whatever peace councils follow the war. In
that case, high inflation is a possibility.

John

[Higgenbotham]

I should mention that the above stories about Las Vegas and Disney are, I believe, examples of noise, disorder, or "false signalling" in the economy, as I'm guessing that many of those visitors really can't afford to be there. But the businesses will have no choice but to take the crowd numbers at face value and behave accordingly. This is a possible example of how false signalling in the stock market is carrying over into the real economy.

Another example would be the recent rise in multi-family housing starts. The fact of the matter is that there is a housing glut but, by failing to allow free market mechanisms to clear the market and reduce home values to their proper level, noise, disorder, or "false signalling" is taking place.

[shoshin]

John, isn't it only the losers who have to repay their debts? If China "loses the war," we won't pay them anything. However, if we lose...

[vincecate]

As far as I know, no major economy, whether creditor or debtor nation,
experienced hyperinflation during the period 1929-1945, the equivalent
previous period. Some of them experienced great inflation after
1945.

In 1929 most of the world was on a gold standard. It seems to be impossible to get to debt at 80% of GNP and deficit of 40% of spending while on a gold standard. You just can't spend twice what you get in taxes with a gold standard, you need to be able to print money to swing that. And in general hyperinflation is something for fiat currencies, not gold standard. Some people count Rome's devaluing of their coins as hyperinflation but it was rather different than paper money hyperinflation. I can't think of any other thing close to hyperinflation under gold or silver standard. Even though many countries went off the gold standard in the 1930s it still takes awhile to get to these 80% and 40% situations.

[John]

Here's some text from a lengthy Spiegel article today on
the eurozone crisis:

Delusions of the Euro Zone
The Lies that Europe's Politicians Tell Themselves

How much does time cost? That depends what you need it for. The time
that Europe's leaders want to buy to tackle the euro crisis is a
precious commodity. And its price keeps going up and up.

Initially, it was supposed to cost €110 billion ($130 billion). That's
how expensive the first EU bailout package for Greece was. Soon, it
was expanded via a comprehensive rescue fund that helped out Portugal
and Ireland. Then came a second bailout package for Greece, followed
by an even more comprehensive rescue fund for the rest.

In late September 2011, representatives in Germany's parliament, the
Bundestag, had not yet voted on this expanded package -- which would
put Germany alone on the hook for €211 billion -- but it was already
clear to them that even that wouldn't be enough. But nobody could say
that out loud, and especially not Finance Minister Wolfgang Schäuble,
because they obviously didn't want to endanger the government's
majority in parliament -- and, thereby, its own ability to govern.

On top of that, the European Central Bank (ECB) is buying up sovereign
bonds of debt-ridden euro-zone countries. At first, it was Greece,
Portugal and Ireland. Then, beginning in the summer of 2011, it bought
bonds from Italy and Spain. It now has a grand total of over €195
billion of bonds on its books. If things should go south, Germany will
also ultimately be responsible for 27 percent of that figure,
corresponding to Germany's share of the ECB's capital.


http://www.spiegel.de/international/eur ... 69,00.html