Financial topics

[Trevor]

we're not going to be able to sustain this level of debt. Europe should give us a clue to that, but it hasn't. I'm expecting a Greek default in 2012 and possibly other countries, in addition to China's economy taking a major contraction.

[aedens]

We've actually had considerably less inflation than I expected, especially compared to the 1970's. It's only been about three percent or something like that.

We did not break the buck, they did. As we mentioned before the nature of NAFTA was indeed only to the scope of assisting economies leaning left in there bent of mind. It is only a process of its own nature.

[Higgenbotham]

I would think of steady inflation or inflation targeting as determining the force of the money flow required to sustain a steady rate of debt increase. With an unsustainable debt, the force required is eventually large enough to set up destabilizing feedback loops that can only be dampened by a collapse of the debt load.

Disposable personal income:
Per capita:
Chained (2005) dollars...............
Apr 11 May 11 Jun 11 Jul 11\r\ Aug 11\r\ Sep 11\r\ Oct 11\r\ Nov 11\p\
32,591 32,539 32,579 32,456 32,318 32,277 32,349 32,326
Personal saving as a percentage of
disposable personal income..............
4.8 4.7 5.0 4.3 4.1 3.5 3.6 3.5

Disposable personal income:
Per capita:
Chained (2005) dollars...............
2009 2010 II 10 III 10 IV 10 I 11 II 11 III 11\r\
32,141 32,446 32,473 32,581 32,628 32,670 32,570 32,350
Personal saving as a percentage of
disposable personal income..............
5.1 5.3 5.6 5.6 5.2 5.0 4.8 3.9

http://www.bea.gov/newsreleases/nationa ... pi1111.txt

More evidence of false signalling.

Note the 32,591 and 32,326 numbers. As incomes fell 0.8%, savings rates fell 1.3%. EIther these numbers are screwed up or people spent more as their incomes fell. Note the 32,473 and 32,350 numbers. Those nearly identical incomes correspond to savings rates of 5.6% and 3.9% respectively.

http://research.stlouisfed.org/fred2/gr ... d]=PSAVERT

Cut and paste.

Looks like Third Turning behavior to me.

[John]

The Sunday morning news talk shows are focusing on the circus
atmosphere of the Iowa election, and particularly the fact that one
candidate after another goes from the bottom of the polls to the top
of the polls, and back down again, so that there's been a different
leader every week.

I would relate this "political volatility" to the volatility in the
stock market, and even to the volatility in euroland. People are
anxious and desperate, grasping at each new solution, and then
abandoning it when they realize that it won't work.

The ultimate in volatility will be total panic, when people realize
that nothing will work, and each person then is out for himself.

John

[Higgenbotham]

Interesting observation, John.

It appears that WWII may have been the event that boosted savings rates. If China attacks Taiwan and we see a similar reaction, the debt load, which is several times higher than it was in 1940, will be immediately impossible to sustain. Therefore, such an event, though perhaps not obvious to the majority, could lead to a collapse in the stock market. The majority will think back to Desert Storm and how that turned stock prices higher.

http://www.depositaccounts.com/content/ ... 40_dow.jpg



http://www.npr.org/news/graphics/2009/m ... g_rate.gif

[Higgenbotham]

http://www.taipeitimes.com/News/front/a ... 2003503184

A US military expert said China may be trying to take over Taiwan by using a strategy of “economic entanglement.”

Barry Watts, a senior fellow with the Washington-based Center for Strategic and Budgetary Assessments, told a US congressional commission this week: “Why use military force if economic entanglement leading to economic capture is succeeding?”

In testimony before the US-China Economic and Security Review Commission, Watts said that the most common scenarios for a conflict between the US and China were built around a Chinese attempt to invade Taiwan.

“The first point to be made about the likelihood of such an attempt is that China has been fairly successful in pursuing the economic entanglement of Taiwan,” he said.

Watts, who was testifying on China’s military space program, said that he had discussed the possibility of a Chinese attack on Taiwan with senior Taiwanese national security officials in Taipei.

“What struck me during that trip was the growing migration of Taiwan’s advanced technologies and businesses to mainland China, lured by such incentives as lower labor costs,” Watts said.

“Since then, the indications are that the gradual economic entanglement of Taiwan has continued, and that it is leading — in the long run — to Taiwan’s eventual economic capture by the People’s Republic of China [PRC],” he said. “If this assessment is correct, then the chances of the PRC initiating a military takeover of Taiwan in 2012 or even 2020 appear to be quite low. Note, too, that this approach embodies Sun Tzu’s (孫子) dictum that the acme of strategy is to subdue the enemy without fighting.”

This is what I see happening, which is basically what I said to Lily when we were discussing China in March, a couple months before this article was published (same idea applies to the US in terms of economic entanglement).

However, the evidence also exists that points to the advantage China could gain by a surprise military attack on Taiwan, much of this advantage in my humble opinion being gained through the horrible blunders of US (and world) economic policy that have become evident since March. I now believe more likely than not that Lily was right.

An Obama Presidency promises to be both exciting and scary. It'll be fun to watch, except for the disasters.

http://www.generationaldynamics.com/cgi ... gd.e081104

[Higgenbotham]

I would think of steady inflation or inflation targeting as determining the force of the money flow required to sustain a steady rate of debt increase. With an unsustainable debt, the force required is eventually large enough to set up destabilizing feedback loops that can only be dampened by a collapse of the debt load.

Further explanation on the steady rate of debt increase. Steady as she goes for now (year over year percent change) since early 2011 is at 1.5 percent per annum. But note "steady as she goes" here seems to correlate with volatility in other places, perhaps the price that is being paid for steady debt growth.

http://research.stlouisfed.org/fred2/gr ... nge]=10yrs

Cut and paste.

I'm sure I don't see the total picture.

[John]

An Obama Presidency promises to be both exciting
and scary. It'll be fun to watch, except for the disasters.

http://www.generationaldynamics.com/cgi ... gd.e081104

You dog, you.

I'd forgotten I wrote that.

I keep debating with myself who, among the current crop of prominent
politicians, would be the best person to lead the nation through the
coming war and financial crises.

Obama is willing to screw anyone in sight, forget any promise, and
violate any law or the constitution to get done anything he wants
done, even though most of his policies are borne out of hatred for
Boomers. However, those may be the best traits to lead the nation,
since he'll certainly transform his hatred for Boomers into hatred for
the enemy.

Hillary Clinton knows a lot more about what's going on in the world
than Obama does, and she has the advantage of having her violent
serial rapist husband as a partner, who will certainly be an asset to
her. Once again, the hate-filled desire for vengeance may be an asset
in a time of total war.

I feel an affinity to Newt Gingrich because he also makes statements
that are obviously true, but politically incorrect. I remember when
he said something like, "We're not going to deport millions of illegal
aliens who have been here for 10-20 years, and have established lives
here." That's certainly true, no matter what you think of the illegal
immigrant debate, but saying something truthful does not get you votes
these days.

Ron Paul is a total fruitcake.

Mitt Romney and Jon Huntsman both seem to be good solid managers,
which should be a good thing when leading the nation into war. Of the
two, I would give a preference to Huntsman because I believe that he's
aware that we're headed to war with China, and would be more likely to
prepare.

I don't really have solid feelings about the other candidates. The
most vomit-worthy moment was when Herman Cain had no idea what to say
about Libya, even though we've been involved in a war there for a
year. I'm really glad he's gone.

John

[Higgenbotham]

An Obama Presidency promises to be both exciting
and scary. It'll be fun to watch, except for the disasters.

http://www.generationaldynamics.com/cgi ... gd.e081104

I'd forgotten I wrote that.

Maybe I wasn't clear enough but it's my thought that with this presidency 3/4 over we are now going to see the disasaters unfold.

[Higgenbotham]

Marc Faber recognizes the volatility and its root cause too. The employment stats were obviously transcribed incorrectly. Down at the bottom, he throws out some stats on record stock market volatility that I wasn't aware of.

Dr. Marc Faber: Actually Jim, before we move to that, I just want to give you some statistics. When Mr. Bernanke became Fed Chairman, oil was at $58 a barrel. It is now over $100. The S&P was at 1264, it is now at about the same level. Gold was at $480, it is now $1,700 and something. And the civilian employed in 2000 were 220,000,000 and then now 130,000,000. The unemployment rate was 4%, it is now 8.6%. Unemployment among teenagers was 12%, it is now 24%. The average duration of unemployment was at the time 15 weeks, it is now 40 weeks. What a great job the Fed’s Chairman has done.

Jim Puplava: Hmm, I guess money printing does not buy as much as it used to.

Dr. Marc Faber: China, coming back to China, I am not saying that it is necessarily his fault that this has happened but then you should not claim that with monetary policies, you can influence economic expansions and avoid recessions. In other words, what’s the case he’s always maintained: through our interventions, we can smoothen out the business cycle. But actually if you look at the record, you have higher booms and busts and you have higher financial volatility. This year we never, ever had before a year when you had so many nine to one advance days and nine to one decline days. In other words, volatility has been incredibly high the end result is that the S&P is basically unchanged. I mean I just argue the best is not to intervene into a free market. One intervention leads to another one. And at the end, you have a socially communist system like we had in the Soviet Union and in China. And we all know what the economic results were of those experiences.

http://www.financialsense.com/contribut ... transcript