Thursday, December 25, 2008
Wednesday, December 24, 2008
New Open Forum
Feel free to post up your links, comments, hold a discussion etc.
After todays rate cut, I couldn't help but to post this great cartoon.
With ZIRP now in place, Debt Monetization is all that is left in the Fed's "Bag-o-tricks"... See link for more On ZIRP - Our Future
.
After todays rate cut, I couldn't help but to post this great cartoon.
With ZIRP now in place, Debt Monetization is all that is left in the Fed's "Bag-o-tricks"... See link for more On ZIRP - Our Future
.
U.S. debt approaches insolvency
From AsiaNews - Snippets Below
In the United States, the danger of debt insolvency is growing, putting at risk the currency reserves of foreign countries, China chief among them. According to new figures published by Bloomberg in recent days.
The American government has employed a total of 8.549 trillion dollars to stop the financial crisis. This means a total of about 24-25.4 trillion dollars of direct or indirect public debt weighing on American taxpayers.
In 2007, public debt in the United States was 10.6 trillion dollars, compared to a GDP of 13.811 trillion dollars. Public debt in 2007 was therefore 76.75% of GDP. In just one year, direct and indirect public debt have grown to more than 100% of GDP, reaching 176.9% to 184.2%. These percentages exclude the debt guaranteed by policies underwritten by AIG, also nationalized, and liabilities for health spending (Medicaid and Medicare) and pensions (Social Security).
In 2007, 61.82% of America's public debt was held by foreign investors, most of them Asian. So the U.S. public debt held by nonresident foreigners is equal to about 109.39% (113.86%) of GDP.
In the early months of next year, when the official data are published, the United States will run a serious risk of insolvency. This would involve, in the first place, a valuation crisis for the dollar.
After this, the United States could face a social crisis like that in Argentina in 2001. A crisis in U.S. public debt would likely have a severe impact on the Asian countries that are the main exporters to the United States, China first among them.
LINK: U.S. debt approaches insolvency; Chinese currency reserves at risk
In the United States, the danger of debt insolvency is growing, putting at risk the currency reserves of foreign countries, China chief among them. According to new figures published by Bloomberg in recent days.
The American government has employed a total of 8.549 trillion dollars to stop the financial crisis. This means a total of about 24-25.4 trillion dollars of direct or indirect public debt weighing on American taxpayers.
In 2007, public debt in the United States was 10.6 trillion dollars, compared to a GDP of 13.811 trillion dollars. Public debt in 2007 was therefore 76.75% of GDP. In just one year, direct and indirect public debt have grown to more than 100% of GDP, reaching 176.9% to 184.2%. These percentages exclude the debt guaranteed by policies underwritten by AIG, also nationalized, and liabilities for health spending (Medicaid and Medicare) and pensions (Social Security).
In 2007, 61.82% of America's public debt was held by foreign investors, most of them Asian. So the U.S. public debt held by nonresident foreigners is equal to about 109.39% (113.86%) of GDP.
In the early months of next year, when the official data are published, the United States will run a serious risk of insolvency. This would involve, in the first place, a valuation crisis for the dollar.
After this, the United States could face a social crisis like that in Argentina in 2001. A crisis in U.S. public debt would likely have a severe impact on the Asian countries that are the main exporters to the United States, China first among them.
LINK: U.S. debt approaches insolvency; Chinese currency reserves at risk
Marc Faber: 2009 to Be `Catastrophic' for Global Economy
Excellent interview where Farber illustrates his firm grasp of the dire economic situation we're in. First 4 minutes of the first video provides the best Macro-economic perspective, followed by a discussion of individual sectors, countries, etc in the later segments.
Part 1
Part 2
Part 1
Part 2
Tuesday, December 23, 2008
Articles of interest
Returned home late tonight and don't have much time to post, but would like to share a couple of links with you... Feel free to just scan through the lower ones, but I highly suggest you read the entire Karl Denninger post (1st below).
1) Karl Denninger Must Read: To Our Government: You Must Act Now please be sure to read the article at the embedded link internal to Karl's post
2) When will the government's long and costly bailout of the deeply distressed insurance giant AIG be over? Don't expect it to be anytime soon. - AIG's rescue has a long way to go
3) Even a federal bailout could not save three of the last remaining plants in the United States still making sport utility vehicles - It’s the End of the Line for S.U.V.’s
4) Home sales declined dramatically last month and housing prices posted their sharpest decline in four decades as a rapidly slowing economy discouraged many potential buyers from tip-toeing into the market - November Home Sales Fell Faster Than Expected
5) The US economy shrank in the third quarter, official data confirmed Tuesday, as the IMF's top economist warned of a second Great Depression offering no respite from relentless gloom ahead of Christmas - US economy shrinks as IMF warns of Great Depression
6) Dour data expected on Christmas Eve dampens the holiday spirit. U.S. economic reports are likely to be downbeat tomorrow, with data on durable goods (fall of 3% expected) and weekly unemployment claims of 558,000expected - Santa Likely To Skip Wall Street
In closing, allow me to share with you a very old, yet quite fitting quote for today's economy:
The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance. -- Cicero , 55 BC
Regards
Randy
1) Karl Denninger Must Read: To Our Government: You Must Act Now please be sure to read the article at the embedded link internal to Karl's post
2) When will the government's long and costly bailout of the deeply distressed insurance giant AIG be over? Don't expect it to be anytime soon. - AIG's rescue has a long way to go
3) Even a federal bailout could not save three of the last remaining plants in the United States still making sport utility vehicles - It’s the End of the Line for S.U.V.’s
4) Home sales declined dramatically last month and housing prices posted their sharpest decline in four decades as a rapidly slowing economy discouraged many potential buyers from tip-toeing into the market - November Home Sales Fell Faster Than Expected
5) The US economy shrank in the third quarter, official data confirmed Tuesday, as the IMF's top economist warned of a second Great Depression offering no respite from relentless gloom ahead of Christmas - US economy shrinks as IMF warns of Great Depression
6) Dour data expected on Christmas Eve dampens the holiday spirit. U.S. economic reports are likely to be downbeat tomorrow, with data on durable goods (fall of 3% expected) and weekly unemployment claims of 558,000expected - Santa Likely To Skip Wall Street
In closing, allow me to share with you a very old, yet quite fitting quote for today's economy:
The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance. -- Cicero , 55 BC
Regards
Randy
Monday, December 22, 2008
Economic Tsunami of 2009
Before you ask" "why should I give any credence to this article?" Please take a couple of minutes to read my 2008 assessment - written in Dec 07: Ushering a new Economic Era.
Though I hope that I'm wrong in my bleak 2009 outlook below, these are my expectations as I see things today. Ultimately, the data (12 months from now) should tell us whether or not I was close.
Economic Tsunami of 2009
The US is still in the early stages of a growing global economic crisis, combined with a tectonic monetary transformation, yet many Americans are merely in a daze and struck with surreal disbelief - like a group of tourists wandering the beach in Phuket, Thailand after the waters receded... This awe inspiring event has never been seen before and most are oblivious to the fact that this is just the breathtaking precursor to a disastrous outcome, so the ignorant masses stay put - trying to grasp the unreal - incognizant of the devastating consequences of their inaction...
The waters started receding in 2008 and as the year comes to a close, the tide is now fully pulled out to sea... 2009 however will likely cause mother nature to reverse these forces quickly, and the first wave of this massive economic tsunami, building on the horizon for over a year now, will finally come crashing ashore with quite destructive results.
My personal 2009 expectations:
- US Job Market to get much worse and will be the "hot topic" discussed in the mainstream media; The BLS officially published and severely understated U-3 unemployment rate will easily cross the 10% threshold in 2009. (link to the real US unemployment picture)
- Housing market will continue to crater while prices fall unabated - due to increasing unemployment, resetting ARMs, inability to refinance, and more people (who CAN afford their mortgage) merely "walking away" - out of disgust/exasperation that banks refuse to work with them (the responsible borrowers/homeowners) while they continue to reward the irresponsible. Home sales however, may likely start to pick up, as those who 1) have a job and 2) can qualify, take advantage of lower mortgage rates and homes become more affordable - but the number of new buyers will significantly lag behind the pervasive increase in foreclosure rates, so home inventories will continue to build while prices fall.
- Bailouts Galore; we're already $8.6 Trillion into this bailout mess (link to 2008 bailout figure)), so what's several more trillion in unpayable (aside from inflation erosion) taxayer dollars? I anticipate we will see bailouts for California, Michigan and others; more money for AIG, the Bond market, Infrastructure improvements, additional stimulus checks for the masses, etc. link to the money hole
- DOW to test the 6,000 range; though we will see a few nice bear-market rallies before and after, the 6,000 range will likely be tested - but don't think this will be the "ultimate low", as that should come later. link to DOW, where's the floor?
- US Dollar to fall to lowest levels in history; with all the new bailouts and increasing debt levels of the US Gvt, the dollar will lose its prestige as a global monetary safe haven and will ultimately test the 65 level (and possibly lower) on the US Dollar Index - sparking a new round of consumer inflation for the masses. The US dollar won't lose its reserve currency status in 2009, but it will in due time. link to Dollar: faltering foundation of US economic strength
- Treasury bubble pops - a flight to safety ensued in late 2008 and Treasuries were the vehicle used. High demand caused rates to fall while face values rose. When the Treasury bubble bursts in 2009, traders will be crushed as rates rise and face values fall. As this happens, the buying price of the bond drops and thus, traders will have to sell currently owned bonds for less than what was paid.
- Derivatives unwind; over a quadrillion (a thousand trillion) dollars in derivatives existed at the height of this economic bubble - part of the reason for our "slowed and controlled" economic implosion. Our monetary masters (AKA: The Plunge Protection Team - PPT) have thrown everything - including the kitchen sink, at our banks, markets and economy - to prevent a massive unwind of this monsterous derivatives complex. From what I understand, much of the froth in these notional derivatives have already expired/bled off, yet we are still stuck with about $700 Trillion outstanding. If the PPT can keep our house of cards afloat for another 18-24 months, these too will expire and the biggest threat to our global economy will have blown over, but I think we're going to see some fireworks first. If AIG, Fannie/Freddie, GM, Citigroup or a big someone else implodes, they will likely set of a chain of cascading counterparty derivative dominoes - insurance bets that can't be paid, but that which are needed to pay off other counterparties, who in-turn, can no longer pay off others, etc.
- Complete US Banking System Nationalization and/or Banking System "Holiday" (shutdown); hundreds of new bank failures will likely lead to public panic, banking runs and gvt imposed withdrawl limits; which will ultimately lead to nationalization and/or a banking system holiday. If a holiday IS imposed, ATM machines, banks and electronic commerce will be shut down across the nation (as the government tries to figure out what to do). People will grow anxious as their credit/debit cards don't work and they're unable to buy food, gas - anything. It may be wise to keep some cash under the matress (just in case). link to banking system shutdown?
- Gold crosses through $1,200 on it's way to meet its 2010 or 2011, one-to-one ratio with the DOW.
- US Economic Depression is declared; it took a year of looking at backwards data for the "experts" to finally declare that we've been in a recession the whole time - a year now! If we experience just four more months of the same, it will be an economic downturn and predicament not seen since The Great Depression. Well folks, the ingredients are already baked into the cake...
Closing:
Ultimately, 2009 will be quite bad as that first tsunami wave crashes ashore, but it's only the first of many and once the waves end, we've still got flooding, carnage, destruction and cleanup to deal with. Let's just hope that these events don't lead to a complete breakdown in society. link to Social Implications of a Significant Economic Downturn
Best Regards
Randy
Though I hope that I'm wrong in my bleak 2009 outlook below, these are my expectations as I see things today. Ultimately, the data (12 months from now) should tell us whether or not I was close.
Economic Tsunami of 2009
The US is still in the early stages of a growing global economic crisis, combined with a tectonic monetary transformation, yet many Americans are merely in a daze and struck with surreal disbelief - like a group of tourists wandering the beach in Phuket, Thailand after the waters receded... This awe inspiring event has never been seen before and most are oblivious to the fact that this is just the breathtaking precursor to a disastrous outcome, so the ignorant masses stay put - trying to grasp the unreal - incognizant of the devastating consequences of their inaction...
The waters started receding in 2008 and as the year comes to a close, the tide is now fully pulled out to sea... 2009 however will likely cause mother nature to reverse these forces quickly, and the first wave of this massive economic tsunami, building on the horizon for over a year now, will finally come crashing ashore with quite destructive results.
My personal 2009 expectations:
- US Job Market to get much worse and will be the "hot topic" discussed in the mainstream media; The BLS officially published and severely understated U-3 unemployment rate will easily cross the 10% threshold in 2009. (link to the real US unemployment picture)
- Housing market will continue to crater while prices fall unabated - due to increasing unemployment, resetting ARMs, inability to refinance, and more people (who CAN afford their mortgage) merely "walking away" - out of disgust/exasperation that banks refuse to work with them (the responsible borrowers/homeowners) while they continue to reward the irresponsible. Home sales however, may likely start to pick up, as those who 1) have a job and 2) can qualify, take advantage of lower mortgage rates and homes become more affordable - but the number of new buyers will significantly lag behind the pervasive increase in foreclosure rates, so home inventories will continue to build while prices fall.
- Bailouts Galore; we're already $8.6 Trillion into this bailout mess (link to 2008 bailout figure)), so what's several more trillion in unpayable (aside from inflation erosion) taxayer dollars? I anticipate we will see bailouts for California, Michigan and others; more money for AIG, the Bond market, Infrastructure improvements, additional stimulus checks for the masses, etc. link to the money hole
- DOW to test the 6,000 range; though we will see a few nice bear-market rallies before and after, the 6,000 range will likely be tested - but don't think this will be the "ultimate low", as that should come later. link to DOW, where's the floor?
- US Dollar to fall to lowest levels in history; with all the new bailouts and increasing debt levels of the US Gvt, the dollar will lose its prestige as a global monetary safe haven and will ultimately test the 65 level (and possibly lower) on the US Dollar Index - sparking a new round of consumer inflation for the masses. The US dollar won't lose its reserve currency status in 2009, but it will in due time. link to Dollar: faltering foundation of US economic strength
- Treasury bubble pops - a flight to safety ensued in late 2008 and Treasuries were the vehicle used. High demand caused rates to fall while face values rose. When the Treasury bubble bursts in 2009, traders will be crushed as rates rise and face values fall. As this happens, the buying price of the bond drops and thus, traders will have to sell currently owned bonds for less than what was paid.
- Derivatives unwind; over a quadrillion (a thousand trillion) dollars in derivatives existed at the height of this economic bubble - part of the reason for our "slowed and controlled" economic implosion. Our monetary masters (AKA: The Plunge Protection Team - PPT) have thrown everything - including the kitchen sink, at our banks, markets and economy - to prevent a massive unwind of this monsterous derivatives complex. From what I understand, much of the froth in these notional derivatives have already expired/bled off, yet we are still stuck with about $700 Trillion outstanding. If the PPT can keep our house of cards afloat for another 18-24 months, these too will expire and the biggest threat to our global economy will have blown over, but I think we're going to see some fireworks first. If AIG, Fannie/Freddie, GM, Citigroup or a big someone else implodes, they will likely set of a chain of cascading counterparty derivative dominoes - insurance bets that can't be paid, but that which are needed to pay off other counterparties, who in-turn, can no longer pay off others, etc.
- Complete US Banking System Nationalization and/or Banking System "Holiday" (shutdown); hundreds of new bank failures will likely lead to public panic, banking runs and gvt imposed withdrawl limits; which will ultimately lead to nationalization and/or a banking system holiday. If a holiday IS imposed, ATM machines, banks and electronic commerce will be shut down across the nation (as the government tries to figure out what to do). People will grow anxious as their credit/debit cards don't work and they're unable to buy food, gas - anything. It may be wise to keep some cash under the matress (just in case). link to banking system shutdown?
- Gold crosses through $1,200 on it's way to meet its 2010 or 2011, one-to-one ratio with the DOW.
- US Economic Depression is declared; it took a year of looking at backwards data for the "experts" to finally declare that we've been in a recession the whole time - a year now! If we experience just four more months of the same, it will be an economic downturn and predicament not seen since The Great Depression. Well folks, the ingredients are already baked into the cake...
Closing:
Ultimately, 2009 will be quite bad as that first tsunami wave crashes ashore, but it's only the first of many and once the waves end, we've still got flooding, carnage, destruction and cleanup to deal with. Let's just hope that these events don't lead to a complete breakdown in society. link to Social Implications of a Significant Economic Downturn
Best Regards
Randy
Sunday, December 21, 2008
Should The Government Stop Dumping Money Into A Giant Hole?
From The Onion News Network - Absolutely Hilarious, but sometimes the truth IS!
Great Depression plus hyperinflation
Terry Coxon, Senior Economist with Casey Research: Hyper inflation will soon replace deflation on consumer goods while the asset class continues down.
Subscribe to:
Posts (Atom)