Posted on 12/28/2008 10:42:49 PM PST by Freedom_Is_Not_Free
I meant on a national scale — yes, many of us who aren’t whiny little welfare parasites will continue to get by.
I mean that if the US goes down, China, Japan and the EU are in no position to try dancing on our graves...
Did you see the recent stats on Japanese exports?
Announced on 12/22/08, the exports to the US for November 2008, compared to November 2007 fell by 34%.
When I saw that, I had to be impressed. As in “Holy crap!”
This is the sort of market into which I’m making an observation “if we go down, there’s no hope for any other country...”
Boatload of $ being shipped back to US? There is a real cartoon image. To buy what? Real estate, stocks, bonds, land, cars, factories, steel, oil, coal, potash, malls, trains, planes? Trade it for other fiat currency? No, not a reliable trade. Tell me what these repatriated dollars will be used to buy, and why is this not taking place at this time?
I say, you think the $ is bad - how about a CMO, or a CDO, or other recently invented, heavily leveraged derivative, that up to recently had been used as a valuable financial asset, with an iffy counterparty, representing at least 1000x the dollars around the world (some estimates are up to $1,000,000,000,000,000), now vanishing down a black hole.
All this ersatz pseudo wealth never was and now the realization is hitting the fan. A huge deflationary tsunami. Institutions are scrambling for as real a financial asset as they can get, that works for their books, seems to be the $, not silver, not gold, not potash, not steel, not real estate, not loans. Look at the $'s value shooting up, and the availability of $'s disappearing. Look at the stampede into 0% short term US treasuries - the buyers are betting on considerable deflation in the near term.
The $ still has an enduring claim on bountiful resources of all types in a well protected highly stable country. And for a financial institution it is their blood, bone, and sinew. They simply cannot endure without it.
I predict that foreigners will be scarfing up all the $'s they can get their hands on. If they have any brains, that is. Then when our stock market stabilizes, they will sink it into our real assets at a once in a century bargain, touching off the mother of all recoveries, and will thereby come to own the US.
They all say they had predictions after the fact. Also if your negative all the time eventually you will be right! Remember 2000 computer crash? How every computer would crash after the time rolled over on Jan 1, 2000? This cost our government billions to update computers. All I did was roll over thee date on my computer and restart. Did not have an impact!
I’m not surprised you are so cynical about “experts” claiming to know after the fact. But don’t let your cynicism blind you to the fact that some people made these predictions in a timely manner. Eric Janzsen was one of those people. Meredith Whitney was another. So were Nouriel Roubini and Peter Schiff. I think Mike Shedlock was another. I’m sure there are dozens but these come to mind.
These people were soundly berated as “doom and gloom people” two or three years back, while the mainline talking heads propagated the belief that there was no housing bubble, later that it was mild, later that it not hurt the real economy. Same for sub-prime — first they said there was no problem, later that it was a tiny fraction of loans, later that it would not hurt the real economy.
All the while through 2005, 2006, and 2007 while these talking heads like Jim Cramer and Larry Kudlow and Ben Stein and hundreds of others were saying how great the economy was structurally, with no serious foreseeable future problems, people like Eric Janzsen were outlining detailed discussions what the structural problems were in financing and the economy, and making accurate predictions about what was going to come.
So I don’t blame you for being cynical and discounting out of hand anybody who claims to have predicted the severity of this liquidity crisis, but the fact remains, several people did loudly predict this crisis and they were soundly chastised for doing so — until the crisis blew up.
then, we have fewer stores......fewer stores means less access, less competition, and higher prices.....
more people vying for that camera or that gas barbecue.....the retailers can charge quite a bit more.....
deflation then inflation.....sounds reasonable....
that probably won't affect cars and houses...which we have too many of..
Yes, that is precisely what he is predicting.
I anticipate it will be in some ways like the British empire. A hundred years ago, the sun never sat on that fine empire, the British Navy ruled the waves, and "the City" (London bankers) ruled the worlds financial systems, to the lesser extent that such matters were globalized back then.
Despite Herr Hitler's finest efforts, Great Britain never sank, though it is a tad less Great now.
The United States differs in some ways, including at least that it has an enormous bounty of native wealth in its land, which can provide most of the food, energy and commodities that we require to live adequately, if only the enviro-nuts would let us have at these resources.
In nations with a long cultural, ethnic or religious heritage, but a short ruling government history, governments can collapse under such stress. But in nations whose government has centuries of a strong successful and rule, then absent being invaded and overrun by a stronger neighbor, they do not collapse. Rather they morph into less healthy forms and decline over long expanses of time, along with their underlying host nation.
The treasury and the fed are desperately trying to convert bad dollar denominated assets into good $ denominated assets to save the hides of the favored money mavens who concocted these schemes, but the amount that these bodies can/will supply, astounding as it is, is dwarfed by previously asserted $ denominated credits.
If the treasury and/or fed move up an order of magnitude in $ creation, then maybe we'll see an inflationary effect - otherwise, deflation, as dollar denominated paper claims vanish.
When you throw in the manufacturing, energy, and commodity resources of Canada and Mexico, I think you realize that the North American continent will get along just fine.
I anticipate a considerable increase in death due to war in the coming two decades.
But for two reasons, this deflation will not end in a wimper and will not last all that much longer.
The central banks will not be denied. Failing debt paper has limits to its supply; fiat currency does not.
The second reason is slightly more difficult for me to explain. First ask why the earlier enormous runup in this debt paper did not create massive inflation. Some assets (California real estate, for example) rose three or four times in dollar denominated value. But there was not widespread wage and price inflation across almost all areas.
Why?
Because China, OPEC and other nations exporting to the United States and Europe were soaking up the dollars received in that trade to purchase the debt paper issued by the commercial and central banks of those nations.
China, OPEC and others are ceasing to purchase our paper. At some point, they will likely start selling it, first quietly, then in a mad rush for the exits. Already China is using the Treasuries it holds to purchase farming land and mining property around the world. China and some OPEC nations are ramping up their purchases of gold and silver, again hedging their Treasury holdings.
The financial tide of the last 25 years has been massive. It will reverse. Rather ... it is reversing, in my estimation.
Last point, I think that the middle class in the US has become quite de-fanged in asserting their claim for the fair share of the wealth they create. Hence the massive growth in disparity between executive pay and skilled worker pay. And shrinkage between skilled and unskilled pay. We've become easy to yoke. Dollar spending has been subdued compared with growth in the world economy.
First point, I think the runup in commodities, agriculture, and asset rich companies early in 2008 was fueled by dollar denominated, but rapidly becoming worthless, trades for something of "value". The trade fell apart when the obvious need for a growing or stable economy to support the "value" of these assets ran into a brick wall. Augmenting the volatility is the nature of the "fast" money pouring from one sector to the next in rapid rotation.
I think that the middle class in the US has become quite de-fanged in asserting their claim for the fair share of the wealth they create. Hence the massive growth in disparity between executive pay and skilled worker pay. We've become easy to yoke. When food prices, gas prices, house prices double, instead of demanding from our bosses that our salaries double to accommodate, we struggle on with paltry yearly wage increases.
So what is of economic value? One can hardly be criticized by holding the yardstick of value, the $. You won't go to jail, be sued, or otherwise banished from the game. Particularly when the $ is becoming ever more valuable in exchange for other stuff: you will be a hero.
Things can change - but some large scale shift is needed before the $ becomes the last worthless fiat currency.
Failing debt paper has limits to its supply; fiat currency does not.
During its hayday not too long ago, unregulated and unlimited virtual $ obligations were created by banks, insurance companies, brokers, etc. Everything worked as long as the music played. Hundreds of times the excess $'s got created. Even Ma and Pa Kettle were getting rich passively because some of these claims were traded for ordinary real assets.
We may only have 1/100th of the money supply we had last year, as the phony $ claims are being recognized as worthless. And it is happening around the world. Bankers in every developed nation became players. The boom generated lots of stuff in reality, but now the stuff will have to be repriced in terms of the actual $'s floating around to get bids. Thems with the $, being the most conservative bond and CD holders will be a tough sell for lots of this stuff, I think.
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