Posted on 03/25/2002 4:07:33 PM PST by TigerLikesRooster
Is there any way you can post tomorrow's wrap up tonight?
Well, I need to talk to Cleo. But she charges too much for one-to-one session :).
I've been reading about how our economy will follow Japan's economy into the tank for at least 12 years now. You see, dire alarmist predictions sell more newsletters than the reasonable forecasts made by experienced economists. There are a number of major differences between the American economy and the Japaneese economy. One of the biggest differences is that America has a huge home building industry and a lot of empty land where we can build new homes. This home building industry, along with the auto industry, can be cranked up rapidly by the Fed simply by cutting interest rates. This is how the Fed prevents recessions from turning into depressions. Japan, however, doesn't have any vacant land where they can build new houses. Their real estate is completely developed. There's no place to put any more houses. Therefore Japan has a lack of industries that can be stimulated by lower interest rates. In addition, the Japaneese people have a very high savings rate (around 20%) and so they have less need to borrow to make any kind of purchase. America has a low savings rate, therefore consumer spending is stimulated greatly by lower interest rates. Finally, Japan has a strict population control policy and has essentially no population growth, which greatly reduces their long-term economic growth. China is now the engine of economic growth in Asia and it's economy will be bigger than Japan's in a few years. In a nutshell, Japan's economy is already maxed out because of limits on real estate development and population growth. America has neither of those limits and we will continue to grow steadily in the years ahead. Much of the rise in gold prices is simply a trading rally in the commodities market. This rally will probably lose steam around $300 as long as inflation remains reasonably low. People have been predicting a big jump in gold prices for 15 years and it's not going to happen without a jump in inflation.
Until rohry comes back alive from the snowy north :).
The Dollar Index is just as strong now as it has been in recent times. The price of gold is going up for other reasons. Mainly because of hoarding by the Japanese and declining forward sales by producers.
That'll be $50.
Once people lose confidence in paper, which is what is happening in Japan right now, the confidence isn't gained back easily. Over the weekend, a relative gave me more than 200 German 100-mark notes issued between 1903 and 1910. When issued, they were worth just under $25 -- i.e., more than an ounce of gold. I was recently appraised that they are now worth between $0 and $0.07. They were demonetized following the German inflation of 1923.
You are either with us or you are with the Tarotists.
Here are the minutes of the January FOMC meeting. I can't find any such plan.
American policy makers tend to boost American economy by lowering the saving's rate and making credits cheaper. It works up to a certain point. But the temptation to overdo it is too great. It is like a potent stimulant. One can always come up with some scenario where growing debts and other problems can be taken care of. But its plausibility will go down as time goes and more of these problems continues. We will see how this will turn out. In the end, somebody has to pay up all these. The easiest way is to socialize (or monetize) debts and blame it on small selected group of convenient scapegoats.
U.S. is different from Japan. But that difference is not wide enough to ensure that America escapes with minor damage to its economy and Japan goes down big time. The difference is in my view that America decided to pump in money(credits) before bubble pops like Japan did. So America is forestalling the popping for now. And America may monetize debts rather than going under like Japan.
After WWI, the French forced a debt burden on Germany they couldn't pay that led to their hyper-inflation. The French were also the ones in the early 1970's who pushed the United States to default on its gold debt under the Bretton Woods foreign exchange system. If you think the United States is going to default on its payments again, let's hear your reason, rather than your emotion based dislike of our fiat currency.
If your fee is cheaper, I may join you. If you have fancy star chart, that is even better :). What is your group by the way ? Babylonians ?
As a percentage of GDP, Japan has five times the public debt of the United States and their GDP is shrinking while the debt continues to grow. That's a big difference, not a little one.
I envision large scale bailouts, rising CPI, rising wage demands, and a falling dollar. Kind of like the economy from 1976-1980 under Carter, but on a larger and deeper scale.
Any thoughts?
Miss Cleo is unavailable. Can Mr Arch Crawford help you?
The CEO of CENTEX homes appeared on CNBC this morning. ;)
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