Just like the demand for American cars will never fall, the demand for US debt will never fall. We are the supreme nation, and our supremeness is unchallengable.
There is no solution for usury... the adding of interest to debt is a systemic failure at some point.. The Fed is not in that point yet as this is just another wash rinse repeat cycle of boom bust with Joe 6p as the "payee".
The one who is closest to the creator of Fiat of course does very well as does the politician who gets his cut.. the payee by being dumbed down in "school" does not realize he is the sheep.
Oh, now yah got me started! I was going to ask the question of what paper costs, cause I thought, gads, the cost of paper must be going up at the mint, and then I recalled a funny link:
The cost of raw metal for coins is probably having some impact on Fed inflation and even if they'd like to factor out housing, oil, food and everything going hyperbolic, what about the cost of printing money. This is hyperinflation baby and these dumbass retards have no clue how to value anything and every model they have is either totally broken or corrupted!
Re: $5.4202 is the rounded silver value for the 1971-1974, 1976 silver Eisenhower dollar on June 26, 2008. This is usually the value used by coin dealers when selling these coins at melt value. However, the total melt value is continued below.
The cost of the copper in pennies must be going off the charts!
Sure, the bulls are eating turf right now... we all can see it's not contained... and we all can see that far more writedowns are coming.
but we've had quite a move this week. wouldn't be surprised to see a pretty sharp short-term rally.
also, not sure I'm overly comfortable with counterparty risk. I have a lot of bets out there that have counterparty risk (Proshares funds).
also:
gold and oil have been in a trading range...seems to have broken upwards of late... could we see a spike back down?
there has been a lot of demand destruction, at least in the US, lately.
anyway, medium and short term look horrific, but beware the bear market rally.
The problem is that as the US has shifted its manufacturing base overseas, this lost income was replaced by foreigners (Japan, China and the Middle East) being able to dope the US economy through wealth transfers to US consumers by means of easy credit. This was done through both private and public sector means; but by far the most effective was through the private sector, for example by pumping in easy cash for ridiculous home loans. Now that game is over, the private sector is reeling and now foreigners can now only pump welfare checks to American consumers through the public sector.
We may just need another war to make this work. Or accept the reality that the US standard of living is inflated by 30% by foreign welfare checks and unless Americans start making things the rest of the world wants to buy then the US standard of living is going to drop steeply.
China and India are in much worse shape than we are we simply do not have the right perspective... Food and water are essential and these will be a social barometer for everyone to see.. China is sitting on a massive time bomb of social unrest and there is no way around the fact that with Peak Oil comes peak population... think about that in terms of social chaos...
"We may just need another war to make this work. Or accept the reality that the US standard of living is inflated by 30% by foreign welfare checks and unless Americans start making things the rest of the world wants to buy then the US standard of living is going to drop steeply."
High fuel costs may be good for the U.S. in one way. Some manufacturers are squeaking about high transport costs and are starting to talk about putting decentralizing manufacturing so there are plants near each market. In a situation where the U.S. imports so many consumer goods, that could be a net gain for us.
Can't afford another war. Can't afford the ones we're in.
Need the army corps of engineers back here rebuilding bridges in the Midwest right now. Losing millions of dollars in goods spoiling in stranded rail cars.
Need infrastructure and a massive alternative energy program, stat.
stealthwii@gmail.com writes: So what is a good inflation hedge in these times? Just oil? Food?
Historically, people in these circumstances develop and maintain large numbers of kinship and artificial kinship bonds (blood brotherhoods, marriages, fosterages, pacts of alliance, etc).
The threats in this situation are often wipe-out type events -- home burned, store of worth debased, wealth confiscated, food stores depleted. You want to keep your fallbacks as non-quantitative as possible so that someone might stick with you when you are net worth 0 and beyond.
It's easier than it sounds because everyone soon becomes keenly aware it could happen to anyone, so the economic interest in helping someone who has nothing is increased with the chances you too will soon have nothing and need to call in markers.
I think it's important to keep pointing out that the fed's "rock and a hard place" did not just appear out of the blue. Choices were made, particularly, though not solely, during the Bush administration, that caused this situation. The Bush administration wanted to stimulate the economy first to recover from 9-11 and later to prevent its becoming a hindrance to the Iraq invasion and occupation.
I just don't want "them" to convince everyone that this just sort of "happened" and that we should pity them that they find themselves in this situation.
With around $300 billion loaned out to member banks at short term rates, the Fed will keep interest rates as low as they can rationalize.
It's about helping the member banks, not helping the economy.
Inflation is a given, regardless of what the fed does, because of rising demand for resources from the rest of the world and too many unwanted dollars in foreign accounts.
I just don't want "them" to convince everyone that this just sort of "happened" and that we should pity them that they find themselves in this situation.
This goes back a little further to the "deficit don't matter" years.
Hey the recession isn't significant yet at all. I don't see people evicted from their homes, people in bread lines, or people cutting back their spending at all. And they are buying big cars like crazy and driving everywhere with gay abandon. What does he mean by "significant recession"?
Well, it's true that a weak dollar and high fuel prices will be a boon to U.S. manufacturing (for the domestic market), although of course this is bad for the U.S. standard of living generally (the reason U.S. manufacturing declined in the first place was that consumers switched to less expensive foreign made goods - this is good for consumers - now switchign back because those goods are no longer expensive will do for handbags and blue jeans what the weak dollar did for oil).
I am increasingly amused by the tendency of commentators to treat manufacturing as a favored, more morally upright and sound basis for growth than services. It's the mirror image of the tendency to do that with agriculture when agriculture was declining as a share of national income.
America's advantages all militate toward a continued decline in manufacturing, and that's fine. Manufacturing is boring and doesn't pay well. The United States has great educational and cultural advantages over the rest of the world. If they want to make our products and let us be their accountants, lawyers, and entrepreneurs, I don't see a problem.
And, back ON topic, I'd like to mention that domestic price rises derived from energy/commodity price increase on international markets are NOT inflation. It's an external price shock and it isn't telling us we're overheated and inflating, it is telling us we're poorer than we used to be because we have to buy so much oil/gas/gold/etc.
The Fed shouldn't counter energy inflation. It should probably do something about the dollar eventually, but avoiding a massive deflation due to credit contraction is Job One.
It might be of interest to note that Buffett is under water in a number of his recent investments: UNH, KFT, KMX, SNY to mention the most obvious. He of course is not a market timer, but still I would think he would kick himself for not being willing to wait a bit before buying.
"America's advantages all militate toward a continued decline in manufacturing, and that's fine. Manufacturing is boring and doesn't pay well. The United States has great educational and cultural advantages over the rest of the world. If they want to make our products and let us be their accountants, lawyers, and entrepreneurs, I don't see a problem."
They're raising their own just fine, thanks.
A better, sounder way to go than moving domestic production across the world would have been to invest in automation and remove the human factor has much as possible. Reducing jobs, sure, but making the remaining ones mainly high-value and possibly creating an industrial base with a flexibility second to none.
Sure, the unions would have had to be beaten down. But that happened anyway, didn't it. It was just cheaper and less risky (and frankly, required less management expertise) to find low-wage workers to do the job. For a while.
The men who owned and started the Fed Reserve system knew exactly the outcome.. they were not stupid or ignorant.. Don't assume that in 1913 that there were not aware of the consequence of creating interest on debt... 1933 unlawful taking of money, 1971 closing of the gold window, and repeal of the Glass Stegal law were not stupid mistakes or unintended consequences or errors... to assume that Ben Bernanke is ignorant or inept is arrogant to the extreme... he knows exactly what the outcome is to be... I am not talking about short term interest rates either...
the myth is that the Fed has any control over interest rates. They lost control of effective rates long ago...
Check Jumbo rates etc.
Again they are maintaining the charade of control while keeping the spreads wide for it's best customers. Problem is those "customers" are keeping said money and blowing the comm. bubble.
Must be nice to paper over mistakes with 2% for another 3 months.
"America's advantages all militate toward a continued decline in manufacturing, and that's fine. Manufacturing is boring and doesn't pay well. The United States has great educational and cultural advantages over the rest of the world. If they want to make our products and let us be their accountants, lawyers, and entrepreneurs, I don't see a problem."
The day we will no longer read such statements, will be the beginning of a real recovery for the US.
"In theory, the best outcome is to find is a sweet spot that allows global growth outside of the US to decelerate while avoiding a free fall in the Dollar. "
Does this mean that let foreigners suffer than we American could enjoy the free ride?
In the last thread you mentioned kingdom halls. Are you a jehovah witness? I was raised as one. Cannot imagine driving door to door preaching, or driving to the kingdom hall for five meetings a week with five dollar gas.
I'm with Bob Dobbs on the roboticization of manufacturing; the key is that we could develop a workforce to maintain the automated production lines, which would mean high-value add jobs. Automated manufacturing would also mean higher-quality, more consistent product...which is also good.
With the Fed holding nominal interest rates well below the rate of inflation, it's no wonder we are continuing to see increases in the value of commodities, a decline in the dollar, and so on. And the Fed isn't alone ... several other global central banks are running a negative REAL interest rate policy. The last time the Fed did this as consistently as it has in the past few years is the late 1970s-1980. What was the resulting economic environment? Stagflation. Same story now (though admittedly, it's more of a stagflation-lite, with lower unemployment and lower inflation)
I am increasingly amused by the tendency of commentators to treat manufacturing as a favored, more morally upright and sound basis for growth than services. It's the mirror image of the tendency to do that with agriculture when agriculture was declining as a share of national income.
America's advantages all militate toward a continued decline in manufacturing, and that's fine. Manufacturing is boring and doesn't pay well. The United States has great educational and cultural advantages over the rest of the world. If they want to make our products and let us be their accountants, lawyers, and entrepreneurs, I don't see a problem.
A services economy isn't a problem per se so long as you don't import more than you export and that you don't consume more than you produce - that production can be 'services' but they have to be competitively priced & exportable. It becomes a HUGE problem if you import oil & mfg products and don't return anything else except 'paper promises' (incur debt - which we have done).
Now there is nothing saying you can't export services to exchange for those - service providers just have to do it which means they have to PRICE their services so as globally to take foreign market share just like foreigners do here in mfg & ag & mining. What is so hard to understand about that?
Except look at the record - neither has happened... US services (almost 100% labor) is priced FAR higher than foreign services AND we don't export anywhere need enough services to offset the oil & mfg goods we import. Therein lies the problem.
There is NOTHING more noble about mfg & ag & mining than services. But if you do plan on building a 'services economy' you have to either ... trade services to balance trade, make enough mfg & ag products to export in exchange for what you import OR go without oil & mfg'd goods & food... running huge CAD forever isn't a long term option.
Consumer spending up more than predicted. Due probably to government checks. This society simply cannot save, and spends almost everything that it gets and more too, if it can borrow. That is not good either.
No fiat currency in the whole history of mankind has not ended up worthless.. what ever + or - interest rates do is just a wash rinse repeat cycle.. you cannot create a formula of 1+.02%=1...
That intelligent men refuse to see that boggles my mind... you cannot create money it is a medium of exchange...
When and I do mean when the currency collapses their is only one thing left..who owns the resources.. if you who are dependent upon labor for your rent must sell that labor somewhere somehow to those who own "capital"...
No other consequence can or will be the outcome... manufacturing, service, intelligence are all just a part of "labor". Capital is who owns legal rights to the resource.. If that court is set up in a state and it is sovereign was decided by the war between the states...called civil war by the winners... if it was to be a supreme court and a constitution was decided by the international war called WWII by the winners... The legal right to ownership will rest now with the World Court enforced by the supranational force called the UN... No one should deceive themselves into thinking they own anything that cannot be "taxed". Carbon tax, global warming are all just part of the new wash rinse and repeat cycle.. Extremely few on earth want the country of Iran bombed excepting leaders who have a plan to consolidate power into a center. If I am wrong name one just one national leader who want power to go back to local governments... I mean a real world leader...
The one-cent (penny) and five-cent pieces (nickels) are considered "minor" coins of the United States and have never contained precious metals.
Currently, none of the coins produced for circulation contain precious metals. However, the continued use of reeded edges on current circulating coinage of larger denominations is useful to the visually impaired. For example, the 10-cent (dime) and one-cent coins are similar in size; the reeding of the dime makes it easily identifiable by touch.
During the 1st(So Far) Great Depression 85% of people lived on farms,today less than 5% do.We'll know times are bad when we see more people with gardens in their back yards.We'll know times are really bad when we see gardens in their front yards and chickens,rabbits,pigs(And here we mention Goats again)ect. kept.
B writes:
"Misleading' Fed Should Let Banks Fail" Video - CNBC.com play=1
Thought I should post this again for you latecomers. Thanks for bearing with me those who have seen it.
BB | 06.27.08 - 11:29 am | #
BB - if you listen to Faber all the way through when he says 'let the banks fail' he also says just 'transfer the accounts' to a solvent bank entity - no problem - at the end of the interview.
Got a clue for everyone - the operational details of such requires A LOT of gov't intervention & regulation & arm twisting by somebody with regulatory clout (somebody like the Fed or FDIC).
Probably more than a little 'honey' to go with the 'medicine'.
That is RTC II - what he describes isn't even that far from what happened w/ Bear Stearns.
If they really let banks fail a la 1800s panics (just let'em go) - we'd see the euro at about $5 and oil at $400-500. You wouldn't get anyone to touch the dollars, US assets or trade w/ us for anything.
Faber is talking his book - some of it makes sense but still his book.
el presidente,
Haven't you heard? Accounting and financial analysis are being offshored to India. Software development too, starting in the mid-90's. And high-tech startups during the boom were largely staffed by Indians and Chinese with H1B visas.
I tell my kids it's OK to work in services, but choose one that can't be offshored.
Beginning with the FY 2005 financial statements, the United States Mint no longer includes the cost of
protecting the nation's gold and silver reserves as an offset against Other Financing Sources (seigniorage).
Therefore, the Protection Program, which represents the cost of protecting the nation's gold and silver
reserves, reflects a loss on the Statement of Net Cost, and the Circulating Program reflects a zero net cost
because revenue equals total costs. The cost of securing United States Mint facilities, staff, and assets is
included in the cost of production and is a proper charge to the Circulating Program. This change was made
as part of the conversion to a government United States Generally Accepted Accounting Principles (USGAAP)
presentation of the FY 2005 financial statements.
God bless you Bush and all the folks thar stealing us blind....you fucking assholes!
dryfly writes:
Faber is talking his book - some of it makes sense but still his book.
Evryone talks their books. However i think faber is right this time. I am not sure about your dollar projections but am sure that it isn't appealing as much now to everyone else.
He did mention gold, which is currency neutral.
Luhrmans experience highlights a growing conundrum for the Mint and for U.S. taxpayers. Primarily because zinc, too, has soared in value, producing a penny now costs about 1.7 cents. Since the Mint currently manufactures more than seven billion pennies a year and sells them to the Federal Reserve at their face value, the Treasury incurs an annual penny deficit of about fifty million dollarsa condition known in the coin world as negative seigniorage. The fact that the Mint loses money on penny production annoys some people, because one-cent coins no longer have much economic utility. More than a few people, upon finding pennies in their pockets at the end of the day, simply throw them away, and many dont bother to pick them up anymore when they see them lying on the ground. (Breaking stride to pick up a penny, if it takes more than 6.15 seconds, pays less than the federal minimum wage.)
Evryone talks their books. However i think faber is right this time. I am not sure about your dollar projections but am sure that it isn't appealing as much now to everyone else.
He did mention gold, which is currency neutral.
BB | 06.27.08 - 12:28 pm | #
I am not a 'hard money' nut but do agree with him the dollar is toast. Tim Duy's piece is complimentary in that he says the Fed can't really do a damned thing about it. There's your rock & hard palace.
In the end we will be a lot poorer until we decide to go back to making things & providing services we can exchange GLOBALLY for the stuff we consume.
"We'll know times are really bad when we see gardens in their front yards and chickens,rabbits,pigs(And here we mention Goats again)ect. kept."
Already been an article in the local "lifestyle" newspaper about the joy of raising chickens for enjoyment (and coincidentally food), and the moral righteousness of being a locavore (eating food raised close to home).
Could be they're just making a fashionable virtue out of a coming middle-class necessity? Makes you wonder. I've got a big enough backyard for chickens, but I'd have to raccoon-proof it!
"PENNY DREADFUL
Theyre horrid and useless. Why do pennies persist?"
Nothing compared to the change I had to lug around in France the past year. Maddening. And you can't get rid of it at banks (there are signs in the windows stating "no change accepted." Sent a lot of postcards!
Copper hit its highest level in nearly two months on Friday, boosted by strong fundamentals and falling stocks, but worries about demand Chinese demand were expected to cap gains.
Aluminium held firm as investors bought on expectations that rising costs of energy, which analysts estimate accounts for between one-third to 45 percent of smelting costs, would help push prices towards the record $3,310 set in May 2006.
"Dollar weakness and the possibility of a Peruvian miners' strike that could start on Monday could lend further support," brokerage MF Global said in a report.
Peruvian miners are moving ahead with a plan to strike for better benefits starting on Monday, despite pleas from the government to reconsider their protest, a union leader told Reuters on Thursday.
The sterling surged to a two-month high versus the U.S. dollar. The sterling climbed to 1.9950 in the late morning, its best level since late April. In the U.S., the Reuters/University of Michigan Consumer Sentiment Index came in at 56.4, a slightly worse-than-expected result.
dryfly-I agree with much of what you say. However, the US does export a lot of IP, both in the cultural and technological areas. In my industry (biotech) the ROW combined is still not equal to the US. Of course, it's difficult to export enough to pay the oil import bill at $140/bbl.
As for the $, despite the gnashing of teeth, it hasn't gone anywhere against the euro, loonie, yen or pound since March, despite enormous turmoil and huge commodity inflation.
That may be wise. But am betting that Trichet will do his duty. Let's see what happens next week.
I am still looking for a negative close on equities today.
If the policy makers were American your assumptions would be correct.. they are internationalist with no loyalty to anyone country... too many people get caught up in racial, political, and conspiracy turmoil.. this is not about race or politics but economics... those who get caught up in those issues make any discussion go nowhere... if fact they are trolls on the internet...
Looks like you may be wrong. I believe the FED and the PPT will control the descent of the market because it is the bellweather for the sheeple's mood. A crash = people's mood tanks, a slow descent.......and before you know it everyone looks around and says "how'd that happen.....
I am increasingly amused by the tendency of commentators to treat manufacturing as a favored, more morally upright and sound basis for growth than services
You, sir, are an idiot and apparently need an economics lesson.
The Primary sector of the economy is resource extraction and harvesting. This produces the raw materials that become finished goods in the Secondary sector.
The Tertiary sector provides services that increase the productivity and/or increase the leisure time of people, but by itself it does not increase the national weal; rather it is a net drain on wealth and cannot exist except upon an adequate basis of the Primary and Secondary sectors.
Where wealth is consumed in the domestic economy there must be an offsetting wealth creation activity, or an asset sale to someone outside the economy.
You can't eat ledger books, or house yourself in TV shows.
Though I do of course agree that the US has done a pretty good job of being the world's premier R&D center, though we could be doing a lot better in this area.
Great post CR--as usual. Tim Duy is a smart fella and I agree with how succinctly he "chalk-talks" the three conditions that must hold for the Fed to successfully navigate the current challenges.
But it reminds me more than a little of the crippled Apollo 13 mission:
If the crew can use the Lunar Module as a temporary lifeboat;
If the crew can can jury-rig a crude scrubber to remove deadly carbon dioxide from the Lunar Module's breathing atmosphere;
If the crew can then hand-fly the Command Module through the re-entry atmosphere without skipping off into deep space or burning up;
Then, we'll get through this. Hey, it worked for Tom Hanks!
We are in what I call the "Smokey The Bear" market. If you remember the US policy on forest fires was any fire was bad. It this approach worked for about 40+ years. Then we started to have super fires resulting from all the dead wood that had accumulated over the decades. Even small fires suddenly became catastrophic. Now the fires burned to hot to be helpful the environment and the ecology of our forest changed for the worst.
In 1988 when the stock market collapsed the fed stepped in to save the financial system, which we all agree was a good thing. However this policy soon morphed into a prop up the stock market policy, so that any dip in the market was seen as bad for the financial system. So like Smokey the Bear, the fed would not allow a protracted bear market under any circumstances.
So when you hear the experts on TeeV say the fundamentals do not justify the sell off, they may correct at some level. However the die has been cast and the markets eventually find a way to correct themselves, only this time it will not behave as everyone expects.
In the absence of such equilibrium, the US economy can hobble along only as long as the following three conditions hold:
The Federal Reserve can maintain easy monetary policy.
The US government can sustain repeated fiscal stimulus measures.
Haha... so once again the key to making the economy better is firehosing paper everywhere, not making our labor force and industries more competitive or educating our population about financial and economic matters that might actually lead to wise decisions.
Paper is the key.
More shopping sprees are the key.
Rewarding people with money for just doing more of the same.
No focus on real economic goals or outcomes.
It's all about building a paper screen that hides what's really going on and hoping it's enough to fool your creditors in to thinking that you have something behind the big paper facade to pay them back with.
The goal now is just to keep them fooled as long as possible.
Our economy requires deception to continue functioning.
Marc Faber and Peter Schiff make a lot of sense, except that they are so bullish on gold. What are they going to do with a pile of gold? It's pretty, and it's a good non-corroding electrical conductor, but what other intrinsic value does it have? You can't burn it for fuel. You can't eat it. What's the point of owning gold when people need food and fuel?
I'm gonna bury my money in the back yard - in the form of plants, seeds, compost, and fertilizer. It's not beyond the realm of possibility for food to become the new currency when this economy finally hits bottom.
We're all agreeing that the Fed has good motivations, right?
Because if we started thinking that they were like the management teams of some fallen companies lately, and were like, you know, just robbing people for personal or oligarchic gain, well...that would be nuts.
LA writes: What are they going to do with a pile of gold?
Peter Schiff is a gold diaper baby; his father is such a gold nut he's in prison for stealing tax payer money by refusing to pay his share. Schiff and his father believe taxes not based on gold are illegitimate. They have sex with gold. Answer your question?
IMHO those in control of resources own both sides of the game..FWIW check into what actually owns the stocks that are issued. I am talking about the clearing house here... If you own the resource that is used up in war what care you whose young son dies...as long as the fight is about race, land space, religion, anything but the real issue...
Keep both sides supplied with weaponry issue all kinds of media controlled information about what the other side is doing to harm you, make sure both sides young men are supplied with enough nationalism and you win... simple as that... you sell them the articles of war, finance it and you always end up on the true winning side...
I think the PPT wants the market to go down but not substantially. There may be a feeling that lower equity prices will lead to lower commodity prices.
Randy to answer your comment more directly..if I own the crap table what do I care if snake eyes or a bunch of sevens are rolled...jut as long as they are players at the table...
Aheadofthecurve writes:
dryfly-I agree with much of what you say. However, the US does export a lot of IP, both in the cultural and technological areas. In my industry (biotech) the ROW combined is still not equal to the US. Of course, it's difficult to export enough to pay the oil import bill at $140/bbl.
As for the $, despite the gnashing of teeth, it hasn't gone anywhere against the euro, loonie, yen or pound since March, despite enormous turmoil and huge commodity inflation.
Aheadofthecurve | 06.27.08 - 12:46 pm | #
The CAD numbers don't lie - contrary to the 'dark matter' advocates. IP doesn't feed the dog unless you CONTROL the IP content once out side the borders & are able to harvest its fruits a long time.
Plus it is one of the most perishable of products you'll find anywhere. In the long run IP benefits those who use it the most wisely. I'd rather see us BUY IP from others and use it wisely (to create FAR greater wealth & value en masse for our society) than to develop it & all but give it away or lose it to others who will use it to produce wealth & value en masse for their people.
Obviously the ideal situation is to do both - create & use. I fear we are heading the opposite direction however.
The good news is that can change - the bad news is it isn't pleasant getting there - weaker dollar, more work for less pay (in global price parity terms). But it isn't the end of the world either.
And 'yes' the dollar has probably fallen as far as it is likely to fall against EU & CAN$, etc. Against RMB? I bet we've just begun...
There may be a feeling that lower equity prices will lead to lower commodity prices.
why? I would worry that lower equity prices will cause people to pull their cash from equities and put them in the commodity markets. (which they're doing. I know because it's what I am doing)
what the Fed NEEDS to do IMO is to raise the rates of return on risk-free investments (i.e. Treasurys, Savings Accounts etc). This can be initiated by raising the FFR which will strengthen the dollar and also make the absolute rate of return on these investments higher
It will possibly cause the equities markets to go down but who cares it's going down anyway.
but more importantly it will give ivnvetors confidene that we want a strong dollar. Thus SOME of them will leave commodities (which they are using as an inflation hedge) and go into Treasuries and Banks (bolstering our bank balance sheets)
so you'd have higher "safe" interest rates, more capital flowing into the banks, capital flowing OUT of commodities. I'm not sure what'd happen to stocks.
as commodity prices fell, people would pull their money out of them and put them in the "safe" investments again.
Can any of the 279 visitors out there tell me why PNC is trading at $58, the same price it was at 900 DOW points ago? I am looking to expand the breadth of my regional shorts and someone suggested I take a look at them. Seems like something is going on there to hold them up though...
I'm a GE retiree.Been gone almost 11 years.Debated it,but got out of GE stock when I retired after buying it for 33 years.Used my 7% and GE's 3 1/2 and a extra 10% for about 10 years for nothing but GE stock.Had I think 7 splits.Get to 120-140-split-run up again 120-140-split-ect.The reason I'm relating this is I just saw GE at 26.45 and I know MANY people who left before and after me plus those still working there who have kept everything in GE stock.This was bought at from about 65 on down.It's sad,but I have heard several say that "When it gets back to 60,I'm selling".A lot of these people are going to die without ever cashing in ANY of their stock.They will deny their and their family a good life because they can't accept reality.
Isn't balancing the risk of inflation with the risk recession then develping a monetary policy according pretty much the job description of the Federal Reserve? Nothing new there. Maybe I am missing something, but I doubt it.
Haha... so once again the key to making the economy better is firehosing paper everywhere, not making our labor force and industries more competitive or educating our population about financial and economic matters that might actually lead to wise decisions.
Unfortunately - part of making our industries & people more competitive is making them 'cheaper' vis-a-vis global competition. 'Paper' does that without making people or businesses take a nominal pay &/or earnings cut - but the result is the same. If feels the same.
Superior performance & productivity earns a premium but a modest premium. What's worse is the competition is NOT standing still - they've been saving & investing (private & public both). We? Not so much. Some, yes but nowhere near enough vis-a-vis competition.
Just a speculation: if the indexes close at these levels, even if after going lower today, there's a good chance for a flush Monday establishing some type of support.
My wife's sugarcane plantation in Guatemala is starting to look more and more attractive as the days go by. Real estate is expensive though... you need to pay up to feel safe.
IP is overrated in terms of exports. Because it's a "soft" product, many of the IT/Pharma companies have been "offshoring" IP, even if most of the R&D was done in the US. Ireland is a notorious IP haven (10% corporate tax rate, 0% on patent royalties)
Follow up: I'm focusing on the emerging markets etf EEM (cause I own EEV), and there's a reliable pattern forming (inverted W) that projects about 2% lower if broken. The broad markets would go in tandem, so we could really break down today.
There is no film in the cameras, cheaper to operate them that way. Actually when I was in Pomplona when I was a young man I was going to run with the Bulls in the morning, (Seventh day, of the seventh month, for seven days,) except I met this lovely English girl, and we both got drunk, etc,etc.
I think thats on film somewhere.
Somebody needs to patent & produce 'brain bleach'... or those thingies from 'Men In Black'... there are posts here where sometimes both wouldn't be enough.
"If you strip out food and energy, inflations is not a problem." I think Ben is a secret admirer of Mugabe.
Between Ben and Huss it is time for me to go long on prayer rug manufacturers and buy an open airline ticket to Moscow.
Let take a moment to remember old unemployedit and note that a lot of Intellectual Property went out the window when we offshored our Information tech or allow foreign workers to display native IT workers. In short instead of native sons and daughters having high paying IT jobs, most are competing with overseas labor with low wages.
This started with steel long ago, but was masked by easy debt substituting for income.
I went under water on DXD when I bought it in April at $52.80, but given that I sold it at $65.05 today I'm fine with a draw down (I took a much larger draw down in the EEV).
But really... Do not buy DXD now! It needs at least a significant consolidation if not a retracement downward. But it will eventually go much higher from where I sold it.
"A services economy isn't a problem per se so long as you don't import more than you export and that you don't consume more than you produce - that production can be 'services' but they have to be competitively priced & exportable. It becomes a HUGE problem if you import oil & mfg products and don't return anything else except 'paper promises' (incur debt - which we have done)."
-dryfly
This was meant as a critique of my post; I recognize that, and agree with the critique. On blog comments you can't really set out all the caveats you need to make a really airtight point, so I usually don't try.
Obviously buying goods on credit isn't sustainable. I was singing the praises of the service economy, not the praises of the debt economy. And I think it would be great if we could mechanize manufacturing in the United States sufficiently to outcompete China. Unfortunately, the cost of labor overseas is a bigger advantage for most manufacturing purposes than the lower cost of capital in the United States at present.
So new manufacturing generally sets up overseas. It is important to note that the USA still manufactures just as much as it did in the '70s - it just does so with fewer people and for lower prices because we do so much more efficiently - and as a result Manufacturing as a share of national income has declined... precisely because it is so much more efficient than it was in the '70s.
This is of course precisely what happened to agriculture in the century leading up to the '70s. Go figure.
Since 1990, the United States has been in a truly unique position in world history; a single hegemon astride the entire world. That's not something that is likely to last forever; and indeed, the seeds of its end were sown before 1990. Deng Xiaoping's industrial (and more important, ideological) revolution in China begin in 1980 or so.
Obviously buying goods on credit isn't sustainable. I was singing the praises of the service economy, not the praises of the debt economy.
That caveat is the killer behind the 'services only' argument. Until it is answered - its a pie-in-the-sky nonstarter of a solution.
I am actually a huge proponent of 'services'... services are by far the most environmentally 'sound' alternative. I mean how much green house gas is produced during a massage?
Heck I think we should all be performance artists & bloggers... as soon as we figure out a way to live without material (like food or fuel). Until then we are going to have to either produce it OR produce something of value to trade for it. We aren't doing enough of either in aggregate.
That is my point - service economy advocates haven't produced a workable 'model' to sustainably & consistently get us there. Continued CAD & 'twin deficits' were the only things that have propped it up until now.
sadly:
I feel we have to do what China and everybody else is doing.
Devalue our currency making our labor more "competitive".
this will keep people working, albeit for a lower standard of living.
it reminds me of stories I heard about China 20-30 years ago. The local official was givin a US farmer a tour of a farm. The US farmer saw all these peasants doing manual picking of crops. He said "wow, if you put in machines then you could increase your yield significantly and also decrease your labor costs!!!"
to which the official responded "Yes. And if we do not do these things then we can have 100% employment"
"So new manufacturing generally sets up overseas. It is important to note that the USA still manufactures just as much as it did in the '70s - it just does so with fewer people and for lower prices because we do so much more efficiently - and as a result Manufacturing as a share of national income has declined... precisely because it is so much more efficient than it was in the '70s.'
One would think that's a good thing, no?
And how much of the imported stuff, other than oil, is necessary? I look at the sheer quantity of crap in most houses. Wouldn't our kids be better off with 2 or 3 really high quality toys than 50 p.o.s.'s? Buy 3 high cost items instead of 30 cheap ones and you could afford domestic.
There's still nothing wrong with an all-services (let alone our 70% services) economy. The problem is that we are ineffective in exporting services to match our imports of manufactures, leading to a large current account deficit, massive inflows of foreign capital, and dollar depreciation.
If we exported more investment banking services, for instance, that would offset Chinese toys just as effectively as exporting American toys. It's just easier to move goods than services, so we're on the difficult side for exports.
The solution, of course, is to depreciate the dollar and decrease the cost of capital domestically.
Would have been nice if we had started doing this before oil went up.
And how much of the imported stuff, other than oil, is necessary? I look at the sheer quantity of crap in most houses. Wouldn't our kids be better off with 2 or 3 really high quality toys than 50 p.o.s.'s? Buy 3 high cost items instead of 30 cheap ones and you could afford domestic.
Aheadofthecurve | 06.27.08 - 3:38 pm | #
I agree but that is NOT where we are as a society - not yet anyway - we want both & the world lends it to us. However a weakening dollar forces a decision: imported oil or imported crappy mfg goods, can't have both with weak dollars. Running huge deficits to have both is getting harder all the time.
::::
el presidente writes:
There's still nothing wrong with an all-services (let alone our 70% services) economy. The problem is that we are ineffective in exporting services to match our imports of manufactures, leading to a large current account deficit, massive inflows of foreign capital, and dollar depreciation.
If we exported more investment banking services, for instance, that would offset Chinese toys just as effectively as exporting American toys. It's just easier to move goods than services, so we're on the difficult side for exports.
The solution, of course, is to depreciate the dollar and decrease the cost of capital domestically.
Would have been nice if we had started doing this before oil went up.
el presidente | 06.27.08 - 4:41 pm | #
Yup - but we could export way more 'services' if only our service professionals were cheap enough. They aren't.
Weaken the currency enough and our services get 'cheap'. But so does mfg, agri, mining, etc. Of course if $$$ got that weak then I Bankers wouldn't be able to vacation in strong currency regions (like Europe) either. They would be too poor - just like mfgrs.
Currency ratios are as big a part of this as is 'productivity'.
Oh and it isn't just easier to 'move' products, it is also easier to 'inventory' products - to trade where AND when demand requires. Services need to be produced 'on demand' - tough.
That's why 'tradeables' are almost a synonym for 'products' while 'non-tradeables' are almost a synonym for 'services'. That goes all the way back to Ricardo. Products 'trade' services don't or rather 'didn't'...
And as for doing this rebalancing BEFORE oil took off? The weakening dollar due to our massive long running CADs & resultant fishy financials is a big reason WHY oil took off. And food. And base metals (steel, aluminum)... etc.
It wasn't an accident. It was an inevitable result of decades of deficits & development offshore. It should have been expected.
Dry fly, I agree that it isn' the move to services per se that's the problem. But the fact that ALOT of 'em were financial services...
Organic George- I like you Smokey the Bear analogy.
Energy and other commodity prices are not rising due to "inflation", rather they are rising due to supply not meeting worldwide demand at lower prices. Any attempt to correct this by raising the price of money domestically will do nothing but make us less competitive internationally. The damage was done the day we exported the first manufacturing job to China, and put into overdrive when we started exporting high tech jobs to India. Now they are our competitors for commodities. In they case of oil they are geographically closer than we are to major supply chain areas like the Middle East and Russia. Blame God I suppose, but interest rates have nothing to do with that. What would help would be to curtail our simultaneous wars on Muslims, Venezuela and Science. That is an ignorant combination.
First?
OT; WAMU @ 4.87, lower than a gal of gas?
Fed wants inflation. How else can member banks of the Federal Reserve system pay off their debt?
Coming soon: how to convert your car to run on $1 bills!
Maybe we need to go back to steam power and just burn dollars for cheap fuel?
Just like the demand for American cars will never fall, the demand for US debt will never fall. We are the supreme nation, and our supremeness is unchallengable.
what is the expected inflation according to TIPS ?
It's worse than you guys make it. All our $$$ is electronic today - not physical. You have to take satisfaction from ephemeral blips.
There is no solution for usury... the adding of interest to debt is a systemic failure at some point.. The Fed is not in that point yet as this is just another wash rinse repeat cycle of boom bust with Joe 6p as the "payee".
The one who is closest to the creator of Fiat of course does very well as does the politician who gets his cut.. the payee by being dumbed down in "school" does not realize he is the sheep.
But how will we fund the Eternal War?
Oh, now yah got me started! I was going to ask the question of what paper costs, cause I thought, gads, the cost of paper must be going up at the mint, and then I recalled a funny link:
Silver Coin Melt Values - Coinflation.com (Updated Daily)
The cost of raw metal for coins is probably having some impact on Fed inflation and even if they'd like to factor out housing, oil, food and everything going hyperbolic, what about the cost of printing money. This is hyperinflation baby and these dumbass retards have no clue how to value anything and every model they have is either totally broken or corrupted!
Re: $5.4202 is the rounded silver value for the 1971-1974, 1976 silver Eisenhower dollar on June 26, 2008. This is usually the value used by coin dealers when selling these coins at melt value. However, the total melt value is continued below.
The cost of the copper in pennies must be going off the charts!
"I suspect the US economic environment will shift decisively toward higher inflation or significant recession."
Gee, it doesn't take an expert to see that rough times are ahead. This statement is like the doctor saying, "You might die. Or, you might not."
Well, thanks a lot for the penetrating analysis. Does this guy make money from this kind of stuff? If so, I want to be in his business.
So what is a good inflation hedge in these times? Just oil? Food?
I dont think gold and silver are in this economy.
$0.0256178 is the melt value for the 1909-1982 copper cent on June 26, 200
Does this guy make money from this kind of stuff? If so, I want to be in his business.
He's an academic... sort of like the current Fed Chairman.
OT; WAMU @ 4.87, lower than a gal of gas?
Kona Gold | 06.27.08 - 11:08 am | #
I'm thinking a lot of stocks will become cheaper than a gallon of gasoline due to convergence.
So what is a good inflation hedge in these times? Just oil? Food?
Food, water, shelter, health, clothing, and loved ones.
Always useful, and priceless when needed.
"Misleading' Fed Should Let Banks Fail"
Video - CNBC.com
Thought I should post this again for you latecomers. Thanks for bearing with me those who have seen it.
Drew | 06.27.08 - 11:28 am
Good call!
People need to be careful IMO. even the bears.
Sure, the bulls are eating turf right now... we all can see it's not contained... and we all can see that far more writedowns are coming.
but we've had quite a move this week. wouldn't be surprised to see a pretty sharp short-term rally.
also, not sure I'm overly comfortable with counterparty risk. I have a lot of bets out there that have counterparty risk (Proshares funds).
also:
gold and oil have been in a trading range...seems to have broken upwards of late... could we see a spike back down?
there has been a lot of demand destruction, at least in the US, lately.
anyway, medium and short term look horrific, but beware the bear market rally.
Drew is that you DT...
...Joe 6p as the "payee"... Well another 3p and Joe can take the bus.
YouTube -
Drew is that you DT...
No, lol. Not DT...
"This is not good." Are you sure? How profound!
If we hit a recession, it wont be long before China and others stop buying dollars. That could lead to some very uncertain times.
How many shares per gallon does your bank get?
couldn't resist
There's some serious volatility out there today.
The problem is that as the US has shifted its manufacturing base overseas, this lost income was replaced by foreigners (Japan, China and the Middle East) being able to dope the US economy through wealth transfers to US consumers by means of easy credit. This was done through both private and public sector means; but by far the most effective was through the private sector, for example by pumping in easy cash for ridiculous home loans. Now that game is over, the private sector is reeling and now foreigners can now only pump welfare checks to American consumers through the public sector.
We may just need another war to make this work. Or accept the reality that the US standard of living is inflated by 30% by foreign welfare checks and unless Americans start making things the rest of the world wants to buy then the US standard of living is going to drop steeply.
Watch Out for Georgia's Worst Banks
Watch Out for Georgia's Worst Banks | Financial Advisor Forum | Financial Articles & Investing News | TheStreet.com
China and India are in much worse shape than we are we simply do not have the right perspective... Food and water are essential and these will be a social barometer for everyone to see.. China is sitting on a massive time bomb of social unrest and there is no way around the fact that with Peak Oil comes peak population... think about that in terms of social chaos...
"We may just need another war to make this work. Or accept the reality that the US standard of living is inflated by 30% by foreign welfare checks and unless Americans start making things the rest of the world wants to buy then the US standard of living is going to drop steeply."
High fuel costs may be good for the U.S. in one way. Some manufacturers are squeaking about high transport costs and are starting to talk about putting decentralizing manufacturing so there are plants near each market. In a situation where the U.S. imports so many consumer goods, that could be a net gain for us.
Can't afford another war. Can't afford the ones we're in.
Need the army corps of engineers back here rebuilding bridges in the Midwest right now. Losing millions of dollars in goods spoiling in stranded rail cars.
Need infrastructure and a massive alternative energy program, stat.
stealthwii@gmail.com writes:
So what is a good inflation hedge in these times? Just oil? Food?
Historically, people in these circumstances develop and maintain large numbers of kinship and artificial kinship bonds (blood brotherhoods, marriages, fosterages, pacts of alliance, etc).
The threats in this situation are often wipe-out type events -- home burned, store of worth debased, wealth confiscated, food stores depleted. You want to keep your fallbacks as non-quantitative as possible so that someone might stick with you when you are net worth 0 and beyond.
It's easier than it sounds because everyone soon becomes keenly aware it could happen to anyone, so the economic interest in helping someone who has nothing is increased with the chances you too will soon have nothing and need to call in markers.
I think it's important to keep pointing out that the fed's "rock and a hard place" did not just appear out of the blue. Choices were made, particularly, though not solely, during the Bush administration, that caused this situation. The Bush administration wanted to stimulate the economy first to recover from 9-11 and later to prevent its becoming a hindrance to the Iraq invasion and occupation.
I just don't want "them" to convince everyone that this just sort of "happened" and that we should pity them that they find themselves in this situation.
I think condoms and toilet paper would do.
higher inflation or significant recession, hmmmmmm----- maybe both.
With around $300 billion loaned out to member banks at short term rates, the Fed will keep interest rates as low as they can rationalize.
It's about helping the member banks, not helping the economy.
Inflation is a given, regardless of what the fed does, because of rising demand for resources from the rest of the world and too many unwanted dollars in foreign accounts.
Sue writes:
I just don't want "them" to convince everyone that this just sort of "happened" and that we should pity them that they find themselves in this situation.
This goes back a little further to the "deficit don't matter" years.
Hey the recession isn't significant yet at all. I don't see people evicted from their homes, people in bread lines, or people cutting back their spending at all. And they are buying big cars like crazy and driving everywhere with gay abandon. What does he mean by "significant recession"?
Well, it's true that a weak dollar and high fuel prices will be a boon to U.S. manufacturing (for the domestic market), although of course this is bad for the U.S. standard of living generally (the reason U.S. manufacturing declined in the first place was that consumers switched to less expensive foreign made goods - this is good for consumers - now switchign back because those goods are no longer expensive will do for handbags and blue jeans what the weak dollar did for oil).
I am increasingly amused by the tendency of commentators to treat manufacturing as a favored, more morally upright and sound basis for growth than services. It's the mirror image of the tendency to do that with agriculture when agriculture was declining as a share of national income.
America's advantages all militate toward a continued decline in manufacturing, and that's fine. Manufacturing is boring and doesn't pay well. The United States has great educational and cultural advantages over the rest of the world. If they want to make our products and let us be their accountants, lawyers, and entrepreneurs, I don't see a problem.
And, back ON topic, I'd like to mention that domestic price rises derived from energy/commodity price increase on international markets are NOT inflation. It's an external price shock and it isn't telling us we're overheated and inflating, it is telling us we're poorer than we used to be because we have to buy so much oil/gas/gold/etc.
The Fed shouldn't counter energy inflation. It should probably do something about the dollar eventually, but avoiding a massive deflation due to credit contraction is Job One.
It might be of interest to note that Buffett is under water in a number of his recent investments: UNH, KFT, KMX, SNY to mention the most obvious. He of course is not a market timer, but still I would think he would kick himself for not being willing to wait a bit before buying.
The United States has great educational and cultural advantages over the rest of the world.
Largely useless as one can see by the fact that Bush was elected twice.
"there has been a lot of demand destruction, at least in the US, lately."
In chicago the public transportation buses average 2-3 gallons...how will that effect demand destruction????
Great post CR - pretty well sums it all up, unfortunately. Thx.
then I suspect the US economic environment will shift decisively toward higher inflation or significant recession.
how about a little of both?
"America's advantages all militate toward a continued decline in manufacturing, and that's fine. Manufacturing is boring and doesn't pay well. The United States has great educational and cultural advantages over the rest of the world. If they want to make our products and let us be their accountants, lawyers, and entrepreneurs, I don't see a problem."
They're raising their own just fine, thanks.
A better, sounder way to go than moving domestic production across the world would have been to invest in automation and remove the human factor has much as possible. Reducing jobs, sure, but making the remaining ones mainly high-value and possibly creating an industrial base with a flexibility second to none.
Sure, the unions would have had to be beaten down. But that happened anyway, didn't it. It was just cheaper and less risky (and frankly, required less management expertise) to find low-wage workers to do the job. For a while.
The men who owned and started the Fed Reserve system knew exactly the outcome.. they were not stupid or ignorant.. Don't assume that in 1913 that there were not aware of the consequence of creating interest on debt... 1933 unlawful taking of money, 1971 closing of the gold window, and repeal of the Glass Stegal law were not stupid mistakes or unintended consequences or errors... to assume that Ben Bernanke is ignorant or inept is arrogant to the extreme... he knows exactly what the outcome is to be... I am not talking about short term interest rates either...
@ 175 oil the fed will raise rates ... IRAN gets bombed = 175 oil ... SO FUCKING SAD THERE NO GATE KEEPER WATCHING THE BANKS
the myth is that the Fed has any control over interest rates. They lost control of effective rates long ago...
Check Jumbo rates etc.
Again they are maintaining the charade of control while keeping the spreads wide for it's best customers. Problem is those "customers" are keeping said money and blowing the comm. bubble.
Must be nice to paper over mistakes with 2% for another 3 months.
Ciao
MS
"America's advantages all militate toward a continued decline in manufacturing, and that's fine. Manufacturing is boring and doesn't pay well. The United States has great educational and cultural advantages over the rest of the world. If they want to make our products and let us be their accountants, lawyers, and entrepreneurs, I don't see a problem."
The day we will no longer read such statements, will be the beginning of a real recovery for the US.
"In theory, the best outcome is to find is a sweet spot that allows global growth outside of the US to decelerate while avoiding a free fall in the Dollar. "
Does this mean that let foreigners suffer than we American could enjoy the free ride?
Yup... this is most certainly "it."
Should we go long the tinfoil hat makers?
son of Curtis,
In the last thread you mentioned kingdom halls. Are you a jehovah witness? I was raised as one. Cannot imagine driving door to door preaching, or driving to the kingdom hall for five meetings a week with five dollar gas.
Regarding BB, my grandfather always said "Be wary of a man with a beard as he has something to hide"
I'm with Bob Dobbs on the roboticization of manufacturing; the key is that we could develop a workforce to maintain the automated production lines, which would mean high-value add jobs. Automated manufacturing would also mean higher-quality, more consistent product...which is also good.
With the Fed holding nominal interest rates well below the rate of inflation, it's no wonder we are continuing to see increases in the value of commodities, a decline in the dollar, and so on. And the Fed isn't alone ... several other global central banks are running a negative REAL interest rate policy. The last time the Fed did this as consistently as it has in the past few years is the late 1970s-1980. What was the resulting economic environment? Stagflation. Same story now (though admittedly, it's more of a stagflation-lite, with lower unemployment and lower inflation)
I am increasingly amused by the tendency of commentators to treat manufacturing as a favored, more morally upright and sound basis for growth than services. It's the mirror image of the tendency to do that with agriculture when agriculture was declining as a share of national income.
America's advantages all militate toward a continued decline in manufacturing, and that's fine. Manufacturing is boring and doesn't pay well. The United States has great educational and cultural advantages over the rest of the world. If they want to make our products and let us be their accountants, lawyers, and entrepreneurs, I don't see a problem.
A services economy isn't a problem per se so long as you don't import more than you export and that you don't consume more than you produce - that production can be 'services' but they have to be competitively priced & exportable. It becomes a HUGE problem if you import oil & mfg products and don't return anything else except 'paper promises' (incur debt - which we have done).
Now there is nothing saying you can't export services to exchange for those - service providers just have to do it which means they have to PRICE their services so as globally to take foreign market share just like foreigners do here in mfg & ag & mining. What is so hard to understand about that?
Except look at the record - neither has happened... US services (almost 100% labor) is priced FAR higher than foreign services AND we don't export anywhere need enough services to offset the oil & mfg goods we import. Therein lies the problem.
There is NOTHING more noble about mfg & ag & mining than services. But if you do plan on building a 'services economy' you have to either ... trade services to balance trade, make enough mfg & ag products to export in exchange for what you import OR go without oil & mfg'd goods & food... running huge CAD forever isn't a long term option.
Its really that simple.
Consumer spending up more than predicted. Due probably to government checks. This society simply cannot save, and spends almost everything that it gets and more too, if it can borrow. That is not good either.
No fiat currency in the whole history of mankind has not ended up worthless.. what ever + or - interest rates do is just a wash rinse repeat cycle.. you cannot create a formula of 1+.02%=1...
That intelligent men refuse to see that boggles my mind... you cannot create money it is a medium of exchange...
When and I do mean when the currency collapses their is only one thing left..who owns the resources.. if you who are dependent upon labor for your rent must sell that labor somewhere somehow to those who own "capital"...
No other consequence can or will be the outcome... manufacturing, service, intelligence are all just a part of "labor". Capital is who owns legal rights to the resource.. If that court is set up in a state and it is sovereign was decided by the war between the states...called civil war by the winners... if it was to be a supreme court and a constitution was decided by the international war called WWII by the winners... The legal right to ownership will rest now with the World Court enforced by the supranational force called the UN... No one should deceive themselves into thinking they own anything that cannot be "taxed". Carbon tax, global warming are all just part of the new wash rinse and repeat cycle.. Extremely few on earth want the country of Iran bombed excepting leaders who have a plan to consolidate power into a center. If I am wrong name one just one national leader who want power to go back to local governments... I mean a real world leader...
The one-cent (penny) and five-cent pieces (nickels) are considered "minor" coins of the United States and have never contained precious metals.
Currently, none of the coins produced for circulation contain precious metals. However, the continued use of reeded edges on current circulating coinage of larger denominations is useful to the visually impaired. For example, the 10-cent (dime) and one-cent coins are similar in size; the reeding of the dime makes it easily identifiable by touch.
Maybe Bernanke should take off his blinders!
During the 1st(So Far) Great Depression 85% of people lived on farms,today less than 5% do.We'll know times are bad when we see more people with gardens in their back yards.We'll know times are really bad when we see gardens in their front yards and chickens,rabbits,pigs(And here we mention Goats again)ect. kept.
PPT will succeed today.
B writes:
"Misleading' Fed Should Let Banks Fail"
Video - CNBC.com play=1
Thought I should post this again for you latecomers. Thanks for bearing with me those who have seen it.
BB | 06.27.08 - 11:29 am | #
BB - if you listen to Faber all the way through when he says 'let the banks fail' he also says just 'transfer the accounts' to a solvent bank entity - no problem - at the end of the interview.
Got a clue for everyone - the operational details of such requires A LOT of gov't intervention & regulation & arm twisting by somebody with regulatory clout (somebody like the Fed or FDIC).
Probably more than a little 'honey' to go with the 'medicine'.
That is RTC II - what he describes isn't even that far from what happened w/ Bear Stearns.
If they really let banks fail a la 1800s panics (just let'em go) - we'd see the euro at about $5 and oil at $400-500. You wouldn't get anyone to touch the dollars, US assets or trade w/ us for anything.
Faber is talking his book - some of it makes sense but still his book.
Mel writes:
PPT will succeed today.
It does look that way doesn't it.
I am betting the other way. Let's see at the end of the day.
el presidente,
Haven't you heard? Accounting and financial analysis are being offshored to India. Software development too, starting in the mid-90's. And high-tech startups during the boom were largely staffed by Indians and Chinese with H1B visas.
I tell my kids it's OK to work in services, but choose one that can't be offshored.
What a shock, The US Mint has an annual report available from 2006, how convenient to NOT be accountable!
The United States Mint Annual Report
Beginning with the FY 2005 financial statements, the United States Mint no longer includes the cost of
protecting the nation's gold and silver reserves as an offset against Other Financing Sources (seigniorage).
Therefore, the Protection Program, which represents the cost of protecting the nation's gold and silver
reserves, reflects a loss on the Statement of Net Cost, and the Circulating Program reflects a zero net cost
because revenue equals total costs. The cost of securing United States Mint facilities, staff, and assets is
included in the cost of production and is a proper charge to the Circulating Program. This change was made
as part of the conversion to a government United States Generally Accepted Accounting Principles (USGAAP)
presentation of the FY 2005 financial statements.
God bless you Bush and all the folks thar stealing us blind....you fucking assholes!
dryfly, you said something several months ago that I liked so much I kept it:
"Either quit burning so damned much oil or make something valuable to exchange for it. Paper don't cut it anymore."
dryfly writes:
Faber is talking his book - some of it makes sense but still his book.
Evryone talks their books. However i think faber is right this time. I am not sure about your dollar projections but am sure that it isn't appealing as much now to everyone else.
He did mention gold, which is currency neutral.
Terry - that hasn't changed. Its a concept that is as old as dirt.
PENNY DREADFUL
Theyre horrid and useless. Why do pennies persist?
Dept. of Currency: Penny Dreadful : The New Yorker
Luhrmans experience highlights a growing conundrum for the Mint and for U.S. taxpayers. Primarily because zinc, too, has soared in value, producing a penny now costs about 1.7 cents. Since the Mint currently manufactures more than seven billion pennies a year and sells them to the Federal Reserve at their face value, the Treasury incurs an annual penny deficit of about fifty million dollarsa condition known in the coin world as negative seigniorage. The fact that the Mint loses money on penny production annoys some people, because one-cent coins no longer have much economic utility. More than a few people, upon finding pennies in their pockets at the end of the day, simply throw them away, and many dont bother to pick them up anymore when they see them lying on the ground. (Breaking stride to pick up a penny, if it takes more than 6.15 seconds, pays less than the federal minimum wage.)
son of curtis
i might disagree with a point here or there...
but to the thrust of what you said, i say right on.
what's going down, macro-wise is exactly what the policy makers intended and want
that is,a decrease the goods and serves that amercians can afford and consume.
decrease the value of debt, social service commitments (ss) and the future cost of pension plans.
no policymaker nor elected official nor political party would last long telling americans the truth
Evryone talks their books. However i think faber is right this time. I am not sure about your dollar projections but am sure that it isn't appealing as much now to everyone else.
He did mention gold, which is currency neutral.
BB | 06.27.08 - 12:28 pm | #
I am not a 'hard money' nut but do agree with him the dollar is toast. Tim Duy's piece is complimentary in that he says the Fed can't really do a damned thing about it. There's your rock & hard palace.
In the end we will be a lot poorer until we decide to go back to making things & providing services we can exchange GLOBALLY for the stuff we consume.
Mel writes:
PPT will succeed today.
BB writes:
It does look that way doesn't it.
I am betting the other way. Let's see at the end of the day.
I am betting that neither of you are right. I read on a UFO sight that the PPT was on vacation with Bigfoot in Loch Ness.
"We'll know times are really bad when we see gardens in their front yards and chickens,rabbits,pigs(And here we mention Goats again)ect. kept."
Already been an article in the local "lifestyle" newspaper about the joy of raising chickens for enjoyment (and coincidentally food), and the moral righteousness of being a locavore (eating food raised close to home).
Could be they're just making a fashionable virtue out of a coming middle-class necessity? Makes you wonder. I've got a big enough backyard for chickens, but I'd have to raccoon-proof it!
"also, not sure I'm overly comfortable with counterparty risk. I have a lot of bets out there that have counterparty risk (Proshares funds)."
Yes, it's been bothering me so much, I got out of proshares today. Though people who stay in will probably do well.
dryfly writes:
providing services we can exchange GLOBALLY for the stuff we consume
Someone once said innovate or die, it hold true now more than ever.
I value your input and thank you for it.
"PENNY DREADFUL
Theyre horrid and useless. Why do pennies persist?"
Nothing compared to the change I had to lug around in France the past year. Maddening. And you can't get rid of it at banks (there are signs in the windows stating "no change accepted." Sent a lot of postcards!
Today crude has been up above $142 a barrel
Copper hit its highest level in nearly two months on Friday, boosted by strong fundamentals and falling stocks, but worries about demand Chinese demand were expected to cap gains.
Aluminium held firm as investors bought on expectations that rising costs of energy, which analysts estimate accounts for between one-third to 45 percent of smelting costs, would help push prices towards the record $3,310 set in May 2006.
"Dollar weakness and the possibility of a Peruvian miners' strike that could start on Monday could lend further support," brokerage MF Global said in a report.
Peruvian miners are moving ahead with a plan to strike for better benefits starting on Monday, despite pleas from the government to reconsider their protest, a union leader told Reuters on Thursday.
The sterling surged to a two-month high versus the U.S. dollar. The sterling climbed to 1.9950 in the late morning, its best level since late April. In the U.S., the Reuters/University of Michigan Consumer Sentiment Index came in at 56.4, a slightly worse-than-expected result.
BB- I'm out of the 2x long gold ETFs today.
Gonna wait until the next shoe drops.
dryfly-I agree with much of what you say. However, the US does export a lot of IP, both in the cultural and technological areas. In my industry (biotech) the ROW combined is still not equal to the US. Of course, it's difficult to export enough to pay the oil import bill at $140/bbl.
As for the $, despite the gnashing of teeth, it hasn't gone anywhere against the euro, loonie, yen or pound since March, despite enormous turmoil and huge commodity inflation.
IT-Why get out of DGP today? SKF hit 150 today..
Interesting Times writes:
BB- I'm out of the 2x long gold ETFs today.
That may be wise. But am betting that Trichet will do his duty. Let's see what happens next week.
I am still looking for a negative close on equities today.
I have 2 gardens and a farm, the rest of you better get with the program.
Anonymous writes:
I have 2 gardens and a farm, the rest of you better get with the program.
Quit scaring me will you, it's bad enough as it is.
If the policy makers were American your assumptions would be correct.. they are internationalist with no loyalty to anyone country... too many people get caught up in racial, political, and conspiracy turmoil.. this is not about race or politics but economics... those who get caught up in those issues make any discussion go nowhere... if fact they are trolls on the internet...
@BB
Looks like you may be wrong. I believe the FED and the PPT will control the descent of the market because it is the bellweather for the sheeple's mood. A crash = people's mood tanks, a slow descent.......and before you know it everyone looks around and says "how'd that happen.....
I wish it would crash....I'm short....
randy writes:
@BB
Looks like you may be wrong.
I'll admit it at the end of the day. Till then i have my reasons. Good luck on your shorts.
@son-of-curtis
you sound like you've around the block a few times. do you think the PPT is controlling the markets, .....DOW, Gold, et al?
I'd be intersted in your opinion.
Thanks.....:>
Randy,
If they don't start buying up futures hard soon it will be hard to stop BB's prediction from not coming true
I'm now 95% cash (Canadian dollars).
5% long oil income trusts. (pays the gas with the dividends)
We're about to see another inflection point.
@BB
what 2X long gold etfs did you have?
son-of curtis
i hope i didn't suggest that all or even most of the policymakers are american.
but many of our elite in business and politics are "in" on the "fix" if not outright part of the group that puts the fix in, or decides what to fix.
I am increasingly amused by the tendency of commentators to treat manufacturing as a favored, more morally upright and sound basis for growth than services
You, sir, are an idiot and apparently need an economics lesson.
The Primary sector of the economy is resource extraction and harvesting. This produces the raw materials that become finished goods in the Secondary sector.
The Tertiary sector provides services that increase the productivity and/or increase the leisure time of people, but by itself it does not increase the national weal; rather it is a net drain on wealth and cannot exist except upon an adequate basis of the Primary and Secondary sectors.
Where wealth is consumed in the domestic economy there must be an offsetting wealth creation activity, or an asset sale to someone outside the economy.
You can't eat ledger books, or house yourself in TV shows.
Though I do of course agree that the US has done a pretty good job of being the world's premier R&D center, though we could be doing a lot better in this area.
Believe it or not, I'm up 1% today, with an all-long position.
2x LONG gold etf HGU (toronto stock exchange)
2x SHORT gold etf HGD
NEWS BREAK
Ijust saw Ben flying overhead and he sprinkled some dollar bills out from his helicopter.
Now I am able to and fill my tank with gas.
"Believe it or not"
LOL
crispy&cole
Both of you are morons.
Actually, I agree with that(If you knew where the name came from, you would also agree)
I include you sir, as well as your namesakes.
Cat fight!
LOL.
What is working for you today?
Same thing that's worked for me for 3 years from $3 to $35, ELN.
Great post CR--as usual. Tim Duy is a smart fella and I agree with how succinctly he "chalk-talks" the three conditions that must hold for the Fed to successfully navigate the current challenges.
But it reminds me more than a little of the crippled Apollo 13 mission:
Then, we'll get through this. Hey, it worked for Tom Hanks!
We are in what I call the "Smokey The Bear" market. If you remember the US policy on forest fires was any fire was bad. It this approach worked for about 40+ years. Then we started to have super fires resulting from all the dead wood that had accumulated over the decades. Even small fires suddenly became catastrophic. Now the fires burned to hot to be helpful the environment and the ecology of our forest changed for the worst.
In 1988 when the stock market collapsed the fed stepped in to save the financial system, which we all agree was a good thing. However this policy soon morphed into a prop up the stock market policy, so that any dip in the market was seen as bad for the financial system. So like Smokey the Bear, the fed would not allow a protracted bear market under any circumstances.
So when you hear the experts on TeeV say the fundamentals do not justify the sell off, they may correct at some level. However the die has been cast and the markets eventually find a way to correct themselves, only this time it will not behave as everyone expects.
I'm up 1% today, with an all-long position.
funny, so am I . . . 'course, my all-long position is SDS.
In the absence of such equilibrium, the US economy can hobble along only as long as the following three conditions hold:
Haha... so once again the key to making the economy better is firehosing paper everywhere, not making our labor force and industries more competitive or educating our population about financial and economic matters that might actually lead to wise decisions.
Paper is the key.
More shopping sprees are the key.
Rewarding people with money for just doing more of the same.
No focus on real economic goals or outcomes.
It's all about building a paper screen that hides what's really going on and hoping it's enough to fool your creditors in to thinking that you have something behind the big paper facade to pay them back with.
The goal now is just to keep them fooled as long as possible.
Our economy requires deception to continue functioning.
I thought SDS broke up after the 60s were over.
Marc Faber and Peter Schiff make a lot of sense, except that they are so bullish on gold. What are they going to do with a pile of gold? It's pretty, and it's a good non-corroding electrical conductor, but what other intrinsic value does it have? You can't burn it for fuel. You can't eat it. What's the point of owning gold when people need food and fuel?
I'm gonna bury my money in the back yard - in the form of plants, seeds, compost, and fertilizer. It's not beyond the realm of possibility for food to become the new currency when this economy finally hits bottom.
Bank index broke down 10 yr support line..BB I think you be 2 for 2
We're all agreeing that the Fed has good motivations, right?
Because if we started thinking that they were like the management teams of some fallen companies lately, and were like, you know, just robbing people for personal or oligarchic gain, well...that would be nuts.
OK...what might it do?
LA writes: What are they going to do with a pile of gold?
Peter Schiff is a gold diaper baby; his father is such a gold nut he's in prison for stealing tax payer money by refusing to pay his share. Schiff and his father believe taxes not based on gold are illegitimate. They have sex with gold. Answer your question?
IMHO those in control of resources own both sides of the game..FWIW check into what actually owns the stocks that are issued. I am talking about the clearing house here... If you own the resource that is used up in war what care you whose young son dies...as long as the fight is about race, land space, religion, anything but the real issue...
Keep both sides supplied with weaponry issue all kinds of media controlled information about what the other side is doing to harm you, make sure both sides young men are supplied with enough nationalism and you win... simple as that... you sell them the articles of war, finance it and you always end up on the true winning side...
Dammit. I missed that really nice breakdown I've been waiting for by writing that stupid comment. Serves me right.
randy:
Am not particularly fond of Etf's, but stick with what you are familiar with.
I would still be a little hesitant on gold if it doeesn't breach 935 but will settle for 930.
Am not a gold bug, but if conditions persist, it sure would be good to be one.
Good luck with your trade.
Thar she blows my lad.
points at Dow index action
"PPT will succeed today."
All this talk of the PPT is silly. I doubt the PPT could tie their own shoes let alone accurately predict and then control the markets!
AC, I think we're fresh out of deceptio
"I'm up 1% today, with an all-long position.
funny, so am I . . . 'course, my all-long position is SDS. ;)"
Believe it or not I'm up 120% since April in my all Long PMs / Short Financials portfolio. Think i should trim?
I think the PPT wants the market to go down but not substantially. There may be a feeling that lower equity prices will lead to lower commodity prices.
They have sex with gold
ROFL. Ok you got me on that one. reminds me of Austin Power's "Goldmember"
Randy to answer your comment more directly..if I own the crap table what do I care if snake eyes or a bunch of sevens are rolled...jut as long as they are players at the table...
If we break 11,000 today - I am going Long!
Aheadofthecurve writes:
dryfly-I agree with much of what you say. However, the US does export a lot of IP, both in the cultural and technological areas. In my industry (biotech) the ROW combined is still not equal to the US. Of course, it's difficult to export enough to pay the oil import bill at $140/bbl.
As for the $, despite the gnashing of teeth, it hasn't gone anywhere against the euro, loonie, yen or pound since March, despite enormous turmoil and huge commodity inflation.
Aheadofthecurve | 06.27.08 - 12:46 pm | #
The CAD numbers don't lie - contrary to the 'dark matter' advocates. IP doesn't feed the dog unless you CONTROL the IP content once out side the borders & are able to harvest its fruits a long time.
Plus it is one of the most perishable of products you'll find anywhere. In the long run IP benefits those who use it the most wisely. I'd rather see us BUY IP from others and use it wisely (to create FAR greater wealth & value en masse for our society) than to develop it & all but give it away or lose it to others who will use it to produce wealth & value en masse for their people.
Obviously the ideal situation is to do both - create & use. I fear we are heading the opposite direction however.
The good news is that can change - the bad news is it isn't pleasant getting there - weaker dollar, more work for less pay (in global price parity terms). But it isn't the end of the world either.
And 'yes' the dollar has probably fallen as far as it is likely to fall against EU & CAN$, etc. Against RMB? I bet we've just begun...
Vix still 6 under march 08 high of 30's and skf pushes thru 150 high...hmmmm
There may be a feeling that lower equity prices will lead to lower commodity prices.
why? I would worry that lower equity prices will cause people to pull their cash from equities and put them in the commodity markets. (which they're doing. I know because it's what I am doing)
what the Fed NEEDS to do IMO is to raise the rates of return on risk-free investments (i.e. Treasurys, Savings Accounts etc). This can be initiated by raising the FFR which will strengthen the dollar and also make the absolute rate of return on these investments higher
It will possibly cause the equities markets to go down but who cares it's going down anyway.
but more importantly it will give ivnvetors confidene that we want a strong dollar. Thus SOME of them will leave commodities (which they are using as an inflation hedge) and go into Treasuries and Banks (bolstering our bank balance sheets)
so you'd have higher "safe" interest rates, more capital flowing into the banks, capital flowing OUT of commodities. I'm not sure what'd happen to stocks.
as commodity prices fell, people would pull their money out of them and put them in the "safe" investments again.
Can any of the 279 visitors out there tell me why PNC is trading at $58, the same price it was at 900 DOW points ago? I am looking to expand the breadth of my regional shorts and someone suggested I take a look at them. Seems like something is going on there to hold them up though...
Tks
Joh
I'm a GE retiree.Been gone almost 11 years.Debated it,but got out of GE stock when I retired after buying it for 33 years.Used my 7% and GE's 3 1/2 and a extra 10% for about 10 years for nothing but GE stock.Had I think 7 splits.Get to 120-140-split-run up again 120-140-split-ect.The reason I'm relating this is I just saw GE at 26.45 and I know MANY people who left before and after me plus those still working there who have kept everything in GE stock.This was bought at from about 65 on down.It's sad,but I have heard several say that "When it gets back to 60,I'm selling".A lot of these people are going to die without ever cashing in ANY of their stock.They will deny their and their family a good life because they can't accept reality.
I have been trampled, run over, crushed, and stomped by the PPT many times.
Isn't balancing the risk of inflation with the risk recession then develping a monetary policy according pretty much the job description of the Federal Reserve? Nothing new there. Maybe I am missing something, but I doubt it.
Lefty, can you post the recording from your security camera at the store? Especially the trampling, bulls on the ru
Haha... so once again the key to making the economy better is firehosing paper everywhere, not making our labor force and industries more competitive or educating our population about financial and economic matters that might actually lead to wise decisions.
Unfortunately - part of making our industries & people more competitive is making them 'cheaper' vis-a-vis global competition. 'Paper' does that without making people or businesses take a nominal pay &/or earnings cut - but the result is the same. If feels the same.
Superior performance & productivity earns a premium but a modest premium. What's worse is the competition is NOT standing still - they've been saving & investing (private & public both). We? Not so much. Some, yes but nowhere near enough vis-a-vis competition.
[Insert appropriate popcorn reference here]
Just a speculation: if the indexes close at these levels, even if after going lower today, there's a good chance for a flush Monday establishing some type of support.
My wife's sugarcane plantation in Guatemala is starting to look more and more attractive as the days go by. Real estate is expensive though... you need to pay up to feel safe.
Nice yield on that crop though.
the US does export a lot of IP
IP is overrated in terms of exports. Because it's a "soft" product, many of the IT/Pharma companies have been "offshoring" IP, even if most of the R&D was done in the US. Ireland is a notorious IP haven (10% corporate tax rate, 0% on patent royalties)
Follow up: I'm focusing on the emerging markets etf EEM (cause I own EEV), and there's a reliable pattern forming (inverted W) that projects about 2% lower if broken. The broad markets would go in tandem, so we could really break down today.
Market not really doing so bad today... maybe on Monday then.
Hmmm... Dennis Kneale says this is just a crisis in confidence.
So, marketarily speaking, going long on gold is the missionary position? Ack - getting a visual. Schiff and Pop Schiff going long on gold. Eewwwwwww.
Head exploding...too
many
jokes...
Anonymouse writes: ...we could really break down today.
Shut it! We don't need you to tell us the obvious!
I'm up 1% today, with an all-long position.
I'm down 4.77%, SWHC...........
What really scares me is that oil is breaking all-time highs with little resistance.
Ahh... The crisis in American confidence is over in Beijing
There is no film in the cameras, cheaper to operate them that way. Actually when I was in Pomplona when I was a young man I was going to run with the Bulls in the morning, (Seventh day, of the seventh month, for seven days,) except I met this lovely English girl, and we both got drunk, etc,etc.
I think thats on film somewhere.
Head exploding...too
many
jokes...
LA | 06.27.08 - 1:45 pm | #
Somebody needs to patent & produce 'brain bleach'... or those thingies from 'Men In Black'... there are posts here where sometimes both wouldn't be enough.
Gold kisses 930.
Interesting Times writes:
What really scares me is that oil is breaking all-time highs with little resistance.
It's a good thing, it will drop and then resume, sure to catch some complacent traders out.
Just reloaded Bloomberg
. Got an error message saying, "Error 666: Temporarily out of green pixels. Please try again later."
uuu writes:
Gold kisses 930.
935 and let's see if it can ho9ld it.
"If you strip out food and energy, inflations is not a problem." I think Ben is a secret admirer of Mugabe.
Between Ben and Huss it is time for me to go long on prayer rug manufacturers and buy an open airline ticket to Moscow.
Crude hit $142.50...I might start riding my bike
Holy sh!t I just looked at USO!
Again, the close is key to whether this is support today.
Finally. We are now officially in a BEAR MARKET. Down 20% from Oct07 highs. We got that milestone out of the way. Let's see what happens here.
Okay, alright. I'm taking profits on DXD (own it since $52.80). It's going parabolic. The market may suffer a major reversal today.
Anonymouse writes:
The market may suffer a major reversal today.
Somehow i don;t think a reversal is in place. But go ahead and grats on your good trade.
It's a good thing there was no "good" news today, we would have realy slid into the ditch.............
BB,
Thanks. I feel much better now.
Vix still 6 under march 08 high of 30's and skf pushes thru 150 high...hmmmm
I know what both Vix and skf are... but what does this relationship mean in practical terms? That there is still room for more market correction?
dryfly
Let take a moment to remember old unemployedit and note that a lot of Intellectual Property went out the window when we offshored our Information tech or allow foreign workers to display native IT workers. In short instead of native sons and daughters having high paying IT jobs, most are competing with overseas labor with low wages.
This started with steel long ago, but was masked by easy debt substituting for income.
display should be displaced
Personal savings rate jumped to 5% in May.
404 Page not found
Mr. Market to Mr. Bernake: "Checkmate."
I went under water on DXD when I bought it in April at $52.80, but given that I sold it at $65.05 today I'm fine with a draw down (I took a much larger draw down in the EEV).
But really... Do not buy DXD now! It needs at least a significant consolidation if not a retracement downward. But it will eventually go much higher from where I sold it.
Interesting Times writes:
Mr. Market to Mr. Bernake: "Checkmate."
You wish. I am looking at the bailouts that will be coming.
vader - I was thinking of the old gang when I wrote that. Appears we never learn mistakes from the past.
"A services economy isn't a problem per se so long as you don't import more than you export and that you don't consume more than you produce - that production can be 'services' but they have to be competitively priced & exportable. It becomes a HUGE problem if you import oil & mfg products and don't return anything else except 'paper promises' (incur debt - which we have done)."
-dryfly
This was meant as a critique of my post; I recognize that, and agree with the critique. On blog comments you can't really set out all the caveats you need to make a really airtight point, so I usually don't try.
Obviously buying goods on credit isn't sustainable. I was singing the praises of the service economy, not the praises of the debt economy. And I think it would be great if we could mechanize manufacturing in the United States sufficiently to outcompete China. Unfortunately, the cost of labor overseas is a bigger advantage for most manufacturing purposes than the lower cost of capital in the United States at present.
So new manufacturing generally sets up overseas. It is important to note that the USA still manufactures just as much as it did in the '70s - it just does so with fewer people and for lower prices because we do so much more efficiently - and as a result Manufacturing as a share of national income has declined... precisely because it is so much more efficient than it was in the '70s.
This is of course precisely what happened to agriculture in the century leading up to the '70s. Go figure.
Since 1990, the United States has been in a truly unique position in world history; a single hegemon astride the entire world. That's not something that is likely to last forever; and indeed, the seeds of its end were sown before 1990. Deng Xiaoping's industrial (and more important, ideological) revolution in China begin in 1980 or so.
Anonymouse writes:
Thanks. I feel much better now.
Sell enough to make you able to sleep at night. I value your technical analysis.
Thank you.
Kis,
Seems majority here think it could run more or ?
VIX Index Charts - Cboe Market Volatility Index Charts
Obviously buying goods on credit isn't sustainable. I was singing the praises of the service economy, not the praises of the debt economy.
That caveat is the killer behind the 'services only' argument. Until it is answered - its a pie-in-the-sky nonstarter of a solution.
I am actually a huge proponent of 'services'... services are by far the most environmentally 'sound' alternative. I mean how much green house gas is produced during a massage?
Heck I think we should all be performance artists & bloggers... as soon as we figure out a way to live without material (like food or fuel). Until then we are going to have to either produce it OR produce something of value to trade for it. We aren't doing enough of either in aggregate.
That is my point - service economy advocates haven't produced a workable 'model' to sustainably & consistently get us there. Continued CAD & 'twin deficits' were the only things that have propped it up until now.
But I'm open to suggestions.
el presidente:
you've brought up increased mechanization of US manufacturing a few times.
will this be able to compete with manual labor going forward IF energy costs continue to soar?
sadly:
I feel we have to do what China and everybody else is doing.
Devalue our currency making our labor more "competitive".
this will keep people working, albeit for a lower standard of living.
it reminds me of stories I heard about China 20-30 years ago. The local official was givin a US farmer a tour of a farm. The US farmer saw all these peasants doing manual picking of crops. He said "wow, if you put in machines then you could increase your yield significantly and also decrease your labor costs!!!"
to which the official responded "Yes. And if we do not do these things then we can have 100% employment"
An upwards surge is happening, i still think we shall finish in the negative. Let's see.
I mean how much green house gas is produced during a massage?
Um. Uh...oh, never mind.
ppt at work?
Not much left til July 4th. GS forecast oil to be $150. What a precision.
Gold kisses 930
I bet those got almonds in them!
"So new manufacturing generally sets up overseas. It is important to note that the USA still manufactures just as much as it did in the '70s - it just does so with fewer people and for lower prices because we do so much more efficiently - and as a result Manufacturing as a share of national income has declined... precisely because it is so much more efficient than it was in the '70s.'
One would think that's a good thing, no?
And how much of the imported stuff, other than oil, is necessary? I look at the sheer quantity of crap in most houses. Wouldn't our kids be better off with 2 or 3 really high quality toys than 50 p.o.s.'s? Buy 3 high cost items instead of 30 cheap ones and you could afford domestic.
We are all the financial economy now!
There's still nothing wrong with an all-services (let alone our 70% services) economy. The problem is that we are ineffective in exporting services to match our imports of manufactures, leading to a large current account deficit, massive inflows of foreign capital, and dollar depreciation.
If we exported more investment banking services, for instance, that would offset Chinese toys just as effectively as exporting American toys. It's just easier to move goods than services, so we're on the difficult side for exports.
The solution, of course, is to depreciate the dollar and decrease the cost of capital domestically.
Would have been nice if we had started doing this before oil went up.
One would think that's a good thing, no?
And how much of the imported stuff, other than oil, is necessary? I look at the sheer quantity of crap in most houses. Wouldn't our kids be better off with 2 or 3 really high quality toys than 50 p.o.s.'s? Buy 3 high cost items instead of 30 cheap ones and you could afford domestic.
Aheadofthecurve | 06.27.08 - 3:38 pm | #
I agree but that is NOT where we are as a society - not yet anyway - we want both & the world lends it to us. However a weakening dollar forces a decision: imported oil or imported crappy mfg goods, can't have both with weak dollars. Running huge deficits to have both is getting harder all the time.
::::
el presidente writes:
There's still nothing wrong with an all-services (let alone our 70% services) economy. The problem is that we are ineffective in exporting services to match our imports of manufactures, leading to a large current account deficit, massive inflows of foreign capital, and dollar depreciation.
If we exported more investment banking services, for instance, that would offset Chinese toys just as effectively as exporting American toys. It's just easier to move goods than services, so we're on the difficult side for exports.
The solution, of course, is to depreciate the dollar and decrease the cost of capital domestically.
Would have been nice if we had started doing this before oil went up.
el presidente | 06.27.08 - 4:41 pm | #
Yup - but we could export way more 'services' if only our service professionals were cheap enough. They aren't.
Weaken the currency enough and our services get 'cheap'. But so does mfg, agri, mining, etc. Of course if $$$ got that weak then I Bankers wouldn't be able to vacation in strong currency regions (like Europe) either. They would be too poor - just like mfgrs.
Currency ratios are as big a part of this as is 'productivity'.
Oh and it isn't just easier to 'move' products, it is also easier to 'inventory' products - to trade where AND when demand requires. Services need to be produced 'on demand' - tough.
That's why 'tradeables' are almost a synonym for 'products' while 'non-tradeables' are almost a synonym for 'services'. That goes all the way back to Ricardo. Products 'trade' services don't or rather 'didn't'...
And as for doing this rebalancing BEFORE oil took off? The weakening dollar due to our massive long running CADs & resultant fishy financials is a big reason WHY oil took off. And food. And base metals (steel, aluminum)... etc.
It wasn't an accident. It was an inevitable result of decades of deficits & development offshore. It should have been expected.
Dry fly, I agree that it isn' the move to services per se that's the problem. But the fact that ALOT of 'em were financial services...
Organic George- I like you Smokey the Bear analogy.
I think Tim makes a good point. IMO we are inflating to counter the deflating of the Housing bubble. So far it is going as well as could be expected.
We still have 6 months of deflating and deleveraging. After that we have probably a year of slow scrape off the bottom economy.
Bottom line - Inflation continues for 6 months and after that it is uncertain how long it will take to stop it.
Energy and other commodity prices are not rising due to "inflation", rather they are rising due to supply not meeting worldwide demand at lower prices. Any attempt to correct this by raising the price of money domestically will do nothing but make us less competitive internationally. The damage was done the day we exported the first manufacturing job to China, and put into overdrive when we started exporting high tech jobs to India. Now they are our competitors for commodities. In they case of oil they are geographically closer than we are to major supply chain areas like the Middle East and Russia. Blame God I suppose, but interest rates have nothing to do with that. What would help would be to curtail our simultaneous wars on Muslims, Venezuela and Science. That is an ignorant combination.