Sub-Prime leading collapse.
OK now I'm worried. The Dollar is taking a battering from the sub-prime fiasco and it has no sign of abating. Its great news for me buying a new Macbook but this couldn't come at a worse time for the Eurozone.
So, are we over stating the case over here or is it as bad as we think?
Ulairi wrote:I actually think a strong dollar policy is bad economic policy....I also find this curious. Do you mean that parity is where all the currencies should aim for? When it comes to economics I'm a bit clueless
No...well, yes, but that doesn't really happen. 
What I mean is that a weak dollar will help increase our exports, decrease our imports, and make our capital markets more attractive to foreign investment. I think that our current monetary policy is quite good and anti-inflationary. I also think we are sustainable since we are the worlds reserve currency.
Since we are in a period of heavy borrowing, increasing the dollar would actually hurt our economy.
For instance, there are 108 beads in a Catholic rosary and there are 108 stitches in a baseball. When I learned that, I gave Jesus a chance. ~Ron Shelton, Bull Durham, 1988
About LDS, I know that tea isn't ok for them to drink, unless you're chinese and then it's ok. The LDS comes to my girlfriends TSA meetings and has tried to get her to sign up.
For instance, there are 108 beads in a Catholic rosary and there are 108 stitches in a baseball. When I learned that, I gave Jesus a chance. ~Ron Shelton, Bull Durham, 1988
Man, you've got thousands of highly intelligent, very savvy people on Wall Street and in hedge funds arguing about that right now. No consensus there.
With Optimus Prime fighting the Deceptacons now, I think we'll all be ok.
Well, Cooking Mama didn't help me become a better cook, and Trauma Center certainly didn't help me become a better surgeon. I have the proof of both sitting in my freezer. -- imbiginjapan
I've been saying this since late '99 or so: we're headed for a near-complete financial collapse. I've gotten tired of yelling it from the rooftops, but it's just as inevitable as it ever was. I was expecting a major but survivable depression after the Nasdaq collapse: I assumed that the Fed would protect the value of the dollar and, thus, worldwide American hegemony. Instead, they prescribed more of what made us sick in the first place: massive money printing. (actually lending: the Fed lends dollars into circulation.) All this money sloshing around had to go somewhere, so it went into real estate, along with massive leveraged debt on the part of consumers. To stave off the damage from one bubble, they started two new ones that are much, much, MUCH bigger. I'm not at all sure that the United States of America, as the current entity, will survive the coming collapse. There will be something called the US, but I think it may end up being a different government entirely.
Since debt is fundamentally the problem, the government's response will be hyperinflation. It has two choices: massive debt collapse and deflation, or massive money printing and hyperinflation. It will probably try to strike some middle ground, but it's going to eventually end up in one scenario or another. I'm betting hyperinflation, and that we're going to eventually end up looking a lot like Zimbabwe. We don't have the economic means to pay our debts; it's simply not possible. Hyperinflation feels less painful when you can't pay debts, but it's just as destructive.
For the last eight years or so, other countries have propped us up; China and Japan have been our biggest benefactors, sopping up huge amounts of excess dollars... in essence, they imported our inflation, sending their economies into massive expansion. Because Japan had been in deflation after THEIR stock market bubble, I expect they may do all right, but China's gonna be hurting when their exports collapse. You can't grow an economy at 20% a year for that long without doing tremendous damage; people build factories and the like in the expectation of things going up at that rate forever. Capital assets get massively overbuilt, and then fail in an oversupply situation. Even factories and capital investments that would have been perfectly profitable in a normal situation will still fail because of the oversupply of goods. That's what happened to us in the late 20s, leading to the Great Depression. So while we're inflating ourselves to death, China... I dunno. I think they might deflate while we inflate, but I don't know for sure. I suppose they might continue to import our inflation, but I don't think they can swallow it all; I don't think anyone can.
One thing I do know: the pain we are all about to experience is primarily the fault of Clinton and Greenspan. They were smart enough to know what this meant over the long term, particularly Clinton. Bush's team was too stupid to figure this stuff out, and while they share blame for continuing the stupidity of the 1990s, they didn't start it, and they were backed into a corner by the time they took power.
We have completely given up on the idea of fiscal responsibility in government; it took about a generation to spend our accumulated wealth, and now we're starting to fall apart.
I think you forgot a few points Malor. I'm more of the opinion that there was a big push by those people in the know to let this continue as long as possible so that they, and their friends, could get as many hard assets outside of the US as possible. Thereby letting them ride the whole thing out without too many problems. I really wonder how much of the world will follow us into collapse this time.
"I love deadlines. I like the whooshing noise they make as they fly by." -- Douglas Adams
When I saw the European currencies merge into the euro and witnessed the trade deficit grow. I said the future name of the U.S. would be "North America special economic zone".
Go for their eyes boo
Okay.
So what do we do to protect ourselves?
"Sometimes I go around saying, 'Kommisar Paulson has seized the commanding heights of the economy!'" - Paul Krugman, asked if recent changes to banking are socialistic.
Stock up your canned goods for a minimum of three months. Stop drinking coke. And join a worldwide network based on conservative religious doctrine.
LDS ftw!
This is the internet! In our natural environment, atheists run in packs and have dictionaries! --- JoeBeDurndurn
I suppose we all should have bought all those monex gold coins that pretentious British woman was whoring on the comercials during CNN.
Go for their eyes boo
If you expect the collapse of the American government/financial system, I think your only choice is gold or foreign currencies. If you want to make money, then you're going to have to open your own business. In prior wild west situations, selling guns, liquor and whores worked out pretty well in the short run.
sounds like the founders of the city of Seattle!
This is the internet! In our natural environment, atheists run in packs and have dictionaries! --- JoeBeDurndurn
I read a history of the gold rush in California a few months ago and was surprised to find out that some of the guys who got the richest out of the Gold Rush never moved a grain of dirt. They made all their cash by trading with the miners, most of whom ended up with very little for their trouble.
That's precisely the story of the founders of Seattle, though it was the Klondike rush (or ruse depending on your point of view) that drove their revenues. Suppliers of Filson jackets, Ivory flakes, and Levi jeans made fortunes. The owner/operator of the largest bordello turns out to be the largest patron of the Seattle school system (though you will find nary a mention of her in the school history).
This is the internet! In our natural environment, atheists run in packs and have dictionaries! --- JoeBeDurndurn
It was unethical for the banks to offer people these cancerous loans, and stupid of people to sign up for them.
NOTE: This is not a doodle bug.
Spore
Also, you really shouldn't trust anyone else to keep it safe for you. We need to give proper credit to the man who predicted this long ago.
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kaostheory wrote:
It's easy for first time home buyers to be stupid. They should have been more careful but I can excuse their inexperience. It's the bastard brokers that wrote the loans that they knew people couldn't afford.
Go for their eyes boo
But...I *hate* Pepsi!
Anyway, if I stockpile gold, I'll only be easy meat for the raging suburbanites when the revolution comes.
"Sometimes I go around saying, 'Kommisar Paulson has seized the commanding heights of the economy!'" - Paul Krugman, asked if recent changes to banking are socialistic.
I actually think a strong dollar policy is bad economic policy....
You guys can prep and I'll continue on doing as I've been doing.
For instance, there are 108 beads in a Catholic rosary and there are 108 stitches in a baseball. When I learned that, I gave Jesus a chance. ~Ron Shelton, Bull Durham, 1988
Have you been reading this:
Semper Delectatio
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Here's an interesting article in the Wall Street Journal online, kind of related to this discussion. It's more about the savings rate, but it's tied closely to the discussion at hand. Two very bright economists in a point-counterpoint type discussion. (Subscription might be required...I apologize if it is):
http://online.wsj.com/article/SB118398853722660848.html?mod=home_whats_n...
As for me, my opinion is that subprime lending is, in general, a good thing. In the last 3 years, scoundrels have come in and screwed many uneducated buyers, but the market itself is essential if lower-income and less than good credit customers want a shot at homeownership. The lenders must be compensated for the additional risk or the loans won't be available at all.
The brokers deserve some of the blame, but the borrowers deserve the vast majority. I don't care if it's a first home or not, when individuals make the largest purchase of their life, they are responsible for educating themselves.
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Or, instead of buying gold, you can invest into gold. I moved about 30% of my 401(k) into precious metals a few month ago. The YTD return is 34%.
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After the collapse, I for one will be looking to pick up some sweet beach front property in California with my uber strong Canadian dollar.
Nevermind that our economy will completely melt down as well as the rest of the industrialized world...
I've heard this mentioned before, but I can't quite remember why it was a good idea?
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I also find this curious. Do you mean that parity is where all the currencies should aim for? When it comes to economics I'm a bit clueless
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You almost had me, convinced Paleo, until I realized the glaring flaw in your proposal: the LDS people drink Coke. It's the coffee and tea that must be eschewed.
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You are sadly and profoundly mistaken on the Coke bit. Most regard the restriction as an admonishment against "strong drink" and all of the ones I know do not make an exception for Coke or other carbonated beverages.
It's lemonade. Serve lemonade at your next LDS get-together.
This is the internet! In our natural environment, atheists run in packs and have dictionaries! --- JoeBeDurndurn
I think Ulari wants to make the U.S. more attractive to exports instead of us being a net importer. From the latest trade data I am seeing a falling dollar boosting our exports.
Playing WoW as: Vilius (70 NE Druid)
“The only function of economic forecasting is to make astrology look respectable.” John K Galbraith
Floating currencies are a cancer that is devouring the economic system; it allows for the rise of 'vulture capitalism', people who simply make money off currency moves. When currencies are backed by commodities, they're much harder to abuse, and there's not much of a market in speculating against them. (particularly when they're all based on the same commodity, which historically was gold, but the actual commodity in question doesn't matter.) When currencies float and have no inherent value, the vulture capitalists can extract huge amounts of real value from the economy. And currency trading is a zero-sum game; for every winner, there must by definition be a loser. The loser is, often, the worldwide economy.
Once those capitalists get past a certain size, they control the system more than the governments do. George Soros is hailed as being 'The Man Who Broke the Bank of England', and he made somewhere around a billion dollars doing it. That means, in essence, that he (legally) stole a billion dollars from the people of England. (and anyone else holding that currency.)
The kind of reckless financial bubble we've gotten into here is still possible on a commodity-backed system, but it's much more difficult; it's harder to send false signals to the economy for a long period with commodity money. It can still happen (poor monetary policy in the 20s was what resulted in the boom/bust of the Great Depression), but it takes more work and it's much easier to see by people trying to monitor an economy's health.
What to do? Good question. If you're trying to protect wealth, get the hell out of real estate (you should have been out years ago), and store wealth in things that aren't dollars. We may have deflationary/inflationary swings, so keeping some cash will be important.
Fundamentally, I believe it's guessing which way things will fall apart, not on whether they will or not. The strategies to survive inflation and deflation are diametrically opposed. In deflation, cash is king. Cash is all that matters. But because we can make as many dollars as we want, anytime we want, I just don't think we'll deflate over any long period.
If we inflate, gold and silver should be in your portfolio, but don't overdo it. Because of global warming, it looks like clean water may become scarce, so if you have some way of buying into a known good water supply, that would probably be a great investment. Guns would be good. Collectibles will be good. I may be foolish here, but I don't think food supplies themselves will be a problem... AFFORDING them may, but hopefully other investments will help you keep eating if it comes to that. (If we get to the point of actually having the food supplies disrupted, we'll fail so completely that we won't come back for generations. Modern people have no idea how to grow food, so if the System fails that badly, stocking foodstuffs is just delaying your death awhile, not preventing it. I REALLY don't think this will happen.) Energy is likely to be good long-term, but if the economy cools off drastically, demand and prices will drop a bunch, so I don't think I'd buy into oil companies right now. The garbage always needs picking up, so those companies should do fine.
Stocks in general tend to do pretty well in an inflation, because the companies can adapt to new circumstances and keep making money, but you need to buy very strong, flexible companies. Warren Buffett's companies will be more likely than any I know to survive a bad downturn; that man has an incredible nose for great management, and if you give him your money, you will probably do well.
In the last really big financial crunch, entertainment was big. Movies made tons of money even though everyone was so poor, because they all wanted to escape for awhile. Gaming, movies, internet, MMORPGS... I think these will all do fine, although we probably will see fewer blockbusters and a lot more budget titles.
It would probably be instructive to see what happened to stocks in the 1970s, which was the last really powerfully inflationary period we had.... immediately after, if you'll note, the last time we tried to finance a war and expand government spending simultaneously.
Malor, are you arguing that a floating currency is a bad idea? I just want to make sure I read you right....
For instance, there are 108 beads in a Catholic rosary and there are 108 stitches in a baseball. When I learned that, I gave Jesus a chance. ~Ron Shelton, Bull Durham, 1988
You are sadly and profoundly mistaken on the Coke bit. Most regard the restriction as an admonishment against "strong drink" and all of the ones I know do not make an exception for Coke or other carbonated beverages.
It's lemonade. Serve lemonade at your next LDS get-together.
It is you, my friend, who are sadly mistaken. As a person who grew up around devout Mormons this point of misunderstanding drives my crazy. Cue minor thread derail:
"Strong drink" refers only to alcoholic beverages. "Hot drinks" is defined as a point of doctrine to mean coffee and tea (meaning the tea plant, green or otherwise, but not herbal tea). LDS doctrine instructs its members not to drink coffee or tea, even decaf. There is no prohibition against caffeine. Plenty of devout and active Mormons drink Coke and Pepsi daily, and some swill Red Bulls and RockStars, and it is not considered a transgression.
Many LDS church members and leaders have expressed their opinion that drinking caffeinated beverages goes against the spirit of the prohibition on coffee and tea, any many choose to avoid all caffeinated products, but formal doctrine contains no prohibition against caffeine. It's a personal choice and matter of opinion, not doctrine. The Mormon Church's Headquarters of Public Affairs has this official statement:
The LDS people I know, including family, are well aware of the church's formal position on the matter and choose accordingly. Snopes even addresses this issue re: the longstanding rumor that a Mormon owns Coca-Cola.
Edit: I am feeling feistier and more argumentative than usual today, probably because I've had too much caffeine.
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