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Chakra
12-12-2006, 12:08 PM
Here's a fairly short report that sums up some of the very real and huge problems facing the USA in the next few years. Some people here might find it fascinating just how bad the financial situation really is next door.

http://www.agorafinancial.com/RudeAwakening/RAissues/2006/NovDec/RA121206.html

Lets hope those foreign countries keep buying treasuries or it could get bad.

Light_Keeper
12-12-2006, 12:28 PM
What about us Canadian's we are not far behind

12-12-2006, 12:53 PM
Our debt is steadily decreasing, though...

Ours:

http://www.ndir.com/SI/education/debt.shtml

Theirs:

http://www.toptips.com/debtclock.html

darryl smith
12-12-2006, 03:35 PM
"Why, under a Democrat controlled Whitehouse and Congress (Clinton Years) and booming economic times, did the National Debt always go up? Answer; too much SPENDING!"

Are they headed for trouble? Most certainly, the democrats like our Liberals always drive spending through the roof. A simple difference in ideology that makes the biggest difference is that conservatives dont believe that the government can create jobs while the Liberals amoung us think the government is wholely responsible for job creation.

The 6th Member Of AC/DC
12-12-2006, 03:49 PM
The government may not create jobs but they better do a better job of limiting these billion dollar companies from having cheap foreign labour at their disposal...

GenX
12-12-2006, 03:52 PM
Why is this in Soapbox?

I guess after posting this story over and over again for the last ten months in R&P Chakra needed a new audience.

darryl smith
12-12-2006, 03:57 PM
Hey 6th we are the cheap foreign labour.

Chakra
12-12-2006, 04:07 PM
This isn't about politics. This shouldn't of been moved. I've posted about this topic only once before speed. It's a very real issue and people have to be prepared for it.

Economics and politics are not the same.

Everyone is tied to the tracks and the trains coming, ignoring the subject or moving it into a section that sees no viewers is useless. Most of the time there's less then 3 people even looking in this section. Why post this for a bunch of people that have read it before, since there seems to be only a handful of people who actually visit this part of the board.

GenX
12-12-2006, 04:10 PM
Chakra, you beat this subject to death.

Do yourself a favor, and read some books by the recently-deceased Milton Friedman. After doing so compare his thoughts to those of John Maynard Keynes, whom you obviously take your economic theories from.

Compare both mens economic theories. Give Friedman's a fair and solid chance. And then see if you'll post such alarmist half-truths anymore.

Verotik
12-12-2006, 08:24 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: barrack</div><div class="ubbcode-body">"Why, under a Democrat controlled Whitehouse and Congress (Clinton Years) and booming economic times, did the National Debt always go up? Answer; too much SPENDING!"

Are they headed for trouble? Most certainly, the democrats like our Liberals always drive spending through the roof. A simple difference in ideology that makes the biggest difference is that conservatives dont believe that the government can create jobs while the Liberals amoung us think the government is wholely responsible for job creation. </div></div>

so did it go down under a republican white house and congress?

The Bush Budget Deficit Death Spiral
by Robert Freeman

Lenders talk about a “debtor’s death spiral.” It occurs when borrowers get so far in over their heads they begin borrowing money just to cover the interest payments on past borrowings. The borrowers have to do this to keep the lending flowing but they can no longer plausibly pay down the principal. As new debt compounds on old, bankruptcy becomes imminent. Further lending is foolhardy. Foreclosure is only a matter of time.

The U.S. is starting to look like it is entering just such a death spiral. It is foretold not simply by the large and growing deficits, nor by the fact that their carrying costs will rise quickly as interest rates rise. Rather, it is the fact that these trends are becoming irreversible, a structural part of the U.S. economy.

When the ultimate collapse will occur, whether it comes with a bang or a whimper, how it will be triggered, and how severe it will be are as yet unknown. But as Herbert Stein, Chairman of the Council of Economic Advisers under Richard Nixon was fond of saying, “Things that can’t go on forever, don’t.”

The first signs of impending trouble are the exploding budget deficits themselves. They began, of course, under the parlous economic stewardship of Ronald Reagan. Reagan cut the marginal tax rate on the wealthiest of Americans from 70% to 38%. He promised it would spur an orgy of investment and rocket the economy to new levels of production and prosperity. Instead, his “supply side economics” did the exact opposite. It produced the deepest recession since the Great Depression.

Output fell 2.2% in 1982 while budget deficits soared. When Reagan took office in 1981, the national debt stood at $995 billion. Twelve years later, by the end of George H.W. Bush’s presidency, it had exploded to $4 trillion. Reagan was a “B” grade movie actor and a doddering, probably clinically senile president, but he was a sheer genius at rewarding his friends by saddling other people with debts.

Bill Clinton reversed Reagan’s course, raising taxes on the wealthy, and lowering them for the working and middle classes. This produced the longest sustained economic expansion in American history. Importantly, it also produced budgetary surpluses allowing the government to begin paying down the crippling debt begun under Reagan. In 2000, Clinton’s last year, the surplus amounted to $236 billion. The forecast ten year surplus stood at $5.6 trillion. It was the last black ink America would see for decades, perhaps forever.

George W. Bush immediately reversed Clinton’s policy in order to revive Reagan’s, once again showering an embarrassment of riches on the already most embarrassingly rich, his “base” as he calls them. He ladled out some $630 billion in tax cuts to the top 1% of income earners. In true Republican fashion, they returned the favor by investing over $200 million to ensure Bush’s re-election. Do the math. A $630 billion return on a $200 million investment: $3,160 for $1. I’ll give you $3,160. All I ask is that you give me $1 back so I can keep the goodness flowing. Do we have a deal? Republicans know return on investment.

But the cost to the public has been a return to the exploding deficits of the Reagan years. Bush blew through Clinton’s surplus in his first year. The 2004 deficit reached $415 billion, a record. Still, its real size is masked by the fact that Bush has shifted $150 billion from the Social Security trust fund in order to make the shortfall look smaller. It’s like pretending you’re richer when you move money from one pocket to another. Both sums have to be repaid, so the real amount borrowed is the $415 billion “nominal” deficit plus the $150 billion from Social Security or $565 billion.

This shell game with federal trust funds taints all official forecasts about Bush’s deficits going forward. For example, the Congressional Budget Office estimates Bush’s cumulative ten year deficit at $2.3 trillion, to be sure, a breathtaking shortfall from the $5.6 trillion surplus he inherited from Clinton. But as with the yearly number, this one ignores the trust fund sleight of hand, an omission of some $2.4 trillion. When this is added back in, Bush’s ten year deficit leaps to $4.7 trillion, $10.3 trillion short of Clinton’s number.

But even that number is understated because the CBO forecasts are based on current law. Bush’s tax cuts have not yet been made permanent. If Bush is re-elected and the cuts are made permanent, that would add another $3.2 trillion to the shortfall. It was not too long ago that a $3.2 trillion increment to anything would have made sober people’s noses bleed but such figures are mere accounting details to the Big Thinkers in the White House, especially since it will not be their constituents who are paying it back.

Add it all together—the “nominal” deficit, the stealth siphoning from Social Security, and the permanent effects of Bush’s tax cuts—and the 10 year deficit explodes to a mind-boggling $7.9 trillion. Within ten years, the government will owe more than $15 trillion. And this, at precisely the time the government needs fiscal solvency to begin paying the Baby Boomers their Social Security.

This run-up in debt represents the most rapid, predatory looting of public wealth in the history of the world. The interest costs alone will consume the government and, soon, the entire economy. In fiscal 2004, interest costs came to $321 billion against a deficit of $415 billion. So three quarters of all the current year borrowing is spent paying interest on past borrowing. This is the most immediate symptom of the deficit death spiral.

And the situation will only get worse when interest rates rise, as they must. The U.S. has enjoyed an unprecedented period of low rates, the lowest in 50 years. The only direction they can go is up. And they will rise quickly once foreigners, who are more and more the buyers of U.S. debt, become saturated with dollars and begin to eschew additional lending.

This is effectively what happened in the early 1970s when the Arab oil sheikdoms realized that Nixon had decoupled the dollar from gold redemption but was still paying for oil in dollars—essentially paper. The sheiks tripled the price of oil in 1973 and again in 1978. The OPEC “oil shocks” wrought havoc on the American economy, putting a death to the halcyon days of post-World War II economic growth. Today’s oil at $50 a barrel is the modern day enactment of the same implicit disdain for dollars.

The Japanese did the same thing in 1987. For years they had funded Reagan’s massive supply side budget deficits but had been made fools as the dollar was losing 15% a year in value, more than wiping out the 5% return they were receiving on their treasuries. They wisely stopped buying in October 1987, precipitating the greatest one-day U.S. stock market collapse since the Great Depression.

The “dollar overhang” problem caused by Bush’s record budget deficits is compounded by record U.S. trade deficits. Every month, the U.S. economy buys some $50 billion more from the world than it sells, in the act flooding the world with private dollars. These are on top of the public dollars from the budget deficits. The total trade deficit for 2004 will amount to some $680 billion. As recently as 1992, the amount was only $34 billion, a twenty fold increase in just over 10 years, another sign of the spiral.

These “twin deficits”—trade and budget—combine to well over $1 trillion a year of borrowing. Their effect is to bury the world’s economy in dollar debts, dollars that increasingly buy less and less. As mentioned above, no one knows when the world will say, “enough.” Japan holds a reported $1 trillion supply of dollars, China, more than half a trillion. Both have bought dollars—in effect loaning equivalent sums to the U.S.—in order to keep the value of their own currencies low and therefore make their own goods cheaper in American markets.

The Bush administration claims that both countries will continue to buy dollars so that their own currencies will not rise. But the danger is that once one major player declares it doesn’t want any more dollars there will be a rush for the exits. Demand for dollars, and with it, the dollar’s price, will plummet. The last player holding dollars will be stuck with the bag, a multi-trillion dollar stash of dollar holdings that are worth only a fraction of what they were just a month before.

In other words, there are structural incentives biasing the descent toward chaos rather than order. Already, the dollar is down 19% over the past year, an eerie harkening of the Japanese experience of the late eighties. Its decline is being cagily “managed” by the U.S. Treasury which has muscled foreign central banks into picking up the slack since private foreign buyers have begun to refuse further dollar purchases. Foreign central banks now hold some 40% of total U.S. government debt.

The only way the U.S. government can prevent a stampede is to raise interest rates—the return for holding dollars. And Alan Greenspan has begun this process. But this, of course, increases the carrying costs of the national debt. As if a $7 trillion national debt funded at 4% isn’t bad enough, envision a $15 trillion debt at 10%. Instead of $300 billion a year in interest costs, think of $1.5 trillion. Instead of interest amounting to 3% of GDP, imagine the carnage as it approaches 10%.

The higher rates will put a knife in the heart of an already tenuous recovery, undermining the only process by which payoff might ever be accomplished. It will suck all of the oxygen out of the economy. Economists call this the “crowding out effect” when lending to the government gets priority over private lending. After all, government has the power to tax in order to fulfill its obligations whereas private borrowers do not.

But the market rations shortages by raising prices—interest rates—forcing private borrowers to pay ever more for scarce capital. In this way, markets for private debt mirror markets for public debt. Investment, the foundation of future growth, will be savaged. New roads, hospitals, factories, schools and research will be sacrificed to escalating interest rates borne of stratospheric debt.

This occurred during the deficit-burdened 1980’s when investment grew at an annual rate of only 2.5% versus 6.9% in the surplus-graced 1990’s. And not surprisingly, productivity suffered as well. It grew at a meager 1.4% per year during the 1980’s but almost 50% faster, 2.0%, during the 1990’s.

This is the perverse, inescapable cycle—the death spiral—that comes part and parcel with too much debt. Its relentlessly rising carrying costs steadily erode the possibility of getting out from underneath it. Higher debt loads lead to higher interest rates, which lead to lower investment which leads to slower growth and, ultimately, diminished prosperity. And it develops a runaway, recycling dynamic all its own.

Finally, it is not only the high absolute levels of debt, nor their rapid expansion, nor even the imminence of much higher interest rates that consign the U.S. to the certain oblivion of a deficit death spiral. It is that this toxic combination of circumstances has become structural, irreversible, locked into the very nature of government economic policy. It is like a driver hurtling down a cul de sac and gluing his foot to the accelerator.

The very purpose of the Reagan supply side tax cuts was to funnel more of the nation’s wealth to those already wealthy. This is what David Stockman, Reagan’s Budget Director, meant when he called them a “Trojan Horse.” And they did their job wonderfully.

In 1980, the top 20% of income earners captured 43.7% of all national income. By 1992, at the end of the first Bush administration, their share had risen to 46.9%. Today it is over 49%. Meanwhile, the lowest four fifths of all income earners have seen their share of national income decline. The lowest quintile’s share has shrunk from 4.2% to 3.5%. The second lowest quintile has fallen from 10.2% to 8.8%. The middle quintile has seen its share fall from 16.8% to 14.8%. And the second highest quintile has suffered a decline from 25.0 to 23.3%. It is empirically the case that the rich are getting richer while everyone else is getting poorer.

The problem this holds for national economic management is that the rich consume a much lower percentage of their income than do those who are not rich. How many cars can you drive at one time, anyway? The rich are also the most likely to spend what money they do on foreign luxury goods, take foreign vacations, make investments in foreign countries, or just let the money sit in the bank.

The poor, working, and middle classes, on the other hand, spend virtually everything they earn. The car needs new tires, the kids need new shoes, the washing machine needs fixing, they’re two months behind on the rent and three months behind on the credit cards. In all of these ways, income shifted through the tax code to middle and lower quintile earners is quickly spent while income shifted to the wealthy is not. This is not class warfare. It is Economics 101.

It is personal consumption—spending—that generates 67% of GDP. If more of the nation’s income goes to those who do not consume its output, while those who do consume it have less and less income, a structural shortfall emerges where there is simply not enough purchasing power to sustain GDP. GDP will ratchet steadily downward in mirror image to the rate at which national income is transferred upward.

The only recourse is for the government to step in to pump up demand. This is the role the deficits play in sustaining GDP. This is why deficits exploded under Reagan, Bush I, and Bush II, all of whom cut taxes on the rich, but declined under Clinton who raised them. Rising public deficits are necessary—in fact, indispensable—to sustaining GDP because so much of the nation’s wealth has been transferred from those who, as a matter of necessity, spend it to those who, as a matter of taste, do not.

Supply side economics (and that includes Bush’s ill-disguised variant) rests on the repeatedly disproved faith that investment and prosperity are caused by giving ever more of the nation’s wealth to the already wealthy. As long as this lunacy continues to drive tax policy, the government will keep expanding federal deficits. Eventually, possibly soon, this will cause a collapse of the dollar that can only be reversed by raising interest rates. But that will explode the carrying costs on the by-then mammoth debts, vitiating private sector investment. And that will kill all future prospects of meaningful growth.

This is the essence of the Bush budget deficit death spiral. To be sure, the debts are an unequalled bonanza for those few who lend the money, for they get to do so at ever-higher rates of interest. But it is a death sentence for all the rest of the economy.

Robert Freeman writes on economics, history and education. He can be reached at robertfreeman10@yahoo.com.

GenX
12-13-2006, 08:45 AM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">But it is a death sentence for all the rest of the economy. </div></div>

"The dollar rose against the euro and yen early Wednesday after a government report showed U.S. retail sales increased much more than forecast last month. The Commerce Department said seasonally adjusted U.S. retail sales increased by 1% in November, the largest gain since July."

link (http://www.marketwatch.com/news/story/dollar-rallies-after-stronger-retail/story.aspx?guid=%7B904A7098%2D2167%2D4373%2D9242%2 D28527ACC8786%7D&dist=MorePulse)

"Economic activity expanded at an energetic 3.8 percent annual rate in the third quarter, providing vivid evidence of the economy’s stamina even as it coped with the destructive forces of hurricanes Katrina and Rita."

Enter the complete URL for the link you wish to add. (http://www.msnbc.msn.com/id/9849583/)

"Many Americans worry that that high energy costs combined with rising interest rates will plunge the U.S. economy into economic doldrums. The latest data, however, reveal that the economy continues to grow steadily despite these potential pitfalls. While a great deal of news analysis hypes weaknesses in the economy, the facts suggest otherwise."

Enter the complete URL for the link you wish to add. (http://www.heritage.org/research/economy/wm1105.cfm)

"People have called Dr. James F. Smith an optimistic economic forecaster, one who is frequently on the high side when predicting national growth and the low side when predicting inflation and interest rates.

"However, the reality of the U.S. economy in the past three years has in most cases exceeded even my forecasts," the University of North Carolina at Chapel Hill financial expert says. "The good news for me is that others have seen their forecasts turn out even further off the mark."

link (http://www.sciencedaily.com/releases/1999/02/990224071540.htm)

"With the release of June economic figures, the US economy showed continuing strength and growth. Unemployment figures are at a 4.6% five-year low.


Senior Economist at First Trust Advisors LP Bill Mulvihill commented: “The consumer is going to remain relatively strong in the second half of the year. The economy keeps growing, employment is healthy and incomes are rising; those are all strong fundamentals for the consumer.''

link (http://www.theconservativevoice.com/article/15998.html)

"A stronger-than-forecast 132,000 jobs were created in November, according to a government report on Friday that implied the U.S. economy had more underlying resilience than previously thought. "

link (http://news.yahoo.com/s/nm/20061208/bs_nm/usa_economy_dc)

Most countries in the world would beg for a "death sentence" like this!

Chakra
12-13-2006, 10:56 AM
That's what all the headlines want the American public to think Speed. Most of those statements are just twisting the truth to make the actual situation sound better.

Lately every single piece of information that has hit the press has been turned around to sound good no matter how bad the actual information is. Medium incomes across the board decrease and people take on low wage jobs, and they print how many new jobs are created even though that's not the true story.

Things are bad, and turning to really bad quickly. Each quarter this year growth has decreased and a recession is right around the corner. The incoming recession isn't what scares me but the fundamentals that point to a very bad series of events in the near future (in the next 5-10 years or sooner).

At a certain point there will be less benefit to hold onto the greenback then to sell it, even if it means China or Japan have to watch their currencies appreciate and the dollar fall. The economic collapse of the United States is in the hands of Asian central banks and that scares the hell out of me.

China or Japan could basically destroy the American way of life with one simple decision. How can you not be completely scared by that prospect? The fundamentals are in place for the dollar to drop by a large margin again. The dollar has already lost tons of ground in the last 3 years, and currency traders all know that there's a long way for it to drop yet.

Scary. No time left to continue, I'll continue later.

GenX
12-13-2006, 11:10 AM
Again, I say that you have subscribed to the views of negativity expounded by Keynsian economics.

And why would the liberal media, one so obsessed with negaitivty and hatred of this current administration, be carrying water for Bush? The fact is the media has been very negative on the economy, and finally non-partisan economists and sites are saying 'enough is enoug'; the American economy is an amazing engine, and the 'doom-n-gloomers' are wrong.

Read what Freidman had to say about deficits and debts, you owe it to yourself.

In my micro-and macro-econ classes I had the enjoyment of studying both Keynes and Freidman. You shoudl allow yourself the same enjoyment before becoming a fan of the doom-n-gloomers that have distorted Keynes and attempted to rewrite history to make Keyne's legacy a success it never has been.

GenX
12-13-2006, 11:40 AM
Hot off the presses:

"The Dow Jones average briefly hit a record intraday high on Wednesday in New York, buoyed by strong U.S. economic indicators.
At 10 a.m., the Dow Jones Industrial Average gained 37.89 points from the previous day to 12,353.47. It briefly hit 12,368.61, surpassing the intraday record posted on Nov. 22.

The tech-heavy Nasdaq Composite Index rose 7.10 points to 2,438.70."

Breaking News (http://www.breitbart.com/news/2006/12/13/D8M02BK80.html)

Chakra
12-13-2006, 12:40 PM
The stock market isn't the best gauge for how the economy is doing, especially in this situation. I'm not so worried about the upcoming recession as I am the long term consequences of what's going on. The choices that the federal reserve can make are narrowing too. They can't lower interest rates to stimulate the economy because that will crash the dollar. Well they could, but then their asking for a bad situation. If they don't increase interest rates then foreign central banks won't buy or keep holding the dollar, but if they do that it will squeeze money out of the pockets of consumers. Allan Greenspan just said these things below the other day. It's the opposite of his position when he was in charge, but he's more free to say what he wants now. I'm worried about our near future. Not next month or next year but a few years in the future. The next 5-10 years or sooner can be the tipping point, but all we can do is sit and wait for the inevitable.

Allan Greenspan

I'll first set this up for you… In a speech he gave yesterday, former Federal Reserve Chairman Alan Greenspan said, "the dollar will probably keep falling because it's unlikely that international fund managers will continue to increase their allocations to the U.S. currency."

Russia and other oil-producing currencies are shifting their assets out of dollars toward the euro and yen, a Bank for International Settlements' quarterly report showed today.

Greenspan said, "the dollar, heading for its fourth annual decline in the past five years, will probably keep falling until the U.S. current-account deficit diminishes."

And here's the statement that should ring in every investors ear until they do something about it… "The dollar will continue to drift downward until there is a change in the U.S. current-account balance, it's IMPRUDENT to hold everything in one currency."

All this currency talk doesn't even take deficits, personal consumer debts, the housing crash, and the retracting manufacturing base etc. A report released just a week or so ago about manufacturing came in at 49, which means there's a retraction in manufacturing (another ominous sign of things to come).

Not only that bonds are reversed right now. A 1 year bond pays more then a 10 year bond. Almost every single time this event took place in the past a recession hit right after that.

12-13-2006, 01:02 PM
Chakra, what makes me wonder is that ever since I have been alive, and aware of the economy, there have been doomsayers and books predicting a great crash.

The current voices have the appearance of simply joining the chorus of voices that continually beat this drum. It makes me say, "I don't know what to believe anymore."

Chakra
12-13-2006, 01:44 PM
I know exactly what you mean aydeloof. They published books back in the 80's and 90's predicting crashes and such. Each generation thinks they are the generation where things will change. It's like a story with a bunch of climax's and you're not quite sure when it's going to end.

The next 5 to 10 years are going to be interesting either way, that we can all count on. It's the huge imbalances in the system right now that are so much bigger then any time in history that scare the pants off simple folk like myself that just want to live and be happy. People were freaking about the deficits when they were 10 percent of what they are now. Does that mean we can let this reckless spending multiply by 10 again? Obviously the answer is no, and the world is starting to actually react to the situation. A few months ago was the first time that the USA couldn't sell enough treasuries to cover its trade deficit. Recently for the first time America is being purchased quicker then it is purchasing.

If the world all plays along and is very diplomatic with the USA this game can go on for a long, long time. As long as oil exporter countries, China, Japan and all the emerging countries agree to continue to fund the United States spending habits. Unfortunately there's been whispers and discontent with the status quo, and you can see it with the ever deflating US dollar.

So you're right and this could go on for years and years. The problem is it can't go on forever and I'm not that old. I'm only in my 30's, and there's no way with the current political system these debts can possibly shrink. Who is going to elect a party that has huge tax increases or cutting back as its platform? It doesn't matter whether their Republican or Democrat, both parties have no choice but to continue with the status quo. Even during Clinton's years when they supposedly had a surplus they didn't. They just look at a certain set of numbers and report it, but even during Clinton's years huge debt was accumulated.

There's a good chance there will be a recession next year, but I'm more worried about the big one, not just some fluctuation in the market. It might be next year, it could be in 5, but the big problem is it's almost certainly soon when you compare it to our remaining lifespans. That's my fear, and that's why I try to warn people to prepare for it.

darryl smith
12-13-2006, 02:50 PM
"There's a good chance there will be a recession next year" - they said that for the last ten years!. They also might be right this time as the democrats have control of the check book

GenX
12-13-2006, 02:50 PM
Chakra, I see what you are saying, to a point. The scenarios you bring up are possible, but not plausible (at least now).

As Volks points out there really is a long history of economic scare-mongers. They may indeed be right...someday. But a stopped clock is right twice a day; too.

Alarmism is no way to keep a sober and even-keeled mind about the world around us. Now, I didn't say we should just sit back like fat cats and pretend nothing is wrong. But I don't see alarmism as providing anything good to the arena of debate and ideas.

KDawg
03-16-2007, 10:38 AM
Instead of creating a new thread, I thought this story would go well here:

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">"It's going to be a disaster for many people who don't have a clue about what happens when a real estate bubble pops.

"It is going to be a huge mess," said Rogers, who has put his $15 million belle epoque mansion on Manhattan's Upper West Side on the market and is planning to move to Asia.</div></div>


Coming U.S. Property Crash (http://www.reuters.com/articlePrint?articleId=USL1470530620070314)

And here's a good article about why the above is believable. It's a couple of years old, but the information is relevant.

Dark side of subpirme loans (http://www.boston.com/business/personalfinance/articles/2005/08/03/dark_side_of_subprime_loans/)

Chakra
03-16-2007, 11:20 AM
A quote from the article KDawg posted.

"This is the end of the liquidity party," said Rogers. "Some emerging markets will go down 80 percent, some will go down 50 percent. Some will most probably collapse."

If you read the works of many blogging economists they are predicting anywhere from a 40 to 70 percent crash in the markets sometime in the next year or two. What's more scary is that even main stream reporters are now throwing out huge corrections like 30 percent.

Sure 30 percent doesn't sounds like a big deal at first, but it's the huge pension funds and such that take a beating. A good portion of pension funds in North America are already under funded. If the markets crash by 30 to 50 percent there will be a lot of pensioners who will be extremely disappointed with the choices some of these funds will be forced to make.

Ever week since early December a sub-prime mortgage company has claimed bankruptcy. Now the second largest sub-prime mortgage company is about to go bankrupt too. The lending industry is taking a pounding because of all this turmoil. Already lending standards are tightening like a noose all over. The days of no down payments have already disappeared, and people that could get loans one year ago are firmly rejected now. This is going to create even more glut in housing and the problems are going to get much worse before they get better.

I read that over 10 percent of all sub-prime loans in the United States right now are in default. That's a scary situation, and that's a lot of people being forced out of their homes.

Hans
03-16-2007, 12:15 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Speedy the Parrot</div><div class="ubbcode-body">Hot off the presses:

"The Dow Jones average briefly hit a record intraday high on Wednesday in New York, buoyed by strong U.S. economic indicators.
At 10 a.m., the Dow Jones Industrial Average gained 37.89 points from the previous day to 12,353.47. It briefly hit 12,368.61, surpassing the intraday record posted on Nov. 22.

The tech-heavy Nasdaq Composite Index rose 7.10 points to 2,438.70."

Breaking News (http://www.breitbart.com/news/2006/12/13/D8M02BK80.html)
</div></div>

And then this happened : http://money.cnn.com/2007/03/16/markets/markets_1045/index.htm?postversion=2007031611

I suggest you stick to what you know, which is spreading the word of Bush and friends.

GenX
03-19-2007, 09:05 AM
Is it that time of the month again?

I thought Chakra's monthly "The US is Doomed" threads didn't come out until the fourth Tuesday of every month...

Must be the time change-thingy.

GenX
03-19-2007, 05:31 PM
"Parsing through a dozen or so newspapers and websites this morning, I was stunned not to find a single reference to the very strong economic state of the union. Sure, there’s plenty about global warming, carbon caps, President Bush’s poor polling numbers, Republican opposition to the troop surge in Iraq, and the usual horse-race speculation about Hillary Clinton and the Democratic primary race for presidency. But there’s nothing — and I mean nothing — about the excellent economic state of the union.

I did manage to find one article, buried deep in the Wall Street Journal, entitled “Class of ’07 Gets Plenty of Job Offers.” It talked about employers planning to hire 17 percent more graduates this year than they did last year. This happens to top the college-hiring peak of the last economic boom in 2000.

There’s also an interesting op-ed by Deputy Treasury Secretary Bob Kimmet (an old friend with lots of supply-side blood in his veins), who notes the positives of “job churn.” More than 55 million Americans, or four out of every ten workers, left their jobs in 2005. Since there were more than 57 million new hires that same year, this is good news. It also means that new hires exceeded employee separations by an average of 364,000 per month. Per month!

Eat your heart out Lou Dobbs.

The fact is, jobs continue to boom. So do real incomes, productivity, and profits. Economist Michael Darda points out that real wages over the first five years of the Bush expansion are actually growing more rapidly than over the first five years of the Papa Bush/Bill Clinton boom.

Meanwhile, unemployment today is only 4.5 percent. Federal, state, and local tax collections are soaring through the roof. Budget deficits are plunging. Inflation-adjusted GDP is averaging just more than 3 percent. Family wealth stands at a record of slightly more than $54 trillion. Total employment is at a record 146 million.

Stock markets, as you might have noticed, also continue to rise. They have done so, almost without interruption, for four years, on the shoulders of a remarkable surge in business profits — which itself is a function of the high-tech, knowledge-based product explosion.

These corporate profits, along with our record-setting stock markets, have enriched the more than 100 million investors who are participating in this prosperity. In fact, this America boom is spearheading a global economic surge. While the American free-market model is often derided as “cowboy capitalism,” imitation remains the sincerest form of flattery. And it isn’t just China, India, and Russia who are acquiescing to the worldwide spread of American capitalism. It’s also Eastern Europe and parts of South America. Heck, even the socialists in Old Europe — like France and Germany — are getting into the act by reducing individual and corporate tax rates to promote growth.

Note to John Edwards and other modern-day class warriors: The best anti-poverty plan is a growing economy, one that creates jobs and higher middle-class living standards. As free enterprise has been unleashed around the world, government planning once again has been rejected. This is the spirit of Adam Smith’s Wealth of Nations, where he argued almost 250 years ago for free markets, free trade, and a very light touch with respect to taxes and regulations.

Someone should be making the point that if the economy ain’t broke, there’s no need to fix it. Taxing the rich will not make the non-rich rich. Attacking businesses will not produce more jobs and investor-class profits. Imposing trade barriers will not help high-quality, low-cost consumer imports, nor will it promote job-enhancing business exports or help poor nations grow richer.

As for the global-warming alarmists, imposing carbon caps or carbon taxes won’t do anyone any good. On the economic side of things, this will severely depress production and employment. And for what? An estimated global temperature reduction of 4/100ths of 1 degree Fahrenheit?

Government meddling and failed liberal social policies are precisely what we don’t need today.

As President George W. Bush takes the podium tonight for his seventh State of the Union message, his policy of lower marginal tax rates and a general absence of overregulation (with the exception of Sarbox, but including the opposition to carbon caps) has succeeded in nurturing low inflation and entrepreneurial economic growth.

Of course, Bush gets very little credit for this in the mainstream media or in the polls, which is a shame. The truth is, the president has had the economic story basically right for six years. His overall economic record is rather solid.

But the bottom line is the bottom line: As we enter 2007, the economic state of the union is excellent.

If it ain’t broke, don’t fix it."

-Larry Kudlow, NROnline

Chakra
03-19-2007, 05:56 PM
Everything is fine. Just keep thinking that while the ship sinks. The job growth numbers in the United States don't even come close to matching the growing population. How can you create more jobs for people, when many times more people enter the country then jobs created?

Here's an article posted just today on a major web page. This is just a slice of the huge cake of articles about how bad of a situation we're in right now.

http://articles.moneycentral.msn.com/Inv...lyGetWorse.aspx (http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/WarningThisMessWillOnlyGetWorse.aspx)

On the verge of collapse. This is mainstream media too. You don't want me to start posting the none mainstream stuff, since they are even more pessimistic.

I will get no joy in telling you I told you so, because this is not good for any of us. I honestly hope I'm wrong, but I read on this subject for at least an hour every day and I've been watching it closely, and it doesn't sound good at all.

GenX
03-19-2007, 06:01 PM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">On the verge of collapse </div></div> /ubbthreads/images/%%GRAEMLIN_URL%%/lol.gif

You doom n gloomers live such a sad, sad existence. /ubbthreads/images/%%GRAEMLIN_URL%%/crazy.gif

Chakra
03-19-2007, 06:20 PM
I'm not the one who said that Speedy. It was the article I quoted, and it's from mainstream media. Don't you find that troubling in the least?

GenX
03-19-2007, 06:31 PM
Look at my article, from the mainstream media...totally contradicts yours.

Does that trouble you in the least? At the very least I hope it makes you a bit less pessimistic.

Strategio
03-27-2007, 03:57 PM
Re: Is America on the verge of a crisis?

Yes.
No.

Ultra54
03-27-2007, 05:53 PM
The sky is falling, the sky is falling!

Hans
03-27-2007, 10:30 PM
Sounds all really good, here's some American headlines for today to show how good it is. Where's the parrot when you need him?

Retiring couples need $215K for health costs
http://money.cnn.com/2007/03/27/pf/retirement/health_costs/index.htm?postversion=2007032720

Consumer confidence drops in March. A separate report showed U.S. single-family home prices plummeted in January, the first annualdecline in home values in more than a decade.
http://money.cnn.com/2007/03/27/news/economy/confidence.reut/index.htm?postversion=2007032716

Fed official: We're watching inflation risks. "(Recent) indicators have been mixed and our economy has slowed in 2006 and is slowing this year as a result of the adjustment that we are seeing in the housing sector. That has pulled back economic growth in the U.S.," she told the forum.
http://money.cnn.com/2007/03/27/news/eco...rsion=200703270 (http://money.cnn.com/2007/03/27/news/economy/bc.usa.fed.pianalto.reut/index.htm?postversion=200703270)
8

KDawg
03-28-2007, 12:01 PM
The subprime loan nightmare is just beginning, with many foreclosures on the horizon. This will undoubtedly have far-reaching effects for the rest of the U.S. (and by extension, ours) economy.

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">As many as 2.4 million Americans could lose their homes because of problems with subprime loans, the Center for Responsible Lending said Tuesday in testimony to Congress, and the head of the Federal Deposit Insurance Corp. became the first top regulator to urge a legislative fix for the subprime-lending crisis.</div></div>

link (http://www.chicagotribune.com/business/chi-0703270459mar28,0,7205241.story?coll=chi-business-hed)

GenX
03-28-2007, 01:02 PM
The question is: will there be a crisis for the crisis afficianados if America's crisis is really no crisis at all, thus providing a crisis for those that believe a crisis in America is the only thing that won't send them into an existential crisis, whereas one crisis melds into another crisis, thus the crisis mode loses its value when crisis begets crisis, with no real foundation or attachment to reality.

Hans
03-28-2007, 08:14 PM
Well, it looks like the stance towards Iran and it's nuclear abilities are already causing hikes in oil prices and other things. Most of the attitude towards Iran is fueled by American beliefs and points of view.
Just like the Iraq war, which has sadly ended in a country that's unable to govern itself and protect it's own citizens against violence and corruption.

Really, when are we going to start thinking ourselves, and see things the way we want to see them, rather then listening to the voice of the only super power left?

GenX
03-28-2007, 09:17 PM
Really, let's listen to Europe.

They infanticized themselves into negative birth rates, and have economies that, if they grow at all, they grow at an astounding rate of 0.5 or 0.6 percent yearly.

Yes...let's all be Europe! Where the best and brightest are shunned, and mediocrity is worshipped as compassion and tolerance.

No thanks.

Hans
03-28-2007, 10:16 PM
Did I mention Europe anywhere Mr Parrot?

GenX
03-29-2007, 08:45 AM
Who else would assume a leadership role, Eritrea?

Hans
03-29-2007, 02:37 PM
Have you ever considered your arch enemy the former USSR (biggest country by size), or the communist China (Biggest country by ethnic population)?

GenX
03-29-2007, 04:22 PM
China's economy is a paper tiger, and until they decide to insert more capitalism and free market reform in place of collectivist thought it will remain so for the forseeable future.

Russia...did you REALLY say Russia????

Return of Too Many Daves
03-29-2007, 04:50 PM
If Sanjaya wins American Idol, then I say yes, yes indeed America is on the verge of a crisis.

That hair, those eyebrows. A crisis certainly.

GenX
03-29-2007, 04:51 PM
Hard to argue that one...

Hans
03-29-2007, 05:33 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Speedy the Parrot</div><div class="ubbcode-body">China's economy is a paper tiger, and until they decide to insert more capitalism and free market reform in place of collectivist thought it will remain so for the forseeable future.

Russia...did you REALLY say Russia???? </div></div>

I said USSR, which is different then Russia. But yes, why not?

Strategio
03-29-2007, 09:54 PM
If America is really in crisis then it is up to the people to change it. We can start with debt. If people weren't so selfish and needed everything now now now, the country would be much more stable. But instead we spend on entertainment, spend on beer, spend on a nicer house when our existing house is fine, spend on the nicest sound system, the nicest yard, and the list goes on. If anything ruins our countries financially it will be the people whose wealth is suspended by the helium balloon of credit.

KDawg
08-10-2007, 11:35 AM
And so it begins:

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Stocks moved off session lows after the Federal Reserve added more money to the banking system to stem a growing credit crunch. </div></div>

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> Fed Adds Another $16 Billion in Reserves to System, Following $19 Billion Injection Earlier Today</div></div>

Fed adds funds to banking system at dizzying pace (http://www.cnbc.com/)

KDawg
08-10-2007, 11:38 AM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> Financial markets got pummeled for the second straight day amid growing signs that the subprime mortgage problem may be far more widespread than anyone thought.

The wall of worry continued as bad news seemed to spring up every hour.

"I don't know that anybody knows where the bottom of this thing is," said Larry Levin, president of SecretsofTraders.com. "The only things that are moving the market right now are these subprime and credit headlines and something that the Fed might possibly do."</div></div>

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> Probe of Wall Street Firms

The Securities and Exchange Commission is reviewing whether Wall Street firms are calculating the value of their subprime-mortgage assets consistently, the Journal said, citing people familiar with the inquiry.

The regulatory checks are expected to include Wall Street's five biggest investment banks, including Goldman Sachs and Merrill Lynch. So far, few of Wall Street's big firms have disclosed any significant subprime losses even though the meltdown in the mortgage market has caused market turmoil, the Journal said.</div></div>

Worries about spreading credit crunch pummel market (http://www.cnbc.com/id/20212433)