Like the illusion of Wall Street, with its vast and powerful investment banks, now shuttered, China too is an illusion perpetuated by the Globalists that gave us the 15,000 mile Caesar salad, poisoned cat food and lead based paint on babies' pacifiers. Like the illusion that money would come from thin air to always push housing prices higher, China has spent a generation pursuing its illusion. Pursuing an unattainable dream to be like the West, while 6000 years of its carefully shepherded top soil blows into the sea.
Posted: Tue Jan 24, 2006 4:01 pm Post subject: Re: Interest rates and investments after peak oil
threadbear wrote:
Here's a general economic question. When you have stagflation you have fewer dollars floating around and prices going up.
Actually, no. You still have growth in the money supply and what you lack is the economic activity to grow productivity. This is why Volcker pushed so hard on the short end, to stop unproductive borrowing. This is not our condition today even if the borrowing is domestically unproductive. Because we can spend those dollars on labor we can't compete with, the inflationary pressure doesn't exists.
However, the quality of domestic debt is degrading rapidly because we are not investing that debt into domestic productivity. So the real threat on the horizon is deflation. The foreign central bank holdings of dollars is now so large that the rest of the world is stuck with this arrangement. Those that talk about 'dumping dollars' simply don't answer the question, 'Dump them in exchange for what?'
Posted: Wed Jan 25, 2006 2:13 am Post subject: Re: Interest rates and investments after peak oil
A related Question:
Where is all the gold being kept now?
Fort knox is empty, where is all the nations gold kept in europe?
Just interested if anyone knows, I hear it is some country who built specially built vaults and they rent storage for it and it is very secure.
Which country is that?
Posted: Wed Jan 25, 2006 12:47 pm Post subject: Re: Interest rates and investments after peak oil
lakeweb wrote:
threadbear wrote:
Here's a general economic question. When you have stagflation you have fewer dollars floating around and prices going up.
Actually, no. You still have growth in the money supply and what you lack is the economic activity to grow productivity. This is why Volcker pushed so hard on the short end, to stop unproductive borrowing. This is not our condition today even if the borrowing is domestically unproductive. Because we can spend those dollars on labor we can't compete with, the inflationary pressure doesn't exists.
However, the quality of domestic debt is degrading rapidly because we are not investing that debt into domestic productivity. So the real threat on the horizon is deflation. The foreign central bank holdings of dollars is now so large that the rest of the world is stuck with this arrangement. Those that talk about 'dumping dollars' simply don't answer the question, 'Dump them in exchange for what?'
Best, Dan.
The powers that be will fight both hyper inflation and deflation any way they can. The most logical long range plan is to institute a further bifurcation of society where the botton three quarters of Americans struggle in an expensive world that only the upper 25% can easily afford.
It's textbook Marx. Stagflation can go on a very long time, too. Many third world economies have stagflationary economies that have gone on for decades, with the blessing of the IMF.
Deflationary models are based on prices collapsing to a level that come closest to meeting the consumer's ability to pay. This isn't going to happen this time around. So the stagflation will be ongoing. Demand destruction in energy will keep energy prices from screaming upward, but it's simply not elastic enough to offset the fact that it is becoming an increasingly scarce commodity. Everything will change. Welcome to Mexico.
Posted: Wed Jan 25, 2006 1:17 pm Post subject: Re: Interest rates and investments after peak oil
threadbear wrote:
Deflationary models are based on prices collapsing to a level that come closest to meeting the consumer's ability to pay...
Hi threadbear,
Deflation is not about models. The Great Depression was a very real event. It came about because of a contraction in the money supply. During the roaring twenties money was created from debt without regard to the quality of that debt.
Google: japan "bad debt"
That is another very real deflationary event. Even with a strong production base and a world still buying their exports, they are having a very rough time of it. If deflation became an event in the U.S., we would have more than a rough time of it. So would the rest of the world.
Posted: Wed Jan 25, 2006 5:20 pm Post subject: Re: Interest rates and investments after peak oil
Lakeweb, I don't think the money supply is going to contract that much any time soon. Otherwise, I would completely agree with you. As long as there are vehicles left to soak up the currency, like natural resources and metals, that will be the new bubble that sustains what appears to be a perpetual motion machine. If metals return 20% a year and bank interest rates return just 10%, while the stock market remains kind of flat, can you imagine how much commercial activity this will create?
And deflation can be accomplished through various means other than just a contracting of the money supply. How do you know that the contraction of the money supply wasn't a reaction to deflationary forces, rather than the cause?
Gold is mysterious on many levels. It's the stuff of fairy tales. Where it's kept and how much of it there actually is, is also like a fairy story, one that people will conveniently overlook. Buying gold is like kissing a prince, it just might take a few years before it's abundantly clear you've got yourself a frog.
Posted: Thu Jan 26, 2006 3:08 pm Post subject: Re: Interest rates and investments after peak oil
Lakeweb, You made a very good point about the currency being backed by labour rather than gold. As long as wage inflation is held in check, that is some kind of brake against hyper inflation. True? I'm a bit of a novice in this area.
Thank you for the article I read the whole thing and it is very interesting.
In other words NO ONE KLNOWS WHERE THE GOLD IS!
That is what I thought, no one knows where the Gold is.
When the WT centers fell that gold and silver disappeared to no where. 30 thousand tons of silver and 20 tons of gold, that is the first place they dug at and there were lots of armed federal marshalls.
someone know swhere the gold is but they are not talking.
Well, if it is no longer here in the USA , this is going to bite us.
Knox is empty I hear I don't know about other banks.
But whatever, BiLgates (Billions gates, get it?) probably
has 1 billion in his basement.
How do you get to be one of these market Lord's that run the nations economies and can tell when to move a couple thousand tons of gold around?
Posted: Thu Jan 26, 2006 11:34 pm Post subject: Re: Interest rates and investments after peak oil
Almost-random thoughts:
Americans standard of living is too high and must correct downwards.
China and Japan are likely not to sell-off many of our bonds if they can help it. Because if they did, they'd debase the value of their remaining holdings. So, what they do instead is to threaten selling off these bonds to gain leverage over the U.S. - where the U.S. would learn to do their bidding or could be forced to sit idly while, for example, China invades Taiwan, or annexes the oil rights to Central Asia. And, in the event the U.S. were even to consider defaulting on the bond holders, countries could retaliate by confiscating U.S.-owned corporate or military assets abroad. U.S. corporations and military would stand in the way of this happening.
Such foreign countries, who have leverage over U.S.'s international and domestic affairs, hold trillions of USD, and all the U.S. needs to do to remain solvent is to keep paying the vig of just few percentage points a year.
It will be in these foreign investors' interest to see the dollar retain much of its buying power in the near future. Thus at foreigners' urgings, the U.S. will likely adopt a degree of fiscal austerity that will:
a) submerge asset values of U.S. commercial and residential properties;
b) decimate U.S. laborers' earning power (corollary to this, effectively strip away their working standards and ability to redress);
c) manage inflation so as to preserve the U.S. bonds' purchasing power;
d) curb consumption of commodities (e.g., petroleum and metals) to allow China and the rest of the world to obtain these same items less expensively.
In short, phase-in third world living and working conditions.
I contend that all of the above are possible and, in fact, is the plan that is being put to the present administration. And that phasing-in of third world conditions will be done not with any organization or compassion, but instead by a seat-of-the-pants default.
If you cannot afford gassing-up your SUV, driving to work, and paying your mortgage, then sell your car and carpool. If this doesn't cut it, then sell your house and move to a dingy rat trap closer to work. Or ask your in-laws to move-in and share the expenses. But don't make any excuses to your boss, because he won't want to hear anything of it.
And if you disappoint your banker, he'll then foreclose on you. You'll be substantially dispossessed and made, again by default, to live in the most blighted neighborhood, forlorn and abandoned.
Let several years go by like this, and Americans will have begun to adjust their lifestyles accordingly, and may even learn to be net savers.
I think all that's required for such a scenario to play out is that the U.S. gets a little weaker militarily, or a little more despised diplomatically. And to this end, as the American President is fond of saying, "we're making constant progress."
The dollar here would remain relatively strong, and inflation relatively subdued. So who'd need gold?
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