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: Fri Jun 27, 2008 8:39 am Post subject: Re: Financial Tsunami
mobil1 wrote:
Yes, our Canadian military is relatively pathetic, at least compared to the US who we have traditionally depended on should Russia come over the pole for us.
On the plus side, we've been running budget surpluses for many years and our formerly pathetic Canuck dollar is now virtually at par with US.
Absolutely. I didn't mean to dis the Canadian military. More like heap abuse on the politicians that have enfeebled it by chronic under-investment for over three decades.
Personally, I am very happy that Canada broke out of its tax and spend rut, and started to pay down the debt by running budget surpluses. Now if Ontario and Quebec would follow suit it would be perfect.
None the less aside from setting aside money to pay down the debt there is no good economic argument to running a budget surplus. Balanced budget, yes. Deficit, no. But senseless to run a surplus. Return that money to the taxpayers that earned it. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Fri Jun 27, 2008 12:15 pm Post subject: Re: Financial Tsunami
Mr. Bill,
I do recall that years ago, towards the end of the Cold War , a comedian stated that Canada was essential to the US defense against the commie hord coming over the pole. In effect, we could use Canada as a free-fire zone.
And can you belive it...some folks actually laughed. Damn Yankees!
Back on point: as you have a much clearer view of the picture: should there be a serious seroius drop in worldwide GNP how would that impact the US ability to continue to float our debt let alone increase it to pay for then obvious need to modify our infrastructer/lifestyles.
Needles to say I'm jealous of any success the C's have had paying down debt.
Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall "below zero".
"We're in a nasty environment," said Tim Bond, the bank's chief equity strategist. "There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth."
Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. "This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that's possible. It has lost all credibility," said Mr Bond.
...
Quote:
The two leaders - MBIA and Ambac - have already been downgraded as the rating agencies belatedly turn stringent. The risk is further downgrades could set off a fresh wave of bank troubles. "The creditworthiness of many US financial institutions will decline in coming months," he said.
The bank warned that engineering and auto firms we're likely to face a crunch as steel and oil costs surge. "Their business models will have to be substantially altered if they are going to survive," said Mr McAdie.
A small chorus of City bankers dissent from the view that inflation is the chief danger in the US and other rich OECD countries. The teams at Societe Generale, Dresdner Kleinwort, and Banque AIG all warn that deflation may loom as housing markets crumble under record levels of household debt.
Bernard Connolly, global startegist at Banque AIG, said inflation targeting by central banks had become a "totemism that threatens to crush the world economy".
He said it would be madness to throw millions out of work by deflating part of the economy to offset a rise in imported fuel and food prices. Real wages are being squeezed by oil, come what may. It may be healthier for society to let it happen gently.
_________________ “It does not do to leave a live dragon out of your calculations, if you live near him.”
J.R.R. Tolkien
"The time has come for men to act like men; and for women, well, to act a lot more like men."
-Ma Cur
Joined: Jun 20, 2008 Posts: 67 Location: Quebec/Ottawa, Canada
Posted: Fri Jun 27, 2008 10:49 pm Post subject: Re: Financial Tsunami
I suspect the Canadian gov't will need some of that money to ease the pains of the hard times ahead. IMO we have reasonably decent social assistance programs, but in hard times, those programs will be stretched.
It may be tempting for our National Gov't to try to bring back something like the National Energy Program (NEP) that Trudeau created in the 1970s oil crisis. Albertans and the west of Canada has hated Trudeau ever since. This program effectively siphoned oil profits from Alberta and put it back in he manufacturing base in Ontario.
Retiring baby boomer problem too. Perhaps some more immigration will be considered for that issue. Hey if Chinese shipping costs go too high, we can just bring China here, one Chinese at a time. Strangely enough, I work for a company run by ethnic Chinese, who sponsor Beijing employees to North America.... (ah, so)
Posted: Mon Jun 30, 2008 1:10 am Post subject: Re: Financial Tsunami
Rockman, I have posted it before, but it is worth repeating:
Globally,
Current Account Surplus = Current Account Deficit
where
Current Account = Budget (surplus/deficit) + Trade (surplus/deficit) + Balance of Payments (surplus/deficit)
and
Trade Surplus = Trade Deficit
plus
Balance of Payment Surplus = Balance of Payment Deficit.
So anytime that GNP/GDP falls it translates directly into less capital to fund deficits regardless of who's they are. Less Asian exports means less capital to fund the US' current account deficit. High food and energy prices, however, are a wealth transfer from consumers to producers, and do not necessarily mean less capital to fund the US' deficits. But the only reason to invest in the US for foreign investors is if they believe that their capital is safe and that they can earn an attractive yield net of inflation. Those assumptions are fraying at the edges per Cur's post above.
The US currently consumes some two-thirds of the world's current account surplus or savings. We doubt they can consume 100-percent. Especially given a low growth environment and negative real interest rates. And we know the US cannot consume more than 100-percent of the world's savings. That is impossible. So we are currently somewhere between two-thirds and impossible. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Joined: May 10, 2007 Posts: 3317 Location: Resiliency Farm
Posted: Mon Jun 30, 2008 1:42 am Post subject: Re: Financial Tsunami
Interview on Bloomberg TV:
The interview is with Martin Hennecke.
1. We are already in a recession if you account for inflations eating into GDP numbers
2. The American government is in a worse position than 1929 due to unfunded liabilities
3. The expected depression will be worse than 1929.
4. Move out of the dollar, don't trust in Euros or oil, look to edible commodities as a way to preserve wealth.
I am having trouble linking the video. It can be accessed from the front page of the Bloomberg site. www.bloomberg.comwww.bloomberg.com _________________ “It does not do to leave a live dragon out of your calculations, if you live near him.”
J.R.R. Tolkien
"The time has come for men to act like men; and for women, well, to act a lot more like men."
-Ma Cur
Posted: Mon Jun 30, 2008 2:31 am Post subject: Re: Financial Tsunami
Quote:
4. Move out of the dollar, don't trust in Euros or oil, look to edible commodities as a way to preserve wealth.
Or land.
"A man without land is nobody." Simcha from The Apprenticeship of Duddy Kravitz. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Mon Jun 30, 2008 3:12 am Post subject: Re: Financial Tsunami
Heineken wrote:
It seems fantastic to contemplate, but I do think an invasion of Canada by a desperate America is a possibility in future. A starving populace would support any crazy scheme that promised dinner.
Canada is vulnerable.
Its' my understanding that under their own law the US has rights to all Canadas' resources anyway ?
No need to invade. _________________ "One minute I held the key, next the walls were closed on me, and I discovered that my castle stands upon pillars of salt and pillars of sand."
Posted: Mon Jun 30, 2008 4:33 am Post subject: Re: Financial Tsunami
Battle_Scarred_Galactico wrote:
Heineken wrote:
It seems fantastic to contemplate, but I do think an invasion of Canada by a desperate America is a possibility in future. A starving populace would support any crazy scheme that promised dinner.
Canada is vulnerable.
Its' my understanding that under their own law the US has rights to all Canadas' resources anyway ?
No need to invade.
Yes, but they may just want to take it in the future. Remember John Candy in that one movie? Can't remember the name. Also Wag the Dog.
Posted: Mon Jun 30, 2008 4:54 am Post subject: Re: Financial Tsunami
Quote:
The world needs higher interest rates to tackle a clear inflation threat, even though economic growth is likely to be hit harder than most observers expect, the Bank for International Settlements said on Monday.
The Swiss-based BIS -- a meeting place and think tank for the world's central banks -- gave a gloomy outlook for both inflation and growth in its annual report, published after a three-day meeting of central bankers from over 100 countries.
BIS General Manager Malcolm Knight said central banks faced their greatest challenge in years, with growth slowing even as inflation pressures intensified
Posted: Mon Jun 30, 2008 5:32 am Post subject: Re: Financial Tsunami
wisconsin_cur wrote:
Interview on Bloomberg TV:
4. Move out of the dollar, don't trust in Euros or oil, look to edible commodities as a way to preserve wealth.
Help, could you define some edible commodities since corn is sorta iffy at this time.
Is cheese on the commodity market? If so, we could stimulate your market up there. They gave me back my $600 last week so I am looking to invest. _________________ THE SIMPLE LIFE: One frozen pond, a few sticks, a little round puck, and a bunch of rowdy kids.
Posted: Mon Jun 30, 2008 5:37 am Post subject: Re: Financial Tsunami
Thanks Mr. Bill. A clear picture.
In my relative youth during the economic collapse of the early 80's I didn't pay much attention to what level capital decline occured...you have any memories?
Essentially my question is: should we have a true price shock/economic decline is there any reasonable expectation that there would be sufficient capital in the world market to pay for the necessary adjustments to power generation as well as all the other adjustments to "business as usually" we've been needing for the last 20 years? We may finally accept the changes that are need to our energy consumption habits but will there be significant capital available to impliment even the minot changes let alone a few trillion to build nuclear palnts, evryone buy hybrids, etc?
Posted: Mon Jun 30, 2008 8:12 am Post subject: Re: Financial Tsunami
Back during the stock market crash in 1987 I was trading futures and options on the CBOT and WCE as well as physical grain for import and export, so I was more concerned about weather, freight markets and 'the soybean complex'.
So my own recollections of what happened are sketchy at best. But generally the stock market drop was blamed on program trading, and therefore the fall-out was short and sweet, while the rally resumed by year-end.
The problem as I see it at the moment is that domestic firms, say, in Australia, Canada, western Europe or the USA, for example, look at decisions to invest on a more or less global scale now, so they will go to where the money is being made; where they can source raw materials; and where there are paying customers. They are much less constrained to their domestic market as they may have been in the past, so conversely investment conditions at home have to remain attractive to induce them to stay.
The rest is a long, rambling post that never really arrived where I expected it to, so read at own risk, or not!
Quote:
Here and now we are talking about a confluence of events such as: global imbalances; a credit crisis; falling home values in several countries; gathering inflationary forces on a more or less global scale that will ultimately lead to higher interest rates; against a backdrop of slower growth. While higher food and fuel prices contribute to lower discretionary spending from a tapped-out US consumer as well as reduced corporate profits.
Sure someone somewhere is making money from higher food, fuel and fertilizer prices, but that is being offset by farmers leaving land idle because they cannot afford the higher price of triple-F or in some cases high quality seeds as well. Rural poverty and higher food prices for the urban poor have pushed millions further into subsistance, while frustrating the desire of many more to climb up the economic ladder.
If I had to venture a guess I would say that the income spread between the developing world and the developed world will continue to converge, but not at higher levels of income and better living standards as many globalization proponents have suggested, but at lower levels. That I believe is due to post peak oil resource depletion AND not enough research, investment and development into viable alternatives. Basically, too little, too late to avoid a rough transition period to a new economic reality.
But that means more competition for capital from the developing world. Given higher growth rates and higher nominal interest rates that puts the USA in a tough position given that TPTB are more inclined to keep real interest rates low, while at the same time running budget deficits on a federal, state and municipal level that are going to strain bond markets.
Given a fixed economic pie at any one given time there will be competing needs for capital to fund infrastructure, health, education, entitlement programs and such things as military spending. But also capital will have to potentially choose between private infrastructure projects that offer higher returns to funding public infrastructure projects that might be less attractive, but is none the less necessary.
All at a time that rising energy prices increase the cost of production as well as reduce consumer spending on other goods and services. While those countries or segments of the economy that produce food, energy, fertilizer, plus other metals and commodities, will be both generating capital, but bidding for it at the same time.
The rich world (however you define it) starts from a stronger, initial position, but wealth consumed is not the same as wealth invested. We (collectively) still need to produce something that someone else is willing and able to buy at a profit. That is a lot different than living on credit and not having the economic means to repay it with interest.
I warned you! ; - )) _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Mon Jun 30, 2008 8:32 am Post subject: Re: Financial Tsunami
Fairly palatable Mr. Bill.
And leads to the thought: With capital flocking to the best market one could assume market quality will hinge on growth potential (especially when viewed from the ratio of value input/ value output.) Thus my simplistic knee jerk reaction would be to expect limited capital availablity in the US as a result of more atractive opportunites in China (and India perhaps). I've recently started calling this the new "China Sydrome): China's economy is so hot it cuts right through the earth's core and burns out collective butts.
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And the meltdown continues.
