Posted: Mon Jul 21, 2008 9:21 am Post subject: Re: The Economist: America may default on it's debt
MrBill wrote:
manu wrote:
Yes, it's a global meltdown. Mr.Bill finally jumps on the bandwagon!
You have been sniping at me for almost a year now, but you have never provided the post in which I refered to the subprime meltdown as a bump in the road? Likely because I never said that. But whatever, so long as you're amused! ; - ))
This was a complement. I don't have time to look for an old post, but trust me, you said it. I can remember you were thanking Seahorse for pointing out the sub prime mess when it first hit, then you made your comment.
Joined: Mar 12, 2007 Posts: 1004 Location: As close as I can get to the beginning of the pipe.
Posted: Mon Jul 21, 2008 9:38 am Post subject: Re: The Economist: America may default on it's debt
MrBill wrote:
manu wrote:
Yes, it's a global meltdown. Mr.Bill finally jumps on the bandwagon!
You have been sniping at me for almost a year now, but you have never provided the post in which I refered to the subprime meltdown as a bump in the road? Likely because I never said that. But whatever, so long as you're amused! ; - ))
"Unlike Gideon or mmasters I have traded interbank FX and lived through many financial crises. If you think this is a crisis, you should have been trading ZAR in the 90s.
Any dimwit financial journalist that says, this is unprecedented, is an idiot. I have personally seen much worse. More on that next week. Cheers."
_________________ "When fascism comes to America it will be wrapped in a flag and carrying a cross." --Sinclair Lewis
Posted: Mon Jul 21, 2008 9:53 am Post subject: Re: The Economist: America may default on it's debt
Oh Mr. Bill, I remember it well too.
It was right after the Fed issued its first announcement that it was going to open up a new lending facility.
Gideon postulated that it was a point of inflection that we would, some day, look upon as indicating a sea change toward economic disaster.
You then said that it was a blip, and nothing any seasoned economist would consider out of the norm.
Gideon then said, Mr. Bill, that you had seen what would eventually be viewed as the greatest economic warning sign ever and entirely missed its relevance.
You replied that you had not.
It turns out, Mr. Bill, that Gideon was right. _________________ Massive Human Dieoff must occur as a result of Peak Oil. Many more than half will die. It will occur everywhere, including where you live. If you fail to recognize this, then your odds of living move toward the "going to die" group.
Posted: Mon Jul 21, 2008 12:11 pm Post subject: Re: The Economist: America may default on it's debt
Mr.Bill dropped the ball on this one. That's the problem with paying too much heed to publications like the Economist. By the time it hits their pages, it's history. The sub prime fiasco has been predicted, debated, and gone over with a fine tooth comb, in alternative media, since banks started issuing them, en masse, a few years ago.
Joined: Mar 26, 2005 Posts: 3780 Location: over here
Posted: Mon Jul 21, 2008 12:56 pm Post subject: Re: The Economist: America may default on it's debt
Twilight wrote:
On the subject of debt default, it is possible only after the US has lost its superpower status by other means. It owes much of its present status to the appearance of unstoppable force and immovable object combined. Debt service is a sacred keystone of that. It will maintain that as long as necessary. There are many other burdens that go with its status, expectations that it must live up to. It will never admit military defeat in deed by withdrawal from anywhere - Vietnam being the sole exception and an illustration of the standard required. It will never back down from seemingly absurd stand-offs such as that with Cuba, even if at first glance counter-productive, for it cannot be seen to acknowledge successful examples of resistance. The US is like a star who must never allow herself to be photographed in her natural appearance, so much does its status depend on projecting an image flawlessness.
All that is looking ravaged by time lately, and $10 trillion is an impossible sum to repay, but do not expect a default to come ahead of anything of note. It is more likely to be a final act by then irrelevant.
I disagree with that and think that the opposite is more true; the only thing that could bring the US to it's knees is a debt default and that it was only a question of time before growth addicted politicians and public alike began to believe in goldilocks' fairytale economics of running up debt to levels so high... all in order to finance phantom economic growth. In short, consumer, corporation and government dug a very deep grave for the American economy while they thought they were digging for gold and high oil prices are kicking them in.
And like mrBill suggested, this financial hole is potentially so big it could suck the whole world economy into it like the financial equivalent of a black hole.
Now we're back on topic
(and let's keep it that way instead of talking about who said what when etc) _________________ "The best thing about the future is that it comes only one day at a time."
Posted: Mon Jul 21, 2008 1:18 pm Post subject: Re: The Economist: America may default on it's debt
Bas, A number of us have been taken out to the woodshed, called Communists, tin foil hat nutters, etc...by Mr.Bill. Why would you interfere with us lunching on revenge? With the aid of the search function, it's best served cold, with a glass of chianti.
Joined: Mar 26, 2005 Posts: 3780 Location: over here
Posted: Mon Jul 21, 2008 2:13 pm Post subject: Re: The Economist: America may default on it's debt
misterno wrote:
The US will never default on their debt. They will just print money. And they know how to hide it.
Why do you think FED does not publish M3 numbers anymore?
As in, nobody wants to borrow that money, but the fed throws it in the market by buying government bonds? you're may be right for a while, but there still could come a point at which nobody believes in the value of those government bonds nor the dollar, leading to default. All roads lead to Rome in this case, unless the government magically turns the deficit into a surplus, or which is more likely but not a complete certainty; the house of cards will stop falling with the frannie government guarantee. _________________ "The best thing about the future is that it comes only one day at a time."
Posted: Tue Jul 22, 2008 1:10 am Post subject: Re: The Economist: America may default on it's debt
Manu, if I said it, then I owe you an apology, but reading that post I still stick by what I said. I was narrowly refering to the Fed's and ECB's decision to add liquidity to the market via reverse repos. The only unusual thing was the size and the public announcement that they made. I by no means called the subprime mortgage fiasco a bump in the road.
I already apologized to mmasters ages ago. Gideon is a very angry person and not worth bothering about. It just reinforces the lesson that I need to keep a cool head and focus on the argument and not on the poster. This was a clear example where I should have kept a clearer head.
This was written in July 2007 with regards to credit conditions.
Quote:
All I am saying though is that dire predictions about peak oil aside is that too many markets are up, way up, on a glut of global liquidity and the asset price inflation that causes. Too many markets are correlated with one another and they are all drawing from the same pool of liquidity.
Now along with higher interest rates in response to inflation as well as tighter credit markets due to bad debt concerns, as highlighted by the subprime mortgage fiasco, we are facing a very likely probability that these problems may seep into equity investors' collective consciousness too.
The market has had a good run-up on the back of cheap financing; hedge funds willing to take on big risks for less rewards; private equity paying over the top to take public companies private; and the expectation that other companies were suitable targets. In short, it is a bubble of sorts, and we know what has to eventually happen.
I am just not sure that the oil companies that have risen some 33% of so year to date are going to be able to withstand the downward pull of a falling stock market? I am sure these are good companies to buy, but at these prices today? I took a look at my portfolio today to see what I could sell? I cannot find anything I really want to get rid of. I already used the rally to sell off all my under-performing dogs. And some that have not done well, like some drug firms, I still believe will have their day, like the large caps of late. However, I am not adding to any positions.
Everyone else can buy Apple if they want. That's not where I want to be when it gets nasty and the exists are jammed. Just my opinion though.
Between June and August last summer I became progressively more bearish and called for a retracement to 1250 in the S&P500 when it was trading at 1555 and it subsequently dropped to 1269 before the Fed intervened in mid-August. I clearly said that Q2'07 corporate results would prove to be the high tide, and looking back they were. Finally, we hit a new low at 1200 this month, and I feel we will still see 1173, yet. But I have been largely bearish for years. I wrote this back in November 2004:
Quote:
Just a short word on the dollar’s weakness. There appears to be little that anyone can or is prepared to do about this in the short term, so we recommend long ruble positions, on the back of a stronger euro. The ruble touched 28.3150, and in the absence of CBR intervention we see 28.00 by year- end now. Since its inception at 1.1900-1.2000 in 1999 the euro fell to circa 0.8650, and at that point, even the optimists of the euro experiment were distraught. The strength of the US economy proved ethereal – post dot.com boom, post Enron & Worldcom, post 9/11, and in the face of record deficits on all fronts. Given the same degree of negativity surrounding the dollar now, one may reasonably expect that the euro would appreciate to 1.3800-1.3900, a corresponding move in the opposite direction. Certainly, we have seen the yen under 100 before, and this is not just about dollar weakness, as the euro has appreciated as well against Sterling, the Swiss Franc, and the Canadian dollar, too. Therefore, we are in a period of painful transition for the dollar, and until the US government garners the wisdom and courage to address their fiscal and trade imbalances we do not rule out 1.35-1.40 dollars against the euro, and higher US interest rates as well.
source: RIC Daily 25.11.04
Quote:
There is no mistaking the subdued mood of the markets this week, despite the Thanksgiving Day break and the kick-off of the Christmas shopping season. US treasuries have backed-up as the decline of the dollar has become alarming enough, that not just Russia, but major central banks like China, are now also slowing and or reducing their purchases of US treasuries, and reassessing their portfolios to reduce their dependence on ‘not so risk free’ dollar assets. This has helped push EUR/USD through 1.3300, and has set the stage for a move to 1.3500.
Given it is a quiet day in the markets due to thinly staffed desks in America, it would have been the perfect day for the ECB, BOJ & BOE to intervene in FX markets, but why? These are portfolio flows and not short-term speculative bets, so there is no reason to punish investors for correctly predicting that the US cannot have both a strong dollar policy and low interest rates given their huge fiscal and trade imbalances, and up to now looser monetary policy via the Fed. Therefore, concerted intervention at this time would only serve to confuse markets and prove ultimately futile. Therefore, we stand by our assertion that we will eventually see 1.35-1.40 dollars to the euro, and in turn this will likely have an upward bias for Sterling, yen, and rubles.
source: RIC Daily, 26.11.04
Quote:
Our market view:
At the top of the news over the weekend is the view that the dollar has further to fall on the back of reduced purchases of US treasuries by central banks, who have reduced their holdings in treasuries for the week ending November 24th. Given the USA needs $2 bio a day in fresh investment to cover their yawning current account deficit, and that private demand for US dollar denominated assets is waning, central bank buying was the only remaining plank on which the dollar was standing. That unsteady support has been severely weakened by the central banks, who cover 60% of America’s budget deficit through their purchases of US treasuries, as they review their portfolio allocations and reduce their dollar holdings in favor of mainly euros. We add India to the list of Russia and China as central banks that have publicly announced a re-weighting of their currency reserves. Here is a note to US Treasury Secretary, John Snow. Next time you publicly call on China to revalue their yuan, think about who has been financing America’s unsustainable fiscal and trade deficits. Never mind who is building all those DVDs, games & mobile phones Americans are buying on credit for Christmas.
Source: RIC Daily, 29.11.04
So once again, I apologize if you took my comments to mean that I did not see some serious problems occuring. Had I have had a clearer head and not been engaged in a tit for tat exchange then perhaps my message would have been clearer. But I think specifically going back to my posts of last summer - especially after the Fed first dropped interest rates in mid-August - we became increasingly alarmed at the pace of deterioration in the subprime market and the effect that lower US interest rates would have on global inflation.
August 10, 2007
Quote:
Just some thoughts on whether the sub-prime fiasco and credit crunch is a US financial crisis caused by debt and leverage or symptoms of wider problem? It seems that we are not the only ones asking such questions.
(continued)
China reported higher than expected inflation at 10-year high, while Japan posted better than forecasted growth. This should lead to the BOJ to raise rates in August/September, but they may use the turmoil in the financial markets as reason to delay raising rates yet once again. Amid rumors making the rounds on weekend that the Fed and the ECB may be forced to do an about face and cut rates to save financial markets this is all very inflationary if central banks do not muster the courage to collectively tackle run away growth and inflation in the global economy.
If the CBs are not up to the inflation fight then there is only one place to be, as much as I hate to say it, and that is in gold. Many of the mining majors ended the week lower, and gold is well off its highs, so it may be time to trawl this sector looking for under-valued producers that might benefit from higher inflationary expectations going forward. All this is, of course, speculative and would depend on the Fed and ECB riding to the rescue of financial markets while the BOJ and PBOC happily go along with monetary accomodation to smooth financial markets (temporarily).
I think it is madness. Loose monetary policies are at the very heart of the financial problems and global imbalances we are currently seeing. If the CBs cannot grasp the nettle now then say goodbye to inflation as she be going higher. Easy money now means an even harder landing in the future. Earth calling Paul Volcker. Come in Paul Volcker.
Posted: Tue Jul 22, 2008 1:17 am Post subject: Re: The Economist: America may default on it's debt
threadbear wrote:
Bas, A number of us have been taken out to the woodshed, called Communists, tin foil hat nutters, etc...by Mr.Bill. Why would you interfere with us lunching on revenge? With the aid of the search function, it's best served cold, with a glass of chianti.
Threadbear, you may think this, but simply is not true. For one, I have never used the words 'tin foil hat nutters' or called anyone (other than eastbay) a communist! ; - )
This is a forum to discuss issues related to post peak oil resource depletion, and that is my only interest. I have zero interest to get into a pissing match with anyone. So I apologize if I have ever lost my head or said things in the heat of an exchange that you felt were unfair. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Tue Jul 22, 2008 3:11 am Post subject: Re: The Economist: America may default on it's debt
Tax the Super Rich as a means to pay off the debt? How does that work? Most of the "assets" of the super rich are worthless paper, equity stocks that hold no value as factories close, packaged up securities that will never pay off. Its a lot of paper in a big house of cards, but it holds no real value.
Buy Commodities! Buy GOLD! is the clarion cry. Well you can buy the Futures, but what happens when the seller can't deliver at any price? You do need the production at the end of the line here somewhere to actualy get real value, not perceived or bet-on value. Gold seems like a good bet, but do you really OWN the gold or do you just own some paper certificates which say you own some sitting in the Federal Reserve Bank in NY? Can Saudi Sheiks EAT the oil as it comes up out of the ground? Even if you own Gold Coins in a Safe at Home, can you EAT those gold coins? Like a $100B Zimbabwe Note, a Gold Coin is worhtless if there is no food to BUY with it. If I'm Hungry, I wouldn't sell you a TWINKIE for a a bar of gold, and I own lots of Twinkies. LOL. ( A friend gave them to me when I was haranguing her about Peak Oil and she gave them to me because of their long shelf life.)
However you spin it down here, by hyper inflation or by direct default of the Treasury, this economic system is not salvageable. Its only a question of how long it takes for it to spin down in the absence of sufficient production to support the population. Because all the economies are interconnected, just as the Big Banks are, if one of them fails then they ALL will fail, in short order.
If you actually can get credit nowadays, for sure run it up to the MAX. The paper is all worthless. Ben and Henry are pulling all-nighters trying to figure out how to push the paper around to keep the system floating a while longer, just like a typical homeowner starts charging up a credit card to cover shortfall on the mortgage. BOTH credit lines go into jeopardy, and even if said person tries to de-leverage, he can't find buyers for the properties. Eventually here new Capital Raising Stock Offerings are not going to be bought by ANYONE. You cannot keep writing down debt and expect somebody will come in to throw good money after bad. The taxpayer OBVIOUSLY can't foot the bill, since the Taxpayer isn't paying taxes because he is JOBLESS and on the dole.
I am astounded that people buy the Bond issues and Treasury securities as a "safe" harbor for their money. Those securities cannot pay off, moreover you probably can't get you money out once you bought in. How long before the Treasury goes bankrupt, or hyper inflation has people pushing dollars around in wheelbarrows? Or printing $100B US currency notes?
Economy goes local here, barter economy or "shadow" economy. When, not if the currency fails, so also fails the nation states tied together by such economics. Has to happen, not a question of IF, just a question of WHEN. I am entertaining bets on the month and year the system collapses completely. Anybody wanna make a guess?
Posted: Tue Jul 22, 2008 3:25 am Post subject: Re: The Economist: America may default on it's debt
The US has been defaulting on its debt for years. Gradually, via devaluation. Maybe it'll start defaulting more rapidly, but it's a matter of degree. I don't see a headline "America defaults" looming - they will just continue to do it bit by bit as they have in the past. _________________ "Who knows what the Second Law of Thermodynamics will be like in a hundred years?" - Economist speaking during planning for World Population Conference in early 1970s
Posted: Tue Jul 22, 2008 6:47 am Post subject: Re: The Economist: America may default on it's debt
Yeah I remember Mr Bill saying it too a little less than a year ago when the housing bubble started to unravel. Something like what was happening wasn't even a blip on the radar. Couldn't find it though, Mr Bill probably deleted the thread. _________________ Just look at us. Everything is backwards; everything is upside down. Doctors destory health, lawyers destroy justice, universities destroy knowledge, governments destroy freedom, the major media destroy information and religions destroy spirituality.
Posted: Tue Jul 22, 2008 6:57 am Post subject: Re: The Economist: America may default on it's debt
Cashmere wrote:
Oh Mr. Bill, I remember it well too.
It was right after the Fed issued its first announcement that it was going to open up a new lending facility.
Gideon postulated that it was a point of inflection that we would, some day, look upon as indicating a sea change toward economic disaster.
You then said that it was a blip, and nothing any seasoned economist would consider out of the norm.
Gideon then said, Mr. Bill, that you had seen what would eventually be viewed as the greatest economic warning sign ever and entirely missed its relevance.
Posted: Tue Jul 22, 2008 7:36 am Post subject: Re: The Economist: America may default on it's debt
It must be collective amnesia then because I certainly never said it. But whatever the crowd bays for blood. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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