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: Thu Aug 21, 2008 8:59 am Post subject: Re: Housing and Economic Collapse - In Progress #3
shady28 wrote:
If you have inflation, most things - including assets - go up in price. Look at the last 10 years. Housing, gold, commodities, all going up. Inflation isn't limited to just food and gas. In general all prices go up, including assets and investment items during an inflationary boom.
Logic or not, say you live in CA. Over the last 5 years your home has lost 25% of its value but you are paying 25% more for food and 100% more for fuel.
Whats that called?
-G _________________ I Have and will continue to vote against ANY politician who supports the various bailouts. Curse you for selling out our future for status quo now!
Posted: Thu Aug 21, 2008 9:23 am Post subject: Re: Housing and Economic Collapse - In Progress #3
shady28 said:
Quote:
I keep seeing people stating contradictory things. You really need to educate yourself on what inflation IS.
There are two definitions of “inflation”. Price and monetary. Price inflation occurs when the cost of items increase. That can come about because of a shortage of a commodity. Energy is our primary example in the present case.
Monetary is when the CB of a country prints additional currency. They have not created any additional wealth, just more currency. That can push prices upward. As threadbear points out a credit squeeze can be deflationary to asset prices, even in the face of monetary expansion. When the credit markets are broken, as they are now, asset prices can contract not because the currency does not exist, but because it can not be moved to the markets.
We are sort of in the worst of both worlds. Monetary and price inflation are occurring, and with a broken credit market. Home values are plunging and food and fuel are skyrocketing.
This is not a good place for JP6 to be in with his 110% financed and falling valued castle in the burbs, 2.7 kids, 1.3 dogs and a wife who likes to run Johnny to Miki Dees in her Escalade.
Posted: Thu Aug 21, 2008 9:43 am Post subject: Re: Housing and Economic Collapse - In Progress #3
I like the dictum which goes something like this>>> deflation in things you want (discretionary items like boats and plasma TV's), inflation in things you need (non discretionary items like food and fuel). _________________ Civilization: the biosphere's skin disease
Joined: Aug 24, 2005 Posts: 442 Location: Costa Geriatrica, Spain
Posted: Thu Aug 21, 2008 10:12 am Post subject: Re: Housing and Economic Collapse - In Progress #3
gnm wrote:
shady28 wrote:
If you have inflation, most things - including assets - go up in price. Look at the last 10 years. Housing, gold, commodities, all going up. Inflation isn't limited to just food and gas. In general all prices go up, including assets and investment items during an inflationary boom.
Logic or not, say you live in CA. Over the last 5 years your home has lost 25% of its value but you are paying 25% more for food and 100% more for fuel.
Posted: Thu Aug 21, 2008 10:20 am Post subject: Re: Housing and Economic Collapse - In Progress #3
The terminology is obfuscating the reality we live in. How about simply referring to PRICES going up and down, instead of using the 'flation-terms?
Any putz can see prices flustuate, and knows what that means to the individual. The causes are more obscure, but more easily make sense if we simply say, "energy prices are up because of supply/demand, speculation/international politics/whatever", and "housing prices are down due to lack of credit/overpricing/debt-strapped consumers/whatever".
Add in a term (inflation) with at least two definitions, and we are doomed to confusion.
If we are going to talk about monetary systems, and want to be understood, the same thing applies. We can say the money supply is expanding or contracting, and most will get the point.
This single definition problem has cost more internet bandwidth than any other issue I can think of, to no avail, and with utter confusion in the wake. _________________ Local fix-it guy..
Posted: Thu Aug 21, 2008 10:25 am Post subject: Re: Housing and Economic Collapse - In Progress #3
firestarter wrote:
I like the dictum which goes something like this>>> deflation in things you want (discretionary items like boats and plasma TV's), inflation in things you need (non discretionary items like food and fuel).
that works for me: a nice simple description of the effects.
Posted: Thu Aug 21, 2008 12:54 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
I think one of things that is muddying the inflation/deflation discussion is that all of the creative financial innovation from the last few decades have distorted the traditional markets. Derivatives, swaps, hedges and other leveraging has created credit (debt) that has had the effect of increasing the money supply outside of central banks control. This additional pseudo-money has had an inflationary effect causing the prices of assets to rise.
Now the de-leveraging is occurring we are experiencing deflation of this money and many assets are dropping in value. The exceptions seem to be those assets that are showing signs of scarcity (i.e. energy, food, raw materials). _________________ Civilization is a personal choice.
Posted: Thu Aug 21, 2008 3:16 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
shady28 wrote:
...
All that said, awareness of the commodities implosion is now creeping into the mindset enough that I would expect a bounce soon (a week or so), although most declines also have a one or two day 'panic' sell near the bottom. The bounce will likely be significant since bear 'corrections' usually retrace 1/3 or more of a decline - and we've had a ferocious decline. It's also likely to be the last good exit point for commodities investors. With that, I'd still expect commodity prices in general to lose 50% of their peak before Q1 2009 is over - including gold and oil.
Bear phases :
1 - Correction of over valuation
2 - Realization
3 - Distress selling
The bounce has started. Now it's crunch time for the investors - are you really bullish, and think this is a bottom, or are you going to use the opportunity to take exit positions?
I'm guessing this upward move will lasts a few weeks. _________________ Welcome to the Kondratieff Winter
Posted: Thu Aug 21, 2008 7:26 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
Quote:
Bank borrowing from ECB is out of control
By Ambrose Evans-Pritchard
Last Updated: 3:06pm BST 21/08/2008
Quote:
The European Central Bank has issued the clearest warning to date that it cannot serve as a perpetual crutch for lenders caught off-guard by the severity of the credit crunch.
Not Wellink, the Dutch central bank chief and a major figure on the ECB council, said that banks were becoming addicted to the liquidity window in Frankfurt and were putting the authorities in an invidious position. (snip)
Quote:
The latest data from the Bank of Spain shows that the country's banks have increased their ECB borrowing to a record €49.6bn (£39bn). A number have been issuing mortgage securities for the sole purpose of drawing funds from Frankfurt.
These banks are heavily reliant on short-term and medium funding from the capital markets. This spigot of credit is now almost entirely closed, making it very hard to roll over loans as they expire.
The ECB has accepted a very wide range of mortgage collateral from the start of the credit crunch. This is a key reason why the eurozone has so far avoided a major crisis along the lines of Bear Stearns or Northern Rock.
The dollar is not the only currency backed by waste paper basket assets. This may also explain why the dollar, that is now backed by 65% garbage MBS and etc, has not declined faster than it has against other currencies. Those other currencies have also become trash heaps in the heat of the credit crisis.
When the fiat implosion goes off, you’ll hear a gigantic SWISHHHH. That will be the monetary system being sucked into a financial black hole!!
Joined: Dec 07, 2005 Posts: 2025 Location: Australia
Posted: Thu Aug 21, 2008 10:38 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
For the inflation/deflation debate;
Fresh from LeMetropoleCafe (sorry no link as it is paid site)
Quote:
Monthly July M3 Gained $81 billion. In the last several days, I have received a large number of subscriber requests for comment on monthly M3 growth, given a popular-media story of a private estimate out in the U.K. of a $50 billion monthly contraction in July U.S. M3 money supply. Based on my regular estimation of ongoing M3, no such contraction took place in the series as traditionally defined by the Federal Reserve (methodology discussed in the August 2006 SGS Newsletter); to the contrary, monthly M3 increased by roughly $81 billion.
As reported in last week’s newsletter (August 13th, page 31), the Shadow Government Statistics Ongoing M3 estimate for July 2008 increased by roughly $71 billion from June, a number that subsequently has revised to about $81 billion, based on the latest week’s Fed reporting. That estimate is for the month-to-month change in the seasonally-adjusted, monthly-average M3. For the month, the largest M3 component increase was in M2, reported up by $38.9 billion per the Fed. The other M3 component that still is published fully by the Fed — institutional money funds — was shy of flat, with an $800 million monthly contraction. Large time deposits, repos and Eurodollars — all modeled to a certain extent with a backing in other Fed reporting — increased for the month….
_________________ It's not a bailout, it's a buy-in" - Nancy Pelosi
Posted: Thu Aug 21, 2008 11:36 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
Looks like there will be good opportunities for buying natural gas stocks in late September, oil drillers and servicers in mid October, and foreclosed housing by the end of next winter.
g
By GERALD P. O'DRISCOLL JR.
August 22, 2008; Page A15
Will the U.S. Treasury repudiate its obligations to its creditors, be they citizens or investors around the world? Most observers would answer "no" without hesitation. But Congress, with the complicity of the White House and the Fed, has arguably embarked on a stealth repudiation.
In his famous treatise, "The Wealth of Nations," Adam Smith noted there had never been a "single instance" of sovereign debts having been repaid once "accumulated to a certain degree." We may have reached Smith's threshold.
The bond markets are certainly not protecting creditors from the risk of what Smith called "pretended payment" through inflation. Nor did they do so until far into the great inflation of the 1970s. Not until late 1977 and into 1978 did the bond market fully incorporate the reality of the debased dollar, by demanding higher long-term interest rates.
How can this happen? Markets are supposed to be forward-looking and efficiently price in all relevant risks. Yet monarchs have been repudiating debt explicitly and implicitly throughout recorded history.
Many years ago, the Austrian economist Ludwig von Mises offered an explanation. He suggested that while you can't, in Abraham Lincoln's words "fool all of the people all of the time," you can fool all of the people at least some of the time. And this is easier to do if a central bank has in the past earned credibility in fighting inflation.
....
Quote:
We are at a Smithian moment, in which the temptation for the Fed to spend its last dime of credibility may prove irresistible. Investors are already being taxed by inflation and can rationally expect that tax rate (the inflation rate) to be raised going forward. Wages are not keeping up. Main Street is being taxed to fund Wall Street excess. Anyone who works, saves and invests is exposed to confiscation of his capital and earnings through inflation.
If the Fed maintained its independence of action and said no to the inflationary finance of Congress's profligacy, we wouldn't have reached this point. But the Fed has forsaken that independence amid an absence of leadership.
Perhaps, as rarely happens, Adam Smith will be proven wrong. Let us hope so, because hope appears to be all we have.
_________________ “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: Fri Aug 22, 2008 9:26 am Post subject: Re: Housing and Economic Collapse - In Progress #3
Quote:
Mike Shedlock: "The Telegraph is reporting Sharp US money supply contraction points to Wall Street crunch ahead. The US money supply has experienced the sharpest contraction in modern history, heightening the risk of a Wall Street crunch and a severe economic slowdown in coming months.... M3 has proven to be a poor leading indicator. Housing has been crashing for three years, equity prices in general have been sinking for 9 months and financials have been sinking like a rock for a year. The US recession started in December of 2007 or January of 2008, some 8-9 months ago. Pray tell what about M3 is leading?...Deflation is here even as misguided screams of inflation from those looking in the rear view mirror are now echoing around the world.
Shedlock is obviously looking at asset prices, which began their downturn in late ‘05 or early ‘06. He has ignored the fact that we have to eat, drive around or pay the medical insurance bill. In the consumer area, there has been a huge increase in prices during this same period.
Without a more comprehensive understanding of PO and peak energy, by the financial industry, this whole situation will continue to perplex them. In the meantime we will be fed a continuing stream of misinterpreted, exaggerated information. If not, down right lies.
Quote:
Q2 GDP: Gross Leveraged Lie
The story told at home in the Untied States was that the USEconomy would be the first to exit the troubled times since first to enter it with the explosion of the subprime mortgage crisis last August. The story told at home was that the Untied States is the only nation to eek out some positive growth, while Europe (including Germany), England, and Japan are officially showing negative GDP readings for the first time. The story told overseas was that the US has come clean on bank balance sheet damage, when the USGovt has finally installed powerful rescue plans to deal with the problem. Not a single theme is true. In fact, the lies have grown worse and the public scrutiny of the lies has grown almost totally absent.
Posted: Fri Aug 22, 2008 10:17 am Post subject: Re: Housing and Economic Collapse - In Progress #3
Shedlock also ignores the global central banks in promoting inflation. He is much too U.S. centric, but it's a global financial system we labor under. He even admits that the rest of the world's CB's are not on the same credit cycle as we are here in the U.S. If we don't get a global deflation pray tell how we get massive price deflation here? Shedlock doesn't explain this, rather he ignores it. Wonder why? _________________ Civilization: the biosphere's skin disease
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