I think this is the beginnings of an economy based on perpetual growth and fossil fuel energy running headlong into geological energy constraints. Basically I see an undulatory downward path for the rest of my life. From here out, I think any rallies in our economic condition are going to be met with spiking commodity prices that knock us right back down.
Posted: Fri Oct 10, 2008 1:55 am Post subject: Re: Housing and Economic Collapse - In Progress #3
It's not really (quite) as bad as it first appears... bank reserves have increased enormously, and are vastly greater than required reserves. The fact that so much are borrowed is a reflection of the TAF borrowings being so high. There can never be a shortage of bank reserves, as long as the Fed has the power to create money. And a loss of bank reserves doesn't directly mean a loss of bank equity.
Reserves are just an accounting artefact that can be created or destroyed at will by the central bank. No need to get too hung up on them. We don't have "gold reserves" anymore. _________________ "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: Fri Oct 10, 2008 7:38 am Post subject: Re: Housing and Economic Collapse - In Progress #3
Quote:
It's not really (quite) as bad as it first appears... bank reserves have increased enormously, and are vastly greater than required reserves.
The bank reserves are up but I don't expect they would have borrowed more than their required reserves unless they were going to need it.
Quote:
There can never be a shortage of bank reserves, as long as the Fed has the power to create money.
That's no consolation since the creation of money effectively takes away from the value of everyone's dollars. And they are indeed creating money. See: Federal Reserve H.4.1 Look at the change from one year ago.
Posted: Fri Oct 10, 2008 7:43 am Post subject: Re: Housing and Economic Collapse - In Progress #3
I thought I read something about lowering reserve requirements to zero? Anybody know what's up with that?
It seems to me that if no reserves were required, then the FDIC would not be required to take over an insolvent bank? So, account insurance would be out the window? Worried here. _________________ Local fix-it guy..
Posted: Fri Oct 10, 2008 8:12 am Post subject: Re: Housing and Economic Collapse - In Progress #3
patience wrote:
I thought I read something about lowering reserve requirements to zero? Anybody know what's up with that?
It seems to me that if no reserves were required, then the FDIC would not be required to take over an insolvent bank? So, account insurance would be out the window? Worried here.
Yes, that was in the bailout legislation, in a round about way.
Posted: Fri Oct 10, 2008 8:54 am Post subject: Re: Housing and Economic Collapse - In Progress #3
patience wrote:
I thought I read something about lowering reserve requirements to zero? Anybody know what's up with that?
It seems to me that if no reserves were required, then the FDIC would not be required to take over an insolvent bank? So, account insurance would be out the window? Worried here.
This, along with all the bailouts etc, continue to fail to address the core issue. Money and monetary policy are mechanical systems, but failure of the mechanical systems are a side effect not a cause.
The core issue is confidence and trust.
Without trust, there is no credit. Without credit, this economic system fails.
And what do they give us?
CEOs get on TV and lie about their stability, only to have their corporation fail a few days later.
Politicians who have been on the take from these corporations tell us that they have everything under control, only to waffle in the wind mere weeks later and conduct panicky meetings. Clearly either incompetent, dishonest, or most likely both.
And the result? The legislation merely pander to these same CEOs with bailouts funded by the public the politicians maliciously claim to represent. Again, these people are criminal and not worthy of trust.
We may have some minor market recoveries along this road. I expect one soon, with a big rally in Nov and Dec. People will say the worst is over.
As long as the core problem remains, it won't be over. While this type of behavior is allowed in Washington and on Wall Street, the core problem will remain.
Asking current political and corporate leaders to do something about it is like asking someone to hang themselves. _________________ Welcome to the Kondratieff Winter
Posted: Fri Oct 10, 2008 11:22 am Post subject: Re: Housing and Economic Collapse - In Progress #3
shady28 wrote:
frankthetank wrote:
Shady-
I'm done buying metals. I only bought silver, and only invested a small portion of savings into it. From now on i'm only buying what i can eat or use.
A slight hedge is not a bad thing.
I do think deflation is going to be very prevalent for the next 6 months at a minimum. Once the debt collapse stops - which will probably be years away - my position on that will reverse.
So, let me get this straight. You are seeing (aside from ongoing asset deflation) an inflationary scenario, following what we're in now, serious deflation?
Joined: Mar 12, 2007 Posts: 1008 Location: As close as I can get to the beginning of the pipe.
Posted: Fri Oct 10, 2008 3:09 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
Shady is saying the same thing that all the rest of us have been saying; debt destruction followed by reflation/hyperinflation. He is calling the debt destruction deflation; that's the difference. There's really no difference. We've got 2-6 months for hyperinflation to catch hold. _________________ "When fascism comes to America it will be wrapped in a flag and carrying a cross." --Sinclair Lewis
Posted: Fri Oct 10, 2008 3:33 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
FloridaGirl wrote:
That's no consolation since the creation of money effectively takes away from the value of everyone's dollars. And they are indeed creating money. See: Federal Reserve H.4.1 Look at the change from one year ago.
The monetary base has increased nearly 20% in one month. Until now, Bernanke has managed to sterilize the impact of his interventions on the monetary base. So we're entering a different regime here. The recent development of allowing payment of interest on bank reserves will just encourage more money printing. _________________ "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: Fri Oct 10, 2008 3:44 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
Iaato wrote:
Shady is saying the same thing that all the rest of us have been saying; debt destruction followed by reflation/hyperinflation. He is calling the debt destruction deflation; that's the difference. There's really no difference. We've got 2-6 months for hyperinflation to catch hold.
The main difference is that I see the deflationary spiral running its full course first.
We won't see high or hyper inflation until after that, and that will probably take years. I said 6 months at a minimum, but to have that short of a contraction would take massive printing and direct payments into the economy by the fed. VERY unlikely. They haven't done anything like that yet.
And, I'm not calling debt destruction deflation. Debt destruction leads to deflation - it's simply a historical fact. Check the link in my signature below, this is just the way markets work, and as Jim Rogers says 'have worked for thousands of years'.
Asset deflation already surrounds us, and it's rapidly creeping into main street as well. Even so, it will not bring on a new round of consumerism. Inflation brings on consumerism, not deflation. _________________ Welcome to the Kondratieff Winter
Joined: Sep 16, 2004 Posts: 4863 Location: Southwest WI
Posted: Fri Oct 10, 2008 4:23 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
Just let me know when gold has hit a bottom... Then i'll convert any useless dollars i have...
Silver took a horrible pounding today... horrible.
I do see hyperinflation at some point. The more i hear of another stimulus, the more i want to convert to gold...but until then i'm stocking up on blocks of cheese, pepperoni, flower, mushrooms, lasagna noodles, and other ingredients for my favorite meals.... A person can never have enough pizza and lasagna.
Shady-
What is your take on the disconnect on the paper price vs physical price of silver (and gold?)? I can show you a list of completed Ebay auctions and people are paying double spot price!? _________________ Clothing should be optional.
Joined: Oct 23, 2004 Posts: 5928 Location: New Jersey
Posted: Fri Oct 10, 2008 6:06 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
Today's plunge in stocks/commodities has more to do with the settlement of Lehman derivatives than anything else, although ordinary margin calls were also an important factor.
Once the Lehman settlement is passed, and those companies who are on the winning side of Lehman trades are paid off, hundreds of billions of $s from liquidated positions will become available. That money won't be sitting in one month treasury bills earning 0.01% very long.
The $1 trillion added by the Fed, effectively doubling its balance sheet, will have incredibly strong effects on prices. Before long, we are going to a huge move upward in commodity prices, although I don't know exactly when that will start. Remember after the 1929 crash, there was a tremendous price rally for months afterward.
Granted many financial companies will still be failing and going bankrupt as prices rise. _________________ It's already over, now it's just a matter of adjusting.
Posted: Fri Oct 10, 2008 6:14 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
My husband picked up the bullion we ordered over a month ago from the bank, to deposit in our safe deposit box. The woman who handled the transaction told him that as of tomorrow, their bullion supplier will be charging the bank a hefty premium over the spot price. So there you go. A definite disconnect between spot price and what the BANKS have to pay!!
Joined: Oct 23, 2004 Posts: 5928 Location: New Jersey
Posted: Fri Oct 10, 2008 6:18 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
threadbear wrote:
My husband picked up the bullion we ordered over a month ago from the bank, to deposit in our safe deposit box. The woman who handled the transaction told him that as of tomorrow, their bullion supplier will be charging the bank a hefty premium over the spot price. So there you go. A definite disconnect between spot price and what the BANKS have to pay!!
You may be surprised I agree with you, but I suspect the Exchange Stabilization Fund, which came out of the shadows in the TARP bill, is trying to 'stabilize' the price of gold by selling gold futures. Therefore the disconnect between futures and bullion. _________________ It's already over, now it's just a matter of adjusting.
Posted: Fri Oct 10, 2008 6:37 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
DantesPeak wrote:
Today's plunge in stocks/commodities has more to do with the settlement of Lehman derivatives than anything else, although ordinary margin calls were also an important factor.
Once the Lehman settlement is passed, and those companies who are on the winning side of Lehman trades are paid off, hundreds of billions of $s from liquidated positions will become available. That money won't be sitting in one month treasury bills earning 0.01% very long.
The $1 trillion added by the Fed, effectively doubling its balance sheet, will have incredibly strong effects on prices. Before long, we are going to a huge move upward in commodity prices, although I don't know exactly when that will start. Remember after the 1929 crash, there was a tremendous price rally for months afterward.
Granted many financial companies will still be failing and going bankrupt as prices rise.
I subscribe to the theory that there will *always* be a bull market somewhere.
No matter what is happening in the economy there is always always always a bull market.
It's just that most people don't know where to look.
After the stock market gets pounded into the basement (where it belongs) whoever is still left standing will then pour their money into commodities and the bull market will continue. _________________ joeltrout Oct-2008: Dow 13,000 in three years
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