[Roccland]

Why America Is Headed For A Depression

Well, now we've got the beginning of the consequences, and what America is doing, for the most part, is sticking its fingers in its ears and going "LA LA LA LA LA LA LA LA" - because actually removing the fingers from your ears requires that you admit that you are likely part of the problem as you're in debt up to your eyeballs and are unwilling to live within your earnings capacity!

Would you like to know the rest of the consequences that are coming for you, your children and grandchildren if you don't remove the fingers and stop chanting? Do you even know what they are? Let me lay a few out for you:

As noted in previous Tickers, I believe China threatened Paulson and thus our government if they didn't insert the Fannie and Freddie "rescue" provisions into the Housing Bill - $800 billion, potentially, worth of liability out of your pocket. Do you like the idea of foreign governments dictating to our government what we must do as a nation and how high our taxes must be?

China and Japan could get upset with our profligate spending, discerning that we can't possibly pay back what we owe them (see, they buy a lot of our debt.) They could express this opinion either by refusing to buy more, or actively dumping what they own. The alternative? They tell us what we can and can't spend - and how much Granny can have in her last year of life. Again - are you willing to have foreign governments dictate your standard of living and what the government can and can't spend on?

What happens when you can't get a loan? Of any sort. Oh, and you kinda need one. Guess you'll have to do without that (whatever it is), right? What if its gasoline or food? Could you survive six months without any of your credit cards?

Think your job is safe? How sure are you? Can it be shipped to China? If not, will what it pays if your job is NOT outsources to China keep food on your table? Are you sure? What if you're wrong?

How do you unwind close to $3 trillion in bad debt, and who eats the loss? If its "the taxpayer", are you willing to pay 30-50% more for everything - forever? Oh, your wages won't go up either. If your purchasing power deteriorates by another 30-50%, will you be able to feed, clothe and keep your family and yourself warm this winter?

You think this is all about finances? No.

Karl is spot on - I just wish he would see a bigger picture.

Oh well - he too has his finger in his ears about available energy...

[DantesPeak]

who eats the loss?

It will added to the national debt and inflated away. They can't possibly raise taxes very much, if at all. So the Fed will just debase/devlaue the dollar - like it has been doing since last November.

Yes, wages won't keep up. No, we won't have general deflation, but it will be very hard to sell a one family home.

[Cashmere]

Karl is a smart guy who is an idiot.

It took about 10 minutes for me to figure out the Market Ticker site.

MT is a bunch of business major flag wavers with several apple pies each up their asses.

Karl and Co. are so introspectively void that they believe the following:

1. Deflation is going to occur because there is "no way they would try to print us out of this mess - that would destroy the country."

and

2. We are not in Iraq for oil.


The level of self-imposed ignorance required for #2 is so strikingly high I could not take seriously any other comment made by the person.

1 is stupid 2, but not nearly on the level of 2.

Market Ticker is useful only to the extent that 1 or 2 posters there have insight into the financials and banks. Beyond that, it's flag waving ignoramuses wall to wall.

[firestarter]

Market Ticker is a haven for fat ass, racist, sexist, Denninger sycophants, America relative to the rest of the world is never wrong (read: radically jingoistic), neocon windbags.

Denninger is one of the blogospheres biggest megalomaniacs. He would literally rip off your head to prove that he is correct about any opinion he harbors. His forum has been emasculated to where it is 1/100th of what it was before he summarily banned virtually everyone who disagreed with him. He's an asshole, period.

[burtonridr]

He has some good points... We all know that china is coming into the oil party just a little late. Whats to say that if their economy begins to crash they wont cash in their check and ask for the money?

Now what happens when our economy is no longer worth what it was and we cant repay the debt?

I dont think our nation will just flop over and take instruction from china, it may be the makings for the first foreign war on our soil for a long time.

[Roccland]

Market Ticker is a haven for fat ass, racist, sexist, Denninger sycophants, America relative to the rest of the world is never wrong (read: radically jingoistic), neocon windbags.

Denninger is one of the blogospheres biggest megalomaniacs. He would literally rip off your head to prove that he is correct about any opinion he harbors. His forum has been emasculated to where it is 1/100th of what it was before he summarily banned virtually everyone who disagreed with him. He's an asshole, period.

Yep - no argument there...he banned me about 9 months ago when I told him his veggie VW would not outrun PO and the ensueing die off.

That said - it is a good place to go for the play by play.

I think he is right about a depression - I think it will be a hyperinfaltionary depression or hyperstagflation but hey...what are words among friends...right?

When he banned "No Thing" for her views on a ruling elite engineering this crash to enslave the global population...he showed his true colors.

[firestarter]

Roc,

He banned Nothing because she did not sign on to at least two of his petitions, and explained why she did not. A month or so later, after her explanations regarding her not supporting his petitions, he banned her under the cover of her being a so called moonbat because she postulated a financial meltdown that would lead to a U.S. default of its debt. She then linked a website as an aside calling for a mathematically perfect economy, which Denninger blew a gasket over.
Soon after came the ban. She was easily the most insightful poster at the forum, and her intelligence, and differing viewpoints, challenged MR Megalomaniac himself. She was stealing his thunder. She had to go. Ever since, the forum is a slanted, one trick pony--generally a bore. As` for Denninger being a prophet, you know what they say about broken clocks.

[Roccland]

Roc,

He banned Nothing because she did not sign on to at least two of his petitions, and explained why she did not. A month or so later, after her explanations regarding her not supporting his petitions, he banned her under the cover of her being a so called moonbat because she postulated a financial meltdown that would lead to a U.S. default of its debt. She then linked a website as an aside calling for a mathematically perfect economy, which Denninger blew a gasket over.
Soon after came the ban. She was easily the most insightful poster at the forum, and her intelligence, and differing viewpoints, challenged MR Megalomaniac himself. She was stealing his thunder. She had to go. Ever since, the forum is a slanted, one trick pony--generally a bore. As` for Denninger being a prophet, you know what they say about broken clocks.

That is my understanding too.

You are right - Karl is a megalomaniac...

But for the play by play - it is one of the best place to go.

[firestarter]

You are right - Karl is a megalomaniac...

But for the play by play - it is one of the best place to go.

For a play by play it is one of the best places to go, but it was A LOT better before Denninger set up his $150 Golden paywall earlier in the year.

[Roccland]

You are right - Karl is a megalomaniac...

But for the play by play - it is one of the best place to go.

For a play by play it is one of the best places to go, but it was A LOT better before Denninger set up his $150 Golden paywall earlier in the year.

Yeah - too bad -

Oh well -

[vtsnowedin]

[/quote]

It will added to the national debt and inflated away. They can't possibly raise taxes very much, if at all. So the Fed will just debase/devlaue the dollar - like it has been doing since last November.

.[/quote]

You almost made me spill my beer. Can't raise taxes??? We are about to have a Democratic president and congress at the same time. Can't Raise taxes??? Thats funny right there I don't care who you are. Just wait and see.

[Cashmere]

He's no prophet.

He's been calling for Deflation for a long time now.

Inflation is now the worst it's been in 20 years.

That's not prophetic, that's stupid.

[Roccland]

He's no prophet.

He's been calling for Deflation for a long time now.

Inflation is now the worst it's been in 20 years.

That's not prophetic, that's stupid.

Oh yes - we are well on our way to high double digit inflation.

And wait until FDIC is the next to be bailed out...

We ain't seen nothing yet.

Got gold?

[Hawkcreek]

You almost made me spill my beer. Can't raise taxes??? We are about to have a Democratic president and congress at the same time. Can't Raise taxes??? Thats funny right there I don't care who you are. Just wait and see.

You don't consider the present conservative induced inflation as a hidden tax?
Do you really think taxes have gone down in the last 8 years for anyone but coorporations or the rich?
Where do you think the money for the war is coming from - hint - it isn't coming from taxes on corporations or the rich- at some time the ordinary taxpayers will have to take a cut in their standard of living (via taxes or inflation) to pay for the conservative spending frenzy.
Just wait and see.

[BigTex]

Didn't Japan lower rates to 0% and double government spending as a percentage of GDP and they STILL had deflation?

A credit collapse is deflationary.

Falling housing prices are deflationary.

Paying off debt is deflationary.

I know it is completely contrary to everything we are thinking right now, and what future government liabilities would suggest, but deflation seems like a much larger threat than people are appreciating.

Liquidity injections are irrelevant in a situation where credit is collapsing, or at least that's what the Japanese found.

If I take the cash that falls out of the helicopter and put it under my mattress, nothing has been accomplished by the money drop.

One line of thinking is that the seeming stoking of inflation expectations by TPTB is a way of mitigating the fallout from the credit collapse.

I don't know what's going on right now (inflation or deflation), but when your system is debt based from top to bottom and credit dries up, that's not good.

Stated differently, in a system premised upon infinite growth where the tool of growth is the extension of credit for investment which will provide a future return sufficient to pay the financing cost, what happens when the future return is no longer sufficient to pay the financing cost? I suppose step one would be massive defaults and step two would be credit collapse. Once you have credit collapse, how could you have anything but deflation?

The Depression was a deflationary period, even with low interest rates and high levels of government spending. It was deflationary because of EXPECTATIONS regarding the future that made people unwilling to invest in productive capacity. It seems to me that whether you put cash under your mattress or gold and silver, it's deflationary in either case because neither activity is accelerating the movement of money or increasing the economy's ability to generate economic activity.

Just some thoughts. I have no idea what's going to happen myself.

[vtsnowedin]

Hawkcreek:
I am well aware that all deficit spending is a tax that you and I will have to pay plus interest. The present inflation you speak of only started after the Dems took control of congress. Cause and effect? I'm not sure . Are you? On 911 the terrorist struck a blow to the finacial heart of America thinking it would bring us to out knees. They didn't get it quite right but it and its aftermath has cost us trillions. Would you rather they had surrendered.
Taxes are high and so is the deficit. goverment spending is out of controll and government mismanagement is high. but it can get much worse and probably will.

[Roccland]

On 911 the terrorist struck a blow to the finacial heart of America thinking it would bring us to out knees. They didn't get it quite right but it and its aftermath has cost us trillions. Would you rather they had surrendered.

You are speaking of Bush, Cheney, and zionist bankers...as "they"...right?

[Serial_Worrier]

Hawkcreek:
I am well aware that all deficit spending is a tax that you and I will have to pay plus interest. The present inflation you speak of only started after the Dems took control of congress. Cause and effect? I'm not sure . Are you? On 911 the terrorist struck a blow to the finacial heart of America thinking it would bring us to out knees. They didn't get it quite right but it and its aftermath has cost us trillions. Would you rather they had surrendered.
Taxes are high and so is the deficit. goverment spending is out of controll and government mismanagement is high. but it can get much worse and probably will.

You bet. Under O-bammer, see the budget go from $3 trillion to $4 trillion overnight as he delivers on his promises of national healthcare, guaranteed incomes, more windmills, etc... Of course he'll massively raise the marginal tax rates up to 90% causing the economy to totally tank. Then will start to see $1 trillion budget deficits and the Democrats will bleat *MORE TAXES, MORE SPENDING*. I weep for the future.

[ROCKMAN]

Tex,

Eco is certainly not my strength but:

"what happens when the future return is no longer sufficient to pay the financing cost? I suppose step one would be massive defaults and step two would be credit collapse. Once you have credit collapse, how could you have anything but deflation?"

Isn't that essentially what happened in the real estate/mortgage world this last year or so? I jus read that even with declining rates mort. applications just hit a 17 year low.

Mother Earth is so much easier to understand than Mother Economy.

[BigTex]

Tex,

Eco is certainly not my strength but:

"what happens when the future return is no longer sufficient to pay the financing cost? I suppose step one would be massive defaults and step two would be credit collapse. Once you have credit collapse, how could you have anything but deflation?"

Isn't that essentially what happened in the real estate/mortgage world this last year or so? I jus read that even with declining rates mort. applications just hit a 17 year low.

Yes, and I believe it gives you a peek behind the curtain of what global economic growth (or lack thereof) might look like in a post peak oil world.

A debt based monetary system has as one of its premises that future productivity will be greater than present productivity (otherwise where would the income to pay the financing cost come from?). To date, this hasn't been a problem, since cheap fossil fuels harnessed to human creativity has been sufficient to generate amazing productivity gains. In other words, investing in the future for the last 100 years has been a sure bet. However, when human-created technological complexity begins hitting a point of diminishing marginal returns (as it must at some point) and the cheap fossil fuels get expensive, betting on future productivity looks a little riskier.

Consider, too, that future generations will ALSO have the debts of this generation to pay, so they will potentially be facing:

(1) an inherited baby boomer liability,
(2) diminshing returns on their advances in technology,
(3) resource inputs that are significantly more expensive than in the past.

...and

(4) the problem of population growth and the unpleasant scenarios it leads to.

Ought to be fun.