"Where do you get the standards for class? Low, Middle, Upper, etc?"
Excellent question, I will attempt a response.
For IR S purposes, there are tax brackets taxation brackets based on income and this is probably usable at least as a basis for determination of economic class. See, the first part of the argument is that there are two general distinctions of class...social class and economic class. The two classes are not necessarily the same nor directly linked to each other but those of higher economic class tend to be in the higher social class and visa versa. So, let's work with economic class since that seems to be more central to this thread and as a starting point, we can use tax brackets to divide economic classes.
I'm paraphrasing for brevity so if there is an argument regarding my distinctions, please feel free to jump in. Please realize that the income for tax purposes is not necessarily indicitive of actual income.
Upper class distinction: Influential, charitable, upper 2-3% of the earners in the U.S. categorized as people making more than 174K/yr in income for tax purposes. Very comfortable life styles.
Upper middle distinction: top 10%-15% of wage income , well educated with some post grad education, well placed in the work environment, household incomes greater than 100K/yr, professionals with registrations and degrees (architects, engineers, attorneys and the like). Comfortable life styles.
Lower middle class: Some college education, household incomes below 100K/yr, tradesmen and product representatives/sales. Struggle at times to make ends meet but able to maintain a stable lifestyle.
Working class:45% of Americans are in this class (+/-), lacking college educations, lower income brackets, includes blue and white collar workers. Difficulty making ends meet, challenging lifestyles but maintain food and housing.
Lower class: Poor economicallly, poorly educated, drift in and out of jobs and poverty, marginalized and disenfranchised. Difficult lifestyles.
There is a basic distinction of economic classes in the U.S. economy.
<< <i>The unemployment rate shot up to 5% in December .... from 4.7%
And the sky turns black. This is all the evidence you need to ignore the "bad news" that the media love to shout from the rooftops. >>
And some people really believe that all the goverment numbers are accurate When the number look bad in a rigged system to support them then you better take note because by the time the public wakes up it's too late. Let's talk about oil this is the down season for it just wait until summer when the peak hits and see what you think of that. Maybe that will wake some up but it's better to keep you head in the sand.
The 10,000 jobs upward revision for Oct/Nov is almost laughable considering that housing and financial sectors added something like 40,000 jobs to the initial Oct. reported payrolls via the Birth Death Model. But if you take out the birth death model adjustment, 2007 was probably a negative year for new jobs. But the 1 MILLION jobs that the birth death model will "create" on paper in 2008, should help stem the tide of real job losses. The BLS at work. I suspect the Birth Death model will be overhauled, but only long into the current crisis since we need every "paper" we can get. The BDM accounted for 85% of the jobs in 2007....nearly 2X the rate of the previous 3 years. Go BDM! See Rob Kirby link below for more BDM shenanigans.
Here's a neat link to check the OTC derivatives holdings of your local bank. The UBPR report also gives a comparison of your bank to others in it's peer group (ex PG 101 are all banks > 1BILL assets). For the city, use the location of the main office branch, not your local town branch. See pages 5, 5a, 5b.
Just for kicks I compared my bank to a friend. His bank, carried about $6 BILL in OTC assets vs $16 BILL total assets of which $1.6B were OTC derivatives (40% OTC assets, 10% derivatives). My bank had only 2% derivatives and 20% OTC assets. I like my bank better.
What are the odds of the last 3 months of 2006 and 2007 having the exact same finanical sector "jobs" number while it totally diff economic environments?
RR -- your post raises a question I'd like to ask board members -- what are you seeing, locally, and in your profession, with respect to jobs? It my geographic niche (Pacific NW), and professional niche (financial services/insurance) things don't feel so dire. It's possible we are about to get crunched, but it doesn't feel like it is happening yet.
If I think about the 1970 recession, or the early 80s recession, I knew or knew of many people who lost a job or were looking rather anxiously for work. At the moment, even in a very extended group of acquaintences, I can't think of anyone out of a job. I am curious to hear, informally, what people are really seeing -- not second hand, but in your own business and among your friends.
Business down big-time in 2008. Community doing so-so. Christmas shopping was EASY, so on a larger scale things can't be too great. However, our region receives significant benefits from the oil and gas sector. Royalty payments are sky-high, and they seem to get spent. And anyone needing a job can still get one in the oil field - from janitor to CEO.
The industry I'm in tends to retain their people. What few openings become available have 10 or more applicants for every position. I doubt it's representative of the overall workforce. I don't know anyone in the financial sector but my brother is in the home "advisor" business in the Boston area (ie buyer's agent). That is, he is hired to locate or comment on properties for potential homeowners. He is not a listing agent and apparently he gets paid whether transactions result or not. So that leaves him less susceptible to the market fluctuations due to falling home prices. He thinks what we're experiencing now is just a passing cloud on the home market and that prices will stabilize where they are now for a while. I don't share that opinion. Me thinks we are headed down, down, down, for a lot longer.
In Houston, we seem pretty much insulated from the realestate defaults; though they are higher than regular, it's certainly not a panic. Properties are moving, I just upgraded about 2X on my residence. The sellers were certainly willing sellers @-5% but that was about as far down as they go. It's just like another acquaintance said to me that there are plenty of willing sellers but they aren't going to come down much and the buyers with good credit are hotly persued but doesn't seem to be much buyers market/sellers market advantage to either side. Sales are definitely thinner but haven't known anybody in distress and I had my old residence sold before I moved out eventhough we closed after we moved. New home builders are selling but they don't seem to be doing as good in the hinterland areas as they seemed to do pre July '07 with the exception that now they are throwing in fairly generous perks with the new houses to help them to move some.
Economically, we seem to be doing about the same as before these financial challenges started showing up in certain areas of the country. There is plenty of work at all levels here, haven't heard of any of my collegues wanting for profitable work in the architecture/planning business. Everybody seems to have as much work as they can do but nobody has opened up a new office in a while so it's doubtful that we are in boom times right now but we seem to be doing ok in my little corner of the world. On the other hand, we are mostly oil/gas, medical, and corporate HQ type businesses in this town as those businesses supply a fair number of the buks/taxes and jobs for the region. There is a saying here that for every dollar the price of oil goes up, 1000 jobs are created here from the sector. So, we seem pretty insulated but not making much in the way of major advances.
Gold prices, stock prices, CPI figures, TV pros analysis aside..........
what I am seeing in the past 8 months is a large slowing of consumer spending strongly evident at all the major Canadian coin shows and for the Canadian jewelry markets.
Coins and diamonds are about the only two markets I feel confident that I'm in 'tune' with.
"Gold is money, and nothing else" (JP Morgan, 1912)
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
<< <i>RR -- your post raises a question I'd like to ask board members -- what are you seeing, locally, and in your profession, with respect to jobs? It my geographic niche (Pacific NW), and professional niche (financial services/insurance) things don't feel so dire. It's possible we are about to get crunched, but it doesn't feel like it is happening yet.
In my industry which is aviation...we have about 4,500 pilots at the big Purple overnight express company. We have never laid off since its inception in 1973. There have been periods of no hiring like in the early 1990's but that was due to the absortion of 1,000 Flying Tigers pilots. Int'ly we are opening two bases this year, one in Paris and one in Hong Kong. That business is brisk and are currently up-ing the manning at both domiciles before they open. International is growing like domestic did in the 1980's. Currently, domestic is saturated.
A few days ago we (pilots) all got the "we are not going to furlough" letter stating that we are a bit "fat" in each seat and may not hire for THREE YEARS!? Part of the problem is the economy domestically and fuel prices. The third wrinkle is the Age 60 rule. Up until just recently, pilots retired at 60 (some continue on as flight engineers, but 3-man corkpits are getting fewer in the industry.) Now, pilots that have just retired can come back until the age of 65. So now we have a flood a pilots coming back and it's an unknown for the Company to plan its future.
Good news is we are still buying freighter versions of 757's and 777's for several more years.
As far as gauging the economy, I've always looked at our stock price (FDX) as an economic strength indicator. Look at a longterm chart and one can see recessions, bubbles and whatnot. But we have become so global in the past 10 years I'm not really sure how the chart reveals the international market. Does the chart mirror our US economy, International economy or a combination? Our stock peaked this past spring and has really slid the past two months. I sold all of my FDX in August...writing on the wall imho.
<< <i>In Houston, we seem pretty much insulated from the realestate defaults; though they are higher than regular, it's certainly not a panic. Properties are moving, I just upgraded about 2X on my residence. The sellers were certainly willing sellers @-5% but that was about as far down as they go. It's just like another acquaintance said to me that there are plenty of willing sellers but they aren't going to come down much and the buyers with good credit are hotly persued but doesn't seem to be much buyers market/sellers market advantage to either side. Sales are definitely thinner but haven't known anybody in distress and I had my old residence sold before I moved out eventhough we closed after we moved. New home builders are selling but they don't seem to be doing as good in the hinterland areas as they seemed to do pre July '07 with the exception that now they are throwing in fairly generous perks with the new houses to help them to move some.
Economically, we seem to be doing about the same as before these financial challenges started showing up in certain areas of the country. There is plenty of work at all levels here, haven't heard of any of my collegues wanting for profitable work in the architecture/planning business. Everybody seems to have as much work as they can do but nobody has opened up a new office in a while so it's doubtful that we are in boom times right now but we seem to be doing ok in my little corner of the world. On the other hand, we are mostly oil/gas, medical, and corporate HQ type businesses in this town as those businesses supply a fair number of the buks/taxes and jobs for the region. There is a saying here that for every dollar the price of oil goes up, 1000 jobs are created here from the sector. So, we seem pretty insulated but not making much in the way of major advances. >>
Hmmm......... well, unemployment is up nearly double from a year ago, if you believe the Houston Chronicle. There are 300% more homes, both new and used for sale than 18 months ago. the real estate defaults are just beginning to start to rise, I expect to see a lot more soon. Credit has tightened up severly.
Property taxes are way up in some parts of the city, the ones paying the highest already. We have a very vindictive Mayor. He began busing in several thousand New Orleans teenagers (you know, the ones still getting FEMA checks) over 10 miles to our local high school, but they don't bus them home, so our neighborhoods are being trashed and break ins and property damage are sky high. The school has been ruined and the campus is now covered with temporary buildings. We complained bitterly, even got on the evening news about it, in fact. He retaliated by influencing the county to kill us on property taxes. That was exposed by a member of the taxing authority, after the taxes shot up, of course. Mine went up 19% and I've got a bill for over 9K due this month just in that area. My protest was denied flat out. That's rare. A couple of homes in my neighborhood that are now valued by the county for $480K and $460 respectively, finally sold after nearly 9 months on the market for 290K and 259K. The folks were elderly and beginning to fear the crime, we have only 1/3rd the police force we had two years ago and they don't come around here much, except to set up speed traps. We've had 3 car jackings and a separate murder in a parking lot in the last year alone. The first in anyone's memory. My large arched brick mailbox was destroyed last spring and the cops only needed 11 hours to get here. I even had digital pictures of the perps including a license plate number. The car was stolen, of course. I should have just shot them and been done with it, it would have saved us all a lot of future trouble as when they were finally caught on another rap, they were gang members from NO with an extensive rap sheet for 20 year olds, including armed robberies. That cost me $1100.
This is a fairly upscale area of Houston and people are starting to suffer, there have been several lost jobs. Professional jobs taken for less money by younger and cheaper employees. Most folks here are well established and have the savings and investments to hang on for a while, but it's not a pretty picture from here. I know I have begun cutting back on excess spending, just in case.
My backyard neighbors bought here a couple of years ago, now they are being transferred back to England. They bought at the peak and paid 535K for a very nice and large home. Agents are telling them to expect to take as much as a 200K hit if they want to sell quickly. I know I couldn't break even if I were to sell now, not that I have any plans along those lines.
My fafvorite B&M shop also handles jewelry along with high end antiques, he's seeing more desperate sellers than he's seen since the crash back in '87.
I expect it to only get worse for a few more years before it gets better. We haven't seen anything yet. I know it's worse elsewhere, but it's starting to hit here and were are usually fairly insulated from these things as opposed to other large cities.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
Hubris and arrogance are too ensconced in Washington for policy-makers to be aware of the economic policy trap in which they have placed the US economy. If the subprime mortgage meltdown is half as bad as predicted, low US interest rates will be required in order to contain the crisis. But if the dollar’s plight is half as bad as predicted, high US interest rates will be required if foreigners are to continue to hold dollars and to finance US budget and trade deficits.
Which will Washington sacrifice, the domestic financial system and over-extended homeowners or its ability to finance deficits?
The answer seems obvious. Everything will be sacrificed in order to protect Washington’s ability to borrow abroad. Without the ability to borrow abroad, Washington cannot conduct its wars of aggression, and Americans cannot continue to consume $800 billion dollars more each year than the economy produces.
A few years ago the euro was worth 85 cents. Today it is worth $1.48. This is an enormous decline in the exchange value of the US dollar. Foreigners who finance the US budget and trade deficits have experienced a huge drop in the value of their dollar holdings. The interest rate on US Treasury bonds does not come close to compensating foreigners for the decline in the value of the dollar against other traded currencies. Investment returns from real estate and equities do not offset the losses from the decline in the dollar’s value.
China holds over one trillion dollars, and Japan almost one trillion, in dollar-denominated assets. Other countries have lesser but still substantial amounts. As the US dollar is the reserve currency, the entire world’s investment portfolio is over-weighted in dollars.
No country wants to hold a depreciating asset, and no country wants to acquire more depreciating assets. In order to reassure itself, Wall Street claims that foreign countries are locked into accumulating dollars in order to protect the value of their existing dollar holdings. But this is utter nonsense. The US dollar has lost 60% of its value during the current administration. Obviously, countries are not locked into accumulating dollars.
The reason the dollar has not completely collapsed is that there is no clear alternative as reserve currency. The euro is a currency without a country. It is the monetary unit of the European Union, but the countries of Europe have not surrendered their sovereignty to the EU. Moreover, the UK, a member of the EU, retains the British pound. The fact that a currency as politically exposed as the euro can rise in value so rapidly against the US dollar is powerful evidence of the weakness of the US dollar.
Japan and China have willingly accumulated dollars as the counterpart of their penetration and capture of US domestic markets. Japan and China have viewed the productive capacity and wealth created in their domestic economies by the success of their exports as compensation for the decline in the value of their dollar holdings. However, both countries have seen the writing on the wall, ignored by Washington and American economists: By off-shoring production for US markets, the US has no prospect of closing its trade deficit. The off-shored production of US firms counts as imports when it returns to the US to be marketed. The more US production moves abroad, the less there is to export and the higher imports rise.
Japan and China, indeed, the entire world, realize that they cannot continue forever to give Americans real goods and services in exchange for depreciating paper dollars. China is endeavoring to turn its development inward and to rely on its potentially huge domestic market. Japan is pinning hopes on participating in Asia’s economic development.
The dollar’s decline has resulted from foreigners accumulating new dollars at a lower rate. They still accumulate dollars, but fewer. As new dollars are still being produced at high rates, their value has dropped.
If foreigners were to stop accumulating new dollars, the dollar’s value would plummet. If foreigners were to reduce their existing holdings of dollars, superpower America would instantly disappear.
Foreigners have continued to accumulate dollars in the expectation that sooner or later Washington would address its trade and budget deficits. However, now these deficits seem to have passed the point of no return.
The sharp decline in the dollar has not closed the trade deficit by increasing exports and decreasing imports. Off-shoring prevents the possibility of exports reducing the trade deficit, and Americans are now dependent on imports (including off-shored production) for which there are no longer any domestically produced alternatives. The US trade deficit will close when foreigners cease to finance it.
The budget deficit cannot be closed by taxation without driving up unemployment and poverty. American median family incomes have experienced no real increase during the 21st century. Moreover, if the huge bonuses paid to CEOs for off-shoring their corporations’ production and to Wall Street for marketing subprime derivatives are removed from the income figures, Americans have experienced a decline in real income. Some studies, such as the Economic Mobility Project, find long-term declines in the real median incomes of some US population groups and a decline in upward mobility.
The situation may be even more dire. Recent work by Susan Houseman concludes that US statistical data systems, which were set in place prior to the development of off-shoring, are counting some foreign production as part of US productivity and GDP growth, thus overstating the actual performance of the US economy.
The falling dollar has pushed oil to $100 a barrel, which in turn will drive up other prices. The falling dollar means that the imports and off-shored production on which Americans are dependent will rise in price. This is not a formula to produce a rise in US real incomes.
In the 21st century, the US economy has been driven by consumers going deeper in debt. Consumption fueled by increases in indebtedness received its greatest boost from Fed chairman Alan Greenspan’s low interest rate policy. Greenspan covered up the adverse effects of off-shoring on the US economy by engineering a housing boom. The boom created employment in construction and financial firms and pushed up home prices, thus creating equity for consumers to spend to keep consumer demand growing.
This source of US economic growth is exhausted and imploding. The full consequences of the housing bust remain to be realized. American consumers lack discretionary income and can pay higher taxes only by reducing their consumption. The service industries, which have provided the only source of new jobs in the 21st century, are already experiencing falling demand. A tax increase would cause widespread distress.
As John Maynard Keynes and his followers made clear, a tax increase on a recessionary economy is a recipe for falling tax revenues as well as economic hardship.
Superpower America is a ship of fools in denial of their plight. While off-shoring kills American economic prospects, "free market economists" sing its praises. While war imposes enormous costs on a bankrupt country, neoconservatives call for more war, and Republicans and Democrats appropriate war funds which can only be obtained by borrowing abroad.
By focusing America on war in the Middle East, the purpose of which is to guarantee Israel’s territorial expansion, the executive and legislative branches, along with the media, have let slip the last opportunities the US had to put its financial house in order. We have arrived at the point where it is no longer bold to say that nothing now can be done. Unless the rest of the world decides to underwrite our economic rescue, the chips will fall where they may.
Dr. Roberts was Assistant Secretary of the US Treasury for Economic Policy in the Reagan administration. He is credited with curing stagflation and eliminating "Phillips curve" trade-offs between employment and inflation, an achievement now on the verge of being lost by the worst economic mismanagement in US history.
I guess the above read is an answer to one forum members question yesterday:
Isn't a falling dollar all good?
Funny, all you ever hear the Treasury Heads ever say is that they support a strong dollar policy...regardless which way the dollar is heading. Haven't heard one yet state that they favor a weak dollar policy for economic leverage.
Longshot's post summarizes two years of reflections on this particular thread.
It remains astounding to me how our leadership has ignored Economics 101 for years now. No wonder people like Edwards, Obama and Huckabee are surging and dethroning the presumptive old order. And even among these, who has the nerve to say these things aloud, and specify/begin the painful corrections?
<< <i>It remains astounding to me how our leadership has ignored Economics 101 for years now. No wonder people like Edwards, Obama and Huckabee are surging and dethroning the presumptive old order. And even among these, who has the nerve to say these things aloud, and specify/begin the painful corrections? >>
Ron Paul does, though he's a bit of a fruitcake on other issues and he's been effectively removed from future debates.
The truth will not set you free in American politics.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
While flipping through channels late last night happened to run across Hillary preaching to some NH voters. One thing that stood out was all the negative things she had to say about the economy. And the fix for all of them was to get in there and "make some correct adjustments." But, isn't that exactly how we got here in the first place?...a whole lot of "correct" Fed and Treasury adjustments over the past 10-15 years. Thank you Ms. Bilderberg.
<< <i>While flipping through channels late last night happened to run across Hillary preaching to some NH voters. One thing that stood out was all the negative things she had to say about the economy. And the fix for all of them was to get in there and "make some correct adjustments." But, isn't that exactly how we got here in the first place?...a whole lot of "correct" Fed and Treasury adjustments over the past 10-15 years.
roadrunner >>
I suspect we'll see about three more rate cuts before we get to election day. The subprime and credit has tightened, so that won't be much of an issue.
The Fed always paints a rosy picture in an election year, it's the following year when we reap the real effects. I suspect it won't be pretty, though those of us who have been involved with this thread since the start will probably weather the storm.
Lord help us in 2009, depending on who is in the White House.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
The so-called "Correct" moves by the Fed in the last 30 years were done to redistribute the wealth of the USA to the richest among us. Whether you consider them to be correct or not depends on if you're in the 5% that benefitted or the 95% that will ultimately pay the bill. The "supply and demand" idea of capitalism has been twisted continually since 1980 to focus all benefit on the wealthy...not much different than communism really, except with a different group of beneficiaries.
we buy gold...they will take it away from us? we buy silver...it goes nowhere. we buy stocks..they go in the toilet we buy house...they foreclose.. Where is the nearest bridge??
For those like me who don't follow the overall CRB as closely as the metals, here's an interesting article that explains a major rewrite of the CRB index in 2005 that has skewed the CRB much more heavily towards being an oil index. The 2 charts clearly show there has been no breakdown in the commodities bull during the 2005-2007 period. Interesting.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
"Who is "they"? I still have my gold." Gold is good.
For consideration:
There probably won't be a gold standard in the near future nor any commonly circulating gold currency. The attachment to the absolute real value of goods and services would destroy the "floating" economies of the developed nations. Absent a commonly valued currency in a global market/economy, it would beg the question..."What is the actual value of the currencies?" The reply would probably be that the actual value is something that is agreed up through trade of goods and services for currencies.
If you can accept that the world markets are somewhat amorphous because they are constantly interacting with each other's currencies and those currencies are constantly revaluing themselves as a result of trading goods for different national currencies then you would have to beg the question..."Why isn't there something that everybody can use that has a constant value?" The obvious answer is gold.
Oil has become more expensive, not just in USD but for everyone. Oil is traded in dollars on the international market. The argument that the USD is weak so oil costs us some unusually high multiple of what everyone else is paying, is not valid. $100USD oil is the new benchmark and everything is going to become more expensive, from lightbulbs to alcohol, for everybody, be they in Shanghai, London, or Detroit. It's not like we didn't know this was coming, we've been talking about here for a good while. Add the housing and stock market situation, throw in a little bad debt and credit retraction, stir with some international unrest and sure, the resulting mix is going to have challenges. It's not particularly a rosy picture but things are evolving and we know that and there is change afoot.
We're doing all we can. We are diversified in our investments, have buks in reserve, minimum consumer debt and we are stocked up on that precious barbarous relic just to keep the playing field even. The best thing that we can do now is to continue saving and try to stay away from any type of financial vulnerability and that includes upping your personal insurance to equal your net worth. Stay loose but stay focused and maybe even give some thought to getting a little further off of the radar screen.
“$100USD oil is the new benchmark and everything is going to become more expensive, from lightbulbs to alcohol, for everybody, be they in Shanghai, London, or Detroit. It's not like we didn't know this was coming,”
MH,
Good point,
Peter Schiff sent out an email at the end of last week trying to calm down his investors who were seeing 10 to 15 % drops in their investments over the last several weeks. This was exactly my point to him in an email discussion on 12/28/05.
In our email discussion my point was that as a Global economy, has everything tied together, when a disaster happens it happens to all. In addition I made two other points, one that I felt that Asia would not take up the slack for the American consumer in their own countries simply because the average U.S. income is $41,000 per year and the average Chinese income is $2,000.
Second I felt that most of the developed countries also had tax and spend socialized economies that would have the very same stagflation problems just on a different scale.
What we are concerned with in this thread is the U.S, but what we are seeing here is being seen around the world. Holding foreign investments and foreign money may have worked for the last few years, but that is coming to a close. Owning paid for hard assets, and keeping a low profile, is the only real partial solution available to us.
Peter has done a great job informing the public about these coming crises periods, but in the end paper is paper no matter who prints it. In addition as we follow the news reports we see that just as many foreign banks and investment funds own these toxic derivatives as U.S. firms.
Short search trying to find how to anticipate historic movement of PM in a recessionary environment. What is a recession?
The last mild recession we were in was between '73 and '75. (Can't get the Kitco charts to go up...bummer.) Kitco historic charts
In the '11-'13 recession, gold was flat; it also circulated as common currency, in the '73-'75 recession, gold went to about 3X pre recession prices with no ties to a common currency, so we enter the recession at about 760 USD and now it's at about 900.
I remember gold in 1975, the year gold ownership was legalized again. I recall a two-panel editorial cartoon of the time that pictured it best: In the first "1974" panel, investors croon and swoon over a gold bullion bar. In the second "1975" panel, investors flee the bar holding their noses! Gold rose to over $180 early only to crash below $130 - a 30% loss for the year. Why should anyone bother with gold when you could buy government bonds or utilities and earn a better return?
Salute the automobile: The greatest anti-pollution device in human history! (Just think of city streets clogged with a hundred thousand horses each generating 15 lbs of manure every day...)
I guess people bought gold in 1976 to see their money quadruple. That was a classic stagflation environment. Even during earlier 70's recession gold was still not fully released to float until gold backing was entirely removed from the money supply. I think that was 1974 when the 5% gold cover clause was removed (?). I can also remember from 1966 to 1982 when stocks went nowhere. At least hard assets were doing something during that time. The massive drop in gold from 1974 to 1976 was probably the first time anyone had seen such a thing happen. It shook out a lot of weak hands. I wasn't even paying attention then as I was into type coins and seated material.
I looked at Cramer's show today and all he had on him when he went through a metal detector was some change and a knife. I think he was after some guy from Sallie Mae------------------------BigE
Well my friends it looks like gold is at $885 this morning, so is it to late to buy gold to protect your assets, Perhaps not!!
Two things of great interest happened yesterday, first lets look at part of an article out of the Financial Times;
Gold is the new global currency Published: January 8 2008 02:00 | Last updated: January 8 2008 02:00
There was a time when gold was money. In today's uncertain world, the yellow metal is back in fashion. A better way to think of gold may be as central bankers used to before America dropped the gold standard: not as a commodity, but as another currency. As long as the dollar stays weak, gold's bull run will last.
The arguments for further gains in the gold price are compelling. It looks cheap, despite climbing from a low of about $250 a troy ounce in 1999, when central banks were selling reserves. The UK's decision back then to sell 60 per cent of its official holdings looks particularly poor judgment.
Prices have a long way to go before they approach the inflation-adjusted record touched in 1980 when Soviet tanks invaded Afghanistan. At yesterday's $859, gold was trading at less than half that level. It could top $1,000 and still be at the lower end of what some analysts argue is a safe haven range.
The US Federal Reserve's aggressive, rate-cutting response to the credit squeeze has created a risk of a sharp rise in American inflation. That in turn creates the risk of a precipitous fall in the dollar and so makes gold more attractive as a hedge.
Second,
Glenn Beck had the head of the GAO on his news show last night. Mr. Walker is what we can call the head accountant for the U.S. government. He is appointed to a 15 year term and cannot be fired. In a nut shell what Mr. Walker said was that the United States is bankrupt!
“ The current obligations of our government can never be paid. Even if we rasied taxes to 117%, our current and future obligations cannot be met. Our current liabilites exceed 58 trillion dollars and we have no way to meet these obligations. The American people are consistantly lied to, and our government keeps two sets of books. One it shows to the public, and one it does not. As an example the government reported a defict on september of 2007 of 163 billion dollars, but the REAL defict was 344 billion dollars. Frankly if this type of accounting was done in a publicly held corporation all of the senoir officers would go to jail.”
Probably the most succinct explanation of the S&L bailout I have read (embedded within the article), as I was more into the Kreb's cycle and that kind of stuff then.
Do your best to avoid circular arguments, as it will help you reason better, because better reasoning is often a result of avoiding circular arguments.
The media has been offering the results of the Christmas season on mass retailers like Targetesque stores but even high end Tiffany took it in the shorts. retail/Christmas So, as observed here much earlier in this year, retail is indeed seeing lower participation by a cash strapped populace.
Personal debt and credit card defaults/late payments have been in the news with some astounding numbers, with the pundits suggesting that people are using credit cards since the house ATM's are all broken and they can't pay their credit cards. Now, they are really screwed unless the Fed bails them out. So is the fed to fix the housing for the punters and the credit cards for the dreamers? Methinks it is doubtful that our seriously over extended Fed can do this if they even wanted to.
So, Ben's lowering rates and this time he means it...maybe a whole basis point and more promised as they year progresses. This will stimulate the economy but unfortunately, this has already been factored into the stocks and the cut hasn't even been posted yet...well ahead of the actual curve, people have already played.
All the while, today's news contains interesting items about the unemployment rate looking up Unemployment so, at least people are working...HUH? So, with many sectors in contraction how does the employment rate improve? Must be the magic of modern math.
The interesting thing that we need to factor into our thoughts here is that information moves at the speed of electrons now. Everything that happens anywhere is known everywhere, now. The snails pace of cause and effect, particularly in financial matters where it's about the money, is no longer a factor. Now, if you are waiting to see the reaction of one thing on the other means that you are way too late to the table. The need for prognostication is greater than it has ever been. As the quote from the basket ball coach goes..."Go to where the ball will be, not to where it has been." Unfortunately, most of us are not that good at guessing, we are way too slow but the ideas and trends identified here give us a bit of a leg up. We need to be much more proactive in our anticipation of financial trends because the near future used to mean a few months but that has changed to where the near future is right now.
Methinks it is doubtful that our seriously over extended Fed can do this if they even wanted to.
Indeed. Ask the Japanese how their economy did after a big bubble and subsequent 0% interest rates. Perhaps the wand of deflation will pass to the USA from Japan.
Housing affordability is still beyond the means of most. In the old days, pre 2001,lol, banks would lend you about 3x your income if you had decent credit. So a $300,000 house is still beyond the means of most Americans. Not until interest rates drop considerably, or income rise considerably, or people save enough to put 20% down, will the housing sector start to rise.
The stock market had a miserable 15 years from the late 60's to early 80's. Precious metals had a miserable 15 years in the 80s to 90s. Now it is time for real estate.
I agree completely about real estate prices. I live in a non bubble area (Kentucky) but even here new homes being built start at 250,000 and no one can afford that given the return to normal mortgage loans.
<< <i>Rather than having a thread where we make our Gold, Silver, and economic predictions perhaps we can start a thread where we post related world announcements, price moves, and make comments on these moves as well as the predictions of others. Gold is at $455 today and Silver is back to $8.
Here is the first news of the day,
December 2, 2004 ........... >>
It doesn't seem to have taken that long to double one's money in either metal. According to rule 72, that's about a 24 % return since the thread's inception. As an investment, precious metals have done quite well.
<< <i>Rather than having a thread where we make our Gold, Silver, and economic predictions perhaps we can start a thread where we post related world announcements, price moves, and make comments on these moves as well as the predictions of others. Gold is at $455 today and Silver is back to $8.
Here is the first news of the day,
December 2, 2004 ........... >>
It doesn't seem to have taken that long to double one's money in either metal. According to rule 72, that's about a 24 % return since the thread's inception. As an investment, precious metals have done quite well. >>
Take that back to the end of '01 and the return is much more like 50% annually. An even better investment when one looks at it from that perspective.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
Now here are some over paid people really doing a great job!
If all the guys on Wall Street would give us advanced intel like this perhaps we could make a few bucks, Ha Ha Ha
Gold Forecasts Raised by Goldman Sachs on Weaker Dollar Outlook
By Stuart Wallace Jan. 11 (Bloomberg) --
Goldman Sachs Group Inc. increased its three, six and 12-month forecasts for gold because of a weaker outlook for the U.S. dollar. Gold will trade at $885 an ounce in three months, from a previous estimate of $795, the bank said in an e-mailed report today. The metal will reach $900 in six months, from a previous forecast of $785, and $800 in 12 months, from a previous prediction of $750, the bank said. Gold for immediate delivery was trading at $894.61 an ounce as of 8:35 a.m. in London.”
<< <i>Now here are some over paid people really doing a great job!
If all the guys on Wall Street would give us advanced intel like this perhaps we could make a few bucks, Ha Ha Ha
Gold Forecasts Raised by Goldman Sachs on Weaker Dollar Outlook
By Stuart Wallace Jan. 11 (Bloomberg) --
Goldman Sachs Group Inc. increased its three, six and 12-month forecasts for gold because of a weaker outlook for the U.S. dollar. Gold will trade at $885 an ounce in three months, from a previous estimate of $795, the bank said in an e-mailed report today. The metal will reach $900 in six months, from a previous forecast of $785, and $800 in 12 months, from a previous prediction of $750, the bank said. Gold for immediate delivery was trading at $894.61 an ounce as of 8:35 a.m. in London.”
GOLD BROKE $900 THE DAY THIS FORECAST CAME OUT !! >>
Man.... they really went out on a limb with that forecast, didn't they!! ??So they think it will take.... 6 months..... to gain another $6.00??
Two great posts on deflation here and here. I am starting to lean toward seeing deflation as the most likely outcome of the popping of the huge asset bubbles in recent years.
However, the author of these blog posts thinks gold will do well in a deflationary environment. I don't agree.
"Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
Comments
Excellent question, I will attempt a response.
For IR S purposes, there are tax brackets taxation brackets based on income and this is probably usable at least as a basis for determination of economic class. See, the first part of the argument is that there are two general distinctions of class...social class and economic class. The two classes are not necessarily the same nor directly linked to each other but those of higher economic class tend to be in the higher social class and visa versa. So, let's work with economic class since that seems to be more central to this thread and as a starting point, we can use tax brackets to divide economic classes.
I'm paraphrasing for brevity so if there is an argument regarding my distinctions, please feel free to jump in. Please realize that the income for tax purposes is not necessarily indicitive of actual income.
Upper class distinction: Influential, charitable, upper 2-3% of the earners in the U.S. categorized as people making more than 174K/yr in income for tax purposes. Very comfortable life styles.
Upper middle distinction: top 10%-15% of wage income , well educated with some post grad education, well placed in the work environment, household incomes greater than 100K/yr, professionals with registrations and degrees (architects, engineers, attorneys and the like). Comfortable life styles.
Lower middle class: Some college education, household incomes below 100K/yr, tradesmen and product representatives/sales. Struggle at times to make ends meet but able to maintain a stable lifestyle.
Working class:45% of Americans are in this class (+/-), lacking college educations, lower income brackets, includes blue and white collar workers. Difficulty making ends meet, challenging lifestyles but maintain food and housing.
Lower class: Poor economicallly, poorly educated, drift in and out of jobs and poverty, marginalized and disenfranchised. Difficult lifestyles.
There is a basic distinction of economic classes in the U.S. economy.
And the sky turns black. This is all the evidence you need to ignore the "bad news" that the media love to shout from the rooftops.
<< <i>The unemployment rate shot up to 5% in December .... from 4.7%
And the sky turns black. This is all the evidence you need to ignore the "bad news" that the media love to shout from the rooftops. >>
And some people really believe that all the goverment numbers are accurate
Rate Cut?
So are stocks! I sense a hint of panic in the crowd... if it gets worse, it will be time to help them feel better.
Here's a neat link to check the OTC derivatives holdings of your local bank. The UBPR report also gives a comparison of your bank to others in it's peer group (ex PG 101 are all banks > 1BILL assets).
For the city, use the location of the main office branch, not your local town branch. See pages 5, 5a, 5b.
Just for kicks I compared my bank to a friend. His bank, carried about $6 BILL in OTC assets vs $16 BILL total assets of which $1.6B were OTC derivatives (40% OTC assets, 10% derivatives). My bank had only 2% derivatives and 20% OTC assets. I like my bank better.
UBPR report - find OTC derivatives at your local bank
What are the odds of the last 3 months of 2006 and 2007 having the exact same finanical sector "jobs" number while it totally diff economic environments?
Kirby digs up BLS shenanigans....again
BLS link to Birth Death Model
roadrunner
If I think about the 1970 recession, or the early 80s recession, I knew or knew of many people who lost a job or were looking rather anxiously for work. At the moment, even in a very extended group of acquaintences, I can't think of anyone out of a job. I am curious to hear, informally, what people are really seeing -- not second hand, but in your own business and among your friends.
Business down big-time in 2008. Community doing so-so. Christmas shopping was EASY, so on a larger scale things can't be too great. However, our region receives significant benefits from the oil and gas sector. Royalty payments are sky-high, and they seem to get spent. And anyone needing a job can still get one in the oil field - from janitor to CEO.
He thinks what we're experiencing now is just a passing cloud on the home market and that prices will stabilize where they are now for a while. I don't share that opinion. Me thinks we are headed down, down, down, for a lot longer.
roadrunner
Economically, we seem to be doing about the same as before these financial challenges started showing up in certain areas of the country. There is plenty of work at all levels here, haven't heard of any of my collegues wanting for profitable work in the architecture/planning business. Everybody seems to have as much work as they can do but nobody has opened up a new office in a while so it's doubtful that we are in boom times right now but we seem to be doing ok in my little corner of the world. On the other hand, we are mostly oil/gas, medical, and corporate HQ type businesses in this town as those businesses supply a fair number of the buks/taxes and jobs for the region. There is a saying here that for every dollar the price of oil goes up, 1000 jobs are created here from the sector. So, we seem pretty insulated but not making much in the way of major advances.
will it get its own icon and special
name??????????????????????????
Will it even become sentient?
Camelot
what I am seeing in the past 8 months is a large slowing of consumer spending strongly evident at all the major Canadian coin shows and for the Canadian jewelry markets.
Coins and diamonds are about the only two markets I feel confident that I'm in 'tune' with.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
<< <i>RR -- your post raises a question I'd like to ask board members -- what are you seeing, locally, and in your profession, with respect to jobs? It my geographic niche (Pacific NW), and professional niche (financial services/insurance) things don't feel so dire. It's possible we are about to get crunched, but it doesn't feel like it is happening yet.
In my industry which is aviation...we have about 4,500 pilots at the big Purple overnight express company. We have never laid off since its inception in 1973. There have been periods of no hiring like in the early 1990's but that was due to the absortion of 1,000 Flying Tigers pilots. Int'ly we are opening two bases this year, one in Paris and one in Hong Kong. That business is brisk and are currently up-ing the manning at both domiciles before they open. International is growing like domestic did in the 1980's. Currently, domestic is saturated.
A few days ago we (pilots) all got the "we are not going to furlough" letter stating that we are a bit "fat" in each seat and may not hire for THREE YEARS!? Part of the problem is the economy domestically and fuel prices. The third wrinkle is the Age 60 rule. Up until just recently, pilots retired at 60 (some continue on as flight engineers, but 3-man corkpits are getting fewer in the industry.) Now, pilots that have just retired can come back until the age of 65. So now we have a flood a pilots coming back and it's an unknown for the Company to plan its future.
Good news is we are still buying freighter versions of 757's and 777's for several more years.
As far as gauging the economy, I've always looked at our stock price (FDX) as an economic strength indicator. Look at a longterm chart and one can see recessions, bubbles and whatnot. But we have become so global in the past 10 years I'm not really sure how the chart reveals the international market. Does the chart mirror our US economy, International economy or a combination? Our stock peaked this past spring and has really slid the past two months. I sold all of my FDX in August...writing on the wall imho.
Ren
<< <i>In Houston, we seem pretty much insulated from the realestate defaults; though they are higher than regular, it's certainly not a panic. Properties are moving, I just upgraded about 2X on my residence. The sellers were certainly willing sellers @-5% but that was about as far down as they go. It's just like another acquaintance said to me that there are plenty of willing sellers but they aren't going to come down much and the buyers with good credit are hotly persued but doesn't seem to be much buyers market/sellers market advantage to either side. Sales are definitely thinner but haven't known anybody in distress and I had my old residence sold before I moved out eventhough we closed after we moved. New home builders are selling but they don't seem to be doing as good in the hinterland areas as they seemed to do pre July '07 with the exception that now they are throwing in fairly generous perks with the new houses to help them to move some.
Economically, we seem to be doing about the same as before these financial challenges started showing up in certain areas of the country. There is plenty of work at all levels here, haven't heard of any of my collegues wanting for profitable work in the architecture/planning business. Everybody seems to have as much work as they can do but nobody has opened up a new office in a while so it's doubtful that we are in boom times right now but we seem to be doing ok in my little corner of the world. On the other hand, we are mostly oil/gas, medical, and corporate HQ type businesses in this town as those businesses supply a fair number of the buks/taxes and jobs for the region. There is a saying here that for every dollar the price of oil goes up, 1000 jobs are created here from the sector. So, we seem pretty insulated but not making much in the way of major advances. >>
Hmmm......... well, unemployment is up nearly double from a year ago, if you believe the Houston Chronicle. There are 300% more homes, both new and used for sale than 18 months ago. the real estate defaults are just beginning to start to rise, I expect to see a lot more soon. Credit has tightened up severly.
Property taxes are way up in some parts of the city, the ones paying the highest already. We have a very vindictive Mayor. He began busing in several thousand New Orleans teenagers (you know, the ones still getting FEMA checks) over 10 miles to our local high school, but they don't bus them home, so our neighborhoods are being trashed and break ins and property damage are sky high. The school has been ruined and the campus is now covered with temporary buildings. We complained bitterly, even got on the evening news about it, in fact. He retaliated by influencing the county to kill us on property taxes. That was exposed by a member of the taxing authority, after the taxes shot up, of course. Mine went up 19% and I've got a bill for over 9K due this month just in that area. My protest was denied flat out. That's rare. A couple of homes in my neighborhood that are now valued by the county for $480K and $460 respectively, finally sold after nearly 9 months on the market for 290K and 259K. The folks were elderly and beginning to fear the crime, we have only 1/3rd the police force we had two years ago and they don't come around here much, except to set up speed traps. We've had 3 car jackings and a separate murder in a parking lot in the last year alone. The first in anyone's memory. My large arched brick mailbox was destroyed last spring and the cops only needed 11 hours to get here. I even had digital pictures of the perps including a license plate number. The car was stolen, of course. I should have just shot them and been done with it, it would have saved us all a lot of future trouble as when they were finally caught on another rap, they were gang members from NO with an extensive rap sheet for 20 year olds, including armed robberies. That cost me $1100.
This is a fairly upscale area of Houston and people are starting to suffer, there have been several lost jobs. Professional jobs taken for less money by younger and cheaper employees. Most folks here are well established and have the savings and investments to hang on for a while, but it's not a pretty picture from here. I know I have begun cutting back on excess spending, just in case.
My backyard neighbors bought here a couple of years ago, now they are being transferred back to England. They bought at the peak and paid 535K for a very nice and large home. Agents are telling them to expect to take as much as a 200K hit if they want to sell quickly. I know I couldn't break even if I were to sell now, not that I have any plans along those lines.
My fafvorite B&M shop also handles jewelry along with high end antiques, he's seeing more desperate sellers than he's seen since the crash back in '87.
I expect it to only get worse for a few more years before it gets better. We haven't seen anything yet. I know it's worse elsewhere, but it's starting to hit here and were are usually fairly insulated from these things as opposed to other large cities.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
Impending Destruction of the US Economy
By Paul Craig Roberts
Hubris and arrogance are too ensconced in Washington for policy-makers to be aware of the economic policy trap in which they have placed the US economy. If the subprime mortgage meltdown is half as bad as predicted, low US interest rates will be required in order to contain the crisis. But if the dollar’s plight is half as bad as predicted, high US interest rates will be required if foreigners are to continue to hold dollars and to finance US budget and trade deficits.
Which will Washington sacrifice, the domestic financial system and over-extended homeowners or its ability to finance deficits?
The answer seems obvious. Everything will be sacrificed in order to protect Washington’s ability to borrow abroad. Without the ability to borrow abroad, Washington cannot conduct its wars of aggression, and Americans cannot continue to consume $800 billion dollars more each year than the economy produces.
A few years ago the euro was worth 85 cents. Today it is worth $1.48. This is an enormous decline in the exchange value of the US dollar. Foreigners who finance the US budget and trade deficits have experienced a huge drop in the value of their dollar holdings. The interest rate on US Treasury bonds does not come close to compensating foreigners for the decline in the value of the dollar against other traded currencies. Investment returns from real estate and equities do not offset the losses from the decline in the dollar’s value.
China holds over one trillion dollars, and Japan almost one trillion, in dollar-denominated assets. Other countries have lesser but still substantial amounts. As the US dollar is the reserve currency, the entire world’s investment portfolio is over-weighted in dollars.
No country wants to hold a depreciating asset, and no country wants to acquire more depreciating assets. In order to reassure itself, Wall Street claims that foreign countries are locked into accumulating dollars in order to protect the value of their existing dollar holdings. But this is utter nonsense. The US dollar has lost 60% of its value during the current administration. Obviously, countries are not locked into accumulating dollars.
The reason the dollar has not completely collapsed is that there is no clear alternative as reserve currency. The euro is a currency without a country. It is the monetary unit of the European Union, but the countries of Europe have not surrendered their sovereignty to the EU. Moreover, the UK, a member of the EU, retains the British pound. The fact that a currency as politically exposed as the euro can rise in value so rapidly against the US dollar is powerful evidence of the weakness of the US dollar.
Japan and China have willingly accumulated dollars as the counterpart of their penetration and capture of US domestic markets. Japan and China have viewed the productive capacity and wealth created in their domestic economies by the success of their exports as compensation for the decline in the value of their dollar holdings. However, both countries have seen the writing on the wall, ignored by Washington and American economists: By off-shoring production for US markets, the US has no prospect of closing its trade deficit. The off-shored production of US firms counts as imports when it returns to the US to be marketed. The more US production moves abroad, the less there is to export and the higher imports rise.
Japan and China, indeed, the entire world, realize that they cannot continue forever to give Americans real goods and services in exchange for depreciating paper dollars. China is endeavoring to turn its development inward and to rely on its potentially huge domestic market. Japan is pinning hopes on participating in Asia’s economic development.
The dollar’s decline has resulted from foreigners accumulating new dollars at a lower rate. They still accumulate dollars, but fewer. As new dollars are still being produced at high rates, their value has dropped.
If foreigners were to stop accumulating new dollars, the dollar’s value would plummet. If foreigners were to reduce their existing holdings of dollars, superpower America would instantly disappear.
Foreigners have continued to accumulate dollars in the expectation that sooner or later Washington would address its trade and budget deficits. However, now these deficits seem to have passed the point of no return.
The sharp decline in the dollar has not closed the trade deficit by increasing exports and decreasing imports. Off-shoring prevents the possibility of exports reducing the trade deficit, and Americans are now dependent on imports (including off-shored production) for which there are no longer any domestically produced alternatives. The US trade deficit will close when foreigners cease to finance it.
The budget deficit cannot be closed by taxation without driving up unemployment and poverty. American median family incomes have experienced no real increase during the 21st century. Moreover, if the huge bonuses paid to CEOs for off-shoring their corporations’ production and to Wall Street for marketing subprime derivatives are removed from the income figures, Americans have experienced a decline in real income. Some studies, such as the Economic Mobility Project, find long-term declines in the real median incomes of some US population groups and a decline in upward mobility.
The situation may be even more dire. Recent work by Susan Houseman concludes that US statistical data systems, which were set in place prior to the development of off-shoring, are counting some foreign production as part of US productivity and GDP growth, thus overstating the actual performance of the US economy.
The falling dollar has pushed oil to $100 a barrel, which in turn will drive up other prices. The falling dollar means that the imports and off-shored production on which Americans are dependent will rise in price. This is not a formula to produce a rise in US real incomes.
In the 21st century, the US economy has been driven by consumers going deeper in debt. Consumption fueled by increases in indebtedness received its greatest boost from Fed chairman Alan Greenspan’s low interest rate policy. Greenspan covered up the adverse effects of off-shoring on the US economy by engineering a housing boom. The boom created employment in construction and financial firms and pushed up home prices, thus creating equity for consumers to spend to keep consumer demand growing.
This source of US economic growth is exhausted and imploding. The full consequences of the housing bust remain to be realized. American consumers lack discretionary income and can pay higher taxes only by reducing their consumption. The service industries, which have provided the only source of new jobs in the 21st century, are already experiencing falling demand. A tax increase would cause widespread distress.
As John Maynard Keynes and his followers made clear, a tax increase on a recessionary economy is a recipe for falling tax revenues as well as economic hardship.
Superpower America is a ship of fools in denial of their plight. While off-shoring kills American economic prospects, "free market economists" sing its praises. While war imposes enormous costs on a bankrupt country, neoconservatives call for more war, and Republicans and Democrats appropriate war funds which can only be obtained by borrowing abroad.
By focusing America on war in the Middle East, the purpose of which is to guarantee Israel’s territorial expansion, the executive and legislative branches, along with the media, have let slip the last opportunities the US had to put its financial house in order. We have arrived at the point where it is no longer bold to say that nothing now can be done. Unless the rest of the world decides to underwrite our economic rescue, the chips will fall where they may.
Dr. Roberts was Assistant Secretary of the US Treasury for Economic Policy in the Reagan administration. He is credited with curing stagflation and eliminating "Phillips curve" trade-offs between employment and inflation, an achievement now on the verge of being lost by the worst economic mismanagement in US history.
Isn't a falling dollar all good?
Funny, all you ever hear the Treasury Heads ever say is that they support a strong dollar policy...regardless which way the dollar is heading. Haven't heard one yet state that they favor a weak dollar policy for economic leverage.
roadrunner
It remains astounding to me how our leadership has ignored Economics 101 for years now. No wonder people like Edwards, Obama and Huckabee are surging and dethroning the presumptive old order. And even among these, who has the nerve to say these things aloud, and specify/begin the painful corrections?
Here's a warning parable for coin collectors...
<< <i>It remains astounding to me how our leadership has ignored Economics 101 for years now. No wonder people like Edwards, Obama and Huckabee are surging and dethroning the presumptive old order. And even among these, who has the nerve to say these things aloud, and specify/begin the painful corrections? >>
Ron Paul does, though he's a bit of a fruitcake on other issues and he's been effectively removed from future debates.
The truth will not set you free in American politics.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
roadrunner
<< <i>While flipping through channels late last night happened to run across Hillary preaching to some NH voters. One thing that stood out was all the negative things she had to say about the economy. And the fix for all of them was to get in there and "make some correct adjustments." But, isn't that exactly how we got here in the first place?...a whole lot of "correct" Fed and Treasury adjustments over the past 10-15 years.
roadrunner >>
I suspect we'll see about three more rate cuts before we get to election day. The subprime and credit has tightened, so that won't be much of an issue.
The Fed always paints a rosy picture in an election year, it's the following year when we reap the real effects. I suspect it won't be pretty, though those of us who have been involved with this thread since the start will probably weather the storm.
Lord help us in 2009, depending on who is in the White House.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
we buy silver...it goes nowhere.
we buy stocks..they go in the toilet
we buy house...they foreclose..
Where is the nearest bridge??
Are you asking because Cramer or Krudlowe just recommended buying shares in them?
CRBrev9 vs CFBrev10 - New Zeal
For those like me who don't follow the overall CRB as closely as the metals, here's an interesting article that explains a major rewrite of the CRB index in 2005 that has skewed the CRB much more heavily towards being an oil index. The 2 charts clearly show there has been no breakdown in the commodities bull during the 2005-2007 period. Interesting.
roadrunner
Knowledge is the enemy of fear
<< <i>Where is the nearest bridge??
Are you asking because Cramer or Kudlowe just recommended buying shares in them?
roadrunner >>
<< <i>we buy gold...they take it away from us? >>
Who is "they"? I still have my gold.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
For consideration:
There probably won't be a gold standard in the near future nor any commonly circulating gold currency. The attachment to the absolute real value of goods and services would destroy the "floating" economies of the developed nations. Absent a commonly valued currency in a global market/economy, it would beg the question..."What is the actual value of the currencies?" The reply would probably be that the actual value is something that is agreed up through trade of goods and services for currencies.
If you can accept that the world markets are somewhat amorphous because they are constantly interacting with each other's currencies and those currencies are constantly revaluing themselves as a result of trading goods for different national currencies then you would have to beg the question..."Why isn't there something that everybody can use that has a constant value?" The obvious answer is gold.
Oil has become more expensive, not just in USD but for everyone. Oil is traded in dollars on the international market. The argument that the USD is weak so oil costs us some unusually high multiple of what everyone else is paying, is not valid. $100USD oil is the new benchmark and everything is going to become more expensive, from lightbulbs to alcohol, for everybody, be they in Shanghai, London, or Detroit. It's not like we didn't know this was coming, we've been talking about here for a good while. Add the housing and stock market situation, throw in a little bad debt and credit retraction, stir with some international unrest and sure, the resulting mix is going to have challenges. It's not particularly a rosy picture but things are evolving and we know that and there is change afoot.
We're doing all we can. We are diversified in our investments, have buks in reserve, minimum consumer debt and we are stocked up on that precious barbarous relic just to keep the playing field even. The best thing that we can do now is to continue saving and try to stay away from any type of financial vulnerability and that includes upping your personal insurance to equal your net worth. Stay loose but stay focused and maybe even give some thought to getting a little further off of the radar screen.
JMHO, for entertainment purposes only.
“$100USD oil is the new benchmark and everything is going to become more expensive, from lightbulbs to alcohol, for everybody, be they in Shanghai, London, or Detroit. It's not like we didn't know this was coming,”
MH,
Good point,
Peter Schiff sent out an email at the end of last week trying to calm down his investors who were seeing 10 to 15 % drops in their investments over the last several weeks.
This was exactly my point to him in an email discussion on 12/28/05.
In our email discussion my point was that as a Global economy, has everything tied together, when a disaster happens it happens to all. In addition I made two other points, one that I felt that Asia would not take up the slack for the American consumer in their own countries simply because the average U.S. income is $41,000 per year and the average Chinese income is $2,000.
Second I felt that most of the developed countries also had tax and spend socialized economies that would have the very same stagflation problems just on a different scale.
What we are concerned with in this thread is the U.S, but what we are seeing here is being seen around the world. Holding foreign investments and foreign money may have worked for the last few years, but that is coming to a close. Owning paid for hard assets,
and keeping a low profile, is the only real partial solution available to us.
Peter has done a great job informing the public about these coming crises periods, but in the end paper is paper no matter who prints it. In addition as we follow the news reports we see that just as many foreign banks and investment funds own these toxic derivatives as U.S. firms.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
I don't see it dipping below $850 again. Resistance at $900?
silver would be they way to go right now, IMHO if someone were to get into the metals now.
i don't know anything about the options market, so i'd buy just the physical stuff.
What is a recession?
The last mild recession we were in was between '73 and '75.
(Can't get the Kitco charts to go up...bummer.) Kitco historic charts
In the '11-'13 recession, gold was flat; it also circulated as common currency,
in the '73-'75 recession, gold went to about 3X pre recession prices with no ties to a common currency,
so we enter the recession at about 760 USD and now it's at about 900.
Any prognostications out there?
(Just think of city streets clogged with a hundred thousand horses each generating 15 lbs of manure every day...)
That was a classic stagflation environment. Even during earlier 70's recession gold was still not fully released to float until gold backing was entirely removed from the money supply. I think that was 1974 when the 5% gold cover clause was removed (?). I can also remember from 1966 to 1982 when stocks went nowhere. At least hard assets were doing something during that time. The massive drop in gold from 1974 to 1976 was probably the first time anyone had seen such a thing happen. It shook out a lot of weak hands.
I wasn't even paying attention then as I was into type coins and seated material.
$882 Angel just went down. Ka-boom.
roadrunner
The charts I have show strong support at $820.00, so you could be right!
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
Well my friends it looks like gold is at $885 this morning, so is it to late to buy gold to protect your assets, Perhaps not!!
Two things of great interest happened yesterday, first lets look at part of an article out of the Financial Times;
Gold is the new global currency
Published: January 8 2008 02:00 | Last updated: January 8 2008 02:00
There was a time when gold was money. In today's uncertain world, the yellow metal is back in fashion.
A better way to think of gold may be as central bankers used to before America dropped the gold standard: not as a commodity, but as another currency. As long as the dollar stays weak, gold's bull run will last.
The arguments for further gains in the gold price are compelling. It looks cheap, despite climbing from a low of about $250 a troy ounce in 1999, when central banks were selling reserves. The UK's decision back then to sell 60 per cent of its official holdings looks particularly poor judgment.
Prices have a long way to go before they approach the inflation-adjusted record touched in 1980 when Soviet tanks invaded Afghanistan. At yesterday's $859, gold was trading at less than half that level. It could top $1,000 and still be at the lower end of what some analysts argue is a safe haven range.
The US Federal Reserve's aggressive, rate-cutting response to the credit squeeze has created a risk of a sharp rise in American inflation. That in turn creates the risk of a precipitous fall in the dollar and so makes gold more attractive as a hedge.
Second,
Glenn Beck had the head of the GAO on his news show last night. Mr. Walker is what we can call the head accountant for the U.S. government. He is appointed to a 15 year term and cannot be fired.
In a nut shell what Mr. Walker said was that the United States is bankrupt!
“ The current obligations of our government can never be paid. Even if we rasied taxes to 117%, our current and future obligations cannot be met. Our current liabilites exceed 58 trillion dollars and we have no way to meet these obligations. The American people are consistantly lied to, and our government keeps two sets of books. One it shows to the public, and one it does not. As an example the government reported a defict on september of 2007 of 163 billion dollars, but the REAL defict was 344 billion dollars. Frankly if this type of accounting was done in a publicly held corporation all of the senoir officers would go to jail.”
SO IS IT TO LATE TO BUY GOLD ???????
(As a neophyte), I thought this was an interesting synopsis of the sub-prime 'situation' and some of the behind the scenes goings-on:
North on NINJA loans etc.
Probably the most succinct explanation of the S&L bailout I have read (embedded within the article), as I was more into the Kreb's cycle and that kind of stuff then.
Personal debt and credit card defaults/late payments have been in the news with some astounding numbers, with the pundits suggesting that people are using credit cards since the house ATM's are all broken and they can't pay their credit cards. Now, they are really screwed unless the Fed bails them out. So is the fed to fix the housing for the punters and the credit cards for the dreamers? Methinks it is doubtful that our seriously over extended Fed can do this if they even wanted to.
So, Ben's lowering rates and this time he means it...maybe a whole basis point and more promised as they year progresses. This will stimulate the economy but unfortunately, this has already been factored into the stocks and the cut hasn't even been posted yet...well ahead of the actual curve, people have already played.
All the while, today's news contains interesting items about the unemployment rate looking up Unemployment so, at least people are working...HUH? So, with many sectors in contraction how does the employment rate improve? Must be the magic of modern math.
The interesting thing that we need to factor into our thoughts here is that information moves at the speed of electrons now. Everything that happens anywhere is known everywhere, now. The snails pace of cause and effect, particularly in financial matters where it's about the money, is no longer a factor. Now, if you are waiting to see the reaction of one thing on the other means that you are way too late to the table. The need for prognostication is greater than it has ever been. As the quote from the basket ball coach goes..."Go to where the ball will be, not to where it has been." Unfortunately, most of us are not that good at guessing, we are way too slow but the ideas and trends identified here give us a bit of a leg up. We need to be much more proactive in our anticipation of financial trends because the near future used to mean a few months but that has changed to where the near future is right now.
Oh, yes, the entitlements... Welfare/Healthcare costs
edited to add the entitlement picture.
JMHO, for entertainment purposes only.
<< <i>
<< <i>My favorite Pet Rock, pictured below likes the increasing gold prices -- me too!!
769 Gram (25 OzT) Gold Nugget w/Gold Coin Photos (for scale) -- Original Thread
Wow, that's neat Stuart! >>
I like that Pet Rock.
"The silver is mine and the gold is mine,' declares the LORD GOD Almighty."
Indeed. Ask the Japanese how their economy did after a big bubble and subsequent 0% interest rates. Perhaps the wand of deflation will pass to the USA from Japan.
Housing affordability is still beyond the means of most. In the old days, pre 2001,lol, banks would lend you about 3x your income if you had decent credit. So a $300,000 house is still beyond the means of most Americans. Not until interest rates drop considerably, or income rise considerably, or people save enough to put 20% down, will the housing sector start to rise.
The stock market had a miserable 15 years from the late 60's to early 80's. Precious metals had a miserable 15 years in the 80s to 90s. Now it is time for real estate.
Knowledge is the enemy of fear
<< <i>Rather than having a thread where we make our Gold, Silver, and economic predictions perhaps we can start a thread where we post related world announcements, price moves, and make comments on these moves as well as the predictions of others.
Gold is at $455 today and Silver is back to $8.
Here is the first news of the day,
December 2, 2004
........... >>
It doesn't seem to have taken that long to double one's money in either metal. According to rule 72, that's about a 24 % return since the thread's inception. As an investment, precious metals have done quite well.
<< <i>
<< <i>Rather than having a thread where we make our Gold, Silver, and economic predictions perhaps we can start a thread where we post related world announcements, price moves, and make comments on these moves as well as the predictions of others.
Gold is at $455 today and Silver is back to $8.
Here is the first news of the day,
December 2, 2004
........... >>
It doesn't seem to have taken that long to double one's money in either metal. According to rule 72, that's about a 24 % return since the thread's inception. As an investment, precious metals have done quite well. >>
Take that back to the end of '01 and the return is much more like 50% annually. An even better investment when one looks at it from that perspective.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
If all the guys on Wall Street would give us advanced intel like this perhaps we could make a few bucks, Ha Ha Ha
Gold Forecasts Raised by Goldman Sachs on Weaker Dollar Outlook
By Stuart Wallace
Jan. 11 (Bloomberg) --
Goldman Sachs Group Inc. increased its three, six and 12-month forecasts for gold because of a weaker outlook for the U.S. dollar.
Gold will trade at $885 an ounce in three months, from a previous estimate of $795, the bank said in an e-mailed report today. The metal will reach $900 in six months, from a previous forecast of $785, and $800 in 12 months, from a previous prediction of $750, the bank said.
Gold for immediate delivery was trading at $894.61 an ounce as of 8:35 a.m. in London.”
GOLD BROKE $900 THE DAY THIS FORECAST CAME OUT !!
<< <i>Now here are some over paid people really doing a great job!
If all the guys on Wall Street would give us advanced intel like this perhaps we could make a few bucks, Ha Ha Ha
Gold Forecasts Raised by Goldman Sachs on Weaker Dollar Outlook
By Stuart Wallace
Jan. 11 (Bloomberg) --
Goldman Sachs Group Inc. increased its three, six and 12-month forecasts for gold because of a weaker outlook for the U.S. dollar.
Gold will trade at $885 an ounce in three months, from a previous estimate of $795, the bank said in an e-mailed report today. The metal will reach $900 in six months, from a previous forecast of $785, and $800 in 12 months, from a previous prediction of $750, the bank said.
Gold for immediate delivery was trading at $894.61 an ounce as of 8:35 a.m. in London.”
GOLD BROKE $900 THE DAY THIS FORECAST CAME OUT !! >>
Man.... they really went out on a limb with that forecast, didn't they!! ??So they think it will take.... 6 months..... to gain another $6.00??
However, the author of these blog posts thinks gold will do well in a deflationary environment. I don't agree.