Goldsaint...If this is true then interest rates will continue to go lower as demand pushes bond prices higher. If this happens then gold will be a terrible investment. Look at the 2 charts below. I think you will see a fairly strong corrolation between gold and short term interest rates. There is a bit of a lag, which is to be expected, but you cant argue the similiar trends. I think it is no coincidence that gold peaked just before rates did and it started to move higher just before rates did.
But that opens up another can of worms. If rates go lower will boomers put their money in CD's at 2%? I think not, it will remain in the stock market. IMO only rates above 8% will seriously affect the market. That, I think, is a more likey scenerio.
“Many stocks go up by a lot more than 5%. Some outstanding stocks go up 50%, and a few even go up 500%”
Baley, I am sure this is true but all these billions of retirement dollars are not invested in this hand full of stocks that move like this, they are in mutual funds that according to Morning Star make no money.
These millions of baby boomers are not generally day traders; they have regular jobs and know very little about investing in the stock market. They were convinced to put their money in the market because it gave them some tax savings.
“Goldsaint...If this is true then interest rates will continue to go lower as demand pushes bond prices higher. If this happens then gold will be a terrible investment.”
Cohodk,
As I said, I don’t see these folks buying numismatics or Gold either, but there are still lots of folks in the world that might at least buy gold when the U.S. stock and bond markets drop, and the dollar declines further.
They won’t buy our stocks in a permanent declining market, you are probably right they won’t buy our bonds either. No reason to buy Euros, they are going to have the same situation.
In addition why would our American companies continue to make large profits when ten of millions of boomer shoppers are going to be forced to cut their spending by more than 50%?
Gold has not been moving up these last several years because American baby boomers are moving the market, most have no gold, and there are no tax reasons for them to buy.
As far as interest rates going lower, why would that happen? How are we ever going to reduce our debt? The federal government alone is going to churn out debt in the trillions each year paying just for entitlements.
As Cintas and Topstuff have said I think these boomers are going to dump most of their investments just to live and then have to at least find part time work until they die. They are going to have a very hard time adjusting to subsistence living, and are going to be screaming at the government for MORE programs.
There are those analysts that do believe that the boomers are going to sell all their stock holdings, but still believe that the wealthy will stay in the market. I do not see that happening either. Why stay in this market when the company’s profits are dropping due to declining sales, and every year there are millions of sellers dumping their retirement accounts?
The last 50 years this country has had it good...now things seem to be turning...Those who will be hurt the most are those who have always had and will not be able to cope to being without or having to cut back...THEY JUST DON"T KNOW HOW...but they will learn quickly...If you never had you will not miss...but to those who have had it all, will be a very tough go of it...who will survive, the ones who had the least. If I were the boomers, I would not trust the banks or the FDIC....Who would I trust....Insurance Companies....Buy an insurance policy that will pay you an income until death do you part.
As far as interest rates going lower, why would that happen? How are we ever going to reduce our debt? The federal government alone is going to churn out debt in the trillions each year paying just for entitlements
If Americans are forced to cut their spending by 50% the the economy will surely faulter. The FED will have to cut rates to stimulate whats left of the economy.
Why should individuals reduce debt? It will die when they do, why pay it off?
Agreed, the current entitlements programs are the biggest crisis facing this country. But what are we going to do about it?
<< <i>The Feds announced today that they will eliminate the rent indicator from the CPI as an unreliable indicator of inflation. A spokesman for the government said, “there is no way we can allow an indicator in the CPI that might go up” >>
This is NUTS!!!!
Now there is no cost of housing (home prices NOR rent) in the CPI index???????????
What is next?????? Food??????????
Nah, if you don't have housing, you don't need food.
The Feds have gone way over the line on this one. They are looking very STUPID!
“Agreed, the current entitlements programs are the biggest crisis facing this country. But what are we going to do about it?”
“If Americans are forced to cut their spending by 50% the economy will surely falter. The FED will have to cut rates to stimulate what’s left of the economy.”
Cohodk,
I do not think anyone has a solution to the entitlement programs other than issue more debt, or have hyperinflation and re-issue the currency; we can pick our poison on that issue.
But on the second issue I think this is where people are very confused. The reason the interest rates are rising are to get the foreign devils to keep buying the debt, and rolling over the debt they have.
Wall-Street says it is because of inflation, and perhaps that is part of it but we had that same inflation when the rates were 1%, the only difference now is that it is showing up in the few items left in the CPI, and PPI.
26 years ago everyone was aghast that oil prices, commodities, and the national debt were so very high.
Most all of today’s economists keeping saying don’t worry the debt is manageable, don’t worry we can pay it, don’t worry it is a small part of our economy. If any of those lies were true than why have we never paid any of it off in 26 years, and in addition we have had to borrow ALL the S.C. Medicare, Gov. pensions funds, etc.etc.
Here is what we owed on the books in 1980.
12/31/1980 $930,210,000,000.00
Here is what is on the books now without the other trillions borrowed that are undisclosed to us. 06/22/2006 $8,339,777,349,882.77
If our current interest on this debt averages 4% as it rolls over, how much just interest will be added each year? (sorry my calculator will not go this high)
"The Feds announced today that they will eliminate the rent indicator from the CPI as an unreliable indicator of inflation. A spokesman for the government said, “there is no way we can allow an indicator in the CPI that might go up”
Oreville, THIS IS NOT TRUE, JUST MY SENSE OF HUMOR! Terry
This spring a relative of mine passed away. The spouse called Discover to change the name on the account. When Discover learned the accountholder had died, they said not to pay anything more. There are no assets in the estate for Discover to collect from. Who pays the bill?
It's gone to collections and they are probably faking some big fees and interest, while continuing to say "Dont pay." That way they can soak the IRS with fake deductions, I guess. But it's pretty weird when someone calls the bank and asks to pay the loan, and the bank declines!
But on the second issue I think this is where people are very confused. The reason the interest rates are rising are to get the foreign devils to keep buying the debt, and rolling over the debt they have
Goldsaint.....All America has to do is pay more than anyone else. Foreigners bought our debt at 1% just as they do at 5%. Humankind in greedy. They will always flock to the highest rates. For the past 25 yrs global rates have been declining, they have finally started rising and presently are at historical averages. If the $hit really hits the fan then the rest of the world knows that American consumers are the best anywhere. Just wait to see how that debt is forgiven. They wont let the golden hen die.
I don't usually post the articles, but I like this one...I get a little tired of reading about how gold is a lousy investment when you look at 'the returns'...gold isn't about a percentage over time.
"An increasing money supply leads to the steady erosion of purchasing power. Based on published CPI figures, both the Canadian and the US dollar have lost about 83% of their purchasing power since 1970."
<< <i>Americans are concerned about oil prices, but the fact is, oil in the US is still 3X to 5X cheaper than it is in Europe - and Europe is reasonably competitive given the fact that it's shackled with job- and profit-destroying regulations and taxes. The human spirit of enterprise is incredibly resilient and adaptable. >>
At present, the price of gas is running about $5-6/gallon in Europe, much the same as it has been for many years; of course, it's increased slightly recently as a result of the rapid run-up in the price of oil, but that's mainly because the governments have provided some relief in the tax rates so that the pump price doesn't see huge increases. Typically, as far as I can remember, the price of gas over the past 25 years has run about $4-5 a gallon in Europe, which usually meant about 4 times the price in the States. But whereas Stateside prices have doubled or tripled recently, prices in Europe have remained relatively flat. I hypothesize that the reason for this is that European governments realize consumers won't be able to pay much more for the product.
.....GOD
"Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you." -Luke 11:9
"Hear, O Israel: The LORD our God is one LORD: And thou shalt love the LORD thy God with all thine heart, and with all thy soul, and with all thy might." -Deut. 6:4-5
"For the LORD is our judge, the LORD is our lawgiver, the LORD is our king; He will save us." -Isaiah 33:22
Yes, gold or precious/industrial metals are constantly cited as terrible investments over the past 10, 15, 20, 25, ...., 50 year periods. What the Wall Street crowd doesn't like to post is that over the past 5 years gold/PM indices have far outclassed the major stock indices. It will be the same story at the 10+ year point. By that time most portfolios will be considered lacking if they don't have some exposure to hard assets....just about that time is when it will be the wrong time to move into PM's.
Look at these outrageous stories being spread around the world for the foreign devil press!
PRAVDA Each Adult American citizen owes the world one million dollars 06/15/2006
STEP ONE - around 20 Trillion Dollars - Indebtedness of the USA : After the area of Ronald Reagan and George W. Bush with their idiotic idea of releasing some of the richest people from taxes - to the disadvantage of middle-class, this nation has a dept-tower of approx. 20 trillion. Covered is this dept by some gold reserves and some other State fortune, however never covering in fact the debts.
STEP TWO - around 20 Trillion Dollars
The cumulative figure of debts of the 50 States reach the figure of the above national indebtedness. Experts in the USA may re-control the matter and find out that my assumption is too low.
STEP THREE - around 20 Trillion Dollars - Indebtedness of all towns, counties and other state organisations of the USA: Here I see myself confronted with more complexity: Let's assume that the hundreds of towns, counties and other state affairs sum up in a debt that will reach the one of the USA as a nation (point ONE above).
STEP FOUR - around 10 Trillion Dollars - Indebtedness in Health care and old age funds: Daily you can read of huge under-covers in pension funds of states and firms in the health and old-age business. You can read of immense debts with insurances, hospitals, homes, pharmaceutics and all other societies or persons involved in that business. I assume that we would reach here a level of 50% of total state debts.
STEP FIVE - around 50 Trillion Dollars - Indebtedness in companies under Chapter 11 and other debts of quasi-broken firms: For car producers and airline companies alone, we hear of billions of dollars being kept behind under Chapter 11. Adding all the middle and little companies throughout the country and debts under bankruptcy laws, we may well find 50 trillion of debts which are not covered by assets of those entities.
STEP SIX - about 5 Trillion Dollars - Debts in credit-card accounts of individuals: Starting at the age of 16, young American are quasi forced by capitalistic beliefs into indebtedness by criminal banks and credit card-institutions. Assume that each American - willing to consume - has an average-debt of 30,000 dollars - we summarize with 150 million consumers an amount of nearly 5000 billion or 5 trillion.
STEP SEVEN - rounded 90 Trillion Dollars - Debts in House-market, only covered by a so called "valuation-bubble:" Here comes the big thing: I assume the value of all houses and buildings (without ground or other real estate not built) for the whole USA on 300 trillion. Assuming that later in time, a bubble of 30 % of total value of houses will show up, we have here an uncovered debt of 90 trillion.
STEP EIGHT - around 30 Trillion Dollars - Any other indebtedness: Bank credit accounts, outstands with stock exchange, monthly costs, all open invoices, social charges not paid yet, all kind of debts, not mentioned above already.
Conclusions and relativating remarks on the above figures: Now we count and can see one million dollar debt for each adult head in the USA. Can these debts not be covered in any way, we are facing a collapse never seen before in history in this world. It will make tumble to hell all banks, insurance and re-insurance companies, all stock exchanges, not only the ones in the USA but throughout the world. "
I don't find $245 TRILLION as a total USA debt to be an unrealistic number. It's possible it could be TOO low. The national debt if forged out for 30-50 years of future benefits is around $50-75 TRILLION. Toss in corporate and private debt spread around the world and TRILLIONs add up quickly. Chris Laird's recent article estimated total world value at around 10X this number or more. A large fraction of this value is someone's liability as well.
Here's a similar article from financialsense.com by Bud Conrad basically stating that we are nearly bankrupt. Economist John Williams says we are already there with only the faith in the US govt's ability to print FRN's holding things together.
Was reading one PM's analysts comments 2 nights ago and he basically said gold was going to wallow in the sub $600 range for most of the year. He said there was NO reason or way for gold to be worth over $600 for quite some time. Now that the hedge funds had bailed gold had no basis to go higher. Seems he was quite wrong as well.
Russ should do very well on his $20 MS65 Saint trade as those have already rebounded 3-5% depending on when you bought them. Supply is basically gone. Just over the past few days circ $20's have gone into hiding at the "current" levels.
Can you believe that Asia is now using nearly as much oil as the U.S. What happens in the next few years, perhaps $150 oil and $7.00 per gallon gas?
In addition Asians love Gold, so if only one percent of the population below buys one U.S. one-ounce coin that’s 30 million coins? Do we have 30 million one ounce gold coins?
I suppose that once these folks can afford $7.00 per gallon gas, like us, then they could buy one coin?
What say you ?
Todays Gold is $653.50
The Rise of the Chinese Consumer By Frank E. Holmes
July 12, 2006 Economist Simon Kuznets, who came up with the concept of GDP, won the 1971 Nobel Prize for his work to explain infrastructure investment. That work is relevant to what we're seeing today in emerging nations. Kuznets noticed that roads and highways, seaports, airports and other infrastructure are built over a 15- to 20-year period. It is a period of strong jobs creation, and once these pieces are built, the economy is growing and robust.
A good example of this is when the U.S. built interstate highways in the 1950s. This construction work absorbed more than half of the world's commodities. This is very significant as we look at those emerging economies that have policies for infrastructure construction and growing demand for commodities.
Asia's rapid growth is driving this secular bull market. Asia 's 3 billion people now consume about 20 million barrels of oil daily, while 300 million Americans consume 22 million barrels per day. The difference is that Asia has been growing at 6 percent per year, twice the U.S. rate. Since 2000, there have not been enough new discoveries of oil, gas and precious metals to meet Asia 's demand as they have built infrastructure. This is the most important reason why we are living with ever-higher energy prices.
China 's energy consumption is expected to be 69 percent higher in 2010 than in 2002, according to the Federal Energy Information Administration. That growth rate is five times higher than the estimate for the United States and more than 15 times higher than Europe.
China , in the midst of a massive infrastructure build-out, used half of the world's cement and 40 percent of the world's steel last year, according to government statistics.
China plans to build 14 express highways, six railways and a dozen new seaport facilities before 2010.
When it comes to China , our investment team has a simple philosophy: whatever China needs, get long, and whatever they have as surplus, get it out of the way, because China will just dump it. That happened with both steel and aluminum.”
This just in to add to the above story, the BLACKMAIL begins from Venezuela!
July 12, 2006, 1:30PM Citgo to stop selling gas to U.S. stations
"CARACAS, Venezuela — Venezuela-owned Citgo Petroleum Corp. has decided to stop distributing gasoline to some 1,800 U.S. stations.
The states where Citgo will stop selling gasoline are: Iowa, Kansas, Kentucky, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma and South Dakota. A limited number of stations in Illinois, Texas, Arkansas and Iowa will also be affected. Venezuela is the world's fifth-largest oil exporter and the U.S. is its top buyer. The United States relied on Venezuela for about 11 percent of its oil supply in 2005."
<< <i>This just in to add to the above story, the BLACKMAIL begins from Venezuela!
July 12, 2006, 1:30PM Citgo to stop selling gas to U.S. stations
"CARACAS, Venezuela — Venezuela-owned Citgo Petroleum Corp. has decided to stop distributing gasoline to some 1,800 U.S. stations.
The states where Citgo will stop selling gasoline are: Iowa, Kansas, Kentucky, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma and South Dakota. A limited number of stations in Illinois, Texas, Arkansas and Iowa will also be affected. Venezuela is the world's fifth-largest oil exporter and the U.S. is its top buyer. The United States relied on Venezuela for about 11 percent of its oil supply in 2005." >>
I think i seen a Citgo station around my part of the country North East. But i never see any one in there getting fuel. Lukoil is now the big name up this way.
"The silver is mine and the gold is mine,' declares the LORD GOD Almighty."
This out today, are we being prepared for some really bad news from the Fed?
Is the United States Bankrupt? Laurence J. Kotlikoff Federal Reserve Bank of St. Louis July 2006,
Is the U.S. bankrupt? Or to paraphrase the Oxford English Dictionary, is the United States at the end of its resources, exhausted, stripped bear, destitute, bereft, wanting in property, or wrecked in consequence of failure to pay its creditors?
Many would scoff at this notion. They’d point out that the country has never defaulted on its debt; that its debt-to-GDP (gross domestic product) ratio is substantially lower than that of Japan and other developed countries; that its long-term nominal interest rates are historically low; that the dollar is the world’s reserve currency; and that China, Japan, and other countries have an insatiable demand for U.S. Treasuries.
Others would argue that the official debt reflects nomenclature, not fiscal fundamentals; that the sum total of official and unofficial liabilities is massive; that federal discretionary spending and medical expenditures are exploding; that the United States has a history of defaulting on its official debt via inflation; that the government has cut taxes well below the bone; that countries holding U.S. bonds can sell them in a nanosecond.
Is the United States bankrupt? Many would scoff at this notion. Others would argue that financial implosion is just around the corner. This paper explores these views from both partial and general equilibrium perspectives. It concludes that countries can go broke, that the United States is going broke, that remaining open to foreign investment can help stave off bankruptcy, but that radical reform of U.S. fiscal institutions is essential to secure the nation’s economic future.
I always get a kick out of tweaked govt stats. The above article discussed hedonics in the GDP calculations. In a nutshell, Mish talks about things added in by the govt to boost GDP. They are rather remarkable. The govt's own stats show that 35% of the GDP is from these odd sources that are not true income, but "goods or services of some sort" that are deemed to add value to the economy.
examples:
$153 Billion is tacked on because homeowners are assumed to rent their homes to themselves. Ok....I can buy that (lol)
$335 Billion is tacked on to account for that fact that banks offer free checking to so many customers. The govt figures that the service is offered so cheaply that the economy "gains" $335 Billion in value from this "free" service. Add it to the GDP boys!
And those 2 are only about 14% of the total services added in. You wouldn't believe it if it weren't actually listed as such in the govt's own stats. Then after fudging up some 35%, a GDP deflator is applied to remove inflationary effects. Unfortunately the GDP deflator is known to understate inflation by far more than the CPI does. So this is yet another factor that helps to overstate the GDP. The darn thing is so overstated that by the time 2 consecutive drops in GDP occur and a recession is officially called, a downturn will have been underway for a few years!
Thanks for your post RR, just more evidence of the Feds jacking with the numbers.
All of this government data has become so unreliable it is bewildering why the economists use it at all.
What is astonishing is that the mainstream media never even bothers to read the real numbers?
Many afternoons I watch Larry Kudlow just so I can have a good laugh. He pulls out all of his Government statistics at least three times a week and shows how the GDP is in great shape, there is very low inflation, workers are being paid more and more, and everyone should own all the paper assets they can put away.
I suppose these folks touting all these fraudulent numbers truly believe that if you just keep everyone going in the illusion long enough everything will turn out O.K. Personally I don’t think so.
I think when the Federal Reserve starts publishing papers about the potential bankruptcy of the country a disastrous end cannot be far off.
Can you believe that Asia is now using nearly as much oil as the U.S. What happens in the next few years, perhaps $150 oil and $7.00 per gallon gas?
Gas will not go to $7. As gas starts to get closer to $4 you will see a dramatic economic slowdown. This will decrease demand. Oftentimes the best cure for high prices is high prices.
"Oftentimes the best cure for high prices is high prices."
I agree completely but it comes with some pain.
There is tremendous pressure on commodities, including gasoline. Oil is certainly in demand but there is plenty of oil available. What is not available is refining capacity, that is why Citgo is pulling out of the US, it cost them too much to refine their low quality crude and distribute the product to the US...they are losing money. I said previously in this thread, that $3 gas is a gift and I still believe that...at $4 then we start getting to where the flesh meets the bone. At $5 then we will start seeing significant changes in society in the US. The govt. will jack with numbers, rattle swords, yell and scream in the public media but all for naught...it is just going to cost more to play, it's an international market now...we have to compete with everyone else and there is going to be some major unhappiness at not being able to supersize and being forced to downsize.
So, the govt. is jacking the numbers to keep the peace but reality is when you drive to work, buy your stuff at the store after it has been shipped around the country, fly to your vacation, anything that involves energy consumption, it will feel cause added pressure on your wallet. It doesn't matter what the govt. tells us, when we look in our wallet and see 5's when we used to see 20's, that's reality. Soon the increases will hit power distribution, fertilizer for crops, plastics, all the little things that add up to higher costs. My point is that the govt. wants people to not panic and start yelling "The wolf is at the door!" but reality is that it is just going to cost more to enjoy the standard of living we have enjoyed for the last few years. We've been on a joy ride but ticket prices are going up.
This means that there will be fewer mackers sold, less eating out, less travel, fewer vacations, generally fewer perks for the regular guy. The poor are somewhat insulated by entitlements for housing, education, health care, food, stamps, the list goes on and for good reason. If the poor take to the streets then there will be hell to pay and every government from cities to counties to states to the congress know that! The economically compromised have to have their bacon and their kids out of the house in the public education babysitting program but on the other hand, regardless of race, they will become enslaved and it won't take too long before that reality starts creeping into the news.
It will be the regular guy that takes this hit...him and all the small businesses that rely on his disposable income...carpet cleaners, landscapers, furniture stores, etc. The mindset has been to give the regular guy some TV, sports, and public recreation areas, but TV suks anymore because advertisers have captured public broadcast channels to the point that content of the shows is severly compromised...30 minutes of content for an hour show with a barrage of commercials every 15 minutes, so that isn't going to help anyone. If you want to go to the park, most folk have to drive...and there you go. Sports is still an opiate but there isn't going to be a lot of regular guys that can afford $40 a seat for his family to go watch a BB game and that's before they get to $7 dogs and $6 beers and spend 3 gallons of gas getting there.
Newspapers are on their backs as advertisers flee to the net and print circulation continues to decline. I predict there will be some major changes in media as an opiate of the people and it will probably be based on the internet. Read 1984 again. We are surely on the brink of some significant changes in lifestyle and the separation between those that can afford it and those that can't is going to be more and more conspicuous and that's going to be a problem and it probably won't take more than a couple of years. The top 10% of income earners should do just fine but security is going to cost more and the people that can afford it will pay it. At some point we will have to move into socialism as a form of government as Europe has, even if we still call it a democracy. I predict a third party will come from the wings and will ignite politics, an appeal to the common man, the promise of a chicken in every pot but it might take a few more years but we could see it as soon as the next election, sometime after '08, and it will not be SOS, different day...it will be something with big time mass appeal, like McGovern in '68 or a new Kennedy.
The answer: minimal personal debt and a store of hard assets/cash are required food for survival. Be adaptable, flexible, and don't be afraid to make some adjustments. Pay attention, be prepared, have a plan.
“Gas will not go to $7. As gas starts to get closer to $4 you will see a dramatic economic slowdown. This will decrease demand. Oftentimes the best cure for high prices is high prices.”
Well perhaps, but then again Europe has become adjusted to these prices! In the case of automobiles what choice do we really have? Americans are so spread out, shall we just not drive 40 mile round trips to work?
Many people in large cites pay outrageous fees to park their cars, but they still drive to work each day.
I understand that the democratic leader, Nancy P. said today in the Wall Street Journal that if the Dems get the house back they want to add on to the gas taxes? Is she nuts?
Could we do some conserving, sure, but much of our day-to-day travel is of necessity. We live and work in a country of wide open spaces, drive long distances to work, take the kids long distances to school, drive a long way to go shopping, or to the theater. Are we going to change our entire lifestyles? Move into crowed cites and walk, I doubt it very much!
I agree something has to give, I just have no clue what it might be, but so far this year with gas running at an average $3.00 plus per gallon Americans are using MORE than they did in the summer of 2005.
1. "In the case of automobiles what choice do we really have? Americans are so spread out, shall we just not drive 40 mile round trips to work?"
Mass transit is the best way to solve this. Figure:
$50/mo.+ to park 18 Mi./gal. so a little more than two gallons @ $3 and that's about $7/dayX5 days for $35/wk or $140/mo. we're at $190/mo. with parking and gas., less public transit fare @ $2/day for $40 a month and you have $150/month advantage for using mass transit
maybe you don't need that second car anymore at $350/mo payment
we're talking about FIVE HUNDRED DOLLARS A MONTH just for riding the bus or carpooling and that's before maintenance and insurance savings! For the bugs, that's a nice ms $10 lib. every month!!!
2. "Is she nuts?"
To most of us...yes, but obviously not to everybody.
3. "Are we going to change our entire lifestyles?"
Yes, it will be necessary.
4. "Move into crowed cites and walk"
The europeans have been doing it for generations. We have "master planned communities" and they seem to work well for the suburban basics.
5. "I agree something has to give"
Yes, but folk have to remember that it is a dynamic evolution. Things are in a constant state of evolution be they economics, populations, weather patterns, tides and currents ...all are dynamic and not static. Successful evolution requires adaptability...so something will give anyway, everything is in a constant state of change.
Anyways... while eating dinner with the fam the other day, I was remarking about the differences in pricing for various items... I paid $4.75 USD for 1 Sam Adams beer, and yet $7 USD for a crab, shrimp and other items lunch the day before... I always mention how a pepperoni pizza (md) from pizza hut in the 70's was about $20 USD, and now the same pizza (lg, garlic bread, supreme) is $5 USD... back in the early $70's an oz (coin) of gold was ~$30 USD... now ~$650 USD.
My checking account is free vs. ~$11 / month USD when in college AND we have free checks AND they'll mail them for us, plus online banking (free).
It's kind of weird... some things have drastically dropped in price, while others have not.
Back towards the end of the Clinton administration, the gov had enough money on hand to pay the entire amount of the "float" in treasury debt (and still having money left over), yet plp questioned the reasoning of this action... "How are we going to price our debt?".
The doom and gloom crowd don't seem to remember the Regan era to Clinton era... we've done this before, no worries.
Jazzfest tonight, wine and loving on a grassy hill under the warm Texas sky; the world is on fire... but it never mattered anyways... we're still going to have potato salad this weekend, if you have your health, family and friends... that's all you ever needed. Turn off the TV.
Have a great weekend.
I listen to your voice like it was music, [ y o u ' r e ] the song I want to know.
I'd give you the world, just because...
Speak to me of loved ones, favorite places and things, loves lost and gained, tears shed for joy and sorrow, of when I see the sparkle in your eye ... and the blackness when the dream dies, of lovers, fools, adventurers and kings while I sip my wine and contemplate the Chi.
I love it when there is the smell of panic in the air like this week. If it's the end of the world, then nothing matters.
But I doubt it is so it's time to bottom fish for bargains or start accumulating cash for the inevitable fire sales in real estate, especially in vacation properties and commercial strip malls [my fav].
If oil tanks our economy too much then the rest of the world goes with us and oil demand drops like rock. The terrorists fighting over ideology, religion etc. will keep on fighting as they have for centuries so that really should have no effect on gold.
What will affect gold is when the dollar finally capitulates. Notice I said when and not 'if'. The dollar had the sharpest drop against the Mexican peso this week, in more than 5 yrs. Irony is the Mexican election is almost a dead heat with both sides claiming victory. Such uncertainty should weaken a currency like Mexico's but it got stronger. Not a good omen forthe green back!
I was also astonished that the Fed released such a damaging paper, below is the link. This is a very long document but I thought I would post it for those that are real students of the economy.
Talk about gloom and doom from the horse’s mouth. As usual I have not seen anything in the main stream press about this paper, which must have taken many weeks to write given all the detail and numbers required.
Many of the economic disaster scenarios that we have covered here in nearly two years were outlined in this paper as real possibilities. The changes outlined by the Fed would change the face of economics in the U.S. for 50 plus years.
The recent 800 point drop in the Dow, and the 20% price increase in Gold, over the last several weeks has been blamed by the media and Wall Street on the pathetic Korean attempt to shot off missiles and the conflict in Israel. Which I believe are non-starters as these are just continuations of the same old decades long battles. Why the media has not covered this well researched Fed document is just one more sign of their blindfolded position.
The financial media and Wall Street hang on every word issued at every Fed region concerning even the faintest sign that the rates may go up .25 of a point, and yet when a detailed paper is published on what a disaster has been created by entitlements and the printing press there is not a word spoken.
These are the reforms of which I've been a proponent for years. The health care system while once the envy of the world is now geared to provide care only to the healthy who are well-insured. Three industries are fed off the money flowing into this system.
Taxes punish those who would provide the capital which will be necessary to avoid a lessen- ing standard of living while rewarding those exporting our wealth to China. Social Security reform is inevitable and the longer it is delayed the less fair it will be.
If changes aren't made there will be inflation which will further damage the economy by pun- ishing good companies unable to keep up and rewarding bad ones who can. Wealth will lie idle, while the incompetent run wild.
If changes are made now, they can be relatively painless, but at some point it will simply be too late.
"If changes are made now, they can be relatively painless, but at some point it will simply be too late. "
It looks to be to late now!
As we have discussed here, best make your own personal plan!
The U.S. press may be ignoring this but the Foreign press is not!
TELEGRAPH U.K. US 'could be going bankrupt' By Edmund Conway, Economics Editor (Filed: 14/07/2006)
The United States is heading for bankruptcy, according to an extraordinary paper published by one of the key members of the country's central bank.
A ballooning budget deficit and a pensions and welfare timebomb could send the economic superpower into insolvency, according to research by Professor Laurence Kotlikoff for the Federal Reserve Bank of St Louis, a leading constituent of the US Federal Reserve.
Experts have calculated that the country's long-term "fiscal gap" between all future government spending and all future receipts will widen immensely as the Baby Boomer generation retires, and as the amount the state will have to spend on healthcare and pensions soars. The total fiscal gap could be an almost incomprehensible $65.9 trillion, according to a study by Professors Gokhale and Smetters.
Prof Kotlikoff said: "This figure is more than five times US GDP and almost twice the size of national wealth. One way to wrap one's head around $65.9trillion is to ask what fiscal adjustments are needed to eliminate this red hole. The answers are terrifying. One solution is an immediate and permanent doubling of personal and corporate income taxes. Another is an immediate and permanent two-thirds cut in Social Security and Medicare benefits. A third alternative, were it feasible, would be to immediately and permanently cut all federal discretionary spending by 143pc."
Interesting that metal has hardly moved these last two weeks...”
MH My guess is that all of the media coverage about this War, that very few on the planet care about, is stifling all the main medias coverage of housing prices falling, dozens if not hundreds of companies involved in options fraud, and skyrocketing U.S. debt.
There has been so much paper currency printed the last couple of decades that billions of dollars flow like waves of the ocean into speculation trying to make a few more bucks.
No doubt the oil markets are manipulated up at least several dollars as NOTHING has changed with this war.
This part of the Middle East is where poor souls go on earth to do their bad karmas; nothing has changed here in 3,000 years. When a Roman general took Masada, he was congratulated by one of his centurions for wining. His comment back to the centurion was, “ I have won nothing, I have captured a rock in the middle of a barren desert, next to a poison sea”
i just think that many people are a little more optimistic than the overall theme of this thread. I don't necessarily think that the country is headed toward ruin quite as fast as some here would suggest. I still believe, albeit maybe stubbornly, that America can take note of and at least make an effort at fixing its major problems as it has done in the past...especially something as serious as economic ruin. I'm just not ready to throw in the towel and stock food, water, and ammunition just yet.
<< <i>...is stifling all the main medias coverage of housing prices falling, dozens if not hundreds of companies involved in options fraud, and skyrocketing U.S. debt. >>
Yawn...old news. Can't sell papers with that. You know, a trillion here, a trillion there, pretty soon it adds up to quite a confidence game!
What amazes me is that someone will throw out a gloom-and-doom scenario, for example The Limits of Growth, in which a lot of true premises are piled up to support a sound conclusion, but since the author makes the mistake of predicting the date of doom--and of course gets it wrong--everyone feels free to dimiss the premises and the conclusion as "disproved."
Population growth, peak oil, paper money...the question is which one first, and when. When a predicted date-of-doom slides past, it doesn't mean, assuming the presmises are sound, the problem is gone, or the theory disproved, it just means the day of reckoning is postponed.
You cannot look at one half of any one of these parabolic charts and not see clearly what must come after.
On the other hand...people are easily duped. Maybe it will go on for a long time still.
As far as a collective group of humans taking note of how certain actions are driving them all to ruin and taking corrective measures...it's possible. But the Romans didn't manage it, nor the Egyptians, nor anyone I can think of. Civilization rise...and they fall. None have endured the final test and avoided the catastrophe.
Somehow I don't think we'll be the first, nor, given the degree of decadence now manifest, do I think it entirely desirable that this civilization prolong itself indefinitely.
Skip the food and water. Gold and guns will do to procure both, should it come to that.
Comments
<< <i>They will pull it all out because if you only have 60,000 saved, you HAVE to pull it all out to live! >>
-More likely these folks will continue to work. The trend of working/living longer is already in place.
<< <i>The trend of working/living longer is already in place. >>
For the "free trade" afficionados in the group, could we accurately correct that statement to:
"The NECESSITY of working/living longer is already in place. "
Goldsaint...If this is true then interest rates will continue to go lower as demand pushes bond prices higher. If this happens then gold will be a terrible investment. Look at the 2 charts below. I think you will see a fairly strong corrolation between gold and short term interest rates. There is a bit of a lag, which is to be expected, but you cant argue the similiar trends. I think it is no coincidence that gold peaked just before rates did and it started to move higher just before rates did.
But that opens up another can of worms. If rates go lower will boomers put their money in CD's at 2%? I think not, it will remain in the stock market. IMO only rates above 8% will seriously affect the market. That, I think, is a more likey scenerio.
Knowledge is the enemy of fear
“Many stocks go up by a lot more than 5%. Some outstanding stocks go up 50%, and a few even go up 500%”
Baley,
I am sure this is true but all these billions of retirement dollars are not invested in this hand full of stocks that move like this, they are in mutual funds that according to Morning Star make no money.
These millions of baby boomers are not generally day traders; they have regular jobs and know very little about investing in the stock market. They were convinced to put their money in the market because it gave them some tax savings.
“Goldsaint...If this is true then interest rates will continue to go lower as demand pushes bond prices higher. If this happens then gold will be a terrible investment.”
Cohodk,
As I said, I don’t see these folks buying numismatics or Gold either, but there are still lots of folks in the world that might at least buy gold when the U.S. stock and bond markets drop, and the dollar declines further.
They won’t buy our stocks in a permanent declining market, you are probably right they won’t buy our bonds either. No reason to buy Euros, they are going to have the same situation.
In addition why would our American companies continue to make large profits when ten of millions of boomer shoppers are going to be forced to cut their spending by more than 50%?
Gold has not been moving up these last several years because American baby boomers are moving the market, most have no gold, and there are no tax reasons for them to buy.
As far as interest rates going lower, why would that happen? How are we ever going to reduce our debt? The federal government alone is going to churn out debt in the trillions each year paying just for entitlements.
As Cintas and Topstuff have said I think these boomers are going to dump most of their investments just to live and then have to at least find part time work until they die.
They are going to have a very hard time adjusting to subsistence living, and are going to be screaming at the government for MORE programs.
There are those analysts that do believe that the boomers are going to sell all their stock holdings, but still believe that the wealthy will stay in the market. I do not see that happening either. Why stay in this market when the company’s profits are dropping due to declining sales, and every year there are millions of sellers dumping their retirement accounts?
Some people with nothing to lose, gamble it all. Some people with nothing to lose, bury it in a CD.
Worry about what someone else who has nothing will choose? Nah, there are more profitable endeavors to pursue every day.
If Americans are forced to cut their spending by 50% the the economy will surely faulter. The FED will have to cut rates to stimulate whats left of the economy.
Why should individuals reduce debt? It will die when they do, why pay it off?
Agreed, the current entitlements programs are the biggest crisis facing this country. But what are we going to do about it?
Knowledge is the enemy of fear
<< <i>The Feds announced today that they will eliminate the rent indicator from the CPI as an unreliable indicator of inflation. A spokesman for the government said, “there is no way we can allow an indicator in the CPI that might go up” >>
This is NUTS!!!!
Now there is no cost of housing (home prices NOR rent) in the CPI index???????????
What is next?????? Food??????????
Nah, if you don't have housing, you don't need food.
The Feds have gone way over the line on this one. They are looking very STUPID!
<< <i>Why should individuals reduce debt? It will die when they do, why pay it off? >>
Not true! Debt is the responsibility of the estate to be paid off, assuming you have any assets.
But better yet, here is a true story of my handling an estate of a deceased woman three years ago.
Oreville (speaking to the credit card companies): "Mrs. so and so passed away and I see she owes you $15,000."
Credit Card Company special legal department rep (that handles estates) : "She needs to pay off her balance."
Oreville: "I would like to discuss a settlement on the account. I would like to offer payment of 20% to pay off the balance."
Credit Card Company Rep: You understand that a settlement would be noted as such in her credit report.
Oreville: " Uh, she is deceased. I don't think a credit report for a dead person means anything anymore. She cannot apply for credit anymore."
Credit Card Company Rep: "Doesn't matter, her credit report will still be damaged by the settlement."
I spoke with the executor what the credit card rep stated and he could not stop laughing for two weeks.
This is a true story! We are getting more and more stupid as a nation!!!!!!!!
“If Americans are forced to cut their spending by 50% the economy will surely falter. The FED will have to cut rates to stimulate what’s left of the economy.”
Cohodk,
I do not think anyone has a solution to the entitlement programs other than issue more debt, or have hyperinflation and re-issue the currency; we can pick our poison on that issue.
But on the second issue I think this is where people are very confused. The reason the interest rates are rising are to get the foreign devils to keep buying the debt, and rolling over the debt they have.
Wall-Street says it is because of inflation, and perhaps that is part of it but we had that same inflation when the rates were 1%, the only difference now is that it is showing up in the few items left in the CPI, and PPI.
26 years ago everyone was aghast that oil prices, commodities, and the national debt were so very high.
Most all of today’s economists keeping saying don’t worry the debt is manageable, don’t worry we can pay it, don’t worry it is a small part of our economy. If any of those lies were true than why have we never paid any of it off in 26 years, and in addition we have had to borrow ALL the S.C. Medicare, Gov. pensions funds, etc.etc.
Here is what we owed on the books in 1980.
12/31/1980 $930,210,000,000.00
Here is what is on the books now without the other trillions borrowed that are undisclosed to us.
06/22/2006 $8,339,777,349,882.77
If our current interest on this debt averages 4% as it rolls over, how much just interest will be added each year? (sorry my calculator will not go this high)
"The Feds announced today that they will eliminate the rent indicator from the CPI as an unreliable indicator of inflation. A spokesman for the government said, “there is no way we can allow an indicator in the CPI that might go up”
Oreville,
THIS IS NOT TRUE, JUST MY SENSE OF HUMOR!
Terry
Oh, sorry!
This spring a relative of mine passed away. The spouse called Discover to change the name on the account. When Discover learned the accountholder had died, they said not to pay anything more. There are no assets in the estate for Discover to collect from. Who pays the bill?
It's gone to collections and they are probably faking some big fees and interest, while continuing to say "Dont pay." That way they can soak the IRS with fake deductions, I guess. But it's pretty weird when someone calls the bank and asks to pay the loan, and the bank declines!
how low inflation will be. Should make folks all feel a lot better.
The present administration is no more true Republicans then the man
in the moon. They are in actuality magicians. All the tricks are done
with smoke and mirrors. True Republicans should be ashamed at this
loss of fiscal responsibility. The purpose for manipulating the price index
is three fold. To sustain the bragging rights of the administration, to reduce
the COLA increase in Social Security to reduce the COLA in wages. It is highly likely
that the honest price index is closer to 7 % inflation per year or double the OFFICIAL increase.
When the lending institutions start making loans and mortgages more restrictive, spending
will drop and we shall see the true underlying strength or weaknesses of our National economy.
Camelot
Goldsaint.....All America has to do is pay more than anyone else. Foreigners bought our debt at 1% just as they do at 5%. Humankind in greedy. They will always flock to the highest rates. For the past 25 yrs global rates have been declining, they have finally started rising and presently are at historical averages. If the $hit really hits the fan then the rest of the world knows that American consumers are the best anywhere. Just wait to see how that debt is forgiven.
Knowledge is the enemy of fear
nullThe Role of Precious Metals In An Investment Portfolio
The link is to a Kitco commentary.
Cathy
That suck's!!!
https://www.pcgs.com/setregistry/quarters/washington-quarters-major-sets/washington-quarters-date-set-circulation-strikes-1932-present/publishedset/209923
https://www.pcgs.com/setregistry/quarters/washington-quarters-major-sets/washington-quarters-date-set-circulation-strikes-1932-present/album/209923
<< <i>Americans are concerned about oil prices, but the fact is, oil in the US is still 3X to 5X cheaper than it is in Europe - and Europe is reasonably competitive given the fact that it's shackled with job- and profit-destroying regulations and taxes. The human spirit of enterprise is incredibly resilient and adaptable. >>
At present, the price of gas is running about $5-6/gallon in Europe, much the same as it has been for many years; of course, it's increased slightly recently as a result of the rapid run-up in the price of oil, but that's mainly because the governments have provided some relief in the tax rates so that the pump price doesn't see huge increases. Typically, as far as I can remember, the price of gas over the past 25 years has run about $4-5 a gallon in Europe, which usually meant about 4 times the price in the States. But whereas Stateside prices have doubled or tripled recently, prices in Europe have remained relatively flat. I hypothesize that the reason for this is that European governments realize consumers won't be able to pay much more for the product.
"Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you." -Luke 11:9
"Hear, O Israel: The LORD our God is one LORD: And thou shalt love the LORD thy God with all thine heart, and with all thy soul, and with all thy might." -Deut. 6:4-5
"For the LORD is our judge, the LORD is our lawgiver, the LORD is our king; He will save us." -Isaiah 33:22
roadrunner
Look at these outrageous stories being spread around the world for the foreign devil press!
PRAVDA
Each Adult American citizen owes the world one million dollars
06/15/2006
STEP ONE - around 20 Trillion Dollars
- Indebtedness of the USA :
After the area of Ronald Reagan and George W. Bush with their idiotic idea of releasing some of the richest people from taxes - to the disadvantage of middle-class, this nation has a dept-tower of approx. 20 trillion. Covered is this dept by some gold reserves and some other State fortune, however never covering in fact the debts.
STEP TWO - around 20 Trillion Dollars
The cumulative figure of debts of the 50 States reach the figure of the above national indebtedness. Experts in the USA may re-control the matter and find out that my assumption is too low.
STEP THREE - around 20 Trillion Dollars
- Indebtedness of all towns, counties and other state organisations of the USA:
Here I see myself confronted with more complexity: Let's assume that the hundreds of towns, counties and other state affairs sum up in a debt that will reach the one of the USA as a nation (point ONE above).
STEP FOUR - around 10 Trillion Dollars
- Indebtedness in Health care and old age funds:
Daily you can read of huge under-covers in pension funds of states and firms in the health and old-age business. You can read of immense debts with insurances, hospitals, homes, pharmaceutics and all other societies or persons involved in that business. I assume that we would reach here a level of 50% of total state debts.
STEP FIVE - around 50 Trillion Dollars
- Indebtedness in companies under Chapter 11 and other debts of quasi-broken firms:
For car producers and airline companies alone, we hear of billions of dollars being kept behind under Chapter 11. Adding all the middle and little companies throughout the country and debts under bankruptcy laws, we may well find 50 trillion of debts which are not covered by assets of those entities.
STEP SIX - about 5 Trillion Dollars
- Debts in credit-card accounts of individuals:
Starting at the age of 16, young American are quasi forced by capitalistic beliefs into indebtedness by criminal banks and credit card-institutions. Assume that each American - willing to consume - has an average-debt of 30,000 dollars - we summarize with 150 million consumers an amount of nearly 5000 billion or 5 trillion.
STEP SEVEN - rounded 90 Trillion Dollars
- Debts in House-market, only covered by a so called "valuation-bubble:"
Here comes the big thing: I assume the value of all houses and buildings (without ground or other real estate not built) for the whole USA on 300 trillion. Assuming that later in time, a bubble of 30 % of total value of houses will show up, we have here an uncovered debt of 90 trillion.
STEP EIGHT - around 30 Trillion Dollars
- Any other indebtedness:
Bank credit accounts, outstands with stock exchange, monthly costs, all open invoices, social charges not paid yet, all kind of debts, not mentioned above already.
Conclusions and relativating remarks on the above figures:
Now we count and can see one million dollar debt for each adult head in the USA. Can these debts not be covered in any way, we are facing a collapse never seen before in history in this world. It will make tumble to hell all banks, insurance and re-insurance companies, all stock exchanges, not only the ones in the USA but throughout the world. "
A large fraction of this value is someone's liability as well.
Here's a similar article from financialsense.com by Bud Conrad basically stating that we are nearly bankrupt. Economist John Williams says we are already there with only the faith in the US govt's ability to print FRN's holding things together.
Was reading one PM's analysts comments 2 nights ago and he basically said gold was going to wallow in the sub $600 range for most of the year. He said there was NO reason or way for gold to be worth over $600 for quite some time. Now that the hedge funds had bailed gold had no basis to go higher. Seems he was quite wrong as well.
Russ should do very well on his $20 MS65 Saint trade as those have already rebounded 3-5% depending on when you bought them.
Supply is basically gone. Just over the past few days circ $20's have gone into hiding at the "current" levels.
roadrunner
Bud Conrad on US debt
Can you believe that Asia is now using nearly as much oil as the U.S. What happens in the next few years, perhaps $150 oil and $7.00 per gallon gas?
In addition Asians love Gold, so if only one percent of the population below buys one U.S. one-ounce coin that’s 30 million coins? Do we have 30 million one ounce gold coins?
I suppose that once these folks can afford $7.00 per gallon gas, like us, then they could buy one coin?
What say you ?
Todays Gold is $653.50
The Rise of the Chinese Consumer
By Frank E. Holmes
July 12, 2006
Economist Simon Kuznets, who came up with the concept of GDP, won the 1971 Nobel Prize for his work to explain infrastructure investment. That work is relevant to what we're seeing today in emerging nations. Kuznets noticed that roads and highways, seaports, airports and other infrastructure are built over a 15- to 20-year period. It is a period of strong jobs creation, and once these pieces are built, the economy is growing and robust.
A good example of this is when the U.S. built interstate highways in the 1950s. This construction work absorbed more than half of the world's commodities. This is very significant as we look at those emerging economies that have policies for infrastructure construction and growing demand for commodities.
Asia's rapid growth is driving this secular bull market. Asia 's 3 billion people now consume about 20 million barrels of oil daily, while 300 million Americans consume 22 million barrels per day. The difference is that Asia has been growing at 6 percent per year, twice the U.S. rate. Since 2000, there have not been enough new discoveries of oil, gas and precious metals to meet Asia 's demand as they have built infrastructure. This is the most important reason why we are living with ever-higher energy prices.
China 's energy consumption is expected to be 69 percent higher in 2010 than in 2002, according to the Federal Energy Information Administration. That growth rate is five times higher than the estimate for the United States and more than 15 times higher than Europe.
China , in the midst of a massive infrastructure build-out, used half of the world's cement and 40 percent of the world's steel last year, according to government statistics.
China plans to build 14 express highways, six railways and a dozen new seaport facilities before 2010.
When it comes to China , our investment team has a simple philosophy: whatever China needs, get long, and whatever they have as surplus, get it out of the way, because China will just dump it. That happened with both steel and aluminum.”
July 12, 2006, 1:30PM
Citgo to stop selling gas to U.S. stations
"CARACAS, Venezuela — Venezuela-owned Citgo Petroleum Corp. has decided to stop distributing gasoline to some 1,800 U.S. stations.
The states where Citgo will stop selling gasoline are: Iowa, Kansas, Kentucky, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma and South Dakota. A limited number of stations in Illinois, Texas, Arkansas and Iowa will also be affected.
Venezuela is the world's fifth-largest oil exporter and the U.S. is its top buyer. The United States relied on Venezuela for about 11 percent of its oil supply in 2005."
<< <i>This just in to add to the above story, the BLACKMAIL begins from Venezuela!
July 12, 2006, 1:30PM
Citgo to stop selling gas to U.S. stations
"CARACAS, Venezuela — Venezuela-owned Citgo Petroleum Corp. has decided to stop distributing gasoline to some 1,800 U.S. stations.
The states where Citgo will stop selling gasoline are: Iowa, Kansas, Kentucky, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma and South Dakota. A limited number of stations in Illinois, Texas, Arkansas and Iowa will also be affected.
Venezuela is the world's fifth-largest oil exporter and the U.S. is its top buyer. The United States relied on Venezuela for about 11 percent of its oil supply in 2005." >>
I think i seen a Citgo station around my part of the country North East. But i never see any one in there getting fuel. Lukoil is now the big name up this way.
"The silver is mine and the gold is mine,' declares the LORD GOD Almighty."
THIS IS NOT GOOD !!
This out today, are we being prepared for some really bad news from the Fed?
Is the United States Bankrupt?
Laurence J. Kotlikoff Federal Reserve Bank of St. Louis
July 2006,
Is the U.S. bankrupt? Or to paraphrase the
Oxford English Dictionary, is the United
States at the end of its resources, exhausted,
stripped bear, destitute, bereft, wanting in
property, or wrecked in consequence of failure
to pay its creditors?
Many would scoff at this notion. They’d point
out that the country has never defaulted on its
debt; that its debt-to-GDP (gross domestic product)
ratio is substantially lower than that of Japan and
other developed countries; that its long-term
nominal interest rates are historically low; that
the dollar is the world’s reserve currency; and
that China, Japan, and other countries have an
insatiable demand for U.S. Treasuries.
Others would argue that the official debt
reflects nomenclature, not fiscal fundamentals;
that the sum total of official and unofficial liabilities
is massive; that federal discretionary spending
and medical expenditures are exploding; that the
United States has a history of defaulting on its
official debt via inflation; that the government has
cut taxes well below the bone; that countries holding
U.S. bonds can sell them in a nanosecond.
Is the United States bankrupt? Many would scoff at this notion. Others would argue that financial
implosion is just around the corner. This paper explores these views from both partial and general
equilibrium perspectives. It concludes that countries can go broke, that the United States is going
broke, that remaining open to foreign investment can help stave off bankruptcy, but that radical
reform of U.S. fiscal institutions is essential to secure the nation’s economic future.
I always get a kick out of tweaked govt stats. The above article discussed hedonics in the GDP calculations. In a nutshell, Mish talks about things added in by the govt to boost GDP. They are rather remarkable. The govt's own stats show that 35% of the GDP is from these odd sources that are not true income, but "goods or services of some sort" that are deemed to add value to the economy.
examples:
$153 Billion is tacked on because homeowners are assumed to rent their homes to themselves. Ok....I can buy that (lol)
$335 Billion is tacked on to account for that fact that banks offer free checking to so many customers. The govt figures that the service is offered so cheaply that the economy "gains" $335 Billion in value from this "free" service. Add it to the GDP boys!
And those 2 are only about 14% of the total services added in.
You wouldn't believe it if it weren't actually listed as such in the govt's own stats. Then after fudging up some 35%, a GDP deflator is applied to remove inflationary effects. Unfortunately the GDP deflator is known to understate inflation by far more than the CPI does. So this is yet another factor that helps to overstate the GDP.
The darn thing is so overstated that by the time 2 consecutive drops in GDP occur and a recession is officially called, a downturn will have been underway for a few years!
roadruner
Thanks for your post RR, just more evidence of the Feds jacking with the numbers.
All of this government data has become so unreliable it is bewildering why the economists use it at all.
What is astonishing is that the mainstream media never even bothers to read the real numbers?
Many afternoons I watch Larry Kudlow just so I can have a good laugh. He pulls out all of his Government statistics at least three times a week and shows how the GDP is in great shape, there is very low inflation, workers are being paid more and more, and everyone should own all the paper assets they can put away.
I suppose these folks touting all these fraudulent numbers truly believe that if you just keep everyone going in the illusion long enough everything will turn out O.K.
Personally I don’t think so.
I think when the Federal Reserve starts publishing papers about the potential bankruptcy of the country a disastrous end cannot be far off.
Gas will not go to $7. As gas starts to get closer to $4 you will see a dramatic economic slowdown. This will decrease demand. Oftentimes the best cure for high prices is high prices.
Knowledge is the enemy of fear
I agree completely but it comes with some pain.
There is tremendous pressure on commodities, including gasoline. Oil is certainly in demand but there is plenty of oil available. What is not available is refining capacity, that is why Citgo is pulling out of the US, it cost them too much to refine their low quality crude and distribute the product to the US...they are losing money. I said previously in this thread, that $3 gas is a gift and I still believe that...at $4 then we start getting to where the flesh meets the bone. At $5 then we will start seeing significant changes in society in the US. The govt. will jack with numbers, rattle swords, yell and scream in the public media but all for naught...it is just going to cost more to play, it's an international market now...we have to compete with everyone else and there is going to be some major unhappiness at not being able to supersize and being forced to downsize.
So, the govt. is jacking the numbers to keep the peace but reality is when you drive to work, buy your stuff at the store after it has been shipped around the country, fly to your vacation, anything that involves energy consumption, it will feel cause added pressure on your wallet. It doesn't matter what the govt. tells us, when we look in our wallet and see 5's when we used to see 20's, that's reality. Soon the increases will hit power distribution, fertilizer for crops, plastics, all the little things that add up to higher costs. My point is that the govt. wants people to not panic and start yelling "The wolf is at the door!" but reality is that it is just going to cost more to enjoy the standard of living we have enjoyed for the last few years. We've been on a joy ride but ticket prices are going up.
This means that there will be fewer mackers sold, less eating out, less travel, fewer vacations, generally fewer perks for the regular guy. The poor are somewhat insulated by entitlements for housing, education, health care, food, stamps, the list goes on and for good reason. If the poor take to the streets then there will be hell to pay and every government from cities to counties to states to the congress know that! The economically compromised have to have their bacon and their kids out of the house in the public education babysitting program but on the other hand, regardless of race, they will become enslaved and it won't take too long before that reality starts creeping into the news.
It will be the regular guy that takes this hit...him and all the small businesses that rely on his disposable income...carpet cleaners, landscapers, furniture stores, etc. The mindset has been to give the regular guy some TV, sports, and public recreation areas, but TV suks anymore because advertisers have captured public broadcast channels to the point that content of the shows is severly compromised...30 minutes of content for an hour show with a barrage of commercials every 15 minutes, so that isn't going to help anyone. If you want to go to the park, most folk have to drive...and there you go. Sports is still an opiate but there isn't going to be a lot of regular guys that can afford $40 a seat for his family to go watch a BB game and that's before they get to $7 dogs and $6 beers and spend 3 gallons of gas getting there.
Newspapers are on their backs as advertisers flee to the net and print circulation continues to decline. I predict there will be some major changes in media as an opiate of the people and it will probably be based on the internet. Read 1984 again. We are surely on the brink of some significant changes in lifestyle and the separation between those that can afford it and those that can't is going to be more and more conspicuous and that's going to be a problem and it probably won't take more than a couple of years. The top 10% of income earners should do just fine but security is going to cost more and the people that can afford it will pay it. At some point we will have to move into socialism as a form of government as Europe has, even if we still call it a democracy. I predict a third party will come from the wings and will ignite politics, an appeal to the common man, the promise of a chicken in every pot but it might take a few more years but we could see it as soon as the next election, sometime after '08, and it will not be SOS, different day...it will be something with big time mass appeal, like McGovern in '68 or a new Kennedy.
The answer: minimal personal debt and a store of hard assets/cash are required food for survival. Be adaptable, flexible, and don't be afraid to make some adjustments. Pay attention, be prepared, have a plan.
JMHO
Knowledge is the enemy of fear
“Gas will not go to $7. As gas starts to get closer to $4 you will see a dramatic economic slowdown. This will decrease demand. Oftentimes the best cure for high prices is high prices.”
Well perhaps, but then again Europe has become adjusted to these prices! In the case of automobiles what choice do we really have? Americans are so spread out, shall we just not drive 40 mile round trips to work?
Many people in large cites pay outrageous fees to park their cars, but they still drive to work each day.
I understand that the democratic leader, Nancy P. said today in the Wall Street Journal that if the Dems get the house back they want to add on to the gas taxes? Is she nuts?
Could we do some conserving, sure, but much of our day-to-day travel is of necessity. We live and work in a country of wide open spaces, drive long distances to work, take the kids long distances to school, drive a long way to go shopping, or to the theater. Are we going to change our entire lifestyles? Move into crowed cites and walk, I doubt it very much!
I agree something has to give, I just have no clue what it might be, but so far this year with gas running at an average $3.00 plus per gallon Americans are using MORE than they did in the summer of 2005.
Mass transit is the best way to solve this. Figure:
$50/mo.+ to park
18 Mi./gal. so a little more than two gallons @ $3 and that's about $7/dayX5 days for $35/wk or $140/mo.
we're at $190/mo. with parking and gas., less public transit fare @ $2/day for $40 a month and you have $150/month advantage for using mass transit
maybe you don't need that second car anymore at $350/mo payment
we're talking about FIVE HUNDRED DOLLARS A MONTH just for riding the bus or carpooling and that's before
maintenance and insurance savings! For the bugs, that's a nice ms $10 lib. every month!!!
2. "Is she nuts?"
To most of us...yes, but obviously not to everybody.
3. "Are we going to change our entire lifestyles?"
Yes, it will be necessary.
4. "Move into crowed cites and walk"
The europeans have been doing it for generations. We have "master planned communities" and they seem to work well for the suburban basics.
5. "I agree something has to give"
Yes, but folk have to remember that it is a dynamic evolution. Things are in a constant state of evolution be they economics, populations, weather patterns, tides and currents ...all are dynamic and not static. Successful evolution requires adaptability...so something will give anyway, everything is in a constant state of change.
"Resistance if futile...you will adapt." 7 of 9
Saul Goode
Prices are up now from fear, not actual interuption of supply. If it finally hits the fan with Iran, that's when we have a supply issue.
<< <i>Ah - the thread that refuses to die.
+1
Anyways... while eating dinner with the fam the other day, I was remarking about the differences in pricing for various items... I paid $4.75 USD for 1 Sam Adams beer, and yet $7 USD for a crab, shrimp and other items lunch the day before... I always mention how a pepperoni pizza (md) from pizza hut in the 70's was about $20 USD, and now the same pizza (lg, garlic bread, supreme) is $5 USD... back in the early $70's an oz (coin) of gold was ~$30 USD... now ~$650 USD.
My checking account is free vs. ~$11 / month USD when in college AND we have free checks AND they'll mail them for us, plus online banking (free).
It's kind of weird... some things have drastically dropped in price, while others have not.
Back towards the end of the Clinton administration, the gov had enough money on hand to pay the entire amount of the "float" in treasury debt (and still having money left over), yet plp questioned the reasoning of this action... "How are we going to price our debt?".
The doom and gloom crowd don't seem to remember the Regan era to Clinton era... we've done this before, no worries.
Jazzfest tonight, wine and loving on a grassy hill under the warm Texas sky; the world is on fire... but it never mattered anyways... we're still going to have potato salad this weekend, if you have your health, family and friends... that's all you ever needed. Turn off the TV.
Have a great weekend.
I'd give you the world, just because...
Speak to me of loved ones, favorite places and things, loves lost and gained, tears shed for joy and sorrow, of when I see the sparkle in your eye ...
and the blackness when the dream dies, of lovers, fools, adventurers and kings while I sip my wine and contemplate the Chi.
Whatever happened to Laura's $495 gold before $600 gold
projection back in May/June timeframe?
roadrunner
<< <i>Ah - the thread that refuses to die.
Tried a stake through the heart. Any other suggestions?
But I doubt it is so it's time to bottom fish for bargains or start accumulating cash for the inevitable fire sales in real estate, especially in vacation properties and commercial strip malls [my fav].
If oil tanks our economy too much then the rest of the world goes with us and oil demand drops like rock. The terrorists fighting over ideology, religion etc. will keep on fighting as they have for centuries so that really should have no effect on gold.
What will affect gold is when the dollar finally capitulates. Notice I said when and not 'if'. The dollar had the sharpest drop against the Mexican peso this week, in more than 5 yrs. Irony is the Mexican election is almost a dead heat with both sides claiming victory. Such uncertainty should weaken a currency like Mexico's but it got stronger. Not a good omen forthe green back!
I am surprised the Federal Reserve Bank allowed such an article from the St Louis Fed Reserve Bank to publish such article.
By the way excellent posts mhammerman!
I was also astonished that the Fed released such a damaging paper, below is the link.
This is a very long document but I thought I would post it for those that are real students of the economy.
Talk about gloom and doom from the horse’s mouth. As usual I have not seen anything in the main stream press about this paper, which must have taken many weeks to write given all the detail and numbers required.
Many of the economic disaster scenarios that we have covered here in nearly two years were outlined in this paper as real possibilities. The changes outlined by the Fed would change the face of economics in the U.S. for 50 plus years.
The recent 800 point drop in the Dow, and the 20% price increase in Gold, over the last several weeks has been blamed by the media and Wall Street on the pathetic Korean attempt to shot off missiles and the conflict in Israel. Which I believe are non-starters as these are just continuations of the same old decades long battles. Why the media has not covered this well researched Fed document is just one more sign of their blindfolded position.
The financial media and Wall Street hang on every word issued at every Fed region concerning even the faintest sign that the rates may go up .25 of a point, and yet when a detailed paper is published on what a disaster has been created by entitlements and the printing press there is not a word spoken.
http://research.stlouisfed.org/publications/review/06/07/Kotlikoff.pdf
Text Link
<< <i>
Text Link >>
These are the reforms of which I've been a proponent for years. The health care system
while once the envy of the world is now geared to provide care only to the healthy who are
well-insured. Three industries are fed off the money flowing into this system.
Taxes punish those who would provide the capital which will be necessary to avoid a lessen-
ing standard of living while rewarding those exporting our wealth to China. Social Security
reform is inevitable and the longer it is delayed the less fair it will be.
If changes aren't made there will be inflation which will further damage the economy by pun-
ishing good companies unable to keep up and rewarding bad ones who can. Wealth will lie
idle, while the incompetent run wild.
If changes are made now, they can be relatively painless, but at some point it will simply be
too late.
too late. "
It looks to be to late now!
As we have discussed here, best make your own personal plan!
The U.S. press may be ignoring this but the Foreign press is not!
TELEGRAPH U.K.
US 'could be going bankrupt'
By Edmund Conway, Economics Editor
(Filed: 14/07/2006)
The United States is heading for bankruptcy, according to an extraordinary paper published by one of the key members of the country's central bank.
A ballooning budget deficit and a pensions and welfare timebomb could send the economic superpower into insolvency, according to research by Professor Laurence Kotlikoff for the Federal Reserve Bank of St Louis, a leading constituent of the US Federal Reserve.
Experts have calculated that the country's long-term "fiscal gap" between all future government spending and all future receipts will widen immensely as the Baby Boomer generation retires, and as the amount the state will have to spend on healthcare and pensions soars. The total fiscal gap could be an almost incomprehensible $65.9 trillion, according to a study by Professors Gokhale and Smetters.
Prof Kotlikoff said: "This figure is more than five times US GDP and almost twice the size of national wealth. One way to wrap one's head around $65.9trillion is to ask what fiscal adjustments are needed to eliminate this red hole. The answers are terrifying. One solution is an immediate and permanent doubling of personal and corporate income taxes. Another is an immediate and permanent two-thirds cut in Social Security and Medicare benefits. A third alternative, were it feasible, would be to immediately and permanently cut all federal discretionary spending by 143pc."
<< <i> Gold's 5% increase last week was generally attributed to escalating tension in the Middle East
Paul van Eeden
Jul 17, 2006 >>
Edit - LOSER!
MH
My guess is that all of the media coverage about this War, that very few on the planet care about, is stifling all the main medias coverage of housing prices falling, dozens if not hundreds of companies involved in options fraud, and skyrocketing U.S. debt.
There has been so much paper currency printed the last couple of decades that billions of dollars flow like waves of the ocean into speculation trying to make a few more bucks.
No doubt the oil markets are manipulated up at least several dollars as NOTHING has changed with this war.
This part of the Middle East is where poor souls go on earth to do their bad karmas; nothing has changed here in 3,000 years. When a Roman general took Masada, he was congratulated by one of his centurions for wining. His comment back to the centurion was, “ I have won nothing, I have captured a rock in the middle of a barren desert, next to a poison sea”
Buying top quality Seated Dimes in Gem BU and Proof.
Buying great coins - monster eye appeal only.
<< <i>is this the most popular post ever? >>
Doubt that.
I would guess that most don't care a whit about gold, economics, world affairs or anything much outside a very narrow and local arena.
And, as that suits the politicos just fine, there will be no popular or public effort to encourage anyone to do so.
<< <i>...is stifling all the main medias coverage of housing prices falling, dozens if not hundreds of companies involved in options fraud, and skyrocketing U.S. debt. >>
Yawn...old news. Can't sell papers with that. You know, a trillion here, a trillion there, pretty soon it adds up to quite a confidence game!
What amazes me is that someone will throw out a gloom-and-doom scenario, for example The Limits of Growth, in which a lot of true premises are piled up to support a sound conclusion, but since the author makes the mistake of predicting the date of doom--and of course gets it wrong--everyone feels free to dimiss the premises and the conclusion as "disproved."
Population growth, peak oil, paper money...the question is which one first, and when. When a predicted date-of-doom slides past, it doesn't mean, assuming the presmises are sound, the problem is gone, or the theory disproved, it just means the day of reckoning is postponed.
You cannot look at one half of any one of these parabolic charts and not see clearly what must come after.
On the other hand...people are easily duped. Maybe it will go on for a long time still.
As far as a collective group of humans taking note of how certain actions are driving them all to ruin and taking corrective measures...it's possible. But the Romans didn't manage it, nor the Egyptians, nor anyone I can think of. Civilization rise...and they fall. None have endured the final test and avoided the catastrophe.
Somehow I don't think we'll be the first, nor, given the degree of decadence now manifest, do I think it entirely desirable that this civilization prolong itself indefinitely.
Skip the food and water. Gold and guns will do to procure both, should it come to that.