Not a chance that Fannie or Freddie going down now that the caps on their assets have been removed through at least 2012. F&F will now become the final resting place for all questionable residential mortgages/MBS's, etc. This way, they can be filled up with junk from the banks w/o alerting J6P as to what is going on. Thus they are an integral part in the 3 year plan to keep the lid on the housing market while the insiders complete bailing out at levels as close as possible to 100 cents on the dollar. Basically F&F will become the Bad Asset Mortgage bank (BAM). J6P will then become the Carlton Sheets or Tom Vu of the residential housing market.
Would love to hear what all of you think about this story.
American Numismatic Association Governor 2023 to 2025 - My posts reflect my own thoughts and are not those of the ANA.My Numismatics with Kenny Twitter Page
ksammut, I have a large portion of my check going into a money market 403B. I am close to retirement. What I think is it may be time to reallocate places to put my money. Bob
"Bernanke repeated yesterday that while interest rates are likely to stay low for an “extended period,” the Fed in “due course” will need to “begin to tighten monetary conditions to prevent the development of inflationary pressures.”"
Begin to tighten monetary conditions? The money supply has been contracting for several months now and is still contracting.
Treasury auction results were disappointing all week. Could be a one-time or could be the start of a trend. Going to have to raise interest rates to keep selling it if the weakness continues.
They talk about draining the stimulus money but I believe only a third of it has been spent.
Still, it will be interesting to see if the fed can pull off money tightening when unemployment remains high.
30 yr rates are the same as they were in 2005 and have just popped above the 1000 dma which has been relatively flat over the past 4 years. Unemployment will remain high whether we have 0% Fed funds rate or 2% Fed funds as we have excess capacity in the USA and the world. If the Fed funds rate were to be increased from 0.25% to 2.00%, what is the harm? What rates would really increase that much to harm the economy? Honestly, I only see good in raising rates. It will encourage saving. People put more money in the banks (CD's) thus making the banks healthier. Inflation concerns would disappear. Money market fund yields would increase as they buy short term treasuries meaning the USA pays interest to its citizens rather than the Chinese.
<< <i>30 yr rates are the same as they were in 2005 and have just popped above the 1000 dma which has been relatively flat over the past 4 years. Unemployment will remain high whether we have 0% Fed funds rate or 2% Fed funds as we have excess capacity in the USA and the world. If the Fed funds rate were to be increased from 0.25% to 2.00%, what is the harm? What rates would really increase that much to harm the economy? Honestly, I only see good in raising rates. It will encourage saving. People put more money in the banks (CD's) thus making the banks healthier. Inflation concerns would disappear. Money market fund yields would increase as they buy short term treasuries meaning the USA pays interest to its citizens rather than the Chinese.
Cool charts Cohodk. Very nice! It certainly appears there are major shifts now occuring in currencies. That Euro chart becomes even more locked in when you consider that the 1998, 2005, and 2009 highs all form an upper channel to match the lower one already drawn. I like the smaller triangle within the larger one as well. The massive 2008 deleveraging peak needs to be cut off some to fit the upper channel line as the USDX/Euro pair became pretty overheated/overcooled during that period.
I thought the FED had relatively little say when it came to the long end of the yield curve? They definitely can move the shorter term rates around but doesn't the market really dictate the 10-30 yr rates with history showing the FED as reluctant follower rather than bold leader? How much of the big banks' $170 TRILL in interest rate swaps involves the longer term rates?
The upper trendline on USD chart posted is very loosey goosey. I don't like the touches...........The lower trendline looks sound. MJ
Walker Proof Digital Album Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>30 yr rates are the same as they were in 2005 and have just popped above the 1000 dma which has been relatively flat over the past 4 years. Unemployment will remain high whether we have 0% Fed funds rate or 2% Fed funds as we have excess capacity in the USA and the world. If the Fed funds rate were to be increased from 0.25% to 2.00%, what is the harm? What rates would really increase that much to harm the economy? Honestly, I only see good in raising rates. It will encourage saving. People put more money in the banks (CD's) thus making the banks healthier. Inflation concerns would disappear. Money market fund yields would increase as they buy short term treasuries meaning the USA pays interest to its citizens rather than the Chinese.
Uncle Ben------RAISE THOSE RATES!!!!! >>
That would be the responsible thing to do and the best for the country and economy long term. Short term it would probably crater the housing market and the stock market. The bond market is much more important but most people don't know or care. They would see their house and 401K values drop and vent their anger at the politicians. The politicians know this and are therefore reluctant to raise rates. IMHO they will not voluntarily raise.
<<The upper trendline on USD chart posted is very loosey goosey. I don't like the touches...........The lower trendline looks sound. MJ[/
When one tries for perfection in technical analysis he opens the door to overconfidence. Next time I'll draw the lines with a crayon. >>
It's also just as dangerous when one tries make a chart fit their trade or agenda. You will need a thick magic marker to make that upper trendline work
Walker Proof Digital Album Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
You will be right one day of course but I wouldn't hold my breath waiting for it to happen anytime soon. You could miss a great story financially in the meantime waiting for it to happen.
There is over building in the coastal areas in both residential and commercial. I've seen it. The difference between China and let's say the US is that they are prepared to deal with it. Financially, they could actually make us pay for it this time around. Call it turn around being fair play. FYI- Chanos couldn't find China on a map.
<<Overcapacity may be looming in manufacturing as well>>
I couldn't disagree more.
Due to increased costs in China the past few years a lot of joint venture factories have closed or moved elsewhere. In the present, manufacturing in China is almost at 100% capacity. Factories are out on production the longest I've ever seen in my 25 years in China. Simply put, it's hard finding qualified factories that have any production in the next several months. Personally, I'm having trouble factories to produce my designs at any cost.
As for raising interest rates before the mid years elections-----------zero chance.
All just my opinion.
MJ
Walker Proof Digital Album Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
I must believe that most of you know how much debt is carried by households in the USA?
How much of that debt is linked to "variable" rates......
Think hard. Think again. Rates are going NOWHERE. Increases in the rates, even for mere 2% would TRASH American households. It is a VERY FRAGILE situation. Recovery? What recovery. Look in the trenches. Is life better? 18%+ unemployment (yes, the 10% is a joke)?
Unless the federal government is going to commit to a wage increase for all.....like mandate COLA increases that went along with the high cost of living in the early 1980 - and that might not even do it - forget it. You are living in a dream world.
I say NO INCREASE until 2012 at best. Even with all their "dancing" around the question, the FED is holding the line too.
The fed will save Wall St before they save Main St. That said, higher interest rates would hurt Wall St. as well as be politically unsavory right now. The easiest option is to print, and that's what will happen.
they have already saved wall street - or so we think?
main street is a grave concern to them, any indication of severe distress, whether it be continued unemployment increases, interest rate hikes, shortages of goods, could be disasterous to main street.
How much of that debt is linked to "variable" rates
How much? I assume you are talking about mortgages that could reset, yes? Cuz it aint about credit cards as all have increased to 25% already.
What better incentive do people have to pay down their debt than to increase interest rates? What better incentive have to save than to increase rates. 0% interest rates have not and will not promote job creation.
I agree, there is no recovery, and I wrote in Oct 2008 that this was not a garden variety recession. We had too many industries on life support--automotive--thats should have shed 500,000 jobs 2 decades ago. Those jobs will not be coming back until our population increases by 30 million. 7-8% unemployment is the best we can hope for in the next decade. Thats 3% higher than what some consider full employment and equates to about 4-5 million jobs. Those jobs are gone.
MJ,
I love companies/economies that are running at 100%. They got nowhere to go but down.
FYI- Chanos couldn't find China on a map
He did find a way to become a billionaire.
You will be right one day of course but I wouldn't hold my breath waiting for it to happen anytime soon
I do believe China will implode before the US dollar does.
I have no agenda. I call things the way I see them. I spoken fondly of gold and I've made negative comments about the technical picture of the dollar. Regarding the above chart of the dollar, if it breaks below the lower trendline, then the downtrend is intact and will lead to the mid-60's. If it breaks the upper trendline, then the dollar rally will continue for years, perhaps a decade or more.
The world has too much debt, and if it all blows up, we can all kiss our assets goodbye.
I love companies/economies that are running at 100%. They got nowhere to go but down. >>
True, but they could run at near 100% for fifty years. I hope you have a really long term outlook and are in good health to see this through
<<FYI- Chanos couldn't find China on a map
He did find a way to become a billionaire.>>
As is Jim Rogers. JR stated he doubted if Chanos even knew how to spell China. It's very popular to call China in a bubble these days. Dave, it's weird seeing you in the populist camp.
<<You will be right one day of course but I wouldn't hold my breath waiting for it to happen anytime soon
I do believe China will implode before the US dollar does.>>
I will take that bet if you can find a way to structure it. If not, it will have to be a friendly one. China has already replaced the US as the world super power in my humble opinion. We need to find our own place in the world now and be comfortable in our own skin.
<The world has too much debt, and if it all blows up, we can all kiss our assets goodbye.>
The US and EU are not the world. JMHO. MJ
Walker Proof Digital Album Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
I remember reading intel reports in the eighties predicting this. More recently I have read that Chineses grade school boys spend their summers in military camp (every other year.) They seem to be preparing for something.
Back in the 80's "they" were worried about Japan replacing the US as the global economic superpower, Japan owning the US, the US being on the way to being Japan's biotches, etc.
How did that turn out?
I do believe A. China's bubble is inflating, and B. Percentage growth figures are difficult to compare when the starting size is unequal (i.e., "the US economy is only growing at 1% but China is growing at 10%").
My backyard orange production is up 1200% year over year... however last year I only grew one orange last year and this year 13. at that rate in a dozen years I can supply the world market
I won't be able to maintain that growth figure indefinitely, and next year it may even decline.... but in a dozen years, that tree will be bigger.... but never as big as my neighbor's who planted his 10 years earilier.
The difference is that China has a mechanism in place for recovery... manufacturing. What does the US have? Financial services? "Green" jobs? If (and that's a big if) China has any kind of a recession, it's likely to be shallow and brief, as investment money is still going to flow into that country at an obscene pace regardless of what happens.
With our top 25 banks still carrying $170+ TRILL in interest rate swaps, the FED/Treasury/Govt. cannot afford to kill all those banks in one shot be re-manipulating rates in the opposite direction. Those swaps will be allowed to be rolled over and over (marked to model) to keep them paper-solvent. This is one apple cart that cannot be disturbed....and so far it's been left isolated and untouched.
<< <i>The difference is that China has a mechanism in place for recovery... manufacturing. What does the US have? Financial services? "Green" jobs? If (and that's a big if) China has any kind of a recession, it's likely to be shallow and brief, as investment money is still going to flow into that country at an obscene pace regardless of what happens. >>
Manufacturing is only good if you produce a product people want at a price they will pay. There is nothing to say India, or even Africa, could not produce the same goods more cheaply. If the rest of the world stays mired in a recession, it will most definately hurt China. Even if China went from 10% growth to 2%, the effects would be substantial.
<The world has too much debt, and if it all blows up, we can all kiss our assets goodbye.>
The US and EU are not the world. JMHO. MJ
China has no debt? Malaysia has no debt? Dubai, Argentina, Hong Kong, Canada, Australia, ect?
But sovereign debt is not entirely what I am talking about. Consumer debt may be even more important. I would be very interested to see what the world would look like without demand from the US and EU. I imagine it would be a world of subsitance farmers.
I like Jim Rogers, but why has he been less successful--in terms of creating wealth--than both Chanos and Soros?
I dont consider believing China being in a bubble to be a populist view. I think the opinion is split 50-50. Meaning China will continue on its tear for a little while longer, implying the bubble gets bigger.
I am talking about resetting Mtges, Credit Cards, other forms of loans linked to variable indexes.....
And no, not all credit cards have reset to 25%, not quite. Many of the folks holding debt and STILL PAYING are still enjoying lower rates in the 7-12% range,
Right now you have an issue with the bottom fifth of households - wait until it hits the middle third......and then higher....and thats EXACTLY what higher rates will do.....when those go belly-up it'll be real bad........what kind of profits will those big banks show then?
Rates will not move.....at all.......for at least another 2 years.
I have three credit cards with 2.99% interest until paid off. They can't mess with the interest terms of the loan. However, last year they increased the mimimum monthly payment from 2.5% to 5% of the balance. So they will screw you in other ways, hoping you will default on the low rates when you cannot pay the minimum balance and then charge you 29.9%. BTW these three cards will be paid off in the next 3 months.
<< <i>I have three credit cards with 2.99% interest until paid off. They can't mess with the interest terms of the loan. However, last year they increased the mimimum monthly payment from 2.5% to 5% of the balance. So they will screw you in other ways, hoping you will default on the low rates when you cannot pay the minimum balance and then charge you 29.9%. BTW these three cards will be paid off in the next 3 months. >>
Sounds like we have the same CC company. I had the 2.99% interest rate they had for the life of the loan. Got the same minimum rate jacked up. I transfered the balance out from them. I know they were hoping I'd used the card again, as many people will do, but it backfired on them in my case, it has a zero balance and will stay that way. I'd cancel it if my long history with them wasn't helping my credit score.
It's obscene that these banks borrow the money (from the taxpayers) @ 1% interest, then turn around and lend it out at the rates they do. I'd gladly pay double that rate if the gov. would cut out the middleman. I wouldn't mind so much if they paid me 20% + on my savings or IRA.
I am talking about resetting Mtges, Credit Cards, other forms of loans linked to variable indexes.....
And no, not all credit cards have reset to 25%, not quite. Many of the folks holding debt and STILL PAYING are still enjoying lower rates in the 7-12% range,
Right now you have an issue with the bottom fifth of households - wait until it hits the middle third......and then higher....and thats EXACTLY what higher rates will do.....when those go belly-up it'll be real bad........what kind of profits will those big banks show then?
Rates will not move.....at all.......for at least another 2 years. >>
What is the % of people who would be directly negatively affected by higher rates 5%, 10%? There are multiples of that who are savers and who have always done the "right thing" that are being killed by these low rates. Enough of this pandering to the ultra minority. Time to help the majority. RAISE RATES NOW!!!! EVERYONE will be affected if the FED does not begin to raise rates soon.
<< <i>What is the % of people who would be directly negatively affected by higher rates 5%, 10%? There are multiples of that who are savers and who have always done the "right thing" that are being killed by these low rates. Enough of this pandering to the ultra minority. Time to help the majority. RAISE RATES NOW!!!! EVERYONE will be affected if the FED does not begin to raise rates soon. >>
I agree that's what they *should* do. Hopefully we all realize that they won't be doing this any time soon though...
I had a very interesting lunch yesterday with an old friend who is very wealthy, an economist, and was CEO of a NYSE company at one time.
Our multi hour conversation centered around what we had predicted would happen in this economy 10 years ago.
Most of what we thought would happen has come to pass, but where we were way off base was the amount of time that we thought it would take for the economy to totally crash.
Here is what our thinking is at this time.
We may have as long as another 15years of a slowly declining American system.
Think of the American economic system as a socialist ponzi scheme, whereby the left side of the scheme has the payees, and the right side has the payors.
In our current situation there is no turning back, as well as there are no real solutions.
That said everyone’s concentration the next few years will be on keeping the ponzi scheme going until such time as the only fix is a total collapse.
Here is how things might play out, and how much time all of this will take.
First we are still in the borrowing phase, where investors of all types are willing to loan us trillions at very cheap interest rates. That phase might come to a close by the end of this year.
At that point the rates will go up enough to entice the investors back to the table, and that phase might go on for two more years.
Next we will have governments of all sizes cutting a little, perhaps 10% of their budgets, and of course raising taxes/fees of all types. This move will see us through another year or two.
We can also expect means testing of S.S. and Medicare, as well as some cut backs in other programs including the military in the next 4 years. All of this will get us through another 2 years.
Also during this time we might see a national sales tax but that would be in addition to the current income tax.
As we slowly get to the end of our rope on what interest rates we can pay, and where we can cut various programs, we will be 7 years down the road. At the point that we have run out of all options we will start our hyperinflation phase, where we just print the money and pay the folks, because we have no further options. This phase can last as long as another 8 years.
Ah, but what about making changes, what about the Tea Party folks? I am sorry but this will not, and cannot work.
If we elected nothing but strict constitutionalists, and ultra conservatives, to congress, they would not be able to fire 50% of the government employees, and stop all the socialist programs without causing riots in the streets of every major city in the country. That will just not happen.
GoldSaint, sounds reasonable. The real wild card is the timing. I think the system can and will go on longer than most people can imagine... although 10-15 years is probably as reasonable as one can predict.
Higher yields will bring debt buyers back to the table. The only question is, how will Japan and China - the two largest US debt holders - continue to be able to afford to buy our debt?
I think where I lack understanding is how countries invest in other country's debt. Most countries like Japan are running deficits just like the US. How or where does this money to invest come from? I guess it's all part of a ponzi scheme. It's impossible to relate a comparison to an individual's finances... where as I personally would stop or extremely limit investing activities if I started running a personal deficit. In fact, I might even be selling investments to raise cash in that scenario. It is mind boggling how we can have money to buy other country's debts when we already owe so much.
There is a way that could spark a recovery, but the cure is as bad or worse than the disease. A massive war. I'm not talking anything like Iraq or Afghanistan, something more on the order of WWII (if that kind of war is still even possible to fight without destroying the planet). It would require lots of casualties in industrialized nations, reducing both skilled and non-skilled labor, and the reduction of people requiring the current social programs. The need for massive rebuilding projects would also put people to work. I hope this doesn't happen, it would be bad, but anything is possible.
Goldsaint, interesting sound evaluation. Of course any major global event could hasten predictions. When socialized governments support "robin hood" tactics government produces a society of non-productive individuals.
The governor of New Jersey was on Squawk this morning and stated that a state employee contributes about $124,000 during his lifetime and will receive back over 3.2 million in pension and health benefits. Rounding that off to a rough estimate of say about 4 million federal and state employees. 4 million x 3.2 million= $$120,000,000,000,000. The Unions have to give something up that is a given because it is unsustainable. Just Federal Employees xxxx Just State Employees
<< <i>The governor of New Jersey was on Squawk this morning and stated that a state employee contributes about $124,000 during his lifetime and will receive back over 3.2 million in pension and health benefits. Rounding that off to a rough estimate of say about 4 million federal and state employees. 4 million x 3.2 million= $$120,000,000,000,000. The Unions have to give something up that is a given because it is unsustainable. Just Federal Employees xxxx Just State Employees >>
Comments
<< <i>What is the deal with China releasing all their numbers tonight? I was told by my banker that this is going to be big. >>
Please explain further as I worked 15 hrs today and have not had a chance to follow markets, (PM's equities), listen to news, etc, what is going on?
Come on guys, repeating alarmist rumors and then going dark is not cool.
Random Collector
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Why silver price will boom to $50/oz
roadrunner
Would love to hear what all of you think about this story.
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Not a Chance.....
Interest Rates are GOING NOWHERE........
We are lucky to see any movement for the next 2 years.
And the Euro.
Knowledge is the enemy of fear
Begin to tighten monetary conditions? The money supply has been contracting for several months now and is still contracting.
Treasury auction results were disappointing all week. Could be a one-time or could be the start of a trend. Going to have to raise interest rates to keep selling it if the weakness continues.
They talk about draining the stimulus money but I believe only a third of it has been spent.
Still, it will be interesting to see if the fed can pull off money tightening when unemployment remains high.
Uncle Ben------RAISE THOSE RATES!!!!!
Knowledge is the enemy of fear
<< <i>30 yr rates are the same as they were in 2005 and have just popped above the 1000 dma which has been relatively flat over the past 4 years. Unemployment will remain high whether we have 0% Fed funds rate or 2% Fed funds as we have excess capacity in the USA and the world. If the Fed funds rate were to be increased from 0.25% to 2.00%, what is the harm? What rates would really increase that much to harm the economy? Honestly, I only see good in raising rates. It will encourage saving. People put more money in the banks (CD's) thus making the banks healthier. Inflation concerns would disappear. Money market fund yields would increase as they buy short term treasuries meaning the USA pays interest to its citizens rather than the Chinese.
Uncle Ben------RAISE THOSE RATES!!!!! >>
+1
I thought the FED had relatively little say when it came to the long end of the yield curve? They definitely can move the shorter term rates around but doesn't the market really dictate the 10-30 yr rates with history showing the FED as reluctant follower rather than bold leader? How much of the big banks' $170 TRILL in interest rate swaps involves the longer term rates?
roadrunner
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>The upper trendline on USD chart posted is very loosey goosey. I don't like the touches...........The lower trendline looks sound. MJ >>
When one tries for perfection in technical analysis he opens the door to overconfidence. Next time I'll draw the lines with a crayon.
Knowledge is the enemy of fear
<< <i>30 yr rates are the same as they were in 2005 and have just popped above the 1000 dma which has been relatively flat over the past 4 years. Unemployment will remain high whether we have 0% Fed funds rate or 2% Fed funds as we have excess capacity in the USA and the world. If the Fed funds rate were to be increased from 0.25% to 2.00%, what is the harm? What rates would really increase that much to harm the economy? Honestly, I only see good in raising rates. It will encourage saving. People put more money in the banks (CD's) thus making the banks healthier. Inflation concerns would disappear. Money market fund yields would increase as they buy short term treasuries meaning the USA pays interest to its citizens rather than the Chinese.
Uncle Ben------RAISE THOSE RATES!!!!! >>
That would be the responsible thing to do and the best for the country and economy long term. Short term it would probably crater the housing market and the stock market. The bond market is much more important but most people don't know or care. They would see their house and 401K values drop and vent their anger at the politicians. The politicians know this and are therefore reluctant to raise rates. IMHO they will not voluntarily raise.
Empty buildings are sprouting across China............. Overcapacity may be looming in manufacturing as well
Knowledge is the enemy of fear
When one tries for perfection in technical analysis he opens the door to overconfidence. Next time I'll draw the lines with a crayon.
It's also just as dangerous when one tries make a chart fit their trade or agenda. You will need a thick magic marker to make that upper trendline work
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>The sucking sound of commodity deflation will be deafening when this puppy blows.
Empty buildings are sprouting across China............. Overcapacity may be looming in manufacturing as well >>
You will be right one day of course but I wouldn't hold my breath waiting for it to happen anytime soon. You could miss a great story financially in the meantime waiting for it to happen.
There is over building in the coastal areas in both residential and commercial. I've seen it. The difference between China and let's say the US is that they are prepared to deal with it. Financially, they could actually make us pay for it this time around. Call it turn around being fair play. FYI- Chanos couldn't find China on a map.
China not in bubble
<<Overcapacity may be looming in manufacturing as well>>
I couldn't disagree more.
Due to increased costs in China the past few years a lot of joint venture factories have closed or moved elsewhere. In the present, manufacturing in China is almost at 100% capacity. Factories are out on production the longest I've ever seen in my 25 years in China. Simply put, it's hard finding qualified factories that have any production in the next several months. Personally, I'm having trouble factories to produce my designs at any cost.
As for raising interest rates before the mid years elections-----------zero chance.
All just my opinion.
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
How much of that debt is linked to "variable" rates......
Think hard. Think again. Rates are going NOWHERE. Increases in the rates, even for mere 2% would TRASH American households. It is a VERY FRAGILE situation. Recovery? What recovery. Look in the trenches. Is life better? 18%+ unemployment (yes, the 10% is a joke)?
Unless the federal government is going to commit to a wage increase for all.....like mandate COLA increases that went along with the high cost of living in the early 1980 - and that might not even do it - forget it. You are living in a dream world.
I say NO INCREASE until 2012 at best. Even with all their "dancing" around the question, the FED is holding the line too.
main street is a grave concern to them, any indication of severe distress, whether it be continued unemployment increases, interest rate hikes, shortages of goods, could be disasterous to main street.
thats the last thing the administration wants
<< <i>they have already saved wall street - or so we think? >>
Main St. isn't out of the woods, and they won't do anything that will endager Wall St.
How much? I assume you are talking about mortgages that could reset, yes? Cuz it aint about credit cards as all have increased to 25% already.
What better incentive do people have to pay down their debt than to increase interest rates? What better incentive have to save than to increase rates. 0% interest rates have not and will not promote job creation.
I agree, there is no recovery, and I wrote in Oct 2008 that this was not a garden variety recession. We had too many industries on life support--automotive--thats should have shed 500,000 jobs 2 decades ago. Those jobs will not be coming back until our population increases by 30 million. 7-8% unemployment is the best we can hope for in the next decade. Thats 3% higher than what some consider full employment and equates to about 4-5 million jobs. Those jobs are gone.
MJ,
I love companies/economies that are running at 100%. They got nowhere to go but down.
FYI- Chanos couldn't find China on a map
He did find a way to become a billionaire.
You will be right one day of course but I wouldn't hold my breath waiting for it to happen anytime soon
I do believe China will implode before the US dollar does.
I have no agenda. I call things the way I see them. I spoken fondly of gold and I've made negative comments about the technical picture of the dollar. Regarding the above chart of the dollar, if it breaks below the lower trendline, then the downtrend is intact and will lead to the mid-60's. If it breaks the upper trendline, then the dollar rally will continue for years, perhaps a decade or more.
The world has too much debt, and if it all blows up, we can all kiss our assets goodbye.
Knowledge is the enemy of fear
<<MJ,
I love companies/economies that are running at 100%. They got nowhere to go but down.
True, but they could run at near 100% for fifty years. I hope you have a really long term outlook and are in good health to see this through
<<FYI- Chanos couldn't find China on a map
He did find a way to become a billionaire.
As is Jim Rogers. JR stated he doubted if Chanos even knew how to spell China. It's very popular to call China in a bubble these days. Dave, it's weird seeing you in the populist camp.
<<You will be right one day of course but I wouldn't hold my breath waiting for it to happen anytime soon
I do believe China will implode before the US dollar does.>>
I will take that bet if you can find a way to structure it. If not, it will have to be a friendly one. China has already replaced the US as the world super power in my humble opinion. We need to find our own place in the world now and be comfortable in our own skin.
<The world has too much debt, and if it all blows up, we can all kiss our assets goodbye.>
The US and EU are not the world. JMHO. MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
I remember reading intel reports in the eighties predicting this. More recently I have read that Chineses grade school boys spend their summers in military camp (every other year.) They seem to be preparing for something.
R95
How did that turn out?
I do believe A. China's bubble is inflating, and B. Percentage growth figures are difficult to compare when the starting size is unequal (i.e., "the US economy is only growing at 1% but China is growing at 10%").
My backyard orange production is up 1200% year over year... however last year I only grew one orange last year and this year 13. at that rate in a dozen years I can supply the world market
I won't be able to maintain that growth figure indefinitely, and next year it may even decline.... but in a dozen years, that tree will be bigger.... but never as big as my neighbor's who planted his 10 years earilier.
Liberty: Parent of Science & Industry
roadrunner
<< <i>The difference is that China has a mechanism in place for recovery... manufacturing. What does the US have? Financial services? "Green" jobs? If (and that's a big if) China has any kind of a recession, it's likely to be shallow and brief, as investment money is still going to flow into that country at an obscene pace regardless of what happens. >>
Manufacturing is only good if you produce a product people want at a price they will pay. There is nothing to say India, or even Africa, could not produce the same goods more cheaply. If the rest of the world stays mired in a recession, it will most definately hurt China. Even if China went from 10% growth to 2%, the effects would be substantial.
<The world has too much debt, and if it all blows up, we can all kiss our assets goodbye.>
The US and EU are not the world. JMHO. MJ
China has no debt? Malaysia has no debt? Dubai, Argentina, Hong Kong, Canada, Australia, ect?
Here's a link to List of countries by external debt.
But sovereign debt is not entirely what I am talking about. Consumer debt may be even more important. I would be very interested to see what the world would look like without demand from the US and EU. I imagine it would be a world of subsitance farmers.
I like Jim Rogers, but why has he been less successful--in terms of creating wealth--than both Chanos and Soros?
I dont consider believing China being in a bubble to be a populist view. I think the opinion is split 50-50. Meaning China will continue on its tear for a little while longer, implying the bubble gets bigger.
Knowledge is the enemy of fear
I am talking about resetting Mtges, Credit Cards, other forms of loans linked to variable indexes.....
And no, not all credit cards have reset to 25%, not quite. Many of the folks holding debt and STILL PAYING are still enjoying lower rates in the 7-12% range,
Right now you have an issue with the bottom fifth of households - wait until it hits the middle third......and then higher....and thats EXACTLY what higher rates will do.....when those go belly-up it'll be real bad........what kind of profits will those big banks show then?
Rates will not move.....at all.......for at least another 2 years.
Box of 20
I hope I NEVER have to get a credit card! Been 48 years and counting! Cash is king in my book
<< <i>I have three credit cards with 2.99% interest until paid off. They can't mess with the interest terms of the loan. However, last year they increased the mimimum monthly payment from 2.5% to 5% of the balance. So they will screw you in other ways, hoping you will default on the low rates when you cannot pay the minimum balance and then charge you 29.9%. BTW these three cards will be paid off in the next 3 months. >>
Sounds like we have the same CC company. I had the 2.99% interest rate they had for the life of the loan. Got the same minimum rate jacked up. I transfered the balance out from them. I know they were hoping I'd used the card again, as many people will do, but it backfired on them in my case, it has a zero balance and will stay that way. I'd cancel it if my long history with them wasn't helping my credit score.
It's obscene that these banks borrow the money (from the taxpayers) @ 1% interest, then turn around and lend it out at the rates they do. I'd gladly pay double that rate if the gov. would cut out the middleman. I wouldn't mind so much if they paid me 20% + on my savings or IRA.
<< <i>Cohodk....
I am talking about resetting Mtges, Credit Cards, other forms of loans linked to variable indexes.....
And no, not all credit cards have reset to 25%, not quite. Many of the folks holding debt and STILL PAYING are still enjoying lower rates in the 7-12% range,
Right now you have an issue with the bottom fifth of households - wait until it hits the middle third......and then higher....and thats EXACTLY what higher rates will do.....when those go belly-up it'll be real bad........what kind of profits will those big banks show then?
Rates will not move.....at all.......for at least another 2 years. >>
What is the % of people who would be directly negatively affected by higher rates 5%, 10%? There are multiples of that who are savers and who have always done the "right thing" that are being killed by these low rates. Enough of this pandering to the ultra minority. Time to help the majority. RAISE RATES NOW!!!! EVERYONE will be affected if the FED does not begin to raise rates soon.
Knowledge is the enemy of fear
<< <i>What is the % of people who would be directly negatively affected by higher rates 5%, 10%? There are multiples of that who are savers and who have always done the "right thing" that are being killed by these low rates. Enough of this pandering to the ultra minority. Time to help the majority. RAISE RATES NOW!!!! EVERYONE will be affected if the FED does not begin to raise rates soon. >>
I agree that's what they *should* do. Hopefully we all realize that they won't be doing this any time soon though...
I had a very interesting lunch yesterday with an old friend who is very wealthy, an economist, and was CEO of a NYSE company at one time.
Our multi hour conversation centered around what we had predicted would happen in this economy 10 years ago.
Most of what we thought would happen has come to pass, but where we were way off base was the amount of time that we thought it would take for the economy to totally crash.
Here is what our thinking is at this time.
We may have as long as another 15years of a slowly declining American system.
Think of the American economic system as a socialist ponzi scheme, whereby the left side of the scheme has the payees, and the right side has the payors.
In our current situation there is no turning back, as well as there are no real solutions.
That said everyone’s concentration the next few years will be on keeping the ponzi scheme going until such time as the only fix is a total collapse.
Here is how things might play out, and how much time all of this will take.
First we are still in the borrowing phase, where investors of all types are willing to loan us trillions at very cheap interest rates. That phase might come to a close by the end of this year.
At that point the rates will go up enough to entice the investors back to the table, and that phase might go on for two more years.
Next we will have governments of all sizes cutting a little, perhaps 10% of their budgets, and of course raising taxes/fees of all types. This move will see us through another year or two.
We can also expect means testing of S.S. and Medicare, as well as some cut backs in other programs including the military in the next 4 years. All of this will get us through another 2 years.
Also during this time we might see a national sales tax but that would be in addition to the current income tax.
As we slowly get to the end of our rope on what interest rates we can pay, and where we can cut various programs, we will be 7 years down the road.
At the point that we have run out of all options we will start our hyperinflation phase, where we just print the money and pay the folks, because we have no further options.
This phase can last as long as another 8 years.
Ah, but what about making changes, what about the Tea Party folks?
I am sorry but this will not, and cannot work.
If we elected nothing but strict constitutionalists, and ultra conservatives, to congress, they would not be able to fire 50% of the government employees, and stop all the socialist programs without causing riots in the streets of every major city in the country.
That will just not happen.
Higher yields will bring debt buyers back to the table. The only question is, how will Japan and China - the two largest US debt holders - continue to be able to afford to buy our debt?
I think where I lack understanding is how countries invest in other country's debt. Most countries like Japan are running deficits just like the US. How or where does this money to invest come from? I guess it's all part of a ponzi scheme. It's impossible to relate a comparison to an individual's finances... where as I personally would stop or extremely limit investing activities if I started running a personal deficit. In fact, I might even be selling investments to raise cash in that scenario. It is mind boggling how we can have money to buy other country's debts when we already owe so much.
Perhaps interest free loans from the Fed that are not reported?
Box of 20
<< <i>The governor of New Jersey was on Squawk this morning and stated that a state employee contributes about $124,000 during his lifetime and will receive back over 3.2 million in pension and health benefits. Rounding that off to a rough estimate of say about 4 million federal and state employees. 4 million x 3.2 million= $$120,000,000,000,000. The Unions have to give something up that is a given because it is unsustainable. Just Federal Employees xxxx Just State Employees >>
More on the story...
Raising taxes to fill pension coffers would be a difficult sell to taxpayers
Knowledge is the enemy of fear