<< June is normally a hefty month for the birth death model input. So out of those +18,000 jobs reported today.....131,000 of them came from the black box CES BD model. That means -113,000 jobs might be a closer number once the voodoo is subtracted back out. >>
Timmy was on Meet the Press Sunday. He seems confident that Congress will raise the debt limit.
BTW Social Security did not cause these deficits. Irresponsible tax policy, unfunded wars, over bloated government programs like Homeland Security and Defense.... but the Repubs are using this as a way to dismantle it along with Medicare even though it was the Repubs who pushed through Part D(Prescription Coverage).
cohodk, don't ever think that short sellers can't be screwed by the government. Remember when the US only allowed silver positions to be liquidated?
As ludicrous as it may seem, I wouldn't put it past a government in fiscal trouble to require the exchanges to only accept "buy" orders on their bonds. Wouldn't that be interesting? Libor would go nuts and the markets would freeze until rates got to about 25% or so.
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>Timmy was on Meet the Press Sunday. He seems confident that Congress will raise the debt limit.
BTW Social Security did not cause these deficits. Irresponsible tax policy, unfunded wars, over bloated government programs like Homeland Security and Defense.... but the Repubs are using this as a way to dismantle it along with Medicare even though it was the Repubs who pushed through Part D(Prescription Coverage). >>
Most of the damage caused by social security is really the result of insurance.
Bloated government is a severe problem but much of the bloat is the military industrial complex and the most severe problem is the waste caused by rampant greed.
Anyone who wants to fix problems needs to start with the waste and enforc- ing the laws against unbridled greed. Start with campaign finance reform and go from there. Start with fixing the schools by abolishing government inter- ference and cutting funding by 60%.
Blaming unions and freeloaders is like blaming a wart for causing a crippling dis- ease. Cut off the wart and people die but the disease remains and spreads.
<< <i>cohodk, don't ever think that short sellers can't be screwed by the government. Remember when the US only allowed silver positions to be liquidated?
As ludicrous as it may seem, I wouldn't put it past a government in fiscal trouble to require the exchanges to only accept "buy" orders on their bonds. Wouldn't that be interesting? Libor would go nuts and the markets would freeze until rates got to about 25% or so. >>
Absolutely they can be screwed for sometime, but not indefinately. If an asset is a pig, it will eventually act like a pig. In your example, "rates rising to 25%", is exactly what the short sellers are counting on.
This global debt bubble is bigger than almost anyone is willing to admit. The next 10-15 years are gonna be fun. That is not a raging endorsement for PMs, as I believe EVERYTHING will suffer. The developed economies have borrowed from the future for the past 2 generations and problems will not be recified overnight. Savers will eventually get paid for their patience and suffering.
Most of the damage caused by social security is really the result of insurance
The damage was that SS created a false sense of security that disuaded people from saving for themselves.
Another "problem" has been the incredible advances in medicine that have increased life expectancy by more than 15 years since 1935. When first proposed people the G thought they would pay benefits for only a few years after retirement, not a few decades. The age limit for SS should be at least 72 today, and probably closer to 75.
Also, SS taxes should have been on a persons total earned wages, not just the first $106,000 as it is today, or $66,000 as it was 10 years ago. Those who have lower incomes pay a much larger % of their income in SS taxes than do those who make mucho bucks.
<< <i>Savers will eventually get paid for their patience and suffering. >>
That will depend greatly on how they are storing their savings. >>
Indeed. And I think we both know of whom I am speaking and we differ greatly in opinion. There is a reason why demand for bonds in both the USA and Germany continues unabated. BTW---The yield of 30 yr German Bunds is 3.35%, nearly 90 basis points less than the USA. Doesnt look like Europeans are expecting inflation in the wake of the sovereign bailouts. I find it interesting to note that German bunds of less than 4 years all yield less than the ECB target funds rate.
Some Federal Reserve officials are ready to provide more monetary policy easing if the recovery is too sluggish to cut the lofty unemployment rate and if inflation eases as expected, minutes of their June meeting released on Tuesday show.
The conclusion was not exactly what I expected. The authors don't agree with either a gold backed monetary system nor the current FED based fractional reserve system. Video skips the first minute of the introduction....just manually reset it to 00.00.
<< <i>There is a reason why demand for bonds in both the USA and Germany continues unabated.
I'd be a little bit cautious about that "demand", since the majority of demand for US Treasuries is now from the US Treasury, no? >>
Believe me, there is TREMENDOUS demand for US treasuries. Why did rates drop (prices increase) as the QE2 printing press ended? Less supply to meet the demand. As much as I wish otherwise, interest rates are not going higher, but real rates may be.
<< <i>Also, SS taxes should have been on a persons total earned wages, not just the first $106,000 as it is today, or $66,000 as it was 10 years ago. Those who have lower incomes pay a much larger % of their income in SS taxes than do those who make mucho bucks. >>
I'm OK with this statement, however, if I pay more - I should get a much bigger benefit than those who pay less into the system.
This also means if you pay nothing, you get nothing.
Good Video. I heartily recommend taking the time to watch it. As rr indicates, they are not advocating a return to the gold standard, and in fact they point out that a return to the gold standard is one of the steps that the big banks will propose in order to continue to strip assets from the public.
It filled in alot of history that I've never taken the time to study in depth. Now I understand "the crime of '73" and the implications of the "greenbacks" that were issued by Lincoln.
There are several VERY IMPORTANT quotes not only from the Founding Fathers, but also some immensely revealing excerpts from banking committee meetings and various banking documents throughout the history of the US.
The tie-ins to The Wizard of Oz are somewhat interesting, but they are mostly peripheral to the issue of what the banking complex really does.
cohodk will find this video to be exactly on point.
Q: Are You Printing Money? Bernanke: Not Literally
I didnt watch the entire video, just the first few minutes and I agree with Schiff that we are in for a long period of slow growth/recession/depression. I dont think I've ever said otherwise. In fact, Schiff's comments support my view that interest rates could remain low for another decade.
I dont know who the narrator is, but there are some dubious links under the video.
If you really want to know what I believe, from someone much more intelligent and articulate than I, then this video is a much see. Its about 48 min, but is well worth your time. There is no propaganda, conspiracy theory or innuendo, or contrived analysis. Just plain old fashioned economics. This is the school of thought to which I subscribe.
Both the video and the new report are good, cohodk. He doesn refer to transitory inflation, and I will concede that while inflation may be transitory, it isn't done yet.
He plans on staying in the long end of the bond market because he anticipates continued deflation, more unemployment, more deterioration in spending patterns and low longterm interest rates for an extended period. But he also noted in his interview that the Fed has taken on significant interest rate risk with its new subprime real estate holdings and that the Treasury has a risk of default.
I don't think that he has reconciled his two opinions, but I do think that it points towards his worry of sovereign default. And that is why precious metals are not tanking, even if money supply is shrinking.
Q: Are You Printing Money? Bernanke: Not Literally
Have a house in Boca Raton you want to sell? Are you realistic and will sell at market value? Come see me. I'm looking for 1 house and can meet you anywhere, anyplace and pay you in cash, gold, check, any way you want.
Good Video. I heartily recommend taking the time to watch it. As rr indicates, they are not advocating a return to the gold standard, and in fact they point out that a return to the gold standard is one of the steps that the big banks will propose in order to continue to strip assets from the public. It filled in alot of history that I've never taken the time to study in depth. Now I understand "the crime of '73" and the implications of the "greenbacks" that were issued by Lincoln. There are several VERY IMPORTANT quotes not only from the Founding Fathers, but also some immensely revealing excerpts from banking committee meetings and various banking documents throughout the history of the US.
That was my impression too. Not a monetary historian so this filled a lot of holes in my 18th and 19th century history as well. Maybe those holes didn't exist back in high school history class but they were there last week. I only used the WizOz reference to grab attention as long video's usually don't get anyone's attention. The first part of the video is not that important. But the historical portions presented from the 1700's to early 1900's is good material. I remember spending a lot of time reading about William Jennings Bryan in junior year history class but 40 yrs of "forgetting" takes its toll. I was intrigued by silver in 1971 and maybe WJB piqued my interest even further. One thing seems to run through history is that enough bankers and politicians seem to know what sound monetary policy is, probably better than most of today's economists. The problem is that eventually we always deviate from sound policy. The last 10-15 or so minutes of the video somewhat summarizes the earlier material.
Thanks for the Hoisington links Cohodk. I follow Cliff Droke at times and he seems to be in agreement with Barker. They also seem to be generally in agreement with Hoisington.
<< <i>Both the video and the new report are good, cohodk. He doesn refer to transitory inflation, and I will concede that while inflation may be transitory, it isn't done yet.
He plans on staying in the long end of the bond market because he anticipates continued deflation, more unemployment, more deterioration in spending patterns and low longterm interest rates for an extended period. But he also noted in his interview that the Fed has taken on significant interest rate risk with its new subprime real estate holdings and that the Treasury has a risk of default.
I don't think that he has reconciled his two opinions, but I do think that it points towards his worry of sovereign default. And that is why precious metals are not tanking, even if money supply is shrinking. >>
I dont think his opinions or analysis are contradictory. He thinks there is a possibility the FED "could" take on too much debt thus rendering it insolvent. But I think we need to understand by what is meant by the word "possibility". We all know that just about anything is possible so in this case is the possibilty 1% or 99%? I think the chances are extremely low, but yes, this needs to be considered and evaluated.
He does make mention of transitory inflation in the written quarterly report. You can go to their website and read commentary going back 8+ years. Having the advantage now of hindsight, I think you'll find much of their analysis to be very accurate. Especially look at the 2007-2008 period.
I dont know if I would read into his comments "more unemployment, more deterioration in spending", but rather little or no improvement. I've been saying this for the last 3 years. Our economy has boomed for 50 years due to spending via debt. We never could have achieved such a boom period without it. But now its over. I would not be surprised if in 6 years unemployment is still 8.5%, as this is probably closer to full employment given reduced spending via both the private and public sector.
Jim Grant's father pursued a varied career, including studying the timpani. He even played for a while with the Pittsburgh Symphony. But the day came when he rethought his career choice. "For the Flying Dutchman overture," says his son, "they had him cranking a wind machine."
The younger Mr. Grant, who can be sardonic about his own chosen profession, might say he's spent the past 28 years cranking a wind machine, though it would be a grossly unjust characterization. Mr. Grant is founder and writer of Grant's Interest Rate Observer, perhaps the most iconic of the Wall Street newsletters. He is also one of Wall Street's strongest advocates of the gold standard, knowing full well it would take away much of Wall Street's fun.
You might say that, as a journalist and historian of finance, he has been in training his whole life for times like ours—in which the monetary disorders he has so astutely chronicled are reaching a crescendo. The abiding interest of Grant's, both man and newsletter, has been the question of value, and how to know it. "Kids today talk about beer goggles—an especially sympathetic state of perception with regard to a member of the opposite sex," he says of our current market environment. "We collectively wear interest-rate goggles because we see market values through the prism of zero-percent funding costs. Everything is distorted."
He adds: "I can't explain the world's infatuation with government securities and negligible yields. These bonds and notes and bills are denominated in currencies that central bankers are doing their best to depreciate."
By "can't explain," he perhaps means he recognizes too well a phenomenon he can't justify. The famously lanky Mr. Grant, whom I meet in his office over Wall Street, is a dyed-in-the-wool skeptic of the efficient markets hypothesis. Markets are "unpredictably inefficient," he says. Right now, he sees Ben Bernanke's Federal Reserve as a prime malefactor behind the characteristic economic folly of our age (though China is a big offender too): suppressing the proper functioning of the price system. "By flooding the system with dollar bills, I submit to you that he has accomplished little of what he meant to accomplish and he has unintentionally done a great many things he didn't want to do."
. Mr. Grant is also a critic—albeit with caveats—of today's great bankers, whom he says in one respect don't hold a candle to their gilded forebears. "When you take away the downside, you take away the virtue. You take away the moral foundation of markets. You always have envy but now the envy is a little better grounded in objective facts. Taxpayers get the downside. Modern-day Wall Street gets the upside."
The upside did not come swiftly for Mr. Grant, a veteran of our sister publication Barron's, where he was the founding author of its "Current Yield" column. He left the comfy arms of Dow Jones in response to an "intramural political squabble" and, in 1983, hung out his own shingle.
Upon plowing his $75,000 in accumulated Dow Jones profit-sharing into a newsletter, he expected his former Barron's readers to race to sign up. They didn't. His nest egg quickly evaporated. Paying himself a salary was not even on the agenda for several years. Eventually he took on a silent partner in Wall Street investor John Holman Jr., whose children now luxuriate in dividends from Grant's Interest Rate Observer.
"The tax problems were long in coming," Mr. Grant notes wryly. Come they did. Today, he will only say that his subscribers number between 5,000 and 10,000. At $910 a pop, you do the math. Mr. Grant hosts three sold-out conferences a year in New York and London and is interviewed frequently on television. ("Business development," he calls it.) Along the way he's also written several books of financial and political history, including 1992's acclaimed history of debt, "Money of the Mind."
Not bad for a kid who, technically, never got off his native Long Island, since he and his wife, a doctor, today live in Brooklyn, where they raised four children. One of those children recently earned a place in the record books as a victim/beneficiary of long-range yenta action: Two mothers meet by chance in the old neighborhood. It turns out both have young Marines serving in Fallujah. The result is stated succinctly in a New York Times wedding announcement last October: "Emily Hope Grant and Matthew Demetri Turner, both Marine captains, are to be married Sunday in Brooklyn."
Perhaps even more delightful for the father, his daughter is no longer in Fallujah. She starts a new job on Wall Street next month.
Of his own Wall Street clients, Mr. Grant says, they seem to renew at "gratifying rates," his best indication that he's doing something right—i.e., making them money. He freely admits to a lack of market clairvoyance. What Grant's can do for its readers, he says, is observe how the market is handicapping future outcomes and call attention to cases where it thinks the odds look out of whack. When Treasury bonds were yielding 13% in the early 1980s, Grant's called them a screaming buy. If inflation, then coming down, suddenly ran amok again, an investor could give up 13% a year in principle and still break even on the coupon.
Likewise, before the housing crash, he took a hard look at subprime mortgage securities and urged investors to short them. "They were then selling at 100 cents on the dollar," he now says. "If we were wrong, they might go to 101 or 102. If we were right, they'd go down a lot."
And today? "We are looking at a bunch of these big cap, astoundingly cheap American enterprises that are hiding in plain sight. Wal-Mart is one, J&J is another," he says. Wal-Mart he describes as a mature business whose per-share earnings are those of a growth company, thanks to its massive share buy-backs.
"We can observe that the dividend yield [on many blue-chip U.S. companies] is a match for most points on the Treasury yield curve. But their managements are adaptive, unlike the inert Treasury bond that you buy for so-called safety."
In the present macro environment, Mr. Grant adds, "you can't exactly predict whether the debt predicament or the printing press is going to get the upper hand in our affairs. Rather than hiding out in the unguided missiles including my beloved gold bullion, look at these impressively adaptive businesses that have managed to make a go of it in every political environment and even today."
The key is "adaptive"—willing and able to do what it takes to produce returns for shareholders. The lesson was painfully reinforced by his one foray into professional money-managing. In the late 1990s, with a partner, he raised money to invest in severely undervalued Japanese companies. "These bargains can and did remain bargains for 12 years," he says with a grimace, because Japanese managers don't need to care about shareholder wealth.
Mr. Grant is skeptical, scathing even, of the Japanese-style deflation fears that today motivate Mr. Bernanke's monetary spigots. Good deflation, he says, is "when prices fall as a result of productive processes and technical apparatus, that is called progress." Bad deflation is when merchants, drowning in debt and unable to get credit, dump goods at firesale prices. "The Fed refuses to make that distinction."
Hence a horrifying irony: After the dot-com crash, Alan Greenspan and Mr. Bernanke drove down interest rates to fight a feared deflation and ended up inflating the mortgage bubble. "The Fed, in assaulting a phantom deflation, precipitated an actual one."
Mr. Grant would prefer a monetary system tied to the amount of gold dug out of the ground to one based on the untrammeled discretion of Ph.Ds. The latter is what America got with President Nixon's 1971 decision to close the Treasury's gold window, breaking the last link to the classical gold standard, in which anyone was free to exchange dollars for gold at a fixed and guaranteed price. Result: the dollar, not gold, became the world's "reserve currency."
The U.S. government was empowered to borrow seemingly unlimited funds from foreigners and repay with a currency that the U.S. government itself could print. "Dollars pile up in Asia. Merchandise piles up here," says Mr. Grant, as America, in possession of the printing press, has tried to achieve the "ancient hope of mankind, to live without working."
The "fiat" dollar, he adds ruefully, "is one of the world's astounding monetary creations. That a currency of no intrinsic value is accepted as money the world over is an achievement that no monetary economist up until not so many decades ago could have imagined. It'll be 40 years next month that the dollar has been purely faith-based. I don't believe for a moment it's destined to go on much longer. I think the existing monetary arrangements are so precarious, so ill-founded and so destructive of the economic activity they are supposed to support and nurture, that they will be replaced by something better."
How exactly the transition to a new gold standard might take place is a puzzle, but Mr. Grant says he's seen many "impossible" things come to pass in his career. A certain "social spontaneity" might take a hand. He points to GLD—the ticker symbol for an exchange-traded fund whose gold holdings now make it equivalent to the world's 10th largest central bank. "At the margin," he says, "people are registering dissent from the judgment of our central bankers by bidding up the price of gold."
Earlier this year Mr. Grant put his mouth where his mouth is, testifying before Rep. Ron Paul's House monetary affairs subcommittee on the virtues of the gold standard. No Democrats and few Republicans showed up. Asked to predict exactly when the dollar will blow up, Mr. Grant jokes, "I'd say 1978."
But his point is an earnest one and brings us back to the modern character of Wall Street. The gold standard, he says, citing the "late, great" libertarian economist Murray Rothbard, was the "people's system. If you didn't like the currency, you could exchange your paper for gold and that sent a message."
In our age of "wiki everything," Mr. Grant finds it anomalous that we sacrifice freedom of monetary choice for the diktats of central planners acting out of the Fed's faux-colonnaded headquarters in D.C. The fiat dollar is an "elite" system, he says, and Wall Street is its supporting "interest group"—those nimble, market-savvy, plugged-in folks know how to shuffle assets and exploit cheap funding from the Fed to leverage up their profits and soften the downside.
'The winners in Wall Street have always been hugely rich and therefore have been objects of great envy and great populist animosity. This is one of the great evergreens of American politics," Mr. Grants says. But those earlier financiers "got to participate fully in the downside as well as the upside. Years ago, Goldman Sachs was a partnership and partners were at risk for everything they owned. I think it's fair to assume that attention to risk management is different now.
"Wall Street today is a statist creation," adds the man who has known, loved and chided the Street for nearly four decades as one of its most able observers. "Greenwich, Connecticut"—where billionaire hedge-fund operators keep their homes—"is not what Fifth Avenue was in the Edwardian age. Greenwich, Connecticut will be the last to sign up for the new gold standard."
As for Mr. Grant, it may turn out he's been cranking a wind machine after all—by steady effort and perspicacity, helping to move the ship of history back toward sounder monetary arrangements.
This is a short article with some interesting statements regarding the new Pan Asia Gold Exchange. If there was any truth to the manipulation conspiracies at all, and in addition to the European and US debt hoopla, metals could be in for a huge move.
Excerpts: The Pan Asia Gold Exchange is going to send shockwaves through the mechanisms for the price discovery for both gold and silver. It's backed by China's state administration for foreign exchange and also the Chinese security regulatory commission. But the biggest bombshell is the offer of an RMB gold contracts for international investors.
Now the first contract is actually going live this month and its a 10-ounce gold mini-contract for the domestic Chinese retail market, which really until now has been restricted to physical purchases, so this domestic contract should be fully operational this month
Especially as there are 320 million customers of Ag bank of China, who going to be plugged into this exchange platform from the onset. If just 1% of their customers bought a single 10-oz contract, that would require new physical demand of 1,000 tons.
Armstrong agrees that a return to a gold standard by itself is not the answer. He also points out that gold has not really been money for most of the past 3,000 yrs, but a covenient asset to get other things you might need. Ironically, he too brings the Wiz of Oz into the discussion.
I think his commentary damages his credibility: Why people are passionate about gold insisting upon it being MONEY is very strange.
It is not strange, it is in the constitution:
Article I, Section 10, Clause 1: No State shall…coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.
So gee, where is everyone getting the idea that money is gold and silver. Durr...
But aside from that, he misses the point that gold and silver are one of many ways to store wealth or value. Does that make it money? And if not a gold-standard or asset-backed currency, then what? We should store value in fiat?
I saw this explanation of money which seems quite fitting: Money only facilitates the exchange of goods and services, but underneath it all, it is the goods and services themselves that are being exchanged. Think of it as a highly efficient and improved barter. If you are a plumber, you don't really need money to live (you can't eat money); money just makes it possible for you to indirectly exchange your plumbing services for groceries. If money weren't there, each time you needed food you would have to find a grocer that was in need of plumbing services so that you could barter your services for food.
As it is actually the goods and services that are being exchanged in an economy (rather than currency), going to a gold-backed currency should not cause deflation.
your bolded clause refers to what the STATEs may or may not do, not the federal government. Note that states are NOT allowed to coin their own gold or silver money.
the Federal Reserve dollar is the medium of exchange in the USA; gold is just another commodity, it's price in terms of dollars reacting to supply and demand (and FUD)
edited to add, OK, gold is THE BEST commodity. I love it too, and have much
But it ain't money, as it lacks universal practical acceptance (i.e, you can't "spend" it at the store) unless you convert it back to FRNs or their electronic equivalent (debit/credit cards), just like all the other goods and services are converted to our unit of account, not exchanged directly for each other.
edited again: now is the time for someones to chime in that their gardener takes ASEs, their contractor takes kruggerands, etc. Ok, the exception proves the rule
now is the time for someones to chime in that their gardener takes ASEs, their contractor takes kruggerands, etc. Ok, the exception proves the rule
Last Fall I had the pool guy come and close the pool. He charges $250. I had just picked up a 10oz Engelhard bar at spot $20 and talked him into taking it instead of a check for $250. He never did send me a thank you card this Spring.
And earlier last year I paid an Amish guy for a pile of firewood with a tablesaw (sans motor, of course).
I also have 2 friends in the home construction business who got boats.
So from my experience, if gold is money, so are tablesaws and boats.
<< <i>Note that states are NOT allowed to coin their own gold or silver money. >>
According to the American Constitution, US states are not allowed to print paper money. However Article I, section 10, paragraph I states that no state shall "make anything but gold and silver Coin a Tender in Payment of Debts."
Back in march the state of Utah passed a bill making gold and silver coins legal tender again. Many economists supported the measure to safeguard Utah´s citizens and companies from future dollar devaluation. In practice it means that Utah’s citizens are allowed to pay taxes, government services or other fees in the form of gold or silver coins in the future, as well as exempting gold transactions from state taxes. Other US states are proposing similar bills, among them Montana, Missouri, Colorado, Idaho, Indiana, New Hampshire, South Carolina, Georgia and Washington
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
That's your example? Prices are dropping because of expiring patents and competition, which has ZERO to do with anything we discuss here or any economic trends.
<< <i>That's your example? Prices are dropping because of expiring patents and competition, which has ZERO to do with anything we discuss here or any economic trends. >>
No, prices will drop with an expanded supply to the demand curve. If the demand were to increase incrementally with the expanded supply, then the product prices would reflect the increased demand by not dropping at all. Supply / demand - It is the driving force behind all economic trends and not patent expirations.
Y'all should read cohodk's posts a bit more introspectively.
So, how exactly do our lives change when the US loses it's AAA credit rating? I know that it will probably lead to mass sell-off of US bonds, but what would the impact be on loans and other types of banking items?
<< <i>No, prices will drop with an expanded supply to the demand curve. If the demand were to increase incrementally with the expanded supply, then the product prices would reflect the increased demand by not dropping at all. Supply / demand - It is the driving force behind all economic trends and not patent expirations.
Y'all should read cohodk's posts a bit more introspectively. >>
I don't think you followed his link. The drug companies charge whatever price they want when they have exclusive rights to it. Then when the patent expires multiple companies copy the drug and sell it at a fraction of the cost. A product going from 1 manufacturer to many has little to do with supply and demand as the initial mfr makes no attempt to limit supply, and demand remains relatively the same, or rather the demand shifts from the brand-name product (only game in town) to the alternatives, but total qty of demand remains the same.
Regardless, this is something that is constantly happening, as every month there are drug [patents] that are expiring and facing new competition from generics. This is not a new trend.
<< <i>So, how exactly do our lives change when the US loses it's AAA credit rating? I know that it will probably lead to mass sell-off of US bonds, but what would the impact be on loans and other types of banking items? >>
The politicians have apparently done a great job of instilling fear into the minds of Americans. Someday this game they play with us will come back to bite them.
"So, how exactly do our lives change when the US loses it's AAA credit rating? I know that it will probably lead to mass sell-off of US bonds, but what would the impact be on loans and other types of banking items?"
There are folks wiser in these matters than myself that would likely offer more studied opinions but I can offer some things. If our national credit rating gets lowered, it's similar to what happens when you miss one of your credit card payments, your apr goes up immediately. For the country, our credit card is our sales of US treasuries that mature at a certain interest rate when held for a certain period of time. When we sell the treasuries, we pay interest to those that purchase them. If our credit rating goes down, we pay a higher rate to people that would buy our treasuries. So, it's kind of like a catch 22 in that when we can't afford our bills, we have to pay more interest to borrow money to stay afloat.
There are newsers that say our bank credit for homes and cars would dry up if our credit rating gets lowered. Hard to tell if that's a reasonable prognostication or not since cars are mostly financed by the dealers and if you don't pay the note, they come and haul it off so I don't see car credit freezing up as long as you have a pulse and a job. As far as home purchasing credit drying up, I think it's just like the treasuries in that there's still going to be adequate financing. For housing, qualified (700+) types of folks only, the credit rating might need to be a little higher and the mortgage rates will likely go up a little but I think the pundits are sensationalizing the "freezing up" of personal credit. It's just going to cost more for interest rates on cars and homes.
What the likely result of some type of default for us cube farmers, as far as I can tell, would be negligible. But, if you look at who's doing all the yelling and screaming over this, it's the people sucking up gov freebies/assistance, the Timmy "Did he ever pay his taxes?" types, and of course the politicians. It is much more telling to watch who is doing the screaming than it is to actually pick through the details of what they are saying since all of them have some story line they are working.
mh, I agree, but I disagree in that it would affect the average consumer more than you suggest, as the prices of a lot of things will rise for them. I think there could be a hidden time bomb to make the housing crisis worse... a lot of people used 5/1 (and other term) ARMs to buy their homes that are now under water. They have continued to make payments because they can and probably because their payment has not changed because their rate has not changed much (or even gone down). There could be a lot of expired ARMs that will get in trouble when rates go up.
The upside, is that your bank savings account will start paying more.
" The fact that we're here today to debate raising Americas debt limit is a sign of leadership failure. It is a sign that the u.s. government can't pay it's own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our governments reckless fiscal policies." Sen. Obama of Illinois March 2006.
Comments
European Council President Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis for Monday morning
Italy is scared. Dang them evil short sellers. LOL
Knowledge is the enemy of fear
Worse than that - try -272,000!
My Adolph A. Weinman signature
BTW Social Security did not cause these deficits. Irresponsible tax policy, unfunded wars, over bloated government programs like Homeland Security and Defense.... but the Repubs are using this as a way to dismantle it along with Medicare even though it was the Repubs who pushed through Part D(Prescription Coverage).
Box of 20
too high a percentage of the population on life long entitlements, it will never end guys
they will vote for whoever hands out more $$ to them, regardless of what it does to the overall economy
As ludicrous as it may seem, I wouldn't put it past a government in fiscal trouble to require the exchanges to only accept "buy" orders on their bonds. Wouldn't that be interesting? Libor would go nuts and the markets would freeze until rates got to about 25% or so.
I knew it would happen.
<< <i>
One million deaths from smoking and heart disease in 2009 - none from marijuana and terrorists
roadrunner >>
Yikes a blessing from G-d ( Marijuana for those who are REALLY out there ) and a curse from the devil all in the same link
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>Timmy was on Meet the Press Sunday. He seems confident that Congress will raise the debt limit.
BTW Social Security did not cause these deficits. Irresponsible tax policy, unfunded wars, over bloated government programs like Homeland Security and Defense.... but the Repubs are using this as a way to dismantle it along with Medicare even though it was the Repubs who pushed through Part D(Prescription Coverage). >>
Most of the damage caused by social security is really the result of insurance.
Bloated government is a severe problem but much of the bloat is the military
industrial complex and the most severe problem is the waste caused by rampant
greed.
Anyone who wants to fix problems needs to start with the waste and enforc-
ing the laws against unbridled greed. Start with campaign finance reform and
go from there. Start with fixing the schools by abolishing government inter-
ference and cutting funding by 60%.
Blaming unions and freeloaders is like blaming a wart for causing a crippling dis-
ease. Cut off the wart and people die but the disease remains and spreads.
<< <i> Cut off the wart and people die but the disease remains and spreads. >>
But we'll have a better looking corpse.
Tis better to die than have a bad hair day.
<< <i>cohodk, don't ever think that short sellers can't be screwed by the government. Remember when the US only allowed silver positions to be liquidated?
As ludicrous as it may seem, I wouldn't put it past a government in fiscal trouble to require the exchanges to only accept "buy" orders on their bonds. Wouldn't that be interesting? Libor would go nuts and the markets would freeze until rates got to about 25% or so. >>
Absolutely they can be screwed for sometime, but not indefinately. If an asset is a pig, it will eventually act like a pig. In your example, "rates rising to 25%", is exactly what the short sellers are counting on.
This global debt bubble is bigger than almost anyone is willing to admit. The next 10-15 years are gonna be fun.
Knowledge is the enemy of fear
The damage was that SS created a false sense of security that disuaded people from saving for themselves.
Another "problem" has been the incredible advances in medicine that have increased life expectancy by more than 15 years since 1935. When first proposed people the G thought they would pay benefits for only a few years after retirement, not a few decades. The age limit for SS should be at least 72 today, and probably closer to 75.
Also, SS taxes should have been on a persons total earned wages, not just the first $106,000 as it is today, or $66,000 as it was 10 years ago. Those who have lower incomes pay a much larger % of their income in SS taxes than do those who make mucho bucks.
Knowledge is the enemy of fear
<< <i>Savers will eventually get paid for their patience and suffering. >>
That will depend greatly on how they are storing their savings.
<< <i>
<< <i>Savers will eventually get paid for their patience and suffering. >>
That will depend greatly on how they are storing their savings. >>
Indeed. And I think we both know of whom I am speaking and we differ greatly in opinion.
Knowledge is the enemy of fear
I'd be a little bit cautious about that "demand", since the majority of demand for US Treasuries is now from the US Treasury, no?
I knew it would happen.
Fed minutes: some ready to ease if recovery lags
I have a very strict gun control policy: if there's a gun around, I want to be in control of it - Clint Eastwood
The conclusion was not exactly what I expected. The authors don't agree with either a gold backed monetary system nor the current FED based fractional reserve system.
Video skips the first minute of the introduction....just manually reset it to 00.00.
roadrunner
<< <i>There is a reason why demand for bonds in both the USA and Germany continues unabated.
I'd be a little bit cautious about that "demand", since the majority of demand for US Treasuries is now from the US Treasury, no? >>
Believe me, there is TREMENDOUS demand for US treasuries. Why did rates drop (prices increase) as the QE2 printing press ended? Less supply to meet the demand. As much as I wish otherwise, interest rates are not going higher, but real rates may be.
Knowledge is the enemy of fear
<< <i>Also, SS taxes should have been on a persons total earned wages, not just the first $106,000 as it is today, or $66,000 as it was 10 years ago. Those who have lower incomes pay a much larger % of their income in SS taxes than do those who make mucho bucks. >>
I'm OK with this statement, however, if I pay more - I should get a much bigger benefit than those who pay less into the system.
This also means if you pay nothing, you get nothing.
It filled in alot of history that I've never taken the time to study in depth. Now I understand "the crime of '73" and the implications of the "greenbacks" that were issued by Lincoln.
There are several VERY IMPORTANT quotes not only from the Founding Fathers, but also some immensely revealing excerpts from banking committee meetings and various banking documents throughout the history of the US.
The tie-ins to The Wizard of Oz are somewhat interesting, but they are mostly peripheral to the issue of what the banking complex really does.
cohodk will find this video to be exactly on point.
I knew it would happen.
As if we didn't already know, Europe is screwed:
Germany digs in heels over Friday summit on Greece
I dont know who the narrator is, but there are some dubious links under the video.
If you really want to know what I believe, from someone much more intelligent and articulate than I, then this video is a much see. Its about 48 min, but is well worth your time. There is no propaganda, conspiracy theory or innuendo, or contrived analysis. Just plain old fashioned economics. This is the school of thought to which I subscribe.
This video is from 1 year ago.
Dr. Lacy Hunt of Hoisington Investment Management articulates his view of why deflationary forces are so strong in the economy despite the doubling of the monetary base and will lead to further decline in long term interest rates
This video is from last week. Most is a repeat of past commentary, but there is discussion of the end of QE2.
The Morass of Debt
Knowledge is the enemy of fear
Hoisington 2nd qtr 2011 report and outlook
Knowledge is the enemy of fear
Bernanke: Fed would supply more stimulus if needed
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Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>There is a reason why demand for bonds in both the USA and Germany continues unabated.
I'd be a little bit cautious about that "demand", since the majority of demand for US Treasuries is now from the US Treasury, no? >>
Last 2 auctions since the end of QE2 have been very strong. Even Santelli said so.
From Briefing.com......BONDX $21 bln 10-yr Note Reopening Results: 2.918%; Bid/Cover 3.18x (Prior 2.23x, 12-auction avg 3.02x); Indirect Bidders 42.0% (Prior 50.6%, 12-auction avg 50.2%)
Read more: http://www.briefing.com/Platinum/InDepth/InPlay.htm#ixzz1S0XFFRSU
And....
Pimco’s Gross Raised Treasury Holdings
Knowledge is the enemy of fear
He plans on staying in the long end of the bond market because he anticipates continued deflation, more unemployment, more deterioration in spending patterns and low longterm interest rates for an extended period. But he also noted in his interview that the Fed has taken on significant interest rate risk with its new subprime real estate holdings and that the Treasury has a risk of default.
I don't think that he has reconciled his two opinions, but I do think that it points towards his worry of sovereign default. And that is why precious metals are not tanking, even if money supply is shrinking.
I knew it would happen.
GOOD: The Hidden Cost of War
But they're keeping us free
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Tom Pilitowski
US Rare Coin Investments
800-624-1870
David Barker (long k wave guy) via Clif Droke
Have a house in Boca Raton you want to sell? Are you realistic and will sell at market value? Come see me. I'm looking for 1 house and can meet you anywhere, anyplace and pay you in cash, gold, check, any way you want.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
That was my impression too. Not a monetary historian so this filled a lot of holes in my 18th and 19th century history as well. Maybe those holes didn't exist back in high school history class but they were there last week. I only used the WizOz reference to grab attention as long video's usually don't get anyone's attention. The first part of the video is not that important. But the historical portions presented from the 1700's to early 1900's is good material. I remember spending a lot of time reading about William Jennings Bryan in junior year history class but 40 yrs of "forgetting" takes its toll. I was intrigued by silver in 1971 and maybe WJB piqued my interest even further. One thing seems to run through history is that enough bankers and politicians seem to know what sound monetary policy is, probably better than most of today's economists. The problem is that eventually we always deviate from sound policy. The last 10-15 or so minutes of the video somewhat summarizes the earlier material.
Thanks for the Hoisington links Cohodk. I follow Cliff Droke at times and he seems to be in agreement with Barker. They also seem to be generally in agreement with Hoisington.
roadrunner
<< <i>Both the video and the new report are good, cohodk. He doesn refer to transitory inflation, and I will concede that while inflation may be transitory, it isn't done yet.
He plans on staying in the long end of the bond market because he anticipates continued deflation, more unemployment, more deterioration in spending patterns and low longterm interest rates for an extended period. But he also noted in his interview that the Fed has taken on significant interest rate risk with its new subprime real estate holdings and that the Treasury has a risk of default.
I don't think that he has reconciled his two opinions, but I do think that it points towards his worry of sovereign default. And that is why precious metals are not tanking, even if money supply is shrinking. >>
I dont think his opinions or analysis are contradictory. He thinks there is a possibility the FED "could" take on too much debt thus rendering it insolvent. But I think we need to understand by what is meant by the word "possibility". We all know that just about anything is possible so in this case is the possibilty 1% or 99%? I think the chances are extremely low, but yes, this needs to be considered and evaluated.
He does make mention of transitory inflation in the written quarterly report. You can go to their website and read commentary going back 8+ years. Having the advantage now of hindsight, I think you'll find much of their analysis to be very accurate. Especially look at the 2007-2008 period.
I dont know if I would read into his comments "more unemployment, more deterioration in spending", but rather little or no improvement. I've been saying this for the last 3 years. Our economy has boomed for 50 years due to spending via debt. We never could have achieved such a boom period without it. But now its over. I would not be surprised if in 6 years unemployment is still 8.5%, as this is probably closer to full employment given reduced spending via both the private and public sector.
Knowledge is the enemy of fear
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
i hope the whole opinon piece from this w/e WSJ shows up here. if not google the title.
yeah google the title, last 40% of entire op is decent, IMHO
Scourge text:....
Jim Grant's father pursued a varied career, including studying the timpani. He even played for a while with the Pittsburgh Symphony. But the day came when he rethought his career choice. "For the Flying Dutchman overture," says his son, "they had him cranking a wind machine."
The younger Mr. Grant, who can be sardonic about his own chosen profession, might say he's spent the past 28 years cranking a wind machine, though it would be a grossly unjust characterization. Mr. Grant is founder and writer of Grant's Interest Rate Observer, perhaps the most iconic of the Wall Street newsletters. He is also one of Wall Street's strongest advocates of the gold standard, knowing full well it would take away much of Wall Street's fun.
You might say that, as a journalist and historian of finance, he has been in training his whole life for times like ours—in which the monetary disorders he has so astutely chronicled are reaching a crescendo. The abiding interest of Grant's, both man and newsletter, has been the question of value, and how to know it. "Kids today talk about beer goggles—an especially sympathetic state of perception with regard to a member of the opposite sex," he says of our current market environment. "We collectively wear interest-rate goggles because we see market values through the prism of zero-percent funding costs. Everything is distorted."
He adds: "I can't explain the world's infatuation with government securities and negligible yields. These bonds and notes and bills are denominated in currencies that central bankers are doing their best to depreciate."
By "can't explain," he perhaps means he recognizes too well a phenomenon he can't justify. The famously lanky Mr. Grant, whom I meet in his office over Wall Street, is a dyed-in-the-wool skeptic of the efficient markets hypothesis. Markets are "unpredictably inefficient," he says. Right now, he sees Ben Bernanke's Federal Reserve as a prime malefactor behind the characteristic economic folly of our age (though China is a big offender too): suppressing the proper functioning of the price system. "By flooding the system with dollar bills, I submit to you that he has accomplished little of what he meant to accomplish and he has unintentionally done a great many things he didn't want to do."
.
Mr. Grant is also a critic—albeit with caveats—of today's great bankers, whom he says in one respect don't hold a candle to their gilded forebears. "When you take away the downside, you take away the virtue. You take away the moral foundation of markets. You always have envy but now the envy is a little better grounded in objective facts. Taxpayers get the downside. Modern-day Wall Street gets the upside."
The upside did not come swiftly for Mr. Grant, a veteran of our sister publication Barron's, where he was the founding author of its "Current Yield" column. He left the comfy arms of Dow Jones in response to an "intramural political squabble" and, in 1983, hung out his own shingle.
Upon plowing his $75,000 in accumulated Dow Jones profit-sharing into a newsletter, he expected his former Barron's readers to race to sign up. They didn't. His nest egg quickly evaporated. Paying himself a salary was not even on the agenda for several years. Eventually he took on a silent partner in Wall Street investor John Holman Jr., whose children now luxuriate in dividends from Grant's Interest Rate Observer.
"The tax problems were long in coming," Mr. Grant notes wryly. Come they did. Today, he will only say that his subscribers number between 5,000 and 10,000. At $910 a pop, you do the math. Mr. Grant hosts three sold-out conferences a year in New York and London and is interviewed frequently on television. ("Business development," he calls it.) Along the way he's also written several books of financial and political history, including 1992's acclaimed history of debt, "Money of the Mind."
Not bad for a kid who, technically, never got off his native Long Island, since he and his wife, a doctor, today live in Brooklyn, where they raised four children. One of those children recently earned a place in the record books as a victim/beneficiary of long-range yenta action: Two mothers meet by chance in the old neighborhood. It turns out both have young Marines serving in Fallujah. The result is stated succinctly in a New York Times wedding announcement last October: "Emily Hope Grant and Matthew Demetri Turner, both Marine captains, are to be married Sunday in Brooklyn."
Perhaps even more delightful for the father, his daughter is no longer in Fallujah. She starts a new job on Wall Street next month.
Of his own Wall Street clients, Mr. Grant says, they seem to renew at "gratifying rates," his best indication that he's doing something right—i.e., making them money. He freely admits to a lack of market clairvoyance. What Grant's can do for its readers, he says, is observe how the market is handicapping future outcomes and call attention to cases where it thinks the odds look out of whack. When Treasury bonds were yielding 13% in the early 1980s, Grant's called them a screaming buy. If inflation, then coming down, suddenly ran amok again, an investor could give up 13% a year in principle and still break even on the coupon.
Likewise, before the housing crash, he took a hard look at subprime mortgage securities and urged investors to short them. "They were then selling at 100 cents on the dollar," he now says. "If we were wrong, they might go to 101 or 102. If we were right, they'd go down a lot."
And today? "We are looking at a bunch of these big cap, astoundingly cheap American enterprises that are hiding in plain sight. Wal-Mart is one, J&J is another," he says. Wal-Mart he describes as a mature business whose per-share earnings are those of a growth company, thanks to its massive share buy-backs.
"We can observe that the dividend yield [on many blue-chip U.S. companies] is a match for most points on the Treasury yield curve. But their managements are adaptive, unlike the inert Treasury bond that you buy for so-called safety."
In the present macro environment, Mr. Grant adds, "you can't exactly predict whether the debt predicament or the printing press is going to get the upper hand in our affairs. Rather than hiding out in the unguided missiles including my beloved gold bullion, look at these impressively adaptive businesses that have managed to make a go of it in every political environment and even today."
The key is "adaptive"—willing and able to do what it takes to produce returns for shareholders. The lesson was painfully reinforced by his one foray into professional money-managing. In the late 1990s, with a partner, he raised money to invest in severely undervalued Japanese companies. "These bargains can and did remain bargains for 12 years," he says with a grimace, because Japanese managers don't need to care about shareholder wealth.
Mr. Grant is skeptical, scathing even, of the Japanese-style deflation fears that today motivate Mr. Bernanke's monetary spigots. Good deflation, he says, is "when prices fall as a result of productive processes and technical apparatus, that is called progress." Bad deflation is when merchants, drowning in debt and unable to get credit, dump goods at firesale prices. "The Fed refuses to make that distinction."
Hence a horrifying irony: After the dot-com crash, Alan Greenspan and Mr. Bernanke drove down interest rates to fight a feared deflation and ended up inflating the mortgage bubble. "The Fed, in assaulting a phantom deflation, precipitated an actual one."
Mr. Grant would prefer a monetary system tied to the amount of gold dug out of the ground to one based on the untrammeled discretion of Ph.Ds. The latter is what America got with President Nixon's 1971 decision to close the Treasury's gold window, breaking the last link to the classical gold standard, in which anyone was free to exchange dollars for gold at a fixed and guaranteed price. Result: the dollar, not gold, became the world's "reserve currency."
The U.S. government was empowered to borrow seemingly unlimited funds from foreigners and repay with a currency that the U.S. government itself could print. "Dollars pile up in Asia. Merchandise piles up here," says Mr. Grant, as America, in possession of the printing press, has tried to achieve the "ancient hope of mankind, to live without working."
The "fiat" dollar, he adds ruefully, "is one of the world's astounding monetary creations. That a currency of no intrinsic value is accepted as money the world over is an achievement that no monetary economist up until not so many decades ago could have imagined. It'll be 40 years next month that the dollar has been purely faith-based. I don't believe for a moment it's destined to go on much longer. I think the existing monetary arrangements are so precarious, so ill-founded and so destructive of the economic activity they are supposed to support and nurture, that they will be replaced by something better."
How exactly the transition to a new gold standard might take place is a puzzle, but Mr. Grant says he's seen many "impossible" things come to pass in his career. A certain "social spontaneity" might take a hand. He points to GLD—the ticker symbol for an exchange-traded fund whose gold holdings now make it equivalent to the world's 10th largest central bank. "At the margin," he says, "people are registering dissent from the judgment of our central bankers by bidding up the price of gold."
Earlier this year Mr. Grant put his mouth where his mouth is, testifying before Rep. Ron Paul's House monetary affairs subcommittee on the virtues of the gold standard. No Democrats and few Republicans showed up. Asked to predict exactly when the dollar will blow up, Mr. Grant jokes, "I'd say 1978."
But his point is an earnest one and brings us back to the modern character of Wall Street. The gold standard, he says, citing the "late, great" libertarian economist Murray Rothbard, was the "people's system. If you didn't like the currency, you could exchange your paper for gold and that sent a message."
In our age of "wiki everything," Mr. Grant finds it anomalous that we sacrifice freedom of monetary choice for the diktats of central planners acting out of the Fed's faux-colonnaded headquarters in D.C. The fiat dollar is an "elite" system, he says, and Wall Street is its supporting "interest group"—those nimble, market-savvy, plugged-in folks know how to shuffle assets and exploit cheap funding from the Fed to leverage up their profits and soften the downside.
'The winners in Wall Street have always been hugely rich and therefore have been objects of great envy and great populist animosity. This is one of the great evergreens of American politics," Mr. Grants says. But those earlier financiers "got to participate fully in the downside as well as the upside. Years ago, Goldman Sachs was a partnership and partners were at risk for everything they owned. I think it's fair to assume that attention to risk management is different now.
"Wall Street today is a statist creation," adds the man who has known, loved and chided the Street for nearly four decades as one of its most able observers. "Greenwich, Connecticut"—where billionaire hedge-fund operators keep their homes—"is not what Fifth Avenue was in the Edwardian age. Greenwich, Connecticut will be the last to sign up for the new gold standard."
As for Mr. Grant, it may turn out he's been cranking a wind machine after all—by steady effort and perspicacity, helping to move the ship of history back toward sounder monetary arrangements.
Excerpts:
The Pan Asia Gold Exchange is going to send shockwaves through the mechanisms for the price discovery for both gold and silver. It's backed by China's state administration for foreign exchange and also the Chinese security regulatory commission. But the biggest bombshell is the offer of an RMB gold contracts for international investors.
Now the first contract is actually going live this month and its a 10-ounce gold mini-contract for the domestic Chinese retail market, which really until now has been restricted to physical purchases, so this domestic contract should be fully operational this month
Especially as there are 320 million customers of Ag bank of China, who going to be plugged into this exchange platform from the onset. If just 1% of their customers bought a single 10-oz contract, that would require new physical demand of 1,000 tons.
Armstrong agrees that a return to a gold standard by itself is not the answer. He also points out that gold has not really been money for most of the past 3,000 yrs,
but a covenient asset to get other things you might need. Ironically, he too brings the Wiz of Oz into the discussion.
roadrunner
Why people are passionate about gold insisting upon it being MONEY is very strange.
It is not strange, it is in the constitution:
Article I, Section 10, Clause 1: No State shall…coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.
So gee, where is everyone getting the idea that money is gold and silver. Durr...
But aside from that, he misses the point that gold and silver are one of many ways to store wealth or value. Does that make it money? And if not a gold-standard or asset-backed currency, then what? We should store value in fiat?
I saw this explanation of money which seems quite fitting:
Money only facilitates the exchange of goods and services, but underneath it all, it is the goods and services themselves that are being exchanged. Think of it as a highly efficient and improved barter. If you are a plumber, you don't really need money to live (you can't eat money); money just makes it possible for you to indirectly exchange your plumbing services for groceries. If money weren't there, each time you needed food you would have to find a grocer that was in need of plumbing services so that you could barter your services for food.
As it is actually the goods and services that are being exchanged in an economy (rather than currency), going to a gold-backed currency should not cause deflation.
the Federal Reserve dollar is the medium of exchange in the USA; gold is just another commodity, it's price in terms of dollars reacting to supply and demand (and FUD)
edited to add, OK, gold is THE BEST commodity. I love it too, and have much
But it ain't money, as it lacks universal practical acceptance (i.e, you can't "spend" it at the store) unless you convert it back to FRNs or their electronic equivalent (debit/credit cards), just like all the other goods and services are converted to our unit of account, not exchanged directly for each other.
edited again: now is the time for someones to chime in that their gardener takes ASEs, their contractor takes kruggerands, etc. Ok, the exception proves the rule
Liberty: Parent of Science & Industry
Last Fall I had the pool guy come and close the pool. He charges $250. I had just picked up a 10oz Engelhard bar at spot $20 and talked him into taking it instead of a check for $250. He never did send me a thank you card this Spring.
And earlier last year I paid an Amish guy for a pile of firewood with a tablesaw (sans motor, of course).
I also have 2 friends in the home construction business who got boats.
So from my experience, if gold is money, so are tablesaws and boats.
Knowledge is the enemy of fear
<< <i>Note that states are NOT allowed to coin their own gold or silver money. >>
According to the American Constitution, US states are not allowed to print paper money. However Article I, section 10, paragraph I states that no state shall "make anything but gold and silver Coin a Tender in Payment of Debts."
Back in march the state of Utah passed a bill making gold and silver coins legal tender again. Many economists supported the measure to safeguard Utah´s citizens and companies from future dollar devaluation. In practice it means that Utah’s citizens are allowed to pay taxes, government services or other fees in the form of gold or silver coins in the future, as well as exempting gold transactions from state taxes. Other US states are proposing similar bills, among them Montana, Missouri, Colorado, Idaho, Indiana, New Hampshire, South Carolina, Georgia and Washington
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
The cost of prescription medicines used by millions of people every day is about to plummet.
Knowledge is the enemy of fear
<< <i>That's your example? Prices are dropping because of expiring patents and competition, which has ZERO to do with anything we discuss here or any economic trends. >>
No, prices will drop with an expanded supply to the demand curve. If the demand were to increase incrementally with the expanded supply, then the product prices would reflect the increased demand by not dropping at all. Supply / demand - It is the driving force behind all economic trends and not patent expirations.
Y'all should read cohodk's posts a bit more introspectively.
<< <i>No, prices will drop with an expanded supply to the demand curve. If the demand were to increase incrementally with the expanded supply, then the product prices would reflect the increased demand by not dropping at all. Supply / demand - It is the driving force behind all economic trends and not patent expirations.
Y'all should read cohodk's posts a bit more introspectively. >>
I don't think you followed his link. The drug companies charge whatever price they want when they have exclusive rights to it. Then when the patent expires multiple companies copy the drug and sell it at a fraction of the cost. A product going from 1 manufacturer to many has little to do with supply and demand as the initial mfr makes no attempt to limit supply, and demand remains relatively the same, or rather the demand shifts from the brand-name product (only game in town) to the alternatives, but total qty of demand remains the same.
Regardless, this is something that is constantly happening, as every month there are drug [patents] that are expiring and facing new competition from generics. This is not a new trend.
<< <i>So, how exactly do our lives change when the US loses it's AAA credit rating? I know that it will probably lead to mass sell-off of US bonds, but what would the impact be on loans and other types of banking items? >>
The politicians have apparently done a great job of instilling fear into the minds of Americans. Someday this game they play with us will come back to bite them.
PC, I dont know what to say.
Knowledge is the enemy of fear
There are folks wiser in these matters than myself that would likely offer more studied opinions but I can offer some things. If our national credit rating gets lowered, it's similar to what happens when you miss one of your credit card payments, your apr goes up immediately. For the country, our credit card is our sales of US treasuries that mature at a certain interest rate when held for a certain period of time. When we sell the treasuries, we pay interest to those that purchase them. If our credit rating goes down, we pay a higher rate to people that would buy our treasuries. So, it's kind of like a catch 22 in that when we can't afford our bills, we have to pay more interest to borrow money to stay afloat.
There are newsers that say our bank credit for homes and cars would dry up if our credit rating gets lowered. Hard to tell if that's a reasonable prognostication or not since cars are mostly financed by the dealers and if you don't pay the note, they come and haul it off so I don't see car credit freezing up as long as you have a pulse and a job. As far as home purchasing credit drying up, I think it's just like the treasuries in that there's still going to be adequate financing. For housing, qualified (700+) types of folks only, the credit rating might need to be a little higher and the mortgage rates will likely go up a little but I think the pundits are sensationalizing the "freezing up" of personal credit. It's just going to cost more for interest rates on cars and homes.
What the likely result of some type of default for us cube farmers, as far as I can tell, would be negligible. But, if you look at who's doing all the yelling and screaming over this, it's the people sucking up gov freebies/assistance, the Timmy "Did he ever pay his taxes?" types, and of course the politicians. It is much more telling to watch who is doing the screaming than it is to actually pick through the details of what they are saying since all of them have some story line they are working.
The upside, is that your bank savings account will start paying more.
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Tom Pilitowski
US Rare Coin Investments
800-624-1870
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our governments reckless fiscal policies." Sen. Obama of Illinois March 2006.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870