Thread: The strongest economy in the world

^ So is the US to blame for Iceland's fall?

Originally Posted by Jet Gorgon

^ So is the US to blame for Iceland's fall?

How do you work that one out?
As far as I am aware Iceland got into trouble by allowing their banks to play around with big chunks of money in other peoples currency while at the same time running consistent trade deficits. When the banking business fell over, they didn't have anything to back up the inflated value of their currency in the way of actual goods and the Icelandic currency became virtually worthless as other countries lost confidence in it. But they do actually produce stuff for export. Mainly fish I think. So they should be able to get back on their feet, all be it at a reduced standard of living compared to what they have been used to.

I am not sure how you think I am saying USA was responsible for Icelands fall from financial grace.

^ So, Iceland wasn't part of the "con job" you speak of?

Originally Posted by Jet Gorgon

^ So, Iceland wasn't part of the "con job" you speak of?

This is not an interview Jet.
If you got something to say in the discussion then spit it out.

Here is a brief 1 minute video of GWB. Not only is he a lame-duck, but apparently an unpopular lame-duck.

Peter Schiff and some other analysts. Interview on Bloomberg. Nov 21, 2008.

Bond Market bloodbath, dollar decline and rising gold.

Thoughts and opinions?

Here's the first part of the interview. More focus on the US dollar.

US unemployment (U3) numbers are getting very high for the first time applicants and are still high for those already on it.

1 out of 3 home will be owned by the banks, soon.

Originally Posted by Milkman

Marc Faber gave this interview 2 weeks ago.

during the last 45 seconds he predicted that the US government will go bankrupt. It's not a matter of "if," but "when" in his opinion.

---------Faber Obviously doesn't know the meaning of bankrupt. The US gv'ts' debts are in dollars. It manufactures dollars. End of explanation.


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Originally Posted by who

----Faber Obviously doesn't know the meaning of bankrupt. The US gv'ts' debts are in dollars. It manufactures dollars. End of explanation..

I think the concept of bankruptcy/insolvency is related to the obligations (promised pay-outs).

SS & Medicare, and annul payments of the national debt.

The US government cannot print its way out of this.

The internal US economy may end up folding under the pressure of the retiring baby boomers, but the external US debt is no problem really.
All the external US debt is written in $USs. And all the external US debt gets paid back in $USs. It doesn't matter what the trading value of the $US is, all that matters is the number of zeros on the paper. If and when the $US crashes in trading value, places like China and Japan get paid back in $USs. And if the US govt has to crank up the printing presses to cover the debt, then that will ultimately devalue the trading worth of the $US. So China and Japan get the money they loaned to buy their products during the boom times of the $US, but when its paid back in $USs they find that this currency will now only buy half the goods it could when they loaned it. Effectively it means they have shipped a lot of real goods to USA over the preceding years and will likely only get paid back for maybe only half of them. Good for USA, but bad for the countries who put complete faith in the value of the $US.

A similar sort of thing is happening again right now with a lot of big money people pulling their money out of companies that actually produce tradable things and buying up $USs. The $US is booming again but it makes the country uncompetitive in trade and drives it deeper into debt trying to prop up unviable industries to stave off unemployment. But when places like China and Japan wake up they are sinking real goods into a black hole and stop lending to USA, the US borrow and spend your way out of debt strategy will come crashing down along with the value of the $US.

That one hasn't hit the world yet. But it will.

Originally Posted by Panda

The $US is booming again but it makes the country uncompetitive in trade and drives it deeper into debt trying to prop up unviable industries to stave off unemployment. But when places like China and Japan wake up they are sinking real goods into a black hole and stop lending to USA, the US borrow and spend your way out of debt strategy will come crashing down along with the value of the $US.

That one hasn't hit the world yet. But it will.

Thanks, Panda.

When do you think the value of the US Dollar will significantly go down, or even crash?

TIA.

Mate, I wouldn't be game to put a date on that. But I would expect it to fully unfold within 2009. It only takes one cow to start a stampede.

Investors are pulling their money out of tangible goods production an putting it into $USs as they figure that is the last safe haven. But its really just compounding the problem and setting the whole world up for an even bigger fall when it comes.

Gold is back in high demand too and getting hard to find in some places. The price of gold is on the rise again. Expect gold prices to go through the roof next year as investors pull out of $USs and look for a safer investment.

I reckon when we see gold at $US2,000 an ounce there will be no turning back.
US gold reserves are huge by world standards but could only pay for a tiny fraction of their international debt.

Originally Posted by Milkman

Here is a debate between Art Laffer and Peter Schiff.

Laffer invented the "Laffer Curve," used by advocate of Supply-Side. Apparently the Laffer Curve was invented in a Washington, DC, bar on a napkin.

This brief debate took place on August, 2006.

Who turned out to be right?

'
----------The Laffer Curve was not invented on a napkin, it was illistrated that way to a fellow diner in a restaurant not a bar. And of course Laffer is right as history has proved over and over again.

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Originally Posted by Milkman

Originally Posted by who

----Faber Obviously doesn't know the meaning of bankrupt. The US gv'ts' debts are in dollars. It manufactures dollars. End of explanation..

I think the concept of bankruptcy/insolvency is related to the obligations (promised pay-outs).

SS & Medicare, and annul payments of the national debt.

The US government cannot print its way out of this.

.
..............Yes it can "print its way out of THIS' What ever "this" is. Countries have been inflating thier way out of debt for centurys, but the US will not have to.


Marc Faber is the owner of a minor tip-sheet. His quality can be judged by the following quote:

"The Warren Buffett approach is dead and it's been dead for ten years and it's going to be dead for another ten years"
I will remind you that Buffett made his money over 50+ years by investing, and now is the richest man in the US.

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Thanks for the reply above, Panda.

Here's a recent article about the change in the TARP (Troubled Asset Relief Program).

Paulson decided to change course (as we know) and not buy the toxic assets. This article claims that this change of course has led to continuied illiquidity.

Credit markets turn ugly as Tarp turns its back on toxic assets

By Paul J Davies, Michael Mackenzie and Aline van Duyn


Published: November 20 2008 02:00 | Last updated: November 20 2008 12:52

US mortgages and credit markets on both sides of the Atlantic have been severely jolted since the US Treasury turned its back on plans to use some of its $700bn in financial bail-out funds to buy troubled assets from banks.


More than a week has passed since Hank Paulson, the Treasury secretary, changed the parameters of the Troubled Asset Relief Programme (Tarp). Yet despite Mr Paulson's insistence to Congress this week that policy actions were starting to bear fruit, the picture on the ground in the credit markets has turned uglier.


The realisation there are no other buyers for some of the toxic assets the government has decided not to buy has led to a sharp fall in the value of mortgage-related assets and a wave of renewed selling. Some large investment funds had bought mortgages expecting the Tarp would help to shine a light on the market and establish a clearing price.


"Now those markets will go back to being completely illiquid as there will be no price discovery process started by the Tarp," says Jay Mueller, portfolio manager at Wells Capital Management. "It is tremendously difficult to trade when the rules of the game change."


Bankers and analysts in Europe say the renewed gloom in US asset-backed bonds has knocked both European markets and general inter-bank liquidity. Institutions are being forced to face up to the prospect of further pain from some assets they hold.


....."The Treasury's announcement of a 180-degree shift in direction for the allocation of Tarp monies sent the credit markets into a tailspin," says Meredith Whitney, analyst at Oppenheimer. "As Tarp monies will no longer be allocated to buy illiquid assets off bank balance sheets, the market for such assets got even more illiquid.

Link & Entire: FT.com / UK - Credit markets turn ugly as Tarp turns its back on toxic assets

I went to the other channel and invited Storekeeper to come and join us on this thread.

He hasn't replied.

Sounds like things are just rosy....it's the "Strongest Economy in the World" after-all.

Dec. 5, 2008

WASHINGTON - Skittish employers slashed 533,000 jobs in November, the most in 34 years, catapulting the unemployment rate to 6.7 percent, dramatic proof the country is careening deeper into recession.

The new figures, released by the Labor Department Friday, showed the crucial employment market deteriorating at an alarmingly rapid clip, and handed Americans some more grim news right before the holidays

And:

Home loan troubles break records again

WASHINGTON – A record one in 10 American homeowners with a mortgage were either at least a month behind on their payments or in foreclosure at the end of September as the source of housing market pressure shifted to the crumbling U.S. economy.

The Mortgage Bankers Association said Friday the percentage of loans at least a month overdue or in foreclosure was up from 9.2 percent in the April-June quarter, and up from 7.3 percent a year earlier.

Distress in the home loan market started about two years ago as increasing numbers of adjustable-rate loans reset to higher interest rates. But the latest wave of delinquencies is coming from the surge in unemployment.

Entire: Yahoo & this: Economy shed 533,000 jobs in Nov. - Stocks & economy- msnbc.com

Ooooh, the squatters are moving into foreclosed homes.
Video - Breaking News Videos from CNN.com

Here is a brief youtube from a Canadian program about Gold Backwardation:

Good for Brazil. I suspect they steered clear of hedges, emphasized energy independence and kept real estate in check.

You figure they're the new strongest economy in the world?

Originally Posted by Texpat

You figure they're the new strongest economy in the world?

Most stable perhaps but strongest no. They certainly should be members of that exclusive world economy's club.