US Stocks Plunge, Dow Falls Over 300 Points As Fears Grip Market

**socal** · 06-08-2011, 06:44 AM

Originally Posted by Bower

I had coffee this morning with a friend of mine who works for Hargreaves Lansdown, i asked him what i should do in the current market, his reply, he feels like a man who knows a hundred ways to make love to a woman but cant get a date !

I know, its just funny how so many people forgot that gold exists. BTW my plan is doing fine but I will admit, the mining stocks have been hit and some are real dogs.

Should have went all physical gold.

**socal** · 06-08-2011, 06:47 AM

Originally Posted by Marmite the Dog

I'm led to believe that the deregulation of the financial systems caused the problems, not the system itself. Wouldn't tougher regulation solve many of the problems like it did in Asia after '97?

Going off the gold standard in 1971 caused the problem. There is no limit to the creation of money and financial products.

Will we go back on a gold standard ? No but we will go onto a floating gold standard denominated in Euros when the USD finally crashes.

**socal** · 06-08-2011, 06:50 AM

[quote=Agent_Smith;1837135]

Originally Posted by Tom Sawyer

The extraordinary expansion of the world-economy in the postwar years (more or less 1945 to 1970) has been followed by a long period of economic stagnation in which the basic source of gain has been rank speculation sustained by successive indebtednesses.

This has the ring of truth to it. I'm not an economist but this viewpoint seems to fit the last 40 years of economic activity, particularly here in the US.

Interesting that you noticed the last 40 years in particular. 2011 minus 1971 = 40.

1971 was the exact year that the world went off the gold standard.

**Agent_Smith** · 07-08-2011, 01:15 AM

^It baffles me as to why gold has been so valuable to humanity over the past few thousand years. Other than its use in electronics and other specialty areas (in recent history) it really has no intrinsic value. It can't be used for nourishment, build shelter, or be used for any other practical purpose - not even weaponry. I know its highly malleable and somewhat rare compared to other metals but this doesn't seem like a good enough reason to invest so much value in it. Nickel, copper and iron are far more useful metals than gold.

It just seems like some sort of generations long con game to convince people that gold is valuable because you can make jewelry with it and impress your neighbors. Just sounds like a big marketing ploy for something somewhat useless. Like those pet rocks they sold back in the 70's.

Originally Posted by socal

Interesting that you noticed the last 40 years in particular. 2011 minus 1971 = 40. 1971 was the exact year that the world went off the gold standard.

It's possible, or it could just be a concurrent coincidence. Like I said, I think this whole gold infatuation is just a human conceit.

**baby maker** · 07-08-2011, 02:55 AM

/\.....the whole thing is a gigantic con....it's all mind games....

Gold is even more so....one onz of physical Gold / allocated Gold for three onzs of unallocated Gold/ paper Gold....

....the same as everything.....people just can not resist selling things they
don't have....speculation....

there is only thirty thousand tonns above ground....the total taken out of the earth to date.....

....so don't be late at the Gold window....the shelves may be bare....
when you come waveing your dirivative around....for that is what it is...
before heading off to your secure compound with your AK47.......

**socal** · 07-08-2011, 05:33 AM

Originally Posted by Agent_Smith

^It baffles me as to why gold has been so valuable to humanity over the past few thousand years. Other than its use in electronics and other specialty areas (in recent history) it really has no intrinsic value. It can't be used for nourishment, build shelter, or be used for any other practical purpose - not even weaponry. I know its highly malleable and somewhat rare compared to other metals but this doesn't seem like a good enough reason to invest so much value in it. Nickel, copper and iron are far more useful metals than gold.

It just seems like some sort of generations long con game to convince people that gold is valuable because you can make jewelry with it and impress your neighbors. Just sounds like a big marketing ploy for something somewhat useless. Like those pet rocks they sold back in the 70's.

Originally Posted by socal

Interesting that you noticed the last 40 years in particular. 2011 minus 1971 = 40. 1971 was the exact year that the world went off the gold standard.

It's possible, or it could just be a concurrent coincidence. Like I said, I think this whole gold infatuation is just a human conceit.

No it is not a coincidence. I can prove for a fact that it is not a coincidence.

You have gold backwards, it is digital money in your bank account that has no intrinsic value, it is the little square pieces of paper in your wallet that has no intrinsic value.

Gold has intrinsic value because high net worth individuals, central banks and countries need a place to hold their wealth in a currency that cannot be duplicated.
Gold is that currency. All other currencies can be duplicated on a computer or run off a printing press.

**socal** · 07-08-2011, 05:35 AM

Originally Posted by baby maker

/\.....the whole thing is a gigantic con....it's all mind games....

Gold is even more so....one onz of physical Gold / allocated Gold for three onzs of unallocated Gold/ paper Gold....

....the same as everything.....people just can not resist selling things they
don't have....speculation....

there is only thirty thousand tonns above ground....the total taken out of the earth to date.....

....so don't be late at the Gold window....the shelves may be bare....
when you come waveing your dirivative around....for that is what it is...
before heading off to your secure compound with your AK47.......

How is gold a con ? If you hold the physical ?

If you bought gold at the all time high in every gold bull market since the beginning of time, you would be ahead today. Doesn't look like a con to me.

**Tom Sawyer** · 07-08-2011, 09:07 AM

Originally Posted by Butterfly

^ indeed, all thanks to Reagan and Thatcher

Don't forget their guru Milton Friedman

**Butterfly** · 07-08-2011, 08:24 PM

Originally Posted by Agent_Smith

It baffles me as to why gold has been so valuable to humanity over the past few thousand years.

it's because of the Ancient Aliens who came to earth, they were using it, and it became valuable ever since

**IceSpike** · 07-08-2011, 08:26 PM

Your Country Ever Had an Educated Black President?

**Tom Sawyer** · 07-08-2011, 10:51 PM

No - But Sarkozy probably shagged a few black hookers. Does that count? They proly spoke both french and english. Is Obama bilingual? Bill was allegedly cunilingus..

**OhOh** · 08-08-2011, 01:00 AM

Originally Posted by Agent_Smith

It baffles me as to why gold has been so valuable to humanity over the past few thousand years

Gold is an easy to sell or buy commodity, the same as US dollar bonds. There is a market all around the world for both.

Try walking around with £10,000 of wheat, copper or lead. That value, in gold is 10oz, that value in government bonds 1oz. Both can be easily verified as genuine.

There is a liquid market for both.

**Agent_Smith** · 08-08-2011, 01:27 AM

Originally Posted by socal

Gold has intrinsic value because high net worth individuals, central banks and countries need a place to hold their wealth in a currency that cannot be duplicated.

Thank you for an intelligent answer, Socal.

But still, it seems odd that one can say that "50 bushels of wheat equals one ounce of gold" when gold itself has no intrinsic value, but the wheat does (it feeds people). It seems that gold is just a place-marker for something that has real value, but this place-marker itself has no intrinsic value - only what is assigned to it by society (governments/markets).

So, to me, it seems like a game of pretend that everyone has to buy into, much like your quibble with paper money, Socal.

Gold = $$$ = wheat/labor/land etc. Without the actual wheat/labor/land etc then gold would just be another rock and paper money just kindling for the fire.

Originally Posted by OhOh

Try walking around with £10,000 of wheat, copper or lead. That value, in gold is 10oz, that value in government bonds 1oz. Both can be easily verified as genuine.

I get that, it's a convenient way to calculate wealth and buying power. But the metal itself - not tied to anything in particular - would not be worth much on its own as a practical matter.

Stuck in the desert, I would rather have a gallon of water rather than a bar of gold. It's all relative.

**Butterfly** · 08-08-2011, 01:50 AM

The intrinsic value of Gold is a myth,

**Agent_Smith** · 08-08-2011, 01:52 AM

^That's kinda what I'm driving at.

**OhOh** · 08-08-2011, 02:27 AM

Originally Posted by Agent_Smith

Stuck in the desert, I would rather have a gallon of water rather than a bar of gold

In the real world the bar of gold will by you lakes of water, wine and enough people to feed and pamper you for your lifetime.

In the desert it would also buy you food, water, camels, a guide and dancing girls whilst you water would last you a day tops.

Originally Posted by Agent_Smith

Thank you for an intelligent answer

My answer is equally as intelligent.

**OhOh** · 08-08-2011, 02:34 AM

Eric Margolis

"No sooner had President Barack Obama signed the bitterly contested federal budget deal than financial markets gave their verdict by nose-diving. The best that America’s reviled politicians could say was that the deal was a “down payment” on serious future spending cuts.
The agreement calls for $2.4 trillion in spending cuts over ten years. A bipartisan committee was tasked with coming up with another $1.5 trillion in cuts by November. Considering that the 2011 deficit will be over $1.4 trillion, and the national debt is over $14 trillion, these cuts, if ever realized, are modest, to say the least.

Obama hailed this compromise as “an important first step.” Many others saw it as the latest example of the growing financial and political paralysis of the United States. The budget deal merely curbs runaway government spending; it does not reduce it. As of now, it appears that the heaviest cuts would fall on the social services Medicare, Medicaid, and Social Security. In other words, the poor and elderly are to bear the brunt of budget reductions. More guns, less butter. Fifty million Americans rely on Medicaid for health care; 44 million Americans rely on government food assistance.

Not surprisingly, America’s left is fuming with indignation. The right is crowing.

What is remarkable about this budget is that military spending is largely spared, showing once again the power of America’s military-industrial complex. The Pentagon may face cuts of $350-400 billion over a decade.But that’s peanuts compared to the Pentagon’s budget which is now near $900 billion annually when all war costs are accounted for. The US military budget doubled after the 9/11 attacks. Talk in Washington of a “peace dividend” from ending the wars in Iraq and Afghanistan is illusory. The US-installed Baghdad regime is shortly expected to “request” the US maintain “training” troops in Iraq indefinitely. The same will happen in Afghanistan. Meanwhile, the Obama administration has expanded active military operations into Yemen, Libya, Djibouti, Somalia, Kenya, and West Africa. It may end up involved in the new state of South Sudan.

The US is now “fiscally hollow,” warns respected senior American strategist and diplomat Charles Freeman, noting the entire US military budget is financed by money borrowed from China and Japan. He warns the US is entering a long-term military rivalry with China that Beijing can easily bare but that may prove “fiscally ruinous for us.’ One cannot avoid the sharp irony that during the Cold War in the 1980’s, the US spent the Soviet Union into the ground. Now, it appears that China may end up doing the same thing to the financially strained United States.

Few in Washington dare admit that the US can no longer afford “full spectrum global dominance.” The federal budget can only be balanced by cutting in half the gargantuan US military budget which amounts to an amazing 45% or so of world military spending. Add Washington’s rich allies, and the figure rises to 80%. Halving the Pentagon budget would only take it back to pre-9/11 days. Wars and vast buildup of internal and external security forces under President George W Bush left a budget deficit of $6.1 trillion, just about equal to the combined deficits of all US presidents since Jimmy Carter to Obama.

But no one has yet come up with a way to halt this military-industrial juggernaut. While benefits of the poor and elderly are to be cut, the Pentagon is trying to forge ahead with its $1 trillion F-35 fighter purchase. Why not just call up Moscow and Beijing and say, “hey, if you don’t build any new generation stealth fighters, we won’t either.” Fat chance. The military-industrial complex and Wall Street supply the lion’s share of political contributions. Jobs in every state depend on continued military production.

US Defense Secretary Leon Panetta is already warning the nation’s security is in danger if Pentagon budgets are cut. From whom, we must ask. Are Red Chinese troops about to land in Los Angeles? Are the Russians going to grab Hawaii? Well, there are always the lurking Muslims whose nefarious plans to impose a caliphate over the USA can only be stopped by new stealth heavy bombers."

**Agent_Smith** · 08-08-2011, 02:53 AM

Originally Posted by OhOh

In the real world the bar of gold will by you lakes of water, wine and enough people to feed and pamper you for your lifetime. In the desert it would also buy you food, water, camels, a guide and dancing girls whilst you water would last you a day tops.

Not if you're alone and thirsty.

My point is that gold itself has little value to humans, its value is made up.

**OhOh** · 08-08-2011, 04:01 AM

Chinese agency downgrades U.S. credit rating - CNN.com

Released 3/8/11 but not many comments.

"Beijing (CNN) -- Although the United States narrowly avoided an unprecedented default following congressional approval of a last-minute compromise plan to raise the debt ceiling, China's leading credit rating agency Wednesday downgraded U.S. sovereign debt after putting it on negative watch last month.
The Dagong Global Credit Rating Company, which lowered the United States to A+ last November after the U.S. Federal Reserve decided to continue loosening its monetary policy, announced a further downgrade to A, indicating heightened doubts over Washington's long-term ability to repay its debts.
It said the gloomy assessment -- much lower than the AAA ratings given by the so-called "big three" Western agencies Moody's, Fitch, and Standard and Poor's -- was inevitable given the level of market concern generated by the stalemate between Democrats and Republicans over the debt ceiling.
"The squabbling between the two political parties on raising the U.S. debt ceiling reflected an irreversible trend on the United States' declining ability to repay its debts," Dagong Chairman Guan Jianzhong told CNN.
"The two parties acted in a very irresponsible way and their actions greatly exposed the negative impact of the U.S. political system on its economic fundamentals," he said.
Ironically, Dagong's move could hurt not just the United States but also China, the largest foreign owner of U.S. debt with holdings worth almost $1.2 trillion.
"Our downgrade simply reflects reality," Guan said. "Our rating didn't cause China to lose any money --- it was the inappropriately high ratings for the U.S. by Western agencies that had led China to make risky investments in U.S. debt."
Observers say China, whose foreign exchange reserves now stand at $3.2 trillion, has had little choice but to buy U.S. Treasury bonds.
"There aren't that many other markets that are as deep or as liquid as treasuries," said Patrick Chovanec, an economic analyst with Tsinghua University in Beijing. "When they accumulate reserves, this is the only place they can put them."

The privately held Dagong, founded in 1994 to rate Chinese companies, attracted worldwide attention last July when it published its first sovereign credit ratings and, citing growing deficits in the developed world, ranked China higher than the United States and Japan.
Dagong now rates 67 countries and aims to more than double the number by the end of this year. Its ambition to become an alternative to the "big three" suffered a setback, however, when the U.S. Securities and Exchange Commission refused to recognize its rating because of the commission's inability to supervise the Beijing-based agency.
Guan, who worked as a civil servant and a Wall Street accountant before taking the helm at Dagong, is quick to defend his firm's independence and objectivity. He points to what he calls Western agencies' "double standard" in rating the U.S. and European economies to underscore the global need for a newcomer like Dagong.
"People are used to credit ratings issued by the 'big three,' but the financial crisis has clearly proved them wrong," Guan said. "They can no longer shoulder the responsibility of rating the world."
"That's the role we are striving to play," he added."

For the complete press release see:

Dagong

**OhOh** · 08-08-2011, 04:08 AM

Originally Posted by Agent_Smith

Originally Posted by OhOh

In the real world the bar of gold will by you lakes of water, wine and enough people to feed and pamper you for your lifetime. In the desert it would also buy you food, water, camels, a guide and dancing girls whilst you water would last you a day tops.

Not if you're alone and thirsty.

My point is that gold itself has little value to humans, its value is made up.

I understand your point but gold has "value" in many more circumstances. A gallon of water has value until it is "consumed" then it has no value. A bar of gold similarly until it is consumed. A gallon of water has no value at all in Ireland.

Many people around the world, in deserts, jungles and cities equally value gold because of the many "items" it enables them to purchase or consume.

**OhOh** · 08-08-2011, 04:52 AM

S&P Move Isn't a Shock but Adds to Gloom - WSJ.com

Pretty Graph and debt data by country. Note Libya doesn't appear on it because it has no debt.

**OhOh** · 08-08-2011, 05:24 AM

Asian Governments, Investors Brace for Fallout From S&P Downgrade of U.S. Credit Rating - WSJ.com

"For a year or so following the financial crisis, the recovery strategy in most countries was based on a renewed belief in activist government—stimulus packages, bailout of key industrial and financial firms and even talk of (and some action on) industrial policy, notably related to “green growth”.

Since then, however, a different kind of recovery strategy has been on the ascendancy. This strategy believes that recovery requires a dramatic cut in government spending, minimal tax increases (ideally tax cuts for the rich) and deregulation.

Unfortunately, this strategy is not going to lead to a sustainable recovery. Why? Because it is based on false premises. Here are five of them.

1. Reduction in government deficits is the prerequisite for recovery.

The assumption underlying the current dominant recovery strategy is that there is a private sector rearing up to rush in, as soon as the government makes way by reducing deficits. However, at the moment, the problem is of weak private sector demand, not the crowding-out of private sector by an aggressively expanding government.

The dramatic slowdown of the U.S. and the U.K. economy in the last few quarters, following the exhaustion of earlier stimulus packages, is a reminder of such realities. Reduction in government deficits in the face of weak private sector demand will weaken, or even reverse the recovery.

Moreover, cutting deficits in the short run may not even reduce the deficits very much in the long run because the resulting economic slowdown will reduce government revenue. The financial market knows this, even while it clamours for deficit reduction, as evidenced by the continued downgrading of the European periphery countries by credit rating agencies despite their heroic efforts at massive spending cuts.

2. Deficits should mainly be reduced by cutting welfare spending.

The current strategy recommends deficit cuts to be achieved mainly by cutting expenditure, especially welfare spending, rather than raising revenues. This is on the grounds that current deficits are mainly due to excessive “populist” spending on social welfare.

However, with the possible exception of Greece, much of the current deficits have been generated by the fall in tax revenues due to the economic downturn, rather than by excessive welfare spending. So the ultimate solution should be an increase in government revenue through growth.

If demand shortfall is the problem, as it is at the moment, cutting welfare spending can exacerbate the problem. People who are net welfare recipients, generally poorer people, have a higher propensity to consume, so taking money away from them will reduce demand, at least in the short to medium run.

3. Cutting welfare spending is good for growth in the long run.

But how about the long-term impacts? Whatever the effects of welfare spending cuts in the short run, don’t we need to reduce the welfare state in order to promote growth in the long run since it diverts valuable investible resources into consumption? And does it not make workers less flexible and resistant to changes in the work place and jobs by diminishing their fear of unemployment?

No, the view that welfare spending is anti-growth is unwarranted. For example, using World Bank data it is possible to show that Scandinavian countries, despite having welfare states more or less double the size of that in the U.S. (as proportions of GDP), have grown faster than the U.S. throughout the post-World War II period. Even after 1990 (1990-2008), when the U.S. was supposed to have entered an economic renaissance (well, at least until the 2008 crisis), the two fastest growing economies, in per capita terms, in the core OECD group were Finland (2.6%) and Norway (2.5%), with the U.S. notching up only 1.8%, tied with Sweden. If we count only the 2000s (2000-2008), the growth rates of Sweden (2.4%) and Finland (2.8%) were far superior to that of the U.S. (1.8%).

The Scandinavian experiences have been possible because a well-designed welfare state can make people more, rather than less, accepting of changes. When assured that they can have a second or even a third chance in their lives through the welfare state, people become more adventurous with their career choices and more easily accept job restructuring and redundancies. All of this can promote economic growth.

4. Taxes for the rich should not be raised, if we are to promote growth.

As most strikingly manifested in the recent U.S. budget deal, the strong presumption behind the current recovery orthodoxy is that tax increases for the rich should not be used for deficit reduction so that these wealth creators can invest and generate growth; making the rich richer (at least no less poorer than they are now) will in the end make all of us richer, is the belief.

However, the record of the current generation of the rich in this regard has been dismal. Despite the rise in income inequality in most countries in the last three decades, economic growth has slowed down rather dramatically—the world economy grew at 3.2% in per capita terms between 1960 and 1980, while it grew at 1.4% between 1980 and 2009.

Nowhere has the failure of the rich been as evident as in the U.S.. According to the Economic Policy Institute, a Washington D.C. think-tank, between 1979 and 2006 (the latest year of available data), the top 1% of earners in the U.S. more than doubled their share of national income, from 10% to 22.9%. The top 0.1% did even better, increasing their shares by more than three times from 3.5% in 1979 to 11.6% in 2006. Despite getting such a bigger share of national output, the rich in the U.S. have failed to increase the growth rate. The U.S. growth rate in per capita terms since 1980 has been around 1.8%, which is the same rate as the one seen between 1950 and 1980.

So, figuratively speaking, the Americans have been paying their “wealth creators” two to three times more than before to get the same outcome. What makes people think that they will behave differently this time around?

5. Further deregulation is necessary for economic growth.

Another plank in the current recovery strategy is deregulation, so that the wealth creators have less constraints. In Britain, there is talk of another bout of deregulation to cut the “red tape” away. In the U.S., there is a growing call to dilute and/or delay the Dodd-Frank financial reform act in order to aid recovery.

However, regulations can actually promote growth by limiting the ability of firms to engage in activities that bring them greater profits in the short run but harm the overall economy and thus, the firms themselves in the long run.

For example, individual banks may benefit from lending more aggressively. But when all of them do the same, they may all suffer in the end, as such lending behaviors may increase the chance of systemic collapse, as we have seen in the 2008 crisis. Given this, the proposal to dilute the Dodd-Frank is highly misguided.

Moreover, many governments have actually helped economic growth by doing things that the private sector wouldn’t do. The success of activist industrial policies conducted by countries like Japan, France, Korea until the 1980s and China today are probably well known, but many other governments have also helped economic growth through spending on infrastructure and R&D.

The U.S. is a prime example. Most of the industries where the U.S. maintains an international technological edge have been created, and often maintained, by aggressive federal funding of R&D and public procurement programs—aircraft, computer, semi-conductors, Internet, pharmaceutical, just to name the most important ones."

Ha-Joon Chang teaches economics at the University of Cambridge

He is obviously one of those dumb uneducated Asians who are unable of thinking.

**socal** · 08-08-2011, 06:29 AM

Originally Posted by Agent_Smith

Originally Posted by socal

Gold has intrinsic value because high net worth individuals, central banks and countries need a place to hold their wealth in a currency that cannot be duplicated.

Thank you for an intelligent answer, Socal.

But still, it seems odd that one can say that "50 bushels of wheat equals one ounce of gold" when gold itself has no intrinsic value, but the wheat does (it feeds people). It seems that gold is just a place-marker for something that has real value, but this place-marker itself has no intrinsic value - only what is assigned to it by society (governments/markets).

So, to me, it seems like a game of pretend that everyone has to buy into, much like your quibble with paper money, Socal.

Gold = $$$ = wheat/labor/land etc. Without the actual wheat/labor/land etc then gold would just be another rock and paper money just kindling for the fire.

Originally Posted by OhOh

Try walking around with £10,000 of wheat, copper or lead. That value, in gold is 10oz, that value in government bonds 1oz. Both can be easily verified as genuine.

I get that, it's a convenient way to calculate wealth and buying power. But the metal itself - not tied to anything in particular - would not be worth much on its own as a practical matter.

Stuck in the desert, I would rather have a gallon of water rather than a bar of gold. It's all relative.

Gold is physical money. It represents time. It takes allot of time to find, then to dig out of the ground. It is rare, that is what gives it value.

You can convince yourself all you want about how useless gold is but you would probably change your mind if you won 25 million paper dollars tomorrow.

**socal** · 08-08-2011, 06:32 AM

Originally Posted by Butterfly

The intrinsic value of Gold is a myth,

using that logic, it shouldn't be worth anything. As valuable as garbage.

**socal** · 08-08-2011, 06:33 AM

Originally Posted by Agent_Smith

^That's kinda what I'm driving at.

That's all easy to say now. Try being a central banker that needs a place to put... oh I dunno, a trillion dollars give or take.

Thread: US Stocks Plunge, Dow Falls Over 300 Points As Fears Grip Market

Thread Tools

Display

Thread Information

Users Browsing this Thread

Posting Permissions