Topic: Recession Imminent - page 4. (Read 11410 times)

a nation that issues more debt plus currency than its productive capacity to solve their problems.

we do indeed.

we agree on more things than we disagree.  i also think Japan is a template for whats going to happen to the US.  we are "pushing on a string" and failing to clean out the overindebted banks just like Japan.  their problem is that the savings are now exhausted.  especially in light of Fukushima.  several authors/investors like John Mauldin, Kyle Bass, Hugh Hendry are betting Japan is about to go over the edge.  i agree.  look at the EWJ/Nikkei.  they do some great demographic analyses and there does not seem to be enough workers to pay for the retirees.  i think the bond vigilantes are finally going to have their day in Japan.  just this last Thursday they tried another currency blast to try and stop the advance of the yen.  it looks to have failed already.  why this odd dynamic?  Strengthening Yen in the face of worsening debt?  how does that work?  i will explain below in terms of USD's.


you are not alone in this thinking.  i however as well as some great thinkers, Prechter, Mish, Shilling, Rosenberg, Foss think we've already had our "hyperinflation" so to speak which topped in 2008. the ramp from 3/09 to now is the last gasp IMO.  during that time we've doubled the national debt in just 3 yrs compared to the prior 250 yr.  they've tried all sorts of wacky zero interest bound stimulative efforts like HAMP, TARP, QE 1&2, auto discounts, suspending mark to market, bailouts, and all of the worst corruption and manipulations the world has ever seen. to the US apparatchiks, its never enough.  it didn't work.  these were all inflationary stimuli and now we have to pay the piper.  

if the ECB were going to throw the Euro under the bus, why are they letting such tough austerity plans go forward in Greece, Ireland, Spain, Italy?  these are extremely dangerous so why not put the fire out with more monetization?  i would argue b/c they can't.  the debt ceiling has been hit and deflation is screaming to gets its due turn.  i say that central banks have lost control like they did in 2008.  it doesn't matter what they do, the market will dictate otherwise.  they've done a tremendous job trying to reinflate to now but Mr. Margin must be paid.  defaults are on the horizon and i agree Greece will default.
 

by stopping QE2 and not doing a QE3 like everyone expects.  and this is what they've done.  when everyones on one side of the boat like they are with this theory that Bernanke will do a QE3, 4,5,6,7, etc. it probably won't happen.  its too dangerous to assume that he will.  my belief is that QE2 was to allow the banks one last chance to unload their bad debt to the public and sell off underwater stock.  to get their balance sheets in order in preparation for the inevitable which is a cleansing of the debt.  also what you'll see if this happens is a paradoxical RISE in the USD and UST's.  how so?  b/c the liquidation of the bad debt causes a scramble for cash USD's and a decrease in the amount of debt based USD's worldwide (virtual USD's).  people like to say "flight to safety".  i prefer "forced scramble for currency USD's" (cash).  this is how the US debt based system differs from Zimbabwe hyperinflation.  they didn't have a mature bond market so they just printed up the money to pay their debts.  those printed monies couldn't be easily removed from the system as their productive capacity continued to decrease so hyperinflation ensued.  compare this to our debt based system.  those debt based loans will vaporize on default thus reducing the total amount of USD's (debt plus currency) worldwide.  60% of debt worldwide is USD denominated.  this would be deflation.


agreed.


avoid BTFD.

I'm not sure what an inflationist is. I expect we'll soon be on a very frightening roller coaster ride and we'll be fleeing from one bad decision to the next. Perhaps with bubbles growing and popping everywhere, contrarian thinking is the only logical approach. I appreciate your disagreement. Maybe we'll all be smarter for it.

You mention 100 years of inflation. I see thousands of years of fiat inflation ever since the Chinese invented the magical paper. After hundreds (thousands?) of attempts, we've just not quite figured it out. I've read a bit about pre-French revolution, Weimar Germany, and Japan. I don't know much about Zimbabwe (but I suspect Mugabe just kicked out the productive land owners, received no taxes, initiated starvation, and just printed). I don't know much about South America, Yugoslavia, or even the Roman Empire, etc. But ancient to modern history seems unanimously stacked against paper. I'm sure we can agree on that.

I agree that "this time is different". Why? Because the entire global economy is in debt or (for example China) is servicing the debt to prop up an otherwise fragile economy. What differentiates Japan from the United States is that Japan is a nation of savers and invested in its own industry. The United States otoh is a nation of debtors with investors outside of the nation. So, I throw out the comparison. But I feel we can compare Japan as a nation of the past fifteen years to the entire planet today. We earthlings are in debt and our few savers are obviously invested in the Earth. I don't think we'll see a redistribution of wealth between nations -- people and institutions (banks) yes -- but not nations. Asia will fall with Europe and the US.

If we're still on the same page, the question seems to be "will the economy deflate now or will/can the central banks continue to print money?" I do not disagree that the economy will collapse by deflation. I just think hyperinflation is the next train stop.

You seem to be saying that hyperinflation will be avoided by a conscious decision to deflate and unwind the economy. How would that process occur? Wouldn't the central banks have to intentionally allow all markets and private banks to collapse? How would they preserve the currencies?



I fully expect/ed Greece to default and reissue its own currency. I'm sure some generous deal was made behind closed doors "Look, if you hang in there we'll give you loans forever, no matter what we say in public."



I need to ponder this. I expect gold to drop but hoped to buy at that point. I think people are foolishly tho truly running to dollars and bonds as the dollar goes down. Please do try to find this article.

netrin:  everything you say certainly has merit.  it comes down to the fact that you see things in terms of an inflationist.  i, otoh, think we live in a boom bust cyclical society where you swing btwn extremes of inflation and deflation.  you think the central banks can continue to inflate by devaluing their currencies.  if you look at the stock mkt since 1929 as perhaps an indicator from a broad view you could be considered right. the inflation of the monetary base also argues in your favor.  so why won't everything except currencies continue to go up?

personally i think we've hit a ceiling in how much debt can be taken on.  i clearly am in the minority and could be wrong as the last 100 yrs of history argues against me.  perhaps i am stupid to bet against the current system of inflationary forces.  sometimes i question myself.

but looking back over the last 11 yrs with 2 stock mkt crashes and one ultimate housing bubble crash, i can't but help something is different this time.  as Rogoff and Reinhart argue "this time is different".  this is the contrarian viewpoint no doubt.  but when i look at whats happening in Greece and the other PIGS i don't think so.  who ever would imagine that a sovereign nation would have to consider selling off their islands to "allow" them to take on even more debt?  how insane and immoral is that?

look at the price of gold.  there is something seriously wrong. look at zero bound interest rates.  how sustainable is that?  look at the mountain of 1.7 T in excess banking reserves at the Fed.  why would banks hoard?  they don't think its worth it to lend the money out even tho they get a measly 0.25%.



it looks to me with the recent stock mkt plunge we're going into phase 2 of the financial crisis which never was really cured.  the ferociousness of the selloff is an indication of the gross imbalance our Fed/gov't cabal has built to an even greater degree since 3/09.  anyone in stocks now hoping for a reversal or anyone BTFD stands to get reamed big time just like the dip buyers back in 1930.

watch the gold price.  if it can continue to power forward then you'll be proven correct.  if it starts to drop, i would head underground asap.  i personally think Bernanke and the bankers realize they have to get the gold price down since leveraged investments are heading into gold and not the real economy as they would like.  the Fed can provide free cash to the system but they can't control where it goes.  i wish i could find that link to that article someone here on the forum provided about how the banks are complaining to Bernanke about the drop in the dollar b/c of alternative currencies such as btc.

OK, I'm just not comfortable calling monetary inflation a form of default, which is the only way I can interpret "defaulting on SS by artificially lowering the CPI". If for example Greece's austerity brings their budget into surplus (without hand outs) then there is no reason for Greece (or the EU) to default. But I do not expect that to ever happen. Never. I expect Europe will continue to provide loans that Greece can never repay, Europe will loosen it's stability pact (>2% inflation), and debt will increase.

Likewise but to a lesser extent for the US and PIIGS. I don't expect the US to balance its budget before some huge global readjustment (default, WWIII, gold standard, total monetization, ? ?).


True. But Switz and Scandinavia with ~40% debt/gdp can afford to devalue the franc and kroner(s) and will need to if they hope to trade with failing neighbors. They also retain the right to lock their borders; indeed Denmark and Switz already do customs inspections at the border despite Schengen agreements.

no, the examples i gave are where they are paying out less than they should or by cutting back payements.  it has nothing to do with debt monetization; it has to do with increasing austerity.  its going on all over the world.  look at Europe.

Switzerland is pulling out all the stops to devalue the Franc.  So far it hasn't been all that successful but it's definitely something they are trying to achieve.  Record CHF compared to other countries is very bad for their economy.

Well, it's exactly this way of thinking put the recession much prolonged. But there is nothing to blame, people should always seek for security when there is uncertainty. Unless saving has accumulated to a very high level, they dare not to spend again.

This careful and planned thinking is supported by Austrian Economists, if everyone in the society act like this, then we have a perfect stable economic system. But the problem is, the majority of people are not like this, they don't even know how to manage their personal economy. I looked around my friends nearby, none of them without a debt bounded on a house.

So, even you can handle yourself very well, we are all on the same planet, if most of the other guys got problem, you can not get out of it

OK, then by default you mean price inflation through debt monetization, right? The government will pay its debts with worthless paper. My vote (bet not choice) is that nearly all democracies will devalue their currencies and the few that don't (Denmark and Switzerland) are going to lock down their borders.

I love how the press talks about "the recovery" as though it is destine to happen.  I will believe in a recovery when I see a reason for demand to increase.

they are defaulting on SS by artificially lowering the CPI.  they're cutting Mcar benefits as well.  defense is being slimmed down.  look at NOC, RTN, LMT defense stocks.   they're telling a story.

my question to you is who does Bernanke pay homage to?  the people or to his banking handlers?  i say the latter.  therefore why would he destroy the asset side of the bank's balance sheets to the benefit of the ppl?

what currency is the elites billions if not trillions held in?  USD.  therefore why would his handlers allow him to destroy their wealth savings?

who enables the banks to do their dirty work?  the Fed.  therefore why would the Fed let the USD self destruct which is the Fed's only franchise product?

topping measured in dollars (and Euro, etc). I think we all agree. But the bet on the table is whether the Fed and central banks will continue to devalue their currencies or let the party stop cold turkey. Why do you think the Fed will stop printing money? Do you think the US will default on Social Security and Defense?

wow, that hurts.

i've grown up a saver and always will be.  i don't mind debt when necessary like for my mortgage and business but i've since paid both off given the crisis which has been debt driven.

you seem to be doubling down and i'd be careful given what i feel is a large topping formation since 2001.  we just can't assume anymore debt.

have you studied demographics?  we and China are getting much older and these elders are moving into the dependent state.  they also sell stocks and RE during retirement not to mention draw on SS and Mcar.  they'll be many fewer workers to support those dependents. 

did you see the labor participation rate this AM?

A tripple top breakdown...

If it will be DEFLATION, FEB still have lots of room to play around

What I'm fraid is that Inflation rate eventually pick up because of the raw material price rising, but no serious money were put into new hiring(only invest in machine/robots) thus jobless rate keep climbing. STAGFLATION is a dead end for any kind of  monetary policies

I think recent down trend is more of a psychological effect rather than fundamental, but sometimes fundamentals were also driven by people's mood, especially when most of the people havn't get out from the shadow of financial crisis. Actually their risk tolerance ability have improved. I believe QEs and stimulates already helped, but not enough and visible. People argue that they are not useful, but just a month after QE2 ended, the market looks like this

It's still difficult to explain to people that saving hurts economy

everything you say here is absolutely correct.  my only slight disagreement is the "flee to safety" part. 

i'd say its more like "forced to buy dollars by having to liquidate assets".  yours implies a choice; mine implies force.

this is the money quote.  the problem with the system as it exists today with bankers knowing when they're going to ramp liquidity AND when they're going to shut it off, means the rest of us shleps continually have to play catch up.  in other words; we never win.

In a mass selloff like today, just about everything gets liquidated as margin calls come in and people flee to safety.  Treasuries and the USD were about the only long positions that fared well today.  Interestingly, the Swiss Franc held up despite the gov't attempt to devalue the currency.

If we're heading for 2008 redeux, the miner stocks will be taken down with the rest of equities.  

i have confirmed tonite that we have a confirmed bearish primary trend change according to Dow Theory.  this is the first time we have seen this since the March 09 lows.  this is bad news and i would caution all commodity inflationists that a bear market means DEFLATION.

look at AEM a former gold stock darling.  absolute carnage.  NEM, ABX, and GG getting smacked as well.  none of the juniors are performing either.  this is a repeat of 2008 when they got destroyed.