Monday, January 24, 2011

THEN AND NOW

I grew up in the 60's, back then lots of families made do with one salary, and the mother could stay at home, raise the kids....perhaps later on getting a part time job.....the US $ was strong.

It wasn't hard to get a job, most recessions didn't last very long, 6 months on avg or less....there wasn't so much debt back then.

Technology and hosuing drove the economy into the 2000 top, FED policy in fear of Y2K threw gasoline on the fire. What began as a growing managable expansion ended in WILD speculation and over building of capacity.....debt beagn to grow but was still under control.

We had ENRON...we had WORLCOM, and we HAD INTEL (INTC) which now 10 years later is maybe 25% of what it was then....

FED didn't like slow down, but that is what heals for the next push, BUT instead FED(Greenspan) lowered FED FUNDS to then unheard of 1% and kept it there! INstead of healing they begot another, this time more wild speculative bubble (#2)....real estate....housing mortgage debt bubble.

Rather than let it heal, and take the pain so we could rebuild from the ashes, the FED again embarked on an even more insane gambit and lowered funds to 0%....and it's still there at 0% 2 years later!!!!

If the economy could stand on its own 2 feet, would rates be 0%? Would the tax cuts inacted to battle last bear (10 years ago) be extended another 2 years? WOuld another round of QE be needed? WOuld 20% of Americans need gov't assistance? Would the housing market still be barely off its worst levels of 2009?

We keep hearing of jobs growing, housing recovering, exports growing and GM rebirthing..etc.....so when will FED END THIS INSANE GAME? Where savers get nothing? Where speculation is fostered? Where margin debt as exploded again to new highs....where leverage is not a dirty word......my g-d haven't we learned anything?

SO adding even MORE DEBT to the system is the way to heal a bursted debt bubble?

But amidst all the pain and hurt on main street, there is a once in a lifetime rally on wall street....and HUGE bonuses are the rage again. And bullishness has come back to peak levels and beyond....and it only took barely 16 months to accomplish that.

Maybe they pulled a rabbit out of the hat, but not in any way I can understand. The US is now saddled with $14 TRILLION of debt and no end in sight.....how can that be good? and we are not adding in Medicare and Social Security some say could add $50 TRILLION more.

MOST States and cities are BILLIONS away from balancing their budgets, Municipal bonds have sold off sharply.....cuts have been announced, many police and fire fighters will be laid off.

SO who knows folks, paper assets may rise to the heavens.......on a wing, a prayer and a Ponzi scheme.

I have NO doubt, the actions of these foolish men, desperate to fool the people and maintain their POWER, will end badly.....what you see now is what seperates PHASE ONE from PHASE 2 of a secular bear market....thats my take....PHASE 3 is out there....waiting

Duratek

2 comments:

Anonymous said...

If the economy could stand on its own 2 feet, would rates be 0%? Would the tax cuts inacted to battle last bear (10 years ago) be extended another 2 years? WOuld another round of QE be needed? WOuld 20% of Americans need gov't assistance? Would the housing market still be barely off its worst levels of 2009?
The economy cannot stand on its two feet. We are still in a depression.Taxes will have to go up at some point. But they wont help. Another round of QE is a given so is another after that unless the congress or the bond market intervenes. Remember that countries run deficits until the bond market intervenes. Same in Greece. It will be the same in Japan. It will be the same for US. Not that QE will help the 20% of Americans you are talking about. QE only reaches wall street and they dont use it grow crops or otherwise use it for anything that increased GDP. they use it purely for speculation like oil futures, copper futures etc and you and me end up paying more at the pump. So QE is more taxation of the poor as the poor are hurt most by speculation in commodities.


We keep hearing of jobs growing, housing recovering, exports growing and GM rebirthing..etc.....so when will FED END THIS INSANE GAME? Where savers get nothing? Where speculation is fostered? Where margin debt as exploded again to new highs....where leverage is not a dirty word......my g-d haven't we learned anything?
No we havent. At least the Fed and Congress pretend all of that is "necessary".

SO adding even MORE DEBT to the system is the way to heal a bursted debt bubble?
Well do you have any idea how money is created in the modern monetary system? Since MONEY IS DEBT in our ponzi scheme they have to increase total debt to increase money supply or at least prevent it from falling. Since We The People have declined to into more debt the Congress and The Fed are going into debt for you. Dont worry their powers of inflation are dwindling. Soon they will realise the system is broken. Then that will lead to default of Hyperinflation. Either one will crush the dollar. You have plenty of time. Slowly convert dollar holdings/savings into other currencies. Pick currencies with low govt debt for example australian dollar. Technically now is a bad time but once the Aussie corrects it will be a good buy.

But amidst all the pain and hurt on main street, there is a once in a lifetime rally on wall street....and HUGE bonuses are the rage again. And bullishness has come back to peak levels and beyond....and it only took barely 16 months to accomplish that.
Short answer QE1, Suspension of mark to market, QE2.

Maybe they pulled a rabbit out of the hat, but not in any way I can understand. The US is now saddled with $14 TRILLION of debt and no end in sight.....how can that be good? and we are not adding in Medicare and Social Security some say could add $50 TRILLION more.
No rabbit sorry! Debt is not good but see my answer to previous question. Since money is debt they dont have a choice. Unless they change current monetary policies which by the way will have to happen.

MOST States and cities are BILLIONS away from balancing their budgets, Municipal bonds have sold off sharply.....cuts have been announced, many police and fire fighters will be laid off.
Governments take part in the asset bubble creation because they benefit from it. As house prices go up so do tax revenues. This leads to expansion of government, raises,bonuses, increases in pensions. When the bust comes they do the wrong thing and start shedding jobs. Its retarded. Which is better cutting retirement benefits that are unrealistic or cutting the police force? They should do the right thing and cut retirement benefits, no raises, cut salaries and keep everyone employed.


SO who knows folks, paper assets may rise to the heavens.......on a wing, a prayer and a Ponzi scheme.
Heaven wont be helping when Bernanke is forced to stop the printing press.

Anonymous said...

I have NO doubt, the actions of these foolish men, desperate to fool the people and maintain their POWER, will end badly.....what you see now is what seperates PHASE ONE from PHASE 2 of a secular bear market....thats my take....PHASE 3 is out there....waiting
Yes it will end badly but not just for the US my friend. Take a look at debt in Europe. How long will German taxpayers backstop the losers? How long will Japan be able to keep interest rates low? Japanese savings are way down now as the elderly retire. When the retiring Japanese become net sellers of Japanese bonds what will happen to interest rates and what will happen to the Yen? If you think 2008 was the worst you aint seen nothing yet!