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Anomalies have been with us for years like baseballs floating in the sky supported against the force of gravity by some mysterious power. Now some of these apparently irrational phenomena are taking more familiar forms - the baseballs are falling back to earth. For example:
1. The sustained rise in housing prices since 1986 and especially over the past 5 years brought the price of houses in many areas to heights that made us wonder how our children would ever afford to buy a house. How could the price of a basic necessity rise beyond the grasp of the next generation? And how could it be that home owners could essentially be paid to live in their houses every year for decades instead of housing being a cost? How could owning a home after all the costs of maintenance, repairs, insurance, mortgage, etc turn out to be a profitable enterprise year after year - the opposite of paying rent - because of a constant appreciation in the value of houses?
Answer: home prices are dropping and they will drop substantially further before this deflationary period is finished so that they will again be affordable for our children. Home ownership will become a cost center again, not a profit center, just like it was for our parents. Yes, eventually home prices will begin to increase gradually, but from a much lower level and only after people stop thinking about their housing costs as if they were an investment.
2. How can the price of oil be so much higher than the energy equivalent price of natural gas (a multiple of about 6)?
Answer: That is not a total anomaly since oil and gas are not really freely substitutable for each other. Nonetheless, oil is coming back toward 6 times gas and it may well go there or even lower before the next bull market in oil starts.
3. How can American political leaders starting with Johnson (and excepting only Clinton and Bush I) trash the federal budget, apparently on purpose in some cases (Reagan and Bush2), running up deficit after deficit, without it having any real world consequences for the U.S. dollar and without the American public apparently caring at all?
Answer: That whole program looks likely to change going forward and the process will not be fun as the country discovers that deficits eventually have consequences. The next administration will need to pump up this deflating economy with more deficit spending of nearly unimaginable proportions which will come on top of the absolutely unconscionable deficits and debt run up by Bush - essentially doubling the total of all prior deficits, in other words the national debt, in just 8 years. At some point the markets will punish the dollar and force the U.S. to put its fiscal house back into order. Sacrifices may be required by a disastrous runaway inflation just as has been the case with some famous South American and African countries that have tolerated profligate governments.
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This article has 27 comments:
congress has the power of the purse, but congress can respond to presidential requests.
I see Gerorge II as the real life Manchurian Candidate. With an Ivy League MBA he knows how to successfully run a business or run one into the ground. EVERY policy he has chosen has worked to run the country into the ground to the brink of financial destruction. Did he have help ? Sure.
Countries die from within, not from external attack. George II has gutted this country's trade, manufacturing, financials, military, and left us with debt. Mountains of unpayable debt.
Wake up and smell the coffee and the BS. Congress did not do this.
Former Fed Reserve Chairman Allan Greenspan made that statement before a primarily Democratic Congressional Committee seeking to put the blame on someone. The media chose to ignore the Greenspan statement.
The Presidential Candidate whose given name is:
Barack Hussein Obama is being advised by the person
Paul Adolph Volcker who planted the original seeds of the present crisis with his flawed theories which all economists espoused thereafter.
Next, if there are "mountains" of unpayable Debt then why is the Greenback rising? If the Debt is actually unpayable, the Dollar should be dropping like a ton of bricks. Why are other Nations buying this debt like there is no tommorow? I submit that the Debt is payable if the Government continues on its current course of owning part of every Financial Institution in the nation which in turn controls all industries in need of Credit. Socialism is the transition from capitalism to communism.
Wikipedia: Socialism, the Communist Manifesto, Karl Marx and for full names of both Candidate and Advisor: Barack Hussein Obama and Paul Adolph Volcker.
These are the facts, they are not taken out of context. This started with the Flawed Economics of one Paul Adolph Volcker and have led to the present Financial Crisis and movement from Capitalism to Communism via Socialism. I submit that the real Manchurian Candidate who guided economic policies to get to this point and is still around behind the scenes is Mr. Paul Adolph Volcker.
Whatever the policy that The President Elect espouses, he will need the backing of Volcker to get past the conservatives of both parties.
Greenspan followed Volcker's now "Tainted" economics and gave his blessing to George W's economic policies. He probably had a hand in formulating them. Congress went along because Greenspan endorsed them.
From Johnson we have The Great Society and the War on Poverty. Everything can be linked together to the present situation. The transitions relate only to changes in the heads of state, the actual power lies in the hands of the Economists and the various Heads of the Treasury. The two people who have and will continue to have more power than either the President or Congress will be Bernanke and Paulson, Paulson's replacement is expected to be a former protege at Goldman S.
BTW Burns, the Fed Chairman who was in office between 1970-1978 was born in the Ukraine.
The FACTS are that we left the Clinton years with a $120B surplus, and now are in disaster. The first treasury sec. wanted to devalue the dollar to help US manufacturing, of which there is none.
This admin allowed the levering of 5 investment banks way beyond what a commercial bank could do. The leverage was used to make bubbles, not produce economic value. Hence we are messed up.
The dollar is high because we sent the rest of the world into a tail spin, no other reason.
At best we will have a long, slow road back, engineered by very good Fed and Treasury secs.
I look today and don't see that the word investment has any meaning at all. Time to look for a small business, I guess.
They have everyone buffaloed. Now it will be our way or we will paint a picture so bleak that the nation will freak out.
Ever wonder why the Fed became so transparent about its projections and the various fed Governors ran around loose at the mouth? Some for, some against, yadda yadda. Everyone is united now. Gives the Fed more credibility.
The Toxic waste originated at the Investment Houses by firms like Goldman at which Paulson was the leader. No one even questions his role there.
One brief look at the past decades' change in income of the top 1/3 vs the bottom 1/3 shows the top tier has 10X the increase in income and pays 1/3 less taxes than the top 1/3 two decades ago. You probably believe the BS McCain is spouting, but IT ISN'T TRUE. It's campaign rhetoric.
"Paul Adolph Volcker who planted the original seeds of the present crisis" .........
Talk about revisionist history, Volker did the polar opposite of Greenspin and FIXED the 1970's problem. You must be getting your history from Red Chinese texts. Maybe Cuban.
George II is the living Manchurian Candidate. EVERY policy he has brought into being has hurt the USA. I stand by that statement. So do the facts.
There have been different parties in power during the past 28 years but only 3 Fed Chairman. The present one inherited the current situation.
Eliminating Bernanke leaves us with two. Of the two, Greenspan announced that he had been following a "Broken" Economic system just a few days ago. It was Greenspan who approved of the stimulus package introduced by GW. Without Allen's approval, Congress would have passed something different, I seem to remember a massive fight about the level of the tax on dividends. The other is Paul Volcker who is advising Obama.
If anyone is trying to obfuscate history, its your current attempt. I don't have the means to change what is in the wikipedia nor do I care who created the initial Income Tax system which now includes exemptions and tax loopholes introduced by both parties over the years.
One thing I do find curious is that you started posting actively about 6 weeks ago and most of your posts deal with the either the Failed Policies of George W. Bush or a bashing of corporations in general. Are you here to Change, Change, Change?
Most of the people at Seeking Alpha have very ardent views on Stocks, they give opinions, provide statistics, write articles. You don't. Your history is available to anyone who wishes to view it.
I started my little program of flushing out those who wish to use Seeking Alpha just about a week ago when I noticed a sudden influx in new posts from people who had never used it before. Most of the new posts don't deal with stocks but they do deal with Politics and attempt to divert by ridiculing anyone whose views don't coincide with Change, Change, Change.
Its not just here, the Motley Fool has its own watchers as well.
Please Wikipedia what was done by whom. Its all there.
All I have presented is a time line and the people active within it. It happens to coincide with actual history.
Deal with it. But after the election, I don't expect anyone will hear from you again. Your Job will be over.
The "graduated income tax was adopted".
George II is the living Manchurian Candidate. EVERY policy he has brought into being has hurt the USA. I stand by that statement. So do the facts.
Remember that the voting record of these Democrats is publically recorded. The Executive Branch can only propose, passage requires the Majority in Congress.
Of course you stand up for Axelrod, you are one of the ones that has shown up in the last week. Last Saturday to be precise. And just like axelrod who included "redistributying" the wealth and applying it to the GOP, you seem to agree with nonexistent facts as well.
To quote axelrod: " The GOP is nothing but a bunch of greedy B'tards who do not want to pay their fair share."
Is that what you stand for? Or are you going to say I took it out of context. Its his entire first paragraph, he does not seem to realize that the "Rerpublicans" are the GOP.
Please read the comments of the one who calls himself "OctoberFaith".
"Post"
Just giving it another shot.
mountains of unpayable debt.
...
perhaps you and I right now are talking about two different things paul.
...
sorry moving on.
I enjoy your work, but you have this tendency to let your politics to get in the way of a good story.
The Reagan administration only produced federal deficits because of a liberal DEMOCRAT Congress. Left to his own devices, Reagan would have had balanced budgets after the fiscal mess he inherited ended. And he spent the money to modernize our defense, which is one of the few legitimate roles of government in our society.
As for oil, the bulk of it is used as a transportation fuel. Therefore, we can easily substitute natural gas for most of the oil we consume. It is a superior fuel for a variety of reasons. It is also 40% less expensive than gasoline.
Actually, I'm looking forward to the next 4 years. You big government guys are going to get your wish with a Democrat president and a virtually filibuster proof Democrat Congress. So we're going to get a big dose of your Liberal politics. Let's hope it works out better than the Carter years.
When it doesn't, maybe we can find another Reagan to put humpty back together again.
That theory didn't work either because it turns out that the American public actually likes the programs that the government spends money on. Each and every program has its powerful and/or broad based constituency - even those awful earmarks.
Anyway, I believe that Reagan knew very well that the Laffer Curve was a joke and did not mind at all inflating the budget deficit. Reagan is a false god of the GOP, in my view. He was a great orator but actually a very ineffectual president with one important exception: he shifted the country away from a union stranglehold on the corporate cost structure.
That shift has continued ever since Reagan and has now unfortunately gone too far. This election will reverse the shift of wealth away from working people that Reagan began, assuming Obama is elected.
Incidentally, for those who thing Reagan brought down the Soviet Union through militiary spending, that is wrong. What brought it down, aside from its own corrupt and inefficient system, was low oil prices. It is true that Reagan's CIA helped engineer those low oil prices.
History will always view Reagan highly because of the very deep recession he inherited and from which the US emerged regardless how it was done.
What is your take on the contention that Obama is the new JFK? I watched the Cuban Missile Crisis on TV and Nikita Khruschev's shoe pounding at the UN.
On an orator, close but as a leader, I pass on him.
That's what should happen. But there is a key difference that amounts to the classic elephant in the room. Our debt is in our own currency, not someone else's. Asian and Latin American currency crises came because they had dollar-denominated debts that couldn't be paid off in baht or pesos.
The US is not going to repay its national debt. That would be a complete reversal of decades of US fiscal policy (it started before Johnson). To pay back our national debt would require decades of living below our means, higher taxes, and underconsuming. This will not happen voluntarily. Instead, we will create money to pay off our debts, which will massively devalue the USD, raising prices (e.g., all that oil we won't be able to import any more), with an end result of underconsumption and becoming a lot poorer as a nation.
On Nov 01 11:20 PM Jim Kingsdale wrote:
> Reagan campaigned on a combination of lower taxes, higher military
> spending and lower deficits -using the laughable Laffer Curve to
> justify what George I correctly called "vudoo economics." But the
> Reagan insiders at the time were specifically trying to achieve huge
> budget deficits on the theory that a big enough deficit would be
> the only thing that could "stop the Democrats from spending money."
>
>
> That theory didn't work either because it turns out that the American
> public actually likes the programs that the government spends money
> on. Each and every program has its powerful and/or broad based constituency
> - even those awful earmarks.
>
> Anyway, I believe that Reagan knew very well that the Laffer Curve
> was a joke and did not mind at all inflating the budget deficit.
> Reagan is a false god of the GOP, in my view. He was a great orator
> but actually a very ineffectual president with one important exception:
> he shifted the country away from a union stranglehold on the corporate
> cost structure.
>
> That shift has continued ever since Reagan and has now unfortunately
> gone too far. This election will reverse the shift of wealth away
> from working people that Reagan began, assuming Obama is elected.
>
>
> Incidentally, for those who thing Reagan brought down the Soviet
> Union through militiary spending, that is wrong. What brought it
> down, aside from its own corrupt and inefficient system, was low
> oil prices. It is true that Reagan's CIA helped engineer those low
> oil prices.
You will end like I did, with god coming down to mess up my languages huh?
love = control = greed : sex = oil = fear
control : greed
oil : fear
love : sex
you can only have one path or the other, huh?
You will end like I did, with god coming down to mess up my languages huh?
love = control = greed : sex = oil = fear
control : greed
oil : fear
love : sex
you can only have one path or the other, huh?