The Scariest Chart Ever 177 comments
January 20, 2009
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If this doesn't give you pause, nothing will. From East Coast Economics:
Here is a chart of borrowing by U.S. banks from the Federal Reserve through Dec. 2007:
Now, same chart through December 2008:
Anyone still think there are not some rough patches down the road?
Editor's note, 1/29/09: The original version of this post indicated that the charts show 'federal borrowing', and not borrowing by banks from the Fed. That has been corrected here.
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This article has 177 comments:
1. Paulson has made sure that GS and all off-the-books affiliates are solvent and protecting the dollar.
2. Congress, President Obama, and Bernake have solidarity in cutting spending and protecting the dollar.
3. China + Japan love USA treasuries and will buy all they can, at ever-increasing premiums.
4. The Fed has plenty of defaulted MBS papers to totally cover these debts with, anyway.
So, what's the problem?
The cost of the bailout ($4.6165 trillion) exceeds the inflation adjusted cost of the Marshall Plan, New Deal, S&L Bailout, Nasa's Lifetime Budget, the Korean, Vietnam, and Iraq wars and also the Lousiana Purchase, combined ($3.92 trillion).
boingboing.net/2008/11...
> Some additional context that's been previously reported:
>
> The cost of the bailout ($4.6165 trillion) exceeds the inflation
> adjusted cost of the Marshall Plan, New Deal, S&L Bailout, Nasa's
> Lifetime Budget, the Korean, Vietnam, and Iraq wars and also the
> Lousiana Purchase, combined ($3.92 trillion).
Salient comparable which is omitted: World War II.
Debt as a percentage of GDP ended up at %120 in 1946, which is about where we'll be when the bailout is complete.
The world in 1946 looked shaky, but things turned out fine, as it happened.
The world in 1946 looked shaky, but things turned out fine, as it happened. "
Yeah? We made stuff to sell to the rest of the world in 1946. What do we sell them now?
"The world in 1946 looked shaky, but things turned out fine, as it happened."
Yes....know why?
We were not bombed to hell and back like Europe or Japan. Our manufacturing base was the envy of the world. Everybody bought stuff from us. We had battle hardened vets ready to take on the job of rebuilding America's economy. We did not have a bunch of Wall Street Pansies pushing MBS's, CDO's, or CDS's. We made REAL STUFF! And we had cheap, plentiful oil. We had better values, morals and ethics.....a real sense of community...no PC tribalism.
Now....do we have any of this today?
Even though the charts look hyperinflationary, its just that the old non-existent funny money *non-performing debt* is being replaced by new non-existent funny money *US-issued treasury debt.*
Those left with the obligation to pay will be ___ (fill in the blank, if you know).
On Jan 20 05:27 PM Sentinel wrote:
> Crocodilian says...
>
> "The world in 1946 looked shaky, but things turned out fine, as it
> happened."
>
> Yes....know why?
>
> We were not bombed to hell and back like Europe or Japan. Our manufacturing
> base was the envy of the world. Everybody bought stuff from us.
> We had battle hardened vets ready to take on the job of rebuilding
> America's economy. We did not have a bunch of Wall Street Pansies
> pushing MBS's, CDO's, or CDS's. We made REAL STUFF! And we had
> cheap, plentiful oil. We had better values, morals and ethics.....a
> real sense of community...no PC tribalism.
>
> Now....do we have any of this today?
>
> Croc....your comments are a croc.
We make plenty of "real stuff". The problem, in fact, is that we make so much "real stuff", so cheaply, that everyone has about as much of it as they need for the time being.
The world in 1946 was terrifying, and far more challenging than today. We lurched out of WWII into the Cold War very quickly -- we faced a Soviet Army in the millions, and had to run very large defense budgets throught the 1950s (%10 of GDP or more)
In Europe and Japan, people were homeless, and starving. Our problems today are an excess of shelter and obesity.
Britain was on rations through 1953. The US faced the challenge of what to do with the millions of servicemen coming home, for whom there were no jobs. The expectation in 1946 was that the nation would lurch back into Depression . . . labor unrest was more or less a given; take a look at the state of the steel industry in 1948-49 to get a flavor of the challenges.
2009 has challenges, but they don't objectively compare with 1946.
On Jan 20 05:34 PM a believer wrote:
> Yep and at $4.6 billion we are closing in on 40% of GDP.
>
> Even though the charts look hyperinflationary, its just that the
> old non-existent funny money *non-performing debt* is being replaced
> by new non-existent funny money *US-issued treasury debt.*
>
> Those left with the obligation to pay will be ___ (fill in the blank,
> if you know).
whenever you look back on things you say things turned out fine. there was little consumer debt after wwII - today it is mind blowing. the masses had nothing and were committed to building something better than the depression life.
2009 we want to maintain what we have. the future is not viewed as being brighter than today. it is not the same as 1946 - and the results will be different. it is more like 1929. our economy will reset to a new level. this will cause some hardship. we will not enjoy the prosperity of the past.
On Jan 20 08:56 PM The hand wrote:ened."
>
> whenever you look back on things you say things turned out fine.
> there was little consumer debt after wwII - today it is mind blowing.
> the masses had nothing and were committed to building something better
> than the depression life.
>
No, "the masses" were far less content than nostalgia suggests.
People came home from the War, and the mood in the country turned dark, very quickly. Labor and race relations were terrible. We have a rather glowing view of the immediate post-war world, but that's nostalgia. The late '40s and early '50s were bitter, and there was a profound insecurity that we might not be able to compete with the Soviets (seems comical now that we know how their regime ended, but that wasn't the way it seemed in, say, 1949).
> 2009 we want to maintain what we have. the future is not viewed
> as being brighter than today. it is not the same as 1946 - and the
> results will be different. it is more like 1929. our economy will
> reset to a new level. this will cause some hardship. we will not
> enjoy the prosperity of the past.
We have far more in 2009 than we did in 1946. In 1946, medical care was cheap, because there wasn't much of it . . . for many common conditions (like heart attacks) there was little more than supportive care.
As for today, its fair to say that much of our "prosperity of the pas [eight years]" was an illusion, paid for by the dollars we borrowed from the "right now".
There will be some pain as these debts are reckoned-- that's clear. But the point of looking to history is to get a sense of how the economy has been able to work off debt levels, and we have.
The differences of today compared with 1946 are not only camparing our production base but also our political base.
In those days MOST of congress had US interests at heart. Now most of them know the empire is dieing so many have pledged thier loyalty to Israel. This cannot be denied so people please don't even try to disagree. We only have a few that take thier oath of office seriously.
On Jan 20 05:27 PM Sentinel wrote:
> Crocodilian says...
>
> "The world in 1946 looked shaky, but things turned out fine, as it
> happened."
>
> Yes....know why?
>
> We were not bombed to hell and back like Europe or Japan. Our manufacturing
> base was the envy of the world. Everybody bought stuff from us. We
> had battle hardened vets ready to take on the job of rebuilding America's
> economy. We did not have a bunch of Wall Street Pansies pushing MBS's,
> CDO's, or CDS's. We made REAL STUFF! And we had cheap, plentiful
> oil. We had better values, morals and ethics.....a real sense of
> community...no PC tribalism.
>
> Now....do we have any of this today?
>
> Croc....your comments are a croc.
If we make so much stuff then why do we have to borrow upwards of 2 billion a day to finance the trade deficit? Dont confuse where you buy stuff ie wallmart with where you make stuff ie.China.
After four years of war induced deprivation there was pent up demand for consumer goods which had been rationed during the war. Couple that with the high savings levels that resulted from the rationing, the fact that we were the only nation not in tatters after the war, a good work and moral ethic in general, a hyper industrial manufactoring capacity and you have the unique American experience of world supremecy post ww2.
Now this may bother you but heres the nasty. Not only are things going to get worse due to deleveraging with high unemployment etc. but we have to establish a high savings rate again to fuel the recovery. Now when your in a severe recession anyway and have to add on top of that a decrease in your current consumption level even more to get some savings, you can see the immense gravity of the situation.
Debt is not an option so dont even THINK ABOUT IT! Debt is our current problem and deleveraging is correcting it as fast as the government will let it, not that it will be an option anyway, because the rest of the world is "gonna get religion" about issuing debt to a people who cant pay it back.
On Jan 20 09:13 PM Crocodilian wrote:
>
1. Health care products - ABT, JNJ, MMM, XRAY, PFE, MRK.
2. Computer software - ORCL, MSFT, IBM, plus a million smaller companies
3. Advanced industrial products - GE, EMR, MMM, ETN
4. "Cool" brands - NIKE, KO, PEP, YUM, MCD, music/movie industries
5. Airplanes/defense tech - BA, LMT, RAY, NOC
6. Computer/communication... hardware - AAPL, TXN, INTC
You might think that our banks will pull us down, but the only things worse than American banks are everyone else's banks. Japanese banks haven't had decent profits in 20 years. European banks went in for subprime/bad CDOs/crooks like Madoff at a level that no one over here did.
Does the comparison in the charts reflect that in fig. 2 all of the data from fig. 1 is insignificant (flat line)??!
Thumbs up for yes, thumbs down for no.
Sorry to be a pain!
On Jan 21 01:00 AM occdude wrote:
>
> If we make so much stuff then why do we have to borrow upwards of
> 2 billion a day to finance the trade deficit? Dont confuse where
> you buy stuff ie wallmart with where you make stuff ie.China.
Is an Apple iPod made in China an American product or a Chinese one?
Is an Acura made in Ohio a Japanese car, or an American one? Is a Ford assembled in Hermosillo an American car, or a Mexican one?
This is a world economy, and we've moved the the low value add processes to the cheapest places. The trade deficit will be reflected in exchange rates, over time. The US remains a good place to manufacture high value add processes.
Trade deficits are ultimately self-correcting through exchange rates.
>
>
>
> After four years of war induced deprivation there was pent up demand
> for consumer goods which had been rationed during the war. Couple
> that with the high savings levels that resulted from the rationing,
> the fact that we were the only nation not in tatters after the war,
> a good work and moral ethic in general, a hyper industrial manufactoring
> capacity and you have the unique American experience of world supremecy
> post ww2.
>
Doesn't change the fact that debt was %120 of GDP, the rest of the world was broke, we had no jobs for the returning soldiers, we had a three million man Soviet Army in Eastern Europe, we had European and Japanese Occupations of war-devastated and starving nations.
The "work and industrial ethic" that you speak of was actually ferociously bitter labor antagonism.
A small list of strikes give some idea of what labor relations in the US were like in the 1940s:
# Bituminous Coal Strike (1943, U.S.)
# Philadelphia Transit Strike (1944, U.S.)
# Kelsey-Hayes Strike (1945, U.S.)
# New York City Longshoreman's Strike (1945, U.S.)
# Montgomery Ward Strike (1945, U.S.)
# Oil Workers' Strike (1945, U.S.)
# Bituminous Coal Strike (1946, U.S.)
# Electrical Manufacturing Strike (1946, U.S.)
# General Motors' Strike (1946, U.S.)
# Pittsburgh Power Strike (1946, U.S.)
# Railroad Strike (1946, U.S.)
# Steel Strike (1946, U.S.)
# R.J. Reynolds Tobacco Company Strike (1947, U.S.)
# Telephone Strike (1947, U.S.)
# Longshore Strike (1948, U.S.)
# Hawaiian Dock Strike (1949, U.S.)
People generally aren't aware of just how bitter the labor situation was in the US in this period . . .
Non-borrowed Reserves at Depository Institutions have finally turned positive in the week of Dec 17 after getting into negative territory in Jan of 2008. When Non-borrowed Reserves become a negative number, it means that banks as a whole are insolvent.
The banks made a lot of bad investments, resulting in a lot of consumed resources without production. Instead of losing money and going bankrupt on these investments, we lust filled the hole they had. The banks are not lending much money and trying to increase their reserves, which constricts the money supply since the majority is made up of loaned money backed by 10% reserves. We're about to experience the market adjust for the same amount of money with less production and goods, once the banks start to loan again. Shortly after they start loaning, the fractional reserve will begin to compound and we will really start to feel some inflation. Once it is loaned out, the $700billion can turn into as much as $7trillion.
We're not anywhere close to the beginning of a recovery. That is years away. We are in the first year of the depression.
If this were the Great Depression, it would be January 1930, just a few months after the stock crash. 1932 at the latest.
We are no longer on a gold standard, we use a fiat currency.
We are burdened by much higher taxes.
Our business must comply with an ever growing list of costly regulations.
Monopolies in some of our best markets including medicine, software, and entertainment, are being held through extended copyright and intellectual property laws.
Our military budget is huge and our army spread with no direct threat to the US.
Consumer debt is atrocious.
We are over $10trillion in debt.
We will soon have $1trillion deficits.
The outlook doesn't look so good.
I lost a good job, due to the greedy banksters and greedy oil companies.
I say let them fail. $700 billion could have paid off every sub-prime mortage.
TARP is the biggest scam to hit the taxpayer ever. Several of you have mentioned Madoff, social security is the biggest ponzi scheme.
So what do they have to do? Well, we are a consumer led country..Not too much of what we consume is actually made here...most of its made in China.. They need to cut taxes to every single class level..incl the rich. Tough choices will have to be made from Obama as to whether or not the finanical sector should be temporarily nationliazed, or the banks will fail or get split up..Its an inevitable downward spiral..and there is too much momentum to stop it.
Capitalsim will ring free again! hopefully, next time it will be more responsibiliy
When it rose from 0 looks a lot, but the truth is it's not.
> I really don't know why people are comparing this to the post war
> era.
Because its a most comparable moment in financial/economic history. One of the things that's being said is that the levels of debt that the Federal Government will assume are unique.
The point of examining the world in 1946 is that we've seen these debt levels before --accompanied by other world challenges-- and dealt with them successfully.
First we need to think about basic human earthly needs: water, food, sewage, waste, temperature control, shelter, education, and travel for all the inhabitants of the world. This requires a whole new perspective and investment agenda to accomplish.
Armaments, what else?
On Jan 20 05:27 PM JohnAl wrote:
> Yeah? We made stuff to sell to the rest of the world in 1946. What
> do we sell them now?
The point you're trying to make is falling on deaf ears because the logic falls apart when you follow the money (debt). The debt part of the debt/GDP in 1946 was, for the most part, money spent in the US that stayed in the US. Today, that is not the case. Over half of the proposed stimulus and all of the previous one represents cash payouts to consumers who will send many of those dollars overseas. (You have been shopping lately, haven't you?). Other trillions are going to banks and institutions; much of which (we don't really know how much) will also go overseas to make good on counterparty liabilities.
"2009 has challenges, but they don't objectively compare with 1946"
Not yet.
On Jan 21 07:09 AM Crocodilian wrote:
> On Jan 21 03:21 AM Dakk wrote:
But what concerns me more is what is the total burden of debt on the US taxpayer? Municipalities and States are, I believe, far more indebted today on a per capita basis than they have ever been. While that burden does not directly impact the US treasury borrowing (yet) or the dollar it is a burden that impairs our ability to grow out of this crisis. In comparing era's shouldn't we be looking at the total taxpayer burden?
On Jan 20 04:16 PM Stephen Webb wrote:
> Some additional context that's been previously reported:
>
> The cost of the bailout ($4.6165 trillion) exceeds the inflation
> adjusted cost of the Marshall Plan, New Deal, S&L Bailout, Nasa's
> Lifetime Budget, the Korean, Vietnam, and Iraq wars and also the
> Lousiana Purchase, combined ($3.92 trillion).
>
> boingboing.net/2008/11...
...that was called "sarcasm."
> 3. China + Japan love USA treasuries and will buy all they can,
> at ever-increasing premiums.
> ...
> So, what's the problem?
Just how home prices would always go up, up, up!
Over and over, It is clear to any behaviorist that humans never learn the big lessons of life, and as the shrinks always correctly say...."if you keep doing something over and over that you say you don't want or like, you must be getting something of value to you out of that continued behavior".
It is not always clear just what we are truly getting out of it, but it is clear that it is very important to us for things to appear "just fine" as much as possible. And, how very human.
On Jan 20 05:27 PM JohnAl wrote:
> "Debt as a percentage of GDP ended up at %120 in 1946, which is about
> where we'll be when the bailout is complete.
>
> The world in 1946 looked shaky, but things turned out fine, as it
> happened. "
>
> Yeah? We made stuff to sell to the rest of the world in 1946. What
> do we sell them now?
On Jan 20 09:34 PM Dookie wrote:
> Alot of good projections here. I have to agree with the pessimests
> though.
> The differences of today compared with 1946 are not only camparing
> our production base but also our political base.
> In those days MOST of congress had US interests at heart. Now most
> of them know the empire is dieing so many have pledged thier loyalty
> to Israel. This cannot be denied so people please don't even try
> to disagree. We only have a few that take thier oath of office seriously.
I do agree with the political sentiment (or at least what I read) of that era. After Great Depression and such a horrendous war we had to unite or DIE. That created responsible citizenship as well that were hatched initally in the Roaring Twenties (much like today, speakeasies, getting drunk and laid partying on debt).
Today the political apparatus answers to the debt holders, China, select oil producing nations. While the model really worked well in restraining hostilities during the boom times, the hostilities will flare up during the bust times. Will we avoid WWIII? Just a guess, but no. I suspect a global war that goes nuclear but in certain proportions.
Actually of interest in the testimony of John of Patmos in Revelations, 200 M combatants is specifically mentioned and 1/3 of mankind perishing. But the interesting part of that is John says that we still don't learn even after that event. What a strange societal evolutionary process man is on, of consolidations through wars. The conflicts grow much larger as does the peace in-between global wars. In-between, there is money to be made and nor am I losing a wink of sleep over it. Let's face it, we could have been born a poor Korean farmer encircled by 1,000 cavalry of Ghengis Kahn. Or simply born in North Korea for that matter.
On Jan 20 09:34 PM Dookie wrote:
> Alot of good projections here. I have to agree with the pessimests
> though.
> The differences of today compared with 1946 are not only camparing
> our production base but also our political base.
> In those days MOST of congress had US interests at heart. Now most
> of them know the empire is dieing so many have pledged thier loyalty
> to Israel. This cannot be denied so people please don't even try
> to disagree. We only have a few that take thier oath of office seriously.
On Jan 21 08:41 AM Sailorman wrote:
> We have a lot to rebuild and develop! We need to think about saving
> this earth and its resources. Recycling, replenishing, and renewing.
>
>
> First we need to think about basic human earthly needs: water, food,
> sewage, waste, temperature control, shelter, education, and travel
> for all the inhabitants of the world. This requires a whole new perspective
> and investment agenda to accomplish.
I do realise all too well that when USA sneezes Canada (and the rest of the world) catch a cold. Right now the USA has heart mumurs, and the rest of the globe need triple by passes.
Who would've thought the Republican mantra would be to spend instead of to cut taxes and spend less....
With respect to Clinton and Bush the American people need to stop glorifying the Presidency and start some war criminal investigations and impeachments. The whip must be cracked to at least show the whip exists.
Nice!!!! My investment analyst, Patrick Kirts, alerted me to this chart last summer and it truly freaked me out. I hope more people realize the effect on inflation going forward as well as the death of our currency.
Beware of historical comparisons (and timeframes).
Like JC, we need a modern day Mesiah to redeem the world of its sins, specially the USA who commited the gravest sins for the last 30 years - - - over-indulgence.
Like JC, we need someone to nail on the cross. GWB did not qualify to be nailed, He is the one next to JC (the robber or thief).
In the end, after all the gut wrenching cycles of hopes and despairs we are going to go thru in the future; we will all realize that we really have to pay penance first and start depending on ourselves and not the Mesiah in order for us to be able to get out of this rot.
Let us not lose sight of what we still have and don't destroy ourselves thru despair like what happened during the great depression of the 30's and 40's which created Hitler and WWII.
On Jan 21 01:33 PM zeppo wrote:
> 65 million years ago the Earth got smacked with an asteroid that
> practically destroyed the planet and every living creature. But
> in the end things worked out just fine!
>
> Beware of historical comparisons (and timeframes).
Hard to see how historical ignorance is better than a relevant comparable. This economy has had, in living memory, debt levels of %120 of GDP.
We paid it down (trough debt was about %30 of GDP during the Carter Administration)
We're going to have debt levels of %120 of GDP again, before we're done with our financial crisis.
So: Isn't it useful to know that we have, previously, negotiated those debt levels successfully?
Yes we have certain advantages....we are probably on of the most enrepreneurial countries on the planet and can find opportunity in each situation, but nowhere near the extent we would need to create UNREAL and CRAZY amounts of wealth, required to pull us out of this abyss. In addition to this, we do not manufacture many of the consumer goods found in our establishments (as mentioned in another blog) and the labor is outsourced! money does not circulate on an individual level as much here. In other words, corporate establishments get what is known as quantities of scale and cheaper products en masse. Small business has no chance against this (other than personalized service and local patronage). Well.......can you think of many sectors that are not institutionalized in a corporate sense (I can only think of propietary, service and product based individuals here).
We are also a war economy. Why are companies like lockheed and boeing doing so well? Due to the fact that they get massive U.S and global government contracts for defense and weapons creation (this is how Hitler gave Germany the economic boom before wwII and got support from his blinded people by reducing unemployment). The civilian airlines are but a small slice of the overall revenue.
Reduced government spending is probably the single most effective way for a government to reduce spending and subsequent spending. Our government sectors have truly expanded in all areas the last ???? years. Here is a link, please take a look and analyze the data www.fedspending.org/fp...
Don't get me wrong I love my country, but we seem to be getting the cold shoulder for some time now and grass roots are coming from corporate lobbyists. We are distracted from it all due to work, obligations, entertainment, etc,,, We are working harder and longer to pay off theives and corporate execs that use creative accounting techniques and are seemingly exempt from our justice system, while we tire and stress more than ever. Enough said, just think of this.........if our debt is only increasing, how will the government afford to pay retirement to a generation that follows the baby boomer generation?
Gold Barron, you are absolutely correct in my opinion
On Jan 21 03:14 PM willy wonka wrote:
> Too many factors and not enough time to overhaul the economic infrastructure
> are at play. The fact that we have saturated the world with our dollar
> does not help. In addition the more we print, the more we suffer
> the consequences of inflation and realize that fiat money is no good.
Why are our Treasury auctions four times over-subscribed? The folks bidding at those auctions don't seem to think that "fiat money is no good", do they? They could trade those dollars for lots of other assets, real or financial, but they're not doing that. Why not?
A dollar today buys twice as much oil as it did a year ago. It buys twice as much land in California. It buys twice as many shares of Apple-- so far, I'm not seeing any inflation anywhere: where do you see it?
On Jan 20 05:07 PM Crocodilian wrote:
> On Jan 20 04:16 PM Stephen Webb wrote:
On Jan 21 03:20 PM Grumpy D wrote:
> So many comments but no one has mentioned the real difference from
> the post-war situation, namely the much different demographic picture.
> The baby boom that started in 46 was a key factor in the long period
> of growth which followed the war. Now, however, we are looking at
> a period in which this enormous group enters retirement... and many
> of these retirees have essentially zero private savings. This is
> why the coming decades are so frightening.
This is a very good point, Grumpy D.
Demographics are a big part of the economic profile of a nation. If you look at Japan, a very big part of their consumption drought is that they're aging so rapidly.
What's important to note about the US is that even though we are older than we were, we're still much younger than other "Northern" nations. Many of the other OECD nations are actually shrinking in population. Through births and immigration, we're still growing. We also have the ability to reduce the age of the nation by permitting more immigration.
The question of whether absolute or relative age is more significant in looking at our massive debts is an open question.
I don't think any participants in this useful debate argue that the citizens of the U.S. have not dug themselves into a huge hole after decades of instant gratification thanks to excessively easy credit. Nor do I see commenters trying to argue against the idea that much of the prosperity of the past decade has been illusory with a lot of useless jobs created in the financial, housing and retail sectors.
The debate, as I see it, is whether these excesses necessarily lead to a global economic collapse on the order of the Great Depression or whether the admitted excesses can be rectified on a more gradual basis. The challenges are huge, but the antidotes, current and prospective, are massive and without close precedent.
The subject chart is not "the scariest ever." It is absolutely essential to counteract the collapse in monetary velocity, as another commenter has noted, and is evidence that we did learn something from policy errors that exacerbated the Great Depression. Great skill will be required to withdraw all that credit in a timely manner so as to prevent a serious inflation problem down the road, but at least the strategy should not be faulted. I agree with Crocodilian that it is useful to know that the country has previously been successful in dealing gradually with a huge debt overhang.
From a purely economic standpoint, the jobs lost by millions of soldiers after the end of WWII were just as useless as the jobs now being lost by millions of people in the financial and over-stored retail sectors. They will need to be retrained by companies in sectors that will play a more legitimate role in our country's future growth as we seek to become less dependent on foreign sources of energy.
I see reasons for hope that much of our current economic distress is the result of a shock so severe that it radically altered the behavior of all economic participants. Declines in housing values, $4 gasoline, tighter credit standards, and then the bottom falling out of the stock market caused everyone to panic and suddenly start hoarding cash. But gas is now much cheaper, credit has certainly loosened for business, and anyone with extra cash on hand is getting virtually no return on it. As the panic gradually subsides, consumers who have marginally improved their balance sheets will marginally increase their spending, banks will marginally ease their lending standards, businesses will marginally add to inventories, emerging countries will marginally increase their exports, and on and on. A recovery will be underway, not a robust recovery anytime soon but enough of a recovery to put Armageddon on hold.
There is a price to be paid for all this governmental meddling in the rate of future growth that is now possible, but the idea is to accept a lower rate of future growth in return for minimizing the amplitude of economic cycles that are inevitable. I won't argue with anyone who insists that the long-term cost of excessive government is too high a price to pay.
I see a stock market that has largely discounted Armageddon. If a less dire scenario unfolds, there are great opportunities to be found in today's stock market.
On Jan 21 02:27 PM Crocodilian wrote:
>
Get ready to buy gold.
On Jan 21 04:08 PM zeppo wrote:
> That one measurement of 120% is the same but most every other measure
> is different and so is the broader landscape, as others have already
> pointed out. This is not to say that things won't out nicely, but
> rather that using this narrow comparison to make a strong forecast
> is a weak argument. I hope you're right!
I reviewed the broader landscape, at length. With the exception of demographic issues, the situation in 1946 was substantially more challenging than it is today. Just consider the difference between the Chinese communists coming to power in 1949, and compare to al Qaeda. Mao was a lot more threatening than bin Laden.
We had some seriously tough years-- there's a reason that Truman left office as deeply unpopular as W (not necessarily Truman's fault, but the period 1946-1952 did not feel good to Americans).
Also, in 2014, would you rather buy a Chevy for $25,000 (in today's dollars) or a Toyota for $100,000 (in today's dollars). Imagine that...Walmart China will have to start a "Buy Chinese" ad campaign because everything is made in the currency-manipulating USA. And they thought they were soooo smart, dumbing down the next generation of first-worlders with leaded toys and melamine-laced powdered milk for candy bars. Of course, I have learned Mandarin just to hedge my bets...
"Here is a chart of federal borrowing"...it appears that the author is implying government borrowing rather than bank borrowing from the Fed, which the chart represents; though I could be mistaken on his intent.
If so, it's hilarious that the fear-mongering author of this article did not even copy the content from another blogger correctly.
Everyone chillax and stop herding - if we can just make draconian cuts in entitlement benefits (Medicare/Social Security), which cost us $800B last year (hint: the bailouts, just like the cost of the Iraq occupation, will be a joke in the long run), we just may survive.
The US model does an amazing job of harnessing human potential, despite the short run pain it can cause. Our paranioa makes us work hard and die younger than countries with socialized medicine (who spend far less per capita on health care), but it sure as hell beats the USSR in the 1970's and 1980's. We just need to have enough children to outvote the pill-hungry, me-me-me baby boomers and buy up the excess supply of assets left when they have departed...or open up the borders. Who of them will want to terrorize the poor decrepit US at that point?
either way i love this country and hope whatever happens may it work out for the good of man
Anyway, it's not really the debt level, it's who we owe it to that matters. Japan has had much higher debt/ GDP - not such a big deal, they have a huge savings rate so they just owe it to themselves. Not so us. What this suggests it that the government is just delaying the inevitable - consumption has to fall, it's going to be painful, and this says we're going to try to pay it on the installment plan versus lump sum. But pay we will
we maxed out our credit and cant pay now we get a new card to pay and have nothing more to give except more credit
This will probably lead to a complete restructuring of global money at some point even after yet another possible artificial recovery from recession. Some new kind of money will have to replace national printing press fare and debt will have to be absolved with some sort of global jubilee. This may be years away, but Ross Perot wasn't elected to nip this debt thing in the bud in the early '90s; and now it can't be fixed. He should have run in this November's election with his charts just to say I told you so!
Then I just cried.
On Jan 21 11:50 AM iThinkBig wrote:
> Pornography, fiscally engineered paper, frozen hamburgers, wheat,
> steel. I think I just named the major ones. Sarcasm off.
On Jan 21 04:48 PM CrackingUp wrote:
> The continuation of our Ponzi scheme seems obvious...borrow from
> the rest of the world until our currency is nearly worthless, which
> will allow us to run massive current account surpluses as our manufactured
> goods will have become dramatically more competitive. In twenty years,
> the hyperinflation will reveal the very negative real yields of the
> debt issued in 2009.
>
> Also, in 2014, would you rather buy a Chevy for $25,000 (in today's
> dollars) or a Toyota for $100,000 (in today's dollars). Imagine that...Walmart
> China will have to start a "Buy Chinese" ad campaign because everything
> is made in the currency-manipulating USA. And they thought they were
> soooo smart, dumbing down the next generation of first-worlders with
> leaded toys and melamine-laced powdered milk for candy bars. Of course,
> I have learned Mandarin just to hedge my bets...
>
> "Here is a chart of federal borrowing"...it appears that the author
> is implying government borrowing rather than bank borrowing from
> the Fed, which the chart represents; though I could be mistaken on
> his intent.
>
> If so, it's hilarious that the fear-mongering author of this article
> did not even copy the content from another blogger correctly.
>
>
> Everyone chillax and stop herding - if we can just make draconian
> cuts in entitlement benefits (Medicare/Social Security), which cost
> us $800B last year (hint: the bailouts, just like the cost of the
> Iraq occupation, will be a joke in the long run), we just may survive.
>
>
> The US model does an amazing job of harnessing human potential, despite
> the short run pain it can cause. Our paranioa makes us work hard
> and die younger than countries with socialized medicine (who spend
> far less per capita on health care), but it sure as hell beats the
> USSR in the 1970's and 1980's. We just need to have enough children
> to outvote the pill-hungry, me-me-me baby boomers and buy up the
> excess supply of assets left when they have departed...or open up
> the borders. Who of them will want to terrorize the poor decrepit
> US at that point?
On Jan 21 11:50 AM iThinkBig wrote:
> Pornography, fiscally engineered paper, frozen hamburgers, wheat,
> steel. I think I just named the major ones. Sarcasm off.
>
>
> On Jan 20 05:27 PM JohnAl wrote:
The sky is not falling, and more importantly I really believed it will take a long time to pull out of this. I don't believe that either, the world moves faster now. We are, like it or not, a bi polar global community.
Our highs will be higher, our lows lower and in general we'll be more volatile.
On Jan 20 09:13 PM Crocodilian wrote:
>
I would say that regulations mostly pay for themselves. If anything, we need more regulations. If we had had more transparency we might not have had such a problem with the toxic investments floating around.
Regarding taxes, marginal taxes were much higher in the post-war period. The argument can be made that high marginal (emphasis on marginal) taxes are good for the economy. Low taxes encourage speculation. High marginal taxes encourage steady growth and investment as the way to wealth is to keep the money in the company and grow the business. Larry Beinhart has a series of articles on this.
Put another way, those are Fed assets, not liabilities.
The Worldwide DEBT is the problem.
The best solution for the present economic crisis would be a REBOOT or restart of the entire debt system for the ENTIRE WORLD.
1. A data base listing ALL DEBT, government, business and personal needs to be created. The list would need to list the debt and debt holder with a bank that could make an accounting of the debt. Included would be all national debt of all nations, all mortgages car notes and credit cards for individuals. All outstanding bond and other debt for corporations, The idea is to list ALL DEBT of any kind owed.
2. Every government on the planet would need to call a special session of its legislature.
Using the same authority that governments have to use or create FIAT CURRENCY the legislatures and Central Banks need to authorize the creation of ACCOUNT CREDIT in an amount equal to all the listed debts in the world.
3. The Various governments and Central Banking Systems then need to make an accounting change equal to the debt in the form of an ACCOUNT CREDIT or CREDIT zeroing out ALL THE DEBT in the entire world, and crediting all debt-holders in the world.
The following day the economy of the entire world would restart and the Stock Markets of the world would react to the new renewed capital in the banking systems, the Capital now available to restart all business and the disposable income to the individual people would restart and grow the retail sectors and the manufacturing sectors of the entire world.
Some have commented that if this was done in a very short time the exact problem would be repeated. My answer to this idea is history does recycle and repeat itself but some do learn and avoid making the same mistake. Europe learned after WWII and has avoided a major repeat for more than sixty years.
The other objection has been the possible inflation that would result would weaken the dollar. My answer to the weakened dollar is it may be a GOOD thing to help our ability to export manufactured products and also make our manufactured products more competitive in our own country. Jobs are needed for our own citizens especially the bottom forty percent.
Allen Charles Report
allencharlesreport.blo.../
On Jan 20 05:27 PM JohnAl wrote:
> "Debt as a percentage of GDP ended up at %120 in 1946, which is about
> where we'll be when the bailout is complete.
>
> The world in 1946 looked shaky, but things turned out fine, as it
> happened. "
>
> Yeah? We made stuff to sell to the rest of the world in 1946. What
> do we sell them now?
The debt as a % of GDP will be over 350%!!!
Please illustrate where you got your numbers.
Total U.S. economic debt is over $50 Trillion, with GDP on pace to come in under $14 Trillion; thus 350%.
Secondly, 1946 was near the end of the downturn that started in '29.
This will take a longer time period to come out of than anyone would like,
but it has taken years (of excess credit) to get here.
> There may be reasons to worry about the Federal balance sheet, but
> that chart is not one of them. That chart shows the amount that banks
> have borrowed from the Federal Reserve. What it shows is that, during
> the credit crisis, banks have been less willing to lend to each other,
> and hence they are borrowing from the Fed instead.
>
> Put another way, those are Fed assets, not liabilities.
If I have a $14 Million receivable, that is recorded as an asset. But if I can collect only $9 Million, then I just lost $5 Million. The banks borrowed this much money, and yes, the receivables are recorded at the FED as assets.
But the banks used that money to lend bad mortgages and make quick money on MBS. Credit card defaults and Commercial MBS have not even begun to rear their ugly heads. Once they do, the FED will write off half of their "assets."
BTW, I'm a retired governmental accounts receivable manager and really did write off $9 million in government receivables. Now, take my story of a small state government agency and multiply it by...
... ah, just send it to infinity.
Out of control national and personal debt due to purposeful elitist political choices in gov't and business, failed gov't oversight due to criminal corruption, left wing socialism toward illegal immigration, elimination of protective trade tariffs, political/business/mil... corruption as a tolerated way of life, youth corruption and brainwashing by schools, entertainment and media.............. and the worst of all........everything in our society is determined now by the pressure of personal, gov't, business, educational ,and international politics..... what to do, wear, read, write, think, see, buy, vote, love, hate...............eve... All is now is subservient to this era of runaway sociopolitical influence unprecedented in our history that has grown unchecked by national laws meant to protect but are ignored without penalty, so that it degrades and dishonors all honor and dignity of those who came before. We are now not even a faint shadow of what our founding fathers wanted us to be.
Our total adherence and slavery to the power, corruption and mind control of this cancerous "Death Row of Politics" will be the final nail in the American coffin as I do not see anything ahead that will control or reverse it in time to save us.
We are 5% of the world's people producing over 20% of the world's manufactured goods. This fact is indisputable.
Not towels, and shoes, and toys...
Airplanes and computers and media content and cars ( OK, Toyotas and BMW's) and lots of other things that are made with low labor content and very high productivity.
I agree with the point of the original chart and the notion that the US economy and the world economy are in for very rough times due to the deleveraging of the financial system...
But this argument doesn't need the above falsehood to be true.
Our annual exports are about $1.15 Trillion, about the same as China's $1.2Trillion and much more per capita. It's the imports and consumption that are our problem.
This misinformation is a perfect example of the notion that if something is repeated enough times people think it is true.
We've got serious problems, but the fog of this falsehood won't help solve them.
On Jan 20 05:27 PM JohnAl wrote:
> "Debt as a percentage of GDP ended up at %120 in 1946, which is about
> where we'll be when the bailout is complete.
>
> The world in 1946 looked shaky, but things turned out fine, as it
> happened. "
>
> Yeah? We made stuff to sell to the rest of the world in 1946. What
> do we sell them now?
No country in the history of the world has borrowed, taxed or spent its way to prosperity. And I do not see that changing now.
On Jan 20 11:24 PM sr9web wrote:
> yikes! All of us WWII buffs should remember that in 1946, the U.S. produced 50% of the world's industrial output. Today, the U.S. and China combined produce barely 30%, with the U.S being the 'junior partner.' Also, in 1946, U.S. corporate taxes paid 50% of the annual federal revenue. Compare that with today where 68% of our economy is based on "consumption," and U.S. corporations pay 17% of the federal tax revenue, and 67% of U.S. Corporations paid no taxes at all. What do we have? . . . . a consumer-based economy where the consumer gets the shaft from the tax structure . . . from the banks . . .from the insurance companies . . .from the prescription drug companies . . from the oil companies . . and from our domestic auto producers. No wonder the consumers (i.e. wroking men and women) are collapsing under the weight of their financial burdens. We're pulling the whole train.
or click this link......
www.itulip.com/forums/...
I have to go change my shorts now.
On Jan 20 05:27 PM Sentinel wrote:
> Crocodilian says...
>
> "The world in 1946 looked shaky, but things turned out fine, as it
> happened."
>
> Yes....know why?
>
> We were not bombed to hell and back like Europe or Japan. Our manufacturing
> base was the envy of the world. Everybody bought stuff from us. We
> had battle hardened vets ready to take on the job of rebuilding America's
> economy. We did not have a bunch of Wall Street Pansies pushing MBS's,
> CDO's, or CDS's. We made REAL STUFF! And we had cheap, plentiful
> oil. We had better values, morals and ethics.....a real sense of
> community...no PC tribalism.
>
> Now....do we have any of this today?
>
> Croc....your comments are a croc.
ie nobody twisted their arm to succumb to the loan tactics used by idiot originators. The fact that investors bought this garbage makes them even bigger idiots than than the home bubble chasers. The psychology of these 10% slackers foreclosing on these idiot loans, and the concommitant bank capital erosion, has put credit availability and home pricing into a tailspin which will be difficult to recover from until pricing reaches equilibrium and securitization is once again available. This has all snowballed into the biggest bubble burst of the last 100 yrs, irrespective of the fact that 90% of our good people are (or were)paying their mortgage and managing their bills just fine. The flippers, naive bubble chasers, and most of all greedy originators (not to mention wallstreet) all deserve our indigation and ire, the whole lot of 'em because as they say it takes two to tango.
On Jan 21 03:21 AM Dakk wrote:
> I really don't know why people are comparing this to the post war
> era. This is just the beginning and we still have a long way to go.
> The full effects have yet to hit in and the economy is still largely
> in shock. We are still attempting to prop ourselves up through inflation,
> which will work at first. However, it isn't until the new money begins
> to circulate that the effects are felt, and banks are still shaky
> with lending so the new money has yet to be lent out.
>
> The banks made a lot of bad investments, resulting in a lot of consumed
> resources without production. Instead of losing money and going bankrupt
> on these investments, we lust filled the hole they had. The banks
> are not lending much money and trying to increase their reserves,
> which constricts the money supply since the majority is made up of
> loaned money backed by 10% reserves. We're about to experience the
> market adjust for the same amount of money with less production and
> goods, once the banks start to loan again. Shortly after they start
> loaning, the fractional reserve will begin to compound and we will
> really start to feel some inflation. Once it is loaned out, the $700billion
> can turn into as much as $7trillion.
>
> We're not anywhere close to the beginning of a recovery. That is
> years away. We are in the first year of the depression.
> If this were the Great Depression, it would be January 1930, just
> a few months after the stock crash. 1932 at the latest.
>
> We are no longer on a gold standard, we use a fiat currency.
> We are burdened by much higher taxes.
> Our business must comply with an ever growing list of costly regulations.
>
> Monopolies in some of our best markets including medicine, software,
> and entertainment, are being held through extended copyright and
> intellectual property laws.
> Our military budget is huge and our army spread with no direct threat
> to the US.
> Consumer debt is atrocious.
> We are over $10trillion in debt.
> We will soon have $1trillion deficits.
>
> The outlook doesn't look so good.
and abused by scheming originators...
On Jan 22 04:01 PM User 342557 wrote:
> we're where we are because investment banks et al used 40-1 leverage
> to invest in the 10% slackers that bought overvalued homes with ridiculous
> terms thinking they were getting a BARGAIN(now that's laughable)
> Now the slackers are walking or not paying due to debt overburdens
> that they willingly walked into
> ie nobody twisted their arm to succumb to the loan tactics used by
> idiot originators. The fact that investors bought this garbage makes
> them even bigger idiots than than the home bubble chasers. The psychology
> of these 10% slackers foreclosing on these idiot loans, and the concommitant
> bank capital erosion, has put credit availability and home pricing
> into a tailspin which will be difficult to recover from until pricing
> reaches equilibrium and securitization is once again available. This
> has all snowballed into the biggest bubble burst of the last 100
> yrs, irrespective of the fact that 90% of our good people are (or
> were)paying their mortgage and managing their bills just fine. The
> flippers, naive bubble chasers, and most of all greedy originators
> (not to mention wallstreet) all deserve our indigation and ire, the
> whole lot of 'em because as they say it takes two to tango.
>
> On Jan 21 03:21 AM Dakk wrote:
Do you understand the concept of baseline power? Didn't think so. Baseline power is that power that you can count on so much that you don't think about it...ever....24/7.
Flip you lightswitch....it comes on....at 2pm and at 2am
Turn on your TV.....it comes on at 12pm and at 12 am.
The ability for all the green tech in the world cannot sustain now or in the future the baseline power requirements to run one advanced industrial country much less the world.
The only "Green" power supply that can do that is nuclear. And you "greenies" are into that sort of thing.
Don't get me wrong....I love solar and wind and geothermal and hydro. We need much more of it. But combined they will only be a PART of the solution not the answer.
Here's a link for you and others that puts M1 into perspective with M2 and a reconstructed M3.
It is indeed scary.
www.shadowstats.com/al...
On Jan 22 03:38 PM User 342535 wrote:
> Todd; You should at least be correct with your alarmist charts. Your
> charts show COMMERCIAL BANK BORROWINGS FROM THE FED. If you want
> to post something really scary then post the chart of the recent
> changes in velocity of M1. We are in a liquidity trap -- I haven't
> seen one of those since about 1933.
On Jan 21 01:40 AM najdorf wrote:
> occdude/sentinel: It's a pretty common trope that America used to
> make stuff and now it doesn't. This idea is nonsense. Let's make
> a list of what America still makes better than anyone else in the
> world:
>
> 1. Health care products - ABT, JNJ, MMM, XRAY, PFE, MRK.
> 2. Computer software - ORCL, MSFT, IBM, plus a million smaller companies
>
> 3. Advanced industrial products - GE, EMR, MMM, ETN
> 4. "Cool" brands - NIKE, KO, PEP, YUM, MCD, music/movie industries
>
> 5. Airplanes/defense tech - BA, LMT, RAY, NOC
> 6. Computer/communication... hardware - AAPL, TXN, INTC
>
> You might think that our banks will pull us down, but the only things
> worse than American banks are everyone else's banks. Japanese banks
> haven't had decent profits in 20 years. European banks went in for
> subprime/bad CDOs/crooks like Madoff at a level that no one over
> here did.
www.youtube.com/watch?.../
On Jan 20 05:27 PM JohnAl wrote:
> "Debt as a percentage of GDP ended up at %120 in 1946, which is about
> where we'll be when the bailout is complete.
>
> The world in 1946 looked shaky, but things turned out fine, as it
> happened. "
>
> Yeah? We made stuff to sell to the rest of the world in 1946. What
> do we sell them now?
.... Former Treasury Secretary Paul O'Neill was told "deficits don't matter" when he warned of a looming fiscal crisis.
O'Neill, fired in a shakeup of Bush's economic team in December 2002, raised objections to a new round of tax cuts and said the president balked at his more aggressive plan to combat corporate crime after a string of accounting scandals because of opposition from "the corporate crowd," a key constituency.
O'Neill said he tried to warn Vice President Dick Cheney that growing budget deficits-expected to top $500 billion this fiscal year alone-posed a threat to the economy. Cheney cut him off. "You know, Paul, Reagan proved deficits don't matter," he said, according to excerpts. Cheney continued: "We won the midterms (congressional elections). This is our due." A month later, Cheney told the Treasury secretary he was fired....
If anyone says deficits matter, just fire them. Problem solved.
On Jan 20 05:27 PM JohnAl wrote:
> "Debt as a percentage of GDP ended up at %120 in 1946, which is about
> where we'll be when the bailout is complete.
>
> The world in 1946 looked shaky, but things turned out fine, as it
> happened. "
>
> Yeah? We made stuff to sell to the rest of the world in 1946. What
> do we sell them now?
>
> Capitalsim will ring free again! hopefully, next time it will be
> more responsibiliy
Because hope has worked so well the past few years to control abuses at banks, the MBS CDO CDS rating agency markets, and mortgage broker market??
research.stlouisfed.or...
The graph is misleading and meaningless because the FED changed how this was measured in 2008. If you scroll down the page it explains the changes made in 2008. You'd think they'd adjust for that or something or not publish the graph as it's meaningless because it measures different things in different years.
Willi
Unless your family happens to be at the receiving end of the munition's glide path. Then it's a funeral.
Claiming that something bad is "good" for the economy is short sighted at best. Research Frederic Bastiat and the fallacy of the broken window.
Think about someone who lost everything in a tornado and has to replace it. Sure, that boosts the GDP, but the person isn't better off. Instead of owning a house and a bank account they own a house (the bank account gets spent rebuilding the house).
You can be fairly certain that given the choice they would rather have both the house and the bank account.
If this sort of thing is what anyone suggests is the way to boost our economy, then why don't they get the ball rolling and burn their house down tonight? Make sure to leave the car in the garage so you lose that too.
The bottom graph extends the X axis (timeline) by a year. The Y axis changes scale and you can see it now peaks at around 700 billion dollars. That's why the rest of that chart looks virtually flat now. The highest previous peak was only about 1% of the current peak.
On Jan 21 01:50 AM Jackson Cash wrote:
> I apologize in advance, but I agree with a previous poster about
> seeing the numbers:
>
> Does the comparison in the charts reflect that in fig. 2 all of the
> data from fig. 1 is insignificant (flat line)??!
>
> Thumbs up for yes, thumbs down for no.
>
> Sorry to be a pain!
On Jan 20 05:34 PM a believer wrote:
> Yep and at $4.6 billion we are closing in on 40% of GDP.
>
> Even though the charts look hyperinflationary, its just that the
> old non-existent funny money *non-performing debt* is being replaced
> by new non-existent funny money *US-issued treasury debt.*
>
> Those left with the obligation to pay will be ___ (fill in the blank,
> if you know).
On Jan 21 12:10 AM TTT wrote:
> Just print more money to borrow more money. Simple as that.
On Jan 20 05:27 PM JohnAl wrote:
> "Debt as a percentage of GDP ended up at %120 in 1946, which is about
> where we'll be when the bailout is complete.
>
> The world in 1946 looked shaky, but things turned out fine, as it
> happened. "
>
> Yeah? We made stuff to sell to the rest of the world in 1946. What
> do we sell them now?
On Jan 21 01:40 AM najdorf wrote:
> occdude/sentinel: It's a pretty common trope that America used to
> make stuff and now it doesn't. This idea is nonsense. Let's make
> a list of what America still makes better than anyone else in the
> world:
>
> 1. Health care products - ABT, JNJ, MMM, XRAY, PFE, MRK.
> 2. Computer software - ORCL, MSFT, IBM, plus a million smaller companies
>
> 3. Advanced industrial products - GE, EMR, MMM, ETN
> 4. "Cool" brands - NIKE, KO, PEP, YUM, MCD, music/movie industries
>
> 5. Airplanes/defense tech - BA, LMT, RAY, NOC
> 6. Computer/communication... hardware - AAPL, TXN, INTC
>
> You might think that our banks will pull us down, but the only things
> worse than American banks are everyone else's banks. Japanese banks
> haven't had decent profits in 20 years. European banks went in for
> subprime/bad CDOs/crooks like Madoff at a level that no one over
> here did.
On Jan 23 10:37 AM dividendmachine wrote:
> Want to "stimulate" the economy?
>
> 1) Pass a law that the first 10,000 of dividend income is TAX FREE.
> That will give incentive to move out of cash and into dividends for
> ALL americans and will caus a sharp rise in the stock market ,especially
> to blue chip dividend payers
>
> 2) Now "subsidize" new hiring BY giving EVERY business in America
> small or large a 2000 dollar TAX CREDIT for every NEW hire in 2008
>
>
>
>
> 3) replace the unemployment benefits paid out with JOBS that pay
> 40,000 but require the jobless to become part of crews which volunteer
> at youth centers in their towns and help out the less fortunate.Each
> person will be able to use the"special skills" they possess to contribute
> and those who claim to have no special skills can do menial tasks
>
>
> 4) CUT every federal program's budget and EVERY social security ,welfare
> or entitlement program by 1%
>
> 5) Make internet gambling LEGAL by requiring all website to buy a
> license from the US and pay .25% of their reported profits to the
> Treasury
>
> 6) Legalize prostitution like it is in Nevada in each state but put
> in health rules and like gambling charge for licenses and .25% of
> their profits
>
> 7) Since we are ready to close Gitmo lets take many of our jailed
> killers that we are spending hundreds of millions annually to house
> and feed and lets give them the option to be sent to be dropped into
> Afghanaistan and let them run loose over there.
>
> 8) To thse countries who have defaulted on theirdebts to us for each
> million dollars they owe us send them so many "prisoners" who would
> rather live there in freedom then here in captivity.Each prisoner
> would be given his choice
>
> Of couse this is not politically correct but its REALLY correct
> Yeah? We made stuff to sell to the rest of the world in 1946. What
> do we sell them now?
We've got Britany, Paris, and all the sheople that exist only to maintain and follow them. They'll make good fuel.
We've got way too many boomers who are useless spoiled douchebags. They'll make good fuel.
We've got wat too many bank managers, brokers and politicians. They'll make good fuel.
We've got Nascar and all those sheople....
From all I know, the Federal Government and the States (i.e. the people of the USA) own immense parts of the American continent, Alaska, off-shore coastal areas, with proven natural resources of every imaginable kind, from rare earths, metals to fossil fuels. Mountain areas with huge potential for hydro electricity, geothermal, land for cultivation, forests and so forth.
Leaving environmental, tourism and related issues aside for a moment, where and how do these assets show up in the balance sheet of the US of A Inc? Do they? Are they factored in the (still relative) strength of the Dollar?
There one agonizes over the monumental debt; the liabilities; but what about these equally monumental latent assets? Or do I miss something?
Grateful for some edification, opinions. Thank you
(The Tax Foundation has them <A HREF="www.taxfoundation.org/...">here</A>.)
We make plenty of "real stuff". The problem, in fact, is that we make so much "real stuff", so cheaply, that everyone has about as much of it as they need for the time being.
Again, pile of croc. We make cars that our neighbors do not want to drive for $70 per hour, and those employees are worth about $14 per hour on the global market. Bailing them out is plain stupid. We make houses no one wants. Those are the two biggest ticket items we make and we are scewed on both fronts. What we have produced is a generation of kids who are self-centered, self-absorbed who want it all now.Saving? They have no concept.
>
> "Debt as a percentage of GDP ended up at %120 in 1946, which is about
> where we'll be when the bailout is complete.
Actually, total debt as a percentage of GDP is over 300% today, approaching 400%. The previous peak was a tad under 300% immediately prior to the Crash of '29.
1946 was on the low side, due to the near-complete elimination of personal debt, due to the prior decade of depression and the war.
But the picture Todd chose to present is misleading. Look for the huge spike in debt for WWII -- where is it? It's not there because this is a chart of ONLY Federal Reserve debt, not Treasury debt, not consumer debt, not corporate debt.
However, if you put all these together, the picture is still of a debt tsunami of historic proportions -- just nothing quite as hopeless as the representation made by a single chart showing only one part of the debt picture.
US/Europe is going into the dustbin for a generation.
Today, we are a debtor nation and the U.S. dollar has lost its reserve currency status since Middle East and Venezuelan oil can be purchased in currencies other than the dollar. The U.S. dollar stopped being supported by gold reserves in 1971.
The only constant between now and 1946 is that we still have the world's most sophisticated military industrial complex and no nation would dare to take a chance to choose sides against us.
On Jan 20 05:07 PM Crocodilian wrote:
> On Jan 20 04:16 PM Stephen Webb wrote:
On Jan 21 12:10 AM TTT wrote:
> Just print more money to borrow more money. Simple as that.
Joshua,
You are probably right that "capitalism will ring free again", simply because everyone in America is a voluntary immigrant or the direct descendant of one. (Including the Native Americans; there were lots of people who stayed in Siberia.) So we're a people of risk-takers.
However, your hope that "it will be more responsibly" is a fatuous one. It is absolutely inimical to capitalism that it be "responsible". In the first place, human beings are basically conniving thieves, in the second the incentives implicit in capitalism are entirely stacked toward self-dealing, and in the third places one and two are made for each other. That is, capitalism is the "natural" economic system for homo sapiens.
I'm sure that most of us reading will be compost by the time that the next big blow up happens; the "improve it through regulation" team of capitalism's endless Rugby scrum will carry the day for a couple of decades. But eventually the "home" team of freebooters will turn the tide as they always do, by dangling the seductive illusion that "you too can be RICH!" in front of the folks they'll be raping.
Things will not get better until human nature changes, and by golly, that's not going to happen before we immolate ourselves.
On Jan 21 05:19 AM joshuaodonnell wrote:
> The next 4 years will be crucial to determining where the country
> will go economically... If the financial system continues on a downard
> spiral, we will go into another great depression, however the govt.
> does not want this to happen.(atleast we dont think it does)...
>
> So what do they have to do? Well, we are a consumer led country..Not
> too much of what we consume is actually made here...most of its made
> in China.. They need to cut taxes to every single class level..incl
> the rich. Tough choices will have to be made from Obama as to whether
> or not the finanical sector should be temporarily nationliazed, or
> the banks will fail or get split up..Its an inevitable downward spiral..and
> there is too much momentum to stop it.
>
> Capitalsim will ring free again! hopefully, next time it will be
> more responsibiliy
Notice that the charts don't tell you the duration of the bank borrowings. Was it overnight lending, 7 days, 30-years or what? My guess is it's a mix, but primarily short-term lending possibly against liquid Treasury securities. I'm also wondering if the data shown by the chart includes all lending by the Fed, including lending by all the "special lending facilities," since I've read somehwere that total lending by the Fed with that included is actually on the order of 6-7 trillion.
It's not clear yet whether any mortgage-related bank collateral is going to recover or lose more value. It depends on whether the U.S. government ever gets its act together and bails out consumers, especially homeowners, with low-interest, long-term loans to convert excess mortgage debt to more tolerable long-term non-mortgage debt in order to rescue upside-down homeowners and lenders on a fair basis and for other purposes, to stimulate the housing market. If not, the currently insolvent banking system remains insolvent, bank failures skyrocket, and there's an avalanche of consumer and business bankruptcies. The bank regulators and the FDIC will own a huge number of banks and deposits. In that case also, many loans by the Fed via special lending facilities might fail, if much of the ever-revolving bank collateral proves to be mortgage-related. Then perhaps the U.S. government will need to borrow money to lend to the Fed to prevent it from going bust.
The correct, perhaps the only, good solution (fair, fast-acting, long-lanting, effective) to the mortgage/credit/housin... crises is direct federal lending, since the lending sector is so badly broken, not federal borrowing and spending. My greatest fear is that the only solutions that will be attempted are throwing trillions more at the banks and government spending while leaving the consumers and businesses broke.
How many future generation's of wealth has been drug out on the chopping block and at risk??
I know that question is utter speculation, however I think we are many more than the silly 2 or 3 (gen x's, y's, and z's) that is tossed around...
I don't see the US able to pay any of this off, and those that created this mess will be long gone when the you know what hits the fan...
Wow, that is just terrible, what let-down today's leadership is mortgaging 100 years of the future today!
On Jan 23 07:58 PM Tiberius wrote:
> Jackson Cash: in answer to your question, just look at the numbers
> on the Y axis (left side). They are kind of hard to read, but you
> can read them still. The top chart shows a peak at 8 billion dollars
> or so.
>
> The bottom graph extends the X axis (timeline) by a year. The Y axis
> changes scale and you can see it now peaks at around 700 billion
> dollars. That's why the rest of that chart looks virtually flat now.
> The highest previous peak was only about 1% of the current peak.
>
>
>
>
>
> On Jan 21 01:50 AM Jackson Cash wrote:
> on these investments, we lust filled the hole they had. The banks
that's one heck of a freudian slip.
victory!
It's not that the debt was so high, but the GDP was so low.
One's the GDP start increasing, the debt evaporated. That was simple.
The worst are the gold commercial with those British a-holes. Jesus.
( for the many lovers of mixed metaphors among commentators I offer the alternative sentences;-
'while the present house of cards was being hatched'
'while the present tower of greed and corruption was being dug'
'while the incestuous union of government and finance was being consummated'
On Jan 21 12:36 PM 00Billy wrote:
> Once upon a time Canada had a higher per capita debt ratio...now
> I can finally look down my nose at the socialists to the south. j.king
>
>
> I do realise all too well that when USA sneezes Canada (and the rest
> of the world) catch a cold. Right now the USA has heart mumurs, and
> the rest of the globe need triple by passes.
>
> Who would've thought the Republican mantra would be to spend instead
> of to cut taxes and spend less....
>
> With respect to Clinton and Bush the American people need to stop
> glorifying the Presidency and start some war criminal investigations
> and impeachments. The whip must be cracked to at least show the whip
> exists.
>
On Jan 21 12:54 PM Lee Eugene Munson wrote:
> Todd,
>
> Nice!!!! My investment analyst, Patrick Kirts, alerted me to this
> chart last summer and it truly freaked me out. I hope more people
> realize the effect on inflation going forward as well as the death
> of our currency.
Silver is also found in many consumer products and is also used as an inflation hedge for similar reasons. But to put the supply in perspective, if you were to take all of it ever mined in the world to date and make a solid cube out of it.. it would occupy the space of a large house. No more.
On Jan 27 12:26 AM PeterG wrote:
> Gold is such shit. One day everyone is going to wake up and realize
> that there's gold everywhere and it's useless. The shit is everywhere
> - computers, pawn shops, and CHOCOLATE CAKE. Are you telling me the
> dude with the rolled gold chains at the flea marker it going to dominate
> the world after a giant fall global out of some kind? HELLL NO! The
> dude with the guns, women, oil, and food is. He'll give two shits
> about gold.
>
> The worst are the gold commercial with those British a-holes. Jesus.
>
>
>
On Jan 21 02:24 AM mkreisel wrote:
> Todd, the chart might look scary, but borrowings from the Fed by
> US banks have actually dropped to $562 billion after peaking at $725
> billion during the week of Nov 19.
>
> Non-borrowed Reserves at Depository Institutions have finally turned
> positive in the week of Dec 17 after getting into negative territory
> in Jan of 2008. When Non-borrowed Reserves become a negative number,
> it means that banks as a whole are insolvent.
>
>
High taxes encourage political rot and corruption as it becomes good business to open lobbying firms and become entrenched in the government to protect assets from taxation.
The high marginal taxes create a slave worker class and a parasticial ruling corrupt class that can avoid the taxes or receive the taxes workers pay. The ruling class gives a small percentage of the tax reciepts to the poorest 40% in various handouts and keeps them completely ignorant thus cheaply earning and manipulating their political support while keepign the majority of the taxes paid by the worker/slaves.
The regulations pay for themselves fromt eh POV of the ruling elite who can use the tools of regulation to harrass competition and keep smacking the upper middle class back down the ladder. This is why the gietners and IMF workers of the world ignore tax laws while if we tried it we'd be in prison.
On Jan 22 02:30 AM neutrino23 wrote:
> I have to object to those above complaining about high taxes or onerous
> regulations.
>
> I would say that regulations mostly pay for themselves. If anything,
> we need more regulations. If we had had more transparency we might
> not have had such a problem with the toxic investments floating around.
>
>
> Regarding taxes, marginal taxes were much higher in the post-war
> period. The argument can be made that high marginal (emphasis on
> marginal) taxes are good for the economy. Low taxes encourage speculation.
> High marginal taxes encourage steady growth and investment as the
> way to wealth is to keep the money in the company and grow the business.
> Larry Beinhart has a series of articles on this.
Approximately 16 million men and women served in the US Military during WW 2. Thats a huge chunk of people serving the war and most of them out of the country.
On Jan 20 05:07 PM Crocodilian wrote:
> On Jan 20 04:16 PM Stephen Webb wrote:
On Jan 23 10:46 AM Haxnbauer wrote:
> HELLO!!! That is not a chart of Federal Borrowings!!!. The print
> is tiny but, as has been pointed out, it is a chart of BANK borrowings
> from the FEDERAL RESERVE. Is Todd Sullivan being misleading on purpose,
> by accident, or is he just a sloppy idiot?
On Jan 20 06:35 PM Crocodilian wrote:
2009 has challenges, but they don't objectively compare with 1946.
>
You explain how the Americans came out of the recession, but you muddy the water by bringing up the labour strife of the 40s.
The labour strife of the forties was born of the sacrifices of WWII. The men went to fight, the women learned to weld. Regular people sacrificed regular and luxury commodities for the war effort. People "sacrificed" their disposable income by buying US bonds to cover the war effort. There is also no doubt that those working in factories at home worked overtime to provide for the war effort.
Labour strife was over fair pay, and an eight hour day, One could argue that the labour strife of the forties created the middle class, and gave the middle class the time to spend the money they made. Once could also argue that it was union gains in the forties that created the wealth and relatively easy living 50's.
But the other factor that brought the American economy out of the depression after WWII, again, brought up by you, is that the rest of the world was in shambles. It was only America, and Canada who had production capabilities still intact which enabled domestic consumption subsidized by exports of our products to other nations rebuilding.
We assisted the other nations in rebuilding and financed that rebuilding. There was so much that was gained by both the American and Canadian economies after the destruction of the second world war that we had a phenomenal post war boom. Including a baby boom.
Those conditions don't exist today. We are in a baby bust. American infrastructure is crumbling, and the rest of the world is the producer and financier of America's consumer economy.
You also fail to address another condition created by WWII, and reinforced soon after. The hegemony of the US dollar. It is not a coincidence that oil, on the world market, is priced in US dollars. It has been this very point that has allowed the dollar to continue to rise in value. As the rise in oil production and use has risen exponentially in the last 30 years. Once the reign of the dollar as the world's reserve currency is over, as in, once nations start trading oil in currencies other than the dollar, its 40 year support system will crash. Along with stock markets and the actual dollar. See Iceland, see Argentina...etc...
There is no catalyst for improvement in the economy. The media and the internet have brainwashed the public that "cheaper is better", so there is no margin to pay workers in America enough to live, pay down their debt, AND save. Let alone spend.
A severe contraction is upon us. One that will see the US, and other governments around the world, race to devalue currencies to prod the export economy model. Which is exactly contrarion to the message comming out of the States which is "We should not resort to protectionism"...
Every stimulous/bailout package by world governments are a form of protectionism. Just like tax cuts to corporations result in the same thing as government spending. Deficits that turn into the debt of our childrens children.
Yet you conservatives, you republicans keep shoveling the same old shit out the front, while you allow the neoliberals to move towards a one world government and allow the elite to rape the earth and the people who reside on it.
Its sick. And not in the current vernacular of the word "sick".
peace...
On Jan 21 07:09 AM Crocodilian wrote:
> On Jan 21 03:21 AM Dakk wrote:
Church donations in America with the chart shown. I'd bet they they are inversions of each other. Perhaps the Ole Silver Hairs knew what they were doing when they put God in their schools, courts, sporting events, and grave yards. .... Perhaps the generation that was smart enough to crack the atom and went to the moon had it figured out,
Let`s hope that doesn`t happen before the current administration can right the ship.
Russia and China are now blaming the US for the entire financial crisis, two of our three biggest creditors. I know it`s their response to the yuan manipulation blurb from our govt but all the same.
What we need is to slash taxes, slash the money supply, slash government spending, slash debt....oh wait we are doing the OPPOSITE.
On Jan 21 11:51 AM CanadianView wrote:
> Solution - The US needs to open its borders & lift immigration
> restrictions (at least to those with cash). A steady influx of people
> with assets to buy up the surplus housing will go a LONG way towards
> improving the economy of tomorrow. Just think, maybe they will even
> have good ideas & y'all could even learn something!
What is MBS papers, anyone ?
On Jan 20 04:10 PM 31October wrote:
> Oh it's not that scary...
>
> 1. Paulson has made sure that GS and all off-the-books affiliates
> are solvent and protecting the dollar.
> 2. Congress, President Obama, and Bernake have solidarity in cutting
> spending and protecting the dollar.
> 3. China + Japan love USA treasuries and will buy all they can, at
> ever-increasing premiums.
> 4. The Fed has plenty of defaulted MBS papers to totally cover these
> debts with, anyway.
>
> So, what's the problem?
If one were a speculator, a bettor... the odds are stacked overwelhming against success before collapse. The sun will rise again, however the landscape may look all together different when the darkness dissapates and the light is restored.
I am not certain anyone we currently have at the forefront of this crisis has the vision and (for lack of a better word) SAC needed to lead us out of this problem we are facing. Another consideration when drawing comparisons to long gone time frames in US history.
On Jan 21 10:07 AM J.J. Rendina wrote:
> Crocodilian,
>
> The point you're trying to make is falling on deaf ears because the
> logic falls apart when you follow the money (debt). The debt part
> of the debt/GDP in 1946 was, for the most part, money spent in the
> US that stayed in the US. Today, that is not the case. Over half
> of the proposed stimulus and all of the previous one represents cash
> payouts to consumers who will send many of those dollars overseas.
> (You have been shopping lately, haven't you?). Other trillions are
> going to banks and institutions; much of which (we don't really know
> how much) will also go overseas to make good on counterparty liabilities.
>
>
> "2009 has challenges, but they don't objectively compare with 1946"
>
>
> Not yet.
We have had short-term thinking among our populist politicians for decades, and now need good government which is willing to de-ponzify our current situation (Medicare, Social security, etc)
I'm not optimistic, however
We can even power our cars with steam. A modern steam engine is more efficient, has more torque than its petrol equivalent and can efficiently burn anything to produce power, petrol, sump oil, cooking oil, wood. Great for a depression!
On Jan 22 04:42 PM Sentinel wrote:
> Gripper2...you need to get a grip.
>
> Do you understand the concept of baseline power? Didn't think so.
> Baseline power is that power that you can count on so much that you
> don't think about it...ever....24/7.
>
> Flip you lightswitch....it comes on....at 2pm and at 2am
>
> Turn on your TV.....it comes on at 12pm and at 12 am.
>
> The ability for all the green tech in the world cannot sustain now
> or in the future the baseline power requirements to run one advanced
> industrial country much less the world.
>
> The only "Green" power supply that can do that is nuclear. And you
> "greenies" are into that sort of thing.
>
> Don't get me wrong....I love solar and wind and geothermal and hydro.
> We need much more of it. But combined they will only be a PART of
> the solution not the answer.
The US production/value added products can be summed up as,
"Would you like a toxic, subprime, MBS to go with your Big Mac today?"
On Jan 20 05:07 PM Crocodilian wrote:
> On Jan 20 04:16 PM Stephen Webb wrote:
online.wsj.com/article...
Let the whole system collapse and start again, it will be less taxing and more interesting for everybody.
See you in the soup lines!
On Jan 20 05:07 PM Crocodilian wrote:
> On Jan 20 04:16 PM Stephen Webb wrote:
On Jan 21 01:40 AM najdorf wrote:
> occdude/sentinel: It's a pretty common trope that America used to
> make stuff and now it doesn't. This idea is nonsense. Let's make
> a list of what America still makes better than anyone else in the
> world:
>
> 1. Health care products - ABT, JNJ, MMM, XRAY, PFE, MRK.
> 2. Computer software - ORCL, MSFT, IBM, plus a million smaller companies
>
> 3. Advanced industrial products - GE, EMR, MMM, ETN
> 4. "Cool" brands - NIKE, KO, PEP, YUM, MCD, music/movie industries
>
> 5. Airplanes/defense tech - BA, LMT, RAY, NOC
> 6. Computer/communication... hardware - AAPL, TXN, INTC
>
> You might think that our banks will pull us down, but the only things
> worse than American banks are everyone else's banks. Japanese banks
> haven't had decent profits in 20 years. European banks went in for
> subprime/bad CDOs/crooks like Madoff at a level that no one over
> here did.
Very interesting and insightful
www.gotoguy.com/?p=560
1) Abolish the Federal reserve and the fractional reserve banking system.
1) Abolish our debt-based monetary system i.e Outlaw Usury.
3) Spend money into the economy, don't lend money into the economy.
Now that's REAL change.
On Jan 21 01:00 AM occdude wrote:
Debt is not an option so dont even THINK ABOUT IT! Debt is our current problem and deleveraging is correcting it as fast as the government
> will let it, not that it will be an option anyway, because the rest
> of the world is "gonna get religion" about issuing debt to a people
> who cant pay it back.
But will the USA get Religion and not issue debt to people who can't pay it back? Or will start the cycle all over again? By guess is we have short memories. 5-6 years from now credit will loosen and the buying bing and consumer economy behavior will be back.
I hope I have some cash left to invest to ride the wave and get off before the sharks get me or the wave breaks on the beach.
I don't honestly believe gold will be as valuable as people think, at least initially. Things that are needed for our basic needs and survival will hold greater value (you can't eat gold after all), but once that crisis is over there will need to be some new 'currency', so maybe at that time gold and silver will kick in.
That chart may just indicate bank borrowing from the Fed, but in any case, it is still alarming to see something at such an unprecedented level in history.
I really think we are only just beginning to see how deep this crisis may be - I think it will be monumental and this is the tip of the iceberg. The pain of job losses and businesses closing that we are seeing now is just the beginning.
But I'm trying to stay positive and hope that something better can come from all this ugly crunch-time period that we have to go through.
The politically incorrect suggestions of one poster above, about a new world currency and getting the unemployed to 'work' for $40k etc would probably work, but would be so unpopular they'd be the death knell of any govt that agreed to them!
Prop up the bad guys with money!
Reward the mistakes & incompetence!
We’ve increased the Money Supply 70% since October!!!!!
Can you imagine?!
Bernanke refused to show up the other day before congress
Altogether, the world’s markets over the past four weeks saw $11 trillion worth of assets wiped out. This sum corresponds to virtually the entire annual gross national product of the US, or the European Union.
Fed debt per person: $58K
Un-funded Medicare/Medicaid per person: $332K
Fed's plundered trusts per person: $30K
Un-funded SS: $166K
Every American owes: $586K for FED debt
Gov grows 4 Xs faster than economy
Fed spending grows 16 times faster than economy, (16 fold expansion in control & gov dependence)
The US gov now holds 57% share of entire National Income = Government makes more than all the money made in private sector!
How long does the USA honestly think it will last?
We are at the non-sustainability point of Democracy!
The Empire devoured the State & Now NORTHCOM’s homeland defense force trains on US soil to combat civil unrest in the States
America is entirely bankrupt!
Help yourself - Get another citizenship & move your currency out of the US dollar!
America lost all call to the claim of a democratic republic around 1897 to 1913
The banks in turn have created many fake instruments like derivatives
One quadrillion dollars is the sum of outstanding fake derivatives (fake money pledged by the wealthy banks to buy real things) 1,000,000,000,000,000 on the market, (e.g. a bank with only one real dollar can legally say it owns several billions of real dollars) – The total combined assets of the world is only actually a very small fraction of that sum!
They will pop this bubble so they can buy up real assets!