The Coming Depression: See It Clearly Through Historical Eyes [View article]
You suggest (fairly) my last line is ambiguous in that there is no clear relationship between the article and the success or failure of the Obama government stimulus plan. Let me provide some clarification.
The thrust of the article is that business cycles busts are usually created by excesses of money creation, new financial instruments which facilitate the money creation and decreasing credit quality. There is historical statistical and descriptive evidence to support this position, which the article briefly refers to, but which is amply supported from numerous areas.
A "solution" to these boom and bust cycles must be related and effective with the true problems. President Obamas's polices are equivalent to giving a drunk some "hair of the dog", i.e. more liquor. If the problem is excess money, poor credit and out of control financial instruments (derivatives), the solution is not to give more money and create more bad credit.
The Fed, particularity under Alan Greenspan and now with Mr Bernanke, is to print money to get out of problems. While this is a short term solution, up to a certain point, when applied in great excess it creates the type of problem we have today.
To be specific, the money creation policies currently being employed run the risk of creating hyperinflation, a problem far more serious than we currently have. They do not have any reasonable prospect, in my opinion, of solving the current problem other than deferring the problem somewhat and ultimately making it much worse.
These are the lessons we can learn from history, including very recent history.
On Feb 23 09:16 AM You're Kidding wrote:
> You say you see cycles in the above chart... > > I see nothing in it that would tell me when to get fully invested > in this market, nor do I see anything in your article that would > indicate you are willing to make any such predictions. > > That would be a smart move on your part and quite revealing as to > how much practical, useful information you really think these "cycles" > tell us. > > Nothing like having your cake and eating it, too. That's a winner > if I've ever heard of one. > > But there's more! You conclude by saying: > > "If I am correct in the assertions made in this article, it raises > serious doubts about the effectiveness of the Obama plan to fix the > economic problems of the country." > > So let me get this straight. You are saying that these cycles you > see, going back hundreds of years, portend the future success of > what the government might do now? You realize, of course, that if > the government was going to take say, a much different action, that > your "model" would still raise the same doubts about its success, > too? In other words, no matter what the government does, or doesn't > do, it probably won't work, because of what your cycles tell us. > > > Now, I know you haven't thought this through, because any logical > person would see the complete irrationality of such thinking. So > please, tell us you were wrong, so we don't have to put your name > on the "Never Read Another Article From These People" list. >
Mario Draghi's Real Message: Some Euro Countries Will Collapse, And Soon [View article]
Ricardo11, I retired in 1980. In my generation, you collected your loans or went broke. No government bailouts.
90% of people assume there is a solution to the problem. Either lend more money or stop spending to bring the national accounts back into balance. Yet, the reality is there are points when the level of indebtedness goes too far and there is no solution other than a fundamental reset with major adjustments. We are at one of those points. Reading "This Time is Different" by Rogoff and Rinehardt is required reading to understand this.
Several of my articles talk about the best strategy. Be ready to go to cash, as a minimum or short the market as we get the signal the downturn is beginning. Banks will be hurt the most and will be the best short if you are so adventuresome. 5 or so years down the road will probably be the investment opportunity of the century as we come out of the down turn.
3 Arguments For An Inevitable Economic Collapse [View article]
My wife agrees with you. However, my view is that one can protect himself if he knows what is coming. There are a lot of things one can do to improve one´s economic position even though there is bad economic news coming. At the end of this cycle, around 2015-2017, there will be a great investment opportunities for those in condition to make the investments at that time and who have the courage to invest when things seem so bleak.
Obama Wants a 'Better Plan'? Here's One: Bite the Bullet [View article]
Your question is very legitimate. The commercial real estate market is going into the tank and there is a strong holdover of unresolved mortgage credit in the regional banks. However, the "falling shoe" which most concerns me is the derivatives exposure (particularly the CDS's and interest rate swaps) which are most centered in the big banks, hedge funds, private equity and investment banks. Judging by the FED's actions, it is this type of problem that they are most worried about. If this "shoe drops", we have truly systemic risk to the system and we are faced with a much graver set of circumstances to deal with. In this scenario, the regional banks have a much better chance of surviving without government aid.
On Apr 05 08:42 AM old trader wrote:
> "I would submit if we solved Citi and B of A and maybe Wells Fargo > and JP Morgan, the FDIC could deal with the rest. We have many strong > regional banks which will quickly step up to play major roles in > banking that are not burdened with the enormous problems of the largest > banks." > > Mr. Wood, > > I'm no big fan of the current stimulus plan(s), and agree we're at > risk of our own "Japanese decade" (or worse), but I'm not certain > how many "strong regional banks" there are to step up to the plate. > Granted, they avoided getting involved with many/all of the exotic > debt instruments that plague the bulge bracket banks, but they were > certainly big players in the CRE market, and that particular shoe > is looking like its starting to drop.
Mario Draghi's Real Message: Some Euro Countries Will Collapse, And Soon [View article]
Remurraymd, I am not talking about 2009. I am talking 2013. Let´s talk in a year and see what your opinion is. Economic fundamentals do matter and change trends.
New European Bank Agreement: Deceiving Themselves And The World [View article]
I suggest to you that unrecoverable losses in banks can not be solved by loans because the unrecoverable aspect means there is no way to pay off the loan. Spanish banks are full of unrecoverable real estate loans.
Recent Policy Decisions and a Greater Depression [View article]
Thank for a most provocative article. A discussion of economics can not be labeled "conservative" ( or liberal) as one of the people did commenting on your article. You make a most interesting projection of where the economy will go based on Obama's economic policies.
My question for you is whether your are a student of Elliot Wave Theory? Your projections coincide exactly with what Elliot Wave Theory (particularity as represented by people like Bob Prechter). It is fascinating to see technical projections as those presented by Bob Prechter and fundamental economic analysis as presented by you which not only match in directionality and in timing for changes of direction of the market.
The Unavoidable U.S. Reality: The Upcoming Economic Collapse [View article]
it is not, in my opinion, Democratic Propaganda. The article says the solution of the both the left and the right will fail at this point of time. This is based on classical economics and much history which demonstrates what happens when you get to a certain point of indebtedness.
3 Arguments For An Inevitable Economic Collapse [View article]
We believe there are very close parallels. 2008 is 1929. 2012 and the next few years are the 30´s, which is a part of the decline called the 1929 Crash. However, virtually every tangible economic measure is substantially worse today than in the 1930´s. This particularly includes the size of the bubble and the relationship between the size of the government debt in relation to country income (GDP)
Mario Draghi's Real Message: Some Euro Countries Will Collapse, And Soon [View article]
The Recusant, Well said. QE is a short term solution to temporary problems, not a long term solution to fundamental imbalances. We have created an enormous financial bubble since 2001 that can not be cured by more QE.
The Unavoidable U.S. Reality: The Upcoming Economic Collapse [View article]
The point of the article is that there is no solution at this point in time with the current level of indebtedness and the breakdown politically in the US. Inevitably, the US, and much of the world, will pass through several years of severe economic adjustment.
I now have 50 years experience in 6 Latin American countries where I have been President of Citibank and GE in several of them. My experience is living through multiple economic collapses of Argentina and Brazil. For these purposes, I am neither Republican nor Democrat. I am a businessman and economist who has seen first hand the problems that over indebtedness brings to a country and it citizens.
Prepare For Europe Collapse Before New Year [View article]
James, congratulations. I think your articles are outstanding, and particularly this one. I completely support your ideas of collapse in 6 months (you can read my articles to see that). However, I find it disturbing to see many commentators supporting printing money as a solution . For bankers such as myself who spent their adult life in Latin America, we see Greece as following the road of Argentina. Venezuela has had 7,000% inflation during the most recent 15 years. And the old German's I know will not, at the moment of truth, agree to printing the money to try to fix the European problem. They still remember the 20's and Hitler to intensely. While your excellent article focused on the stabilization fund not being a solution, there several other major reasons why the situation can blow in the next 6 months. We will have the southern European nations' depositors starting to remove their deposits from their national banks to avoid being caught by devaluations when their country leaves the EMU. This can quickly lead to a bank liquidity crises which brings down the Southern European countries' national banks, which in turns leads to the contagion of the northern European and US banks. Dexia went down in a matter of days because of fears relating to its ability to pay, and this could be repeated at almost any country with the EMU exception Germany and small number of other European nations. The current interpretation that not paying 60% of your debt is not a credit event causing CDS to payout could have highly unpredictable results even in the US. US banks currently report only their net exposure position on CDS. If a major default took place and CDS's provides no protection, this could upset balance sheets throughout the western world. Think of the AIG problem.
Mobyss, you have made a most astute comment to which we should all give careful consideration. Bernanke is a intelligent man. To say unintelligent things means that he is probably in a corner without a solution that the President can politically accept.
Does Friday's CPI Report Mark an Inflection Point? [View article]
Well done. Excellent article. The risk of hyperinflation is the biggest risk we face that the US has never faced before. The Fed seems to forget that fixing a current problem by pumping money into the economy is what has made most of our current problems. Pumping massive amounts of new money into the economy is far from being a solution; pumping massive amounts of new money runs the risk of hyperinflation, as you point out.
The Unavoidable U.S. Reality: The Upcoming Economic Collapse [View article]
I can agree with virtually everything you say. There is much waste that needs to be cut. But in the context of this article, the issue is what will be the consequences of cutting expenses? The consequence will be shrinking government spending which will affect negatively the economy which will lead to less investment because the economy is in decline.
This is a matter of the way economics work. It is not a matter of Tea Party members (and many centrists) who justifiably wish to cut unnecessary spending. It is a matter what will be the real short term effect. The article explains that both the democratic left and the Tea party road lead to a similar conclusion at this time in our history. And that is dramatic economic decline for a period of a few years. Much like a person with very advanced cancer, we can give more or less medicine, but the cancer is to far advanced to avoid the death of the patient (in this case, several years of economic decline to make the adjustments necessary before we begin renewed growth).
The Coming Depression: See It Clearly Through Historical Eyes [View article]
The thrust of the article is that business cycles busts are usually created by excesses of money creation, new financial instruments which facilitate the money creation and decreasing credit quality. There is historical statistical and descriptive evidence to support this position, which the article briefly refers to, but which is amply supported from numerous areas.
A "solution" to these boom and bust cycles must be related and effective with the true problems. President Obamas's polices are equivalent to giving a drunk some "hair of the dog", i.e. more liquor. If the problem is excess money, poor credit and out of control financial instruments (derivatives), the solution is not to give more money and create more bad credit.
The Fed, particularity under Alan Greenspan and now with Mr Bernanke, is to print money to get out of problems. While this is a short term solution, up to a certain point, when applied in great excess it creates the type of problem we have today.
To be specific, the money creation policies currently being employed run the risk of creating hyperinflation, a problem far more serious than we currently have. They do not have any reasonable prospect, in my opinion, of solving the current problem other than deferring the problem somewhat and ultimately making it much worse.
These are the lessons we can learn from history, including very recent history.
On Feb 23 09:16 AM You're Kidding wrote:
> You say you see cycles in the above chart...
>
> I see nothing in it that would tell me when to get fully invested
> in this market, nor do I see anything in your article that would
> indicate you are willing to make any such predictions.
>
> That would be a smart move on your part and quite revealing as to
> how much practical, useful information you really think these "cycles"
> tell us.
>
> Nothing like having your cake and eating it, too. That's a winner
> if I've ever heard of one.
>
> But there's more! You conclude by saying:
>
> "If I am correct in the assertions made in this article, it raises
> serious doubts about the effectiveness of the Obama plan to fix the
> economic problems of the country."
>
> So let me get this straight. You are saying that these cycles you
> see, going back hundreds of years, portend the future success of
> what the government might do now? You realize, of course, that if
> the government was going to take say, a much different action, that
> your "model" would still raise the same doubts about its success,
> too? In other words, no matter what the government does, or doesn't
> do, it probably won't work, because of what your cycles tell us.
>
>
> Now, I know you haven't thought this through, because any logical
> person would see the complete irrationality of such thinking. So
> please, tell us you were wrong, so we don't have to put your name
> on the "Never Read Another Article From These People" list.
>
Mario Draghi's Real Message: Some Euro Countries Will Collapse, And Soon [View article]
90% of people assume there is a solution to the problem. Either lend more money or stop spending to bring the national accounts back into balance. Yet, the reality is there are points when the level of indebtedness goes too far and there is no solution other than a fundamental reset with major adjustments. We are at one of those points. Reading "This Time is Different" by Rogoff and Rinehardt is required reading to understand this.
Several of my articles talk about the best strategy. Be ready to go to cash, as a minimum or short the market as we get the signal the downturn is beginning. Banks will be hurt the most and will be the best short if you are so adventuresome. 5 or so years down the road will probably be the investment opportunity of the century as we come out of the down turn.
3 Arguments For An Inevitable Economic Collapse [View article]
Obama Wants a 'Better Plan'? Here's One: Bite the Bullet [View article]
On Apr 05 08:42 AM old trader wrote:
> "I would submit if we solved Citi and B of A and maybe Wells Fargo
> and JP Morgan, the FDIC could deal with the rest. We have many strong
> regional banks which will quickly step up to play major roles in
> banking that are not burdened with the enormous problems of the largest
> banks."
>
> Mr. Wood,
>
> I'm no big fan of the current stimulus plan(s), and agree we're at
> risk of our own "Japanese decade" (or worse), but I'm not certain
> how many "strong regional banks" there are to step up to the plate.
> Granted, they avoided getting involved with many/all of the exotic
> debt instruments that plague the bulge bracket banks, but they were
> certainly big players in the CRE market, and that particular shoe
> is looking like its starting to drop.
Mario Draghi's Real Message: Some Euro Countries Will Collapse, And Soon [View article]
New European Bank Agreement: Deceiving Themselves And The World [View article]
Recent Policy Decisions and a Greater Depression [View article]
My question for you is whether your are a student of Elliot Wave Theory? Your projections coincide exactly with what Elliot Wave Theory (particularity as represented by people like Bob Prechter). It is fascinating to see technical projections as those presented by Bob Prechter and fundamental economic analysis as presented by you which not only match in directionality and in timing for changes of direction of the market.
The Unavoidable U.S. Reality: The Upcoming Economic Collapse [View article]
3 Arguments For An Inevitable Economic Collapse [View article]
Mario Draghi's Real Message: Some Euro Countries Will Collapse, And Soon [View article]
The Unavoidable U.S. Reality: The Upcoming Economic Collapse [View article]
I now have 50 years experience in 6 Latin American countries where I have been President of Citibank and GE in several of them. My experience is living through multiple economic collapses of Argentina and Brazil. For these purposes, I am neither Republican nor Democrat. I am a businessman and economist who has seen first hand the problems that over indebtedness brings to a country and it citizens.
Prepare For Europe Collapse Before New Year [View article]
While your excellent article focused on the stabilization fund not being a solution, there several other major reasons why the situation can blow in the next 6 months. We will have the southern European nations' depositors starting to remove their deposits from their national banks to avoid being caught by devaluations when their country leaves the EMU. This can quickly lead to a bank liquidity crises which brings down the Southern European countries' national banks, which in turns leads to the contagion of the northern European and US banks. Dexia went down in a matter of days because of fears relating to its ability to pay, and this could be repeated at almost any country with the EMU exception Germany and small number of other European nations.
The current interpretation that not paying 60% of your debt is not a credit event causing CDS to payout could have highly unpredictable results even in the US. US banks currently report only their net exposure position on CDS. If a major default took place and CDS's provides no protection, this could upset balance sheets throughout the western world. Think of the AIG problem.
How Is Bernanke 100% Sure? [View article]
Does Friday's CPI Report Mark an Inflection Point? [View article]
The Unavoidable U.S. Reality: The Upcoming Economic Collapse [View article]
This is a matter of the way economics work. It is not a matter of Tea Party members (and many centrists) who justifiably wish to cut unnecessary spending. It is a matter what will be the real short term effect. The article explains that both the democratic left and the Tea party road lead to a similar conclusion at this time in our history. And that is dramatic economic decline for a period of a few years. Much like a person with very advanced cancer, we can give more or less medicine, but the cancer is to far advanced to avoid the death of the patient (in this case, several years of economic decline to make the adjustments necessary before we begin renewed growth).