Anandakos

Is the Market Reversal Already Happening?

I very much agree that taxing carbon would have been FAR better. The current cap and trade is so eviscerated that it won't accomplish much, but will guarantee trading profits for big coal and utility companies.

I'd prefer to see a mandatory universal single payer catastrophic system and leave the rest to the private sector. I think some fellow from the Hoover Institute suggest that "catastrophic" be defined as a percentage of last year's income. Something like 25% or thereabouts.

That gives people the opportunity to save up a quarter of their annual earnings or buy private insurance to get to the Federal level, preventing fiscal Armageddon for families, but allowing reasonable premiums.

In the years following the onset of a debilitating disease, the threshold of Federal payment would fall because a debilitated person has no income.

It also removes the quarrels about pre-existing conditions, rescission, and the "public option".

Do calm down about "protectionism" though. Since we don't make much except airliners, grain and CDO Squareds here in the US anymore, what do we care if other people raise tariffs on our exports? With a few well-placed tariffs we might be able to make some things again.

You're smoking some old leftover John Birch brand pre-Fidel Cuban stogies if you think that organized labor controls this administration. Ha. Ha. Ha.

And finally, how in hell do you propose to pay for the debt which means so much without raising some taxes? Yes, spending needs to be cut, mostly on Imperial Wet Dreams and no-bid contracts. But most of the difference between 19% brought in and 25% spent is W's tax cuts and the spending to catch the economy falling off the step ladder.

Your characterization of Democrats shows an excessive intake of Vitamin G. Poisoning by this vitamin is shown by enlargements of the abdomen and buttocks caused by lethargically channel surfing between Fox News Channel and the WB.

On Nov 22 10:52 AM FB5000 wrote:

> I have to admit I quit reading when I saw a 90% correction in the
> S&P.
>
> Market PE of 88? Really?
>
> Where do they find keep finding these Klowns?
>
> You are in a low inflation, low interest rate environment. Productivity
> is high, corporate profits are increasing, world trade is increasing,
> retail sales are rising
>
> The negatives are housing - expect it to continue to lag - and large
> and growing govt. debt and an expansion of entitlements. Increased
> taxes are coming. This is not a bad thing if the money used on good
> programs and to pay down debt. And if the tax burden is more evenly
> spread over the society.
>
> The market is where it was in 1998. On balance you should expect
> continued improvement from these levels. Especially as economic growth
> accelerates into 2010, profits rise and rates stay low.
>
> We will see employment growth in first half 2010 and rising inflation
> later into 2010. Rates will have to rise.
>
> This is not a bad environment and markets reflect that - once Armageddon
> was averted.
>
> The real risks are political
>
> 1. Cap and Trade - a stupid piece of legislation. Just tax carbon.
> Cap and trade will impose costs but not achieve the desired outcome.
>
> 2. Healthcare "reform" - a very stupid piece of legislation. This
> could be done at a much lower cost. I hope the bill is thrown out.
> This would be very bullish.
> 3. Protectionism. Obama is an instinctive protectionist. This is
> very very very bad. I hope he gets better advice. The Clinton approach
> would be far better - Larry Summers are you listening? Or is nobody
> listening to you? Hard to imagine
> 4. Organized Labor. Andy Stern is now basically living in the White
> House. This is very bad. Andy would like to organize the world. He
> may do it. Obama needs to get away from this concept. It is the job
> killer.
> 5. A stupid desire to Tax the life out of the "rich". Class based
> ideologically driven garbage thinking does not lead to prosperity.
> Ask the British who lives through the 1960's and 90% marginal tax
> rates.
>
> Avoid those 5 things or get rational Carbon and Healthcare legislation
> and smart Tax reform and we will see new highs in the S&P and
> 4% unemployment before the next Presidential election. Obama gets
> re-elected and the Republican party splits into a moderate wing and
> crazy - Glen Back wing. Guaranteeing the next 20 years of Democrat
> rule.
>
> That's all.

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

Good post, Love. Sounds like your "don't use the brakes" takes the place of a Prius' econometer. Well done.

It is odd how much extra fuel is consumed on curvy roads. It must be the greater tire friction from the turns. Yes, that's surely it.

On Aug 04 06:49 AM H. T. Love wrote:

> On Aug 02 09:04 PM Old Wizard wrote:

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

My bad. Not "$6,000 in gasoline" in the part about the Prius, but "6,000 gallons of gasoline".


On Aug 03 02:06 PM Anandakos wrote:

>
> Whaffle,
>
> You are SERIOUSLY computationally challenged. Even if one of the
> newly purchased cars goes 300K miles and is at the extreme low end
> of the allowable mileage range (23 MPG = the 18 MPG max for eligibility
> of the trade-in plus 5 MPG minimum improvement for the $3,500 rebate),
> it will use 13,050 gallons of gas in its lifetime. Most vehicles
> don't go 300K and most of those bought will get more than the legal
> minimum for the program, but let's assume the worst case scenario.
> Any higher mileage vehicle will pay less in Federal fuel taxes over
> the life of the vehicle.
>
> The Federal fuel tax is 18.4 cents per gallon, which is a total tax
> payment of exactly $2,400 over the life of that worst case new vehicle.
> That is ONE PERCENT of what you claim. And that's not even the DIFFERENCE
> between the new and old cars. If indeed the difference is only the
> minimum of 5 MPG (the "Clunker" gets 18 mpg) the loss in Federal
> fuel taxes is only $652.50. That is the minimum that the fuel tax
> will lose over the life of a 300K mile vehicle.
>
> Now lets look at your "worst case" scenario. Say the traded in vehicle
> gets 15 mpg and the new one gets 30. That is 10,000 gallons of gas
> over the new vehicle's 300K mile life or $1,840 in Federal fuel taxes.
> Assuming that the 15 mpg vehicle could last another 300K miles --
> unlikely at best -- it would have consumed 20,000 gallons of gas
> and paid $3,680 in fuel taxes.
>
> That is a difference of $1,840.
>
> How about if the old vehicle gets 10 and the new one 30? The old
> vehicle would have paid $5,540 in fuel taxes and the new one will
> still pay $1,840 for a difference of $3,680.
>
> Let's be really bizarre and assume you're trading in a Dodge Ram
> 7 liter crew cab and buying a Prius. I don't know exactly what the
> Ram would get but if we assume you were a idiot and didn't get it
> with a diesel, it would probably be in the seven to eight mpg range.
> If 7 mpg and it made it another 300K miles it would consume 42,850
> gallons and pay $7,886 in Federal fuel taxes. The Prius is rated
> at about 50 combined, so it would consume $6,000 in gasoline, paying
> $1,104 over its lifetime. Even this completely implausible scenario
> would cost the fuel tax fund only $6,782, about 2.7% of what you
> mooted.
>
> Think before you type. Also, you might want to change your alias
> to "Whiffle" in honor of the ball that packs no punch.
>
> On Aug 03 01:32 PM Whaffle wrote:

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

Whaffle,

You are SERIOUSLY computationally challenged. Even if one of the newly purchased cars goes 300K miles and is at the extreme low end of the allowable mileage range (23 MPG = the 18 MPG max for eligibility of the trade-in plus 5 MPG minimum improvement for the $3,500 rebate), it will use 13,050 gallons of gas in its lifetime. Most vehicles don't go 300K and most of those bought will get more than the legal minimum for the program, but let's assume the worst case scenario. Any higher mileage vehicle will pay less in Federal fuel taxes over the life of the vehicle.

The Federal fuel tax is 18.4 cents per gallon, which is a total tax payment of exactly $2,400 over the life of that worst case new vehicle. That is ONE PERCENT of what you claim. And that's not even the DIFFERENCE between the new and old cars. If indeed the difference is only the minimum of 5 MPG (the "Clunker" gets 18 mpg) the loss in Federal fuel taxes is only $652.50. That is the minimum that the fuel tax will lose over the life of a 300K mile vehicle.

Now lets look at your "worst case" scenario. Say the traded in vehicle gets 15 mpg and the new one gets 30. That is 10,000 gallons of gas over the new vehicle's 300K mile life or $1,840 in Federal fuel taxes. Assuming that the 15 mpg vehicle could last another 300K miles -- unlikely at best -- it would have consumed 20,000 gallons of gas and paid $3,680 in fuel taxes.

That is a difference of $1,840.

How about if the old vehicle gets 10 and the new one 30? The old vehicle would have paid $5,540 in fuel taxes and the new one will still pay $1,840 for a difference of $3,680.

Let's be really bizarre and assume you're trading in a Dodge Ram 7 liter crew cab and buying a Prius. I don't know exactly what the Ram would get but if we assume you were a idiot and didn't get it with a diesel, it would probably be in the seven to eight mpg range. If 7 mpg and it made it another 300K miles it would consume 42,850 gallons and pay $7,886 in Federal fuel taxes. The Prius is rated at about 50 combined, so it would consume $6,000 in gasoline, paying $1,104 over its lifetime. Even this completely implausible scenario would cost the fuel tax fund only $6,782, about 2.7% of what you mooted.

Think before you type. Also, you might want to change your alias to "Whiffle" in honor of the ball that packs no punch.

On Aug 03 01:32 PM Whaffle wrote:

> Using cars generates gas/road tax money.
> Therefore, more efficient cars will lower government revenue.
>
> Let's say every car purchased under cash for clunkers is 2x as efficient.
> Then, according to our mathematical and statistical manipulators
> (I mean, genius'es) , we'll see a 50% reduction in gas tax revenue
> over the life of the car.
> Pulling out my SWAG slide rule, that comes out to a cost of over
> 250,000$ per car.
>
> Clearly, we need less efficient cars if we want to "save our grandchildren
> from the vast debt we are creating".
>
> Disraeli was right , "there are lies, damn lies and statistics".

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

Mud Engineer,

What foolishness; the people buying these new cars are not poor. The government is not buying the car for them, lock, stock, and barrel. It is basically providing a bigger trade-in allowance on guzzlers worth less than $4,500; most buyers still have to take out a loan. It's just somewhat smaller than it would have been.

Nobody whose car is worth more than $4,500 trade in is going to participate; if they were going to buy anyway, they'll take the trade-in offered by the dealer. I hope you're able to understand that.

Because of this there will be an economic cost, paid by the buyers of relatively low-priced used cars over the next few years. The truth is that anyone who can afford a new car in this economy is probably already driving a decently running, reliable vehicle. Those worth less than $4,500 are being trashed irrevocably and removed from the pool of available used vehicles. While that's a bit of a fuel economy and emissions benefit, it is an economic cost for people who are struggling anyway.

So in fact the people who you so hate -- the "losers" of society who "don't have to pay taxes or even get a so called tax refund -- will be the ones most hurt by this program, since reliable used cars will rise in price.

I surprised you aren't cheering their comeuppance, Ebeneezer.

On Aug 03 11:35 AM MudEngineer wrote:

> This cash for clunkers program "is not a tax rebate". This is taking
> money from the people who pay taxes and giving it to the people who
> make so little money that they don't have to pay any taxes and may
> even get a so called tax refund even though they paid no taxes.
> That my friend is exactly "socialism".
>
> Your wonderful "cap and trade" will really screw the people who have
> no or little money as energy in all forms will rise in cost and they
> can least afford to pay those new taxes. All because of a few idiots
> who mistake CO2 as the cause of global temperature change when sun
> spots actually cause this cycles naturally. If cap and trade and
> the healthcare plan both pass, we will be permenantly in a recession
> or a depression. THANK YOU LORD OBAMA, OUR NEW DICTATOR!

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

WD216,

Many Americans have "an anti-business mentality" because their interactions with business are unpleasant, unsafe, and unfair. Businesses deploy armies of lawyers against their customers, collude with one another to fix prices and limit service, exploit the employees who generate the revenue keeping the lights on, and buy legislation from Congress making it all legal and protecting the processes.

There is no doubt that the limited liability corporation is the economic organization best able to accomplish large projects lasting an extended period of time. But giving such legal enterprises access to Bill of Rights protections was stupendous folly. Sure, they need access to courts and court procedures as a "person" in order to defend themselves against torts and to initiate them against one another in order to protect their contract rights. But they should not be assumed to have the POLITICAL rights guaranteed by the first ten amendments (free speech, petition of grievance, bearing of arms, and so on).

Since we don't have the initiative at the Federal level I have no idea how to correct this one hundred and thirty year old catastrophe, but it is the root of most of the distortions that afflict our democratic republic today.

On Jul 31 01:39 PM WD216 wrote:

> If those are the correct numbers, then is program costing $1 billion
> and 22,000 vehicles were sold, then the $45,000 per vehicle is correct.
>
>
> However more importantly, are the lines, "This government is, unfortunately,
> a reflection of the current state of economic immaturity that prevails
> in America. The vast majority of people, including most people in
> Congress, do not understand the forces that drive the real economy"
>
>
> Brilliant lines, they sum up the entire mess. We have a bunch of
> good speakers in office that don't know their a*s from their elbow
> when it comes to the economy. The American people don't either as
> they have an anti-business mentality, learned mostly through our
> liberal education system.
>
> The country is going to come out of this recession, only because
> of the trillions that are being spent. However, within 2 to 3 years
> you will see disaster strike due to these same spending policies.
> Our problems will be much worse then. This all due to ignornat Americans
> electing people that speak well.

Shift in U.S. - China Dialogue Is Louder than Words

King,

Much of what you say has a strong element of truth, but your assumption of "an adequate social safety net" assumes continued access to borrowed capital by the government. The point of this article is that continuation of that access is in doubt. I don't see that you disproved that point, so your argument that the US middle class is an advantage is flawed.

The only way out of our dilemma here in the US is to abandon empire and redirect the resources consumed by it to productive assets here: a better energy grid, renewable energy generation, a revamp of our transportation infrastructure, and significant improvements in education.

Those steps would revitalize the social safety net over time without unsustainable borrowing.


On Jul 30 10:59 AM KingGeithner wrote:

> Feng -
>
> I completely agree. China is in the process of creating its own massive
> bubble. While its recent stimulus spending has allowed for China
> to maintain its critical 8% growth rate (again one always has to
> question the reliability of these figures coming out of China), its
> state controlled banks have been shelling out easy money left and
> right, with lending standards ever more dubious. Apparently the Chinese
> government has not learned an important lesson: that lowering loan
> and banking standards in order to spur growth will always come back
> to bite a country in the rear years down the road. The main reason
> the U.S. saw growth after the internet bubble burst was because we
> lowered banking standards and began peddling ever more complex financial
> weapons of mass destruction. Thus, China can claim they have 8-10%
> GDP growth every year over the next 5 years, much like how we had
> nice GDP growth during the mid 2000s; let's see how sustainable China's
> growth will be.
>
> I think people are too quick to write off the U.S. and upgrade China
> as the world's sole future financial power. The U.S. has the world's
> strongest middle class and an adequate social welfare safety net.
> China has no safety net for its citizens, and a nonexistent middle
> class. It will forever be dependent on the U.S. and the rest of the
> world to sustain its growth, unless it can guarantee a basic safety
> net for its citizens and close the income gaps so that a healthy
> middle class can actually develop. China is essentially at the mercy
> of the economic situation of the U.S.

Shift in U.S. - China Dialogue Is Louder than Words

Pax,

It doesn't matter that the US has been keeping "ancient and deep enmities" in check in various parts of the world. While that may have been a beneficial result, it occurred as a result of actions taken from less than altruistic motives, at least for the past three or four decades.

In any case, it can't continue. Every empire in history has undergone the same cycle of scrappy ascendancy, hegemony for a shorter or longer time, and bankrupt overwhelm. It seems that each lasts for fewer years than the former, but I have a feeling that China's coming one will endure for quite a while, simply because there will be no credible competitor.

You are correct that we have a highly productive agricultural base at this time. But at least 20% of our grain production is over the rapidly failing Ogalalla Aquifer and will be gone in ten years. When you fly over the region between the 100th Meridian and the Front Range of the Rocky Mountains and see all those green circles, you're over Ogalalla country.

When it goes we will have great difficulty feeding ourselves at the level to which we're accustomed, never mind exporting our golden river of wheat and barley.


On Jul 29 03:46 PM Pax Americana wrote:

> The USA is not, and will not, be "swept aside" as easily as you presume,
> the US military still is the Arbiteur of Global power reach, and
> maintains a tenuous peace in extremely fractious corners of our planet.
> Without Americas overiding Military power in these regions, Ancient
> and deep enmities would again raise their head. Secondly America
> is the "Bread Basket" of the planet, and food is, and will become
> increasingly important. We also issue more scientific patents than
> anyother Nation, "right off America at your peril!

The Coming Economic Collapse, Part 2

Oh, and I forgot that the nearly universal "formula" for benefit computation in the old plans was "2% per year of service up to 30 times average final compensation". AFC was typically the highest two years of service and could include cashed out accumulated annual leave.

That means that the maximum benefit was 60% of the AFC -- not the 80% you claim -- and only after 30 years of service. Not "a couple of decades". Most governments limit accrued leave to a couple of months, so the AFC might have been inflated by 1/12 or 8%. A nice little lift, no doubt. That too is excluded from current plans because they typically use the average of the highest five years' salary to compute the AFC.

Public safety and military typically had 2.5% per year of service and so could receive 75% of the AFC.

Finally, the "double dipping" you describe was forbidden for all except public safety and military retirees. They could move laterally to the ordinary civil service and begin accumulating service credits in the standard plan. Or of course a Federal retiree could go to work for a state or vice versa and accumulate credits. However, do the math. After 30 years a person is in her or his early fifties and simply does not have another 30 years to attain a "full" retirement in another system.


On Jun 10 10:21 AM Anandakos wrote:

>
> Teresa,
>
> The Federal Retirement System you describe ("a couple of decades...")
> was "retired" in 1982. The system available to anyone hired since
> that date is much less generous and includes a actuarial penalty
> for retirement before 65 similar to that of Social Security. Most
> similar state plans were similarly changed at about the same time.
>
>
> And are completely wrong about the spousal statement. There have
> been actuarial penalties based on the age of the spouse when a survivor
> option is selected in all such plans since they were implemented.
> Even the "gold plated" FRS and state "Plan 1" era systems had them.
>
>
> You've gone all Limburger Cheese on us.
>
> On Jun 08 08:45 AM TeresaE wrote:

The Coming Economic Collapse, Part 2

Teresa,

The Federal Retirement System you describe ("a couple of decades...") was "retired" in 1982. The system available to anyone hired since that date is much less generous and includes a actuarial penalty for retirement before 65 similar to that of Social Security. Most similar state plans were similarly changed at about the same time.

And are completely wrong about the spousal statement. There have been actuarial penalties based on the age of the spouse when a survivor option is selected in all such plans since they were implemented. Even the "gold plated" FRS and state "Plan 1" era systems had them.

You've gone all Limburger Cheese on us.

On Jun 08 08:45 AM TeresaE wrote:

> Another great installment Graham.
>
> One thing you, and all that write on the feds leave out, the debt/future
> cost of government pensions and their best in the world health-care.
>
>
> No one, even shadowstats, can find these numbers as the Fed divides
> them amongst the departments and buries it in salaries.
>
> We have to wake up.
>
> Most government employees work less than 25-30 years and retire early.
> Many retire to go back to work in another government job, thus earning
> themselves TWO or more government pensions.
>
> Then those government employees point fingers at Social Security
> as being the problem. SS recipients have to work well into their
> 60s or 70s to draw back what they paid in.
>
> Federal (and many state) employees, only have to show up for a couple
> decades to draw up to 80% of their HIGHEST salaries FOR LIFE. Don't
> discount their younger spouses drawing checks for their lifetimes
> too.
>
> FUBAR is the word that best describes what our government has done
> to our children.
>
> And yet, you can't get people to wake up and band together to stop
> it.
>
> 50 years of massive spending and failed policies have brought us
> to today.
>
> I wish I felt it was fixable, but I don't. My fellow citizens can't
> be bothered with the truth. Good luck to us all.

PIMCO's Bill Gross Sees a Bleak Future

Jimbo,

I worked for ten years in the geo-stratigraphic departments of Shell and various BP antecedents (Sohio and Amoco). I wasn't a geoscientist myself; I wrote programs and databases for them.

But I got to know them and they ALL understand and recognize the difficulty of Peak Oil. The fact is that oil was sourced only in certain sedimentary environments, and must have been trapped by impervious deposition above the source rock. The necessary antecedents were fairly uncommon but frequent enough to have produced large accumulations in a few regions of the globe.

Since the oil industry was created in the United States, we spent the first sixty years of the oil age poking holes throughout the contiguous 48 states. There are over 2 million 10 digit API numbers, each of which identifies a penetration of the surface of the Earth with the intention of finding and/or producing liquid hydrocarbons.

Obviously they are clustered in the reef and dome formations that are characteristic of North American oil deposits. It makes a lot more sense to drill next to a well which is producing oil than one hundred miles away. But they are nearly EVERYwhere that granite doesn't protrude.

Certainly modern geoscience technology and enhanced recovery technologies have allowed us to extract a greater percentage of the original oil in place. Horizontal drilling has allowed us to exploit thin deposits that would not have been economic with vertical penetration.

But THERE ARE NO MORE GLORY HOLES ONSHORE in North America. Or offshore in less than 1000 feet of water. Every day there are dozens of aircraft and seismic trucks fanned out over the continent looking for that little squiggle in some electric field plot nobody has noticed before. They rarely succeed.

There are significant deposits in the deep water Gulf, but nobody is blocking development of them except possibly off the west coast of Florida. Possibly because there is no direct proof that accumulations in likely deposits have been trapped properly. There has as yet been no actual drilling in the precincts of interest that would show accumulated captured hydrocarbons.

I was in Anchorage when Sohio shut in the Mukluk well in the Beaufort Sea. The seismic results show a beautiful structure in the same sandstones that supply the Prudhoe and Kuparuk fields, at about the same mean sea level depth. Sohio was willing to bet $1 billion in the late 1970's and early 1980's that there was a lollapalooza field there. So sure they built a gravel island on which to place the exploration wells. It turned out that there was only one exploration well, because the caprock was fractured. There is clear sign that oil once inhabited the formation but that it leaked out several million years ago.

Obviously neither of us can be sure about the "agenda" you suppose, but it may be true. Certainly from a national security point of view, it's a good idea. Most of the places that have large accumulations of oil don't much like us and will be happy -- at least temporarily -- to take yuan instead of dollars for oil.

But the truth is the world MUST!!!!!!! convert to a green energy economy. ANY alternative that depends on non-renewable resources, be it "sequestered" coal, fission -- even the holy grail of fusion -- will run out one day. The resources the Earth has today can only be depleted by a technological civilization. It is far better to save them for use as chemical inputs and use the genuinely permanent sources of solar theromofusion (solar and wind) and gravitation (tides) to power our civilization.

The necessary technologies are available. The only thing stopping it is entrenched wealth.

On May 31 10:42 AM Jimbo wrote:

> I see inflation coming sooner, rather than later. I fear that we
> may have a "double dip" recession(depression?). The looming resets
> of mortgages, together with a poor employment picture,seem to combine
> for the perfect storm. The price of oil is now determined by a world
> market. If other countries increase their use, this means higher
> prices for a stressed U.S. economy and we can do nothing about it
> with an administration and Congress dead set against increasing domestic
> production. I suspect the agenda is to starve the oil based economy
> to force a "new age" of green fuels. But what if this plan fails?

Interview with Peter Schiff: Reflating the Bubble

396040.

Very well said. Those are exactly the basis of our economic success.

On Apr 24 07:55 PM user396040 wrote:

> This is the argument Andrew Mellon made during the Hoover Administration
> - "liquidate everything." Theoretically, it has some merit. In
> the long run, it is possible that markets would clear at lower prices.
> But, as Harry Hopkins said - "people don't eat in the long run."
> In a democracy, there will always be a strong demand for government
> action to avert a depression. I think the Republicans missed the
> boat last Fall. They could have proposed a simple stimulus - everyone
> subtracts 10% from his 2008 taxes and every state gets a check in
> the amount of $1000 for every person counted in the last census.
>
> Inflation is helpful at a time like this because it makes it easier
> for debtors to pay back their debts and it makes it easier to reduce
> real wages(just refrain from giving raises).
> A strong dollar does not enable us to rebuild our industrial base;
> instead, it makes it impossible for US industry to compete with imports
> unless we go back to imposing high tariffs. The dollar is up a great
> deal against many of our key trading partners in the last year(Canada,
> Mexico, Brazil, UK). A lower dollar would give the industrial part
> of the economy a shot in the arm and automatically increases the
> dollar earnings of multinational companies.
> In the long run, we will need a value added tax, a lower and simpler
> income tax, more money spent on education more effectively(people
> are by far our most important resource). We also desperately need
> some infrastructure upgrades. We need to reduce our dependence on
> oil imports. In the long run, these things - the intelligence and
> resourcefulness of our people, the quality of our infrastructure,
> our energy independence, and a tax system more oriented to taxing
> consumption rather than production - and not a strong dollar or
> the amount of gold buried in our back yards - are the things that
> will make us strong.

Interview with Peter Schiff: Reflating the Bubble

Utilitus,

I agree that what you stated seems sound, but it's not really.

Securities are not "money". Depending on a specific security's liquidity it can be exchanged more or less readily for money. But by so doing the money supply is unchanged. The person who formerly had the security now has the money that the person who now has the security used to have. (Confusing syntax, I know). Net change in money supply: zero.

The fact that securities held by people which have lost value can now be traded for fewer dollars does not reduce the money supply. If anything it actually increases it! What has changed is the VELOCITY of money. That has given us the appearance of deflation.

So flooding the money pool with dollars created to buy previously non-existent government bonds does increase the money supply and will eventually lead to inflation when velocity returns to a more normal rate. We can hope that the inflation is largely limited to the price of assets as it was during the first seven years of this decade. But don't bet on it; the Fed has lost 25 years of credibility in the past few months.


On Apr 27 02:14 PM utilitus wrote:

> Exerpt from Bill Gross' current PIMCO 'Investment Outlook':
>
> "The Dollar – As the center of structured finance and the shadow
> banking system, the dollar was bolstered as it sold paper to the
> rest of the world. To date, its recent strength seems counterintuitive.
> Weakness may more accurately describe its future."
>
> On Apr 24 12:55 PM mavericks wrote:

Interview with Peter Schiff: Reflating the Bubble

Because they will "un-peg"! It's already happening. Most of the Gulf states are beginning to peg to a basket of the dollar, yen, and Euro, because they sell to all three. By pegging their currencies to a basket they can sell oil in any of the three currencies and "convert" it to their own with limited currency risk.

On Apr 24 07:55 AM Freya wrote:

> Yes, it is thought provoking and it will come to pass in some form
> eventually.
>
> I do have a real problem figuring out one of his statements though:
> The USDs collapse is a gimme but when asked what currencies he would
> be in he says " Well, ultimately, a lot of the currencies which are
> currently pegged to the dollar will be very strong, a lot of the
> Asian currencies."
>
> If the USD is going to collapse, how will buying currencies pegged
> to the USD go up? Especially since the USD is a basket of currencies
> to begin with.
>
> It just sounds very, very complicated.
>
> I figure that you should just go with the Resource rich nations and
> their currencies.

U.S. Records Huge Trade Deficit

Mr. Morici,

Your statistics in your sandwich bun are excellent; the condiments of your analysis are flavorful. But where's the beef? HOW does the United States cut "the trade deficit .. in half"? Who beside the owners of Chinese factories does not want this?

This fairly long article appears to be a strong endorsement of a platitude.