G-Cloud

Putting $1T Subprime Mortgage Losses in Perspective

Forbes was off the point and you got sucked in based on a nonsensical argument. The law of large numbers includes the fact that you cannot extrapolate relative small outcomes from large number comparisons. However you can objectively extrapolate large numbers from sets of small numbers. Your and Forbe's statements are incredibly naive in terms of how the failure of the system (it doesn't matter why it failed us, it matters that if failedu s, and it matters that the effect has had a significant negative impact on millions of american families). Macro formulas like Y = C+I+G are useless when the real I and G are impossible to calculate. All the numbers are "extrapolated" and therefore are "estimated." C can be accurately calculated based on a set of true numbers. The other point Forbes completely missed it that it took 230 years to built the total net worth to where it was. It's taken 1 year to wipe out 2-3% or more of that net worth with more to come. Forbes is trying trick people and you are regurgitating his crap. You need to visit the thousands of new neighborhoods that have been abandoned, looted, and torched to do some meaningful extrapolation. Look and the mirror and asked yourself "Why am I focusing on extremely theoretical assumptions when there are real problems to analyze and solve."

The Hindenburg Omen: Crash Signal In Play

The H Omen is confirming what common sense tells us. The state of the global economy is perhaps more fragile than at any other time. W

e have no long term experience with the exotic and intertwined financial transactions that we are dealing with today.

We have multiple speculative bubbles that are bursting.

We don't know what we don't know about the size of future losses that may be taken by the financial and related sectors. (Major uncertainty).

We have experienced rapid inflation in energy and food prices and it is having a profound negative effect on demand for less essential goods and services (leading to higher unemployment).

We have underfunded obligations in both government and private pension plans at precisely the time that large numbers of baby boomers are retiring (some benefits are going to be reduced - there will be no choice).

We have seen trillions of dollars of real estate wealth disappear into thin air in the US and the Euro Community in just two years with more to come (the disappearing nest egg).

Consider the possibility of worldwide disruptions in the delivery of energy and food and the total effect on the markets.

Watch out for test of Oct 2005 DOW levels (10,215) by this October or sooner.

Why Today Is Different From the Inflationary 1970s

Perhaps you should look at this from a utilitarian viewpoint so you can get a handle on reality.

You are taking food and energy out of core inflation to give the impression that things aren't is bad as they seem. This is a futile exercise. You need to complete the opposite analysis and state the inflation rate of food and energy, the two most important commodity classes. Frankly, your comparison to the 1970's is useless since we weren't competing for these commodities with BRIC at that time.

People need a place to live and to eat; they need to buy gas, and they need to buy food, soap, healthcare, and medicine. They also need to purchase electricity, heat, and water. Almost all other purchases are optional. They can put off purchases of new clothes, furniture, electronics, new cars, and anything else they "don't really NEED".

The reason inflation is so low in the non-commodity sectors at this time is due to heavy discounting as retailers try to convert their inventory to cash as quickly as possible. There are record number of restaurants, retail stores, and other business closing their doors. Discretionary purchasing power continues to shrink. Tne total net worth of Americans and American corporations is taking a big hit.
This is payback for government and corporate mismanagement and American's appetite for quick profits, conspicuous consumption, greed, and lack of patience.

There is no need for you to make assumptions and analyses that have nothing to do with reality. The real problems are right in front of your eyes.