norom

Five Reasons the Market Could Crash This Fall

In other words, the United States needs to stop using bricks of plastic explosive to build its financial system. Hmmm...you may have a point there.

2 Thoughts on California

Prop 13 did it. Pure and simple. Also, people are fleeing California in droves. When your most productive citizens leave there's really not a whole lot you can do. Cali let special interests manage the state's affairs with elected leaders scrounging up money to finance the waste. Oh well. Its a good lesson for everyone else. California is a state but has an economy the size of a European nation so, yeah, it could happen elsewhere.

U.S. Deficit Tops $1 Trillion. What's the Big Deal?

The "big deal" is probably the fact that there won't be a means to pay this debt off, leading to the biggest default in global economic history. We keep comparing debt to GDP like we can somehow allocate a portion of GDP to that debt. We cannot. I wish to heaven people would stop justifying debt and leverage by running comparisons to productivity which did not occure because of those specific debts and leverage.

Lets think about this for a second, consumption expenditures increased GDP the most over the years. I.e. people buy more crap on credit. Now, despite the government's attempts at loosening credit, people aren't buying into it. Debt now has shame associated with it.

Economists and writers here are good at putting numbers together but terrible at reading behavioural trends that those numbers represent. This is not math.

Country GDP Growth

Betting on GDP seems to produce more pain than pleasure. I prefer Warren Buffett's approach of simply ignoring the macro-economy totally. It serves no purpose other than to instigate debate that goes nowhere.

Why Does Congress Ask Fannie and Freddie to Guarantee Bad Loans?

hmmm....it takes me more than a week to pay all my bills and cover personal expenses....I don't see how the whole country can do it either.

I think the majority of the pressure through both lobbyists and the people in general is to try and maintain price levels without directly fixing prices. This falls in line with the FED mandate to control inflation and deflation.

The problem, is that nobody knows what sustainable prices are. I mean, really. Borrowing money enables consumers to buy things at a higher price level than they would if they paid cash. Now firms, instead of increasing allocative efficiency, simply increase prices through terms of finance.

That puts the US at an extreme competitive disadvantage.

The Cap and Trade Delusion

You know what the worst thing you can do today is if you try to commit fraud? Try to hide it. If you simply commit fraud on the American people in broad daylight, for all to see, and act like it doesn't matter to you, (no displays of guilt), you can get away with it.

Marc Faber: 10-20% Inflation Coming to the U.S.

We already had hyperinflation followed by deflation during the run on oil and energy prices.

The reason it was inconsequential was because nobody had the money to pay the inflated prices. Just because a dollar is worth less on some currency market doesn't mean I have more of them.

So, prices have no choice but to go down.

Does Economic Policy Matter for Growth?

Great, (and short), article. Indians used to do a rain-dance to bring the rain. We now know it would have rained anyway with or without the rain-dance. People blame government for economic failiure, (and are correct in doing so most of the time), the government congratulates itself on economic success, (incorrect in doing so all of the time).

The study of economics is the study of Non Sequitur.

$134 Billion in Smuggled Bonds? Almost Surely a Scam

If this were part of a ponzi scheme it would have been far easier to enter larger and larger numbers into an excel spreadsheet and simply make them a chart, the label it a ROR, and stamp it with an official logo. Rich people have been proven stupid enough to belive anything presented as a statistic or chart.

Nasty Implications of the UAW Owning Too Much of the Auto Industry

Employee ownership is a great way to get off the hook for obligations that normally accompany Union contracts. Privately-owned companies and even a lot of publically owned ones award the ability to purchase stock to employees, which, if the company does well, can pay off big in the long term. I'm not sure about the agreement, but I think the actual employees should be awarded the stock not an employee organization like the UAW.

Stock ownership rather than contractual obligations allows for an employee's fringe or future benefits to be within the confines of reality. They can hold it or sell it. If its worth less than so be it. A lot of the Big Three's problems would never have happened if this plan were in place decades ago.

The Next Debt Crisis

We also did not have a Federal Reserve, and funds were backed by a limited supply of gold. There is no economic correlation between now and then from a monetary standpoint. It is also innaccurate to call the Great Depression over after WWII or after the New Deal. Anyone who has studied the subject understands that the Great Depression lasted officially until 1954.

Money is backed by that which has the greatest degree of utility. Right now thats time. When you save you are storing the productive time units of productivity into the future for a time when you are less productive. Not one single article I've read here or one single comment reflects somebody who truely understands modern inflation and deflation.

So please, everybody, get a clue!


On May 27 01:38 PM John Lounsbury wrote:

> I suggest to readers that they look at what happened following WW
> II to get an idea of what happens when national debt reaches 100%
> of GDP, employment crashes and inflation reaches double digits. From
> 1945-49 we went through a real wringer. It is not often referred
> to today, but at the time Americans thought the Great Depression
> had resumed.

If Gold Bugs' Fantasies Came True

Great article. If gold goes up because of hyperinflation selling it at these high levels won't make you rich since your purchasing power is debased.

Gold cannot be "money" because there isn't enough. When it was the reserve currency there were restrictions on private possesion. If the gold-bugs really had their way people would be forced to sell their gold to the government at prices nowhere near the market price. Their investments would be wiped out.

If gold is the only commodity immune to inflation then the best way for a government to hide inflation is the sieze gold, leaving the gold bugs with nothing more than a worthless pile of cash.

Drowning in Derivatives

Um, thats not how derivitives work. You cannot claim to know the liability potential of every derivitive contract on the planet earth, and these agreements have done wonders offsetting risk for companies that actually make things. Hedge funds and banks lost their pants because they speculated on derivatives, which is not what the derivative is designed to do.

The Perfect Storm: Three Forces to Undo the Recovery

The Unions did. There is now, at Chrysler, an incentive to take on projects with negative net-present-value because shareholders get all the upside. The Unions got a cheap date and stand to profit hugely while the money they subsited on from debt-holders dry out. Its like buying your own credit-card debt and forgiving yourself of that debt.


On May 12 09:09 PM nuclear stocks wrote:

> The unions did not steal Chrysler from the bondholders. The bondholders
> purchased bad bonds. Have you ever heard of a bankruptcy hearing
> where the very first motion was to protect the employees? If the
> employees walk, the bondholders get nothing because the company is
> worth nothing. Obama did the same thing that the bankruptcy court
> would have done at the bondholder’s insistence. This guy is clueless
> about the corporate bankruptcy process.
>
> What were those bondholders thinking when they bought the Chrysler
> bonds, Chrysler has bee essentially bankrupt for ten years.

The Perfect Storm: Three Forces to Undo the Recovery

It will happen again. The productive capacity of the United States and its capacity to consume has never been more distant. Thats the Achillies heel of every great civilization, dependance on imports which can only be afforded by an ability to make transfer and interest payments. The supply of goods and services can only go down, which leads to inflation and turmoil. Our primary industries do not produce anything of tangible value and those that do have no incentive to use time and resources effectively. Instead of building the economy by ensuring a competitive marketplace our government has allocated the time and resources of the United States to furthering X-inefficiency, the virus that caused this collapse in the first place. I.e. too much money chasing money.