Quaker

The Recovery Was Too Expensive

GDP is really a money flow number. It really bears little resemblence to the economic activity going on in the country or to earnings power. This is why GDP went down so little yet personal income tax reciepts to the government went down 35%, the biggest drop in history.

Corporate taxes right now are about 8% of total spending. Personal income taxes are about 35% of spending. The rest is mostly borrowed.

Given baseline budgeting for entitlements, there's little question that Bernanke didn't really do anything other than kick the can down the road. The fact that he considers this a victory shows how shallow and bureaucratic his thinking really is.

The fact is, all we really did was hasten the collapse of the federal government. The key flaw in peoples thinking is the perception that things that change gradually will always change gradually. When this thing stops, it's going to stop like a june bug stops when it hits your windshield.

Perhaps There Are Unseen Green Shoots

I believe that we're in a systemic change in currency and trade regimes worldwide, similar to that which happened in the late 20's in Germany and in 1870's in London and Amsterdam.

The changes we're going through are more historical than economic. The reason we gor into trouble was the China, Saudi trade caused an excess of dollars to enter the market and and excess of IOU's to be issued. This caused interest rates to get absurdly low and destroyed worldwide equity.

Nothing we do is going to change this until we get either a new trading regime (a replacement for fiat reserves) or we take it on the chin and write debt down 30%. In fact, both are happening. China is using the Renmimbi as a trading currency with select partners, certain commodities are not following the spot markets, (Iron ore and heavy middle eastern crude) and countries are cutting side deals with each other outside US and Euro influence.

In fact,this will be exasperated in the coming year. Why would China expose itseld to bubble prices in commodites caused by wreckless Goldman Sachs traders? Why would they expose their trade wiith Brazil to the whims of a intellectual moron like Ben Bernanke.

Most people, especially economists, lack the ability to see the world in three deminsions. Currency's are nothing other than tradable debt instruments. Throughout history tradable debt instruments have become worthless as the worlds traders shunned them. This time is no different. If the world economy is going to grow again, it's not going to do it carrying the weight of 30 trillion in loans on it'sback.

Is the Employment Picture Really Better Now than in 1933?

I live in a farm area. There are VERY few Americans working on farms. I'd estimate maybe 1 in 10 during the off season and 1 in 30 during planting and harvesting. Everybody is Mexican and Guatemalan.

I also live in the northeast. A HUGE % of the population is either retired, (early) disabled, (BS) or working for government directly or institutions funded by government.

John Hussman: Wishful Thinking

In comparing this current re/depression with that of the 30's there are actually more similarities than people realize.

First, in 1920-1929 and 2000-2007, in both cases the rich got richer and in both cases a large percentage of the people got noticeably poorer. In both cases, the total of liabilities increased across the board, but the rich grew their asset values while the poor grew wages which were destroyed by inflation.

In both cases, low capital costs and free trade made it easy to move machines and destroy equity capital. What many people viewed as "getting richer" was simply the monetizing of equity that took years to accumulate. The fact that today most of American manufacturing companies are debt bombs is hardly a coincidence.

These aren't judgements on policies, simply observations. In nature, we don't ask ourselves if a species policies caused extinctions. In business,we assume the "guiding hand" causes growth and recession.This is absurd but don't try telling that to an economists.

For myself, I see no real reason why unemployment can't go to 20%. The only real justification is that drops in the past were followed by expansions. To believe the economy is going to improve SOME INDUSTRY has to lead us out. Name it. Housing? Glut. Cars? MASSIVE Glut.

IMO, this depression will be identical to the one in 1929, only we are England this time. Our reserve currency status is over. Guess what? When the pound lost reserve status, nobody expected that either. When the guilder was replaced it happened in just two years.

There are two sides to a balance sheet. GE may have leveraged up too high but they also pissed away their equity by buying shares and paying dividends. There's little reason to believe it'll be different this time.

How Much Inflation Will We Have to Endure?

5 years tips lost 15% last week.

How Much Inflation Will We Have to Endure?

last week the 5 year tips lost 15%.

3 Economic Crises: My Take

I would add that, IMO, there will be a global collapse in commercial real estate. It amazes me that the same asset value lending that caused the bank collapses in the 80's is upon us again.

I suspect commercial reits will fall 50-80%.

There's Just No Need For A Fed Cut

people who rely on government statistics to tell them what the economy is doing deserve to lose their money.

The View From Friday's GDP Report

When was the last time GDP was revised up? IMO, GDP will start to really fall in the fourth quarter. This is when contagion from the mortgage markets makes it's way into credit cards and financing for boats, Harley's, motor homes and cottages.

Economics is the science of deception. 2 and 10 average to 6. So does 5 and 7. Add hedonic adjustments and seasonal adjustments and you have worthless blather.

Almost all of my elderly clients (accounting firm) have multiple homes and virtually ALL are selling one. Either a Florida or a NY. Almost all have leveraged motor homes and multiple cars. All the "home value" statistics tell you is that as sales fall, prices are being concentrated around the national average for mortgage loan approval based on wages. (As if we needed analysis to see that was going to happen. This has nothing to do with actual price.

The cottage industry is going to get DEMOLISHED. Cottages are the ultimate Alt-A, subprime. Nobody... and i mean NOBODY can even imagine summer home prices will fall. Not owners, not bankers.

But simultaneoulsy, we are going to get a bloodbath in sales of motor homes, harleys, ski-doo's.

When marina's are stuffed with unsellable fishing traulers and banks are repoing lake front property by the neighborhood, BEA will still be saying GDP is going up 3.4%.