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Why Lessons From The First Great Depression Mean The Next Four Months Will Be Very Painful For Stockholders

Tyler Durden's picture





 

Scott Minerd, CIO of Guggenheim Partners, parses through the years of the Great Depression, and focuses on the pivotal 1936, which contained in it the seeds for the destruction of the period of relative economic growth and stability from 1932 to 1936, and resulted in a plunge in the economy in the second great recession of the Depressionary period: that of 1937 and 1938. While the first period saw "GNP grow at an annualized rate of 10 percent, the Dow rose approximately 20 percent per annum, and unemployment declined from as high as 25 percent in 1933 to as low as 11 percent in 1937" the second and much more dire phase of 1937-1938 . saw a unprecedented plunge in economic data: "national output declined by 5.4 percent, unemployment skyrocketed from 11 percent back to 20 percent, the Dow Jones Industrial Average declined 49 percent, and four years of healthy price recovery receded into 3 percent annual deflation." What precipitated the second collapse? "The short answer is that it was a confluence of factors, a perfect storm of monetary and fiscal policy mistakes" yet the immediate catalyst, if one can be defined was "the fiscal policy missteps of the Roosevelt Administration, who, in an effort to balance the budget after six years of deficits, implemented a series of tax increases in 1936 and 1937 that caused output, prices, and income to fall and sent unemployment skyrocketing." We are currently faced with precisely the same juncture, and unfortunately for America, things now have a far lower probability of occurring "just as they should" in order for the country to emerge in one piece on the other side of the tunnel. Here is why.

First a question - what caused Rooselvelt to flip out and commence on a series of disastrous economic policies? Minerd explains:

In response to such Republican criticism of his fiscal policies, Roosevelt fired back by issuing the following points in the Democratic Party platform of 1936 (my paraphrase, followed by direct excerpts originally published June 23, 1936):

1. Deficit spending was a result of the crisis inherited from the previous Administration: “We hold this truth to be self-evident – that 12 years of Republican leadership left our Nation sorely stricken in body, mind, and spirit; and that three years of Democratic leadership have put it back on the road to restored health and prosperity.”

2. The Democratic Party restored confidence in America, thus the cost of deficit borrowing had declined to extremely low levels: “We have raised the public credit to a position of unsurpassed security. The interest rate on government bonds has been reduced to the lowest level in 28 years.”

3. The Democratic Party would still balance the budget through the austerity of limited growth in government and by higher taxes: “We are determined to reduce the expenses of government...Our retrenchment, tax, and recovery programs thus reflect our firm determination to achieve a balanced budget and the reduction of the national debt at the earliest possible moment.”

Does any of this seem familiar? It shoud, as should the fact that in his several years in office the budget deficit had soared, and the attempt to balance it resulted first and foremost in an explosion in unemployment, as the chart below demonstrates:

What specifically went wrong to cause the 1937-1938 episode?

Someone once asked me what Roosevelt did that was so bad leading up to the recession of 1937-38. The answer I give is simple: “He attempted to balance the budget at the wrong time.” More specifically, he attempted to balance thebudget by increasing tax revenues at a time when the economy was still finding its footing and the Federal Reserve was attempting to reverse policy. Even after the four years of recovery following the Great Depression, when Roosevelt began his series of tax increases unemployment remained over 12 percent, which on its own would be considered the worst labor market in modern U.S. economic history.

If the Roosevelt Administration’s driving purpose was to prove to the world that it could balance the budget, it was successful. In 1937, the budget deficit declined by 1.9 percentage points in relation to GNP. In 1938, that trend continued with the deficit declining another 1.4 percentage points in relation to GNP. By December of 1938 the Roosevelt Administration had essentially achieved its goal of a balanced budget.

But what was the cost of such actions? According to data from BCA Research, the unemployment rate went from 11.2 percent in May of 1937 to 20.0 percent just 14 months later. Data from the Federal Reserve Bank of Minneapolis shows the overall economy contracted 5.4 percent in 1938. The Dow Jones Industrial Average fell 49 percent from March 1937 to March 1938. Two years later, in March of 1939, the equity market remained depressed, still 30 percent below its March 1937 levels. The U.S. economy, which had whipped unemployment down from 25 percent in 1933 to 11 percent in 1937, limped into the 1940s with unemployment hovering just over 15 percent. The silver lining of all this economic carnage? For one month in 1938 the budget deficit was reduced to just $89 billion dollars – nearly, but not quite balanced.

So have we learned anything from the past? And even if we have, will the imminent expiration of the tax cuts be the equivalent of the tax hike the rapidly plunged America into the biggest economic deterioration at the tail end of the Great Depression? Alas, the answer is probably yes.But not before the Fed embarks on a proper QE strategy, one that has the potential to not only spike asset prices as the Primary Dealers bid up everything that is not nailed down, but this would happen in a time of surging unemployment. With the true unemployment rate already in the 20% ballpark as calculated by objective, non-governmental estimates, will the outcome of the tax changes of 2011 result in the biggest economic catastrophe in US history? We should look back in time for the answer...

It’s evident from Chairman Ben Bernanke’s speech in Jackson Hole last week that the Fed stands ready to continue to provide quantitative easing if necessary. I believe it will be necessary since the economic data in the next few months is likely to be pretty ugly and the rhetoric out of Washington is likely to devolve into a nightly news highlight reel of partisan feuding.

Yet despite the Fed’s commitments, some of the same issues that occurred in 1937 loom on the horizon today. For instance, in the first quarter of 2011 the United States faces massive tax increases. Similar to the mid-1930s, many have argued that deficits must be tamed now and that the economy is healthy enough to sustain austerity measures. Under such political pressure, it appears unlikely that even a portion of the Bush tax cuts will be extended.

There are a host of economic forecasts about the potential size of the fiscal drag that would result from a full expiration of the Bush tax cuts. Macroeconomic Advisers, for instance, believes it will subtract 0.9 percentage points off GDP. ISI Consulting thinks it could be even larger, around 1.2 percentage points. Arthur Laffer, the famed supply-side economist, prefers a number significantly larger, predicting as much as 6 percentage points of fiscal drag. Any way you slice it, if estimates for economic growth in 2011 range from 2 to 3 percent, these tax increases could result in flat to anemic growth and elevate the risk of recession due to the slightest bit of economic turbulence.

In addition to the expiration of the Bush tax cuts, there is the additional cost of healthcare reform. While some would argue that healthcare reform is just a transfer payment program, the fact remains that there will be no incremental healthcare benefits available in the next three years. Therefore, the transfer payments, which are intended to be revenue neutral over the next 10 years, actually create a fiscal drag between 2011 and 2013 before becoming modestly stimulative when the benefits become available from 2014 to 2020.

So what does this imminent change to tax expectations mean for investors in practical terms? Very bad things, especially for those who anticipate a run up in stocks into the mid-term elections: "One clear consequence of the repeal of the Bush tax cuts will be an urgency to accelerate taxable income into 2010. This will have a number of impacts on the market, the most direct being a desire to liquidate positions in equities and other financial assets to realize capital gains before the New Year. This will continue to put downward pressure on equities and increase volatility."

That's right: equity liquidations, meaning the long expected second major leg down in stocks is at most 4 months away.

There's more:

Last week, Bernanke also referenced the importance of a “baton pass” from the economic boosts of government spending and inventory replenishing to the more sustainable support of consumer spending. If equity prices decline in conjunction with the renewed pressure on the housing market as tax incentives are removed, the net effect is likely to be an adverse impact to already fragile consumer sentiment and spending. In essence, the economy is in danger of a fumbled baton pass from 2010 to 2011.

In the face of this uncertainty, and in light of the Jackson Hole remarks, it appears Chairman Bernanke and the FOMC will find it necessary to increase their holdings in long-term securities and increase the size of their balance sheet. This will ultimately lead to lower interest rates and a need to maintain low long-term rates for several years in a hope to prop up the housing market by maintaining record low mortgage rates (see my recent commentary on “The Story in Housing”). What remains to be seen is how severe the economic headwinds will be as a result of the fiscal tightening going into 2011, and how dramatically the Fed will move once it reaches the decision to continue to grow its balance sheet.

In the short run, given the amount of purchases that the Fed will have to make, quantitative easing will most likely swamp the amount of incremental borrowing required by the government, which means that financing the deficit won’t be a problem. Ultimately, however, the U.S. economy will come to the end of the road and inflation concerns will reemerge.

Once the market collapse has transpired, then, and only then, once we enter the proverbial revulsion stage in equities, will the stage be set for an actual bull market:

I believe further quantitative easing is likely to take place in the near term. I also believe there is a strong probability that there will be some form of additional fiscal stimulus passed by the government as it yields to mounting pressure to address the nation’s historically high unemployment rate. After these two events take place, the stage should be set for the green shoots of recovery to reappear in 2011. Once these harbingers of economic health appear, the Fed will come under pressure to convince the market that it has a sound exit strategy to unwind its massive balance sheet. Simultaneously, pressure will reemerge for fiscal austerity and deficit reduction.

As we approach the presidential election of 2012, monetary and fiscal policymakers will be faced with their greatest challenge: whether to reverse the emergency policies applied up to that point, and if so, at what pace and timing to conduct such measures. The risks surrounding these decisions are even greater than the risks that surround the near-term policy decisions about further fiscal stimulus and quantitative easing – taking away support is always more difficult than giving it. The dangers will be strikingly similar to the risks that faced the economy in 1936. Remember, it was Roosevelt’s dash to fiscal discipline in 1936 – combined with the Fed’s misguided decision to tighten monetary policy by doubling the required reserve ratio for banks – that resulted in the severe fiscal drag on aggregate demand and economic output that pulled the economy back into a deep recession.

While I remain optimistic that the current economic “soft patch” will not unravel into a full-blown recession, my concern increases when I look ahead to the challenges the economy will face once it regains its footing. The parallels to 1936 grow increasingly striking the closer one looks to 2012, especially if the green shoots of economic recovery take hold between now and then, which I believe they will thanks to additional policy actions later this year and in early 2011. Oddly enough, the foundation for the recession of 1937-1938 was laid in the election year of 1936. The question remains, will the presidential election of 2012 lay the foundation for a parallel series of events? Given the unprecedented monetary and fiscal policies enacted in recent months, as well as those that are likely to be enacted in the near term, the opportunities for future errors of policy judgment loom large. In light of this, whether it’s in relation to 2010 or 2012, the lessons of 1936 are stark and disturbing.

And while America in 1938 and onward was a different country, whose manufacturing industry and thus real economic output potential, was only starting to stretch its wings, further having the rather tragic benefit of World War II as an unprecedented attractor for record economic activity, the current outlook is far more bleak. The US consumer is on average far older, the pension system is on the verge of bankruptcy, the US' chief export (at least on a relative basis) is services, and the spectre of a war at this juncture would have far more dire ramifications: a small regional conflict that avoids the participation of the superpowers may have a marginal boost to the economy, but likely nowhere near enough. A full blown collapse into another world war leads to consequences too dire to even imagine. Which is why we agree with Minerd, that while the intermediate steps that occurred in the immediately preceding 1937 period are all in line, and which the government will only have itself to blame if it screws up on the transition to a smooth glide slope, the events on the other end of the tunnel look far bleaker.

Full must read paper from Guggenheim.

 


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Thu, 09/02/2010 - 13:57 | Link to Comment Citizen of an I...
Citizen of an IKEA World's picture

Run, don't walk, to your local book purveyor for a copy of The Forgotten Man, by Amity Shlaes.

Thu, 09/02/2010 - 14:57 | Link to Comment weinerdog43
weinerdog43's picture

"Run, don't walk, to your local book purveyor for a copy of The Forgotten Man, by Amity Shlaes."

And then run even faster the other way.

Thu, 09/02/2010 - 16:10 | Link to Comment HonestJohn
HonestJohn's picture

that book was as dry as toast...I prefer Devil take the Hindmost: The History of Finacial Specualtion by Edward Chancellor

Thu, 09/02/2010 - 16:22 | Link to Comment jwthomps
jwthomps's picture

That book is seriously good for a

real understanding of that period of

time.

Thu, 09/02/2010 - 17:30 | Link to Comment cossack55
cossack55's picture

To get a solid "feel" for that period, I highly recommend Studs Terkel's  "Hard Times".  An oral history compiled in 1970 when many or the players and victims were still alive.  A damn fine read with some intersting perspectives on Goldman Sucks and JP Morgan.

Thu, 09/02/2010 - 18:19 | Link to Comment New_Meat
New_Meat's picture

and Roth's "Depression Diary:"

http://www.abebooks.com/servlet/SearchResults?an=roth&sts=t&tn=depressio...

and for serious readers, Milton Friedman and Anna Schwartz (kinda the basis of his Nobel).

- Ned

Fri, 09/03/2010 - 01:23 | Link to Comment whatsinaname
Thu, 09/02/2010 - 20:38 | Link to Comment Crisismode
Crisismode's picture

I prefer people who don't read books at at all.

 

BOOKS are sooooo Old-Timey.

 

Can't you people find what you need to know online?

 

WHY do you WASTE you time reading BOOKS????

 

Oh, right.

 

They're not electronic.

 

And they say "you're" instead of "your", correctly.

 

Pardon me.

 

.

Thu, 09/02/2010 - 20:58 | Link to Comment New_Meat
New_Meat's picture

you and Kathy should hook up. - Ned

Thu, 09/02/2010 - 21:01 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

And they say "you're" instead of "your", correctly.

never thought about that, mode.

your = your're  =  you are. right?

books are hard for some, to just sit down and read in/on a chair. i try. i like picture books, art books. clouds, artists are up in the clouds, with pictures.

Fri, 09/03/2010 - 01:38 | Link to Comment Unscarred
Unscarred's picture

Picture books are so benign and callous.  Color by numbers is where the REAL action is at!

Fri, 09/03/2010 - 02:23 | Link to Comment palmereldritch
palmereldritch's picture

Can we possibly use this opportunity to advance a potential standardized (albeit atavistic) Internet grammar virus?:

Your = You're = Yore (wtf, it could be used on some of those re-enactment parts of the web) => new standard: Yor

There = Their = They're (personally, this one drives me crazy for so many reasons...but I digress) => new standard: Ther


Fuck it.  At the very least, it will drive the grammar nazis mad.  And make drunk typing waaaaaaay eazier.

Thu, 09/02/2010 - 23:06 | Link to Comment island
island's picture

And they say "you're" instead of "your", correctly.

 

And they put the commas correctly inside the quotation marks. :-|

Thu, 09/02/2010 - 21:30 | Link to Comment sgt_doom
sgt_doom's picture

While I am NOT suggesting anyone discount your reading suggestion, I would like to point out the abject ignorance among all these self-styled economics scholars (especially those with a concentration on the Great Crash & Great Depression era).

First, they almost always ignore Prohibition (1920-1933), which had two colossal, gargantuan effects at that time:

(1) A massive tax cut, as taxes no longer could be collected on something which it was illegal to sell (alcoholic beverages); and,

(2) Where was all the illegal, and incredible sized monies laundered?

Why, the stock exchanges, naturally.

(They also seem uniformly ignorant of a process today called "securitization" -- but was at that time practised under different names, but effectively the same process.)

We are observing parallel processes today: massive tax cuts for the super-rich, funded by borrowed monies from foreign countries; securitization run wild, of course, and the sudden and dramatic growth of hedge funds, beginning in 2002.  (Now where do you suppose that growth originated?  2002?)

 

Thu, 09/02/2010 - 21:44 | Link to Comment New_Meat
New_Meat's picture

and Joe Kennedy was trans-shipping scotch whiskey over horseneck beach, then he became the first chairman of the SEC.

Sheila, you have such great progenators in yoiur past--keep up the good work.

- Ned

Fri, 09/03/2010 - 00:09 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

+ 10

LOL...

Fri, 09/03/2010 - 14:20 | Link to Comment sgt_doom
sgt_doom's picture

Let us not forget that Prohibition lasted from 1920 to 1933, and that three processes ended in 1933:

(1) securitization

(2) Extreme tax cuts resulting from untaxed liquor, and

(3) Unregulated dark pools laundered through the stock exchange.

Sound familiar????

Thu, 09/02/2010 - 23:40 | Link to Comment Rusty Shorts
Fri, 09/03/2010 - 14:41 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

sister, bitchez.

Fri, 09/03/2010 - 11:36 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

dunkin' do....nuts, bitches†

Fri, 09/03/2010 - 01:43 | Link to Comment Unscarred
Unscarred's picture

Personal fav right here:

http://en.wikipedia.org/wiki/The_Little_Engine_That_Could

"I--think--I--can, I--think--I--can." 

Thu, 09/02/2010 - 14:07 | Link to Comment Sudden Debt
Sudden Debt's picture

I HAVE A PLAN TO FIX THIS!!

we should kill a Austrian Prince and blame a group of people associated with most bankers.

we can't do it ourselves... maybe we should let it look like a assassination?

After that, we pick a fight with the Germans!

They also have money!

And when we win, we let them pay for it all and TAKE ALL THEIR GOLD!!!

WHOEHAHAHAHAHA!

I could work...

and if not, we can try again a few years later!

WHO'S WITH ME!!

Thu, 09/02/2010 - 14:12 | Link to Comment Translational Lift
Translational Lift's picture

Some demented Serb.........

Thu, 09/02/2010 - 14:14 | Link to Comment Treeplanter
Treeplanter's picture

Let's pretend we do all that cool stuff, but take the gold for real...  

Thu, 09/02/2010 - 14:17 | Link to Comment Azannoth
Azannoth's picture

I agree in principle, but let's assasinate a Mongolian goat herder, we blame it on the Chineese and pretend to defent democracy in Mongolia by invading it, than we stage a border crossing by a few Chineese soldiers into Mongolia and start a fight with the Chineese, after we win we take all their Rare Earths and null our debt with them 

Thu, 09/02/2010 - 14:21 | Link to Comment Almost Solvent
Almost Solvent's picture

Tibet. They want to be free. Lets free a people that actually want to be free.

 

 

Thu, 09/02/2010 - 16:55 | Link to Comment Thorlyx
Thorlyx's picture

Good one !

Thu, 09/02/2010 - 17:27 | Link to Comment Commander Cody
Commander Cody's picture

You idealist.  No economic benefit in freeing Tibet.

Thu, 09/02/2010 - 22:29 | Link to Comment Wallace Hartley
Wallace Hartley's picture

I agree that it has to be the "Chineese" that we villify.  They have the most valuable resources.  They've been stockpiling raw materials, have vast natural resources, and let's not forget...they own a ton of US debt.  But what could be the spark?  Anyone see the home page blurb on MSNBS a few days ago about a Chinese satellite capable of taking out other orbiting satellites?  The US could discontinue transmission from one or more major communication satellites and blame the Chinese for it.  A direct threat to the infrastructure of the US and a threat to our "freedom".  It's the modern day equivilant of sinking a passenger ship and much harder to prove/disprove.  We're so dependent on electronic communication that the gullable US public would be demanding someone's butt!  Bonus...they could wipe out the Zero Hedge satellite and spread their propaganda just like in the good 'ole days!!! Any comments?

Fri, 09/03/2010 - 11:31 | Link to Comment A Proud Canadian
A Proud Canadian's picture

Not to mention all the Capital equipment and technology that has flowed there funded by Western Corporations....probably dwarfs the amount of USTs.

Thu, 09/02/2010 - 14:25 | Link to Comment Jason T
Jason T's picture

who do you think you are, the british empire??

Fri, 09/03/2010 - 02:21 | Link to Comment palmereldritch
palmereldritch's picture

And by that of course, you mean The German Black Nobility

Thu, 09/02/2010 - 15:04 | Link to Comment Black Forest
Black Forest's picture

After that, we pick a fight with the Germans!
They also have money!
And when we win, we let them pay for it all and TAKE ALL THEIR GOLD!!!

You won't win. We'll drop Iraqi Dinar all over the States and let you pay reparations in Chinese Yuan by 2099.

Thu, 09/02/2010 - 16:14 | Link to Comment ATTILA THE WIMP
ATTILA THE WIMP's picture

Let's do Panama instead. They got plenty of mucho fine weed.

Thu, 09/02/2010 - 23:31 | Link to Comment Johnny Bravo
Johnny Bravo's picture

There's way better weed grown right here in good old Colorado.  California too.
It's legal for medical purposes, and for a 200 dollar fee, you can buy the best weed on the earth from any number of stores.

Pretty soon, it'll all be legal for anybody over 21.

Fri, 09/03/2010 - 00:13 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Yet another point I agree with JB on.  Excellent.  And that is another lurch to freedom and liberty to do as we want.

...

Still going to buy Gold though.  5000 years and all that.

Even a superstar Johnny Bravo might want to concede that one (as a wealth preserver).

Fri, 09/03/2010 - 00:55 | Link to Comment Johnny Bravo
Johnny Bravo's picture

Do you live in Colorado?  Or do you just agree that the weed is good here?  Or that it shall be legal soon?

About the gold... weed is worth more than gold.  It's a lot more liquid, anyway. 

Fri, 09/03/2010 - 01:14 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

LOL JB!

No, I live in SE USA.

Because of my cantankerous conservative/libertarian nature, I want it ALL!  Re Liberty and Freedom.

Gold?  That is my way to insure that my 24 year old daughter comes out of whatever happens OK.

Fri, 09/03/2010 - 01:28 | Link to Comment Johnny Bravo
Johnny Bravo's picture

I personally believe that after looking at somebody who is drunk side by side with somebody who is high, there's no contest!  People have to make the weed legal.

I actually came back to this site because I found this article, and thought it may be of interest to you.  
http://www.safehaven.com/article/18047/sp500-and-gold-at-crucial-pivot-points

You have a 24 year old daughter?  Yowsa!  Of course, I only say that because that's close to my age!

Fri, 09/03/2010 - 02:08 | Link to Comment jomama
jomama's picture

Dr. Jekyll,

Nice article. You gotta respect a guy who is the self proclaimed oil and gold expert, and makes a .ico of his face for his web address bar.

Fri, 09/03/2010 - 02:15 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Fuggetaboutit JB!

Our daughter has her boyfriend, an electrical engineer working with Eaton.  And, flash news, my niece (her cousin) announced her engagement to a rich NYC youngster...!

She has a job as a paralegal with bankruptcy lawyers!  Secure job, LOTS of overtime...

Re stoned vs. drunk, well yes I agree.  But the laws BAN the weed, que pena...  That may change, as you point out.  Shi'ite!  They make weed easy to get, and I am a goner...!

Course, like Freewheeling Frankling said in the 1970s:

"Drinking and getting stoned is like pissing into the wind."  I never got clarification on to whether that was good or no.  Worked out well enough when I was in college...

Best of luck to you, Sr. VP at JPM trying to screw me re gold!    :)

Thu, 09/02/2010 - 17:46 | Link to Comment zoomer
zoomer's picture

You're too late:

1. US Millitary sinks S Korean patrol boat.

2. S K blames N K

3. N K & S K start throwing rocks at each other across the DMZ

4. China "Backs Up" N K(as US M is already in S K), more rock throwing ensues

5. US declares China "Enemy"

6. China assets (T/MBS/ASB Bonds) seized.

7. Trade stops and unemployment/trade deficts "Fixed"

   No One hurt(except the poor sailors-"they were expendable"),

    Problem solved.

Thu, 09/02/2010 - 18:00 | Link to Comment Getagrip
Getagrip's picture

Didn't that already happen? Think they called it WWI... 

Thu, 09/02/2010 - 18:56 | Link to Comment Oswald Spengler
Oswald Spengler's picture

What happened to blaming the Jews? It always worked in the past.

Thu, 09/02/2010 - 19:42 | Link to Comment Getagrip
Getagrip's picture

Israel has nuke's-and Divine providence..? They are and have been the center of world attention since I can remember (and I'm old) . Why is this little country the center of so much controversy and attention? Why do they matter?? I know and think all will in time...standby...    

Thu, 09/02/2010 - 21:39 | Link to Comment Rebel
Rebel's picture

Oh, I know, I know too . . . wonder if we are thinking the same thing?

Fri, 09/03/2010 - 07:41 | Link to Comment old_turk
old_turk's picture

A fine plan, SD, but it will not be popular with the Austrian Prince crowd.  Or the anti-war crowd.  Or the bankster crowd.  Or the Bilterbergers.  Or the Tripartite Commission.  Or the UN or the International War Crimes Tribunal. 

Wait a minute, this plan just keeps getting better and better. :-)

Thu, 09/02/2010 - 14:06 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

just in credible and I are playing golf. he is a chemical engineer working schumberger in WY. and really likes atlas strugged ayn Rand. well he is only 22 years young. I am wising him up the back nine

Thu, 09/02/2010 - 14:16 | Link to Comment Frank Owen
Thu, 09/02/2010 - 14:31 | Link to Comment Joe Davola
Joe Davola's picture

Maybe it's his good buddy weiser.

Thu, 09/02/2010 - 15:29 | Link to Comment PhattyBuoy
PhattyBuoy's picture

Been my experience that the "wisers" you speak of, leads to the 19th hole ...

Thu, 09/02/2010 - 15:55 | Link to Comment Frank Owen
Frank Owen's picture

Come on now, Kathy with a 22 year old engineer, and a bottle of wisers... he might finish off playing more than 19. Sorry Kathy, this is a bit mean - but i am still laughing, because you're right - I'm sick.

Thu, 09/02/2010 - 17:59 | Link to Comment Hephasteus
Hephasteus's picture

It might be humerous. She would play dumb when she should play available. Play aloof when she should play dumb, play drunk and horny 3 hours before they start drinking. And the poor engineer would spend all day at work the next day trying to figure out how she blew her head gasket.

Thu, 09/02/2010 - 18:52 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

shut up†

i asked him how to spell wising and he said no such word, and i said i was using as slang. well he really enjoyed our day golfing, he said so very very much. i am quite engaging with young men and it is absolutely hardly ever sexual. well, especially with chemical engineers. no i was doing some education,,,,,al stuff with him. what i know and he didn't. he is going to start checking out ZH, for information. he is leaving for WY, you know what they have at these schlumberger's facilities, right? M A N   C A M P's  not man caves, nothing like those. they have to put all the workers up in temporary trailer parks, so they call them MAN CAMPs. honest. think about it. he doesn't own a F150, either, trouble.

Thu, 09/02/2010 - 19:53 | Link to Comment Hephasteus
Hephasteus's picture

Ok shutting up.

Thu, 09/02/2010 - 23:33 | Link to Comment Johnny Bravo
Johnny Bravo's picture

What'd ya shoot?  I'm sure I can outdrive you both.  :)

Fri, 09/03/2010 - 11:46 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

yeah i bet you could, JB. i suck, don't keep score, not good with high numbers. i only play golf for the walk and meeting guyz. my motto. play with the men, tease, flirt, compliment. you don't have to take them home.

Fri, 09/03/2010 - 11:50 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

~

Thu, 09/02/2010 - 18:45 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

i am starting to really enjoy your humor, frank. i see that you got a new job and you smoke out on your deck. we have a lot in common. what size are U. i bet you could teach me a thing or 2 about rim shots? how bout it, want to hang around. i know you are a bit more morally high grounded than myself, but that is OK with me.

Thu, 09/02/2010 - 20:16 | Link to Comment Frank Owen
Frank Owen's picture

I can't play 21 holes with you - Spitzer would get morally offended.

Thu, 09/02/2010 - 21:10 | Link to Comment ColonelCooper
ColonelCooper's picture

Maybe you two could get a room.  Your guy's banter is starting to read like the beginning of a Penthouse Letter written by a Russian dockworker.

Just sayin'.

 

Thu, 09/02/2010 - 21:54 | Link to Comment Frank Owen
Frank Owen's picture

You've gotta be kidding after your Johnny's personal troll routine. And penthouse always refuses my letters. "Dear Frank, Your previous submissions routinely turn even the most hardened staffer's faces red and we are going to have to ask you to refrain from sending any more. Following your most recent letter two of our female staff are now suffering from agoraphobia, and the rest can't bear to look into their mother's eyes. Your letter was unfortunately photocopied and all the male staff have been awol for 4 days, and are now starting to call in with "tennis elbow". Please for the love of God - desist - Penthouse.

Thu, 09/02/2010 - 22:17 | Link to Comment ColonelCooper
ColonelCooper's picture

LMAO.  And I was kidding, yes.

C'mon, you gotta admit, the Russian dockworker thing was kind of funny.

Thu, 09/02/2010 - 22:25 | Link to Comment Frank Owen
Frank Owen's picture

I wasn't sure if you were joking or if you were just grumpy having recently had that hemorrhoid removed.. lol I took the russian dockworker thing as a fucking compliment.

Fri, 09/03/2010 - 11:49 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

~

Fri, 09/03/2010 - 11:48 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

now w h a t in the heck is that picture of?

Fri, 09/03/2010 - 11:50 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

 

tyler, he's got  F I G H T .

Thu, 09/02/2010 - 14:07 | Link to Comment HitTheFan
HitTheFan's picture

Uh oh!!

Thu, 09/02/2010 - 14:08 | Link to Comment Mongo
Mongo's picture

When hunted by lions, it is not important to be the first one but make sure your not the last...

Thu, 09/02/2010 - 14:09 | Link to Comment Sudden Debt
Sudden Debt's picture

My broker gave me 2 tickets today for the movie permiere for Wallstreet with douglas.

It's a sign I tell you!

MUST...

MUST BUY...

MUST BUY MORE STOCK!!

Thu, 09/02/2010 - 18:03 | Link to Comment Getagrip
Getagrip's picture

Buy some for me!!! I like VXX!!

Thu, 09/02/2010 - 23:36 | Link to Comment Johnny Bravo
Johnny Bravo's picture

Me too.  VXX is the shit, yo.

Fri, 09/03/2010 - 00:19 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

I look at VXX every day at stockcharts.com.  May take your advise and snipe it soon.

I keep buying Gold, it may wind up as my shit, yo.

Fri, 09/03/2010 - 01:12 | Link to Comment Johnny Bravo
Johnny Bravo's picture

I would wait to see if the S&P can break the 1100ish area first.  It really looks like it wants to test that area, which isn't too far away from where it's at now.

If it breaks that level, buying the VXX is a bad idea for a while.

I think that the best way to trade VXX is to act like you're shorting the S&P. 

Edit:  I am conflicted on what to do here.  I'd probably stay away altogether if it was me.
I just read some charts, and the monthly S&P looks like it has some time to run, but the weekly is getting a bit toppy.
Maybe we see some pullback in the short term on the S&P before we go higher?

I am very conflicted.

Well, that's my honest two cents... 

Fri, 09/03/2010 - 01:27 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

At this point, I am very careful/confused as to what to do.

I will buy Gold for my daughter!  Just today, her cousin (my niece) announced that she will marry a "K Street" lobbyist who has his doubts about whether he can look at himself in the morning digging up dirt on Republican candidates running this Fall...

I am glad that I am old (54) and will just worry about keeping my savings safe...

...

SAFETY is Numuro Uno re your wealth!  CAREFUL everyone!

Fri, 09/03/2010 - 01:31 | Link to Comment Johnny Bravo
Johnny Bravo's picture

Well, of course I wish you well in whatever you do.

So that guy is a dem lobbyist?  I'll take his job!  I'd love to look up dirt on the R's all day! :)  I could sleep very well at night.. .

I think that GLD is starting to look like it's coming up on resistance, and volume is light.

I posted an article that is interesting in the other post, about the weed.  You should check it out!  I came here just to post it for you.

Good luck trading.

Fri, 09/03/2010 - 11:56 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

doe ray me, damn your busy with weddings and family. i thought i read some where else about a niece married to a different professional not K street.....er?

Fri, 09/03/2010 - 11:53 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

R U married? doesn't matter 2 me, but, i would love to go to that movie.

Thu, 09/02/2010 - 14:09 | Link to Comment michael.suede
michael.suede's picture

This guy is an idiot that doesn't understand basic Austrian theory.

WWII as an attractor for economic activity?

The massive misallocation of resources that resulted from WWII left people living in poverty.  Sure, the GDP rose, but government spending is included in GDP!  GDP is meaningless when viewed in this context.

This guy needs to read some Mises and Rothbard.

So much of what he said is wrong.

 

Thu, 09/02/2010 - 14:23 | Link to Comment Mitchman
Mitchman's picture

+1.  In addition, he assumes an nice and accommodative bond market and no other external shocks to the economy.  It's hard to buy into a "foundation" being laid in for a 2011 bull equity market when right now it's only the FED and the PD's that are buying equities and the consumer "only" has another $6 trillion of deleveraging (per David Rosenberg) to go.

Sheeeeshh.

Thu, 09/02/2010 - 14:28 | Link to Comment RockyRacoon
RockyRacoon's picture

Sounds like you have something to offer to the discussion.  An expansion of your ideas and some pertinent links to further reading would be appreciated.

Thu, 09/02/2010 - 14:33 | Link to Comment LePetomane
LePetomane's picture

+7.3

Thu, 09/02/2010 - 15:51 | Link to Comment RockyRacoon
RockyRacoon's picture

Good stuff all.  All my favorite people on parade. I'll save the link list.

I was actually trying to tease out more than a condemnation of the article.  It's good to hear criticism but I like it with a dose of "fact".

Thu, 09/02/2010 - 18:06 | Link to Comment michael.suede
michael.suede's picture

If you want to learn damn near everything there is to know about Austrian economic theory in one shot, read Rothbard's Man, Economy and State, also availible for free from Hacker. 

This 1500 page monster is the ultimate destroyer of Keynesian nonsense.

Be warned though, after reading it, you WILL become an anarchist.

http://www.hacer.org/pdf/Roth3.pdf

 

Thu, 09/02/2010 - 21:24 | Link to Comment ColonelCooper
ColonelCooper's picture

You are now the third or fourth recommendation  I've seen to buy this book.  I just ordered it.  Thank you for the clincher.

I'm not too excited about having to become an anarchist.  I'm already an anti-social loner who dislikes government interference, and despises people who have a lack of personal responsibility..... are you telling me it's going to get worse?

Thu, 09/02/2010 - 22:02 | Link to Comment Blano
Blano's picture

"I'm already an anti-social loner who dislikes government interference, and despises people who have a lack of personal responsibility"

 

Well you're definitely not  alone there.

Thu, 09/02/2010 - 22:39 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

you guys are great, love wit.

Thu, 09/02/2010 - 22:51 | Link to Comment Hephasteus
Hephasteus's picture

No I'm past anti-social. I'm anti-global working on anti-galactic and then I'll move my way up to anti-universal.

If people are going to put you in your place. You gotta make it hard work. Getting away from assholes starts as urban sprawl and ends up with a never ending expanding universe without enough gas for the assholes to come visit.

Thu, 09/02/2010 - 22:28 | Link to Comment michael.suede
michael.suede's picture

Yeah, you probably will be worse.

Right now I'm signing up for graduate political science classes for no other reason than to create disturbances in the class room by constantly quoting Rothbard.

I'll have to video tape my exploits and share them here.

 

Fri, 09/03/2010 - 02:46 | Link to Comment A Nanny Moose
A Nanny Moose's picture

I hope you already have diploma in hand before you start rising up against the man, and causing a ruckus. Many of these academic assholes don't like their authority questioned, and "when you mess with the bull, you get the horns."

Fri, 09/03/2010 - 10:32 | Link to Comment michael.suede
michael.suede's picture

Yeah, I'm good to go.

I work in a technical field anyways, so going for my masters in poli sci is purely for personal enjoyment.

 

And believe when I tell you I intend to enjoy myself by causing chaos in the classroom.

 

Fri, 09/03/2010 - 12:02 | Link to Comment kathy.chamberli...
kathy.chamberlin@gmail.com's picture

you're going 4 the girls.

is that the right your? teach me, please†

 

Thu, 09/02/2010 - 14:31 | Link to Comment SDRII
SDRII's picture

+10

The money line today from Bernanke occured when asked what book he would reccomend about insight into the Crisis and he fulminated praise on Lords of Finance - a tome to keynsian apologists

 

 

 

Thu, 09/02/2010 - 14:49 | Link to Comment RockyRacoon
RockyRacoon's picture

The "unexpected developments" Bernanke referred to is the collapse of the global banks. This is FED speak and to those in the loop, this is the dire warning. So many renowned economists have misdiagnosed the objective and consequences of quantitative easing. Central bankers' scribes and the global mass media hoodwinked the people by saying that QE will enable the banks to lend monies to cash-starved companies and jump start the economy. The low interest rate regime would encourage all and sundry to borrow, consume and invest. This was the fairy tale. ... The multiplier effect of fractional reserve banking did not take off. Bank lending in fact stalled.

When the ball hits the ceiling fan, sometime early 2011 at the earliest, there will be massive bank runs. I expect that the FED and other central banks will pre-empt such a run and will do the following: 1) Disallow cash withdrawals from banks beyond a certain amount, say US$1,000 per day; 2) Disallow cash transactions up to a certain amount, say US$10,000 for certain transactions; 3) Transactions (investments) for metals (gold and silver) will be restricted; 4) Worst-case scenario – the confiscation of gold AS HAPPENED IN WORLD WAR II. 5) Imposition of capital controls etc.; 6) Legislations that will compel most daily commercial transactions to be conducted through Debit and or Credit Cards; 7) Legislations to make it a criminal offence for any contraventions of the above.

http://www.thedailybell.com/1341/Bank-Run-2011.html


Thu, 09/02/2010 - 14:53 | Link to Comment Invisible Hand
Invisible Hand's picture

Gold was actually confiscated in 1933.  The price paid was approximately 15% of the world market price ($32 vs. $240 if my memory serves)

My guess is that this will happen within 5 years or shortly after the Treasury bubble/dollar collapse, whichever comes first.

Just a thought for the gold bugs.

Thu, 09/02/2010 - 15:17 | Link to Comment rosiescenario
rosiescenario's picture

...forget gold...ammo shall be the new currency...it is already being hoarded...it is a far more useful currency then gold...it is a currency with 'multi tasking' capability...

Thu, 09/02/2010 - 15:49 | Link to Comment RockyRacoon
RockyRacoon's picture

currency with 'multi tasking' capability

Brass suppositories?

Thu, 09/02/2010 - 21:03 | Link to Comment MrSteve
MrSteve's picture

Your memory is a miserable failure. Gold was called in at $20 per ounce and revalued after the bank "holiday" at $35 an ounce. It stayed pegged at $35 until Nixon "closed the gold window" in response to DeGaulle's call for settlements in gold.

The confiscation of gold is problematic in the future while the confiscation of purchsing power, real value, through the Fed's programs and bond / money printing is absolutely guaranteed. If you are on record as having bought gold, make sure you give some to the Salvation Army via written receipt and then you can claim you threw the rest of yours in the red kettle at Christmas. The black market is the black market. That's my story and I'm stickin' to it.

 

Thu, 09/02/2010 - 23:39 | Link to Comment Johnny Bravo
Johnny Bravo's picture

Except for that treasuries and the dollar aren't going to collapse.

It'd be really funny if they made you sell your gold for 180 bucks though.  I'd LMAO all day long.

They won't though, because treasuries and the dollar aren't going to collapse.

That is a low-probability conspiracy theory event.

Thu, 09/02/2010 - 19:25 | Link to Comment Arkadaba
Thu, 09/02/2010 - 15:39 | Link to Comment Spitzer
Spitzer's picture

Thats right, there was fuel rationing during the war.

he even said that a real bull market might start up in 2011 before the credit cycle has come full circle.

Thu, 09/02/2010 - 16:31 | Link to Comment DosZap
DosZap's picture

10/4, gasoline, and tires.........

Yep, a Bullshit Mkt, but Unca Ben has already had that one in full swang............

Thu, 09/02/2010 - 17:54 | Link to Comment puckles
puckles's picture

I suspect that what he meant was that WWII essentially killed off all of the productive first world economies--they were in ruins--leaving ONLY the USA as a producer/supplier to the world for a number of years.  The unintended benefit to those in ruins was that anything rebuilt had to be up to modern standards, which eventually boosted Germany and Japan enormously...

Fri, 09/03/2010 - 03:54 | Link to Comment Rusty_Shackleford
Rusty_Shackleford's picture

Wait a minute.  

You mean to tell me that producing millions of tons of goods and then blowing them up isn't an efficient use of capital?

Thu, 09/02/2010 - 14:14 | Link to Comment SheepDog-One
SheepDog-One's picture

People who conclude the monetary printing stimulus is the norm now, therefore it goes on to infinity, will soon get quite a rude awakening!

Thu, 09/02/2010 - 14:15 | Link to Comment mb666
mb666's picture

The market is irrational and does not have to reflect "fundamentals".

The market is going up! Yesterday was a substantial gain for the S&Ps.

Don't fight the Tape! Doomsayers are rarely right. Stocks are neither cheap or expensive.

Thu, 09/02/2010 - 14:46 | Link to Comment SheepDog-One
SheepDog-One's picture

'Doomsayers are rarely right' ...well until the doom happens as it always does then leaves clowns like mb666 demanding to know why didnt someone stop it! Why didnt someone put out the WARNING! Same old shit time after time from the moron sheeple.

Thu, 09/02/2010 - 15:13 | Link to Comment mb666
mb666's picture

Doomsayers get paid, on average, once every 25 years on their bearish bets. I really enjoy historical Wall Street books and its amazing how frequently people stay exceptionally bearish after sharp declines (e.g. 2007). Gold bugs, perma-bears, "the world is going to end" sayers come to life during every market fall. Nassim Taleb has been very influential to me, and I'm all about tails (which mostly occur on the downside), but they don't happen too often.

Im flat-to slightly bullish on stocks. Limit your downside by rolling some SPY puts.

Zerohedge is a good place for doomsayers because the blog is overwhelmingly bearish. Psychologically, doomsayers/bears feel very comfortable when their beliefs are reconfirmed by a bearish blog. Nothing wrong with that, but something to think about. Why make bets that the markets will collapse, when it is highly unlikely/infrequent and basically happened just two years ago. No two times are exactly a like. Just because we had a second crash in 1931 after 1929 doesn't mean it will happen today. Horrible risk/reward.

Lastly, "the stock market does not determine the health of our economy". -My Own Story by Bernard Baruch

Thu, 09/02/2010 - 15:38 | Link to Comment chunkylover42
chunkylover42's picture

Maybe I'm making too fine a point, but there's a big difference between people who are bearish and people who think that the markets will collapse (I presume you mean stock market).

I am bearish in the short/intermediate term (and positioned accordingly) because I believe that expectations are too high for corporate profits and economic growth.  That is, stocks are pricing in a robust recovery that I think will fail to materialize.  This is much different than betting on a collapse to the system.  In the long run I am generally optimistic about the future of the economy, notwithstanding the challenges that we face (debt levels, demographics, unfunded liabilities, etc.). 

Finally, the stock market does not determine the health of the economy any more than a thermometer does not determine the health of the patient.  Just a thought.

Thu, 09/02/2010 - 20:08 | Link to Comment mb666
mb666's picture

Good response. I do, however, disagree on the short/intermediate term. I think the stock market will go sideways. When that happens it still does tend to lean slightly upwards. Maybe only because of inflation, which is inevitable with the Fed's printing of money. According to historical P/E (which is a simple but time proven approach), equities are neither overbought/oversold. Long Year treasuries are killing "legendary" hedge fund managers and this squeeze will end. Will scale into the TBT and hold it for several years. Thought about working it with options/leaps but I don't want to play the "time the market" game.

My belief is that it is very tough to make money on the short side unless there is a catastrophe/major event (defaults/bankruptcies/war/terrorist attack/etc.). Bears usually get paid only after a catalyst event triggers fear. The uncertainty we are currently facing is priced-in IMO (bank failures/sovereign debt default/high unemployement/high levels of debt/etc.). If the world remains dull, bulls will win.

Finally, the stock market is a completely irrational market driven by sentiment. It can go higher as the "fundamentals" remain poor. Don't fight the tape.

 

 

Thu, 09/02/2010 - 23:16 | Link to Comment rocker
rocker's picture

I'm not. Selling everthing tomorrow. Hope it rallies for my sale. Everything.

Thu, 09/02/2010 - 15:44 | Link to Comment Spitzer
Spitzer's picture

wrong.

Dr. Doom Marc Faber does make bullish calls, like when he called the bottom in March of 09 almost to the day.

Peter Schiff is always bullish on something.

Thu, 09/02/2010 - 20:23 | Link to Comment mb666
mb666's picture

I respect Marc Faber. He buys assets he deems cheap and sells those are expensive. Perhaps the media exegerates his personality as a doomsayer. He seems more of a value investor who is also willing to short "bubbles".

Schiff on the other hand is generally only bullish on things that should be going inverse to the stock market, per se. He's bullish on gold because he has little faith in the economy and fears inflation (short US dollar). I've read several of his books and his approaches are too "simple". Economics is exceptionally complex and just by saying that global debt is too high and will crumble nations is too over the top. That's one big variable in the web of a seemingly infinite factors.

Countries have historically been in debt. Civilizations have collapsed because of debt. But that doesn't mean that the world economic system will collapse every time debt reaches "unprecedented" levels. Soveriengn defaults are priced-in. Inflation has been reflected in the fall of US Dollar and the rise in Yen & AUD (rise of commodities).

 

Thu, 09/02/2010 - 23:23 | Link to Comment rocker
rocker's picture

Your right, the economy will be great as soon as we close 1/2 of any business who sells something.

And then, we only need to close 10% of those who make things. The rest is imported.

Did you know they started importing Reese's Peanut Butter Cups last year.

Hint, as to where they are making them now, "Don't drink the water". 

Thu, 09/02/2010 - 16:48 | Link to Comment -273
-273's picture

The difference this time I am afraid, is that we appear to have reached peak oil around 2005. There can be no more sustainable growth unless a new energy source with an EROI around that of oil is found, or the transportability of oil, or a replacement for the 700+ something uses for oil. And after 6 years of research into the topic I am of the opinion that there is none. And any that have potential, are too far off to prevent a severe dislocation into the world economies. (as The Hirsch report points out)

Hirsch report

Without an understanding of the role oil has played in the growth of modern civilisation and the inability of it to keep up with demand in the near future (as in the near past) all current economic theories are pretty much irrelevant.

Thu, 09/02/2010 - 16:55 | Link to Comment RichardENixon
RichardENixon's picture

The other difference this time would be the number of bankrupt entities worldwide.

Thu, 09/02/2010 - 17:57 | Link to Comment puckles
puckles's picture

Not to mention sovereign nations...

Thu, 09/02/2010 - 17:10 | Link to Comment DaveyJones
DaveyJones's picture

"unless a new energy source with an EROI around that of oil is found" - nothing even close (as you said) and remember the EROEI has been falling dramatically for some time. We are closing on one for one barrel and it started at a couple of hundred to one.   

Thu, 09/02/2010 - 18:12 | Link to Comment Treeplanter
Treeplanter's picture

We hit peak oil in the 70's and every decade since.  We should be driving on natural gas by now, cause oil is too valuable to be burning up.  Exploration is on going.  the ocean on the SW of Haiti is said to look promising.  More places that have been overlooked or were looked at with old technology are going to show up with oil.  My beef is we should keep it for making stuff.

Thu, 09/02/2010 - 17:28 | Link to Comment flacon
flacon's picture

Once you understand the implications of COMPOUND INTEREST an interest rate of 0.00000001% WILL go to INFINITY. 

Fri, 09/03/2010 - 04:05 | Link to Comment chrisina
chrisina's picture

If you really understood compound interest (and basic maths), you'd understand that it would only go to INFINITY in an INFINITE amount of time...

Lim ( Exp(At) ) ---> Infinity  when t---> Infinity, (whenever A>0)

Thu, 09/02/2010 - 17:41 | Link to Comment grunion
grunion's picture

Industrial war profiteers seem so pleasant and sophisticated

Thu, 09/02/2010 - 20:21 | Link to Comment mb666
mb666's picture

Bernard Baruch actually slashed prices drastically below the market value to support the US. I believe that during WWI, he sold copper for 85% less than the market value to the government.

Thu, 09/02/2010 - 22:21 | Link to Comment FEDbuster
FEDbuster's picture

I would like to add, "the health of our economy does not determine the stock market".

Thu, 09/02/2010 - 23:41 | Link to Comment Johnny Bravo
Johnny Bravo's picture

mb666, it's nice to see somebody telling the truth for a change on this site, aside from me.

I say the same things, but I always get that fag Colonel Sanders putting up the same youtube link and thinking he's funny.

Thu, 09/02/2010 - 15:03 | Link to Comment nwskii
nwskii's picture

You could be right but you have to include this is your calculation

100-200 Trillion in Debt and they keep printing money and going into more debt. If you or I had a lifestyle like that we would be in Bankruptcy and Jail. SO I hate to tell you this DOOM will come to the markets, its just a matter of time. 

Thu, 09/02/2010 - 20:28 | Link to Comment mb666
mb666's picture

Yes the world has accumlated a lot of debt. The market has known this for a decade and has been priced-in. Corrected greatly in 2007.

But US asset prices will increase. The main reason is that we are the safehaven of the world. Money will continue to funnel into US securities as uncertainty looms.

Unfortunately government is failing to minimize the budget deficiet. Did you guys know that president Bush spent more money than the administrations from Washington to Clinton COMBINED. And now Obama is on track to spend far more than Bush.

As long as China purchases our securities we'll be okay. As long as we begin slowly cutting into the budget. China also has no other choice because it invest its money elsewhere unless its something commodity related (Australia).

Thu, 09/02/2010 - 21:11 | Link to Comment MrSteve
MrSteve's picture

DOOODE! Read the news before you post this malarkey-

"As long as China purchases our securities we'll be okay."

China dumped about one-third of its US Treasury notes in the past quarter. That would be a  negative purchase per your thinking, so the okay may be IxNay.

Fri, 09/03/2010 - 03:10 | Link to Comment A Nanny Moose
A Nanny Moose's picture

What are we producing to generate the wealth to pay back that debt? Just because someone has money to loan, we should just borrow it? That path is what brought us here in the first place. A couple of the 10 Cannots come immediately to mind:

You cannot establish sound security on borrowed money.

You cannot keep out of trouble by spending more than you earn.

 

Thu, 09/02/2010 - 23:42 | Link to Comment Johnny Bravo
Johnny Bravo's picture

That would be 100T in liabilities, not debt.

There IS a difference... 

Thu, 09/02/2010 - 14:16 | Link to Comment ex VRWC
ex VRWC's picture

You give the government far too much credit.  Your argument seems to be that the depression had stabilized before the tax hike in 1936, and that the subsequent drag on GDP caused the next leg down in the depression.  I think you are only considering one factor of many regarding the next leg down.  The government has already done their damage with loose fiscal policy and the Fed has already done their damage with loose monetary policy, over decades.  The patient is far beyond the government or Fed's ability to do more that induce a twitch in the zombie's limbs at this point, no matter how many jolts or drugs they apply. 

Simply put, the next leg down is baked in the cake.  QE2, tax hikes, no tax hikes, it does not matter.  There are far too many 'headwinds' for any of it to make much difference.  We are past planning for how the government might make a 'baton pass' or establish a 'glide slope'.  The irresistible pull is downward.

Thu, 09/02/2010 - 15:21 | Link to Comment rosiescenario
rosiescenario's picture

"The irresistible pull is downward."

 

...the black hole's gravitational force is irrestible...how we emerge on the other side is the real question.

Thu, 09/02/2010 - 14:16 | Link to Comment doolittlegeorge
doolittlegeorge's picture

Let's not forget 73-74.  That would be "USA loses Vietnam pretty much" and "here comes Yom Kippur."  Her name was Golda Meier and I think she said "those tanks in Syria are there for happy things."  In short "she was surprised."

Thu, 09/02/2010 - 14:19 | Link to Comment NOTW777
NOTW777's picture

what would the dems do w/o the blame game.

blame is spelled b lame

Thu, 09/02/2010 - 23:44 | Link to Comment Johnny Bravo
Johnny Bravo's picture

What would the rethugs do without obstruction?

Oh yeah, they'd fuck the entire economy again like they did the last time they had all three branches of government.

Fri, 09/03/2010 - 03:02 | Link to Comment A Nanny Moose
A Nanny Moose's picture

Every time somebody drinks the K00l-Aid that the Republicrat duopoly brought to the party, a liberty fairy loses it's wings

Thu, 09/02/2010 - 14:24 | Link to Comment mbasham
mbasham's picture

US is actually in much more dire straits now than in the 30s-debt at all levels is much, much higher, savings are lower (current official savings rate is misleading due to massive debt forgiveness (bank, fannie/freddie writeoffs as a reduction in debt are included in savings), and unemployment if calculated the same way as it was in the 30's would be closer to 25%. Whereas sovereign debt was viewed as temporary in the 30's as expectations were that the US would pay off its debt as it matured (the gold standard helped to enforce expectations) we now have debt levels approaching 66% using the most conservative definition of 'debt' and all projections are that entrenched laws will create an explosion of even higher debt (entitlement programs). What is the end game? Most seem to look for the fed to money print, but the line in the sand for the dollar (fed. reserve notes ) is much closer than anyone thinks. The Fed despite all its intentions to boost the profits of its member/owner banks will ultimately seek to preserve the value of its one true asset - dollars/federal reserve notes. Not to do so would be political suicide for the Fed. This decision will lead to a collapse of the debt enduced asset value spiking activities of the Fed and much like a junkie has to go through withdrawal, will lead to the necessary wash out of the financial system and set the stage for a new secular bull market/economic expansion. Target for the 500 in this end game is below 200.

Thu, 09/02/2010 - 14:56 | Link to Comment bigkahuna
bigkahuna's picture

I have one concern for your comment. If the fed had any care for the dollar, then why did it point the figurative ship (dollar) towards the figurative waterfall (debasement/devalue/destruction of the dollar) and gun the ship's engine full speed ahead? I do not see any way of rescuing the dollar. The best I believe we will do to keep the existance of the dollar is to pull a Hugo Chavez and devalue it one day by a very significant amount. Then all of the Federal Reserve Banks would be screwed on their debt anyway though.

I do not believe that the fed wants to screw itself in any way. The fed seems to be up to something tricky. I am not sure what is going to happen, but whatever it is I am certain it will lead to some form of transfer of wealth to the fed and it's banks. I do not believe they care one iota for the stock market at this point. If there is a seculr bull, it will be running for the fed and the fed only.

What do you think?

 

Thu, 09/02/2010 - 15:47 | Link to Comment Spitzer
Spitzer's picture

devalue against what ? other fiat currencies or gold ?

Thu, 09/02/2010 - 17:07 | Link to Comment bigkahuna
bigkahuna's picture

I would say hypothetically both.

Thu, 09/02/2010 - 17:48 | Link to Comment grunion
grunion's picture

I am sure you mean the rest of the US when you mention the stock market. I too smell large scale skullduggery about.

Thu, 09/02/2010 - 18:19 | Link to Comment Treeplanter
Treeplanter's picture

I think these institutions' first priority is saving themselves because they see themselves as so very very important.  Then their bank and politician buddies and the country a distant last because we are not worthy.  Enron accounting is now encouraged on Wall Street..  Contracts only count if the politicians say so.  Illegal trading is for the public good.  These are all additional time bombs that will backfire on these fools.

Thu, 09/02/2010 - 18:31 | Link to Comment bigkahuna
bigkahuna's picture

I agree -- check out this link for a laugh. This is what I think about what the fed is doing - LOL!

 

http://www.youtube.com/watch?v=vdQFuTQ1l5U

Thu, 09/02/2010 - 18:48 | Link to Comment Spitzer
Spitzer's picture

lol, exactly what the fed is doing.

Fri, 09/03/2010 - 00:00 | Link to Comment Daves not here man.
Daves not here man.'s picture

LOL! +.999  thanks for that!

Thu, 09/02/2010 - 15:10 | Link to Comment Mark Beck
Mark Beck's picture

The Transfer of wealth from the FED is largely over in terms of magnitude for the member banks. Through TARP and bad debt purchases. The FEDs primary focus is to maintain the T market, by participating in ever larger actions. The FED will reach a point where it will control rates even as it becomes the majority buyer. USD debasement will steadily increase. The FED has already abandoned the USD in terms of store of wealth.

For loss of bond market confidence I look for a US collapse from within. First Municiple defaults, then a state (or dedicated state bailout, with huge loss in state credit rating). Then US downgrade, and then reduced participation in auctions.

We the bond holders realize the US tax base cannot support the debt buyers will exit.

Mark Beck

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