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-- Deep "recession"
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Originally posted by Shakka Now we've seen it all. Bernanke & Co are all in and the U.S. is officially in quantitative easing mode. I am going to plunk some equity into my house and refinance in short order. Capitalizt I still hope you own all that gold!

Good thinking!

Nice to see some people are good at this life stuff.

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Originally posted by pkcRAISTLIN no, just pointing out that your one and only commentary re the economy always focuses on spending and inflation, when its blatantly obvious (to those of us in reality) that some things are far worse.

I agree that there are lots of problems but unfortunately no one remembers things unless you repeat them way to often.

Many of the books I've read in the past couple of years that are supposed to be 'good' are quite repetative, usually to the tone of being twice as long as they should be.

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Originally posted by atbell They represent portions of a company that aren't even fixed in thier proportions (companies can issue more stock just like a country prints money).

of course they can, but that dillutes the value of the existing stock in proportion to the amount of newly issued stock. issuance of new stock creates a new proportion.

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Originally posted by atbell The only way stocks offer gains to stock holders are through increases in price followed by a sale, or through dividends. The volatility of stocks has ment that the most profitable allocation of money is to put it into speculative stocks. This is not the same as finding a company that is sound, produces something that people want, and awards those who wish to share the risk. People should invest in businesses they understand or in banks who pay people a lot of money to understand.

dude....no shit! i'm not even sure why you wrote that or what it was supposed to contradict.

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Originally posted by atbell Realllllllyyyyy Here's how they do it. I, sovereign country, say to Uncle Sam, please pay up. Uncle Sam says, "No". The US government would default on bonds if they realize that the damage to the economy would be worse because of inflation. But I didn't have to tell you that now did I. The risk is that the US is currently only sustainable because people want to buy more of what they've got. As soon as a bond issue is unfulfilled ... watch out!

OK - that's a fine fanciful point, however, that is among one of the more unrealistic scenarios drawn up. The US public debt is not as great a percentage of the GDP as it has been in past.

quote:

Originally posted by atbell Tax revenues... depressions don't creat tax revenus, they create deficits. This is good, I'll write it again:

who said anything about recessions creating additional tax revenue. most treasuries have terms in lengths of years, not months. as long as future tax revenues can pay down the debt inflationary pressures shouldn't be too great. i'm not saying we aren't going to experience significant inflation, because i think we will, however, some of that pressure will be relieved if we don't have to print money to pay it down.

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Originally posted by atbell You mean, ah, it won't pay off it's debt? This is called a ponzi scheme, where losses are covered by swindling more people into buying. Generally the term is used to describe suckers who keep them going.

except everyone involved in buying US treasuries knows exactly what is going on.

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Originally posted by atbell Oh, and I shouldn't forget: Is nicely met by today's financial times: http://www.ft.com/cms/s/0/d049482c-...0077b07658.html

that article barely addresses the point. Debt is servicable by a nation so long as it can draw down its principal if necessary. It's hard to say whether the US debt is servicable because it hasn't shown a willingness to actually reduce the debt.

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Originally posted by atbell I will summarize. 1. there is a depression 2. deflation is setting in 3. to clear up deflation money is printed 4. debt stock continues to climb as no tax revenues are comming in (see 1) 5. US defaults on bonds 6. Ponzies cry That's a little simplified but I think it does the job.

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Originally posted by jerZ07002 OK - that's a fine fanciful point, however, that is among one of the more unrealistic scenarios drawn up. The US public debt is not as great a percentage of the GDP as it has been in past.

There is a very specific chart that Ned Davis has highlighted and updated over the years that would dispute this. Only in the very recent past have we even begun to delever. I can't link the chart b/c it's a subscription site, but as of his latest update (the data goes from 12/31/1922 - 9/30/2008), total credit market debt as a % of GDP still stands at an all-time high of 359.2%. At the height of the Great Depression, this number stood around 260%--we are still in unchartered territory.

Household debt as a % of GDP at 9/30/2008 stands at 101.1% after peaking at 102.5% The 55 year mean is 56.1%. The figures are still truly staggering. The problem with so many analysts is that the focus purely on the income statement and have thrown caution to the wind when it comes to the balance sheet.

That does not mean I think the U.S. is going to default on our debt--that would be a Black Swan event. I was merely talking to your point that debt vs. GDP has come down by whatever degree.

quote:

Originally posted by Shakka There is a very specific chart that Ned Davis has highlighted and updated over the years that would dispute this. Only in the very recent past have we even begun to delever. I can't link the chart b/c it's a subscription site, but as of his latest update (the data goes from 12/31/1922 - 9/30/2008), total credit market debt as a % of GDP still stands at an all-time high of 359.2%. At the height of the Great Depression, this number stood around 260%--we are still in unchartered territory. Household debt as a % of GDP at 9/30/2008 stands at 101.1% after peaking at 102.5% The 55 year mean is 56.1%. The figures are still truly staggering. The problem with so many analysts is that the focus purely on the income statement and have thrown caution to the wind when it comes to the balance sheet. That does not mean I think the U.S. is going to default on our debt--that would be a Black Swan event. I was merely talking to your point that debt vs. GDP has come down by whatever degree.

so what is the link between total credit and the potential inability of the US to pay down debt and why is that a more relevant indicator than US public debt v GDP? im not saying that total market debt isn't relevant, i'm just not sure why that is a better indicator. i understand some of the implications (e.g., interest expense reduces tax revenue, etc...)

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