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  #21  
Old 11-29-2007, 04:43 PM
Copernicus Copernicus is offline
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Default Re: The differences between 1929 and Today

[ QUOTE ]
Agreed. Your right that nobody wants a sudden crash. If they don't all panic and try to get out first they can do that. 10-20% yearly depreciation of the dollar, you bet.

You can only play a game of chicken for so long before Asians decide they have accumulated enough of our wealth ad they are going to focus on domestic demand.

[/ QUOTE ]

and the exact same things were being said in late 80s early 90s (ZOMG, the Japanese have bought Pebble Beach, they are going to own everything soon).

A much greater problem arises if the OPEC countries try to compensate for lost buying power by raising prices. Thanks to our retarded energy policies (thank you Greenies) we are even more vulnerable than we were during the oil embargo.
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  #22  
Old 11-29-2007, 05:22 PM
PLOlover PLOlover is offline
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Default Re: The differences between 1929 and Today

so you're saying we're gonna have a 1933 style german depression instead of a 1933 US style?
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  #23  
Old 11-29-2007, 05:39 PM
lehighguy lehighguy is offline
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Default Re: The differences between 1929 and Today

Someone elses words, but good.

MattTheSkywalker
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--------------------------------------------------------------------------------

Quote:
Originally Posted by The Diabolical Biz Markie
FWIW,

We've been through this before, with people predicting gloom and doom for the US economy. The "Great Reckoning" which sounds like it might be MTS's favorite book, was written in the early 90s (maybe before...but I remember reading it in the early 90s).

never read it. Empire of Debt, that's a good book.



Quote:
Japan was going to own all the US, and we were all going to be broke.

If you think this is the same, you misunderstood conditions then and now.

Japan in the late 80s was even dumber than we were. Deflation at home killed them and they sold their trophy US assets at fire sale prices. Do you imagine the oil kingdoms experiencing deflation? Is world demand for oil ebbing? I wish....but no, it's not. So these people will still certainly invest in the US just not in the government debt, which is what we've counted on for so long.

The two largest shareholders in our largest bank are Arabs. Nothing to see here? maybe not. But when the board was ushering CEO Chuck Prince out, they had to brief Riyadh. At best, this is unusual. A sign? I don't know.

Two bailouts in less than 20 years tells me that something stinks. The US never went to the Japanese for a bailout. The Japanese were over-reaching, proud of their re-ascent, and they paid for their hubris. Arabs are not the late 80s Japanese, and oil wasn't $90+a barrel then either.

Nor was the dollar at its lowest ever value in the late 80s. Nor was a productive segment of our society retiring en masse. And our debt loads were a few trillion lighter.

Otherwise, it was exactly the same.
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  #24  
Old 11-29-2007, 05:45 PM
The once and future king The once and future king is offline
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Default Re: The differences between 1929 and Today

[ QUOTE ]
First and foremost - Many on this board believe in the assertion that the Great Depression was caused by a contraction of the money supply. Regardless of the validity of this assertion, one must concede that there is no such contraction occuring today.

[/ QUOTE ]

This is an complete and utter fallacy. This is exactly what is happening today. What exactly do you think the term credit crunch means?

Not long ago the financial system was throwing credit at anyone with a pulse and inflating the money supply as a consequence. Now the banking system wont even lend money to each other because they are unsure of who is holding the toxic waste.

The fed and CBs might inject some liquidity, but so far this has had little positive effect on LIBOR and interbank rates which are at record highs and reflect the true cost of money. Indeed today the $one month libor jumped 40bp.

Also markets that deal in commercial debt have ground to an absolute standstill. Read this from yesterdays Telegraph (pro tory broadsheet)

[ QUOTE ]
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 7:18pm GMT 28/11/2007

Companies in Britain and Europe have failed to place a single high-yield bond since the credit crunch kicked off in August, and may now have to wait until next year before the credit market reopens for business.

Société Générale said the monthly volume of junk bond issues peaked at €6.5bn (£4.69bn) in June, falling to zero in August, September, October, and November as investor flight from the market forced up yield spreads to stringent levels.

Far from returning to normal, the credit markets appear to tightening even further into the Christmas season.

[/ QUOTE ]

The liquidity being injected by the fed et al is no where near enough to restore liquidity to normal levels it is just enough to keep the system ticking over without there being a catastrophic gridlock in liquidity.

It is also a tiny drop in the ocean compared to the amount of debt/money supply/ that was crated by the financial system over the last five years or so.

It is important that there has been no housing bubble in the USA or the UK (where house prices have increased even more rapidly than the US) there has been a credit bubble. House prices are going down simply because there is less money chasing the houses because the credit that bid them all up has disappeared. The idea that this bubble can pop, which it most certainly has in a big way without there being a contraction in the money supply is obviously nonsense.

To claim that there is no contraction in the money supply reveals that you have no understanding of the conditions that may lead to a 1929 esq scenario.
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  #25  
Old 11-29-2007, 06:14 PM
The once and future king The once and future king is offline
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Default Re: The differences between 1929 and Today

[ QUOTE ]
Its an easy trap to fall into, but overall markets are not driven by currencies, they are driven by production of goods and services.

[/ QUOTE ]

This may have been true once, but in recent times no longer applies. This can be easily proven by looking at recent movements in Equity markets.

In August subprime broke the surface the US housing market began to decline, and the credit crunch was underway. A few months later the DOW was hitting record highs. Why?

Because all the market cared about was the fact that the FED said it would increase the money supply which it went on to do by dropping interest rates by .5%. SO the markets didnt care about any downside to production or consumption, they only cared that the Fed was going to increase the money supply. The movement in the markets was purely driven by perceptions of currency manipulation by the central bank.

This has led to the bizare state that if the Fed says something along the lines of "There is danger of a downswing in growth in production, therefore we will cut interest rates" this is considered good news by the equity markets. Whatever the dangers are that are creating the possibility of retarded growth in production are seen as irrelevant all that matters is the growth in the money supply.

This can be clearly seen in the market movements over the last few day. Western CBs and major financial players have all issued increasingly bearish if not rabid bearish statements over the last week about the prospects for growth going forward, yet the Dow has has gone up over 200 points 3 days in a row. That is because the fed has indicated that given the negative outlook it will probably cut rates on 21st December. So again, in price movements, the actual negative data that leads to fears about growth and actual production etc, the real economy are seen as irrelevant and price movements have all been driven by the belief that an interest cut is due 21/12/07.

Thus it can be seen that price movements in the Dow and other Equity markets are driven allmost entirely by how those markets see currency manipulation occurring in the short to medium term. In short its all about the currency baby.
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  #26  
Old 11-29-2007, 07:17 PM
lehighguy lehighguy is offline
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Default Re: The differences between 1929 and Today

Perhaps you should think in real terms nominal terms. Sure the market went up on the 50bp, but the dollars it was price in lost a huge amount of value. Nominal, not real, gain.
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  #27  
Old 11-29-2007, 07:23 PM
The once and future king The once and future king is offline
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Default Re: The differences between 1929 and Today

[ QUOTE ]
Perhaps you should think in real terms nominal terms. Sure the market went up on the 50bp, but the dollars it was price in lost a huge amount of value. Nominal, not real, gain.

[/ QUOTE ]

Yea but I am talking about price action.

Or are you suggesting that upward trends are a calculated attempts by markets to compensate for the loss of value in the dollar that any fed cut will cause?

Roughly estimating on the fly (I could look it up but I cant be far out)I would say the DJI has gained about 9% in the last year. Its gone from circa 12200 to 13300 reaching 14200+ on the way (after the credit crunch started) so dollars in the DJI will have retained value much better than dollars kept under the mattress or in a standard saving bank account. That 9% is also alot bigger than CPI (CPI LOL).

I see entirely the point you are making, but it is not relevant to my arguement. I am rejecting the point that Equity markets react via price action to events in the real economy by stating that the price action (in recent history) is mostly motivated by events in currency manipulation.
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  #28  
Old 11-29-2007, 10:33 PM
Copernicus Copernicus is offline
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Default Re: The differences between 1929 and Today

[ QUOTE ]
[ QUOTE ]
Perhaps you should think in real terms nominal terms. Sure the market went up on the 50bp, but the dollars it was price in lost a huge amount of value. Nominal, not real, gain.

[/ QUOTE ]


Yea but I am talking about price action.

Or are you suggesting that upward trends are a calculated attempts by markets to compensate for the loss of value in the dollar that any fed cut will cause?

Roughly estimating on the fly (I could look it up but I cant be far out)I would say the DJI has gained about 9% in the last year. Its gone from circa 12200 to 13300 reaching 14200+ on the way (after the credit crunch started) so dollars in the DJI will have retained value much better than dollars kept under the mattress or in a standard saving bank account. That 9% is also alot bigger than CPI (CPI LOL).

I see entirely the point you are making, but it is not relevant to my arguement. I am rejecting the point that Equity markets react via price action to events in the real economy by stating that the price action (in recent history) is mostly motivated by events in currency manipulation.

[/ QUOTE ]

So the decline in oil prices, the confidence in the dollar shown by Abu Dhabi's investment in CitiCorp, robust retail sales are all minor effects compared to a discount rate cut that could have been anticipated and priced into the market after the last Fed meeting (and I believe was)?

The realization that there was an over-reaction in the markets to the sub-prime problem had nothing to do with the recovery it was all the Fed?

Things are much more complex and robust then you are willing to admit, because of your political agenda.

Back in August I said that the Fed should shock the system back into equilibrium with a 50 bp reduction in the discount rate, and was disappointed it was only 25. I also reported the belief of one of the major investment firms itn the country that an immediate 50bp cut would be sufficient to drive the Dow up to 15,000 in short order. If they were correct, the subsequent actions of the Fed are nowhere near fully priced into the market (unless they have already been offset by the Hillary effect, which I don't believe to be the case). There is a lot of upside to go before the Dems drag things down, imo.
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  #29  
Old 11-29-2007, 11:54 PM
Exsubmariner Exsubmariner is offline
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Default Re: The differences between 1929 and Today

[ QUOTE ]
so you're saying we're gonna have a 1933 style german depression instead of a 1933 US style?

[/ QUOTE ]

Germany in 1933 was not the world's richest nation, nor did it have the largest economy on earth and it was not facing a currency market where most currencies were pegged to the Mark, nor did it have foriegn governments that hoarded trillions of marks waiting to invest in its economy.
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  #30  
Old 11-29-2007, 11:56 PM
Exsubmariner Exsubmariner is offline
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Default Re: The differences between 1929 and Today

Is it me or did you say in one post that there was contraction of the money supply underway due to the credit crunch and then refute your own arguement by stating it wasn't the case and asserting its all about the currency?

Come on, man. You can't have it both ways.
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