The differences between 1929 and Today

[lehighguy]

We aren't going to have a contraction of the moeny supply because Bernanke is going to print dollars like crazy and destroy the currency. Hyperfinlationary recession or deflationary recession, take your pick. The fed can't create any real wealth by fiddling with this stuff. Eventually we'll be at 0.2Euro/Dollar and gas will be 6$/gallon or worse. Inflation will be unfathomable.

The dollar is losing its place as world reserve currency. World banks are tired of trading ever greater amounts of real goods for a continually depreciating paper currency. China is experiencing ever higher inflation because we export it too them. Central banks around the world have announced thier intention to diversify out of (i.e. dump) the dollar. Our currency has lost astonishing value in the last five years and especially the last month. This will only continue as Helicopter Ben lowers rates.

The dollar as a reserve currency has allowed us to expand the money supply at astonishing levels without fully experiencing the resulting inflation. Those extra dollars have led to an astonishing and reckless expansion of personal, corporate, and mortgage debt as well as unfathomable malinvestment. Now all of that inflation is about to come back to us as they sell off these reserves.

Your right about the gold standard. Foolish foriegn central banks could try to devlaue in response to our devaluation, causing huge worldwide inflation. Luckily the ECB, BOC, BOE, BOJ, and others haven't been retarded like that. Thier countries will get by.

I'm not going to try and predict what kind of retarded trade policies the pols could come up with in a deep recession. Only that the power that they wield today is far far greater then FDR ever had.

[Exsubmariner]

[ QUOTE ]
We aren't going to have a contraction of the moeny supply because Bernanke is going to print dollars like crazy and destroy the currency. Hyperfinlationary recession or deflationary recession, take your pick. The fed can't create any real wealth by fiddling with this stuff. Eventually we'll be at 0.2Euro/Dollar and gas will be 6$/gallon or worse. Inflation will be unfathomable.

The dollar is losing its place as world reserve currency. World banks are tired of trading ever greater amounts of real goods for a continually depreciating paper currency. China is experiencing ever higher inflation because we export it too them. Central banks around the world have announced thier intention to diversify out of (i.e. dump) the dollar. Our currency has lost astonishing value in the last five years and especially the last month. This will only continue as Helicopter Ben lowers rates.


[/ QUOTE ]

I'm going to say again what I said to tolbiny. Holders of dollars have no interest in taking any action that would make themselves poorer. The problems you mention in China is precisely why they will not flood the market with dollars. It would compound their problems. Everyone who holds $ has an incentive and a stake in keeping the game going. They aren't going to crash it.

If anything, they will diversify into commodities. Even more likely, they will look to invest all those dollars to create more economy or more ownership.

[tolbiny]

[ QUOTE ]

I'm going to say again what I said to tolbiny. Holders of dollars have no interest in taking any action that would make themselves poorer. The problems you mention in China is precisely why they will not flood the market with dollars. It would compound their problems. Everyone who holds $ has an incentive and a stake in keeping the game going. They aren't going to crash it.

[/ QUOTE ]

China has already made the mistake of holding US dollars, they have no "good" way out. Of course they won't "crash" the dollar, but they will move out of it. Take their sovereign wealth fund they recently announced, it will be funded with 200 billion from their reserves. Their reserves are $US. Then they announced they are diversifying their reserves, more dollars on the market. The Saudis didn't follow the latest rate cuts with their own, Kuwait unpegged from the dollar to the basket of currencies and agreed to sell oil to the Japanese in Yen. Who is adding dollars to their reserves to counteract these measures? Just because the sell off is orderly and controlled doesn't mean it isn't a sell off.

[lehighguy]

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.

[Copernicus]

[ 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.

[lehighguy]

Someone elses words, but good.

MattTheSkywalker
Member Join Date: Nov 2005
Location: NY / Palm Beach
Posts: 5,303



--------------------------------------------------------------------------------

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.

[Moseley]

[ QUOTE ]
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.

[/ QUOTE ]

We are pumpin oil out of Alaska like it's goin outta style. Problem is: we are shippin the bulk of it to Japan, at a discount to the market price, in exchange for them financing our deficit.

[DcifrThs]

[ QUOTE ]
[ QUOTE ]
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.

[/ QUOTE ]

We are pumpin oil out of Alaska like it's goin outta style. Problem is: we are shippin the bulk of it to Japan, at a discount to the market price, in exchange for them financing our deficit.

[/ QUOTE ]

que tin foil hat.

please source this. i'm assuming you have data that show that japan's oil purchases from alaska are below market price.

espeically seeing as how oil is pumped out by private institutions and the deficit is a government issue, the govt would have to provide compensation to the companies for selling to japan at below market prices.

try again though

Barron