Sorry to Harsh John Adam's Mellow...

[Fastback]

But take a look at this and tell me what you think...

 

http://www.americanthinker.com/2010/01/201...l_be_worse.html

[Magox]

But take a look at this and tell me what you think...

 

http://www.americanthinker.com/2010/01/201...l_be_worse.html

These things take a long time to develop, and what will most likely happen is that we won't see any sort of a depression in 2010. I've harped on this point forever now, and it is a very real threat, and a lot of people scoff at the notion that we are in any sort of imminent danger, and maybe it won't all come crashing down now, but I am certain that one day we will have to pay the piper, and it will be a very hefty penalty that has all sorts of disastrous implications.

 

In my view it is the #1 threat to our economy. It is a ticking time bomb, and I don't see how we will avoid this situation.

 

This administration has already committed to a philosophy of tremendous government spending, the idea behind is that they will provide such a jolt to the economy that it will lead to a sustained recovery allowing our government to collect sufficient tax receipts to pay down the debt.

 

Think of it as a bridge, they are hoping that the spending stimulus will be just enough to carry us over troubled waters, and that the other side of the bridge is the recovery. The problem is that we have spent tremendous resources, going now on 3 stimulus plans, bank and auto bailout that will total close to $2 trillion and it is very likely that this still won't be enough to get us to a sustained recovery which will mean that the government will have to do either one of two things, and that is either spend more and keep building that bridge or just bite the bullet, in which we would most likely fall into another very painful recession.

 

The problem with spending more is a two fold problem, one that it is the implication it has on the value of the dollar, and two what it will do to U.S treasury rates.

 

I am certain that by the end of 2010, U.S treasury debt rates are going to go up at least 1% with the possibility of going up 2%. This is a problem. The U.S housing market continues to fight an uphill battle, with credit shrinking, home prices that are either still falling or in best case remaining stagnant, and the reasons why the home sales have been picking up is because mortgage rates are at record low prices and the government is giving nice tax credits for those who want to buy homes, which btw I believe is a total waste of money. Think about it, it is estimated that only 15% of home buyers went out to buy homes because of the $8000 tax credit. Which means that 7 out of 8 buyers were going to buy homes anyway, so when you do the math, it comes out to close to $120,000 worth of tax payer real value to each hombuyer. FREAKING WASTE!!

 

To go back to my point, if interest rates go up another 1%-2%, that will stunt much of the momentum that has been gained, plus the $8000 tax credit is set to expire (thank god) which will slow down sales even more, and this is not even including the MBS buying spree that the Federal Reserve has been involved with that is also set to expire in April. Another reason why mortgage rates were down so low is because the Federal Reserve spent well over $1 Trillion in buying these MBS to artifically bring down rates. There is a very good chance that once they shy away from this program that demand for MBS will be low, meaning rates could sky rocket. However my guess is that at some point in 2010 the Fed will make an announcement to purchase more MBS to try to keep mortgage rates in check.

 

Another problem I see is the unlimited funds that the government is going to provide Fannie and Freddie. This tells me that they will remain lax in their lending standards in hopes that this will stimulate the housing market, which means that the taxpayer is on the hook for these loans.

 

All this is just what I see next year, the real risk in my view doesn't come for a few years from now. My guess is that the W.H will have another stimulus plan for 2011 to avoid risking another recession, meanwhile pushing down the REAL deficit problem down the road.

 

At some point our creditors won't be buying our debt, which means that all hell will break lose. Rates will soar, business lending will get crushed, along with many other loans. Of course this has some serious implications on the value of the dollar. Jesus, I hate to think what will happen to the dollar.

 

Well, I've been taking action to protect myself of this very possible scenario, and I would advise for you guys to do the same.

[Fastback]

Have you factored in the coming default of Kalifornia and the expected federal bailout? That will happen sooner than later and will also have a major negative effect on our economy (and constitution)?

 

At some point our creditors won't be buying our debt, which means that all hell will break lose. Rates will soar, business lending will get crushed, along with many other loans. Of course this has some serious implications on the value of the dollar. Jesus, I hate to think what will happen to the dollar.

 

This may happen sooner than later. China and petro producing nations are working as fast as they can to find a viable alternative to the dollar, which you already know.

[Magox]

This may happen sooner than later. China and petro producing nations are working as fast as they can to find a viable alternative to the dollar, which you already know.

Yes, they are taking active steps to reduce reliance on the dollar such as creating currency swaps with one another, buying IMF and Chinese bonds and diversifying funds into natural resources. The problem is that they have a strong symbiotic relationship with the U.S, the Chinese have close to $2 trillion in U.S bonds so they don't want to do anything that will devalue the dollar even more, since they already are heavily invested into it. The view they have is that we are in this together. Also if we were to go through some sort of a painful recession or even worse yet depression, not only do their treasury investments take a hit but who would be buying their ****? Not only would we be buying less but so would the rest of the world because of our down fall.

 

You know the old saying, If the U.S gets a cold then the rest of the world gets a Flu, in this case if we got a flu the rest of the world probably would get a pneumonia. However, this analogy is becoming less and less the case every day as other countries are catching up to us, albeit no one is close yet, but none the case they are catching up.

 

Either way, I think it is just a matter of time, I've gone through it a thousand times in my mind and I just can't see us getting out of this debt crisis. I just don't see it.

[Dave_In_Norfolk]

Jesus, I hate to think what will happen to the dollar.

Please tell us!

[Dave_In_Norfolk]

This may happen sooner than later. China and petro producing nations are working as fast as they can to find a viable alternative to the dollar, which you already know.

Do you think China will stop selling us cheap manufactured goods and petro nations will cut off our oil over this dollar thing? The horror!

[Magox]

Do you think China will stop selling us cheap manufactured goods and petro nations will cut off our oil over this dollar thing? The horror!

Those aren't the risks, I would explain this and the ramifications of a plummeting dollar, but you're too much of a dumbass to understand.

[John Adams]

But take a look at this and tell me what you think...

 

http://www.americanthinker.com/2010/01/201...l_be_worse.html

 

How are you harshing my mellow? Do you think that hoping the US gets its ducks back in a row means ignoring the fiscal irresponsibility that marked the Bush years (and appears to be accelerating under Obama)? If anything, you make Peggy's point. The US has forgotten its mission and now is in deep ****. But it is fixable. Not quickly, as Magox has often stated...but only over a long time with a clear and ambitious plan (that no one has put forward).

 

This mess can be undone but it's a mess alright.

[Fastback]

OK, maybe the thread title is mislabeled. And this isn't directed at you personally. I read the article you linked and get Peggy's point. I agree that our troubles are fixable , but where I might differ from you is that I doubt the politicians have the intestinal fortitude to do what is right and in the nations long term best interests.

 

If we charter the right course, it will be a long journey, and will come with much pain.

 

While I am an optimist, I am a pragmatic optimist. I have a difficult time with being an irrational optimist. I also believe in prayer, and I'm certain that we differ there based on your past postings, but to each his own. Bush was a disaster, but Obama is the perfect storm.

 

No disrespect intended, but when I went to post this thread I had recently read the link you posted.

[keepthefaith]

Do you think China will stop selling us cheap manufactured goods and petro nations will cut off our oil over this dollar thing? The horror!

 

 

Way to cheapen yourself on a serious and complex issue. Try the ears open mouth closed approach. You have a lot to gain.

[DC Tom]

Way to cheapen yourself on a serious and complex issue. Try the ears open mouth closed approach. You have a lot to gain.

 

There's a valid point in there, though: US consumption drives the world economy to a large degreemm, and rampant inflation of the dollar and a collapse of the US economy doesn't benefit China or the oil exporters. Moving away from the dollar as a currency standard isn't going to change their reliance on US markets.

 

At the same time, they're not Countrywide Mortgage, either. Eventually they WILL stop lending us money if we keep borrowing recklessly. But there's a hell of a lot of economic disentanglement that has to happen before that's practical for them.

[Magox]

There's a valid point in there, though: US consumption drives the world economy to a large degreemm, and rampant inflation of the dollar and a collapse of the US economy doesn't benefit China or the oil exporters. Moving away from the dollar as a currency standard isn't going to change their reliance on US markets.

 

At the same time, they're not Countrywide Mortgage, either. Eventually they WILL stop lending us money if we keep borrowing recklessly. But there's a hell of a lot of economic disentanglement that has to happen before that's practical for them.

You're giving Dave way too much credit.

 

On a somewhat related topic, I did just read this. Regarding China and the U.S and how trade relations are becoming more strained because of BO's commitment to the Labor Unions.

 

BEIJING -- Trade disputes between Beijing and Washington over exports of tires, chickens, steel, nylon, autos, paper and salt are multiplying and further damaging the already tense relationship between the two economic powers.

 

The Obama administration says it only aims to protect the country's rights, but the Chinese counter that the United States started the whole thing by launching an unprovoked attack.

 

The current tensions began in September, when the United States imposed a staggering 35 percent import fee on tires from China.

 

Economically speaking, the tariff was minor; it only applied to a couple of billion dollars in annual imports, less than 1 percent of the total annual trade volume between the two countries. But it infuriated the Chinese, who felt it was a political concession to U.S. labor unions rather than a legitimate punishment for something they did wrong.

 

The feeling was that "China should not just sit there and do nothing," said Lu Bo, a researcher with the Chinese Academy of International Trade and Economic Cooperation, a think tank under the Chinese Ministry of Commerce.

 

China fired back at the United States with a full arsenal of its own trade complaints.

 

As the world begins to emerge from the worst economic crisis since the Great Depression, there is growing concern that a rising tide of tit-for-tat protectionism is slowing the recovery.

 

Despite world leaders' repeated promises to minimize trade barriers, protectionist measures have spiked, according to a recent study by Global Trade Alert.

 

In China, the U.S. tire duties imposed in September struck an emotional nerve. They were seen as a move pandering to the United Steelworkers who had helped get President Obama elected, and as a violation of the U.S. president's promise to other G-20 leaders that he would avoid protectionist measures. On Internet bulletin boards, public sentiment about the United States turned ugly, and there were widespread nationalist calls for China to start dumping its vast holdings of U.S. Treasury bonds.

 

Zhou Wenzhong, China's ambassador to the United States, said the tire fee -- which was also widely criticized by Western scholars and media outlets -- represents "a very dangerous precedent."

[Jim in Anchorage]

Chickens?

[DC Tom]

You're giving Dave way too much credit.

 

I just said there was a valid point; I didn't say he intended to make it.

[Magox]

This is what I was referring to. Although Krugman is a liberal hack and the ultimate keynesian, he is a pretty smart fella.

 

Here’s what’s coming in economic news: The next employment report could show the economy adding jobs for the first time in two years. The next G.D.P. report is likely to show solid growth in late 2009. There will be lots of bullish commentary — and the calls we’re already hearing for an end to stimulus, for reversing the steps the government and the Federal Reserve took to prop up the economy, will grow even louder.

 

But if those calls are heeded, we’ll be repeating the great mistake of 1937, when the Fed and the Roosevelt administration decided that the Great Depression was over, that it was time for the economy to throw away its crutches. Spending was cut back, monetary policy was tightened — and the economy promptly plunged back into the depths.

 

This shouldn’t be happening. Both Ben Bernanke, the Fed chairman, and Christina Romer, who heads President Obama’s Council of Economic Advisers, are scholars of the Great Depression. Ms. Romer has warned explicitly against re-enacting the events of 1937. But those who remember the past sometimes repeat it anyway.

 

The Obama fiscal stimulus plan is expected to have its peak effect on G.D.P. and jobs around the middle of this year, then start fading out. That’s far too early: why withdraw support in the face of continuing mass unemployment? Congress should have enacted a second round of stimulus months ago, when it became clear that the slump was going to be deeper and longer than originally expected. But nothing was done — and the illusory good numbers we’re about to see will probably head off any further possibility of action.

 

Meanwhile, all the talk at the Fed is about the need for an “exit strategy” from its efforts to support the economy. One of those efforts, purchases of long-term U.S. government debt, has already come to an end. It’s widely expected that another, purchases of mortgage-backed securities, will end in a few months. This amounts to a monetary tightening, even if the Fed doesn’t raise interest rates directly — and there’s a lot of pressure on Mr. Bernanke to do that too.

 

Will the Fed realize, before it’s too late, that the job of fighting the slump isn’t finished? Will Congress do the same? If they don’t, 2010 will be a year that began in false economic hope and ended in grief.

 

http://www.bloomberg.com/apps/news?pid=206...3XHKM&pos=4

 

Krugman, 56, said the Federal Reserve’s plan to end purchases of $1.25 trillion of mortgage-backed securities and about $175 billion of federal agency debt in March could spur an increase in mortgage rates and lead to declines in home sales and prices.

 

Any sales by the Fed of mortgage-backed securities as part of a so-called “exit strategy” from record stimulus could increase mortgage rates by 1 percentage point and impede the recovery, Krugman said.

Damn I'm good. I said that before he did

[John Adams]

OK, maybe the thread title is mislabeled. And this isn't directed at you personally. I read the article you linked and get Peggy's point. I agree that our troubles are fixable , but where I might differ from you is that I doubt the politicians have the intestinal fortitude to do what is right and in the nations long term best interests.

 

If we charter the right course, it will be a long journey, and will come with much pain.

 

While I am an optimist, I am a pragmatic optimist. I have a difficult time with being an irrational optimist. I also believe in prayer, and I'm certain that we differ there based on your past postings, but to each his own. Bush was a disaster, but Obama is the perfect storm.

 

No disrespect intended, but when I went to post this thread I had recently read the link you posted.

 

You've read enough of my posts to know I don't believe in prayer but you think I believe "politicians have the intestinal fortitude to do what is right and in the nations long term best interests."

 

Is that you Dwight? I know it is. Come clean.

[Adam]

You've read enough of my posts to know I don't believe in prayer but you think I believe "politicians have the intestinal fortitude to do what is right and in the nations long term best interests."

 

Is that you Dwight? I know it is. Come clean.

Do the American people have the intestinal fortitude to allow them to do whats right without voting them out of office

[Dave_In_Norfolk]

Those aren't the risks, I would explain this and the ramifications of a plummeting dollar, but you're too much of a dumbass to understand.

I know they are not risks, that why I was making fun of you with them. Come on, what will a falling dollar mean? Last time I checked, a high dollar happened at the bottom of the economic mess as investors flocked to it as a safe bet. A lower dollar happened because investors felt safe to go out again

[Magox]

I know they are not risks, that why I was making fun of you with them. Come on, what will a falling dollar mean? Last time I checked, a high dollar happened at the bottom of the economic mess as investors flocked to it as a safe bet. A lower dollar happened because investors felt safe to go out again

I'll play along.

 

It was due to a repatriation process. It was a head scratcher at the time, but reflecting back it made sense to a certain degree. If you remember there was an outright systemic failure that occured. Banks weren't lending to one another, commercial paper dried up completely. The banks rely on overnight lending (LIBOR), but when Lehman went down there was a fear that any bank could be the next one to drop. Funds had been going into the Chinese, Russian, Brazilian, Indian, Gulf and other Emerging market stock markets at an alarming rate and many of these markets were at all time highs. When this systemic failure occured an interesting dynamic took place which was this repatriation process that I was talking about, money came rushing out of those markets into what was viewed as the safest place to be, which was U.S Government Bonds.

 

When the Bank Bailout coupled with the CPFF which was the Federal Reserves unprecedented move to restore liquidity in overnight lending was implemented, confidence slowly returned to the markets, and an unwinding process occured, in which these investments that had rushed into bonds started returning back into riskier assets such as commodities, developed and emerging market stocks.

 

Now you smugly ask "Come on, what will a falling dollar mean?"

 

Do you have a short memory or are you just ignorant? which is it?

 

Do you remember what happened in July of 2008 when the U.S dollar was at a record low? Do you remember where Oil and grains prices were at that time?

 

That's right genius, oil was at $147 a barrel and corn prices were north of $8 a bushel. Is that a coincidence? Let me answer that for you smart guy. NO!!

 

However, I see the U.S dollar going alot lower than where it did in July of 2008. I'm not predicting that it will happen in 2010, as there will be a false sense of security from the markets that believe that we will begin our Exit Strategy, by either increasing the fed funds rates and letting the MBS and Treasury buying program expire which will lead to a higher dollar at some point during 2010.

 

However, when the market realizes that the recovery that is taking place isn't a sustained one, you will most likely see the government come out with more stimulus pledges and the Federal Reserve will continue to reassure markets that it won't be raising rates (which is what it is doing now) and it will probably continue its MBS and Treasury purchases.

 

By the end of next year we will most likely have a national debt close to $14 Trillion and rising rapidly with more money printing that we have ever seen with interest rates near 0%. You tell me where the dollar is going.

[Fastback]

You've read enough of my posts to know I don't believe in prayer but you think I believe "politicians have the intestinal fortitude to do what is right and in the nations long term best interests."

 

Is that you Dwight? I know it is. Come clean.

 

Sorry, no Dwight here. I'm Chris. That aside, since you don't believe that the pols will do the right thing, why the other thread about Peggy Noonan's "mindless optimism" and trying to adopt that outlook? I don't get it.