ECONOMY: Is it really this dire?

[NoStateofMind]

http://www.youtube.com/watch?v=1LajuETlDmA

This video would make it seem that the US is on its last leg regarding economic recovery. Is now the time to invest in gold to hedge against massive inflation?

 

[bamacre]

Well, when Obama warned Americans not to "stuff money under their mattresses," he really meant it. :laugh:

 

[NoStateofMind]

Originally posted by: bamacre
Well, when Obama warned Americans not to "stuff money under their mattresses," he really meant it. :laugh:

lol

I forgot to add the second part. They explain a bit more:

http://www.youtube.com/watch?v...cOE66o&feature=related

 

[piasabird]

I keep puttin muney under my pillow, but every day my pillow is shrinking.

In English this meas every time we turn around our paychecks are worth less and less until we cant afford to buy food.

 

[Fern]

Originally posted by: PC Surgeon

Originally posted by: bamacre
Well, when Obama warned Americans not to "stuff money under their mattresses," he really meant it. :laugh:

lol

I forgot to add the second part. They explain a bit more:

http://www.youtube.com/watch?v...cOE66o&feature=related

Glad you added the second part above.

I was gonna recommend that to you when I saw your OP.

This news, and then some opinions I've heard about all this extra money injected into the economy but now just sitting on the sidelines, only to flood into the economy later, do raise concerns about inflation.

As far as gold, I don't pay much attention to it, but I recently read elsewhere that there are so many "derivatives" based on gold that it will NOT function well as a hedge for inflation. Don't understand how that could be, but if I were considering investing in gold I'd check it out.

Typicaly high inflation brings high interest rates, more so if the inflation is caused by excess money supply (as opposed to something like increased price in gas - higher interest rates don't help that). Might be some way to profit from that angle (e.g., shorting LT bond funds etc).

Me? I don't really want gold, can't eat it or otherwise really use it. I'd rather have a shipping container full of canned goods etc in my backyard. At least I'll be able to eat.

Fern

 

[NoStateofMind]

Fern, I am no economic expert and not many can claim that anyway. I am just a normal American trying live a normal lifestyle in bad economic times. Will it really get so bad that Gold would have no value? I see that happening only if there is a food shortage of some sort. If hyperinflation hits wouldn't having gold in small quantities be a viable way to exchange for the going currency at the time, in essence hedging your losses off before its too late?

 

[Fern]

Originally posted by: PC Surgeon
Fern, I am no economic expert and not many can claim that anyway. I am just a normal American trying live a normal lifestyle in bad economic times. Will it really get so bad that Gold would have no value? I see that happening only if there is a food shortage of some sort. If hyperinflation hits wouldn't having gold in small quantities be a viable way to exchange for the going currency at the time, in essence hedging your losses off before its too late?

I don't know.

First, these guys are talking about the possibility of global depression, combined with high inflation in the USA like Argentina (? correct country). TBH, I have a hard time wrapping my head around the concept of a depression with hyper inflation. But if that were to happen, all bets are off - no telling how the value of gold might be affected.

Secondly, gold has historically been a good hedge against inflation so having a bit may be reasonable and prudent. But I'd check to make sure it's not already overvalued in anyway thus reducing it's effectiveness as a hedge. I'd also check that stuff about 'derivatives'. IIRC, thery were saying that there were MORE gold-based instruments than actual gold available. While OT(one)H that sounds like gold demand may shoot up if those instruments were required to be converted into actual gold itself, OTOH if people can manufacture gold derivatives (and not gold) it may dampen demand via an artificial supply increase. Sort of like CDS's, just print 'em and sell 'em.

I may be a little older than others here, but in the past (late 70's/early 80's) when inflation was high and gold popular we had Maddoff type schemes by gold dealers. You know the ones where you buy the gold and they 'store it' for you? Well, there NEVER was any gold. If you're gonna get some, actually get it and store it yourself to be safe.

Fern

 

[NoStateofMind]

Yeah, if I was to put money in gold it would be gold in hand anyways cause I have heard of what you mentioned. Printing certificates for gold that's not there, essentially.

 

[nullzero]

PC Surgeon,

Those of us who even said the word hyperinflation were laughed over a year ago. Now all the idiot keynesian economist and believers are running around like a chicken with its head chopped off with no idea how to fix this problem other then destroying the currency and the country. LegendKiller and others have been touting all the bailouts and impotent programs that the government and FED has come up with.... After each program passes it has almost no effect on stopping the train from derailing. The more you screw with the free markets the more screwed up the economy will get.

 

[JSt0rm]

I'm not as smart in such things but don't we need to kick start inflation? Isn't part of the problem right now deflation?

*ohh I forgot to add I dont watch fox news so I didnt see the clip in question. My ? is based off the comments here.

 

[cubeless]

Originally posted by: JSt0rm01
I'm not as smart in such things but don't we need to kick start inflation? Isn't part of the problem right now deflation?

they are already working on that... inflation is virtually inevitable... if it doesn't occur we will have yet another new chapter in economic history... gov'ts can't spend like we are and not generate inflation...

but i think the big problem still lurking is the 'bad debt' that the gov't is finally deciding that it has no choice but to start buying... once they start valuing it (and they will overvalue it with virtual certainty) it will still be at lower values than it was insured (with cds's) and we will get a whole new shitstorm... methinks that that's why paulson (who knows exactly what all the bad guys did in this affair) didn't want to touch that... the longer they can hold off the better, as time lets the shitcube melt a bit and gives everyone a chance to try to twiddle things behind the scenes...

but i may be wrong... i have become a believer in the audacity of hope... i hope these smart guys haven't killed us all...

 

[First]

Originally posted by: nullzero
PC Surgeon,

Those of us who even said the word hyperinflation were laughed over a year ago. Now all the idiot keynesian economist and believers are running around like a chicken with its head chopped off with no idea how to fix this problem other then destroying the currency and the country. LegendKiller and others have been touting all the bailouts and impotent programs that the government and FED has come up with.... After each program passes it has almost no effect on stopping the train from derailing. The more you screw with the free markets the more screwed up the economy will get.

We didn't see the financial system collapse, that clearly would have happened now that we've seen the markets react to the turmoil of financial uncertainty for 6 months, all of which a direct reaction to the scare of private financial institutions' risky assets, little to do with the bailouts themselves being fatally flawed. You'd have to be completely out to lunch to think we could let companies like Bear, Fannie, Freddie, AIG, etc. collapse, all of whom originally accounted for $6T out of $10T in assets, and not experience a deep depression. That clearly won't happen now barring a terrorist attack, so we've probably seen the worst of it. Fleshing out the CDS/CDO is the final (or original depending on your perspective) hurdle, which is likely what this soon to be announced next program out of the administration is targeted towards.

 

[nullzero]

Originally posted by: Evan

Originally posted by: nullzero
PC Surgeon,

Those of us who even said the word hyperinflation were laughed over a year ago. Now all the idiot keynesian economist and believers are running around like a chicken with its head chopped off with no idea how to fix this problem other then destroying the currency and the country. LegendKiller and others have been touting all the bailouts and impotent programs that the government and FED has come up with.... After each program passes it has almost no effect on stopping the train from derailing. The more you screw with the free markets the more screwed up the economy will get.

We didn't see the financial system collapse, that clearly would have happened now that we've seen the markets react to the turmoil of financial uncertainty for 6 months, all of which a direct reaction to the scare of private financial institutions' risky assets, little to do with the bailouts themselves being fatally flawed. You'd have to be completely out to lunch to think we could let companies like Bear, Fannie, Freddie, AIG, etc. collapse, all of whom originally accounted for $6T out of $10T in assets, and not experience a deep depression. That clearly won't happen now barring a terrorist attack, so we've probably seen the worst of it. Fleshing out the CDS/CDO is the final (or original depending on your perspective) hurdle, which is likely what this soon to be announced next program out of the administration is targeted towards.

I don't know where you have been... we are still in a economic collapse. It is just in slow motion right now. But credit markets are still not functional without government support, the banking system is not functional without government support, the economy is not able to sustain itself without government support (bailouts etc.), and the list goes on. Trust and confidence in the financial system is shattered and will takes many years to recover.

 

[miketheidiot]

Originally posted by: Fern

First, these guys are talking about the possibility of global depression, combined with high inflation in the USA like Argentina (? correct country). TBH, I have a hard time wrapping my head around the concept of a depression with hyper inflation. But if that were to happen, all bets are off - no telling how the value of gold might be affected.

Fern

i also don't know how that could happen. It doesn't even make sense conceptually.

Originally posted by: nullzero
PC Surgeon,

Those of us who even said the word hyperinflation were laughed over a year ago. Now all the idiot keynesian economist and believers are running around like a chicken with its head chopped off with no idea how to fix this problem other then destroying the currency and the country. LegendKiller and others have been touting all the bailouts and impotent programs that the government and FED has come up with.... After each program passes it has almost no effect on stopping the train from derailing. The more you screw with the free markets the more screwed up the economy will get.

not only do people have a pretty good idea how to fix it , but it pretty much is fixed. Right now it feels like we are seeing the bottoming out process.

Tomorrow i'm going all in on citi, BoA, and maybe one more institution to be decided. :evil:

 

[First]

Originally posted by: nullzero

I don't know where you have been... we are still in a economic collapse. It is just in slow motion right now. But credit markets are still not functional without government support, the banking system is not functional without government support, the economy is not able to sustain itself without government support (bailouts etc.), and the list goes on. Trust and confidence in the financial system is shattered and will takes many years to recover.

Sure it will, like hyperinflation right? Let me know when this happens. Better yet, I'll let you know when it doesn't by bumping this thread.

 

[nullzero]

Originally posted by: miketheidiot

Originally posted by: Fern

First, these guys are talking about the possibility of global depression, combined with high inflation in the USA like Argentina (? correct country). TBH, I have a hard time wrapping my head around the concept of a depression with hyper inflation. But if that were to happen, all bets are off - no telling how the value of gold might be affected.

Fern

i also don't know how that would happen.

Originally posted by: nullzero
PC Surgeon,

Those of us who even said the word hyperinflation were laughed over a year ago. Now all the idiot keynesian economist and believers are running around like a chicken with its head chopped off with no idea how to fix this problem other then destroying the currency and the country. LegendKiller and others have been touting all the bailouts and impotent programs that the government and FED has come up with.... After each program passes it has almost no effect on stopping the train from derailing. The more you screw with the free markets the more screwed up the economy will get.

not only do people have a pretty good idea how to fix it , but it pretty much is fixed. Right now it feels like we are seeing the bottoming out process.

Tomorrow i'm going all in on citi, BoA, and maybe one more institution to be decided. :evil:

I am glad you think its all fixed. Tell me how your investments work out down the road.

 

[nullzero]

Originally posted by: Evan

Originally posted by: nullzero

I don't know where you have been... we are still in a economic collapse. It is just in slow motion right now. But credit markets are still not functional without government support, the banking system is not functional without government support, the economy is not able to sustain itself without government support (bailouts etc.), and the list goes on. Trust and confidence in the financial system is shattered and will takes many years to recover.

Sure it will, like hyperinflation right? Let me know when this happens. Better yet, I'll let you know when it doesn't by bumping this thread.

Go right ahead and bump it. When we see a inflation rate running over 20% for the year. I will be sure to bump this as well.

 

[First]

Originally posted by: nullzero

Originally posted by: Evan

Originally posted by: nullzero

I don't know where you have been... we are still in a economic collapse. It is just in slow motion right now. But credit markets are still not functional without government support, the banking system is not functional without government support, the economy is not able to sustain itself without government support (bailouts etc.), and the list goes on. Trust and confidence in the financial system is shattered and will takes many years to recover.

Sure it will, like hyperinflation right? Let me know when this happens. Better yet, I'll let you know when it doesn't by bumping this thread.

Go right ahead and bump it. When we see a inflation rate running over 20% for the year. I will be sure to bump this as well.

rofl.

 

[miketheidiot]

Originally posted by: nullzero

Originally posted by: Evan

Originally posted by: nullzero

I don't know where you have been... we are still in a economic collapse. It is just in slow motion right now. But credit markets are still not functional without government support, the banking system is not functional without government support, the economy is not able to sustain itself without government support (bailouts etc.), and the list goes on. Trust and confidence in the financial system is shattered and will takes many years to recover.

Sure it will, like hyperinflation right? Let me know when this happens. Better yet, I'll let you know when it doesn't by bumping this thread.

Go right ahead and bump it. When we see a inflation rate running over 20% for the year. I will be sure to bump this as well.

20% is not hyperinflation

*unless you mean 20% a month or something....

 

[nullzero]

Originally posted by: miketheidiot

Originally posted by: nullzero

Originally posted by: Evan

Originally posted by: nullzero

I don't know where you have been... we are still in a economic collapse. It is just in slow motion right now. But credit markets are still not functional without government support, the banking system is not functional without government support, the economy is not able to sustain itself without government support (bailouts etc.), and the list goes on. Trust and confidence in the financial system is shattered and will takes many years to recover.

Sure it will, like hyperinflation right? Let me know when this happens. Better yet, I'll let you know when it doesn't by bumping this thread.

Go right ahead and bump it. When we see a inflation rate running over 20% for the year. I will be sure to bump this as well.

20% is not hyperinflation

*unless you mean 20% a month or something....

There is no concrete definition on the exact % other then the currency rapidly loses value over a period of time. I picked 20% because at that point you know there is a serious problem that is leading toward run away inflation and hyperinflation.

 

[Fern]

I think it's a bit premature to feel confident the banking crisis is fixed or has bottomed out etc.

I'd be leary of buying banking stocks early tomorrow too.

Geithner is supposed to finally unveil his plan tomorrow, I guess you could go long or short on bank stock early tomorrow depending on how you bet his plan is gonna be received. But that strikes me more as gambling than 'investing'

And since they're just getting around to announcing the plan, I think it's a bit early to proclaim any successes for it. Why not give it a while? I love seeing 'confidence', but I guess I'm so cautious I see it as more bravado than anything at this point.

Did anybody go AIG-like crazy and sell a bunch of CDS for eastern European mortgages? Are other 'shoes' gonna drop? Any big governmental/regulatory changes comming down the pike? (Here or in Europe?). I haven't heard much about Chinese banks, anything lurking there? IDK, so I'm 'uncertain'.

Fern

 

[NoStateofMind]

I know China expressed concerns about our ability to pay back the loans we've gotten from them. Are they turning off the spigot? What would that mean to our economy?

 

[miketheidiot]

Originally posted by: PC Surgeon
I know China expressed concerns about our ability to pay back the loans we've gotten from them. Are they turning off the spigot? What would that mean to our economy?

it was one guy, and china is only the 5th or 6th largest holder of us debt, after japan, the fed, us citizens and banks, and the us government itself.

 

[miketheidiot]

Originally posted by: Fern
I think it's a bit premature to feel confident the banking crisis is fixed or has bottomed out etc.

I'd be leary of buying banking stocks early tomorrow too.

Geithner is supposed to finally unveil his plan tomorrow, I guess you could go long or short on bank stock early tomorrow depending on how you bet his plan is gonna be received. But that strikes me more as gambling than 'investing'

And since they're just getting around to announcing the plan, I think it's a bit early to proclaim any successes for it. Why not give it a while? I love seeing 'confidence', but I guess I'm so cautious I see it as more bravado than anything at this point.

Did anybody go AIG-like crazy and sell a bunch of CDS for eastern European mortgages? Are other 'shoes' gonna drop? Any big governmental/regulatory changes comming down the pike? (Here or in Europe?). I haven't heard much about Chinese banks, anything lurking there? IDK, so I'm 'uncertain'.

Fern

i'm not a short term investor, i'm thinking a year down the road at the very minimum.

 

[Craig234]

Originally posted by: Evan

Originally posted by: nullzero
PC Surgeon,

Those of us who even said the word hyperinflation were laughed over a year ago. Now all the idiot keynesian economist and believers are running around like a chicken with its head chopped off with no idea how to fix this problem other then destroying the currency and the country. LegendKiller and others have been touting all the bailouts and impotent programs that the government and FED has come up with.... After each program passes it has almost no effect on stopping the train from derailing. The more you screw with the free markets the more screwed up the economy will get.

We didn't see the financial system collapse, that clearly would have happened now that we've seen the markets react to the turmoil of financial uncertainty for 6 months, all of which a direct reaction to the scare of private financial institutions' risky assets, little to do with the bailouts themselves being fatally flawed. You'd have to be completely out to lunch to think we could let companies like Bear, Fannie, Freddie, AIG, etc. collapse, all of whom originally accounted for $6T out of $10T in assets, and not experience a deep depression. That clearly won't happen now barring a terrorist attack, so we've probably seen the worst of it. Fleshing out the CDS/CDO is the final (or original depending on your perspective) hurdle, which is likely what this soon to be announced next program out of the administration is targeted towards.

I had predicted some things I'll list here, for years now.

Did predict: Given that the pendulum has so far in favor of the wealthy since Reagan, and so many gains of the public middle and lower classes from FDR on have been lost and we're seeing the highest concentrations of wealth since the Great Depression, I thought there was the possibility that the wealthy would be able to extract even more wealth, and that it would get very costly, starting to 'cuti into the bone'. Where would they get it from? Lower and middle class wealth was in two main places: homes and the stock market. The rich own the vast majority of stocks, so affecting that would hurt the rich far more. That left the housing market as a target. I did not know how they'd do it, but the increasing prices in a bubble, getting people to not only choose to borrow against the inflated value, but to almost have to get caught up in it somehow even if just taking out a mortgage for an inflated price, seemed like an important part. Bubble burts, homeowners are left with the debt but not the phony bubble wealth.

That pretty much happened.

I did not predict the timing (no idea, but I did go mostly to cash around 2004 in preparation), and I'd never heard of a credit default swap - no idea about the mechanics.

So, what am I seeing now? Well, also for a long time I've suspected the possibility of large inflation as our debt has grown out of control. Reason - the debt gets too big to pay off, and inflation 'robs' the creditors but allows paying it down. You can't do it lighly because lending largely stops. It hasn't happened for many years since I've noted that - but the boggling spending now seems to me to leave little chance to avoid it, again the timing not clear, but probably sooner than later.

I don't have th financial expertise to say much to prove any certainty on it, but the pressures seem prett clear.

In one way, it's ironic - the far right had a 'starve the beast' plan to block government spending, but their economic crash has created the massive stimulus spending. Oops.