Suppose the stock market loses 20% of its value tomorrow..

Tom

Lifer
Oct 9, 1999
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Or 30%, or 50%.

Or the interest rate we have to pay on our bonds to move them quadruples, or worse..

Do you think all of that loss will be worth John Boehner keeping the speakership ?

Because I am telling you, these Republicans have no clue what they are playing with here.

At a minimum we are going to have a recession out of this nonsense and we are much closer to a complete tailspin than we realize, with no real way of stopping it.

All for no reason.
 

Matt1970

Lifer
Mar 19, 2007
12,320
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Wow, even bigger than the great depression? You really need to turn off that left wing scare radio or whatever it is you are listening to.
 

Tom

Lifer
Oct 9, 1999
13,293
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Wow, even bigger than the great depression? You really need to turn off that left wing scare radio or whatever it is you are listening to.

I'm watching C-Span, a Veteran's commitee hearing.

But that's only tangential to my post. I am posting my thoughts, not those of whatever you are talking about, which I'm not aware of.

And yes, the potential is worse than the events that triggered the Great Depression.
 

Matt1970

Lifer
Mar 19, 2007
12,320
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Well I am not sure who is putting these thoughts into your head but we have had 18 gov shutdowns since 1976. The one in the 90's was for 21 days. We already passed a bill to fund back pay to workers, some have already been called back to work. Explain to me where the panic is?
 

SparkyJJO

Lifer
May 16, 2002
13,357
7
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If a government shutdown = loss of economic control, it just goes to prove our economy is based on funk and garbage in the first place. The economy should not be so tied to the government like that.
 

Sacrilege

Senior member
Sep 6, 2007
647
0
0
The concern is talk of a government default or selective default. The government shutdown is a hardship for government workers and some businesses, but it is not the major concern.

government shut down =/= default
 

zinfamous

No Lifer
Jul 12, 2006
111,133
30,084
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Well I am not sure who is putting these thoughts into your head but we have had 18 gov shutdowns since 1976. The one in the 90's was for 21 days. We already passed a bill to fund back pay to workers, some have already been called back to work. Explain to me where the panic is?

OP is not referring to the shutdown.

try to keep up.
 
Jan 25, 2011
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I'm just not seeing much money at all moving to the sidelines at all right now. There's a few people but nothing impactful. I just don't see anything major occurring at all.
 

Tom

Lifer
Oct 9, 1999
13,293
1
76
Well I am not sure who is putting these thoughts into your head but we have had 18 gov shutdowns since 1976. The one in the 90's was for 21 days. We already passed a bill to fund back pay to workers, some have already been called back to work. Explain to me where the panic is?

Two reasons.

1. More-so than almost anytime in history, we are the preeminent economic force in the world. Which means if we falter the world will falter. And unlike countries like Argentina, Greece, etc., if we fail we are too big a piece of the world economy for any other nation to bail us out.

2. bonds. If we can't sell our bonds it will start a downward spiral that there's no end to but complete economic failure. And if we have to pay higher interest it potentially will choke our economy to a slow death.
 
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Sacrilege

Senior member
Sep 6, 2007
647
0
0
I'm just not seeing much money at all moving to the sidelines at all right now. There's a few people but nothing impactful. I just don't see anything major occurring at all.

Why would you move to the sidelines now when there are still 5 business days until the potential default time?
 

Tom

Lifer
Oct 9, 1999
13,293
1
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I'm just not seeing much money at all moving to the sidelines at all right now. There's a few people but nothing impactful. I just don't see anything major occurring at all.

Study history. No one knows where the breaking point is or we'd never have economic disasters.
 

Tom

Lifer
Oct 9, 1999
13,293
1
76
btw, I'm not saying its going to happen. I'm just saying what I'm worried about and its based on my life and what I think I know about history.

I just want to talk about it, I'd be happy if someone can convince me there's no danger.
 
Jan 25, 2011
16,699
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Why would you move to the sidelines now when there are still 5 business days until the potential default time?

Let me rephrase. I'm not having many conversations with investors who are considering it. The sentiment seems to be it won't happen. I see no catastrophic crash occurring.
 
Oct 16, 1999
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Let me rephrase. I'm not having many conversations with investors who are considering it. The sentiment seems to be it won't happen. I see no catastrophic crash occurring.

Most don't see a catastrophic crash occurring until it's actually occurring, otherwise it wouldn't be catastrophic.

I think there's way too much confidence in the competency of congress by a good margin of folks who seem to often complain government can't do much right. It's a bit baffling.
 
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glenn1

Lifer
Sep 6, 2000
25,383
1,013
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btw, I'm not saying its going to happen. I'm just saying what I'm worried about and its based on my life and what I think I know about history.

I just want to talk about it, I'd be happy if someone can convince me there's no danger.

If it really as bad as you think, Obama would negotiate. Instead he's looking at us as a buying opportunity for political capital. But I guess his bluff worked on you. You can fool some of the people...
 

IronWing

No Lifer
Jul 20, 2001
70,208
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Where are the sidelines in a Treasury default? Treasury bonds? Cash? Gold? Corporate bonds? Euros? Yen? Real estate? Commodities?
 

Matt1970

Lifer
Mar 19, 2007
12,320
3
0
btw, I'm not saying its going to happen. I'm just saying what I'm worried about and its based on my life and what I think I know about history.

I just want to talk about it, I'd be happy if someone can convince me there's no danger.

You just said "At a minimum we are going to have a recession out of this nonsense"

Sigh....
 

Spungo

Diamond Member
Jul 22, 2012
3,217
2
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Where are the sidelines in a Treasury default? Treasury bonds? Cash? Gold? Corporate bonds? Euros? Yen? Real estate? Commodities?

What to buy depends on how bad things are. During a very extreme crisis like Russia's 1917 revolution or the rise of Nazi Germany, people favor gold because it's a very dense form of money that is easy to transport, hide, or smuggle. Obscenely rich people often have at least some of their wealth in the form of gold bullion. At gold's current price of $1300/oz, a pound of gold, about the size of a deck of cards, is worth $20,800. Hungarian chemist George de Hevesy dissolved gold Nobel Prize medals in acid to hide the gold from the Nazis. Few things are as safe as gold when it seems like the world is ending.

Some other possibilities are to hold different currencies. Germany experienced hyperinflation in the 1920s, but America's currency was backed by gold. Converting German marks to US dollars at that time was a safe hedge against inflation. Countries with good balance sheets and stable political systems are more likely to have stable currency. Norway, Finland, and Sweden have some of the lowest debt loads in the world, so I would expect their currencies to be some of the safest. A quick google search shows that Norway and Sweden have their own currency, but Finland uses the Euro. I'm not too fond of the Euro because the EU has so many loser countries in it that would rather go bankrupt than cut any social programs. I'm thinking about countries like Greece, Spain, France.

That said, I would probably just sit on the side line in US dollars, but have the cash in an investment account and ready to buy something. Defaulting on national debt is the kind of thing that causes panic selling and market crashes. Wait for the crash then buy large cap companies that operate on a global scale. Coca Cola is sold in every country. McDonalds is in every country. Intel is in every country. Microsoft is in every country. Oil companies like Exxon and Chevron are global.
Bonds are the absolute worst thing to hold during a crisis. Things like the price of gold, real estate, and stocks automatically scale with inflation, but bonds move in the opposite direction. The whole point of having a positive inflation target is to welch on bond payments. If a bond is set for 5% interest and the inflation rate is 8% due to wild money printing, the bond effectively has a negative interest rate. Adding insult to injury, the value of a bond goes down when interest rates go up. Your crappy bond is paying 5% but the newly issued bonds are paying 10%. The only way to sell that crappy bond is at a steep discount.
 

cubby1223

Lifer
May 24, 2004
13,518
42
86
Suppose the stock market loses 20% of its value tomorrow..

Doom and gloom threats over the stock market have already been used many time over, this is nothing new. My googling skills are not good tonight, there were at least two times back in the stimulus/bailout days Reid ranted over fear of crashing stock markets if legislation was not immediately passed into law, and both times the stock market *rose* in value the day after the senate did not vote on the bailout.
 
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Spungo

Diamond Member
Jul 22, 2012
3,217
2
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Doom and gloom threats over the stock market have already been used many time over, this is nothing new. My googling skills are not good tonight, there were at least two times back in the stimulus/bailout days Reid ranted over fear of crashing stock markets if legislation was not immediately passed into law, and both times the stock market *rose* in value the day after the senate did not vote on the bailout.

Many crashes are a direct result of the government or the fed fucking around. Look at the current bond market. Interest rates are at record lows, the fed is printing billions of dollars every month, and those dollars are being used to buy government bonds. This creates several problems:
1 - Printing money directly leads to inflation.
2 - We have a fractional reserve banking system. A bank can hold $1 of newly printed money then lend out $10 of new money. This multiplying causes greater inflation. This is why the cost of everything has gone way up in the past few years. Families are struggling more than ever because incomes have not increased as quickly as inflation. The only reason our dollar appears to be doing fine is because every other country is printing money as well.
3 - Inflation causes things like gold and stocks to jump in price by large amounts. Gold hit record highs since 2009 and the stock market is at an all time high. People see this and want to get in on the action.
4 - Ridiculously low interest rates and a strong bull market lead to wild, speculative investing and heavy leveraging. This almost always leads to a crash. People invest on margin, the stock declines a little, there is a margin call, the stock is forcibly sold to cover the margin. Thousands of people doing this at the same time leads to a crash. Betting on margin is what caused the 1929 stock market crash and the recent real estate crash.

A lot of people are scared because our current situation looks a lot like 2006-2008. Stock and real estate prices are almost entirely driven by speculation at this point. Stocks are expensive because people want to buy stocks, not because the companies are doing better. Real estate is once again being purchased by investors instead of people looking for a place to live. We'll see a crash just like the dot com crash and the real estate crash. The only question is when.