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Old 08-05-2011   #11
Marvin (aka Heinz)
 
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Originally Posted by Greg Norrell View Post
I think Wall St is abruptly aware, now that the manufactured debt ceiling crisis is over, that austerity measures will stifle economic recovery (think 1937) and cause at least slow growth and at worst a double dip. Corporations have 2.5 trillion bucks to spend when they think there will be a return on the investment. Fear is what we have to fear.
i think we are looking a a period of slow growth. Yes, not just corporations, but some individuals are 'hoarding' monies until they can get a better return.
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Old 08-05-2011   #12
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Crazy isn't it? The US has found that the word, "crisis" attached to any situation gives decision makers wide and extreme latitude. So, any absurdity can be exercised when it is in response to a crisis. Situations like budgetary deadlines which come in the normal course of business are not crises. Equate the recent debt ceiling circumstance to something like your household electricity bill which comes due on a regular cycle. The bill's due date is not a crisis. Ignoring that it must be paid in order that your electric power continue is not a crisis. Now, not having the money to pay the bill might be, unless of course the money was taken out of the budget and spent on booze and gambling. But the regular bills are not themselves crisis events. Waiting till the power is shut off to scramble around scraping up the money to pay the bill (and reconnection plus penalties) is a manufactured crisis. A crisis is something that is catastrophic in proportion and is un foreseen. Like an accident, injury or sudden illness.

For the US's part, our leaders made no preparation. In fact, we've had no plan of action to bail out the sinking ship for decades. So, here we were, presented with an economic crisis situation which demanded decisive action in a short period of time. I suppose no one on Capitol hill owns a calender, except the ones with congressional breaks and vacations marked on it. The deadline to do something was dramatically pressed to the limit. The president signed the bill into law 10:10 before the manufactured deadline. All the battling reported by the press was democrats fighting republicans and the president not coaxing congress but fighting his political foes. No one wants to admit it, and no one wants to be the bad guy but the US is broke. All the congressmen and the president want to be re-elected. The way to do that is to make constituents happy, the voting public is happy when the status quo is undisturbed. No additional taxes, not pet project cuts.

Out of all the drama and debate, what resulted in the debt ceiling legislation was borrowing more money to pay debts we cannot pay, and reducing additional spending by inconsequential amounts. For I don't know how many times the US is using borrowed money to pay past debts while not generating enough money to pay current or past debts.

What idiotic logic to say, "if we don't borrow more money we'll default on our debts" and not add to that, "We've got to cut up the credit cards" and "We going to make more money". Yet this is the action the US has taken. While publicizing to the US public these goings on, the rest of the world was listening. One of the compelling reasons the government gave for the necessity of raising the debt ceiling was to prevent US default and to prevent a panic in stock markets. Well we see that happened.

Some financial talking heads maintained that the debt crisis was a non-issue from the start. Again, we've been force fed the notion that we must do a thing, for to not do this thing would spell destruction for sure, and this thing is the only option. The economic stimulus, the bank and automobile industry bail-out and the waging war on three different fronts against an invisible enemy we're all told are/were absolutely necessary to preserve the interests and security of the US.

I guess the holders of the collective purse have been awakened and it brought to their attention that the US cannot and will not live within its means, cannot and will not pay their debt, cannot or will not generate enough new revenue to sustain itself. Going into default isn't much different than borrowing money that cant be paid back to keep the wolves away from the door.

Guess what? The US is not the only country caught up in the Ponzy scheme economy. Other countries have employed the same philosophy.

On a more grand scale, international debts and loans work just like the failed mortgage situation which was pre-dated by the S&L debacle. Country A holds debts from Country B. Country A needs immediate currency so borrows money from Country C, using the debt notes from A as collateral. The debts are bought and sold as if they are valuable investments. So many mortgage companies traded paper, loans were bundled up and sold as package deals. The hope being that the bad debts being encapsulated in a package would simply be absorbed. When the mortgage bubble popped and defaults out ran the good notes problems started. Some defaulted property could not be foreclosed on, because it was impossible to determine who the mortgage holder was. International debts are the same.

I predict there will be a complete zeroing out, a wiping clean of the slates and a total devaluing of currencies. Quite frankly money is nothing more than fancy printed paper. If it's used to represent the worth or value of an asset that's one thing, when it only represents the worth of a different colored piece of pretty printed paper, that's another.

Capitalism cannot sustain for indefinite periods. It grows like a soap bubble then pops and another soap bubble has to be blown. Capitalist like to trade money for money. Somewhere the money's value has to be attached to something tangible and life sustaining, not a future value of a thing.

We're all broke. Now we're going to learn what are necessities and what are luxuries.
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Old 08-05-2011   #13
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As some might know, I don't read long posts, so I jumped straight to the end of Steve's post.

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Originally Posted by Songman45 View Post
Capitalism cannot sustain for indefinite periods. It grows like a soap bubble then pops and another soap bubble has to be blown.
If memory serves, economists, since Adam Smith, I believe, are trying to explain the up & down of the capitalist system to no avail. Heck, one of Marx's biggest beeves with capitalism is the economic cycles.
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Old 08-05-2011   #14
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Steve, I agree we are broke, borrowing 41% of what the govt spends. But unfortunately the economy will suffer from reduced spending. Look at what Hoover's 'belt-tightening' did in 1930-1932. Look what happened in 1937 when Congress and FDR decided recovery was on the way and spending needed to be checked. Captitalism is cyclical. And when the gears lock up, governments have to grease them with fancy paper to make them churn again.
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Old 08-05-2011   #15
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Originally Posted by Greg Norrell View Post
Steve, I agree we are broke, borrowing 41% of what the govt spends. But unfortunately the economy will suffer from reduced spending. Look at what Hoover's 'belt-tightening' did in 1930-1932. Look what happened in 1937 when Congress and FDR decided recovery was on the way and spending needed to be checked. Captitalism is cyclical. And when the gears lock up, governments have to grease them with fancy paper to make them churn again.

The thing is though, at least for the case of the US, our fancy paper isnt made by the government. Its made by a private business. Bernake and the Fed are basically an outsource company. One that we intrusted with the financial foundation of this country. All we need is 1 big bad wolf to come blow it down. Paper is no stronger then straw or twigs.
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Old 08-05-2011   #16
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The situation is precarious, no doubt. I'd trust Bernanke with his PhD in economics much more than if Congress ran the Fed.
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Old 08-05-2011   #17
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I think the world is going to get a wake up call. To add more fire to the topic. How can you value a company like facebook in the Billions of Dollars? I think all of these valuations, Credit ratings, debt ceilings, bonds etc have gotten out of hand and all need to be corrected. People have been paying a little too much attention to these, at times, outrageous valuations, and looking for the next guinea pig to come along so they can increase its value to unsustainable levels. Did we not learn anything from the first dotcom bubble? what about the real estate bubble? I see another bubble coming.. perhaps we shall call it the sovereign debt bubble?
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Old 08-05-2011   #18
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Gentle reminder: While the US economy is the biggest in the world, it's not the only one either. Meaning, let's not get into US politics, please There is a whole group for that, I believe.
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Old 08-05-2011   #19
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I'm still hoping for a photography bubble. In the meantime, I'm going to avoid politics and get ready for an appt.
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Old 08-05-2011   #20
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Originally Posted by meinster View Post
I think the world is going to get a wake up call. To add more fire to the topic. How can you value a company like facebook in the Billions of Dollars? I think all of these valuations, Credit ratings, debt ceilings, bonds etc have gotten out of hand and all need to be corrected. People have been paying a little too much attention to these, at times, outrageous valuations, and looking for the next guinea pig to come along so they can increase its value to unsustainable levels. Did we not learn anything from the first dotcom bubble? what about the real estate bubble? I see another bubble coming.. perhaps we shall call it the sovereign debt bubble?
Always puzzled me (e.g. Facebook valuation). It reminds me of the NFL. Some players are average but have this mythical upside, hence teams over-pay for them.


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