the end is near>? | General financial discussion | Discussion forum

chill-pill indeed! sounds like killarney might need suicide intervention...

killarney forgot to add one thing to his cut-and-pasted analysis... there is no better global alternative to the USA, and there likely won't be a better alternative for many decades to come. people can piss and moan all they want about global ponzi schemes (countries buying eachother's debt), fiat currency allowing value to be created from nothing, etc.. etc.. but at the end of the day, everyone knows that the USA is simply "too big to fail", and every country on the planet with an interest in the USA, whether it's through stock ownership or US government bonds, would never allow the USA to fail, as it would plunge the world into financial armageddon.

In my opinion, none of the developed countries (not just the US) were ever sustainable at their former overly high, decadent standards of living and cost levels. It was just a matter of time until their populations were forced to scale back and reduce their material standard of living significantly.

You can't expect booming economic growth forever, as it demands increasing materialism and consumerism and a growing population. We should have been working toward figuring out how to foster an inflation-free, steady-state economy with flat population level once it became clear the factors that support growth were leveling off. We should have worked toward a land where $1 has the same buying power in twenty years as it does today, and where the same number of people are born as die so that demographics are stable across the age range, instead of greying demographics undermining the sustainability of social programs and health care and pension plans.

I also think that globalization, outsourcing, and automation, which used to destroy only blue collar jobs, but now destroys middle class jobs such as IT, has finally reached a point where a critical mass of people in the USA in both the lower and former middle classes can no longer afford to buy goods because their wages are so depressed, and won't ever be going back to what they were.

The good jobs no longer exist by choice; the North American companies chose to move them overseas to chase the cheapest labour, and we as a species keep choosing to automate everything. The end result of these trends is less and less jobs, especially as technology gets better and self-improving so that less techs are required to maintain each generation of it. There's a chance automation will bring a self-maintaining utopia to us all, but that won't be for a while if it does happen.

This has all been foretold by decades by people looking far ahead at the end result of the automation, outsourcing, and sustainability trends.

If you want to get people back to work immediately, then the companies on US soil need to stop moving their workers overseas. Production needs to return to North America, which should have a VARIED economy of both labour and white collar jobs. Until then, you can kiss goodbye to the late 20th century standard of living, although honestly it wasn't sustainable in the first place anyway. I think it's pretty clear that's we're never going back to how things were.

Get used to living in tiny houses, rooming houses, having no real disposable income, not being able to afford kids, and taking transit or walking (or driving a 20 year old car) to a minimum wage job. Though still employed in a middle class job, I started transitioning to living that way a few years ago when I noticed the unsustainable trends, and am now very glad I got used to living like that by choice instead of being forced into it now like everyone else is. Also glad I paid off all debts (including mortgage) last year so lack of work will be less of a disaster when it happens in the future.

I can assure you that simple living is still highly enjoyable, so it's not all doom and gloom. At this point, there's no going back anyway, so you might as well embrace it and start radically changing your lifestyle and spending habits into something that doesn't require more than a minimum wage job in the first place!

It's not just the US that's going to experience loss. The developing countries are also being shortchanged of their taste of late 20th century standard of living. The best they can expect to get is what we're adjusting down to now. Right now we're all living through a great equalization across the world to a livable but spartan standard of living for *all* people. That's the end result of globalization.

The end of the era of decadence is here, nothing more. It's the beginning of the era of frugality and of a more common standard of living across the globe. Like I said, it's not so bad. You still have family, love, friends, and enjoyment of nature's splendours even if you're living simply. Kicking and screaming about wanting to go back to the good old days is just going to make the transition hurt more than it needs to. Adjust to it, get frugal, develop a strong social network, and you'll be fine.

It gives the illusion of being better informed (and smarter) than average people.

If the statements are facts, then I would argue that those who are aware of the statements are indeed better informed than the average person, but perhaps I give the average person too little credit. The illusion would be if the statements are false.

Being smart would be to admit that the pessimistic predictions could be possible outcomes.

in that case, i say, great to hear that, kilarney. you have a good day.

and knowing the future makes one feel wiser than average people. Being able to predict the future is always an illusion, because the course of history never runs straight.

True. But this is how we all try to make our decisions, by being as informed as possible and trying not to get burned if it doesn't go the way we think it will.

Inflation is currently a big concern with the quantitative easing happening in the US. How much more money can they print before they are no longer able to support their military at its current might? Once the fear of retaliation for dropping the US dollar subsides, then the US dollar could possibly collapse. Until then, there will still be a slow devaluing since the other G20 countries agreed not to compete to devalue their own currencies. How much more steam is there in the US usury-based economy? It's anyones guess, but Peter Schiff has a lot of capital that he's betting on his version of the future (whether it is the same as what he publicly says or not is a different story).

What "fear of retaliation"? Has the US threatened any country planning not to trade in US dollar?

Some would argue that a big reason for attacking Iraq was due to Iraq wanting to trade oil in other currencies, it certainly wasn't because of 9/11 that they attacked. Some would argue that Iran's desire to trade oil in Euros is a bigger reason for the US wanting to attack rather than nuclear proliferation, or Venezuela's desire to do the same rather than freeing the people from the regime that governs them. The US enjoys the position of being the world's reserve currency, and their military might is quite the insurance policy to keep it that way.

The US doesn't have a usury-based economy.

I suppose that my usage of the term "usury" is out-of-date. It used to mean lending money at interest, it now means at "exorbitant interest" as you correctly pointed out. I was trying to use it based on the obsolete meaning of the word. The fractional reserve system allows banks to lend out more money than is deposited in them. In order to keep that type of fiat monetary system intact, economic growth is a requirement in order for the banks to continue to essentially create credit out of thin air. Basically, this is what drives US economic policy since growth is such an essential element to keeping things going and why consumption is so important.

As a saver, I'd think credit contraction would be a good thing.

mike said:

QE, QE2 deflation.

Thus, I see it as deflationary. Less money out there in total.

I am all for deflation and credit contraction, however, QE and QE2 are inflationary by design. The Fed has stated that they want to target a rate of 2% inflation per annum as measured by the Consumer Price Index (CPI).

Currently, the rate of inflation in the US is 1% (again, as measured by CPI), which is below their target rate of 2%, so they want to intervene and cause inflation so that they can meet that target. Thus, Quantitative Easing is inflationary.

Now, the first round of QE is believed to have failed not because it caused deflation, but because it did not inflate enough. However, this is all based on the assumption that CPI is a good measure of inflation.

According to Wikipedia (http://en.wikipedia.org/wiki/Inflation):

Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.

The term "inflation" originally referred to increases in the amount of money in circulation, and some economists still use the word in this way. However, most economists today call an increase in the money supply monetary inflation, to distinguish it from rising prices, which may also for clarity be called 'price inflation'.[12] Economists generally agree that monetary inflation is one of the main causes of price inflation.

I don't know whether CPI understates or overstates inflation, however, due to the housing bubble, and the fact that house prices are not included in the calculation of CPI (only rent is), some believe that CPI currently understates inflation.

Either way, inflation robs savers and rewards debtors. If the market is not interested in buying toxic assets at the values that would keep the banks in business, why should the Fed? The banks made a gamble, they lost, now they expect savers to pay for their losses?

Selby said:

I am old enough to remember the panic of the early 1970's. All the talk was about how we are running out of oil and the eastern bastards could freeze in the dark. 40 years later it still hasn't happened and we now know of more oil that ever before--even if it does cost a lot to get at it.

Doom perception is very easy. Seeing the future is tough.

jeremywong said:

This is called http://abcnews.go.com/Technolo.....038;page=1

I don't know if anyone reads this thread anymore. I haven't seen jeremywong on here for a while and kilarney hasn't replied to his original post. If no one else posts to this thread then I will stop posting to it.

According to this article: http://www.straitstimes.com/Br.....78361.html a ratings agency in China stated:

Washington had already defaulted on its loans by allowing the dollar to weaken against other currencies - eroding the wealth of creditors including China, Mr Guan said.

I think this is in reference to QE2 which "monetizes the debt", even Ben Bernanke cleverly says that while the Fed is not technically printing any money, they are growing the money supply:

"What the purchases do... is... if you think of the Fed's balance sheet, when we buy securities, on the asset side of the balance sheet, we get the Treasury securities, or in the previous episode, mortgage-backed securities. On the liability side of the balance sheet, to balance that, we create reserves in the banking system. Now, what these reserves are is essentially deposits that commercial banks hold with the Fed, so sometimes you hear the Fed is printing money, that's not happening, the amount of cash in circulation is not changing. What's happening is that banks are holding more and more reserves with the Fed. Now the question is what happens the economy starts to grow quickly and it's time to pull back the monetary policy accommodation. There are several tools that we have"

Reference: about 19mins into this video: http://www.c-spanvideo.org/pro.....m/296446-1

Now, in the Keynesian view of economics, this action is supposed to have a stimulative effect because banks are supposed to loan out up to 10 times these newly created reserves (due to Fractional Reserve banking) to stimulate production which results in growth. As the past year has shown, this hasn't happened, because people are skittish about debt and haven't borrowed the amounts allowed to be created from those excess reserves. Growth is key because if production doesn't keep up with the money supply, inflation is the result because there is now more money available but not enough demand for use of that money.

Some people argue that if no one is using the money, then the money doesn't really exist so it shouldn't cause inflation. This would have been true if the Fed didn't create the reserves by purchasing Treasury debt (ie. monetizing the debt).

The original amount of newly created money has already been used to purchase $600+ billion of US Treasury Notes on the open market (Open Market Operations), so the money supply has already grown by $600+ billion dollars. The money supply could grow up to $6 trillion if the banks loaned up to 10 times those reserves out. Productivity has not increased proportionally

This is the reason why credit agencies are downgrading (German agency Feri just did this: ), or contemplating downgrading the rating of US Treasury debt, because the US is basically creating their own money to pay for their own debt while not maintaining the value of their currency by increasing productivity.