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#1
03-04-2005, 07:29 PM
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U.S. economic collapse looming for 2005?
From the 2004 Idaho Observer
Maybe the optimists of the forum can tell me why I don't need to be worried. 
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#3
03-04-2005, 08:32 PM
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Re: U.S. economic collapse looming for 2005?
The title of your link says it all. It's 2005, where the hell have you been? You people really are an amazing lot. From the article:
[ QUOTE ] Their only short-term goal has been to keep the U.S. economy strong enough to assure re-election for George Bush in November. Washington reports are that Bush made a deal to re-appoint Greenspan on the promise Greenspan would keep the economy growing until the elections. [/ QUOTE ] Clinton reappointed him as well. The Greenspan critics never cease to amaze me either. The Fed's primary goal is to provide price stability and towards that end, Greenspans record is stellar and he's been around since 1987. Why wouldn't Greenspan want the economy to grow after the election? BTW Greenspan will have to step down in 2006. [ QUOTE ] They have done this by a combination of historic low interest rates, rates only seen before in times of war or depression, and by stimulating the economy by record budget deficit spending and issuing government bonds to finance it. The world has been flooded with cheap dollars as a result. [/ QUOTE ] Lower short term interest rates are in the realm of Greenspan and the Fed utilizes short term rates to effect the money supply which is part of the following equation: the quantity of money (M) times the velocity of circulation (V) equals the price level (P) times output (y), MV=Py. In order to maintain price stability the Fed must use the money supply to offset changes in the velocity of money (demand for money more or less) and output (consumption). The budget deficit and government bonds are in the realm of Congress and the President. I read the rest of the article and it's filled with a lot of shall we see disinformation. Two semi-government agencies, the Federal National Mortgage Association (known as FannieMae) and the Government National Mortgage Association (or GinnieMae) buy up the banks' mortgage contracts, taking the risk from the local banks. Wrong the securitization of loans has resulted in a market for what's referred to as Mortgage Backed Securities (MBS) that is bigger than the market for U.S. Treausrys. The people who own the bonds are the ones accepting the risks inherent with them. Personally I have a lot more confidence in the bond ratings of MBS than I do of corporates. He left out Freddy Mac and these aren't the only entities involved with mortgage securitizations. I've made a ton of money trading the stocks of those companies that do. The American family is highly indebted, not just for their home. The Federal Reserve data show a total U.S. debt level now above $35 trillion, or some $ 450,000 for a typical family of four. Average consumer debt for credit cards, autos and such is at record highs. Car makers continue to offer car loans, with loans for up to six or even seven years. Many Americans owe more on their car than it is worth. Personal debt is high but it's offset by home equity and retirement savings for a lot of folks. Ever since raising rates, Greenspan has calmed nervous markets by stating that future rises will be ever so gradual This is wrong. The Fed has adopted a policy of transparency and the "measured pace" of the Fed was intended to give plenty of warning to those involved in the "carry trade" (borrow short-lend long) which was particularly profitable in 2002-2003 to unwind their positions. Higher interest rates threaten to explode the $3 trillion dollar home mortgage debt bubble, where home values are estimated to be at least 20% overvalued nationally. Real estate markets tend to be non ubiquitous. It's a local phenomona. Because homes are overpriced in Key West Florida (not sure if they are but they are high) doesn't mean homes are overpriced in Cleveland, Ohio let's say. Individual markets have their own characteristics. When private bond investors such as major pension funds and banks lose confidence in Greenspan's inflation commitment, the only other source of support for low interest rates would be the willingness of Japan and China above all, to pour billions more of their dollars into buying U.S. bonds. The largest buyers of U.S. government debt have been the central banks of the Asia-Pacific. The central banks of Japan and China alone hold more than $1 trillion of U.S. Treasury bonds as foreign currency reserves. And why would that be? It's called currency intervention. That is a major reason the U.S. stock and other markets have been falling steadily in recent weeks. The U.S. debt bubble depends on maintaining the myth of a U.S. recovery to lure foreign capital to invest, helping keep the dollar from collapsing. Should foreign pension funds of the central banks of China and Japan be convinced the U.S. recovery is in danger, there could be a major shift of funds out of dollars. My goodness the stock market was down over a two week period. It's called normal volatility. [ QUOTE ] In the 12-month period from April, 2003 to April, 2004, the Bank of Japan spent a record $200 billion to buy U.S. dollar bonds or, in effect, to finance the cost of Bush's Iraq war. The Banks of China, South Korea and Taiwan have spent nearly as much on dollar bonds as the Japanese. They did this for clear reasons: Their currencies are linked to the dollar, and were the dollar to fall against the Yen or the Yuan, Asian exports would suffer a decline, endangering their economic growth and leading to explosive rises in unemployment across Asia. By recycling their trade dollar surplus into buying U.S. Treasury debt, they argue they are looking after their own needs. Should a dollar crisis in early 2005 occur, a global financial crisis would likely follow. [/ QUOTE ] And this is exactly why they'll keep buying them. They have major problems without the U.S. consummer. In normalized terms the budget deficit isn't even close to a record.
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#7
03-05-2005, 09:37 AM
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Re: U.S. economic collapse looming for 2005?
Dow just broke 11000 ..jobs report was great...inflation is non existant.
Oil is about to jump alot... Im not seeing an impending collapse. Real estate is pretty due for a dip though.
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#8
03-07-2005, 03:24 AM
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Re: U.S. economic collapse looming for 2005?
"You people" is a poor choice of words and regrettable. Pulling up 2004 articles where the doom and gloom predictions of the authors has been shown to be basically wrong as well as containing disinformation seems to be an excercise in stupidity. But then you have Harry Reid calling Greenspan a political hack so to a certain extent people do follow the example of their leaders in blind stupidity. Heard Nancy Pelosi basically echo the same thing today. Do the Democrats actually have an ideas besides raising taxes and redistributing income?
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#10
03-07-2005, 03:38 AM
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Re: U.S. economic collapse looming for 2005?
[ QUOTE ]
What's wrong with raising taxes and redistributing income? I support both. That's why I'm a Democrat. [/ QUOTE ] Finally a democrat who admits what he is. This is refreshing. Please talk to your masters about changing the name of the party to Socialist Workers Party. This will go a long way towards truth in advertising ... Also regarding: [ QUOTE ] What's wrong with raising taxes and redistributing income? [/ QUOTE ] Apparently you need to study harder in those econ classes you're taking ... natedogg
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