Calling all economic experts

[turbodog]

Re: The Economy, What's your take

Man, A lot of this is over my head so bear with me.
...

Don't berate yourself. A lot of this is all under your belt instead of over your head. By that I mean that several people here are blowing smoke up your butt.

 

[LightInTheWallet]

According to the CIA World Factbook, China is ranked #1 and the United States is ranked dead last ( using the account balance method ) here is the link CIA - The World Factbook -- Rank Order - Current account balance

 

[LightInTheWallet]

Re: The Economy, What's your take

"Election year" This is an Internationally occurring phenomenon, well documented in the foreign press, the international markets are not wholly confident in the US financial markets now. The reasons can be debated, the severity can be debated, but to say that nothing is happening except for political mindgames seems a little naive IMHO. Are the rate cuts and stimulus packages a reaction to non-existant circumstances?

 

[da.gee]

But politicians would never do anything just for show would they? They have their, er, uh, I mean, our best interests at heart.

Let the imbalances correct themselves. The pressure on China from within will force action and has already. It is not in China's best interest to trash the US economy.

 

[da.gee]

Re: The Economy, What's your take

The stimulus package is a short term "fix" for our heads. Do you think the planned $150 billion is going to turn the economy around? For how long? A week? A month? A quarter? Its real function is to soothe the hearts and minds of the masses. Oh, and it does happen to be an election year.

What about all those NOT eligible for the stimulating? The collective purchasing power of that demographic dwarfs the $150 billion of the stimulus package. Are they being swayed by this giveaway to "save" the economy? Do they even think the economy needs saving?

Who cares if international markets are "not confident" in the US financial markets? Money will chase where the money is. Where is your diversification? Surely you have some international exposure in your portfolio should US markets decline? Somewhere someone is making money. Asian index fund anyone?

Concensus estimates still call for earnings of the S&P 500 companies to RISE by 7.7%. P/E multiple for the S&P 500 has historically been at about 17.7, currently it is trading at 13.7 making valuations quite attractive. Institutional investors have already been buying bargains in oversold sectors. We are closer to the bottom than the middle. The numbers may look unattractive now but think past a couple quarters or even this year.

 

[mdocod]

Re: The Economy, What's your take

The stimulus package looks like a wealth redistribution package to me. I guess I have the wealthy people to thank for this one, THANKS!! lol...

Oh.. and thank you Mother Iris and Father Gov.

 

[LEDninja]

Re: The Economy, What's your take

Some random thoughts caused by this his thread and the other two:
(Calling all economic experts https://www.candlepowerforums.com/threads/170424
Food prices and emergency planning https://www.candlepowerforums.com/threads/187665)

Stock Market:
1) I read an article a long time ago (~12 years) where the researcher discovered the shape of the DOW follows the US birthrate but lags it by 41 years. He decided this is a result of the # of people in their prime earning years investing for retirement. His projections (shifting the birthrate graph 41 years) show the DOW in a steep and fairly protracted decline starting around 2010-2012. I figure this will happen as baby boomers withdraw their savings/investments to fund retirement and there are not enough gen-X investing to make up for the money withdrawn.
2) The Japanese housing market bubble bursting caused their stock market to crash way back in 1990. 17 years later it still has not recovered. Hope it does not happen in the US.

Food:
Read a recent article where there is not just a problem with food prices but famine may actually occur in North America. Reasons?
1) # of farmers are declining. Many current farmers are either leaving the business or retiring with no young 'uns taking their place.
2) A lot of NA farming is possible only due to irrigation but the water table in a lot of states is depleted faster than it can be replaced. Soon the water will run out. No water > no farming > no food. (No water > no farming > no food - this is happening in Darfur and parts of Auatralia though the cause seems to be no rain rather than a depleted water table)
3) NA farming is so mechanized the author considered it a way to turn oil into food. With rising oil prices so will food prices.

China.
The US$ has dropped considerably against most major currencies of the world. As a result imported goods (food and oil for example) has increased dramatically in the US. The US has not felt the full impact of the devaluation of the US$ because China has artificially kept the Yuan down. If China cannot keep the Yuan down the USA will see 100% inflation real fast. Imagine Fenix costing more than Surefire!

Canada.
If the US sneezes Canada catches a cold.

Tough times are ahead and it can be hard for a retiree like me with no way of earning more income.

 

[daveman]

But politicians would never do anything just for show would they? They have their, er, uh, I mean, our best interests at heart.

Let the imbalances correct themselves. The pressure on China from within will force action and has already. It is not in China's best interest to trash the US economy.

Of course not, the Chinese have been saving the Amercian economy from a runaway inflation nightmare the past 8 years. AMERICA OWES CHINA A "THANK YOU," NOT A SCREW YOU.

 

[daveman]

Re: The Economy, What's your take

China.
The US$ has dropped considerably against most major currencies of the world. As a result imported goods (food and oil for example) has increased dramatically in the US. The US has not felt the full impact of the devaluation of the US$ because China has artificially kept the Yuan down. If China cannot keep the Yuan down the USA will see 100% inflation real fast. Imagine Fenix costing more than Surefire!

Somebody gets it right... the U.S. owes China (no pun intended) big time for saving its sorry butt from the inflationary nightmare the American government (Fed) had created.

Honestly, I don't know how the Chinese leadership can take the dog and pony show from the American politicians year in and year out, being used as the scapegoat when it was China that had kept the inflationary sharks at bay for Washington. I would've told Washington to %@#@ off a long time ago...

 

[PEU]

I hope you're addressing WaveParticle, Peu. In case you couldn't tell, my questions and posts in this thread were ALL rhetorical... and thanks for participating bro.

Yes I was


Pablo

 

[js]

Re: The Economy, What's your take

The stimulus package looks like a wealth redistribution package to me. I guess I have the wealthy people to thank for this one, THANKS!! lol...

Oh.. and thank you Mother Iris and Father Gov.

The money isn't coming from wealthy people. It's being created out of thin air.

As for $400B being a "drop in the bucket", that would be true if we were talking about ECONOMIC VALUE, but I was talking about actual $$$ held by foreign entities. And WP tells us that it's actually $1,000B. 1 trillion USD being held in reserve by overseas holders.

They hold the USD because it is (or was) the worlds reserve currency of choice. But if (when) that changes, all those dollars will get dumped.

And that amount of liquidity entering the economy is most definitely NOT a drop in the bucket.

 

[js]

Of course not, the Chinese have been saving the Amercian economy from a runaway inflation nightmare the past 8 years. AMERICA OWES CHINA A "THANK YOU," NOT A SCREW YOU.

+1

 

[WAVE_PARTICLE]

If the Chinese do not recify their self-imposed bubble soon, the eventual burst will be felt around the world. Guess where 80% of your products come from? These products keep prices low....

Anyhow, I'm not about to argue whether or not nations should have influences on the policies of other nations, but I can tell you that nothing good ever comes out of government intervention that interferes with the natural equilibrium of the market. This activity creates massive bubbles and only magnifies the inevitable adjustment that must happen.....will happen.

I fear that the longer China takes to freely float their currency, the harder they will fall. You can bet that they will not be the only casualty. Think about what will happen when a country dumps more than $1 trillion of USD into the market....

WP

 

[MarNav1]

Re: The Economy, What's your take

The money isn't coming from wealthy people. It's being created out of thin air.

As for $400B being a "drop in the bucket", that would be true if we were talking about ECONOMIC VALUE, but I was talking about actual $$$ held by foreign entities. And WP tells us that it's actually $1,000B. 1 trillion USD being held in reserve by overseas holders.

They hold the USD because it is (or was) the worlds reserve currency of choice. But if (when) that changes, all those dollars will get dumped.

And that amount of liquidity entering the economy is most definitely NOT a drop in the bucket.

Oh come on js, what are ya worried about? Just wait till after the election and then invest ma man! It'll all blow over! Then Aunt Hillary or Uncle Obama will save ya! Till then just chill, take a nap, it'll be okay! Oh I forgot, if they don't save ya the Federal Reserve will. New printing presses solve alot of problems!

 

[MarNav1]

If the Chinese do not recify their self-imposed bubble soon, the eventual burst will be felt around the world. Guess where 80% of your products come from? These products keep prices low....

Anyhow, I'm not about to argue whether or not nations should have influences on the policies of other nations, but I can tell you that nothing good ever comes out of government intervention that interferes with the natural equilibrium of the market. This activity creates massive bubbles and only magnifies the inevitable adjustment that must happen.....will happen.

I fear that the longer China takes to freely float their currency, the harder they will fall. You can bet that they will not be the only casualty. Think about what will happen when a country dumps more than $1 trillion of USD into the market....

WP

Seems like 95% of the products anymore and the majority of it isn't the greatest that's for sure.

 

[shakeylegs]

Re: The Economy, What's your take

Somebody gets it right... the U.S. owes China (no pun intended) big time for saving its sorry butt from the inflationary nightmare the American government (Fed) had created.

Honestly, I don't know how the Chinese leadership can take the dog and pony show from the American politicians year in and year out, being used as the scapegoat when it was China that had kept the inflationary sharks at bay for Washington. I would've told Washington to %@#@ off a long time ago...

I imagine the Chinese government has it's own economic tiger by the tail. Having kept the Yuan artificially low during the go-go years, they should face significant and difficult inflationary pressures when they let it float against other currencies. A fenix won't be the only thing more expensive than a surefire. Imagine the new wallyworld, prices right up there with Neiman's.

American and European corporations have been investing their profits (our consumer dollars) in chinese and indian production capacity, ignoring the decaying domestic production infrastructure. We, as consumers, temporarily "benefited" by lower priced, if somewhat cheesy and occasionally toxic consumer goods, at the expense of productive jobs and manufacturing readiness. So when the Yuan re-values, prices of consumer goods should rise world wide. Our burger-flipping service economies can't possibly produce enough jobs to maintain the current (slipping) standard of living.

On the other hand, the Yuan's rise might mark the beginning of a long pendulum-like reversal - poor american and european workers can be put to work in the new chinese and indian built factories. Imagine the world's largest noodle and shark fin soup factory in detroit - "Edsel Noodle and Shark, Inc". Might look good on the back of a bowling shirt.

 

[WAVE_PARTICLE]

Re: The Economy, What's your take

Somebody gets it right... the U.S. owes China (no pun intended) big time for saving its sorry butt from the inflationary nightmare the American government (Fed) had created...

I guarantee you, the Chinese did America no favors. You think artificially holding back inflation from the U.S. (via FX manipulation of the yuan) will last? All it created was a enormous BUBBLE. The day will come when China will be forced to DUMP their USD reserves ($1 trillion worth). China's super-heated growth is not sustainable and they will need to deal with their runaway inflation problem. The day will come when hundreds of billions of USD will flood the market, and it will be a day of reckoning. Remember, China isn't the only one holding massive USD reserves....it's all over the Middle East too (Saudi Arabia)....all currency pegs to the USD. When China's peg decouples, those pegs will decouple too....they will have to....or risk hyperinflation.

Instead of a GRADUAL shift to the new market equilibrium over time, it will be a SUDDEN and FORCEFUL shift to that new equilibrium....all thanks to China and every other government who has tried to "control" and "manipulate" natural market forces.

No favors.....

 

[js]

Re: The Economy, What's your take

I guarantee you, the Chinese did America no favors. You think artificially holding back inflation from the U.S. (via FX manipulation of the yuan) will last? All it created was a enormous BUBBLE. The day will come when China will be forced to DUMP their USD reserves ($1 trillion worth). China's super-heated growth is not sustainable and they will need to deal with their runaway inflation problem. The day will come when hundreds of billions of USD will flood the market, and it will a day of reckoning. Remember, China isn't the only one holding massive USD reserves....it's all over the Middle East too (Saudi Arabia)....all currency pegs to the USD. When China's peg decouples, those pegs will decouple too....they will have to....or risk hyperinflation.

Instead of a GRADUAL shift to the new market equilibrium over time, it will be a SUDDEN and FORCEFUL shift to that new equilibrium....all thanks to China and every other government who has tried to "control" and "manipulate" natural market forces.

No favors.....

It's validating to hear your take on these things, WP, given your obvious expertise and knoweldge in this area.

I'd still love to hear more of the nitty gritty details of FRR and currency creation by the banks, though . . .

 

[js]

If the Chinese do not recify their self-imposed bubble soon, the eventual burst will be felt around the world. Guess where 80% of your products come from? These products keep prices low....

Anyhow, I'm not about to argue whether or not nations should have influences on the policies of other nations, but I can tell you that nothing good ever comes out of government intervention that interferes with the natural equilibrium of the market. This activity creates massive bubbles and only magnifies the inevitable adjustment that must happen.....will happen.

I fear that the longer China takes to freely float their currency, the harder they will fall. You can bet that they will not be the only casualty. Think about what will happen when a country dumps more than $1 trillion of USD into the market....

WP

This is exactly what I have been thinking about. And like you say in the other thread, it won't end with just China. They aren't the only country holding USD in reserve, are they?

 

[da.gee]

I should add to my comment that it is not in the best interests of China to trash the US economy but that may be the result of the forces correcting themselves.