Posted on 01/12/2009 10:10:30 AM PST by randita
Why were people still buying real estate, even after the market started to turn south?
In the case of the bond market — it could be a case of “the greater fool” theory in action. IOW, it's just the latest Ponzi scheme. The test will come soon enough. Obama wants to borrow & spend $1 trillion for “economic stimulus” & he's been talking about trillion dollar deficits for years to come. If China (for one) ever stops buying U.S. Treasuries — what do you suppose will happen to the value of the U.S. dollar?
“there is little the federal government can do other than house and feed homeless and hungry Americans”
Where n the constitution does the government get the right to house and feed anyone.
Eliminate all welfare!
How do wages in Zimbabwe compare with the inflation rate?
It is a strange dichotomy where it is in the Chinese best interest to keep lending the USA money in order to sell their goods here. It is like a drug dealer extending credit to an addict in order that he be able to buy more drugs. The question is not one of IF we will overdose, but when.
The Chinese are quietly building their reserves of gold, as are oil rich arab countries. This massive Ponzi scheme will end badly and sooner, rather than later I fear. Global trade can only occur when their is trust in currency and in the counterparties ability to pay. The trust is rapidly disappearing in both areas, and the freezing of global trade may well be the catalyst that sets everything in motion.
We could be approaching a global depression, and with the advent of technology and computers, it may engulf us at a speed most can’t comprehend. Depression at the speed of the internet, rather than the slow motion 30’s style. That is what truly frightens me.
Who is this clown? Is this jist some dufus making a opersonal rant?
“bond purchasers tend to be saavy folks”
Yes they are, and I hope you are right. On the other hand, I am wondering if a lot of them actually do think there is a substantial risk of future inflation yet are buying bonds now anyway because they appear to be the least harmful alternative.
Not sure about wages, but they just started issuing their first 50 BILLION dollar notes. If you live in Zimbabwe, even the poor are billionaires now.
Inflation is not caused by a “spiral.” That metaphor was always just a dodge, so the government could blame others for inflation. I remember magazine ads in the mid-70s (under Ford) showing a worker, a housewife, and a storekeeper as PIGS, with copy saying, “We all need to be a little less piggy.”
“If China (for one) ever stops buying U.S. Treasuries — what do you suppose will happen to the value of the U.S. dollar?”
It will collapse, and Chinese products will suddenly be far more expensive for US consumers, and the Chinese economy will tank. China knows that, so they won’t stop buying our bonds unless they are forced to. In fact, right now they are pushing in the opposite direction, doubling down on their weak yuan policies. I expect that, instead of cutting bond purchases outright, China will likely try to prod us constructively into more responsible fiscal policies by making threats to do so.
I remember back in the late 1970's, whoever it was that did the Jimmy Carter impersonations on SNL had him saying "Inflation is your friend. Eventually, with inflation, everyone will be a millionaire".
“bond purchasers tend to be saavy folks”
Would they be the same folks who were smart enough to create CDO’s, MBS’s and other financial instruments which created this crisis? Would the ybe the same Wall ST, Wharton School grads who decided it was kosher to invent no doc, no money down ARM’s and give them out like candy to illegal immigrants and the unemployed? If they are the same folks, I would say they are making the same mistakes all over again.
“What happens when the Chinese/Japanese, etc stop buying US bonds? That is the crux of the question. On the one hand they have incentive to prop up the USD as they already hold so much US debt. On the other hand, the maxim ‘throwing good money after bad’ comes to mind.”
on the topic of debt, Donald Trump said something like: If I owe you a millions dollars I have a problem, if I owe you 100 million dollars, YOU have a problem. If the US goes bankrupt the Chinese will lose TRILLIONS. As much as they hate us they dont want that to happen.
Yep! What’s the first thing people stop paying when they are in a survival mode, credit cards.
bfl.
and BTW China has already talked about pulling out of US debt.
Hmm, maybe more screaming would be dramatic enough...
Where in the Constitution does it say the government can yank money out of my earnings?
Like I said, “how long will they continue to subsidize our debt addiction?” Our economy is cratering and thus demand for their goods is drying up. The articles of factory closings and riots in China are much more common and growing. They will only continue to extend credit as long as it is in their best interest to do so. As our economy collapses, they may decide soon that is no longer the case. We will soon know as the US Gov’t is about to embark on a bond issuance orgy the likes of which the world has never seen. How their will be enough aggregate demand to purchase all those bonds is beyond me, but we will know within six months to one year the result.
They'll take their vengeance in other ways, such as military adventures in Africa and Asia that we can no longer afford to counter.
Take a sip of brandy before this one ..............
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