DOOM: the markets dead as we know it

[sharkman]

Here's an update for those who may have been concerned about the situation in California

The California Controller says that the state risks a financial meltdown within 50 if they can't fix their 24 billion budget gap. I'm not sure what exactly a financial meltdown is if they are not already in one, but their revenues fell 17% when compared with a year ago, and I guess Obama's stimulus is about as effective here as everywhere else. State revenues derived from income tax fell 39% when compared with a year ago. That's scary.

By the way, it says that this controller is a democrat.

[Bonam]

As long as there are people that need to buy products, and others who can produce those products, the markets will never be dead. Markets have operated for thousands of years, since the dawn of human history, in basically the same way. I don't know how people can be blind to these kind of basic realities that underly our system.

Some who are presently rich or well off may become poor, some industries may fall and others may rise, some stocks may become completely devalued, some companies may go out of business, but as long as there are humans alive there is nothing that can stop the exchange of goods and services and the existence of markets that facilitate that exchange.

Anyway, crisis for some is opportunity for others, and corporations that are able are already positioning themselves to come out of this recession stronger than ever. And if in the process, consumers realize that racking up endless and unmanageable debt is a bad idea, everyone will only be better off for it in the long run.

[sharkman]

We have drifted from the thread topic, which was unrealistic to begin with, of course the markets are never dead. Even in the Depression the markets functioned, albeit at a much smaller, slower rate.

Do you have any thoughts on the California situation? My link outlines some very serious situations.

[geoffrey]

Ultimately, Washington will bail them out and it will all be ok. What's another $20-30b on Obama's cash printing mission?

[sharkman]

He's spent over $50 billion on the car industry alone, somehow I doubt it will take 20-30 for California. Arnie recently suggested they stop issuing welfare cheques. Can you imagine the law suits?

[Oleg Bach]

He's spent over $50 billion on the car industry alone, somehow I doubt it will take 20-30 for California. Arnie recently suggested they stop issuing welfare cheques. Can you imagine the law suits?

What - the rich guys want to steal the wefare cheques from the poor guys ---talk about desperate.....The market will boom again once we evolve into the fact that it is people that are the econonmy - not figures - and not cash - PEOPLE! - if we cheer up and treat each other well there will be no problem - but as long as some think of themselves as entitled gods on earth - while the rest of us are dirt - well there will be no economy - you need the dirt to grow a garden - and you need people to water that dirt...the unwashed are the foundation of wealth.

[sharkman]

My dear Oleg, I suggest you look up a chap by the name of Peter Schiff. He alone predicted the present crisis we are in and he has something to say about where we are going.

Edited June 17, 2009 by sharkman

[ReeferMadness]

The markets aren't dead but maybe they should be. For as long as I've been investing, I've been watching periods of failure to react followed by periods of massive overreaction. If the markets truly reflect the collective intelligence of the participants, we're all too stupid for our species to survive.

I clench my teeth every time I see some airhead on TV talk sagely about how the market instills "discipline" when conservative and speculative investors alike get crushed by some senseless massive swing.

Invest in lottery tickets. The odds are almost as good and at least the proceeds go to good causes.

[ReeferMadness]

My dear Oleg, I suggest you look up a chap by the name of Peter Schiff. He alone predicted the present crisis we are in and he has something to say about where we are going.

Just because he made one lucky call, it doesn't make him a sage. Let's see some of his more extreme predictions come true.

I don't think the market pain is over but I woudn't bet the farm on what he's saying.

Was Peter Schiff Wrong?

[Moonbox]

Just because he made one lucky call, it doesn't make him a sage. Let's see some of his more extreme predictions come true.

I don't think the market pain is over but I woudn't bet the farm on what he's saying.

Was Peter Schiff Wrong?

That was actually an interesting read. Makes him sound like a giant blowhard.

[Pliny]

That was actually an interesting read. Makes him sound like a giant blowhard.

Mish is a giant blowhard.

Peter Schiff has the course pegged. Hyperinflation is what will occur in the States. If I were a conspiracy theorist I would say the powers that be are attempting to collapse the US Dollar in favour of a North American Currency.

Since I am not a conspiracy theorist and believe that all things can be explained more easily by stupidity than by conspiracy, I offer this hypothesis. I think Obama economically has the IQ of an idiot and has a vision of heaven on Earth but has somehow forgotten that work is necessary to the creation of wealth and it can be simply transferred around making everyone happy. Why noone is calling him on it is puzzling but at least I am and I think Sean Hannity, too.

Edited July 4, 2009 by Pliny

[bush_cheney2004]

.... I offer this hypothesis. I think Obama economically has the IQ of an idiot and has a vision of heaven on Earth but has somehow forgotten that work is necessary to the creation of wealth and it can be simply transferred around making everyone happy. Why noone is calling him on it is puzzling but at least I am and I think Sean Hannity, too.

Since IQ has nothing to do with any particulary subject or course of study, I think we can see who the blowhard is.

[Moonbox]

Mish is a giant blowhard.

Peter Schiff has the course pegged. Hyperinflation is what will occur in the States.

Anyone with Economics 101 can see that inflation will be high moving forward. Schiff didn't figure that out by himself. As for Hyperinflation and US currency going to zero, that's a pretty bold claim and I really don't see it happening. I could maybe see EVENTUALLY that the USD gets replaced by another currency as the international standard after a long devaluation, but I can't see it going to zero.

As for the world decoupling from the US economy, clearly that hasn't happened

Edited July 10, 2009 by Moonbox

[Bonam]

The US is FAR, FAR away from the point where it would go into hyperinflation. Not gonna happen any time soon.

[Pliny]

Anyone with Economics 101 can see that inflation will be high moving forward. Schiff didn't figure that out by himself. As for Hyperinflation and US currency going to zero, that's a pretty bold claim and I really don't see it happening. I could maybe see EVENTUALLY that the USD gets replaced by another currency as the international standard after a long devaluation, but I can't see it going to zero.

As for the world decoupling from the US economy, clearly that hasn't happened

There is no other way that Americans will accept a common North American currency, if indeed that is the plan. We'll see.

You know, you would think that Americans being so proud of their currency would not allow it to be devalued so much over the past century. It has gone from being 100% backed by gold to a mere token- less than that actually, as long as the Federal government has a debt.

Value? Will it approach zero? Well, you do agree inflation will be high - I am just saying it will be higher than you think.

[Pliny]

The US is FAR, FAR away from the point where it would go into hyperinflation. Not gonna happen any time soon.

One more year, two max. China and the rest of the world don't want any more US dollars and don't want to buy it's debt, when they refuse to buy anymore something has gotta give. It means a big change with a lot of adjustment. We'll see if it is in the form of hyperinflation or not.

[bush_cheney2004]

....You know, you would think that Americans being so proud of their currency would not allow it to be devalued so much over the past century. It has gone from being 100% backed by gold to a mere token- less than that actually, as long as the Federal government has a debt.

When the US dollar / reserve notes were backed by precious metals it was still very volatile. As you know, a weak dollar has advantages (e.g. US exports). Americans are not so enamoured with their dollar so much as its status as the preferred currency from drug dealers to petro dollars. Dollar valuations are relative to the things that really matter, not any love affair with the physical currency. That's all it is....currency.

Inflation yes...hyperinflation....not very likely.

[geoffrey]

I agree that outright hyperinflation is unlikely.

However, there will be a large adjustment to the average American's standard of living with the dramatic increases in taxation and the rising cost of foreign produced and commodity based goods over the next decade.

[Pliny]

When the US dollar / reserve notes were backed by precious metals it was still very volatile.

Only due to fractional reserve banking practices. Otherwise a dollar always bought it's weight in gold or silver as promised.

As you know, a weak dollar has advantages (e.g. US exports). Americans are not so enamoured with their dollar so much as its status as the preferred currency from drug dealers to petro dollars. Dollar valuations are relative to the things that really matter, not any love affair with the physical currency. That's all it is....currency.

Today the dollar doesn't fulfill the definition of a "currency". It is a token or an electronic entry on a balance sheet.

Inflation yes...hyperinflation....not very likely.

Ok. Time will tell.

[Pliny]

I agree that outright hyperinflation is unlikely.

Perhaps. But the giant ponzi scheme must end.

However, there will be a large adjustment to the average American's standard of living with the dramatic increases in taxation and the rising cost of foreign produced and commodity based goods over the next decade.

Yes, I agree. Government won't be able to pretend to create wealth anymore. The people will realize it is they who create it. Probably a good thing.

[Pliny]

Anyone with Economics 101 can see that inflation will be high moving forward. Schiff didn't figure that out by himself. As for Hyperinflation and US currency going to zero, that's a pretty bold claim and I really don't see it happening. I could maybe see EVENTUALLY that the USD gets replaced by another currency as the international standard after a long devaluation, but I can't see it going to zero.

I'm with Voltaire on the subject of paper currencies.

As for the world decoupling from the US economy, clearly that hasn't happened

Never will. The Americans haven't completely forgotten how to create wealth unlike the people of the European social democracies who demand it as a right.