Gloomy predictions for the economic future

[Michael Hardner]

People love to demonize speculators but they serve a critical role in a financial system by providing liquidity. It everyone was a 'buy and hold' investor then the chances if there being someone wanting to buy when you want to sell would be much smaller. This would reduce the returns on investing. Obviously it would be nice if we could get the benefits of speculators without the downside but I don't think that is possible.

It seems to me that at a certain point such speculation is more like gambling than investment. Tell me more, though.

[TimG]

It seems to me that at a certain point such speculation is more like gambling than investment.

It is gambling but it gambling that serves a useful purpose. The last thing we would want is a financial system with no speculators.

[Michael Hardner]

It is gambling but it gambling that serves a useful purpose. The last thing we would want is a financial system with no speculators.

I understand the need for it, but aren't there more downsides at the extreme end ?

[Pliny]

I understand the need for it, but aren't there more downsides at the extreme end ?

As I explained on another thread, Michael it will serve it's purpose and only surpasses that when easy money and easy credit will sustain it beyond any necessary price corrections which is it's purpose in the economy. Basically, it is one of the factors regulating supply and demand.

Edited June 7, 2011 by Pliny

[Oleg Bach]

They should have an ancient jubalie and forgive everyone for every debt world wide...and start fresh...it might topple the filthy and useless rich though...but if they are so smart they would recover - or would they? Depressions arise out of human emotional depression - The more doom and gloom provided by the media will inflict more poverty. Happy people are prosperous always. Besides no one really has any real money anyway. Take for instance a muli-billion dollar merger - no money changes hands just a few nice letters back and forth, sent by some slick lawyers.

[Oleg Bach]

Just like my old wife - she predicts the worst...and lives the worst. One must use the power of firm blief to alter the future for the better - we will be fine - if we believe - Better to live in a fools paradise than in a self declared hell.

[sharkman]

That's what the people thought about firm belief and positive thinking when the recession of '81 hit. 19-20% interest rates on those renewing their mortgages, credit card interest rates going through the roof, etc. A lot of good people went bankrupt. We need good advice so we can be prepared for the good or bad. During that recession my folks could have gone bankrupt if they had bought a nicer home than they did in '78. As it was, mom took a job and they threw everything at the mortgage that they could before renewal, and they paid it off a year or two after renewal.

Obama's full of positive thinking, speaking of 'headwinds to the economy' and such while his country sees millions of unemployed lose their homes and employers still not hiring much after 2 years. I heard that 1 in 6 Americans is living on food stamps.

[bloodyminded]

I heard that 1 in 6 Americans is living on food stamps.

I'm not stating outright that you're wrong, but that sounds dubiously high.

[Pliny]

I'm not stating outright that you're wrong, but that sounds dubiously high.

At 14% that is pretty close to 1 in 6. It is certainly heading quickly towards that.

Number of Americans on Food stamps

[bush_cheney2004]

At 14% that is pretty close to 1 in 6. It is certainly heading quickly towards that.

Number of Americans on Food stamps

If you look at bar chart, one can see that many millions of Americans (10% ?) have routinely used the program on average for several decades. I remember them being used extensively during the early 1970's as a supermarket cashier. There are additional programs for mothers/parents with infants and young children (i.e. USDA WIC).

Many more people actually qualify for such programs but do not enroll because there is still a stigma associated with being "on the dole".

[GostHacked]

I'm not stating outright that you're wrong, but that sounds dubiously high.

http://blogs.wsj.com/economics/2010/11/04/some-14-of-us-uses-food-stamps/

At 14% it`s more like 1 out of 7. This was in 2010.

[GostHacked]

http://www.cnn.com/2011/WORLD/europe/06/20/greece.debt/index.html?hpt=hp_t2

I expect more like this to happen to other countries getting bailed out by the EU.

Athens, Greece (CNN) -- Greece is preparing to sell off billions of dollars worth of state assets including airports, highways and state-owned companies, as well as banks, real estate and gaming licenses, to meet international lenders' demands that it raise funds.

European finance ministers said Sunday that they were on track to give Greece a second huge bailout to keep the government afloat, but reiterated that Athens had to take tough measures to get it.

Greece has to raise 50 billion euros ($71 billion) through privatization by 2015, Eurogroup members said.

It also has to push through tough budget-cutting measures, they said, despite widespread protests in the country that forced a government reshuffle last week.

Prime Minister George Papandreou faces a vote of confidence in his new ministers this week as his party clings onto a wafer-thin majority in parliament.

Meanwhile, the country's economic crisis raises concerns for Europe's currency, the euro. A default on its debts by Greece, or other struggling nations such as Portugal or Ireland, could adversely affect the world economy.

The question is, since it seems like Greece does not have the money to pay off the bail out debts, who are the ones going to buy these items and assets? Austerity has come to Greece.

The people have been taking to the streets and it has not been pretty.

No worries, the economy is ok, everything is fine, go back to whatever it was you were doing.

[Pliny]

If you look at bar chart, one can see that many millions of Americans (10% ?) have routinely used the program on average for several decades. I remember them being used extensively during the early 1970's as a supermarket cashier. There are additional programs for mothers/parents with infants and young children (i.e. USDA WIC).

Many more people actually qualify for such programs but do not enroll because there is still a stigma associated with being "on the dole".

The bar chart I posted shows it had never reached above 10% until 2010.

Sadly, the real number is probably 1 in 6 due to that stigma besides those that would prefer to rely on family and/or friends.

[Pliny]

http://www.cnn.com/2011/WORLD/europe/06/20/greece.debt/index.html?hpt=hp_t2

I expect more like this to happen to other countries getting bailed out by the EU.

The question is, since it seems like Greece does not have the money to pay off the bail out debts, who are the ones going to buy these items and assets? Austerity has come to Greece.

The people have been taking to the streets and it has not been pretty.

No worries, the economy is ok, everything is fine, go back to whatever it was you were doing.

It would be nice if someone, in the wake of this type of news, could tell me why the Euro is showing so strong against the USD???

[bush_cheney2004]

The bar chart I posted shows it had never reached above 10% until 2010.

That's OK...the point was that there has always been a substantial number of Americans using such federal and state programs.

Sadly, the real number is probably 1 in 6 due to that stigma besides those that would prefer to rely on family and/or friends.

Why is it "sad"? Such programs are just part of the entitlement/welfare state. Clearly few Americans are starving to death.

[dre]

The main cause of the recession was the burst of the real estate bubble. The real estate bubble was caused by federal government policies along with irresponsibility in the private sector.

As for high oil prices, they are caused by worldwide increasing demand, only slowly growing supply, and instability in some of the nations that produce and export oil.

As for globalization, it has acted to slow salary growth among workers in industrialized economies by thrusting them into competition with workers in developing nations who can work for a much lower price.

Pacific rim nations and oil producing nations that have huge trade surpluses with the US were sitting on mountains of US dollars, and many of them had extremely high personal savings rates. Trillions and trillions of dollars of this money was dumped back into the US housing market. Pension funds, and hedge funded world wide were purchasing mortgage backed securities through massive clearing houses on wallstreet.

Suddenly it wasnt just American families bidding up the housing market anymore... it was fund managers world wide. There was so much demand for mortgage backed securities that origionating even very risky mortages became very profitable, and this risky loans were then bundled with solid mortgages in increasingly complexed asset backed securities.

The problem with placing much blame on the government is that almost none of the big players that origionated sub prime mortgages were subject to any of these policies. The often talked about CRA only applies to banks that accept FDIC deposits. Almost all of the risky players were pretty much completely unregulated. The "fanny and freddy" rants fall apart pretty fast too if you actually follow the money... Those institutions were securitizing less and less mortgages prior to the bubble finally bursting. That leaves the Fed which does bear SOME blame. Its possible that if they had started raising interest rates near the end of 2003 when it was starting to become obvious to anyone with a brain what was going to eventually happen that they could have cooled the market down even with the gigantic rushing river of capital flowing into the US from abroad... and it wasnt super bright for Greenspan to go on TV and tell Americans to get ARMS with teaser rates either

[Pliny]

Why is it "sad"? Such programs are just part of the entitlement/welfare state.

Sad because some who have proudly never had to rely on the entitlement/welfare state find themselves in that position.

Clearly few Americans are starving to death.

True! The various levels of government are the ones starving - for revenues.

[bush_cheney2004]

Sad because some who have proudly never had to rely on the entitlement/welfare state find themselves in that position.

OK....but it's no "sadder" than getting "pogey" in Canada, which is readily accepted...no...demanded!

True! The various levels of government are the ones starving - for revenues.

There is no revenue problem...the problem is spending.

[GostHacked]

There is no revenue problem...the problem is spending.

There is a problem with spending. So where would you cut the spending?

[Pliny]

OK....but it's no "sadder" than getting "pogey" in Canada, which is readily accepted...no...demanded!

Now that is sad.

There is no revenue problem...the problem is spending.

Welll...I'll be hornswaggled...someone is trying to tell me they have a problem with revenues and need to raise taxes on the rich. Those fork-tongued devils.

[Pliny]

There is a problem with spending. So where would you cut the spending?

I watched a democrat on TV who was asked that question wiggle around for five minutes and wound up not naming one program he would make cuts to.

Basically, he said, "There are lots of places we can make cuts to."

The interviewer said, "Ok can you name me one place, a program you would cut?"

Politician:"Sure there are lots of places we can make cuts to."

Interviewer:"Can you name me one?"

Politician: "Well, there is lots of waste in medicare."

Interviewer: "So you would make cuts to medicare?"

Politician: "No. I didn't say that."

Interviewer: "Well, name me one program you would make cuts to then."

Politician: "I have already said that there is a lot of waste in Medicare....

Interviewer: "Yes. Yes. But name a program you would cut?"

Politician: "If we just eliminate waste...

Interviewer: "Alright... thank you very much."

If you have a talent for not answering questions in a thousand words or more you too could be a politician.

[Oleg Bach]

If you tell a child he is going to have a wonderful life - it increases the chances of happiness and prosperity by 98% - IF you shovel doom and gloom down the throats of the public - you project and paint a dismal future....what's wrong with our economists....don't they know that no one wants to pay or employ a gloomy person - let alone even have them arround - These economic predictions are akin to cutting your own throat.

[Moonlight Graham]

So when all this hits the fan is the bottom going to drop out of the market? What should investors be doing to protect themselves? Bonds could be problematic with the likelihood of interest rate heights...

Buy guns and gasoline.

[Pliny]

So when all this hits the fan is the bottom going to drop out of the market? What should investors be doing to protect themselves? Bonds could be problematic with the likelihood of interest rate heights...

Let me guess - you don't own any "bonds".

[Oleg Bach]

All is well _ anytime we give into an economic or metal depression the rats prosper...don't let them convince you to be more poor...because it seems anything a recession or depression is forcast...some one out their gets richer.. Why is that?