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Bernanke Stumped by Representative Ron Paul
Scott Reamer Sep 20, 2007 3:57 pm
In today's testimony before the house, Fed Chairman Bernanke was questioned by Representative Ron Paul in what was a remarkable exchange.
In today’s testimony before the house, Fed Chairman Bernanke was questioned by Representative Ron Paul in what was a remarkable exchange. Remarkable for how straightforward, lucid, and anti-statist the question was. In his questioning, Ron Paul stated:
“I want to follow up on the discussion about moral hazard. I think we have a very narrow understanding about what moral hazard really is. Because I think moral hazard begins at the very moment that we create artificially low interest rates which we constantly do. And this is the reason people make mistakes. It isn’t because human nature causes us to make all these mistakes, but there is a normal reaction when interest rates are low that there will be overinvestment and malinvestment, excessive debt, and then there are consequences from this. My question is going to be around the subject of how can it ever be morally justifiable to deliberately depreciate the value of our currency?”
His statements continued (about how much oil, gold, wheat, corn, etc. has gone up since the rate decrease) but the heart of his question was the following moral question: ...consciously depreciating the value of the USD has winners and losers (Wall Street/banks/the rich and everyone else), Mr. Bernanke. How do you constantly choose Wall Street over the rest of America?
You will not be surprised to know that B-52 Ben didn’t answer the question. He couldn’t answer the question (at least truthfully). Was he going to say that the Federal Reserve is a quasi-private institution whose prime directive is to cartelize and protect the profits of the banking industry? Was he going to say that the only policy the Fed knows is based on the flawed Keynesian logic that wealth can be created out of thin air via printing presses? Of course not.
But his non-answer is not germane. The element that Ron Paul introduced is: the morality of the Federal Reserve’s constant injection of credit into the system at the slightest hint of macroeconomic distress. And I mean slightest: we haven’t even seen a GDP print below 0. We were only down 4.2% from the ALL TIME high in the Dow (the Fed’s own research suggests that the stock market is the best leading indicator of the economy).
Back in July of 2006, I wrote a piece introducing this moral element into the discussion of the Federal Reserve’s monetary policies. I wrote then words that today, after a pre-emptive, forestalling 50 basis points decrease and more than $1 trillion in worldwide central bank injections of credit, are as germane as ever:
“A constant loss of value in the monetary unit forces all manner of dire consequences on economic actors: it favors consumption over saving, speculation over investment, capital over labor, and the young over the old; it prevents accurate economic calculation about the future and thus clouds investment horizons; it hollows out a country's middle class making for more class conflict between haves and have nots… there are grave time preference consequences as well that impact not only long term investment projects (as noted above) but also the very manner in which parents raise their children and how children care for their ageing parents, as well as the lessons of frugality and hard work that once were the bedrock of this nation.”
Bravo to Ron Paul for giving voice to the hundreds of millions or pensioners, savers, working stiffs, poor, fixed income beneficiaries, laborers, gasoline-, bread-, milk-, and egg-buyers who weren’t able to ask Mr. Bernanke why he – like every Fed chairman before him since 1913 – screwed them for the benefit of the top 5% of the population of this country.
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 Gold Customer
Joined: 11/13/2004
Posts: 102
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Thanks for posting that Big Block. It is a small glimpse into America's version of the book, The Road to Serfdom by Hayek.
soc
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Registered User
Joined: 1/28/2005
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BigBlock
You play the game most others in your position do.
You criticize and criticize and criticize but you offer
no alternative.
Please tell us were there is fairness and equality.
No wealth and no poverty. Everyone has a fair
and equal existence.
There are no boom/bust cycles. Just a nice flat
and steady existence. A system that is lucid
and straightforward and has fundamental equality
and fairness.
If you are lazy or ambitious it does not matter.
If you are intelligent or not so smart it does not matter.
There will always be a level playing field. There will
always be fairness and equality.
I guess if we are truly at the brink of disaster. We have
only one hope. We must elect Ron Paul as our president.
(Since he is such a deep and lucid thinker)
Thanks
diceman
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Registered User
Joined: 9/14/2007
Posts: 38
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Dear diceman, I am not sure what game you refer to, but I don't do a lot of playing. Not sure what you imply by my position either.
For future references make sure to leave me out of the discussion and concentrate on the topic. I am not the topic here, neither did I write what was in the topic.
Also as far as I can read noone mentions anything that points to fairness and equality on a no wealth no poverty or equal existence. You must have thought that one out on your own ah!
The regards is to an out of control inflation (fabricated by the nonsense printing of M3 to keep pushing the markets up to demented levels), which by the way your government tells you in your face it isn't happening. Sure take gasoline, and energy out of the way and is not that bad - kidding right??
In Italy there was a national strike as a protest to a 20% increase in their pasta.
Mexico has national protest to an outrage increase in price of their tortillas.
Gasoline is over 200% what was just about 5 yrs ago, not to mentione petroleum base products. And your utilities have increased at an outrage pace.
No inflation??
The solution is a free market, a real free market. As of late (few years), the manipulation of the markets makes them far from free.
In a real free market there are bust/boom cycles, and there are poors and rich folks. What there isn't is fake manipulations and solutions, that indeed are making an already existing problem worse.
In a free market the one who works hard, and intelligently gets compensated in return at a proportional rate. So if you are lazy or ambitious, or smart or not sure matters.
What doesnt' happen is what is happening now, all that you work for your assets, your fortune, your real estate, and everything else is depreciating because of the exponential production of M3. Yes the rich is being hit too, but no that it matters to a person with $20,000,000. So what now he/she is worth $19,000,000 - big deal ah!
Apply the same to the poor, and you have very different results when you cannot fill you car tank with gasoline or buy diapers for the little one, or perhaps even buy groceries to feed your family.
The middle class is eroding as a consequense too.
You cannot make an economy which is losing its industrial power and becoming more and more service oriented grow at the same rate. It is just not going to happen. Pumping more and more M3 is not a solution.
And you well know the results on basic materials as Oil, wheat,etc, not too mention housing, health care and on and on.
I like to resume as I posted on a previous post:
The current crisis is a result of the Fed allowing money supply to grow, post 2001, at a faster rate than the increase in national income (output). This has a fourfold effect:
Inflation. Prices rise as more money chases the same quantity of goods.
Savings decline. Investors receive less interest and their capital is eroded by inflation.
Asset prices rise. Investors buy real assets as a hedge against inflation — and in anticipation of price increases due to inflation.
Debt rises. Cheap money attracts new borrowers who compete to buy the now scarce real assets, further forcing up prices (as in the current real estate bubble).
Unfortunately expectations of further price increases soon become entrenched. There is no self-moderating mechanism in the market to bring rates and assets back to a happy equilibrium. In fact, the opposite is true. Expectations of price increases become self-reinforcing, attracting further speculators to the market and driving up prices faster and faster. As any stock market chartist, economist or biologist will tell you: no self-reinforcing cycle can last. The market has to collapse when it runs out of new speculators to attract or when existing speculators attempt to cash in their paper profits. Like a giant Ponzi scheme, it can only end in tears
About electing Ron Paul as a president I am not sure what to say, but I can certainly say that anyone would be a deeper, lucier, and better thinker than the nuckle head that is there now.
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Registered User
Joined: 9/14/2007
Posts: 38
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I like to add something to the topic,which many of you are probably aware of, but what the heck - just in case.
As the cost basis points are shaven off the scale and so is the value of our currency; the buying power of consumers decreases.
Go and travel to Europe now - your currency is worth a lot less - heck they just say today that the value of the american dollar has matched the value of the canadian dollar.
Guess what? The value of your market indexes in correlation to the value of your currency (since the markets operate in american dollars)are not nearly where they are telling you they are. Meaning that your profits are deterirating before you even see them. In fact the currency correlated value of the Dow per example currently is about 12,600 or around there. Not the 13,700 you see in your screen. That is a fabricated lie to make you think everything is honky dory.
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Registered User
Joined: 10/7/2004
Posts: 319
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There was a Chemistry professor in a large university that had some
Foreign Exchange students in his class. One day while the class was in
the lab the Prof noticed one young man (exchange student) who kept
rubbing his back and stretching as if his back hurt.
The professor asked the young man what was the matter. The student told
him he had a bullet lodged in his back. He had been shot while fighting
communists in his native country, who were trying to overthrow his
country's government and install a new communist government.
In the midst of his story he looked at the professor and asked a strange
question. He asked, "Do you know how to catch wild pigs?"
The professor thought it was a joke and asked for the punch line. The
young man said this was no joke.
"You catch wild pigs by finding a suitable place in the woods and
putting corn on the ground. The pigs find it and begin to come everyday
to eat the free corn. When they are used to coming every day, you put a
fence down one side of the place where they are used to coming. When
they get used to the fence, they begin to eat the corn again and you put
up another side of the fence. They get used to that and start to eat
again. You continue until you have all four sides of the fence up, with
a gate in the last side. The pigs, who are used to the free corn, start
to come through the gate to eat. When you see that they all are
peacefully eating the free corn, you slam the gate shut on them and
catch the whole herd.
"Suddenly the wild pigs have lost their freedom. They run around and
around inside the fence, but they are caught. Soon they go back to
eating the free corn. They are so used to it that they have forgotten
how to forage in the woods for themselves, so they accept their captivity."
The young man then told the professor that is exactly what he sees
happening to America . The government keeps pushing us toward
communism/socialism and keeps spreading the free corn out in the form of
programs such as supplemental income, tax credit for unearned income,
tobacco subsidies, dairy subsidies, payments not to plant crops (CRP),
welfare, medicine, and campaign promises for "free" health care and income distribution etc. While we continually lose our freedoms,
just a little at a time.
One should always remember "There is no such thing as a Free Lunch!"
Also, "You can never hire someone to provide a service for you cheaper
than you can do it yourself."
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Thank you survivor.
At least someone understands what has value.
Thanks
diceman
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Registered User
Joined: 6/6/2005
Posts: 1,157
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Excellent post, Survivor. Thanks.
BigBlock, I have to wonder...is it really possible to remove the connection between poster and post? Psychologically, I can understand the difference between the two. One is a live, complex human being, the other is a group of words and thoughts either typed out or cut and pasted that may or may not represent the emotions and feelings of the person who placed them there. But certainly there is at least a slight connection between the two. Given that I am a strong proponent of free speech, it is agreed that all viewpoints are not just tolerated, but welcome, but the person posting those thoughts/views cannot, in my opinion, be removed completely from that discussion.
The greater question, in my opinion, is why would he want to be?
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Exactly davidjohnhall.
I responded to BigBlock as if these were his thoughts.
(even though he didn't write it)
I expect when someone posts something that they are at
least in partial agreement.
Unless they state:" I don't agree with this but it might be interesting
for those who do".
(Are we supposed to believe it is just a random collection
of letters)
I consider the first post quite dumb. Somewhat in the class warfare
political mode, extremely biased also dishonest. It reminds me of the type of economic dribble posted by rmr1976 from : "The world will end as
we know it" websites over a year ago.
(we can see how useful that information was)
Thanks
diceman
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Registered User
Joined: 4/18/2005
Posts: 4,090
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"The government keeps pushing us toward
communism/socialism and keeps spreading the free corn out in the form of
programs such as supplemental income, tax credit for unearned income,
tobacco subsidies, dairy subsidies, payments not to plant crops (CRP),
welfare, medicine, and campaign promises for "free" health care and income distribution etc. While we continually lose our freedoms,
just a little at a time."
I find it irritating that that the big bad guy is alwayse "comunisim". Some of the above are not necessarially bad things. While I don't suport comunism at all SOME socialism is a good thing (the rest of the world sees the two as seperate entities). And I think it is fair to say that under this administration there is not a fear of any thing of the sort coming to us.
The result of zero socalized programs is IMO an Economic Serrengheti not for the corportation and business but for the individual, the sick, weak, elderly swept up and consumed by the strong powerful, and hungry. Most americans see only capitalism and comunism but there are other forms of government in which the two can fit into. Oligarchy for example actually resembes the directions we are heading much more than communism. An Oligarchy is a government in which the power, privliage, and wealth are in the hands of a select few (while not being necessarily a monarchy), this may include voting rights, governmental support, controll of the recources or what ever.
The Greeks who we herald as laying the foundations of "western" society and pioneering democracy had a very unfair democracy for the general populas at large.... in short it was an Oligarchical Democracy.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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Scott
Imagine a hitchhiker. A driver sees the hitchhiker
and decides to pick him up. The driver has a good
heart. Good intent. He wants to help someone in-need.
Imagine A): The driver takes the hiker were he is going, is thanked, and drops him off.
Imagine B): The hiker has bad intent. He takes control of the car. Hits the driver over the head
and steals his wallet and his car.
---------------------------------------------------------------------
The problem with your scenarios is you control
them. (they are between your ears) You imagine
the equivalent of A). In the real world B) can happen.
Whenever this type of debate starts. Those who
believe in A). Think the driver (who does
not stop) is selfish, cold hearted, mean spirited.
The truth is he may have the same sentiments.
He is just too afraid of B).
Thanks
diceman
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Registered User
Joined: 9/25/2007
Posts: 1,506
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An interesting article on the subject ...
Satyajit Das is laughing. It appears I have said something very funny, but I have no idea what it was. My only clue is that the laugh sounds somewhat pitying.
One of the world's leading experts on credit derivatives, Das is the author of a 4,200-page reference work on the subject, among a half-dozen other tomes. As a developer and marketer of the exotic instruments himself over the past 30 years, he seemed like the ideal industry insider to help us get to the bottom of the recent debt crunch -- and I expected him to defend and explain the practice.
I started by asking the Calcutta-born Australian whether the credit crisis was in what Americans would call the "third inning." This was pretty amusing, it seemed, judging from the laughter. So I tried again. "Second inning?" More laughter. "First?"
Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before a game destined to go into extra innings. And it won't end well for the global economy.
Das is pretty droll for a math whiz, but his message is dead serious. He thinks we're on the verge of a bear market of epic proportions.
The cause: Massive levels of debt underlying the world economy system are about to unwind in a profound and persistent way.
He's not sure if it will play out like the 13-year decline of 90% in Japan from 1990 to 2003 that followed the bursting of a credit bubble there, or like the 15-year flat spot in the U.S. market from 1960 to 1975. But either way, he foresees hard times as an optimistic era of too much liquidity, too much leverage and too much financial engineering slowly and inevitably deflates.
Like an ex-mobster turning state's witness, Das has turned his back on his old pals in the derivatives biz to warn anyone who will listen -- mostly banks and hedge funds that pay him consulting fees -- that the jig is up.
Rather than joining the crowd that blames the mess on American slobs who took on more mortgage debt than they could afford and have endangered the world by stiffing lenders, he points a finger at three parties: regulators who stood by as U.S. banks developed ingenious but dangerous ways of shifting trillions of dollars of credit risk off their balance sheets and into the hands of unsophisticated foreign investors; hedge and pension fund managers who gorged on high-yield debt instruments they didn't understand; and financial engineers who built towers of "securitized" debt with math models that were fundamentally flawed.
Investors are abuzz over the Fed’s interest-rate decision, but the Federal Reserve can’t fix everything, cautions MSN Money’s Jim Jubak. Lower interest rates alone won’t boost confidence in the debt market.
"Defaulting middle-class U.S. homeowners are blamed, but they are merely a pawn in the game," he says. "Those loans were invented so that hedge funds would have high-yield debt to buy."
The liquidity factory
Das' view sounds cynical, but it makes sense if you stop thinking about mortgages as a way for people to finance houses and think about them instead as a way for lenders to generate cash flow and create collateral during an era of a flat interest-rate curve.Although subprime U.S. loans seem like small change in the context of the multitrillion-dollar debt market, it turns out these high-yield instruments were an important part of the machine that Das calls the global "liquidity factory." Just like a small amount of gasoline can power an entire truck given the right combination of spark plugs, pistons and transmission, subprime loans became the fuel that underlays derivative securities many, many times their size.
Here's how it worked: In olden days, like 10 years ago, banks wrote and funded their own loans. In the new game, Das points out, banks "originate" loans, "warehouse" them on their balance sheet for a brief time, then "distribute" them to investors by packaging them into derivatives called collateralized debt obligations, or CDOs, and similar instruments. In this scheme, banks don't need to tie up as much capital, so they can put more money out on loan.
The more loans that were sold, the more they could use as collateral for more loans, so credit standards were lowered to get more paper out the door -- a task that was accelerated in recent years via fly-by-night brokers now accused of predatory lending practices.
Buyers of these credit risks in CDO form were insurance companies, pension funds and hedge-fund managers from Bonn to Beijing. Because money was readily available at low interest rates in Japan and the United States, these managers leveraged up their bets by buying the CDOs with borrowed funds.
Talk back: Do you think a bear market is just around the corner?
So if you follow the bouncing ball, borrowed money bought borrowed money. And then because they had the blessing of credit-ratings agencies relying on mathematical models suggesting that they would rarely default, these CDOs were in turn used as collateral to do more borrowing.
In this way, Das points out, credit risk moved from banks, where it was regulated and observable, to places where it was less regulated and difficult to identify.
Turning $1 into $20
The liquidity factory was self-perpetuating and seemingly unstoppable. As assets bought with borrowed money rose in value, players could borrow more money against them, and it thus seemed logical to borrow even more to increase returns. Bankers figured out how to strip money out of existing assets to do so, much as a homeowner might strip equity from his house to buy another house.
These triple-borrowed assets were then in turn increasingly used as collateral for commercial paper -- the short-term borrowings of banks and corporations -- which was purchased by supposedly low-risk money market funds.
According to Das' figures, up to 53% of the $2.2 trillion commercial paper in the U.S. market is now asset-backed, with about 50% of that in mortgages.
When you add it all up, according to Das' research, a single dollar of "real" capital supports $20 to $30 of loans. This spiral of borrowing on an increasingly thin base of real assets, writ large and in nearly infinite variety, ultimately created a world in which derivatives outstanding earlier this year stood at $485 trillion -- or eight times total global gross domestic product of $60 trillion.
Without a central governmental authority keeping tabs on these cross-border flows and ensuring a standard of record-keeping and quality, investors increasingly didn't know what they were buying or what any given security was really worth.
A painful unwinding
Now here is where the U.S. mortgage holder shows up again. As subprime loan default rates doubled, in contravention of what the models forecast, the CDOs those mortgages backed began to collapse. Because they were so hard to value, banks and funds started looking at all CDOs and other paper backed by mortgages with suspicion, and refused to accept them as collateral for the sort of short-term borrowing that underpins today's money markets.
Through late last month, according to Das, as much as $300 billion in leveraged finance loans had been "orphaned," which means that they can't be sold off or used as collateral.
Investors are abuzz over the Fed’s interest-rate decision, but the Federal Reserve can’t fix everything, cautions MSN Money’s Jim Jubak. Lower interest rates alone won’t boost confidence in the debt market.
One of the wonders of leverage is that it amplifies losses on the way down just as it amplifies gains on the way up. The more an asset that is bought with borrowed money falls in value, the more you have to sell other stuff to fulfill the loan-to-value covenants. It's a vicious cycle. In this context, banks' objective was to prevent customers from selling their derivates at a discount because they would then have to mark down the value of all the other assets in the debt chain, an event that would lead to the need to make margin calls on customers already thin on cash.
Now it may seem hard to believe, but much of the past few years' advance in the stock market was underwritten by CDO-type instruments which go under the heading of "structured finance." I'm talking about private-equity takeovers, leveraged buyouts and corporate stock buybacks -- the works.
So to the extent that the structured finance market is coming undone, not only will those pillars of strength for equities be knocked away, but many recent deals that were predicated on the easy availability of money will likely also go bust, Das says.
That is why he considers the current market volatility much more profound than a simple "correction" in prices. He sees it as a gigantic liquidity bubble unwinding -- a process that can take a long, long time.
While you might think that the U.S. Federal Reserve can help prevent disaster by lowering interest rates dramatically, as they did Wednesday, the evidence is not at all clear.
The problem, after all, is not the amount of money in the system but the fact that buyers are in the process of rejecting the entire new risk-transfer model and its associated leverage and counterparty risks.
Lower rates will not help that. "At best," Das says, "they help smooth the transition."
The fine print
Das notes that Japan in the 1990s lowered interest rates to zero and the country still suffered through a prolonged recession. His timetable for the start of the next serious phase of the unwinding is later this year or early 2008. . . . Das' most readable book for laypeople is "Traders, Guns & Money," an amusing exposé of high finance, published last year. Das occasionally writes a blog at his publisher's Web site. Also available are a boxed set of his reference books on derivatives and his book specifically on CDOs. . . .
Perhaps the oddest line on the subject by a world leader was uttered by Luiz Inacio Lula da Silva, the president of Brazil. Asked if he was worried about the effects of the credit crunch in his country, he dismissively called it "an eminently American crisis" caused by people trying to make a lot of "third-class money." . . . CDOs were first widely used back in the late 1980s by Drexel Burnham Lambert junk-bond king Michael Milken to sell off damaged and previously unsellable debt in a way that was more palatable to customers.
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Registered User
Joined: 9/14/2007
Posts: 38
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Very interesting article realitycheck. I kind of thought the conversation was getting a littl off tangent when pointing to "Hitchhikers???".
Do you really think that the lowering of interest rates by the feds will really smooth out the transition off this mess?
Also is to notice that the current national strike of GM workers may be the last drop of water going in before the ship starts to sink.
As I already was aware, and the article mentions the lower rates in Japan didn't help the recession in yrs.
How do you think that the lowering of rates in the US will impact the current situation?
I have my own aswers to those questions, the only reason why I ask is to get different point of views.
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Registered User
Joined: 9/25/2007
Posts: 1,506
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Well ...
I'm just a dumb ol' country boy ... but I have been around the dance floor a few times ...
Through the '90s ... I heard all of the B/S about a "new paradigm" ... how this time was going to different ...
As people told me about the "new economy" and the "old economy" ... I tried to explain to them that there is ONLY one economy ...
People who build computers ... ship them in cardboard boxes ...
People who make cardboard boxes ... use computers in their business ...
One economy ... One engine ...
No one should worry about the NASDAQ at 5000+ ... becaue it represented the "new economy" ... ROFL ...
This country has been on a 30 - 35 year economic cycle since the beginning of the industrial revolution ...
It has always culminated in about 10 years of "boom-time" ...
The first time we called it the "Gay '90s" ...
The second ... the "Roaring 20s" ...
Then ... the "Post War Boom" ...
And lastly ... the "Dot Com Revolution" ...
You can call it "Bacon & Eggs" if you like ... doesn't change what it is ... the end of the cycle ...
The first and third of these "boom-times" were fueled ... I believe ... by vast productivity increases ...
But the second and fourth were fueled by credit ...
During the second (1920s), you could go 10X on margin ...
Now ... you have have to find new and innovative ways to gain the same amount of leverage ... as SEC rules no longer allow direct margining of this magnitude ...
As long as the procedes form the leverage is reinvested ... it is a self-fulfilling phophecy ... and the bubble grows bigger ...
How do think the lowering of rates will affect the US ?
Much like it has before ...
The FOMC will lower rates in an attempt to interfere with the free market system ... i.e. provide a "soft landing" ... and when inflation rears it's ugly head ... they will be caught with their pants down around their ankles ...
The last time we saw the loonie trading par with the dollar was '76 ... and it coincided with a huge rally in precious metals ... and thus ... a rally in the currencies of resource-based economies ...
But ... what followed ? I remember prime going to 21% ...
Mortgage rates at 18% ...
Car loans at 24% ...
But ... I'm sure that that can't happen again ... cause this is a "new paradigm" ...
The US has already seen the best days that it likely will ever see ...
From here ... the standard of living will continue to decline ... and this will be caused a little by the reduction in wages ... but mostly by the inflation of commodities that those wages must be used to procure ...
There is 1.5 billion consumers rapidly moving from the third world to the mainstream ... competing for the same finite set of resources ...
Well ... I'm rambling on ... sorry ...
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Registered User
Joined: 9/14/2007
Posts: 38
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Well said realitycheck. I wish more commentary from country boys like yourself would show up around here. Lets keep it alive.
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Registered User
Joined: 12/21/2004
Posts: 902
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actually the "gay 90s" coincided with a depression... just sayin'
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Registered User
Joined: 9/25/2007
Posts: 1,506
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QUOTE (hohandy) actually the "gay 90s" coincided with a depression... just sayin'
hohandy ...
You are correct that it coincided with an agricultural depression in the southeastern US ...
And it was also a time of great disparity between the "haves" and the "have nots" ...
But ...
It was also a time of unprecedented economic expansion ... particularly in the more industrialized northeast ...
It was a time when we saw an explosion of immigration from poorer countries seeking the promise of a better life in this country ...
It was a time when we first saw alternating current coming into commonplace use ... and all of the productivity gains associated with that ...
But ... back to the matter at hand ...
What really scares me the most right now ...
Is that I hear all of these fed governors, ex fed governors, and "experts" telling us all how inflation is a "dead beast" ... that they have it all figured out ... and it just won't ever be a problem again ...
Horse-Hockey !!
They might X-out volitile food and energy costs in their short term readings ... but if the rises are persistent, they will be factored into to virtually every manufactured item and service within 18-24 months ... and that's inflation ...
Everyone laughed at Boone Pickens back in January ... with oil at $44/brl ... when he said that fundamentals supported $80/brl oil by the end of the summer ...
Hear anybody laughing now ??
Now he's saying that we might see $100/brl by the end of the year ... who knows ...
Also ... there are so many products/commodities that we import ... from places other than those who have locked their parity rates to the dollar ...
As the dollar declines against free floating currencies ... we will be effectively "importing inflation" ...
What the "experts" can't figure out right now is pretty hilarious to me ...
They can't seem to understand why the subprime debacle hasn't caused a larger unemployment problem ...
Well ... duh !!
If they ever climbed out of their ivory towers and actually visited job sites ... they would notice that a huge number of folks building houses ... don't exactly speaka the English very well ...
And these folks don't file for unemployment ...
I dunno ... I don't have all the answers ...
But ... I don't think the folks at the FOMC do either ...
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QUOTE (realitycheck) QUOTE (hohandy) actually the "gay 90s" coincided with a depression... just sayin' hohandy ... You are correct that it coincided with an agricultural depression in the southeastern US ... And it was also a time of great disparity between the "haves" and the "have nots" ... But ... It was also a time of unprecedented economic expansion ... particularly in the more industrialized northeast ... It was a time when we saw an explosion of immigration from poorer countries seeking the promise of a better life in this country ... It was a time when we first saw alternating current coming into commonplace use ... and all of the productivity gains associated with that ... But ... back to the matter at hand ...
Sorry Realitycheck - with all due respect I'm not going to let this go.
your musings don't really have much weight if you are going to re-write history.
Just a snippet from Wikipedia:
"The Panic of 1893 was a serious decline in the economy of the United States that began in 1893 and was precipitated in part by a run on the gold supply. The Panic was the worst economic crisis to hit the nation in its history to that point.
Causes
People attempted to redeem silver notes for gold; ultimately the statutory limit for the minimum amount of gold in federal reserves was reached and U.S. Notes could no longer be successfully redeemed for gold. The investments during the time of the Panic were heavily financed through bond issues with high interest payments. The National Cordage Company (the most actively traded stock at the time) went into receivership as a result of its bankers calling their loans in response to rumors regarding the NCC's financial distress.
A series of bank failures followed, and the price of silver fell. The Northern Pacific Railway, the Union Pacific Railroad and the Atchison, Topeka & Santa Fe Railroad all failed. This was followed by the bankruptcy of many other companies; in total over 15,000 companies and 500 banks failed (many in the west). About 20%-25% of the workforce was unemployed at the Panic's peak."
etc...
Pardon me, but "a serious decline in the economy of the United States" that was "the worst economic crisis to hit the nation in its history to that point" in which "20%-25% of the workforce was unemployed" is a bit more than being blithely dismissed as "an agricultural depression in the southweastern United States" while going on to claim that it was a time of "unprecedented econimic expansion".
Up until 1930 or so, it was called "The Great Depression", and only replaced in name because an even greater one came along.
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Wikipedia?? isn't that the one made of free content, that has been claimed to be the cause of so many students failures and misconceptions. Heck I can go there and write down my own interpretation of facts - no questions asked.
One thing is clear the mention of "gay 90's" by realitycheck had no strong reference to the topic. It was mentioned more as example.
The strong reference was the economic cycling boom. That is what you should be concern with - not the little remark of "gay 90's"
Anyways do you think that the economy is all honky dory, and that the market is a reflection of such?
How do you think this will resolve?
That is what we are after in this topic - not the gay 90's.
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QUOTE (lBigBlock) Wikipedia?? isn't that the one made of free content, that has been claimed to be the cause of so many students failures and misconceptions. Heck I can go there and write down my own interpretation of facts - no questions asked.
BigBlock - for some reason I just knew that you would come back with such an empty and arrogant and ignorant response. If you can't dispute the facts belittle and discredit the source. How intelligent of you. Are you going to deny that the Crash of 1893 and the Great Depression of the 1890s didn't exist? Would you rather me gather some relevant quotes from a more reputable economic history of the United States?
Here's a quote from An Empire of Wealth - the Epic History of American Economic Power by John Steele Gordon:
"Because the United States was a highly industrialized nation by the 1890s, the depression that began in 1893 brought unparalleled economic suffering to the American population."
Shall I go on?
David O. Whitten of Auburn University (The Depression of 1893)writes: "The Depression of 1893 can be seen as a watershed event in American history. It was accompanied by violent strikes, the climax of the Populist and free silver political crusades, the creation of a new political balance, the continuing transformation of the country's economy, major changes in national policy, and far-reaching social and intellectual developments. Business contraction shaped the decade that ushered out the nineteenth century."
According to the Encyclopedia of American History "before 1893 had ended, 491 banks and over 15000 commercial institutions were reported to have failed. Before the turning point was reached in 1897, almost one third of the total railroad mileage was in the hands of receivers."
Do you you really know nothing of Coxey's Army and the circumstances behind William Jennings Bryan's famous "Cross of Gold" speech during the 1896 Presidential campaign?
It's amazing how some get all excited and hold such strong opinions and endlessly pontificate about economic conditions yet demonstrate the barest acquaintance with actual facts. It takes a lot of gall -and makes a very weak argument - to dismiss someone based solely upon redicule of the source they use.
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hohandy, again
"Anyways do you think that the economy is all honky dory, and that the market is a reflection of such?
How do you think this will resolve?"
Stick to the topic, specifics events that took place 2 centuries ago is not the topic here.
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This is a great thread. You dont get many economics threads on this site but when Diceman, Hohandy and Bigblock start posting the writings get interesting.
I can't remember who wrote it but there was or is a historian who has found that democracies in history only tend to last a few hundred years. After that they have tended to fail usually due to moral or economic decline caused by forces from within. Also, and importantly, he talked about the capacity of democracies to vote themselves all kinds of benefits without being willing to pay for them. If someone knows the name of this guy, help me out.
Anyway, I think objectively if you look at the US you have to admit we are a failing economic power and will likely be a failing military one as well in the next 50 years or so. How long can an economy thrive if it outstources its best manufacturing jobs, has become the largest debtor nation, and has a government that has endemic corruption?
Two examples come to mind: Medicare pays out benefits far greater in value than people have paid in taxes. Yet any attempt to cut it and politically its a non-starter for the lucky elderly who are now hogging all the dollars and their congressional friends who want to get reelected. A new perscription drug benefit is enacted and could easily cost trillions of $ and yet there is no funding mechanism to pay for it. The money will just magically show up I suppose. Point three for good measure is current war in Iraq - all borrowed money and likely to cost a trillion or more before its said and done. Are any of these signs of a government that you would want to hire or would have faith in to run your country? My guess is that historians will point to these and other current events as indications of societal failures prior to more future problems. It will be interesting when the baby boomers retire in large numbers and realize their is no money in the bank to pay for the empty promises made to them.
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QUOTE (lBigBlock) hohandy, again
"Anyways do you think that the economy is all honky dory, and that the market is a reflection of such?
How do you think this will resolve?"
Stick to the topic, specifics events that took place 2 centuries ago is not the topic here.
Bigblock - I'm not the one offering revisionist and faulty history and then expecting others to give credence to my thoughts and opinions. I offered a simple correction to what Realitycheck stated, and he persisted in offering wrong information. I'm not the one who brought it up - but I won't sit by silently and watch people misstate or misrepresent actual "facts" (as opposed to opinions) without making sure that the record is corrected or at least addressed. I don't have to have to offer an opinion as to where the economy is going in order to dispute or point out when wrongful facts are stated in support of opinions. As a working economist I do have opinions on the matter, but a chat board discussion based on "common sense" that quickly devolves into immigrant and FED-bashing isn't the place for it, even though you seem to really enjoy it.
Obviously you have a problem with that - rather than question the accuracy of what I've posted in contrary to your friend Realitycheck's assertion, you first redicule the source that I cited and then lecture me that what I've said has no place here. 2 superfluous posts by you for no reason other than to exhibit your contempt - and then you have the BALLS to tell me what I can and cannot post?
Who the died and put you in charge of what gets posted here? You need a serious case of "get over yourself" dude.
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It appears a little odd that realitycheck just signed up as a registered user only days ago, and already he has become the Ed McMahon to bigblock's Jonny Carson.
I cannot speak in depth on the current topic of microeconomics for my knowledge in this area is not up to parr. However I can say that I have frequented many forums like this one over the years and there has always been predictions of doom, and the feds ability, or lack of ability to keep us out of inflation.
And yet the general direction of the stock market always seem to be going up.
bigblock, you seem to expect us to trust your sources that you cut from one article or another and then you remove yourself from and accountability for its contents, and now you have your alter ego - (realitycheck) to come and help you fight your battles.
My little neice once had an imaginary friend. 
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Well ... I certainly wasn't looking to start a pissing contest ...
And I said "southeastern US" ... not "southwestern" ...
And Apsll is quite correct ... the general direction is always up ... even if sometimes it takes a few decades ... or maybe more ... to get your money back ...
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You are a funny man RC, but my time frame for trading is much shorter than that.
As I have stated above, years ago the same brand of gospel that your self and bigblock have been warning about has never come to fruition.
You both have a right to discuss your opinions here, but yes lets try to keep the contents of you arguments in the bladder where it belongs..
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That's really all we're talking about here Apsll ... opinions ... and I did offer mine ... but only after being asked ...
The article that I posted may have been a prognostication ... but ... it's not mine ...
I don't let my trading be influenced by opinions ... not mine or anyone else's ...
I learned two valuable lessons early in my trading career ... and they have both served me well over the last 25 years ...
1. The market is brilliant ... I am stupid .... and the farther I get away from this ... the poorer that I get ...
2. If you spend your life betting on the end of the world ... there may come ONE day when you are right ... and you will be wrong ALL of the rest ... and IF the day comes that you are right ... it will no longer matter ....
Also ... I don't delude myself with thinking that the market has anything at all to do with "fundamentals" ....
It is all about money flows ... and those flows are driven almost entirely by two very basic emotions ... greed & fear ...
Price charts are merely graphical representations of that "struggle of the herd" as they attempt to resolve the imbalances between those emotions ...
With that said ... I also believe that the market tells you everything that you need to know ... before it is crucial for you to know it ...
Not just once ... but many times ... in a variety of different ways ...
Yet ... it has no tolerance for the obstinate ...
Last week I did greatly trim my Asian investments ... not because I haven't really enjoyed the meteoric rise ... but simply because I don't see it as being sustainable ... even with double digit growth rates ... although I continue to view it as the most fruitful place for investment over the next quarter of a century ...
Making money is only half of the equation ... holding on to it is the other half ...
Also ... I'm more than a bit concerned over the persistent lack of volume in the US markets in this recent rebound ... and I may be addressing them in a likewise fashion early in the week ...
As far as my "opinion" on inflation goes ... let me say that it is only my opinion and I am not a "working economist" .... and this quote below is also not from a "working economist" ... as a matter of fact ... this is just from an old retired guy who writes books in his bathtub ...
“We’re at a turning point,” he said. “My successors will not have it as easy as my colleagues and I did. I’m reasonably certain that the post-Soviet change was a one-shot force, and we seem to have gotten to the maximum point of disinflation and are now on the other side of it. Inflationary pressures are likely to start to rise, although it’s still very early.”
In my business, I have seen metals prices double and sometimes triple over the last 18 months ... but ... on the other hand I have seen job applicants asking for "starting" wages significantly below what they wanted just a couple of years ago ... and these have offset one another ...
Will domestic corporations continue to be able to absorb rising costs out of thier margins ... and if so ... for how long ?
Will labor rates fall to offset ? I've seen it in my business ... with very highly skilled employees ... but it doesn't look that way in the national numbers ...
Like I've said before ... I don't have all of the answers ... not sure that I have any of them ...
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My first impressions of you were that Bigblock had gone out and cloned himself. I see know that I have miss-read you. You are as wise as Bigblock and yet tempered.
I am in agreement with your statement that "everything that you need to know is in the charts". Also that we need to follow the money. I have some Templates that I designed for that very purpose.
Following microeconomics and paying attention to fundamentals is too much work for me. I have my own ways of gauging the health of the Markets and finding good stocks when the markets are trending. I am a short term to intermediate term trader, (Purely Technical chart and indicator analysis). Since the beginning of this Bull market that started in 2003 I have found great success and I am always building onto my knowledge level with the help of a whole bunch of smart and generous folks that post on this forum.
I hope that it will be a nice addition.
Apsll.
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correction, I hope that you will be a nice addition.
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QUOTE (jcfla7)
I can't remember who wrote it but there was or is a historian who has found that democracies in history only tend to last a few hundred years. After that they have tended to fail usually due to moral or economic decline caused by forces from within. Also, and importantly, he talked about the capacity of democracies to vote themselves all kinds of benefits without being willing to pay for them. If someone knows the name of this guy, help me out.
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years. These nations have progressed through this sequence: 'From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage.'"
Lord Woodhouselee, Alexander Fraser Tytler
QUOTE (jcfla7)
Anyway, I think objectively if you look at the US you have to admit we are a failing economic power and will likely be a failing military one as well in the next 50 years or so. How long can an economy thrive if it outstources its best manufacturing jobs, has become the largest debtor nation, and has a government that has endemic corruption?
Two examples come to mind: Medicare pays out benefits far greater in value than people have paid in taxes. Yet any attempt to cut it and politically its a non-starter for the lucky elderly who are now hogging all the dollars and their congressional friends who want to get reelected. A new perscription drug benefit is enacted and could easily cost trillions of $ and yet there is no funding mechanism to pay for it. The money will just magically show up I suppose. Point three for good measure is current war in Iraq - all borrowed money and likely to cost a trillion or more before its said and done. Are any of these signs of a government that you would want to hire or would have faith in to run your country? My guess is that historians will point to these and other current events as indications of societal failures prior to more future problems. It will be interesting when the baby boomers retire in large numbers and realize their is no money in the bank to pay for the empty promises made to them.
Yep ...
The Social Security program will undoubtedly degenerate from an "entitlement" to just another welfare program ... just as we have seen happen in the Medicare drug benefit ... which is phased out based on income ... eventually ... the entire program will be ...
It may even get "interesting" long before everyone thinks ...
You see ... everyone knows that the program will currently be insolvent given current parameters by around 2041 ...
But ... what most don't realize ... is that it will begin experiencing a negative cash flow around 2017 ... maybe 2018 ...
What I'm referring to is the point at which the payroll tax is exceeded by the benefit outlay ...
At that point ... the SSA will begin to demand payment from the Treasury for all of those IOUs ...
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Reality - thanks for finding that quote. The guy who wrote it really had a grasp of things.
Let me add a couple items that are on point here. There is a big misconception among most people I meet that there is a trust fund for social security. Not sure about medicare but I suspect the 'trust fund' for that is just as empty. The social security 'trust fund' is really just a bunch of government IOUs sitting in a file cabinet that represent a claim but nothing more. The real excess funds that are being generated every year by social security taxes are spent every year by the government on current spending. That is why the social security system will go negative far earlier than 2041. As soon as the baby boomers start retiring in numbers (maybe 10 years from now) social security won't have the worker to retiree ratios to support them.
Just heard this on an investment program today. Not sure its true but have no reason to doubt it. If the government was forced to account for the total current value of its future promises (just as companies are required to do) by way of pensions, medicare, social security and others than the real budget defecit would actually be over a trillion dollars. I think about the trillion dollar figure and it makes me realize no politician who wanted to get elected or reelected would be willing to talk about it.
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Well ...
There is technically a trust fund ... but think of it like a bank ... you deposit your money ... and they loan your money out to buy homes ... fund business ventures, etc.
You get the benefit of interest on your money ...
Just because your money isn't sitting in a brown paper bag in the corner of the vault doesn't mean that it isn't "on deposit" at the bank ...
But you're right in that it is mostly a numbers game ... rather than segregated funds operating independently from the US Treasury ...
When Social Security was implemented in the middle 1930s ... we had already seen average lifespan in the US grow from the low 40s around the turn of the century ... to about 63 years of age by the time the program was started ...
When it began ... the payroll tax rate was 1/2% ... that's 1/2% from the employee ... and 1/2% from the employer ...
So ... let's reflect on that ...
Assuming no growth ... it takes 100 years for just 1 year of income to be paid in for the benefit of each worker ...
But ... with a "full benefit" age of 65 ... the "average person" wasn't going to live to see any of it anyway ... right ?
It was both short-sighted and foolish for them to believe that the trend in life expectancy would not continue ...
Today the rate is over 12 times that at 6.2% ... and has a Medicare tax riding on top of that ... at 1.45%
Although many would argue that it is higher ... for the sake of our illustration let's just assume that today's lifespan number stands at about 80 years of age ...
The average person will draw out of the system ... everything that they paid in ... everything that their employer(s) paid in on their behalf ... and the earnings on all those deposits ... in the first 4-5 years that they draw full benefit ...
So ... let's say that a person retiring today at 65.5 will draw out everything in their "account" by around age 70 ...
That leaves them on essentially "welfare" for the next 10 years ... or around 12.5% of their life ...
Right now ... there is a big move in Congress to sharply raise the cigarette tax ... arguing that it would help to offset healtcare related costs associated with smoking ... and thereby offer an incentive to quit ... while supplementing disadvantaged children's healthcare ...
Well ... let's say that they are successful ... and everybody quits ...
Right now ... some of those smoking related healhcare costs are shouldered by the govt ... but a heck of a lot of it is covered by private insurance ...
But those people who quit smoking ... will live much longer ... and be on SS much longer ... and ALL of that cost will be shouldered by the govt ...
The people who work in the tobacco industry will draw unemployment ... and ALL of that cost will be on the govt ...
Look at these numbers ....
Around 1900 ... the population of the US stood at about 75 million ...
By 1950 ... it had doubled to around 150 million ...
And today ... a little over half a century later ... it has doubled again and stands at over 300 million ...
This country experiences about ...
1 new birth every 7 seconds ...
1 death every 13 seconds ...
1 additional international immigrant every 13 seconds ...
Which gives us a population net increase of 1 additional person about every 11 seconds ...
Population growth is a good thing if they're working in the system their entire life and helping to fund all of this stuff ... i.e. putting in more than they're taking out ... and you don't mind them walking around exhaling and farting and adding to our greenhouse gas problem ...
And ... I think that all of us realize that at some point ... all of the illegals in this country will be granted citizenship ... with all of the "entitlements" that go with that ...
But ... the vast majority of these folks will "shortcut" the system ...
Rather than working and paying into the system for 50 years before they get benefits like the rest of us ... their average will be less than 20 years ... for a far greater time than it takes the system to go bust ...
And with all of that said ... it is still very likely be Medicare and the sharply rising healthcare costs that threaten the system the most ...
General Motors won a huge vistory the other day by getting out from under the burden of delivering healthcare into perpetuity through a defined benefit program ...
The only solution that I see ... that would suit our "From each acoording to his abilities ... to each according to his needs" government ... is to move Social Security to a "need based" program ... and increase the payroll tax ... and remove the cap from it ...
And at that point ... they may as well just get rid of it ... and build it into the income tax rate ... and call it what it is ... welfare ...
And all the while ... life expectancy is likely to continue it's upward climb ...
This thing is a train wreck from so many different directions it just isn't funny ....
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one of the fallicies of the doom and gloom argument that dwells on changes in life expectency since the 1930s is that, while, yes, there has been an increase in longevity of those who reach 65, a great deal of the change in life expectency, which the argument completely ignores, is based upon positive change in the infant mortality rate. In 1935 56 children out of every 1000 under the age of 1 died. In 2005 that number was 6.4. That means, all other things being equal (which of course they aren't), there were 50 more people for every 1000 in the population that actually lived to working age to contribute to the employment base than there were in 1935 when the model was devised. But of course the simplistic and dramatic criticisms cherry-pick the gloom and doom and don't consider the entire picture or what statistics that are casually thrown around actually mean.
One reason why I don't care for these types of discussions - especially in a forum where we are supposed to be talking about the STOCK MARKET( and specifically how we can use Worden products to analyse stocks). The arguments are much more complicated than either "gloom and doom" or rosy scenarios permit, so adequate discussion of the factors involved tend to be entirely superficial with emphasis on dramatic soundbytes, slogan, and emotion, or, in order to be treated with the detail they deserve, bring us too far afield than the purpose of this forum calls more.
I want to pay attention to the stock market now, or shortly down the road, and techniques for analysis of that - not get all sidetracked about what might or might not happen 40 years from now when no one here really knows what will happen or is qualified to actually give informed opinion - and such discussion tends to actually be more abot politics and political agendas, when you come down to it, and not about the stock market at all.
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True enough. It would be funny in a way that programs could be so mismanaged if it weren't true. My aim is to save as much as I can figuring that is all I will ever see. I expect to get nothing from either medicare or social security just hope that they don't increase my taxes further since I should probably be punished for trying to save money.
I know of one social security program out there, Austraila, that makes a lot of sense. The gist of the program is mandated retirment savings by each worker on his own behalf. I think their social security tax is 10% or so. The big difference though is the funds that are withdrawn are actually invested in real stuff like stocks and bonds and the worker gets a personal account with his name on it so it knows what his account is worth and the government can't mismanage the funds. When he retires, there is money for him provided by hiw own efforts. This way most workers who would otherwise spend all they make are forced to save on their own behalf. This concept probably would never work in this country though because too many people like the concept of getting a free ride and would be upset to learn they had to cut back on their living costs to provide for retirment.
Like you said, "It may even get "interesting" long before everyone thinks ..."
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QUOTE (hohandy) I want to pay attention to the stock market now, or shortly down the road, and techniques for analysis of that - not get all sidetracked about what might or might not happen 40 years from now when no one here really knows what will happen or is qualified to actually give informed opinion - and such discussion tends to actually be more abot politics and political agendas, when you come down to it, and not about the stock market at all.
Well hohandy ...
The way this works is ...
If you don't click on the thread ...
You don't read the thread ...
And therefore ... you are not "distracted" by the content of the thread ...
Let's review ...
Click on thread ... distracted by thread ...
Don't click on thread ... not distracted by thread ...
QUOTE (jcfla7)
I know of one social security program out there, Austraila, that makes a lot of sense. The gist of the program is mandated retirment savings by each worker on his own behalf. I think their social security tax is 10% or so. The big difference though is the funds that are withdrawn are actually invested in real stuff like stocks and bonds and the worker gets a personal account with his name on it so it knows what his account is worth and the government can't mismanage the funds. When he retires, there is money for him provided by hiw own efforts. This way most workers who would otherwise spend all they make are forced to save on their own behalf. This concept probably would never work in this country though because too many people like the concept of getting a free ride and would be upset to learn they had to cut back on their living costs to provide for retirment.
Well ...
As I'm sure that you know, the Republicans proposed this ... and were demonized for it ...
Just as they were for "school vouchers" ...
The "welfare state" knows all too well ... that it needs every cent that they can squeeze out of the "producers" to fund their program toward government dependence ...
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8 posts since you've been here Realitycheck - not one having to do with stocks. Plenty of bashing of others mixed in with factual and analytical hoo-hah - some of it prima facie offensive more suitable for a Rush Limbaugh forum.
Let me know when you're actually ready to talk about stocks.
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On this thread I have only commented that BigBlock's original post was America's version of Hayek's book, “The Road to Serfdom”. I would have liked to have left it at that but certain comments have arisen to which I feel a need to respond. Also, there seems to be ambiguity about what the economic picture has to do with trading or to put it another way, how can I use this information (the “gloom and doom” scenario) to make money? Consequently there are three subjects I wish to address; 1) the initial post - Ron Paul's questions of Bernanke as it relates to Hayek's book, 2) ad hominem arguments, attacking the arguer instead of the argument, and 3) How can one use the “gloom and doom” scenario to make money?
1) In his book Hayek detail’s how and why central planning can not work in the long run. The primary tool of central planners is managing markets. Various forms of central planning are such as socialism, fascism, democracy, communism, monarchy, oligarchy, etc. . . The one thing all central planning governments have in common is that politics and economics are mixed rather than separate. Ron Paul has years of history in congress arguing against our government engaging in activities our Constitution prohibits. And most of our government’s legislation and time is now spent precisely on economic discussions. To elaborate further could create a book or at least a large pamphlet. It is understandable that few have read Hayek's book. It’s not written at a sixth grade level as major media is purported to be written. It’s a college level reader. A few sentences I had to resort to my grade school sentence diagramming to find the subject, verb and object. Upon doing so, I often found myself saying, "My God, what brilliance!"
2) ) When we go off on ad hominem arguments, it is justifiable to ask ourselves how we can use this to make money. I’ve never found it to help. I confess that I, myself, occasionally am tempted to respond with ad hominem arguments. But before I post a response, I look at what I’ve written and pretend that I’m sitting at a round table in front of everyone who is about to read it. I ask myself, would I say this to their face?
3) The nuts and bolts - How can one use the “gloom and doom” scenario to make money? I suggest that a valuable aspect of making money is keeping what you have. There is no way I would recommend that a trader worry about it over every trade. However, I do think it’s prudent to keep the possibility in mind and think about what might be the clues that things may get worse than expected. Also, that raises the question, How worse can worse be? I read a few years back, never able to verify it, that in the 1930s, or there about, the long bond which was paying x percent a year was downgraded to x percent over several years, in effect financially killing those who thought they were wise and retiring in cash or a safe equivalent.
The likelihood of the doom and gloom scenario and how to deal with it we each have to decide for ourselves. But I think to totally ignore it is potentially financially deadly. “Fooled by Randomness” suggests that events are always possible outside of our expectations. Some hedge funds have recently been educated to that possibility.
soc
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The fist post here is quite possibly one of the dumbest things
I've read here in some time.
(I cant believe this is what passes for economic
analysis today)
This is what I call analysis by the bourgeois class.
(my term)
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Manias take many forms. When we look at something like
the market top in 2000 or the crash of 1987, the housing
bubble. Knowledge falls by the wayside. There is no more risk .
There is no more danger. Thinking becomes lazy. Profit is simple.
(buy stocks, buy tech, buy real-estate)
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This mania is also true to a certain extent in the growth
of our economy and capitalism. We have a generation that
hasn't really faced true hardships. (at least not the ones of the
previous generations have) Ironically it is a testament to our
success that this type of foolish, lazy thinking exists.
(just like market tops)
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This bourgeois class leaves their vacation home by the lake
gets in their prius and drives to starbucks. As they sip their
7$ coffee and order netflix videos from their laptop over the
WIFI network. They denounce capitalism. They consider it
knowledgeable to not like their country. They are champions
of equality and fairness (as long as they are no part of the fairness
equation) They are champions of the little guy. (as long as it
is verbal only and they don't actually have to do something or
it doesn't cost them anything)
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Without having to face real problems(that exist in most of the
places without capitalism) Starvation, real poverty, disease,
war, oppression. This bourgeois class has to redefine disaster.
Today horror is defined as :"my guy didn't win the election"
Today horror is defined as what the FED is doing.
Today horror is defined as 3$ a gallon gas.
(of course they don't mind price inflation when the
house they brought for 40K is now worth 500K)
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It would be nice if just once this generation appreciated
what business and industry have brought them. It would
be nice if they appreciated their standard of living. It would be
nice if instead of whiny cry babies. They woke with a smile
on their face and some optimism. Realize that our
country isn't perfect but its a lot better than most of the
alternatives.
(and yes I know its horrible but your guy doesn't
win the election every time. no matter who you are)
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As for me I'm willing to put up with the "horror" of the
FED. Inflation is a small price to pay when the alternatives
are considered.
To my view most of things pointed out by realitycheck and
jcfla7 are the failure of socialism and not capitalism. Once
you let politicians control your life. You better hope they are
good. (let me know when you find them)
(isn't it interesting that most are multi-millionaires that have
done very little work and spend most of their day spending
others money (oh excuse me: fixing problems) )
Remember that according to the experts. We wouldn't have enough
food to feed ourselves. (population growth)
Now we suffer from obesity.
According to the environmental experts. (a few decades ago)
The coming Ice Age was our biggest threat.
Now it is global warming.
Thanks
diceman
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Registered User
Joined: 9/25/2007
Posts: 1,506
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hohandy ...
If you feel that I have unfairly "bashed" you or the Fed ... I do sincerely apologize ...
And although it is true that the market controls interest rates to a much greater deegree than the Fed ... and generally acts before the Fed ... the Fed does provide them with an "affirmation" ... without which they will generally quickly readjust ...
I really do wish you the best of luck in your trading ... and I wish that I could tell you that "The First Million is The Most Fun" ... but ... I found the first half million or so to be stressfull beyond compare ...
A lot of us older folks (I'm 45) had some advantages that you will likely not have ...
I say this because I detect an exhuberance in your posts which makes me believe that you are somewhat younger ... maybe late 20s ...
First ... we had the benefit of "learning" during what I believe that history will record as being the greatest bull market that this country will have ever have had ...
And that single thing allowed me to make HUGE mistakes ... and still be forgiven for my stupidity ...
Looking back ... I still can't believe some of the things that I did ...
Secondly ... I think the quality of televison as we were growing up played a role ...
Not only did we have the benefit of news anchors like Walter Cronkite who was able to capture and hold the attention of even a child ...
But ... we also spent Sunday night laying on the living room floor watching Mutual of Omaha's Wild Kingdom ...
We watched as if our own very life was at stake as a lioness ran out onto the plain after a heard of gazzelles ... and they moved in a herd ... in almost perfect unison from one direction to another ... like a huge wave washing one way ... and then another ...
You see ... to my way of thinking ... in order to be a successful technical trader ... you must be a voyeur ...
No ... not the kind that just likes to watch people screw ... but rather one who enjoys and is intriqued by watching the movements and reactions of the most complex creature on earth ... with all of it's strengths, fears, and frailties ...
Jane Goodall has spent nearly a lifetime watching a small group of gorillas ... when they act as individuals ... when they act as a herd ... who leads ... and who follows ...
And after all of this study ... how accurately do you think that she could predict the that small band of gorilla's reaction to a threat ... as opposed to how accurately you or I could ?
The point of all of this is that you shouldn't get too hung up on the numbers ... learn to understand the mentality of the herd ... and the numbers will take care of themselves ...
People learn in different ways ... some learn very effectively by watching others "do it right" ...
I, on the other hand, learn best by watching others, or myself, screw it up ...
For that very reason ... I follow this commentary daily ... http://www.signalwatch.com/markets/markets-dow.asp
The herd is not out there worrying about drawing you the prettiest possible picture on a chart ...
Slippage, therefore, must often be discounted ...
Take a look at the trendline drawn under the lows in the weekly chart at the bottom of this page ... http://www.signalwatch.com/markets/markets-dow.asp?Date=07/23/07
Becasue the slippage was not discounted ... it left him ill-equipped to predict the turn in the market in August ...
As you can see in the weekly chart here ... http://www.signalwatch.com/markets/markets-dow.asp?Date=08/23/07
So what did he do ... he drew the trendline under even more slippage ... rendering it even more useless ... http://www.signalwatch.com/markets/markets-dow.asp
One of the most absolute bedrocks of technical analysis is that what was resistance tends to become support ... and what was support tends to become resistance ... HOWEVER ... these are not always horizontal lines ... they are quite often uptrending or downtrending lines ...
Let's look at another example ....
Look at the downtrending line drawn across the tops in the daily chart here ...http://www.signalwatch.com/markets/markets-dow.asp?Date=08/24/07
And it's still in good shape here ... http://www.signalwatch.com/markets/markets-dow.asp?Date=08/30/07
By here ... the line is still in place and the downtrend has been broken ... http://www.signalwatch.com/markets/markets-dow.asp?Date=09/05/07
But by here ... the line has been redrawn ... http://www.signalwatch.com/markets/markets-dow.asp?Date=09/12/07
Leaving the technician ill-equipped to realize that the line that was resistance ... had been successfully tested as support ...
And from there ... the uptrend can continue ...
Again .... I wish you good luck ...
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Registered User
Joined: 9/25/2007
Posts: 1,506
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Socrates & diceman ... GREAT posts ...
dice ... not to be cliche' ... but yours was a great "reality check" ...
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