Market Collapse Tomorrow?

Off Topic Politics & World Issues
61

[quote]beebuddy wrote:
dhickey wrote:

Sorry bud, this is just plain wrong. There is no practical reason to grow the money supply unless you need something smaller than a penny for regular transactions.

I view the Austrian idea that money was ever a product of free individuals as nonsense, at least as far as gold & silver are concerned. Gold money (and of course fiat money) was much more likely the product of some sort of political monopoly. So IMO there are ONLY practical reasons to use fiat, such as buffering recessions and maintaining the stability of the state and thus our society. You can’t really argue that recessions haven’t been as bad since 1933. Also capital markets haven’t stopped and real growth has been better than ever. The USD might as well be called gold. Both are intrinsically worthless AFAIC.[/quote]

What can one expect of someone who lives in DC? You’re one of the many getting fat from suckling off the teat of the State…no doubt. This isn’t a valid argument for anything I have already said. I am just pointing out your bias.

You may not believe that money arose in the market freely but that just means you don’t understand economics at all. The fact that you cannot see money as a practical solution to barter is quite funny and puts into light what sane people arguing for honest money are up against…

62

What’s interesting here is that the worldwide bailout will make things a lot worse.

"Most important, it’s in the bond and credit markets where the world’s governments will face their day of reckoning.

Millions of investors will ask: �??Why should I put my money in government guaranteed bonds when I can put it in government guaranteed banks and get a much higher yield?�??

Or worse, some will say: �??I bought your bonds because I didn’t trust the banks. Now, you’re giving my money to the banks anyhow. So I can’t trust you anymore either.�??

You and I know that they’re wrong, that the government’s direct guarantee is far stronger than any indirect guarantee. But all it takes is a small percentage of investors acting on these beliefs to tip the scale in the bond market, drive interest rates higher and make the entire debt crisis a lot worse."

http://www.marketoracle.co.uk/Article6797.html

The governments propose to shore up banks, yet will have to pay higher T-bond rates to compete with the banks they just…saved.

63

[quote]beebuddy wrote:
dhickey wrote:

I view the Austrian idea that money was ever a product of free individuals as nonsense, at least as far as gold & silver are concerned. Gold money (and of course fiat money) was much more likely the product of some sort of political monopoly. So IMO there are ONLY practical reasons to use fiat, such as buffering recessions and maintaining the stability of the state and thus our society. You can’t really argue that recessions haven’t been as bad since 1933. Also capital markets haven’t stopped and real growth has been better than ever. The USD might as well be called gold. Both are intrinsically worthless AFAIC.[/quote]

I completely disagree with this. This is classic Keynes. Fiat money cannot buffer recessions, I can make them worse. Changes in money supply cloud market signals. A recession is nothing more than a correction of a speculative boom. The correction is the speculators realizing that they had misread market signals and if left alone the market will return to correct production and pricing. Playing with fiat money in any significant way will only confuse this process and prolong the pain.

The great depression was not caused by markets or the gold standard and is not applicable to this conversation. The great depression was a disaster created by medaling in the markets.

There have been recesssions since markets were created and they were very mild by 1929 standards. I believe there was on in 1921 that lasted 18 months.

I would be happy to hear why you think a fiat money supply can shorten a recession. I’ve read Greenspan’s explaination and it just doesn’t jive for me. A fiat money system isn’t evil in and of itself. The problem is that is it is just too easy to abuse. The printing presses will never stop running, gov’t will never live within its means. This will always cause more harm than any small theoretical benefit fiat money may have in a recession.

Greenspan was brilliant when looking a particular market. The guy could do more with numbers and spreadsheets than anyone, and he made a very good living working with the largest companies in the country. IMHO, this is not a good quality for someone at the fed to have. Planning a market economy is much different than looking at one particular industry. Greenspan admitted this.

The problem was he always felt like he had to do something. So did the other very bright members of the fed. I don’t beleive their egos would let them sit back and wait.

64

[quote]rainjack wrote:
Have you ever participated in the real world?
[/quote]

What other world is there to participate in? Even fantasy has to begin in reality.

65

[quote]LIFTICVSMAXIMVS wrote:
rainjack wrote:
Have you ever participated in the real world?

What other world is there to participate in? Even fantasy has to begin in reality.[/quote]

That’s about what I though.

Book experts have no place in the real world. You either do, or you watch. You are a watcher.

I have no respect for anyone too lazy to participate beyond sitting on their ass and reading.

66

[quote]beebuddy wrote:
You should preface your post by stating that almost no economists use the word “inflation” the way you do. Certainly no layperson uses it the way you do. I’ve noticed that your definition is popular among conspiracy nuts though. BTW, that wasn’t a thinly veiled ad-hom. If you are a conspiracy nut I haven’t noticed.[/quote]

Recognize that in the field of economics, as in strength training, there are different and opposing schools of thought. He has made clear his adherence to the Austrian School, so you should judge his statements accordingly.

Inflation is equivalent to currency devaluation, according to free market economists.

67

[quote]rainjack wrote:
LIFTICVSMAXIMVS wrote:
rainjack wrote:
Have you ever participated in the real world?

What other world is there to participate in? Even fantasy has to begin in reality.

That’s about what I though.

Book experts have no place in the real world. You either do, or you watch. You are a watcher.

I have no respect for anyone too lazy to participate beyond sitting on their ass and reading. [/quote]

I think Lifty is a scientist/prof.

68

[quote]Headhunter wrote:
What’s interesting here is that the worldwide bailout will make things a lot worse.

"Most important, it’s in the bond and credit markets where the world’s governments will face their day of reckoning.

Millions of investors will ask: �??Why should I put my money in government guaranteed bonds when I can put it in government guaranteed banks and get a much higher yield?�??

Or worse, some will say: �??I bought your bonds because I didn’t trust the banks. Now, you’re giving my money to the banks anyhow. So I can’t trust you anymore either.�??

You and I know that they’re wrong, that the government’s direct guarantee is far stronger than any indirect guarantee. But all it takes is a small percentage of investors acting on these beliefs to tip the scale in the bond market, drive interest rates higher and make the entire debt crisis a lot worse."

http://www.marketoracle.co.uk/Article6797.html

The governments propose to shore up banks, yet will have to pay higher T-bond rates to compete with the banks they just…saved.
[/quote]

I’d like to add to this post by pointing out that government guarantees on bank deposits are also a bad idea because it removes accountability and allows banks to behave recklessly with money. After all, if they screw up and loose, their depositors will still get their money back.

This type of rational is part of the problem that got us into this economic mess in the first place. Freddy & Fanny were government backed entities and felt with the strength of the government behind them they could operate with insane amounts of leverage without worry of failure.

69

[quote]rainjack wrote:
I have no respect for anyone too lazy to participate beyond sitting on their ass and reading. [/quote]

The superiority you ascribe to yourself is humorous.

70

[quote]LIFTICVSMAXIMVS wrote:
rainjack wrote:
I have no respect for anyone too lazy to participate beyond sitting on their ass and reading.

The superiority you ascribe to yourself is humorous.[/quote]

The superiority you ascribe to yourself and the theories of others is pathetic.

Why is it humorous to you for someone who is successful in business to be proud of that fact, and hold no respect out for those who don’t even make an effort?

71

[quote]orion wrote:
What makes you think that I would discuss anything of real practical value with someone that would rather piss on it than try come up with at least a decent attempt of an rebuttal?

What is in it for me?[/quote]

You and Lifty have been putting up with shit for years. I can’t believe there are people on this board who would still choose to attack you personally over your consistent adherence to libertarian and Austrian principles. What with all the exposure granted to Ron Paul, the paleo right, Lew Rockwell, and von Mises, one would think this ideology has at least earned the right of formal recognition by its opponents.

To clarify the point, I’m not suggesting that everyone ought to agree with you, but merely that everyone should recognize where you’re coming from by now.

To suggest that someone doesn’t know what they’re talking about and is making things up as they go is a cheap taunt which cannot be made earnestly about individuals who have clearly established their intellectual position.

[quote]dhickey wrote:
To finish up, there is no substitute for economic theory. It is all we have. Real world experience or historical data is almost completely worthless in economics. There are entirly too many variables in play to accurately model specifics of a market. Fluctuating money supplies, mountains of changing regulation, unstable gov’ts and the fear and uncertainly this creates in markets, prohibit any accurate case study in macro economics. You have to start with theory and try to defend it or destroy it with logic and reasoning. Any of the major booms or busts can be explained quite well using Austrian theory.
[/quote]

Absolutely correct. Contrary to the teachings of present-day econometrists, the study of economics is best undertaken through the use of a priori assumptions and logical reasoning.

The much vaunted notion of “falsifiability” is a golden calf which is nearly impossible to apply meaningfully to any scientific field. The inherent problem with falsifiability which renders it useless is the fact that it requires perfectly controlled, closed systems, in which all possible variables are known to humans. This is an impossible ideal.

As you say, everything proceeds from theory.

72

I mostly agree with this opinion by Robert Ringer, although I’m not sure I quite agree with his idea of an invisible 30 year depression, I get his drift.

"The most practical solution to America’s financial ills is to face the music- now, rather than later. The major question of our time has not been raised by anyone in the media: Are you prepared to lower your standard of living - even suffer - so your children and grandchildren can enjoy a better standard of living and not have to suffer worse than you?

Put more directly, are you prepared to face the moral and Constitutional reality that you are entitled to absolutely nothing other than the right to pursue your own success and happiness in any way you so choose, so long as you do not commit aggression against others?

In other words, are you prepared to go “cold turkey” in exchange for freedom? I’m sorry to say that my personal take on the pulse of our country is that not many people are willing to give up (a false sense of) security in exchange for freedom. Which is why even the staunchest conservatives in the Republican wing of the Demopublican Party will not name specific government programs they would be willing to eliminate. (Not cut - eliminate.)

When the hopeless, stand-for-nothing J. McBama talks about “letting the marketplace sort things out for the economy,” he is quick to assure voters that the government will, of course, pay unemployment benefits to those “in need,” retrain (as in $$$) people who have lost their jobs, etc., etc., etc.

Message to J. McBama: It’s not the government’s Constitutional role to shore up people who have lost their jobs - nor does it have a moral right to do so. Job loss and job retraining are simply none of the government’s business.

And, contrary to what politicians, the media, and most Americans seem to believe, it’s not the government’s job to “get the economy moving again.” Sorry, but it’s simply not in the Constitution. Economic stability can be created only by allowing the market to take its natural course and rid the economy of synthetically created wealth.

In more blunt terms, what I’m talking about here is a deflationary depression. Make that a massive deflationary depression. As I’ve said so often, we’ve been in an invisible depression for at least 30 years. What I’m advocating is that we ignore the daily lies that come out of Washington and demand that the invisible depression be allowed to reveal itself."

73

Ugly day.

74

[quote]Sloth wrote:
Ugly day.[/quote]

Notice when the bailout went through a couple of weeks ago the market steadily went down?

We hit 8,000 like I was aiming at for a bottom and we shot up and was way up early yesterday until it was announced that the government was buying stocks in financial institutions.

We have fallen over 1,100 since that announcement yesterday…

I don’t think investors who are in it for the long term likes the idea of all this government intervention and inflation.

75

Looks like I was wrong about yesterday, but today… Geez. The stock market is being gamed by the big guys, I remember Cramer admitting it a few weeks ago. Bonds aren’t looking to good either, in fact, it looks as if the government wants people to pay them to loan them money! What kind of shenanigans are these?

Good thing Obama will be president real soon! He will save us all and fix the world! YAY!!!

77

[quote]Sloth wrote:
Ugly day.[/quote]

That was a short suckers’ rally. I was looking for 11,500 on the Dow and 1125 on the SP. The fact that it was only one day I find very alarming. I was expecting a 3000 Dow with a 350 SP only in the most extreme case. This crack in the market makes those numbers more plausible.

78

Still waiting for the collapse…

79

[quote]Neuromancer wrote:
Still waiting for the collapse…[/quote]

Not for long.

This has not even hit the real economy yet.

However, your financial industry will shrink, as will your construction companies.

When Americans start to save, the whole Chinese production capacity is worth shit. Americans have 1 trillion worth of pre-approved credit cards in case the shit hits the fan.

So when the shit really hits the fan, i.e. your businesses go bankrupt, people lose their jobs, Fed prints money, Chinese sell Americas IOU´s to go shopping in the US, inflation skyrockets, more people lose jobs, people start using pre-approved cc´s…

That is what could happen.

And part of this will happen.

Don´t get cocky because you mistake the first two drops of rain for the storm.

80

Do I somehow come across as American?

I think what we are seeing is possibly the first worldwide coordinated response to a financial crisis.In this particular instance you have seen the American govt. follow the European lead in how to attempt to deal with the credit crunch by taking equity positions in leading banks.This was not on the table until Europe took the bailouts in that direction.It was of course done before in Sweden in the early 90’s (if memory serves),with pretty decent results.

So what that tells me is that the US is quite prepared to follow if the path appears sound,and that everything financial is now so interlinked worldwide,that if one sinks,the rest suffer mightily.

Time will tell if the approach works.But the concept that an across the board financial collapse a la the 30’s will not be allowed to happen is quite clear in my mind.

For the record,I’m Spanish,and I believe in the European method of doing things.