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are we in a recession?
- Thread starter brokerboy
- Start date
Not sure you doves are open to suggestion....here's some food for thought: Bill Gross said we're headed for a dollar collapse if we continue down the present course of run-away deficits and monetization. If you could elaborate as to why he's on the wrong side of that trade, I'd love to hear it.
http://pimco.com/EN/Insights/Pages/Damages.aspx
BB - no idea. Haven't looked. Maybe all this sounds wild to you, but this thread sounds very ignorant to me. Just saying.
http://pimco.com/EN/Insights/Pages/Damages.aspx
BB - no idea. Haven't looked. Maybe all this sounds wild to you, but this thread sounds very ignorant to me. Just saying.
Quote from denner:
So you're saying that Japan doesn't count? The Nikkei from 1989 to present is exempt from your argument?
The Japanese Yen never collapsed. Big difference. We're not talking an equity explosion. We're talking a dollar implosion. Everything priced in USD will explode not because it's intrinsic value has skyrocketed, but because the dollars it's priced in have become worth(less). We're not Japan, man.
Quote from achilles28:
The Japanese Yen never collapsed. Big difference. We're not talking an equity explosion. We're talking a dollar implosion. Everything priced in USD will explode not because it's intrinsic value has skyrocketed, but because the dollars it's priced in have become worth(less). We're not Japan, man.
ok, I agree we aren't Japan, but OTOH, I'd say we have no historical precedent for all Western economies pursuing a path to inflate away debt simultaneously. So we can sit here and say the US dollar is going into the dustbin of history, what about the Eurozone? what happens when the "China miracle" is found to be a con, that they've been "cooking the books" for years...the resource bubble in Australia implodes...Japan is already in deep, etc, etc...
As we've already seen after the first 3-4 iterations of QE, the rest of the world doesn't just sit still and let Bullet Ben torpedo the dollar towards 0, it's not that simple. Exporting inflation, as has already been done these past few years, is just one of several catalysts to the crisis in the ME. Pursuing this policy indefinitely will not last long enough for the equities to infiniti scenario to play out.
Just as you were justified in stating that the US situation is not the same as Japan's (albeit they're working on decades of ZIRP), it's certainly not the same as comparing it to a third world country like Zimbabwe.
Doesn't it concern you in the least bit that the markets have been weak ever since the latest QE announcement? That AAPL, GOOG, amongst others have dropped double digits percentage-wise? Couple that with the "fiscal cliff" in early 2013, I just don't see it as clear sailing simply because the Fed has declared itself the arbiter of all outcomes.
As always, a cogent and thoughtful reply. You make great points, but two sides make every market? Europe is plagued with the same structural problems as the US, and it's core (Italy, already...no small potatoes), will hit the wall about the same time we will (specifically, France and the UK). I don't see the USD imploding against other currencies, except against Asian trading partners. Europe and the US are going over this cliff together. Whether we erase this debt, push the reset button, institute a new monetary unit - whatever - we are fast approaching debt to GDP ratios where investors head for the doors. That's simply a fact. The question is what will our Central Banker masters do when we get to that point?
I hear you about equities and the recent sell-off. Faber is calling for a 10-20% correction. Maybe. The global economy, if left unmolested by Central Banks, wants to deflate and contract. The whole system is propped up by Government spending.. The declining marginal return of that debt is yes and no. Look at the deficit, that's why. It's been parred down by about 400 Billion, and that's why the economy is beginning to slide. You are thinking fundamentals, and you're right. But I'm thinking policy response. In fact, I am betting on it. If you take the other side, you're essentially betting the FED and Treasury will stand idly by and let this market economy slip into the deflationary oblivion they spent the last 4 years trying to save it from. I think that's a very unwise position to take. We're talking Bubble Ben here.
Anyway, I gotta sleep. I'll write more tomorrow. Good night
I hear you about equities and the recent sell-off. Faber is calling for a 10-20% correction. Maybe. The global economy, if left unmolested by Central Banks, wants to deflate and contract. The whole system is propped up by Government spending.. The declining marginal return of that debt is yes and no. Look at the deficit, that's why. It's been parred down by about 400 Billion, and that's why the economy is beginning to slide. You are thinking fundamentals, and you're right. But I'm thinking policy response. In fact, I am betting on it. If you take the other side, you're essentially betting the FED and Treasury will stand idly by and let this market economy slip into the deflationary oblivion they spent the last 4 years trying to save it from. I think that's a very unwise position to take. We're talking Bubble Ben here.
Anyway, I gotta sleep. I'll write more tomorrow. Good night
Very interesting discussion. I also believe in the policy responses as you Achilles. However, one market property that works against a weakened USD is that whenever there is perceived shit in the market, people turn to safe havens of which US treasuries is one. When is this property going to reverse and where is all the money supposed to go? I haven't figured out my view on that yet.
I don't think there can be a deflationary path - end-game wise - based on the fact that US is a major debtor nation alone. Real terms increases of that debt pile is unfathomable to me...
I don't think there can be a deflationary path - end-game wise - based on the fact that US is a major debtor nation alone. Real terms increases of that debt pile is unfathomable to me...
Quote from FrostBead:
However, one market property that works against a weakened USD is that whenever there is perceived shit in the market, people turn to safe havens of which US treasuries is one.
The perception of the market is induced in such way that money is forced to flow to support treasuries.
This is main strategy of the Fed to help manage staggering deficits which in turn feeds back to create bigger deficits and weaker economy.
In the short term anything may be possible but in the longer term your faith is well placed. Like the Law of Gravity the laws of economics (ultimately fairly simple math) will rule. And the higher we fall from the louder the thud.
Quote from achilles28:
Just to clarify, I have zero faith in the Feds "omnipotence". I have 100% faith in the laws of economics. It's all about the money supply. Ben is no Volker. Lets not kid ourselves. The QE will never ever end until we get a recovery, or the dollar implodes. That's a guarantee. [/B]
Quote from vicirek:
The perception of the market is induced in such way that money is forced to flow to support treasuries.
This is main strategy of the Fed to help manage staggering deficits which in turn feeds back to create bigger deficits and weaker economy.
Every asset class has its own cycle and thus utility. T-bills have been the shelter of last resort for everyone around the globe. However, as mentioned by another poster, 75% of T-bills are now only bought by the Fed. Seems the peak utility of T-bills to sponsor the deficit and debt is soon reaching. Hard assets like lands, buildings, gold, silver, precious metals, even warehouses full of grain and seed will or already have started to become high demand assets.
Without any further delay, Congress should pass the law that budgets at all levels have to be balanced no matter what. Even if it means cutting US defense in half, putting two dozen prisoners in one jail cell or doubling the number of students in a high school class for each single teacher etc. etc.
Obama did mention that economic problems are the #1 security threat to the US. But sadly he did not do much to face off and push back this monster. Romney's agenda is all bs in the first place and has little potentials to line up numbers correctly for the economy.
http://reddragonleo.com/ not saying it will happen but it points to the fact that there are alternatives,as an aside ,if the banks stopped buying and began selling equities in the last 3 weeks, they would clean upQuote from achilles28:
If it weakens further, just more reason to further stimulate or hike up the deficit. That's all they can do