world economy EXPLANATION

[condotown]

This is what I've been talking about for a long time.

Finally someone has explained what is happening for everyone to understand.

http://www.asianewsnet.net/news.php?id=7358&sec=3

Economists cannot provide any answers

Editorial Desk

The Nation (Thailand)

Publication Date: 19-08-2009

Last week, Nobel Prize-winning economist Paul Krugman attended an international business forum in Kuala Lumpur. His message did not sound as bullish as before. He said the world has avoided a Great Depression and that the worst of the financial crisis is over. And it will take at least two years for the global economy to make a full recovery, though the world now faces a prolonged slowdown like Japan's "lost decade" of the 1990s.

Krugman's views are marred by contradictions at best. On the one hand, he jumps to the conclusion that the global economy will recover eventually. On the other hand, he is not quite sure how the global economy will mend itself after this systemic breakdown.

"How do we get out? I think the technical answer is God knows. We have a great shortage of role models," said Krugman, a professor of economics at Princeton University in the United States.

In the past, swift economic recoveries saw affected countries export their way out of trouble, trading with countries with large surpluses. "Unless we can find another planet to export to, we cannot have an export-led recovery from this global financial crisis, which means we have a serious difficulty," he said.

Like most economists, Krugman can't get out of the hole into which he has dug himself. He somehow believes that the global economy will return to its growth path, similar to what happened over the past few decades: The exporting nations, armed with excess production capacity, will continue to produce manufactured goods for global consumers. This excess production and excess consumption will continue forever, or so it seems, so that planet earth will experience joy and prosperity. Krugman and the world's economists believe in the sustainability of global capitalism and global financial capitalism even though they are teetering on the edge of a cliff.

Krugman is right when he says we will need consumers from Mars to purchase all the manufactured goods from planet earth, to help the export-led countries recover from the crisis. But since there are no consumers from Mars that we know of, we have to live with the indebted consumers on earth, who no longer have the purchasing power to acquire all the excess manufactured goods. Global industrialisation has arrived at a dead end. All the abuses in the global financial system, in which banks and institutions and corporations issue debts and paper money that flood the market, have accelerated its demise.

Technology and investment have gone into factories and plants to the extent that they can turn out more manufactured goods than global consumers need. Yet they continue to produce. Secondly, industrial production and distribution and the services that are tied to them are linked to the financial system. Producers have to seek financing and rollover their debt. They survive if they can sell their manufactured goods and receive the income to pay both the interest and principal they owe to the banks. Whenever this brief rollover is interrupted, they go bankrupt.

Now we are witnessing an interruption in the world's largest consumer market - the United States - that is putting global industrial production at risk of a breakdown. Consumers from other parts of the world can't make money fast enough or in amounts large enough to consume all the goods from the global industrial capacity. A collapse in demand will hit the global industrial production and financial systems in one fell swoop.

Krugman brought his audience to a comfort zone. He said that to find anything comparable to our current woes, economists have to look back to the 1930s, when the world slump was brought to an end "by a very large set of public works programmes known as World War II. Demand created by World War II helped lift the global economy out of the depression".

In this respect, Krugman is playing with fire, though he admitted that it was a joke. "Hopefully we're not going to repeat that strategy," he said, adding that policy-makers could try more stimulus programmes, higher inflation targets and spurring business investment. "We don't know which of these things will work, so we need to try all of them," he said.

But how can governments come up with further stimulus programmes when they are already saddled with debts amid growing business bankruptcies? Excess production and excess consumption have reached a point where we actually need radical restructuring so that we can get back to our original shape.

We can't continue to produce and consume excessively, buoyed by paper wealth that does not correspond to the fundamentals. Sadly, no economist can admit this reality, including the policy-makers, who are all tempted to introduce stimulus programmes for short-term gain.

The only way out of this crisis is to undertake restructuring in a painful way. We might witness a New Economy emerging. The old global capitalism is dead, for good. :?

[eagle]

We all got ripped off by a bunch of crooked bankers, insurance and wall street yuppies. Started in the US and spread all over the world as the economy is now global. Now we have to get used to living with the new parameters and the criminals they all get away !! :twisted:

[PeeMarc]

There are so many paradoxes of our time now. All the things we collectively wished and strived so hard for have, in fact, given us the opposite...

The 'global community' now enables us to reach out to connect with the world. But we spend far less time, if any, with the real people around us, our neighbors and our community...so we have never felt so alone and detached.

In our quest for more leisure time to enjoy our hard earned lives, we don't cook, grow things or make things ourselves anymore... we don't use our hands for even the simplest practical things... we get poorer countries and people to do this for us. But now we work even more... and have LESS leisure time to keep feeding our desperate consumerism and pay for this priviledge.

We continue create 'Eco-living' and health resorts and spas, better diets etc...we demand our buildings be more environmentally friendly and are desperately trying to reconnect with nature again... but the average person who looks at a frozen chicken in a supermarket or the beef in a Big Mac CANT see any connection to the ACTUAL living animals on farms.

We write and consume more and more books and online advice about love and relationships... yet we seem to know far less than our parents about how to love and stay in a long term relationship.

We keep striving for simple happiness... but we seem so unhappy in our hearts.

We all desperately want to be rich...but in doing so we have collectively sent the world broke.

The list goes on...

In all, we seem to have detached ourselves from basic reality of life and living a big lie.

[condotown]

We all got ripped off by a bunch of crooked bankers, insurance and wall street yuppies. Started in the US and spread all over the world as the economy is now global. Now we have to get used to living with the new parameters and the criminals they all get away !! :twisted:

You left out "politicians". They were all bought off. And ultimately they will blame the people for electing them....

Democrat/Republican/Whig... Makes no difference.

[Cosmo]

This is what I've been talking about for a long time.

Finally someone has explained what is happening for everyone to understand.

http://www.asianewsnet.net/news.php?id=7358&sec=3

Economists cannot provide any answers

Editorial Desk

The Nation (Thailand)

Publication Date: 19-08-2009

Last week, Nobel Prize-winning economist Paul Krugman attended an international business forum in Kuala Lumpur. His message did not sound as bullish as before. He said the world has avoided a Great Depression and that the worst of the financial crisis is over. And it will take at least two years for the global economy to make a full recovery, though the world now faces a prolonged slowdown like Japan's "lost decade" of the 1990s.

Krugman's views are marred by contradictions at best. On the one hand, he jumps to the conclusion that the global economy will recover eventually. On the other hand, he is not quite sure how the global economy will mend itself after this systemic breakdown.

"How do we get out? I think the technical answer is God knows. We have a great shortage of role models," said Krugman, a professor of economics at Princeton University in the United States.

In the past, swift economic recoveries saw affected countries export their way out of trouble, trading with countries with large surpluses. "Unless we can find another planet to export to, we cannot have an export-led recovery from this global financial crisis, which means we have a serious difficulty," he said.

Like most economists, Krugman can't get out of the hole into which he has dug himself. He somehow believes that the global economy will return to its growth path, similar to what happened over the past few decades: The exporting nations, armed with excess production capacity, will continue to produce manufactured goods for global consumers. This excess production and excess consumption will continue forever, or so it seems, so that planet earth will experience joy and prosperity. Krugman and the world's economists believe in the sustainability of global capitalism and global financial capitalism even though they are teetering on the edge of a cliff.

Krugman is right when he says we will need consumers from Mars to purchase all the manufactured goods from planet earth, to help the export-led countries recover from the crisis. But since there are no consumers from Mars that we know of, we have to live with the indebted consumers on earth, who no longer have the purchasing power to acquire all the excess manufactured goods. Global industrialisation has arrived at a dead end. All the abuses in the global financial system, in which banks and institutions and corporations issue debts and paper money that flood the market, have accelerated its demise.

Technology and investment have gone into factories and plants to the extent that they can turn out more manufactured goods than global consumers need. Yet they continue to produce. Secondly, industrial production and distribution and the services that are tied to them are linked to the financial system. Producers have to seek financing and rollover their debt. They survive if they can sell their manufactured goods and receive the income to pay both the interest and principal they owe to the banks. Whenever this brief rollover is interrupted, they go bankrupt.

Now we are witnessing an interruption in the world's largest consumer market - the United States - that is putting global industrial production at risk of a breakdown. Consumers from other parts of the world can't make money fast enough or in amounts large enough to consume all the goods from the global industrial capacity. A collapse in demand will hit the global industrial production and financial systems in one fell swoop.

Krugman brought his audience to a comfort zone. He said that to find anything comparable to our current woes, economists have to look back to the 1930s, when the world slump was brought to an end "by a very large set of public works programmes known as World War II. Demand created by World War II helped lift the global economy out of the depression".

In this respect, Krugman is playing with fire, though he admitted that it was a joke. "Hopefully we're not going to repeat that strategy," he said, adding that policy-makers could try more stimulus programmes, higher inflation targets and spurring business investment. "We don't know which of these things will work, so we need to try all of them," he said.

But how can governments come up with further stimulus programmes when they are already saddled with debts amid growing business bankruptcies? Excess production and excess consumption have reached a point where we actually need radical restructuring so that we can get back to our original shape.

We can't continue to produce and consume excessively, buoyed by paper wealth that does not correspond to the fundamentals. Sadly, no economist can admit this reality, including the policy-makers, who are all tempted to introduce stimulus programmes for short-term gain.

The only way out of this crisis is to undertake restructuring in a painful way. We might witness a New Economy emerging. The old global capitalism is dead, for good. :?

Sorry Don, I disagree with his views.

It wouldn't be from Dr Doom, would it?!?

Any way, there are many points I could argue but I will just pick on one - his argument about overcapacity.

Many countries around the world have dealt with overcapacity in their Auto industry by offering incentives - for example the "Cash for Clunkers" scheme. This has been a great success so far.

Another scheme being offered is "cash bonus" to buy a new home. That is having a tremendous effect in stimulating demand (putting a floor) in the housing market in the US.

Furthermore, countries like China are large savers, they have tremendous capacity to spend - their recent strategy of stimulating domestic consumption has been a great success - this has largely cushioned the fall in their exports.

The point I am trying to make is that not everyone (or every country) is profligate in their spending during the boom years - some do save.

They are now the ones who have the capacity to buy things (or invest) on the cheap.

There are other points I could make - like population increases every year and the fact that most manufactured goods have an effective life of 3 to 5 years.

[amarone]

All those so called experts working in the bussines or in the universitys.

With justa few examples all of them missed to foresee this economic crisis we are in now.

In other words I am not all that impressed with them.

So the moral never trust them.

Now they are giving out all kinds of signals "we have reached the bottom" "its turning but it Will take a long time"

"Its turning and will skyrocket so we will be back to 0 soon"

I stopped listen a long time ago.

WHat I do know is that if nobody is buying anything for a long time there will eventually be a demand.

JUst hope it doesnt take too long until the wheels start turnig normal again because I dont think this crisis is the end of the world

[CiaranM]

There are other points I could make - like population increases every year and the fact that most manufactured goods have an effective life of 3 to 5 years.

i would say MOST manufactured goods have a life span of in excess of 3 to 5 years .... but we ARE convinced we need to change then because they have become OBSOLETE or even worse UNFASHIONABLE !!!!!

[eagle]

We all got ripped off by a bunch of crooked bankers, insurance and wall street yuppies. Started in the US and spread all over the world as the economy is now global. Now we have to get used to living with the new parameters and the criminals they all get away !! :twisted:

You left out "politicians". They were all bought off. And ultimately they will blame the people for electing them....

Democrat/Republican/Whig... Makes no difference.

Yes and ultimately the people are to blame for not holding politicians accountable. What the US needs is an integrity Czar.

[Cosmo]

All those so called experts working in the bussines or in the universitys.

With justa few examples all of them missed to foresee this economic crisis we are in now.

In other words I am not all that impressed with them.

So the moral never trust them.

Now they are giving out all kinds of signals "we have reached the bottom" "its turning but it Will take a long time"

"Its turning and will skyrocket so we will be back to 0 soon"

I stopped listen a long time ago.

WHat I do know is that if nobody is buying anything for a long time there will eventually be a demand.

JUst hope it doesnt take too long until the wheels start turnig normal again because I dont think this crisis is the end of the world

Dude, if you are refering to me...I suggest you click the link below - have a look at the date on the first page. You can go to my archived journals too (plenty of journals on this topic).

http://www.thailandfriends.com/index.php?name=DB_phpBB2&file=viewtopic&t=11922

And if you are wondering, I am doing "ok" in this recession.

[Cosmo]

There are other points I could make - like population increases every year and the fact that most manufactured goods have an effective life of 3 to 5 years.

i would say MOST manufactured goods have a life span of in excess of 3 to 5 years .... but we ARE convinced we need to change then because they have become OBSOLETE or even worse UNFASHIONABLE !!!!!

You are Absolutely right on this point.

I stand corrected!!!

I should add the word Unfashionable in the sentence above.

[condotown]

But.....

Debt is retired in two ways.. by paying it off or by default....

At the current rate....There is no way in hell the US is gonna pay it off. Soon they will not even be able to service the interest! Then what?

[Bruce551]

lets see, to pay off debt, you can raise Taxes, Barrow More Money, and finally you can Print More Money 5555

[CiaranM]

There are other points I could make - like population increases every year and the fact that most manufactured goods have an effective life of 3 to 5 years.

i would say MOST manufactured goods have a life span of in excess of 3 to 5 years .... but we ARE convinced we need to change then because they have become OBSOLETE or even worse UNFASHIONABLE !!!!!

You are Absolutely right on this point.

I stand corrected!!!

I should add the word Unfashionable in the sentence above.

i wasn't really correcting u .... because in essence goods do have a life span of 3 to 5 years (or even less), but it's not because they r no longer functional, more because we ARE convinced that they no longer service our needs !!

i mean TVs can easily last 15-20 years .... but now we need bigger screens, LCD, plasma, HD etc !!!

and don't even get me started on mobile phones .... i buy a new one frequently because i keep losing the f**king things .... but most of my family and friends back home change them every 12-18 months simply because they CAN under the terms of whatever network contract they r using !!

which means phones which were top of the range phones 12-18 months ago and which r still working perfectly well r getting replaced by the "new top of the range phones" ..... and in another 12-18 months exactly the same thing happens again !!!

[Cosmo]

But.....

Debt is retired in two ways.. by paying it off or by default....

At the current rate....There is no way in hell the US is gonna pay it off. Soon they will not even be able to service the interest! Then what?

Yeah, I agree with you on this point.

Many countries, in particular the US, will have huge debt problems.

Fortunately, for you, the USD is still the world's reserve currency so your government can still borrow at low interest rate (but not for long).

Btw, did you read comments from Warren Buffet yesterday on this issue?

The US like many countries have a huge credit card billl, so there will be very painful adjustments in the years ahead.

Do you think your govenment will ever cut its defence spending by half?!? :shock: :roll:

You know, even at half, your military will still have plenty of weapons to blow the world up many times over!!! :twisted:

[condotown]

But.....

Debt is retired in two ways.. by paying it off or by default....

At the current rate....There is no way in hell the US is gonna pay it off. Soon they will not even be able to service the interest! Then what?

1) Do you think your government will ever cut its defense spending by half?!? :shock: :roll:

2) You know, even at half, your military will still have plenty of weapons to blow the world up many times over!!! :twisted:

1) NO (Huge military industrial complex more powerful and corrupt than the worst corporate greedmeisters... $$Trillions$$ disappear into the black hole called the Pentagon)

&

2) YES... So don't piss off MY government.... muahahahahaha

[LakeGeneve]

There are other points I could make - like population increases every year and the fact that most manufactured goods have an effective life of 3 to 5 years.

i would say MOST manufactured goods have a life span of in excess of 3 to 5 years .... but we ARE convinced we need to change then because they have become OBSOLETE or even worse UNFASHIONABLE !!!!!

Totally agree on this point. Companies and marketing wankers have realised how much more money can be made in convincing people that they need to purchase the new model every 1-2 years to keep up with the 'so-called' trends and assumed technological advances.

It was not so long ago that people seemed to keep their manufactured goods for 20-30 yrs.

When middle class kids today are turning over the mobile phs, laptops and other gadgets every year it does no bode well for the planets future.

[amarone]

All those so called experts working in the bussines or in the universitys.

With justa few examples all of them missed to foresee this economic crisis we are in now.

In other words I am not all that impressed with them.

So the moral never trust them.

Now they are giving out all kinds of signals "we have reached the bottom" "its turning but it Will take a long time"

"Its turning and will skyrocket so we will be back to 0 soon"

I stopped listen a long time ago.

WHat I do know is that if nobody is buying anything for a long time there will eventually be a demand.

JUst hope it doesnt take too long until the wheels start turnig normal again because I dont think this crisis is the end of the world

Dude, if you are refering to me...I suggest you click the link below - have a look at the date on the first page. You can go to my archived journals too (plenty of journals on this topic).

http://www.thailandfriends.com/index.php?name=DB_phpBB2&file=viewtopic&t=11922

And if you are wondering, I am doing "ok" in this recession.

No I wasent refering to you.

I said most of them run in the same direction.

I mean not many bankes before all this had the curage to say no to somebody that wanted to loan some money even if they should have.

I guess its not easy to have an opinion that contradicts everybody elses.

Good for you that your doing ok and my guess is that you did or do something different than others since you are doing ok.

[condotown]

Buying the latest new cell phones, computers, TVs and other electronics every six months is not going to be enough to get us out of this mess.

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100000698/can-the-souffle-really-rise-again/

Ambrose Evans-Pritchard has covered world politics and economics for 25 years, based in Europe, the US, and Latin America. He joined the Telegraph in 1991, serving as Washington correspondent and later Europe correspondent in Brussels. He is now International Business Editor in London.

Can the soufflé really rise again?

Two facts that should give pause for thought.

1) Japanese data released on Thursday showed that exports fell yet again in July. They are down 39.5pc to the US, and 26.5pc to China.

Japan is the world?s second biggest economy. It lives on exports. It is also a key part of the supply chain for the Chinese economy. How can this hard data be reconciled with the extreme V-shaped recovery already priced in by the markets?

By the way, Toyota is suspending a key production line at its Takaoka plant in central Japan. It is cutting global capacity by 1m vehicles.

2) The Baltic Dry Index measuring freight rates for bulk goods and commodities has been falling almost continuously for eleven weeks, dropping from 4,290 to 2,778 on Thursday.

Is this just a glut of ships or is this telling us what the Shanghai market is also telling us, that credit tightening by the Chinese government is pulling the rug from underneath the latest commodity bubble?

There is something wrong with the entire recovery tale, which ignores the fact that excess plant is still at the highest level since the Great Depression (capacity use is 70pc in Europe, 68pc in the US, 65pc in Japan, and as low as 50pc in some countries, according to the World Bank?s Justin Lin). Companies will have to cut jobs and investment.

Soaring ?confidence? indicators have decoupled from reality. The world economy is still prostrate. GDP has shrunk 4pc, 6pc, 8pc, even 12pc or more in a large group of countries. There it more or less sits, like a deflated soufflé.

An end to technical recession in France, Germany, and Japan because Q2 ( and undoubtedly Q3 to come) ekes out a rise from a collapsed base does not mean anything ? except that zero interest rates worldwide, and a massive fiscal stimulus that is pushing public debts towards 100pc across the OECD states (and cannot easily be repeated once the first sugar rush subsides), has mercifully prevented the Great Contraction from turning into an immediate catastrophe.

As the Bank of England?s Governor Mervyn King puts it: ?It?s the level, stupid?. The level of economic activity is years away from full recovery.

The Bundesbank?s Axel Weber says it will take until 2013 for Germany to get back to where it was. He also warns, by the way, that there will be a second wave of the credit crisis as Germany?s home-grown troubles come to the fore. Round one was imported havoc from the US: round two will be rising defaults at home and a credit squeeze as ratings downgrades force banks to set aside fresh capital. (I enclose the Weber link for German readers http://www.sueddeutsche.de/finanzen/916/484353/text/)

I have no idea when stock markets and commodities ? especially base metals ? will reflect the hard facts on the ground (ie, an end to the Chinese construction bubble). Timing is not my forte. Nor is the market.

But I am absolutely convinced that those who think we can return to the status quo ante of the credit bubble as if nothing has happened are delusional. As almost every central banker in Jackson Hole reminded us over the weekend, it is going to be a very long hard slog.

[Cosmo]

Buying the latest new cell phones, computers, TVs and other electronics every six months is not going to be enough to get us out of this mess.

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100000698/can-the-souffle-really-rise-again/

Ambrose Evans-Pritchard has covered world politics and economics for 25 years, based in Europe, the US, and Latin America. He joined the Telegraph in 1991, serving as Washington correspondent and later Europe correspondent in Brussels. He is now International Business Editor in London.

Can the soufflé really rise again?

Two facts that should give pause for thought.

1) Japanese data released on Thursday showed that exports fell yet again in July. They are down 39.5pc to the US, and 26.5pc to China.

Japan is the world?s second biggest economy. It lives on exports. It is also a key part of the supply chain for the Chinese economy. How can this hard data be reconciled with the extreme V-shaped recovery already priced in by the markets?

By the way, Toyota is suspending a key production line at its Takaoka plant in central Japan. It is cutting global capacity by 1m vehicles.

2) The Baltic Dry Index measuring freight rates for bulk goods and commodities has been falling almost continuously for eleven weeks, dropping from 4,290 to 2,778 on Thursday.

Is this just a glut of ships or is this telling us what the Shanghai market is also telling us, that credit tightening by the Chinese government is pulling the rug from underneath the latest commodity bubble?

There is something wrong with the entire recovery tale, which ignores the fact that excess plant is still at the highest level since the Great Depression (capacity use is 70pc in Europe, 68pc in the US, 65pc in Japan, and as low as 50pc in some countries, according to the World Bank?s Justin Lin). Companies will have to cut jobs and investment.

Soaring ?confidence? indicators have decoupled from reality. The world economy is still prostrate. GDP has shrunk 4pc, 6pc, 8pc, even 12pc or more in a large group of countries. There it more or less sits, like a deflated soufflé.

An end to technical recession in France, Germany, and Japan because Q2 ( and undoubtedly Q3 to come) ekes out a rise from a collapsed base does not mean anything ? except that zero interest rates worldwide, and a massive fiscal stimulus that is pushing public debts towards 100pc across the OECD states (and cannot easily be repeated once the first sugar rush subsides), has mercifully prevented the Great Contraction from turning into an immediate catastrophe.

As the Bank of England?s Governor Mervyn King puts it: ?It?s the level, stupid?. The level of economic activity is years away from full recovery.

The Bundesbank?s Axel Weber says it will take until 2013 for Germany to get back to where it was. He also warns, by the way, that there will be a second wave of the credit crisis as Germany?s home-grown troubles come to the fore. Round one was imported havoc from the US: round two will be rising defaults at home and a credit squeeze as ratings downgrades force banks to set aside fresh capital. (I enclose the Weber link for German readers http://www.sueddeutsche.de/finanzen/916/484353/text/)

I have no idea when stock markets and commodities ? especially base metals ? will reflect the hard facts on the ground (ie, an end to the Chinese construction bubble). Timing is not my forte. Nor is the market.

But I am absolutely convinced that those who think we can return to the status quo ante of the credit bubble as if nothing has happened are delusional. As almost every central banker in Jackson Hole reminded us over the weekend, it is going to be a very long hard slog.

Don, I agree in general with your assessment.

This recovery will not be a V-shaped recovery like many had hoped. It is going to be a bumpy ride.

Any way, just to add one more point; currently, there are some 15 million US homes under water (where the value of their home is less than the loan). There is a danger that many of these home owners/investors will walk away from their obligations too, thereby triggering another round of write off by the banks or maybe a few more financial collapses.

In the end, it may take up to 2013 for the market to get back to where it was - but remember, we fell from a very high point.

[Mister Moobs]

ok

so either through luck or research or the Gods or some combination thereof, I have been doing pretty well in teh stock market for the past 4 months.

Has everyone else.

I bowed out a bit before the big dip back in march and then jumped back in right after the low.

And stocks like OSK, AAPL, UA have been carrying me well.

So when is the next big slump or downturn or sell off.

How can one tell that it's coming?

[Cosmo]

Sept. 16 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, who yesterday said the recession has likely ended, may have to accept a slow recovery and high unemployment as the price for defending his inflation-fighting credentials.

With these words, the US Fed Chairman signalled to the world that the worst Recession, since the 1930's is over!!!

Just hope we don't go back to our old ways of spending more than what we earned ... :roll:

[eagle]

Sept. 16 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, who yesterday said the recession has likely ended, may have to accept a slow recovery and high unemployment as the price for defending his inflation-fighting credentials.

With these words, the US Fed Chairman signalled to the world that the worst Recession, since the 1930's is over!!!

Just hope we don't go back to our old ways of spending more than what we earned ... :roll:

Tell that to the people who lost their job or life savings or both. I think head should be rolling. Madoff isn't the only crook in wall street !!

[condotown]

Sept. 16 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, who yesterday said the recession has likely ended, may have to accept a slow recovery and high unemployment as the price for defending his inflation-fighting credentials.

With these words, the US Fed Chairman signalled to the world that the worst Recession, since the 1930's is over!!!

Just hope we don't go back to our old ways of spending more than what we earned ... :roll:

Do you really believe this crap? What's gonna happen in three to five years when the USA will need to use a third of its gross national product just to service the interest on the national debt. The SHIAT is yet to hit the fan.

The greed and sense of entitlement of the "elite" controlling the world's monetary systems and governments knows no bounds.

I used to just think that social security and medicare was a giant ponzi scheme, but now I realize the entire system that needed bailing out (for the time being) is also a ponzi scheme... And nobody in government will admit the truth to the people.

[Cosmo]

Sept. 16 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, who yesterday said the recession has likely ended, may have to accept a slow recovery and high unemployment as the price for defending his inflation-fighting credentials.

With these words, the US Fed Chairman signalled to the world that the worst Recession, since the 1930's is over!!!

Just hope we don't go back to our old ways of spending more than what we earned ... :roll:

Do you really believe this crap? What's gonna happen in three to five years when the USA will need to use a third of its gross national product just to service the interest on the national debt. The SHIAT is yet to hit the fan.

The greed and sense of entitlement of the "elite" controlling the world's monetary systems and governments knows no bounds.

I used to just think that social security and medicare was a giant ponzi scheme, but now I realize the entire system that needed bailing out (for the time being) is also a ponzi scheme... And nobody in government will admit the truth to the people.

Don, I realised a long time ago that if I can't change it, I roll with it.

Really, I don't care where the market is headed.

My trading strategy has always been to follow the trend, which is a must, in the derivatives market.

In any case, I do agree with your assessment that there will be massive headaches in the years ahead, as world governments (in particular, the US) wean us off the STIMULUS drip.

I will be ready when that day comes.

In the meantime, I am enjoying the ride up.

Hope you heard the latest about "C".

Good luck with your trading.

[Bruce551]

Till Debt Does Its Part

By PAUL KRUGMAN

So new budget projections show a cumulative deficit of $9 trillion over the next decade. According to many commentators, that?s a terrifying number, requiring drastic action ? in particular, of course, canceling efforts to boost the economy and calling off health care reform.

The truth is more complicated and less frightening. Right now deficits are actually helping the economy. In fact, deficits here and in other major economies saved the world from a much deeper slump. The longer-term outlook is worrying, but it?s not catastrophic.

The only real reason for concern is political. The United States can deal with its debts if politicians of both parties are, in the end, willing to show at least a bit of maturity. Need I say more?

Let?s start with the effects of this year?s deficit.

There are two main reasons for the surge in red ink. First, the recession has led both to a sharp drop in tax receipts and to increased spending on unemployment insurance and other safety-net programs. Second, there have been large outlays on financial rescues. These are counted as part of the deficit, although the government is acquiring assets in the process and will eventually get at least part of its money back.

What this tells us is that right now it?s good to run a deficit. Consider what would have happened if the U.S. government and its counterparts around the world had tried to balance their budgets as they did in the early 1930s. It?s a scary thought. If governments had raised taxes or slashed spending in the face of the slump, if they had refused to rescue distressed financial institutions, we could all too easily have seen a full replay of the Great Depression.

As I said, deficits saved the world.

In fact, we would be better off if governments were willing to run even larger deficits over the next year or two. The official White House forecast shows a nation stuck in purgatory for a prolonged period, with high unemployment persisting for years. If that?s at all correct ? and I fear that it will be ? we should be doing more, not less, to support the economy.

But what about all that debt we?re incurring? That?s a bad thing, but it?s important to have some perspective. Economists normally assess the sustainability of debt by looking at the ratio of debt to G.D.P. And while $9 trillion is a huge sum, we also have a huge economy, which means that things aren?t as scary as you might think.

Here?s one way to look at it: We?re looking at a rise in the debt/G.D.P. ratio of about 40 percentage points. The real interest on that additional debt (you want to subtract off inflation) will probably be around 1 percent of G.D.P., or 5 percent of federal revenue. That doesn?t sound like an overwhelming burden.

Now, this assumes that the U.S. government?s credit will remain good so that it?s able to borrow at relatively low interest rates. So far, that?s still true.

Despite the prospect of big deficits, the government is able to borrow money long term at an interest rate of less than 3.5 percent, which is low by historical standards. People making bets with real money don?t seem to be worried about U.S. solvency.

The numbers tell you why. According to the White House projections, by 2019, net federal debt will be around 70 percent of G.D.P. That?s not good, but it?s within a range that has historically proved manageable for advanced countries, even those with relatively weak governments.

In the early 1990s, Belgium ? which is deeply divided along linguistic lines ? had a net debt of 118 percent of G.D.P., while Italy ? which is, well, Italy ? had a net debt of 114 percent of G.D.P. Neither faced a financial crisis.

So is there anything to worry about? Yes, but the dangers are political, not economic.

As I?ve said, those 10-year projections aren?t as bad as you may have heard. Over the really long term, however, the U.S. government will have big problems unless it makes some major changes. In particular, it has to rein in the growth of Medicare and Medicaid spending.

That shouldn?t be hard in the context of overall health care reform. After all, America spends far more on health care than other advanced countries, without better results, so we should be able to make our system more cost-efficient.

But that won?t happen, of course, if even the most modest attempts to improve the system are successfully demagogued ? by conservatives! ? as efforts to ?pull the plug on grandma.?

So don?t fret about this year?s deficit; we actually need to run up federal debt right now and need to keep doing it until the economy is on a solid path to recovery. And the extra debt should be manageable.

If we face a potential problem, it?s not because the economy can?t handle the extra debt. Instead, it?s the politics, stupid.

Its the politics, if the politicians will truly reform Health Care system to bring the costs down and build a clean energy economy centered energy efficiency and renewable energy. A sustainable economy, we will be OK.

Improved mass transit and electric cars hold the potential to dramatically lower oil imports, that will change the USA balance payments and help keep American competitive in the market place.