US Financial Crisis

Hi, Pike,

As a securities broker and consultant, you are probably seeing people who are a lot better off to begin with Furthermore, most of us will agree that there was economic growth in the U.S. in the last 8 years. The problem is that most of us didn't get to experience it. The last 8 years for most middle class and lower has been one long recession.

As I said before, the U.S. has been blessed with no major economic crisis since the Great Depression. There aren't too many people around to remember what triggered it or how bad it was.

After the Great Depression, a whole generation put enough regulations to guarantee that it wouldn't happen again. Enough, in fact, that it has taken almost 30 years to dismantle many of them. Enough, in fact, that if it weren't because there are still many of them in place, we would be living through another Great Depression right now.

Right before the Great Depression, a culture that was very similar to ours existed: a glorification of speculation, a lot of investments done through debt, lax regulation on financial markets, a religious belief on how the market could sort things out magically.

Then the market did take care of itself, destroying the life of millions of people. Many, in fact, who never participated in the wild speculation of the era. Many, who did everything right. We got to remember this because if we don't, none of the rest of what I am saying will matter.

The most dangerous element of the current economic situation is a belief that nothing really bad could happen. Heck, I have read some people who are welcoming the coming economic problems as punishment for those who overextended themselves. They seem to forget that the market is not a daddy that gives candy to good children and a spanking to bad children. It is more like influenza of 1918, killing people as it goes through.

Our current libertarian/free market religious beliefs are preventing our leadership to take action and preventing the population from creating the political conditions to force our leadership to take action.

I ask you then, what is the foundation for your skepticism about the economic warnings from so many economist, Pike. You know that the current bond market have thrown conventional wisdom on investing out the window. Bonds are suppose to be more secure than equities, yet at this point they seem to be more risky because the bank and credit situation hasn't been fully sorted out yet.

Also, explain what inflation is going to do with savings, and why this isn't an economic threat. If middle class people saved 200K and inflation punches out 10% to 25% of its value within a year or two, how can this not be seen with alarm? (I would like to give you a firm figure, but since U.S. inflation rates are doctored to look better than reality, I have to give a wide range. What I know is that gas and certain food staples and medical care have risen over 100% in the last 8 years).

If you really have a good answer for why this isn't a problem, please tell me. Really. I have to admit that I keep hoping that things will just sort themselves out because I have no control over these forces.

To me, it feels that I am at the beach as I see a wall of water heading towards to me in what looks like a tsunami while knowing that I can't ran away from it. So I put my head in the sand most of the time to make it possible for me to live until the water hits me.

I just want to be sure that when you downplay the credit market problems and inflation, that you are actually looking at the sea and know that there isn't a tsunami approaching, rather than you are doing the same, putting your head in the sand next to me.

Free markets don't exist and never have.  And politics and economics are inseparable.  Neo-con "classical" economics advantages wealthy persons on the theory that they are the only ones with anything to invest and therefore they provide the energy for the economic engine.  (That is not really the case if one looks at how many small investors there are in the West in the last 40 or 50 years.  It was true before that however.)

Edited by pikeshot1600 - 04-Jul-2008 at 16:53

Originally posted by hugoestr Hi, Pike, As a securities broker and consultant, you are probably seeing people who are a lot better off to begin with Furthermore, most of us will agree that there was economic growth in the U.S. in the last 8 years. The problem is that most of us didn't get to experience it. The last 8 years for most middle class and lower has been one long recession. As I said before, the U.S. has been blessed with no major economic crisis since the Great Depression. There aren't too many people around to remember what triggered it or how bad it was. After the Great Depression, a whole generation put enough regulations to guarantee that it wouldn't happen again. Enough, in fact, that it has taken almost 30 years to dismantle many of them. Enough, in fact, that if it weren't because there are still many of them in place, we would be living through another Great Depression right now. Right before the Great Depression, a culture that was very similar to ours existed: a glorification of speculation, a lot of investments done through debt, lax regulation on financial markets, a religious belief on how the market could sort things out magically. Then the market did take care of itself, destroying the life of millions of people. Many, in fact, who never participated in the wild speculation of the era. Many, who did everything right. We got to remember this because if we don't, none of the rest of what I am saying will matter. The most dangerous element of the current economic situation is a belief that nothing really bad could happen. Heck, I have read some people who are welcoming the coming economic problems as punishment for those who overextended themselves. They seem to forget that the market is not a daddy that gives candy to good children and a spanking to bad children. It is more like influenza of 1918, killing people as it goes through. Our current libertarian/free market religious beliefs are preventing our leadership to take action and preventing the population from creating the political conditions to force our leadership to take action. I ask you then, what is the foundation for your skepticism about the economic warnings from so many economist, Pike. You know that the current bond market have thrown conventional wisdom on investing out the window. Bonds are suppose to be more secure than equities, yet at this point they seem to be more risky because the bank and credit situation hasn't been fully sorted out yet. Also, explain what inflation is going to do with savings, and why this isn't an economic threat. If middle class people saved 200K and inflation punches out 10% to 25% of its value within a year or two, how can this not be seen with alarm? (I would like to give you a firm figure, but since U.S. inflation rates are doctored to look better than reality, I have to give a wide range. What I know is that gas and certain food staples and medical care have risen over 100% in the last 8 years). If you really have a good answer for why this isn't a problem, please tell me. Really. I have to admit that I keep hoping that things will just sort themselves out because I have no control over these forces. To me, it feels that I am at the beach as I see a wall of water heading towards to me in what looks like a tsunami while knowing that I can't ran away from it. So I put my head in the sand most of the time to make it possible for me to live until the water hits me. I just want to be sure that when you downplay the credit market problems and inflation, that you are actually looking at the sea and know that there isn't a tsunami approaching, rather than you are doing the same, putting your head in the sand next to me.

The issue with the distribution of wealth of the past eight years is interesting to look at for the various econmic classes, for example in 2003, I was able to move to a bigger house in the Northern Virginia area due to my parents moving into the upper-middle class mainly due to my Dad moving into much higher paying private sector employment. However even where I am now in an area of Northern Virginia outside of Washington DC that has a very large-upper-middle to upper-class population the dramtic shift in economics is being felt in very big ways as prices for everyday needs have gone up dramtically and foreclosures have skyrockted. In addition many in the white collar workforce are beginning to lose thier jobs. so this shows the current economic crisis being felt here in the US is not just confined to the middle and working classes. Which I think will present a much bigger problem going into this.       

Originally posted by hugoestr Originally posted by Panther Good question. I have one myself. If the US economy is tanking, then why is it still growing? Hi, there, This is a history forum, so let's remember what the economic conditions were right before the crash of 1929. Eerily similar.

I agree and could this be a ploy to force the Norrh American Union and the Amero currency upon the people of the Americas????
I found this article in August Review and it is not if but when the crash happens.



http://www.augustreview.com/news_commentary/global_banking/imminent_financial_crisis?_2008070394/

Imminent Financial Crisis?      

You won't see this repeated in U.S. media outlets, but Europe is running scared of an impending financial disaster.

Barclays Capital, the Royal Bank of Scotland and Fortis are pulling away from the U.S. financial markets. The withdrawal of funds from New York institutions has not been reported, but amounts to at least a mini-run on the banks involved, similar to what happened to Bear Stearns in March; the run may be expanding......

hugo:

Originally posted by pikeshot1600 hugo:   Such dire predictions in the previous several posts!  Hell, none of us has any control over these forces.  Forecasting the future of anything is a waste of drinking time, and all we have to go on with this is the relatively recent past.  People are adaptable; very severe circumstances have been encountered and overcome before, and it must be assumed they will be again.   So enjoy the beach, and....  What else can any of us do?

Edited by Panther - 04-Jul-2008 at 22:23

I blame the economical throubles of the U.S. to a single factor: the rise of the economicists charlatans, and particularly to the "economy of services".

Originally posted by pikeshot1600 hugo: Such dire predictions in the previous several posts! Hell, none of us has any control over these forces. Forecasting the future of anything is a waste of drinking time, and all we have to go on with this is the relatively recent past. People are adaptable; very severe circumstances have been encountered and overcome before, and it must be assumed they will be again. So enjoy the beach, and.... What else can any of us do?

Oh, sacred mother of God...

I was hoping against hope that you were going to outline why these forecasts wouldn't happen.

In light of your post,

and with it a little ancient poem appropriate for the times:

Tu ne quaesieris—scire nefas—quem mihi, quem tibi
finem di dederint, Leuconoë, nec Babylonios
temptaris numeros. ut melius, quicquid erit, pati!
seu plures hiemes, seu tribuit Iuppiter ultimam,
quae nunc oppositis debilitat pumicibus mare
Tyrhenum. Sapias, vina liques, et spatio brevi
spem longam reseces. dum loquimur, fugerit invida
aetas: carpe diem, quam minimum credula postero.


With an old translation, for those who don't know Latin:

Ask not ('tis forbidden knowledge), what our destined term of years,
   Mine and yours; nor scan the tables of your Babylonish seers.
   Better far to bear the future, my Leuconoe, like the past,
   Whether Jove has many winters yet to give, or this our last;
   THIS, that makes the Tyrrhene billows spend their strength against
        the shore.
   Strain your wine and prove your wisdom; life is short; should hope
        be more?
   In the moment of our talking, envious time has ebb'd away.
   Seize the present; trust to-morrow e'en as little as you may.

hugo:

Edited by pikeshot1600 - 07-Jul-2008 at 19:16

Pike,

Oh, you don't disappoint. You never do.