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Author
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Topic: Economic `Armageddon' predicted
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Đan_da_house_man ©
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Member # 4788
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posted
this frightens me. is it possible? can the economy collapse? already the canadian dollar is at 84 cents U.S when a while ago it was at 64 cents.
Economic `Armageddon' predicted
By Brett Arends/ On State Street
Tuesday, November 23, 2004
Stephen Roach, the chief economist at investment banking giant Morgan Stanley, has a public reputation for being bearish.
But you should hear what he's saying in private.
Roach met select groups of fund managers downtown last week, including a group at Fidelity.
His prediction: America has no better than a 10 percent chance of avoiding economic ``armageddon.''
Press were not allowed into the meetings. But the Herald has obtained a copy of Roach's presentation. A stunned source who was at one meeting said, ``it struck me how extreme he was - much more, it seemed to me, than in public.''
Roach sees a 30 percent chance of a slump soon and a 60 percent chance that ``we'll muddle through for a while and delay the eventual armageddon.''
The chance we'll get through OK: one in 10. Maybe.
In a nutshell, Roach's argument is that America's record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants.
The result: U.S. consumers, who are in debt up to their eyeballs, will get pounded.
Less a case of ``Armageddon,'' maybe, than of a ``Perfect Storm.''
Roach marshalled alarming facts to support his argument.
To finance its current account deficit with the rest of the world, he said, America has to import $2.6 billion in cash. Every working day.
That is an amazing 80 percent of the entire world's net savings.
Sustainable? Hardly.
Meanwhile, he notes that household debt is at record levels.
Twenty years ago the total debt of U.S. households was equal to half the size of the economy.
Today the figure is 85 percent.
Nearly half of new mortgage borrowing is at flexible interest rates, leaving borrowers much more vulnerable to rate hikes.
Americans are already spending a record share of disposable income paying their interest bills. And interest rates haven't even risen much yet.
You don't have to ask a Wall Street economist to know this, of course. Watch people wielding their credit cards this Christmas.
Roach's analysis isn't entirely new. But recent events give it extra force.
The dollar is hitting fresh lows against currencies from the yen to the euro.
Its parachute failed to open over the weekend, when a meeting of the world's top finance ministers produced no promise of concerted intervention.
It has farther to fall, especially against Asian currencies, analysts agree.
The Fed chairman was drawn to warn on the dollar, and interest rates, on Friday.
Roach could not be reached for comment yesterday. A source who heard the presentation concluded that a ``spectacular wave of bankruptcies'' is possible.
Smart people downtown agree with much of the analysis. It is undeniable that America is living in a ``debt bubble'' of record proportions.
But they argue there may be an alternative scenario to Roach's. Greenspan might instead deliberately allow the dollar to slump and inflation to rise, whittling away at the value of today's consumer debts in real terms.
Inflation of 7 percent a year halves ``real'' values in a decade.
It may be the only way out of the trap.
Higher interest rates, or higher inflation: Either way, the biggest losers will be long-term lenders at fixed interest rates.
You wouldn't want to hold 30-year Treasuries, which today yield just 4.83 percent.
http://business.bostonherald.com/businessNews/view.bg?articleid=55356
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(O.o)
(> <) One day while viciously throwing down on his box, Jack boldly declared - Let There Be House!
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Đan_da_house_man ©
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Krugman: Economic Crisis a Question of When, Not If
Mon Nov 22, 2:22 PM ET
By Pedro Nicolaci da Costa
NEW YORK (Reuters) - The economic policies of President Bush (news - web sites) have set the country on a dangerous course that will likely end in crisis, Princeton economics professor Paul Krugman told Reuters in an interview.
Krugman, who may be best known for his opinion column in The New York Times, said he was concerned that Bush's electoral victory over Sen. John Kerry (news - web sites) earlier this month would only reinforce the administration's unwillingness to listen to dissenting opinions.
That, in turn, could spell serious trouble for the U.S. economy, which under Bush's first term was plagued by soaring deficits, waning investor confidence and anemic job creation.
"This is a group of people who don't believe that any of the rules really apply," said Krugman. "They are utterly irresponsible."
Krugman is currently taking some time off from journalism to write and promote the second installment of his latest project -- economics textbooks aimed at making the science more accessible to college students.
In the meantime, however, he worries the Bush administration's fiscal policies are going to push the world's largest economy into a rut.
The most immediate worry for Krugman is that Bush will simultaneously push through more tax cuts and try to privatize social security, ignoring a chorus of economic thinkers who caution against such measures.
"If you go back and you look at the sources of the blow-up of Argentine debt during the 1990s, one little-appreciated thing is that social security privatization was a important source of that expansion of debt," said Krugman.
In 2001, Argentina finally defaulted on an estimated $100 billion in debt, the largest such event in modern economic history.
BANANA REPUBLIC?
"So if you ask the question do we look like Argentina, the answer is a whole lot more than anyone is quite willing to admit at this point. We've become a banana republic."
Crisis might take many forms, he said, but one key concern is the prospect that Asian central banks may lose their appetite for U.S. government debt, which has so far allowed the United States to finance its twin deficits.
A deeper plunge in the already battered U.S. dollar is another possible route to crisis, the professor said.
The absence of any mention of currencies in a communique from the Group of 20 rich and emerging market countries this past weekend only reinforced investors' perception that the United States, while saying it promotes a strong dollar, is willing to let its currency slide further.
"The break can come either from the Reserve Bank of China deciding it has enough dollars, thank you, or from private investors saying 'I'm going to take a speculative bet on a dollar plunge,' which then ends up being a self-fulfilling prophecy," Krugman opined. "Both scenarios are pretty unnerving."
In the longer-term, Bush's version of social security reform, which Krugman says would relegate pensions for the elderly to the whims of volatile financial markets, could have wide-ranging implications for future generations.
The only bright spot in having Bush in power for another four years, said Krugman, is that further economic mismanagement might trigger some sort of popular outcry.
"I do believe at some point there is going to be a popular tidal wave against what has happened," concluded Krugman. "In the meantime, you keep banging on the drum, you keep telling the truth.
"And then eventually we have the great demonstrations, which I think are important to let the government know that many Americans are not happy with what is happening," he said.
http://news.yahoo.com/news?tmpl=story&cid=615&u=/nm/20041122/pl_nm/economy_crisis_krugman_dc_1&printer=1
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(O.o)
(> <) One day while viciously throwing down on his box, Jack boldly declared - Let There Be House!
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jimmymack-2000
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posted
The world economy is totally unbalanced right now, and has been for a while. U.S. consumer demand is at an infinite order of magnitude compared to that of any other country. Americans spend and buy and spend some more, whereas everyone else is hunkered down and saving. It has to end sometime.
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She's doing so much harm, doing so much damage
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Đan_da_house_man ©
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i just hope it doesn't come true. the world will be a disaster.
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(> <) One day while viciously throwing down on his box, Jack boldly declared - Let There Be House!
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urban electrik
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posted
this is going to break the BACK of the REPUBLICAN party...
and the Fiscal Conservatives know it.
all the old (poor)southern racist voting REP trying to pretend we are going to return culturally to the 1950's, are going to feel like they got slapped a mack truck.
people talk about "dumbing down"
nothing in nature survives going backwards...
it will be fun to watch the evangelicals reconcile globalization.
buckle up
it's going to be nastee in 2007.
![[bolt]](graemlins/bolt.gif)
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ue | power to the sheeple
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altrrdst8
Star Member
Member # 23
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posted
poor economic policies and a leader of dubious democratic credentials.
America really is a Banana Republic.
![[rofl]](graemlins/rofl.gif)
st8
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I don't mean to sound bitter, cold, or cruel, but I am, so that's how it comes out.....
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Prince HiFi
Star Member
Member # 800
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posted
This is why putting the smackdown on Iraq after they started selling oil in Eurodollars was so important - The US dollar will stay afloat as long as the global oil continues to be denominated and exchanged in US dollars. If oil exchange ever goes to the Euro, it's ovah for the US dollar (and economy).
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Prince HiFi
Star Member
Member # 800
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posted
x2
[ November 24, 2004, 08:36 AM: Message edited by: DubMaster R-R-Rick O'Shay ]
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Oak Pk, IL's Best Bedroom DJ, serge
Platinum Member +
Member # 83
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posted
Like I've said before, when China changes to a new currency, it's OVAH for the U.S.
It will devalue the American dollar, and Americans will be paying out of our azzes for what were once cheap goods.
We will run out of resources and funds to fight a war with no end, just like the USSR did when they stuck themselves in a war with no end in Afghanistan.
You gotta admit that Bin Laden fellow is pretty smart.
The American empire will collapse in about 10-12 years.
[ November 24, 2004, 10:11 AM: Message edited by: serge ]
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paz!
Oak Park's pulchritudinousest, dj serge
ode2nov2 aka Two Americas Mix
A Laptop, A Mousepad, and a Feeling...
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ChiJAM
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quote:
Originally posted by serge:
Like I've said before, when China changes to a new currency, it's OVAH for the U.S.
They won't change it, they'll just remove the dollar/yuan peg. The yuan will rise against the dollar and Walmart won't be such a good deal anymore.
ChiJAM
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"All of the animals except man know that the principal business of life is to enjoy it."
Samuel Butler
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Oak Pk, IL's Best Bedroom DJ, serge
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quote:
Originally posted by ChiJAM:
quote:
Originally posted by serge:
Like I've said before, when China changes to a new currency, it's OVAH for the U.S.
They won't change it, they'll just remove the dollar/yuan peg. The yuan will rise against the dollar and Walmart won't be such a good deal anymore.
ChiJAM
When the average American consumer can't even save a spare buck at WalMart, that's a major sign of trouble.
American consumer spending is what is driving the world economy at this point. A lessening of American consumption can not be good for the world economy.
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paz!
Oak Park's pulchritudinousest, dj serge
ode2nov2 aka Two Americas Mix
A Laptop, A Mousepad, and a Feeling...
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ChiJAM
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quote:
Originally posted by serge:
When the average American consumer can't even save a spare buck at WalMart, that's a major sign of trouble.
American consumer spending is what is driving the world economy at this point. A lessening of American consumption can not be good for the world economy.
Yep, Americans purchase tons of imported goods and go into debt to continue to do so. However, as interest rates creep up in order to curtail the exodus of foreign investment in the U.S., going into debt will become more difficult. Then, spending is curtailed and all of those export-driven countries start to sweat. This has been a long time coming, too.
Peep out "The Dollar Crisis" by Richard Duncan. It's a good read.
ChiJAM
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"All of the animals except man know that the principal business of life is to enjoy it."
Samuel Butler
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altrrdst8
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posted
add the baby boomer pension problem. its gonna be chaos
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I don't mean to sound bitter, cold, or cruel, but I am, so that's how it comes out.....
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Oak Pk, IL's Best Bedroom DJ, serge
Platinum Member +
Member # 83
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posted
quote:
Originally posted by ChiJAM:
quote:
Originally posted by serge:
When the average American consumer can't even save a spare buck at WalMart, that's a major sign of trouble.
American consumer spending is what is driving the world economy at this point. A lessening of American consumption can not be good for the world economy.
Yep, Americans purchase tons of imported goods and go into debt to continue to do so. However, as interest rates creep up in order to curtail the exodus of foreign investment in the U.S., going into debt will become more difficult. Then, spending is curtailed and all of those export-driven countries start to sweat. This has been a long time coming, too.
Peep out "The Dollar Crisis" by Richard Duncan. It's a good read.
ChiJAM
Thanks for the tip. I'm gonna hit Amazon up for this! ![[Hail]](hail.gif)
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paz!
Oak Park's pulchritudinousest, dj serge
ode2nov2 aka Two Americas Mix
A Laptop, A Mousepad, and a Feeling...
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julian_kelly
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posted
Whats a practical and achievable solution for survival for an individual/family that wishes to survive in touch economic times?
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ChiJAM
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quote:
Originally posted by julian_kelly:
Whats a practical and achievable solution for survival for an individual/family that wishes to survive in touch economic times?
Adaptation to tough economic times should only represent a slight modification to what should have been your regular habits anyway, e.g., living beneath your means, saving money, prudently investing and securing/maintaining more than one source of income. If you haven't been doing these things, you need to start. If you have been, do so with even more vigor. The sad part is: it's going to be too late for some folks.
I've read several of your posts, so I'm aware of your business acumen, Julian. What say you?
ChiJAM
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"All of the animals except man know that the principal business of life is to enjoy it."
Samuel Butler
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david mancuso
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posted
quote:
Originally posted by urban electric:
this is going to break the BACK of the REPUBLICAN party...
and the Fiscal Conservatives know it.
all the old (poor)southern racist voting REP trying to pretend we are going to return culturally to the 1950's, are going to feel like they got slapped a mack truck.
people talk about "dumbing down"
nothing in nature survives going backwards...
it will be fun to watch the evangelicals reconcile globalization.
buckle up
it's going to be nastee in 2007.
I wish but not so....as they like to collect things like precious stones/art etc.
Vatican Classic example of hording.
d
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Moksha
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Member # 574
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posted
quote:
Originally posted by julian_kelly:
Whats a practical and achievable solution for survival for an individual/family that wishes to survive in touch economic times?
gold?
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C hristian
Diamond Member
Member # 856
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posted
Julian -
To answer your question, the trades seem to always survive and even prosper when everything else is haywire. That said, it's usually the sidework that one gets as a tradesman that is the most profitable. And when there are no more million dollar contracts, a next door neighbor always needs something fixed on the weekend.
Barter for what you can. Start getting used to it now. It will come in really handy later. (or even now)
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C hristian's Post-election Democratic Mix
Around the World in 58 Minutes
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dirtie blonde
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Member # 4335
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posted
quote:
Originally posted by ChiJAM:
quote:
Originally posted by julian_kelly:
Whats a practical and achievable solution for survival for an individual/family that wishes to survive in touch economic times?
Adaptation to tough economic times should only represent a slight modification to what should have been your regular habits anyway, e.g., living beneath your means, saving money, prudently investing and securing/maintaining more than one source of income. If you haven't been doing these things, you need to start. If you have been, do so with even more vigor. The sad part is: it's going to be too late for some folks.
I've read several of your posts, so I'm aware of your business acumen, Julian. What say you?
ChiJAM
They say to always have enough money in the bank at all times to live off of for at least 3 months and own a home. Interest rates are low, instead of building more debt (unless it is a mortgage), take advantage and get rid of it and build a diverse investment portfolio.
People definitely need to be more conservative when it comes to spending. I am working on myself. How much crap do you really need? Do you really need to by a brand new $35k car, or can you settle for a $16k used one, or do you really need a car at all? People need to do a better job at separating needs from wants.
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Đan_da_house_man ©
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even if the dollar is worthless, can't they use the gold in all the reserves to bring it back to life?
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(> <) One day while viciously throwing down on his box, Jack boldly declared - Let There Be House!
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dirtie blonde
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quote:
Originally posted by dan_da_house_man:
even if the dollar is worthless, can't they use the gold in all the reserves to bring it back to life?
They stopped backing all the deposits with gold a long time ago. There wouldn't nearly be enough.
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