Economic Armageddon ?

From last night's coasttocoastam.com radio program:



Economic Armageddon
Joe Meyer (meyerassoc.com), an arbitrator and mediator for the NASD and NYSE, discussed the probability of a worldwide financial meltdown looming in our future. What could be some of the contributing factors of the coming economic Armageddon?

Consumer debt is a big problem. Meyer said, "Currently, we have now outstanding consumer credit [of] $9.3 trillion." According to Meyer, the average debt load per household is about $18,700, and 18% of a household's net income is used to pay down debt.

The total debt of America is $31 trillion. Despite this huge debt load, foreign countries continue to invest in U.S. treasury bonds. However, Meyer warned, "If [foreigners] stopped purchasing our bonds, it would be literally impossible to finance our budgetary deficits." Bond prices would be significantly hindered, which would in turn panic equity and housing markets Meyer concluded. This could, in Meyer's opinion, cause banks to call in mortgages--house loans would have to be paid off immediately or face foreclosure.

The tough job market is also a source of concern for Meyer. He went on to explain that the U.S. has lost 2.7 manufacturing jobs in the last 3 years. Meyer said that only 10% of the American workforce is in manufacturing--a sharp decrease from 25% during the 1950s and 1960s. Many of these jobs are going to China and other parts of the world.

Concerning China, Meyer cited some interesting statistics. Currently China consumes 40% of the world's cement, 27% of its steel, and 7% of its oil production. Meyer said oil consumption in China increased by 30% in one year alone.

Added together, our debt load and lack of savings, the scarcity of good paying jobs, and trade imbalances may be heading us toward economic ruin. Meyer suggested that concerned individuals not take on additional debt, and try to reduce any current debt. He went even farther in proposing that homeowners sell their houses and convert what they own into cash.

My comment: anyone know where I can get a 6,000 sq. ft cardboard box?

 

The net worth of americans is 44 trillion. Not everyone owes a mortgage on there property and many do have brokerage accounts and ira's and 401 k's. This money is not counted in the savings rate.

 

As usual it's for justifying the bearish trend probably until summer. After that they would pretend as usual: finally everything is fine again fed has saved the world ... and Bush election haha !

Armagedon YES FOR SURE as economic gravity law but not until FUNDAMENTAL JOINS TECHNICAL that is to say when retirement of baby boomers will come. Then you will see what a financial armagedon really is: dow will tank and target 2000 from maybe 12000 or 15000 and until losing 90% of his value.

 

Richard, are you trying to challenge harrytrader to the chief conspiracy theory promoter position on ET?

 

Not 100% sure but if one is making mortgage payments in a timely manner , the bank can not call in the loan.

Mortgages on some farm property is different ...if the appraised value falls below the mortgage amount the loan can be called in.

 

Besides, I'm in therapy to rid myself of this addiction to ET (I'm trying hypnosis). If all goes well, I'll be able to stay away. I equate it to not being able to look away at a horrendous car crash. You know you shouldn't look over but...

That profitable thread is going to be hillarious so I'm worried as hell.

 

In response to the quote from Mr. Joe Meyer, whom neglects to identify debt as an asset, and relates China to a cause for concern, I wish to call upon the writings of “harrytrader’s” signature author. Bastiat, a libertarian matched only by Smith, used irony to illustrate the fallacy in common points of view. In one of his most famous essays, Bastiat petitioned lawmakers on behalf of everyone involved in the production of lighting products.

In this essay, Bastiat writes, “ You no longer have the right to invoke the interests of the consumer. You have sacrificed him whenever you have found his interests opposed to those of the producer. You have done so in order to encourage industry and to increase employment…when told that the consumer has a stake in the free entry of iron, coal, sesame, wheat, and textiles, ‘Yes,’ you reply, ‘but the producer has a stake in their exclusion.’ Very well, surely if consumers have a stake in the admission of natural light, producers have a stake in its interdiction.” Bastiat’s irony regarding government intervention seeking to limit the exchange of light between the sun and consumers on earth, mocks the political posture that imposed tariffs on the exchange of goods between France and its neighbors.

I feel that Joe Meyer’s desire is to hinder the development of China and other countries. He strives to accomplish this by invoking fear in the minds of consumers, while he depicts China and other parts of the world as thieves, working manufacturing jobs overseas. Meyer concludes this attempt by relating the present U.S. Job Market’s manufacturing percentage to the now ancient era of the 1950s and 1960s. I do not wish to degrade the era of the 1950s and 60s, but the worldwide wealth per capita today dwarfs that “golden era.” Industry on a global scale has boomed, and China is evidence to that. If I used the methodology of Mr. Joe Meyer, I would assume that over the past 54 years, North America has experienced a massive economic decline. However, our great country has participated equally, if not more, in the continuous economic expansion dating back to Smith’s great book published in 1776.

On the issue of national debt, I am amazed at how someone with Mr. Meyer’s stature can neglect to view the holding of debt as an asset. He points out the fact that foreigners support the financing of our government expenditures, but neglects to mention the fact that much of the world’s wealth is stored in a variety of government notes, and those notes make up much of the wealth of our world. Meyer fails to give debt a worthy place in the economic environment of today. Debt plays a crucial role in the growth and expansion process of the business cycle, for the issuing of debt to a variety of consumers benefits both sides of the transaction. That is how the market system works. Prices and interest rates move into balance, so that both parties are content with the trade. The consumer of debt benefits at the issuance of the credit, while the issuers reward comes by delaying consumption. The average debt load of the market participant sheds light on the extent of just how strong the next phase of the business cycle can grow, but only if we have faith in the desire of the consumer.

As to the demand for U.S. Government Debt failing to remain strong, just watch the bond market for clues on the demand for treasuries when markets get flustered. This should put your worries to rest.

 

I listened to that show and Myers sounded like an idiot to me. He thought that the fact that the markets are trending up but insiders are selling was a sign that the insiders know something that the world doesn't. Insider selling is just paycheck cashing. It sounded to me like his mind ran a lot towards the panic/fear/uncertainty/doubt/conspiracy side that you get a lot of on that show.