Just like Schwartz over at BSC said there was no liquidity issues. I don't trust Wall Street executives as far as I can spit. The truth is, no one knows how far we are through this, as, there is a high degree of human emotions involved. We are floating on a sea of credit default swaps and a Cat 5 hurricane is still 1,000 miles away and we are only in a pontoon boat (but it has granite fixtures, leather seats, GPS, and crome cleats to boot). Can we make it back to The Port of Reality before it's too late or will we continue to believe that we are invincible to this perfect storm that is coming?
here is the full article..less the big jpegs The trees behind the forest say this For every dollar GDP made, the is about $5 dollars of new debt required. if there is no or even slower paced newdebt, unemployment will sky rocket, as projects and orders will slow/stop. There is your doosie recession. The fed rate cuts have not gone to the consumer, they have gone to the banks profit line to help them recover losses. This will continue until the housing market stops falling and full losses of this house deflation can be accounted for.. No employment, no bargining power for wage inflation. There for debt deflation will be acclerated when the employment numbers explode...ouch !
WE DID SEE IT COMING.......BUT FEW COULD SPEAK OUT THE TRUTH. NOW JUST WAIT FOR THE STORM TO PASS AND QUICKLY PUT YOUR MONEY TO WORK WHEN THINGS RETURN TO NORMAL.
Have a question I don't really understand. The article (and whats being observed) talks about stagflation occuring due to cost push inflation + recession. Likewise in 1970s, there was lots of stagflation. Question I don't understand and I hope someone can clearly explain (read the article some times but still don't really get it) is what EXACTLY is the cause of this cost push inflation. We have less and less spending as people get poor and the credit crunch hits so wouldn't that cause prices to decrease? Money supply is decreasing drastically as we enter the "dissipation" phase where the bubble winds down so less money in system = less dollars chasing goods = lower prices? The only way I can see the dollar is appreciating but isn't it only depreciating because of the Fed's action (printing press). But the Fed's action during the stagflation of 1970s wasn't like Bernanke's (or was it?) So besides the Fed, what is the main cause of this cost push inflation or the rise of commodity prices? It obviously isn't global warming or peak oil as in the article. The article mentions interests rates had to be risen in the 1970 to 20%ish just to push investors out of commodity prices back into the economy. Why would is this commodity bubble even existing anyways (or in the 1970s) wouldn't the high prices actually cause demand to crash as in the article would in turn deflate the commodity bubble? Thanks for any response, I'm new to economics and am spending a lot of time on it and would like to really understand whats going on.
Creation of credit by borrowing (Federal Deficit and "off budget borrowing") adds to the money supply as that money is spent to buy things, but was never earned via production and sale of produced goods. Thus you have more money chasing the same goods, and therefore demand rises relative to supply, and prices rice.
Yes but this creation of money by creation of debt will basically be "unwound" by the impending credit contraction associated with the decrease of housing prices and the credit crunch. Since the SOURCE of the inflation and depreciation is this issuing of new credit/debt. Won't the contraction of such result in a deflation? Why is there instead stagflation (inflation) and increase in commodity prices?
Yes, why are commodity prices staying high? That is the clue.... Is the Fed going to call in its loans? No, its handing out as much as it can, as fast as it can. Is the government going to increase taxes or cut spending and pay off its debts? No, just the opposite. They have benn borrowing about $2 billion more every day, and just added another $160 billlion to the tab. IMO, they are ALL pumping in "liquidity" as fast as they can, and all that is resulting is inflation and support for import demand, not the investment in production, and job creation they would hope for. The only contractions are reduced leverage and bad debt losses, as I see it. I do think we are seeing contractions in certain sectors caused by fear of collapse, or lack of consumer spending, but those are offset by the money shifting to other sectors, like short term treasuries. The problem is we keep shipping the dollars overseas to pay for the huge trade deficit, but foreigners can't find anything to buy or invest in here they want to have or are willing to risk at current prices, so the dollars stack up in short term treasuries as their owners try to figure out what to do with them, and the pile keeps getting higher and higher. What is the 3 month t-bill rate, now? It was down in the 1.8% PER YEAR range last time I looked. Too much money and nothing worth buying is going to cause cost push inflation starting at a flight to commodities when interest rates are way below the real inflation rate.