Martin, Seems you're guardedly optimistic Western economies aren't susceptible to a catastrophic debt implosion. I read Mithos' arguments. I have yet to read your counter. Can you articulate for us "doomers" how and why we're mistaken? In my opinion, the transitional path to collapse is obvious. Deficit spending and multi-lateral bailouts are the stimulus keeping this world economy afloat. Cut that and we blow through the '09 lows with a dramatic surge in unemployment (>~20%). The majority of banks, insurers and real-estate types are rendered insolvent. This is your worst-case scenario. It's a Great Depression. The alternative is to postpone a deflationary collapse by debt-financed stimulus in lieu of a consumer recovery. The problem here: sovereign debt is already at extreme levels and heavily weighted towards the short-end of the curve. This makes a return to prudent interest rates in light of a foreseeable recovery impossible, since debt service costs will envelope the majority of Western budgets. After things pickup, we get a final bubble and currencies implode relative to metals and commodities. We're boxed in. That's the point. Austerity assures a deflationary collapse. And continued deficit financing eliminates the possibility of future rate hikes. Which is why gold is where it is. The optimists are really arguing for their own demise here, imo.
achilles, I am not saying that the scenario that you describe is impossible. My point is that, in similar vein, I don't see it as inevitable. We could argue these things endlessly, but, in simplest terms, I think this time is a bit different, but not that different. Crises like these have happened before and the system survived (and, sometimes, even was made better). Again, I don't see why this time is so drastically different. If there's anything I learned having lived through various different crises, when you're too close to the action, disasters always look very large and significant. In reality, they often don't "amount to a hill of beans in this crazy world". Obviously, I could be wrong this time.
I have always remembered the next Jim Rogers quote from 2002 when asked when it will all come crashing down and how long such a crash could last. Jim, you asked how long this can go on, Marc is right, it can go on for a while. Look at Argentina , it debased and destroyed its currency for 30 or 40 years. The Perones came in there and ruined the place. The people continue to live and dance and drink and everything else in Argentina . It wasn't a very good life, they got worse and worse and they had military dictatorships, et cetera, but it didn't fall off the face of the earth, it just wasn't a lot of fun. http://www.financialsensearchive.com/transcriptions/2003/RT090603.html I think it's a very pragmatical line of thinking that can really help you both on a personal level as on a financial level making wise investment decisions. Do not think we will go out with one quick bang and don't let short term fluctuations influence your longer term outlook.
In my opinion, the transitional path to collapse is obvious. Deficit spending and multi-lateral bailouts are the stimulus keeping this world economy afloat. Cut that and we blow through the '09 lows with a dramatic surge in unemployment (>~20%). The majority of banks, insurers and real-estate types are rendered insolvent. This is your worst-case scenario. It's a Great Depression. The alternative is to postpone a deflationary collapse by debt-financed stimulus in lieu of a consumer recovery. The problem here: sovereign debt is already at extreme levels and heavily weighted towards the short-end of the curve. This makes a return to prudent interest rates in light of a foreseeable recovery impossible, since debt service costs will envelope the majority of Western budgets. After things pickup, we get a final bubble and currencies implode relative to metals and commodities. We're boxed in. That's the point. Austerity assures a deflationary collapse. And continued deficit financing eliminates the possibility of future rate hikes. Which is why gold is where it is. The optimists are really arguing for their own demise here, imo. _______________________________________________________ I would have to say spot on! I truly do not see a way out of the "BOX" unless we allow the system to crash and "Roboot" so to speak. To tear down the system, and rebuild on solid principles of Capitalism with Gold back "Currency" and demolish the FED BANKS. This would take a lot of pain, far more than any country is willing to go through. Not sure when the deflationary collapse will come, but it is the end result on our current path.
Martin, I'd love to hear the rational behind your position. I'm not here to argue. Time will prove either of us right. Or neither, and someone else. The whole point is to broaden our individual perspectives through collaborative debate. My worry is today's distressed sovereigns represent an overwhelming majority of global output. Whereas in the crisis of yester-year, defaults and collapses were localized to relatively insignificant nations and trading blocks. Like a chain of mountaineers roped together, when the weakest falls, the remaining hold integrity. Instead of a Thailand, Russia or Argentina, now, it's US, Canada, UK, EU, Japan. At the same time... Honestly, there is no way BRIC can pick up the slack. To add insult to injury, they already manufacture most of our exports. With the specter of grand intervention looming after every drop, anything can happen. Nothing is written in stone. True. But as it stands today, under it's current structure, our money-system can't continue. "They" will have to change the rules. And there isn't much they can do except print, expropriate and repudiate. Repudiation is the best option, imo. However, that screws the Bankers, whom, recent history has shown, are the new ruling class. So in my mind, it's expropriate and/or print. Theft, overt or covert. I am open to alternative opinions.
It is not just the governmental debt it is private debt especially in america and uk. If you look at the countries with high debt there is a reason they do not have a private sector that is capable. This is evident in eastern europe. All they have done is postponed the inevitable with more debt making the end result even worse. Even if they do not default the impact of repaying the debt and the cost of retirement will dampen demand so things will not be like they were before. This isn't even taking into consideration the price of energy especially oil and the higher population. This will end badly it is just a matter of when.
The posers and dancers have left; where can they be found now? In other rooms at ET. What a place, this ET!!! But can they pose and dance like these 2 ordinary folk? http://www.youtube.com/watch?v=xB9SJ3kH3Fwhttp://www.youtube.com/watch?v=xB9SJ3kH3Fw --------------- But a simple reminder to the posers, one soooo basic that it dispenses with the liability of useless discussions .... BEARmarket rock-bottom BASICS ... only 1 is required and its like this .... Re: stocks indexes, real estate et al that crashed from 2007 (the latter from 2006) At a TRUE bearmarket bottom, no Media agency would be able to find even ONE single person who would be willing to make a +ve comment. (application: go on back to March 2009 news articles and note how mannnnny +ve statements were issued within one week of the March 9, 2009 lows) Paste that on your refrigerator door, posers.