bostonbubble.com

[john p]

http://www.atimes.com/atimes/Global_Economy/JK19Dj02.html

This is a very, very good article. It took me a couple/few times to read to understand.

There are forces that are causing inflation and forces causing deflation. Our language and historical reference don't equip us to deal with this complexity. People seem to have this toggle switch and we don't have words that identify these simultaneous dual forces.

On the one hand, we see inflation in the cost of heating oil, our commuter rail and MBTA passes and parking, but deflation when people sit on the sidelines to wait for house prices to bottom.

The bottom line of this article kind of goes back to one of my concerns; the expansion of money in the money supply has a day of reckoning/correction in the form of inflation. You can't flood the markets with money without expecting assets to buoy with the upward pressure of the liquid it floats on.

I do believe that trickle down economics failed because as wealth got sucked up like a tornado, it didn't fuel or carry with it a middle class, it sheared. I believe that foreign investment transferred the wealth overseas versus investment in the USA and the expansion of the derivatives galaxy didn't create the internal pressure to transform the liquid gas to rain droplets which would have watered the crops below (trickle down economics). The expansion of derivatives and foreign emerging markets did not contain the wealth's pressure and create the transformation that makes trickle down economics possible.

Also in this article it warns about a "Smoot-Hawley-style attack" on foreign trade or a "major outbreak of global protectionism". He also writes about how Neville Chamberlin was a much better handler of the economy in Britain than the Americans at the time. For me, that reminds me that you do need to pay attention to some of the other risks in the World and although Chamberlain was open minded to trade, he put his head in the sand with respect to other risks i.e. the Nazi's.

I think the best way to head off risks like the Nazi's or any other radical group is to engage in discussions with people when they get into a delusional way of thinning. I mean one of the big problems with radical Islam is that they had a generation of children that were not given a modern education that would equip them with an industrious set of skills so that they could compete in the market. It is important to to reach out and help these people understand that you are not a threat and that you shouldn't be considered a scapegoat, but a friend and potential trade partner. Worst case, those that don't know how to fish have to take someone else's fishes. In order to do that, they need to scapegoat someone. The Jews had a lot of money so they became a nice target to be a scapegoat by the Nazi's. The Nazi's thumped their chests and paraded around and just manufactured pride by having the audacity to display pride and then create a wave of nationalism. Because it wasn't grown or rooted in any fundamentals, they needed to be predators and attack and take from others. Heading off the Nazi's would have meant heading off the delusion and the allure of that delusion. Today, there is an allure towards delusion in our own country. I am not worried about a radical shift by any means, but I do think we will turn the dial too abruptly and we might not be sophisticated enough to understand the duality of the situation as well as fall into the knee-jerk reactions of protectionism that would be the first natural response to these sorts of stresses. I hope that we can learn from past mistakes like Hawley-Smoot and head off the delusion with elevated debate on the subject matter.

All this political mumbo-jumbo is important because we're going into a global economic crisis and each nation will respond to it differently. Some nations might come out ok like Britian did before WWII and other's might not do quite as well like Germany. Germany said screw this, printed a ton of money and just became a delusional socialist predator. Socialistic thinking scares me because when people expect something for nothing, or don't believe in working for what they get and expect that something is owed to them and they are "Entitled", they being to take and they have less of a threshold to overcome to actually steal. When you listen to a society that has a lot of stealing, the people doing the stealing have a disposition where they are being wronged and the "haves" stole from them and they are just taking back what they deserve. If a country has a leader that tells their people that they need to take personal responsibilty, they might not be as politically appealing as the politican who blames the minority, the rich and tells the people that they don't have to pick up any of the burden. Then, we might get a mixture of some populist leaders in some countries and other fundamental types. I wonder if this will be the first real test of this "League of Nations" i.e. the United Nations. If we get a delusional leader or two or three, can the rest of the nations get the wildcard ones to chill out.

[showgunx]

We are in the deflationary situation under a inflationary environment. All the bailout out money and Fed rate cut suppose to jackup inflation, but the fear of further downturn of economic condition keep everyone from spending, which lead to short term deflation. This thing won't hold long since it is not a normal market condition.
I am not sure how it will plan out, but I am worry we might get into hyper-inflation period once this recession end, that will hurt the average consumer even more. You know, when you lost your job, exhust all your saving, and your house worth 1/3 what it used to be, then the bread and milk price suddently double due to devaluation of dollar. And all you can do as the average Joe is raise your behind and take it as you are the government's bitch.

[john p]

I wish I had the ability to distill it down like that.

Anyway, it is interesting how the government isn't BURDENED with having to turn a profit and their only "check" are the voters who seem to have forgotten their due dilligence to vote the bums out when they can't manage their affairs efficiently.

The cost of government is significantly outpacing the capacity of the cost burden on the governed.

If the slices of the pie within a Budget are growing faster than Prop. 2 1/2's 2.5%, instead of creating new revenue streams or fees or tolls, they need to cut services, take slices of the pie out that are unnecessary and restrain other slices from growing too quickly. We can't "level service" as a baseline and then pile on straw after straw, until the camel's back is broken and the camel is on life support. The parasites of government will eat our dead carcas and then start eating themselves. We have a babyboom of workers in Government now. Dukakis felt that it was better to hire a worker than to pay them welfare. Twenty-five years later we have to pay these people huge pensions. This socialistic, Santa Claus mentality have yoked the industrious and productive people in society to a lifetime of tugging a barge of deadbeats.

http://www.cltg.org/


This is a case in point that exhibits how the private sector has the lawn mowed every recession and the public sector just grows and grows and grows. It is so fascinating how this correction hasn't affected the public sector and how they continue to bury the people with more and more costs.

[Boston ITer]

Fellows, here's the problem with runaway hyperinflationary (ala Argentinian Peso, etc), the IBS and the worldwide forex.

There are basically a basket of five major currency pairs: the USD, Euro, Japanese Yen, Pound Sterling, and Swiss Fr which comprise of 80% of the volume of currencies traded in the globe. None of the above are backed by Gold/Silver, or anything else other than good faith in the system.

The reason why places like Argentina, Zimbabwe, Thailand, Brazil, etc, can lose such a high percentage of their value (during a market meltdown) is that the buyers simply disappear and the holders are left with tissue paper. With the USD, however, the buyer/sellers simply play the card shuffle game with the other big four (and sometimes a small country like Norway, Australia, or Canada) and each Clarion call for a dollar collapse just becomes another bear market trading channel.

When there's potential of hyperinflation, however, in a currency held by a majority, you'll see all the big players on the globe (holders of the big five pairs) with numerous call options on the Gold futures like no other time. That's not where we are today because that would be essentially a global loss of faith in fiat money. Today, it's a run to the USD, until the markets calm down and then a return to the bear market channel but with the Euro, also being bearish this time around.

[showgunx]

Below article states JP Morgan "wants" the FED to lower it rate to zero by Feburary. If that came true, then we are another step closer to hyperinflation.



http://www.marketwatch.com/news/story/JP-Morgan-sees-Fed-cutting/story.aspx?guid=%7B393EA877%2DFCDA%2D4FD2%2DAE38%2D76AB0D750CE2%7D

[Boston ITer]

But realize, near 0% rates is really pushing on the string. It's not really giving away the money but more making it available for international arbitrage operations will then of course, lowers it valuation since all the traders started to do the same thing.

I think hyperinflation is a different phenomena for us. The dollar will, over time, lose purchasing power, however, it isn't the same as ten dollars for a glass of milk which is more the Argentine scenario of a busted currency.

[showgunx]

I sure hope the inflation would not get out of hand couple of years from now, since I as everyone else, still get paid with dollar at work.
For now the US economy is in life support mode, so all the liquidity being pumped into it get obsorted without any side affect. But once it stablizes, if the FED not suck all these excessive liquidity out of it fast enough, double digit inflation is not impossible to occur. If average salary got double digit increase as well, that would make the situation ok, but what is the chance of that going to happen? Most likely we have to accept the fact of US currency no long
Now if the FED want to pursuit the other road, in order to suck the excessive liquidity out of the market, we are talking about fast interest rate hike, which will further punish this indebted nation as a whole. As the matter of fact, this act might push us into depression.
We are in deep shit right now, in order to fix our issues, we have to experince great pain, there is no easy way out.

[admin]

[showgunx]

The difference between US and Japan situation is, US try to inject all these 700 billions bailout money into the system right now. These liquidity will save us for now, but might devaluate the dollar later.

[Boston ITer]

Well, true dollar devaluation would correlate to Gold at $2K-$5K per oz and in this case, since the other big four currencies are in the same trading pairs as the USD, those currencies would also go down against Gold. And that would reflect a worldwide loss of confidence in central banking authorities.

So if you really believe in devaluation, you might want to buy Gold when the deflation levels out, probably near $700/oz.

[Guest]

I think I disagree with you john, but I can't figure out what you're arguing. In your analogy, who are the socialists and who are the Nazis in this country?

[Renting in Mass]

Forgot to log in. The comment above is mine.

[john p]

The socialists are those that are predisposed to delusions realted to getting a service for free. Those that think that they do not have to contribute but deserve services because they are "entitled".

The nazi's are those that are predisposed to the same delusions as socialists but get angry and have to manufacture a scapegoat or false ego to rationalize their guilt of being a predator and taking something someone else earned. Basically it is a cross between socialism and elitism.

This past year I have been studying the mechanics of politics and have been intriqued.

http://www.mltranslations.org/Brazil/manifesto.htm

http://query.nytimes.com/mem/archive-free/pdf?_r=1&res=9C05E3DF153BE433A2575BC2A96E9C94699ED7CF

When people get freaked out or pissed off they tend to make wild pendulum swings and throw out their value structure. Before WW II each nation had different leaders chosen. The "-ism" they chose is sometimes beside the point because it is often the magnetism of the leader that most sheep follow. It is the "x" factor that make people belive that this is the right leader for right now. Guys like Churchill said the right things and he was ignored. When Hitler started to roll, they realized that they needed a real leader like Churchill more than the polished appeaser Chamberlain. After Churchill saved England, they threw him under the bus and voted him out.

Politics are so irrational, so my concern is not to follow the best ideas, because people don't seem to be interested in ideas. Obama and Patrick were light on specifics and have no concrete plans. They sold something else and people bought it. If people base decisions based on masterplans or ideas that don't exist it helps me to understand how before WWII we got such a wide array of leadership styles. When people are frightened they often go for a rock star personality and the common denomenator isn't ideas or values, it is personality.

It makes me think that people don't belive in a value structure because if they did they'd persevere through hard work and they'd cling to their core values and ride the storm out through hard work. I think that people that are scared often reach out for any life-line they see. People were hoodwinked by real estate agents and mortgage brokers because of their salesmanship persona "x" factor.

What I've learned is that you can give people all the information they need to make a rational decision and they will run from it. I mean Deval Patrick wrote a letter to ask to release a grandmother rapist and we made the guy our Governor. People let Hitler take over despite his total and complete bullshit because of the "x" factor he had, that magnetism that made people feel like the stars were aligned for him.

Why we have asset bubbles like for housing, stocks, etc, is the same reason why we choose iconic personality types for leaders. We're obviously not looking for a plan or specifics, fundamentals.

Now, I hope I'm wrong about this, but what I'm saying is because human nature is unpredicatable and we don't choose leaders based on fundamentals or values, it is a total crap shoot as to how the nations of the world choose their leaders. Now with this global economic crisis, we're going into a heightened state and that will just accelerate some irrational behavior and that is what I can neither predict or control.

[Guest]

When Hitler started to roll...
Obama and Patrick...
rock star personality...
People let Hitler take over because of... that magnetism that made people feel like the stars

Wow. I thought that's where you were headed. I'll be leaving this thread now.

[john p]

The nature of my dialogue is going down this course because we're in "irrational" territory where emotion is driving the situation and because we have no game plan; Obama has not offered any specifics and the fear of this unknown is making lenders nervous.

Inflation and deflation will depend on the nature of the individuals that make up our society i.e. our Credit Rating. If lenders think that people and leaders will be irresponsible and not pay back their debts and just spend and run up their credit cards and refuse to pay and let government debt build, why wouldn't lenders hoard their money? Credit isn't loosening because lenders are afraid that we have become soft and too risky to lend to.

Think about how investors stopped building rental properties when we had rent control. The government made rules that allowed renters to be irresponsible deadbeats. Why would anyone want to be a landlord when people today have invented words like "renterlord"? The laws were written like the landlords were evil and the renters were the opressed.

Lenders fear the unknown. Will Obama tax capital gains? How much? He's now listening to his "advisors" and we're finally going to see some detail to the phantom "plans". Why is it that we can't offer in detail what Obama is going to do? Why is it that we allowed our government to borrow $750 Billion and not have a basis to spend it? How is it that it was voted on and there is no concrete basis for how it is to be spent? That is unsettling for investment markets and the deadbeats are lining up to get some of that pork. My post is outrageous because the situation, the reality is outrageous. I do not limit what is possible because what is going on is surreal and before you pass judgment on me, offer some detail for me to believe otherwise. Otherwise, don't get mad at me because I'm telling you the earth is round. I'm trying to explain why the markets have dropped and offer some thoughts to help understand the nature of inflation versus deflation.

Lenders fear that they don't know what Obama's plans are. They say what is driving a lot of the markets today is emotion. Obama was a cheerleader for failure in Iraq and with the Economy, yet other than massive government spending, he has no plan. Obama added to the negative sentiment to our Nation and Economy and he did it for self-serving purposes. He ran on a platform of doom and gloom but he has no plan. Again, when he uses the words "invest" he means borrow and taxes. Any idiot can just run up a credit card bill; is that why we elected a Harvard Grad? I mean Deval Patrick had no plan so he offered casinos. Is that why we chose that Harvard Grad? Any idiot can put in casinos to add a revenue stream, but what happens when we piss through that money? Really, what's next after casinos? More casinos? What happens when people gamble their money away and there is none left? Do we have to bail out these hardships? This stupidity is mind boggling and it is coming from "leaders" from our top Universities. I mean Bush was Harvard and Yale. If we think this is the best of the best, we're screwed.

Obama knew he wouldn't get elected by saying that we would actually have to pay for our spending, he just said that the rich would have to pay again. The deeper and deeper we go into debt the more risky our situation will be and other nations like Brasil won't want to follow our lead as a democratic/capitalistic model, they'll choose a more radical, socialistic model. If a leader gets into power by trashing capitalism, we will find hostile nations who might scapegoat us as the terrorists did on 9/11.

What am I supposed to think when I see stuff like this:

lady expecting to have her mortgage and gas paid for:

http://www.youtube.com/watch?v=gv3rSQ_tu8k

talking head fawning over Obama, throwing objectivity to the wind:

http://www.youtube.com/watch?v=3m9Gbb6NSwM

This is not rationality, this is what happens when you say some vague "We want Chage" slogan, people fill in the blanks, and a vessel of hope can't go every direction. How many people feel that they can remote control change? What's going to happen to that lady who is hopeful and having an orgasim because she thinks Obama is going to pay for her mortgage and gas?

Don't try to frame anything out of context. I didnt' say Patrick or Obama are evil men. I think they rationalize some shady behavior like most politicans, but again, I don't think they are capable of doing something intentionally cruel. Throughout history, desperate leaders that are poisoned with vanity do some extreme things. What is irresponsible about Patrick, and Obama is that they didn't/don't understand the situation they are in and have made promises and offered hope when they don't have the experience or the plan to engage this reality. Obama led people to believe that they should be hopeful. It is irresponsible to do that if you know you are uncapable of making those changes. They led innocent people to believe that they could deliver positive change and they are not equipped to do so. What we needed was a leader who asked us to take personal responsiblity and to save their money and pay their bills. Instead, Obama scapegoated the rich guy and the liberals attacked Joe the Plumber because he hoped and dreamed but had a plan to work hard to get it. They resented Joe the Plumber because he wanted to work his way to his dreams and did not want a handout and he didn't have disdain for the rich. How dare he not hate the rich who pay the overwhelming amount of taxes.

When people want hand outs, it leave a dangerous impression and societies in history have gotten into deep trouble once they have lost the industrious values of independence and self reliance. Obama has no plan, everything he is saying today requires us to go deeper and deeper into debt. He doesn't address the fundamental problem of our sending our wealth to emerging nations. His current plan will provide temporary relief to certain industries, but he is just feeding fish that will eventually run out and make the problem even more desperate down the road. If he makes impressions on people and gives them reason to believe that they are "entitled" and won't these "entitled" deadbeats start to get angry and because our fundamentally flawed consumer economy is unsustainable, what do you think is going to happen? If the thought of that upsets you don't blame me, don't focus your frustration at me. If you so smart, tell me, what is Obama's plan to stop the hemmorage of money being sent to China? The Union's Pension funds are in trouble and we're in a political environment where we have to subsidize union workers that were overpaid their entire careers, overcharged us for cars, overcharged us for car financing, and we have to pay because those companies and union workers drained and bled like vampires that industry and us for decades. Isn't that surreal to you? I'm sorry if I'm doom and gloom but when we are actually having this sort of debate it frightens me and I think it is responsible to try to challenge the value structure and unveil the delusion.

I'm just saying that when people don't do their due dilligence with choosing leaders, buying homes, etc. they will be unrooted to rational thought and can be manipulated very easily. Charles Gibson said just a few days before the election "You know it is surprising how little we actually know about Barack Obama". If this is capable in the United States, imagine the manipulation that is possible in nations like Iran, Iraq, China, Russia, etc.

We are only 60 years from a World War. Do you honestly think that we have evolved that much that during dire times, nations won't fall into the same reactive political dispositons? We're supposed to be one of the more sophisticated nations and we chose a guy with such little experience and no concrete plan. If we did this, what on earth type of leader might they pick in other less sophisticated nations?

What is dangerous about Obama is that he has high expectations to live up to because he charged everyone up and made people believe that it was possible. What is he going to do if his plan doesn't work? He said anyone who talked about the harsh realities was a cynic. I thought it was a sign of responsibility to check, double check, and then verify? What are other nations going to think if we do or don't attack the pirates that are looting ships? What are they going to think if we square off or back off of missile positions in the world? Is he going to stop North Korea's or Iran's desire to have nuclear weapons? Is he going to sprinkle magic dust over them and make them love us?

When the going gets tough, the tough get going, and the weak go into the fetal positon and cry for their mommy's. The weak followers are the ones that manufacture heros, wear t-shirts of their superhero fantasy fairy tale. This is why Harvard continues to sell losers, there are still enough followers to fall in love with the notion that they are elite. Just like the idiot that overpaid for a house because of the realtor with the fancy car and clothes, dumb followers are a big risk and when a leader gets elected by fanning the flames of entitlement to an already growing mass of people that are living beyond their means, what do you think a lender is going to do? Inflation versus deflation relates to people's disposition to their outlook in the economy and the credit worthiness of the borrower and lender.