Re: Economic troubles coming

[Guest guest]

There is a smoke and mirrors game that is working to mask what is happening.

You may have noticed the strategic patroleum reserves were opened up a little.

Why do you suppose that is? It's not to improve the economy, since the amount

that is going to be released is so trivial it won't really matter. What's

happening is that the fed can make a quick buck by selling that oil at a premium

to boost the government's overall revenue in a time when tax revenue is poor due

to few people working.

Another thing that has happened is a shift in consumer purchasing. There was a

slight ramp up in purchasing before Christmas and a a slight ramp up in

purchasing after the holiday season as consumers picked up sale items that

stores wanted to offload. This kept people employed for longer than expected in

the hope that sales would persist and the economy would continue to grow. But

that has not happened, and people are starting to get laid off again.

Thirdly, inventory had dropped across the board in many stores to the point

where stores MUST order to keep their shelves stocked. In the past, stores had

been on a cyclical wheel of purchasing more than they needed and offloading

excess merchandise to discount outlets. No more. This careful purchasing has

resulted in factories having to produce less and employ less.

None of this takes into consideration various debt holdings that people have.

Though many are employed, many others are unemployed, with massive debts which

they cannot repay. Banks are still foreclosing on houses, and credit card

companies are willing to settle more than before. But there are plenty of people

who cannot make installments on anything that has payments.

Also, the world situation continues to be poor. The US is hoping that the low

value of the dollar will cause people around the world to purchase its products,

but the US has long since passed the point of producing much that anyone wants

to buy, and careful consumers who are hurting worldwide are more willing to buy

junk from the Chinese that quality stuff that is more expensive.

Finally, the European Union and the Euro are beginning to falter. They are in a

no win situation. If they persist with their union, Greece and other countries

will have to resort to " austerity measures " which will impovrish their

countries. If they disband the union, the expense of developing and issuing new

currencies will hurt a lot of countries, and the arbitrary cost of the same

goods on different sides of the border will cause people to become more

isolationist as they were in the first place which will prevent money from

flowing around the globe.

I had argued for more isolationism in the past. Not to the point where people

don't buy outside of their countries, but only to the point where jobs are

always safeguarded and inflation remains stable.

Up by Raven, an Arby's recently closed down because it could not make it in

today's business climate. In Michigan by a rest stop a couple years back, a

Burger King closed down. I'm seeing more and more of this in other places as

well.

Now I have always been a big believer in investing in energy, but time to do

that is limited. We are nearing the point where energy will be a bubble that

will burst too. This is because manufacturers and transport and shipping

companies many no longer be able to pay the expense of it.

Gold will be another bubble which will burst soon.

The thing to do now is to pay down debts as much as possible and save enough to

ensure that all the taxes you have can be paid, and to stuff some additional

money away to pay for higher tax rates and the insipid health care plan.

Do not rely on the Goldman Sachs figures. They are too positive. The US

government is technically bankrupt. If they raise the debt ceiling, investment

houses will preserve the government's rating even though the situation will be

much worse than it already is. If the government actually tries to pay down its

debt, the rating may actually worsen because any plan to reduce the debt is

based on current market conditions and does not take into account all the people

that are going to be out of work because of governments failure to renew

lucarative contracts with the private sector, and because it will be dumping its

own employees on the street as well.

We also have an underfunded social security system which is increasingly being

drawn upon by an aging population AND...(here is something we forget)...the

government is now going to have to pay for a lot of funerals and burials for a

whole lot of WWII veterans, Korean War Veterans, and Vietname War Veterans.

Administrator

First there is this article with some of the clowns who caused these troubles to

say a major slide is expected in the next few months. I wonder if it will happen

around the September.

http://www.cnbc.com/id/43534613

Here's another article that states the banks have about $1.5 Trillion in Federal

Reserve accounts where it is earning but a small interest rate. It could be

earning more money even if lent out at the rock bottom rate of a little over 3%

but that isn't happening. If, for whatever reason, that money gets dumped back

into they system, we'll be getting serious inflation very fast. In fact, its

really surprising it hasn't happened already. The Fed has dumped so much money

into the economy that is doesn't have anywhere to go and this proves it, yet the

incompetent fools in DC want to dump even more money.

The site includes charts showing the money dumped into the economy over time and

how much is in these federal reserve accounts.

http://blog.independent.org/2011/06/23/the-continuing-puzzle-of-the-hyperinflati\

on-that-hasnt-occurred/

There is plenty of other information out there as well about how bad the economy

is and unemployment is rising, but the media is doing all it can to hide it. Not

surprising since Obama recently admitted the media was covering for

them.

[Guest guest]

Just feel the need to add some things to my prior posts. One of the articles

whines that the banks are apparently sitting on piles of cash and is reluctant

to loan anything out, and if they did, hyperinflation would result.

Well, they DO and they do NOT have piles of cash.

Try to follow this logic:

People are dipping into their savings to the point where cash from banks'

customer base is low.

While the Fed has forced banks to accept cash they don't want, the problem with

this forced loan is that the banks MUST at some time pay it back or else default

on the cash, in which case the banks become the property of the government. The

government can call this loan anytime, so the banks, which have learned their

lesson through overextending their credit in the past, are going to either

invest their money in SAFE investments or sit on it.

Meanwhile, banks are required to have a percentage of cash on hand so that if

all of its depositers make a run on the bank, they can pay out that percentage.

Contrary to what it says in the teller line, you cannot redeem ALL of your

deposit back in a specified amount of time IF there is a run on the bank. You

may only obtain a percentage, and then afterwards, you may get all of what you

are owed as soon as the bank is able to borrow the money to pay you.

So that further restricts money that can be loaned out.

Finally, even if people are paying down their debts, employment figures are

still high, the economic forecast remains poor, and housing prices are still too

high. Therefore too many people are credit risks. Even people who would have

been safe credit risks before lending restrictions were loosened are poor

candidates mainly due to the poor economy.

So the banks are not the problem at this particular juncture. The problem began

with irresponsible banks who loaned money with no down payment on a house.

Legitimate banks had to follow suit to stay in businesses, and the second the

economy faltered, then the whole system collapsed.

The solution to the problem would have been to do nothing when the collapse

occurred except to revise Fed policy and tighten lending restrictions. What

would have happened is that banks across the country would have collapsed. These

banks would have been taken over by the Fed and then given to responsible

banking institutions who would have foreclosed on bad debtors and retained

responsible loans.

Or maybe not.

At any rate, the recent economic policy is just hyperextending a crisis in

worsening it. You can bet that when it collapses completely, there will be a

Republican President in office. Of course, both parties are to blame for this

and neither party should be in office.

One other note on the oil/energy thing: The amount of oil that will get sold off

will pay for a few days or weeks of the Libya mission and then everything will

be back to normal, but I am thinking that this is a way to make energy companies

look bad because the government will start complaining that prices dropped for a

few days and then went back up while the " greedy " companies made a huge profit.

People need to keep in mind WHY oil companies are making a profit these days.

It's not because they are taking a huge cut from the sale of gasoline. Profit

margins on the sale of gas are smaller than ever. Oil companies are actually

selling off many of their gas stations because they are yeilding minimal

profits. What's happening is that oil companies began buying back massive

amounts of stock just around the time the economy began to falter and has

continued doing so every quarter. This means they pay dividends to fewer

investors. With fewer dividends to pay to investors, that's more money they get

to keep. AND, with all the limitations imposed upon them with regard to

exploratory drilling, that is money they don't have to spend either. Granted,

the remaining investors get higher dividends, but even that will not last once

oil companies stop buying stocks back. You'll actually see oil company profits

fall once they stop buying back stock and base their profits purely on the sale

of gas, although they may counter that profit loss by rasing the price of gas,

in which case, THEN we will see massive inflation.

China is also buying private oil operations in foreign coutries and then running

these concerns itself. The sale of these operations creates profits in the oil

sector, but it also hamstrings these companies from doing business as well in

the future. If a company sells its concerns in, say Nigeria, to China, it may

well never drill in Nigeria again as long as the political situation in that

country prevents it.

This is why I said earlier that the energy sector is a bubble that is near to

bursting. It will be some time yet, but it will happen.

Administrator

[Guest guest]

Get ready kids things are going to get rough for a while... Paying off as much

debt as possible is definitely a good idea. Also having tangible assets is good.

I personally like buying land. I also have some junk silver coins laying around

just in case. Do you think it is possible to prepay taxes on land for a year or

2 in advance?

Sent from my iPad

[Guest guest]

" Do you think it is possible to prepay taxes on land for a year or

2 in advance? "

No, because during the course of a year, your taxes may go up or down.

Aside from that, why give money to the government in advance when you could be

investing it and earning money yourself?

Administrator

[Guest guest]

Paying off debt is a good thing because of the interest rates that go with it, especially in credit cards. Land is good, particularly if you can do something with it like farm it, even if just enough to provide some of your own food.

Gold and silver may be useful, but keep in mind that it is a commodity and once it is spent it is gone. You'd need a lot of the stuff to live on for any length of time, provided people actually accept it and at a stable and reasonable value. That's the problem with gold and sliver right now is that it isn't a common currency so most people don't know how to use it as a currency so it would be very easy to get ripped off even unintentionally. Now what would be interesting is to have enough to issue your own currency based on it, that is to issue paper or other currency backed by your gold. That opens a whole other kettle of fish though and still doesn't solve the problem of someone taking your notes and coming later to claim your gold and wiping you out.

As for paying taxes in advance, in addition to the reasons gave, states won't take advanced payment because they prefer to have money coming in over time. This is why property taxes are due several times per year and income taxes can be paid quarterly. This steady trickle of money makes things easier for them than dealing with a big pump of money around one time of year. Not the least this helps because the amounts of money are smaller so there is a degree of control over spending excess, at least in small government like states and towns, more or less.

Get ready kids things are going to get rough for a while... Paying off as much debt as possible is definitely a good idea. Also having tangible assets is good. I personally like buying land. I also have some junk silver coins laying around just in case. Do you think it is possible to prepay taxes on land for a year or 2 in advance?Sent from my iPad

[Guest guest]

Paying off debt is a good thing because of the interest rates that go with it, especially in credit cards. Land is good, particularly if you can do something with it like farm it, even if just enough to provide some of your own food.

Gold and silver may be useful, but keep in mind that it is a commodity and once it is spent it is gone. You'd need a lot of the stuff to live on for any length of time, provided people actually accept it and at a stable and reasonable value. That's the problem with gold and sliver right now is that it isn't a common currency so most people don't know how to use it as a currency so it would be very easy to get ripped off even unintentionally. Now what would be interesting is to have enough to issue your own currency based on it, that is to issue paper or other currency backed by your gold. That opens a whole other kettle of fish though and still doesn't solve the problem of someone taking your notes and coming later to claim your gold and wiping you out.

As for paying taxes in advance, in addition to the reasons gave, states won't take advanced payment because they prefer to have money coming in over time. This is why property taxes are due several times per year and income taxes can be paid quarterly. This steady trickle of money makes things easier for them than dealing with a big pump of money around one time of year. Not the least this helps because the amounts of money are smaller so there is a degree of control over spending excess, at least in small government like states and towns, more or less.

Get ready kids things are going to get rough for a while... Paying off as much debt as possible is definitely a good idea. Also having tangible assets is good. I personally like buying land. I also have some junk silver coins laying around just in case. Do you think it is possible to prepay taxes on land for a year or 2 in advance?Sent from my iPad

[Guest guest]

Good points throughout.

Not many of the fast food places have gone under in this town, at least not yet. A few other stores have though. Not long ago the Blockbuster store that had been here for 20 plus years closed. Since then I've noticed a few vending machine type rental things around town at some convenience stores in addition to the ones that have been in grocery stores for a while. There comes a point when adding machines is counterproductive because if so many people have been replaced by them, who is going to have the money to buy what the machines make and sell?

You're right that cash is also flowing into the commodity markets now, especially gold. It won't be long before those bubbles pop and then there will be nothing left for the cash to flow into. As for resources, China is already trying to buy up US oil land and is also trying to buy up land to build industrial parks in the US. This is happening because they hold so many dollars in terms of our debt but also built up from trade imbalances over the years. I'm sure they know that with the current clowns infesting DC that the dollar is going to tank soon. So they are using their surplus dollars to buy things of value like land and our resources. I think it will be very amusing to see the Feds try to explain why, when oil supplies are disrupted in the next year or two, that US oil is being drilled and shipped to China instead of being used here. That could get very interesting, in a bad way of course. Also makes me wonder about all the other land the feds have been snapping up in the last two years, land that has mineral wealth under it the feds are putting off limits. Maybe they are planning to sell that off too.

In a message dated 6/25/2011 11:39:14 P.M. Eastern Daylight Time, no_reply writes:

We also have an underfunded social security system which is increasingly being drawn upon by an aging population AND...(here is something we forget)...the government is now going to have to pay for a lot of funerals and burials for a whole lot of WWII veterans, Korean War Veterans, and Vietname War Veterans.Administrator

[Guest guest]

Good points throughout.

Not many of the fast food places have gone under in this town, at least not yet. A few other stores have though. Not long ago the Blockbuster store that had been here for 20 plus years closed. Since then I've noticed a few vending machine type rental things around town at some convenience stores in addition to the ones that have been in grocery stores for a while. There comes a point when adding machines is counterproductive because if so many people have been replaced by them, who is going to have the money to buy what the machines make and sell?

You're right that cash is also flowing into the commodity markets now, especially gold. It won't be long before those bubbles pop and then there will be nothing left for the cash to flow into. As for resources, China is already trying to buy up US oil land and is also trying to buy up land to build industrial parks in the US. This is happening because they hold so many dollars in terms of our debt but also built up from trade imbalances over the years. I'm sure they know that with the current clowns infesting DC that the dollar is going to tank soon. So they are using their surplus dollars to buy things of value like land and our resources. I think it will be very amusing to see the Feds try to explain why, when oil supplies are disrupted in the next year or two, that US oil is being drilled and shipped to China instead of being used here. That could get very interesting, in a bad way of course. Also makes me wonder about all the other land the feds have been snapping up in the last two years, land that has mineral wealth under it the feds are putting off limits. Maybe they are planning to sell that off too.

In a message dated 6/25/2011 11:39:14 P.M. Eastern Daylight Time, no_reply writes:

We also have an underfunded social security system which is increasingly being drawn upon by an aging population AND...(here is something we forget)...the government is now going to have to pay for a lot of funerals and burials for a whole lot of WWII veterans, Korean War Veterans, and Vietname War Veterans.Administrator

[Guest guest]

I mentioned in the other reply about China trying to buy oil land in the US. I don't see why they won't since the US allowed the company the mines our Uranium to be bought be a Russian company. I think more and more that the government is planning to sell off government lands and the minerals under they to pay debts or keep "trade" flowing because the US has nothing to offer other nations anymore other than natural resources and intellectual property that can be easily exported. We're basically putting out selves back to being a colony to be plundered for its natural resources and kissing industrialization goodbye. Deindustrialization has been a plan for the more than 20 years now since the first Bush administration because they thought production was worthless and messy and that finance was were the future lay. Yeah, that worked out really well. Fools.

What has happened is that the Fed, congress and the white house have prevented a series of corrections beginning with the tech bubble burst. In a real market system, there would have been a sharp recession as interest rates shot up to clear out the excess money in the system. The market would then have recovered because more people would have cleared their debts to escape the rising interest rates and put more in savings and investments. Interest rates would then fall again and business would start borrowing again taking advantage of all the money in the banks that had built up. The cycle would then repeat over and over again.

However, the Fed dumped more money into the market after the Tech burst. That then flowed into other things. The next correction should have been in late 2001 and early 2002. 9/11 happened though and more money was dumped to prevent a recession for the "national morale." The tap was never really turned off as money cascaded into mortgages and the next bubble built up. Some sounded the alarm, even Bush did, but Bush never used the power of his office to crack down on the mortgage industry and other bad policy. He could have easily done so before 2006 when his party still controlled government.

Still unable to learn from its own mistakes, government kept dumping money and now we are on a knife's edge. If they adopted policies to suck that money back out of the system, probably through higher interest rates and cuts to or even elimination of capital gains taxes people would start saving and investing again. As it is, most savings and money market accounts pay less than the rate of inflation, usually much less, so they are actually losing money. Boosting interest rates isn't popular right now, but that's only because people are addicted to debt. Perhaps working a deal with creditors so they work with debtors to pay back their debts in a reasonable fashion rather than the harsh methods pursued now would help. Eventually banks would learn that they could make a nice profit still by offering savings because business would be make more and bigger loans that are more likely to be paid off than consumer loans, but that would take forcing them to making savings attractive to consumers again.

Lastly, we're in this mess because our economic and political elites came to believe that consumption drove the economy. It doesn't. Production does. You can give consumers each a million dollars, but if there is still only the same limited amount of stuff to buy, all you'll get is inflation. Production of goods and services has to increase in order to increase consumption, not the other way around. Until they learn that and stop the insanity of deindustrializing the US things won't turn around.

In a message dated 6/26/2011 12:22:44 A.M. Eastern Daylight Time, no_reply writes:

China is also buying private oil operations in foreign coutries and then running these concerns itself. The sale of these operations creates profits in the oil sector, but it also hamstrings these companies from doing business as well in the future. If a company sells its concerns in, say Nigeria, to China, it may well never drill in Nigeria again as long as the political situation in that country prevents it.

[Guest guest]

I mentioned in the other reply about China trying to buy oil land in the US. I don't see why they won't since the US allowed the company the mines our Uranium to be bought be a Russian company. I think more and more that the government is planning to sell off government lands and the minerals under they to pay debts or keep "trade" flowing because the US has nothing to offer other nations anymore other than natural resources and intellectual property that can be easily exported. We're basically putting out selves back to being a colony to be plundered for its natural resources and kissing industrialization goodbye. Deindustrialization has been a plan for the more than 20 years now since the first Bush administration because they thought production was worthless and messy and that finance was were the future lay. Yeah, that worked out really well. Fools.

What has happened is that the Fed, congress and the white house have prevented a series of corrections beginning with the tech bubble burst. In a real market system, there would have been a sharp recession as interest rates shot up to clear out the excess money in the system. The market would then have recovered because more people would have cleared their debts to escape the rising interest rates and put more in savings and investments. Interest rates would then fall again and business would start borrowing again taking advantage of all the money in the banks that had built up. The cycle would then repeat over and over again.

However, the Fed dumped more money into the market after the Tech burst. That then flowed into other things. The next correction should have been in late 2001 and early 2002. 9/11 happened though and more money was dumped to prevent a recession for the "national morale." The tap was never really turned off as money cascaded into mortgages and the next bubble built up. Some sounded the alarm, even Bush did, but Bush never used the power of his office to crack down on the mortgage industry and other bad policy. He could have easily done so before 2006 when his party still controlled government.

Still unable to learn from its own mistakes, government kept dumping money and now we are on a knife's edge. If they adopted policies to suck that money back out of the system, probably through higher interest rates and cuts to or even elimination of capital gains taxes people would start saving and investing again. As it is, most savings and money market accounts pay less than the rate of inflation, usually much less, so they are actually losing money. Boosting interest rates isn't popular right now, but that's only because people are addicted to debt. Perhaps working a deal with creditors so they work with debtors to pay back their debts in a reasonable fashion rather than the harsh methods pursued now would help. Eventually banks would learn that they could make a nice profit still by offering savings because business would be make more and bigger loans that are more likely to be paid off than consumer loans, but that would take forcing them to making savings attractive to consumers again.

Lastly, we're in this mess because our economic and political elites came to believe that consumption drove the economy. It doesn't. Production does. You can give consumers each a million dollars, but if there is still only the same limited amount of stuff to buy, all you'll get is inflation. Production of goods and services has to increase in order to increase consumption, not the other way around. Until they learn that and stop the insanity of deindustrializing the US things won't turn around.

In a message dated 6/26/2011 12:22:44 A.M. Eastern Daylight Time, no_reply writes:

China is also buying private oil operations in foreign coutries and then running these concerns itself. The sale of these operations creates profits in the oil sector, but it also hamstrings these companies from doing business as well in the future. If a company sells its concerns in, say Nigeria, to China, it may well never drill in Nigeria again as long as the political situation in that country prevents it.

[Guest guest]

Some billionaire was reputed to have said that trying to pump money into the

economy like the fed has been doing is ridiculous for a very simple reason. He

said if he gave 6 billion dollars to charity, that breaks down to one dollar per

person, which is about enough to buy enough rice to feed someone for a day.

Consumers are as much to blame as governments, but governments would do better

to let the system steer itself.

Administrator

Lastly, we're in this mess because our economic and political elites came to

believe that consumption drove the economy. It doesn't. Production does. You can

give consumers each a million dollars, but if there is still only the same

limited amount of stuff to buy, all you'll get is inflation. Production of goods

and services has to increase in order to increase consumption, not the other way

around. Until they learn that and stop the insanity of deindustrializing the US

things won't turn around.

[Guest guest]

By the same token I always get a laugh out of land reformers who want to take land from those who have it to give it to those who have none. What are they going to do, give the "landless" 40 acres and a mule? That's not enough land to live on timber harvests from and most people won't know how to or be interesting in actually farming the land. For that matter, not all land is suitable for farming because it might be swampy, hilly, or just plain poor soil. Smaller plots of land would simply be the same story only more so because it would be harder to economically raise crops on the land without a lot of hand labor and forget about timber income.

Still, I expect the government may well try shoveling more free money at consumers probably next year in the run up to the elections. Obama tried this in the last election, quite in violation of federal election laws, when he promised screaming mobs a little "walking around money" if they voted him into office. Of course what was so funny about that was the "emergency money" took so long to be handed out, months later, that many of the people it was meant to help had already lost their homes, cars, jobs, whatever, or had solved their own problems. All that will accomplish is to bring on the inflation.

But like you said, the Republicans will likely be in charge when it really gets bad, and that is probably why the Fed is trying to drag things out, kind of like the strange coincidence of the banks starting to fail shortly before the election, destroying McCain's leads in the polls. Its a pity the American people are so badly educated and have such short attention spans that they will heap all the blame on the Republicans, aided in their misconceptions and forced forgetting of Obama's actions by a complicit media.

In a message dated 6/26/2011 2:05:02 P.M. Eastern Daylight Time, no_reply writes:

Some billionaire was reputed to have said that trying to pump money into the economy like the fed has been doing is ridiculous for a very simple reason. He said if he gave 6 billion dollars to charity, that breaks down to one dollar per person, which is about enough to buy enough rice to feed someone for a day.Consumers are as much to blame as governments, but governments would do better to let the system steer itself.Administrator