Why the US will have the Biggest Crash the World has Ever Seen

[Ruprecht]

Of course, if it's one of those faithful apocalypses, the accumulation of gold could actually be the exact opposite of what one should do to prepare.

Oh ye of little faith...

To infinity and beyond!

 

[Jack V Savage]

Gold. The answer is always gold (supplemented by guns and ammo, for those of weaker faith).

It's great that there are still companies that advertise to talk radio fans that they are willing to accept worthless fiat currency in exchange for gold. You'd think that businesses were in it just to make money, but that proves that there is some real good in this world.

 

[UpaLoompa]

It's great that there are still companies that advertise to talk radio fans that they are willing to accept worthless fiat currency in exchange for gold. You'd think that businesses were in it just to make money, but that proves that there is some real good in this world.

If even half the posters bought half the gold they said they did, some major baths were taken.

 

[Greoric]

With the caveat of mentioning that the TS is calling "the BIGGEST CRASH" as opposed to "a big economic downturn" (an important distinction), I'm also somewhat disappointed. This thread needs some testable conditions or should have had a title more along the lines of "Evidence of an eroding American economy and long term predictions".

So I'm going to address my bet with Jack a little later on, because there was a lot I wanted to cover in my response. As far as a big economic downturn v. crash, I'm still saying the latter. However, the whole issue is just based on trajectory.

Jack is just assuming that since I think growth rate will be slower by the end of this year I'm implying that's all that will happen. But that's just the start. For example, if someone throws a ball up in the air the ball slows it's velocity upwards at the same rate as when its accelerating down. On both sides of the throw the acceleration is the same, its just more noticable on the dissent.

With all the monetary stop gaps that are still in place that economic trajectory is more parabolic that acutely precipitous. It will eventually reach a precipitous rate downwards, yes, but probably not until a flashpoint causes that to occur.

 

[Jack V Savage]

The article is in danish. But he has also written opinion pieces about the same subject in The Economist: http://preview-debates.economist.com/debate/days/view/929. The Featured Guest part is him - Steen Jakobsen.

Honestly, he kind of lost me right off the bat.

There are three chief reasons why global growth will disappoint in 2013:

• Asia and China have matured and need a new business model.

• The cost of maintaining heavy debt loads hurts potential growth.

• Entitlement societies have a political elite who are kept in power by the majority who benefit from the status quo entitlement system.

I don't see any of those as being true. I mean, every country's economy needs to keep evolving, but I don't see any kind of huge turning point for China. There's no evidence for the second claim. And the third sounds wacky. Then he says that disposable income is being by the (non-existent) increase in prices from QE. First, inflation has been extremely low in America, and second, a general increase in prices can't reduce the labor share of income (and, in fact, higher inflation would increase the labor share by reducing debt burdens and increasing employment and thus labor's bargaining position). Then, he doesn't say it but he implies that he thinks the S&P 500 would close negative for 2013 (actual price change from first trading day in the year to last: 26.4%). And he claims that the top speed of the U.S. economy has slowed from 5% to 2.5% (doesn't say when), but doesn't provide the basis for that, except to claim that the burden of debt has somehow caused it.

Jack is just assuming that since I think growth rate will be slower by the end of this year I'm implying that's all that will happen.

I have never said that or anything like it. I know you're predicting a big crash. I'm just saying that you'll take any negative news, regardless of how minor or unrelated to your analysis, as vindication.

With all the monetary stop gaps that are still in place that economic trajectory is more parabolic that acutely precipitous.

What are you referring to?

It will eventually reach a precipitous rate downwards, yes, but probably not until a flashpoint causes that to occur.

Yeah, you said that China would stop buying treasuries and then rather than being a big boost to our economy, it would actually cause major problems, but you never explained how.

 

[Thames]

Honestly, he kind of lost me right off the bat.

I don't see any of those as being true. I mean, every country's economy needs to keep evolving, but I don't see any kind of huge turning point for China. There's no evidence for the second claim. And the third sounds wacky. Then he says that disposable income is being by the (non-existent) increase in prices from QE. First, inflation has been extremely low in America, and second, a general increase in prices can't reduce the labor share of income (and, in fact, higher inflation would increase the labor share by reducing debt burdens and increasing employment and thus labor's bargaining position). Then, he doesn't say it but he implies that he thinks the S&P 500 would close negative for 2013 (actual price change from first trading day in the year to last: 26.4%). And he claims that the top speed of the U.S. economy has slowed from 5% to 2.5% (doesn't say when), but doesn't provide the basis for that, except to claim that the burden of debt has somehow caused it.

Thanks for the answer. He definitely is a bit wacky. His CEO is even more so (that guy have actually appeared on Fox News, where he is just lying his ass off).

But regardless, I was also interested about the claim that the money generated by the QE has been mainly absorbed by the richest (capital holders), and that there is an abnormal inflation in the stock market because of it. But that the actual real-economy is seeing very slow growth.
Also about the study that shows that deflation does not by default equal no growth. And that the central banks should stop worrying about keeping inflation above 0%, but instead worry about not causing bubbles.

What is your take on that? That the QE have mainly provided short-term money for the richest people in the western world, that the normal consumer won't see much benefit, that we will eventually see the bubble created in the stock market explode again (he doesn't say this, but I think it's heavily implied), and that the central banks have their priorities all wrong.

 

[Jack V Savage]

But regardless, I was also interested about the claim that the money generated by the QE has been mainly absorbed by the richest (capital holders), and that there is an abnormal inflation in the stock market because of it. But that the actual real-economy is seeing very slow growth.

The economy hasn't really been seeing slow growth. It's slow in the sense that we had a huge downturn and we want really exceptionally strong growth to get the labor markets strong again, and we haven't gotten that (also, for people who look at nominal growth, it looks slower because inflation has been so low). But it's been pretty good, and it's been positive for a long time so we are slowly getting back to normal.

The labor share of income has been declining since the 1960s (though it reversed sharply from 1997-2001, before correcting). I don't really see how QE is supposed to have contributed to that. It helps stock prices in a variety of ways, but it also helps the labor market.

Also about the study that shows that deflation does not by default equal no growth. And that the central banks should stop worrying about keeping inflation above 0%, but instead worry about not causing bubbles.

What is your take on that? That the QE have mainly provided short-term money for the richest people in the western world, that the normal consumer won't see much benefit, that we will eventually see the bubble created in the stock market explode again (he doesn't say this, but I think it's heavily implied), and that the central banks have their priorities all wrong.

I don't know that deflation by default equals no growth, but it's certainly a drag on growth (increases debt burdens, which reduces demand, and discourages spending and investment, and it also can lead to higher unemployment--think of the argument against MWs and apply that across all wages). Low inflation also does all of that, but not as much.

And I'd agree that central banks have their priorities all wrong, but in the exact opposite way. It seems to me that they have been excessively afraid of inflation and not concerned enough with boosting employment. Though, really, the effectiveness (for good or bad) of central banks is way overstated these days. In normal times, it's the opposite. For all the talk about it, fiscal policy (tax cuts/increases, spending) doesn't really affect the economy because central banks are running the show. That is, the Fed can effectively counteract any effects of fiscal policy. But with interest rates as low as they are, the Fed can't effectively counteract contractionary fiscal policy and wouldn't want to counteract expansionary fiscal policy. As is often the case, the big fights are over distributional issues. The right is freaking out because they fear the inequality-reducing effects of higher inflation, though they're presenting the case as being the opposite (see earlier in this thread how Ultra--a far-left guy--cited an op-ed from a Republican hedge-fund billionaire expressing concern that low interest rates could *increase* inequality--LOL).

 

[SpidermanISGOAT]

It's great that there are still companies that advertise to talk radio fans that they are willing to accept worthless fiat currency in exchange for gold. You'd think that businesses were in it just to make money, but that proves that there is some real good in this world.

Good job on owing this thread. But I got a question

Isnt gold of some use? Why else then does the US, Germany and the IMF hold so much of it?

 

[Denter]

Gold. The answer is always gold (supplemented by guns and ammo, for those of weaker faith).

Real preppers stockpile nitrogen packed food, ammo, and gasoline. Gold is newb-tier.:icon_twis

 

[Thames]

The economy hasn't really been seeing slow growth. It's slow in the sense that we had a huge downturn and we want really exceptionally strong growth to get the labor markets strong again, and we haven't gotten that (also, for people who look at nominal growth, it looks slower because inflation has been so low). But it's been pretty good, and it's been positive for a long time so we are slowly getting back to normal.

The labor share of income has been declining since the 1960s (though it reversed sharply from 1997-2001, before correcting). I don't really see how QE is supposed to have contributed to that. It helps stock prices in a variety of ways, but it also helps the labor market.

I don't know that deflation by default equals no growth, but it's certainly a drag on growth (increases debt burdens, which reduces demand, and discourages spending and investment, and it also can lead to higher unemployment--think of the argument against MWs and apply that across all wages). Low inflation also does all of that, but not as much.

And I'd agree that central banks have their priorities all wrong, but in the exact opposite way. It seems to me that they have been excessively afraid of inflation and not concerned enough with boosting employment. Though, really, the effectiveness (for good or bad) of central banks is way overstated these days. In normal times, it's the opposite. For all the talk about it, fiscal policy (tax cuts/increases, spending) doesn't really affect the economy because central banks are running the show. That is, the Fed can effectively counteract any effects of fiscal policy. But with interest rates as low as they are, the Fed can't effectively counteract contractionary fiscal policy and wouldn't want to counteract expansionary fiscal policy. As is often the case, the big fights are over distributional issues. The right is freaking out because they fear the inequality-reducing effects of higher inflation, though they're presenting the case as being the opposite (see earlier in this thread how Ultra--a far-left guy--cited an op-ed from a Republican hedge-fund billionaire expressing concern that low interest rates could *increase* inequality--LOL).

Thank you for your input.
I did read you and Ultraman's exchange, and it kind of touched on the same subject. Ironically Ultraman also cited a clearly right-wing persona for his claim about rising inequality.
The people at Saxo Bank are certainly known as being very right wing (see that fox news interview), so I did also find it odd that their chief economist was suddenly pleading for the little guy. So you're probably right, that this is some kind of propaganda mission.

But at the same time some of it did also sound plausible to me. Especially the part about QE and low interest rates being exploited by capital holders.
I guess I have to read some more studies about this. I thought I had the mechanics of this somewhat figured out. But I clearly don't.

 

[Ruprecht]

Real preppers stockpile nitrogen packed food, ammo, and gasoline. Gold is newb-tier.:icon_twis

Well, I don't know what the Paulite/Libertarian/Austrian Economics/Gold Bug/Prepper/Survivalist crossover group looks like, but with Paulites and Austrians in general... Gold.

http://schiffgold.com/

 

[Jack V Savage]

First read on Q2 2015 results is out:

http://www.bloomberg.com/news/artic...-up-in-second-quarter-after-better-2015-start

Looking pretty good. The TS, I'm sure, is happy to be wrong.

 

[KILL KILL]

Has this big crash happened yet? I'm tired of seeing ron Paul commercials telling me the world is about to end.

 

[Jack V Savage]

Has this big crash happened yet? I'm tired of seeing ron Paul commercials telling me the world is about to end.

Any day now:

http://ronpaulsurvivalreport.blogspot.com/2008/02/shocking-news-ron-paul-predicts.html

From the Congressional Record:

"Thank you very much, Mr. Chairman, for allowing me to appear before your subcommittee this morning to discuss the feasibility of establishing a gold standard.

As you know, I have introduced, and other members have cosponsored, H.R. 7874, which is a comprehensive bill to place the United States on a full gold coin standard within two years of the date of its passage.

I believe such a standard to be not only desirable and feasible, but absolutely necessary if we aim to avoid the very real possibility of hyperinflation in the near future, and economic collapse."

Absolutely shocking and completely frightening. If Ron Paul predicts hyperinflation in the near future, then dammit, it must be true. Even more shocking is when the speech was given: February 23, 1981.

 

[Ayin]

That just means the event is being pushed down the line. Now when it happens (more than three decades later...) it's going to be worse since, because of government intervention in the economy, the markets didn't get a chance to naturally correct themselves.

I think I'm getting the hang of this.

 

[HOLA]

Has this big crash happened yet? I'm tired of seeing ron Paul commercials telling me the world is about to end.

Has anyone seen this recent Krugman blog? Brutal!

I don

 

[Jack V Savage]

Has anyone seen this recent Krugman blog? Brutal!

He completely nailed it there.

That just means the event is being pushed down the line. Now when it happens (more than three decades later...) it's going to be worse since, because of government intervention in the economy, the markets didn't get a chance to naturally correct themselves.

I think I'm getting the hang of this.

All the growth we've had since we've gotten off the gold standard is an illusion. We're like Wile E. Coyote and just waiting for that moment when we realize that there's no ground under us. Amazing to think that people have been born, grown up, worked jobs, raised families, and died without ever realizing that it was all fake.

 

[Cubo de Sangre]

If even half the posters bought half the gold they said they did, some major baths were taken.

Outside of wedding rings I've never bought any gold. But I can say that my metals/mining ETF has gotten crushed. Quite the opposite of the health care industry ETF.

What is your take on that? That the QE have mainly provided short-term money for the richest people in the western world, that the normal consumer won't see much benefit, that we will eventually see the bubble created in the stock market explode again (he doesn't say this, but I think it's heavily implied), and that the central banks have their priorities all wrong.

The global financial market imploding due to liquidity/solvency issues is most assuredly not going to help the normal consumer. I'd think preventing a wider collapse in general is beneficial on the whole.

 

[Jack V Savage]

Outside of wedding rings I've never bought any gold. But I can say that my metals/mining ETF has gotten crushed. Quite the opposite of the health care industry ETF.

What should happen is that people say something like, "that bastard Paul/Schiff conned me and cost me a lot of money!" and rethink their understanding of the economy. But that isn't what actually happens.

 

[Cubo de Sangre]

What should happen is that people say something like, "that bastard Paul/Schiff conned me and cost me a lot of money!" and rethink their understanding of the economy. But that isn't what actually happens.

Probably. In my case I picked a handful of sectors and bought into ETF's. Mining/metals seems risky but I considered it part of hedging. The Utilities ETF has been solid.