You sure about that?
The US is Bankrupt
- Thread starter Graemsay
- Start date
You sure about that?
America needs another ‘World War’ where it can sit away from the action for years manufacturing stuff for both waring parties and selling it to them at a premium, then step in at the very end and claim victory. Although I don’t know if the ‘hey, you sank my battleship’ reason will work this time.
Also the fact that we have long range bombers, oh and nukes, means they can’t sit out and manufacture, but it worked like magic the last time!
Also the fact that we have long range bombers, oh and nukes, means they can’t sit out and manufacture, but it worked like magic the last time!
All they have to do is default and the rest of the world (well those that count anyway) would be really and actually bankrupt.
Of course it may cause some annoyances and lead to some gripes, so...
Devalueing the USD, while increasing OS borrowing, achieves the same effect slower. And increases US exports.
And all the talk of the yuan being undervalue is load of BS, as it's not beneficial to either sides which is why it has'nt happened.
Of course it may cause some annoyances and lead to some gripes, so...
Devalueing the USD, while increasing OS borrowing, achieves the same effect slower. And increases US exports.
And all the talk of the yuan being undervalue is load of BS, as it's not beneficial to either sides which is why it has'nt happened.
Yes. And I remember bizarre interviews TV where business commentators would hysterically talk down and laugh at people like Robert Shiller for daring to suggest that there was a housing bubble.
The gut feeling in mainstream America was that the graph of housing values would always go up in a straight line.
We had friends buy housing in a town called Stockton, and commute for 4 hours a day to work in Silicon Valley, because this was the new solution to the housing shortage "crisis". Those housing estates are now being bulldozed.
Were you there? Do you remember something different?
I remember them rolling in the isles laughing at Peter Schiff. I think he spoke of the housing bubble as well as the economy generally.
No-one has ever apologised to Schiff, nor will they ever do so to Keen, even if he is proven correct. They no longer actually shoot the messengers, but they are still not keen on them. (no pun intended)
More chart porn re US economy:
More chart porn re US economy:
WW,
I am just trying to be the devils advocate here.
Current new home sales is the lowest on the chart which starts around 1963. So we are at a figure below what it used to be in 1963.
Existing home sales are down to 1997 levels.
Is this all a bit overdone here. How low can it go? Is the US population, GDP lower now compared to 10years ago?
I am not saying US is not in problem. What I am saying is we must be approaching the bottom now. I could be wrong. But looking at US companies corporate profits and balance sheets, their operations overseas and Asian countries still performing strongly, Europe still growing at a decent rate. I think we will see conditions improving in US in the coming months.
edit: Just wanted to also add. BHP opening it's purse to spend over $40B to acquire Potash, Intel also trying to acquire McAfee for $9B, also Google acquiring quite aggressively. To me it's saying all these big corporations are betting for better economic conditions in the coming months/years.
Cheers,
Oracle.
Oracle, the two broad US economic indicators I take most note of
- conference board leading economic indicator (LEI) updated monthly
- ECRI Weekly Leading Index - Growth (WLI-G)
I won't consider the US economy is growing soundly until the former is trending upwards for 4-6 mths and the latter is positive for 6 mths. Mind you, this is all independent of further stimulus (QE2). If QE2 is introduced, the above will be artificially propped up, but this guarantees a more serious recession/depression after it finishes in many non Keynesian economists' views.
While LEI is trending sideways, and housing and unemployment not improving, recession risk is >>50% in my books.
A WLI-G < -10 has good predictive power of a recession.
It's worth tracking US credit health. Banks won't loosen lending while consumer loan delinquencies are rising. And a recovery independent of QE2 isn't on the cards until credit can fuel increased consumption.
US central banks publish good data, especially NY Fed and St Louis Fed
The household debt charts below are from the NY Fed:
The US has to deleverage and this chart shows that's begun, but let's keep in mind many peopel are walking away from non recourse loans to facilitate this.
As in Australia, lending for housing, days on the market, and foreclosures are worth tracking.
edit: removed last chart as realtytrac link is unstable.
- conference board leading economic indicator (LEI) updated monthly
- ECRI Weekly Leading Index - Growth (WLI-G)
I won't consider the US economy is growing soundly until the former is trending upwards for 4-6 mths and the latter is positive for 6 mths. Mind you, this is all independent of further stimulus (QE2). If QE2 is introduced, the above will be artificially propped up, but this guarantees a more serious recession/depression after it finishes in many non Keynesian economists' views.
While LEI is trending sideways, and housing and unemployment not improving, recession risk is >>50% in my books.
A WLI-G < -10 has good predictive power of a recession.
It's worth tracking US credit health. Banks won't loosen lending while consumer loan delinquencies are rising. And a recovery independent of QE2 isn't on the cards until credit can fuel increased consumption.
US central banks publish good data, especially NY Fed and St Louis Fed
The household debt charts below are from the NY Fed:
The US has to deleverage and this chart shows that's begun, but let's keep in mind many peopel are walking away from non recourse loans to facilitate this.
As in Australia, lending for housing, days on the market, and foreclosures are worth tracking.
edit: removed last chart as realtytrac link is unstable.
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HI ww,
are you sure about the chart showing US total debt balance at just 11.7 tril$? I thought was much higher then that (as you can see from the debt clock )
I also have a better chart that put together existing home sales and new homesales, would be good to have a chart like that for australia
are you sure about the chart showing US total debt balance at just 11.7 tril$? I thought was much higher then that (as you can see from the debt clock )
I also have a better chart that put together existing home sales and new homesales, would be good to have a chart like that for australia
Lower yet.
"Sentiment" has a much greater effect on prices than is commonly accepted here. When sentiment turns and prices fall it is hard to put in a floor. That's why treasuries are scared to death about deflation....... Hard as hell to reverse.
And deflation is real in parts of the US now.Boz my data source is the New York Fed.
Just skimming around their site and found their new webpage dedicated to household debt. Have a gawk. It's got all the charts that were in the pdf report I pulled the earlier ones from.
WHy it might differ from other reports I don't know. Maybe others include off balance sheet liabilities or are not specifically "net" household debt.
Just skimming around their site and found their new webpage dedicated to household debt. Have a gawk. It's got all the charts that were in the pdf report I pulled the earlier ones from.
WHy it might differ from other reports I don't know. Maybe others include off balance sheet liabilities or are not specifically "net" household debt.
What are their promises worth?
Not that that the US would declare any reliable (truthful) data, but...............What would be the scope of their unfunded liabilities?
Any ideas?
Edit: .............actually just went searching and it looks from a few websites like it's around 100 trillion or so. Here's one source (unsure of accuracy):
http://ezinearticles.com/?What-is-the-Total-Unfunded-Liability-of-the-US-Government?&id=3531013
Not that that the US would declare any reliable (truthful) data, but...............What would be the scope of their unfunded liabilities?
Any ideas?
Edit: .............actually just went searching and it looks from a few websites like it's around 100 trillion or so. Here's one source (unsure of accuracy):
http://ezinearticles.com/?What-is-the-Total-Unfunded-Liability-of-the-US-Government?&id=3531013
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If you look at the middle of debt clock page you get:
Total personal debt (at 16.252 tril$)
Mortgage debt ( at 13.836 tril$)
Consumer debt (at 2.416 tril$)
Credit Card debt (at 818.1 tril$)
personal debt per citizen at 52,411$, funny that that number is very much similar to Australia infact it is equivalent to 59kA$ which moltiplied by 22 mil citizens makes around 1.3 trilA$ that is equivalent to motgage leding plus personal lending in australia.
I don't know either why debt number from FED are different then other sources
Shiff should be apologizing to all those who lost their money following his advice to buy EU, AUD and OIL who would've lost their money and been margin called with anything over 3:1 leverage.
He's been calling a recession for ten years, sooner or later it's gonna happen.
And when it happened he got his main calls (which he personally gained from) wrong.
The interviews are all there on youtube.
Yes, Schiff was wrong on some of his investment advice.....not gold though....but that doesn't make him wrong on the bigger picture fundamentals.
Every economist agrees the bigger the macros the harder it is to predict timing. And who would have thought the gubmint would socialize debt to the unprecedented scale it has.....and it turns out unsuccessful.
Krugman and co are now saying the stimulus wasn't big enough, and the gang are sitting around arguing how much bigger to make it, and the timing. Obama realizes to announce another major spending spree pre election could lose him the election.
And I'll go on the record right here and now saying if there is a QE2, the US is seriously stuffed. THere's no way the private sector will pick up the risk when QE2 ends. US bankruptcy will be brought forward.
Great work here Winston, truely valueable information, even for non perma bears such as myself.
Emphasis needs to be placed on the ECRI weekly leading index as you have mentioned.
Also the chart about re total consumer debt is very instructional.
See how much 'effort' is required to pay down debt when the underlying asset class is not moving in your favour. Some words of wisdom here potential for australian property investors.
Emphasis needs to be placed on the ECRI weekly leading index as you have mentioned.
Also the chart about re total consumer debt is very instructional.
See how much 'effort' is required to pay down debt when the underlying asset class is not moving in your favour. Some words of wisdom here potential for australian property investors.
You raise a very interesting point here Oracle,
Winston you are the 'unofficial' Sommersoft statistican
Maybe you can add some light to this.
I had a quick look over your graph of new housing starts, it seems that the 'mean' equilibrium point is somewhere around 600,000 houses.
I then looked at the 'rough' accumulated trend above 800,000 and came up with a very approximate 'surplus' 2.4 million houses which need to be worked off.
If equilibrium is 600,000 we need a cumulative period under 600,000 to approximately equal a cumulative -ve 2.4 million to roughly restore things to the mean.
Of course these are all very rough figures
Thx for kudos IV. I'd love a dashboard of all significant macro to micro factors for US, Aus etc. I started to build one for Aus that pulled data from RBA and ABS, but then RBA changed web access rights and some data scraping didn't work.
It's a time consuming process to set up, and it seems others are evolving what I envision anyways. Another expanding economics data source is tradingeconomics. good data and time series charts from what I've seen so far.
This is a short article that discusses what might kick the US recovery off. There's only 4 things that can do it - h'holds, business, govt, foreign sector.
Regarding how low US house sales can go, the really big lesson Aussies need to take home from what is happening there is housing prices are primarily a factor of credit supply. This is why I have been making so much noise about Australia's growing reliance on foreign credit to prop Aus prices up. How much lower US prices can go will be dependent on two things:
1. when private US lenders are prepared to take US houses onto their balance sheets again.
2. when/if the US govt determines they cannot wait for private lenders to pick up that risk, they do as Bill Gross recently suggested and direct Fannie and Freddie or a new govt lender, to lend at low interest and govt guarantee to home buyers.
These are the two options that will put a floor under housing prices. For various reasons, I don't see the private sector will lead funding of resi mortgages, and neither does Bill Gross. The govt is going to have to wear that risk.
(This should underline that asset valuation via mark to market is dependent on the market having access to credit. Take the credit away and the market can only price houses via the cash in the economy which is a hell of a lot less than credit money. Hence why broad money and credit money is important to track. )
The US's problem is that for 2 decades at least, growth was being fueled by unsustainable growth in credit.....and it maxed out. No one is prepared to extend the previous level of credit to households or business, so imo, the domestic economy must contract to a smaller size. That especially applies to the services and construction sector. The S&P500 is masking a lot of this contraction because so many US companies are expanding earnings in foreign markets....but that is not helping the domestic economy significantly.
edit: a quality interview with Shiller and Zillow's chief economist Tues 24.8.10.
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