US Depression postoned; not prevented

Stimulus providing a sugar rush................perhaps these are just empty calories and the temporary high will lead to thud :(

http://finance.yahoo.com/tech-ticke...-it-says-trend-forecaster-celente-401119.html

Another doom & gloom person trying to get the chance at the spot light.

Mark my words:
the US will have another depression?
i am 100% right..........
but when????????

On a more serious note, the US is extremely unlikely to experience a depression in the next few years.
A double dip down turn, yes quite possible.
Another recession, yes quite possible.

But there is a big difference between a depression and a recession. In the 1900's we had only one depression, but numerous recessions.

People must remember that our economic system is adaptive based on the drive to make profits. This acts as a natural stabiliser. Why do i say based on the drive to make profits?
because people individually act in their own best interests, but collectively they form the market place, and thus their combined self serving actions act as a stabiliser and eventually a catalyst for future growth.

Just step back a moment and think:
*US consumers are now saving
*US companies have been through a period of excessive cost cutting and thus the survivers are leaner and can operate in reduced economic conditions
*there are no more crazy loans being taken out by consumers
* there are no more stupid lenders willing to lend crazy loans to consumers if they wished.
* consumers have heightened awairness of soverign debt.
etc etc
Thus US consumers/businesses are adapting to their environment.

The partial socialisation of private sector debt by the government will REDUCE future economic growth potential, but it wont in itself cause a depression.
 
But there is a big difference between a depression and a recession. In the 1900's we had only one depression, but numerous recessions.
What (in your opinion) are the "big differences" between a recession and depression?

Broader unemployment in the US is over 17%, arguably the highest level it's been since the Great Depression.

While most say now that the US is not in a depression, I suspect in 20 years time looking back that most will consider the depression to have started in 2008.

It's not like we look back at the Great Depression and see the market rally 30% leading into early 1930 and then claim the depression started after it started to decline again. The Great Depression by most is considered to have started in 1929.
 
You're headed in the right direction Hobo.

There is debate among the "economic journalists" that WW mentions about whether the Yanks are headed for a depression or high (hyper?) inflation. Either way it doesn't sound appetising. :D

Elements of both are inevitable now. I have tried to think about a depression and it is V difficult, having spent my life with inflation, but I no longer think that they are mutually exclusive.

"Inflationary depression", enter stage right.

Just step back a moment and think:
*US consumers are now saving
*US companies have been through a period of excessive cost cutting and thus the survivers are leaner and can operate in reduced economic conditions
*there are no more crazy loans being taken out by consumers
* there are no more stupid lenders willing to lend crazy loans to consumers if they wished.
* consumers have heightened awairness of soverign debt.
etc etc
Thus US consumers/businesses are adapting to their environment.


I think you are in error. The US Gov is now the lender of last resort. If they can't find someone to borrow their money they give it away. No way to run a country.
 
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What (in your opinion) are the "big differences" between a recession and depression?

i'm sure someone can google the official difference. If you want a practicle example, look at the state of fear in the global market place between Nov08-March 09. You wont get this from the media which is always hyping something, but if you have contacts in senior business/treasury management/ or large business owners talk to them. Now imagine that state of fear existing for several years. Thats a depression. Its truely terrifying.


Broader unemployment in the US is over 17%, arguably the highest level it's been since the Great Depression.

So what was broading unemployment say in 2007 & 2008 im sure it was higher than the official unemployment statistics.
Also look at the trend in new unemployment. This is the key its a very nice inverse bell curve.


While most say now that the US is not in a depression, I suspect in 20 years time looking back that most will consider the depression to have started in 2008.

You suspect, i mean this in a non-offensive manner, but your feelings have no relevance on what the market will do (not from an individual point anyway, if you can convince 50% of the population to think the same way then im scared)



It's not like we look back at the Great Depression and see the market rally 30% leading into early 1930 and then claim the depression started after it started to decline again. The Great Depression by most is considered to have started in 1929.

You really need to understand the catalysts of the great depression and compare it to this current period.

We are not in a time repeat loop here.

Again i emphasise that i dont think things are going to be all rosy over the next several years, i just think a depression is a very remote probability and thus i am investing accordingly.

If you really think a depression is around the corner, i honestly dont know what you do. I dont think gold is the answer since this is a free marketable asset (and hence subject to trading above/below its intrinsic value). Maybe buy a farm and a gun.
 
I think you are in error. The US Gov is now the lender of last resort. If they can't find someone to borrow their money they give it away. No way to run a country.

actually there was an interesting article about this. Basically so long as the US is the country of last reserve (and it still is, give me an alternative, and gold is not the answer) US sovereign debt CANNOT go into default.
The central bank can 'inflate' away the debt. And they have done this before, after WWII.

In regards to US central bank expansion of liquidity, look at the last several months (from memory about 5 or six months), they are quietly withdrawing it. The curve has moved downwards (albiet at still much higher levels).
I dont have the graph to prove my point (ive deleted the file and its not sourced from a public sight which can be googled:().

Secondly you forget China. Its still caught in the trade loop, until it can create a self sustaining economy that is not so reliant on exports, it HAS to support the US. It might complain, it might rattle its saber, but at the end of the day its a dictatoral government that keeps its population in place through employment.
 
Is the Fed Reserve a Ponzi Bank

So, if the US cannot go into default and it ends up mattering not whether the tax payer can fund the ever increasing interest bill is the central bank a Ponzi Bank?

Isn't there a limit to Maddof finance as people see beyond the smoke and the mirrors come smahing down?

Pardon my naivety.......my head doesn't get around this stuff too easily. :confused:

With e-commerce and electronic everything these days, it is a mere observation on my behalf (and I don't have charts/graphs to prove it just anectdotal observation), aren't cyles getting shorter and quicker.

I know there are cycles within cycles, however with property at least, we are seeing sharper and shorter bull runs. Perhaps it all averages out in the end over the traditional 7-10 year time frame that we often like to refer too, however I think it is a sign of the times to be far more nimble on one's toes.

Just my observations :)
 
So, if the US cannot go into default and it ends up mattering not whether the tax payer can fund the ever increasing interest bill is the central bank a Ponzi Bank?
Excellent observation Player. And if something can't go on forever: It wont!

I don't know when it will end, but end it will. You don't want to be on the wrong side of THAT trade. :D
 
So, if the US cannot go into default and it ends up mattering not whether the tax payer can fund the ever increasing interest bill is the central bank a Ponzi Bank?



its a ponzi scheme that has limits imposed by a country's dependence on foreign credit and imports.

foreigners constantly reassess the risk of lending to a country by revaluing bond issuance and a country's currency relative to other currencies.

reassessment is by way of a country's anticipated cash flows and liquid assets. These are measured via:
- the current account (a country's qtrly or annual cash flow with the rest of the world)
- net foreign debt (a country's net loans and borrowings with the rest of the world)
- availability of private and public foreign income generating assets for sale to foreigners.
- sovereign risk (risk of a govt defaulting on foreign loans, or intentionally inflating their currency to reduce foreign debt, or not adequately regulating finance sector)
- exposure to external shocks (health of trading partners, overall dependence on foreign creditors)

If foreigners constrict credit to a country, the country has no option than to borrow from itself....which is what the USA has done in buckets since GFC, via the Fed Reserve Bank buying - bonds issued by US Treasury and sub prime mortgages.

Whether a country borrows from foreigners or from its future productivity, both increase money supply. And if money supply growth exceeds GDP growth, then inflation results.

Most developed nations have been increasing money supply quicker than GDP for years......a logical outcome of running current account deficits and relying on ever increasing foreign credit.....and recurrent CADs are unsustainable unless a country sells off assets (like Australia).

Either way, it is an indication that current account surplus countries finance the lifestyles of CAD countries....Australia, Europe, and the USA are living a lifestyle financed by the hard work and savings of emerging nations.

It is unsustainable in the long term.

Many are concerned about it. And governments are always attempting to mask how bad things are.

John Williams shadow stats is an effort to expose the US govt's masking of their true financial position. Australia needs a John Williams.
 
I think one of the big challenges for the US economy is restructuring so many unprofitable and ineffecient industries. Australia went through this process in the 80's and 90's, and it was very painful, but it produced an efficient economy which could withstand alot of the shaking from overseas.
I'm not an expert, but what I've seen of the US, there still seems to be a highly protectionist govt, with huge inefficiencies and therefore costs.

A good example is the medical industry. Here a visit to the GP would cost the govt/ insurance say around $100. In the US, I paid $750 each for 2 separate visits to a GP (in 2 different states). In the process, I saw 5 different people - receptionist/ finance person/ second receptionist/ nurse and finally doctor, over about 4 hours. If the whole process was streamlined they could significantly reduce costs. But, they will probably also increase unemployment, because at least 3 of those people were unnecessary.
But now, the US health industry is falling apart. In the area of medical devices which I work in, the US customers are paying around double to what we would here for standard products, and the products they are using have about half the function. Their level of service is less than most of the developing Asian markets I work in. Its really sad, and it needs a huge overhaul.

But Americans find it so hard to see that there economy and health systems are not the strongest and most secure in the world..... so they find it difficult to embrace significant changes.

I don't think there will be a depression there, but I think there is lots of painful restructuring ahead.

Pen
 
i'm sure someone can google the official difference. If you want a practicle example, look at the state of fear in the global market place between Nov08-March 09. You wont get this from the media which is always hyping something, but if you have contacts in senior business/treasury management/ or large business owners talk to them. Now imagine that state of fear existing for several years. Thats a depression. Its truely terrifying.
You say there is big difference between recession and depression and then tell me to "google it"?? There are those including myself that believe the US, UK and probably other parts of the world are currently in depression right now, regardless of the current positive MSM spin. That is why I asked you what the differences were, because I was interested in your take on it, there is no universal definition or set of rules differing the two. There does not need to be fear in the market the entire length of a depression, you will note that after the 1929 crash there was positive press, believing the worst was over...it wasn't.

So what was broading unemployment say in 2007 & 2008 im sure it was higher than the official unemployment statistics.
Also look at the trend in new unemployment. This is the key its a very nice inverse bell curve.
Can you link me to the graph? With Obama talking about hiring up to 1.4m Americans to perform the Census this year I suspect short term data will be skewed unfairly. One has to wonder why they need 3x the number of people to perform the census as it took in 2000...

You suspect, i mean this in a non-offensive manner, but your feelings have no relevance on what the market will do (not from an individual point anyway, if you can convince 50% of the population to think the same way then im scared)
Neither do your feelings. There is no technical definition of a depression to my knowledge, so your opinion that the US isn't in one is simply that, your opinion.

If you really think a depression is around the corner, i honestly dont know what you do. I dont think gold is the answer since this is a free marketable asset (and hence subject to trading above/below its intrinsic value). Maybe buy a farm and a gun.
My opinion is that Gold will (and already is) taking on a monetary role, so while it is subject to the possibility of trading under intrinsic value, if it does then I don't believe it will be for any great length of time. I believe there will be a currency crisis at some point in the next few years and expect Gold to be a safe haven.

I also have my doubts about things getting that bad in Australia, when I say we are in/I expect a depression I want to reiterate that I am talking about the US, UK, parts of Europe. Who knows, Australia might make it through relatively unscathed.
 
Celente says the recent signs of economic recovery are nothing more than a boost based on "a stimulus economy." Once those measures are pulled back the economy will once again tank

I totaly agree.

In my opinion which is based on what I read online and from talking to people in the US things are not looking good.
Imagine what the situation would be like without the fed's support of the economy. I'm actually VERY worried for the future of the people, starting with their housing.

I was looking online for houses in the Chicago area and the map I was looking at was full of flags showing the location of houses on foreclosure.
The banks are not selling them yet because they don't want to flood the market with properties none can afford to buy, and the people are still in their homes but for how long?

Properties in the area I was looking at have lost 30% of their value since last year and will lose more this year. Investors are nowhere to be seen and this situation is not going to change because property values are expected to fall and the rental law is favouring the tenants (you can't get a non paying tenant out during winter time).

On the work front, many of the people who still have a job are forced to reduce their working hours.
One day employment will pickup again but not before they fix their banking system and solve their housing problems.

Does the above situation affect us?
Yes, mostly through the share market but also through the credit markets. On a positive note, our $ is going up in value and I expect it to go up even more so it's a good time to plan our overseas holidays. :D

IMHO
 
US house prices are still going backwards, just not as quickly.

BlobServer
 
I think one of the big challenges for the US economy is restructuring so many unprofitable and ineffecient industries. Australia went through this process in the 80's and 90's, and it was very painful, but it produced an efficient economy which could withstand alot of the shaking from overseas.
I'm not an expert, but what I've seen of the US, there still seems to be a highly protectionist govt, with huge inefficiencies and therefore costs.

A good example is the medical industry. Here a visit to the GP would cost the govt/ insurance say around $100. In the US, I paid $750 each for 2 separate visits to a GP (in 2 different states). In the process, I saw 5 different people - receptionist/ finance person/ second receptionist/ nurse and finally doctor, over about 4 hours. If the whole process was streamlined they could significantly reduce costs. But, they will probably also increase unemployment, because at least 3 of those people were unnecessary.
But now, the US health industry is falling apart. In the area of medical devices which I work in, the US customers are paying around double to what we would here for standard products, and the products they are using have about half the function. Their level of service is less than most of the developing Asian markets I work in. Its really sad, and it needs a huge overhaul.

But Americans find it so hard to see that there economy and health systems are not the strongest and most secure in the world..... so they find it difficult to embrace significant changes.

I don't think there will be a depression there, but I think there is lots of painful restructuring ahead.

Pen

They know their health system lags behind. Unfortunately most of their system is run by the private sector. Try telling Private Industry to cut costs, when sales are down and they have over committed and over manufactured.

It's not only devices, it's drugs too. The US charges it's own citizens MORE for drugs than it does to other countries. Work that one out.

Sunfish
You say there is big difference between recession and depression and then tell me to "google it"?? There are those including myself that believe the US, UK and probably other parts of the world are currently in depression right now, regardless of the current positive MSM spin. That is why I asked you what the differences were, because I was interested in your take on it, there is no universal definition or set of rules differing the two. There does not need to be fear in the market the entire length of a depression, you will note that after the 1929 crash there was positive press, believing the worst was over...it wasn't.

I agree with you and think the US is spinning out of control. Really, the only control the US has is over it's army and aid support. What a massive problem when you consider that one problem has to be solved by fixing another one...which can't be fixed until you fix another one and so on.

Player
If foreigners constrict credit to a country, the country has no option than to borrow from itself....which is what the USA has done in buckets since GFC,

Whether a country borrows from foreigners or from its future productivity, both increase money supply. And if money supply growth exceeds GDP growth, then inflation results.

My only hope is that foreign countries and American investors continue to plough money into Aus as a stable and growing economy. When we look around us - we are the lucky ones...so far.:)

Happy Australia Day All - I'm off to a picnic at the beach and a BBQ around the pool. :)

Regards JO
 
I would define a recession is when the economy has gotten overheated and after a period of clearing inventories and cost cutting things carry on pretty much as they were.

A depression is when the old economic model doesn't work anymore and mal investment and non profitable industries have to be wiped away before resources are reallocated to more productive new industries and initiatives.

I would say the world is closer to the second definition than the first although Australia has fortunately been insulated against the majority of the pain felt around the world due to China's demand for our resources, whether this fortune is temporary or permanent is the big question !
 
Neither do your feelings. There is no technical definition of a depression to my knowledge, so your opinion that the US isn't in one is simply that, your opinion.

You are quite correct in that we all have opinions, and its fine to have an 'opinionated chat' on a web forum.
The key is where you allow your 'opinions' to influence your investment decisions. This is a very dangerous cocktail.

In a nut shell

OxPxD>R(1-P)

Where 'O' is opinion, P is probability, D is the negative return (but expressed as a positive number), R is the normal expected return if a depression doesnt occur.

'opinion' x probability of opinion occuring should dictate the investment decision with reference to the returns possible if the depression doesnt occur.



I also have my doubts about things getting that bad in Australia, when I say we are in/I expect a depression I want to reiterate that I am talking about the US, UK, parts of Europe. Who knows, Australia might make it through relatively unscathed.

If we are talking about depression in the US, Australia WILL FOLLOW.
We are linked to Asia, and Asia is linked to the US.
Decoupling is only possible under 'normal' economic conditions. If there is a depression there will be NO DECOUPLING.
 
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