FIRE Economy D-Day

[Guest]

Re: FIRE Economy D-Day

seems like we've had the inflation.

JK - we have had no real inflation yet to speak of. To call the rise in the cost of living in the US in the past eight years a "significant inflation" relative to the historic inflations logged elsewhere in the world would be a considerable misnomer. You've spoken out about US-centric notions around here in the past. The notion "we've had the inflation" in reference to the past decade's real CPI move in the US is in fact highly US-centric. We've had milquetoast for inflation compared to how it's developed in the real instances elsewhere. This datum is not merely a rhetorical argument - it is highly substantive in terms of understanding where we actually are yet on the inflation time-line.

Respectfully.

[metalman]

Re: FIRE Economy D-Day

called '300 - 600' points down before the market opened. closed down 504.

gave yourself a lot of wiggle room but... not bad.

oh, and gold's back over 780

[jtabeb]

Re: FIRE Economy D-Day

EJ, Forward looking question here:

can I use my PMs (non-paper kind) as collateral to secure the start-up funds for the bio fuel company I want to start. Would a bank do that, will they possibly do that in the future?

I would love to be self-funded, but EVEN I don't think gold will get high enough for that.

Thoughts?

Thanks.

[D-Mack]

Re: FIRE Economy D-Day

Historical Precedent

The precedent is not US 1930 or Japan 1990. Both countries were net creditors with large pools of national savings and industrial capacity to tap to use to develop export trade to earn their way back out of an economic hole. A closer analogy is 1930 Germany.

The sequence of Germany's pre-WWII economic crisis is commonly misremembered as follows:[INDENT] 1. Hyperinflation
2. Depression
3. Hitler elected by angry masses
4. WWII

Not so. Here's what really happened.

1.

1921 to 1923: German hyperinflation

1924: Dawes Plan to restructure debt, Rentenmark replaces the Papiermark

1924: Rentenmark backed by land and industrial goods, hyperinflation ends

1924 to 1929: US and British financing pours into Germany, economy recovers

1925: Germany joins the League of Nations

1929: US market crash (FIRE Economy V1.0), US and British investment in Germany ends

1930: German economy collapses

Then:

2. Depression
3. Hitler
4. War

Also in 1923 (Nov 8-9) Hitler tried to get to power, failed and went to jail

http://en.wikipedia.org/wiki/Beer_Hall_Putsch

On 15 November 1923, a new currency, the Rentenmark, was introduced at the rate of 1 trillion (1,000,000,000,000) Papiermark for 1 Rentenmark. At that time, 1 U.S. dollar was equal to 4.2 Rentenmark. Reparation payments resumed, and the Ruhr was returned to Germany under the Locarno Pact, which defined a border between Germany, France and Belgium.

Further pressure from the right came in 1923 with the Beer Hall Putsch, also called the Munich Putsch, staged by Adolf Hitler in Munich. In 1920, the German Workers' Party had become the National Socialist German Workers' Party (NSDAP), nicknamed the Nazi Party, and would become a driving force in the collapse of Weimar.
Hitler was named chairman of the party in July 1921. On November 8, 1923, the Kampfbund, in a pact with Erich Ludendorff, took over a meeting by Bavarian prime minister Gustav von Kahr at a beer hall in Munich.
http://en.wikipedia.org/wiki/Weimar_Republic

I've read and heard that Montague Norman gave the first credit to Hitler after he came to power, although I'm not able to find a newspaper article or something

Norman put his personal prestige on the line in September, 1933 to support the Hitler regime in its first attempt to float a loan in London. The Bank of England's consent was at that time indispensable for floating a foreign bond issue, and Norman made sure that the "Hitler bonds" were warmly recommended in the City.
http://www.tarpley.net/29crash.htm

And there is always the alternative history floating around of Britain financing Hitler against Russia.

Though Lamont did not subscribe to Norman’s argument that Hitler
and Schacht were ‘the bulwarks of civilization in Germany’ and the only forces
restraining the triumph of Bolshevism in Germany, he did venture the belief that
perhaps Germany would alter slowly. Lamont believed that gradual change under a
Hitler–Schacht tandem, presumably into a more benign, familiar authoritarian state,
was possible, though precisely what Lamont envisaged was not articulated

http://journals.cambridge.org/produc...ltextid=353710

[Charles Mackay]

Re: FIRE Economy D-Day

Yet the comfortable fiction that governments – represented by global central banks – control markets will be put to the test. In truth, governments merely influence markets. At times that influence is effectual and at others not.

I have not seen anyone putting that argument forward on iTulip... although I could have missed it. Just so people who have been following this debate on the "selling" thread aren't misled by definitions, Manipulation and control are not the same thing. If they had "control" then gold would still be $250. They don't. They DO manipulate, they DON'T control!

[FRED]

Re: FIRE Economy D-Day

I have not seen anyone putting that argument forward on iTulip... although I could have missed it. Just so people who have been following this debate on the "selling" thread aren't misled by definitions, Manipulation and control are not the same thing. If they had "control" then gold would still be $250. They don't. They DO manipulate, they DON'T control!

First reference I can find is from August 2002 referred to in an article from Nov. 2006: Countrywide CEO says housing slump has a year to go - Nov. 14, 2006

Countrywide CEO says housing slump has a year to go
November 14, 2006 (Reuters)

The slowdown of the U.S. housing market will last through 2007 as inventories are pared enough to prompt a change in consumer psychology, the chief executive officer of the nation's biggest mortgage lender said on Tuesday.

Mortgage lending has slowed as rising inventories in the housing market led to a "hard landing" for the industry after a decade of strong growth, Countrywide Financial Corp. (CFC.N: Quote, Profile, Research) CEO Angelo Mozilo said at a Merrill Lynch & Co. conference in New York.

"We have another year of adjustment, or transition" in the industry until consumers believe home prices won't decline, Mozilo said. "Various events will make the change take place and one of them is" a decline in available homes, he said.

Mozilo said he expects the industry will see lending volume grow progressively from 2008 to 2010 because of a build-up of demand. Until then, the industry will continue to consolidate and eliminate excess capacities.

AntiSpin: What a bunch of crap. Thankfully we have the iTulip WayBack Machine to instruct us on where we are in the denial cycle.

Let us return briefly to August 2002:

iTulip.com has consistently contradicted the consensus opinion of mainstream economists, who certainly spend too much time reading each other's nonsense and unanimously agreed:

• In 1999 that no financial market and economic bubble existed. Technology had created a high growth, high productivity, low inflation New Economy.
• In late 2000 that there was a financial market bubble, in fact the largest in history, but that no economic recession will follow its collapse.
• In early 2001 that the economy was maybe suffering a mild recession, perhaps related to a negative wealth effect following the collapse of the bubble. The mild recession would end and the economy was due to recover in the second half of the year.
• In early 2002 that the recession in the previous year had lasted only one quarter and the economy was due to recover strongly in the second half of 2002.
• Last week that the 2001 recession had in fact lasted for, well, three quarters rather than one as predicted in 2000 and reported up until last week. GDP growth in Q2 2002 was actually only 1.1% versus the 5% consensus estimate, so maybe the economy won't recover much in 2002. But not to worry, the pace of recovery will accelerate smartly in 2003.

Prosperity is just around the corner. Why anyone listens to these guys anymore is a mystery to us. iTulip.com gave a few of blue sky prognosticators the coveted iTulip.com Flying Pig Award.

The cheerful academic revisionist history of the 1930s post bubble period offered up by Schwartz and Friedman states that if only the Fed had done more or the government more that The Great Depression could have been avoided. But as Alan Greenspan himself said back in 1959, "Once stock prices reach the point at which it is hard to value them by any logical methodology, stocks will be bought as they were in the late 1920s–not for investment, but to be unloaded at a still higher price. The ensuing break could be disastrous because panic psychology cannot be summarily altered or reversed by easy-money policies." Collapsing asset bubbles always leave economic devastation in their wake. Witness the condition of the high technology industry, the center of this most recent asset bubble, now approaching a state of economic dysfunction, with rising unemployment and next to no job creation. Wishful thinking and ignorance of the dynamics of economic contraction set in motion by the collapse of asset bubbles dominates during the collapse phase, as the articles from 1929 attest.

iTulip QuickComment August 9, 2002

I'll also repeat the following advice from that Quick Comment:

If you bothered to read the Wall Street Journal article noted above, hoping to glean how the government is going to fix the stock market and improve your stock portfolio, locate the nearest white board and write 100 times, Bart Simpson style:

The government does not control the markets or the economy
The government does not control the markets or the economy
The government does not control the markets or the economy
The government does not control the markets or the economy
The government does not control the markets or the economy

I congratulate Countrywide Financial Corp. CEO Angelo Mozilo...

...for winning with his prediction the coveted iTulip Flying Pig award–the first, but not the last–since before the 2001 recession!

Congrats, Angelo!

[phirang]

Re: FIRE Economy D-Day

I have it on good authority that credit-card debt will eventually be accepted as collateral by the Fed.

The alternative is complete banking collapse in the US.

[jk]

Re: FIRE Economy D-Day

I have it on good authority that credit-card debt will eventually be accepted as collateral by the Fed.

The alternative is complete banking collapse in the US.

if they're ready to accept equity [btw, in what?], i don't see why they'll draw the line at credit card securitizations. same for student loans. they might draw the line at pawn shop inventories.
i am curious - does anyone know what the terms are for equity based lending from the fed? any restrictions on what equities are marginable, or the size of the haircut?

[Charles Mackay]

Re: FIRE Economy D-Day

First reference I can find is from August 2002 referred to in an article from Nov. 2006: Countrywide CEO says housing slump has a year to go - Nov. 14, 2006

I'm not sure what that article has to do with what I said. I said "I have not seen anyone putting that argument forward on iTulip" ...i.e. I haven't read any iTulip members putting forth the argument that the Central Banks have FULL CONTROL of the markets. Many of us have put forth arguments of intervention and manipulation, but not full control.

As Bill Murphy pointed out in Las Vegas last week, it's not really a debate as Barrick has admitted to it under oath in court as well as Volker admitting to selling gold to hold down the price. That there should even be a debate is strange to me.

[Charles Mackay]

Re: FIRE Economy D-Day

I guess it's a new paradigm! Holding rates at 2% in a wildly inflating currency is now deflationary!

[pwcmba]

Re: FIRE Economy D-Day

WOW - Breaking the buck will have some consequences!

http://tinyurl.com/6jv8zv

On top of that - frozen funds!

[The Outback Oracle]

Re: FIRE Economy D-Day

This tragedy or may I say insanity of the FIRE economy is truly global.

We all know that Spain, UK, Australia have a bumpy road ahead as well. Maybe it will be the turn of Macquarie and Babcock & Brown to fail soon?

For example; when I look at Vancouver's RE, I hope there are brave souls there as well...

Nah! It's not going to happen here in Aus! We're blessed! Anyway foeigners keep sending us money because they like us!

[D-Mack]

Re: FIRE Economy D-Day

WOW - Breaking the buck will have some consequences!

http://tinyurl.com/6jv8zv

On top of that - frozen funds!

Ironic ........

Bruce Bent, chairman of Reserve Management, opened the first money-market mutual fund in 1970. The only other money-market fund to inflict losses on shareholders was the Community Bankers Mutual Fund in Denver, which liquidated in 1994 because of investments in interest-rate derivatives.

``This is uncharted territory,'' said Peter Crane, president of Crane Data LLC in Westborough, Massachusetts, which tracks money-market funds. ``That's certainly a stunner.''

The fund held $785 million in Lehman Brothers commercial paper and medium-term notes. The fund's board revalued the Lehman holdings as worthless effective at 4 p.m. New York time. Lehman filed for bankruptcy protection yesterday.

Bent often said the best money-market funds should be ``boring.'' He derided other funds that invested in securities linked to subprime mortgages and other risky debt.

...
http://www.bloomberg.com/apps/news?p...RU&refer=funds