It's been a while since we've discussed the economy...

[macfly]

Many have told me the worst is finally behind us, and its time to jump back in the market. To be it's sounds like the crowd being wrong again. This evening I heard this excellent interview, and think its well worth everyone's time to watch, and discuss.

Of course I agree with him, and would advise everyone to plan accordingly.

[Z8Mania]

Well, President Obama says its all wonderful....

Seriously, this is how its going to be for a long long time. A lot of contradictory indicators and messages. Its not going to feel like a recovery. Its going to feel like (pardon my borrowing this) "a long hard slog".

The markets have done pretty well and I think probably will continue to do so- just invest really carefully and don't invest too much- sound advice for any time.

[Gregesq]

We are living in strange times. I thought I learned in basic macroeconomics that the printing of money would result in rampant inflation. Yet, we are told that inflation is under control despite the endless printing of money. At the same time, inflation is not as low as the CPI suggests. Costs are higher all over the place in my limited, empirical experience. Flying is more. Cars cost more. Services cost more. Commodity prices spike and then crash. The governments are raising minimum wage, so labor costs more. My auto insurance went up 20% for no reason related to me. Rents are out of control (at least in San Francisco). Just about everything is more expensive (except the cost of borrowng money, and tech like TVs, PCs, and phones). Let's not even get started on the "cost" of taxes. Of course, the CPI doesn't reflect food and energy, two of the things that have increased in price the most in recent years. When did it become OK to pay $4.XX for gas? "It's the new normal." Another slogan.

Strange times - We cannot rely on the government to provide accurate unbiased data. We are running a massive deficit, yet the government shows the debt as stable so as not to punch through the so-called "debt ceiling." The budget and debt purposely exclude items that make them look worse. The social security money is used every year to run current operations without a care about how we will pay social security to a growing pool of participants. How is it that more people are receiving disabiity benefits than ever before? How did everyone get disabled all of a sudden? The unemployment figures are adjusted over and over again. Who can say what they really are? They don't count people who stop looking for work. They don't count this and overweight that What's the "real" number? Good luck finding out.

The government and the Fed don't seem to care how much debt this country incurs, or how much money printing occurs. The "sequester" was a silly, token reduction to a few discretionary budgets, leaving untouched most of the massive deficit. Those in favor use it as proof of fiscal toughness (bullxxxxxxxxxxxxxxxxxxxx). Those against it blame the sequester for dying children, the shooting in DC yesterday, and global warming (bullxxxxxxxxxxxxxxxxxxxx). Meanwhile, millions upon billions are squandered every day on inefficiency, waste, fraud, and incompetence. I know, let's have another war. We'll create lots of high paying, union jobs at our defense contractors' factories. And we'll receive the thanks (campaign contributions) of a grateful board of directors. Which side are we on, though? Doesn't matter, really. Just drop those $500,000 bombs, so we can make some more.

I thought in 2008 that there might be a re-assessment of what is "value." What would happen if people decided a share of stock has no actual value (except what the buyer is willing to pay for it.) A lot of people would be holding valueless stock is what would happen. When the Dow was going down after Lehman, I was worried that might come to pass. But here we are again, doing the Roaring 20's, as we were right before the 2008 crash. Will history repeat itself? It usually does. But when. And who will be holding the bag?

Imagine waking up in Cyprus and hearing that the government will seize half of your money in the bank? I'm sure the citizens never would have conceived of such a thing. Couldn't it happen here? Oh no, never. What about for the children? How about to help "working families"? Wouldn't you "sacrifice" 10% of your holdings in those "fat cat" stockbroker accounts "to help our nation's less fortunate have affordable helathcare? Surely you would want to "pay your fair share" to make those dreams possible.

Long rant. I read a thread like this on the Z8 Boiard, land of the top 5% - and I see other intelligent, educated people who don't seem sure about what's going to happen. Just like me. How to plan for the future? Gold seems to have ebbed and I gave back most of my profits I made in 2008-2011. Real estate is looking better of late (and they're not making any more of it), but for how long until interest rates clamp down on the new boom market? The next stock market crash could wiipe me out if I don't get out early. ... When will it happen? What will be the trigger and how quickly will we see the signs that it's time to get out. And what does one do with "legal tender" when no one wants to buy our debt anymore?

I wish us all a lot of luck in the years to come...

Greg

[Z8Mania]

Greg, you just said exactly what I am thinking.

The problem is the politicians present (at the very best) 1/4 solutions to the problems and they end up causing more problems along the way.....

[macfly]

Yep, we're all in the same boat, one where the captains are either idiots or insanely corrupt. Dem Inc & Rep Inc are a Punch & Judy show in a divide and conquer game being run by the financial-military-industrail complex.

To me it appears that we're in a classic 'end of empire' moment, and one from which the unthinkable and unimaginable increasingly look like the inevitable outcome.

Yet everyone is saying 'We're almost through it, sunny days are here again!'

[skicoach]

Andrew, I saw that presentation yesterday. I am in agreement with you and think we are currently witnessing the end game.

[Z8Mania]

The end of what though? It won't be the end of the world. It will keep spinning.

[skicoach]

The end will be the loss of reserve currency status, severe loss in value of the USD, deflation followed by escalating inflation with what I think will be the creation of a new gold backed global currency that will attempt to normalize financial conditions globally. I think our ability to export inflation around the world without consequence was dealt a big blow today.

[Z8Mania]

I dont think we're there---- yet.

[Norcal]

So, if this were to come to pass, wouldn't gold be good? I'm out of the market and looking for something!

[Gregesq]

I'm no economist, and I don't play one on the internet. So, just going off what I've read and learned over the years - One set of beliefs (mine included) is that the loss of trust in the U.S.'s ability to sustain economic growth and safety and intrinsic value of the dollar could result in refusal to buy U.S. debt to finance our deepening dependency on debt financing, at least without giving the borrower higher rates of return (interest). We pay out interest instead of building roads and other things government is supposed to do with our tax dollars. Higher interest payments will result in higher taxes on the "rich" (till there ain't no rich no more as the song goes), and/or printing more money to pay the debt. Remember that cocaine ad from the 80's? Work harder, so you can buy more coke. So you can stay up longer. And work harder... That's our government in its current form.
So, lower government investment and disincentives to increase income on the "rich" will result in slower economic growth and higher unemployment (hi, France).
There is no interest in reducing debt because the constituents who benefit from it without paying much skin into the game (taxes) are easily organized to vote and complain that the "rich" aren't paying their fair share, and that the government should subsidize luxuries others work for. To be fair, the larger, richer constituents like gaming the system and are getting richer. Witness the "big business" backing of illegal immigration. They take advantage of workers who take less money. Witness government contractors taking advantage of lousy government managers and oversight. And the congresspersons, democrat and republican, get rich off insider trading, consultancies, speaking fees, and cushy lobbyist positions when the stop.
Like many who are paying attention, I am guilty of quietly "taking it" and have no solution. The ship is too big to turn around quickly, or maybe at all. At my age, I'm confident I will die before the crapola hits the fan hard. Sure, I'll have reduced quality of life for the end of my life. But it's our children and grandchildren who are heading towards the abyss. The world will keep spinning, but it will be a less prosperous world. A less pleasant world. A world that is basically a sentence to subsist on the food the government gives you, and to work at a job the government regulates.
I agree with Andrew's comment about the "Empire" and its ultimate demise. This country had a long and great run in its current form. No one in the Holy Roman Empire 100 years before it broke up was sitting around planning for its demise. The French Kings were happy as fish before the late 1700's and had little fear they would not be in power. Every successful, large civilization has had major change in government structure. We are not immune. Our system has decayed over the last 60 years. The impending financial crack-up, the party system, factions, and corruption, fueled by the "media's" fascination with creating gladiator contests out of nearly every political story, will lead to change to our system. I do not know if that change will be peaceful or not, or whether it will fracture the country as already happened once.
I don't have answers, I know. I didn't even sleep in a Holiday Inn Express last night. But anyone who can say that we are heading in the "right direction" as a country is not paying attention, or is benefitting from our race to mediocrity.
"Electrolytes. It's what plants crave." - Idiocracy. Bad movie, but I love the premise.
Well, I'm sure I've earned a special file at the NSA. Sorry I'm ranting. No one wants to hear this spoken aloud in my office, home, etc. (at least not every day).
Best

[Gregesq]

I am not that far off from what he's saying. And he seems to actually know something, although he's in the silver business... So, he probably wants people to buy silver. And the beat goes on!
Greg

[Thackray]

Gregesq,

Idiocracy ? too funny!

A friend and I were watching a gas well being drilled on a neighboring property. He described a scene - 100 years from now - of two men, dressed in rags, standing around the abandoned well. With great amazement one says to the other ?look, fire come from hole?!

I do not think it will take 500 years.

Regards,
Phil

[Z8Mania]

Greg, great points. I tend to agree with you. But I would simply temper the worry factor by saying the only thing I've learned is I don't even come close to knowing it all and our economy is a really complex system and I think that complexity usually works to our advantage. I don't have absolute blind faith, I'm just saying when you think you can see the disaster or the utopia, you might not be seeing it all.

[Gregesq]

Jerry - agreed. I admit I don't know enough about what's "really" going on either. Like I said, it's a big ship to turn. I'm hoping it can right itself before it is too late. I don't know what possessed me to vent like that last night. I guess I took some comfort in seeing other bright and successful people feeling as uneasy as I do about things. Here in SF, one doesn't want to question Dear Leader too loudly....
Best wishes.

[ZbobZ]

Jerry, I question whether complexity is working to our advantage. Maybe so, but maybe not. This financial mess reminds me of a giant perpetual motion machine where new modules are continuously added, increasing complexity, to keep it spinning. But ultimately, the laws of physics dictate that the machine will come to a halt. Perhaps that is a poor analogy, but it appeals to my engineering sensibilities. I think that printing and spending far more that you produce must ultimately lead to the perpetual money machine coming to a halt regardless of how complex it has been made. And if that halt is too sudden, as with any complex machine, the resulting crash may be catastrophic.

[Z8Mania]

Greg and Bob you both make great points. I think on balance it is to our advantage but I don't know this. Its just my belief. I do agree with you that the way things have been going is not the right way to run an economy.

[ZbobZ]

Jerry, for the sake of my children and grandchildren, I hope that you are very right and that I am very wrong. Regards.

[Z8Mania]

It seems like throughout history we've managed to come out ahead, despite our best efforts to goof things up real good. So now we have to wait and see what happens.

[Charles]

I am not too worried about all these young people with their 3.25% fixed rate long term mortgages. Did any of you have that kind of rate back then? There is so much printed money that inflation will drive their salaries up and rob us of our purchasing power, probably more than even our parents...but our parents have some things called social security and medicare, destined to be a shadow of themselves. The question of how the young will make the economic engine work for them is one they can only answer...they are smart, quick, young and can master technology. They will figure it out.

Interest rates are creeping up in the commercial sector, so there is some optimism out there, at least for the short term, but gosh, so much money. There just does not seem to be that many echo boomers, and I am not sure immigration can fill the gap with the necessary ingredients to do more than consume. But who knows. Maybe the pot needs more melting material, so the mutts that have always made up the US population can continue to influence all parts of the globe.