After the events of the last week, I was very confused. I have preached on many occasions, that there are always indicators to future behavior. Reading between the lines is something that has always come easy to me. So when the government decided to Bailout (loan) AIG and not move interest rates, I started to wonder why? Of course less than 24 hrs later we learned of the "Bailout to end all... [more]
After the events of the last week, I was very confused. I have preached on many occasions, that there are always indicators to future behavior. Reading between the lines is something that has always come easy to me. So when the government decided to Bailout (loan) AIG and not move interest rates, I started to wonder why? Of course less than 24 hrs later we learned of the "Bailout to end all bailouts". Now it started to look clear, in retrospect, why they agreed to give AIG $85 Billion and keep rates the same. Why lower rates on the heels of positive news, no sense in waisting a future positive move. Giving AIG the $85 Billion didn't matter at all. It just gave them time until the gov't set up the "Bailout" and AIG's paper would be dumped on the gov't anyway.
In essence, the fed knew after the fall of Lehman and the merger of BoA and ML, that it would have to act quickly and it did. So when it came time to deal with AIG and the interest rate decision, it was a no brain-er. The "Bailout of all bailouts" was planned and ready to be introduced.
I have spent most of Thursday Thur Saturday ,pondering what would be the feds next move. And then it hit me like a ton of bricks. I was asking the wrong question. The right question isn't, what the feds next move is, it's why has the fed done what they have already? I know that sounds like a stupid question, give the events, that led to the "bailout". However I realized, that it was much deeper, then that. So I remembered a conversation I had with my wife. We were watching the news and saw the all the politicians nestled together. I commented to my wife something to the affect like, Wow it's amazing how both of these party's came together so quickly. That my friends was the indicator of all indicators. So here is the real question, What aren't The President, FED, Treasury, and both Republicans and Democrats in the house and senate not telling the people or what is it that has them so scared that they are all in agreement. I know some are thinking, this is a stupid question, we already know why. It's the Credit Crisis.
And I would argue that it's not what has occurred and obvious but what is the great threat that the FED is advising congress about. So I started thinking about it and I came to the conclusion. It's not inflation or stagflation but deflation.
Deflation is what as the FED worried more then anything. Deflation is the fastest route to a depression. I'm going to sit hear and lecture the facts about deflation, however I would advise those interested and unfamiliar with it, educate themselves and see if the pieces fit.
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Response by ccdevi
over 17 years ago
Posts: 861
Member since: Apr 2007
This post belongs in the unintentionally amusing hall of fame.
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Response by csn
over 17 years ago
Posts: 450
Member since: Dec 2007
so dco, what do your crystal balls tell you the government will do next. It would be nice to hear about it before it appears in the media. Don't ya think?
I would agree with all the posts above. I'm not claiming, that I'm the first to recognize deflation as a possibility. My observation, of the events, has indicated that it's the FED that is worried about deflation and considers it, the greatest threat to the world economy.
Knowing the biggest threat perceived by the Fed, will indicate future Fed behavior.
ccdevi "This post belongs in the unintentionally amusing hall of fame." If I had a dollar for everyone on this site that as mocked me for the last year I'd be rich and proven right from the beginning. Hey ccdevi let me guess problem solved? Give me a break.
csn "so dco, what do your crystal balls tell you the government will do next. It would be nice to hear about it before it appears in the media. Don't ya think?"
I'll tell you what, why don't you back and research my predictions months ago and see how many have been right on the money. I never claimed that my opinions where the only ones that existed. However I hve on the right side of the events since the beginning. And I have news, it's just the beginning.
So now that I have been mocked, yet again, why not weight in on "your" analysis and enlighten the rest of us, on what it is, that the Fed is so concerned about? Perhaps you think the problem was solved?
Go ahead that a shot, perhaps I might learn something.
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Response by serge07
over 17 years ago
Posts: 334
Member since: Aug 2008
The next threat IMO, continues to be credit whether it be municipal, corporate, consumer or derivatives. Another issue out there is the enormous amount of regulation at the Federal level that may result from this fiasco. The new regs coming to a financial institution near you will make Sarbanes Oxley seem like a short walk in the park on a sunny day.
I agree that there will be no inflation. Given the issues in the credit markets, it difficult to imagine rising asset values, specially the leveraged type.
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Response by bugelrex
over 17 years ago
Posts: 499
Member since: Apr 2007
There will certainly be no inflation IF the government doesn't create it. I believe they will go overboard with the printing press and create another mess of hyper-inflation...
scary times... I just hope there are still some politicians who are not owned by special interests who will put the country first. I just wish Ron Paul had more influence...
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Response by serge07
over 17 years ago
Posts: 334
Member since: Aug 2008
"scary times... I just hope there are still some politicians who are not owned by special interests who will put the country first. I just wish Ron Paul had more influence..."
I totally agree. This is what happens when politicians sell their souls to special interest groups, who give a rat's behind about this country.
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Response by drdrd
over 17 years ago
Posts: 1905
Member since: Apr 2007
Isn't this whole economy basically smoke & mirrors? We are & have been a debtor nation; we don't make anything in this country anymore; the middle class is losing ground & the robber barons are in ascendancy; the citizenry charges, charges, charges & doesn't save; we're spending billions upon billions of dollars on an ill-conceived war on terror; and the politicians are working for big business, big money. Waiting for the next shoe to drop? I'm expecting the whole armoire to crash down.
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Response by lobo
over 17 years ago
Posts: 264
Member since: Feb 2008
economically, there is nothing worse than deflation. Let's just hope that it's not the case.
Inflation is not good either but it's a lot better than deflation.
Economists do not know how to deal with deflation - at least we are used to dealing with inflation.
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Response by newbuyer99
over 17 years ago
Posts: 1231
Member since: Jul 2008
I don't disagree with any of the negatives here, but"our whole economy is smoke and mirrors" is a gross exaggeration. There is a fair amount of profitable manufacturing that still takes place in the US. Then you have pharma, high-tech, media. All those things "make" something for americans and the world to consume.
Debtor nation is sadly right, though. We spend way more than we earn, individually, and as a country. Until we stop doing that we have big problems. And it doesn't look like we're headed towards fiscal discipline (again, individually or as a country), whatever your politics.
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Response by dco
over 17 years ago
Posts: 1319
Member since: Mar 2008
lobo "Economists do not know how to deal with deflation - at least we are used to dealing with inflation."
100% correct. That's why I'm convinced after the weeks events, that its deflation, that is on the horizon and the powers that be are fully aware and are very scared.
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Response by ccdevi
over 17 years ago
Posts: 861
Member since: Apr 2007
"If I had a dollar for everyone on this site that as mocked me for the last year I'd be rich and proven right from the beginning."
you deserved every bit and more. you were right?, yeah you've been great at posting links and summarizing stuff you've read. Deflation, real genius. Remember what I've said, watch out for this thing called global warming, you heard it here first.
" I have preached on many occasions, that there are always indicators to future behavior. Reading between the lines is something that has always come easy to me."
Can't believe you're not embarrassed typing that.
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Response by evnyc
over 17 years ago
Posts: 1844
Member since: Aug 2008
Given the prospective boomer retirement wave crunching social security, this bailout with no known price tag, and asset devaluation, I fear we are going to remain a debtor nation for a long time to come. Maybe the only path to fiscal discipline is through ruin. Nothing else seems to sink in.
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Response by LP1
over 17 years ago
Posts: 242
Member since: Feb 2008
Did you read in the WSJ what Paulson said when a senator asked him what would happen if the vailout bill wasn't signed? Pauleon said "if it doesn't pass, then heaven help us all". How's that for scared?
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Response by dco
over 17 years ago
Posts: 1319
Member since: Mar 2008
ccdevi- I'm sorry that you bought, at the height of the market. Perhaps you should listen to others and stop being so angry and perhaps next time, (in about 10 years) you might be able to turn a profit.
Don't be so hard on yourself, for buying that 700 sq/ft 2 bed/ 2bath condo in the next "it" area, for $1.5M. You weren't the only one who made this terrible decision. Just deal with it and enjoy all the amenities.
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Response by WmNino
over 17 years ago
Posts: 9
Member since: Sep 2008
dco, I don't know you from Adam, but what I cant figure out is why you feel the need to "preach" (which immediately subtracts from any credibility your argument may or may not have) and then why when people disagree with you you need to baselessly insult them. How the heck do you know what ccdevi bought and when?
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Response by luis5acc
over 17 years ago
Posts: 81
Member since: Oct 2007
The problem is not deflation, but the vast amount of derivatives in the marketplace. The banks have leveraged themselves to cover contracts that have no intrinsic value like mortgages. Everybody is saying thet the problem is toxic mortgages but it is really all the underlying obligations attached to those mortgages. If our government would declare bankruptcy instead of bailout, then all the big money would lose instead of the regular people. That is the real problem. The rich don't want to lose. In bankruptcy, only the people who are linked to the main debt get resolution, those attached tangentially lose. I hope McCain continues to be against this bailout because otherwise we, average citizens, will be on the hook for the huge amount of money.
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Response by tenemental
over 17 years ago
Posts: 1282
Member since: Sep 2007
"I hope McCain continues to be against this bailout"
Apparently not. From an AP article on tonight's 60 Minutes interview:
In the same interview, McCain defended the Bush administration's proposed bailout of financial firms as necessary, though he acknowledged it could get expensive.
"We're going to take over these bad loans," McCain said. "And we're going to have the taxpayer help you out. But when the time comes and the economy recovers, then anything that's gained back is going to go to the taxpayers first.
"I'm not saying this isn't going to be messy. And I'm not saying it isn't going to be expensive. But we have to stop the bleeding," McCain said.
I find that part about the gains being returned to the taxpayer hard to believe.
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Response by ccdevi
over 17 years ago
Posts: 861
Member since: Apr 2007
no worries WmNino, this is his usual song and dance. an internet legend in his own mind, who tries to pass off others ideas as his own. then he ducks and runs when called on it.
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Response by dco
over 17 years ago
Posts: 1319
Member since: Mar 2008
WmNino- I also don't know you from Adam, I just ask that you go back and read ccdevi post and tell me, who insulted who first.
ccdevi- Internet legend? No just someone who saw beyond most.
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Response by dco
over 17 years ago
Posts: 1319
Member since: Mar 2008
Just wanted to remind people deflation is starting to rear it's ugly head. Take it for what it's worth.
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Response by junkman_r_u_serious
over 17 years ago
Posts: 230
Member since: May 2008
tenemental, dont worry about discussion regarding gains. there wont be any gains.
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Response by petrfitz
over 17 years ago
Posts: 2533
Member since: Mar 2008
Luis - who cares what McCain thinks about the bailout? he is uneffective and cant get anythign done. The only thing McCain has added to the bail out negotiations is politics.
McCain is going down like Steve at a Fire Island clam bake.
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Response by mrsblogs
over 17 years ago
Posts: 89
Member since: Mar 2008
Warren Buffet thinks there will be inflation next year, not deflation. So, here's my dilemma...who should I listen to...Warren Buffet, esteemed world renown investor or, dco, unknown anonynous person on Street Easy????
Unless...dco IS Warren Buffet!!! Hmmmm??????
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Response by ccdevi
over 17 years ago
Posts: 861
Member since: Apr 2007
clearly the answer is dco, he sees beyond most and reading between the lines comes easy to him.
petrfitz, that last line is the best contribution you've ever made to this board.
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Response by buster2056
over 17 years ago
Posts: 866
Member since: Sep 2007
Ugh - I see petrfitz and ccdevi share the same "humor." If you are going to resort to one-liners based on stereotypes (equating homosexuality with promiscuity) at least make them clever...
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Response by urbandigs
over 17 years ago
Posts: 3629
Member since: Jan 2006
Ive been discussing deflation for the past 9 months.
The reason AIG had to be bailed out because they are the biggest insurer, they are global, and THEY ISSUED CREDIT DEFAULT SWAPS (CDS) and were on the other side of the trade! When Fannie/Freddie/Lehman failed, it was a credit event. It hit AIG hard, and what do you think is hitting GE hard? They were on the other side of CDS trades as well.
Letting AIG fail would have caused a global catastrophe. Not to say it wont happen anyway.
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Response by urbandigs
over 17 years ago
Posts: 3629
Member since: Jan 2006
Luis5acc - you can break it down a number of ways. Sure, derivatives allowed the credit/housing boom and now is fueling the bust. After all these toxic assets with no place to call home is what is restraining lending power and clogging the credit markets.
But I assure you, DEFLATION, specifically credit deflation/housing deflation and recently commodity deflation is a very big problem!
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Response by WV7
over 17 years ago
Posts: 20
Member since: Jan 2008
But correct me if I'm wrong - as I am far from expert - but all the value that has been created (on paper) in the last decade or so - now that it is devaluing itself, those losses can't just be erased. They HAVE to exhibit themselves somewhere (since when it was created it wasn't like hard assets just moved from one place to another, value was created without money being printed really to back it up). So that's a long, slightly confused way of saying, shouldn't we be worried more about stagflation than deflation, as the most likely place for all of this lost value to appear would be in the dollar?
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Response by urbandigs
over 17 years ago
Posts: 3629
Member since: Jan 2006
hmmm, good question. I have no clue. Im going to forward this to someone who may offer an opinion.
This post belongs in the unintentionally amusing hall of fame.
so dco, what do your crystal balls tell you the government will do next. It would be nice to hear about it before it appears in the media. Don't ya think?
dco, a number of people have been calling this deflation for some time, check out this website. http://globaleconomicanalysis.blogspot.com/
Simple google search shows this has been discussed for several years and recently. For example:
http://www.dailyreckoning.com.au/risk-of-deflation/2007/08/07/
http://www.marketoracle.co.uk/Article3333.html
http://goldnews.bullionvault.com/deflation_money_supply_russell_gold_082020082
I would agree with all the posts above. I'm not claiming, that I'm the first to recognize deflation as a possibility. My observation, of the events, has indicated that it's the FED that is worried about deflation and considers it, the greatest threat to the world economy.
Knowing the biggest threat perceived by the Fed, will indicate future Fed behavior.
ccdevi "This post belongs in the unintentionally amusing hall of fame." If I had a dollar for everyone on this site that as mocked me for the last year I'd be rich and proven right from the beginning. Hey ccdevi let me guess problem solved? Give me a break.
csn "so dco, what do your crystal balls tell you the government will do next. It would be nice to hear about it before it appears in the media. Don't ya think?"
I'll tell you what, why don't you back and research my predictions months ago and see how many have been right on the money. I never claimed that my opinions where the only ones that existed. However I hve on the right side of the events since the beginning. And I have news, it's just the beginning.
So now that I have been mocked, yet again, why not weight in on "your" analysis and enlighten the rest of us, on what it is, that the Fed is so concerned about? Perhaps you think the problem was solved?
Go ahead that a shot, perhaps I might learn something.
The next threat IMO, continues to be credit whether it be municipal, corporate, consumer or derivatives. Another issue out there is the enormous amount of regulation at the Federal level that may result from this fiasco. The new regs coming to a financial institution near you will make Sarbanes Oxley seem like a short walk in the park on a sunny day.
I agree that there will be no inflation. Given the issues in the credit markets, it difficult to imagine rising asset values, specially the leveraged type.
There will certainly be no inflation IF the government doesn't create it. I believe they will go overboard with the printing press and create another mess of hyper-inflation...
scary times... I just hope there are still some politicians who are not owned by special interests who will put the country first. I just wish Ron Paul had more influence...
"scary times... I just hope there are still some politicians who are not owned by special interests who will put the country first. I just wish Ron Paul had more influence..."
I totally agree. This is what happens when politicians sell their souls to special interest groups, who give a rat's behind about this country.
Isn't this whole economy basically smoke & mirrors? We are & have been a debtor nation; we don't make anything in this country anymore; the middle class is losing ground & the robber barons are in ascendancy; the citizenry charges, charges, charges & doesn't save; we're spending billions upon billions of dollars on an ill-conceived war on terror; and the politicians are working for big business, big money. Waiting for the next shoe to drop? I'm expecting the whole armoire to crash down.
economically, there is nothing worse than deflation. Let's just hope that it's not the case.
Inflation is not good either but it's a lot better than deflation.
Economists do not know how to deal with deflation - at least we are used to dealing with inflation.
I don't disagree with any of the negatives here, but"our whole economy is smoke and mirrors" is a gross exaggeration. There is a fair amount of profitable manufacturing that still takes place in the US. Then you have pharma, high-tech, media. All those things "make" something for americans and the world to consume.
Debtor nation is sadly right, though. We spend way more than we earn, individually, and as a country. Until we stop doing that we have big problems. And it doesn't look like we're headed towards fiscal discipline (again, individually or as a country), whatever your politics.
lobo "Economists do not know how to deal with deflation - at least we are used to dealing with inflation."
100% correct. That's why I'm convinced after the weeks events, that its deflation, that is on the horizon and the powers that be are fully aware and are very scared.
"If I had a dollar for everyone on this site that as mocked me for the last year I'd be rich and proven right from the beginning."
you deserved every bit and more. you were right?, yeah you've been great at posting links and summarizing stuff you've read. Deflation, real genius. Remember what I've said, watch out for this thing called global warming, you heard it here first.
" I have preached on many occasions, that there are always indicators to future behavior. Reading between the lines is something that has always come easy to me."
Can't believe you're not embarrassed typing that.
Given the prospective boomer retirement wave crunching social security, this bailout with no known price tag, and asset devaluation, I fear we are going to remain a debtor nation for a long time to come. Maybe the only path to fiscal discipline is through ruin. Nothing else seems to sink in.
Did you read in the WSJ what Paulson said when a senator asked him what would happen if the vailout bill wasn't signed? Pauleon said "if it doesn't pass, then heaven help us all". How's that for scared?
ccdevi- I'm sorry that you bought, at the height of the market. Perhaps you should listen to others and stop being so angry and perhaps next time, (in about 10 years) you might be able to turn a profit.
Don't be so hard on yourself, for buying that 700 sq/ft 2 bed/ 2bath condo in the next "it" area, for $1.5M. You weren't the only one who made this terrible decision. Just deal with it and enjoy all the amenities.
dco, I don't know you from Adam, but what I cant figure out is why you feel the need to "preach" (which immediately subtracts from any credibility your argument may or may not have) and then why when people disagree with you you need to baselessly insult them. How the heck do you know what ccdevi bought and when?
The problem is not deflation, but the vast amount of derivatives in the marketplace. The banks have leveraged themselves to cover contracts that have no intrinsic value like mortgages. Everybody is saying thet the problem is toxic mortgages but it is really all the underlying obligations attached to those mortgages. If our government would declare bankruptcy instead of bailout, then all the big money would lose instead of the regular people. That is the real problem. The rich don't want to lose. In bankruptcy, only the people who are linked to the main debt get resolution, those attached tangentially lose. I hope McCain continues to be against this bailout because otherwise we, average citizens, will be on the hook for the huge amount of money.
"I hope McCain continues to be against this bailout"
Apparently not. From an AP article on tonight's 60 Minutes interview:
In the same interview, McCain defended the Bush administration's proposed bailout of financial firms as necessary, though he acknowledged it could get expensive.
"We're going to take over these bad loans," McCain said. "And we're going to have the taxpayer help you out. But when the time comes and the economy recovers, then anything that's gained back is going to go to the taxpayers first.
"I'm not saying this isn't going to be messy. And I'm not saying it isn't going to be expensive. But we have to stop the bleeding," McCain said.
I find that part about the gains being returned to the taxpayer hard to believe.
no worries WmNino, this is his usual song and dance. an internet legend in his own mind, who tries to pass off others ideas as his own. then he ducks and runs when called on it.
WmNino- I also don't know you from Adam, I just ask that you go back and read ccdevi post and tell me, who insulted who first.
ccdevi- Internet legend? No just someone who saw beyond most.
Just wanted to remind people deflation is starting to rear it's ugly head. Take it for what it's worth.
tenemental, dont worry about discussion regarding gains. there wont be any gains.
Luis - who cares what McCain thinks about the bailout? he is uneffective and cant get anythign done. The only thing McCain has added to the bail out negotiations is politics.
McCain is going down like Steve at a Fire Island clam bake.
Warren Buffet thinks there will be inflation next year, not deflation. So, here's my dilemma...who should I listen to...Warren Buffet, esteemed world renown investor or, dco, unknown anonynous person on Street Easy????
Unless...dco IS Warren Buffet!!! Hmmmm??????
clearly the answer is dco, he sees beyond most and reading between the lines comes easy to him.
petrfitz, that last line is the best contribution you've ever made to this board.
Ugh - I see petrfitz and ccdevi share the same "humor." If you are going to resort to one-liners based on stereotypes (equating homosexuality with promiscuity) at least make them clever...
Ive been discussing deflation for the past 9 months.
The reason AIG had to be bailed out because they are the biggest insurer, they are global, and THEY ISSUED CREDIT DEFAULT SWAPS (CDS) and were on the other side of the trade! When Fannie/Freddie/Lehman failed, it was a credit event. It hit AIG hard, and what do you think is hitting GE hard? They were on the other side of CDS trades as well.
Letting AIG fail would have caused a global catastrophe. Not to say it wont happen anyway.
Luis5acc - you can break it down a number of ways. Sure, derivatives allowed the credit/housing boom and now is fueling the bust. After all these toxic assets with no place to call home is what is restraining lending power and clogging the credit markets.
But I assure you, DEFLATION, specifically credit deflation/housing deflation and recently commodity deflation is a very big problem!
But correct me if I'm wrong - as I am far from expert - but all the value that has been created (on paper) in the last decade or so - now that it is devaluing itself, those losses can't just be erased. They HAVE to exhibit themselves somewhere (since when it was created it wasn't like hard assets just moved from one place to another, value was created without money being printed really to back it up). So that's a long, slightly confused way of saying, shouldn't we be worried more about stagflation than deflation, as the most likely place for all of this lost value to appear would be in the dollar?
hmmm, good question. I have no clue. Im going to forward this to someone who may offer an opinion.
"Rear its ugly head"
Sara? Sara Palin, is that you?
http://www.bloomberg.com/apps/news?pid=20601087&sid=aD24rTsF1jwE&refer=home
Hmmmm.....
http://dealbook.nytimes.com/2013/06/11/insurers-inflating-books-new-york-regulator-says
se, why?