telegraph uk, 12-15-07 wrote:Morgan Stanley has issued a full recession alert for the US economy, warning of a sharp slowdown in business investment and a "perfect storm" for consumers as the housing slump spreads.
clocker bob april 2006 wrote:What will be the breaking point? Let's choose $100 a barrel. That's a nice round number.
The law of supply and demand cannot be conned. It will trump efforts to manipulate the money supply every time.
The important thing to recognize is that a recession is welcomed by those positioned to exploit it, like The Cabal That Does Not Exist...
clocker bob may 2006 wrote:Lenders talk about a “debtor’s death spiral.” It occurs when borrowers get so far in over their heads they begin borrowing money just to cover the interest payments on past borrowings. The borrowers have to do this to keep the lending flowing but they can no longer plausibly pay down the principal. As new debt compounds on old, bankruptcy becomes imminent. Further lending is foolhardy. Foreclosure is only a matter of time.
The U.S. is starting to look like it is entering just such a death spiral. It is foretold not simply by the large and growing deficits, nor by the fact that their carrying costs will rise quickly as interest rates rise. Rather, it is the fact that these trends are becoming irreversible, a structural part of the U.S. economy.
clocker bob june 2006 wrote:Interest rates are *everything* in a world economy that survives on the prices paid by consumers, investors and governments to live on credit. There is a limit to the supply-side stimulus generated by low-interest rate money. At some point, demand is satisfied, and even zero interest rate money can't reignite it. When this limit is reached, the 'real' prices of assets ( housing, commodities, stocks ) peak, and then the prices briefly rise for a different reason- a reaction to the excess of money; that's the phase I believe we're in right now.
An excess of money results in the devaluation of currencies- nobody wants more paper money than they need, because paper money is not a measurement of tangible wealth, it is a measurement of how much debt exists in the global economy- paper money is born from debt, and paper money can die from debt defaults.
Bernanke has no elbow room left. He is in a narrow hallway that will converge like a cone; one wall represents the victims of low interest rates, the other wall represents the victims of high interest rates.
The victims of low interest rates are the lenders; they will not accept weak money as payment on their credit for very long. The victims of high interest rates are the victims of cheap money- the US government, homeowners; they will face a much higher climb up the tree for the fruit very soon. No mercy to the impatient and the reckless is ever shown by the bankers. They lend to earn money, not break even.
There will soon be no price for money that will be a comfortable risk to both creditor and debtor, and central banks without new customers for debt money will do exactly what central banks always do when the market for new debt dries up: batten down the hatches and watch the shakeout from a very high altitude, frequently swooping in like hawks to purchase cheap assets from panicked investors. They're playing no-limit poker, and you will give them the price they want - you can't outwait them.
The US, after living high on cheap money, begins having to pay more and more interest to sustain the deficit spending, while simultaneously crushing the housing market, consumer spending, and job growth ( maybe even the fake job growth ). The stock markets are faith-based speculative sectors of the economy- they live on expectations of future earnings. Stagflation will drive them down at the same rate as stagflation will drive up our cost of living. Wages will stagnate, unemployment will rise drastically, just like the hangover analogy used by Schiff.