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Topic: CoV predicted US economic crash 7 months ago (Read 1483 times) |
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MoEnzyme
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CoV predicted US economic crash 7 months ago
« on: 2008-01-23 13:23:07 » |
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So much for the legacy of "trickle down economics" -- massive tax cuts for the richest. Last week Blunderov finally ended the thread "It’s Official: The Crash of the U.S. Economy has begun." http://www.churchofvirus.org/bbs/index.php?board=69;action=display;threadid=39931 begun 7 months earlier. This week's global financial bloodbaths have confirmed it such that references are unnecessary. We are swimming in bloody bearish news; the Fed made one of the largest surprise rate cuts yesterday and still the US stock market continues fall. The control rods are begining to fail in this final meltdown. I know that the fed and our politicians are going to try to do something to stimulate the economy, but I'm begining to wonder if at this point whether further stimulation will simply lead to stagflation.
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Mo Enzyme
(consolidation of handles: Jake Sapiens; memelab; logicnazi; Loki; Every1Hz; and Shadow)
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MoEnzyme
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Re:CoV predicted US economic crash 7 months ago
« Reply #1 on: 2008-01-23 16:52:34 » |
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It looks like there is some recovery from Monday-Tuesday drops today, but still the Dow continues to float down towards the 12,000 mark, well below the 13,000ish range it had sustained for several years. The crash is still quite real, its just a question of when and if we begin to really burn. Perhaps the control rods aren't quite useless yet, but their effectiveness is certainly in question.
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I will fight your gods for food,
Mo Enzyme
(consolidation of handles: Jake Sapiens; memelab; logicnazi; Loki; Every1Hz; and Shadow)
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Blunderov
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Re:CoV predicted US economic crash 7 months ago
« Reply #2 on: 2008-01-25 13:43:11 » |
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[Blunderov] This guy nailed it way before anybody that I know of.
http://www.thepeoplesvoice.org/cgi-bin/blogs/voices.php/2008/01/25/p22823
Stagflation is Here
Rodrigue Tremblay
"War—after all, what is it that the people get? Why—widows, taxes, wooden legs and debt." - Samuel B. Pettengill
"Armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few." - James Madison, 4th U.S. President (April 20, 1795)
"Let me issue and control a nation's currency and I care not who makes its laws". - Nathan Rothschild, 1791
Last summer, I observed that there was a "solvency crisis" underneath the ongoing subprime mortgage liquidity squeeze. Central banks can alleviate a "liquidity crisis", but they cannot solve a solvency crisis. Last year also, before the events, I warned that the U.S. was heading toward stagflation. This was due to three fundamental factors. First, the structural fiscal imbalances of the federal budget in a period of prosperity, as a result of the Bush-Cheney administration's continuous deficit spending linked to the Iraq and Afghanistan wars and to its large tax cuts; second, the over-indebtedness of the overall U.S. economy coupled with an overall saving rate close to zero (in 1981, it was 12 percent), and, as a consequence, the rapidly increasing foreign debt of the U.S.; and, third, the required decline in the U.S. dollar to reverse and correct the deteriorating American balance of payments. The second factor was a harbinger of less consumer spending in the coming months while the third factor would stoke the fire of overall inflation. And with already high budget deficits, there would be less leeway for an aggressive fiscal policy to sustain economic activity. The table was thus set for a bout of stagflation, i.e. slow growth and rising inflation.
Now, stagflation is here. —Economic growth is slowing down, M3 money supply numbers, as a measure of overall liquidity in the economy, are in the double digits range, the yield curve has inverted and become negative (short term rates higher than longer term rates) and the U.S. dollar has become one the weakest currencies in the world. All this as American twin deficits (balance of trade and federal government budget deficits) are at record levels. —As I pointed out last year, " A lower currency translates into more imported inflation and makes it difficult to maintain low interest rates," even if, in due time, it will improve the trade balance. This means that, for all practical purposes, monetary policy is also severely constrained in what it can now accomplish. For all of 2007, inflation hit 4.1 percent, which is two-thirds more than in 2006 when inflation registered at 2.5 percent. Moreover, the surge in wholesale prices announces even higher inflation in the months ahead.
With inflation being on the rise and real interest rates already in negative territory, aggressive monetary stimulus would likely be counterproductive, because too low interest rates would encourage capital outflows, pushing the dollar further down, and translating into more imported inflation. On top of that, one has to remember that monetary policy shifts take at least nine to twelve months before impacting the real economy. One has also to keep in mind that the U.S. operates, more and more, in an international environment, and is less and less capable of influencing the domestic economy by manipulating one variable only, such as the interest rate.
Of course, the Fed could have played a better preventive regulatory role if it had intervened in 2003-04 to reign in the unsound banking lending practices that have led to the subprime debacle. But the milk is out of the bottle now, and nothing can erase the damage done to the housing construction sector and other parts of the economy because of this lack of oversight.
After seven years of continuous indulging, of borrowing and debt building, the U.S. federal government is also in a fiscal bind and will find it difficult to effectively counteract the slowdown in the economy. Indeed, over the last seven years, the Bush-Cheney administration has run fiscal deficits on the average of $461.29 billion each year, for a grand total of $3,229 billion of cumulative of on-budget deficits.
This makes it harder to embark upon a new round of deficit spending to stimulate the economy. For one, fiscal policy shifts have even a longer time horizon before impacting the real economy. Secondly, the coming slowdown and recession will worsen an already high federal government deficit, as government receipts decline with the rise in unemployment and the drop in income growth. On the spending side, the Iraq war, in particular, is a black hole that siphons off more than $100 billion each year, with no end in sight. Oil prices are also very high, partly because of high world demand, partly because of geopolitical instability and partly because of the lowered dollar.
After seven years of foreign policy madness and of empire building on a mountain of debt, and of public indulging and private gouging, the financial crisis and credit crunch, the plummeting dollar, the high price for oil will all contribute to the 2008 economic slowdown, which is likely to turn into a recession, during the first half of the year, if it is not already into one since last December. The downturn in the world stock markets during this month is another clear indication that something is wrong, not only with the U.S. economy, but also with the world economy.
All that would seem to be very bad news for George W. Bush's Republicans, just as it was bad news for the Democratic Carter administration in the late '70s. Indeed, over the last century, the U.S. economy has been in a recession four times in the early part of a presidential election year, according to the National Bureau of Economic Research. In each of those years — 1920, 1932, 1960 and 1980 — the party of the incumbent president lost the election.
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January 25, 2008 By Rodrigue Tremblay, professor emeritus of economics at the University of Montreal and can be reached at rodrigue.tremblay@yahoo.com He is the author of the book 'The New American Empire' Visit his blog site at: www.thenewamericanempire.com/blog. Author's Website: www.thenewamericanempire.com/ Check Dr. Tremblay's coming book "The Code for Global Ethics" at: www.TheCodeForGlobalEthics.com/
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Hermit
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Re:CoV predicted US economic crash 7 months ago
« Reply #3 on: 2008-01-25 16:02:21 » |
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I think the CoV has done much better than most. Aside from my forecasts of gloom and doom going into Afghanistan and again in Iraq, both born out in blood, equipment and dollars, not only did I track predictions of the current economic issues in February 2006 (24 months ago, more than triple the lead time claimed in this thread) in Church of Virus BBS, Mailing List, Virus 2006, Alarm - Cover Your Ass!, Hermit, 2006-02-27, but I specifically posted an article discussing stagflation (Refer reply 6, dated 2006-06-02), a number addressing the collapse of the property bubble and strongly recommended the purchase of Gold in the month when it dropped to $US 425/oz; accurately noting its turnaround and predicting the amazing profits that speculation in futures would have brought - although even simple holdings would have doubled in value by now (or more accurately would have held their value as the dollar plummeted).
At this point there is some scope in the technicals for a 6 month decrease in the oil price and slight recovery of the dollar, but the fundamentals remain bleaker than anyone living has ever seen. The post civil war, 1890s depression remains a much better model, in my opinion, than the 1930s depression.
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With or without religion, you would have good people doing good things and evil people doing evil things. But for good people to do evil things, that takes religion. - Steven Weinberg, 1999
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Blunderov
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Re:CoV predicted US economic crash 7 months ago
« Reply #4 on: 2008-01-26 00:45:43 » |
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Quote from: Hermit on 2008-01-25 16:02:21 <snip>
not only did I track predictions of the current economic issues in February 2006 (24 months ago, more than triple the lead time claimed in htis thread) in Church of Virus BBS, Mailing List, Virus 2006, Alarm - Cover Your Ass!, Hermit, 2006-02-27, but I specifically posted an article discussing stagflation (Refer reply 6, dated 2006-06-02), ... The post civil war, 1890s depression remains a much better model, in my opinion, than the 1930s depression.</snip>
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[Blunderov] My apologies. I had forgotten - it was a long time ago 
The 1890s depression is a closed book to me but sounds interesting. I will look into it.
Best regards.
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Blunderov
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Re:CoV predicted US economic crash 7 months ago
« Reply #5 on: 2008-01-28 01:17:37 » |
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[Blunderov] The Credit Card Crunch. Word around the watercoolers in Jo'burg banks is that this one will be nasty and will aggravate matters more than somewhat.
http://hanrott.com/blog/?p=444
01.26.08Economic debacle
Posted in The way we live now at 8:06 am by Robert Hanrott
Personal debt has reached astronomic proportions, and the next crisis is going to be over credit card defaults and the sleazy behavior of unregulated credit card companies. ( As a matter of interest UK personal debt , even higher than in the US, currently amounts to £1,400, 000,000,000 and all of it is now costlier to pay off.) Who cares? Well, Western economies are all interconnected and it look as if they could take each other down. The so-called stimulus package does nothing to address the long-term insecurities felt by millions of middle class people, insecurities that are well justified. The financial system is out of control and pre-industrial ideology dictates that the government should do as little as possible. Watch the libertarians, who so much loath government, yelp when they start losing their jobs, have to downsize their houses and trade in their cars. Never mind, they will quickly forget who caused the mayhem be able to blame President Hillary Clinton.
Ah, the greed and lack of common sense! Epicurus would shake his head in disbelief.
http://www.smartmoney.com/consumer/index.cfm?story=20080104
The Coming Credit-Card Crunch
By Aleksandra Todorova |Aleksandra Todorova Archive |Published: January 4, 2008
THE SUBPRIME-MORTGAGE crisis has cost millions of homeowners their homes. Now it threatens to put the squeeze on even more consumers by spilling into the credit-card market.
The bad news is pretty straightforward: With home equity dried up, consumers are piling up credit-card debt at a rapidly increasing pace. As of the third quarter of 2007 (the latest for which data is available), credit-card balances increased by 7% on an annualized basis, according to statistics compiled by market research firm TowerGroup. Compared to the average annual increases of 2% over the previous six years, it's clear that we are fast becoming a country precariously living on borrowed money.
"Consumers are being squeezed out of the credit markets," explains Dennis Moroney, senior research analyst at TowerGroup. "They've used up their home equity to finance their lifestyle, but now with that not available, you're seeing a rise in credit balances and a rise in delinquencies."
Indeed, in the third quarter of 2007, delinquency rates — the ratio of the dollar amount of loans 30 days or more past due to the amount of total loans outstanding — at the country's 100 largest banks crept up to 4.47%, from 4.24% for the same period in 2006, according to Federal Reserve statistics. During the real-estate boom years (2004 to early 2006), when homeowners easily refinanced mortgages or took home equity loans to pay off mounting credit-card debt, delinquency rates rarely surpassed 4%. Charge-offs, or debt that has been removed from the banks' books and declared a loss, are also on the rise, at 4% at the end of the third quarter, compared with 3.84% a year earlier.
Should delinquencies continue to mount, it could impact a wide swathe of credit-card holders — even those who don't have trouble paying their mortgages or managing their finances. Credit-card debt, like mortgages, is sold to investors in the form of asset-backed securities. The more consumers default on credit cards, the more these investors have to lose and, much like the situation with mortgage-backed securities, they may start shying away from these investments. As a result, banks will be less willing to extend credit to consumers.
There is some good news. "Assuming the economy doesn't go into recession — and that's a critical assumption — we don't expect things [in the credit-card markets] to get as bad [as the mortgage market]," says Scott Hoyt, director of consumer economics at Moody's Economy.com. Historically, delinquency rates are lower than they were during the recession of 2002 to early 2003, when they bordered on 5%. And they're certainly lower than delinquency rates in subprime mortgages.
At least for now they are. Charge-offs and delinquencies are expected to keep rising. TowerGroup's Moroney predicts they'll start peaking this summer, when the debts incurred during the holidays are charged off the banks' books. The latest job numbers released Friday, which put December unemployment at 5%, don't bode well either, as credit-card delinquencies are tightly linked to folks having jobs. While a single jobs report isn't enough to make Hoyt change his outlook for credit cards — Economy.com's forecast is delinquencies could reach 2002-03 levels by the end of the year — he concedes that the report does present "even more downside risk" to the credit-card industry.
Working to the banks' advantage — and consumers' detriment — is the fact that banks can control credit risk and easily make up at least part of their losses. "Issuers have been through downturns before," says David Robertson, publisher of the Nilson Report, a credit-card industry newsletter. "They look ahead and use analytics to determine the people more likely to become delinquent and therefore result in a charge-off." Those people might see their interest rates go up, or their credit availability decrease. In addition, those who've been late on payments are already paying higher interest rates that make up for potential losses. "You might ultimately charge off $1,000, but you might have made more than $1,000 from that person in high rates and fees," Robertson says.
In short, creditors will fight the threat of a crunch by squeezing consumers. Here's what you should watch out for this year.
1. Tighter lending standards
If charge-offs and delinquencies continue to rise, credit-card companies will likely respond by making it harder for consumers to access credit.
"To sign someone up for a new account, banks are going to look for higher credit scores," says Robert McKinley, president of CardTrack.com, a consumer credit card information web site. "Just like in the subprime-mortgage market, the days of easy lending are gone." This means consumers will have to work harder to improve their credit scores, paying their bills on time, trying to keep their balances low and monitoring their credit reports for errors. (Click here for more score-boosting strategies.)
2. Reduced credit lines
Like Big Brother, credit-card companies are constantly monitoring everyone. They track customers' card activity, credit scores and other debts, using complex algorithms to predict their risk of becoming delinquent.
When a consumer is flagged as an increased risk, lenders take steps to protect themselves. In the past, the most widely-used tactic was hiking such consumers' interest rates, says CardTrak.com's McKinley. Through a practice called "universal default," a credit-card company could increase your rate even if you always paid your bills on time, but were late on a payment with another bank's account. Now that Congress is taking a closer look at universal default, credit-card companies are turning to other tried and true strategies like reducing the amount of credit they extend.
This year, more consumers can expect to be hit with unexpected decreases on their already existing credit lines, predicts McKinley. The ramifications of such a move could quickly snowball: Lower limits could bring your balance dangerously close to the credit limit, lower your credit score and result in similar action from your other lenders. One way to protect yourself is to make sure you have more credit available elsewhere. Click here for more advice on handling credit limit decreases.
3. Enhanced collections efforts
All of these delinquencies come as welcome news to the folks in the collections industry. After all, more charge-offs mean more business. Collectors take control of these past-due accounts — called receivables — from credit-card companies and keep a portion of each dollar they collect. How soon an account is sold to a third-party collections agency varies by bank, but if delinquencies rise sharply, banks are likely to start passing them along much sooner. "Banks will aggressively peddle this stuff," Moroney says. By selling their receivables to collectors, banks cut the costs of servicing a debt that they may not be able to collect anyway.
Needless to say, all of this is bad news for consumers. Anyone who's ever dealt with a collections agency can tell you their methods can be rough. Worse, there's not much a consumer can do to prevent a delinquent account from going into collections. To protect yourself, be sure to contact your creditor at the earliest sign of trouble. If your interest rate is unmanageably high, ask the lender to lower it. If you're already behind on payments, seek the help of a reputable credit-counseling agency. Even if you're not planning to file bankruptcy, your best bet is to go with one that has been approved to provide prebankruptcy credit counseling by the Department of Justice's Trustee Program, as all such agencies have to pass the program's review process. Find one in your state here.
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Hermit
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Re:CoV predicted US economic crash 7 months ago
« Reply #6 on: 2008-01-28 08:21:42 » |
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Since the Bankruptcy Reform Act was gifted to the insurance companies and credit card issuers of America, it has been vastly worth the latter's while to use every possible trick to get consumers to take more credit than they ought to have, and then to trigger rate increases through any possible means including some which go beyond their usual scurrilous practices (e.g. mailing notification of a payment date change in small print on a card in a package offering new facilities, and then introducing penalizing interest rates for any consumer not making a payment by the new earlier payment date. Apparently carefully selected to move payments into the end of most people's pay periods rather than the beginning). This is because it is effectively impossible for consumers to escape the debt, and because "penalty" interest rates exceeding 30% are not at all unusual.
A datum the credit card issuers keep close to their bosoms is exactly what effective interest rate (total interest/total non-defaulted, non-zero APR loans) they are extorting from their customer base. Given that most people are also encouraged to make minimum monthly payments, ensuring that these interest rates live on forever, there is no likelihood of these practices changing anytime soon. They are far, far too profitable. Amazing how cheaply politicians will sell their souls given the relatively tiny contributions that were needed to buy these profits.
Kind Regards
Hermit
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With or without religion, you would have good people doing good things and evil people doing evil things. But for good people to do evil things, that takes religion. - Steven Weinberg, 1999
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