Market crash: are we there yet ?

[TropicCat]

I don't think this is the place for Cheney discussions. OTOH I would enjoy discussing this inany other thread John names. Closer to the subject of this thread is this little gem which should be a wake up call for all you non interventionists. .

China Cancels American Credit Card

"Kirk said he was the first member of Congress to tour the Bureau of Public Debt, which trades bonds, and was alarmed at how much debt was being bought by the US Federal Reserve due to absence of foreign investors."

Incidentally, Kirk is a Republican and is the only official named in the article. Then again Chris Dodd is probably on a fact finding tour of Barbados.

He went on to say:

"We should track that, because up until last month they were the number one provider of currency to the United States and now they're gone."


Yeah, I'd say keeping an eye on how much of it's own debt the government is buying might be a good thing to notice.

Welcome to the end of deflation... Hyperinflation...here we come..

We should start a betting pool on the price of Gold. I'd love to see our newest troll, Craig, take $900.00 oz.

[camaraderie]

Rick...you think it is NOW for Hyper? I thought it was supposed to be a year from now. What changed...the Chinese? Wasn't that predictable? Do you really think now is the time to jump in on gold?

Windy? Your take on this appreciated too.

[wind_magic]

Originally Posted by camaraderie

Rick...you think it is NOW for Hyper? I thought it was supposed to be a year from now. What changed...the Chinese? Wasn't that predictable? Do you really think now is the time to jump in on gold?

Windy? Your take on this appreciated too.

So the question is - what would make you sell cash ? What would make you lose confidence in the $us to the point that you would refuse to hold it, because the answer for you individually is the answer for all of us as a whole. Right now, you (and everyone) sitting there in front of your keyboards reading this - you know on some fundamental level that the $us isn't completely as safe as a silver dollar, you may not know consciously why you believe that, but on some basic level you do - everyone knows that silver and gold is mined in limited quantities, that is has never been worthless, and that paper grows on trees. We all play the game with $us, we all hold it, it is very convenient, and right now it is appreciating in value. Everyone wishes they had wads of the stuff to pay their mortgage with, so you're probably happy to be holding it now and you probably wish you'd sold stocks a year or two ago and bought more of it. So what would make you want to sell it ? What would make you lose faith in its value, what would make Camaraderie afraid to hold his savings in $us ?

If you can answer that question for yourself, you can answer it for all of us.

What would convince everyone, at once, to sell $us ?

The answer to the question is the same as what would make everyone sell houses like they are doing right now when they were excited to be buying them not 5 years ago. It's the same as the answer to the question of what would make people sell stocks right now when they were excited to be buying them 3 years ago.

What would make everyone sell $us is that everyone else is selling it - and what makes people start selling it is that at some point its value becomes unsustainable and people stop believing in the fairy tale, just like they've stopped believing in real estate and stocks.

What would cause you and everyone else to stop believing the fairy tale ?

The most recent hyper-inflation has happened in Iceland. Iceland is a small island country of 300k people, yet it had a massive banking system and issued piles of currency, the currency was sought after all over Europe. At some point during this financial crisis people stopped believing, they started to sell Iceland's currency, and by the time it got going the currency had collapsed and even the locals were scrambling to buy canned goods, guns, gasoline, and whatever else they could get their hands on to try to get rid of the currency they had, because virtually over night it became worthless. Why them, why now, what made it happen now ? The currencies fundamentals didn't change, it is the same currency it was two years ago, same people involved, same banks, same investors, so why now ?

What made people stop believing in the Icelandic Krona ?

[TropicCat]

I'm so upset I can't stay asleep.

The equation is simple. We’re buying our own debt because no one else will. That's a fairly simple concept. Issuing new debt (US Treasuries) is increasing our money supply. Inflation is automatic when you increase the money supply without an increase in inflation adjusted GDP. Right now, our GDP is decreasing.

Today there is a bond market. But, what's going to happen a month from now? China has already said "forgetaboutit". Last year the Japanese gave us fair warning, if we printed too much, they were sitting on the sidelines. Who can blame either of them? It's only a matter of time before bond traders wake up as investors are not going to buy bonds that are certain to rapidly depreciate in the face of inflation.

I've been predicting this for months. Windy has been telling me to calm down. It's not the time to calm down,

The two largest entities that buy our debt, have just said "no" and were not even slowing down a little bit. The inescapable conclusion is that Hyperinflation was the goal all along. All the speeches were just fluff. Bernanke is going to purposely devalue our currency to get rid of the unpayable US debt. This is now Policy.

As I ponder this, it dawned on me that there's no better time to do it. Think about it. Every Bank is insolvent today anyway, every bad mortgage is being sold to our government. The banks will have the least amount of long term loans in the marketplace in recent memory and can't cry over inflation burying their interest rates.

This is it ... everyone is in position...... The next things to watch are interest rates and gold pricing.

God help those on Social Security. They aren't going to even know what hit them.

[wind_magic]

Trop and I have a little disagreement about timing.

I wouldn't load all my $us into a wheelbarrow just yet ...

[TropicCat]

Yeah we do, but look at recent developments.

Windy, I've never hoped that I was more wrong. Yet, I think my timing is closer than yours. Let's keep an eye on bond and mortgage interest rates, that will be the telltale.

If they go up, we're toast.

[wind_magic]

Originally Posted by TropicCat

Yeah we do, but look at recent developments.

Windy, I've never hoped that I was more wrong. Yet, I think my timing is closer than yours. Let's keep an eye on bond and mortgage interest rates, that will be the telltale.

If they go up, we're toast.

Yes I agree it'll be precious metals and Treasury rates, but not mortgage or corporate bond rates because those spreads could easily widen due to borrower concerns even during an intensification of the deflation.

[TropicCat]

Originally Posted by craigimass

Means nothing to me.

Craig

I've been patient, but your time is now up.

Speaking for myself, I don't want to hear your opinions, I've read them for a couple of weeks now and they don't make sense.

I've also read your researched positions. They have no homework supporting the position. Your sources simply aren't creditable and your arguments weak or unsustainable.

Your lack of knowledge of finance has brought me to to the conclusion that you'd benefit from reading this thread instead of attempting to post in it.

My time is very limited these days so please understand that I won't respond to your future posts.

[TropicCat]

Originally Posted by wind_magic

Yes I agree it'll be precious metals and Treasury rates, but not mortgage or corporate bond rates because those spreads could easily widen due to borrower concerns even during an intensification of the deflation.

I don't think so. Treasuries will have to pay more to attract investors. The LIBOR will track treasuries, therefor mortgage rates will increase.

It's all connected,

[wind_magic]

Originally Posted by TropicCat

I don't think so. Treasuries will have to pay more to attract investors. The LIBOR will track treasuries, therefor mortgage rates will increase.

It's all connected,

No we are actually in agreement, what I said was yes rising Treasury rates will be a good indicator if/when the currency really starts to be devalued, but mortgage and corporate bond rates could increase while Treasury rates decrease because of widening spreads, so they would not be nearly as good as indicators. Example is GM debt selling at greater than 20% yields due to the fact that their credit is not good, that doesn't have anything to do with inflation, that just means nobody thinks GM is good for the money. Mortgage rates could also have a pretty wide spread on real estate concerns resulting in higher mortgage interest rates without currency devaluation.

Edit, in short, all I am saying is that yes if Treasury rates or precious metal prices pick up, I'll accept that as proof, but I won't accept rising mortgage or corporate debt yields because those yields are likely to increase no matter what the $us does ..