Market crash: are we there yet ?

[Rickm505]

Originally Posted by hellosailor

"Every large Wall Street brokerage house was "
Ah, Rick. So we come to the real economics problem:
PTBarnum and the Rubes..

LOL... well written..and well said. I couldn't agree more

[chris_gee]

I have read most of this.
The argument seems to centre on a view that there are reasons for concern about the US economy and that this may lead to the Market going down. Rick has been the main one putting this view forward for which he has been ridiculed.

The contrary views seem to be primarily;
1. It ain’t GWB’s fault. He did not hold a gun to anyone’s head and force them to buy a house they could not afford.
2. Serves em right for being so stupid.
3. You made a dollar when the housing market boomed, now you are whingeing because that has stopped.
4. The sky isn’t falling.
5. Dow 15,000 by year end.
6. Economists know nothing and you must have failed econ 101.
7. The economy is fine.
8. The fed should cut interest rates and keep the party going.
9. It might be our dollar but if it is worthless it is their problem.
10. Inflation is under control - the Government says so.
11. The problem is confined to a few loans and banks.
12. America is committed to a strong dollar.
13. We have ways of defeating deflation. The printing presses are ready.
14. Its been good for twenty odd years now, so that will continue.
15. The Chinese are stupid. Hell they bought into Blackstone and lost a third or was it a half of their money already. They should revalue and then lose some more.

[hellosailor]

I am reminded of the value of the dollar as an alternate and often outright illegal second currency in many places including the Soviet Union not so long ago.

People wanted things that could only be bought for hard currency, or for US products that US companies would not accept their local monopoly money for. So people paid a premium to buy or exchange their scrip for US dollars, and the dollar got a higher value.

That's the bottom line behind any "true" international currency exchange. If there's something you can only do with one currency--you'll pay more for it. If there's nothing you really want from it, you won't buy it.

Value of the dollar overseas? Is only what people can be convinced they need to pay for it. Does someone in the EU or China really NEED anything from the US? Well...if they aren't buying what we make, no. Seems like China needs lots of garbage from the US (they buy a lot of paper scrap to make their own paper) but garbage is, after all, easy to buy. Wheat? Maybe. Coal? Not so much. Cars and trucks and planes? Not any more, they're building their own.

Value of the dollar? Who needs it any more, except us?

[sailaway21]

Rick's whining continues to make little sense. Here's why.

Government has virtually one role in the economy; to screw it up. Virtually all government actions have little or no effect on the economy, the exception being tax policy. Look back as far as you'd like. It's commonly ackowledged that FDR's economic actions lengthened the Grear Depression, not shortened it. Such things as Sarbanes/Oxley and the recent running amok of Eliot Spitzer, while US Attorney for the Southern District of NY, amount to little more than witch hunts and will only hurt business overall or cause other stock exchanges to become more popular.

The current tax rebate contemplated will do little or nothing for the economy unless the receipients go out and spend it. Even then, it's questionable how much it might do. The last such gesture was mostly saved by the receipients, not spent, and so had little effect. It's probably a waste of time.

Inflation is rising as evidenced by the CPI precisely because gas and fuel oil are included in the CPI. No one, least of all the government, is ignoring those price increases. With China and India expanding their industry, the demand for fuel is not likely to moderate soon. If you want to effect those prices from a government standpoint you'd probably consider the idea of authorizing drilling in those oil rich areas of the US we've cordoned off. This "crisis" will only be solved by the supply side of the equation. The good news is that there is plenty of supply available. The bad news is that the government is unwilling to allow that supply to be brought to market.

Food prices are rising because of your government also. But maybe not for the falacious reasons Rick would have you believe. Your government, and anyone else with a fundamental lack of knowledge regarding chemistry, have jumped on the ethanol bandwagon. Amazingly, they've done so partially in response to results seen in Brazil, a country with tremendous resources that has spent the last forty years trying to develop any type of economic coherence whatsoever. Brazilian economic policy is an oxymoron.

Ethanol and the devices that use it make no economic sense without government subsidy and we know what happens with government subsidy's; we get more of what doesn't work in the real world. aside from the fact that ethanol has a lower amount of energy, significantly lower, than gasoline it also takes two gallons of water to make each gallon of ethanol. Can you say water wars? Yes, water is going to go up in price. No, it's not free. Nothing is free.

The vast majority of agriculture in the US is based around corn prices. Demand for corn, due to ethanol, is way up. Start keeping track of beef and chicken prices; they're about to go through the roof. In fact, anything that says "high fructose sugar" on it is going to do the same.

With these factors in mind, it is apparent that the US government can do very little good about the US economy while, at the same time, being perfectly capable of doing a great deal of harm. I wouldn't particularly worry about the economy unless the US government chooses the latter.

Rick and his ilk seem to have a great deal more faith in the government than they do in capitalism. Capitalism always achieves efficiency in the end, government rarely, if ever, does. Capitalism allows for idiocy. Idiocy of the like found in Rick's business. That idiocy will be punished and somebody else will get rich off the punishment. The reason Rick has been categorized as a whiner is that, since his ox got gored, he wants the rules of capitaliam repealed, to his benefit. Ain't gonna happen. The vast majority of homeowners, myself included, who took advantage of low interest rates and actually bought a house they could afford, are doing quite well and will continue to do so. Those builders who realized that nothing lasts forever socked money away for the future and have positioned themselves in the remodeling market where builders of long-standing always go when new construction slows down. The builder with 5 years experience who thought new home demand was inelastic is going to get penalized severely. And it's his fault.

The same thing is going to happen to banks and mortgage companies.

There's no cure for stupid, a point that Rick makes repeatedly. Fortunately, things are not as bad as they seem. Look, for one thing, of better news coming out of Detroit as a major change in direction takes place in that industry. A new UAW contract in hand, containing a solution to the long term medical cost problems will be of great aid. Meanwhile, exports are booming and will continue to do so as demand for American goods overseas continues to rise. If Rick had the least little sense he'd be selling heavy equipment overseas about now, instead of sitting in an empty condo in Florida whining about how George Bush doesn't want to buy it from him. The market is correcting itself, it always does, and while I doubt that we'll have any type of recession, let alone a serious one, I'd be looking at what is positive in that market. Medical technology is going to be on a long term upward trend and I've already mentioned heavy equipment. I don't advocate speculation unless you want to end up like Rick crying about how someone else was to blame for your actions. And, if you're on sound financial ground, it's a great time to buy a house.

[Rickm505]

Originally Posted by sailaway21

Rick's whining continues to make little sense. Here's why.

Government has virtually one role in the economy; to screw it up. Virtually all government actions have little or no effect on the economy, .

Wrong. Oversight laws regulate industries, government passes the law and regulates the specific industries.

[quote=sailaway21]Inflation is rising as evidenced by the CPI precisely because gas and fuel oil are included in the CPI.[/quote

Wrong they are not included. I't simply not possible you are this ignorant.

[quote=sailaway21]This "crisis" will only be solved by the supply side of the equation. The good news is that there is plenty of supply available. The bad news is that the government is unwilling to allow that supply to be brought to market.[/quote

It will be solve when we find a replacement fuel for oil.

[quote=sailaway21]Food prices are rising because of your government also. But maybe not for the falacious reasons Rick would have you believe.[/quote

Interesting..I offered no explanation for rising prices. Just the fact it was occuring. A fact which you consistantly disputed. It must feel strange to be wrong so often??


[quote=sailaway21]Rick and his ilk seem to have a great deal more faith in the government than they do in capitalism.[/quote

You're confusing Capitalism with Robber Barons. Read your history


[quote=sailaway21]The market is correcting itself, it always does, and while I doubt that we'll have any type of recession, let alone a serious one, I'd be looking at what is positive in that market.[/quote

I guess you would consider the Great Depression a market correction. When complete financial systems are demolished it's more than a correction. Once again you show indifference to people's suffering. Here in Florida tent cities are springing up where people are forced to live. Unfortunately they are only reported on here in Florida. This has not happened since the 1930s. Tell those people it's a market correction and you'll get shot. they are literally moving onto Federal lands and parks and setting up tent cities.

You aren't aware this is even happening in Florida and in California, are you? If you are you are the most insensitive person I've ever come across. It's no wonder you're confusing capitalism with the likes of Cornelius Vanderbilt, Jay Gould and Jim Fisk, the Rockefellers and Kennedys. The Barons of old. They got rich the old fashioned way.. illegally.

[sailingdog]

I'm still waiting for whining Rick to explain how he can diss an ethnic dietary staple without any justification... The ignoramus has yet to respond...

[sailaway21]

You're right Rick; it IS simply not possible I am that ignorant. But it is distinctly possible that the depths of your ignorance have yet to be plumbed. Here's a link to the Federal government's Consumer Price Index web page. You'll note that, under Transportation, gas is included and, under Housing, fuel oil is included.http://www.bls.gov/cpi/cpifaq.htm#Question_7

Yes, I am insensitive. I'm insensitive to fear-mongering ignorance masquerading as economic insight. Is it willfull, or are you really that obtuse?

Good day to you, sir.

[wind_magic]

Rick I would be interested in reading about these tent cities, I have not heard that.

[camaraderie]

Rick...I have not chimed in much here as I don't have any relevant expertise but I have been following the discussion with interest. Your statement that fuel oil and gas did not figure into CPI struck me as rather incredible if true so I looked it up:
What goods and services does the CPI cover?

The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:

• FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, service meals and snacks)
• HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
• APPAREL (men's shirts and sweaters, women's dresses, jewelry)
• TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
• MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
• RECREATION (televisions, pets and pet products, sports equipment, admissions);
• EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
• OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).

Source:http://www.bls.gov/cpi/cpifaq.htm#Question_1
Can you advise why you are stating that it is not included?

[artbyjody]

I have start6ed drinking so maybe I make sense or not. Cam - good post...and it bears to light some casual observations I have from a business and regular consumer basis.

1. When my associated costs go up, the prices I charge reflect that cost increase; however, they never go down when one or more of those costs go down. The latter - rarely happens unless dissatisfied with a supplier on a service level, or profitability is adversely effected by another competitor that can on a long term basis - provide the same at a lower cost. If not satisfied with a supplier then negotiate the heck and get a better price point, but it doesn't mean I lower my costs. How does this apply with the CPI? Simple actually - this is a practice that a majority of businesses do. For example oil and gas, look at the cost curve and you will see while a few cents may deducted - once certain consumer prices are established for a long period of time... they stay there. Expect to see $1.25 gal gas even if the price of oil goes below $40 a barrel (thats laughable there) - no, just will not happen....

2. Taxes - when consumables required by the masses have price points that continuously increase - taxes do as well. It is called the government getting a piece of the pie because it is a revenue source. Gas at $3.00 a gallon - add a new 2% tax hike because they make money off the inability of the CPI to go below previous levels - and even in cases it does, it means just more volume so the sneak attack and subtle increases...

3. Subsidies and alternatives that should influence the CPI in general - particularly when in regards to fuel. This country has reeked of farmer aide in terms of subsidies of wheat, soybean, and other farmers that can produce that could go to bio diesel. Why isn't bio-diesel a main stream deal - farmers have the ability but , the open market, ah, you either get the consumable price or you get the we are buying it for scrap price... Because bio is niche - bio sells for more than diesel anyways... so where is the incentive?

The same goes with milk / dairy, and the likes... even if what I consider the core of the justification of rising prices as fuel costs, even when they go down - the rest of the industries will keep the pricing as everyone else is adjusted to it... The market is actually not that competitive...

Just some random thoughts (I tried to keep it limited)....more beer