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Global Economy Bursting?

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Recovery, what recovery?

http://www.guardian.co.uk/commentisfree/cifamerica/2011/jul/28/useconomy-economics


US_CLMS_Report_Earnings_indexes_Recovery.jpg


What did recover in the US, partly or wholly, were only corporate profits (especially those of banks) and the stock markets. The report's chart 14 shows three vertical bars indicating the size of profit and stock recoveries from the second quarter of 2009 through the first quarter of 2011.

What did not recover by the first quarter of 2011 – and has not recovered to this day – is shown by the five remaining bars in the chart. Those tiny bars show what happened to payrolls and to employment. From the depths of the crisis in early 2009 until now, there has been absolutely no recovery whatsoever in wages or jobs for US workers.

Thanks to the Federal Reserve with QE-1 and QE-2 flooding the banking system with cheap money, financial assets and companies did extremely well. For all the government debt creation and spending, nothing has helped the "trickle down" folks.
 
Put everything on the Kitchen Table.

Randolph Kinney said:
Jim Rogers: "Debt Ceiling Talks Are A Charade, The U.S. Has ALREADY Lost It's AAA Rating" (WSJ Interview)

http://dailybail.com/home/jim-rogers-debt-ceiling-talks-are-a-charade-the-us-has-alrea.html
Click to expand...

It seems that the pols' and cable news talking heads love to use the "husband and wife sitting at the kitchen table going over their budget" analogy.
So here is my take on that simplistic parable.

The husband and wife are sitting at the kitchen table agonizing over their budget, on the black side of the ledger (revenues from income) they have had to deal with the fact that Bob, a car salesman has seen a decrease in his commission based income due to the struggling economy. While he once earned $75k a year, he now makes just $45k. Jane is a stay at home mother with no income.

On the red side (debts incurred) they have a mortgage payment, credit card balance, car loan along with the usual ongoing expenditures for; health/life/home/auto insurance premiums, food and fuel, utilities, etc.

Bob notes that their net income is $3000 a month
versus
ongoing expenditures (food, insurance, etc) $1500
incurred debt service (mortgage, car loan, cc) $1700

They are operating at a deficit of $200 per month.
Before the economy tanked Bob had a net income of $4000 a month and they had a $800 monthly surplus.

Obviously cuts in discretionary spending (food, insurance, etc) must be made.
But Jane is upset, she can't decide which items should be cut. She is mad and proposes that they just stop paying for all their already incurred debts which will more than make up for the $200 per month deficit.

Bob explains that doing that will prompt; late fees, collection agents, a decline in their credit rating and a default on their debt obligation. All these will cause them to incur additional debt in future months.

Jane says she does not care, it's not her fault that Bob is making less money than he used to, besides she says, "I promised my mother that I would not have sex with you until you get a better job!"
 
US Debt Crisis Spurs Gold Record, Silver Gains

http://online.wsj.com/article/BT-CO-20110729-716660.html

--Comex Dec gold settles at record $1,631.20/oz, up $15.00 or 1%

--Gold for immediate delivery in London hits record $1,632.74/oz

The dollar sank to a record low against the Swiss franc and a four-month low against the yen, giving gold prices an added boost. Gold denominated in dollars appears cheaper to investors holding foreign currencies when the greenback weakens.
 
investors want Swiss Francs!
Click to expand...
It's absolutely killing the tourist industry in Switzerland. No one can afford to go there.

The sorry part to me is that if you put your money in a money market, it could be at a huge risk of "breaking the buck". If you go to T bills...you get nothing. If you put it under the mattress then you lose inflation (3%+) so whatchagonnado? You have to place your money in equities..stocks. You have to enter the arena of expert hedge fund traders who not only can vet the market better and faster than you (you compete with super speed computers) and who watch the market for 7 hours a day all to basically see if you can outwit the shorts going long or day trade. You might as well spend it at the casino or be very very lucky. 3 of 4 advisors don't know their hole from a but in the ground...My CPA had a client come to him who had a local regional bank managing her money. The joker had her money in mutual funds...all basically high tech, emerging markets, growth stock, and telecommunications... This was in 2000. The funds had virtually the same companies in each. She lost over 2/3rd of her money.
 
You want a better perspective on the Swiss Franc... or the death of the US Dollar
have a look HERE, and click for the last 6 months.
Yes, well over 20% gain since January 1st.
.
 
coolhandluke said:
It seems that the pols' and cable news talking heads love to use the "husband and wife sitting at the kitchen table going over their budget" analogy.
So here is my take on that simplistic parable.

The husband and wife are sitting at the kitchen table agonizing over their budget, on the black side of the ledger (revenues from income) they have had to deal with the fact that Bob, a car salesman has seen a decrease in his commission based income due to the struggling economy. While he once earned $75k a year, he now makes just $45k. Jane is a stay at home mother with no income.

On the red side (debts incurred) they have a mortgage payment, credit card balance, car loan along with the usual ongoing expenditures for; health/life/home/auto insurance premiums, food and fuel, utilities, etc.

Bob notes that their net income is $3000 a month
versus
ongoing expenditures (food, insurance, etc) $1500
incurred debt service (mortgage, car loan, cc) $1700

They are operating at a deficit of $200 per month.
Before the economy tanked Bob had a net income of $4000 a month and they had a $800 monthly surplus.

Obviously cuts in discretionary spending (food, insurance, etc) must be made.
But Jane is upset, she can't decide which items should be cut. She is mad and proposes that they just stop paying for all their already incurred debts which will more than make up for the $200 per month deficit.

Bob explains that doing that will prompt; late fees, collection agents, a decline in their credit rating and a default on their debt obligation. All these will cause them to incur additional debt in future months.

Jane says she does not care, it's not her fault that Bob is making less money than he used to, besides she says, "I promised my mother that I would not have sex with you until you get a better job!"
Click to expand...

A better analogy would be bank robers discussing their next robbery.

One points out that the same bank they rob is running out of money.

The others want to go back immediately and rob that same bank. The reasoning goes that if they don't, the robbers will be out of money and out of business.

And, some one else will just rob that bank anyway so why not us, that's our job?
 
Austin said:
Someone help me out here. Am I missing something? I read this stuff every day and it is such a logical contradiction it makes me questions my own understanding. Below is something I read every day and how I interpret it. Tell me if I am wrong. Paraphrased: This stuff is written generally by statists who desire a compromise and are trying to support their position.
“If the congress does not reach a compromise the government will default on the debt and our credit rating with be lowered which will be devastating.” Then a few lines down there is this: “If we don’t get spending under control soon our entire system will collapse under the weight of the debt and we will lose our credit rating.” What they are saying I reason is that we must do something but not now, later.
Ok, here is where I question my sanity: 1. would it not me more rational for our credit rating to be lowered if we reached a compromise knowing that default was inevitable in just a few years and to stop borrowing now would make us more credit worthy? 2. If you reason we are going over a cliff under our present trend then why would anyone want to prolong the agony? This in my mind is an insane contradiction.
Here is how I explain it. There are some people, most people most likely, who are incapable of dealing with the reality of life as it relates to the future. This is the same day-late and dollar-short crowd who dominates our economy and is the source of our problems. Upside down on their mortgage, huge credit card balance and believing they can borrow their way out of debt or tax the rich to pay for it. In their mind a pending disaster is a non reality. It just can’t happen. Tomorrow will never come. Something will happen to save the day.
In the last few years I started an orchard and vineyard. It takes over 4 years to get good production. I can’t tell you how many people asked me why I was planting those plants because they would product nothing for 4 years. My answer was that 4 years is only 4 years way and in 4 years I will be self sufficient. But that is four years away they say. It will come I say. I may post some pictures of my vineyard and the grapes hanging in clusters. I got the first peach last night and it was the best I ever tasted. Beautiful pears and apples after 2 and 3 years. The reality of the future event is the gulf that divides us. There are those, the majority, who cannot comprehend it. I could really enjoy some of those grapes Austin they are saying….The irrational majority in a democracy is a deadly combination. My farm is no democracy. Sorry no grapes for you!!!! They are going into my wine cellar. My no taxed wine cellar.
Click to expand...

... its something like this ......

.... our economy is so attached to government spending now ...... that gubmnt has to grow its spending at 7% a year just so our economy can grow at 1.5% a year ...

... the ugly truth now is if we cut the growth in spending to 1% decline ..... our GDP would probably be something like a 30% shrinkage in our economy ....

..... or putting it another way ......

..... we have two choices ............ you have two choices .... you can keep your head from being chopped off only if you allow them to chop off a leg and an arm ..... you may have to compromise ..... another leg or another arm ..... you may get to keep your head .... but you may have to have your legs and arms chopped off ....

..... so you may just want them to go ahead and just take the head .....
 
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