World Financial Collapse Imminent

[Cowboy89]

It's funny how those who actually understand and work in finance are the ones not running for the hills in this thread while the one's who understand it the least use phrases like 'elite bankers.' I suppose coming from that perspective it's easy to call other people 'elite.' Also on the silver call, why does the price of gold have any bearing on sterling silver? If you're going to make a call, make it based on something other than the historical price of another metal. Do you understand the silver market better than those actually trading it at the prices we're seeing today or is this just broad fear and hormones?

Will gold or any other metal save you in a financial meltdown scenario of the proportions being talked about here? My guess is that should there be a USD implosion, the institution you used to buy gold would have imploded as well and you won't be able to access your gold for any practical purpose. You're better off spending all your 'gold money' on a weapons locker if you truly believe the world as you know it is ending.

Back on topic, one big thing people fail to grasp is that they assume that the budget revenues in Canada and the US are static. What really caused the deficits we're seeing more than anything is lost tax revenue from corporations and individuals who were laid off, and or lost money on investments. There were spending increases on bailing out companies, and like as well, but on the revenue side there was a definate shock. 2008/09 saw companies and individuals lose money on their businesses and investments et al, 2010 saw companies/individuals make money but use their losses from 2009 to not pay as much or any in taxes in 2010. As the recovery continues taxes from these sources will recover as well. Also on a debt/GDP basis the debt numbers will look better as the economy improves. There is no intention of being 'debt-free' in the US, and to a point it's even unhealthy in the market to have too low government debt.

Also as a last resort, the fed will just keep printing money and inflate it's way to the point where a $80,000 / family share of debt doesn't seem that unreasonable. Stagflation sure, implosion of the US currency or government, no. These things have happened before and we're still here!

[valo403]

Originally Posted by Cowboy89

It's funny how those who actually understand and work in finance are the ones not running for the hills in this thread while the one's who understand it the least use phrases like 'elite bankers.' I suppose coming from that perspective it's easy to call other people 'elite.' Also on the silver call, why does the price of gold have any bearing on sterling silver? If you're going to make a call, make it based on something other than the historical price of another metal. Do you understand the silver market better than those actually trading it at the prices we're seeing today or is this just broad fear and hormones?

Will gold or any other metal save you in a financial meltdown scenario of the proportions being talked about here? My guess is that should there be a USD implosion, the institution you used to buy gold would have imploded as well and you won't be able to access your gold for any practical purpose. You're better off spending all your 'gold money' on a weapons locker if you truly believe the world as you know it is ending.

I believe the idea in regards to silver was to actually buy things made of silver, like a silver tea service.

[Cowperson]

Originally Posted by Phanuthier

As I understand it, its not that there was obscene trust in the USD, money was being piled into US TB's from the 401k's being stashed away as the lesser of 2 evils to the equity MF's - so its not trust in the dollar at all. Especially when the value of the dollar is so heavily dependent on the industries that were drowning, or did I get something wrong?

How does that scenario explain the strength of the USA dollar, destroying all other currencies, including Canada's, through that time frame?

You're talking about Americans switching American dollar assets into a different American dollar asset.

The Japanese Yen, if I remember correctly, was also exceptionally strong in that time frame.

Essentially, for that to happen in both instances, you need strong net inflows of capital from outside of those countries, an abandonment of overseas currencies in favour of places considered safe.

And that's what happened.

Originally Posted by CaptainCrunch

Its the $500 billion thats tough to handle. If you're going to cut you're going after the major rails of their government policy. Social Programs, or defense.

The U.S. military budget is at $664 billion, which sounds like a lot, but it represents 4.3% of their GNP. Now I get numbers anywhere from 664 to 948 so who knows, it looks like their biggest budget chunk is pensions at 900 billion.

In roughly 2006, the year-over-year increase in federal government tax receipts in the USA was greater than the USA defence budget.

This is an enormous economy and the numbers can be intimidating and occasionally mind-boggling.

USA tax revenue dropped by about one-third through the recession, I think, but there is a ton of leverage to the upside as things normalize.

Still, few would argue that America is spending more than it should and that that the needs and desires of Baby Boomers continues to drive the agenda.

Nevertheless, the average American is saving about three times as much today as he/she was only a few years ago . . . . but still below the historic average.

On another topic, America's share of global manufacturing has remained fairly consistent through the last three decades while the average American worker continues to be enormously more productive than the average Chinese worker. The former may change in your lifetime but the latter is unlikely to change. America, if I remember right, still spends far and away more on research and development than any other nation.

The death of America is always an oversold notion.

Cowperson

[moncton golden flames]

Originally Posted by Cowboy89

why does the price of gold have any bearing on sterling silver?

do your own homework and look up the gold/silver ratio.

[PIMking]

Originally Posted by Azure

I actually don't think the problem is that serious.

The US just needs to implement a fair tax, with some additional taxes for the 'rich' people, and cut $500 billion from the budget immediately.

Sure, people are going to suffer, but that is the price you pay for spending money like crazy for so long.

If they implement a fair tax how is taxing the rich more fair? So you say the rich should be punished for being successful? 10% tax on 1,000,000 is a lot more than 10% on 50,000...

[Tinordi]

What people are talking about is a major run on the dollar.

It's certainly 'possible' to do it. But you'd need state backing for the sell-off through sovereign wealth funds and the like. Institutional investors I don't think are enough to make a serious run on it. And because there's no other reserve, state backers would be acting against their own interest in spurring a run, why would they devalue their own holdings?

[valo403]

Originally Posted by PIMking

If they implement a fair tax how is taxing the rich more fair? So you say the rich should be punished for being successful? 10% tax on 1,000,000 is a lot more than 10% on 50,000...

10% is still 10%. Expecting everyone to pay the same on a dollar figure basis is ridiculous.

Btw, I think you're misunderstanding what the term fair tax refers to. It's a different method of taxation, whether or not it's 'fair' is a whole different conversation.

[oilyfan]

Originally Posted by mikey_the_redneck

America was a manufacturing juggernaut. Once upon a time they made the best of everything.....

Now, with "free trade", you have American middle-class labor directly competing with 3rd world slave labor. The result of this, is that middle-class jobs are being sent offshore to save costs for the big corporations, and these jobs are being replaced with service industry jobs, that generally pay much lower on average.

http://www.huffingtonpost.com/2011/0..._n_827360.html

By merging the western middle-class labor pool with the rest of the world, the standard of living will be merged as well, and Americans will be living like Mexcans/Chinese in no time.

America was built on the back of innovation not protectionism, world trade has been going on for centuries. America produced goods that no one produced, innovated where no one else was, why? Because that was the spirit that drove the pioneers through to the mid 20th century. And then complacency set in.

The path out of this funk is always going to be innovation and drive, not protection of jobs that can easily be done by someone who requires no education or training. Is that the kind of jobs Americans want for their children? How many kids grow up these dreaming of getting up in the morning and heading to the factory to work 8 hours of mindless, mind numbing work?

This is going to be an unsettled decade for the US but they will come out of stronger.

[Tinordi]

So true.

The most innovative firms in the world are still mostly American. Apple, Google, hell even GE, and the lion share of profitable energy and internet firms.

What's going on is the painful economic restructuring where workers from uncompetitive sectors (primary manufacturing) and losing out to workers to competitive ones (high tech, services). The key is to not mess with that. There will be winners and losers unfortunately but on the whole, as their economy transitions they will be better off.

[mikey_the_redneck]

Originally Posted by oilyfan

The path out of this funk is always going to be innovation and drive, not protection of jobs that can easily be done by someone who requires no education or training. Is that the kind of jobs Americans want for their children? How many kids grow up these dreaming of getting up in the morning and heading to the factory to work 8 hours of mindless, mind numbing work?

I didn't know protectionism was a dirty word.
Atleast American workers can get paid a wage that can support a family with most manufacturing jobs. The kids growing up now will be working 2 service-sector jobs for minimum wage when they grow up.

[Phanuthier]

Originally Posted by Tinordi

So true.

The most innovative firms in the world are still mostly American. Apple, Google, hell even GE, and the lion share of profitable energy and internet firms.

What's going on is the painful economic restructuring where workers from uncompetitive sectors (primary manufacturing) and losing out to workers to competitive ones (high tech, services). The key is to not mess with that. There will be winners and losers unfortunately but on the whole, as their economy transitions they will be better off.

I don't think innovation in itself is a problem, its the support from underneath. Its no secret there is a widening gap between the educated and everyone else, and the country is moving towards a small elite and inefficient working class.

Finance is an huge issue, but they can be juggled by crafty accountants. The underlying problems of working going overseas (and it does, for sure) is a bigger concern.

(And I don't know why you'd have Apple at the top of the list, then follow it up by saying "hell even GE" ... GE is quite well known for their R&D, while I'd argue Apple is more cosmetics and fashion.)

[Phanuthier]

Originally Posted by Cowperson

How does that scenario explain the strength of the USA dollar, destroying all other currencies, including Canada's, through that time frame?

You're talking about Americans switching American dollar assets into a different American dollar asset.

The Japanese Yen, if I remember correctly, was also exceptionally strong in that time frame.

Essentially, for that to happen in both instances, you need strong net inflows of capital from outside of those countries, an abandonment of overseas currencies in favour of places considered safe.

So you are saying foreign investments were diving into USD and TB's because of confidence in the USD? I recall hearing something different, on the news (using a another dollar as standard), that the non-confidence in the equity market was driving up TB's et al.

[Tinordi]

Originally Posted by Phanuthier

I don't think innovation in itself is a problem, its the support from underneath. Its no secret there is a widening gap between the educated and everyone else, and the country is moving towards a small elite and inefficient working class.

Finance is an huge issue, but they can be juggled by crafty accountants. The underlying problems of working going overseas (and it does, for sure) is a bigger concern.

(And I don't know why you'd have Apple at the top of the list, then follow it up by saying "hell even GE" ... GE is quite well known for their R&D, while I'd argue Apple is more cosmetics and fashion.)

Apple's one of the most valuable companies in the world and is a major contributor to tech exports for the U.S. They're an example of the American firm of the high tech future (if there is one). There's no other equal to Apple anywhere else besides other American firms. Not even close. That's the point, as long as the U.S. keeps innovating they will be producing value.

And yes you speak directly to my point. The U.S. labour pool is restructuring, which is painful. High paying low skill manufacturing jobs are gone, and those workers which are invested in that sector are hurt. But what's happening is that workers are either being educated with new skills or are retraining to be productive in the sectors with comparative advantage.

So the uneducated are being hurt, there will be fewer and fewer uneducated people as this economic trend continues because there's a clear recognition that employment requires education in the new skills.

With respect to your arguments about finance, I completely disagree. That is another HUGE advantage of the American economy. It has the best financial system in the world seeking out better returns on its capital. Getting investment capital is nowhere easier than in the U.S. and that works to give them another innovative edge.

Finance is actually not a bad thing at all. Through history the countries with the most advanced, efficient and sophisticated financial markets have also tended to be the wealthiest and most productive. The key is having MORE finance, not less.

[Phanuthier]

Originally Posted by Tinordi

Apple's one of the most valuable companies in the world and is a major contributor to tech exports for the U.S. They're an example of the American firm of the high tech future (if there is one). There's no other equal to Apple anywhere else besides other American firms. Not even close. That's the point, as long as the U.S. keeps innovating they will be producing value.

Like what innovation? I don't disagree with you that Apple is a financial juggernaut, but innovation? More than GE? I would disagree and ask what exactly. GE is one of the best R&D companies in the world. Aside from cosmetics, if you consider Apple's software infrastructure to be their innovation, I'd argue big companies like Facebook are bigger, and smaller startups like Quara are way more. Hardware? Nope.

Originally Posted by Tinordi

With respect to your arguments about finance, I completely disagree. That is another HUGE advantage of the American economy. It has the best financial system in the world seeking out better returns on its capital. Getting investment capital is nowhere easier than in the U.S. and that works to give them another innovative edge.

Finance is actually not a bad thing at all. Through history the countries with the most advanced, efficient and sophisticated financial markets have also tended to be the wealthiest and most productive. The key is having MORE finance, not less.

Well, its a leveraged system... with highly educated people that kind of know what they're doing. And possibly a different environment. Its hard to say where the economy will go, under conditions that will likely be pretty different. I wouldn't wager a full out meltdown of the USA, but I don't know how you can deny growth in Asia and their substantial growth in all areas.

[Cowperson]

Originally Posted by Phanuthier

So you are saying foreign investments were diving into USD and TB's because of confidence in the USD? I recall hearing something different, on the news (using a another dollar as standard), that the non-confidence in the equity market was driving up TB's et al.

"The" equity market? Define that? USA equity markets? Foreign markets? What? There are a lot of components in that.

The movement of money out of USA equity markets would be one component.

There would also be a large sell off in corporate debt, flowing into government debt as well. Huge.

Nevertheless, in your scenario, if confined solely to the USA, such a transfer would have little effect on the value of the USA dollar relative to other currencies since those dollars you are talking about were already denominated in American currency.

To move the value of the USA dollar relative to other currencies, you need people to sell assets in those currencies and move the proceeds into USA dollars.

The second part of that - which can be exclusive of the first part - is the buying USA Treasuries.

The latter occurs because you feel simply depositing money into bank accounts isn't safe. You don't trust the financial system so you go to the guarantee of the people who actually print the money, the USA government and USA treasuries.

When unknown indicators like the TED Spread and LIBOR rate tightened to levels previously unseen, it was also an indication the global financial system, the blood flowing through the economic body, had stopped. Banks did not trust other banks to be alive the next day so they began charging each other astronomical risk rates to take on the risk or simply refused letters of credit at ports, as an example.

Global trade seized.

It's why the president of the Royal Bank of Canada would later say, in spite of his uniquely strong financial position in this, there was a moment he wasn't sure the bank would survive.

I loved the pure honesty of the moment, where fear dominated greed and we saw the absolute truth . . . . that the safest place was still considered the USA dollar and USA treasuries.

Restoring the flow of blood through the financial system was largely accomplished before Obama took office, although he wasn't much help with some comments early in his presidency . . . . which is why the absolute bottom didn't occur until March, 2009.

And then it was all over very quickly, talk of "Worse Than The Great Depression" giving way to "End of Recession" within a single month, by and large.

And then currencies began to return to their former equilibrium, the Canadian dollar back at par again after dipping down to roughly 78 cents I think.

Cowperson

[Tinordi]

Well, its a leveraged system... with highly educated people that kind of know what they're doing. And possibly a different environment. Its hard to say where the economy will go, under conditions that will likely be pretty different. I wouldn't wager a full out meltdown of the USA, but I don't know how you can deny growth in Asia and their substantial growth in all areas.

Thing is economic growth is not zero-sum. If Asia grows that does not mean than American must shrink. Asia growing is good for everyone, they supply cheaper goods and will demand other goods. A rising tide raises all boats as they say.

[Cowboy89]

Originally Posted by moncton golden flames

do your own homework and look up the gold/silver ratio.

So what does a low ratio tell you about the future price of Silver?

[moncton golden flames]

Originally Posted by Cowboy89

So what does a low ratio tell you about the future price of Silver?

you didn't do your homework did you?

in relation to gold, silver price will go up.

[Ark2]

Originally Posted by moncton golden flames

you didn't do your homework did you?

in relation to gold, silver price will go up.

Is this based on historical trends, or is there some type of relationship between gold and silver that I am not aware of?

[Tinordi]

Originally Posted by Ark2

Is this based on historical trends, or is there some type of relationship between gold and silver that I am not aware of?

Do your homework!!!