Idiot Americans (I can criticize my own people)greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
This from gold-eagle
Idiot Americans (I can criticize my own people)
Here's a little editorial, choose to believe it or not.
"Productivity is up." Now, no one, and I mean no one can dispute this fact. Be it technological advances or other, there is more output per worker than ever before. The expansion rate is mind boggling. How fast we've learned to produce things is growing exponentially. Picture this as a steep straight line, starting at the vertex of a graph, going up and to the right (better yet, draw it).
"Workers' earnings are up only a tiny bit and employment is extremely low." Now, no one, and I mean no one can dispute this fact. Greenspan always talks about worrying that our economic expansion will drive up wages, but so far it hasn't happened. Now draw this line on the graph as a straight line also starting at the vertex but much more shallow.
What you're looking at is a big wedge between Productivity (the steep line) and Earnings (the flatter line).
Now when you take a global look, realize that the very same people earning a little more have to purchase MUCH more in order for there be a reason for the economy (GDP) to grow. This is because supply has to equal demand (SUPPLY = DEMAND) in order to keep the terms "Inflation and Deflation" in check. More on that later. These terms are grossly misused.
"The USA's trade deficit is at an all time high." Now, no one, and I mean no one can dispute this fact. Rather than exporting the productivity in order to take the buying pressure off our workers, we BUY MORE than just what we make...we buy other countries stuff too! Now draw an even steeper (dashed line) above the Productivity line.
Lastly, fill in the Productivity/Earnings wedge with a marker (use either of the steeper lines as you wish).
Now what are we looking at here? The answer is CREDIT! You have to give the workers credit to buy the wedge. As this government is built mostly on self-serving politicians and non-elected officials put into office by the same self-serving politicians, how do you make the idiot American population borrow money and buy things they don't need to survive?
This question has already been answered and its solution firmly put in place: sell the American idiots on "Instant gratification" and then "Expand the money supply." This is the true definition of inflation. Contracting the money supply is deflation. The government has been successful to date, but if you look at your graph, the credit wedge looks like it will expand forever. Guess what, IT CAN'T!
In order to put this all in perspective, you have only to go back to the basics. How much "Purchasing power" does that average worker have? How much can he/she buy with one day's salary? If the answer is less, because the price of milk has gone up to $4/gal, so be it - that's inflation in people's eyes. However, statisticians can manipulate these numbers very easily (the two most commonly used are the CPI (consumer price index) and PPI (the producer price index)). Much more subliminal and less evident to the common folk is that their money's purchasing power has been diluted due to adding much more money into the system (expanding the money supply).
Well folks, I have bad news. For one, we just turned into a nation of debtors. A few months ago, the average USA citizen's savings crossed the zero line and went into the negative territory (-2%). Instantaneously, they reformulated the equation of "Savings" to include 401K (tax deferred) investments (mostly invested in the paper stock market) which took us back into the positive territory (+2%). GET THEM CREDIT CARDS OUT BOYS! BORROW MORE ON THEM EARNINGS YOU EXPECT TO GET OUT OF THE STOCK MARKET!
Now folks, more bad news. The USA finances it's national debt by issuing bonds (among the most important is the benchmark 30 year bond). The government must and will do anything to keep the bond market from tanking (i.e., bond prices falling too fast and/or out of control). Well, the bad news is that the government is buying back their own bonds as a last ditch effort to keep the bond market from tanking (ignore the spin on why this is happening...it's to save the bond market). The fact is, foreigners that have had their money in the bond market for a long time are beginning to sell their bonds and convert the dollars to yen, euro, their own currency, etc. YEEEEEHAAAAWW! MORE DOLLARS COMING IN BOYS! ...WISH THEM CREDIT CARD MACHINES COULD TAKE TWO AT A TIME!
Sorry folks, more bad news. The stock market is not as important as the bond market in the government's eyes. So guess what's going to happen? Interest rates are going up. Oh, they'll do it as painlessly as possible...maybe even able to have very little impact on the stock market...but I think not, and here's why. When interest rates go up, it's harder for corporations to make a profit since they're paying more on their own debt. The stock market is very sensitive to this. In the present market conditions, investors have almost completely forgotten the P/E (price/earnings) ratio. They are willing to pay 40 times what a company can earn in a year (per share) for a share of the stock. My parents were only willing to pay about 6 times the earnings a company could muster for a year. If average "Joe" investor ever gets re-focused on the P/E ratio (which I believe will happen...when, I can say not), the stock market party will be over.
WAIT A MINUTE BOYS! WHERE DID MY SAVINGS GO?! MY 401K WAS LOOKING SO GOOD YESTERDAY! BETTER CUT UP THOSE CREDIT CARDS AND HAVE A GARAGE SALE!
Now folks, the (SUPPLY=DEMAND) equilibrium will be broken at that moment. No longer will CREDIT sustain the wedge you filled in with that marker a minute ago.
Phase 1. Supply greatly outpaces demand. People can't, or won't buy anymore non-essential stuff. Prices go down (deflation in people's eyes), corporate profits go down, companies go away, people get laid off, stock market crashes (if it hasn't already hit bottom). If you are in the position to buy some worthy assets such as ...well, whatever you want to trade your dollars for, you'd better do it. IN ORDER TO TAKE ADVANTAGE OF THIS POSITION, GET OUT OF DEBT NOW. AS A CLOSE SECOND, MAKE SURE ANY DEBT YOU HAVE IS AT A FIXED RATE!
Phase 2. Stagflation, defined as high prices (inflation in people's eyes) accompanied by high unemployment. What would turn prices higher? The answer is the enormous amounts of dollars that are in the US economy as well as the influx of dollars from foreigners that don't want them anymore. Remember, the dollar is the official reserve currency of the world. This means, "Everybody's got some," at least at a country's central bank.
Taken to an extreme, if planes continuously flew over the USA and dropped $100 dollar bills, what would happen. At first, the smart folks would go straight to the store and buy at today's prices. But as time went on and the planes kept dropping those $100 dollar bills, pretty soon they would just raise the prices in the store in order to reach equilibrium again. The problem is that the average person's income isn't going up at the same rate. WHAT? HOW CAN I LIVE ON MY MEASLY INCOME INCREASES? AT LEAST I HAVE A JOB. BETTER LET MY SPOUSE KNOW THAT HE/SHE IS GOING TO HAVE TO FIND A JOB - ANYWHERE - DOING ANYTHING.
Now some of you are already saying to yourselves, "Wait a minute, my spouse already works!" Folks, this is an indication that we have exhausted all means to get any more resources to buy stuff. We're maxed out on our credit cards, our spouses are working. What's next, our kids?
I think I'll just leave it at that and hope you can use this story to benefit yourself and your family.
Remember, God is in ultimate control and His will, will come to pass. However, He does expect us to be good stewards of what He has blessed us with.
For me, my trade is going to be dollars for gold and land. Dollars are so dirty (my mom always told me to wash my hands AFTER handling money). Gold is so pretty (I make sure my hands are clean BEFORE I touch a beautiful piece of gold, be it jewelry or coin). Land is so majestic. It's a great feeling to look out over a piece of land and wonder at its beauty and majesty. Sometimes I think that's where we share the closest natural bond with God...without even thinking about it, He comes to mind.
Donald A. Smith
8 January 2000
-- Andy (2000EOD@prodigy.net), January 28, 2000
Thank you for this wonderful, eye-opening post.
Hey...I was wondering--could those chemtrails actually be dollar bills getting blown out of high-flying airplanes as mentioned above? Has anyone checked this out?!!
Things are happening so fast now it's hard to get everything doped out, but you can do it Andy--YOU CAN DO IT!!!
-- ImSo (email@example.com), January 28, 2000.
Just playing Devil's Advocate folks.
The article is spot on.
I wish some people would lighten up a bit, this is supposed to be a discussion forum, no?
-- Andy (2000EOD@prodigy.net), January 28, 2000.
But seriously folks, Ravi Batra outlines the problem in "The Crash of the Millennium: Surviving the Coming Inflationary Depression". Basically, you can't keep increasing manufacturing capacity and productivity without a commensurate REAL increase in wages so the schmucks MAKING the stuff can afford to buy it. Unless, of course, you want a humonguous depression. Henry Ford understood this, and when he created the assembly line to churn out Model A's, he paid his workers MUCH MORE than the prevailing wages, so his workers could afford to buy his cars. You will notice that even in the U.S., the disparity between the highest paid and the lowest paid has increased tremendously. While this is good for the highest paid, it spells disaster for Johnny Lunchbucket when the hammer drops.
-- A (A@AisA.com), January 28, 2000.
I began to grasp this situation during the mid-70's, but a good cranial thumping like this one brings everything back into proper perspective. I appreciate your effort(s).
-- Yan (firstname.lastname@example.org), January 28, 2000.
I like to refer to him as "The Liar In Chief".
You must have missed his publicly televised message to millions of fellow Americans in which he uttered those now famous words "I Did Not Have Sex with That Woman".
-- Ray (email@example.com), January 28, 2000.
Good Post! I understand what you are saying and my motto for investing has always been, IF YOU CAN'T WALK OVER AND TOUCH IT DON'T BUY IT. And thus I own real estate, and other touchables. Has worked well in my life.
-- justthinkin com (firstname.lastname@example.org), January 28, 2000.
Why are you quoting Ravi Batra? Isn't this the bonehead who frightened people with his "Crash of '90" nonsense that kept the worriers out of the greatest bull market in history?
Good idea to expand the Doom title to the whole millennium--he's got a thousand years now to claim a particular economic cycle was his genius coming true.
And yes, sigh...we're due for a downturn in this economic party.
-- ImSo (email@example.com), January 28, 2000.
It appears that Mr. Greenspan has a plan and it does not address the well being of working class Americans:
Fair Use for educational and research purposes:
http://www.iviews.com/scripts/indexstory.cfm?id=3D199746&category_id=3 D7 Greenspan says US immigration laws should be reviewed in light of labor WASHINGTON, Jan 26 (AFP) - US Federal Reserve Chairman Alan Greenspan on Wednesday called for a review of US immigration policies to allow for the entry of foreign workers to meet acute US labor shortages. "It is clear that under existing circumstances ... throughout the country aggregated demand is putting significant pressure on an ever-decreasing supply of unemployed labor," Greenspan told the Senate Banking Committee at a hearing here on his reappointment. One way to beef up a shrinking pool of available workers, he said, "is expanding the number of people we allow in, either generally or in focused areas. I do think that an appraisal of our immigration policies ... (is) clearly on the table." Greenspan dismissed as purely a "theoretical problem" the possibility that some immigrants may try to enter the United States to take advantage of generous social welfare benefits. "All the experience I've seen suggests that people seeking to come to the United States are coming for jobs and for the opportunities we have here." Greenspan has repeatedly warned that a contracting supply of people who are unemployed but who are nonetheless willing to work will exert inflationary pressures on the economy. Sooner or later, he has said, employers will be forced to raise wages to attract and retain workers, increases they will then pass on to consumers through higher prices. President Bill Clinton earlier this month re-appointed Greenspan to another four-year term as head of the US central bank. His confirmation by both the banking committee and the full US Senate is widely expected. Copyright (c) 2000, AFP Copyright =A9 2000 by iViews.com. All Rights Reserved
-- Bill P (firstname.lastname@example.org), January 28, 2000.
Thanks Andy for the post, I've been reading similar articles like this and I'm glad I got out of debt a long time ago. I didn't buy any gold for Y2K, but I'm leaning now towards purchasing some, just a gut feeling that things are going to get rocky.
-- bardou (email@example.com), January 28, 2000.
I think the article meant to say that Greenspan was re-appointed to head the Federal Reserve Board, not the U.S. Central Bank. The Federal Reserve Board is,ostensibly, the autonimous "Overseer" of the 12 Federal Reserve Banks which are,of course, privately held Corporations.(According to what I have read, the recent audit of the Fed. just consisted of counting pencils and paperclips)
Andy, another good post as usual...one of my favorite quotes from this board, or somewhere, is that "everyone knows the cost of everything but the value of nothing"...a point that I think was being made in your post.
-- Larry (Rampon@airmail.net), January 28, 2000.