Economic Mournings

[deccie]

Which proves exactly the opposite of what you have argued above. Social Security and Medicaid/Medicare are perfect examples of why socialism goes bankrupt.

No, they are purely a bad example of a government social program.

That some systems fail to achieve stated aims does not prove all socialistic goals are bad or prove  that a government is incapable of delivering any program efficiently any more so than the ENRON's of the world prove that all CEO's are criminals.

[OlgaH]

Social Security and Medicaid/Medicare are perfect examples of why socialism goes bankrupt.

Do you happen to know about Social Security and Medicaid/Medicare in China? 1,321,851,888 Chines... if this Socialist Republic go bankrupt we will be in trouble     

[Blues Fairy]

No, they are purely a bad example of a government social program.

That some systems fail to achieve stated aims does not prove all socialistic goals are bad or prove  that a government is incapable of delivering any program efficiently any more so than the ENRON's of the world prove that all CEO's are criminals.

Yeah, right - it's just a bad program, not a bad system.  How will you explain the current troubles of the Detroit Three? 

I'm amazed at the naivete of Americans living in the 21st century and witnessing how socialist Europe rolls back to conservatism, and still arguing that socialism is generally good for you, it's just some crappy programs that don't work out.  World history teaches you nothing. 

[IAmZon]

I am inclined to think that it is not one "ism," or the other "ism, in absolute terms  (let's not forget that most of the isms - socialism; capitalism; ect... are just masks for totalitarianism / cronnyism); but rather required cycles that re-charge each other.

The actual and exact composition of these "isms" change from generation to generation. Good leadership, a strong legal foundation, transparency and a strong press, and the basic economic incentives of a free market is all that is required - but that is a lot.

I remember 6 months ago I was with a friend who has forgotten more than I will ever know about finance and economics.  He was describing what was ahead for the world economies.  At one point, his expression changed to mild horror and he ran out of words to use.

All that seems to have come true now. At the time, he used a metaphor:  He said, "Imagine a 200 car train heading full speed into a marble mountain.  That is what is going to happen."

I talked to him today, he suggested we are at about the 110th car.  But the wreck is still in progress.  He imagines a "L" shaped recession that will last 2 years hard / another 4 - 6 year economic malaise (ala 1970s).  That is one crystal ball.

Any one else have any guesses at how much of the train is yet to crash. Or, is the crash part behind us now?

[deccie]

Yeah, right - it's just a bad program, not a bad system.  How will you explain the current troubles of the Detroit Three? 

I'm amazed at the naivete of Americans living in the 21st century and witnessing how socialist Europe rolls back to conservatism, and still arguing that socialism is generally good for you, it's just some crappy programs that don't work out.  World history teaches you nothing. 

And I'm amazed about people who continue to argue dogma rather than specifics.

The troubles of the Detroit three have been building for years. There are social issues involved certainly. I do not believe it is fair on the company to carry pension plans into the future for past employees. Effectively that means a percentage of each car sold is supporting someone who stopped working years ago. But they are by no means the only problems. GM and Ford in particular have had declining sales for years and if you recall all it took was for the price of gas to increase a huge amount and their SUV's just stopped selling dead in the water.


Social programs need to have very specific goals. One of the problems has been politicans quote the amount spent on something rather than evaluating if the money actually did any good. However, that does not mean at an absolute level that all social programs are by their nature inefficient.

[BC]

Any one else have any guesses at how much of the train is yet to crash. Or, is the crash part behind us now?

Maybe it's like this:

The dollar and interest rates have been kept artificially low over the last few years, trying to balance out trade deficits and offset some government overspending.

Unfortunately, no one wanted to buy US goods even at a ridiculously low price.  I did not see the amount of US cars increase on EU highways even though the prices were quite appealing.  The fuel price crunch did a double whammy.

Now that the world is buying dollars in bulk, the value is going up and retailers will soon begin lowering prices considerably to create affordable domestic demand.

Maybe all this is not really a recession but instead deflation, shifting remaining value all over the place.

I get the feeling it's more like a slinky with things jumping back and forth in an unpredictable manner for some time to come.

[UnderDark]

Olga,

In the last couple of months, the US government unfortunately has already taken major strides in that direction.

As bad as the economy is today, the situation will worsen.  Why?  We have two more waves of economic pain to absorb:

1.  Credit card defaults

2.  Home equity loan failures.

These are HUGE, just as large as sub-prime mortgages.  For the past few years, the US economy has grown because the consumer over borrowed using these two vehicles.  Now these vehicles will be a drain, not a stimulus.

I hope everyone has set aside the money they will need for the next 3-5 years.

Meanwhile, I assume that Russia will have to devalue the ruble within the next six months.

You forgot to mention the Alt-A (liar loan) resets that are to take place 2009 through 2011. These are going to dwarf the Sub-prime loan resets and further deteriorate the housing market.

[daveyj]

A well written article discussing the prospects for Russia as it weathers the commodity downturn and burns through foreign currency reserves to support the rouble.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3469090/Russias-banal-reality-lies-in-between-energy-superpower-and-bankrupt-state.html

For those who don't want to read, it says
-expect at 30% currency devaluation soon
-don't expect a repeat of 1998

[Makkin]

Hello,

  I need to update my predictions from the past which are actually accurate to this point in any case.

  I ststed far back in this thread that the Euro would drop to .87 versus the dollar and the Pound would fall to 1.10.

  Since then I will still stand by these predictions but at the same time I see the British switching to the Euro in the future. Possibly as soon as 2009 and after March.

  It seems that due to the weakness in the British economy it may be the only issue at stake if growth does not happen by June of 09. If the British sytem fails as it may then you will see a quick transition to the Euro and probably the central location in London may change to Germany or elsewhere.

  Quite amazing if you ask me but very very possible and in my opinion you should not invest in the pound after MARCH first 2009.

Makkin

[Gator]

You forgot to mention the Alt-A (liar loan) resets...

Good point.  Actually, these are already taking their toll.  Bear Stearns had a large portfolio of these, and you know where they are today (merged into JP Morgan for pennies on the dollar).

Rivardco,

A crash implies that everything comes to a grinding halt.  That will not happen, but I vote for a L-shape recession lasting two years before recovery begins.  I doubt we will see again in my lifetime (maybe yours) the good ol' days.  By the way, there is more pain to come.  Dow 6000-7000 is possible as dividends for prominent stocks are decreased if not curtailed over the next year.  I am rarely the pessimist, yet this time I am having trouble shaking negativity.  I am a Bear for the first time in my life.

[IAmZon]

GATOR - Come on!  With that wife of yours, you will out live me.

(Amazingly, I'm still running around the world like a kid in a candy shop.  Cali, Colombia is full on beautiful women.  The years continue to roll off me. I will become serious again, but not until the 3rd financial quarter of 2009   New avatar.  Me w/ Teagan Presley. Penthouse centerfold, January.)

[Gator]

Rivardco,

Glad to know that you are enjoying yourself.  I am not sure my libido at my age could handle all of that candy.  Maybe one week on, two weeks off.

[daveyj]

Updates on Russia's foreign currency reserves (now at $450m) and the rouble FX rate.

From the Economist
http://www.economist.com/world/europe/displaystory.cfm?story_id=12641926

And from Putin
http://www.reuters.com/article/marketsNews/idUSLK9832520081120

I must admit, I don't see how the US$ can maintain its recent FX appreciation over the long term.  So many folks are predicting that the flight to the safety of US treasuries will end, and we'll see the US FX rate reverse course next summer.  Maybe that will bail out the Rouble?

[kievstar]

Just remember the Yen has gotten stronger against the USA dollar.  Euro was just overvalued.  USA dollar is not going to tank unless Obama does something stupid. 

Ruble is not in bad shape right now. 

[Misha]

Ruble is not in bad shape right now. 

Well, by the Russian Central Bank's own admission, they spent close to $20 billion defending the ruble last week. Even if they hadn't already promised to spend $200 or so billion of the $450 billion remaining in the reserve funds, at that rate the reserve won't last half a year. Also, yesterday the Urals Blend was trading as low as $45 a barrel. The Russian Minister of Finance said in the past that they needed $70 not to run a deficit.

[Gator]

Who needs a reserve when you have printing presses?!  The ruble will, of course, be devalued.  However, all of the world's printing presses are busy working overtime.

[Misha]

Who needs a reserve when you have printing presses?!  The ruble will, of course, be devalued.  However, all of the world's printing presses are busy working overtime.

Of course, the ruble will be devalued. However, this will contradict Medvedev's and Putin's position that Russia wouldn't be affected by the crisis. This will cause disappointment and bitterness.

[IAmZon]

This is all getting a little spooky.  This has gone waaay beyond cycles.

I read Atlas Shrugged several times when I was in college.  I feel like I am watching the story play out in life.  I mean literally!  The names, their physical appearance, the same moral argumentation.

Who is John Galt?

[OlgaH]

However, this will contradict Medvedev's and Putin's position that Russia wouldn't be affected by the crisis.

I also read Russian news.  but about such Medvedev's and Putin's position I hear only from you.

MOSCOW - Prime Minister Vladimir Putin assured Russians on Thursday, at the annual gathering of the the United Russia party, that he would guide them through the global financial crisis without the economic collapses of the past, but acknowledged there would be pain....

Russian Economic Report
http://go.worldbank.org/SERSEKNWA0

[kievstar]

We usually hear this stuff from Putin and other Europe leaders.  http://www.kyivpost.com/world/31122

Which is crap.  If a country has a strong economy, should not be impacted by other countries issues.  People were spend happy for 20 years and some countries have mickey mouse economies.  It will take time to correct the over spending and mis managed countries.

Just like gaining weight.  Takes a long time to get fat and it takes long time to lose the fat in most cases.

This is going to be a very long recession and were not close to the bottom yet in all countries.

I do like Putin and hope the global recession gets worse so Russia can buy the former Soviet Union companies back cheaply. Than hopefully Russia will create a big middle class. 

 

[ScottinCrimea]

My wife just got back from Crimea and I was quizzing her on how things are there now.  She says much has changed in the year that she has been gone.  Apparently people there went on a credit spending spree.  She says there are now so many cars around Simferopol that it's practically bumper to bumper.  And these aren't just Lada's and Moskvich's, but cars ranging in the $30,000 plus range.  Hard to say how many of these will get repossessed now that many are losing work and the ability to pay the monthly payments, especially with the high interest rates there on consumer credit.  She also said a lot more people have taken out mortgages on houses and apartments.  The banks are desperately trying to work out alternate arrangements to avoid foreclosure because they don't want to dump a bunch of foreclosed property on the market, further driving down the prices.  So far they have dropped about 30%.  As I read the newspaper she brought with her, it shows car prices down 10%, computers and other electronics 10%, gas 10%, fur coats 20% and food prices stable, though she noted that food prices are a minimum of 100% higher than a year ago. For example the samt 10 eggs you could buy before for 4 hrv are now 10 hrv. Natural gas deliver has been cut 30% causing some difficulty in keeping their homes warm.  She had a really difficult time getting dollars as no one wanted to give them up, and at the airport she couldn't find anyone who would exchange the hryvn she had left so she just spent it on souvenirs.

Most there are as much or more pessimistic about the near future as those here and expect at least two years of difficult times.  Still, I think for most it's just a disappointing return to the way things were for them not so long ago.

As far as our property there, the 30% is a drop in the bucket since the value lof our apartment has increases 300% since we bought it.  In reality the value is irrelevant because we have no intentions of ever selling it.  Its value as a home remains the same.  As far as our commercial property, in the short run, between the higher dollar and the cheaper cost of labor and supplies, the remodel will cost less.  In the mid to long term, we may have more difficulty finding tenants and will probably have to lease it for less, but financially it's just an extra for us and since we never paid money to purchase it and pay cash only for the remodel, therefore having no debt on it, it's not such a big deal.  We can wait it out.

On the ligher side, it's great to have my wife back.

[kievstar]

Scott, can you ask your wife if the stores have a lot of mink coats in stock.  I found that Simefropol had the best deals and quality of mink coats two years ago and if the stores are full of coats on sale will need to go in December there.  The mink coats in Kiev tend to be of poor quality and high price.

[OlgaH]

kievstar,

have you ever tried to hunt on mink in Greece, Emirates and China?   

[Mishenka]

Went to my bank today only to find it has been shut down by the Federal Reserve.  Doors were locked tight, everyone there lost their jobs. Economic mourning's. Total bank failures in USA come to 22 this year.  From what I read, 50 more being seized in the next 6 months is a conservative estimate. New Zealand has shut down 10 banks,  their dollar is the lowest it has been in 7 years, at nearly 2-1 usd. Canadian and Australian currency were near equal to the USD 3 months ago have devalued 40%  Euro has fallen to 1.23  from a high of 1.65 Gas there is still 8.00 US a gallon while gas in USA is under $2.00. EU is in the same mess we are in here. Banks closing all over EU. There is no way to avoid it. Printing more cash will do nothing. With oil falling below 45 a barrel,,,, well, no sense in talking about it. At this price at current opperating expenses, it takes all the profit and working capitol out of the oil business. The bail out has failed. That money must be put back in the taxpayers hands to boost the economy. Let  the banks fail. Let the FDIC pay the depositors their money due and get this economy moving again. Get money flowing again. Let the auto makers file chapter 7 and start over without the unions and outrageous opperating costs. Thousands will loose jobs regardless.

Congress is trying to float a ship that is laying at the bottom of the sea. It's sad that all these so called brilliant minds are unable to find a solution.  It's amazing how fragile this 14 trillion economy of the USA really is.

 

[kievstar]

Hi Olga, I do not know much about Mink but have never heard of China and Greece being a good spot - so I think your joking.  I do know that 2 years ago in Crimea my girlfriend was cold and I told her I would buy her a winter coat.  My Russian teacher in USA taught me winter coat in Russian was "shooba".  Told my girlfriend at the time I will buy you a shooba.  She asked me 3 times are you sure (she spoke very little English).  I said no problem.  For the next 5 days we went all over Ukraine searching for a full length grey mink coat.  I drank with the taxi driver Sergey as she looked (Sergey was in the Russian navy so we had a good time).  We ended up buying one for $3,800 in Simeferopol.  Same coat in Kiev was $9,000.  I have a nice picture of her wearing it near the Swallows nest in Crimea but have no idea how to post pictures on this site.  I see why women like them.  There very warm.  PETA can go to hell.