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War on the dollar begins!

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posted on Nov, 9 2006 @ 08:02 PM
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Originally posted by HIFIGUY
Remember that little man..Ross Perot?

Simple economics are at play here.

The US ecnonomy was driven primarily by home sales as well as vehicles.
The low interest rates and creative lending conditions by mortgage lenders allowed for America, to borrow, borrow, borrow against tomorrows earnings.


...and THAT'S a reality check ladies, gentlemen, and adolescent partisans!

Mod Edit: Big quote shortened.

[edit on 9-11-2006 by TheBandit795]




posted on Nov, 9 2006 @ 08:38 PM
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Basic Macroeconomic principles need to be considered here. Supply and Demand forms the backbone of modern pricing systems, including currency pricing.

At the moment the US dollar is fairly strong, meaning on the world market US products are relatively expensive to buy, and for US companies and citizens foreign products are relatively cheap to buy. So inevitably overseas products will have an advantage over US products, and the trade deficit will grow.

Now if the US dollar drops in value against other world currencies, then US products become cheaper for foreigners to purchase, and foreign products will become more expensive for US companies and citizens to purchase. So US products will have an advantage, and the trade deficit will shrink.

When the trade deficit grows to large in the opinion of the market, downward pressure will be applied to the US dollar, and so it will devaluate. As it devaluates US products will become more attractive as mentioned above, and the downward pressure will cease. When the deficit is removed or even trimmed to an appropriate level, then the currency will increase in value again.

Other factors will influence the US dollar value such as oil bourses, foreign reserve holdings and national debt, but the process of international trade is the over-riding factor in determining the value of the US dollar.

[edit on 9/11/2006 by mr_albest]



posted on Nov, 9 2006 @ 11:36 PM
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Originally posted by behindthescenes
China is claiming that it will be replacing some of its currency reserves in U.S. Dollars with precious metals. Just the threat alone caused the dollar's value to tumble today.


The article you cite contains nothing of the gloom and doom you claim. We've all heard the claims that the US economy is about the collapse, but as yet we haven't seen any evidence that legitimate economists are concerned that this will happen in the near future.

Do you have other sources to support your claims?



posted on Nov, 9 2006 @ 11:55 PM
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Let me begin by saying that I'm no expert on this subject, so please forgive me if I make any incorrect statements. Everything that I say is based on my understanding of things...

So far as I know, Saudi Arabia is the biggest player in OPEC and probably has the most pull in the group. The Saudi's depend on the United States for protection from foreign forces (Iran, etc.) as well as internal threats to the stability of their regime. Without our support the House of Saud could very well fall.

I believe that we certainly have enough pull with the Saudi's to expect their opposition to a switch to the Euro. Aside from that, how many members of OPEC depend on the United States for financial and/or military aid? It's not a rhetorical question as I am actually wondering if there are other members of OPEC who rely on the US for some form of aid or protection like Saudi Arabia. If so, wouldn't it be logical to assume that these nations would avoid sanctioning a move that would cause the economic collapse of their sugar daddy?

I don't want to be blunt or further the stereotype of war-mongering, egotistical and emperical Americans, but I would think that if a decision was going to be made that would cause our economic downfall we would pull out all the stops and exercise all of the options at our disposal (including military) to prevent it.

My final thought is this... Last I checked, the US was the world's biggest user of oil. Wouldn't OPEC be shooting themselves in the foot by screwing with our economy if we're one of their biggest customers? And as the biggest customer of Chinese exports, wouldn't China intervene to prevent a switch to the Euro and the subsequent economic collapse of their cash cow?

Just some random thoughts on my part...



posted on Nov, 10 2006 @ 03:56 AM
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Originally posted by GradyPhilpott
but as yet we haven't seen any evidence that legitimate economists are concerned that this will happen in the near future.


No? I'd say put on your glasses.
Since when is Comptroller-General David M. Walker not a 'legitimate economist'? Since when is Professor Kotlikoff (ex advisor of Reagan) not a 'legitimate economist'? The list continues and if you are seriously interested you could read the following thread.

www.abovetopsecret.com...

A quote from that thread:


Originally posted by Mdv2

Comptroller-General David M. Walker:


What they don't talk about is a dirty little secret that everyone in Washington knows, or at least should. The vast majority of economists and budget analysts agree: The ship of state is on a disastrous course and will founder on the reefs of economic disaster if nothing is done to correct it.

There's a good reason that politicians don't like to talk about the nation's long-term fiscal prospects. The subject is short on political theatrics and long on complicated economics, scary graphs and very big numbers. It reveals serious problems and offers no easy solutions.

Source



Because Bush & Co refuse to discuss those alarming problems doesn't mean nothing is going on. Wake up!

Besides, our Neo-Conservative friends eagerly bash Democrats on raising taxes, but they forget to tell the reason why tax raises are necessary. If the current administration didn't mess up the economy like they did, and didn't spend billions of Dollars on a pointless war, there would probably not have been a need for raising taxes.

On topic: Dollar dumping has begun already, Central banks of Sweden, UAE, Italy, Russia and many more, as you can read in my thread.

Oh, and don't worry about China, it will be very hard to diversify without causing the Dollar to collapse. Theyll probably not do it.


[edit on 10-11-2006 by Mdv2]



posted on Nov, 10 2006 @ 08:12 AM
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Originally posted by Rockpuck

Originally posted by djohnsto77
Maybe I'm out in left field, but I just don't think if the pricing of petroleum changed from dollars to euros it'd make much of a difference.

Who cares, the buyer changes money and the seller changes it to something else anyway.


No, you left the ball park entirely. The whole reason our economy stays up is because people buy our money. Honestly, think about it. What do we produce compared with our intake? nothing. except wealth, which is worth nothing if no one wants it.

It isn't a matter of one day China says it wants more gold.. it takes ALOt of time to switch currecnies.. which is why America has a hold on it. Russia will do all oil trade in Rubbles, but there are not enough Rubbles in circulation to meet the need, so only a small amount is done in the Rubble, the rest in the Dollar. OPEC nations would like a bourse as well, Iran wants to go to the Euro, but to change their entire reserve would take a while because the Euro is not produced fast enough to meet the needs. The Dollar is everywhere, you can't escape it. That is why it is used, simply to hard to switch real fast, and once your switching... we might declare war on you. I think the entire reason we went to war with Iraq is because Saddam went to the Euro. Now all trade with Iraq is back to the Dollar.

What do our European friends think of this? We openly engage in dollar wars to keep the Euro down. Eventually though it will be surpassed.


To a certain extent, you're right; we're protected in that the dollar is the most prolithic currency in the world -- and perceived to be the safest.

But the earlier poster is correct, and I hadn't even addressed it. Our enemies are smelling blood in the water; why wouldn't Iran at the very least start to threaten to dump the dollar in favor of the Euro now? Bush is a lame duck at this point, our foreign policy in shambles, and Iran would just love to exert more pressure to gain more concessions on influence over a Shi'ia controlled-Iraq.

While it's highly unlikely any one country will entirely dump the dollar -- it's the selling off of increments that is our near-term problem. And one that could very well wreck our economy. We're already teetering on recession, with the housing market crash in full force. That has deflated the GDP to a little over 1%. It wouldn't take much more of an overall economic slowdown to slap the GDP silly into negative territory.

The only safeguard I see right now is that, in the end, it's against the self interests of China to force the U.S. economy into a crash. The kneejerk reaction economically would amplify back at them. But I don't think OPEC is under the same threat. If the economy tailspins into a major recession -- even, God help us, a depression -- and American's ability to drive all the time diminishes, there are still plenty of countries out there willing to buy their oil.



posted on Nov, 10 2006 @ 08:23 AM
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Originally posted by GradyPhilpott

Originally posted by behindthescenes
China is claiming that it will be replacing some of its currency reserves in U.S. Dollars with precious metals. Just the threat alone caused the dollar's value to tumble today.


The article you cite contains nothing of the gloom and doom you claim. We've all heard the claims that the US economy is about the collapse, but as yet we haven't seen any evidence that legitimate economists are concerned that this will happen in the near future.

Do you have other sources to support your claims?


Grady:

It's more of an analysis. And as a rule, I'm a pessimist. But there are plenty of articles out there regarding the China threat.

Here's one.

China threat analysis

Here's a doom and gloom analysis from The Economist mag....

Finally...

All I'm asking is the recent announcement by China the start of the war against the dollar....



posted on Nov, 10 2006 @ 08:34 AM
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Originally posted by GradyPhilpott

Originally posted by behindthescenes
China is claiming that it will be replacing some of its currency reserves in U.S. Dollars with precious metals. Just the threat alone caused the dollar's value to tumble today.


The article you cite contains nothing of the gloom and doom you claim. We've all heard the claims that the US economy is about the collapse, but as yet we haven't seen any evidence that legitimate economists are concerned that this will happen in the near future.

Do you have other sources to support your claims?


How about the memo from the council on foreign relations to Clinton after he waxed JFKish at his inauguration speech:

"The task is much more complicated and difficult than Clinton makes it out. First the president has not prepared the nation for the sacrifices that lie ahead if America's trajectory is to turn upward.
Second, he has yet to explain the complex obstacles to restarting the American economy when there is a recession in Japan and Europe.
Third, he has yet to confront the delicate problem of pleasing powerful financial markets which are all too ready to unleash their fury at the administration's first fiscal misstep.
Now that the election is over the new president will have to move quickly to deliver the tough message and make agonizing decisions. **In the CNN age, when indelible impressions are instantaneously formed around the world and when wall street and it's foreign counterparts can bring policy makers to their knees overnight**, Clinton's first hundred days are not just an opportunity to unfold a new agenda: rather, they just as equally present a mine field that could blow up and damage his administration for the next four years.
Clinton's immediate priorities should be both offensive and defensive and defined in terms that are crystal clear and that the cancerous budget deficit." (social spending)




[edit on 10-11-2006 by clearwater]



posted on Nov, 10 2006 @ 09:19 AM
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the situation with terrorist muslims (home grown terror) in the uk and other european nations do to there immigration. i think the only currency collapsing in the next decade or to is going to be the euro. china can shift its weight around all it want there the only ones being held by the balls here.



posted on Nov, 10 2006 @ 09:23 AM
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it is all because of this oil thing. im telling you it will happen in 2007, this january will be the mark up of everything. and no it is not the democrats either. these oil corporations will raise oil causeing the american dollar to go down due to the cost of gas to shipp the products to heat your homes , to cook and anything that deals with the gas. im telling you people it will start to happen in january. february we get in a gulf war mess with iran and time magazine to give tips on the going on there. look at the big picture, your money going up , and it will go even higher. im telling you this will happen . wake up people, if you do not beleive me well then check out what other countries say about the situation and they will say the same thing. that the oil is getting higher soon and your dollar will be squat. it is about this oil thing our gov'ts are fighting for control over. it is not a war right now but is will escallate into nations against nations over oil. control over. it will all be fully blown in this february, so watch time magazin. and no im not selling time magazine.

[edit on 10-11-2006 by littlebird]



posted on Nov, 10 2006 @ 09:57 AM
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Originally posted by solidsnake1331
china can shift its weight around all it want there the only ones being held by the balls here.


China cannot do anything at all. I agree, however, that the Euro will collapse, but only if the Dollar collapses. Obviously you don't have a clue, but I'll try to explain.

Two important factors determining the value of a currency against another is speculation and in addition supply/demand.

China, Japan, European countries are the three biggest purchasers of US debts. If one or all for some reason would stop buying US debts, the US economy would inevitably collapse at once. Those countries literally carry the US financial burden, and enable US people to live their rich lives; avoid that FIAT money becomes worthless. Other countries use similar strategies, but one crucial difference is that US has become so dependent on debt buyers that it becoming a serious threat. Later on I'll explain why.

The US is China's second trading partner, which is too important to lose. That's why they purchase US debts, not because they are so profitable, cause they aren't. However, the ever increasing amount of US debts puts downwards pressure on the value of the US Dollar against other currencies, and simultaneously supply increases, which also puts downwards pressure on the Dollar. China has approximately purchases US Treasure-bills worth 1 trillion US Dollar. Since the Dollar's value is depreciating, the profitability of those Treasury-Bills is decreasing.

Moreover, The Federal Reserve which is not a government institution as many people think but a private organization owned by rich Jewish families stopped publicizing M3 money supply details. Why? Because it is suspected of printing unlimited amounts of Dollars, in order to buy off US debts and thus keeps the economy running.

So China is the country finding itself between a rock and a hard place. Since they cannot stop purchasing US dollars (in order to avoid it and the US economy from crashing), but simultaneously it's losing money on purchasing T-bills (since the downwards pressure on the US Dollar continues).

Speculators don't act on results and facts, but on what they expect to happen. That's why central banks are ''diversifying'' (read cutting Dollar Reserves). They are trying to avoid possessing large reserves of worthless US Dollars after it has collapsed. An example is the Central Bank of the UAE, which is going to sell off between 40 and 90% of its Dollar reserves. If China would announce to sell large amounts of Dollars, the economy would crash on a global scale The recent press release about China's thoughts to diversify limited amounts of Dollars did already put downwards pressure on the Dollar, then you can probably imagine what the above mentioned scenario would cause.

Financial analysts expect it to muddle along for as long as possible. Meanwhile, no one will be warned, otherwise it would collapse, and result in a chaotic situation.
Measures have to be taken, should we want to avoid it, but chances are very small. The financial policy of the current administration is largely responsible for the current state, so blaming Democrats about tax raises is ignorant as actions has to be taken rather today than tomorrow.

For those who say ''yes you are a Euro and US basher'' I'm not, however, I'm in the same boat as the Euro would collapse as well.



posted on Nov, 10 2006 @ 09:58 AM
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Originally posted by littlebird
it is all because of this oil thing. im telling you it will happen in 2007, this january will be the mark up of everything. and no it is not the democrats either. these oil corporations will raise oil causeing the american dollar to go down due to the cost of gas to shipp the products to heat your homes , to cook and anything that deals with the gas. im telling you people it will start to happen in january. february we get in a gulf war mess with iran and time magazine to give tips on the going on there. look at the big picture, your money going up , and it will go even higher. im telling you this will happen . wake up people, if you do not beleive me well then check out what other countries say about the situation and they will say the same thing. that the oil is getting higher soon and your dollar will be squat. it is about this oil thing our gov'ts are fighting for control over. it is not a war right now but is will escallate into nations against nations over oil. control over. it will all be fully blown in this february, so watch time magazin. and no im not selling time magazine.

[edit on 10-11-2006 by littlebird]


Our cowboy ways as a nation are over. With China and so many other foreign counties controlling our currency -- and thus our economy -- many posters have it pat correct when they say they have us by our pigley hairs.

Plan to impose tariffs on imports? Sell the dollar. Want to attack Iran? Sell the dollar.

Basically, the hold of U.S. currency is a very powerful bargaining chip against the government. Hell, it's not even a bargaining chip, it's the economic ICBM some economists have long been warning about.....



posted on Nov, 10 2006 @ 10:05 AM
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Originally posted by Mdv2

Originally posted by solidsnake1331
china can shift its weight around all it want there the only ones being held by the balls here.


China cannot do anything at all. I agree, however, that the Euro will collapse, but only if the Dollar collapses. Obviously you don't have a clue, but I'll try to explain.

Two important factors determining the value of a currency against another is speculation and in addition supply/demand.

China, Japan, European countries are the three biggest purchasers of US debts. If one or all for some reason would stop buying US debts, the US economy would inevitably collapse at once. Those countries literally carry the US financial burden, and enable US people to live their rich lives; avoid that FIAT money becomes worthless. Other countries use similar strategies, but one crucial difference is that US has become so dependent on debt buyers that it becoming a serious threat. Later on I'll explain why.

The US is China's second trading partner, which is too important to lose. That's why they purchase US debts, not because they are so profitable, cause they aren't. However, the ever increasing amount of US debts puts downwards pressure on the value of the US Dollar against other currencies, and simultaneously supply increases, which also puts downwards pressure on the Dollar. China has approximately purchases US Treasure-bills worth 1 trillion US Dollar. Since the Dollar's value is depreciating, the profitability of those Treasury-Bills is decreasing.

Moreover, The Federal Reserve which is not a government institution as many people think but a private organization owned by rich Jewish families stopped publicizing M3 money supply details. Why? Because it is suspected of printing unlimited amounts of Dollars, in order to buy off US debts and thus keeps the economy running.

So China is the country finding itself between a rock and a hard place. Since they cannot stop purchasing US dollars (in order to avoid it and the US economy from crashing), but simultaneously it's losing money on purchasing T-bills (since the downwards pressure on the US Dollar continues).

Speculators don't act on results and facts, but on what they expect to happen. That's why central banks are ''diversifying'' (read cutting Dollar Reserves). They are trying to avoid possessing large reserves of worthless US Dollars after it has collapsed. An example is the Central Bank of the UAE, which is going to sell off between 40 and 90% of its Dollar reserves. If China would announce to sell large amounts of Dollars, the economy would crash on a global scale The recent press release about China's thoughts to diversify limited amounts of Dollars did already put downwards pressure on the Dollar, then you can probably imagine what the above mentioned scenario would cause.

Financial analysts expect it to muddle along for as long as possible. Meanwhile, no one will be warned, otherwise it would collapse, and result in a chaotic situation.
Measures have to be taken, should we want to avoid it, but chances are very small. The financial policy of the current administration is largely responsible for the current state, so blaming Democrats about tax raises is ignorant as actions has to be taken rather today than tomorrow.

For those who say ''yes you are a Euro and US basher'' I'm not, however, I'm in the same boat as the Euro would collapse as well.



Excellent post, Mdv. Great way to sum it up.

I guess you highlighted another issue. Is the dollar selloff politically motivated, or protectionist?

Seems in a way China, the European Union and even the Middle East to a certain extent are a slave to our debt nation as well. If they start selling the dollar, and the price collapses, their holdings become worthless and their economy tanks as well.

There is an argument to be made that the M-East and Russia are in the best position, having a Mad Max-like control of the world oil supply. A dead American economy would hurt them, but not catastrophically. And China -- being quite literally the world's manufacturer -- would be seriously hurt by a lack of buying power by the U.S. consumer, but only for a short run.

And a switching of currencies into precious metals or alternative currencies is a way to wean out of what many countries see as an American economy destined for ruin.

At the same time, I need to be practical. This scenario has been harped about before: in the 1970's, in the '80s and even early in the 90's, just before the Tech Bubble. And while bad recessions did occur, we as a country continue to hum along.

But this time, I think we're talking about a bubble in the most fundamental of places: our cash. We're talking a potential 1930's Germany here, where it would be cheaper to burn our cash in fireplaces for heat than pay for natural gas.

Scary times, my friends.



posted on Nov, 10 2006 @ 10:21 AM
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Originally posted by behindthescenes
I guess you highlighted another issue. Is the dollar selloff politically motivated, or protectionist?


It depends on what countries you're aiming at. Rogue States and enemies of the US used and could use it as weapon. Saddam Hussein denominated his oil exports from US Dollars to Euros. After the invasion it was changed back to US Dollars again. Iran also threatened to sell its oil/gas exports in Euros, however, it doesn't seem to be capable of launching such an Oil Bourse anytime soon. Perhaps they will be able to do so next year.

Other countries and individuals are cutting off Dollar reserves as precautionary protection measure, which is why the Central Bank of Italy did it unexpected and secretive to avoid speculation (and thus avoid an increase of exchange losses).


Originally posted by behindthescenes
And a switching of currencies into precious metals or alternative currencies is a way to wean out of what many countries see as an American economy destined for ruin.


I myself purchase precious metals to hedge the risk of being unable to escape the coming chaos. Of course some people will say that I'm nuts, but in 1929 they neither expected the economy to collapse (specifically in Germany). The majority will be unprepared when it happens, only a very small group of individuals will have been smart enough to take precautionary measures.


Originally posted by behindthescenes
But this time, I think we're talking about a bubble in the most fundamental of places: our cash. We're talking a potential 1930's Germany here, where it would be cheaper to burn our cash in fireplaces for heat than pay for natural gas.


Previous recessions cannot be compared to the current threat. The US Dollar is a world currency, the impact would be huge and devastating.



posted on Nov, 10 2006 @ 10:33 AM
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As I see the $ is strongly linked to the oil. Let's assume the little company (steorn.com in Ireland) really is going to put overunity engines on the market in 2007-08. In five years the demand for oil could drop to zero. What could this mean for the $?



posted on Nov, 10 2006 @ 10:49 AM
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Originally posted by dgtempe
For Pete's sakes, isnt it a little premature to be blaming the Dems?


Shall we see if it is "premature"?


by Roland Jackson
Wed Nov 8, 6:31 AM ET


LONDON (AFP) - Global finance markets have wobbled on fears that a Democrat victory in the US Congressional elections could prompt less market-friendly policies in the world's biggest economy.

Investors watched nervously as jubilant Democrats seized power in the US House of Representatives for the first time since 1994 and edged closer to taking the Senate, pushing European and Asian equities lower and weighing also on the dollar.

news.yahoo.com...

So what do you think DG? Apparently the world finantial markets have been rattled just by the DEmocrats winning the House and the Senate....



posted on Nov, 10 2006 @ 10:59 AM
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I myself purchase precious metals to hedge the risk of being unable to escape the coming chaos. Of course some people will say that I'm nuts, but in 1929 they neither expected the economy to collapse (specifically in Germany). The majority will be unprepared when it happens, only a very small group of individuals will have been smart enough to take precautionary measures.


Although I gotta say a lot of shorts got burned on gold and silver in the past few months: There was such a huge runup on prices (particularly at the $600-plus an ounce stake) on speculation that the price could eventually top $1,000 an ounce, that when the price peaked and shrank, many got burned.

This jitteriness could be at play again. I personally got hurt in the energy stock runup. My fault for following the sheep on that one, but I'm still long on energy stocks. I don't see 99-cents per gallon of gas happening again in my lifetime.



posted on Nov, 10 2006 @ 11:42 AM
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Apparently the world finantial markets have been rattled just by the DEmocrats winning the House and the Senate....


The pullback on the markets has been slight, in my view. Both the dow and the nas are holding steady in an uptrending price channel. Initial reations to news often go the wrong way, and I think once the market absorbs the news, bullish sentiment willl continue for a while. Another expensive, destabilising war on Iran seems less likely now Bush is weakened... and this will being back some confidence in investors.




[edit on 10-11-2006 by nowthenlookhere]



posted on Nov, 10 2006 @ 11:57 AM
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Originally posted by nowthenlookhere

Apparently the world finantial markets have been rattled just by the DEmocrats winning the House and the Senate....


The pullback on the markets has been slight, in my view. Both the dow and the nas are holding steady in an uptrending price channel. Initial reations to news often go the wrong way, and I think once the market absorbs the news, bullish sentiment willl continue for a while. Another expensive, destabilising war on Iran seems less likely now Bush is weakened... and this will being back some confidence in investors.


I think the overall stock market is a terrible indicator of where the economy is headed. It's largely ruled by high-stakes gamblers in the short run, with institutional money in the background. None of which, really, have any clue where the economy is headed.

Look at the bond market, it's a better litmus test for our fiscal health. Notice something? Short term instruments are selling better -- and offering better interest rates -- than long term. That's called an inverted yield curve, and historically has percipitated a recession. This time, I think the bond market is clearly saying that they're more confident in placing money in investments for just a short period than the long run.



posted on Nov, 10 2006 @ 12:20 PM
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Originally posted by behindthescenes

I think the overall stock market is a terrible indicator of where the economy is headed. It's largely ruled by high-stakes gamblers in the short run, with institutional money in the background. None of which, really, have any clue where the economy is headed.


I couldn't agree more. I was commenting on the market reaction point.


Look at the bond market, it's a better litmus test for our fiscal health. Notice something? Short term instruments are selling better -- and offering better interest rates -- than long term. That's called an inverted yield curve, and historically has percipitated a recession. This time, I think the bond market is clearly saying that they're more confident in placing money in investments for just a short period than the long run.


I know. There have been exceptions, but generally that's what the yield curve suggests. However, right now the curve is flat, not inverted...cetainlly compared to 2000 for example. Look that the the 10y and 30y, compared to th 5y today..

Living Yield Curve

It was similar in 1989, but then interest rates were much higher, too.




[edit on 10-11-2006 by nowthenlookhere]



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