It’s Official: The Crash of the U.S. Economy has begun

ok boy i read some of my post's and i shake my head sometimes

to re-iterate get out of the stock market, even things like the commodities boom (soy, wheat, feedcorn, etc) may not be safe investments

a few charts caught my attention , specifically the monetary base

(whick contrary to popular economist articles) to mislead is NOT INflating rapidly they in last few weeks actually deflated the money supply and YOY growth in supply slowed to 1.8% which while still an increase is historically LOW. in 2000 in spiked to 15 and then it has declined as a percent to around 4, then 3 and now 1.8% in the last 3 years (respectively).

M3 has been on the rise and is often cited in "printing/inflating like mad articles) but this is the creation of money and CREDIT. the expansion has mostly been in CREDIT. overleveraged credit. i.e 20 dollars in debt (financing for every $ in capital) this is a DEBT/CREDIT bubble. and the fed cutting is trying to slow the collapse of confidence down, by attempting to keep some lending alive thru lower intrest rates, and they will continue most likely to cut but at .25% intervals IMO.

for perspective places like Zimbabwe and the Weimar Republic have seen hyperinflation from dramatic increases in the supply of monetary base, the great depression stemmed from dramatic increases in CREDIT/DEBT.

consumer psychology is the most important aspect, and the reason why the talking heads on cnn , cnbc talk spin postively to keep the whole casino going. it looks like the unwinding of the tower of debt inflated assets has begun and lower intrest rates also do not make foreigners holding dollar assets happy that they are getting less return, especially as these country's peg their currency's to a depreciating dollar, the local inflation is much higher than the yield that their (gov't bonds) are collecting. In a financial credit deflation their may be a flight to saftey of u.s treasury bonds, and at the same time these country's may also continue to DEPEG their local currency's from the dollar ( to ease inflation in the foreign country's) this would lead to asset values falling domestically as well as world wide, and price increases domestically for energy, food, and "walmart" goods. (if less dollars are "recycled by foreigners", but foreigners also see prices rise especially for Food.

it appears to me the credit cycle/bubble may be bursting but we have been here before only to have this delayed further, although this time there seems to be much more downward momentum. only time will tell. but the piper will have to be paid soon.

if the debt tower collapses and at the SAME TIME foreigners de peg their currency's from the u.s. we will have asset deflation and price inflation. i.e financial sectors crushed as well as middle class. if foreigners don't depeg it may just be the financial sector that takes the fall (asset deflation) . although the financial sector falling may be what leads to a big change in consumer psychology/attitudes (i.e saving, not spending) however in this case banks may not be safe, more unemployment, less consumer spending, and eventually more rate cuts, and pressure for foreign gov'ts to de peg their currency's with that of the u.s. , leading to price inflation but just lagging a bit.



[edit on 25-9-2007 by cpdaman]

the dollar has hit a all time record low for 7 consecutive days.

this means prices for goods and food will be going up and up just in time for christmas (oh ya oil too)

bank earning are due in october and there should be hell to pay. many are talking about a possible crash this month.
Goldman sachs has changed their stance on world ecnomic outlook and i beleive they have their shorts in place, precious metals in stock, and are ready to profit

"Goldman Sachs tiptoeing into the bear camp"
www.telegraph.co.uk.../money/2007/09/28/cngold128.xml&CMP=ILC-mostviewedbox

28/09/2007 Goldman Sachs has abandoned its ultra-bullish view of the world economy, warning of a likely recession in Japan and mounting risks that US property slump could spread to parts of Europe.

In a new report, "The Global Economy Hits a Crunch", the US investment bank said it was no longer sure that Asia and Europe would be able to pick up the growth baton as America stumbled. It fears that turmoil is spreading beyond the debt markets to the factory floor.

Much has changed since mid-July, when we wrote that 'the global economy continues to enjoy one of the strongest sustained expansion in modern history'. The mood in financial markets is clearly darker, and the economic data in the developed world is showing signs of wear," it said

stock market charts (if you are in 2 such things) show side ways trading for possibly a few more days, and then a dump, bigger than the dump in august.

i would hold dollars now, as well as some gold. (get out while people are still willing to buy your #) .

with the distinct possibility the federal reserve may try to print money like it's going out of style if a market crash occurs . which would mean re-investing may be necessary (particularly in foreign currency like YUAN)

(contrary to popular beleif they are NOT doing this now) with YOY money base increasing 1.8 %. and come to think of it in a global economy (if the dollar is to be hyperinflated) people may not toss their soon to be worth less buck's in american markets anyway. also with consumer psychology paralyzed the new money may go into price inflation not bubbles as well.

i wonder how human psychology would predict rapid decline's in standard of living and it's effects on violence and civil unrest

a national emergency declared and police state from a financial crash?

don't beg against it

[edit on 29-9-2007 by cpdaman]

Their is an intersting and building loss of confidence in the dollar thoughout the world. Being the world reserve currency many dollar holders are of the belief that the CENTRAL BANKS will be inflating and devaluing the currency further to maintain a debt bubble longer.

As this beleif takes hold more people holding dollars and fiat currency's and even (stocks) are looking more and more into PHYSICAL GOLD not paper gold stocks as a store for their wealth.

The central bankers try to sell gold to raise the supply and depress the price whenever a rally get going, and in the past they have had success but this time the AMOUNT of pressure due to the global beleif that FIAT currency's ( their savings) will be devalued as inflation is beleived to increase is causing investor (consumer's are always behind the curve) to FLOCK TO REAL ASSETS.

The fed does not want to see the people (masses) have alot of their (the central banksters) most valuable assets. They will not allow it to happen. Secondly the run out of the dollar is weakening the dollar further and creating vast imbalances and strains on foreign economies since the dollar is the world reserve currency. The only way to boost these govt's demand for dollars is to make buying Us devt ($assets) attractive through the rise of INTREST RATES in the u.s , because this would create a higher return for foreign investment in the dollar. So the fed has a real reason to stop people from hoarding their most valuable asset (phy. gold) due to a run on the dollar and the global turmoil it is causing.

The obvious problem is that reversing policy and raising intrest rates would cause destruction of the (debt leveraged) Financial markets , especially in the United States. The derivatives pyramid may collapse and result in literally "millions of millionaire's" losing most of their assets and "net worth". The "elite" would be fine but the upper class would take a serious Beat down. this would lead to those who are able to get out holding More worthless "yet strengthening" Paper currency. because all asset values would be depressed , including commodities, like gold.

The cental banks would then bailout the big 5 banks jp morgan, goldman sachs, etc but would likely further centralize the banking system after many more smaller banks would have their loans called in and not be able to make the reserve requirements. This would lead to a buying opportunity of a life time throughout a broad range of asset classes to anyone lucky enough to be holding "ACTUAL dollars, or Euro, or such.

The biggest change would be in Consumer Psychology as many still equate the health of the economy w/ the stock market (which is actually disconnected) but none the less the perception remains.

spending would dry up, unemployment would soar, and well other country's would also feel very recessionary effects. The amount of civil unrest , theft, and suffering would rise to unimaginable levels prompting CITIZENS to DEMAND a GOV'T SOLUTION to the PROBLEM at hand.

A stronger more powerful and authorotative gov't (possibly on a more global or regional scale could take hold) as well as perhaps the elimination of fiat currency in exchange for a mostly credit society ( which would curtaii the motivation to shoot and rob people for their money) since you couldn't steal someone's credit as easily, especially if it was embedded into you w/ a chip.

the amount of death and suffering that could occur during a time like that could be so high as well as also due to the fact that the amount of "useless eaters" which put a drag on society, not to mention use up the dwindling reserves of energy (petro) that the world will have left (because the amount of abiotic oil recovered and re-entering the supply is no match for the the amount being used and in demand (falling supply) w/ a growing population. (this uesless eater attitude is not my thinking but most likely most opinion shapers (think tanks) and (elite's/ bankers)


"The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government of the U.S. since the days of Andrew Jackson."-- U.S. President Franklin D. Roosevelt in a letter written Nov. 21, 1933 to Colonel E. Mandell House.

the central bankers own the world , they own the controlling shares of the major multi national corporations and they have the gov't in their pocket and have for a long time

however, perhaps s the federal reserve will allow the debt bubble to continue and perhpas they will allow the run on the dollar to continue and not raise interest rates, gold would continue to be bought and appreciate, as the fed needs to keep lending money to the gov'ts to keep the markets functioning, the govt's would go deeper and deeper into debt and the central banks may just assume that america is unable to pay the debt back with a dwindling economy that is hollowed out, and the fed may ask for the debt to be repaid by the gov't and the citizens, first with gold.

i'm not sure which option hyperinflation or deflation will occur but either way i would try to be aware of the situation at hand and strategy's (options) should either one come into play.

OCT 20 update


we are facing a large decline (deflation) in asset values , including (stocks) and commodities (even agricultural , oil , and gold stocks)

in the last 10 years CREDIT/DEBT inflation has been inflated /hyperinflated so much that the result was bloated asset PRICES acrosst the board, these gain were not a result of WEALTH, BUT an increase in CREDIT or DEBT and this debt was leveraged (deregulated by markets) to create more credit and debt to fuel new bubbles, the yen carry trade was one source of cheap credit for this boom, but the problem is this mountain of debt/ tower of debt is built on shaky leveraged assets and to keep it from collapsing it needs not just to be maintained, but increased. And there is a limit to credit growth, especially when the growth is built on debt not wealth. The credit crunch is not going away in fact it will get much worse and asset prices are gonna come down, IMO way down.

Any consumer price increases are not the result of rapid "Money Printing"

research.stlouisfed.org...

the chart above shows Year over Year (YOY) dollar growth is around 2%, the bigger increases in "money" is on the credit /debt front.

the consumer price increases are primarily due to DOllar develauation , currency devaluation. Things priced in dollars go up when a currency loses value, not Inflation in money supply. It is really a matter of semantics, but that is part of the deception really.

The bankers Value gold the most. The bankers don't want people to hoard their gold, they would rather people hold Valueless paper, wether people have faith in this paper , determines it's "worth" on the street.

The bankers know the paper (fiat money) which is not backed by gold or silver is worth only the cost it takes to print it. they want people valuing this, not their GOLD. Sure money is worth something of course i am no fool, but when the # hits the fan, i could show you pictures of people burning money for heat (weimar germany 1930's/40's) or city sweepers cleaning the streets with the paper money ( in hungaria) earlier 20'th century. The dollar investors around the world would flock to gold, if they feared fiat inflation, and the bankers don't want this to get out of control.

right now people are buying gold, more and more cause they are undertaking a flight to "hard, tangible assets". their will be a deflation because of the tower of debt, not because the bankers want it. But as this happens the PRICE of every asset will go down, oil, gold, agricultural stocks. TReasury bonds will be sought after, cash will be king. people will sell their gold. And the bankers will consolidate their centeral banks and some sort of regional monetary integretation (european union, north american union/ SE asian union/ south american union) will be formed, some under unified currency, others more loosely. when the civil unrest/dust settles, then the game will start anew. CRedit may be more popular due to less risk of theft which may be a big problem, as the deflation happens and some panic ensues. UN troops will be "in the streets". i think the big banks will short the makret take their profits, and then GAME OVER.

I would not stock pile gold, i would stock pile food and ammo.

It seems interesting to me that everyone is just noticing this. The US has been on a decline since the 50's. That's not just money wise, but health, pollution, crime, you name it.
Now its 2007 and your just saying this. Well to further your cause I will just let you know that the Canadian dollar has been on par with the US monies for awhile now. That hasn't happened since the 50's or 60's. That's a long time ago now.
The US dollar was worth more that 25 to 30 cents for the last 25 years or so, so what do you think happened? I think the US printed to much money, that's all.

you da man, cp, keep hitting us up. very interesting.

cpdaman, i'm wondering if you have any insight into the situation in australia.

i have noticed a massive proliferation of loan brokers, personal finance institutions, investment brokers and such over the last 10 years or so. similarly the large banks have substantially increased their public profile via media. as expected, they promote themselves as gentle, caring, personal institutions interested in the welfare of its 'customers'...

in the last 5 to 10 years australia has become increasingly (i would say dispairingly) finance driven. home loans, mini-me american-style consumerism and public obsession with following 'consumer trends' and such.

small business lending is another HUGE trend that has just popped up out of nowhere in the last 10 years or so.

might the finance sector in australia be attempting to create a similar credit situation to america where everyone is indebted and no one can pay?

certianly, the picture is portrayed to the public as rosy and prosperous, but with all this rosy prosperity largely financed by credit, where does it all lead?

reply to post by cpdaman


I've been thinking the same thing. Australia feels like it's about to pop. There are so many of my friends mortgaged up to the hilt. If the global economy keeps going the way it's headed we must feel the ripple soon.

This thread has been dead for a while, but it seems like a good time to reopen it, with what happened with the US rate cut over night.

I'm not an economist, so it would be great to hear from some of the very smart money minds on ATS.

"The Crash of the Economy has begun"

--> stage II = Bank Failures 2nd column [Non Borrowed(3)] ~ these are bank reserves~
___________________________________________________________
note the combined reserves of member banks is -8755 Billion$




now kindly read a fairly succinct explaination of just how a rather large group of member banks, are tapped out of assets or collateral and the meaning of 'Non Borrowed Reserves'...in the mechanizations of finance...

globaleconomicanalysis.blogspot.com...
(for Saturday 9 February, 2008)



the crash is under way all right, the elite execuitives in banking are snaking their way through a maze of financial wizardy, to keep afloat their banks... for the reason of prolonging their paycheck availability
And Not for the good of the economic community as many suppose.

under normal standards, many (the article estimates between 50-100)
banks are presently insolvent, except for extradinory rule changes, manipulations in accounting and other stuff the banks secretly bellying up to the auction window are now doing.... They would - in past years or decades - have been laughed out of the Fed Discount window and the execs would be unemployed & the bank itself bankrupt.


we are being duped once again & the dire problem is being papered-over
with a bewildering-&-toxic Fog machine

reply to post by St Udio


Great links. Thanks. What is the time frame for all of this? Months? Years? It seems like we have been talking about it for a while now. Is this going to be death from a thousand cuts? Or a bullet to the head?

Here in Australia is getting real bad. Our interest rates are going through the roof and nobody can keep up. We have so much debt it's insane. I can easily see Australia following in the footsteps of the US.

This will never happen in a thousand years the only thing that scares me is that Mr. Bush lets the banks invest our checking accounts which they could not before. But the simple fact of the matter is that our society is driven on consumerism and like me you are typing on a computer that you bought from a store (that pays the same thing I list from now on), that you use with internet that your paying for that needs electricity that your paying for in a house that your paying for that your heating that your paying for. Sitting on your couch that you paid for from a store that pays all those things again. THE CYCLE BEGINS AGAIN AND AGAIN SIMPLE ECONOMICS. I have my MBA but I knew all these things before I even set foot in those college classes.

Sorry I got on a tangent there but here is the real problem with the economy right now and why stocks are plummeting we are all scared that the Mortgage insurance companys are going to go belly up if this happens we are headed toward a big mess.

Originally posted by ohioguy646
This will never happen in a thousand years the only thing that scares me is that Mr. Bush lets the banks invest our checking accounts which they could not before. But the simple fact of the matter is that our society is driven on consumerism and like me you are typing on a computer that you bought from a store (that pays the same thing I list from now on), that you use with internet that your paying for that needs electricity that your paying for in a house that your paying for that your heating that your paying for. Sitting on your couch that you paid for from a store that pays all those things again. THE CYCLE BEGINS AGAIN AND AGAIN SIMPLE ECONOMICS. I have my MBA but I knew all these things before I even set foot in those college classes.

I'm not sure what you are saying will never happen but people were wining and dining the decade before the great depression...thus the name "the roaring 20's"....
the consumer cycle you are talking about was running quite smoothly then also.....but there seems to cycles within the cycles and every so often, we seem to have such things as recessions, bank failures, and occasionally, depressions and total economic failure. the cycle is turning, but which cycle?
before the depression, the people were whining and dining, having a good ole time, the stock market was booming so much, the people were going into debt just to invest in the markets....they were spending lots of money they really didn't have also....the effect was total failure, and then war.

people need houses, heat, and the like, that they are still spending money for them isn't that significant. and well, before the depression, all those luxury items (similar to computers and stuff) were at least mostly made by american companies....that isn't the case anymore. Now, most of it is imported, so the money being made is being exported to other countries. so, the benefit to the american economy is rather questionable.

from what I get from your post, you ain't gonna worry till you see masses of homeless people freezing, out on the street begging for the money to buy a mc donalds cheeseburger. IF this happens, I would venture to guess, it would be too late to start worrying then.

[edit on 5-3-2008 by dawnstar]

Smart money is on SILVER

commercial real estate plunge later this year will lead to higher unemployment and less consumer spending and will be self-reinforcing.

Just wait a couple months and commercial real estate will catch your attention, and is a big one w/ lots of collateral damage for "mainstreet".

commercial real estate plunge later this year will lead to higher unemployment and less consumer spending and will be self-reinforcing.

Just wait a couple months and commercial real estate will catch your attention, and is a big one w/ lots of collateral damage for "mainstreet".

aw....but all those new malls and office buildings being constructed sure did make that illlusion of prosperity a little more convincing though, didn't it...

on a side note....

Carlyle Fund Gets Default Notice After Margin Calls
www.bloomberg.com...


"The Carlyle fund raised $300 million in July and used loans to buy about $22 billion of AAA rated so-called agency mortgage securities issued by issued by Fannie Mae and Freddie Mac."

Carlyle got bit by the housing bust. I imagine all of us taxpayers will have to rally around and bail them out now also

Carlyle said last month its agency mortgage securities ``have the implied guarantee of the U.S. government and are expected to pay at par at maturity.''

why of course we are!!
.....

wasn't it the investors borrowing to buy stocks that caused the depression? the stocks tanked and they couldn't pay back the loans...
I still see alot of similarities between what is happening now, and what was happening just before the depression.....at least from what I know (or think) was happening before the depression. the only difference now, is that they've managed to take most of the risk off the investors and place it squarely on the backs of the taxpayer.

oh, well, silver's has doubled in value in the last two years....

More on Carlyle Capital

Carlyle Capital was suspended in the Netherlands today at the request of securities regulator AFM after falling 58 percent yesterday to $5. Trading was halted pending a statement from Carlyle, AFM spokesman Paul van Dijk said. Carlyle sold the shares for $19 in July's initial public offering.

www.bloomberg.com...

Hmm. 10 months later, and this is called an economic crash? I'm not impressed. I do think we must live in a great nation indeed when people are calling a recession an "economic crash." I'm scared to think how people would react if we actually ever had a real crash!

Now that everyone is thinking they are being smart by buying gold and silver, its time to move out. Contrarian market theory works every time - by the time the masses figure out what the "good buy" is, move on to the next thing.

reply to post by DarkMile77


I am in the same boat. It looks as though we will be in big trouble... I would suggest you buy guns and as much ammo as you can get your hands on. The africans will be looting, raping and killing whitey.