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EJ
01-29-09, 06:08 PM
http://www.itulip.com/images/recession.jpgRecessions, depressions, panics and other redefinitions

We are more than one year into an official recession and even our casual readers are coming to realize that self-reinforcing feedback loops of falling demand and rising unemployment are only just beginning. I am often asked how much longer the recession has to go, and if it drags on for another year or more, at what point do we stop calling it a recession and start calling it a depression? A widespread misunderstanding about the two terms holds that recession and depression are the same phenomena differentiated by degree, that a recession that drags on long enough becomes a depression. But this ignores the history of the terms.

Both terms describe an economic contraction, a reversal of economic growth, specifically falling output. Before "recession" the term "depression" was used, and before that others, with use evolving over time. A severe contraction brands the current term in any era politically impallitable for future use by economists who hope to stay on the right side of the status quo. I find JK Galbraith's take on it illuminating.
"Chapter 9, The Price: Redefined definitions: panic, crisis, depression, recession, growth correction (Page 113):

Where economic misfortune is concerned, a word on nomenclature is necessary. In the course of his disastrous odyssey Pal Joey, the most inspired of John O'Hara's creations, finds himself singing in a Chicago crib strictly for cakes and coffee. He explains this misfortune by saying that the panic is still on. His term–archaic and thus slightly pretentious–reflects the unfailing O'Hara ear. During the last century and until 1907, the United States had panics. But, by 1907, the language was becoming, like so much else, the servant of economic interest. To minimize the shock to confidence, businessmen and bankers had started to explain that any current economic setback was not really a panic, only a crisis. They were undeterred by the use of this term in a much more ominous context–that of the ultimate capitalist crisis–by Marx. By the 1920's, however, the word crisis had also acquired the fearsome connotation of the event it described. Accordingly, men offered reassurance by explaining that it was not a crisis, only a depression. A very soft word. Then the Great Depression associated the most frightful of economic misfortunes with that term, and economic semanticists now explained that no depression was in prospect, at most only a recession. In the 1950s, when there was a modest setback, economists and public officials were united in denying that it was a recession–only a sidewise movement or a rolling readjustment. Mr Herbert Stein, the amiable man whose difficult honor it was to serve as the economic voice of Richard Nixon, would have referred to the panic of 1893 as a "growth correction.'" - Money: Whence It Came, Where It Went (http://www.amazon.com/gp/product/0735100705?ie=UTF8&tag=wwwitulipcom-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0735100705)http://www.assoc-amazon.com/e/ir?t=wwwitulipcom-20&l=as2&o=1&a=0735100705
Look for the term "recession" to fall into obscurity after this recession -- the association will be too dark. The next economic contraction will carry some other label. I propose the word "economic transformation" -- it sounds like it could be a good thing.

On a lighter note, we've compiled this history of advice that we have received from the majority of certified financial planners and wealth managers since iTulip's inception in 2001:


Year - Advice: "Reason."
2001 - Sell gold, buy stocks: "The market's experiencing volatility and gold has peaked."
2002 - Sell gold, buy stocks: "The market's experiencing volatility and gold has peaked."
2003 - Sell gold, buy stocks: "The market's bottomed and gold has peaked."
2004 - Sell gold, buy stocks: "The market's going up and gold has peaked."
2005 - Sell gold, buy stocks: "The market's going up and gold has peaked."
2006 - Sell gold, buy stocks: "The market's going up and gold has peaked."
2007 - Sell gold, buy stocks: "The market's going up and gold has peaked."
2008 - Sell gold, buy stocks: "The market's experiencing volatility and gold has peaked."
2009 - Sell gold, buy stocks: "The market's bottomed and gold has peaked."

The gold price will peak some day, but we're glad we haven't been holding our breath on gold since 2001 or Treasury bonds since 1998.


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Per $1 million returns


iTulip Select (http://www.itulip.com/forums/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
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Mega
01-29-09, 07:10 PM
I am dialed in to "Itulip Fm", just thinking the other day that is about time a cental bank threatened a massive Gold sale......& Germany started making "Statements"...........just like Italy Ref the "Massive" IMF Gold sell off that was about to happen.........the one didn't........just like the others!

Mike

*T*
01-29-09, 08:09 PM
I am dialed in to "Itulip Fm", just thinking the other day that is about time a cental bank threatened a massive Gold sale......& Germany started making "Statements"...........just like Italy Ref the "Massive" IMF Gold sell off that was about to happen.........the one didn't........just like the others!

Mike

Russia sold $10bn reserves to stabilise the rouble, perhaps incl. some gold.

jtabeb
01-30-09, 12:24 AM
Russia sold $10bn reserves to stabilise the rouble, perhaps incl. some gold.

They are NOT THAT stupid.

jk
01-30-09, 06:30 AM
my favorite nomenclature comes from economist alfred kahn [father of airline deregulation]. during the carter administration he was admonished to avoid the fearful "r" [recesssion] word, so he predicted a terrible banana for the economy.

stockman
01-30-09, 07:13 AM
Why only GOLD as alternative investment?

Both Silver and Oil appear extremely oversold relative to Gold at this point. IF you believe that the govt is going to print until they get what they want (lower dollar relative to asset prices) wouldn't the 'diversity' offered by silver and oil make sense along with your gold? Or is it just too early?

It strikes me that even if the economy does respond/strabilize that investors that do want to move out of treasuries/CDs will prefer an economically sensitive asset which cannot be looted away by corporate executives. Silver and oil vs. common stock?

Techdread
01-30-09, 07:59 AM
Why only GOLD as alternative investment?

Both Silver and Oil appear extremely oversold relative to Gold at this point. IF you believe that the govt is going to print until they get what they want (lower dollar relative to asset prices) wouldn't the 'diversity' offered by silver and oil make sense along with your gold? Or is it just too early?

It strikes me that even if the economy does respond/strabilize that investors that do want to move out of treasuries/CDs will prefer an economically sensitive asset which cannot be looted away by corporate executives. Silver and oil vs. common stock?

You've Got it in one.:D

Gold is a lousy investment at the moment. to me it is insurance that i bought and will probably keep but nothing more. If gold goes to $2500 and the dollar gets hammered well you have only preserved your wealth.;)

grapejelly
01-30-09, 09:17 AM
You've Got it in one.:D

Gold is a lousy investment at the moment. to me it is insurance that i bought and will probably keep but nothing more. If gold goes to $2500 and the dollar gets hammered well you have only preserved your wealth.;)

if gold is such a lousy investment, how come it is near or at all time highs in about every other currency except maybe the USD?

What other investment has done as well?

Chris Coles
01-30-09, 09:22 AM
You've Got it in one.:D

Gold is a lousy investment at the moment. to me it is insurance that i bought and will probably keep but nothing more. If gold goes to $2500 and the dollar gets hammered well you have only preserved your wealth.;)

And if stocks manage, say, 5% and the dollar tanks?

jtabeb
01-30-09, 09:54 AM
Why only GOLD as alternative investment?

Both Silver and Oil appear extremely oversold relative to Gold at this point. IF you believe that the govt is going to print until they get what they want (lower dollar relative to asset prices) wouldn't the 'diversity' offered by silver and oil make sense along with your gold? Or is it just too early?

It strikes me that even if the economy does respond/strabilize that investors that do want to move out of treasuries/CDs will prefer an economically sensitive asset which cannot be looted away by corporate executives. Silver and oil vs. common stock?

Fungible, Fungible, Fungible, zero counterparty risk. (not as heavy for same dollar amount of silver). Gold is the ultimate, best insurance. And the premium on the insurance is going up faster than anything else.

Increasing chaos "could" cause energy prices to decline further, but not likely. Increasing chaos only adds to the dollar gold price.

We are not talking an investment here, we are talking saving your ass because everything else is literally too risky or too uncertainm or counterparty risk is too damn high. For these reasons, yes gold. It is the only thing that covers so many bases simultaneously and does it so effortlessly.

Disclaimer, while EJ is 80% treasuries and 20% PM I'm the exact opposite in my allocation, just so you know my (IMHO well founded and well researched;)) bias.

LazyBoy
01-30-09, 10:50 AM
Reminds me of a George Carlin routine about how language changes to obfuscate:


In the first world war, that condition was called Shell Shock. Simple, honest, direct language. Two syllables, Shell Shock. Almost sounds like the guns themselves. That was seventy years ago.

[WWII] ...Battle Fatigue...

[Korea] ...Operational Exhaustion...

[Vietnam] ...Post-Traumatic Stress Disorder. Still eight syllables, but we've added a hyphen! And the pain is completely buried under jargon. Post-Traumatic Stress Disorder.

I'll bet you if we'd of still been calling it Shell Shock, some of those Viet Nam veterans might have gotten the attention they needed at the time. I'll betcha. I'll betcha.

GRG55
01-30-09, 11:11 AM
http://www.itulip.com/images/recession.jpgRecessions, depressions, panics and other redefinitions

We are more than one year into an official recession and even our casual readers are coming to realize that self-reinforcing feedback loops of falling demand and rising unemployment are only just beginning. I am often asked how much longer the recession has to go, and if it drags on for another year or more, at what point do we stop calling it a recession and start calling it a depression? A widespread misunderstanding about the two terms holds that recession and depression are the same phenomena differentiated by degree, that a recession that drags on long enough becomes a depression. But this ignores the history of the terms.

Both terms describe an economic contraction, a reversal of economic growth, specifically falling output. Before "recession" the term "depression" was used, and before that others, with use evolving over time. A severe contraction brands the current term in any era politically impallitable for future use by economists who hope to stay on the right side of the status quo. I find JK Galbraith's take on it illuminating.

"Chapter 9, The Price: Redefined definitions: panic, crisis, depression, recession, growth correction (Page 113):

Where economic misfortune is concerned, a word on nomenclature is necessary. In the course of his disastrous odyssey Pal Joey, the most inspired of John O'Hara's creations, finds himself singing in a Chicago crib strictly for cakes and coffee. He explains this misfortune by saying that the panic is still on. His term–archaic and thus slightly pretentious–reflects the unfailing O'Hara ear. During the last century and until 1907, the United States had panics. But, by 1907, the language was becoming, like so much else, the servant of economic interest. To minimize the shock to confidence, businessmen and bankers had started to explain that any current economic setback was not really a panic, only a crisis. They were undeterred by the use of this term in a much more ominous context–that of the ultimate capitalist crisis–by Marx. By the 1920's, however, the word crisis had also acquired the fearsome connotation of the event it described. Accordingly, men offered reassurance by explaining that it was not a crisis, only a depression. A very soft word. Then the Great Depression associated the most frightful of economic misfortunes with that term, and economic semanticists now explained that no depression was in prospect, at most only a recession. In the 1950s, when there was a modest setback, economists and public officials were united in denying that it was a recession–only a sidewise movement or a rolling readjustment. Mr Herbert Stein, the amiable man whose difficult honor it was to serve as the economic voice of Richard Nixon, would have referred to the panic of 1893 as a "growth correction.'" - Money: Whence It Came, Where It Went (http://www.amazon.com/gp/product/0735100705?ie=UTF8&tag=wwwitulipcom-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0735100705)http://www.assoc-amazon.com/e/ir?t=wwwitulipcom-20&l=as2&o=1&a=0735100705
Look for the term "recession" to fall into obscurity after this recession -- the association will be too dark. The next economic contraction will carry some other label. I propose the word "economic transformation" -- it sounds like it could be a good thing...


Merrill's Rosenberg on the Depression.

You'll find his position has much in common with iTulip, surprising for a Wall Street financial firm, but not for Rosenberg or anyone who has followed him over the years [he's a Canadian who used to toil in obscurity north of the border]. His estimate of another $4 to $6 Trillion of leverage yet to be extinguished - "...it is truly difficult to believe that we are anywhere but in the early stages of this credit contraction..." was almost as sobering as reading iTulip commentary :p

Jim Nickerson
01-30-09, 11:24 AM
Merrill's Rosenberg on the Depression.

You'll find his position has much in common with iTulip, surprising for a Wall Street financial firm, but not for Rosenberg or anyone who has followed him over the years [he's a Canadian who used to toil in obscurity north of the border]. His estimate of another $4 to $6 Trillion of leverage yet to be extinguished - "...it is truly difficult to believe that we are anywhere but in the early stages of this credit contraction..." was almost as sobering as reading iTulip commentary :p

Is it my computer, or is there some error with your attachment to Rosenberg? It shows an error when I attempt to open it, and I want to read it.

jk
01-30-09, 11:30 AM
Is it my computer, or is there some error with your attachment to Rosenberg? It shows an error when I attempt to open it, and I want to read it.
jim, it just opened for me, no problem.

MLM
01-30-09, 12:19 PM
Thanks GRG55, I'd been looking for that.

Jim Nickerson
01-30-09, 01:06 PM
Merrill's Rosenberg on the Depression.

You'll find his position has much in common with iTulip, surprising for a Wall Street financial firm, but not for Rosenberg or anyone who has followed him over the years [he's a Canadian who used to toil in obscurity north of the border]. His estimate of another $4 to $6 Trillion of leverage yet to be extinguished - "...it is truly difficult to believe that we are anywhere but in the early stages of this credit contraction..." was almost as sobering as reading iTulip commentary :p

In my opinion, the pdf by Rosenberg should be read by everyone who is worried about imminent inflation.

Thank you very much for finding and posting it.

Contemptuous
01-30-09, 01:37 PM
A solid call Stockman - only caveat is that silver as a very small market is in fact acutely sensitive to regular scalping raids from the short side. Your fundamental read is spot on in that silver and petroleum today represent deep value and are acutely mispriced, but especially silver is definitely vulnerable to the predations of the institutional shorts, who are few, very concentrated, tightly collaborative, amply funded by "certain institutional interested parties" (whose identity starts with a capital G?) and quite able to continue periodically scalping small longs in this area. Still ... if one keeps one's eye fixed firmly on the five year horizon ... :rolleyes: :) GRG's posting of the Rosenberg article below also encapsulates wonderfully another very large reason to approach such admittedly steeply underpriced assets as silver and petroleum with all the sobriety of an undertaker (for the short term).


Why only GOLD as alternative investment?

Both Silver and Oil appear extremely oversold relative to Gold at this point. IF you believe that the govt is going to print until they get what they want (lower dollar relative to asset prices) wouldn't the 'diversity' offered by silver and oil make sense along with your gold? Or is it just too early?

It strikes me that even if the economy does respond/strabilize that investors that do want to move out of treasuries/CDs will prefer an economically sensitive asset which cannot be looted away by corporate executives. Silver and oil vs. common stock?

Fiat Currency
01-31-09, 01:00 AM
Great article GRG55 ... thanks for posting it.

This section at the end, I would think is of most interest to fellow iTulipers.

Anybody care to comment on whether or not they agree with these assertions? :rolleyes:



Risings savings rate will be incredibly deflationary
The process of a secular rise in the US personal savings rate and the dampening effect this will have on aggregate demand will be incredibly deflationary for some time. While fiscal stimulus will indeed cushion the blow, the mathematical reality is that the federal government must lift its share of the economy by 10 percentage points of GDP just to fully offset a I percentage point contraction in consumer spending. While there is growing concern over government bond supply to fund the record fiscal deficit, there is ample room on bank balance sheets for the new issuance, and the Fed has already hinted that it too will emerge as a buyer of Treasuries if market rates were to back up, as they have been for the past few weeks. Moreover, the expansion of the government debt must be viewed in the context of the contraction of private sector debt, and so on balance, the growth in total economy-wide credit has actually slowed to 6% (year-over-year) from nearly 9% a year ago.

We advocate a high fixed-income orientation
Against this background, we continue to advocate a relatively high fixed-income orientation in the portfolio — a focus on safety and income at a reasonable price. That means long-term noncallable government bonds, state and local ovemment bonds, high-quality corporates (and choose those with strong balance sheets, high cash reserves and minimal refinancing needs). And in the equity market, continue to screen for dividend yield and consistent organic dividend growth in non-cyclical industries.

Techdread
01-31-09, 04:10 AM
And if stocks manage, say, 5% and the dollar tanks?

Stocks are not the only alternatives in the Investment/Speculation world.

Some commodities have fallen by much more than the general stock markets, me I try to buy low and sell high:p.

Oil, Silver, Zinc, Copper, Lead, Nickel and other commodities look like much better bet for long term price appreciation than Gold when the inflation wave strikes.:D

Hell I think even houses will be a better investment in a couple of years than the Yellow Metal.;)

Chris Coles
01-31-09, 04:21 AM
Great article GRG55 ... thanks for posting it.

This section at the end, I would think is of most interest to fellow iTulipers.

Anybody care to comment on whether or not they agree with these assertions? :rolleyes:



Risings savings rate will be incredibly deflationary
The process of a secular rise in the US personal savings rate and the dampening effect this will have on aggregate demand will be incredibly deflationary for some time. While fiscal stimulus will indeed cushion the blow, the mathematical reality is that the federal government must lift its share of the economy by 10 percentage points of GDP just to fully offset a I percentage point contraction in consumer spending. While there is growing concern over government bond supply to fund the record fiscal deficit, there is ample room on bank balance sheets for the new issuance, and the Fed has already hinted that it too will emerge as a buyer of Treasuries if market rates were to back up, as they have been for the past few weeks. Moreover, the expansion of the government debt must be viewed in the context of the contraction of private sector debt, and so on balance, the growth in total economy-wide credit has actually slowed to 6% (year-over-year) from nearly 9% a year ago.

We advocate a high fixed-income orientation
Against this background, we continue to advocate a relatively high fixed-income orientation in the portfolio — a focus on safety and income at a reasonable price. That means long-term noncallable government bonds, state and local ovemment bonds, high-quality corporates (and choose those with strong balance sheets, high cash reserves and minimal refinancing needs). And in the equity market, continue to screen for dividend yield and consistent organic dividend growth in non-cyclical industries.


If I may intrude a new thought here. One of the primary problems the FIRE economy is going to have to face as its influence winds down is the simple fact that a feudal mercantile economy totally relies upon the input of savings into mercantile banks as bank deposits. They in turn can never match what was always seen as the long term average return on those pre FIRE economy savings of about 8% gross gained from dividends paid out to the owners of the equity shares the citizens had purchased as "savings".

To overcome this disparity, the FIRE economy had to rely upon using capital gains as the working mechanism to provide an income to savers. But as we can all now see, that strategy has completely collapsed.

What everyone must realise is we cannot continue to use the existing strategies, and, for that matter, the associated institutional framework. Trying to revive a bankrupt financial institutional strategy is going to be no different to trying to revive a bankrupt business model. If it is built upon sand, it is going to collapse no matter what you try and do to stop it.

We have to face the fact that there is a need to debate exactly what is needed to replace the failed FIRE economic strategy.

In the long distant past, during the immensely successful Industrial Revolution, interest rates were not on the horizon at all. Often the best rate you could get was 1.5%. Why? Because money was useless, as money, it only had increased value from investment into equity capital producing dividends.

To achieve a complete change in direction we need to return to the ethos that produced the last industrial revolution and that will need completely new institutions and related infrastructure and rules.

As some of you know, I am working on debating the long term strategy from a grass roots viewpoint but had introduced a pause to think the next part through before posting. keep an eye out early next week for my next post into "The Road Ahead From a Grass Roots Viewpoint. http://www.itulip.com/forums/showthread.php?t=7480

Chris Coles
01-31-09, 04:29 AM
Stocks are not the only alternatives in the Investment/Speculation world.

Some commodities have fallen by much more than the general stock markets, me I try to buy low and sell high:p.

Oil, Silver, Zinc, Copper, Lead, Nickel and other commodities look like much better bet for long term price appreciation than Gold when the inflation wave strikes.:D

Hell I think even houses will be a better investment in a couple of years than the Yellow Metal.;)

You may be correct, in the short term. But the real movers and shakers, governments, have suddenly realised that there is a huge downside to speculation in commodities, citizen unrest and substantial reductions in tax income from a destabilised economy. So I for one will not be surprised to see some new rules to suppress speculation, (as opposed to true free market trade), in commodities in such a manner that your investment model may be substantially impaired. I might be so bold as to add; in the not too distant future.

stockman
01-31-09, 07:37 AM
You may be correct, in the short term. But the real movers and shakers, governments, have suddenly realised that there is a huge downside to speculation in commodities, citizen unrest and substantial reductions in tax income from a destabilised economy. So I for one will not be surprised to see some new rules to suppress speculation, (as opposed to true free market trade), in commodities in such a manner that your investment model may be substantially impaired. I might be so bold as to add; in the not too distant future.

I fear this as well. For now I use these ETFs- on the long side my primary invetsment is the GLD, I added the SLV when silver broke out vs. the cyclicals (transports); I am watching the USO to add if it also breaks out vs. the transports. I trade the inverse ETFs on a short term basis on the equity markets. It makes sense to me that 'they' will want to eliminate those short funds #1; then elimate those commodity ETFs #2. Possibly the first step would be to disqualify these ETFs for tax deferred retirement plans- then raise the tax on gains in taxable accounts- OR they could begin taxing gains (at a higher rate) on these investments whether or not they are held in qualified plans. I guess I'll cross that bridge when I come to it, for now they are convenient vehicles.

My larger 'alternative investment' is in farm land. I don't think they'll take that away... then again there are a lot of things happening that I didn't expect to see.




"Zimbabwe- President Robert Mugabe’s government announced a plan on Tuesday to “nationalize” all Zimbabwean farmland. More than 5,000 White farmers have been forced to leave, many butchered and raped by the savage blacks." June 9th, 2004

1007

stockman
01-31-09, 08:06 AM
Lukester- thanks for that insight.

I have held the gold ETF for a while; just added the silver ETF. They both have outperformed stocks-

1009

Since 1991 it appears to me that silver outperforms gold when risk appetite picks up. So it tends to do better (than gold) when stocks are also gaining. I think these charts show the relative oversold level of silver and the relationship to the equity market. FWIW

1008
1010

If oil can break out relative to the transports (as silver has) I'll add that to the mix. Currently I hold 15% gold; 5% silver; 15% short stocks; 65% cash.

Techdread
01-31-09, 09:39 AM
You may be correct, in the short term. But the real movers and shakers, governments, have suddenly realised that there is a huge downside to speculation in commodities, citizen unrest and substantial reductions in tax income from a destabilised economy. So I for one will not be surprised to see some new rules to suppress speculation, (as opposed to true free market trade), in commodities in such a manner that your investment model may be substantially impaired. I might be so bold as to add; in the not too distant future.

I did not realise ETFS moved the price of commodities i thought they just followed the index price of the commoditity in question:confused:
I'm more scared that the US government might pull the plug on AIG:mad:

And if things get real bad which they will, whats to stop them from banning the ownership of Gold?

stockman
01-31-09, 10:19 AM
1013

"They've been busy over at the SPDR Gold Shares ETF (NYSEArca:GLD (http://seekingalpha.com/symbol/gld)), adding about 15 tonnes to the trust over the last week, breaching the 800 tonne level for the first time ever."
http://seekingalpha.com/article/115591-gold-shares-etf-inventory-reaches-800-tonnes

raja
01-31-09, 10:53 AM
And if things get real bad which they will, whats to stop them from banning the ownership of Gold?
I'm planning on starting a thread discussing the gov't threats to gold . . . perhaps today or tomorrow.

Steve
02-01-09, 01:47 PM
Is it too late to invest in 10 year treasuries or should I stay at the short? I'm late to the party and wondered how to allocate the cash portion of my portfolio - other than gold. Suggestions the itulip community would be appreciated.

periclesp
02-03-09, 08:55 AM
I'm no economist, but I seem to remember from an economics class that a recession can be defined as 2 quarters of economic contraction, accompanied by inflation. A depression can be defined as an economic contraction (I don't remember if duration is part of the definition) accompanied by deflation. It seems the difference has to do with whether aggregate demand is collapsing or not. Are there any "A" economics students out there who can clarify these definitions and if they have any actual meaning? Do the past couple of months of deflation mean something significant? Is this cause for alarm?

metalman
02-03-09, 09:55 AM
I'm no economist, but I seem to remember from an economics class that a recession can be defined as 2 quarters of economic contraction, accompanied by inflation. A depression can be defined as an economic contraction (I don't remember if duration is part of the definition) accompanied by deflation. It seems the difference has to do with whether aggregate demand is collapsing or not. Are there any "A" economics students out there who can clarify these definitions and if they have any actual meaning? Do the past couple of months of deflation mean something significant? Is this cause for alarm?

the article explains panic, depression, recession... the term for a contraction changes as economists who work for the gov't to downplay it. not related to inflation or deflation. hudson explains... Eric Janszen interviews Dr. Michael Hudson (http://www.itulip.com/forums/showthread.php?p=71276#post71276)
recommended...



Eric [Janszen] (EJ): Let’s talk about the economy. The National Bureau of Economic Research (NBER) finally announced in December that we’ve officially been in a recession for an entire year. What an odd recession it has been. There’s still an awful lot of lending going on. Clearly housing has been hammered but if you go to the malls they’re still busy. It just doesn’t seem like recessions what they were in the old days.

Michael Hudson (MH): One of the National Bureau’s leading indicators is the stock market. It’s supposed to turn up in recessions because companies aren’t investing in new production facilities. If you’re not buying capital goods or property, you’re putting your money into the financial system. Savings end up providing the credit to bid up stock prices.

That’s the past pattern, but stock prices aren’t been going up at all these days. This recession isn’t following the pattern that the National Bureau’s founder, Wesley Mitchell, was describing when he put together his set of leading and lagging indicators 70 years ago. So the NBER is at sea if it tries to find correlations with past business cycles. We’re not in a more or less automatic “cycle” at all – a cycle that will almost automatically turn into a boom like clockwork. The economy has hit a wall – in this case a debt wall. Each business upswing since World War II has taken off from a higher level of debt to income, profits and asset prices. It’s like trying to drive with the brakes on. Right now the financial debt-deflation brake has been pushed to the floor.

EJ: The definition they came up with was simply “two quarters of negative GDP growth.”

MH: That shows how superficial their approach is. The National Bureau was founded to make forecasts. Its staff fed in a mass of statistics, hoping that a pattern would emerge. The result became its leading and lagging indicators – average correlations from many cycles to get a “normal” pattern, assuming that the economy is a self-regulating system. That was Mitchell’s theory and Schumpeter had the same idea in his book on Business Cycles, drawing a smooth sine curve.

Popular wisdom and journalism in the 19th century talked about crashes, not cycles. A long upswing would end in a sudden downturn – a scalloped ratchet pattern. It takes a long time to save up money, but you can lose it in a hurry. But the National Bureau views the GDP and national income as being almost on automatic pilot, rising and ebbing in a consistent pattern. They follow a “one pattern fits all” logic. Instead of saying, “We’ve been a recession, what a surprise,” they should be explaining how this recession is different from others.

EJ: It discredits any institution to tell people things a year after it was obvious to everybody. Not forecasting something is bad enough, but not being able to look in the rear-view mirror and see things clearly is even worse.

MH: If we’re in a recession, what does it mean? We’re in a phase change where the economic relationships, proportions, leads and lags do not operate as they did in the past. So any mathematical model that’s based on this sequence is going to be junk mathematics. The last time we had junk mathematics we had the big financial crises that we’re bailing out today.

Spartacus
02-03-09, 02:40 PM
As the post below yours points out for Gold, some ETFs purchase the commodity outright & warehouse / vault it

Some of the Gold, Platinum and Silver ETFs specifically. Most other commodities of course are too voluminous to practically store a billion dollars worth.


I did not realise ETFS moved the price of commodities i thought they just followed the index price of the commoditity in question:confused:
I'm more scared that the US government might pull the plug on AIG:mad:

And if things get real bad which they will, whats to stop them from banning the ownership of Gold?

Spartacus
02-03-09, 02:46 PM
I did not realise ETFS moved the price of commodities i thought they just followed the index price of the commoditity in question:confused:
I'm more scared that the US government might pull the plug on AIG:mad:

And if things get real bad which they will, whats to stop them from banning the ownership of Gold?

Nothing stops them.

But things will be different this time. In one book I read, the people lined up willingly to sell their Gold to the government last time around (except for some of the rich that moved their Gold out of the country in the days before the confiscation)

I doubt it will happen that way again.

metalman
02-03-09, 03:09 PM
Nothing stops them.

But things will be different this time. In one book I read, the people lined up willingly to sell their Gold to the government last time around (except for some of the rich that moved their Gold out of the country in the days before the confiscation)

I doubt it will happen that way again.

80% sales tax will do the trick.

bart
02-03-09, 04:42 PM
80% sales tax will do the trick.

Gray and black public or private markets can get quite clever.

metalman
02-03-09, 04:52 PM
Gray and black public or private markets can get quite clever.

however, such a law may turn a class of formerly tax law abiding citizens into tax law breakers simply to protect themselves from their gov't.

bart
02-03-09, 05:10 PM
however, such a law may turn a class of formerly tax law abiding citizens into tax law breakers simply to protect themselves from their gov't.

Very true, but I expect more of it nonetheless.

Spartacus
02-03-09, 10:28 PM
millions of people hurting no-one, going about their own business, a business that was legal for eons, for millennia, since time immemorial, instantly turned into criminals.

THAT hasn't happened before. NEVER. Perish the thought.


however, such a law may turn a class of formerly tax law abiding citizens into tax law breakers simply to protect themselves from their gov't.

Who could I be thinking of.. I mean, who could it possibly be ... maybe ... SATAN ???? (hahahaha, just kidding)

I mean marijuana users

c1ue
02-04-09, 07:14 AM
From my personal experience, MJ is not a harmless drug.

There are some who use it regularly and are not affected, but there are also some who use it and become zombies.

I've now met 3 cases of the latter: 1 person who I was told anecdotally was once a low rung, but productive member of society (plumber's assistant) but lost interest in work and most else after several year's of heavy MJ use and is now apparently living as a homeless in the wilds of Santa Cruz.

Another 2 instances I personally witnessed:

1) a bright, young male who loved karate and Russian philosophers. Smoked up a storm, and now has noticeable pauses between action/reaction. Doesn't involve himself with either of previous hobbies, has drifted into part time work.

2) a not so bright, but clean cut young male. After smoking moderately heavily, became less and less able to maintain himself and is now drifting aimlessly near relatives in Utah.

Ironically the hobo and the drifter were living with the high functioning MJ user.

While of course alcohol has much the same variability in effects - I personally have never subscribed to the argument that an equal evil should necessarily be accepted as one which is already entrenched.

Spartacus
02-04-09, 05:01 PM
even if MJ the chemical did 10 times the damage that it does, that would still be a pittance relative to the damage the laws do.

Alcohol is a far more damaging drug.

There's a reason that so many more places at more times have tried to outlaw alcohol than MJ, including the US.


From my personal experience, MJ is not a harmless drug.

Lots of the highest achievers in the US use and have used it, many regularly, so it must be great for helping high achievers (not a pun) get their results as well ; )

goadam1
02-08-09, 09:28 AM
i think "crisis" will be a term that will stick around. A "crisis" allows for political actions to take place. Just look at all the crazy legislation that has been passed in this "crisis." Many downturns in the future will be called a "crisis." Depression is depressing. Recession has lost any meaning. But "crisis" is like the 'snow day' of bad economies.

goadam1
02-09-09, 04:22 PM
Periods of "negative growth" seems to be the new term. We are in a "crisis of negative growth."

http://www.google.com/search?hl=en&q=%22negative+growth%22+crisis&btnG=Google+Search&aq=f&oq=

tombat1913
02-09-09, 05:41 PM
From my personal experience, MJ is not a harmless drug.

There are some who use it regularly and are not affected, but there are also some who use it and become zombies.

I've now met 3 cases of the latter: 1 person who I was told anecdotally was once a low rung, but productive member of society (plumber's assistant) but lost interest in work and most else after several year's of heavy MJ use and is now apparently living as a homeless in the wilds of Santa Cruz.

Another 2 instances I personally witnessed:

1) a bright, young male who loved karate and Russian philosophers. Smoked up a storm, and now has noticeable pauses between action/reaction. Doesn't involve himself with either of previous hobbies, has drifted into part time work.

2) a not so bright, but clean cut young male. After smoking moderately heavily, became less and less able to maintain himself and is now drifting aimlessly near relatives in Utah.

Ironically the hobo and the drifter were living with the high functioning MJ user.

While of course alcohol has much the same variability in effects - I personally have never subscribed to the argument that an equal evil should necessarily be accepted as one which is already entrenched.
Drugs are bad, drugs are good, doesn't matter.

Here's something that does: Bill of rights, Article X- The powers not delegated to the United States by the constitution nor probited by it to the states are reserved to the states respectively, or to the people.

conclusion: A national war on drugs is completely unconstitutional.

And since this is an economics forum I must mention a complete waste of our tax dollars.

jtabeb
02-09-09, 10:05 PM
From my personal experience, MJ is not a harmless drug.

There are some who use it regularly and are not affected, but there are also some who use it and become zombies.

I've now met 3 cases of the latter: 1 person who I was told anecdotally was once a low rung, but productive member of society (plumber's assistant) but lost interest in work and most else after several year's of heavy MJ use and is now apparently living as a homeless in the wilds of Santa Cruz.

Another 2 instances I personally witnessed:

1) a bright, young male who loved karate and Russian philosophers. Smoked up a storm, and now has noticeable pauses between action/reaction. Doesn't involve himself with either of previous hobbies, has drifted into part time work.

2) a not so bright, but clean cut young male. After smoking moderately heavily, became less and less able to maintain himself and is now drifting aimlessly near relatives in Utah.

Ironically the hobo and the drifter were living with the high functioning MJ user.

While of course alcohol has much the same variability in effects - I personally have never subscribed to the argument that an equal evil should necessarily be accepted as one which is already entrenched.

What does smoking MJ get you?

8 Gold medals in the olympic games ain't bad.

http://media.cnbc.com/i/CNBC/Sections/News_And_Analysis/__Story_Inserts/graphics/__PEOPLE/P/phelps_watch.jpg
file:///C:/DOCUME%7E1/Owner/LOCALS%7E1/Temp/moz-screenshot.jpg

c1ue
02-10-09, 09:38 AM
The high functioning case I refer to is manic depressive - and uses the MJ to offset manic phases.

Others I've known who use drugs are similarly psychologically unusual.

But corner cases of success don't necessarily justify allowing zombification.

Or are all MJ users supposedly high functioning?