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livinincali
Participant[quote=enron_by_the_sea]
(a) You conveniently ignored that no one has made thorium cycle nuclear reactor or no one is likely to make one in coming decade. No one with any credibility has proven that it will be economical. Why didn’t you just say fusion reactor instead. And by the way after buliding nuclear plant for 60 years we still do not know how to reliably dispose off hundreds of tonnes of toxic waste that keeps on piling all over this country and the world.
[/quote]Huh. Oak Ridge had a working experiment LFTR in the 1960’s. http://en.wikipedia.org/wiki/Molten-Salt_Reactor_Experiment. In addition there’s at least a few experimental projects going on right now, including the Fuji MSR, the Chinese Thorium MSR Project, and a project in Prague.
LFTR would be a great stop gap measure until working fusion is achieved. Nat Gas could also serve in that role for some time.
Participant[quote=dumbrenter]
None of the rules that applied to other economies, currencies throughout our history apply here anymore, so we have no history to look back to.
In my view, we are all actually sitting very pretty and need to thank our good fortune that folks outside our shores have an insatiable appetite for our paper. The only risk is when major commodities / goods will be priced in currencies other than USD. Unlikely to happen for grain and agriculture related ones since US still dominates that trade as an exporter. So that only leaves out oil or in general any energy source. As long as they are priced in USD, all is good.[/quote]In my eyes history has shown that a fiat currency crisis happens suddenly and violently. The USD will be unquestioned until it finally is and by then it will be to late. Usually in a currency crisis the hard currency does perform better than leveraged assets but not much better. I.e. Iceland saw a 95% reduction in the stock market but only a 50% reduction in the currency value, relative to other currency values.
Of course I’ve been thinking about the economy without currency because currency is just a medium of exchange. What’s really important is the total goods and services available and the competition between people to consume those goods and services.
Americans have had an extremely large competitive advantage compared to the rest of the world, but we aren’t doing things to maintain that competitive advantage. That’s why the average is falling behind the previous standard of living. They are losing to outside competitive forces. In all honesty what competitive advantage does your average baby boomer retiree have in this world economy. Those that have no skills or no desirable assets are going to have a tough time competing.
Participant[quote=dumbrenter]
To make things even interesting, the US can not only choose the interest rate, but the debt is denominated in paper that the US can print at will.
So where exactly is the problem? How can we be over-leveraged when we get to control the rate AND the denomination in which the debt is serviced?We can keep issuing debt till there is no buyer at which point we cannot issue debt anymore which means there is no more debt problem.
OR we will reach a point of exchange rates / devaluation / inflation where it will become cheaper to make things here instead of making them overseas and shipping them here. Which means more jobs here and a vibrant economy.
Looks like folks holding dollar or dollar denominated assets will win in either case. Or so it seems to this dumb renter.[/quote]The problem is that real wealth is the promise of future productivity. We put that debt in terms of dollars but a dollar in itself has almost zero tangible value. When you print too much and people lose faith in actually getting paid back in productive output and instead bags full of paper money you get hyper inflation.
Participant[quote=davelj]
Yes, debt has been growing at a much faster rate than GDP, so we know that it has had a positive impact on GDP (in the past). Now we’re at the point where debt is so large that it has a negative impact on GDP (too much to service). We have too much debt – there’s no question about that. But… you’re dramatically overstating your case when you suggest that there hasn’t been ANY economic growth ex-debt over the last 30 years; this is empirically incorrect. In fact, there’s been a bit of research done on this subject and most of it concludes that about 50-100 bps of annual GDP growth over the last 30 years has been the result of incremental debt.[/quote]Fair enough. If you take on a trillion dollars of debt to produce 300 billion of annual production it theoretically does end up producing a positive return at some point. It’s just difficult to see it when you keep increasing debt every year in excessive of the incremental productivity increases. I suppose in our system we should measure yearly servicing cost versus the GDP growth. I.e. 1.2 trillion @ 4% is right around 70 billion in servicing costs for 30 years. We get about 280 billion in what we assume is permanent growth from that debt.
Certainly in a world with a growing population and growing energy usage there is growth. It’s just that we chose to measure it something that has a variable meaning. A dollar today in terms of productive output is different than a dollar 2 years ago.
Participant[quote=flu]You guys are too risky for me… I’ve just picked up intel shares at 19.85 this morning… Long term play…[/quote]
Hard to argue with INTC down at these levels, but the trend for INTC is terrible right now. It hasn’t even shown signs of stabilizing yet. I’d probably at least wait until you have some signs of stabilization like a QSII before taking a position.
AGNC got hit hard by resistance today. Gaped up to overhead resistance and got sold pretty hard. Definitely could be a case of the bounce is over, but we’ll see. It’s days like these in stocks that make it hard to time a bounce. How much do you let it pull back before you decide to sell.
Participant[quote=spdrun]Maybe the Middle Eastern fun and $7+/gal gas across the USA will throw a monkey wrench in that timeline.[/quote]
I think the fact that we’ve never gone more than 10 years without a significant recession is the biggest problem. We’re almost 4 years removed from the last recession, how long do we really have left before the next one hits? My bet would be that we’re no where near to fully recovered before we get hit by the next one. We’ll also be out of significant policy options. The next real recession is going to suck because there’s really no meaningful stimulus left.
Participant[quote=davelj]
Well, not exactly. Roughly 1/3 of the annual growth over the last 30 years has been a result of debt accumulation. The problem, of course, is that if you keep building up debt at small incremental rates over a long period of time – say three decades – you eventually find yourself over-leveraged. As Dickens pointed out, “Annual income £20, annual expenditure £19 and six pence, result happiness. Annual income £20, annual expenditure 20 and six pence, result misery.”It’s not that all of the growth has been fantasy… it’s just that a very small part of it has been fantasy over a long period of time such that now the cost of servicing that fantasy (resulting from prior debt) is (finally) dragging down our ability to grow.[/quote]
Maybe I’m just arguing semantics, or maybe we’re looking at different data sources but this is what I see. In 1980 the total outstanding debt was right around 5 trillion dollars, this includes public and private debt (Look up the Fed z1 for 1980). That total is now right around 55 trillion. Essentially > 10 fold increase in total debt.
The nominal GDP in 1980 was 2.788 trillion. Today’s it’s around 14.5 trillion. So the economy grew about 5 times in that same period. What I don’t see is any real GDP growth in excessive of debt. In essence we don’t have any example of total debt producing a positive return on investment as a whole. Certainly there are successful businesses that took on debt and produced a real rate of return, but in aggregate there’s been more failures than successes.
If there was real growth in excess of debt then we should be looking at an economy where GDP is well over 30 trillion.
ParticipantThe FHA’s cash reserves aren’t supposed to drop below 2% of projected losses. They ended the 2012 fiscal year at -1.44%, down from the seriously low level of 0.24% at the end of 2011.”
So $16.3 billion in represents 1.68% of anticipated loses? That would mean anticipated losses are basically $1 Trillion.
Is that poor writing? Between the two of them do we conclude they’re hold a trillion dollars of loans that are bad?[/quote]
From a slightly different perspective the FHA has a default rate of about 9-10% right now. If the FHA has 1 trillion in guaranteed loans, then you’re probably looking at 100 billion in potential losses. The odd thing about FHA defaults is we should see those in default foreclosed through HUD but there’s nothing coming out of HUD. Is the government just going to let people squat without paying and artificially reduce inventory? You bet. Good luck seeing any foreclosure inventory in the future. The government/FHA controls whether or not it will happen directly.
Participant[quote=dumbrenter]
So from above, the deleveraging process actually evens out the wealth field rather than concentrating it.Maybe unless the rich get the government to buy the devalued asset and make them whole and stick the difference to the tax payers who are mostly poor. But that would never happen in a democracy, right? :-)[/quote]
Exactly. The reality is we’re aren’t actually deleveraging. If you look at the fed Z1 for total debt you see it slightly increasing with the government deficits replacing any deleveraging in the financial sector. Any deleveraging in the consumer space (i.e. mortgages and car loans) is being replaced by student loan debt. In the great depression we actually deleveraged the debt to a manageable level. In Japan they haven’t deleveraged from 1990. So while it might be possible to carry on like Japan for the next 20 years and avoid the deleveraging process, we aren’t going to see any significant asset price increases assuming nobody does anything stupid to cause hyper inflation.
Participant[quote=dumbrenter]
That’s a pretty good explanation of wealth backed by debt, livinincali.
But if there is a debtor, there needs to be the counter-party creditor.
In this situation, who is the creditor? folks who buy the treasury bonds?
Is it the banks? The FED? Treasury? Foreign governments that peg their currency to dollar?How are they going to react once they find out that there is very little for them to claim in terms of what they lent against (i.e. assets)?[/quote]
The creditor is the big banks, pension funds, the growing wealth gap between rich and poor. As the American populace has taken on increasing amounts of debt to buy things they want now rather then waiting they made the rich people wealthy. They are responsible for the large wealth gap in this country.
In all honesty I think this is just the natural state of affairs based on the demographics. People are growing older and are desperate to acquire assets to be sold to finance consumption in retirement. The need for somebody to owe you in retirement has lead to the loose money policies. People nearing retirement are desperate to claim part of a future workers productivity.
Participant[quote=AN][quote=livinincali][quote=AN]AGNC is up 4.43% so far today.[/quote]
LOL, Right after it was down 20% in the past month and a half. It’s actually a pretty scary chart from a bullish perspective. Looks like a parabolic chart that has met it’s end but you never know. I would never buy that chart no matter what the fundamentals are, but you can always beat the odds from time to time.[/quote]
I’m that worried. It’s still higher than where it was at the beginning of the year before dividend. Talking technical, it’s well below the bottom of the bollinger band. Every time I see stocks fall below that, they always at least bounce back into the band before falling again (if it continues to fall). I just think it’s over sold ATM. We’ll see if I’m right or not, but I just bought some this morning.[/quote]I’d certainly expect a bounce at some point, but it tends to be easier to play the trend rather than the counter trend rallies. Counter trend rallies can be quite explosive but they are so incredibly difficult to time so I usually end up breaking even at best on a counter trend rally. By the time I realize the bounce started and the bounce is over I’m net nothing.
Participant[quote=The-Shoveler]Maybe that was why the posturing Ben was doing today, talking about the need to for easier lending standards,
Maybe a move to get additional funding.
Housing is all about credit markets (well and inflation).[/quote]The problem is that all the growth in the economy for the past 20-30 years has come from increases in debt. If you back out the debt the economy has been shrinking. The entire goal of the fed is to trick people into taking on debt or at least spending every penny they have to grow the economy. 40-50 years ago growth came from saved capital, now it comes from debt. Now that the masses cannot or will not participate the leaders are getting desperate because they fully understand that all assets are priced in credit/debt. If that debt has to be liquidated then all the assets are going to fall in price,the big banks are going to go bankrupt and the masses are going to revolt because their retirement depends on that debt backed wealth. I.e. their retirement depends on their children and grand children to be obligated to produce them goods and services in the future. What better way that larding on student loan and government debt.
In essence people are holding wealth backed by debt and the debtors can’t pay in full so much of the wealth needs to be discounted. The big banks are playing a game of musical chairs in which they hope to be the one that isn’t holding the empty bag when the music stops. They are putting the taxpayer on the hook slowly over time. In my opinion the fed’s QE game is essentially a counterfeiting operation that has to walk the fine line between stimulating demand and not being detectable in prices. I.e. similar to somebody counterfeiting a million dollars in $5 bills and spending little bits here and there so that they don’t draw attention.
Participant[quote=AN]AGNC is up 4.43% so far today.[/quote]
LOL, Right after it was down 20% in the past month and a half. It’s actually a pretty scary chart from a bullish perspective. Looks like a parabolic chart that has met it’s end but you never know. I would never buy that chart no matter what the fundamentals are, but you can always beat the odds from time to time.
Participant[quote=no_such_reality]
Honestly, the fiscal cliff is probably the best compromise solution the congress is going to come up with today. Both sides have what they think is a gun to the other sides head, which probably means it’s pretty good as all the sacred cows are going to get gored.[/quote]All the sacred cows should get gored. Why play favorites. Obviously the biggest problem and fastest growing problem is health care. On the current growth rate it will eat up all of the budget in the next 15 years and it 30 years it would eat up the entire GDP of the country. Social security can probably be indexed to life span and means tested. Defense should probably be reduced by at least 25% and more likely 50% but you could make an argument that some defense spending in R&D is actually a productive activity for the economy.
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