There seems to be two camps. The first camp says that we just experienced a minor blip in the economy, and that the boom will continue for years. The other camp basically says that we will experience a cataclysmic economic meltdown.

What does this say about the current mood? Does this signify a 3T, a 4T, or a transition.

Subject: Al's Allocution
Well, Mr. G spoke again today. He seemed in a somber mood. His rate cuts don't seem to be working but even so he promised more cuts at the next FOMC meeting in a few weeks. He as much as admitted we were in a bubble.

Of course if we have been in an economic bubble the last thing people need is lower interest rates to encourage them to take on MORE debt. But that is all Mr. Green$pan has to offer and all he really ever had to offer.

Al sort of reminds me of a submarine captain with a flooded torpedo room. The sub just keeps going down. All he can do is run his reactors on the redline at full reverse thrust pump for all he's worth and pray for the best. Who knows? It worked back in 1991, maybe it will work again.

<font size=-1>[ This Message was edited by: Robert on 2001-07-21 17:08 ]</font>

If you read Ravi Batra's Crash of the Millennium, then the only reason America avoided a depression in 1991 is because of massive overseas borrowing. Of course, there is some truth to it, but I don't know how much. This time, however, I don't believe we have the option for large scale borrowing, especially since the rest of the world is joining America in this recession.

Greenspan kinda reminds me of Hoover in a way. Both were economic geniuses, but they could not deal with the depression. But when Greenspan finally realizes that rate cuts will not work, we will be in deep recession. Hoover didn't realize that recovery was not "just around the corner" until the 1932 election. He got blamed for it, but he only didn't know how to fix it. What most people don't know, however, is that it was Hoover that deserves credit for starting the New Deal. Greenspan will learn sooner or later that rate cuts will do nothing. Rate cuts even made the stock market rise, but rate cuts don't seem to have a visible effect anymore. The latest rate cut will be a desperation move to keep America from recession.

I said that this recession is inseparable from the energy crisis, but it may also be inseparable from the NMD tests. These tests will lessen the global cooperation with America, and could push China to invade Taiwan soon. Maybe by then, we will know whether or not we are in the 4T.

In the face of this economic gloom, one optimist carries on: Roger Cass, developer of the 'Long Boom' theory. He definitely has some credibility -- he is credited with predicting the fizzle of OPEC's power and Japan's economic decline well before anyone else.

In his theory, typical 'historic' events are seen as parallel and largely irrelevant to a deep economic cycle with a 27 + 27 = 54 year period. Ever since the beginning of modern civilization, an economic 'up' wave of increased production and investment lasting about 30 years has been followed by a 30 year period of overproduction, declining demand and investment.

The current economy is in the early stages of the 5th New Economy. Earlier 'up' waves were 1789-1815, 1848-1873, 1897-1921, 1948-1973. Note the lack of correspondence to generational theory.

According to Cass, we're in a meaningless hiccup. The 'fifth' New Economy began in 1994 with the Internet and will run until 2020. He expects 3.5% growth till 2010, with somewhat less between 2010-2020. Growth will finally be interupted by environmental degradation. However, he expects Japan to reemerge in a major economic turnaround, despite its declining population.

A nest aspect of his theory is that he does not consider wars and similar events as significant, and focuses on overall investment. This allows Cass followers to ignore 4th Turning-style events.

Subject: The New, New, Old, New, Old Economy

In the last five years a lot has been made of the so called "New Economy". Supposedly this "New Economy" which is information based will drive the entire economy to never before seen heights of productivity.

Well, sorry, this is just not true. The New Economy hasn't done anything at all for the "Old Economy". If you subtract out the production figures for Information Technology Software and Hardware, the Old Economy (things like cars and steel and cans of beans and tennis shoes) has been doing poorly at best. In other words there has been NO gain in Industrial Production due to all the IT spending done by corporations. It hasn't produced one more airplane, one more car or one more can of beer. ( As Dr. Richebacher says "you can't eat information!")

Why all the furor over IT then? Two main reasons. The people who use the new IT are paper and pencil pushers. When they got those new computers on their desks they thought "gee whiz, look at how much more productive I am!". Unfortunately in the Old Economy paper and pencil pushers were always cost accounted as "overhead". They don't really contribute anything to production. But since these people got a computer on their desks they just THOUGHT they were contributing to production. They're doing the same old things they always did they're just doing them on a computer.

The other reason is that Wall Street always needs a story (a big lie) to hand to investors in order to make them buy stocks. This IT story was sent from heaven to the touts and grifters on Wall Street. "These companies are computerizing and going on the internet" so the story went "with just a small investment in IT fantastic increases in productivity will happen!" Of course it didn't. The entire IT revolution was a GIGANTIC malinvestment financed with borrowed money which will never pay off. The ONLY increase in Industrial Production from IT came from the production of the IT equipment and software itself!

This ENTIRE bull market from 1982 to now is pure INFLATION financed with borrowed money from the Federal Reserve and its minion banks with the collusion of the Federal Government. Not one new asset has been produced and no matter how high the Dow goes we are all poorer now than when this maddness began 20 years ago.

<font size=-1>[ This Message was edited by: Robert on 2001-07-22 08:31 ]</font>

The IT revolution sold more computers. You can eat computers but the oil-based plastic doesn't have enough viscocity (sp?) to ensure pleasing swallowing.

Subject: Reply

Precisely, Chris all the IT revolution produced was computers.

Well, there you go. Computers are an ideal consumer product, much better than cars. For starters, almost everyone older than age 3 can use one, but you have to be at least 16/18, and there's an upper age limit too, for cars. The average family size (~2.64ish people) will probably have about 2.something cars. They are also likely to have 2.5ish computers. Unlike cars, which can last up to 20 or so years with good maintenance, luck, and careful driving, you almost have to buy a computer every four years or so. You can drive a 1981 Toyota without much hassle (the gas is the same, it fits parking spaces, etc.), but what can you do with a 1981 IBM PC?

Subject: Which shoe next?

So there's no doubt now we're in a recession. What will happen next? One of two things I think. The rally is about over in the Stock Market, we should be about on the cusp of the next leg down. On the last leg down the Market lost 5 Trillion dollars or about 25% of its Net Asset Value. A similar percentage loss would be about 4 Trillion dollars and that amount of loss would have to impact the Dow and S&P stocks not just the NASDAQ like last time.

The other thing that could happen would be a beginning deflation in the Real Estate Bubble. I have been amused lately by some radio ads which go something like this: "Disappointed by your stock portfolio?! You've probably made more money on the appreciation of your house than you'll ever make in the Stock Market!" Of course the Real Estate Market is just as big a bubble as the Stock Market, its just that the action in the Real Estate Market is a lot slower. People don't sell and buy their homes every single day in the Real Estate Market. Thus deflation in real estate will take a lot longer to show. But when and if it does it will hurt a lot more since a lot of people have borrowed so heavily against the equity in their houses.

Quote from Robert: "The other thing that could happen would be a beginning deflation in the Real Estate Bubble. I have been amused lately by some radio ads which go something like this: "Disappointed by your stock portfolio?! You've probably made more money on the appreciation of your house than you'll ever make in the Stock Market!" Of course the Real Estate Market is just as big a bubble as the Stock Market, its just that the action in the Real Estate Market is a lot slower. People don't sell and buy their homes every single day in the Real Estate Market. Thus deflation in real estate will take a lot longer to show. But when and if it does it will hurt a lot more since a lot of people have borrowed so heavily against the equity in their houses."

Ouch! The truth hurts, but the real estate prices in my neighborhood have been wild. There has been about a 35-40 percent appreciation in my condo community in the past 2-3 years. It can't be sustainable. I expect either a dip of about 10 percent and then flat for a long time or no dip but still flat.

I am in the process of refinancing my unit. When the appraisal came in at a wildly inflated price, my lender wanted me to go higher. I held the line -- I wanted a LOWER monthly payment (because of a lower interest rate), not a higher one.

It's going to be a wild ride!

Subject: Rate Cuts

The participants in the chat room over at the PrudentBear.com website have a contest going to see who can guess when the next "surprise" rate cut will be announced and by how much. I would say this Friday the 27th after the market closes and I would guess the cut will be 1/4 point. Anybody else got a different idea?

<font size=-1>[ This Message was edited by: Robert on 2001-07-24 20:59 ]</font>

I would think he would ease while the market is open. I hadn't thought of a surprise cut, but you know I thought he would do 50 last time and he didn't, so maybe another 25 is in the wings. Back in March I thought he would do 75 and he did 50 instead, but then he pulled another 50 as a "surprise" later on. I still believe we will see a 2% Fed funds rate before the economy is officially declared to be in recession.

Subject: There is no "Federal" in the Federal Reserve.

Did you know that the Federal Reserve is not a governmental entity? The Federal Reserve is a private bank. It isn't part of the Federal Government. Al Greenspan is not a government employee. The legislature has to approve the nomination of Chairman of the Federal Reserve but that's about it.

Back in 1913 the Congress ceded its Consitutional responsibility to "coin money and regulate the supply of money" to the Federal Reserve which was formed from a consortium of large Wall Street banks. Talk about setting the fox to watch over the chickens! Ever since the Fed has used its power to create money to sponsor a constant never ending inflation. They create money out of nothing and lend it out to gullible consumers who use it to bid up the price of everything you can think of. This is why prices always rise and no one saves. Why save when your money will always be more worthless next year due to the machinations of the Federal Reserve? Even worse they charge and collect trillions of dollars in interest on all this funny money they create.

What a deal! Create trillions of dollars in counterfeit money then charge interest on it. I wonder who collects all that interest money? Who owns the Federal Reserve? Who is Al Greenspan's boss? (The Rockefellers? The Rothschilds? Who?)

Pay you back with interest...or other "funny" money ideas.


Rep. Martin Olaf Sabo (DFL-MN) is a man with a plan to save Social Security. He would raise the interest rate owed on the IOU's in the Social Security Trust (sic) Fund.


If the interest rate were say 150% per year the Trust Fund would certainly be "sound" enough to cover the costs of retirement of the Boomers and then some. A problem arises when the taxpayers have to cover the 150% interest rate owed to Social Security...but then Mr. Sabo really wants to save SS without cutting benefits, raising the retirement age, or raising taxes. That taxes would indeed be "raised" to cover the "higher" interest rate owed to stabilise the Ponzi scheme of Social Insurance in America is perhaps unfair to the intention of Mr. Martin Sabo. And, are we not to judge by intention rather than result. HTH

The idea that everyone can "invest" social security funds in the stock market (or anywhere else) and get a better return than the social security does already is silly. More than that, people who propose that we collectively can do this are being dishonest.

Pundits claim that since social security is "pay as you go", it isn't really an investment. Well if you buy a stock as an investment for retirement, and then sell it years later for retirement income, *somebody* has to buy that stock. Every dollar of income you get from selling your stock is a dollar some younger person has to put in when he buys your stock. So you see, it's still pay as you go.

Social Security may have been a fine idea in its time (when few workers could expect to live much beyond 2-5 years after retirement in an age of lower life expectancy), but today it does me absolutely no good. (There IS a remote chance it would do my wife some good, since she (being female) is statistically likely to outlive me by a decade.)

All SS does is collect $$ under threat of force. If I don't cooperate with this ponzi scheme, I will be hauled off to jail.

Yes, Mike, it is true that the system can be made more solvent by taxing income over 70,000. Perhaps that is the way to go. If SS must be saved, then by all means do so fairly.

On the other hand, I know of ways I can use the money better -- I could give my parents better care when they get old, for example, and would be able to save much much more for my own retirement. Or I could donate that $$ to the United Way. Or invest it and get at least 3fold better return.

The fact that the whole system is predicated on the idea that I and most Americans are too stupid or irresponsible to take care of ourselves or plan for our future is personally offensive.

Social Security is SOCIAL INSURANCE. It provides income to those previously in the labor force who are too old or sick to work any more. The concept is very different from retirement investment.

Example. My ex-husband, at 40, has severe chronic (often agonizing) pain and has had to retire from work. He has a nice nest egg in his employer-sponsored retirement program -- which he can't touch for another 20+ years! And anyway, its probably only enough to provide a few years of income.

However, thanks to Social Security's disability program, he will get retirement disability. Not enough to replace his earnings, but enough to make ends meet and live in a livable apartment, etc...

What option is there without Social Security disability? Live with his parents, I suppose. But suppose his parents die?

And what about those who retire at age 65 after years of working at low-wage jobs? If you are trying to get by on $20,000 a year, can you really sock enough savings to support yourself in retirement?

I thought it was an article of faith on this board that there will be a crisis in a few years which is going to wipe out the stock market. After your nest egg is wiped out social security will be all you've got left.

Without social security it is reasonable to expect that people would save much more of their income, like the Japanese do. Huge amounts of money would flow into all types of investments, driving prices to high levels and subsequent returns to very low levels. The return on investments would fall to about 1-3% in real terms, like it is for the Japanese. The Japanese have to save a lot because returns are so low. Returns are low because they save so much. Its a vicious circle.

You would NOT get the 7% return from stocks if everybody is investing for retirement. The 7% return is achieved because over the long run most people do not save/invest for retirement, they spend it. This spending trasnlates to increased sales for companies which makes the equity behind them worth more, and the smaller flow of investment dollars keeps the prices low (on average over the long run) and hence, long term average returns high.

Assuming you have other savings, the social security payments you make help produce an environment where those other savings will produce much higher returns. They will more than pay for themselves even if you never get a dime in social security payments.

You might wonder then why do so many libertarians wish to abolish social security if it would produce lower returns on their investments? My analysis above is valid assuming that Americans actually would save much more if social security were abandoned. Libertarians who expect investment returns to be the same are counting on this NOT happening. If people don't save more and keep spending instead then returns won't fall. In this case savers would still get the high returns *and* more money to invest.

But those who didn't save would have to work until they drop dead like people did before the 1930's. Do you really think that people would be willing to go back to those days?

Do you want to run the risk that Americans *will* save like the Japanese after all, resulting in returns falling to Japanese levels and your retirement prospects being inferior than they are today under social security?

And if they don't save and returns stay high, do you want to live in a system where the majority have to die in harness for you to enjoy better retirement prospects than you do currently?

JCarson'71 wrote: "The fact that the whole system is predicated on the idea that I and most Americans are too stupid or irresponsible to take care of ourselves or plan for our future is personally offensive."

Mr. Carson is right-- sort of. Social Security most certainly is predicated on the assumption that most Americans aren't very good at planning for their own long-term futures. And with good reason, since most Americans AREN'T good at it. Not because they are stupid, lazy or irresponsible, but most people either don't have Mr. Carson's expertise/education for understanding how it all works. Why should one be offended because most people aren't as bright as you are?

Personally, I have no problem paying SS, regardless of whether the consequence of not paying is going to jail. Unlike Mr. Carson's parents, mine are ALREADY older. If it wasn't for the Social Security that THAT THEY BOTH PAID INTO FOR A HALF-CENTURY, the entire cost of my mom's nursing home care would be borne by myself at the expense of my own family. Unlike Mr. Carson who is surely independently wealthy, I don't mind paying SS taxes at all, even if I end up not receiving much when I retire in October 2021. I have other investments which will pay my way (knock on wood) when my own time comes.

On 2001-07-31 15:42, jeffw wrote:
I thought it was an article of faith on this board that there will be a crisis in a few years which is going to wipe out the stock market. After your nest egg is wiped out social security will be all you've got left.

Mr. Wilson might be slightly mis-informed upon the exact nature of the future Crisis. If it is a Crisis much like the 2nd American Crisis stocks might do very well.


If, however the stock market is wiped out...the results might be much lower employment and even more cut backs in social insurances. Russians continue to get their pensions...not always on time but often in full face value. The value of the pension in so called "real" terms leaves the holders impoverished even when paid in full. Pensions in Weimar Germany collapsed as did those in 2000 Turkey when the currency collapsed...this might happen here.



Mr. Parker (who drives an anniversary auto of some substance) is glad that others (who include those at the bottom of incomes) are helping pay for his mother's care. This why servility is so enthusiastically embraced...one can go rent seeking and fob of costs to the other fellow. Mr. Carson, that is why it will be ever done at gunpoint; the American does not mind theft if he does not have to rob someone personally but it can be done by the ALL. I do not mind SS as it is just as silly as Casino Gambling, or dot.com-ing as a way of managing our collective wealth...it is just one more bad idea whose time is past; may it long continue to fill the dreams of those who lean toward "security". It is an easily born 15% paid for social peace; which is not a comodity in great abundance in the span of space and time. HTH

_________________
Were it not for imagination, Sir, a man would be as happy in the arms of a chambermaid as of a Duchess. Life of Johnson, 28 April 1788

<font size=-1>[ This Message was edited by: Virgil K. Saari on 2001-08-01 06:40 ]</font>

Let's get something straight--

NO I AM NOT INDEPENDENTLY WEALTHY. WE ARE QUITE POOR, QUITE IN DEBT, AND HAVE NO SAVINGS!! AT AGE 30. HOW'S THAT FOR MONEY MANAGEMENT (OR POSSIBLY BITING THE HAND THAT COULD BE FEEDING ME)???!!! :smile:

No, social security does not eat me up or keep me awake at night. I simply see it as just another bureaucratic hassle.

It is engrained in our collective consciousness that SS is a great national salvation and that we're SOOOO much better off with it than without it.

Sometimes I agree with that.

Being a rowdy Gen X punk, suspicious of institutions and of authority, it is in my nature to question them and not have any reason to believe that they will be reliable.

Social security? It would have been far better had we privatized the whole thing decades ago, like AmTrack and other State-run dinosaurs. (Don't get me wrong, I love trains.)

Investing Social Securty in the stock market as proposed by Cheney (and Bush)? The idea sends chills up my spine. I share the same worries that liberals and moderates do about this idea.

Mike Alexander has excellent points that leave me scratching my head. From a pragmatic standpoint, he may well be correct. However, I can imagine how Japan's terrible financial situation might also be a result of coercive manipulation of dollar/yen ratios by the international banks, extreme population density, and it's Keynesian alliance between corporations and goverment. Nevertheless, Dr. Alexander is the economist here, not me, and I urge you all to listen carefully to his posts.

My principle objection to SS is that

(1) Nothing indicates that many kinds of unemployment or disability insurance couldn't be in place if SS ceased to exist--these could be run privately or by more local forms of government

(2) Ultimately, SS is not voluntary. Yeah yeah sure, we vote for politicians who KEEP it alive, but as Maestro Saari indicates--you can do through politics what no one would dare have the guts to do in private like kill (warfare), steal (income taxes), coerce (subsidies and foreign aid), and kidnap (conscription, inprisonment of non-violent offenders). Ultimately there needs to be a limit on what "majority rule" is allowed to do. There ONCE existed such a quaint little limit called the Constitution, but now that it is regarded as a "living breathing document" I suppose it is not far to stretch that it can be a document that can suffer conveniently surreptitious maladies like cardiac arrest.

Subject: Social Security

I made a bet with my Father that I'll never see a single Social Security retirement check.

You're probably right, Robert. Which is why, as duly noted by Mr. Saari, I am at least glad that SS is here now to help out my parents.

As for myself, I'll probably scrape by in retirement on bits and pieces of what's left of my retirement pension, 401k, IRA, home equity and savings after the Great Devaluation hits. Which, as we all suspect, may not amount to much.

Meanwhile, I'll enjoy my "anniversary automobile of substance" while I still can. As that Josta commercial last year said, "Better do the good stuff now" :smile: