Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: HH who wrote (9735)	7/29/2008 6:43:46 PM
From: Don Earl	Read Replies (1) \| Respond to of 71447

RE: "there are some serious fundamental issues with the US economy and by default... the world economy. Not convinced that it leads to a global meltdown but definitely a serious situation." Yeah, that seems to be the question: How bad will it get? Is it hedging bad? Or stock up on food and weapons bad? The FDIC has around $50 billion available to insure several trillion dollars in deposits. A bank is considered "well capitalized" if it has enough money available to cover 8% of its deposits - most are less than "well capitalized". Over 90 banks are currently on the Feds watch list for being on the verge of failure. The Indy Mac failure wiped out as much as $8 billion of the FDICs insurance funds, with last weeks failure of two more banks wiping out nearly another billion. The Freddy and Fannie bailouts have been downplayed, but if you look at the bill that was passed, the only limit Congress placed on those is the cap on the total national debt. The bill was in effect a blank check for up to $1 trillion out of the gate, and Congress can raise the cap anytime they get to feeling frisky after closed door negotiations with Fannie and Freddy lobbyists. Take Washington Mutual for example: finance.yahoo.com There's nearly $300 billion in liabilities and they have $12 billion in cash on hand. If 2% of the population withdrew $2000 from the bank at the same time, the cash would be wiped out and the bank would fail. As long as that doesn't happen, everything looks okay on the surface - at least for awhile. But, what happens if a big chunk of cash flow is wiped out by bad debts? That cash is already gone. There are no assets that may be sold to collect it. The high margin subprime interest income is gone. At that point, it doesn't take even a minor run on the bank to push it over the edge. There isn't enough in the FDIC insurance fund to cover checking deposits, let alone savings. As others have pointed out, the stock mantra is always, "This time it's different.". The economists always seem to have a different explanation for why it didn't work this time either, but as close as I can tell, the common thread is always an attempt to fuel prosperity through extension of credit on assets that don't exist.

To: HH who wrote (9735)	7/30/2008 3:00:52 AM
From: dybdahl	Read Replies (2) \| Respond to of 71447

All discussions about economy are based on unprecise numbers and unprecise knowledge. Therefore, everything is about probabilities: What is the chance of a recession/serious situation/recovery etc. Imbalances influence probabilities. When making investment decisions, you should not pick one scenario as the most likely, and then invest based on that scenario. You should pick a number of scenarios, judge the likeliness of them, and then see, which investment choice gives you the best risk/reward profile.