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 Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Skeeter Bug who wrote (100834)	1/26/2009 9:47:10 AM
From: Jack Hartmann	Respond to of 110194

running the printing presses is the only way to go... and i that should scare heavy investors in us tbills. This reminds me of South America a few years ago where they ran up huge debts and had the inability to repay the debts. The debt load became crushing and then there was inflation....

To: Skeeter Bug who wrote (100834)	1/26/2009 12:38:56 PM
From: Hawkmoon	1 Recommendation Read Replies (1) \| Respond to of 110194

Yes.. all good points... But we're not as export driven (or tied to a specific market) as other countries. Which suggests to me that production overcapacity is greater in those export driven economies. And I think you're right about needing at least $3 Trillion, but FOR THE MOMENT (and maybe the rest of the year at least) it seems that the equity markets are going to be pretty shaky (or just volatile?) and money is going to be seeking the safety of treasuries. Furthermore, It is my sense that the US has the ability to bring seriously big guns to bear on this problem, and that's something other economies seem to lack. I mean.. look.. the Swiss just had to be bailed out. The Icelandic government has been thrown out.. Greece has ongoing riots, Spain and Italian Banks have Trillions in exposure to Latin/Eastern Europe debt and their own real estate markets are imploding. This is really going to be a challenge to the ECB because they really don't have full control over the politics and budgets of the respective members of the EU. So the scenario I see playing out is that the ECB will be forced to lower rates to a similar level as the US. I don't see them avoiding it because they need the stimulus that will drive their internal consumption to create demand. This will be combined with major deficit spending by the EU members as well.. The question, IMO, is whether the ECB lowering rates will prick the bubble in US T-Bills? To an extent I hope that it does because I don't want to see US rates at sub 1%. It's too much of a pendulum swing to one side and reversal to the other direction (inflation and higher rates to contain it) will be just as hard. To summarize, these exporting countries need to develop internal consumption that replaces their export driven markets and uses up their production capacity. Either that, or they'll need to lay off all the folks who had been involved in producing stuff for US markets. So.. all eyes are on China and what they do in Treasury markets, as well as in spurring their own internal demand. They have $2 Trillion in Reserves, but they also have 1 Billion people.. So that's about $2,000 per person, or half their per capita GDP. A $2 Trillion stimulus here is about $6K per person, or 1/8 of our $45K per capita GDP. No matter what, what we're seeing is going to cause economic and financial analysts to rewrite the rule books.. Hawk