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How i think this mess will wash, long term and short term..and why,



 
 
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Old July 13th 09, 01:45 AM posted to misc.invest.stocks,alt.politics.economics
phil scott
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Posts: 1,324
Default How i think this mess will wash, long term and short term..and why,

It is a fact that if a nation PRINTS trillions of dollars to solve its
financial problems, that hyper inflation and collapse will follow.


However.... our US govt is NOT printing any money,...... it is
**issuing electronic credits***, that act as money, and may indeed
stimulate the economy....this is assisted by low interest rates so
people can afford to buy homes and build businesses etc... little
actual money is being printed though.


all this is happening as deflation due to tough economic times takes
the hot air out of the housing and stock markets etc. the collapsing
tax base will also force the bloat out of government... all if
tgus us a good thing.


This deflation will be painful and *could lead to total collapse....
unless enough trillions in added *credit are issued into the economy
through the banks to keep things afloat... floating on a massive sea
of *credit. thats whats happening now...


its all just barely floating on a massive sea of credit... but it is
doing this as the housing and stock market bubbles deflate. thats a
good and a necessary thing... so far we are deflating these bubbles,
and our bloated state governments without total collapse.



With luck that will be continued.



***** again, this sea of funny money **is not actually money***
(just credit), no extra currency is printed for most of it...


the US Dollar may very well *regain its value, when the FED raises
interest rates again after these bubbles hit bottom... that will be
tricky and it remains to be seen how that will be pulled off,
especially given the 300 trillion dollars or so in hot air derivitives
(insurance policies used to guarantee bad loans).



it may be that as the large insurers, such as AIG go broke, file
bankrupcy and defualt that a good percentage of this derivitive mess
will simply evaporate (like so many trillions in the worlds pension
funds have already evaporated.)


as the work force gets more desperate, and half of the bloated govt
work force is laid off, and the rest got their bloated retirements cut
by 70% or so, and the social security recipients are unfortunately cut
back to starvation levels..... and we start manufacturing in the US
again...we will recover...... it will be a nasty next 15 to 20 years
(time span directly calculated from life expectancy tables)


all of that is necessary...and will happen on the current path if we
are lucky... depends on many things though, luck, oil prices, what we
do about nuclear energy, and what other nations do etc..

***

when that stabilizes, my guess in 10 or 20 years of tight times,
during which time the 80 million social security recipients will all
be deader than hell... restoriing the national economy... full
recovery will begin, that will take another 15 to 20 years... and we
have seen these time frames recently in China and Russia.


then.... interest rates will be raised again, restoring the value of
the US dollar in world markets. Investing in the mean time may be
problematical. Some high tech areas will pay off well. The best
investments will be in ones own operation, skill sets and networks.



imo

***

Support for this argument is my observation that the FED is willing to
loan 'money' to the banks at 1% or less, and the banks are willing to
loan at 4%... that tells you that those in charge have a solution for
hyper inflation.. and I believe my memo here describes that
solution...


if relatively few actual dollar bills are printed, paying the money
back will be difficult and the 4% intrest will provide the banks with
a real profit.



why:

(if the the treasury prints the actual bills, in excess of actual GDP,
then the banks will lose, and collapse...thats why this thing is being
done with credit to the banks... and not by putting dollar bills into
peoples hands).


These guys in charge of the money, as corrupt as they are, probably do
know what they are doing in this aspect at least...they need to save
their own asses as well as ours.

***

Predictions:

a lot of folks will go broke in the financual turmoil...especially
retailers and people with high overhead and into non essential
businesses. actual producers of goods, and essential services
with *low overhead will mostly survive imo.

actual producers who extend too much credit to those about to go
under, (that is about half the Malls and stores in the US) will get
burnt...due to tight money, that will put many contractors etc out of
business as we are already seeing.


this is of course avoidable by structuring for low overhead
operations...getting a sufficient advance on jobs and progress
payments in advance of progress...


I think those contractors will survive ... (this was a memo to one of
my contr clients)



Phil scott
 




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