In 2009, the 20 to 30 year T-bond values have dropped over 25% - a loss of "wealth" at least 10X the increase in wealth from the last 6 week stock rally.
Did I mention that when bond prices fall yields move higher?
This is no picnic for the mortgage and housing market. Mortgages are priced off of the 10 year T-Bond. A 100 basis point rise in yield (1%) would be disastrous for housing.
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Hmmm....
Why would any business build up inventories again at this time? Why ever?
And isn't that the reasoning behind most economist's view that we are nearing the end of the contraction? Because folks will need to replace "stuff" that they have worn out? Isn't that the way it has always worked?
A funny thing about cycles is that they don't go on forever.
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Over the past 5 American Administrations, "Yes!" men have been telling our presidents that we (the U.S.) could "grow our way out of our deficit problem".
Yea? And how's that been working out for you guys? Yet, we are hearing the exact same bulls**t from this Administration. Look, I expect nothing less. But you, YOU, gotta be taking your own steps to protect your own ass.
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"The Rate of Change". Remember that one?
The rate of change in the economy over the past year has been breathtaking. Of course that rate of change is going to slow - if it did not we would be living in f**king caves before the end 2010.
No, we have a problem. Our current system is currently very terribly flawed - politically, socially, economically, and financially - but it is not going to unravel anytime soon.
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My late father used to say: "Believe nothing of what you hear, and only half of what you see for yourself, and you will be alright".
Excellent advice for the times...
mentatt (at) yahoo (d0t) com
6 comments:
Good advice.
From the Thirty-Six Strategies, a collection of ancient Chinese proverbs:
Cornered prey will often mount a final desperate attack. To prevent this you let the enemy believe he still has a chance for freedom. His will to fight is thus dampened by his desire to escape. When in the end the freedom is proven a falsehood the enemy's morale will be defeated and he will surrender without a fight.
>No, we have a problem. Our current system is currently very terribly flawed - politically, socially, economically, and financially - but it is not going to unravel anytime soon.<
If we have a disorderly collapse of the dollar it will take your breath away just how fast our fragile system unravels.
It seems that few people understand the implications of loss of our reserve currency status. We have built a multi layered edifice based on all the benefits of a reserve currency in a global economy and it's a house of cards.
Americans are now oblivious to the massive rage that is building around the world to the systematic misuse and corruption associated with our stewardship of the global reserve currency.
What all this means for the price of oil imports to a country that is importing 75% of it's lifeblood is too scary to even think about...
Nice to see you are mentioning that the world isn't going to end, even with oil depletion. Things will just be more expensive -- that's all. I'm still waiting for the media articles that will explore just how much energy is wasted (I'd guess 50%), and how that will make conventional energy depletion easier to stomach. On the investment front, while oil and natgas commodity prices have ticked up lately, it is not because of oil depletion this time around (the world is presently overflowing in oil and natgas in storage), but it's upticking because of a perceived positive turn of the economy. Eh, I'll take profits and dividends where I can get them. :)
I would second what 'Anonymous' has to say, the rate of change is dependent on how long the dollar can maintain its status.
Remember as sound as a dollar? I do and I'm only 37. It's sad what has happened to this country... I just hope I can take what I remember from better days past to make a better day tomorrow.
Yours in the struggle,
Jeff
You mentioned about 'stuff wearing out'. In economics there is no concept of satiation; of having enough stuff. Yes all around me I see people who have recognised that they now have enough (and maybe way too much!)
If the retail markets are going to rely on replacing worn-out stuff, rather than just getting newer stuff because its 'newer', then the retail sector will probably be 70% smaller in the future. Like it used to be.
As for nearing the end of the depression? To coin your phrase; NAFC!
As to the US$:
So true - BUT there is no replacement currency anywhere on the horizon.
As Sherlock Holmes says... if you eliminate everybody else whoever is left did it. The US$ is the only thing left.
For now....
Hi Donal:
That is how I see it. My friend and analyst at my funds the Mad Scientist fervently believes, and has convinced me, that inventories will NOT be rebuilt - or at least not in a time frame that we should concern ourselves with.
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