Financial Crisis

[12DrinkMore]

A couple of interesting articles from "Asia Times"

Firstly on the rise of the East and decline of the West.

http://www.atimes.com/atimes/China_Business/KF09Cb01.html

With US financing and the dollar in deepening trouble past the short term, and even at present, and with little or no viable and genuine signs of an economic rebound in the US, and with the bulk of the under-developed economies beginning to emerge from this crisis early, then we have the prospect of a world where the developed economies will likely continue to stagnate for years, where their currencies become ever-more prone to crisis, but where most of the emerging market economies return to healthy growth rates and where global investment wealth flows out of the developed economies and in their direction.

This will be a world where the US and its closest allies are obliged to continue to suffer the worst of the global crisis while the emerging economies rebound. This reordering of the global economic landscape cannot fail to effect corresponding geopolitical, global financial and monetary transformations of great potency and persistence.

You are witnessing the most remarkable transformation in recent history, from one global order to another that is completely different one, a grand reversal of fortunes wherein the traditionally "under-developed" economies collectively supersede the traditionally "developed" economies to become the dominant forces in the new global order.

Yes, more and more evidently true.

And then on the methods our Wonderful Leaders are using to try and prevent this.

http://www.atimes.com/atimes/Global_Economy/KF06Dj03.html

http://www.atimes.com/atimes/Global_Economy/KF05Dj03.html

In the words of the Man Himself, who has been ignored by all the self-centred politicians

Adam Smith argued that excessive government employment would be at the expense of capital accumulation and would cause a declining trend in output as attested by the following quote:

Great nations are never impoverished by private, though they sometimes are by public, prodigality and misconduct. The whole, or almost the whole public revenue, is in most countries employed in maintaining unproductive hands. Such are the people who compose a numerous and splendid court, a great ecclesiastical establishment, great fleets and armies, who in time of peace produce nothing, and in time of war acquire nothing which can compensate the expense of maintaining them, even while the war lasts.

Such people, as they themselves produce nothing, are all maintained by the produce of other men's labor. When multiplied, therefore, to an unnecessary number, they may in a particular year consume so great a share of this produce, as not to leave a sufficiency for maintaining the productive laborers, who should reproduce it next year. The next year's produce, therefore, will be less than that of the foregoing, and if the same disorder should continue, that of the third year will be still less than that of the second.

Those unproductive hands, who should be maintained by a part only of the spare revenue of the people, may consume so great a share of their whole revenue, and thereby oblige so great a number to encroach upon their capitals, upon the funds destined for the maintenance of productive labor, that all the frugality and good conduct of individuals may not be able to compensate the waste and degradation of produce occasioned by this violent and forced encroachment.

And here's a couple for Alex, who has doubtless already seen them already

http://www.telegraph.co.uk/news/worldnews/...four-seats.html

Holland's anti-Islamic and Euro-sceptic Freedom Party, headed by Right-wing politician Geert Wilders, won 17 per cent of the vote to gain four seats at its first European election.

http://www.telegraph.co.uk/news/worldnews/...in-parties.html

The major political parties have condemned as "horrific" the election of two BNP candidates to the European Parliament after a dismal showing at the polls for Labour.

The result of the governments ignoring the majority, pandering to minority groups and, of course, their own selfish greed.

[midas]

.... who missed the boat......

All aboard....Last call.....All aboard.....the Titanic.

I'm on (in) dry land.

Regards.

It's hard to see how this could be anything other than a bear market rally when this is happening

on both sides of the Atlantic.

http://ecommerce-journal.com/news/15994_cr...to_rise_further

http://www.creditcardsweb.co.uk/200904/con...-card-defaults/

At this point in the suckers rally, holding deep in the money

long-term put options ready for the inevitable downward leg seems a better bet

[Abrak]

I have no idea why under developed countries see themselves as big winners out of all this and dont actually realise they are getting right and royally tossed over. While the likes of Latvia, Ireland and Iceland are suffering under double digit deflating economies, tight fiscal policies and high interest rates under the auspicies of the IMF or threat of in order to repay foreign borrowers, as payment for their excesses, the US has a ZIRP and a 12% fiscal deficit and knows that it will be foreign creditors that will suffer if it currency falls. Ultimately the collapse in the dollar will amount to the largest default in economic history.

They are only recycling capital from the US and when that capital flow dries up after its worth has fallen, they will be crying themselves to sleep. For instance it seems almost inevitable that China's currency peg with the US will not survive the crisis - its growth has piggy backed the US's decline (which was clouded by asset inflation.) The idea of export recycled economies dominating the world because their major exporter has gone bust is as ludicrous as an over indebted over consumed economy recovering on the basis of more debt and more consumption.

[teletiger]

I don't think any country, under-developed or otherwise, think of themselves as winners in this situation. Any country with a sound production basis, low debt and a market, will consider themselves well placed to be first out of the blocks when the tide turns. Most Asian countries qualify for the first 2 criteria and are working on the third. The tide will turn first in Asia. US, Europe, UK will languish for years. (IMHO)

Germany (sorry Naam) will be hardest hit in Europe. A brilliant production base.....and no market.

There are no winners in this situation....only heavier losers.

The US could default (the probability is increasing) Then all bets are off. Literally.

Regards.

[flying]

Or... How long does the rally have to continue, before people stop calling it a bear market rally?

a strong increase of value which happens after a considerable drop of any asset is quite often called a bear market rally by pussy-footing investors who missed the boat or by gloom&doom gurus who's timing was bad. in rare cases the call "bear market rally!" originates from frustrated investors who check several times a day whether one of their Krüger Rands will buy a bakery.

Of course it goes without saying there is always money to be made in the market...Everyday.

Long or short...right way or wrong way......bear or bull...

......... ok you get the idea

Point is both SoCal & you took the question & picked it into a totally irrelevant side topic.

What I said was..........

Most of us think the Stock Market will once again take a tumble & that this is in fact a Bear Market Rally.

If so do you think that

Then I had a Q

I was just curious more about the mentality towards the dollar than the market.

Again it goes without saying folks make money everyday in the market...Yes it is possible when it goes up & when it goes down etc etc etc

But none had a opinion on the confidence or lack there of towards the dollar for next time the market takes a large hit.

I guess I will have a good indicator with the long bonds.

Edited June 8, 2009 by flying

[Abrak]

At this point in the suckers rally, holding deep in the money

long-term put options ready for the inevitable downward leg seems a better bet

Well somehow I will be beating myself up for a while for missing it because the market was very oversold, fair value and there were some very beaten up stocks. There wasnt much downside in the newsflow or the markets. I sold a stock today, no I didnt make a profit I lost 20% bought 18 months ago but it aint going nowhere but the point is it has gone up 120% in the last 2.5 months. How come I didnt buy it when it was 40% of its current value, trading below cash per share? I simply wasnt looking. Too busy looking at the macro. Anyways March is a weird time to bounce its supposed to happen in mid December. More to the point it all supposed to be over by mid May and then you sell and take the remains of the year off or get burnt.

[Abrak]

Germany (sorry Naam) will be hardest hit in Europe.

Sorry, I dont really understand this argument. I thought the whole point was that Germany had about the best fundamentals in Europe. Sweden, Austria, Switzerland would suffer from exposure to Eastern Europe which had overbuilt and overspent with too much debt and mismatched funding. Italy, Spain, Ireland and the UK have their own problems. Germany isnt going to/cant afford to bail everyone out will probably quit the Euro and go it alone.

[teletiger]

Germany has to wait for it's traditional markets to pick up. US, UK, Eurozone. It's banks are in as much trouble as others.

http://www.ft.com/cms/s/0/5901f960-538b-11...144feabdc0.html

Regards.

[SoCal]

Flying,

I don't think the stock market is going to take a tumble, not to the lows of March, and certainly not to 5,000. If anything I see a setback, and then a slow continued march up. This is why I questioned the term bear market rally.

For the dollar, I see a natural decrease in value, as it returns to what it was trading at pre-Oct 2008. This however does not necessarily mean a loss of faith in the greenback.

So in short, I see a return to normalcy. Chaos and fear have almost run their course.

That said, I doubt things will ever truly be normal again. Long term you guys may be right. I'm certainly willing to listen to what is said, but to be to caught up in fear is not good for your portfolio. There is a lot of money on the sidelines, and even more being printed, one might ask where its all going to go, and leave the end of the world for another day.

[flying]

Flying,

I don't think the stock market is going to take a tumble, not to the lows of March, and certainly not to 5,000. If anything I see a setback, and then a slow continued march up. This is why I questioned the term bear market rally.

For the dollar, I see a natural decrease in value, as it returns to what it was trading at pre-Oct 2008. This however does not necessarily mean a loss of faith in the greenback.

So in short, I see a return to normalcy. Chaos and fear have almost run their course.

That said, I doubt things will ever truly be normal again. Long term you guys may be right. I'm certainly willing to listen to what is said, but to be to caught up in fear is not good for your portfolio. There is a lot of money on the sidelines, and even more being printed, one might ask where its all going to go, and leave the end of the world for another day.

No Prob SoCal

I have no investment to worry about.

Like I said I was more curious about whether or not folks would again run to the dollar if this is in fact a bear rally.

Also I agree that there is money to be made. Like I said folks can bet up or down both on Wall Street & in Vegas.

I have not been in the markets since the Tech bubble.

Since then I decided to invest only in myself & tangible assets.

I am sure I have missed out on making some dough but.........

You never know though I may return someday as some of the mining stocks & agri Stocks look interesting. Maybe even Natural Gas

[Abrak]

So in short, I see a return to normalcy. Chaos and fear have almost run their course.

That said, I doubt things will ever truly be normal again.

Things cant go back to 'normal' because they werent 'normal' before the crisis. The world was operating on the back of an American economy with overconsumption financed by unsustainable amounts of debt through an asset bubble. Other countries were just as guilty of persuing this get rich quick path to growth.

The adjustment looks like it is just going to be long and painful and the investment out look equally difficult.

[Naam]

I don't think any country, under-developed or otherwise, think of themselves as winners in this situation. Any country with a sound production basis, low debt and a market, will consider themselves well placed to be first out of the blocks when the tide turns. Most Asian countries qualify for the first 2 criteria and are working on the third. The tide will turn first in Asia. US, Europe, UK will languish for years. (IMHO)

Germany (sorry Naam) will be hardest hit in Europe. A brilliant production base.....and no market.

There are no winners in this situation....only heavier losers.

The US could default (the probability is increasing) Then all bets are off. Literally.

Regards.

no reason for being sorry Teletiger as i couldn't care less which country is hardest hit

[midas]

No Prob SoCal

I have no investment to worry about.

Like I said I was more curious about whether or not folks would again run to the dollar if this is in fact a bear rally.

Also I agree that there is money to be made. Like I said folks can bet up or down both on Wall Street & in Vegas.

I have not been in the markets since the Tech bubble.

Since then I decided to invest only in myself & tangible assets.

I am sure I have missed out on making some dough but.........

You never know though I may return someday as some of the mining stocks & agri Stocks look interesting. Maybe even Natural Gas

The danger I see in these markets is they been driven higher based mainly on momentum instead of fundamental analysis.

Speculators feel good watching the market rally and want to get in on the trend. How many true investors

are involved in this rally ?

This is not investment -investors buy things after they carefully consider the intrinsic value

whatever the asset is an when the price rises significantly above the intrinsic value many investors actually sell.

This rally is being fulled by speculators who don't have any regard for value and some actually believe

the price is rising because something good is happening in a particular company. This becomes like a

Ponzi scheme and let's not forget when companies in the tech days had billion dollar capitalisations

but with no earnings.

Once again today people are doing the same thing again speculating with their money based on what

the other guy is going to do next. Not on fundamentals or good business conditions because they're simply

not there. Fine if you have that personal risk appetite but not me.

[flying]

The danger I see in these markets is they been driven higher based mainly on momentum instead of fundamental analysis.

What will be interesting is the funds/pensions.

They were hurting so bad & they have made a little back now.

I wonder if they will run for the exit now or at the slightest sign of a down turn?

Or are they already selling into this rally?

Edited June 9, 2009 by flying

[midas]

The danger I see in these markets is they been driven higher based mainly on momentum instead of fundamental analysis.

What will be interesting is the funds/pensions.

They were hurting so bad & they have made a little back now.

I wonder if they will run for the exit now or at the slightest sign of a down turn?

Or are they already selling into this rally?

Institutional core holdings represent over 50% of the market's daily volume and the Institutional Index has made no progress since April 2nd.

[flying]

Look at Mr President tell the Supreme court the limits of of it's Constitutional authority

Amazing is the only word I can think of....well that & scary

From........

http://zerohedge.blogspot.com/2009/06/obam...-is-out-of.html

Monday, June 8, 2009

Obama Claims TARP Issue Is Out Of Supreme Court's Authority Posted by Tyler Durden at 10:49 AM SCOTUS blog reporting that according to a response filed by the Solicitor General Elena Kagan on behalf of the United States of America, no court, not even the Supreme Court, has an authority to rule on the applicability of the TARP funds, previously designated exclusively for financial company bail outs, for the Chrysler case.

The Obama Administration argued Monday that no court, including the Supreme Court, has the authority to hear a challenge by Indiana benefit plans to the role the U.S. Treasury played in the Chrysler rescue, including the use of "bailout" (TARP) funds. The Indiana debt holders, U.S. Solicitor General Elena Kagan wrote, simply have no right to raise that issue, thus putting it out of the reach of the courts.

Although arguing that the courts may not rule on the validity of Treasury's decision to shore up a new Chrysler company with funds from the Troubled Assets Relief Program, the Solicitor General did argue that those funds may go to a troubled auto company, and not just to banks or other regular financial institutions.

Convenient - so if not the highest judicial institution in the US can decide on what the proper venue for TARP utilization is, does that mean that Geithner and Obama are now completely above the law in terms of how they burn taxpayer cash. Of course, the SCOTUS decision is a moot point - nobody dares to stand in front of the Obama juggernaut at this point. However, this chain of events will inevitably set off a precedent of unintended consequences for not just domestic, but also foreign lenders, when it comes to investing into any US companies, especially ones deemed to be added next on the Too Big To Fail bandwagon.

In this sense, the US will be forced to provide unlimited DIP funding as industry after industry discovers it is insolvent and the whole debate over whether the current economic crunch is liquidity driven, is concluded in favor of the rational minds, and lenders discover they have no recourse, not even with the Supreme Court Of The U.S.

Here is the actual Kagan language

http://www.scotusblog.com/wp/wp-content/up...sler-6-8-09.pdf

Edited June 9, 2009 by flying

[midas]

Did you see the Chrysler bondholders lost their appeal yesterday - against the argument

that its unconstitutional what has been done to them olders - if they do then USA has truly taken a new direction

for the worst...what do you think ?

I think they better be very careful with what they rule. Their credibility is getting very thin. It is getting so blatantly obvious to more than a few.

I am sitting on the edge of my chair now. an attorney friend in Tuscon explained how this could have an incredibly

profound impact on spending the TARP money ( if they hear the appeal ).

Edited June 9, 2009 by midas

[midas]

Look at Mr President tell the Supreme court the limits of of it's Constitutional authority

Amazing is the only word I can think of....well that & scary

the whole debate over whether the current economic crunch is liquidity driven, is concluded in favor of the rational minds, and lenders discover they have no recourse, not even with the Supreme Court Of The U.S.

As someone said in an interview ..... the perceived independance of the US judiciary is one of the main things that distinguishes

America from Third World countries . I hope this is not about to be lost now

[flying]

As someone said in an interview ..... the perceived independance of the US judiciary is one of the main things that distinguishes

America from Third World countries . I hope this is not about to be lost now

Funny thing is I thought that was why we have a Supreme court.

I believed it was they who decided what was the constitutionality of something not some elected official....even the big kahuna

Sometimes it seems what we have now is really a corporation ruled by corporate law & not a democracy. They draw up a bail out ...It had how many pages??

They give congress a short time to vote on it....all the while threatening them that they will see carnage if they vote no. They vote no............more threats more pages & they vote yes.

Now they have their feet held to the fire & realize what they voted for lost somewhere in all those pages?

Edited June 9, 2009 by flying

[Abrak]

The danger I see in these markets is they been driven higher based mainly on momentum instead of fundamental analysis.

What will be interesting is the funds/pensions.

They were hurting so bad & they have made a little back now.

I wonder if they will run for the exit now or at the slightest sign of a down turn?

Or are they already selling into this rally?

I have been told (not by anyone reliable, just a couple of brokers) that most of the buyers at the bottom were closing out shorts rather going long, so there isnt a lot of profit taking now. Supposedly the only real buyers now are those who got caught long cash and are scared by the rally. Most of the bulls expect a pull back and obviously the bears have been expecting it to go down for some time.

The biggest worry for equities must be what is happening to bonds and bond issuances. The 10 year UST has gone from 2.06% to about 3.7% in the last 2 and half months while the stock market has gone up 30 odd percent. Now I dont look at that relative valuation because I dont buy USTs but institutional investors do and that is a very big shift. There is going to be US$2trn issuance of UST this year of which the Fed can only absorb so much that will absorb a lot of cash. Roughly translated I would estimate that the equity risk premium has roughly halved.

[Abrak]

I have a vague theory that markets have been so strong and bonds so weak not because people are betting on economic recovery but because investors are hedging against inflation. To some people this might be a statement of the bleeding obvious of to others not so. But if you look at these 2 charts below it certainly makes sense.

What has happened is that although bond yields have risen substantially, inflationary expectations have risen even further so that real yields have fallen. Cash and bonds have therefore becomes less attractive to hold verses hard assets - commodities and equities (whose earnings will rise in nominal terms with inflation).

If someone is reasonably smart (it is a bit too much for me) they should be able to work out what percentage of the stockmarkets rise is based on a recovery of earnings (i.e. economic recovery) and what percentage is a reflection of higher inflationary expectations and a falling real yield. I am not a rocket scientist but I can see that at least half the market rise can be justified by a change in inflationary expectations without assuming any 'greenshoots' at all. Of course these numbers being as they are means that the equity risk premium certainly hasnt halved.

Edited June 9, 2009 by Abrak

[12DrinkMore]

I have no idea why under developed countries see themselves as big winners out of all this and dont actually realise they are getting right and royally tossed over. While the likes of Latvia, Ireland and Iceland are suffering under double digit deflating economies, tight fiscal policies and high interest rates under the auspicies of the IMF or threat of in order to repay foreign borrowers, as payment for their excesses, the US has a ZIRP and a 12% fiscal deficit and knows that it will be foreign creditors that will suffer if it currency falls. Ultimately the collapse in the dollar will amount to the largest default in economic history.

They are only recycling capital from the US and when that capital flow dries up after its worth has fallen, they will be crying themselves to sleep. For instance it seems almost inevitable that China's currency peg with the US will not survive the crisis - its growth has piggy backed the US's decline (which was clouded by asset inflation.) The idea of export recycled economies dominating the world because their major exporter has gone bust is as ludicrous as an over indebted over consumed economy recovering on the basis of more debt and more consumption.

Well, I think we are all pretty much agreeing that the World's #1 consumer is not going to stimulate exports from Asia to the US.

The huge and still very undeveloped consumer economies are still in Asia, notably China and India. In terms of population much much greater than the US. Once these countries stimulate a bit of internal consumerism, then Asia will not rely on the West anymore. There is still a vast amount of hubris in the West, basically repeating the same old statements that

"Asia is in the shit deeper than us"

"Asia cannot get out of the shit before we get out of the shit"

And a total refusal to even consider the possibility that the Asians can actually achieve anything on their own without the West.

The wake-up call is coming.

"Good Morning, Asia!"

[SoCal]

Once these countries stimulate a bit of internal consumerism, then Asia will not rely on the West anymore.

Okay, how are they going to do that?

I know the last year has taught us that the world has decoupled. The US isn't important, yada yada yada.

But exactly how are they going to create a middle class, without the west to buy their exports?

I don't even see China trying to develop a middle class, and if there was ever a time to do so, it certainly has past.

I guess China should depeg the yuan, sell all their US treasuries, and tell the US that they don't need them anymore.

Yes, go tell this to the Chinese.

PS- I don't disagree with you that domestic development would be a great leap forward for many Asian economies, I just don't see it happening anytime soon, and certainly not without the west.

[midas]

Once these countries stimulate a bit of internal consumerism, then Asia will not rely on the West anymore.

Okay, how are they going to do that?

I know the last year has taught us that the world has decoupled. The US isn't important, yada yada yada.

But exactly how are they going to create a middle class, without the west to buy their exports?

I don't even see China trying to develop a middle class, and if there was ever a time to do so, it certainly has past.

I guess China should depeg the yuan, sell all their US treasuries, and tell the US that they don't need them anymore.

Yes, go tell this to the Chinese.

PS- I don't disagree with you that domestic development would be a great leap forward for many Asian economies, I just don't see it happening anytime soon,

But does it really have anything to do with importance -surely USA is flat broke - skint and the consumer has gone away ?

But also why does China even need what we call a " middle class " ? It could still grow steadily into a prosperous nation with a disciplined and

well-educated population even if you just have super rich and " the workers " - a new social model .

Chinese people only nineteen years ago were all wearing the same grey colour Mao style uniforms and riding push bikes to work,

so surely any small improvement to their lifestyles is better than that ? But it doesn't mean they have to adopt the same

brash credit based extravagance that has led to the present predicament of the USA ? In fact we know they spend

money carefully.

[Naam]

The danger I see in these markets is they been driven higher based mainly on momentum instead of fundamental analysis.

What will be interesting is the funds/pensions. They were hurting so bad & they have made a little back now.

I wonder if they will run for the exit now or at the slightest sign of a down turn? Or are they already selling into this rally?

the big funds (especially the pension funds) can't do anything but pray and twiddle their thumbs. in spite of being well diversified their accumulated individual holdings/positions are just too big to sell even a part into this shaky market without causing havoc. i agree with Midas that nearly all markets are driven by momentum and of course expectations and that fundamentals are neglected.

[12DrinkMore]

Once these countries stimulate a bit of internal consumerism, then Asia will not rely on the West anymore.

Okay, how are they going to do that?

I know the last year has taught us that the world has decoupled. The US isn't important, yada yada yada.

But exactly how are they going to create a middle class, without the west to buy their exports?

I don't even see China trying to develop a middle class, and if there was ever a time to do so, it certainly has past.

I guess China should depeg the yuan, sell all their US treasuries, and tell the US that they don't need them anymore.

Yes, go tell this to the Chinese.

PS- I don't disagree with you that domestic development would be a great leap forward for many Asian economies, I just don't see it happening anytime soon, and certainly not without the west.

I think that the last year has shown us that the world has not (yet) "decoupled", and that the US is still far too important to the world economy. The US is now a big handicap to a world recovery.

But the point is that in five or ten years, China, India, etc will be in the position of consuming their own produce. Then we will have a decoupling.

What happened in the years after the second world war up to some 20 years ago, at which point the manufacturing plants were being moved out of the West and into the East? Yes, the West was consuming it's own produce and growing the Western economies. Factory workers were able to afford to buy US manufactured stuff.

Now why shouldn't the Chinese factory workers be able to afford stuff they manufacture? It doesn't need a big middle class, it just needs a working class who can afford standard stuff like lcd TVs, white goods and then maybe a car.

Take Thailand, 25 years ago up in the rice fields fridges, TVs, hi-fis were rare. Now almost every house has them. Everybody has a mobile telephone. Every house has a motorcycle and an increasing number have a pick-up. This did not require the great western consumer.

And, here we go, just about to hit the streets of India,

http://www.thaivisa.com/forum/index.php?ac...mp;qpid=2793452

So compare the price of the car 1,370 Quid to the wages on the production line 171 Quid/month. This car is VERY easily affordable, at only six months wages....

And to cap it all, they are going to export the little box to the paupers of Europe in 2011.

:D

That will really help the car manufacturing industry in Europe, won't it?

"All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

- Arthur Schopenhauer

[Abrak]

Once these countries stimulate a bit of internal consumerism, then Asia will not rely on the West anymore.

Okay, how are they going to do that?

I know the last year has taught us that the world has decoupled. The US isn't important, yada yada yada.

But exactly how are they going to create a middle class, without the west to buy their exports?

I don't even see China trying to develop a middle class, and if there was ever a time to do so, it certainly has past.

I guess China should depeg the yuan, sell all their US treasuries, and tell the US that they don't need them anymore.

Yes, go tell this to the Chinese.

PS- I don't disagree with you that domestic development would be a great leap forward for many Asian economies, I just don't see it happening anytime soon, and certainly not without the west.

I think that the last year has shown us that the world has not (yet) "decoupled", and that the US is still far too important to the world economy. The US is now a big handicap to a world recovery.

But the point is that in five or ten years, China, India, etc will be in the position of consuming their own produce. Then we will have a decoupling.

What happened in the years after the second world war up to some 20 years ago, at which point the manufacturing plants were being moved out of the West and into the East? Yes, the West was consuming it's own produce and growing the Western economies. Factory workers were able to afford to buy US manufactured stuff.

Now why shouldn't the Chinese factory workers be able to afford stuff they manufacture? It doesn't need a big middle class, it just needs a working class who can afford standard stuff like lcd TVs, white goods and then maybe a car.

Take Thailand, 25 years ago up in the rice fields fridges, TVs, hi-fis were rare. Now almost every house has them. Everybody has a mobile telephone. Every house has a motorcycle and an increasing number have a pick-up. This did not require the great western consumer.

And, here we go, just about to hit the streets of India,

http://www.thaivisa.com/forum/index.php?ac...mp;qpid=2793452

So compare the price of the car 1,370 Quid to the wages on the production line 171 Quid/month. This car is VERY easily affordable, at only six months wages....

And to cap it all, they are going to export the little box to the paupers of Europe in 2011.

:D

That will really help the car manufacturing industry in Europe, won't it?

"All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

- Arthur Schopenhauer

Wow - I believe you have a romantic view about how capitalism works.

And I am sure Shopenhauer never meant his quote to be used in that context. Perhaps a better quote of his is this.

'Every nation ridicules other nations, and all are right.'

[flying]

Okay, how are they going to do that?

I know the last year has taught us that the world has decoupled. The US isn't important, yada yada yada.

But exactly how are they going to create a middle class, without the west to buy their exports?

But the point is that in five or ten years, China, India, etc will be in the position of consuming their own produce. Then we will have a decoupling.

What happened in the years after the second world war up to some 20 years ago, at which point the manufacturing plants were being moved out of the West and into the East? Yes, the West was consuming it's own produce and growing the Western economies. Factory workers were able to afford to buy US manufactured stuff.

Now why shouldn't the Chinese factory workers be able to afford stuff they manufacture? It doesn't need a big middle class, it just needs a working class who can afford standard stuff like lcd TVs, white goods and then maybe a car.

Wow - I believe you have a romantic view about how capitalism works.

I guess I have a similar romantic view or logical?

The reason I say that is for me ......to say how can someone succeed without selling to a person who has no money to buy sounds even worse to me.

The crux is at least they have something to sell. Yes the USA was the biggest consumer & we did well with that & gave everyone a false sense of security/growth all over the world. But that is all it was.

It is like a factory worker who has tons of over time ( time & a half pay ) because business is so good. They get used to that bigger paycheck...They start to change their life to fit that bigger income because it has gone on for years & they just take it for granted. But suddenly demand is cut back. Yes it hurts that worker who has grown accustomed to that bigger exaggerated pay check with all the overtime.

But guess what? He probably still has a job because no matter how great a consumer the US is we are not the only consumer in the world. Sales/Income for the producer may drop but the world will still need & really so will we & US will still buy. Less yes but still buy.

On the other hand look at us now.

Our Commander in Chief Mr O has just come up with more change

Guess what the new one is called?

PAY AS YOU GO !!!

Is that rich or what? He said this morning that if congress wants even $1 they will have to take it from somewhere else. Meaning need a buck? You need to cut it out of something existing!

Where was this rule when he was spending Billions?

http://voices.washingtonpost.com/44/2009/0...o.html?wprss=44

Edited June 9, 2009 by flying

[flying]

This is another PAYGO article.................

http://online.wsj.com/article/SB124455428213397897.html

[midas]

As someone said in an interview ..... the perceived independance of the US judiciary is one of the main things that distinguishes

America from Third World countries . I hope this is not about to be lost now

Funny thing is I thought that was why we have a Supreme court.

I believed it was they who decided what was the constitutionality of something not some elected official....even the big kahuna

Sometimes it seems what we have now is really a corporation ruled by corporate law & not a democracy. They draw up a bail out ...It had how many pages??

They give congress a short time to vote on it....all the while threatening them that they will see carnage if they vote no. They vote no............more threats more pages & they vote yes.

Now they have their feet held to the fire & realize what they voted for lost somewhere in all those pages?

I consider this a very sad day for America

The Supreme Court on Tuesday cleared the way for Chrysler LLC's sale to Fiat, turning down a last-ditch bid by opponents that included consumer groups and three Indiana pension plans.

And when the same court was asked to rule on another case in 1952 which had strikingly similar

circumstances it upheld the Constitution, so why not now ?

On June 2, 1952, in a 6-3 ruling, the Supreme Court declared in Youngstown Sheet & Tube Co. v. Sawyer that the President Truman lacked the authority to seize the steel mills. Writing for a badly divided majority, Justice Hugo Black held that the president had no authority under the Constitution to seize private property on the grounds of national security. Since the Congress had not otherwise authorized the president to seize the steel mills, the president could not do so.

Edited June 10, 2009 by midas