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US economic meltdown?

beatmeofficer

a business friend sent me this info about moving funds out of the US (he's assuming i have funds to move). anyone know if he's talking bullshit??



You may want to get out of the US dollar and stock market. here is why.

The U.S. has

a) a plummeting dollar. This means it will get harder and harder to
raise foreign cash, necessary to finance Bush's deficits. The
current account deficit is 5% of GDP...when Argentina got killed a
few years ago, theirs was 4%. Money markets moved $40 BILLION out of
Argentina in less than a week. Think it can't happen in the US?
Think again. Nobody "controls" world financial markets. The US
imports between two and three billion dollars PER DAY to finance its
debts. This is simply not sustainable.

if you want to raise foreign $$ (which you need to finance deficits),
and people don't liek your currency, what do you do? You raise
interest rates... which leads us to

b) ...problems with a record level of US debt. The US currently has
the highest per-capita debt it has ever had in its history. US
household debt is 85% of GDP. 2/3 of all mortgages within the last 4
years are flexible rate. New Bush rules regarding credit cards and
loans make it nealry impossibel to default on credit-cardloans, and
allow banks nearly unlimited roomto change (read: "raise") rates.
The upshot is, Americans are massively vulnerable to changes in
interest rates, which will probably rise in the near future to
attract foreign currency to finance debt. When interest rates rise,
there will be huge real-estate and personal-finance problems.

c) rising oil and natural gas prices. Most of the US government's
ideas about economic growth and deficits were predicated on $28-30
oil. Oil is now $45-50. This means there will be slower growth
worldwide, and the US will face massive increases in oil costs as
their dollar drops. This means INFLATION...which means higher
interest rates....which means (b).

d) The real estate bubble in the US is a HUGE problem. Nearly 1/3 of
all new mortgages are 0% down. When (not if) interest rates go up,
the 0% downers-- who are economically the most vulnerable people--
will start to unload their properties or have the banks foreclose
when payments aren't made. Most homeowners are leveraged to the hilt
with renos, and these are financed through equity loans based on
purported house values. US real estate was financed by a drop to
near-zero real interest rates afetr the enron/dot com fiasco and
9/11. Avergae US house values are up 20% in three years, with
increases much higher in some areas(e.g. New York, Boston). Most
experts agree that this is simply unrealistic, an that the US is now
experiencing "asset inflation" rather than monetary inflation. The
result? A drop in real estate, more personal bankruptcies, and
(scariest) the possibility of bank failures. To add even more spice
to it all...Freddie mac and Ginnie May (the US government's
arms-length mortgage finaciers) are under criminal investigation for
bad loans.

d) China. The renbiri has been pegged to the US dollar. The
chinese want-- and are now publicly talking-- about unpegging. When
(not if) this happens, the dolalr will drop, the renbiri will rise
(who knows how much) and China's ability to export to the US will
drop. Since the Chinese need to grow their economy by at least
5%/year to keep up with social changes (ppl moving to cities from the
countryside) and a drop in the dollar will mean fewer exports, this
will probably cause social unrest in China. The US, meanwhile, will
find itself facing ever-rising costs of manufactued goods (and not
just from China), which means inflation and/or rising interest rates
at home. The Chinese are hoping for a controlled rise in renbiri
value when they float it...but this is fantasy, since nobody controls
currency values. It is quite likely that Chinese investors will dump
US dollars and run for the renbiri or better currencies such as the
Euro (or, potentially, gold). This could accelerate the US dollar
drop.

 
Nov 24, 04 10:51 pm
c.k.

then move it, what are you waitin for?
global warming to melt the ice?

Nov 24, 04 11:13 pm  · 
 · 
abracadabra

US dollar has been plummeting last few days in world markets. really bad..

Nov 24, 04 11:24 pm  · 
 · 
construct

So how do we fix it of that's true?

Nov 25, 04 12:11 am  · 
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spaghetti

yea.. the biggest problem is if foreign countries stop investing in the "dollar". China pays for a huge amount of our debt and owns a lot of 'dollars'--they are in the positive and have a lot of cash on reserve. the US, meanwhile has debt, which is funded by these other nations which hold "dollars'.... as long as the nations do not transfer their moneys into euros, or other currency, the US is generally ok... I think this may be a problem in the LONGGG run.

still, the US market is held in high regards to the rest of the world--everyone else is still trying to catch up; meanwhile, the companies that make up the majority of the US market continue to invest in China.. making it okay for the US markets (correct me if im wrong) its kind of a cycle, and as long as something doesnt disrupt it in a major way, the US is fairly stable. Also, the concept of globalization makes it possible that it wont be a singularly dominated market.. especially as commercialism/capitalism expands.... the end is ideally a stage of equilibrium (think of the US economy, but on the scale of the world/countries...) that is why although there is concern, there isnt a real "crisis" being talked about.

(even though the US is on a downward trend ...it wont be a complete disaster... YET)

Nov 25, 04 12:19 am  · 
 · 
spaghetti

which, by the way, is another reason the US govt is trying to "modernize" the middle east... i guess the usa is trying to "invest and develop" for the future

the thought is that once the middle eastern nations are somewhat like a "startup" company, but in a larger scale...

still... many doubts remain.. if u are definately knowledgable about foreign markets it may be wise to invest, but for average investors, we have no clue

Nov 25, 04 12:27 am  · 
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gustav

Before the year 2020, China will invade the US at the west coast to collect debts. It will probably get as far as Denver. China will not be successful in this foolish endeavour.

Nov 25, 04 11:11 am  · 
 · 
whistler

abra... the US dollar has been down for more than a few weeks its been a trend for numerous years. Up here in the frozen north of Canada we haven't seen the Canadian dollar exchange at this level since 1992 it just closed at $0.85. thats a lot since only a few short years ago it was at $0. 65 and the talk is with the current US adminstration having no clear strategy to change that the US / canda exchange rate will be on par similar to where it was in the 1960'sbefore the end of this current President.

At that point you've lost a lot of ground and don't see why the Canadian dollar the euro or even the Chinese exchange rate won't become the dominate world currency. Well maybe not Canada, but the Chinese is a serious contender.

Nov 25, 04 12:36 pm  · 
 · 
Ms Beary

whoa. before you take your money out of mutual funds, think about why its in there. if you are in it for the long haul, like retirement in many years, you should leave it where it is. most people use funds as a long term gain. if you are using funds for a short term gain, you shouldn't get your financial advice from here. if you are worrying about your fund money, you shouldn't have any (funds).

Nov 25, 04 6:19 pm  · 
 · 
Cameron

sorry kids ours are already on zee move... Euro 'n your own.

Nov 25, 04 9:36 pm  · 
 · 
Fourth Floor West

So how do we fix it of that's true?


who says it is meant to be fixed? could there not be an economic cycle at work here? you can't stay at the top of the heap forever.

Nov 26, 04 1:35 am  · 
 · 
badass japanese cookie

word cameron

Nov 26, 04 2:53 am  · 
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dolemite

part of the decline of the dollar is precipitated by thu US, since it makes exports of thier goods that much cheaper. Foriegn goods will become more expensive along with tarriffs this will ease the huge trade imbalance. Its not the US that is nervous about the dollar decline, it is every other currency that has seen itself rise in comparison to it.

Nov 26, 04 8:38 am  · 
 · 
A

dolemite, I agree somewhat with your claims. The dollar has slid but the Euro isn't high because of the economic strength of Europe. In actuality Europe has bigger economic woes than the USA, but the Euro currency is backed somewhat with a gold standard. That's why it's a realtively stable currency.

As for the dollar falling being good for USA manufacturing...well, yes and no. Just the other day I was in a meeting with a tile rep and we were talking about how nothing is made in the United States anymore. Back when tile was made here it was great because we could sell our exports cheap to the rest of the world. It is good for the USA in some ways. Foreign companies that sell us stuff over here, i.e. Honda, BMW, etc., are investing more into manufacturing in the United States. I think we'll see more of that happening in other businesses outside of the auto industry.

As for China, I think all the fears that they won't buy our national debt are over inflated. The biggest investor in the US debt is Japan by more than a 2-1 margin over China. What troubles me about the American/China relationship is what gets sent each way. They unload their cargo of finished consumer goods. People go to Wal-Mart and buy that stuff. We reload the ships with raw goods - lumber, cotton - and send it their way. Remember your history lesson on the 13 colonies and England?? We trade with China as a third world country and it's sickening.

Nov 26, 04 9:25 am  · 
 · 
norm

the economy is strong and getting stronger.the economy is strong and getting stronger. the economy is strong and getting stronger. the economy is strong and getting stronger. the economy is strong and getting stronger. the economy is strong and getting stronger. the economy is strong and getting stronger. the economy is strong and getting stronger. the economy is strong and getting stronger. the economy is strong and getting stronger. the economy is strong and getting stronger. the economy is strong and getting stronger. the economy is strong and getting stronger.

Nov 29, 04 1:29 pm  · 
 · 
herbst


"nice to see you're still on message, norm! keep up the good work!"

Nov 29, 04 7:48 pm  · 
 · 
norm

being president is hard work...work...wor...wo...w...

Nov 30, 04 8:40 am  · 
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gustav

I heard that:
1. China has bought time at Mexican steel mills (they have been able to do this because U.S. firms have not been paying on time at the Mex mills) and selling steel that we used to have bought time for at huge profits for the Chinese..... to the U.S.
2. China, Russia, India are trading dollars for Euros this week... as a long term strategy.
3. China is making deals with Venezuala to leverage U.S. allotments of oil (huge).
4. Russia has been supplying Iran with nuclear technology for years. I think it was last year, they (Iran) exploded a nuclear device and that info was on the wires for one hour and someone suddenly quelled that info. So the nuclear treaty is bogus. Watch for Iran to make moves with respect to Iraq and Isreal.


I wonder how the rest of the world will respond to the strong arm tactics of China when they become the single world superpower, huh?
The world thought democracy was horrible...
Invest in gold and energy stocks, they will be going through the roof.

Nov 30, 04 11:05 am  · 
 · 
A

gustav - where are your sources on the China buying Venezualan oil and the Mexican steel mills?

I do agree that both gold and energy will see gains. They have been rising over the past two years.

Nov 30, 04 11:45 am  · 
 · 
abracadabra

here is a sidewalk economist's (me) view;
$ will go down. everybody will start to buy american goods,which are better quality and cheap. they'll get use to them and we will produce goods that are addictive without their knowledge (tobacco, pepsi, pizza hut type of idea applied to other goods). we'll start to raise the price covertly as usual. we will again rule the world and you and i will be farting thru silk underwears.
bingo! (most beautiful english word)

Nov 30, 04 1:05 pm  · 
 · 
gustav

A
An Economics prof, I'll get his sources.

Nov 30, 04 1:09 pm  · 
 · 
A

Bingo is the most beautiful word in the English language - especially when Ashton Kutcher uses it to describe a "Smart" car.

"We could really use the Dodge right about now."

Nov 30, 04 1:47 pm  · 
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abracadabra

dart swinger slant6.indeed.zenith of car making.i am in tears remembering of my old wheels.

Nov 30, 04 2:02 pm  · 
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abracadabra

it was identical

Nov 30, 04 2:28 pm  · 
 · 
alphanumericcha

nice ride abra!

Nov 30, 04 2:30 pm  · 
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gustav

abra:
Didn't that slant 6 originate from a marine straight 12 engine?
Solid!
I think the popular colour of that year was green.

Nov 30, 04 5:31 pm  · 
 · 
abracadabra

oh greeeen..

Nov 30, 04 5:48 pm  · 
 · 
abracadabra

and maroon. los angeles was beautiful with my darts.

Nov 30, 04 5:50 pm  · 
 · 
Dazed and Confused

Take heart. Bitching and whining and complaining are all good forward indicators of healthy economic activity.

Nov 30, 04 7:43 pm  · 
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BOTS

gustav – ‘Iwonder how the rest of the world will respond to the strong arm tactics of China when they become the single world superpower, huh?’

The same as we have done with the US as the worlds global superpower… Slag them off, Terrorise the population.

Dec 1, 04 4:15 am  · 
 · 
A
http://www.mineweb.net/sections/whats_new/394129.htm

"The only way the United States can remedy its current economic woes is through consumption decline"

Dec 1, 04 8:52 am  · 
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BOTS

The pound rose to its highest level against the US dollar in more than 12 years today.

Yippeeee - I'm coming over to see ya -all soon for a bargain!

Dec 1, 04 11:37 am  · 
 · 
gustav

Hey BOTS:
With that accent you must be from south Wales!! I was almost expecting you to say Yippee-Yi-Yow-Kie-Yay.
Not taking any sides, didn't the phrase "slag off" originate in the UK in more ways than one.?

Dec 1, 04 3:11 pm  · 
 · 

i am bumping the economy thread because of, stock market tumble today. the worst since 9/11 they say...
any in house economist out there?

Feb 27, 07 8:03 pm  · 
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bump

Jul 26, 07 7:22 pm  · 
 · 
postal

AAAAAAAAAAAAaaaaaaaaaaaaaahhhhhhhhhhhhh!!! SPLAT

it's a good thing i took all my money out of those college funds and sunk it into an engagement ring!

Jul 26, 07 8:56 pm  · 
 · 
xacto

i know this post was made about 3yrs ago, but the last hting china would want is for the usd to become worthless. they currently own 1.2 trillion usd (wiki) of america's debt. if the dollar becomes worthless, so does their 1.2 trillion.

Jul 26, 07 9:10 pm  · 
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squaresquared

I blame Bush for everything.

(Just kidding... Sort of.)

Jul 26, 07 10:45 pm  · 
 · 

Missed this thread the first time, thanks for the bump Orhan, you sidewalk economist, you.

All I have to say about the original post is that I would never take financial advice from a chain email with so many typos.

Jul 26, 07 10:47 pm  · 
 · 
Lookout Kid

The sky is falling, the sky is falling!!!!

Why are some people so inclined to believe only the most negative forecasts? It's the opposite of the ignorant optimist, but almost as ignorant. Maybe we will have some kind of recession--or even an economic collapse, but the evidence isn't so compelling to inspire such outright pessimism! If you want to worry about the economy, the impact of global warming and resource scarcity is far more troubling in the long term as far as I'm concerned.

Jul 26, 07 11:02 pm  · 
 · 

Well, that's if you're not worried about the impending geomagnetic reversal.


Jul 26, 07 11:18 pm  · 
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holz.box

i read recently somewhere that china's economy could absorb that 1.2 trillion dollar debt because it would sink our economy and surge theirs ahead in he global market...

the usd has sucked for the last 3 years. christ, even the canadian dollar is almost worth as much.

Jul 26, 07 11:50 pm  · 
 · 
manamana

I just checked my etrade account, I'm off 6% from a high a few weeks ago.

Oh well. I'm about to put some more in anyway, and lower prices are better than high, right?

Jul 27, 07 12:00 am  · 
 · 
mdler

this is the great thing about having a British roomate. His pound is so high compared to the dollar that he feels obligated to take me out to dinner all the time

Jul 27, 07 12:34 am  · 
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rfuller

absolutely manamana. I pulled all my money i had in RIM a few weeks ago. I'm buying mutual funds like crazy this week. Gotta love it when stocks go on sale. I love capitalism.

Jul 27, 07 1:29 am  · 
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aspect

but mutual funds is going down too?? i would wait till middle of next week to see its bottom.

Jul 27, 07 2:53 am  · 
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I love this quote from the article above:

“There is fear, but not a fear of recession. The fear is directed toward the question of who will be willing to lend $200 billion to provide takeout financing for previously announced private equity deals.”

For god's sake people, won't someone think of the brokers!

Jul 27, 07 8:50 am  · 
 · 

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