Will a real BUST ever happen?

[wig]

I'm no economist and do not apply fundamentals in my trading, but they are fun to look at from a macro level.

So, what's your belief? Is the price of US debt and ultimately the value of the US dollar vulnerable to a massive collapse??

http://www.worldnetdaily.com/news/printer-...RTICLE_ID=33372

[Almighty Colin]

US debt as a percentage of GDP is lower today than it was a decade ago. I believe it's about 65% and that it was mid 70's sometime in the middle of the last decade.

I don't view the dollar as falling. I view it as returning to normal, back where it was about 4 years ago.

I'm not a believer in the gold standard.

Will there ultimately be a collapse? Maybe that depends on the definition of "collapse". If the current decade or so long trend continues of debt as a percentage of GDP decreasing, I think it not likely.

[wig]

Colin, I knew you would show up. Perhaps you are correct.

But, GDP can swing just like anything else and % can change quickly. Is the measurement of debt to GDP the correct benchmark?

[wig]

Colin, where'd ya go??? You know my ass will be asleep shortly. LOL

I am no long term fan of the dollar right now (long term being next 3 years). In January of 2002 I projected a significant decline in the dollar and even gave the date in March I expected it to accelerate at. The dollar index has fallen from 124 to 92 since then.

Now, I have a large cluster of cycles lined up that I think will usher in an intermediate low. I believe that the US Dollar will see a large rally into December -- perhaps as high as 105-110 but at least 102. We don't live in a linear world. ;-))

I am now bullish on the Dollar! Can't say I am a perennial Bear!

btw, i admire your consistent optimisim.

[Vick]

I do have serious concerns with the amount of debt the US gov is running up currently

If available funds start being used to cover the debt, interest rates rise and the bottom falls out of the current booming housing market we could see some (possibly serious) inflation

But then again I am not an economist

But I am all for a balanced budget and at the risk of incurring the wrath of many here even if that includes NOT having the proposed tax cuts and possibly have slight tax increases or even better - new revenue streams from the US Gov to support it's self

As you can tell I am a huge fan of a balanced budget amendment

[wig]

Vick, I agree in premise, but the books are so cooked it is really hard to tell exactly what the finances are.

The Government knows it can only service the debt and it will never be paid off (not with valuable dollars anyway).
It is the same scheme as all paper money schemes IMO. I don't know what makes the US different.

But, it makes no difference to me, really. I am more interested in how I can profit from things than I am interested in how I can help change them for the better.

I know, I am capitalist scum.

[Almighty Colin]

Wig,

I don't know if I'm an optimist. Maybe a little but I think it's realistic that GDP will grow around 3% per year average for quite some time and a little less as the size of the economy grows. It's more difficult to grow faster percentage-wise from a higher base. One need only witness the growth rates in some of the years in the last century. We don't see anything like those numbers anymore and I think that's largely because of the size of the economy.

GDP can swing, yes. How often should one expect a depression magnitude event or a recession?

I just compiled this info from a list of US Recessions:

12 from 1850-1900. 255 months spent in contraction.
12 from 1901-1950. 210 months spent in contraction.
8 from 1951-2000. 85 months spent in contraction.

What I see is that recessions are somewhat frequent with about one recession every 5 years on average and also that they are of considerably less duration and intensity over time. We've nothing seen nothing like the depression in 65 years. There were some very intense recessions of long duration in the late 1800's. In the second half of the 19th century, 42% of the time the economy was decreasing in size. In the second half of the 20th century, that number was only 15% of the time. I think this reflects knowledge and economic policy.

32 recessions in 150 years. 32 presidents in 150 years. Recessions are frequent and normal.

[Almighty Colin]

Originally posted by wig@Jul 2 2003, 05:18 PM
Is the measurement of debt to GDP the correct benchmark?

I think so. The size of one's debt (whether individual, company or nation) is irrelevant without some benchmark. One might compare to GDP, GNP, income taxes paid or any other such figure but those numbers are going to be correlated somewhat anyway. Since the debt to GDP ratio for the US, Canada, Germany, France, and Japan are similar to the US one thing is for certain is that the major economies of the world all have similar views of what is acceptable or not acceptable regarding debt to size of economy. If one falls they probably all fall. What would happen though in worst case scenario. Is there much of a possibility of a recession-like event lasting longer than a decade? Probably not.

What would monetary policy look like on the other side? The result of the depression was the monetary/economic policies of Keynes and his followers, the same policies that some people today really have a problem with. They have been extremely successful though in their goal of smaller, less frequent recessions. I've never heard a better proposal and so on we go. Increase government spending and tax cuts during recessions is the order of the day.

[wig]

Originally posted by Colin@Jul 3 2003, 10:39 AM
How often should one expect a depression magnitude event or a recession?

Recessions are not as interesting as depressions and I'm sure everyone has their own idea of what makes what.

How often to expect any extreme (cycle analysis) is what I spend most of my time studying (of course, I am usually only concerned with 1-3 weeks at a time). However, it is a good question.

My analysis of historical events and related application of cycles leads me to believe that the easy money years, credit expansion and eventual euphoric peak in equities in 2000 marks the culmination of the expansion from the 16 year distribution (correction) we experienced from the late 60's to early 80's.

I am confident in projecting a correction of atleast this magnitude (after all, we are in the midst of it). There is a reasonable chance that this correction may be 1 degree larger.

I am speaking specifically on equitiy markets, which do not necessarily have a direct correlation to the economy. It is plausible, however, that a severe economic contraction could occur at the same time.

This would have larger implications for debt, currencies and metals. And, as no matter of coincidence, my work on these markets also indicates change on a rather large degree.

[Buff]

Originally posted by Colin+Jul 3 2003, 09:51 AM-->