30-year bond at 3.3%

[Extra Stout]

im with you on the problems of deregulation
. However, you described two bubbles that had little to do with deregulation. Also, you went on to agree that cds are more a transparency issue than a money issue. Yes, the system is clogged, but the national wealth was inflated and deflated because of fannie freddies 2 percent capital reserve requirements.

Am i wrong, and if so, why?

The deregulation of derivatives has had an effect that outweighs the credit and housing bubbles by orders of magnitude.

That the CDS issue pertains more to transparency than money does not somehow make it less severe. What those instruments have done is completely obliterate the ability of the financial markets to assess risk, thereby causing them to cease functioning.

The shutdown of the credit markets has been the difference between recessions and depressions in U.S. history since the Civil War.

[ChumpDumper]

Regarding bad debt: it's not the crime, it's the cover up.

[Viva Las Espuelas]

I'm sure Republicans will try to blame Obama for the recession in 2042.

true, and bush will be blamed for everything up til then.

[TDMVPDPOY]

why invest into bonds,

when deposit accounts can give you 4.5-5% return?

or if you want go buy property if you can afford it and ride it out on rental income till property prices goes back up and sell.......

[clambake]

why invest into bonds,

when deposit accounts can give you 4.5-5% return?

or if you want go buy property if you can afford it and ride it out on rental income till property prices goes back up and sell.......

do you have any idea how many people are about to be laid off?

[Cant_Be_Faded]

Low bond yields mean high bond prices, which mean that investors are so risk-averse that they are willing to accept a very low interest rate.

This is amidst an environment when the federal fund interest rate is just 1%.

A liquidity trap is when interest rates are close to zero but still fail to stimulate the economy because nobody is willing to lend or make investments with any risk. Once that happens, the central bank no longer can use monetary policy to stimulate the economy. It is likened to "pushing on a string."

Ehhh.. still don't get it. I suck at economics.

[2centsworth]

The deregulation of derivatives has had an effect that outweighs the credit and housing bubbles by orders of magnitude.

That the CDS issue pertains more to transparency than money does not somehow make it less severe. What those instruments have done is completely obliterate the ability of the financial markets to assess risk, thereby causing them to cease functioning.

The shutdown of the credit markets has been the difference between recessions and depressions in U.S. history since the Civil War.

The deregulation of derivatives or calling insurace contracts credit default swaps? Derivatives are very useful tools. Bypassing capital requirements by calling an insurance contract a credit default swap is something entirely different.

Also, the deleveraging may be a blessing in disguise.

[mouse]

Canada is looking better each day.

[spurster]

Also, this interest rate is low despite a huge deficit. I've always thought that interest rates would shoot up at some point with our government's deficit spending, but demand has remained high for many years even through a bullish stock market. I suppose money from overseas kept interest rates down.

[RandomGuy]

Liquidity trap. The Fed is now powerless to do anything to stop the fall into extended depression.

Americans have no savings, massive debt, vanishing credit, monetary policy is already at the end of its rope, and we haven't even started the worst part yet.

The only thing left to try is good ol' Keynesian government fiscal stimulus on a massive scale, and just hope the U.S. can borrow enough money to do it.

You probably look around you and think, "What is ES babbling about? Things don't look so bad around here."

By March you will understand.

I have told everyone I care for to look out, start putting some cash away, and pay down their variable interest debt.

[RandomGuy]

weimar republic?

Nah. Weimar was a weak, fairly incompetant government in a country with no history or tradition of democracy.

The outgrowth of that was that it concentrated a lot of power in the executive branch with a very weak legislative branch.

This was, by comparison, far more than the US Cons ution allows, even with the current pushing by the executive for extensions/expansions of executive power.

(note: RG has a degree in German, and reads German textbooks)

I still have the text book I read that in somewhere in storage if someone would like the name. It was high-school level, but still a fair textbook.

[RandomGuy]

That is not correct. It is 65%.

That is just Federal Debt. Don't forget city and state debt as well.

You might like this one:
The Grandfather Economic Report.

http://mwhodges.home.att.net/\



or simple total, overall debt, versus income:



Eek.

I have been saying for years that we need to either curb federal spending, or raise taxes enough to start paying down the debt we have been ac ulating since the moron Reagan borrowed us into a hole.

Yeah, that's right, I just called Saint Ronnie a moron.

[RandomGuy]

Canada is looking better each day.

Care to guess who Canada's largest trading partner is?

After that, then tell me what effect a massive slowdown in the US economy will have on US purchases of Canada's exports, mainly raw materials.

WHEEEE.

ok, enough of my posts.

I will leave with this thought and the biggest difference between 1932 and today:

International trade as a percentage of global GDP is much, much higher.

The US as a proportion of that global GDP has been shrinking for years. We will still take a good part of the global economy with us, but the ability to trade and move capital to where it is productive has increased.

I think that this means that we will bounce back a bit sooner than some might think. That and the lack of protectionist tariffs will make the overall effect on living standards somewhat more mitigated than in 1932.

[smeagol]

Thanks ES

[temujin]

Great thread.

Except for the quadrillions, because the number is so high that is essentially irrelevant.

[temujin]

Oh and the recovery will be led by technology, as always.

Just open the drawers and start working on the patents.

[RandomGuy]

Oh and the recovery will be led by technology, as always.

Just open the drawers and start working on the patents.

I think so as well.

Technology has a way of sneaking up on us when we least expect it.

[Nbadan]

....the eventual recovery will be led by the internet....

[Nbadan]

Palin's a grandma and known unknowns....