Any professional economists here? Predictions for the next year?

[ShaneGR]

I was wondering if anyone had a clear grasp on what exactly is going on. I do not.

[junker]

1. Economy and FInancial systems must be separated

Economy and FInancial systems must be separated in your mind. The economy is all us doing all the things we do, the financial system is the banksters and the ailing dollar and all things pegged to it.

The dollar has lost nearly 30 per cent since beginning of year. It will continue to drop, in fact, rapidly to lose a further 40+ per cent by spring.

Gold and silver will soar. They are artifically priced low to actualize the 'strong dollar policy'. Think about it. How did Rubin/Clinton create the strong dollar policy, that is, how is it implemented? Certainly not by 'talking' the dollar up or down, but rather by using the reserves (secretely) of most of the world's central banks to drive the price of gold down in dollar terms. This meant that when you checked the 'value' of the dollar, you were assured, because of the low dollar price of gold, that the dollar was 'strong' or sound. The PPT (plunge protection team) composed of the sec of treasury and the president have the discretion to activate the Exchange Stabilization Fund as well as the Presidential Working Group on Markets, which both participated in selling off the gold in the US (and other countries) vaults to suppress the price of gold in dollar terms such that the dollar was artifically kept high or strong in relative value.

Now they (the PPT/ESF/PWGOM) have run out of gold to sell, and the scam is coming to an end. Thus the price of gold is rising, and will rise extremely RAPIDLY to in excess of 900 by spring with an expecation of several thousands of dollars per ounce by 2004. As an aside, if one takes the total number of just the printed dollars in the world, leaving out all the digital dollars in banks, and divides this by the number of available ounces of gold in the world, then each ounce of gold to dollars SHOULD have a value of over 27,000 dollars. And this does not take the digital dollars into account.

The prices of food are rapidly rising at a commodity level. As is energy. Once the threshold is crossed (estimated in last 2 weeks of Nov 03) the real slide begins.

The professional economists don't know squat. The ones you need to listen to are the professional commodities traders...in any and all commodities. I am not talking about the ENRON types, but rather those who have their own money at risk. These people expect 600 dollar gold by end of Dec. And a further cratered dollar which will end the year under 84 on the basket index against other currencies.

Now note that the paranoid right-wing nut-jobs are very heavily into precious metals (gold, silver et al), and that most of the real damage of the collapse we are living through now, will be visited on the clueless middle class who will (like the germans in 1923 weimar republic) will be wiped out by the sudden appearance of hyper inflation.

The hyper inflation will result in mega dollars for anything, say 22 dollars per loaf of bread by May of next year. This will be followed by a just as sudden, wholesale abandonment of the dollar by every country on the planet including the US of A.

And that's all you really need to know. I can cite stats which show my point of view is valid, especially in a historical context relative to the creation of the Federal Reserve Bank which is NOT a part of the Federal Govt, is in fact a private bank with the Queen and Prince Chucky holding most of the shares, and is not a bank in any sense of the word.

What you are living through is the transition to the post-dollar world. Get used to it. Get used to being poor if you do not have at least one ounce of gold for each person in your care for each year you have to provide for them.

And let us all note that while I do own gold/silver, I am not a gold-bug, and only bought it starting in 1998 with the LTCM bailout by the Fed.

If you want trends, and a serious source of info, then check out www.lemetropolecafe.com, and sign up for a free 2 week subscription.

After you have educated yourself to the scams and schemes that control your economic life, post other questions and we can start a discussion based on knowledge, not ignorance.

Also note that American schools do not teach anyone about money, wealth, or even how to balance a checkbook, let alone the hidden hands that move the world through the financial system.

FOR THE SHORT ANSWER OF WHAT IS COMING, one only need look to argentina.....

[ShaneGR]

2. That does not sound very rosy

Basically you're saying that by the time I get my degree next May, I'm going to be very poor and bread will cost $20.00. And it is all Clinton's fault.

Don't you think you're being just a little bit grim?

[Maple]

3. For America?

Poor...very poor.

[papau]

4. Bush will propose another tax cut, GNP will rise about 4-5% rate at first

then settle back to 3.5% - and job growth will be very low - but positive - averaging 100,000 or so a month, through 12/31/04.

The Market is not tightly connected to the economy - it is more a game of predicting "feelings" - but a lack of a major rise in the economy would tend to hold down the rise in the market - but I suspect 04 will be an up year.

The 10 year bond yield will be above 5% by year-end 04 (I have been saying above 5% by 3/31/05 - but I now think it will happen a bit faster).

If the tax cut for the 04 election does pass, and if Bush is elected, then my five year forecast is 2.5 to 3% GNP growth over those 5 years, the destruction of entitlement to benefits under SS and Medicare - they will become instead programs for cash welfare payments that cover 50% of the need, as payroll taxes are used to fund the never ending Bush tax cuts for the rich, and as we borrow and increase the National Debt ala the Reagan disaster.

If you follow the econ models, I rather like the non-Univ of Chicago variations. If you are talking short term - 3 to 6 months - a straight trend projection is as valid as any other method - both at the Country level - and at the Corporate level.

The key is too remember that the prediction is wrong 100% of the time, and how close it is depends on how you define "close"!!

have fun! (and buy real estate on water frontage! - or maybe not! )

:-)

[rapier]

5. notes

I have no idea what will happen. I never do. I have a suggestion for what could happen that is outside the box.

Contrary to what someone above said, the economy and the financial system are very tightly linked. This has always been the case to some degree, but never more than now.

What could happen is that rising long term interst rates will kill the mortgage finance game. This in fact has already happened. THe mortgage flood, starting 10 years ago, has been the engine behind the flood of liquidity into the system, most of it into the financial system itself to inflate financial assets. Mortgage volume has dropped sharply since the blow off top in the spring, brought on by low interest rates. LOng rates have risen sharply, and thus mortgage activity has slowed dramaticly.

Individuals, households, corporations, states, and the Federal Govenment are awash in debt. As long as new debt was being created in every larger amounts there was enough liquidty to hide the problems of the various sectors. As in refi your house and pay down the credit cards, and buy a new car, etc. etc. This sort of this is what the entire nation has been doing. When you can't borrow cheap anymore then things start lookng a bit bleaker.

THe financial system is highly speculative in nature and also highly leveraged. This means that the markets are vulerable to a panic. I am not predicting a panic, I am just saying that all the conditons are there for one. Especially I will repeat, because of the drying up of new credit, new liquidity. All the rising markets, stocks and real estate especially have been the beneficiaries of the flood of liquidity created by the out of control credit system.

If there is a momentary seize up in the financial markets Al Greenspan will certainly flood the system with money, but does he have enough. In any case this medicine is likely to hurt the dollar and long term interest rates. That in turn will be deadly to so many leveraged players in the financial arena. The long virtious circle of ever lower rates and floods of money/credit will someday, inevitably reverse. And that reverse will be on a dime. Maybe next year. Maybe 05 or 08.

Already the financial system has effected the largest transfer of wealth in world history, to those at the top. They already have theirs. The top 20% having 80% of the assets. They might drag this on a bit longer and squeeze a bit more out.

[stevebreeze]

6. On that cheery note Rapier

I unfortunatly agree. The only question is can Bush/Greensapn, keep the wheels on the cart long enough to help the Bush election? Most of the middle income tax cuts (the child credits that do have some stimuless value) expire after the election next year.

I was however under the impression that Greensapn was alreay very loose with the bucks, money supply wise. Please correct me if I am wrong.

10 year T-bills have risen 1.5% pretty much ending any refi activity. Home buliding while still up may only be hanging on do to those trying to jump on the bandwagon while it is still in reach.

Natural gas prices look to spike as much as 60% over last year. If it's a cold winter that could be a real problem. Not just now but also in spring as many new natural gas electrical peaker plants enter into the mix. Energy prices have been at the hart of a lot of recent(post Vietnam) economimc trouble.

:kick:

[papau]

7. Money supply has shrunk?

I, like yourself, thought Greenspan had an expansion in m1, m2, and m3 going - but I hear that one of those at least shrunk last month/qtr.

I have not followed too closely, but it does not sound correct.

And gas is going to be up 20% - and perhaps 35% in some areas.

But the shrunken currency value is pumping up things a bit - which I expect to continue through the 3rd qtr. of 04.

[rapier]

8. notes

The Fed does not control the money supply. The credit system does.

In days gone by most credit originated thru banks. Thus my first statement that the Fed does not control the money supply needs to be elaborated upon. The first part is that in the past the Fed had more power to control the money supply in that their managment of the discount rate and thru that other short rates had a strong influence on bank lending. So in a sense the Fed used to have a strong influence on money growth but it should be emphasised that the proper word is influence, not control.

(Also, 99% of the time in the past the Fed's policies followed the market and didn't lead it. This is important both operatively and philosophicaly. The current mania by 'free market' conservatives for an activist Fed attempting to control the economy is simply insane. The idea that one man, Greenspan, can, should and does control the economy is an idea so antithical to the idea of free markets that it boggles the mind. What they are advocating is in fact a command economy and the subjugation of market forces. The credit market is a market like any other by the way. In fact it might be considered the mother of all markets)

In any case banks now play a very minor role in credit creation. THe big dogs now are the mortgage industry and Wall St., thru the securitization of all manner of debt.

Today the Fed reported that the money supply measure M3 declined for the 5th week in a row. Why? Well I say because of the dramatic slowdown in new mortgage financing. In this day and age this is an incredible run, and ominous. The cracking of the mortgage mania is the prime cause, in my opinion.

Perhaps I am wrong on the need for ever rising credit creation/money growth to fuel economic growth. (growth such as it is, so far with little job or income growth) If I am not wrong then now, or in future, when money growth stalls or reverses there is going to be a lot of debt which suddenly isn't going to get repaid. Or so say I. In my vision recession is far to mild a term for what could happen.