Richard 01.06.10 at 7:46 pm

“Am I the only one who sees it this way? Please, someone, anyone, explain how Ambrose could be right.”

Hi, Richard. That’s pretty much what I was getting at in my post. He SHOULD be right, provided one or two things are/were true, as I pointed out earlier. The financing should have been done through savings from the get-go (this is not an option now, of course). Since that wasn’t the case, and everything was financed from debt… there just isn’t anyway out of this, imo, than forgetting about at least some of that debt, so that saving and then lending can resume.

I didn’t notice at first, but the good in “The ‘Good’ Delfation” was in quotes. I can see why it is, now. Either a lot of people are going to die for the want productive jobs or the bankers are going to take the biggest hit in recorded human history (I don’t think I have to say who’s side I’m on)

I don’t have the link (cleaned out my browser cache), but I read a 3 page article the other day by someone who used to head the IMF (from 2007 to 2008, iirc). This isn’t the first time I’ve read the suggetion he (and others) made, but the government will have to step in, nationalize the banks, make the decisions that the bankers won’t, and parcel them out back to the private sector, under a new, strict set of rules.

Until recently, I was against such a thing ever taking place, given how government manages things and seeing as how our government has an active interest in the banks now (courtesy of the taxpayer, of course). Not that it was ever my call, but from ideological argument, I didn’t think that kind of strategy would ever work, and so I was against it. Well… I’ve changed my mind. Banks must be made to do so, and that would require the will of the masses that it be done in such a way.

I don’t think we’re quite there yet, but with temperatures creating new record lows (when we’re told the earth is heating up), much wasted to providing bio-fuels, and dwindling grain stores…human nature is going to have force it, else many of us die. No politics or philosophies, here, just hard reality. Simple as that.

(note to readers: I don’t think we’ll be entering a new ice age, but there is credible evidence that we might be in a cooling cycle for the next 20-30 years. Still, one never knows…)

Let me get this straight, Ambrose says everyone in the world has to save and limit consumption in the face of a world imbalance by country of savings vs. spending on a current account basis. To simplify, say the world consists only of China and USA.
The Chinese are already big time savers as a government, and on an individual basis, but Ambrose says they will need to save more. So domestic consumption of Chinese goods and American goods goes down in China and manufacturing etc. declines or at least slows down from the Chinese action alone, causing layoffs, etc. and a downward spiral.
The impact of saving in America will be further declines in manufacturing in China, adding to the job losses in China, and adding to the job losses in America. Now who in America will be able to save? Not the people on food stamps, the unemployed, those with underwater mortgages, etc. Admittedly savings by upper and middle classes can be made, at the expense of those producing mid to high end goods; but can we assume that those savings will be large enough to influence the economy? In theory, a large pool of savings should lower interest rates and generate more risk taking. But the West has made personal savings obsolete with debt and the printing press. It is too late to save our way out of this mess. Had we lived in a system where no money could be lent until it was first earned, taxed and saved, then Ambrose would be right. Seems to me that China is living within that discipline but the West, and particularly America, where taxes are for suckers and money has been declared a virtual free good (0 interest rate) for those on the inside, has long ago given up on honest money.
Clearly, the only hope for a savings strategy is for the government to start saving (sic) by reducing wasteful spending, increasing taxes, reducing benefits etc. which is in practice best achieved during good times. Doing this now will cause more short term pain, more downward spiral.
I suspect Ambrose assumes that if enough savings are generated, that the Western debt could be financed. At what interest rate given the risk? Could there be enough savings to satisfy the debt and ongoing deficits of the West? What about the debt bombs yet to go off in the form of at least $9 trillion, which is going to have a much different impact at 5% than 1% or less?
Am I the only one who sees it this way? Please, someone, anyone, explain how Ambrose could be right.

Rick, did you see this important article at Murdoch’s Marketwatch.com?

—–TrimTabs suggests government manipulated stocks——

http://www.marketwatch.com/story/fund-flows-firm-suggests-government-bought-stocks-2010-01-05

I say this article is “important” first because the source of the so-called “conspiracy theory” concerning “government manipulated stocks” is not Alex Jones but the highly respected financial industry name TrimTabs!

And second this article is important because of where the article was published: Marketwatch. Meaning the mainstream is finally getting on board the “conspiracy train” in a serious way. Of course, Murdoch and his empire (no different from CNN or CNBC/Comcast are only adjusting their parameters of acceptable news content because they must do it in order to maintain a shred of credibility.

I happen to respect the hired comment censors at Marketwatch because they seem to allow a lot of controversial and caustic free speech. But one can assume the avalanche of comments that are censored on daily basis over there are beginning to have an effect on the editors. People are starting to get very angry about the media doublespeak and at some point the big media outlets must decide if they are Soviet style Pravda or not.

&&&&&&

Biderman has always had a knack for getting publicity, but this story doesn’t wash. It doesn’t take nefarious forces to push stocks higher, just a market that became heavily oversold, a small but steady supply of short bettors, and lots of financial-system liquidity with nowhere else to go. RA

To the whole section, “The ‘Good’ Deflation”

I think anyone playing traffic cop is going to be sorely disappointed at the way things play out. He’s talking about things that should have happened already, or something that would work IF lenders are willing to forget about at least a portion of the massive amount of debt. Saving at this point, given the un-natural level of debt, is why people are buying “Chinese/Walmart crap” to begin with. Throw whatever money they left after that… into a bank or under the mattress… debt is still out there, and it is not just going to go away because someone finger-waggles people while ignoring that elephant. Lending, imo, will not resume, even following what should otherwise be sound advice.

Most of the young MBAs, entrepreneurs whom I know, are busy glued to their Internet 24/7 buying selling some derivatives and trying to make easy money. Seldom do they realize that somebody needs to grow food, somebody needs to build their houses, somebody needs to manufacture every damn thing they need or don’t need.

Easy money has been taught and made a habit after the onset of Internet era greatly helped by various Governments to protect their politics. Spending lavishly has become great fun and social issue. How long money can come through thin air? How long politician can think that they can revive the patient with repeated dose of opium?

All this has to end and real economy of demand and supply, manufacturing and services should lead to savings and make merry out of savings.

I am amazed that young Indians who have just joined some BPOs after their graduation, already wish to own a house, electronic white goods, car and week end of holiday solely based on credit provided some banker. They do not wish to give a damn to a possibility of job and wage loss. These things have to end. How long bankers can burn hard savings of hard working people on easy fun loving guys?

Bankers are no longer reliable and they have thrown this world in to dismay.

It is better for world that Savings alone can save us from catastrophe. Savings would certainly lead to immediate contraction but definitely lead us in to a better world as all spending would be productive.