Deprecated: preg_replace(): The /e modifier is deprecated, use preg_replace_callback instead in /hermes/bosnaweb11a/b2191/ipw.cavejunc/public_html/bboard/Sources/Load.php(225) : runtime-created function on line 3
Is the U.S. Going Broke?
   Google Site Search
 
I.V. Community Forum
December 18, 2017, 11:06:16 AM *
Welcome, Guest. Please login or register.

Login with username, password and session length
News: For those who had problems using the spell checker, it is now working properly again.
 
   Home   Help Search Login Register  
Pages: 1 2 3 [4] 5 6
  Print  
Author Topic: Is the U.S. Going Broke?  (Read 54608 times)
LenLigmaH
Newbie
*
Posts: 7


« Reply #45 on: October 06, 2008, 11:23:00 AM »

TALK, TALK, TALK, BLOG, BLOG, BLOG, and BLAH, BLAH, BLAH.  I read the same ‘good willed’ stuff repeatedly in search of just one doable act that will give power to "we the people," to cut the strings from the puppeteers who pull them.  Yes, this nation is bankrupt--bankrupt in so many ways. 

I am scared--damn scared.  I'm so scared that I am beginning to feel and think like a paranoid schizophrenic in regards to the present state of this nation, and that life in America, as we know it is vanishing quickly. 

I worry that we could be on the brink of a horrible collapse far more sinister than the Great Depression.  I worry about waking up to find chaos in the streets, martial law declared, no food in the stores, authorities pounding on our door to take our guns, and herd some into internment camps.  You think it cannot happen here.  Such thinking would be of those who know little about world history, and have little awareness of what has been progressively happening in America. 

I wish I could believe not everything is as dismal as it appears and heading FAST into a nightmare existence.  I wish I could believe that the American people’s vote for presidency mattered and not that exactly who the “powers to be” want in office will be put there.  George Bush was illegally put into office by the manipulation of votes.  For any not aware of this fact--check it out.  It’s public record.  It seems all any can do is watch the siege and fall of America into fascism.  I wish I could believe that the fate of America is in the hands of “we the people.”  I invite any encouraging words to alleviate my concerns and fears.
 
What can we do about any of the unfavorable situations we are concerned with today? We are told to contact our senator, governor, mayor, congress, the white house, in protest.  Protest?   The 60's was an era of huge mass protests.  I ask in earnest was the protesting effective in changing anything?  And, how is it that we are in even deeper doo-doo today. Are you aware that currently, designated protest areas, some caged, are being set up?  You can face arrest for civil disturbance if protesting outside these areas.  These areas are far away from protestor targets, which would be government officials, leaders, and the public. 

I think most people are aware that we have little Constitutional rights left.  How many have watched the YouTube clip of people being arrested for reading the Constitution?  Yep, you read it correctly--arrested for reading the US constitution.   Check it out by going to YouTube and typing in "arrested for reading constitution."

I have yet to come across any substantial information about what the average citizens should do to protect and fortify themselves for day-to-day living through these ever changing and uncertain times.  Mostly, I find how to currently invest wisely, and protect your investments.   Are you kidding me?  I have no money market investments and know few people who have, and the Stock Market is sheer Greek to me.

Not too long ago, I heard a tip on local TV news on how to prepare for the downward spiraling economic situation.  The advice was to make sure you had enough money in reserve to cover your living expenses for 6 months.  It was surreal to me.  WTF!  Most families live from paycheck to paycheck!   
 
Many people are strapped with busy routines.  For some, day-to-day living evolves little beyond working, coming home, eating, and watching the “tube.”  If they catch any news, it usually does not go beyond mainstream networks.  Come morning, they do it all over again. This routine can severely limit an adequate and varied source of news information, and can severely distract and impair accurate judgment of current governmental events.

The Internet is a fantastic, near infinite, information library, but not exempt from deceit, rumor or error.  That is a given no matter where you get your information.  Your own intelligence, discernment, and common sense, should be a governing factor on the truth and validity of something. 

I have strong opinions concerning 9-11, The New World Order, Martial Law, Detainment Camps, etc, and I think for good reason.  Perhaps you should seriously investigate these so-called "conspiracy theories."   You may be surprised at what many highly respected and reputable people believe.  You may find yourself thinking what they believe may not be a fictional conspiracy theory at all, that maybe the real conspiracy lies within our own government.

The following websites contain a wealth of information.  Judge for yourself whether this information is something everyone should know, or discredit.  If you do not know how to operate a computer, find someone who does.

Note: All website URLs should be a direct ("just click on") link.  Should you have a problem, then “copy & paste” the URL link into your search bar.     

***A MUST WATCH***America, Freedom to Fascism (Video) ***A MUST WATCH***
 About the documentary film: Determined to find the law that requires American citizens to pay income tax, producer Aaron Russo ("The Rose," "Trading Places") set out on a journey to find the evidence. This film which is neither left, nor right-wing is a startling examination of government. It exposes the systematic erosion of civil liberties in America since 1913 when the Federal Reserve system was fraudulently created. Through interviews with U.S. Congressmen, a former IRS Commissioner, former IRS and FBI agents and tax attorneys and authors, Russo connects the dots between money creation, federal income tax, and the national identity card which becomes law in May 2008. This ID card will use Radio Frequency Identification (RFID) chips which are essentially homing devices used to track people. This film shows in great detail and undeniable facts that America is moving headlong into a fascist police state. Wake up!
 
America, Freedom to Fascism -  http://video.google.com/videoplay?docid=-1656880303867390173&ei=iK3lSJfrCqfYqAPoi82NCw&q=AMERICA+FREEDOM+TO+FASCISM&hl=en

Loose Change Final Cut (Video) - http://www.loosechange911.com/finalcut/

Architects & Engineers for 9/11 Truth (website) - http://www.ae911truth.org/

Pilots For 911 Truth (website) - http://pilotsfor911truth.org/index.html

The 9/11 Truth Movement (website) - http://www.911truth.org/index.php

Like I said, I'm scared--damn scared.
« Last Edit: October 07, 2008, 11:13:57 AM by LenLigmaH » Logged
Kokopelli
Senior Member
***
Posts: 22



« Reply #46 on: October 06, 2008, 06:33:46 PM »

I too am very uncomfortable with what has been happening. You could say extremely concerned. I have been fortunate (?) to have had the time to follow this for the last 10 years or so.  I have written and commented on the lunacy in the financial system in many thousands of emails to family and friends and posts on blogs. People really didn’t want to know about what was going on. I have been told I am a pessimist and a doomsayer. It was all so predictable.  It is beyond a conspiracy.

Most people really enjoyed the up side of the inflation as stocks went up in the late 1990’s and then houses and real estate in the early years of this century. For many it was the best time ever.

The mess unfolding is the consequence of some of humans’ natural curses, unmitigated greed, the desire to win at any cost and the ability to justify stupid, insane behavior.  Everyone, like you and most other citizens, were way to busy in their own games of either survival or consumerism or both to pay attention or be in a position to do any thing about it. It was like the frog in water, turn up the heat slowly and boil the frog to death. We the People have had the water getting hotter and hotter. Now it is near the boiling point.

What we are dealing with is the game of Monopoly on a grand scale.  As you put it, the Powers that Be (PTB) have been manipulating the system thru Congress to win the game. Problem being, when they have won, what then?  In the board game and in this one, winning means there is no one else left who can afford to play and game over… I believe we have almost reached that point.

Debt is the culprit. Debt created by our fractional reserve banking system.

Not many really understand much about money and debt. Sorry, it’s really true. The government just agreed to create $700 billion in debt, which ended up by the time it was passed, $850 billion plus the other recent bills to bail out Fanny, Freddie, AIG, the auto industry and more comes to almost $2 trillion… To big a number to even comprehend. But this is debt that has to be serviced, at least interest only payments. There is somewhere around another $50 – 70 trillion dollars of total debt this country. Which we are obligated to pay. Numbers way beyond our comprehension. The point is, it is to much to pay when we have sent many of our manufacturing jobs elsewhere in the world and are no longer a large player in the resource arena. Where does the money come from to pay it? By trading paper and leverage?  We have been paying it with more debt. Until recently when the cracks started appearing in the dyke holding all that debt from consuming us.

The most recent $2 trillion is after another $5 trillion that has been borrowed in the tax payer’s name in the last 8 years.  And that doesn’t count all the housing debt piled up or commercial real estate (strip mall) debt or auto loans or student loans or loans for stock buy backs or…?

Will it cause our taxes to go up?   Or just prices to rise? (Which is the silent tax most governments prefer to actual taxation.) 

Why is the creation of an additional $2 trillion important? Because the creation of debt is also the creation of dollars. Why is that important?  Because the number of dollars in circulation chasing goods and services is important. The higher the relationship, means the higher the prices or the lower the purchasing power of the dollar.  In the current case, the dollars being created are just going to replace those lost by leveraged speculation.  I don’t think it is any where near enough but even if it were, it doesn’t fix the real problem of growing insolvency and inability to service the existing debt. And in fact it just makes matters worse because all these debts need to have to be serviced (payments).
 
Let me explain debt and inflation this way. When a company needs money it can either go borrow money create debt which is a cost on future production or create additional stock. Both will get additional capital into the company. One adds long term costs to which affects the company’s profits and the other dilutes the value of the other share holders.  In a fractional reserve banking system, money created from debt is like the creation of additional stock. It dilutes the other dollars. This is why prices have been going up for years. More dollars chasing everything.. This is why stocks went up in the late 1990’s and house prices went up so fast since 2002, many easy dollars chasing housing created from debt.  Except this was done recklessly and money was lent to people who couldn’t possibly pay it back and now aren’t paying it back.

Banks make money from creating debts. In a fractional reserve system, when you deposit $100, the bank only has to keep a small percentage on hand as reserves against defaults and runs on capital.. This has been lowered over the years but with a 2% reserve requirement, they can use your $100 as reserve to create $5000 in loans which is money from thin air.  The banks make money on the fees.  They use to make it on the interest too..

This was how it was. Recently, in most cases they sold the debt to someone else and did that over and over. They didn’t care about the quality of the debt because they didn’t have to because it wasn’t their money nor on their books. In this way they only needed minimal deposits to make lots of money. What a system!

This went some further steps and the debt the mortgage brokers and small banks sold, mostly to Fannie and Freddie but also to pension plans and foreigners was sliced and diced and repackaged in exotic securities which were rated by the rating agencies as top notch debt, sold or borrowed against some times four or five times. Every time, they could gain a percentage on the sale but also could then use the proceeds to buy other debts. This was all made possible because of computer models and their ability to get insurance against possible loss. The expansion of debt was made possible because at every level up the chain, the banks could use the asset (?) as reserve capital to create even more dollars.  They could also insure against losses making it all that much more exciting and profitable and even insurance companies could buy the junk and use it as reserve capital…  It was all sooooooo insane. Unfortunately, the companies that were selling the insurance were totally unregulated and with out any reserves.. Insane? YES!!!!!

All this additional debt created lots and lots of dollars out of thin air. This caused oil to go up in price and food and cooper and lots of things. The trouble with debt is that it has to be serviced and we have reached the point where there isn’t enough actual productive enterprise or profits from real productive profitable endeavors to service all the debt created.   We have reached what some economists refer to as Zero Hour. Where income from all sources possible is inadequate to service the debt created.   And the solution is to create some more and to hope that the dollars created spread out thru the system? I doubt it..

And now that pyramid of debt is collapsing.

So I am worried. Worried that the credit system will break down and life as we know it ends.  Truckers need credit to get fuel. Growers need credit to get seed. Many employers need credit for the buying and selling ends of their commerce and also to make payroll. We are running on credit (creating debt) and it has been impaired by collateralized debt obligations CDOs, and credit default swaps CDSs all fed by Joe and Jane Sixpack’s inability to make their payments which have been impaired by the rising prices of food and fuel caused by the inflationary spiral of trillions of dollars having been created out of thin air thru the fractional reserve banking system turned from stocks to chasing housing to chasing commodities.

How the consequences manifest themselves going forward is totally unknown because the world has never been thru something exactly like this before.


Computer models gave the large institutions both the ability to forecast but also the cover to have plausible denial. No one really knew whether the models were accurate or whether they could accurately forecast whether risk could be managed on such a large scale. The geniuses thought that they would work and the banking industry didn’t really care as it wasn’t their money. They were making money hand over fist and it was just to much fun and so easy to ignore all the potential down side. In fact, all gloomers or questioners were exorcised from the system. If you couldn’t be positive, no one wanted to talk to you at all.

So your fear of the future is well warranted because what happens when the Monopoly game is over? Fold up the board and go home or redistribute the assets and start over.  My concern over the end of the game is about how this manifests itself. I’m not much worried about the internment camps or soldiers showing up at my house, I am more concerned about what happens when the system of credit we have grown so accustomed to breaks down.  Yes it is possible for it to break down. It is very complicated but the $700 billion bail out was more about trying to inject confidence in a system of credit default swaps and inter bank lending more than it was about bailing out Wall Street. What is going on is about leverage and borrowing on margin to gambling on all sorts of what if’s. And about buying insurance on these gambles from companies that have no ability to pay off in the crisis we are in.

This got out of hand when in 1999 Phil Graham (R) pushed thru the repeal of Glass Steagal which prevented large investment banks from creating all these exotic financial instruments that are melting down. The bill was signed into law by President Clinton. This is truly a bi-partisan mess of the first order.

No one knows how this mess will manifest itself. All you can do is be as prepared as you can.  The chances that trucks stop moving is maybe extreme but Washington is extremely worried about something. If you have watched any of the hearings, Bernanke’s demeanor is not of a confident leader.   I think he realizes that all his theories about how the markets should react are just that, theories.  Paulson is a Marie Antoinette. He doesn’t have a clue. He is one of the architects of the derivatives that are plaguing us. More theories and models that are breaking down in the face of real events. 

You really do need to have food for at least a month on hand if this crisis worsens. Buy twenty five pounds of rice and twenty five pounds of beans at least and what ever else you can. There will be little help in this county or maybe in any county if the trucks stop moving food due to their credit cards failing.

No matter, I think times will get quite a bit worse before the start getting better. America has been living a fantasy, thinking it could live on credit used mostly for consumption while prosecuting wars on more than two fronts and lowering taxes at the same time.  There really are consequences for irresponsible behavior and we are just starting to discover what they will be.

Good luck and quit worrying about them coming to get you. They already have no use for you unless you are a doctor or nurse or have some technical skills they need in their crisis of trying to maintain their power. Worry about shelter and food and survival and hope that all this works its way out with as little pain as possible.

Logged
CJ Resident
Veteran
****
Posts: 50


wtf?


« Reply #47 on: October 07, 2008, 12:25:32 AM »

I'll be expecting a full report on the biscuits & gravy :)
The biscuits and gravy were "OK", everything else they served was EXCELENT. The Grange still has the best B&G but you gotta love that thick cut bacon.

You have to be concerned about what's going on but worry will only give you ulcers.

So far this year I've watched my 401k dwindle down some 25% and my Edward Jones account even more. What are you going to do? If you pull your money there are all kinds of taxes, penalties and the like which would amount to more than the loses. So, just close your eyes and go along for the ride! But do prepare.

Tonight should be a good debate with Obama coming face to face with the slandering fool. He should beat the guano out of the old bastard.
Logged

When seconds matter, the police are only minutes away.
Kokopelli
Senior Member
***
Posts: 22



« Reply #48 on: October 07, 2008, 03:44:28 AM »

With out some worry, you wouldn't be prepared to eat as you wouldn't have food in the house, much less put fuel in your car. Worry is part of the survival instincts that we were born with.

Trouble with a lot of people today, they worry about the wrong things. And sure excessive worry about things you have no control over is not healthy but ignoring the train coming down the tracks when you are stalled on a crossing is not healthy either.

We are truly in a paradigm shift in the world. Our financial system is in crisis and is the underlying stability changing rapidly. Even though it is hard thinking thru the financial crisis facing this nation and the world it is real and will have significant consequences for everyone. The only real answer to the situation is a collapse of debts but that is unthinkable as the consequences are to great. Yet, it has to happen. I believe it is inevitable. So question is will it be slow or fast?

People have been living on unrealistic future earnings and extremely unlikely future incomes for a long time.  Pension funds have predicted 8 to 12 percent increases in value for decades. The future has arrived and we have just learned that we have been living way beyond our means, as a nation.  And instead of cutting back and being conservative, what do we propose? More living beyond our means! One definition of insanity is to do the same thing over and over expecting different results. Our leaders are insane! Marie Antoinettes and or members of the Ostrich Society!

Now you have a few choices, you can remain one of the Ostrich Society with your head in the sand and your ass exposed or you can do what ever you can to minimize how the coming events effect you.

One apropro saying I have heard in different ways all my life is "Those who fail to plan, Plan to FAIL!" 

I think under the circumstances it would be wise to have as much food stored as you can (a month minimum and six months best and have garden seeds stored) and always keep your vehicle full of fuel. Even if you failed to plan in the past, it is time to do so now.

We really don't know where this is going, but a failed financial system of this scale has never before been seen.

Good Luck to all of us! And may your god be with you.
Logged
Admin
Administrator
Guru
*****
Posts: 105



« Reply #49 on: October 07, 2008, 05:13:19 AM »

How to Ruin the U.S. Economy

by Ben Stein

Posted on Monday, October 6, 2008, 12:00AM

1) Have a fiscal policy that creates immense deficits in good times and bad, burdening America's posterity with staggering burdens of repaying the debt.

2) Eliminate regulation of Wall Street and/or fail to enforce the regulations that already exist, instead trusting Wall Street and other money managers and speculators to manage other people's money with few or no regulations and little oversight.

3) Have an energy policy that disallows producing our own energy and instead requires that we buy energy from abroad, thus making our oil prices highly volatile and creating large balance of payments deficits, lowering the value of the dollar and thus making the problem get progressively worse.

4) Have Congress mandate that banks and other financial entities lend money to persons they know in advance to have poor credit ratings or none at all.

5) Allow investment banks, insurers, and banks to bet their entire net worth and then some on the premise that borrowers known to be improvident will in fact repay those loans.

6) Allow the creation of large betting pools called "hedge funds" that can move markets and control the outcome of trading, thus taking a forum for savings and retirement for families and making it into a rigged casino game that exists primarily to fleece suckers like ordinary working men and women.

7) Have laws that protect corporate officers from being sued for misconduct but at the same time punish lawyers in the private sector who ferret out such misconduct and try to make accountable the people responsible for shareholder and investor losses. If one of those lawyers gets particularly aggressive in protecting stockholders, put him in prison.

8) Appoint as head of the United States Treasury Department a man whose whole life was spent on Wall Street, who became fantastically rich through his peddling of junk bonds at his firm while the firm later sold short those same sorts of bonds.

9) Scare Americans into putting up $750 billion of their hard earned money to bail out the billionaires and their friends who created the market for loans to poor credit risks (The "subprime" market) and the unbelievably large side bets on those loans, promising that such a bailout would save the retirement savings of Americans, then allow the immense hedge funds to make the market crater immediately afterwards.

10) Propose to save the situation by surtaxing the oil industry, which is owned by our fellow Americans, mostly in their retirement plans, thus penalizing Americans for investing in companies that efficiently and legally produce an indispensable product.

11) Insist that the free market requires that banks and insurers with friends of the Secretary of the Treasury be saved but allow other entities not so fortunate to fail, thus creating total uncertainty and terror among financial institutions, and demolishing all of the confidence built up in financial circles since the days of FDR.

12) Then have the Republican candidate say he would keep on the job the Treasury Secretary who facilitated the crisis, failed to protect the nation from the crisis, got the taxpayers to pony up to save his Wall Street buddies, and have the Democratic candidate, as noted, say he would save the day by taxing the stockholders of energy companies.

There, that should do it.

http://finance.yahoo.com/expert/article/yourlife/112984
Logged
I.M.E.
Veteran
****
Posts: 72


« Reply #50 on: October 08, 2008, 07:18:15 AM »

It's sad when a comedian seems to understand what our economy is doing better then the people running our country.  It's time to oust incumbents.  Vote ALL of them out of office when they next run for reelection.
Logged
I.M.E.
Veteran
****
Posts: 72


« Reply #51 on: October 11, 2008, 05:36:54 AM »

"It was the meltdown of the subprime mortgage market with cascading defaults that triggered the start of the credit crisis in the United States in August 2007."  Subprime mortages; loans to people with poor credit.  Does that sound like something Republicans would do?
Logged
billy-bob
Guru
*****
Posts: 188



« Reply #52 on: October 12, 2008, 11:38:24 AM »

In my opinion, until the powers that be do their dang jobs, nothing positive is ever going to be done.  Aren't they supposed to be professionals?
Logged

GOD , I'm still here!
I.M.E.
Veteran
****
Posts: 72


« Reply #53 on: October 12, 2008, 02:30:23 PM »

They are professionals.  Most of them are lawyers.  Which is important since they write legislation.  However, in view of global warming and the financial melt down, it would help if more of them were scientists and economists.
Logged
CJ Resident
Veteran
****
Posts: 50


wtf?


« Reply #54 on: October 13, 2008, 12:19:12 AM »

Does that sound like something Republicans would do?

Well, yes. It's called GREED.
Logged

When seconds matter, the police are only minutes away.
I.M.E.
Veteran
****
Posts: 72


« Reply #55 on: October 14, 2008, 05:58:06 AM »

Someones comment I read on the internet:

George Bush has been in office for 7 1/2 years. The first six years the economy was fine.

A little over two years ago :
1) Consumer confidence stood at a 2 1/2 year high;
2) Regular gasoline sold for $2.19 a gallon;
3) the unemployment rate was 4.5%.
4) the DOW JONES hit a record high–14,000 +
5) American’s were buying new cars, taking cruises, vacations overseas, living large!…

But American’s wanted ‘CHANGE’! So, in 2006 they voted in a "Democrat" Congress and YES–we got ‘CHANGE’ all right. In the PAST YEAR:
1) Consumer confidence has plummeted ;
2) Gasoline is between $3 and $4 and could go higher;
3) Unemployment is up to 5.5% (a 10% increase);
4) Americans have seen their home equity drop by $12 TRILLION DOLLARS and pric es still dropping;
5) 1% of American homes are in foreclosure.
6) as I write, THE DOW is probing another low~~ $2.5 TRILLION DOLLARS HAS EVAPORATED FROM THEIR STOCKS, BONDS & MUTUAL FUNDS INVESTMENT PORTFOLIOS!

YES, IN 2006 AMERICA VOTED FOR CHANGE…AND WE SURE GOT IT! ..
REMEMBER .... THE PRESIDENT HAS NO CONTROL OVER ANY OF THESE ISSUES, ONLY CONGRESS.
AND WHAT HAS CONGRESS DONE IN THE LAST TWO YEARS, ABSOLUTELY NOTHING.
NOW THE DEMO CRAT CANDIDATE FOR PRESIDENT CLAIMS HE IS GOING TO REALLY GIVE US CHANGE ALONG WITH A DEMOCRAT CONGRESS!!!!

JUST HOW MUCH MORE ‘CHANGE’ DO YOU THINK YOU CAN STAND?
Logged
CJ Resident
Veteran
****
Posts: 50


wtf?


« Reply #56 on: October 15, 2008, 12:08:45 AM »

Someones comment I read on the internet:
So, in 2006 they voted in a "Democrat" Congress and YES–we got ‘CHANGE’ all right.
AND WHAT HAS CONGRESS DONE IN THE LAST TWO YEARS, ABSOLUTELY NOTHING.

Interesting how this can all be blaimed on a Democrat party held Congress if they have done "NOTHING" for 2 years.
Logged

When seconds matter, the police are only minutes away.
I.M.E.
Veteran
****
Posts: 72


« Reply #57 on: October 15, 2008, 05:27:42 AM »

The writer posted an obvious contradiction.  However, the point was that the Dems claim all our problems are because of the last 8 years of Bush, when in fact, for the last two years the Dems have controlled the Senate and House.  Seems most Dems are not aware of how our three house system works.  During the past two years, the Dems could have written and passed legislation that would have "fixed" the problems Bush and the Repubs caused.  They didn't.
Logged
CJ Resident
Veteran
****
Posts: 50


wtf?


« Reply #58 on: October 16, 2008, 12:15:56 AM »

The problems this country is facing right now have been around a lot longer than Bush, he has just helped to escalate them. How could Congress could pass anything with a king who has vetoed more legislation than any other past president?

It's not like we are going to get ourselves out of this hole we've dug for ourselves in 2 years, 4 years or even 10 years. No matter who is elected as the next president it's going to be an uphill battle, for a long time. And they will be blamed for not doing anything

I still believe most of the problems stem from this 2 political party system we seem to think is the only way there is. Each one fighting the other so that nothing ever gets done. All of the finger pointing, which was especially evident during last nights debate, doesn't help to build this country or any other for that matter. There are a lot of qualified individuals out there but since they don't belong to one or the other "major" parties they won't ever get the chance to show what they can do.

Back to "Someones comment I read on the internet". A long time ago, when the Earth was green, I went to school in CA. I know, they have been notorious for piss poor education even back then. But, when I went to school the difference between 4.5% and 5.5% was only 1 % and not 10. But then I was edumacated pre new math.
Logged

When seconds matter, the police are only minutes away.
Admin
Administrator
Guru
*****
Posts: 105



« Reply #59 on: October 16, 2008, 05:31:54 AM »

Good for a laugh, note the date....


The greatest economic boom ever

A lot could go wrong. And it may not feel like a day at the beach to most Americans. But for your average globetrotting Fortune 500 CEO, right now is about as good as it gets, says Fortune's Rik Kirkland.
FORTUNE Magazine
By Rik Kirkland, Fortune
July 12 2007: 9:46 AM EDT

(Fortune Magazine) -- Just how red-hot is the current worldwide expansion? "This is far and away the strongest global economy I've seen in my business lifetime," U.S. Treasury Secretary Hank Paulson declared on a recent visit to Fortune's offices.

That may come as news to many Americans, whose boom-time memories are stuck in the 1990s, when Silicon Valley was the epicenter of our growth fantasies. But the fellow now occupying Paulson's old office at 85 Broad Street in downtown Manhattan shares that upbeat view. Just returned from a ribbon-cutting ceremony in the Middle East, Goldman Sachs (Charts, Fortune 500) CEO Lloyd Blankfein waves out toward the East River as he explains how the rise of the "BRICs" has altered his strategy and his travel schedule. (BRIC is an acronym Goldman coined in 2001 reflecting the rising economic power of Brazil, Russia, India, and China.)

"I helped make my career by being very disciplined about opening offices," he says. Yet in nine months Blankfein has announced or opened offices in Săo Paulo, Moscow, Tel Aviv, Mumbai, Qatar, and now Dubai. "We've never done anything close to that before," he marvels. "The week before Dubai, I was in Turkey, and before that, Russia and China. I'm really living the BRICs-plus-Middle East kind of life."

These days more and more CEOs are livin' la vida BRIC. GE's (Charts, Fortune 500) Jeff Immelt devotes 12 weeks a year to foreign travel and is looking for his company to grow "twice as fast outside the U.S. as inside - 12% a year, vs. 6%." Immelt expects to see even more robust growth - 20% a year - in emerging markets, which last year accounted for $30 billion of GE's nearly $170 billion in sales.

John Chambers, who last fall opened Cisco's (Charts, Fortune 500) new Globalization Center in Bangalore, seconds the notion that "this is the strongest global trend" of his career. "There is a unique balance today," he says. "More than half of GDP growth is coming from emerging countries. And yet the developed countries are also doing pretty well. It is something we have never seen before."

At Boeing (Charts, Fortune 500), Jim McNerney and his team, just back from the Paris Air Show, have booked 634 firm orders for their new 787 jet, which they will unveil in Seattle on 7/8/07 (ah, marketing!). That's more than for any launch in industry history, and thanks go "predominantly to Asian and other emerging-market buyers," says Laurette Koellner, president of Boeing International.

While the current pace isn't quite a record - according to the IMF the world grew at a 5.4% average annual rate from 1970 to 1973, vs. a projected 4.9% from 2003 through 2007- there's really no contest. When our ties were fatter and we were thinner, total world GDP was $13 trillion in constant dollars. Today it's more than $36 trillion. Not to mention, as investor Jim Rogers notes, "there are three billion people in places like Eastern Europe, Russia, India, China, and all of Asia who weren't participating last time around but who now are." Back then, Germany and Japan led the charge. Now the emerging markets are running fastest, along with Europe, which has - for the first time in years - pulled ahead of the U.S. in GDP growth.

The last global good time in the 1970s, of course, ended in a nasty bout of double-digit inflation, spawning the worst stock market crash since the Great Depression, plus other horrors, such as the rise of disco. Is that sorry past our future? Not necessarily. But with nervousness rising over everything from Bear Stearns' battered hedge funds to tightening lending standards that could clog the crowded private-equity deal pipeline, let us first explain how one can be, as we are, short-term bearish but long-run bullish on the global growth story.

When it comes to markets, we hold these truths to be self-evident: (1) It's never different this time, and (2) Every boom leads to financial excesses that spark its undoing. (That's why they're called business cycles.) "The necessary conditions for a bubble to form are quite simple and number only two," investor Jeremy Grantham noted in a recent newsletter headlined "The First Truly Global Bubble." "First, the fundamental economic conditions must look at least excellent - and near perfect is better. Second, liquidity must be generous in quantity and price: It must be easy and cheap to leverage." That pretty much sums up the world we've been living in, a world where prices skyrocketed for Miami condos, Indian stocks, and office towers in Dubai.

Now, though, with interest rates going up, heavily leveraged hedge funds and private-equity firms - not to mention cash-short adjustable-mortgage holders and the bankers who've lent to all three groups - have trillions of reasons to worry. Wilbur Ross, who earned a fortune correctly timing the distressed debt market, is among those who see a "real risk" of a credit shock. The subprime meltdown in the U.S., Ross believes, "isn't remotely over." "More important," he adds, "the same lack of discipline in extending credit has very much become prevalent in the corporate market as well." Since liquidity is more about crowd psychology than the actual money, a financial implosion could spook lenders, cutting off the easy financing that has fueled the record M&A and LBO booms and helped lift stocks to new heights. (That's why they're called credit crunches.)

Then there's the really scary stuff: the prospect of a conflict in the Middle East that spills into full-blown war, an act of nuclear terrorism, and the like. Such "exogenous shocks," in the clinical argot of economists, would likely cause far more lasting damage than any mere market correction. In that sense "globalization remains a delicate phenomenon," says historian Niall Ferguson, whose writings offer vivid reminders of how the chaos of world war ended the first great round of this process early in the last century - and could do so again.

Still, as long as some big geopolitical turmoil doesn't break out - and we're talking Ferguson-level large and bloody, as in August 1914, not October 1973 - the world economy should continue to benefit from globalization. Cross-border trade has soared since the early 1970s to record levels of world GDP. Cross-border financial flows have grown even faster, at a nearly 11% compound annual growth rate since 1990, according to McKinsey & Co. (Disclosure: I do occasional projects for McKinsey.) Much of that investment has generated strong returns, judging by one key measure: Since 1998, GDP per capita in the developing world has risen 4.5% a year, twice the rate of the advanced economies.

The bottom line: If you look past the market's cyclical gyrations, deep secular shifts in technology, productivity, and patterns of consumption do, indeed, "change everything" - or at least change a lot of things. Consider Cisco. Anyone who bought its stock, now at $28, near the $80 peak seven years ago is still hurting. (And if you bought it on margin, God bless you.) But though the bursting of the tech bubble vaporized trillions of dollars of wealth, the revolution marched on. Today over 500 million households are connected to the Internet, more than double the number in 2000 - and half live in the emerging world. Cisco itself now enjoys sales of nearly $30 billion (up from some $19 billion in fiscal 2000), and profits have more than doubled.

The long view matters. Which is why, having made billions by betting that rising emerging-world demand would spur consolidation in the long-moribund steel industry, Wilbur Ross is now trying to ride a similar trend in auto parts. Since August 2004 he has built up a $5-billion-a-year parts supplier from scratch, mostly by acquiring companies overseas on the cheap - "without adding debt," he hastens to add. It's why real estate billionaire Sam Zell, no dewy-eyed optimist but a tough, successful bargain hunter with a bad-ass nickname ("Gravedancer"), even ventures to suggest how things really are different this time. During the 1970s oil producers squandered their newfound gains by making government bank loans to "countries incapable of using it," he says. "Now it's mostly going into rainy-day funds or into productive private investments in places like China and India. That's a whole different kettle of fish from what we dealt with in the past."

And it's why the transformations we've witnessed during this go-go beginning to the 21st century are mere prologue.

***

"We want to go global by going East, not West," says Mohamed Ali Alabbar, the dynamic chairman of Emaar Properties, onstage at the Madinat Jumeirah resort in Dubai. The crowd in the cavernous room divides sartorially between business-suits-and-ties and white-robes-with-burnooses. Outside, motorized dhows ply canals lined with gleaming luxury hotels and shops. Up and down the main road hundreds of cranes twist under the desert sun, as builders race to erect more skyscrapers more quickly than anyplace on earth - among them Emaar's own Burj Dubai, which, when completed next year, will claim the title of world's tallest building. But this morning Ali Alabbar is talking mainly about the scores of malls and housing developments he plans to build in India and North Africa. "The West has got aging populations and aging economies," he says. "The East is where the true glamour lies." Ouch. Still, the man has a point.

As the action moves to emerging economies, think of what's playing out as a global version of America's postwar boom. To catch up, these large populations first require commodities and basic building materials - witness the threefold-plus increase in prices of steel, oil, and copper since 2000. Then, as incomes rise, they spur vast new markets for everything from detergents to cellphones, from airports to hospitals. The McKinsey Global Institute forecasts that over the next decade nearly 450 million newcomers will join the middle class in China and India alone.

Sam Zell is a believer: "I think this consumption story is kicking in on a worldwide basis." To get his share he bought big stakes in two public homebuilding companies in Brazil and Mexico and in the last year has begun investing in new low-cost housing in China and Egypt.

At the same time, growing economies give rise to a new crowd of competitors and entrepreneurs. Think Brazilian jetmaker Embraer or Chinese PC maker Lenovo or Indian expatriate Lakshmi Mittal, who has built a steel colossus with some 10% of global market share. Surely it's early days for this trend, you say? "I hope it's early days," counters Goldman's Blankfein, "because we're investing now from the point of view that this has crossed a tipping point. You ignore the emergence of these new entrepreneurs at the peril not just of losing share in a local market, but of threatening your global franchise."

Jeff Immelt isn't making that mistake. Last fall he took a list created by Boston Consulting Group of the 100 most important companies in developing economies and arrayed it into four camps: customers, suppliers, competitors, and nonaligned. "I tell my leadership team, 'Our goal for this group is to have lots of customers, lots of suppliers - and no competitors,'" he says.

To stay ahead, Immelt is pushing GE hard into an advanced phase of globalization he calls "in country, for the world." That may sound like some celebrity ditty composed for Live Earth, but Immelt is quite serious. He believes that by figuring out how to meet demand in these still relatively poor growth markets, he's going to achieve hard-to-imagine price breakthroughs. And here's what's truly radical: As GE and others do this, these products won't just be sold in emerging markets. Instead they'll filter back into the rich economies - a new deflationary force that should delight buyers but devastate competitors who lack a global footprint.

Examples? "Water," says Immelt. "There's a shortage everywhere, even in places like California and Florida. Some systems we're working on in the Middle East, India, and China are trying to do water desalination at $0.001 per milliliter, which is an off-the-charts low cost. We'll never hit that in the U.S. But we'll hit it someplace outside. And the second we do, a huge market is going to open up inside as well." Immelt sees the same thing happening with coal-sequestration technology or MRI scanners, where GE is working on a product in China that could cut prices in half. "At the right cost point, you not only sell it in China, you open up a market among the 35% of U.S. hospitals that today cannot afford to have an MR scanner," he says. "We've got 15 or 20 projects like this that are going to open up big markets around the world over the next five years."

GE's not alone. Another market to watch: small cars, where the big American, Japanese, and Korean makers are now tussling with locals to grab share in China and India. The new models that emerge will first be sold locally and then to other emerging countries. "But believe me, the goal isn't just emerging markets," says Hari Nair, president of international for auto parts maker Tenneco, which today gets 58% of its sales overseas. This intense competition is spurring innovation, such as the work Nair's team is doing in India to help Tata Motors introduce a "one lakh" car by 2009. (A lakh is 100,000, as in rupees, or roughly $2,500.)

"These environments challenge you to do things you never imagined," says Nair. "You can't just rely on the traditional markets of the West. You've got to be part of new ways of doing business." (For more on the way the emerging world can affect prices, see "How Microsoft Conquered China.")

***

"Sustaining the miracle." That was the theme of a conference I hosted as Fortune's deputy editor in May 1997 in Bangkok, a few weeks before a run on the Thai baht metastasized into a vicious deflationary spiral that soon threatened all Asia - and for a time, it seemed, the global economy. Did anyone gassing on in Bangkok see it coming? Ha!

It's cold comfort to note we weren't alone. The World Bank had just published a special report on the East Asia economic miracle. The airwaves and op-ed pages back then were larded with paeans extolling "Asian values." But the truth is, we blew it. Here's the other funny thing, though: Ten years later it's clear that, despite the very real pain, it was all little more than a bad bump on an upward road.

So where does the world stand today? A little less complacent, at least measured by column inches and airtime. Not a day passes that someone doesn't fret about any number of potential buzz killers: protectionist sentiment in Congress; the humongous U.S. current-account deficit; unprecedented levels of debt buoyed up by know-nothing-and-don't-want-to lenders; the housing slump; and more. On the other hand, measured by what really matters - the money - Mr. Market so far doesn't seem too rattled. Risk spreads, or the gap between historically sketchy paper, such as emerging-market debt or junk bonds, and risk-free Treasuries remain near all-time lows.

Somebody's wrong. Our guess - and that's all it is - is that the next big move won't be up. Alan Greenspan pondered this scenario in his farewell address at the Fed's annual shindig in Jackson Hole, Wyo., two years ago. Quoth the maestro: "Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums." Translation: If a correction occurs, what went up fastest - historically more volatile things like Shanghai shares, Turkish bonds, or the last LBO through the gate, say - will go down even faster. (On Wall Street the pros call that kind of volatility an asset's "beta" - it's a Greek term, but think of it this way: as in "beta beware.")

Assuming history at some point proves yet again unkind, we don't pretend to know how far things will fall, or when they will bounce back. Nor are we ready to buy the notion whispered in some circles that, hey, since global growth is already so robust, if the U.S. goes into recession, can't the rest of the world keep chugging? That day may come, but it's not here yet. As the world's champion buyer of last resort, the U.S. consumer right now remains the global economy's broad-shouldered, albeit increasingly weary, Atlas. If Atlas shrugs ... look out below.

So while it's a wonderful world, as Hank Paulson notes, "it pays to be vigilant." When it comes to financial shocks, Paulson says, we haven't repealed the laws of "economic gravity," so "it's when, not if." (See more of Paulson's comments on the world's economy.) Here's how Lloyd Blankfein is reconciling that potential for short-term fear with long-term optimism. Even as his firm expands abroad, he has lately been lengthening debt maturities (thus lessening Goldman's interest rate risk). And he's been making sure he has plenty of cash on hand, just in case: $50 billion or more by the latest count. Sounds right. There's going to be a lot of growth ahead - for those who stick around to enjoy it.

http://money.cnn.com/magazines/fortune/fortune_archive/2007/07/23/100134937/index.htm
Logged
Pages: 1 2 3 [4] 5 6
  Print  
 
Jump to:  

Powered by MySQL Powered by PHP Powered by SMF 1.1.19 | SMF © 2013, Simple Machines Valid XHTML 1.0! Valid CSS!