USA 2008 Depression

[Spokesperson 0]

Quote[/b] ]The main trigger for the current Depression is believed to be Sub prime lending.

There's no depression. Sure it's possible the recession has come in the US, but it's far from certain. It will come, and will likely come now.

It doesn't matter if you find the "ones" that are responsible for the sub prime loans. It was absolutely natural and necessary.

The Dot-Com crash led to extremely low interest rates in order to get the economy running again. It was necessary, and it's because of this and the increasing real estate-prices the sub-prime loans have been possible. Banks get no profit from keeping their money in vaults. They have to invest or lend money to people. The security of those loans was the real estate, but now the prices decrease which means there's no security.

And to earn more money the interests + loans have been re-made into financial derivatives that can be sold/bought on the market. So that way banks from all the world have invested their share in that.

Most of the US consumption has been based on loans from China mainly. China produces, sells and lends you money at low interets to buy more. You are over-consuming, and under-producing because it's cheaper to produce things in other countries, ie the owners gain more money that way. That will lead to china over-producing which is a big problem.

The reason for all this is the corporate hunger for short-term profit and financial speculation. The stock market is like a lottery. This time it went very wrong. And the most interesting part is that american taxpayers have to pay for the losses of the greedy game.

[walker 0]

Hi all

In reply to Spokesperson

Surprisingly when you get off the topic of your Marxist religion and speak about the economics your arguments are reasoned and cogent.

I agree with you on two things:

1) The US tax payer will be the big looser on the NeoCon government foreign debt 9 Trillion Dollars of it. It works out to 30,000 dollars of back taxes plus interest for every US citizen. http://www.brillig.com/debt_clock/

The amount is expected to top 10 Trillion Dollars by the election. There is of course on top of this another 13 Trillion of non government foreign debt.

2) The big chunk of US Debt is held by communist China. China has been using it to whip George Bush into line on a number of topics. Any time the USA complains the Chinese threaten to call in the loans. They did this in the last trade talks and the White House kowtowed.

On the matter of sub prime

The US stock market is like any stock market it reacts to what it perceives is happening. Ideally things are supposed to be transparent so that the stock market can work properly.

The whole thing with the sub prime pieces of paper is they were designed to obscure the assets. This allowed the banks who had the bad loans to hide them in bonds that they said were as good as paper money. In fact because they were loan based this was never the case.

Hence the Attorney General has started the investigation.

The current effect of US Debt if a trigger event happened were predicted back in 2004 by the Economic Policy Institute.

http://www.epi.org/content.cfm/issuebrief203

Of course a lot of this could have been avoided if the White House had not prevented the Financial Sector Assessment Program (FSAP). From doing their job. The FSAP is a joint IMF-World Bank system to alert countries to weaknesses in their financial systems but has benn prevented from performing its alloted task in the USA.

http://www.imf.org/external/np/fsap/fsap.asp#U

As I pointed out the lack of transparency in US banking is what created sub prime. And now the New York Attorney General Andrew M. Cuomo is investigating them to find out exactly what they did.

http://www.washingtonpost.com/wp-dyn....64.html

Kind Regards walker

[TWCRASH 0]

Actually, I'm about 2/3rds the way to a Bachelor's Degree, courtesy of the Montgomery GI Bill, and I've been working 65-70 hour weeks for a long time to make ends meet. Not exactly sitting on my ass waiting for the next welfare check. So, maybe instead of a pissing contest over who's worked harder, we focus on my point, which was that all indicators are that the economy is not well.

It's easy to place the blame.

If you can't take the barbs back don't sling em. You assumed a certain image of me and was wrong just admit it and move on. Im glad to hear you are getting off your ass and doing something. this changes the perception of you being a lazy ass whiney slacker I had. See we both were wrong. Sorry for the assumption.

[walker 0]

Hi all

The Middle East peak oil problem is a definite factor in the US Recession and one of the factors that may push the US from just a really bad Recession into a Depression.

The Fear of Saudi Arabia running out of oil have been voiced for years here is one of the more prescient predictions of 2004:

Quote[/b] ]Is Saudi Arabia Running Out of Oil?

07/29/04 - 07:03 AM EDT

Jon Markman

When oil prices have doubled to $80 and a second Great Depression threatens global political stability, our president will assemble a 9/11-style commission to explain the intelligence and policy failures that led to the crisis. The verdict will be familiar: The stunning blow to the world economy brought about by the sudden, unexpected depletion of fossil fuel should have been anticipated and prevented.

When that day comes -- in five years or perhaps 20, who knows -- many of the key exhibits will have been penned by Matthew Simmons, a Houston energy analyst and banker at Simmons & Co. International.

Simmons is now shouting from the rooftops -- writing think-tank white papers, giving speeches and finishing a book set for publication next year -- that the world is quickly running out of affordable oil and gas, and that no amount of Middle Eastern pumping can bail us out.

While much of the so-called "peak oil" story is well known, what's news is Simmons' startling claim, based on personal analysis, that Saudi Arabia's pumping capacity is in decline...

http://www.thestreet.com/_tsccom/funds/supermodels/10174679.html

Follow link for the full article

Now all that and more has come to pass!

When I came across this article today and the reaction from leading market analysts and players a shiver went down my spine.

Quote[/b] ]Saudi King Abdullah Drops Quiet Bombshell

By Jim Brown

Updated: Tuesday, April 22 2008 02:04:AM

I had another article prepared tonight but this crossed my desk from ASPO. I thought it was important enough to post it in its original form.  Jim

Saudi King Abdullah drops quiet bombshell

By Steve Andrews and Randy Udall, ASPO USA:

On April 13, Reuters reported the following from Riyadh:

Saudi Arabia's King Abdullah said he had ordered some new oil discoveries left untapped to preserve oil wealth in the world's top exporter for future generations…

"When there were some new finds, I told them, 'no, leave it in the ground, with grace from god, our children need it'," King Abdullah said…

Saudi production capacity stands at around 11.3 million bpd, and is scheduled to rise to 12.5 million bpd next year.

The King's remarks seem to confirm a statement made last year by Saudi oil minister Ali al-Naimi who, when asked "How high can your production go?" replied, "We'll get to 12.5 million barrels a day and then we'll see."

If the Saudi announcement was a bombshell, American nearly newspapers ignored it. We decided to canvass experts we respect to see what they thought. Excerpts follow:

Tom Petrie, vice president, Merrill Lynch:

"King Abdullah's quote speaks to the fast-emerging reality of what I call 'practical peak oil.' My use of bold in this quote walkerThe Saudis and other exporters are placing a new emphasis on elongating the petroleum exploitation and depletion cycle. This stems from a growing awareness of the challenges of conventional resource maturity, as well as rising resource nationalism. This is likely to result in an earlier occurrence of global peak oil output than many consumers yet recognize." ...

http://www.rightsideadvisors.com/public....l-.html

Follow link for the full story and further reaction

Oil sustained 118 dollars a barrel earlier this week leading many in the market to say that 100 plus dollar oil is now permanent and White House officials to voice their fears:

Quote[/b] ]U.S. says high oil prices risky to economy

ROME (Reuters) - Oil prices that hit a record on Tuesday are clearly too high and not beneficial for the U.S. economy, a top U.S. energy official said.

The United States has been remarkably resilient in the face of expensive energy, but a rally on oil to more than $118 a barrel is an economic threat, U.S. Acting Deputy Secretary of Energy Jeffrey Kupfer told a news briefing.

"Oil prices are clearly too high. We are not happy with the prices or the direction they're going in," Kupfer said.

Echoing remarks last week by U.S. Energy Secretary Sam Bodman, he said the United States would not delay its plan to buy more oil for its Strategic Petroleum Reserves, in spite of the oil price...

http://www.reuters.com/article/ousiv/idUSL2234075120080422

Follow link for the full story

The effects of the price per barrel on gas prices at the pump lag by about 3 to 6 months depending on Reserves demand and the delivery schedules though Gas companies will often try to disguise profit taking price rises as being the market rather than them making a fast buck.

Never the less US main street is feeling the pinch with sustained 3.50 gas at the pump as well as 4 dollar gas peak prices and talk of FIVE Dollar gas by the end of this year.

Quote[/b] ]Gas Reaches $3.50, With Little Hope for Relief

By JAD MOUAWAD

Published: April 22, 2008

Gasoline prices surpassed $3.50 a gallon nationwide for the first time and oil jumped to a record on Monday as the long rise of energy prices showed little evidence of giving way to recession fears.

The national average price for regular gasoline is up 22 percent from a year earlier, according to AAA, the automobile club. Some analysts expect it to approach $4 a gallon this summer, when demand is at a peak. Diesel fuel prices reached a record $4.20 a gallon on Monday, on average, compared with $2.93 a gallon a year earlier.

In trading on the New York Mercantile Exchange, crude oil for next-month delivery settled Monday at $117.48 a barrel, up 79 cents, a new high. Oil prices have more than quadrupled in the last five years, and some analysts say that oil will reach $125 a barrel this year...

http://www.nytimes.com/2008/04/22/business/worldbusiness/22oil.html?hp

Follow link for the full story

This along with the deepening credit crunch is also causing an increase in flight from dollar as the value of the dollar continues to drop and more investors see that the Bush/Cheney White House has a long term dollar depreciation policy and US businesses continue to fail.

Quote[/b] ]FOREX-US dollar down on Bank of America results; euro up

Reuter's Mon Apr 21, 2008 4:10pm EDT

(Updates prices, adds quotes)

NEW YORK, April 21 (Reuters) - The U.S. dollar slipped on Monday after unexpectedly weak profits from Bank of America dampened investors' optimism that U.S. financial companies may escape the pinch of the crisis in global credit markets.

In Europe, hawkish European Central Bank inflation comments supported the euro after ECB Governing Council member Klaus Liebscher said there was no reason for pessimism on euro zone growth, suggesting the ECB will maintain interest rates at a six-year high. For details, see [iD:nL21705942]

Bank of America Corp (BAC.N: Quote, Profile, Research), the No. 2 U.S. bank, reported a fall in first-quarter profit due to write-downs and rising credit losses. Net income fell to $1.21 billion, or 23 cents per share. [iD:nN21410537]

Analysts said Bank of America's results suggest the fallout from the credit crisis may not be over as some have speculated, chilling the appetite for risk as such problems were expected to continue weighing on the U.S. economy and the dollar...

http://www.reuters.com/article/usDollarRpt/idUSN2158220720080421

Follow link for full story

While peak oil is happening in Saudi Arabia, other countries like Russia, Iran and Venezuela as well even China and Japan are discovering new reserves and there is of course the vast reserves in the Caspian sea. So while we have Middle East peak oil it does not affect the whole globe yet. Other countries are pushing fossil fuel use reductions and not feeling the pinch as much as the USA; so oil prices are not the full picture in the US recession.

With out doubt it is US Debt that is the fundamental cause of all the problems in the USA. There is no sign yet that the White House intends to address and pay back its last 7 years of record deficits. With every US citizen owing 30,000 dollars in back Taxes I see little hope for the US economy and fear a depression is now certain.

Worried Walker

[Journeyman 0]

While peak oil is happening in Saudi Arabia, other countries like Russia, Iran and Venezuela as well even China and Japan are discovering new reserves and there is of course the vast reserves in the Caspian sea.

Russia is already in decline too even though it has untapped reserves. Venezuela’s and other new finds are not on any significant scale and those that are known about are either very deep or very difficult and expensive to extract. Add to that it takes over ten years for a well to come on line once it has been explored and then only at start-up capacity.

Don’t assume therefore that ‘peak oil’ is not playing some role in the current US slowdown. Speculation plays a major role too, and those investors that fully understand the potential impact of global peak oil are likely to already be taking evasive action.

[binkster 0]

One of the main problems with gas/oil in the US is the enviromental laws/regulations. There are several countries who do not sale/trade oil/gas with the US do to these high expectations.

One example is diesel.. It is a by-product of oil and easier to make than Gasoline but is the most expensive. We consume more gasoline than diesel but it is still higher. Right now diesel is 4.19/gallon while Gasoline is 3.50/Gallon.

The reason for this is the enviromental laws/regulations. Im sure if anyone ever looks at a diesel pump in the USA you will see that it says LOW SULFUR less than 15ppm. This is a new law that started sometime last year.

Next another thing is USA consumes more than we can produce so we are dependent on Foreign oil which OPEC has total controll of pricing. When opec raises prices then producers in the States get the same price. I live in East Texas which is huge in the oilfield business. These high gas prices is excepted where I live cause of the jobs/business it creates. Anyways they havent built a new Refinery since the 70s because they are affraid the money they would make would never pay for the facility due to all the enviromental laws/regulations...

What is sad is that our economy is based on OIL/GAS. Our economy will suffer either way we go in the future. Either we consume so much its gets too high and the world economy will suffer. Or lets say we find an alternative to gas/oil then the worlds economy's will suffer too. Think about the job loss that would happen if we didnt need oil/gas anymore.

I hate to say this but I think in the next 10 to 20 years you will see some horrible things due to this energy problem we have. My advice is to save money and get an education while you can.

[Trapper 0]

Maybe a little bit offtopic but not that much:

www.storyofstuff.com

[Journeyman 0]

... No, it is pretty much 'on topic'!

So is this flash animation from Powerswitch.

...and

a much simpler animation from u-tube to show where we are at!

We are at the 'peak', the peak of our industrialized society. Why? Because the very fundamentals of our industrialised society is based on cheap and plentiful oil. Our entire global economy was constructed on and is totally dependant on it. Just about everything around you was either made from or transported by it (including the very food you eat)!

The problems you see with the economy now are just the very beginning of much worse to come. Global demand for oil will soon outstrip supply. This is a very, very scary scenario indeed!

Someone asked my a while ago what sort of cars we would all be driving in the future. Hover cars, electro magnetic levitation vehicles or space/time machines? ... No I said! … How about something like THIS!

[binkster 0]

... No, it is pretty much 'on topic'!

So is this flash animation from Powerswitch.

...and

a much simpler animation from u-tube to show where we are at!

We are at the 'peak', the peak of our industrialized society. Why? Because the very fundamentals of our industrialised society is based on cheap and plentiful oil. Our entire global economy was constructed on and is totally dependant on it. Just about everything around you was either made from or transported by it (including the very food you eat)!

The problems you see with the economy now are just the very beginning of much worse to come. Global demand for oil will soon outstrip supply. This is a very, very scary scenario indeed!

Someone asked my a while ago what sort of cars we would all be driving in the future. Hover cars, electro magnetic levitation vehicles or space/time machines? ... No I said! … How about something like THIS!

Well said... It is scary especially if you have children that are going to have to live through the worst times...

[Spokesperson 0]

Don't forget the food-crisis either. There are food-riots around the world due to increasing prices. Environmentalist-dickheads who don't think about human rights fuel their cars with what could be other people's food. They prefer the rights of some animal or tree.

Researchers at the UN have called this the "silent mass-murder".

[Trapper 0]

Do you own a car? Will you stop driving when the only fuel your goverment allows to be sold will be part biologicaly, in growing numbers by years?

Who do you call Environmentalist-dickheads? I hope it's you and me, too...

So are you saying we should rely more on oil again to stop the food crisis?

Anyone who's talking about peak oil isn't forgetting about the small symptom of a food-crisis, he's already looking at the bigger picture.

If the animation above is right... 10 calories of oil to get 1 calorie of food..., then you we won't do anyone a favor by abstaining from bio fuel because of a food-crisis at the moment.

[DrBobcat 0]

Which is the greater sin: the use of crude oil and other finite resources to power our homes and automobiles, or the use of biological fuels at the undesirable expense of other people's lives around the world? Last time I checked, many wars up till this time and to come began over energy concerns. In the twentieth and twenty-first centuries, this has meant petroleum. Additionally, civilian casualty rates in modern war have been increasing, IMHO, due to the changing ways in which war is fought. I believe the only thing we can do, in spite of whatever the costs may be, is to try to stray away from limited resources as quickly as we are able. I anticipate far more violence stemming from an assured loss such as oil than from a perceived loss in food supply.

Honestly, I believe a great deal of the African starving nations are in the state they are due to poor governmental policy and leadership, not due to the minute rise in biological fuels 5000+ miles away.

Then again, this is all the opinion of a white, handicapped American in California,

DrBobcat

[Commando84 0]

I don't own a car but imo the food crisis is getting bigger i read in the news that more and more americans now have to go to homeless kitchens to get food.

even those that have jobs

Seriosly that sure is a sign of dark times?

[Spokesperson 0]

US americans going to homeless shelters for food is quite common. It's just that that kind of scenes don't pay well. People who write in online forums are usually not concerned about it either, they live in a different world. Like the Russian bourgeoisie did before the revolution. While dancing in saloons they didn't see how real life was like.

It's also normal for US americans to have two jobs or even more but still don't have money left after all bills have been paid.

When the US goes down, capitalism goes down. The two realistic options as I see it for all secular countries will be just like in the Weimar republic, either fascism (capitalism by force) or socialism (new system). The remaining capitalists will support the fascists just like before and always.

People are more important than easy-transportation in the west. If people starve because food is converted to fuel, then we definately should rely more on oil and other fuels.

[Commando84 0]

I hope the buses will still be around

totally OT for this but would been cool if we had a special minerals to power up vehicles and stuff like they have in tiberium wars game though tiberium cristalls have some nasty side effects too..

[TWCRASH 0]

As for the depression quick update..

they said we would lose 85,000 jobs last month.. it was 20,000. To put this in perspective if you took the whole united states population and divided that 20,000 jobs it wouldnt equal a quarter a percentage point in who was effected.

Unemployment FELL from 5.5 to 5%

The dollar actually got stronger last month as well.

As for "food" shortages its Rice mostly and wont really effect the US.

Farmers are already planting and switching to corn and other items because as with games the hype is just too much to surpass. They just had a big deal about it in the news how certain farmers are swicthing their crops this year already to cash in. And if im not mistaken i saw somewhere someone is growing rice to cash in as well. So we will see. Next year bet we have an oversupply of rice and corn.

Now fuel rules all and you will see less SUV's on the road and more economical cars and motorcycles ( i switched out a Explorer for a minivan this year saving 15+ grand right off the bat. went from 20 miles per gallon to 28 or 29 something in the city.

[walker 0]

Hi all

In reply to twcrash:

The phrase "Doh!" comes to mind but you were not the only one to say, "it was all over", even the Financial Times got caught though many were giving warnings and even they pointed out the risks:

Quote[/b] ]The dollar danger is not over yet

Thursday May 8 2008 13:40

When a currency rises after government officials say that it should, you learn one thing: that the fundamentals were pushing it up anyway. It makes sense for senior US and European officials to talk up the dollar against the euro - as they did this week in the Financial Times - especially now that optimism about the US economy makes their arguments plausible. In the long run, however, the real risk of a dollar crisis is against the managed currencies of Asia and the Middle East.

Early March was a time of danger for the dollar. There were forecasts of a deep depression, liquidity fears around some of the mightiest banks on Wall Street, and the dollar's decline against the euro, already rapid, began to accelerate. That decline could have become self-sustaining if investors had begun to dump US assets, but the decisive rescue of Bear Stearns (NYSE:BSC) by the Federal Reserve shifted expectations about future US interest rates and restored confidence.

Through good judgment, as well as a little good luck, policymakers have so far avoided turning a credit crisis into a currency crisis. Without a run of fresh bad news on the US economy there is little reason for the dollar to fall further...

http://us.ft.com/ftgateway/superpage.ft?news_id=fto050820081450413021

Follow link for the full story

The next day we all woke up to the news:

They call it a dead cat bounce; in shares it is also called a suckers rally. Yesterday the suckers found out why as US shares fell.

Quote[/b] ]U.S. Stocks Fall, Led by Financial, Commodity Shares; AIG Drops

By Elizabeth Stanton

May 9 (Bloomberg) -- U.S. stocks fell, sending the market to its first weekly drop in a month, after American International Group Inc. said it needs to raise $12.5 billion to cover writedowns and concern grew the rally in commodities will end.

AIG, the world's largest insurer, slumped the most since February as the company's second straight quarterly deficit spurred speculation more losses are coming in the financial industry. Freeport-McMoRan Copper & Gold Inc. posted its biggest decline in a week after rising copper stockpiles signaled demand from China is slowing. Exxon Mobil Corp. led energy shares lower, even as crude oil topped $126 a barrel for the first time.

The Standard & Poor's 500 Index sank 9.4, or 0.7 percent, to 1,388.28, giving it a 1.8 percent retreat this week. The Dow Jones Industrial Average slid 120.9, or 0.9 percent, to 12,745.88. The Nasdaq Composite Index lost 5.72, or 0.2 percent, to 2,445.52. Three stocks fell for every two that rose on the New York Stock Exchange, where with only 1.09 billion shares traded it was the slowest session of the year...

http://www.bloomberg.com/apps....er=home

Follow link for the full story

The bad news the FT article had worried about has arrived and US economy continues to decline because of the relentlessly rising oil prices.

AIG Citigroup at risk of bankruptcy and desperatly trying to raise capital to prevent it by having a a home contents sale would worry anyone.

And with oil Reaching above $125 a barrel on Friday and increasing talk and indeed investment in $200 a barrel oil...

Quote[/b] ]Goldman Sachs says $200/barrel crude oil is possible

Analyst says $150-$200 crude may happen within two years

By Tom Stundza -- Purchasing, 5/6/2008 7:39:00 AM

Crude oil prices may increase to as much as $200 a barrel within two years because of a lack of adequate expansion of supply, forecasts Goldman Sachs Group analyst Arjun N. Murti in a new report.

With crude trading around $120 this week, New York-based Murti writes that “the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty.'' ...

http://www.purchasing.com/article/CA6557793.html?industryid=48401

Follow link for the full story

...the risk of a dollar crash and even more US business going bankrupt and the risk of not just a two quarter recession but of triggering a full blown US depression becomes more real

Quote[/b] ]US stocks slump amid record oil price

Posted Sat May 10, 2008 8:47am AEST

US stocks have fallen as the price of oil set another record and concerns about the financial sector flared up again after American International Group (AIG) reported a massive loss.

AIG's dismal results raised doubts that the end of the credit crisis was near.

The world's largest insurer wrote down assets linked to subprime mortgages and said it would need to raise $US12.5 billion to boost its balance sheet.

Its shares fell almost 9 per cent.

Oil rose above $US126 a barrel, spurring concerns about inflation and that consumers will pare back their spending as higher prices at the pump cut into their discretionary income.

Pharmaceutical companies added to the gloomy picture.

Mylan posted a wider loss, while Bristol Myers Squibb fell on the threat of generic competition in Europe for its top-selling blood thinner.

London's FT-100 index fell 66 points to 6,204.

The Dow Jones industrial average fell 120.90 points to close at 12,745.

The Standard & Poor's 500 Index shed 9.40 points to end at 1,388, while the Nasdaq Composite Index slipped 5.72 points to 2,445.

For the week, all three US indexes ended lower, the Dow lost 2.4 per cent, the S&P 500 slid 1.8 per cent and the Nasdaq tumbled 1.3 per cent.

Another big financial company, Citigroup, said it intends to shed roughly $400 billion of non-core assets in a bid to become more competitive.

Citi's shares fell 2.8 per cent to $23.63, while AIG shares slid 8.8 per cent to $40.28.

AIG was the heaviest weight on both the Dow and the S&P 500...

http://www.abc.net.au/news....n=world

Follow link for the full story

What this means for world in terms of stability is really worrying. If the USA is not just militarily overstretched but also financially overstretched in this two front war then more episodes like this weeks events in Lebanon become more of a risk.

Worried walker

[Spokesperson 0]

There are factors that indicate that the financial crisis is a cause for the food crisis. Speculating in food prices is much more profitable than speculating in standard shares now. So capitalists buy and store food and wait for higher prices to maximize profits. They don't care if millions of people die of starvation as a result.

The only way out of the crisis is for the capitalists to make more investments. And this can only be done if investments pay off more. Which means that productivity has to rise dramatically. But apart from the other crises there's no new technology that can increase it.

So the only realistic solution is to lower wages in one way or another. By making more people compete about more free jobs (by fireing people first), or by causing hyperinflation. Some liberal countries that have state-owned companies can sell these in order to gain a few months, but there are no such things in the US.

Another solution is to wage war and making sure resources are taken by force or bought at very low prices.

This won't hold forever.