Originally Posted By mawnck We are SO screwed. John Mauldin is an investment adviser, a very smart guy, and most definitely a conservative. You need to give him your email address to see the entire article (not a bad move IMHO - he sends some VERY informative "spam") so I'm going to quote fairly extensively: >>This week I had the privilege of being on the same panel with former Comptroller General David Walker and former Majority Leader (and presidential candidate) Richard Gephardt. A Democrat to the left of me and a self-declared nonpartisan to the right, stuck in the middle and not knowing where the unrehearsed conversation would take us. ... There was surprising agreement among us (surprising to me, at least). The gist of it is this (and if you have been paying attention this is no surprise): We (the US) are on an unsustainable path. As Walker noted, cutting the budget (spending) by a few hundred billion dollars does not get us to sustainability. Going back to the 2007 budget level would be helpful but not sufficient. Did you see the CBO (the more or less independent Congressional Budget Office) estimates of the deficit that came out this week? The CBO said the fiscal 2011 deficit will hit $1.48 trillion, up from last August's $1.07 trillion estimate. Other estimates, not forced to use unrealistic assumptions, are much higher. ... The simple answer is that no possible resolution of the fiscal deficit that gets us to sustainability (which logic defines as below-nominal GDP, although surpluses would be nice) can be done without real cuts to Medicare entitlements or increased taxes or some combination. ... We located the problem. There is about 30% of the electorate that is mad at Obama and the Democrats for not getting a single-payer, full health-care program. They want nothing less than that. Then there is the 30% or so that are mad about increased taxes, runaway spending, and budget deficits. They will likely punish any Republican who even utters the word “increase” in the same sentence with taxes, unless they are talking about those bad tax-and-spend Democrats. Right now, neither side seems willing to compromise. Obama has punted on coming up with any real solutions. Offering to freeze spending at today’s level is a joke. It is like one of my kids (and this has happened, kind of) getting my credit card, spending a ridiculous amount of money, and then saying, “Ok, Dad, if you’ll give me the card again I promise I won’t spend more than that!” But the GOP is saying they want to cut spending around the edges of the budget without dealing with the real elephants in the room, Social Security and Medicare. They have some plans that get us closer, but none that David or I could see that gets us there. What happens if someone talks about real adjustments to the entitlement programs, or tax increases? Look at what happened to the Deficit Commission and their reports. They were dead on arrival. I thought they had some interesting ideas. It is hard to get to a real compromise with that level of conversation. But what the three of us on the panel did agree on is that if a compromise is not reached, the end result looks like Greece. My points were that much of Europe is getting ready to give us a real crisis, sooner rather than later. Great Britain is headed for what looks like a recession and further problems. Japan, as I am wont to say, is a bug in search of a windshield. We are going to get some great real-time lessons on what happens when you don’t deal with a problem in time. The longer you wait, the worse the results will be when you are forced to deal with the issues. The lack of compromise is going to run head on into a bond market that will force one, or raise rates until there is truly a crisis of biblical proportions. If you think high rates were bad in the ’70s (and they were, trust me!), think what they would be like in a deflationary environment. For that is what would happen. We would fall into a severe recession, and recessions are by definition deflationary. And depending on how late we are in getting our act together, it could be worse than a recession. We could drag the whole world down. Leader Gephardt spoke to the fact that it will take politicians essentially violating what they feel are their core views, for the good (and survival) of the nation. He thinks that there are enough leaders who get it now that a compromise is possible, although he noted that Obama is going to have to back off on some of his main issues. Newt (Gingrich) said flat out that he did not think a compromise was possible, as he did not think Obama would reverse. Let’s call Walker a skeptical optimist. Me, I think it is 2013 before we get the real changes. I just see a bubble in complacency. The market is going up, so all must be right with the world. If we don’t get those real changes, we will need to start thinking the unthinkable. Can we last until 2013? Most likely, as we are going to see some cosmetic changes and that should encourage the bond market. But as our leaders watch the problems of the rest of the developed world increase then, depending on what they do, they could cut us a much shorter leash. We are approaching the Endgame. I worry that we could go much beyond that point without serious volatility and market upheaval.<< <a href="http://www.johnmauldin.com/frontlinethoughts/a-bubble-in-complacency" target="_blank">http://www.johnmauldin.com/fro...placency</a> How's that for a Spudnuts moment?
Originally Posted By mawnck Same article, no email needed: <a href="http://www.businessinsider.com/are-we-in-a-new-bubble-2011-1" target="_blank">http://www.businessinsider.com...e-2011-1</a>
Originally Posted By fkurucz Big time inflation is on its way. Neither party will be able to trim the deficit. Regardless of who is in charge they will continue relying on the printing press (AKA Quantitative Easing) We have been able to export our inflation so far but it won't be longbefore it boomerangs right back at us.
Originally Posted By WilliamK99 So here is an honest question, where should we put our money, in Euro? in another form of currency? If the dollar is going to crash, which it is going to if we stay the present course, I want some of my money in a foreign currency to keep my family sustained for awhile.
Originally Posted By hopemax That's the thing though. We are so screwed, globally, that there is no "safe" place. It's going to be a "currency left standing" situation. The Euro has a real potential of crashing before the dollar does. Yuan, nobody knows. China is set up to benefit, but their economy is so dependent on exports to the West, that if the West crashes, so does their economy. That's why so much money is going into gold and even silver. But you never know if a government is going to declare holding gold illegal, and when the crash happens, will anyone be able to buy your gold at more than you paid today. Some of the advice I've seen, is to buy real goods (tools, food, etc) in anticipation of a return to a more "barter" economy. But the trouble with that is stockpiling too far in advance (so you aren't overpaying, and spoilage). I post this link, with trepidation. Because they do approach the situation from the "everything is NOT going to be okay," side, and we're on the brink of financial apocalypse, we just don't know when. But most of what they do is just collect articles from a bunch of mainstream sources, put them all together, and you can read and make your own opinions. But sometimes they do some analysis, like today's stuff about the assumptions the CBO is using in its projections. This is stuff that we need to have spelled out, but CNN isn't going to do it. <a href="http://theautomaticearth.blogspot.com/" target="_blank">http://theautomaticearth.blogspot.com/</a>
Originally Posted By hopemax > today's stuff < Need to clarify, the current blog post as of today. It is actually from the 28th, so it wasn't posted today. And I also want to say about the blog, for as dire of warnings as they go on about. Their actual, recommendations are pretty reasonable. Get out of debt, don't take on new debt (they think you should get out of the housing market and rent if you can), increase your cash savings, and think about an emergency plan in an anticipation of normal supply chains being radically changed. I think they think, the fall will be so dramatic that what most of us do isn't going to matter, but if you do these things, you will be miles ahead of everyone who doesn't.
Originally Posted By ChurroMonster No serious discussion of reducing the deficit can ignore the immense amount our country spends on "defense".
Originally Posted By gadzuux I thought the same thing. The fact that the idea of reducing defense spending never even came up in the OP - while they go straight for SSI and medicare, meant that it was a right-wing scare piece. Lately, republicans have only grudgingly allowed that some reductions in military spending are "on the table", but I don't think they really mean it. Even secretary Gates is having a hard time cancelling a very expensive "floating tank" defense project. Newsflash: we're fighting in deserts and mountains these days, and tanks that float aren't a big priority. But of course it's the well-placed defense contracts that keep the thing alive in congress. As for the 'end times' rhetoric, there's just not much that you or I can do individually. I'm not about to start stockpiling water and canned goods. And I suspect that skyrocketing fuel prices will eventually be our undoing, which will happen well before global economic collapse. Maybe those survivalists running around the woods with AK47s had it right all along.
Originally Posted By fkurucz >>So here is an honest question, where should we put our money, in Euro? in another form of currency?<< A good question. One camp does not trust any fiat currency at this point as a "race to the bottom" is being expected by some. Some argue that precious metals are a safe store of value during inflationary times, but there is always a risk of confiscation (it happened during the Great Depression). Maybe if you have a safe deposit box in Zurich it could be safe.
Originally Posted By andyll <<But the GOP is saying they want to cut spending around the edges of the budget without dealing with the real elephants in the room, Social Security and Medicare>> Again... medicare and SS are keep off budget and funded by specific payroll taxes. They have never run a deficit for a FY (since Reagan). The do not contribute to the deficit... in fact their surpluses reduce the deficit yearly. Any changes to SS/Medicare will not go to help make it solvent in the future but instead the surpluses will to into the general budget.
Originally Posted By andyll Oh... and in addition... Europe and Asia are in much better financial shape then we are. Their recessions were caused by us and it is our economy that keeps dragging them down.
Originally Posted By tiggertoo <<Again... medicare and SS are keep off budget and funded by specific payroll taxes.>> The problem is that we've borrowed from it to pay for corporate subsidies and other things like tax cuts for the top 2%. Even so, unless the tax code is revamped somehow, the baby boomer generation will put a serious strain on the system, especially considering that retirement packages and pensions have been so heavily slashed in recent years.
Originally Posted By Mr X ***Some argue that precious metals are a safe store of value during inflationary times, but there is always a risk of confiscation (it happened during the Great Depression)*** As well as the risk that it will devalue to next-to-nothing as it did in 1981, when the smart money sells it off like hotcakes and leaves you holding the bag. Just sayin... To honestly answer the question of "where should I put my money", with the caveat that I am NOT an investment professional and my advice is simply one of a guy suggesting common sense solutions, the obvious answer is diversify. If you have some of everything, at least SOMETHING will be worth something under any circumstances. So, put your eggs in lots of different baskets and hope for the best, if you're so very worried about the U.S. Dollar losing value. But, keep in mind, you'll spend tons of money on fees if you do so. So, better be sure before you panic.
Originally Posted By fkurucz "As well as the risk that it will devalue to next-to-nothing as it did in 1981, when the smart money sells it off like hotcakes and leaves you holding the bag." I interest rates go up, that would definitely happen. For now I doubt interest rates will climb, I expect the series of Quantitative Easings to continue for now.
Originally Posted By fkurucz <<Again... medicare and SS are keep off budget and funded by specific payroll taxes.>> Which is why we are being brainwashed into believing that all hope is lost for SS and Medicare. The right wants to dismantle them and use the payroll tax to finance more wars.
Originally Posted By mawnck What's the old saying? "The market can stay irrational longer than you can stay solvent."
Originally Posted By pecos bill Regarding the metals, being strongly invested in them has been quite a ride. You talk about diversity, well shouldnt that include putting some eggs into the metals? Every savvy investor should be at least ten to twenty percent into them, especially Silver, which has been solidly outperforming Gold, and the fundamentals indicate could go much much higher. Dont invest in paper contracts, take physical possesion, even if it means buying a safe. The Fiat Ponzi scheme could be coming to an end, and I would not want to have all my money in the banks when it does.
Originally Posted By Fanboi So if we withdrew from Iraq and Afghanistan and just kept observers there, whatever that means, how would it affect the deficit? In other words, we wouldn't be pursuing two wars anymore, just maintaining the carnage we caused.
Originally Posted By ChurroMonster How about we finally pull all our troops out of Western Europe and Japan? That would save some money.
