Depression in the USA - Deflation verus Inflation

[fihr]

How does that compare to now, when houses soared above inflation recently and u might say, house prices are to high?

If I was borrowing $US I could buy an Aussie house and do nicely.

But since I borrow in AUD, right now it obviously doesn't stack up. I'd need interest rates to lower or property to go up. But it is an opportunity to look out for over time if inflation rears its head. For example, this might happen to certain asset classes in the US, if their interest rates drop and inflation rises.

Re property now - I think that when Australian interest rates start to come down in 12 to 18 months perhaps, then there will be a spike in residential property values. Reason - now no one is building due to high interest rates and rental returns not justifying purchases. But there is so much pent up demand, that when rates lower again, people (both investors and home owners) will jump in as fast as they can in a market with undersupply, since rents are also getting higher and higher. Unless we end up in a recession. Which would just intensify the jump later.

[fihr]

Nice one! Maybe your suburb will go up even further then, if interest rates lower!

I've got a place in Coolum Beach, where growth is more sluggish than Brisbane. But the rents have risen a lot lately.

[tricha]

How to Escape the Black Hole Called the U.S. Economy

By James Howard Kunstler About the Author
(born 1948) is an American author, social critic, and blogger who is perhaps best known for his book The Geography of Nowhere, a history of suburbia and urban development in the United States. He is prominently featured in the peak oil documentary, The End of Suburbia, widely circulated on the internet. In his most recent book, The Long Emergency (2005), he argues that declining oil production is likely to result in the end of industrialized society and force Americans to live in localized, agrarian communities.




The dark tunnel that the U.S. economy has entered began to look more and more like a black hole recently, sucking in lives, fortunes, and prospects behind a Potemkin facade of orderly retreat put up by anyone in authority with a story to tell or an interest to protect – Fed chairman Bernanke, CNBC, The New York Times , the Bank of America... Events are now moving ahead of anything that personalities can do to control them.
The "housing bubble" implosion is broadly misunderstood. It's not just the collapse of a market for a particular kind of commodity, it's the end of the suburban pattern itself, the way of life it represents, and the entire economy connected with it. It's the crack up of the system that America has invested most of its wealth in since 1950. It's perhaps most tragic that the mis-investments only accelerated as the system reached its end, but it seems to be nature's way that waves crest just before they break.
This wave is breaking into a sea-wall of disbelief. Nobody gets it. The psychological investment in what we think of as American reality is too great. The mainstream media doesn't get it, and they can't report it coherently. None of the candidates for president has begun to articulate an understanding of what we face: the suburban living arrangement is an experiment that has entered failure mode.

I maintain that all the "players" – from the bankers to the politicians to the editors to the ordinary citizens – will continue to not get it as the disarray accelerates and families and communities are blown apart by economic loss. Instead of beginning the tough process of making new arrangements for everyday life, we'll take up a campaign to sustain the unsustainable old way of life at all costs.
A reader sent me a passel of recent clippings last week from the Atlanta Journal-Constitution . It contained one story after another about the perceived need to build more highways in order to maintain "economic growth" (and incidentally about the "foolishness" of public transit). I understood that to mean the need to keep the suburban development system going, since that has been the real main source of the Sunbelt's prosperity the past 60-odd years. They cannot imagine an economy that is based on anything besides new subdivisions, freeway extensions, new car sales, and NASCAR spectacles. The Sunbelt, therefore, will be ground-zero for all the disappointment emanating from this cultural disaster, and probably also ground-zero for the political mischief that will ensue from lost fortunes and crushed hopes.
From time-to-time, I feel it's necessary to remind readers what we can actually do in the face of this long emergency. Voters and candidates in the primary season have been hollering about "change" but I'm afraid the dirty secret of this campaign is that the American public doesn't want to change its behavior at all. What it really wants is someone to promise them they can keep on doing what they're used to doing: buying more stuff they can't afford, eating more bad food that will kill them, and driving more miles than circumstances will allow.
Here's what we better start doing.
Stop all highway-building altogether. Instead, direct public money into repairing railroad rights-of-way. Put together public-private partnerships for running passenger rail between American cities and towns in between. If Amtrak is unacceptable, get rid of it and set up a new management system. At the same time, begin planning comprehensive regional light-rail and streetcar operations.
End subsidies to agribusiness and instead direct dollar support to small-scale farmers, using the existing regional networks of organic farming associations to target the aid. (This includes ending subsidies for the ethanol program.)
Begin planning and construction of waterfront and harbor facilities for commerce: piers, warehouses, ship-and-boatyards, and accommodations for sailors. This is especially important along the Ohio-Mississippi system and the Great Lakes.
In cities and towns, change regulations that mandate the accommodation of cars. Direct all new development to the finest grain, scaled to walkability. This essentially means making the individual building lot the basic increment of redevelopment, not multi-acre "projects." Get rid of any parking requirements for property development. Institute "locational taxation" based on proximity to the center of town and not on the size, character, or putative value of the building itself. Put in effect a ban on buildings in excess of seven stories. Begin planning for district or neighborhood heating installations and solar, wind, and hydro-electric generation wherever possible on a small-scale network basis.
We'd better begin a public debate about whether it is feasible or desirable to construct any new nuclear power plants. If there are good reasons to go forward with nuclear, and a consensus about the risks and benefits, we need to establish it quickly. There may be no other way to keep the lights on in America after 2020.
We need to prepare for the end of the global economic relations that have characterized the final blow-off of the cheap energy era. The world is about to become wider again as nations get desperate over energy resources. This desperation is certain to generate conflict. We'll have to make things in this country again, or we won't have the most rudimentary household products.
We'd better prepare psychologically to downscale all institutions, including government, schools and colleges, corporations, and hospitals. All the centralizing tendencies and gigantification of the past half-century will have to be reversed. Government will be starved for revenue and impotent at the higher scale. The centralized high schools all over the nation will prove to be our most frustrating mis-investment. We will probably have to replace them with some form of home-schooling that is allowed to aggregate into neighborhood units. A lot of colleges, public and private, will fail as higher ed ceases to be a "consumer" activity. Corporations scaled to operate globally are not going to make it. This includes probably all national chain "big box" operations. It will have to be replaced by small local and regional business. We'll have to reopen many of the small town hospitals that were shuttered in recent years, and open many new local clinic-style health-care operations as part of the greater reform of American medicine.
Take a time-out from legal immigration and get serious about enforcing the laws about illegal immigration. Stop lying to ourselves and stop using semantic ruses like calling illegal immigrants "undocumented."
Prepare psychologically for the destruction of a lot of fictitious "wealth" – and allow instruments and institutions based on fictitious wealth to fail, instead of attempting to keep them propped up on credit life-support. Like any other thing in our national life, finance has to return to a scale that is consistent with our circumstances – i.e., what reality will allow. That process is underway, anyway, whether the public is prepared for it or not. We will soon hear the sound of banks crashing all over the place. Get out of their way, if you can.
Prepare psychologically for a sociopolitical climate of anger, grievance, and resentment. A lot of individual citizens will find themselves short of resources in the years ahead. They will be very ticked off and seek to scapegoat and punish others. The United States is one of the few nations on earth that did not undergo a sociopolitical convulsion in the past hundred years. But despite what we tell ourselves about our specialness, we're not immune to the forces that have driven other societies to extremes. The rise of the Nazis, the Soviet terror, the "cultural revolution," the holocausts and genocides – these are all things that can happen to any people driven to desperation.
James Howard Kunstler
for The Daily Reckoning Australia
Editor's Note: James Kunstler has worked as a reporter and feature writer for a number of newspapers, and finally as a staff writer for Rolling Stone Magazine . In 1975, he dropped out to write books on a full-time basis.
His latest nonfiction book, The Long Emergency describes the changes that American society faces in the 21st century. Discerning an imminent future of protracted socioeconomic crisis, Kunstler foresees the progressive dilapidation of subdivisions and strip malls, the depopulation of the American Southwest, and, amid a world at war over oil, military invasions of the West Coast; when the convulsion subsides, Americans will live in smaller places and eat locally grown food.
You can get more from James Howard Kunstler - including his artwork, information about his other novels.

[tricha]

My personal view on this recession is the price of oil will be the key to the severity of it all.
Do you think twice now, when you fill your car up about where you are going to go. All that gas money that could has been spent on something else



How much oil does the US import ?????????????????

.................................................. ................................................

I'm guessing at 15,000,000 barrels a day x it by $30 = $450,000,000

Try it again at $60 a barrel = $900,000,000

Try it again at $90 a barrel = $1,350,000,000

Try it at $150 a barrel = $2,250,000,000


The big picture is quite scary.

Come on folks, the maths http://www.youtube.com/watch?v=F-QA2rkpBSY, lets hear your views on this one posted by Financially Dependent on the Peak Oil Thread.

Who out there is in denial, has their head buried in the sand, the dynamics of the world as we know it has changed.



Peak Oil Passnotes: Knock-Through
By Edward Tapamor
07 Mar 2008 at 02:00 PM GMT-05:00

PARIS (ResourceInvestor.com) -- We have long talked about the various impacts of higher oil and energy costs. The way that inflated energy prices knock-through into other commodities, for example by hiking transportation and extraction costs, is one of them. From commodities they then knock through into your pocket, maybe making you feel poorer, or if you bet on their rise, possibly richer.
Other impacts aside from your personal well-being or otherwise have included the run-up in food prices, also linked to transportation and manufacturing, but also to the way biofuels have been so badly mismanaged. All along we have pointed out that there is a correlation between general all round inflation due to rising energy costs, but with a significant time lag.

In other words we are feeling the impact of energy costs at – for argument’s sake – around the $70 per barrel range we had a year ago. Things like capital goods – big stuff such as plant and factory equipment – takes a good while to manufacture. So the estimated cost of say a smelter will rise as energy prices rise, even if the contract was signed when energy prices were lower.
Either the company that ordered the smelter will be hit as costs are passed on to it, or the manufacturer will be hit as it failed to ink any possible rise into its initial contract.
One of the things that has most worried us has been the possibility that the delays in energy costs knocking through were going to be discounted in the current economic malaise. Banks, energy companies and governments are not organisations that like to talk up a crisis, especially as they are the ones that tend to benefit from business as normal.
They all have a vested interest in pretending the next crisis is never going to happen. After all the banks were not exactly screaming out about the credit crunch. We cannot remember too many chief executives warning off poorer folks with bad credit histories from taking out mortgages on the back of the idea of never ending growth.
So what is perhaps slightly worrying at the moment is the prospect of a weakening U.S. economy, losing jobs faster than expected, with continuing banking and housing defaults, faced in no uncertain terms by oil prices wafting around the $106 per barrel price range.
Because, so far we have seen no inclination by any major economy to think their way out of trouble. Instead the only response to troubled times has been to cut interest rates which as those with memories even as poor as the average goldfish will recall, is exactly what got us in this mess in the first place.
We are always told how much more absorbent modern economies are to high energy costs as they have become more efficient, this is indeed true. But the least efficient and most bloated of all of them – with its industries that should have been bankrupt and foreign owned years ago – is the U.S.
Cutting dollar power so that the U.S. becomes some kind of bargain basement shopping mall for the rest of the world – I mean there is only so many pairs of trainers and flats in Manhattan a boy can have - is not going to be the answer. Many people around the world do want to see a smaller less powerful U.S., but a collapsing one is not something anyone is particularly after.
But what happens if that $106 oil takes 18 months to kick through into the U.S. economy? What will happen then? Who will warn us?

[tobo]

....
Because, so far we have seen no inclination by any major economy to think their way out of trouble. Instead the only response to troubled times has been to cut interest rates which as those with memories even as poor as the average goldfish will recall, is exactly what got us in this mess in the first place.

Putting together points from those last two 'discourses'
- the reliance on private (road) transport by suburbia and the centralised production/distribution system (gosh sounds suprisingly socialist, but I digress),
- and the observation that governments don't seem to have the wit to plan and manage with a strategic long term view:

the free economy means profit orientated carmakers will want to find a way to sell cars that don't need gasoline. "Hey, mister suburbian, electric cars plug in at the wall" (where electricity is provided magically - just as much as you want). That allows them to keep their cars.
And power companies will want to find a way to sell just as much electricity as you want. So they will just turn to the list of ways they can increase supply, rank them by price, and just keep picking the next cheapest they can.

Of course that does not address the issue of demand-lead inflation resulting eventually in so many people just not being able to afford all the increasingly expensive coffee, beef, cheese, vegies, training shoes, heating/air con, transport fuel, mortgage... so in time that distributed suburbia problem could start to bite.
I'm just saying, that, yes, economies don't tend to think their way out of trouble. Rather, individual businesses spot a gap in the supply of some product or service, and market the heck out of it.

It's similar to the global warming debate : we won't have a coordinated orchestrated collapse, but rather, individuals (or individual communities) will just fall off the edge one by one. (And some have been falling off that edge already for ages, and we just say "oh, that's just poor people, on the fringe of the system. That's not what the actual system is.")

[tricha]

Big fall in China's trade surplus

There is much political interest in Chinese trade figures

China's trade surplus unexpectedly fell in February, suggesting the US slowdown is hitting demand for Chinese goods.
China exported $8.6bn (£4.3bn) more than it exported last month, down from $23.7bn in February last year, according to government figures.
But economists warned that February data are very sensitive to the timing of China's lunar new year celebrations.
There was more concern that factory gate prices had risen 6.6% in the year to February.
Factory gate prices measure the amount that manufacturers are paid for their products and is a key indicator of consumer inflation to come.
Premier Wen Jiabao told parliament last week that the battle against inflation is his top economic priority for the year.
"Virtually everything is on the rise - not just fuel, but coal and iron ore," said Jun Ma, chief China economist at Deutsche Bank in Hong Kong. "All these things are growing much stronger than fuel, plus labour costs are going up too." Consumer prices figures are due out on Tuesday.

[tricha]

Big fall in China's trade surplus

There is much political interest in Chinese trade figures

China's trade surplus unexpectedly fell in February, suggesting the US slowdown is hitting demand for Chinese goods.
China exported $8.6bn (£4.3bn) more than it exported last month, down from $23.7bn in February last year, according to government figures.
But economists warned that February data are very sensitive to the timing of China's lunar new year celebrations.
There was more concern that factory gate prices had risen 6.6% in the year to February.
Factory gate prices measure the amount that manufacturers are paid for their products and is a key indicator of consumer inflation to come.
Premier Wen Jiabao told parliament last week that the battle against inflation is his top economic priority for the year.
"Virtually everything is on the rise - not just fuel, but coal and iron ore," said Jun Ma, chief China economist at Deutsche Bank in Hong Kong. "All these things are growing much stronger than fuel, plus labour costs are going up too." Consumer prices figures are due out on Tuesday.

Maybe u need to read a bit more Sector or learn to read.

[tricha]

Whatever Tricha, Im telling you, you didn`t provide a link, the story left out details and you purposely highlighted one point (heading), to make it look alarmist (as you always do)




EXPORTS WERE STILL UP
IMPORTS WERE UP MUCH MORE (and Aussies companies are benefiting),
hence surplus looked much worse and as you will see IF YOU read the bloomberg news article, there were a couple of extra factors which helped cause the difference
This actually may be a good thing to help Chinas high inflation as mentioned, as too much cash coming back into China sloping around.

Heres the link, and u still can not read, spot the things I left out. Seems u r visually impaired as well.

http://news.bbc.co.uk/2/hi/business/7286911.stm

[Halebop]

Suspect the newsworthy element is that factory gate prices were up 6.6%. That's a lot of inflation being exported, which is good for nobody.

[STRAT]

I see the FED put some fresh bandaids on the wounds last night and the US markets have reacted accordingly