View Full Version : What Are the Economic Collapse Indicators to Watch For?
09-25-2008, 03:34 AM
Here are some important indicators to watch for, in my humble estimation. (Witnessing just one of these won't be surely indicative, but if we see several of these...) :
A sharp spike in the Federal Funds Rate
News of a failed Treasury auction, or news that Treasury rates have spiked
Overt talk of a US default by Asian or European bankers
Multiple (8+) simultaneous US bank failures on one Friday
Any large Northern Rock style bank runs in the US (with customers lined up on the streets)
A stock market drop of more than 1,200 points in one day
A large and sudden spike in inflation
Any suspension of US stock trading
Draconian new stock trading limits (for example any new "circuit breaker" rules, followed by news that the trading was halted because of the limits)
New restrictions on either precious metals purchasing reporting requirements
New limits on moving funds outside the US
Any large derivatives trading collapses.(Because of disappearing counterparties or illiquidity.)
News that hundreds of hedge funds are suspending redemptions
News that many Money Market funds are dropping below $1.00 Net Asset Value (NAV)
The US Dollar Index (USDI) dropping below 68 for more than one full week of trading.
Any sudden large interest rate moves by the FOMC. (Up or down.)
Gold spiking past $1,500 per ounce
News that any major western power is no longer accepting US Dollars in payment for key commodities
News that any major trading partners are no longer rolling over the majority of their US Treasury paper
A closed session of the full congress that lasts a full day or longer.
The resignation of either the Treasury Secretary or the Federal Reserve Chairman.
Mel Gibson moves to Fiji ;-)
09-25-2008, 08:39 AM
It's been amazing what has happened and the length to which the powers that be have been able to make this look like a pretty picture. I think we can all agree that we're in a pretty bad recession, but if you look at all of the market indicators, the top economists can't even agree that there is a recession. The new way to make everything look pretty is to use regulations or create new laws to block certain classes of people from doing things such as pulling their money from the bank, shorting stocks, and otherwise participating in the economy the way they would in a free market. This is a cooking of the financial indicators no different than a company that cooks their books to con investors.
For example, if you know that investors will try to short financial stocks or stocks backed by the financial sector, just make it illegal for them to do so because if they could, maybe the stock market would loose a horrendous number of points in a single day.
Another example is unemployment. The official unemployment numbers have hovered around 6% for the last few years. The official unemployment numbers are calculated by the number of people who collect unemployment insurance (UI). Of course, an individual can only collect unemployment for around 6-9 months after loosing their job. If the job market is very bad and they don't find another job within 6-9 months, they will no longer receive UI and are no longer counted as unemployed. If companies continue to layoff workers every month and do not open up new positions to US workers, the unemployment rate will always be around 6% even though the true number could be closer to 15%.
Another example is inflation. The official numbers are not accurate because it's truly difficult to have an accurate indicator without just releasing the honest details. The way ordinary consumers notice that inflation is happening is by continuing to buy the same goods and services and paying more for them. The trend right now seems to be to keep prices steady, but give the consumer less. Has anyone noticed major retailers and food vendors keeping steady prices but decreasing their portion sizes? Ditto for customer service and increased automation, lower warranties, less after-purchase customer service, and less responsibility for the seller.
I submit that the only way to know what is really by happening is by watching the regulations and thinking about the potential consequences of what would happen to the market, had the regulations not been imposed. Of course, this isn't 100% conclusive. If you are going by the "official" numbers, everything will look just fine until one or more of the following events happen:
- Violent jump in gas prices
- Power / Electricity Blackout
- Communication / Internet Blackout
- Bank Failures / No Withdrawals Allowed
- Martial Law declared
- No more products imported from other countries (i.e. China)
- Extreme shortages in local stores
- Commerce failures due to infrastructure problems (i.e. shipping carriers, financial systems, communications systems)
- Foreign countries refusing to take our money or exchange it
09-25-2008, 11:09 AM
0ctober 1st = first stage.. i mean if your prepared timing is not relevant.. if not then act now in my opinion. food water ect..
09-25-2008, 02:32 PM
China banks told to halt lending to US banks
09-25-2008, 05:07 PM
Europe and Japan turn cold shoulder to U.S. plea for bank bailouts
09-26-2008, 02:41 PM
Asia Needs Deal to Prevent Panic Selling of U.S. Debt, Yu Says
By Kevin Hamlin
Sept. 25 (Bloomberg) -- Japan, China and other holders of U.S. government debt must quickly reach an agreement to prevent panic sales leading to a global financial collapse, said Yu Yongding, a former adviser to the Chinese central bank.
``We are in the same boat, we must cooperate,'' Yu said in an interview in Beijing on Sept. 23. ``If there's no selling in a panicked way, then China willingly can continue to provide our financial support by continuing to hold U.S. assets.''
An agreement is needed so that no nation rushes to sell, ``causing a collapse,'' Yu said. Japan is the biggest owner of U.S. Treasury bills, holding $593 billion, and China is second with $519 billion. Asian countries together hold half of the $2.67 trillion total held by foreign nations.
China, Japan, South Korea and others should meet soon to seal a deal, said Yu, a former academic member of the central bank's monetary policy committee. The talks should involve finance ministers, central bank governors and even national leaders, he said.
``Whether some kind of agreement between them to continue to hold Treasury bills is viable, I'm not sure,'' said James McCormack, head of sovereign ratings at Fitch Ratings Ltd in Hong Kong. ``It would be unusual. If it became apparent that sovereigns in Asia were selling Treasuries the market would take that quite badly, it's something to be avoided.''
The global credit crisis, triggered by a housing slump in the U.S., has saddled financial companies with more than $520 billion in writedowns and losses, collapsing Bear Stearns Cos. and Lehman Brothers Holdings Inc. in the process. Insurer American International Group Inc. and mortgage giants Fannie Mae and Freddie Mac also were rescued by the government.
U.S. Treasury Secretary Henry Paulson is urging Congress to pass a $700 billion plan to remove devalued assets from the banking system. Federal Reserve Chairman Ben S. Bernanke said Sept. 24 that the U.S. is facing ``grave threats'' to its financial stability.
China's huge holdings of U.S. debt means it must bear a large proportion of the ``burden of sorting things out'' in the U.S., Yu said. China is not in a hurry to dump its U.S. holdings and communication between the two nations every ``couple of days'' is keeping Chinese leaders informed and helping to avoid a potential panic, he added.
``China is very worried about the safety of its assets,'' he said. ``If you want China to keep calm, you must ensure China that its assets are safe.''
Yu said China is helping the U.S. ``in a very big way'' and added that it should get something in return. The U.S. should avoid labeling it an unfair trader and a currency manipulator and not politicize other issues, he said.
``It is not fair that we are doing this in good faith and are prepared to bear serious consequences and you are still labeling China this and that, accusing China of this and that,'' he said. ``China knows what to do. We don't need your intervention.''
The U.S. financial crisis had taught China a lesson and that was: ``Why are we piling up these IOUs if they may default?'' China's economic expansion strategy, which emphasizes export growth that has led to trade surpluses and the accumulation of $1.81 trillion in foreign-exchange reserves, is the main problem, said Yu.
``Our export-growth strategy has run its natural course,'' he said. ``We should change course.''
China should stop intervening in the foreign currency markets and thus allow rapid appreciation of the yuan, he said. While this would cause pain for exporters, China could ease the transition by using its strong fiscal position to aid those who lose their jobs. It also should stimulate domestic demand to offset lower income from overseas sales.
Without yuan appreciation, China will continue to accumulate foreign reserves, which means further accumulating ``IOUs from the U.S.,'' said Yu. ``This is paper and it may default and it will not increase China's national welfare.''
If China doesn't allow the yuan to appreciate and continues to promote export-led growth it will lead to confrontation with the U.S. and Europe, Yu said.
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