[LadyRuby]

Meltdown 06

$this->bbcode_second_pass_quote('', 'M')eltdown '06? You see it coming
Commentary: Monster deficits, pandemics, petro-euros may spoil the party

Recently we asked readers about 20 possible triggers that could cause "Meltdown '06." We hit a nerve, got 445 responses, read all of them and tallied the scores. Only 2% of you are optimists. The others used colorful terms to describe the network of triggers that makes up our unpredictable economy and markets: Perfect storm, tsunami, avalanche, dominoes, house-of-cards.

One imagined a powder-keg and sparks. Another saw bullets in a machine gun, where a slight miscalculation might push an "apocalyptic lunatic" like Iran's president over the edge; then, as we saw with Katrina and 9/11, nobody at FEMA or DOD will act fast enough to stop a rapid-fire chain reaction from escalating out of control.

...

Some of the main themes caught us by surprise, some were deeply troubling. The majority of readers did see a network of interrelated triggers, any one of which could ignite the spark, starting an avalanche. Here's a summary of how 445 responses loosely fit into nine general groups:

National debt: 39%. Federal and trade deficits, energy, weak currency

Consumer debt: 19%. Real estate and household debt, low savings

Wild-cards: 13%. Natural disasters, pandemics, tsunamis, terrorists, etc

War & military defense: 11%. Also homeland insecurity and credibility

Miscellaneous triggers: 6%. Hedge fund risks; derivatives; p/e ratios

Social Security & pensions: 4%. Government and corporate retirees

Political corruption: 4%. Pork-barrels; ethics trials; class warfare

Medicare and health care: 2%. Future triggers rather than near-term

Optimists: 2%. They range from hostile to contrarian to the quixotic

The dominant theme? Clearly America's overwhelming debt. ...

Debt is America's No. 1 problem, an unstable house of cards making investors very nervous. Perhaps the time has come to internalize the warning of political historian and former Republican strategist Kevin Phillips, in Wealth and Democracy: "Most great nations, at the peak of their economic power, become arrogant and wage great world wars at great cost, wasting vast resources, taking on huge debt, and ultimately burning themselves out."

...

Yes, readers were concerned about the new Iranian bourse coming in March, an exchange trading oil for euros not dollars. Iran's goal is to undermine the U.S. dollar as the world's reserve currency. Rhetoric aside, experts say the White House won't play the war card (overextended military, alienate moderate Muslims and lukewarm allies). But the impact of the petro-euro bourse is a huge unknown variable dumping risk into the equation.

War or not, bourse or not, the point here is that in today's powder-keg world the traditional economic models (that assume a relatively stable world) used by Wall Street, Washington, and Corporate America no longer fit.

...


But the biggest lesson we got from our readers was a new appreciation of the "law of unanticipated consequences," an awareness that even with the best of planning, ultimately, at major turning points, the real triggers are nor seen, they are stealth bombers. It's the stuff we refuse to see and fail to plan for that will catch us off-guard. Remember Katrina, 9/11, Iraq's WMDs?

Finally, many of you are expecting some radically new and inventive worst-case-scenario investment strategy. Readers offered many diverse suggestions: Cash, CDs, ETFs, gold, shorts, puts, hard commodities. Well folks, I do have a strategy, but it's neither new nor radical.

...

And pray a lot, we're going to need it in the years ahead!

[Novus]

Gentlemen start your panicing.

Google just missed earnings and is down $70. This could turn into a full scale route for the entire market. Google makes its money advertising and ads sales are down that is a leading indicator of recession.

[linlithgowoil]

things wont go down without a fight. as far as i can tell, there appears to be an enormous amount of surplus cash/currency to invest in things at the moment - as long as this keeps getting ploughed into things, then there will be no crash.

[mgibbons19]

$this->bbcode_second_pass_quote('peaker_2005', '')$this->bbcode_second_pass_quote('linlithgowoil', 't')hings wont go down without a fight. as far as i can tell, there appears to be an enormous amount of surplus cash/currency to invest in things at the moment - as long as this keeps getting ploughed into things, then there will be no crash.

[peaker_2005]

$this->bbcode_second_pass_quote('linlithgowoil', 't')hings wont go down without a fight. as far as i can tell, there appears to be an enormous amount of surplus cash/currency to invest in things at the moment - as long as this keeps getting ploughed into things, then there will be no crash.

[Etalon]

How about a bit of germany style hyper inflation? That would be fun.

[strider3700]

$this->bbcode_second_pass_quote('Etalon', 'H')ow about a bit of germany style hyper inflation? That would be fun.

[threadbear]

What does hyper inflation mean? A currency that loses half of it's value, or 70 to 80% or how about 99%? Hyperinflation to me means a currency that quickly loses well over half of it's value. This is unlikely to happen unless wage inflation accompanies price inflation. Gut feeling? The currency will lose 50% of it's value fairly quickly. That's just extreme inflation, but it's not Weimer Germany

[strider3700]

hmm I think germany was over 99% loss in value at the end their currency became worthless.

I'm not holding my breath for that type of inflation. 50% decline would mean I effectively owe 1 years salary(before taxes) instead of 2 years though. that would cut my payments from 20 years to 10 years. I'd take that in a second even if everything else is going up in price. I believe my consumption habits (or lack of them) make me less vulnerable to inflation then average so I should get ahead is my thinking.

[threadbear]

Strider, If wages don't rise at all, how are you better off if the American dollar devalues? And if you're in Canada, do you think our currency and economy will synchronize more closely with the American dollar and economy? The Canadian dollar could strengthen against the American dollar regardless of monetary policy. We could have lower interest rates than we do today, and a strengthening dollar. That would be weird and unprecedented, I think.

The next decade, Canada and particularly Western Canada is going to roar. The US is going to get it's ass kicked, thanks to several years of horrendously bad economic and govt foreign policy.

BTW, I'm on one of the Gulf Islands. So Howdy, Neighbour!

[strider3700]

$this->bbcode_second_pass_quote('threadbear', 'S')trider, If wages don't rise at all, how are you better off if the American dollar devalues? And if you're in Canada, do you think our currency and economy will synchronize more closely with the American dollar and economy? The Canadian dollar could strengthen against the American dollar regardless of monetary policy. We could have lower interest rates than we do today, and a strengthening dollar. That would be weird and unprecedented, I think.

The next decade, Canada and particularly Western Canada is going to roar. The US is going to get it's ass kicked, thanks to several years of horrendously bad economic and govt foreign policy.

BTW, I'm on one of the Gulf Islands. So Howdy, Neighbour!

[Luckystars]

If the USD goes so will all world currencies. I was going to buy gold but it is too late for that. The US could just deny us the right to own gold as they did in the 30's and you would have to hide it somewhere, at that point you will wish you were dead.

The lesson is we are all in this together, we always have been but we just never wanted to accept that.

[threadbear]

Luckystar--Who you calling "we" Kemosabe? The US could very well be in it alone.

Strider--How on earth do you suppose we are going to be able to weaken a currency based on sound monetary policy, in a resource based economy against one printed by mad men with no sense of proportion? Puhleeze. If China isn't battling US for our exports, it'll be fighting India.

The US has an overblown sense of it's place in the world and that's going to be it's undoing, both politically and economically. It's an Aesop's fable. I suggest, as a fellow ant, you ignore the grasshopper's propaganda, as they party at the expense of the rest of the world.*Their day will come.

*No offense to any on this board. Regardless of our nationality, we are all ants here.

[strider3700]

$this->bbcode_second_pass_quote('threadbear', '
')Strider--How on earth do you suppose we are going to be able to weaken a currency based on sound monetary policy, in a resource based economy against one printed by mad men with no sense of proportion? Puhleeze. If China isn't battling US for our exports, it'll be fighting India.

[threadbear]

$this->bbcode_second_pass_quote('strider3700', '')$this->bbcode_second_pass_quote('threadbear', '
')Strider--How on earth do you suppose we are going to be able to weaken a currency based on sound monetary policy, in a resource based economy against one printed by mad men with no sense of proportion? Puhleeze. If China isn't battling US for our exports, it'll be fighting India.

[FairMaiden]

What resources does Canada have? Have you looked around? Here in BC, our forestry, mining, water, hydroelectric, natural gas, etc are all owned by US companies. We are going to look like a poor 3rd world country that can't even access whats in their own backyard...

[threadbear]

Fairmaiden, They may be American companies, but they will cater to whoever pays them the most for their products. They are beholden to no nation. That's globalization.

[Luckystars]

Luckystar--Who you calling "we" Kemosabe? The US could very well be in it alone.


If I thought that I would buy foriegn currency now. I talkedd to people who know a lot about this and they said to me, "if the USD goes so goes it all. Europe will recover better but that is way down the road. " Global economy, we are all in this together. Global corporations have a strangle hold on the entire planet now. And I don't see anyway to stop them now. It will take full blown meltdown of society, not that it won't happen.

I don't feel important as an American, I feel helpless as an American.