Posted: Wed Feb 13, 2008 9:51 pm Post subject: Re: Depression risk might "force" Fed to buy stock
JohnDenver wrote:
seahorse2 wrote:
But, like Pup said, the fact that MSM are actually running stories on how to avoid a depression ought to scare everyone.
The MSM quotes doom&gloom wingnuts all the time. It's a good way to sell papers, or drive hits from doomer feedlots like this one.
If anybody actually believed the depression scenario, oil futures would be in the toilet.
Maybe...
Looks like it is hard to find specific data on oil use in the 1920's (at least for someone like me who spends too much time on this "doomer feedlot) but there is some data and still more estimates.
When 1929 began the USA was suffering from a period of overproduction.
Depending whose estimates you want to follow 1929 caused little/no downturn in production (and I assume consumption since people were not storing the stuff in their attics).
Weeding out the recessions that had an oil supply componet (73 and 79). Lets look at price during some recessions.
1953: slight increase in the price of gas
82-83: a sharp decline (was this because of the recession or because of the unwinding of the artificially high prices of 79?)
88-92, an increase (even before Iraq invaded Kuwait) followed by a decrease (after the war ended and "wasn't that bad").
In one lecture on-line a historian observes:
Quote:
One-third of Americans were below the poverty line, yet some industries actually managed to make a profit at the beginning of the 1930s as the public looked for a way to escape. If Americans couldn't find work, at least they could go for a drive, have a cigarette, or go to a movie. Correspondingly, sales of oil, gas, cigarettes, and movie tickets all went up. Humorist Will Rogers remarked,
"We're the first nation in the history of the world to go to the poorhouse in an automobile."
So I don't know. I haven't really traveled the world and I may be nothing but a hillbilly doomer sitting on a feed lot but it looks like the assumption that a great unwinding of the economy automatically means cheaper oil may be just that, an assumption. _________________ "Mit der Dummheit kaempfen Goetter selbst vergebens" -Friedrich von Schiller
Posted: Wed Mar 12, 2008 12:49 pm Post subject: Re: Depression risk might "force" Fed to buy stock
Thought government already bought stocks, just like a really lousy investor. They wait for savings & loans to quadruple & buy. They wait for Enron to quadruple & buy. They wait for subprimes & loans to quadruple & buy. This is communism isn't it? _________________ People first, then things, then dollars.
There will be enslavement, cannibalism, & zombie invasions.
Joined: Jun 18, 2004 Posts: 765 Location: Western North Carolina
Posted: Wed Mar 12, 2008 1:58 pm Post subject: Re: Depression risk might "force" Fed to buy stock
JD, I appreciate your contrarian posts and your wit. but sometimes you crack me up!
Quote:
The MSM quotes doom&gloom wingnuts all the time. It's a good way to sell papers, or drive hits from doomer feedlots like this one.
If anybody actually believed the depression scenario, oil futures would be in the toilet.
Yes, obviously everything in the financial sector is fine. Obviously, just look out your window!
Joined: Aug 14, 2004 Posts: 2066 Location: San Diego, Ca.
Posted: Wed Mar 12, 2008 4:59 pm Post subject: Re: Depression risk might "force" Fed to buy stock
Quote:
If anybody actually believed the depression scenario, oil futures would be in the toilet.
What about a Hyperinflationary depression? Would oil prices in USD still drop? _________________ "Peak oil isn't more than an interesting industry factoid and doesn't have anything to do with the hysterics speculated on ad nauseum around here!" ReserveGrowthRulz
Posted: Wed Mar 12, 2008 5:09 pm Post subject: Re: Depression risk might "force" Fed to buy stock
mattduke wrote:
Quote:
Fear that a hobbled banking sector may set off another Great Depression could force the U.S. government and Federal Reserve to take the unprecedented step of buying a broad range of assets, including stocks, according to one of the most bearish market analysts.
That extreme scenario, which would aim to stave off deflation and stabilize the economy, is evolving as the base case for Bernard Connolly, global strategist at Banque AIG in London.
In the late 1980s and early 1990's Connolly worked for the European Commission analyzing the European monetary system in the run up to the introduction of the euro currency.
"Avoiding a depression is, unfortunately, going to have to involve either a large, quasi-permanent increase in the budget deficit -- preferably tax cuts -- or restoring overvaluation of equity prices," Connolly said on Monday.
"If conventional monetary policy is not enough to produce that result, the government may have to buy equities, financed by the Fed," Connolly said.
Legal changes would be needed to give the Federal Reserve and the U.S. government the authority to buy stocks. Currently the Federal Reserve can buy only debt issued by the Treasury, as well as U.S. agency debentures and mortgage-backed securities.
While Connolly already sees some parallels with the 1930s, he expects that a more pro-active central bank and government will probably help avert a repeat of that scenario today.
I like that idea. Then we can see a nice big linear growth trend in the dow. Don't they realize that this garish 400 point contrived jump yesterday does'nt fool anybody. They literally called up their friends and said 'Here's some cash drop it on a few stocks.' And need we note that the Fed buying a bunch of stock to bolster the markets means the Fed owns that much more of everything. This nonsense has to stop, we need JFK dollars asap. _________________ I return to you now at the turning of the tide.
Joined: Apr 09, 2007 Posts: 5898 Location: Alaska (its much bigger than Texas).
Posted: Wed Mar 12, 2008 10:29 pm Post subject: Re: Depression risk might "force" Fed to buy stock
pup55 wrote:
First of all, the very idea that a serious news organization like Reuters is publishing articles that openly discuss potential ways to avoid a depression is, in and of itself, alarming.
Reuters may have been reliable in the past, but it is no longer a "serious news organisation".
Reuters today is notoriously biased and slanted in its coverage of the news. If you see the byline "reuters" you should read it for yucks!
This article is essentially just a recounting of one person's opinion. Interesting perhaps, but there is nothing there to substantiate this person's opinion.
Posted: Thu Mar 13, 2008 5:23 am Post subject: Re: Depression risk might "force" Fed to buy stock
jato wrote:
Quote:
If anybody actually believed the depression scenario, oil futures would be in the toilet.
What about a Hyperinflationary depression? Would oil prices in USD still drop?
jato, a hyperinflationary depression could occur if financial assets lost their value, while physical assets like commodities rose in price as a store of value. The Fed and the US government are doing their best to make sure that happens at the moment.
However, on a inflation-adjusted basis there is a limit to how high prices can go in real terms as commodities like energy, metals and ag commodities are also inputs needed to produce outputs. Those outputs being the goods and services like food, clothing, shelter, heat, etc. that consumers need to buy.
Demand for those goods and services is limited by real wages and inflation-adjusted incomes to pay for that output. If you really have an hyperinflationary depression then prices quickly outstrip wages and incomes, so workers, especially the retired on fixed incomes and the unemployed, of course, can afford to buy less of everything. Therefore, marginal demand would have to fall to near core demand for essential goods and services.
This could occur if the USA continues to debase their currency, while growth and demand outside America decouples from US growth. That has not happened, yet, but it is not to say that it could not happen? _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Joined: Aug 14, 2004 Posts: 2066 Location: San Diego, Ca.
Posted: Thu Mar 13, 2008 6:47 pm Post subject: Re: Depression risk might "force" Fed to buy stock
Quote:
This could occur if the USA continues to debase their currency, while growth and demand outside America decouples from US growth.
That is what I was thinking. Thank you. _________________ "Peak oil isn't more than an interesting industry factoid and doesn't have anything to do with the hysterics speculated on ad nauseum around here!" ReserveGrowthRulz
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