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RE: The Second Wave of Foreclosures - 12/19/2008 7:26:31 AM

samboct

Posts: 1817
Joined: 1/17/2007
Status: offline

How do we restart a currency? Because at the end of the day, it looks to me like the current financial system is done- the debts based on "complex financial instruments" are insurmountable. The $350B poured in to date would be more than enough to purchase over a years worth of cars/trucks, yet it seems to have been swallowed up into oblivion- and Wall St. bonuses. (check NYT article yesterday on Wall St. bonuses.) I give it about 50/50 we have a new currency in a few years.

Basically, I suspect we're looking at a hyperinflation followed by a new currency- that tends to be the way countries get out of debt obligations they can't pay. This was Germany's answer to the US capital markets crashing in the 20s, and it hit Germany hard because the US had loaned Germany lots of $$. Note that the Versailles treaty had nothing to do with the ecnomic crunch- that was Hitler's propaganda. The last major currency reset I recall was in France in the 1950s where there were new francs and old francs. However, I don't recall the end of the world or even the end of the country. What I don't know is if they pegged the new franc to some type of hard currency such as gold for a time to let it get established, or whether they just printed paper.

I'm not sure why people think that the US currency reset is going to lead to anarchy- the euro has been quite successful at becoming a competitor to the dollar. I'm kind of surprised there hasn't been that much of a run on euros, unless people think that both currencies are going to have to be reset- possible I guess- the financial damage hasn't been limited to the US but is clearly global.

To the doomsayers-one of the reasons the depression of the 30s hit the US hard was due to a drought, since much of the ecnomy was pegged to agricultural production. Well, agricultural production plays much less of a role in today's economy, so I suspect that we won't starve- food is pretty cheap compared to other times in history. Moving away from oil and other fossil fuels is a political problem- technologies such as wind are pretty mature, solar technology continues to improve, and geothermal may have some tricks up its sleeve. Massive oil drilling projects are a waste of time and money- we'd be better off building wind farms and batteries, supercapacitors or flywheels.

I do think that Obama's plan of going on an infrastructure building spree is a good one. I'm just not sure what's going to happen with our currency.

Sam

(in reply to Hippiekinkster)

Post #: 61

RE: The Second Wave of Foreclosures - 12/20/2008 12:07:01 AM

MzMia

Posts: 5333
Joined: 7/30/2004
Status: offline

How is creating a new "currency" going to help solve our MANY and various
economic woes?

< Message edited by MzMia -- 12/20/2008 12:09:45 AM >

_____________________________

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To Each His/Her Own
"DENIAL ain't just a river in Egypt." Mark Twain

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(in reply to samboct)

Post #: 62

RE: The Second Wave of Foreclosures - 12/20/2008 5:59:13 AM

samboct

Posts: 1817
Joined: 1/17/2007
Status: offline

Hi Mia

Basically- it allows us to cancel our debts and start over- I think the polite word is "restructure". Typically there is some exchange between old currency and new currency of at least 1000 to 1. I think a hyperinflation is also part of the process in some cases. The hyperinflation allows you to "pay off" debts with cheap money. Of course, the people holding the debt generally aren't so happy which is why it's typically done as a last resort, since they are not going to be so keen on loaning you any more money. Clearly it's a process where there are lots of winners and losers. I have no idea of how things like mortgages or credit card debt are dealt with- when the French economy was restructured there was no credit card debt, and Europeans don't have mortgages like we do. (AFAIK, interest on mortgage debt is not tax deductible in Europe.) I think in the French case it was basically a government defaulting on its notes.

However, what I'm pretty sure of is that the current system is untenable. Basically we don't know how much money is out there "owed" to people. The idea that we can "bail out" the financial system seems to be based on wishful thinking. That $350B didn't make a dent leads me to think it's in the trillions. I don't think this amount of money can be "paid back." What's happening now is the game of Monopoly is over- the greedy people have collected all the money in the game. Effectively, one player has gotten all the money, and the game is over. This means that there's not enough money left to produce things like cars, houses, refrigerators, food etc- but there are some folks who have bank accounts with lots of zeros in them. Detroit is not the only industry in trouble- they all are. So unless we want to say that all businesses are mismanaged (something I think is unlikely) this really means that the rules of the game need to be rewritten. Alternatively, I guess we could go to a South American democracy where there is enormous concentration of money, but the country is poor. So while there are a few people in the country who've accumulated lots of money, the rest of us are looking at each other and saying what do we do now? Because really, there's going to be nothing to spend it on-

If we're to survive as a democracy, there has to be a way to radically redistribute the money. I think this is when you basically call in the currency- wipe out a bunch of debts, and issue new currency.

I saw some calculation on this board that showed that the amount of debt per head in this country is $200,000. Well, we can't pay the interest on that alone, never mind pay it down. What that translates to in my mind is the currency is worthless- it just hasn't been put out of its misery yet.

A possible alternative is to say we're not going to bail out the financial markets and we're going to let them fail. Essentially they already have. This would allow us to keep our current currency, but most banks would fail. I think most insurance companies would be fine, AIG was kind of unusual in that they were taking risk in the CDO market- but I could be wrong on this score. But with most banks failing, there's no money available again unless the Federal Reserve Bank steps up. And now we've got a nationally held bank which is what economists like Greenspan have been telling other countries is a terrible idea for decades. Didn't we learn anything from the Greeks about the dangers of listening to an oracle (Greenspan)?

Does this help?

Sam

(in reply to MzMia)

Post #: 63

RE: The Second Wave of Foreclosures - 12/20/2008 6:09:46 AM

LadyEllen

Posts: 10931
Joined: 6/30/2006
From: Stourport-England
Status: offline

Interesting stuff Sam - since you seem to have thought about all this (and to save me thinking about it!); surely such a "Year Zero" option cant work in a global economy unless all parties (all nations) do the same?

Its one thing to go to Year Zero domestically if one isnt entangled in every other economy some how - but how could it work if one unilaterally went to it whilst other nations didnt?

Not that ultimately - considering the situation, Year Zero is not actually just a good option, but our only option.

E

_____________________________

In a test against the leading brand, 9 out of 10 participants couldnt tell the difference. Dumbasses.

(in reply to samboct)

Post #: 64

RE: The Second Wave of Foreclosures - 12/20/2008 6:22:26 AM

MercTech

Posts: 3706
Joined: 7/4/2006
Status: offline

Fiat and the fortune.. Standards for currency...

Historically, gold is rather impervious to decay and looks pretty. There is a finite supply of gold in the world. In millenia past it became a standard for comparison of the value of items between different cultures and governments.

If you go back to the end of the 17th century when the U.S. was building its infrastructure and standardizing things for a new country, you will find that a dime was defined as a coin with the value of one gram of silver. A dollar was defined as a coin with the value of one gram of gold. The United States Mint was tasked with creating coinage for the new country to replace the British and Spanish money that was commonly in use. (Pieces of 8... a Spanish Reale contained about 2 grams of gold and was commonly cut into eight pieces to use for small change. An 8th bit was worth a quarter in American money... early 1800s)

Starting in the 1850s, to pay for the war effort, an executive order was issued to print paper currency (the Greenback dollar) that was not backed by gold in the federal reserve. This was the first "fiat money" in America. Money that had no standard to compare to for trade but was backed only by the promise of the government that it had value.

Look closely at this. Money is based on the worth of a promise made by politicians. If that doesn't make you go "hmmm" I would be surprised.

Most world governments have moved away from the gold standard. The standard for several decades was to compare to a strong U.S. dollar for interenational trade. Now that the U.S. economy is tanking, what is the standard?

I see it as a strong need for some kind of immutable standard for currency. Gold is traditional. Without a standard, any savings will be nibbled away by the failings of a politicians promise and the buying power of the coin of the realm is easily prone to manipulation. Now, if you are wanting to run an Enron or Worldcom, this would be a good thing.

Stefan

(in reply to samboct)

Post #: 65

RE: The Second Wave of Foreclosures - 12/20/2008 9:26:50 AM

samboct

Posts: 1817
Joined: 1/17/2007
Status: offline

Hi Lady E

Oh, things are entangled all right. I'm going to make a couple of assumptions here:

1) The financial industry is going to be cut down to size. You simply can't create wealth by shoving money around. (I do like your distinction between wealth and money, I'm afraid I've borrowed it.)
2) Manufacturing will resume it's place of importance in measuring the success of an economy.

But if we break the world up into 5 major economies- Europe, US, China, Japan and the rest of the world, we find that Europe has its own currency and is certainly going to lose some money with the US meltdown, China has pegged the yuan to the US $, Japan has its own currency, and the rest of the world is too fragmented to do anything. So what happens with a new US currency? (And I'm still trying to figure this out- but exercising one's brain is important.) Well, China is left holding a lot of worthless treasury notes- but they also have a massive manufacturing base and lots of US know how that they've swiped over the past decades. Besides- it's a controlled economy. I suspect at the end of the day it will come down to some saber rattling, but I don't see massive upheaval there with a US default. Europe has it's own currency and is likely to be somewhat aggravated. However, some folks may say- well, now we're even for the Marshall plan. Switzerland may decline in importance- then again, a lot of folks may run to the Swiss franc as possibly being the most stable currency. Has Europe hollowed out its manufacturing base as badly as the US? I don't think so.

The country that's liable to get shafted the worst is Japan. They've exported a lot of manufacturing capacity to China as well and they've had their own banking/financial mess to deal with since the 1990s when they allowed too much of their money to get tied up in absurd real estate valuations. Nevertheless, they're probably further along in getting rid of fossil fuels than the US and much of the rest of the world, their economy may pick up faster than others as we move away from oil.

Overall, once the idea percolates through, the US is going to be seen as a dramatically weakened superpower- lots of useless military might, but little economic clout. While some folks bank balances in Europe, China and Japan may take a hit, most countries now understand the importance of deficit spending in such a crisis and will probably use it. In short, I expect the idea may gain in popularity- but I'll be the first to admit, I'm guessing here.

Sam

(in reply to MercTech)

Post #: 66

RE: The Second Wave of Foreclosures - 12/20/2008 9:36:03 AM

MzMia

Posts: 5333
Joined: 7/30/2004
Status: offline

quote:

ORIGINAL: samboct

Hi Mia

Basically- it allows us to cancel our debts and start over- I think the polite word is "restructure". Typically there is some exchange between old currency and new currency of at least 1000 to 1. I think a hyperinflation is also part of the process in some cases. The hyperinflation allows you to "pay off" debts with cheap money. Of course, the people holding the debt generally aren't so happy which is why it's typically done as a last resort, since they are not going to be so keen on loaning you any more money. Clearly it's a process where there are lots of winners and losers. I have no idea of how things like mortgages or credit card debt are dealt with- when the French economy was restructured there was no credit card debt, and Europeans don't have mortgages like we do. (AFAIK, interest on mortgage debt is not tax deductible in Europe.) I think in the French case it was basically a government defaulting on its notes.

However, what I'm pretty sure of is that the current system is untenable. Basically we don't know how much money is out there "owed" to people. The idea that we can "bail out" the financial system seems to be based on wishful thinking. That $350B didn't make a dent leads me to think it's in the trillions. I don't think this amount of money can be "paid back." What's happening now is the game of Monopoly is over- the greedy people have collected all the money in the game. Effectively, one player has gotten all the money, and the game is over. This means that there's not enough money left to produce things like cars, houses, refrigerators, food etc- but there are some folks who have bank accounts with lots of zeros in them. Detroit is not the only industry in trouble- they all are. So unless we want to say that all businesses are mismanaged (something I think is unlikely) this really means that the rules of the game need to be rewritten. Alternatively, I guess we could go to a South American democracy where there is enormous concentration of money, but the country is poor. So while there are a few people in the country who've accumulated lots of money, the rest of us are looking at each other and saying what do we do now? Because really, there's going to be nothing to spend it on-

If we're to survive as a democracy, there has to be a way to radically redistribute the money. I think this is when you basically call in the currency- wipe out a bunch of debts, and issue new currency.

I saw some calculation on this board that showed that the amount of debt per head in this country is $200,000. Well, we can't pay the interest on that alone, never mind pay it down. What that translates to in my mind is the currency is worthless- it just hasn't been put out of its misery yet.

A possible alternative is to say we're not going to bail out the financial markets and we're going to let them fail. Essentially they already have. This would allow us to keep our current currency, but most banks would fail. I think most insurance companies would be fine, AIG was kind of unusual in that they were taking risk in the CDO market- but I could be wrong on this score. But with most banks failing, there's no money available again unless the Federal Reserve Bank steps up. And now we've got a nationally held bank which is what economists like Greenspan have been telling other countries is a terrible idea for decades. Didn't we learn anything from the Greeks about the dangers of listening to an oracle (Greenspan)?

Does this help?

Sam

Yes, Sam your explanation did help a lot!
Thank you so much for explaining the "restructuring" of our current currency system.
I will have to read what you have said, probably 3 times to really understand it.
It really does make sense to me now!
You seem to be a person before your time, how long will it take the powers that be to
start moving in this direction?

_____________________________

Namaste'
To Each His/Her Own
"DENIAL ain't just a river in Egypt." Mark Twain

What's your favorite fetish?
"My partner's whisper"--bloomswell

(in reply to samboct)

Post #: 67

RE: The Second Wave of Foreclosures - 12/20/2008 1:02:35 PM

cloudboy

Posts: 7306
Joined: 12/14/2005
Status: offline

Truly, I just don't have the words.....

The upside of an economic meltdown is how it squeezes "wedge issues" like abortion, guns, and gays out of the political forefront.

When's the last time anyone read about how the Surge is working?

(in reply to Hippiekinkster)

Post #: 68

RE: The Second Wave of Foreclosures - 12/20/2008 5:24:30 PM

samboct

Posts: 1817
Joined: 1/17/2007
Status: offline

Hi Mia

I used to write market research reports on advanced materials with 5 year forecasts- it did require a bit of extrapolation. But while it's relatively easy to predict some trends based on science and engineering, it's a lot harder to figure out political turmoil. I'll freely admit I'm guessing here. And much as I dislike conspiracy theorists, when currencies have changed over, it's often happened overnight and with little warning. Note the Franc changeover happened in 1960 and was a factor of a 100 difference between the value of old franc and new franc- to deal with the inflation that continued to take place. I don't know the mechanics of the transition though.

Sam

(in reply to cloudboy)

Post #: 69

RE: The Second Wave of Foreclosures - 12/20/2008 5:32:58 PM

bluepanda

Posts: 328
Joined: 12/12/2005
Status: offline

quote:

ORIGINAL: samboct

Hi Mia

I used to write market research reports on advanced materials with 5 year forecasts- it did require a bit of extrapolation. But while it's relatively easy to predict some trends based on science and engineering, it's a lot harder to figure out political turmoil. I'll freely admit I'm guessing here. And much as I dislike conspiracy theorists, when currencies have changed over, it's often happened overnight and with little warning. Note the Franc changeover happened in 1960 and was a factor of a 100 difference between the value of old franc and new franc- to deal with the inflation that continued to take place. I don't know the mechanics of the transition though.

Sam

I've been thinking an awful lot the last several months about this exact thing, but I have to admit I haven't researched it anywhere near as thoroughly as you, nor do I understand it as well as you seem to. One thing I've wondered about is what the mechanism is for doing such a thing under our system of government. I'm hoping that we'd at least be able to get a bit of a heads-up that something was in the works, or at least becoming likely, so that I could move my money. It's a crazy world right now, isn't it?

_____________________________

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In the forest of the night
What immortal hand or eye
Made you all black and white and roly-poly like that?

(in reply to samboct)

Post #: 70

RE: The Second Wave of Foreclosures - 12/20/2008 9:00:19 PM

corysub

Posts: 1492
Joined: 1/1/2004
Status: offline

quote:

ORIGINAL: popeye1250

Wow, all this negativity, I like it!
The markets climb a "wall of worry."
You forget that Obama is going to have a massive rebuilding program in this country that will put tens of millions of people to work.
That will be good for everyone; the people, large and small companies, our deteriorating infrastructure, the stock and bond markets.

Government does not create a job, unless you work for government. Real jobs are created by profit motivated businesses that go on beyond "building a bridge" or a "windmill". It didn't work for FDR and it won't work for Obama. Further, with woman such important participants in the workforce, how many of you all know a woman who is ready to put aside her computer or lipstick and walk on a steel beam building a bridge! Instead of having politicians pick those favorite pork projects to spend taxpayer money, we should be lowering corporate taxes and be giving incentives to industry, not bailouts to failed or union decimated non-competitive industry such as the automobile sector. The auto industry is not going to get and waste tens of billions of our dollars notwithstanding the fact that their high imbeded legacy and current labor costs destroy any competitive advantage they might have by brilliant design. Ethanol is the most recent example of government waste. Mandating a fuel that is produced from a food product that hurt the average person in the pocket book while at the same time not being competitive in the marketplace withhout huge government subsidy even when oil was priced over US$100/bbl. Now that industry is going the way of the WPA and corn prices are, thankfully, down significantly.

(in reply to popeye1250)

Post #: 71

RE: The Second Wave of Foreclosures - 12/20/2008 10:09:13 PM

UncleNasty

Posts: 1108
Joined: 3/20/2004
Status: offline

quote:

ORIGINAL: samboct

Hi Mia

I used to write market research reports on advanced materials with 5 year forecasts- it did require a bit of extrapolation. But while it's relatively easy to predict some trends based on science and engineering, it's a lot harder to figure out political turmoil. I'll freely admit I'm guessing here. And much as I dislike conspiracy theorists, when currencies have changed over, it's often happened overnight and with little warning. Note the Franc changeover happened in 1960 and was a factor of a 100 difference between the value of old franc and new franc- to deal with the inflation that continued to take place. I don't know the mechanics of the transition though.

Sam

I recall they did similar in Mexico in the early nineties. More or less just dropped zeros from the currency.

I'm aware Argentina had some serious inflation/hyperinflation in the past few years as well, but don't know how they "settled" things down.

uncle Nasty

(in reply to samboct)

Post #: 72

RE: The Second Wave of Foreclosures - 12/20/2008 10:26:34 PM

thishereboi

Posts: 14463
Joined: 6/19/2008
Status: offline

quote:

ORIGINAL: TNstepsout

quote:

ORIGINAL: pahunkboy

All right smarty pants. And this goes to ALL of the non-answere posts, that are sarcastic, mocking, inconsiderate, boorish, unsubstantiated. Y'all have no proof that today is tomorrow is next month is next year. NONE.

If I had any idea what you were saying I could decide if I agree or disagree with you.

Thanks for that, I thought it was me.

_____________________________

"Sweetie, you're wasting your gum" .. Albert

This here is the boi formerly known as orfunboi

(in reply to TNstepsout)

Post #: 73

RE: The Second Wave of Foreclosures - 12/23/2008 7:03:54 AM

samboct

Posts: 1817
Joined: 1/17/2007
Status: offline

"I've been thinking an awful lot the last several months about this exact thing, but I have to admit I haven't researched it anywhere near as thoroughly as you, nor do I understand it as well as you seem to. One thing I've wondered about is what the mechanism is for doing such a thing under our system of government. I'm hoping that we'd at least be able to get a bit of a heads-up that something was in the works, or at least becoming likely, so that I could move my money. It's a crazy world right now, isn't it?"

I won't say I've researched it thoroughly- I'm throwing my ideas out on this board to spur some useful discussion which may shed some light on other aspects. As has been pointed out on another thread, although deflation is a problem largely due to falling housing prices and reduced demand for consumer goods, the government has opened the taps on the money supply which should be inflationary. There's no reason to change currency that I can think of if the money hasn't inflated wildly.

All of this would argue that we should stick our money in other currencies, gold, other precious metals, etc. The problem is that hoarding money contributes to the depression- the economy needs the kick in the butt of spending- not saving. I know this sounds crazy- one of the reasons we got into this problem was because our savings rates were so low- so now the solution is to go out and spend more? An alternative approach would be to purchase hard goods now and assume that if the currency goes to hell, you can still barter the goods for something useful like food. This sort of covers both bases- the need to put your wealth into something other than a currency which may tank, and not throwing shovelfuls of dirt onto what's left of our economy. Realistically, it may be better for all of us if I'm wrong about the need for hyperinflation- maybe there are other alternatives I haven't seen. Loan writedowns might also work and be far less disruptive.

In terms of currency changeovers- what I recall about them is that they tend to be rather secretive and happen rapidly, but I can't point you to a reference on this- just something I've got in my head from doing a lot of reading on other subjects or for fun.

Sam

(in reply to thishereboi)

Post #: 74

RE: The Second Wave of Foreclosures - 12/23/2008 8:59:54 AM

OrionTheWolf

Posts: 7803
Joined: 10/11/2006
Status: offline

~FR~

To add something to this, someone I know just quit their job for a large finance company. Apparently this company wanted a review of all payments past due so they could inact foreclosure. This is on even properties that are only a month or two behind, with no previous record of payment problems. At a meeting they were told they needed to increase the dollar amount of foreclosures so that they were given higher priority for the bail out money. Whether this is true or not, I cannot confirm but it was enough for this person to scrap a job they had been working at for 8 years.

_____________________________

When speaking of slaves people always tend to ignore this definition "One who is abjectly subservient to a specified person or influence."

(in reply to samboct)

Post #: 75

RE: The Second Wave of Foreclosures - 3/4/2009 6:17:28 AM

truckinslave

Posts: 3897
Joined: 6/16/2004
Status: offline

I used to run the "gun counter" for a regional sporting goods store. Max markup was 25%. Problem is that everybody and his brother has an FFL (and, in my case, a "reloaders license') and will sell their friends guns at no more than cost plus 10%, and often at cost.

(in reply to OneMoreWaste)

Post #: 76

RE: The Second Wave of Foreclosures - 3/4/2009 6:23:18 AM

truckinslave

Posts: 3897
Joined: 6/16/2004
Status: offline

quote:

ORIGINAL: cloudboy
When's the last time anyone read about how the Surge is working?

That's only because it worked.

(in reply to cloudboy)

Post #: 77

RE: The Second Wave of Foreclosures - 3/4/2009 6:28:43 AM

truckinslave

Posts: 3897
Joined: 6/16/2004
Status: offline

Destroying/replacing the currency solves many problems imo, but leaves several, including our energy weakness, untouched.
My basic solution:
1. Repudiate all debt.
2. Repudiate all transfer payments. Start over.
3. Nationalize all food exports.
4. Institute a plan for the sale of these exports the formula for which boils down to "a bushel of wheat for a barrel of crude".
5. Tell food importing countries to take it up with OPEC.

(in reply to samboct)

Post #: 78

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