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Discussion in 'The Pub' at netrider.net.au started by Route66, Sep 17, 2007.
Checked out Four Courners program 2night & US Economists believe that
a US recession is unavoidable.
Didnt see it but all they have to do is start another war. Been done before.....
Well, isn't Iraq war enough?
I think that that is a large part of the reason why the US is headed for a recession.
New Orleans Flood didn't help either.
I just wonder how badly this may affect us?
From what I've seen the home loan problem certainly hasn't helped either. Not easy for the economy to run well when a large percentage of wage-earners suddenly find themselves living in a cardboard box. Same could easily happen here if people are stupid enough to get suckered into similar schemes, and certainly no reason to think they won't.
You can find it here
the full episode + extra
Scary thing is, China has been buying up the US's debt like crazy over the last half decade! Would be a disaster if they called it in!!
Also if the Saudi's decide to change from the US dollar to the Euro for trading crude oil!!
From what I hear our situation is not so dissimilar. Needing to borrow more & more to obtain the Aussie dream of owning a home.
10 Years ago I was sure Self sustainability was the way to go for me, so I
sold up in F'ston & moved to Gippy, as it is healthier/better for my kids as well.
Now however there are only 2 of us & I'm thinking of downgrading to a Unit. Don't want to get caught out in very high interest rates, rising prices etc.
Timing is the issue however timing timing timing
I'm not always good with that
Good point ProPilot, puts a tatally different spin on things.
Could just be slow news week and they needed some scary story to keep us interested.
On one hand you have companies announcing records profits and on other you have the media telling us we're heading for a recession. Maybe we need a newer sexier war to divert our attention...
To some degree the idea is self perpetuating. If enough of us believe a recession is on it's way we'll end up creating one.
Re: Four Corners
Yeah, but the problem in the US has been companies offering low interest rates which has encouraged people to borrow even more money - only to find that the "fine print" allows them to jack the interest rate right up after a few years. Consequently there's a wealthy minority that's currently buying up foreclosed homes for cheap to then rent out. So the rich get richer at the expense of the working class majority - which tends to suit those in power very nicely. It already seems to be starting here with people going way too far into debt buying new cars, plasma TV's etc.
How does that work?
Have a read of http://en.wikipedia.org/wiki/Us_public_debt . Interesting stuff if you can be bothered
Also check out http://tools.google.com/gapminder/ . Great interface to compare all kinds of interesting stats...
Too true about the media, we do however know that all is NQR.
However it may not turn out to be as bad as one 'could' allow oneself to believe.
We have had rough seas before, battoned down the hatches & rode them out.
But my brain is always ticking, because I'm the one with all the responsibilities around the home now.
Its pretty challenging at times, even though I'm generally not a worry wart.
'Worry is usually a lot of trouble, which never happens'
'We are waht we think'
Nope, don't get it.
I just hope it doesn't affect us to much, cause I'm going to the States next year and would like the Aussie dollar to be worth something against the US dollar.
China is unlikely to call in the US debt until after peak oil hits and they need the financial clout to ensure they have an adequate supply of the inflated cost oil production; post peak oil.
NB... for those about to flame for me saying 'the oil is running out' please note I'm not saying that at all. :roll:
I'm saying that at some point (soonish medium term) demand will exceed production which will drive prices steeply upwards causing countries to bid against each other for crude oil.
first thing the US did after it "liberated" iraq was to change the oil trading from the euro back ot the US dollar...
(it had recently been changed )
According to that wiki page China holds about US$1.2 trillion of the US Governments foreign reserves(2). About US$420 billion of that is bonds(1) and the rest (I assume) is US dollars. If China decided to try and 'call in' (sell) those reserves to other countries they would de-value the US dollar (the more of something there is, the less valuable it is). This would have some nasty effects on the US economy (everything would cost more), but it would also result in China loosing a heap of money.
China will eventually take over from the US as the global super power but it isn't going to happen before your trip to the US...
There, that should make it as clear as mud...
1. A bond is like a loan, it's basically an agreement that at a future point in time the bond will mature and the holder will receive the original loan amount plus interest.
2. Foreign reserves are the currency of one nation that are held by other nations.
p.s. I could very well be wrong about the above. It's just my take on it...
indeed! i'm curious, given these are things not commonly known or discussed, are you in the financial markets PP? if not, you sound like you're a mighty cluey investor
i'd be interested in your thoughts on where it could all lead....
*edit* just saw the other thread and got some of your background and thoughts there. cheers, c x
On the issue of China... they will not call in the US debt as it is a leveraged position. it has political clout (look at how China is backing away from Taiwan). Similarly China can't afford to call in the debt and devalue there holdings. Consequently they need each other. China is one of the US's biggest trading partner so a recession there will effect Chinas exports and flow through there economy.
There is a similar problem with revaluing the Chine renimbi. The US wants it done as it would devalue Chinese reserves however it would also increase the payments to the chinese from US treasury bonds. Go figure.