4 ms·

How much of this doom and gloom is it reasonable to worry about? How much of it is marketing for the kinds of books this guy writes, which seem of the same them

by gaustin 15y ago

How much of this doom and gloom is it reasonable to worry about? How much of it is marketing for the kinds of books this guy writes, which seem of the same theme?

Estragon 15y ago
> How much of it is marketing for the kinds of books this guy writes Not to mention his $500/yr newsletter. I'm with him on the gloom and doom, though. I'm in cash.
TomOfTTB 15y ago
I'd say it's pretty reasonable to worry about. In fact I'd say a crisis is an absolute certainty. The question is just how bad it will be. A few things to consider... Borrowing - When people discuss the Debt (National and Private) they focus on the wrong thing which is "How are we going to pay this back?". That's an issue but the bigger issue is why we needed it. Borrowing is a wealth transfer from the future to the present. You're saying "I'm going to take this money from my future and use it now". So our economic growth in the last decade has been built on taking money from the future and combining it with our present output. So the real debt problem is we need to borrow to maintain the standard of living we've grown accustomed to and we can't borrow forever. Unrealistic Expectations - One of the results of the above borrowing is we've seen spectacular growth in the stock market. From 1971 to 1986 the Dow increased from 874 to 1912. From 1986 to 2001 the Dow increased from 1912 to 9811 (and that was off a high of over 10,000). Housing prices from 1896 to 1996 remained relatively the same (http://nyti.ms/TxoI4 http://nyti.ms/TxoI4) but then increased 100% between 1996 and 2006. So the asset value increases a whole generation has come to expect aren't normal and were driven by borrowing (look at the national debt increase for these same periods). In other words it isn't realistic to, for example, think a 401k will fully finance your retirement because stock values shouldn't grow that significantly. Crash Fallout - This is a simple one. As valuations fall so do people's perceived savings. People who thought they had a $300,000 house and $1 million in their 401(k) find they now have a $100,000 house and $200k in their 401(k). So they stop spending on luxuries for a long, long time to restore their savings. Demographic Shift - If you ever get the chance there's a very short audio book by a guy named Harry Dent called "The Great Debt Crisis" that's worth reading (Its $23 on Audible). He studies spending patterns of people by age. The argument he makes is we're at the end of a spending boom. People spend money from their early 20s until their kids graduate from college. Then they start to save. We're at the point where all the children of the Baby Boomers are graduating or are about to graduate college. At that point the Baby Boomers spending will drop dramatically. This is a problem because the Baby Boomers had far fewer children. So we're going to see a major fall from that. These four factors (along with other more minor ones) make me think we're going to see a major drop in the next decade.
rnemo 15y ago
It's always reasonable to be cautious, even wary. Doubly so these days. Throwing caution to the wind is what got the US economy into this mess. Never stop being cautious when dealing with any sort of market. That said ever since the end of 2008 you can find a Forbes or WSJ opinion piece not less than once a month about how within the next six months the entire planet is going to fall straight to bits and theres nothing you can really do about it, but heres a few things to do to make you feel better. And those things always happen to conveniently be things that make the problem even worse, basically putting your money into a mattress. Another common theme is that the fact the government is spending a dime at all on anything is whats causing the problem, despite the fact that the US governments deficit problems only play a small part in the overall economy (consumer confidence, lack of hiring, and etc are all more important woes). This particular article is bad enough that I really wish I could downvote it. It's a scare article marketed as journalism and I think it's pretty insulting.
- TomOfTTB 15y ago
  I'm sorry but you're wrong on just about everything here. 1. While I don't know the articles you speak of you can't blame commentators for being off on predictions if the Government is doing everything it can to goose the economy. You say the national debt is a small amount of total debt and that's true. But the governments of the world have also been taking other steps like printing money and artificially keeping interest rates down (at 0 in fact). These are things that could help the economy recover but they are also things that would put off a crisis if it was coming. 2. No one would suggest putting money in your mattress because money loses value. Take a look at the dollar index: http://bit.ly/qO0F7X http://bit.ly/qO0F7X So the dollar has lost about 35% of its value since 2001
  - rnemo 15y ago
    1. I can and will continue to blame the commentators and the respected publications in the financial world who give them voice for consistently publishing pieces that not only turn out to be wrong but aren't doing anything to help the problem. I really don't care what the government is or isn't doing, it's at best irresponsible to keep on publishing articles that doomsay to no result when investor confidence, employer confidence, and consumer confidence are such important parts of economic recovery. 2. I was using metaphor when talking about stuffing money into mattresses, the point being that most of the time the recommended actions for saving the individuals money do nothing good for the overall economy, instead the actions just provide a potential safety blanket. In terms of talking about economic ups and downs and how to prevent them, these actions have not much more effect than shoving money into a mattress
mynegation 15y ago
Article or not, it is always reasonable to worry. In February 2008 business magazines already sported titles like "How low will it go". For people in the know meltdown of august-september 2008 was not a surprise, although hardly anyone could guess timing and specific details.
SkyMarshal 15y ago
The guy writes like a typical stock newsletter huckster, and his to-the-month predictions are shysterish at best, but... the problems he addresses are real, not overblown, and we're more likely than not heading for another downturn at best, crash at worst. Much of the trillions of bad debt that caused the crisis of 2007-2008 was never worked out or resolved, despite the govt and Fed buying a few years to do that (with TARP, stimulus, and QE). It's still there on balance sheets being marked to model rather than market. We're more or less right back at square one, but with the Fed and Govt having used up much of their ammo this time. Fewer options this time around. Imho best we can hope is a managed decline for a while, no abrupt shocks.

by gaustin 15y ago

How much of this doom and gloom is it reasonable to worry about? How much of it is marketing for the kinds of books this guy writes, which seem of the same theme?

Estragon 15y ago

> How much of it is marketing for the kinds of books this guy writes Not to mention his $500/yr newsletter. I'm with him on the gloom and doom, though. I'm in cash.

TomOfTTB 15y ago

I'd say it's pretty reasonable to worry about. In fact I'd say a crisis is an absolute certainty. The question is just how bad it will be. A few things to consider... Borrowing - When people discuss the Debt (National and Private) they focus on the wrong thing which is "How are we going to pay this back?". That's an issue but the bigger issue is why we needed it. Borrowing is a wealth transfer from the future to the present. You're saying "I'm going to take this money from my future and use it now". So our economic growth in the last decade has been built on taking money from the future and combining it with our present output. So the real debt problem is we need to borrow to maintain the standard of living we've grown accustomed to and we can't borrow forever. Unrealistic Expectations - One of the results of the above borrowing is we've seen spectacular growth in the stock market. From 1971 to 1986 the Dow increased from 874 to 1912. From 1986 to 2001 the Dow increased from 1912 to 9811 (and that was off a high of over 10,000). Housing prices from 1896 to 1996 remained relatively the same (http://nyti.ms/TxoI4 http://nyti.ms/TxoI4) but then increased 100% between 1996 and 2006. So the asset value increases a whole generation has come to expect aren't normal and were driven by borrowing (look at the national debt increase for these same periods). In other words it isn't realistic to, for example, think a 401k will fully finance your retirement because stock values shouldn't grow that significantly. Crash Fallout - This is a simple one. As valuations fall so do people's perceived savings. People who thought they had a $300,000 house and $1 million in their 401(k) find they now have a $100,000 house and $200k in their 401(k). So they stop spending on luxuries for a long, long time to restore their savings. Demographic Shift - If you ever get the chance there's a very short audio book by a guy named Harry Dent called "The Great Debt Crisis" that's worth reading (Its $23 on Audible). He studies spending patterns of people by age. The argument he makes is we're at the end of a spending boom. People spend money from their early 20s until their kids graduate from college. Then they start to save. We're at the point where all the children of the Baby Boomers are graduating or are about to graduate college. At that point the Baby Boomers spending will drop dramatically. This is a problem because the Baby Boomers had far fewer children. So we're going to see a major fall from that. These four factors (along with other more minor ones) make me think we're going to see a major drop in the next decade.

rnemo 15y ago

It's always reasonable to be cautious, even wary. Doubly so these days. Throwing caution to the wind is what got the US economy into this mess. Never stop being cautious when dealing with any sort of market. That said ever since the end of 2008 you can find a Forbes or WSJ opinion piece not less than once a month about how within the next six months the entire planet is going to fall straight to bits and theres nothing you can really do about it, but heres a few things to do to make you feel better. And those things always happen to conveniently be things that make the problem even worse, basically putting your money into a mattress. Another common theme is that the fact the government is spending a dime at all on anything is whats causing the problem, despite the fact that the US governments deficit problems only play a small part in the overall economy (consumer confidence, lack of hiring, and etc are all more important woes). This particular article is bad enough that I really wish I could downvote it. It's a scare article marketed as journalism and I think it's pretty insulting.

TomOfTTB 15y ago
I'm sorry but you're wrong on just about everything here. 1. While I don't know the articles you speak of you can't blame commentators for being off on predictions if the Government is doing everything it can to goose the economy. You say the national debt is a small amount of total debt and that's true. But the governments of the world have also been taking other steps like printing money and artificially keeping interest rates down (at 0 in fact). These are things that could help the economy recover but they are also things that would put off a crisis if it was coming. 2. No one would suggest putting money in your mattress because money loses value. Take a look at the dollar index: http://bit.ly/qO0F7X http://bit.ly/qO0F7X So the dollar has lost about 35% of its value since 2001
- rnemo 15y ago
  1. I can and will continue to blame the commentators and the respected publications in the financial world who give them voice for consistently publishing pieces that not only turn out to be wrong but aren't doing anything to help the problem. I really don't care what the government is or isn't doing, it's at best irresponsible to keep on publishing articles that doomsay to no result when investor confidence, employer confidence, and consumer confidence are such important parts of economic recovery. 2. I was using metaphor when talking about stuffing money into mattresses, the point being that most of the time the recommended actions for saving the individuals money do nothing good for the overall economy, instead the actions just provide a potential safety blanket. In terms of talking about economic ups and downs and how to prevent them, these actions have not much more effect than shoving money into a mattress

mynegation 15y ago

Article or not, it is always reasonable to worry. In February 2008 business magazines already sported titles like "How low will it go". For people in the know meltdown of august-september 2008 was not a surprise, although hardly anyone could guess timing and specific details.

SkyMarshal 15y ago

The guy writes like a typical stock newsletter huckster, and his to-the-month predictions are shysterish at best, but... the problems he addresses are real, not overblown, and we're more likely than not heading for another downturn at best, crash at worst. Much of the trillions of bad debt that caused the crisis of 2007-2008 was never worked out or resolved, despite the govt and Fed buying a few years to do that (with TARP, stimulus, and QE). It's still there on balance sheets being marked to model rather than market. We're more or less right back at square one, but with the Fed and Govt having used up much of their ammo this time. Fewer options this time around. Imho best we can hope is a managed decline for a while, no abrupt shocks.